AMENDMENT
3 TO SCHEDULE 14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
|
x Preliminary
Proxy Statement
|
|
o Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|
|
o Definitive
Proxy Statement
|
|
o Definitive
Additional Materials
|
|
x Soliciting
Material Under Rule 14a-12
|
Neonode
Inc.
(Name of
Registrant as Specified In Its Charter)
Not
applicable
(Name of
Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
|
x
|
No
fee required.
|
|
¨
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
(1)
|
Title
of each class of securities to which transaction applies: Common Stock,
par value $0.001 per share, of the Registrant (the “Common
Stock”).
|
|
(2)
|
Aggregate
number of securities to which transaction
applies:
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
|
|
(4)
|
Proposed
maximum aggregate value of
transaction:
|
|
(5)
|
Total
fee paid:
|
|
o
|
Fee
paid previously with preliminary materials.
|
|
o
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its
filing.
|
|
(1)
|
Amount
previously paid: N/A
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.: N/A
|
|
|
(3)
|
Filing
Party: N/A
|
|
|
(4)
|
Date
Filed: N/A
|
Neonode
Inc.
March
[●],
2009
Dear
Stockholder:
You
are cordially invited to attend the Special Meeting of Stockholders of Neonode
Inc. (the “Company”) to be held on March 31, 2009 at the offices of our Swedish
subsidiary, AB Cypressen nr 9683, located at Linnegatan 89, Stockholm, Sweden,
11523. The meeting will begin promptly at 9:00 a.m. local
time.
At this Special Meeting,
you will be asked to consider and vote upon a number of important matters
that relate to our recently completed refinancing (the “December 2008
Refinancing”).
The items
of business to be considered at the special meeting are listed in the following
Notice of Special Meeting and are more fully addressed in the Proxy Statement
included with this letter. The items you will be asked to approve at
the special meeting are as follows:
|
(i)
|
an amendment to the
Company's certificate of incorporation to increase the number of
authorized shares from 77,000,000 to 700,000,000 and to increase
the number of authorized shares of common stock from 75,000,000 to
698,000,000;
|
|
(ii)
|
an
amendment to the Company’s Certificate of Incorporation to increase the
conversion rate of the Series A Preferred Stock such that each share of
Series A Preferred Stock, which is currently convertible into 1 share of
common stock, shall be convertible into 480.63 shares of common stock;
and
|
|
(iii)
|
an
amendment to the Company’s Certificate of Incorporation to increase the
conversion rate of the Series B Preferred Stock such that each share of
Series B Preferred Stock, which is currently convertible into 1 share of
common stock, shall be convertible into 132.07 shares of common
stock
|
As
discussed in the Proxy Statement, the failure of stockholders to approve the
aforementioned proposals could adversely affect the goals of the December 2008
Refinancing, and could make future financings more difficult and
complicated.
The
Company’s Board of Directors believes that a favorable vote for the matters
described in the attached Notice of Special Meeting and Proxy Statement is in
the best interest of the Company and its stockholders and recommends a vote
“For” such matters. Accordingly, we urge you to review the
accompanying material carefully and to return the enclosed proxy
promptly.
Whether
or not you plan to attend the special meeting in person, it is important that
your shares be represented and voted at the meeting. Please
date, sign, and return your proxy card promptly in the enclosed envelope to
ensure that your shares will be represented and voted at the special meeting,
even if you cannot attend. If you attend the special meeting and are
the stockholder of record, you may vote your shares in person even though you
have previously signed and returned your proxy.
On behalf
of your Board of Directors, thank you for your investment in and continued
support of Neonode Inc.
|
/s/
Per Bystedt
|
|
|
Per
Bystedt
|
|
NEONODE
INC.
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On March 31, 2009
To the
Stockholders of Neonode Inc.:
You are
cordially invited to attend the Special Meeting of Stockholders of Neonode Inc,
a Delaware corporation (the “Company”). The special meeting will be
held at the offices of our Swedish subsidiary, AB Cypressen nr 9683, located at
Linnegatan 89, Stockholm, Sweden, 11523. The meeting will begin
promptly at 9:00 a.m. local time. At the meeting, stockholders will
be asked:
|
(1)
|
To
approve an amendment to our Certificate of Incorporation (a) to increase
the number of authorized shares from 77,000,000 to 700,000,000, (b) to
increase the number of authorized shares of common stock from 75,000,000
to 698,000,000, and (c) to incorporate the changes effected by our
previously filed certificates of designations of our preferred
stock;
|
|
(2)
|
To
approve an amendment to our Certificate of Incorporation to increase the
conversion rate of the Series A Preferred Stock such that each share of
Series A Preferred Stock, which is currently convertible into 1 share of
common stock, shall be convertible into 480.63 shares of common stock;
and
|
|
(3)
|
To
approve an amendment to our Certificate of Incorporation to increase the
conversion rate of the Series B Preferred Stock such that each share of
Series B Preferred Stock, which is currently convertible into 1 share of
common stock, shall be convertible into 132.07 shares of common
stock
|
|
(4)
|
To
transact such other business as may properly come before the special
meeting or any adjournment thereof.
|
These
items of business are more fully described in the Proxy Statement accompanying
this Notice.
The
record date for the special meeting is February 6, 2009. Only
stockholders of record at the close of business on that date may vote at the
meeting or any adjournment thereof.
| By Order of the Board of Directors, | |||
|
/s/
David Brunton
|
|||
|
David
Brunton
|
|||
|
Chief
Financial Officer and Secretary
|
|||
Lafayette,
California
March
[__],
2009
Whether
or not you expect to attend the Special Meeting, please complete, sign, and date
the enclosed proxy and return it promptly in the enclosed envelope, which does
not require any postage if mailed in the United States, to ensure your
representation at the Special Meeting. Even if you have voted by
proxy, you may still vote in person if you attend the meeting. Please
note, however, that if your shares are held of record by a broker, bank, or
other nominee and you wish to vote at the meeting, you must obtain a proxy
issued in your name from that record holder to vote in person.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder
Meeting
to
Be Held on March 31, 2009:
The
Proxy Statement is available at www.neonode.com.
NEONODE
INC.
PROXY
STATEMENT
TABLE
OF CONTENTS
|
Page
|
|
|
FORWARD-LOOKING
STATEMENTS
|
4
|
|
WHERE YOU CAN FIND MORE
INFORMATION
|
4
|
|
QUESTIONS AND ANSWERS ABOUT THE
PROPOSALS
|
5
|
|
SUMMARY
OF INFORMATION RELATED TO THE PROPOSALS
|
8
|
|
PROPOSAL 1 APPROVAL OF THE
INCREASE IN AUTHORIZED SHARES
|
10
|
|
PROPOSAL
2 APPROVAL OF THE INCREASE OF THE CONVERSION RATE FOR SERIES A PREFERRED
STOCK
|
11
|
|
PROPOSAL
3 APPROVAL OF THE INCREASE OF THE CONVERSION RATE FOR SERIES B PREFERRED
STOCK
|
17
|
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
|
20
|
|
EXHIBIT
A: Amended and Restated Certificate of Incorporation
|
Except as
otherwise specifically noted, “Neonode,” the “Company,” “we,” “our,” “us” and
similar words in this proxy statement refer to Neonode Inc., formerly known as
SBE, Inc., and its subsidiaries.
FORWARD-LOOKING
STATEMENTS
The
information in this proxy statement contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Statements
that are not historical in nature, including statements about beliefs and
expectations, are forward-looking statements. Words such as “may,”
“will,” “should,” “estimates,” “predicts,” “believes,” “anticipates,” “plans,”
“expects,” “intends” and similar expressions are intended to identify these
forward-looking statements, but are not the exclusive means of identifying such
statements. Such statements are based on currently available
operating, financial and competitive information and are subject to various
risks and uncertainties. You are cautioned that these forward-looking
statements reflect management’s estimates only as of the date hereof, and we
assume no obligation to update these statements, even if new information becomes
available or other events occur in the future. Actual future results,
events and trends may differ materially from those expressed in or implied by
such statements depending on a variety of factors, including, but not limited to
those set forth in our filings with the Securities and Exchange Commission (the
SEC).
WHERE
YOU CAN FIND MORE INFORMATION
We are a
reporting company and file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy
any reports, proxy statements or other information that we file at the SEC’s
public reference room at 100 F Street N.E., Room 1580, Washington D.C.,
20549. You can also request copies of these documents by writing to
the SEC and paying a fee for the copying costs. Please call the SEC
at 1-800-SEC-0330 for more information about the operation of the public
reference room. Our public filings with the SEC are also available on
the web site maintained by the SEC at
http://www.sec.gov.
NEONODE
INC.
651
Byrdee Way Lafayette, California 94549
PROXY
STATEMENT
FOR
THE SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On March 31, 2009
The
Special Meeting of Stockholders of Neonode Inc. will be held on March 31, 2009,
at the offices of our Swedish subsidiary, AB Cypressen nr 9683, located at
Linnegatan 89, Stockholm, Sweden, 11523, beginning promptly at 9:00 a.m.,
local time. The enclosed proxy is solicited by our Board of
Directors. It is anticipated that this proxy statement and the
accompanying proxy card will be first mailed to holders of our outstanding
common and preferred stock on or about March [●],
2009.
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS
Why
am I receiving this proxy statement and proxy card?
You are
receiving a proxy statement and proxy card because you own shares of our common
stock or preferred stock. This proxy statement describes the issues
on which we would like you, as a stockholder, to vote. It also gives
you information on these issues so that you can make an informed
decision.
Who
can vote at the special meeting?
Only
stockholders of record at the close of business on February 6, 2009 will be
entitled to vote at the special meeting. On this record date, there
were 37,009,589 shares of common stock outstanding and entitled to vote,
874,079.96 shares of Series A Preferred Stock outstanding and entitled to vote,
and 92,795.23 shares of Series B Preferred Stock outstanding and entitled to
vote.
Stockholder
of Record: Shares Registered in Your Name
If on
February 6, 2009 your shares were registered directly in your name with our
transfer agent, American Stock Transfer & Trust, then you are a stockholder
of record. As a stockholder of record, you may vote in person at the
meeting or vote by proxy. Whether or not you plan to attend the
meeting, we urge you to fill out and return the enclosed proxy card to ensure
your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If on
February 6, 2009 your shares were held, not in your name, but rather in an
account at a brokerage firm, bank, dealer, or other similar organization, then
you are the beneficial owner of shares held in “street name” and these proxy
materials are being forwarded to you by that organization. The
organization holding your account is considered to be the stockholder of record
for purposes of voting at the special meeting. As a beneficial owner,
you have the right to direct your broker or other agent on how to vote the
shares in your account. You are also invited to attend the special
meeting. However, since you are not the stockholder of record, you
may not vote your shares in person at the meeting unless you request and obtain
a valid proxy from your broker or other agent.
What
is being voted on?
You are
being asked to vote on the following four proposals:
Proposal 1 — To approve an
amendment of our amended and restated Certificate of Incorporation (a) to
increase the number of authorized shares from 77,000,000 to 700,000,000, (b) to
increase in the number of authorized shares of common stock from 75,000,000 to
698,000,000, and (c) to incorporate the changes effected by our previously filed
certificates of designations of our preferred stock;
Proposal 2 — To approve an
amendment of our amended and restated Certificate of Incorporation to increase
the conversion rate of the Series A Preferred Stock such that each share of
Series A Preferred Stock, which is currently convertible into 1 share of common
stock, shall be convertible into 480.63 shares of common stock;
Proposal 3 — To approve an
amendment of our amended and restated Certificate of Incorporation to increase
the conversion rate of the Series B Preferred Stock such that each share of
Series B Preferred Stock, which is currently convertible into 1 share of common
stock, shall be convertible into 132.07 shares of common stock.
How
do I vote?
For each
of the matters to be voted on, you may vote “For” or “Against” or abstain from
voting. The procedures for voting are fairly simple:
Stockholder
of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote in person at the special meeting or
vote by proxy using the enclosed proxy card. To vote using the proxy
card, simply complete, sign, and date the enclosed proxy card and return it
promptly in the envelope provided. If you return your signed proxy
card to us before the special meeting, we will vote your shares as you
direct. Whether or not you plan to attend the meeting, we urge you to
vote by proxy to ensure your vote is counted. You may still attend
the meeting and vote in person if you have already voted by proxy. If
you would like to vote in person, come to the special meeting and we will give
you a ballot when you arrive.
