Proxy Statement - Other Information (preliminary) (pre 14c)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
x Preliminary Information Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
¨ Definitive Information Statement
FTE NETWORKS, INC.
(Name of Registrant as Specified In Its Charter)
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¨Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
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¨Fee paid previously with preliminary materials.
¨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.
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FTE NETWORKS, INC.
999 VANDERBILT BEACH ROAD, SUITE 601
NAPLES, FL 34108
(877) 878-8136
INFORMATION STATEMENT REGARDING ACTION TO BE TAKEN BY WRITTEN CONSENT OF MAJORITY STOCKHOLDERS IN LIEU OF A SPECIAL MEETING
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS’ MEETING WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN
March 9, 2016
To the Stockholders of FTE Networks, Inc.:
This Information Statement is first being mailed on or about March 19, 2016 to the holders of record of the common stock, par value $0.001 (“Common Stock”), of FTE Networks, Inc. (“FTE,” the “Company,” “we,” “us” or “our), a Nevada corporation, as of the close of business on December 30, 2015 (the “Record Date”). This Information Statement is being furnished on behalf of the Company’s Board of Directors (the “Board” and each member a “Director”) to inform our stockholders of the following actions to be taken by the Company, which actions have been approved by the written consent (“Written Consent”) of the holders of a majority of the aggregate voting power of our Common Stock, par value $0.001:
1.Amend the Company’s Articles of Incorporation to effect a reverse stock split of our Common Stock at a 1-for-20 ratio; and
2.Amend the Company’s Articles of Incorporation to increase the authorized shares of the Company’s Common Stock from 70,000,000 shares to 200,000,000 shares.
The proposed reverse stock split and increase in authorized shares of Common Stock (the “Amendments”) are more fully described in the accompanying Information Statement. The Written Consent was executed in accordance with the Nevada Revised Statutes, which permit that any action which may be taken at a meeting of the stockholders may also be taken by the written consent of the holders of outstanding stock having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. The accompanying Information Statement is being furnished to all of our stockholders in accordance with Section 14(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated by the U.S. Securities and Exchange Commission (“SEC”) thereunder, solely for the purpose of informing our stockholders of the actions to be taken by Written Consent before they become effective. The actions described herein will take effect no earlier than March 29, 2016. No action is required by you to effectuate the actions contemplated by the Amendments.
You are encouraged to read the enclosed Information Statement, which provides, among other information, details about the reverse stock split and increase in authorized shares of Common Stock. Thank you for your confidence and support.
Very truly yours, /s/ Michael Palleschi Name: Michael Palleschi Title: Chief Executive Officer FTE Networks, Inc.
GENERAL INFORMATION
This Information Statement is being furnished to the stockholders of the Company to provide material information regarding corporate actions that have been approved by the Written Consent of our stockholders holding a majority of the voting power. The approximate date on which this Information Statement is intended to be sent or given to the stockholders is March 19, 2016. This Information Statement is also available free of charge on the SEC’s website at www.sec.gov.
Only one copy of this Information Statement is being delivered to two or more stockholders who share an address unless we have received contrary instruction from one or more of such stockholders. We will promptly deliver, upon written or oral request, a separate copy of the Information Statement to a stockholder at a shared address to which a single copy of the Information Statement was delivered. If you would like to request additional copies of the Information Statement, if in the future you would like to receive multiple copies of information statements, proxy statements or annual reports, or if you are currently receiving multiple copies of these documents and would like to receive only a single copy, please so instruct us by calling or writing to our corporate secretary at the Company’s executive offices at the telephone number or address specified above.
PLEASE NOTE THAT THIS IS NOT A REQUEST FOR YOUR VOTE OR A PROXY STATEMENT, BUT RATHER AN INFORMATION STATEMENT DESIGNED TO INFORM YOU OF CORPORATE ACTIONS TO BE TAKEN BY THE WRITTEN CONSENT OF A MAJORITY OF OUR STOCKHOLDERS.
The entire cost of furnishing this Information Statement will be borne by the Company. We will request brokerage houses, nominees, custodians, fiduciaries and other like parties to forward this Information Statement to the beneficial owners of the Common Stock held of record by them.
VOTING SECURITIES
Record Date
Only stockholders of record as of the close of business on December 30, 2015 (the “Record Date”) are entitled to notice of the actions approved by the Written Consent.
