UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
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
| [X] | Filed by the Registrant |
| [ ] | Filed by a |
Check the appropriate box:
| [X] | Preliminary Proxy Statement |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| [ ] | Definitive Proxy Statement |
| [ ] | Definitive Additional Materials |
| [ ] | Soliciting Material under |
HOPTO INC.HopTo, Inc.
(Name of registrant as specified in its Charter)
(Name of person(s) filing proxy statement,Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the registrant)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. |
| Title of each class of securities to which | ||
| Aggregate number of securities to which | ||
| Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
| Proposed maximum aggregate value of transaction: | ||
| Total fee paid: |
| [ ] | 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. |
| Amount Previously Paid: | ||
| Form, Schedule or Registration Statement No.: | ||
| Filing Party: | ||
| Date Filed: |
SUBJECT TO COMPLETION – DATED NOVEMBER [●], 2020
November [●], 2020
Dear Fellow Stockholders:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSWe invite you to join us at the 2020 Annual Stockholders’ Meeting (the “Annual Meeting”) of HopTo, Inc., on [●], [●], 2020, beginning at 9:00 a.m. local time, at 620 Newport Center Drive, 11th Floor, Newport Beach, CA 92660.TO BE HELD ON AUGUST 23, 2018
To Our Stockholders:
The Notice of Annual Stockholders’ Meeting, proxy statement and proxy card accompanying this letter provide an outline of the business to be conducted at the meeting.
It is important that you be represented at the Annual Meeting. Please complete, sign, date and return the proxy card to us in the enclosed envelope. If a broker or other nominee holds your shares in “street name,” your broker has enclosed a voting instruction form, which you should use to vote those shares. The voting instruction form indicates whether you have the option to vote those shares by telephone or by using the internet. We urge you to fill out, sign, date and mail the enclosed proxy card or authorize your proxy by telephone or through the internet as soon as possible, even if you currently plan to attend the Annual Meeting. This will not prevent you from voting in person, but will assure that your vote is counted if you are unable to attend the meeting. Your vote and participation in the governance of HopTo, Inc. are very important to us.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely yours,
Jonathon R. Skeels
Chief Executive Officer, Interim Chief Financial Officer, Secretary and Member of Board of Directors
HopTo, Inc.
Notice of Annual Stockholders’ Meeting
The 2020 Annual Stockholders’ Meeting (the “Annual Meeting of Stockholders (our “Annual Meeting””) of hopToHopTo, Inc., a Delaware corporation (the “Company”“Corporation”), will be held on Thursday, August 23, 2018,[●], [●], 2020, beginning at 10:9:00 a.m., local time, at the Company’s offices located at 51 East Campbell Avenue, Suite 128, Campbell, California 95008 for the following purposes, as more fully described in the accompanying Proxy Statement:620 Newport Center Drive, 11th Floor, Newport Beach, CA 92660.
The following matters will be considered at the Annual Meeting:
| ● | ||
| ● | ||
| ● | ||
| ● | ||
| ● | Other matters that may properly come before the Annual Meeting. |
The items to be considered at the Annual Meeting may be considered at the meeting or at any adjournment or postponement of the meeting. You are entitled to vote at the Annual Meeting, or at any adjournment or postponement thereof, only if you were a stockholder of the Corporation at the close of business on October 22, 2020 (the “Record Date”). You are entitled to attend the Annual Meeting, or any adjournment or postponement thereof, only if you were a stockholder at the Record Date or you hold a valid proxy to vote at the Annual Meeting. You must present photo identification and proof of ownership and proxy representation to be admitted to the Annual Meeting.
Whether or not you expect to attend the Annual Meeting, please vote your shares in advance online, by phone or by mail to ensure that your vote will be represented at the Annual 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 Annual Meeting, you must obtain a proxy issued in your name from that record holder.
Jonathon R. Skeels
Chief Executive Officer, Interim Chief Financial Officer, Secretary and Member of Board of Directors
Concord, New Hampshire
[●], 2020
Important Notice Regarding the Availability of Proxy Statement Materials for the
Annual Stockholders’ Meeting to be Held on [●], 2020.
The Proxy Statement, Proxy Card and Our Annual Report on Form 10-K
are available on the internet at www.proxyvote.com.
This proxy statement and the accompanying form of proxy or voting instruction card and our 2019 Annual Report on Form 10-K are being provided to stockholders beginning on or about [●], 2020.