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If you
are a beneficial owner of shares registered in the name of your broker, bank, or
other agent, you should have received a proxy card and voting instructions with
these proxy materials from that organization rather than from
us. Simply complete and mail the proxy card to ensure that your vote
is counted. To vote in person at the special meeting, you must obtain
a valid proxy from your broker, bank, or other agent. Follow the
instructions from your broker or bank included with these proxy materials, or
contact your broker or bank to request a proxy form.
How
many votes do I have?
On each
matter to be voted upon, you have one vote for each share of common stock and/or
preferred stock you own as of February 6, 2009.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who will
separately count “For” and “Against” votes, abstentions, and broker
non-votes. Abstentions and broker non-votes will have the same effect
as votes “Against” for all Proposals.
If your
shares are held by your broker as your nominee (that is, in “street name”), you
will need to obtain a proxy form from the institution that holds your shares and
follow the instructions included on that form regarding how to instruct your
broker to vote your shares. If you do not give instructions to your
broker, the shares will be treated as broker non-votes.
How
many votes are needed to approve each proposal?
To be
approved, all Proposals must receive a “For” vote from the holders of a majority
of the outstanding stock entitled to vote thereon. In addition, the
votes in favor of Proposal 1 must include a majority of the outstanding shares
of common stock. If you do not vote or abstain from voting on any of
these proposals, it will have the same effect as an “Against”
vote. Broker non-votes will have the same effect as “Against” votes
for all Proposals. If those present do not vote, or abstain from
voting, it will have the same effect as an “Against” vote.
What
is the quorum requirement?
A quorum
is necessary to hold a valid meeting. A quorum will be present if a majority of
the outstanding shares are represented in person or by proxy at the special
meeting. On the record date, there were 37,009,589 shares of the
Company's common stock outstanding and entitled to vote, 874,079.96 shares of
the Company’s Series A Preferred Stock outstanding and entitled to vote, and
92,795.23 shares of the Company’s Series B Preferred Stock outstanding and
entitled to vote, for total of 37,976,464.19 shares of stock outstanding and
entitled to vote. Thus, at least 18,989,733 shares must be
represented in person or by proxy at the special meeting in order to have a
quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or
one is submitted on your behalf by your broker, bank or other nominee) or if you
vote in person at the meeting. Abstentions and broker non-votes will
be counted towards the quorum requirement. If there is no quorum, a
majority of the votes present at the special meeting may adjourn the special
meeting to another date.
What
if I return a proxy card but do not make specific choices?
If you
return a signed and dated proxy card without marking any voting selections, your
shares will be treated as broker non-votes and will have the same effect as
“Against” votes.
Who
is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our Directors and employees may also solicit proxies in
person, by telephone or by other means of communication. Directors
and employees will not be paid any additional compensation for soliciting
proxies. We may also reimburse brokerage firms, banks and other
agents for the cost of forwarding proxy materials to beneficial
owners.
What
does it mean if I receive more than one proxy card?
If you
receive more than one proxy card, it means that your shares are registered in
more than one name or are registered in different accounts. Please
complete, sign, and return each
proxy card to ensure that all of your shares are voted.
Can I change my
vote after submitting my proxy?
Yes. You
can revoke your proxy at any time before the final vote at the meeting. If you
are the record holder of your shares, you may revoke your proxy in any one of
three ways:
|
·
|
You
may submit another properly completed proxy card with a later
date;
|
|
·
|
You
may send a written notice that you are revoking your proxy to our Chief
Financial Officer at 651 Byrdee Way, Lafayette, California 94549;
or
|
|
·
|
You
may attend the special meeting and vote in person. However,
simply attending the special meeting will not, by itself, revoke your
proxy.
|
If your
shares are held by your broker or bank as a nominee or agent, you should follow
the instructions provided by your broker or bank.
Does
the Board of Directors recommend approval of the proposals at the special
meeting?
Yes. After
careful consideration, our Board of Directors recommends that our stockholders
vote "For" each of the proposals.
Who
can help answer my questions about the proposals?
If you
have additional questions about these proposals, you should contact David
Brunton, our Chief Financial Officer, at (925) 229-2125.
How
can I find out the results of the voting at the special meeting?
Preliminary
voting results may be announced at the special meeting. Final voting
results will be published in our quarterly report on Form 10-Q for the quarter
in which the special meeting occurs.
SUMMARY
OF INFORMATION RELATED TO THE PROPOSALS
The
section, together with the previous question and answer section, provides
background information related to the proposals discussed in this proxy
statement and to be voted on at the special meeting. The proposals to
be voted on are described in greater detail elsewhere in this proxy
statement. This section may not contain all of the information that
is important to you. To understand the proposals fully, and for a
more complete description of the terms of each proposal, you should carefully
read this entire proxy statement and the attached exhibit in their
entirety.
Business
Overview
We develop user interface touch screen
solutions that enable people to interact more easily and intuitively with a wide
variety of mobile computing, communications, entertainment and other electronic
devices. We currently target the market for digital lifestyle products,
including portable digital music and video players, digital cameras, mobile
phones and other select electronic device markets with our customized touch
screen user interface solutions. The cornerstone of our technology is our
innovative optical infrared touch screen solutions. We believe that keyboards
and keypads with moving parts will become obsolete and that our touch screen
solutions will be at the forefront of a new wave of finger based input
technologies that will enable the user to interact and operate everything from
small mobile devices to large industrial applications using a combination of
touches, swipes and hand gestures.
For a
description of our financial condition, please see our 2007 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on April 15, 2008,
and our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 19, 2008, which are incorporated herein by
reference.
Background
of the December 2008 Refinancing
Prior to
the December 2008 Refinancing, our capital structure included several types of
convertible notes, promissory notes, and warrants that had been issued by us in
2007 and 2008 as part of, or as a consequence of, prior financing
rounds. The following is a brief description of these issuances and
the resulting impact on our capital structure:
August
2007 Financing.
|
|
●
|
On
August 8, 2007, we made an offering of convertible notes (the “August
Bridge Notes”) pursuant to a Note Purchase Agreement, dated as of July 31,
2007, which agreement was subsequently amended on August 1, 2007,
September 26, 2007 and March 24, 2008. We originally received
$3,250,000 from the August 2007 offering. The August Bridge
Notes originally matured on December 31, 2007; however the maturity was
extended to December 31, 2008. The August Bridge Notes, due December 31,
2008, bore 8% per annum interest and were convertible into purchase units
that were made up of a combination of shares of our common stock,
convertible debt and warrants.
|
|
|
●
|
On
September 26, 2007, the August Bridge Note holders that had not converted
their debt were given three year warrants to purchase up to 219,074 shares
(1st
Extension Warrants) of our common stock at a price of $3.92 per share in
exchange for an agreement to extend the term of their notes from the
original date of December 31, 2007 until June 30,
2008.
|
|
|
●
|
On
May 21, 2008, the August Bridge Note holders that had not converted their
debt were given additional three year warrants (2nd
Extension Warrants) to purchase up to 510,294 shares of our common stock
at a price of $1.45 per share in exchange for an agreement to extend the
term of their notes from June 30, 2008 until December 31,
2008.
|
September
2007 Financing.
|
|
●
|
On
September 26, 2007, we sold $5.7 million of securities in a private
placement, comprised of (i) $2.9 million of three-year promissory notes
bearing the higher of LIBOR plus 3% or 8% interest per annum, convertible
into shares of our common stock at a conversion price of $3.50 per share,
(ii) 952,499 shares of our common stock, and (iii) 5 year warrants to
purchase 1,326,837 shares of our common stock at a price of $3.92 per
share, which was subsequently reduced to $1.27 per share pursuant to
certain anti-dilution
provisions.
|
|
|
●
|
In
addition, on September 26, 2007, certain holders of the August Bridge
Notes converted an aggregate of $454,900 of debt and accrued interest into
units offered in the September 26, 2007 financing. The holders of the
August Bridge Notes who converted their notes received (i) $227,450
three-year promissory notes bearing the higher of LIBOR plus 3% or 8%
interest per annum, convertible into shares of our common stock at a
conversion price of $3.50 per share, (ii) 75,817 shares of our common
stock, and (iii) 5-year warrants to purchase 105,612 shares of our common
stock at a price of $3.92 per
share.
|
May 2008
Financing.
|
|
●
|
On
May 21, 2008, we completed a $5.1 million financing, with net cash
proceeds to us of $4.1 million, primarily to prior security holders,
Directors, affiliates of management and institutional
investors. We issued 4,004,793 shares of our common stock and
two new common stock purchase warrants, with an exercise price of $1.45,
for each outstanding warrant exercised. A total of
8,009,586 new common stock purchase warrants were issued to investors who
surrendered or purchased shares under the warrant exchange
offer. We also extended the maturity date of $2.85 million of
convertible debt that was due on June 30, 2008 until December 31, 2008 by
issuing to the note holders 510,293 common stock purchase warrants, with
an exercise price of $1.45.
|
In sum,
immediately prior to the December 2008 Refinancing, there were 27 note holders
holding convertible notes and promissory notes in the aggregate amount of
$6,341,611, and 129 warrant holders holding warrants for the issuance of up to
14,365,434 shares of common stock.
Reasons
for and Description of December 2008 Refinancing
In December 2008, our Board of
Directors approved a number of measures designed to raise new working capital,
refinance the Company and retain key employees to enable it to continue the
development and marketing of its touch screen technologies. In
addition, the approved measures were designed to enable the Company to satisfy
the maintenance requirements for continued listing on the NASDAQ Stock
Market. Specifically, on December 27, 2008, our Board of
Directors approved our entry into refinancing and stock subscription agreements
(together, the “Refinancing Agreements”) relating to the unregistered sale of up
to an aggregate amount of 1,007,931 shares of our Series A Preferred Stock and
Series B Preferred Stock, par value $0.001 per share.
Series
A and Series B Preferred Stock
The
rights, preferences, privileges, and restrictions of the Series A Preferred
Stock and of the Series B Preferred Stock are as described in the Certificate of
Designations filed by us with the Delaware Secretary of State on December 30,
2008. Out of the Company’s 2 million shares of blank check preferred
stock, the Certificate of Designations designated 899,081 shares as Series A
Preferred Stock and 100,934 shares as Series B Preferred Stock. On
January 13, 2009, we filed with the Delaware Secretary of State a Certificate of
Increase of Designation which increased the amount of designated Series B
Preferred Stock from 100,934 to 102,690. On January 29, 2009, we
filed with the Delaware Secretary of State a second Certificate of Increase of
Designation which increased the amount of designated Series B Preferred Stock
from 102,690 to 108,850.
The
Certificate of Designations provides as follows:
● Dividends and
Distributions.
|
Series
A Preferred Stock:
|
The
holders of shares of Series A Preferred Stock are entitled to participate
with the holders of the Company’s common stock with respect to any
dividends declared on the common stock in proportion to the number of
shares of common stock issuable upon conversion of the shares of Series A
Preferred Stock held by them.
|
|
Series
B Preferred Stock:
|
The
holders of shares of Series B Preferred Stock are entitled to participate
with the holders of the Company’s common stock with respect to any
dividends declared on the common stock in proportion to the number of
shares of common stock issuable upon conversion of the shares of Series B
Preferred Stock held by them
|
● Liquidation
Preference.
|
Series
A Preferred Stock:
|
In
the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, subject to the rights of any other series
of Preferred Stock to be established by the Board of Directors (the
“Senior Preferred Stock”), the holders of Series A Preferred Stock shall
be entitled to receive, after any distribution to the holders of Senior
Preferred Stock and prior to and in preference to any distribution to the
holders of common stock, $0.001 for each share of Series A Preferred Stock
then outstanding.
|
|
Series
B Preferred Stock:
|
In
the event of any liquidation, dissolution, or winding up of the Company,
either voluntary or involuntary, subject to the rights of the Series A
Preferred Stock and any other series of Preferred Stock to be established
by the Board of Directors (collectively, the “Senior Preferred Stock”),
the holders of Series B Preferred Stock shall be entitled to receive,
after any distribution to the holders of Senior Preferred Stock and prior
to and in preference to any distribution to the holders of common stock,
$0.001 for each share of Series B Preferred Stock then
outstanding.
|
● Voting.
The
holders of shares of Series A Preferred Stock and Series B Preferred shall have
one vote for each share of Series A Preferred Stock and Series B Preferred Stock
held by them.