Voting Stock
As of the Record Date, there were 46,386,220 shares of Common Stock, 500.377 shares of Series A Convertible Preferred Stock (“Series A Stock”), 295.234 shares of Series A-1 Preferred Stock (“Series A-1 Stock”), 1,994,200 shares of Series D Convertible Preferred Stock (“Series D Stock”), and 917,461 shares of Series F Convertible Preferred Stock (“Series F Stock”) issued and outstanding. Holders of our Common Stock and our Preferred Stock are entitled to vote together as a single class in matters subject to a vote of our stockholders. Each share of Common Stock entitles the holder thereof to one vote in matters subject to a vote of our stockholders. Each share of Series A Stock and Series A-1 Stock entitles the holder thereof to the number of votes equal to the number of whole shares of Common Stock into which such shares are convertible as of the Record Date. Each share of Series D Stock and Series F Stock entitles the holder thereof to 20 votes per share held as of the Record Date. Fractional shares are rounded down to the nearest whole number for each series of Preferred Stock. No other class of voting securities was outstanding as of the Record date.
AUTHORIZATION BY THE BOARD OF DIRECTORS
AND THE MAJORITY STOCKHOLDERS
Under the Nevada Revised Statutes (“NRS”), any action that can be taken at an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote if the holders of outstanding stock, having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, consent to such action in writing. Had a special meeting of stockholders been held to vote on the Amendments, approval of the Amendments would have required that the votes cast in favor of the Amendments exceed the votes cast opposing the Amendments. The Written Consent was executed by stockholders who collectively own shares of Common Stock and shares of Preferred Stock representing 59.6% of the voting power of the Company. See “Information on Consenting Stockholders” below.
We have obtained all necessary corporate approvals in connection with the actions described herein. We are not seeking written consents from any other stockholder, and the other stockholders will not be given an opportunity to vote with respect to the actions described in this Information Statement. This Information Statement is furnished solely for the purposes of advising stockholders of the actions described herein and giving stockholders notice of such actions as required by the NRS and the Exchange Act.
PROPOSALS BY STOCKHOLDERS
No stockholder entitled to vote has transmitted any proposal to be acted upon by the Company.
INTEREST OF CERTAIN PERSONS IN MATTERS ACTED UPON
No director, officer, nominee for election as a director, associate of any director, officer or nominee or any other person has any substantial interest, direct or indirect, by security holdings or otherwise, in any of the matters described herein, other than the interests held by such persons through their respective beneficial ownership of shares of our Common Stock and Preferred Stock set forth below under “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
ACTION ONE
AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION
TO EFFECTUATE THE REVERSE STOCK SPLIT
The Reverse Stock Split
On December 23, 2015, the Board unanimously authorized and approved an amendment to our Articles of Incorporation to effect a reverse stock split of our Common Stock at a 1-for-20 ratio (the “Reverse Split”). On December 30, 2015, stockholders holding a majority of our voting power approved by written consent the amendment to our Articles of Incorporation, which would effect the Reverse Split. The Reverse Split will reduce the number of outstanding shares of our Common Stock by reclassifying and converting all outstanding shares of our Common Stock into a proportionately fewer number of shares of Common Stock. This action will also result in a relative increase in the available number of authorized but unissued shares of our Common Stock because the number of shares authorized for issuance is otherwise unchanged by the Reverse Split. Each stockholder’s proportionate ownership of the issued and outstanding shares of our Common Stock would remain the same, however, except for minor changes that may result from the cash payment for fractional shares, as described below under “Action One ? Amendment to the Company’s Articles of Incorporation to Effectuate the Reverse Stock Split ? Treatment of Fractional Shares.” With the exception of adjustments for those stockholders with fractional shares, the Reverse Split will not affect any stockholder’s proportional equity interest in the Company in relation to other stockholders or rights, preferences, privileges or priorities. Outstanding shares of new Common Stock resulting from the Reverse Split will remain fully paid and non-assessable.
The Purpose and Reason for the Reverse Stock Split
One of the main purposes of the Reverse Stock Split is that part of the reverse merger on June 19, 2013, the Company is required to do a reverse split to recapitalize and restructure the Company. Additionally, the reverse stock split will potentially normalize the share price and share structure to make it more attractive to a broad range of institutional investors and increase our ability to uplist onto NASDAQ.