TABLE OF CONTENTS
| i |
PRELIMINARY PROXY STATEMENT
SUBJECT TO COMPLETION – DATED NOVEMBER [●], 2020
HOPTO, INC.
2020 ANNUAL STOCKHOLDERS’ MEETING
TO BE HELD ON [●], 2020
We are furnishing you this proxy statement in connection with the solicitation of proxies by the Board of Directors (the “Board”) of HopTo, Inc., a Delaware corporation (the “Corporation”, “Company”, “we”, “us”, or “our”). This proxy statement addresses the items of business for the 2020 Annual Stockholders’ Meeting m of the Corporation (the “Annual Meeting”) to be held on [●], 2020, or any postponement or adjournment thereof. We will hold the Annual Meeting at 9:00 a.m., at 620 Newport Center Drive, 11th Floor, Newport Beach, CA 92660. The Notice of Annual Stockholders’ Meeting, this proxy statement, our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, a proxy card and any other accompanying proxy materials are being made available to our stockholders on or about [●], 2020.
Proxy Materials
1. Why am I receiving these materials?
Our Board is making these materials available to you over both the internet and by mailing paper copies to you in connection with the Annual Meeting to be held on [●], 2020. As a stockholder, you are invited to attend the Annual Meeting and are entitled and requested to vote on the proposals described in this proxy statement. This proxy statement includes information that we are required to provide under the rules of the Securities and Exchange Commission (the “SEC”) and is designed to assist you in voting your shares.
2. What is included in the proxy materials?
The proxy materials include:
| ● | Our Notice of Annual Stockholders’ Meeting; | |
| ● | Our proxy statement for the | |
| ● | Our 2019 Annual Report on Form 10-K; and | |
| ● | Our proxy and voting instruction card. |
3. What information is contained in this proxy statement?
The information in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting process, our Board and its committees, corporate governance, the compensation of our directors and executive officers, and other required information.
4. I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy?
If you share an address with another stockholder, you may receive only one set of proxy materials unless you have provided contrary instructions. If you wish to receive a separate set of the materials, please request an additional copy by contacting Householding Department, 51 Mercedes Way, Edgewood, NY 11717 or by calling (866) 540-7095. A separate set of the materials will be sent promptly following receipt of your request.
If you are a stockholder of record and wish to receive a separate set of proxy materials in the future, or if you have received multiple sets of proxy materials and would like to receive only one set in the future, please contact our transfer agent, American Stock Transfer and Trust Company, at 6201 15th Avenue, Brooklyn NY 11219 or by calling (718) 921-8300.
If you are a beneficial owner of shares and you wish to receive a separate set of proxy materials in the future, or if you have received multiple sets of proxy materials and would like to receive only one set in the future, please contact your bank or broker directly.
Stockholders also may write to, or email us, at the address below to request a separate copy of the proxy materials:
HopTo, Inc.
6 Loudon Road, Suite 200
Concord NH 03301
Attn: Investor Relations
investors@hopto.com
5. Who pays the cost of soliciting proxies for the Annual Meeting?
We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and of soliciting proxies.
Our directors, officers and employees also may solicit proxies in person, by telephone or by electronic communication. They will not receive any additional compensation for these activities.
We will reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy materials to beneficial stockholders.
6. What items of business will be voted on at the Annual Meeting?
The proposals to be voted on at the Annual Meeting are:
| ● | The election of | |
| ● | ||
Only stockholders of record at the close of business on June 25, 2018 are entitled to notice of and to vote at our Annual Meeting. A list of stockholders as of this date will be available during normal business hours for examination at our offices by any stockholder for any purpose relevant to our Annual Meeting for a period of ten days prior to the Annual Meeting.
All stockholders are urged to attend our Annual Meeting in person or vote by proxy.YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND OUR ANNUAL MEETING IN PERSON, PLEASE SIGN AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT OUR ANNUAL MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. The proxy is revocable at any time prior to its exercise and will not affect your right to vote in person in the event you attend our Annual Meeting.