● Conversion.
Initially,
each share of Preferred A Stock and each share of Preferred B Stock is
convertible into one share of our common stock. Any modification to
the conversion rate requires shareholder approval.
Refinancing
Agreements
On
December 29, 2008, we commenced entering into Note Conversion Agreements with
the holders of convertible notes and promissory notes of the Company in the
aggregate amount of up to $6,341,611, for the issuance of up to 250,000 shares
of Series A Preferred Stock in exchange for the surrender of the notes by the
note holders. We determined that, based on the capitalization of the
Company, the value of the notes held by the note holders entitled the note
holders to shares representing approximately twenty-five percent of the
Company. However, since we did not have a sufficient number of
unissued shares of common stock to convert all of the outstanding notes into
shares of common stock as well as enter into the other Refinancing Agreements,
we decided to exchange the existing notes for shares of Series A Preferred Stock
at a ratio such that assuming an increase in the Company’s authorized share
capital and an increase in the conversion rate, the note holders would own in
the aggregate an amount of shares equal to approximately 25% of the Company
after completion of our refinancing and capital raising
activities. Nevertheless, pursuant to the Note Conversion Agreements,
we did not guarantee that either the Company’s authorized share capital would be
increased or that the conversion rate would be increased. As of
February 6, 2009, we have entered into Note Conversion Agreements with 24 out of
27 note holders for the surrender of notes in the aggregate amount of $6,195,805
in consideration for the issuance of 233,225.96 shares of Series A Preferred
Stock. Upon the surrender of these notes, the underlying debt in the
aggregate amount of $6,195,805 was retired.
On December 29, 2008, we commenced
entering into Warrant Conversion Agreements with the holders of warrants for the
purchase of shares, notes and/or additional warrants of the Company for the
issuance of up to 108,850 shares of Series B Preferred Stock in exchange for the
surrender of the warrants by the warrant holders. If all of the
existing warrants were to have been converted into shares of common stock of the
Company, the Company would have had to issue 14,365,434 shares of common
stock. Since we did not have a sufficient number of unissued shares
of common stock to convert all of the outstanding warrants into shares of common
stock as well as enter into the other Refinancing Agreements, we decided to
exchange the existing warrants for shares of Series B Preferred Stock at a ratio
such that assuming an increase in the Company’s authorized share capital and an
increase in the conversion rate, the warrant holders would own in the aggregate
14,365,434 shares of common stock after completion of our refinancing and
capital raising activities. Nevertheless, pursuant to the Warrant
Conversion Agreements, we did not guarantee that either the Company’s authorized
share capital would be increased or that the conversion rate would be
increased. As of February 6, 2009, we have entered into Warrant
Conversion Agreements with 92 out of 129 warrant holders in return for the
issuance of 92,795.23 shares of Series B Preferred Stock.
On December 30, 2008, we commenced
entering into Subscription Agreements with certain subscribers (the
“Subscribers”), for the issuance of up to 150,000 shares of Series A
Preferred Stock to the Subscribers, at a price equal to $10 per share, for an
aggregate purchase price of up to $1,500,000. As of February 6, 2009,
we have entered into Subscription Agreements with twelve investors for an
investment in the Company of $1,417,856 in exchange for the issuance of 141,786
shares of Series A Preferred Stock.
Retention
of Key Employees
On December 30, 2008, we entered into a
Share Exchange Agreement with AB Cypressen nr 9683 , a Swedish engineering
company which is doing business as Neonode Technology AB (“Neonode Tech”), and
the stockholders of Neonode Tech : Iwojima Sarl, Wirelesstoys AB, and
Athemis Ltd. (the “Neonode Tech Stockholders”), pursuant to which we
agreed to acquire all of the issued and outstanding shares of Neonode
Tech in exchange for the issuance of 495,000 shares of Series A
Preferred Stock to the Neonode Tech Stockholders. Neonode
Tech was formed on December 29, 2008 following the bankruptcy filing
on December 9, 2008 of Neonode AB, a wholly-owned subsidiary of the Company, and
is comprised principally of engineers formerly employed by Neonode
AB. Based on Swedish tax considerations, we determined that it would
be more efficient to form a new company which would be acquired by Neonode
rather than to re-hire each of the former employees of Neonode AB on an
individual basis. Furthermore, we determined that based on the
importance to the Company of retaining the technology and business expertise of
the beneficial owners of the Neonode Tech Stockholders and of ensuring our
ability to continue to develop our technology, in exchange for complete
ownership of Neonode Tech, we were prepared to issue to the Neonode Tech
Stockholders shares representing approximately 49.5% of the
Company. However, since we did not have a sufficient number of
unissued shares of common stock to issue shares of common stock representing
49.5% of the Company as well as enter into the other Refinancing Agreements, we
decided that in exchange for all of the shares of Neonode Tech we would issue
shares of Series A Preferred Stock at a ratio such that assuming an increase in
the Company’s authorized share capital and an increase in the conversion rate,
the Neonode Tech Stockholders would own in the aggregate an amount of shares
equal to approximately 49.5% of the Company after completion of our refinancing
and capital raising activities. Nevertheless, pursuant to the Share
Exchange Agreement, we did not guarantee that either the Company’s authorized
share capital would be increased or that the conversion rate would be
increased.
The
beneficial owners of the Neonode Tech Stockholders who acquired the Series A
Preferred Stock all signed employment agreements with Neonode Tech whereby they
agreed to remain employees of NewCo for a period of 18 months. In
addition, each of the beneficial owners of the Neonode Tech Stockholders signed
a repurchase agreement with the Company granting the Company a lapsing
repurchase right to purchase the Series A Preferred Stock held by such Neonode
Tech Stockholder in the event the beneficial owner’s employment with Neonode
Tech is terminated other than for cause prior to the expiration of 18 months
from December 29, 2008. Each month, 1/18 of the Series A Preferred
Shares held by the Neonode Tech Stockholders is released from the lapsing
repurchase right. Pursuant to the terms of the Share Exchange
Agreement, upon the closing of the transaction Neonode Tech became a
wholly-owned subsidiary of the Company.
In addition, as part of the December
2008 Refinancing, we issued 4,068 shares of Series A Preferred Stock to Ellis
International LP as full consideration for certain brokerage services supplied
by Ellis International LP to the Company.
Pursuant
to the terms of the Refinancing Agreements and the Certificate of Designations,
any modification of the conversion rate for the conversion of the shares of
preferred stock into shares of common stock is subject to stockholder
approval. In addition, at the time the Refinancing Agreements were
entered into, we were listed on the NASDAQ Stock Market and subject to the
NASDAQ rules. In accordance with the NASDAQ rules, stockholder
approval is a prerequisite to any increase in the conversion rate and subsequent
issuance of common stock securities at a price below the book value or market
value of the common stock, where the amount of stock being issued is equal to
20% or more of the issuer’s common stock outstanding before such
issuance. Thus, the Company undertook that no shares of the preferred
stock issued in these transactions would be converted into common stock, other
than on a one-to-one basis, until the required stockholder approval is
obtained.
Pursuant to the Refinancing Agreements,
we undertook to solicit each stockholder’s affirmative vote at a stockholder
meeting to approve resolutions (i) increasing the authorized share capital of
the Company so as to authorize a sufficient amount of authorized share capital
to enable the issuance of shares of common stock upon conversion of the
preferred stock issued pursuant to the Refinancing Agreements, and (ii)
increasing the conversion rate of our Series A Preferred Stock such that each
share of Series A Preferred Stock shall be convertible into 480.63 shares of
common stock and the conversion rate of our Series B Preferred Stock such that
each share of Series B Preferred Stock shall be convertible into 132.07 shares
of common stock.
The forms
of the Note Conversion Agreement, Warrant Conversion Agreement, Subscription
Agreement and the Share Exchange Agreement, as well as the December 30, 2008
Certificate of Designations for the Series A Preferred Stock and the Series B
Preferred Stock, were filed as exhibits to the Company’s Form 8-K filed on
December 31, 2008, and are incorporated herein by reference.
Information
about AB Cypressen nr 9683 d/b/a/ Neonode Technologies AB
Description
of Business
AB
Cypressen nr 9683 was incorporated in Sweden on December 29, 2008 and does
business as Neonode Technology. The mailing address of Neonode Tech’s
principal executive offices is Linnegatan 89, 11523 Stockholm, Sweden, and its
telephone number is +46 7 09558443. At the time of Neonode’s
acquisition of Neonode Tech, Neonode Tech had no operations and was in essence a
shell company. Neonode Tech has nine employees, all of whom had been
employees of Neonode AB who lost their jobs as a consequence of the bankruptcy
of Neonode AB. Neonode intends to have Neonode Tech serve as
Neonode’s research and development subsidiary to develop hand held optical touch
screen solutions based on Neonode’s proprietary technology.
Neonode’s
technology design goal is to deliver a user experience that is cheaper, faster,
easier and more enjoyable than other touch screen solutions. To achieve that
goal, we plan to have Neonode Tech implement our technology roadmap and develop
products that will enhance the experience between the user and device by
creating the following:
● Durable,
precise and fast touch screen technology;
● Fast,
fun and easy user interface;
● Multi-touch
finger applications for dragging and dropping
● Simplified
user interaction with complex devices
We
believe that for both professionals and consumers the hand held mobile device is
positioned to become the center of an evolving digital lifestyle by integrating
with and enhancing the utility of advanced digital devices such as phone, voice
and text mail, digital music, digital video and still cameras, television,
personal digital assistants, web browsing and other digital devices, into a
single mobile handheld computing and communication device. The attributes of the
mobile device that enable this functionality include a high-quality user
interface, easy access to relatively inexpensive data storage, the ability to
run complex applications, and the ability to connect easily to a wide variety of
other digital devices and to the Internet. We intend, through Neonode Tech, to
provide the functionality and ease of integration with mobile devices, along
with a uniquely differentiated touch screen user interface, that will position
us to offer innovative integrated digital lifestyle solutions.
Our
business model focuses on the licensing of our touch screen solutions to other
companies who develop lifestyle oriented mobile devices. We plan to supply
standard and custom designed touch screen user interface solutions to our
original equipment manufacturer (OEM) customers directly and through their
contract manufacturers, who will license our solutions and pay us directly for
them. Our overall strategy for Neonode Tech is to have Neonode Tech
develop these innovative touch screen hardware and software solutions based on
our proprietary technology
We
believe that our innovative and intuitive touch screen user interfaces can be
engineered to accommodate many diverse platforms, and that our expertise in
simplified user interaction can be utilized to improve the features and
functionality of our solutions. Our extensive arrays of technology include
software, mechanical and electrical designs, and pattern recognition and touch
sensing technologies. We plan to have Neonode Tech develop optical infrared
touch screen interface technologies that will enrich the user’s experience in
interacting with the user’s mobile computing, communications and entertainment
devices.
Board
Consideration and Approval
Neonode’s
Board structured the December 2008 Refinancing as it did due to a combination of
factors. First, Neonode was in financial difficulties and needed a
quick infusion of cash. Second, Neonode’s subsidiary, Neonode AB, had
declared bankruptcy and Neonode had to act quickly to ensure that the key
employees of Neonode AB continued to work for Neonode. Third, NASDAQ
imposed a deadline of December 29, 2008 by which date Neonode had to satisfy
NASDAQ’s continued listing standards, including a minimum stockholders’ equity
of $2,500,000. Neonode’s Board determined that the most efficient way
to address all of the pressing concerns in a timely manner was to enter into the
December 2008 Refinancing transactions before the end of 2008. The
Board determined that the consideration to be paid to the Neonode Tech
Stockholders for the acquisition of Neonode Tech was reasonable, and that the
acquisition of Neonode Tech, and the resulting retention of key employees, was
in the best interests of Neonode’s stockholders.