Increase in Eligible Institutional and Other Investors. We believe a Reverse Stock Split may increase the price of our common stock or potentially decrease its volatility, and thus may allow a broader range of institutional investors with the ability to invest in our stock. For example, many funds and institutions have investment guidelines and policies that prohibit them from investing in stocks whose price is below a certain threshold. We believe that increased institutional investor interest in the Company and our common stock will potentially increase the overall market for our common stock.
Increase Analyst and Broker Interest. We believe a Reverse Stock Split would help increase analyst and broker-dealer interest in our common stock as many brokerage and investment advisory firms’ policies can discourage analysts, advisors, and broker/dealers from following or recommending companies with low stock prices. Because of the trading volatility and lack of liquidity often associated with lower-priced stocks, many brokerage houses have adopted investment guidelines and policies and practices that either prohibit or discourage them from investing or trading such stocks or recommending them to their clients and customers. Some of those guidelines, policies and practices may also function to make the processing of trades in lower-priced stocks economically unattractive to broker-dealers. While we recognize we may remain a “penny stock” under the rules of the Securities and Exchange Commission because a penny stock trades at less than $5.00, we think the increase from the Reverse Stock Split will position us better if our business continues to increase as we expect. Additionally, because brokers’ commissions and dealer mark-ups/mark-downs on transactions in lower-priced stocks generally represent a higher percentage of the stock price than commissions and mark-ups/mark-downs on higher-priced stocks, the current average price per share of our common stock can result in shareholders or potential shareholders paying transaction costs representing a higher percentage of the total share value than would otherwise be the case if the share price were substantially higher.
Board Discretion to Implement a Reverse Split
The Board has the authority, in its sole determination without any further action necessary by the stockholders, to effect the Reverse Split. The Board may, in its sole determination, choose to not effect a Reverse Split. The Board believes that this discretionary authority provides the Board with maximum flexibility to react to prevailing market conditions and future changes to the market price of our Common Stock and, therefore, better enables it to act in the best interests of the Company. In exercising its discretion, the Board may consider the following factors:
·the historical trading price and trading volume of the Common Stock;
·the then prevailing trading price and trading volume of the Common Stock and the anticipated impact of a Reverse Split on the trading market for the Common Stock; and
·the prevailing general market and economic conditions.
At the close of business on the Record Date, the Company had 46,386,220 shares of Common Stock issued and outstanding. Assuming the Reverse Split had occurred, the Company would have approximately 2,319,311 shares of Common Stock issued and outstanding (without giving effect to the treatment of fractional shares) as of the close of business on the Record Date. The actual number of shares of Common Stock outstanding after giving effect to a Reverse Split will depend on the number of shares of Common Stock outstanding at the time the Reverse Split is effected and on the cash payment for fractional shares. The Company does not expect the Reverse Split to have any economic effect on stockholders and warrant holders except to the extent a Reverse Split results in fractional shares as discussed below under “Action One ? Amendment to the Company’s Articles of Incorporation to Effectuate the Reverse Stock Split ? Treatment of Fractional Shares.”
Procedure for Effecting a Reverse Split
To implement the Reverse Split, we will file a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the Sate of Nevada. The Reverse Split would become effective at such time as the Certificate of Amendment is filed with the Secretary of State of the State of Nevada or at such later time as is specified therein. All shares of our Common Stock that were issued and outstanding immediately prior to the effectiveness of the Reverse Split would automatically be converted into new shares of our Common Stock based on the 1-for-20 split ratio.
As soon as practicable after the effective date of the Reverse Split, stockholders of record on the Record Date will receive a letter from our transfer agent asking them to return the outstanding certificates representing pre-split shares of Common Stock, which would be cancelled upon receipt by our transfer agent, and new certificates representing the post-split shares of Common Stock would be sent to each of our stockholders. Such letter will contain instructions for the surrender of the outstanding certificates representing pre-split shares in exchange for new certificates representing post-split shares and the payment of the cash consideration for any fractional share interests, as discussed below under “Action One ? Amendment to the Company’s Articles of Incorporation to Effectuate the Reverse Stock Split ? Treatment of Fractional Shares.” No payment will be made in respect of any fractional share interest until the stockholder has surrendered his or her outstanding certificates in accordance with the instructions in the letter from our transfer agent.