Following
the Board’s December 27, 2008 approval, the following transactions were
consummated:
|
|
·
|
We
entered into a Share Exchange Agreement with the Neonode Tech Stockholders
pursuant to which we agreed to acquire all of the issued and outstanding
shares of Neonode Tech in exchange for the issuance of 495,000 shares of
Series A Preferred Stock to the Neonode
Tech Stockholders. The key employees of Neonode AB
decided to remain with Neonode and are now employees of Neonode
Tech.
|
|
|
·
|
We
entered into Note Conversion Agreements with 24 out of 27 note holders for
the surrender of notes in the aggregate amount of $6,195,805 in
consideration for the issuance of 233,225.96 shares of Series A Preferred
Stock. Upon the surrender of these notes, the underlying debt
in the aggregate amount of $6,195,805 was
retired.
|
|
|
·
|
We
entered into Warrant Conversion Agreements with 92 out of 129 warrant
holders for the surrender of warrants in return for the issuance of
92,795.23 shares of Series B Preferred Stock. Upon the
surrender of the warrants, we cleaned up our balance
sheet.
|
|
|
·
|
We
entered into Subscription Agreements with twelve investors for an
investment in the Company of $1,417,856 in exchange for the issuance of
141,786 shares of Series A Preferred Stock. We now have working
capital to finance our operations.
|
Accounting
Treatment
The
acquisition of Neonode Tech was accounted for as a purchase of a wholly owned
subsidiary. Neonode Tech had total assets on its balance sheet of
$12,000 in cash. Neonode recorded an investment in its new
subsidiary, Neonode Tech, as $12,000 which equaled the total fair value of the
assets held by Neonode Tech on the date purchased, December 30, 2008. The
consolidated financial statements of Neonode Inc are prepared in accordance with
generally accepted accounting principles accepted in the United States of
America and include the accounts of Neonode Inc. and its subsidiary based in
Sweden, Neonode Tech. All inter-company accounts and transactions
have been eliminated in consolidation.
The
purchase of Neonode Tech was deemed to be a related party transaction and as
such the estimated value of the shares of Series A Preferred Stock in excess of
the assets of Neonode Tech that were issued to the shareholders of Cypressen was
recorded as deferred compensation and will be amortized to compensation expense
over the 18 month vesting period of the Series A Preferred Stock at the rate of
approximately $48,000 per month. The deferred compensation was valued
at $868,000 which is equal to 49.5% of the market valuation of the Company based
on the closing price of our stock on the Nasdaq Capital Market multiplied by
number of shares of common stock outstanding at December 31, 2008, the date of
the acquisition of Cypressen by us.
Certain
U.S. Federal Income Tax Consequences
Neither
Neonode nor the current holders of its common stock should recognize gain or
loss as a result of the purchase of Neonode Tech for U.S. federal income tax
purposes.
Regulatory
Matters
Neonode’s
acquisition of Neonode Tech has already taken place. There are no
federal or state regulatory requirements that must be complied with or approvals
that must be obtained in connection with Neonode’s purchase of Neonode
Tech.
Selected
Unaudited Pro Forma Financial Information
The
unaudited pro forma condensed combined balance sheet as of September 30, 2008 is
presented as if Neonode’s acquisition of Neonode Tech had occurred on the date
of the balance sheet presented. The unaudited pro forma condensed combined
statements of operations for the year ended December 31, 2007 are presented as
if the proposed transaction with Neonode had occurred at the beginning of their
fiscal years.
Furthermore,
the unaudited pro forma condensed combined balance sheets as of September 30,
2008 and the unaudited pro forma condensed combined statements of operations for
the year ended December 31, 2007 are based on the historical financial
statements of Neonode Tech and Neonode. The pro forma condensed
combined financial statements give effect to Neonode’s acquisition of Neonode
Tech as a purchase of Neonode Tech by Neonode using the purchase method of
accounting and applying the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma condensed combined financial
statements.
For
accounting purposes, Neonode is acquiring Neonode Tech in this transaction.
Accordingly, the purchase price is allocated among the fair values of the assets
and liabilities of Neonode Tech. Neonode Tech was a “shell” company
incorporated in Sweden and had limited assets, cash, and no operations. The
transaction will be accounted for under the purchase method of accounting in
accordance with Statement of Financial Accounting Standards (SFAS) No. 141,
Business
Combinations. Under the purchase method of accounting, the
total estimated purchase price, calculated as described in the Notes to the
unaudited pro forma condensed consolidated balance sheet for Neonode and Neonode
Tech, is allocated to Neonode Tech’s net tangible and intangible assets acquired
and liabilities assumed in connection with the transaction, based on their
estimated fair values as of the completion of the transaction. This preliminary
valuation and purchase price allocation is done on the basis of the estimates of
fair value reflected in these unaudited pro forma condensed consolidated
financial statements. The excess of the value of the stock issued to
the shareholders’ of Neonode Tech over the fair value of the assets of Neonode
Tech acquired is allocated to deferred compensation and will be amortized to
compensation expense over the 18 month vesting period of the stock paid to the
individual shareholders’ of Neonode Tech.
As
noted above, the merger is being accounted for using the purchase method of
accounting. Accordingly, the pro forma adjustments are based on certain
assumptions and estimates regarding the fair value of assets acquired and
liabilities assumed and the amount of deferred compensation that will arise from
the acquisition. The amount of deferred compensation to be recorded
as of the acquisition date represents the best estimate of the fair value of
Neonode on the date the acquisition was consummated, adjusted for the fair value
of assets acquired and liabilities assumed based on information available to
management as of the date hereof, including all acquisition and related costs.
The actual deferred compensation arising from the acquisition will be based on
the difference between the cost and the fair value of the assets acquired and
liabilities assumed on the date the acquisition was consummated as adjusted for
all charges pertaining to the acquisition. No assurance can be given that actual
deferred compensation will not be more or less than the estimated amount
reflected in the pro forma financial statements.
The
unaudited pro forma condensed combined financial information is based on various
other assumptions and estimates, and is subject to a number of uncertainties
relating to the acquisition and other related matters, including, among other
things, estimates, assumptions and uncertainties regarding: (1) the amount
of accruals for direct acquisition costs and the amount of expenses and other
costs relating to the acquisition; (2) as noted above, the actual amount of
deferred compensation that will result from the acquisition; and (3) the
fair values of certain assets acquired and liabilities assumed, which are
sensitive to assumptions and market conditions. Accordingly, the unaudited pro
forma condensed combined financial information does not purport to be indicative
of the actual results of operations or financial condition that would have been
achieved had the acquisition in fact occurred on the dates indicated; nor does
it purport to be indicative of the results of operations or financial condition
that may be achieved in the future.
Set forth below is the following
unaudited pro forma financial statements:
|
·
|
the
unaudited pro forma condensed combined balance sheet as of September 30,
2008, assuming Neonode’s acquisition of Neonode Tech occurred as of the
balance sheet date presented; and
|
|
|
·
|
the
unaudited pro forma condensed combined statement of operations for the
fiscal year ended December 31, 2007 assuming Neonode’s acquisition of
Neonode Tech occurred as of January 1,
2007.
|
The
unaudited pro forma condensed combined financial statements are presented for
informational purposes only, are based on certain assumptions that we believe to
be reasonable, and do not purport to represent the combined company’s financial
condition nor its results of operations had the acquisition occurred as of the
dates noted above or to project results for any future date or period. In the
opinion of management, all adjustments have been made that are needed to present
fairly the unaudited pro forma condensed combined financial
information.
The
unaudited pro forma condensed combined financial information should be read in
conjunction with the historical financial statements and related attached notes
included elsewhere in this filing.
Unaudited
Pro Forma Condensed Combined Balance Sheet
of
Neonode and Neonode Tech as of September 30, 2008
(in
thousands)
The
Unaudited Pro Forma Condensed Combined Balance Sheet of Neonode and Neonode Tech
set forth below is presented as if Neonode’s acquisition of Neonode Tech
occurred on September 30, 2008. The amounts presented for Neonode are from the
historical Neonode consolidated balance sheet as of September 30, 2008 and
the amounts for Neonode Tech are from the historical Neonode Tech condensed
balance sheet as of December 31, 2008.
|
Neonode
|
Neonode
Tech
|
Adjustments
|
Pro Forma
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
ASSETS
|
|
|
|
|
||||||||||||
|
Current
Assets
|
|
|
|
|
||||||||||||
|
Cash
and cash equivalents
|
$ | 203 | $ | 12 |
|
$ | $ 215 | |||||||||
|
Accounts
receivable, net
|
8 | — |
|
8 | ||||||||||||
|
Inventories,
net
|
1,413 | — |
|
1,413 | ||||||||||||
|
Prepaid
expenses and other current assets
|
496 | — |
|
496 | ||||||||||||
|
|
||||||||||||||||
|
Total
current assets
|
2,120 | 12 |
|
2,132 | ||||||||||||
|
|
||||||||||||||||
|
Property
and equipment, net
|
387 | — |
|
387 | ||||||||||||
|
Intangible
assets, net
|
41 | — |
|
41 | ||||||||||||
|
Goodwill
|
141 | — |
|
141 | ||||||||||||
|
Total
assets
|
$ | 2,689 | $ | 12 | $ | $ | 2,701 | |||||||||
|
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
||||||||||||||||
|
Current
Liabilities
|
||||||||||||||||
|
Current
portion of long-term debt
|
$ | 1,291 | $ | — | $ | $ | 1,291 | |||||||||
|
Accounts
payable
|
9,182 | — | 9,182 | |||||||||||||
|
Deferred
revenue
|
891 | — | 891 | |||||||||||||
|
Embedded
derivatives of convertible debt
|
18,472 | — | 18,472 | |||||||||||||
|
Other
accrued liabilities
|
1,314 | — | 1,314 | |||||||||||||
|
Total
current liabilities
|
31,150 | — | 31,150 | |||||||||||||
|
Long-term
debt, net of current portion
|
72 | — | 72 | |||||||||||||
|
Total
liabilities
|
31,222 | — | 31,222 | |||||||||||||
|
Stockholders’
equity
|
||||||||||||||||
|
Common
stock and additional paid-in capital
|
60,636 | 12 | 868 | (a) | 61,516 | |||||||||||
|
Deferred
compensation
|
— | — | (868 | )(a) | (868 | ) | ||||||||||
|
Accumulated
deficit
|
(89,169 | ) | — | (89,169 | ) | |||||||||||
|
Total
stockholders’ equity (deficit)
|
(28,533 | ) | 12 | — | (28,521 | ) | ||||||||||
|
Total
liabilities and stockholders’ equity
|
$ | 2,689 | $ | 12 | $ | — | $ | 2,701 | ||||||||
Notes
to Unaudited Pro Forma Condensed Combined Balance Sheet of Neonode and Neonode
Tech
On
December 30, 2008, Neonode Tech and Neonode entered into the acquisition
agreement for a transaction accounted for as a purchase under accounting
principles generally accepted in the United States. Pursuant to this acquisition
agreement, Neonode issued 495,000 shares of its Series A Preferred Stock for all
of Neonode Tech’s outstanding shares of common stock. Upon completion of the
acquisition, the current Neonode Tech’s shareholders own approximately 49.5% of
Neonode, assuming conversion of the Series A Preferred Stock at the increased
conversion rate.
Additional
notes regarding pro forma adjustments:
|
(a)
|
Deferred
compensation is calculated as follows: 49.5% of the market value of
Neonode Inc. as of December 30, 2008, the date of the acquisition of
Neonode Tech, less the fair value of the assets of Neonode Tech on the
date of the acquisition. The deferred compensation will be
amortized over 18 months. Neonode Tech shareholders will own
approximately 49.5% of the outstanding shares of common stock of Neonode
after giving consideration for the proposals include in this proxy
statement.
|
Unaudited
Pro Forma Condensed Combined Statement of Operations
of
Neonode and Neonode Tech
for
the Year Ended December 31, 2007
(In
thousands, except per share amounts)
The
Unaudited Pro Forma Condensed Combined Statement of Operations of Neonode and
Neonode Tech set forth below is presented as if Neonode’s acquisition of Neonode
Tech had occurred on the first day of Neonode’s fiscal year, January 1,
2007. The amounts presented for Neonode are from the historical Neonode
Consolidated Statement of Operations for the year ended December 31, 2007
and Neonode Tech did not have any operations in prior periods.
|
Neonode
|
Neonode
Tech
|
Adjustments
|
Pro
Forma
|
|||||||||||||
|
Net
Sales
|
$ | 3,132 | $ | — | $ | $ | 3,132 | |||||||||
|
Cost
of sales
|
2,317 | — | 2,317 | |||||||||||||
|
Gross
profit loss
|
815 | — | 815 | |||||||||||||
|
Operating
Expenses:
|
||||||||||||||||
|
Selling,
general, and administrative
|
8,227 | — | 576 | (a) | 8,803 | |||||||||||
|
Research
and development
|
4,449 | — | 4,449 | |||||||||||||
|
Total
costs and expenses
|
12,676 | — | 13,252 | |||||||||||||
|
Operating
loss from continuing operations
|
( 11,861 | ) | — | (12,437 | ) | |||||||||||
|
Other
expense:
|
||||||||||||||||
|
Interest
and other income (expense),
net
|
(572 | ) | — | (572 | ) | |||||||||||
|
Non-cash
items relating to debt and warrants
|
(36,008 | — | (36,008 | ) | ||||||||||||
|
Other
expense
|
(36,580 | ) | — | 576 | (49,017 | ) | ||||||||||
|
Net
Loss
|
$ | (48,441 | ) | $ | — | $ | 576 | $ | (20,323 | ) | ||||||
|
Net
loss from continuing operations per common share:
|
||||||||||||||||
|
Basic
and diluted
|
$ | (3.15 | ) | $ | — | $ | (0.19 | ) | ||||||||
|
Weighted
average number of common
shares:
|
||||||||||||||||
|
Basic
and diluted
|
15,400 | 3 | 237,909 | (b) | 253,312 | |||||||||||
Notes
to Unaudited Pro Forma Condensed Combined Statement of Operations
Reference
should be made to the accompanying Notes to Unaudited Pro Forma Condensed
Combined Balance Sheet of Neonode and Neonode Tech as of September 30, 2008 for
a summary description of the accounting for the acquisition
transaction.
Additional
notes regarding pro forma adjustments:
|
(a)
|
Adjustment
to reflect 12 months of amortization of the deferred compensation expense
related to the acquisition of Neonode
Tech.
|
|
(b)
|
The
weighted average number of common shares used in the calculation of pro
forma loss per share includes the addition of approximately 237million
shares issued to Neonode Tech stockholders pursuant to the acquisition
agreement adjusted to reflect the proposals included in this proxy
statement..
|
Comparative
Per Share Information
The
following table sets forth the historical per share information of Neonode Tech
and Neonode, and the combined per share data on an unaudited pro forma basis
after giving effect to the acquisition. Also presented is Neonode’s
equivalent pro forma per share data for one share of Neonode common
stock. The pro forma information is presented for illustrative
purposes only. You should not rely on the pro forma financial
information as an indication of the combined financial position or results of
operations of future periods or the results that actually would have been
realized had the entities been a single entity during the periods
presented.
The
unaudited pro forma per share information combines our financial information for
our fiscal year ended December 31, 2007 with the financial information of
Neonode Tech for the Neonode fiscal year ended December 31, 2007, assuming the
acquisition had occurred on the first day of the respective
periods.
Historical
book value per common share for Neonode Tech is computed by dividing
stockholders’ equity (deficit) attributable to common stockholders by the number
of shares of common stock outstanding at December 30, 2008, the date of
acquisition, for both the year ended December 31, 2007 and the nine months ended
September 30, 2008. Historical book value per common share for Neonode is
computed by dividing stockholders’ equity (deficit) attributable to common
stockholders by the number of shares of common stock outstanding at December 31,
2007 and September 30, 2008, respectively. Our unaudited pro forma combined per
share data is derived from the unaudited pro forma combined financial statements
that are included elsewhere in this proxy statement. Neonode Tech has
never had any operations. The Neonode equivalent pro forma per share data is
calculated by applying the conversion rate of 480.63 to one for the 495,000
shares of our Series A Preferred Stock that were issued to the shareholders of
Neonode Tech in the acquisition transaction as though the proposals included in
this proxy statement have been approved by our stockholders. The
495,000 shares of Series A Preferred Stock would convert to 237,911,850 shares
of our common stock under the proposed conversion rate.
|
Year Ended
|
||||
|
December 31, 2007
|
||||
|
(unaudited)
|
||||
|
Neonode
Historical Per Share Data:
|
||||
|
Basic
and diluted net loss per common share
|
$ | (3.15 | ) | |
|
Book
value (deficiency) per common share
|
$ | (0.12 | ) | |
|
Neonode
Tech Historical Per Share Data:
|
||||
|
Basic
and diluted net loss per share
|
N/A | |||
|
Book
value (deficiency) per common share
|
$ | 12.00 | ||
|
Neonode
and Neonode Tech Equivalent Pro Forma Combined:
|
||||
|
Basic
and diluted net loss per common share
|
$ | (0.19 | ) | |
|
Book
value (deficiency) per share
|
$ | (0.01 | ) | |
|
Nine Months ended
|
||||
|
September 30, 2008
|
||||
|
(unaudited)
|
||||
|
Neonode
Historical Per Share Data:
|
||||
|
Basic
and diluted net loss per common share
|
$ | (1.16 | ) | |
|
Book
value (deficiency) per common share
|
$ | (0.95 | ) | |
|
Neonode
Tech Historical Per Share Data:
|
||||
|
Basic
and diluted net loss per share
|
N/A | |||
|
Book
value (deficiency) per common share
|
$ | 12.00 | ||
|
Neonode
and Neonode Tech Equivalent Pro Forma Combined:
|
||||
|
Basic
and diluted net loss per common share
|
$ | (0.12 | ) | |
|
Book
value (deficiency) per share
|
$ | (0.11 | ) | |
Comparative
Per Share Market Price and Dividend Information
Effective
January 2, 2009, our common stock was quoted on the Pink Sheets under the symbol
NEON.PK and effective January 26, 2009, our common stock has been quoted on the
Over the Counter Bulletin Board Market (OTCBB) under the symbol
NEON.OB.
For 2008
and 2007 our stock was traded on the NASDAQ Capital Market under the symbol
NEON. The following table presents quarterly information on the price range of
our common stock, indicating the high and low bid prices reported by the NASDAQ
Capital Market. These prices do not include retail markups, markdowns or
commissions.
|
Fiscal Quarter Ended
|
||||||||||||||||
|
Fiscal 2008
|
March 31 (1)
|
June 30 (1)
|
September 30 (1)
|
December 31
|
||||||||||||
|
High
|
$ | 3.70 | $ | 3.09 | $ | 0.49 | $ | 0.19 | ||||||||
|
Low
|
1.74 | 0.35 | 0.10 | 0.03 | ||||||||||||
|
Fiscal
2007 (1)
|
||||||||||||||||
|
High
|
$ | 3.95 | $ | 4.00 | $ | 7.94 | $ | 4.82 | ||||||||
|
Low
|
1.70 | 1.62 | 2.85 | 2.89 | ||||||||||||
(1) Prior
to our reverse merger with SBE, Inc. on August 10, 2007, our common stock traded
under the symbol SBEI. The stock prices presented for SBEI for the period prior
to August 10, 2007 are adjusted for a 1 for 5 reverse stock split effective
March 29, 2007.
There are
no restrictions on our ability to pay dividends; however, it is currently the
intention of our board of directors to retain all earnings, if any, for use in
our business and we do not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the payment of dividends will depend,
among other factors, upon our earnings, capital requirements, operating results
and financial condition.
No active
trading or public market exists for Neonode Tech common stock. The
shares of Neonode Tech common stock are not listed on any exchange and are not
traded in the over-the-counter market. Neonode Tech has never paid
any cash dividends on its common stock.
Consequences
of Shareholder Approval
Significant
dilution of voting rights and earnings per share
The
holders of our outstanding common stock will be significantly diluted by
conversion of the preferred stock. If the shareholders approve
Proposals 1, 2 and 3, the Series A Preferred Stock and the Series B Preferred
Stock will be convertible into shares of our common stock at the increased
conversion rates, and upon conversion, up to 431,397,645 shares of common stock
will be issued, which amount represents 1,135.96% of the aggregate number of
shares of our common stock outstanding as of the record
date. Similarly, the conversion of the preferred stock into share of
our common stock at the increased conversion rates would significantly reduce
the amount of net earnings available per share due to increase in the aggregate
number of shares of common stock that would be outstanding.
For
illustrative purposes only, the following table reflects the approximate number
of shares of our common stock that would be outstanding as a result of the
conversion of all of the outstanding Series A Preferred Stock and Series B
Preferred Stock at the increased conversion rates, based on 37,009,589 shares of
our common stock outstanding as of the record date, without accounting for
fractional shares, which will be rounded up to the nearest whole
share.
|
Class of
Stock
|
Outstanding
Stock Prior to
Conversion
|
Percentage
of
Outstanding
Stock Prior
to
Conversion
|
Common
Stock
as
Converted(¹)
|
Percentage
of Common
Stock as
Converted(¹)
|
Outstanding
Stock Post
Conversion(¹)
|
Percentage
of
Outstanding
Stock Post
Conversion(¹)
|
||||||||||||||||||
|
Common Stock
|
37,009,589.00 | 97.45 | % | 37,009,590 | 7.88 | % | 469,374,109 | 100 | % | |||||||||||||||
|
Series
A Preferred
Stock(²) |
874,079.96 | 2.30 | % | 420,109,052 | 89.50 | % | 0 | 0 | ||||||||||||||||
|
Series
B Preferred Stock
|
92,795.23 | 0.24 | % | 12,255,467 | 2.61 | % | 0 | 0 | ||||||||||||||||
|
Total:
|
37,976,464.19 | 100 | % | 469,374,109 | 100 | % | 469,374,109 | 100 | % | |||||||||||||||
(¹) Based
on a 1 to 480.63 conversion rate for the Series A Preferred Stock and a 1 to
132.07 conversion rate for the Series B Preferred Stock.
(²)233,225.96
shares of Series A Preferred Stock were issued to the note holders, 141,786
shares of Series A Preferred Stock were issued to the investors, and 495,000
shares of Series A Preferred Stock were issued to the NewCo Shareholders, and
4,068 shares of Series A Preferred Stock were issued to Ellis
International.
If the
shareholders do not approve Proposals 1, 2, and 3, the Series A Preferred
Stock and Series B Preferred Stock will remain convertible into shares of our
common stock on a one-to-one basis.
Impact
on stock price
The
conversion of the preferred stock into shares of common stock at the increased
conversion rates may significantly adversely affect the market price of our
common stock and may impact trading patterns. If large quantities of
our common stock are issued upon conversion of the preferred stock and sold into
the market, the market price of our common stock will be adversely
impacted.
Anti-takeover
effects
Stockholders
should be aware that approval of Proposals 1, 2, and 3 could facilitate our
future efforts to deter or prevent changes in control of Neonode, including
transactions in which the stockholders might otherwise receive a premium for
their shares over then current market prices. As a result of the
authorization of additional shares of stock, we will have a significantly larger
number of authorized but unissued shares of common stock which, along with our
blank-check preferred stock, would be available for future issuance without our
stockholders' approval. These additional shares may be utilized for a
variety of corporate purposes including but not limited to equity financing,
corporate acquisitions and employee incentive plans. The issuance of
such shares, however, may also be used to deter a potential takeover of the
Company that may otherwise be beneficial to stockholders by diluting the shares
held by a potential suitor or issuing shares to a stockholder that will vote in
accordance with the Company's Board of Directors'
desires. Furthermore, the existence of authorized but unissued shares
of common stock may enable the Board of Directors to issue shares to persons
friendly to current management, which would render more difficult or discourage
an attempt to obtain control of the Company by means of a proxy contest, tender
offer, merger, or otherwise, and thereby protect the continuity of the Company's
management. For example, without further stockholder approval, our
Board of Directors could strategically sell shares of common stock in a private
transaction to purchasers who would oppose a takeover or favor the incumbent
Board of Directors.
Consequences
if Shareholders Do Not Approve of the Proposals
If the
shareholders do not approve Proposals 1, 2, and 3, the Series A Preferred
Stock and Series B Preferred Stock will remain convertible into shares of our
common stock on a one-to-one basis.
To
continue to fund our operations going forward, we may need to raise additional
capital from financing sources. One of the ways we may raise such
cash is by issuing shares from time to time. Without additional
authorized common stock, we may be unable to raise the financing we need to fund
our operations going forward. The inability to finance our operations
going forward could lead to our bankruptcy, reorganization, insolvency, or
liquidation.
Interest
of Certain Persons in Matters to be Acted Upon
Per
Bystedt, our Chairman of the Board and Chief Executive Officer, is personally
involved in our refinancing and capital raising activities. Mr.