We will bear the costs of the issuance of the new stock certificates. Stockholders who hold uncertificated shares, either as direct or beneficial owners, will have their holdings electronically adjusted by the Company’s transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Split. Stockholders who hold uncertificated shares as direct owners will be sent a statement of holding from the Company’s transfer agent that indicates the number of shares owned in book-entry form.
Our transfer agent is ClearTrust, LLC, whose telephone number and address are (813) 235-4490 and 16540 Point Village Drive, Lutz, Florida 33558, respectively.
Beginning after the effectiveness of the Reverse Split, each certificate representing shares of pre-split Common Stock will be deemed for all corporate purposes to evidence ownership of post-split Common Stock.
STOCKHOLDERS SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT SUBMIT ANY CERTIFICATES UNLESS AND UNTIL THEY ARE REQUESTED TO DO SO.
Disadvantages of a Reverse Stock Split
Even though our Board believes that the potential advantages of the Reverse Split outweigh any disadvantages that might result, the following are the possible disadvantages of the Reverse Split:
(a)The Reverse Split may leave certain stockholders with one or more “odd lots,” which are stock holdings in amounts of less than 100 shares of our Common Stock. These odd lots may be more difficult to sell than shares of our Common Stock in even multiples of 100. In addition, brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares.
(a)Because the Reverse Split would result in an increased number of authorized but unissued shares of Common Stock, it may be construed as having an anti-takeover effect. For example, it may be possible for the Board to delay or impede a takeover or transfer of control of the Company by causing the additional authorized but unissued shares to be issued to holders who might side with the Board in opposing a takeover bid that the Board determines is not in our best interests or the best interests of our stockholders. The increase in the number of authorized but unissued shares of Common Stock may therefore have the effect of discouraging unsolicited takeover attempts. By potentially discouraging initiation of unsolicited takeover attempts, the increase in the number of authorized but unissued shares of Common Stock may limit the ability of our stockholders to dispose of their shares at the higher price generally available in takeover attempts or that otherwise may be available under a merger proposal. The increase in the number of authorized but unissued shares of Common Stock may have the effect of permitting our current members of management, including our current Directors, to retain their position, and place them in a better position to resist changes that stockholders may wish to make if they are dissatisfied with the conduct of our business. However, the Board is not aware of any attempt to take control of the Company, and the Board did not propose the Reverse Split with the intent that the increase in the number of authorized but unissued shares of Common Stock be utilized as a type of anti-takeover device.
(b)The increased number of authorized but unissued shares of our Common Stock could be issued by the Board without further stockholder approval, which could result in dilution to the percentage of stock ownership or voting power of our current stockholders.
Effect of the Reverse Split
As of the Record Date, there were 46,386,220 shares of Common Stock issued and outstanding. After the Reverse Split, there will be approximately 2,319,311 shares of Common Stock issued and outstanding, the exact number to be determined after effectiveness of the Reverse Split based on the number of shares of Common Stock outstanding at the time the Reverse Split is effected and on the cash payment for fractional shares, as discussed below under “Action One ? Amendment to the Company’s Articles of Incorporation to Effectuate the Reverse Stock Split ? Treatment of Fractional Shares.”
Following the effectiveness of the Reverse Split, all of your shares of Common Stock will be represented by a smaller amount of shares. Specifically, every 20 shares of Common Stock presently outstanding, without any action on the part of the stockholder, will represent one share of Common Stock.
Subject to the provisions for elimination of fractional shares, consummation of the Reverse Split will not result in a change in the relative equity position or voting power of the stockholders. In addition, there will be no change to the rights and preferences of the outstanding shares of Common Stock upon consummation of the Reverse Split.
Effect of the Reverse Split on the Company’s Warrants
Upon effectiveness of the Reverse Split, proportionate adjustments are generally required to be made to the per share conversion price of convertible or exchangeable securities, such as preferred stock. In addition, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options and warrants entitling the holders to purchase, exchange for, or convert into, shares of Common Stock. This would result in approximately the same aggregate price being paid under such options and warrants upon exercise, and approximately the same value of shares of Common Stock being delivered upon such exercise, immediately following the Reverse Split as was the case immediately preceding the Reverse Split. The number of shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted, subject to our treatment of fractional shares. The number of shares reserved for issuance pursuant to these securities will be adjusted proportionately, subject to our treatment of fractional shares.