Bystedt, the beneficial holder of approximately 8.42% of the Company’s
outstanding shares of stock as of January 31, 2009, is the beneficial owner of
Iwojima sarl. Iwojima sarl has entered into a Subscription Agreement
and invested $100,000 in the Company in exchange for the issuance of 10,000
shares of Series A Preferred Stock, and is one of the three NewCo Stockholders
who have participated in the share exchange transaction with the Company
pursuant to the Share Exchange Agreement. Iwojima sarl also
surrendered warrants in exchange for the issuance of Series B Preferred
Stock.
Iwojima
sarl holds 162,133.17 shares of Series A Preferred Stock and 7,210.96 shares of
Series B Preferred Stock. Assuming approval of the Proposals and the
conversion of the outstanding preferred stock into common stock at the increased
conversion rates, Mr. Bystedt will beneficially own approximately 16.9% of our
outstanding common stock.
Mr.
Magnus Goertz, the beneficial holder of approximately 5.15% of the Company’s
outstanding shares of stock as of January 31, 2009, is the beneficial owner of
Athemis Ltd., which company is one of the three NewCo Stockholders who
participated in the share exchange transaction with the Company pursuant to the
Share Exchange Agreement. Athemis Ltd. holds 151,788.17 shares of
Series A Preferred Stock. Assuming approval of the Proposals and the
conversion of the outstanding preferred stock into common stock at the increased
conversion rates, Mr. Goertz will beneficially own approximately 15.4% of our
outstanding common stock.
Mr.
Thomas Eriksson, the beneficial holder of approximately 3.14% of the Company’s
outstanding shares of stock as of January 31, 2009, is the beneficial owner of
Wirelesstoys AB, which company is one of the three NewCo Stockholders who
participated in the share exchange transaction with the Company pursuant to the
Share Exchange Agreement. Wirelesstoys AB holds 151,788.17 shares of
Series A Preferred Stock. Assuming approval of the Proposals and the
conversion of the outstanding preferred stock into common stock at the increased
conversion rates, Mr. Eriksson will beneficially own approximately 15.3% of our
outstanding common stock.
David W.
Brunton, our Chief Executive Officer, has purchased 4,854.74 shares of Series A
Preferred Stock from each of the NewCo Stockholders (Iwojima sarl, Wirelesstoys
AB, and Athemis Ltd.) for a total purchase of 14,564.22 shares of Series A
Preferred Stock. As of January 31, 2009, Mr. Brunton holds
approximately 1.1% of the Company’s outstanding shares of
stock. Assuming approval of the Proposals and the conversion of the
outstanding preferred stock into common stock at the increased conversion rates,
Mr. Brunton will beneficially own approximately 1.53% of our outstanding common
stock.
Ms. Susan
Major, a member of our Board of Directors, and the beneficial holder of 0.84% of
the Company’s outstanding shares of stock as of January 31, 2009, was the
beneficial owner of warrants that were converted into 149.14 shares of Preferred
B Stock. Assuming approval of the Proposals and the conversion of the
outstanding preferred stock into common stock at the increased conversion rates,
Ms. Major will beneficially own approximately 0.07% of our outstanding common
stock.
For a
detailed description of the shareholdings of our Directors, executive officers,
and 5% shareholders, please see the section entitled “Security Ownership of
Certain Beneficial Owners and Management” below.
NASDAQ
Delisting; OTCBB Listing
One of
the objectives of the December 2008 Refinancing was to maintain the listing of
our common stock on the NASDAQ Stock Market. However, on December 30,
2008, we were notified by the staff of the NASDAQ Stock Market that the NASDAQ
Hearings Panel (the “Panel”) had determined to delist our shares from the NASDAQ
Stock Market and to suspend trading effective at the open of trading on Friday,
January 2, 2009.
The Panel
determined that we failed to regain compliance with the NASDAQ continued listing
standards by December 29, 2008, and that the Panel did not have the authority
under the NASDAQ Marketplace Rules to continue our
listing. Specifically, the Panel determined that as of December 29,
2008 the Company did not comply with Marketplace Rule 4310(c)(3), which requires
a minimum stockholders’ equity of $2,500,000. Following the
de-listing of our common stock from the NASDAQ National Market, we listed our
shares on the Over-The-Counter Bulletin Board, where our shares have been
trading since January 26, 2009.
PROPOSAL
1
APPROVAL
OF AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
We are
asking our shareholders to approve an amendment to our Certificate of
Incorporation to (a) increase the number of authorized stock from
77,000,000 shares to 700,000,000 shares, (b) increase the number
of shares of our common stock authorized for issuance from
75,000,000 shares to 698,000,000 shares, and (c) incorporate the
changes effected by our previously filed certificates of designations of our
preferred stock. The additional common stock to be authorized by
adoption of this proposal would have rights identical to our currently
outstanding common stock.
The
adoption of the proposed amendment and any subsequent issuance of our common
stock would not affect the rights of the holders of our currently outstanding
common stock, except for effects incidental to future increases in the number of
shares of our common stock outstanding, such as dilution of the earnings per
share and voting rights of our current holders of common stock. In
addition, the number of authorized shares of our preferred stock will not be
affected by the adoption of this proposed amendment. The number of
shares of our preferred stock will be maintained at 2,000,000. If the
amendment is adopted, it will become effective upon the filing of the amended
and restated Certificate of Incorporation with the Secretary of State of the
State of Delaware.
As of
February 6, 2009, we had outstanding 37,009,589 shares of common stock,
874.079.96 shares of Series A Preferred Stock, and 92,795.23 shares of Series B
Preferred Stock, as well as employee stock options to purchase 460,500 shares of
common stock and warrants held by warrant holders who chose not to convert their
warrants to Series B Preferred Stock for the issuance of 2,118,956 shares of
common stock, which options and warrants, if exercised, would result in the
issuance of an additional 2,579,456 shares of common
stock. Accordingly, on a fully diluted basis, that is, assuming
exercise of all outstanding warrants and options, and conversion of the
outstanding preferred stock at the increased conversion rates, we would need to
have 472,053,562 shares of authorized common stock. However, Article
IV.A of our Certificate of Incorporation currently authorizes us to issue up to
77,000,000 shares of stock, 75,000,000 of which are designated as common
stock. Thus, unless we increase the amount of our authorized stock,
we will not be able to increase the conversion rates of the preferred stock,
which is something that the stockholders who participated in the Refinancing
Agreements expect to occur. Nevertheless, the holders of preferred
stock do not have any contractual or other right to enforce their expectation
that the increase in the conversion rates will occur. All of the
stockholders who participated in the Refinancing Agreements acknowledged that
the stockholders of the Company may vote to reject (i) an increase in the
authorized share capital of the Company to enable the issuance of shares of
common stock at the increased conversion rates, or (ii) a modification of the
initial conversion rates of the preferred stock. They further
acknowledged that there can be no guarantee that the requisite stockholder
approvals will be obtained.
In
addition, assuming the conversion of preferred stock into common stock at the
increased conversion rates, unless we increase the amount of authorized stock,
we will have insufficient authorized shares of common stock to issue in
connection with expected future financings. To continue to fund our
operations going forward, we may need to raise additional capital from financing
sources. One of the ways we may raise such cash is by issuing shares
from time to time. Without additional authorized common stock, we may
be unable to raise the financing we need to fund our operations going forward.
The inability to finance our operations going forward could lead to our
bankruptcy, reorganization, insolvency, or liquidation.
Moreover,
we also engage in periodic discussions with potential partners, strategic
investors and acquisition candidates, all as part of our business
model. If any of these discussions were to lead to a definitive
understanding, it is possible that we could use some of the newly authorized
shares in connection with one or more such transactions subsequent to the
increase in the number of authorized shares. As of February 6, 2009,
we have no plan, commitment, arrangement, understanding, or agreement, either
oral or written, regarding the issuance of common stock in connection with one
or more such strategic transactions subsequent to the increase in the number of
authorized shares.
Although
this Proposal to increase the authorized common stock has been prompted by
business and financial considerations and not by the threat of any hostile
takeover attempt (nor is our Board of Directors currently aware of any such
attempts directed at us), nevertheless, stockholders should be aware that
approval of this proposal could facilitate our future efforts to deter or
prevent changes in control of Neonode, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current market prices. As a result of the authorization of additional
shares of stock, we will have a significantly larger number of authorized but
unissued shares of common stock which, along with our blank-check preferred
stock, would be available for future issuance without our stockholders'
approval. These additional shares may be utilized for a variety of
corporate purposes including but not limited to equity financing, corporate
acquisitions and employee incentive plans. The issuance of such shares, however,
may also be used to deter a potential takeover of the Company that may otherwise
be beneficial to stockholders by diluting the shares held by a potential suitor
or issuing shares to a stockholder that will vote in accordance with the
Company's Board of Directors' desires.
Furthermore,
the existence of authorized but unissued shares of common stock may enable the
Board of Directors to issue shares to persons friendly to current management,
which would render more difficult or discourage an attempt to obtain control of
the Company by means of a proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management. For
example, without further stockholder approval, our Board of Directors could
strategically sell shares of common stock in a private transaction to purchasers
who would oppose a takeover or favor the incumbent Board of
Directors.
To
realize the intent of the Refinancing Agreements and to provide our Board of
Directors with certainty and flexibility to undertake future transactions to
support our future business growth, our Board of Directors deems it in the best
interests of our stockholders and the Company to increase the number of
authorized shares of our common stock.
We
request that you approve an amended and restated Certificate of Incorporation in
the form attached hereto as Exhibit A and adopt the following
resolutions:
“RESOLVED,
that the Certificate of Incorporation of this Corporation (the “Certificate”)
be, and it hereby is, amended (a) to increase the number of authorized shares of
the Corporation’s stock from seventy-seven million to seven hundred million, and
(b) to increase the number of authorized shares of the Corporation’s common
stock (the “Common Stock”) from seventy-five million to six hundred ninety-eight
million; and further
RESOLVED,
that the Certificate be, and it hereby is, amended and restated so as to be and
read in its entirety as set forth in the form attached hereto as Exhibit A,
which Certificate the officers of the Corporation are hereby authorized to file
with the Secretary of the State of Delaware.”
The
adoption of Proposal 1 will require the affirmative vote of the holders of a
majority of our outstanding shares on the record date, and the votes in favor of
Proposal 1 must include a majority of the outstanding shares of common
stock.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE IN FAVOR OF
PROPOSAL 1.
PROPOSAL
2
APPROVAL
OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO
INCREASE
THE CONVERSION RATE OF OUR SERIES A PREFERRED STOCK
We are
asking our shareholders to approve an amendment to our amended and restated
Certificate of Incorporation to increase the conversion rate of our Series A
Preferred Stock such that each share of Series A Preferred Stock, which is
currently convertible into 1 share of common stock, shall be convertible into
480.63 shares of common stock.
The
adoption of the proposed amendment and any subsequent issuance of our common
stock upon conversion of the Series A Preferred Stock into common stock would
not affect the rights of the holders of our currently outstanding common stock,
except for effects incidental to future increases in the number of shares of our
common stock outstanding, such as dilution of the earnings per share and voting
rights of our current holders of common stock. See the description
above in the section entitled "Consequences of Shareholder
Approval." If the amendment is adopted, it will become effective upon
the filing of the amended and restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
As of
February 6, 2009, we had outstanding 874,079.96 shares of Series A Preferred
Stock.
The
rights and preferences with respect to the Series A Preferred Stock are set
forth in our Certificate of Designations, filed with the Secretary of State of
Delaware on December 30, 2008. According to the Certificate of
Designations, each share of Series A Preferred Stock is currently convertible
into one (1) share of common stock, and the holders of shares of Series A
Preferred Stock have one vote for each share of Series A Preferred Stock held by
them.
Pursuant
to the terms of the Refinancing Agreements and the Certificate of Designations,
any modification of the conversion rate for the conversion of the shares of
preferred stock into shares of common stock is subject to stockholder
approval.
Assuming
exercise of all outstanding shares of Series A Preferred Stock at a conversion
rate of one-to-480.63, we would need to issue approximately 420,109,052 shares
of authorized common stock.
Pursuant
to the Refinancing Agreements, we undertook to solicit each stockholder’s
affirmative vote at a stockholder meeting to approve a resolution to increase
the conversion rate of the Series A Preferred Stock such that each share of
Series A Preferred Stock, which is currently convertible into 1 share of common
stock, shall be convertible into 480.63 shares of common stock In
addition, failure to approve the increased conversion rate for the Series A
Preferred Stock could adversely affect future financing plans, which could
adversely affect our ability to fund our operations going
forward. Absent shareholder approval, we may have difficulty raising
additional funds to meet our obligations, and, even if we are able to raise
additional funds, the terms of such financing may not be favorable to
us.
No
dissenter’s rights are available under the Delaware General Corporation Law or
under our amended and restated Certificate of Incorporation or bylaws to any
shareholder who dissents from this Proposal 2.
To
realize the intent of the Refinancing Agreements and to provide the stockholders
who participated in the refinancing transactions with the full benefit of the
bargain, our Board of Directors deems it in the best interests of our
stockholders and the Company to increase the conversion rate of the Series A
Preferred Shares such that each share of Series A Preferred Stock, which is
currently convertible into 1 share of common stock, shall be convertible into
480.63 shares of common stock.
We
request that you approve an amended and restated Certificate of Incorporation in
the form attached hereto as Exhibit A and adopt the following
resolutions:
“RESOLVED,
that the Certificate of Incorporation of this Corporation (the “Certificate”)
be, and it hereby is, amended to increase the conversion rate of the
Corporation’s Series A Preferred Stock such that each share of Series A
Preferred Stock, which is currently convertible into 1 share of common stock,
shall be convertible into 480.63 shares of common stock; and
further
RESOLVED,
that the Certificate be, and it hereby is, amended and restated so as to be and
read in its entirety as set forth in the form attached hereto as Exhibit A,
which Certificate the officers of the Corporation are hereby authorized to file
with the Secretary of the State of Delaware.”
The
adoption of Proposal 2 will require the affirmative vote of the holders of a
majority of our outstanding shares on the record date.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
PROPOSAL
3
APPROVAL
OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO
INCREASE
THE CONVERSION RATE OF OUR SERIES B PREFERRED STOCK
We are
asking our shareholders to approve an amendment to our amended and restated
Certificate of Incorporation to increase the conversion rate of our Series B
Preferred Stock such that each share of Series B Preferred Stock, which is
currently convertible into 1 share of common stock, shall be convertible into
132.07 shares of common stock.
The
adoption of the proposed amendment and any subsequent issuance of our common
stock upon conversion of the Series B Preferred Stock into common stock would
not affect the rights of the holders of our currently outstanding common stock,
except for effects incidental to future increases in the number of shares of our
common stock outstanding, such as dilution of the earnings per share and voting
rights of our current holders of common stock. See the description
above in the section entitled "Consequences of Shareholder
Approval." If the amendment is adopted, it will become effective upon
the filing of the amended and restated Certificate of Incorporation with the
Secretary of State of the State of Delaware.
As of
February 6, 2009, we had outstanding 92,795.23 shares of Series B Preferred
Stock. .
The
rights and preferences with respect to the Series B Preferred Stock are set
forth in our Certificate of Designations, filed with the Secretary of State of
Delaware on December 30, 2008. On January 13, 2009, we filed with the
Delaware Secretary of State a Certificate of Increase of Designation which
increased the amount of designated Series B Preferred Stock from 100,934 to
102,690. On January 29, 2009, we filed with the Delaware Secretary of
State a second Certificate of Increase of Designation which increased the amount
of designated Series B Preferred Stock from 102,690 to
108,850. According to the Certificate of Designations, each share of
Series B Preferred Stock is currently convertible into one (1) share of common
stock, and the holders of shares of Series B Preferred Stock have one vote for
each share of Series B Preferred Stock held by them.
Pursuant
to the terms of the Refinancing Agreements and the Certificate of Designations,
any modification of the conversion rate for the conversion of the shares of
preferred stock into shares of common stock is subject to stockholder
approval.
Assuming
exercise of all outstanding shares of Series B Preferred Stock at a conversion
rate of one-to-132.07, we would need to issue 12,255,467 shares of authorized
common stock.
Pursuant
to the Refinancing Agreements, we undertook to solicit each stockholder’s
affirmative vote at a stockholder meeting to approve a resolution to increase
the conversion rate of the Series B Preferred Stock such that each share of
Series B Preferred Stock, which is currently convertible into 1 share of common
stock, shall be convertible into 132.07 shares of common
stock. Moreover, failure to approve the increased conversion rate for
the Series B Preferred Stock, could adversely affect future financing plans,
which could adversely affect our ability to fund our operations going
forward. Absent shareholder approval, we may have difficulty raising
additional funds to meet our obligations, and, even if we are able to raise
additional funds, the terms of such financing may not be favorable to
us.
No dissenter’s rights are available
under the Delaware General Corporation Law or under our amended and restated
Certificate of Incorporation or bylaws to any shareholder who dissents from this
Proposal 3.
To
realize the intent of the Refinancing Agreements and to provide the stockholders
who participated in the refinancing transactions with the full benefit of the
bargain, our Board of Directors deems it in the best interests of our
stockholders and the Company to increase the conversion rate of the Series B
Preferred Shares such that each share of Series B Preferred Stock, which is
currently convertible into 1 share of common stock, shall be convertible into
132.07 shares of common stock.
We
request that you approve an amended and restated Certificate of Incorporation in
the form attached hereto as Exhibit A and adopt the following
resolutions:
“RESOLVED,
that the Certificate of Incorporation of this Corporation (the “Certificate”)
be, and it hereby is, amended to increase the conversion rate of the
Corporation’s Series B Preferred Stock such that each share of Series B
Preferred Stock, which is currently convertible into 1 share of common stock,
shall be convertible into 132.07 shares of common stock; and
further
RESOLVED,
that the Certificate be, and it hereby is, amended and restated so as to be and
read in its entirety as set forth in the form attached hereto as Exhibit A,
which Certificate the officers of the Corporation are hereby authorized to file
with the Secretary of the State of Delaware.”
The
adoption of Proposal 3 will require the affirmative vote of the holders of a
majority of our outstanding shares on the record date.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As
of January 31, 2009
The
following table sets forth certain information regarding the estimated ownership
of our common stock as of January 31, 2009 by: (i) each director; (ii) each of
our “named executive officers,” as defined in Item 402 under Regulation S-K
promulgated by the Securities and Exchange Commission; (iii) all executive
officers and directors of Neonode as a group; and (iv) all those known by us to
be beneficial owners of more than five percent of our common stock. Unless
otherwise indicated, the address for each of the persons and entities set forth
below is c/o Neonode Inc. - Stockholder address.
Percentage
ownership is based on 37,976,464.19 shares, the estimated number of shares
outstanding as of January 31, 2009, not adjusted for the increased conversion
rates contemplated by this proxy statement.
|
Beneficial Ownership (1)
|
||||||||
|
Beneficial Owner
|
Number of
Shares
|
Percent of
Total
|
||||||
|
Per
Bystedt (2)(3)
CEO
and Director
|
3,196,728.13 | 8.41 | % | |||||
|
Magnus
Goertz (4)
|
1,956,862.17 | 5.15 | % | |||||
|
David
Brunton (2)
CFO
|
419,014.22 | 1.1 | % | |||||
|
John
Reardon (2)
Director
|
269,817 | 0.71 | % | |||||
|
Kenneth
Olson(2)
Director
|
40,000 | 0.11 | % | |||||
|
Susan
Major (2)
Director
|
317,254.14 | 0.83 | % | |||||
|
All
executive officers and directors as a group (5 persons)
(2)
|
4,242,813.49 | 11.04 | % | |||||
|
(1)
|
This
table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, we
believe that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned.
|
|
(2)
|
Includes,
40,000, 70,000, 192,095, 40,000, and 176,595 shares of common stock that
Messrs. Bystedt, Brunton, Reardon, Olson, and Ms. Major, respectively,
have the right to acquire within 60 days after the date of this table
under outstanding stock options.
|
|
(3)
|
Includes
2,987,384 shares of common stock, 162,133.17 shares of Series A Preferred
Stock, and 7,210.96 shares of Series B Preferred Stock held by Iwojima
sarl. Iwojima sarl may be deemed an affiliate of Mr.
Bystedt.
|
|
(4)
|
Includes
1,805,074 shares of common stock and 151,788.17 shares of Series A
Preferred Stock held by Athemis Limited, which may be deemed an affiliate
of Mr. Goertz
|
Beneficial
Ownership if Proposals 1, 2 and 3 are Approved
The
following table sets forth certain information regarding the estimated ownership
of our common stock assuming approval of Proposals 1, 2, and 3 and assuming
conversion of all issued and outstanding Series A and Series B Preferred Stock
by: (i) each director; (ii) each of our “named executive officers,” as defined
in Item 402 under Regulation S-K promulgated by the Securities and Exchange
Commission; (iii) all executive officers and directors of Neonode as a group;
and (iv) all those known by us to be beneficial owners of more than five percent
of our common stock. Unless otherwise indicated, the address for each
of the persons and entities set forth below is c/o Neonode Inc. - Stockholder
address.
Percentage
ownership is based on 469,374,109 shares, the estimated number of shares of
common stock outstanding after the conversion of the Series A and B Preferred
Stock at the increased conversion rates.
|
Beneficial Ownership (1)
|
||||||||
|
Beneficial Owner
|
Number of
Shares
|
Percent of
Total
|
||||||
|
Ramin
Remo Behdasht
58
Carters Road
Dural
NSW 158 Australia (3)
|
27,928,857 | 5.77 | % | |||||
|
Per
Bystedt (2)(4)
CEO
and Director
|
81,905,803 | 17.45 | % | |||||
|
Magnus
Goertz (5)
|
74,702,023 | 15.4 | % | |||||
|
Thomas
Eriksson (6)
|
73,933,854 | 15.3 | % | |||||
|
David
Brunton (2)(7)
CFO
|
7,404,452 | 1.58 | % | |||||
|
Susan
Major (2)(8)
Director
|
336,802 | 0.07 | % | |||||
|
John
Reardon (2)
Director
|
269,817 | 0.06 | % | |||||
|
Kenneth
Olson (2)
Director
|
40,000 | 0.01 | % | |||||
|
All
executive officers and directors as a group (5 persons)
(2)
|
89,956,874 | 19.14 | % | |||||
|
(1)
|
This
table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, we
believe that each of the stockholders named in this table has sole voting
and investment power with respect to the shares indicated as beneficially
owned.
|
|
(2)
|
Includes,
40,000, 70,000, 192,095, 40,000, and 176,595 shares of common stock that
Messrs. Bystedt, Brunton, Reardon, Olson and Ms. Major, respectively, have
the right to acquire within 60 days after the date of this table under
outstanding stock options.
|
|
(3)
|
Includes,
27,590,244 shares of common stock related to the conversion of 57,404.29
shares of Series A Preferred Stock, and 338,633 shares of common stock
related to the conversion of Series B Preferred Stock that Mr. Behdasht
received in having converted his debt and warrants under the December 2008
Refinancing.
|
|
(4)
|
Includes
2,987,384 shares of common stock and the conversion of 162,133.17 shares
of Series A Preferred Stock and 7,210.96 shares of Series B Preferred
Stock to common stock that is held by Iwojima sarl. Iwojima sarl may be
deemed an affiliate of Mr.
Bystedt.
|
|
(5)
|
Includes
1,805,074 shares of common stock and the conversion 151,788.17 shares of
Series A Preferred Stock to common stock that is held by Athemis Limited,
which may be deemed an affiliate of Mr.
Goertz.
|
|
(6)
|
Includes
1,039,905 shares of common stock and the conversion of 151,788.17 shares
of Series A Preferred Stock to common stock that is held by Wirelesstoys
AB, which may be deemed an affiliate of Mr.
Ericksson.
|
|
(7)
|
Includes
334,450 shares of common stock and the conversion of 14,564.22 shares of
Series A Preferred Stock to common stock that is held by Mr.
Brunton.
|
|
(8)
|
Includes
140,510 shares of common stock and the conversion of 149.14 shares of
Series B Preferred Stock to common stock that is held by Ms.
Major.
|
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This
Proxy Statement incorporates by reference the following documents which we have
previously filed with the Securities and Exchange Commission
(SEC). They contain important information about the Company and its
financial condition.
|
|
●
|
The
Company’s 2007 Annual Report on Form 10-K filed with the SEC on April 15,
2008.
|
|
|
●
|
The
Company’s Quarterly Report on Form 10-Q filed with the SEC on November 19,
2008.
|
|
|
●
|
The
Company’s Current Report on Form 8-K filed with the SEC on December 31,
2008,
|
We
will provide, without charge, a copy of any and all of the information that has
been incorporated by reference in this proxy statement (without exhibits unless
such exhibits are specifically incorporated by reference in this proxy
statement) to each person to whom a proxy statement is delivered, upon written
or oral request of such person, and by first class mail or other equally prompt
means within one business day of receipt of such request,. You may
request of copy of the foregoing documents by writing to us at Neonode Inc., 651
Byrdee Way, Lafayette, California 94549 or by calling us at
(925) 229-2125.
|
By
Order of the Board of Directors,
|
|
/s/ David Brunton
|
|
David
Brunton
|
|
Secretary
and Chief Financial Officer
|
Lafayette,
California
March __,
2009
EXHIBIT
A
AMENDED
AND RESTATED CERTIFICATE OF INCORPORATION
OF
NEONODE
INC.
Neonode
Inc., a corporation organized and existing under the laws of the State of
Delaware (the “Corporation”), hereby certifies as follows:
1. The name of the corporation (the
“Corporation”) is Neonode Inc. and its original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on September 4,
1997.
2. The Certificate of Incorporation of the
Corporation, as the same heretofore has been amended, supplemented or restated
(the "Certificate of Incorporation") currently authorizes the issuance of
77,000,000 shares of all classes, which are divided into (i) 75,000,000 shares
of common stock, $0.001 par value per share and (ii) 2,000,000 shares of
Preferred Stock, $0.001 par value per share, of which 899,081 shares have been
designated as Series A Preferred Stock and 108,850 shares have been designated
as Series B Preferred Stock, and the Corporation wishes to increase the number
of authorized shares of common stock to 698,000,000 shares.
3. This Amended and Restated Certificate
of Incorporation of the Corporation restates and integrates and further amends
the Certificate of Incorporation of the Corporation, so as to read in its
entirety as follows:
ARTICLE
I.
The name
of this Corporation is Neonode Inc.
ARTICLE
II.
The
address of the registered office of the corporation in the State of Delaware is
1209 Orange Street, City of Wilmington, County of New Castle, and the name of
the registered agent of the corporation in the State of Delaware at such address
is The Corporation Trust Company.
ARTICLE
III.
The
purpose of this corporation is to engage in any lawful act or activity for which
a corporation may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE
IV.
A.
This corporation is
authorized to issue two classes of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The total number of shares which the corporation
is authorized to issue is Seven Hundred Million (700,000,000) shares, of which
Six Hundred Ninety-Eight Million (698,000,000) shares will be Common Stock, par
value $0.001 per share, and Two Million (2,000,000) shares will be Preferred
Stock, par value $0.001 per share, of which 899,081 shares shall be designated
as Series A Preferred Stock and 108,850 shares shall be designated as Series B
Preferred Stock.
B. Series
A Preferred Stock and Series B Preferred Stock
Subject
to Article IV Section C below, a description of the respective classes of stock
and a statement of the designations, preferences, voting powers (or the lack of
voting powers), relative, participating, optional or other special rights and
privileges and the qualifications, limitations and restrictions of the Series A
Preferred Stock and the Series B Preferred Stock are as follows:
EXHIBIT
A
Series
A Preferred Stock
1. Dividends and
Distributions. The holders of
shares of Series A Preferred Stock will be entitled to participate with the
holders of the Common Stock of the Corporation with respect to any dividends
declared on the Common Stock in proportion to the number of shares of Common
Stock issuable upon conversion of the shares of Series A Preferred Stock held by
them.
2. Liquidation
Preference. In the event of any liquidation, dissolution, or
winding up of the Corporation, either voluntary or involuntary, subject to the
rights of any other series of Preferred Stock to be established by the Board of
Directors of the Corporation (the “Senior Preferred Stock”), the holders of
Series A Preferred Stock shall be entitled to receive, after any distribution
with respect to the Senior Preferred Stock and prior to and in preference to any
distribution of any of the assets of the Corporation to the holders of Common
Stock by reason of the ownership thereof, $0.001 for each share of Series A
Preferred Stock then outstanding.
3. Voting. The
holders of shares of Series A Preferred Stock shall have one vote for each share
of Series A Preferred Stock held by them.
4. Conversion.
(i) Subject
to the availability of a sufficient number of authorized but unissued shares of
Common Stock to effect the conversion of shares of Series A Preferred Stock,
each share of Series A Preferred Stock shall be convertible into the number of
shares of Common Stock that results from multiplying such share by the
conversion rate for the Series A Preferred Stock that is in effect at the time
of conversion (the “Conversion Rate”).
(ii) The
Conversion Rate for the Series A Preferred Stock shall be 480.63 shares of
Common Stock for each share of Series A Preferred Stock.
(iii) Subject
to the availability of a sufficient number of authorized but unissued shares of
Common Stock to effect the conversion of shares of Series A Preferred Stock,
each share of Series A Preferred Stock may be converted into share(s) of Common
Stock at the option of the holder thereof.
Series
B Preferred Stock
1. Dividends and
Distributions. The holders of shares of
Series B Preferred Stock will be entitled to participate with the holders of the
Common Stock of the Corporation with respect to any dividends declared on the
Common Stock in proportion to the number of shares of Common Stock issuable upon
conversion of the shares of Series B Preferred Stock held by them.
2. Liquidation
Preference. In the event of any liquidation, dissolution, or
winding up of the Corporation, either voluntary or involuntary, subject to the
rights of the Series A Preferred Stock and any other series of Preferred Stock
to be established by the Board of Directors of the Corporation (collectively,
the “Senior Preferred Stock”), the holders of Series B Preferred Stock shall be
entitled to receive, after any distribution with respect to the Senior Preferred
Stock and prior to and in preference to any distribution of any of the assets of
the Corporation to the holders of Common Stock by reason of the ownership
thereof, $0.001 for each share of Series B Preferred Stock then
outstanding.
3. Voting. The
holders of shares of Series B Preferred Stock shall have one vote for each share
of Series B Preferred Stock held by them.
4. Conversion.
(i) Subject
to the availability of a sufficient number of authorized but unissued shares of
Common Stock to effect the conversion of shares of Series B Preferred Stock,
each share of Series B Preferred Stock shall be convertible into the number of
shares of Common Stock that results from multiplying such share by the
conversion rate for the Series B Preferred Stock that is in effect at the time
of conversion (the “Conversion Rate”).
EXHIBIT
A
(ii) The
Conversion Rate for the Series B Preferred Stock shall be 132.07 shares of
Common Stock for each share of Series B Preferred Stock.
(iii) Subject
to the availability of a sufficient number of authorized but unissued shares of
Common Stock to effect the conversion of shares of Series B Preferred Stock,
each share of Series B Preferred Stock may be converted into share(s) of Common
Stock at the option of the holder thereof.
C. The Preferred Stock
may be issued from time to time in one or more series. The Board of Directors is
hereby authorized, by filing a certificate (a "Preferred Stock Designation")
pursuant to the Delaware General Corporation Law, to fix or alter from time to
time the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to increase or
decrease the number of shares of any series subsequent to the issuance of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series is decreased in
accordance with the foregoing sentence, the shares constituting such decrease
will resume the status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE
V.
For the
management of the business and for the conduct of the affairs of the
corporation, and in further definition, limitation and regulation of the powers
of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
(1) The
management of the business and the conduct of the affairs of the corporation
will be vested in its Board of Directors. The number of directors that will
constitute the whole Board of Directors will be fixed exclusively by one or more
resolutions adopted by the Board of Directors.
(2)
Subject to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, the directors will be
divided into three classes designated as Class I, Class II and Class III,
respectively. Directors will be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first annual
meeting of stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class I directors will expire and Class
I directors will be elected for a full term of three years. At the second annual
meeting of stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class II directors will expire and
Class II directors will be elected for a full term of three years. At the third
annual meeting of stockholders following the adoption and filing of this
Certificate of Incorporation, the term of office of the Class III directors
will
expire and Class III directors will be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors will be elected for
a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. Notwithstanding the foregoing provisions of this
Article, each director will serve until his or her successor is duly elected and
qualified or until his or her death, resignation or removal. No decrease in the
number of directors constituting the Board of Directors will shorten the term of
any incumbent director.
(3)
Subject to the rights of the holders of any series of Preferred Stock, no
director will be removed without cause. Subject to any limitations imposed by
law, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of
sixty-six and two thirds percent (66-2/3%) of the voting power of all the
then-outstanding shares of voting stock of the corporation entitled to vote at
an election of directors (the "Voting Stock").
EXHIBIT
A
(4)
Subject to the rights of the holders of any series of Preferred Stock, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors will, unless the Board of
Directors determines by resolution that any such vacancies or newly created
directorships will be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the stockholders. Any director elected in accordance with the preceding
sentence will hold office for the remainder of the full term of the director for
which the vacancy was created or occurred and until such director's successor
has been elected and qualified.
(5) In
the event that Section 2115(a) of the California Corporations Code is applicable
to this corporation, then the following will apply:
(a) Every
stockholder entitled to vote in any election of directors of this corporation
may cumulate such stockholder's votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of votes
to which the stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit;
(b) No
stockholder, however, may cumulate such stockholder's votes for one or more
candidates unless (A) the names of such candidates have been properly placed in
nomination, in accordance with the Bylaws of the corporation, prior to the
voting, (B) the stockholder has given advance notice to the corporation of the
intention to cumulative votes pursuant to the Bylaws, and (C) the stockholder
has given proper notice to the other stockholders at the meeting, prior to
voting, of such stockholder's intention to cumulate such stockholder's votes;
and
(6) If
any stockholder has given proper notice, all stockholders may cumulate their
votes for any candidates who have been properly placed in nomination. The
candidates receiving the highest number of votes of the shares entitled to be
voted for them up to the number of directors to be elected by such shares shall
be declared elected.
B.
(1)
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be altered
or amended or new Bylaws adopted by the affirmative vote of sixty-six and two
thirds percent (66-2/3%) of the then outstanding shares of the Voting Stock. The
Board of Directors will also have the power to adopt, amend, or repeal
Bylaws.
(2) The
directors of the corporation need not be elected by written ballot unless the
Bylaws so provide.
(3)
Following the filing with the Secretary of State of the State of Delaware of the
Agreement and Plan of Merger effecting the merger between the corporation and
SBE, Inc., a California corporation, no action will be taken by the stockholders
of the corporation except at an annual or special meeting of stockholders called
in accordance with the Bylaws.
(4)
Special meetings of the stockholders of the corporation may be called, for any
purpose or purposes, by (A) the Chairman of the Board of Directors, (B) the
Chief Executive Officer, or (C) the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board of Directors for adoption) or (D)
by the holders of the shares entitled to cast not less than sixty-six and two
thirds percent (66-2/3%) of the votes at the meeting, and will be held at such
place, on such date, and at such time as the Board of Directors fix
therefor.
(5)
Advance notice of stockholder nominations for the election of directors and of
business to be brought by stockholders before any meeting of the stockholders of
the corporation must be given in the manner provided in the Bylaws of the
corporation.
EXHIBIT
A
ARTICLE
VI.
A.
A director of the
corporation will not be personally liable to the corporation or its stockholders
for monetary damages for any breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (2) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law (3) under
Section 174 of the Delaware General Corporation Law, or (4) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director will be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law as so amended.
B. Any repeal or modification of this
Article VI will be prospective and will not affect the rights under this Article
VI in effect at the time of the alleged occurrence of any act or omission to act
giving rise to liability or indemnification.
ARTICLE
VII.
A.
The corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, except as provided in paragraph B. of this Article VII, and all rights
conferred upon the stockholders herein are granted subject to this
reservation.
B.
Notwithstanding any other
provisions of this Certificate of Incorporation or any provision of law that
might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the Voting
Stock required by law, this Certificate of Incorporation or any Preferred Stock
Designation, the affirmative vote of the holders of sixty-six and two thirds
percent (66-2/3%) of the then outstanding shares of the Voting Stock, voting
together as a single class, will be required to alter, amend or repeal Articles
V, VI, and VII.
4.
This certificate is filed
pursuant to Section 242 and 245 of Title 8 of the Delaware Code, as
amended.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate of Amendment as
of the ___ day of ____________, 2009.
|
|
|
Per
Bystedt, CEO
|
|
|
|
David
Brunton, Secretary and
CFO
|