Important Notice Regarding Availability of Proxy Materials for the Fiscal Year 2018
Annual Meeting of Stockholders to be Held on August 23, 2018
Our Notice of Meeting, Proxy Statement, Annual Report on Form 10-K, and Proxy Card are available on the Internet at [●]
6 Loudon Road, Suite 200
Concord, New Hampshire 03301
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 23, 2018
INTRODUCTION
This Proxy Statement contains information related to the solicitation of proxies by and on behalf of the board of directors of hopTo Inc. (our “Board”) for use in connection with our Annual Meeting of Stockholders to be held on Thursday, August 23, 2018, beginning at 10 a.m., local time, at the Company’s offices located at 51 East Campbell Avenue, Suite 128, Campbell, California 95008, and at any and all adjournments or postponements thereof (our “Annual Meeting”). At our Annual Meeting, stockholders will be asked to consider and vote upon the following proposals:
| ||
7. What are my voting choices?
This Proxy StatementYou may vote “FOR” or “AGAINST” the election of any or all nominees for election as director, the ratification of the selection of dbbMcKennon, the approval of the Reverse Split and the accompanying proxy card are being mailed to stockholdersapproval, on or about August 2 , 2018.
an advisory basis, of the 2019 compensation of our named executive officers.
INFORMATION CONCERNING SOLICITATION AND VOTING8. How does the Board recommend that I vote?
Board Recommendation
Our Board recommends that our stockholdersyou voteFOR amendment your shares “FOR” each of our Certificate of Incorporationits nominees for election to eliminate classificationthe board; “FOR” the ratification of the Board (Proposal 1);FORCorporation’s independent registered public accounting firm; “FOR” the election ofReverse Split; and “FOR” the four (4) director nominees to serve until our annual meeting of stockholders in 2019, or, to serveapproval, on our Board as the Class II, Class III and Class I directors to terms ending asan advisory basis, of the 2019 2020 and 2021 annual meetings of stockholders, respectively (Proposal 2);FOR amendmentcompensation of our Certificatenamed executive officers. The Board is not required to make a recommendation with respect to the frequency of Incorporation to repeala stockholder advisory vote on the provision in Article VII prohibiting stockholder action by written consent without a meeting (Proposal 3);FOR amendmentcompensation of our Certificatenamed executive officers and has chosen not to make a recommendation with respect to that proposal.
9. What vote is required to approve each item?
To conduct business at the Annual Meeting, a quorum must be established. Pursuant to our Second Amended and Restated Bylaws (our “Bylaws”), a quorum is established by the presence in person or by proxy, of Incorporation to change the super-majority voting requirement to a majority vote requirement in Article V relating to the amendment of our second amended and restated bylaws (Proposal 4);FOR amendment of our Certificate of Incorporation to add a new article that requires any related party transaction be approved by either the unanimous affirmative vote of disinterested directors or affirmative voteholders of a majority of our outstanding sharesstock and entitled to vote thereat.
If you indicate “ABSTAIN,” your vote will be counted for purposes of stock held by disinterested stockholders (Proposal 5);FORdetermining the grantpresence or absence of a quorum for the transaction of business at the Annual Meeting, but will not be considered a vote cast with respect to the election of any director nominee or any other proposal. You are not entitled to cumulative voting in the election of directors.
As described below, broker non-votes will be counted for determining the presence or absence of a quorum for the transaction of business at the Annual Meeting, but will not be considered votes cast with respect to the election of any director nominee or any other proposal.
| Proposal | Required Vote | |
| 1. Election of directors | Plurality of the shares present and voting | |
| 2. Ratification of independent registered public accounting firm | Majority of the shares present and voting | |
| 3. Approval of the Reverse Split | Majority of our outstanding shares | |
| 4. Advisory vote on executive compensation | Majority of the shares present and voting |
For the election of directors, the four nominees receiving the most “FOR” votes from the holders of shares present in person or represented by proxy and entitled to vote for the election of common stock to our directors Mike Brochu and John Cronin (Proposal 6);FORwill be elected. Only votes “FOR” or “WITHHELD” will affect the advisory “Say-on-pay” proposal (Proposal 7); andFORtheoutcome. Broker non-votes will have no effect.
The ratification of Marcumthe selection of dbbMcKennon as our independent registered public accounting firm for the fiscal year ending December 31, 2018 (Proposal 8).
2020 must receive “FOR” votes from at least a majority of shares present in person or by proxy and entitled to vote on such proposal. Abstentions will have the same effect as a vote against such proposal. Broker non-votes will have no effect.
Approval of the Reverse Split Amendment and to authorize our Board, if in its judgment it is necessary, to effect the Reverse Split requires an affirmative vote of a majority of the common stock outstanding and entitled to vote at the Annual Meeting. Abstentions and instructions withholding authority to vote for this proposal will count as a vote against the proposal. The Reverse Split Amendment and the Reverse Split is a “non-routine” matter. Therefore, if you do not instruct your broker how to vote with respect to the withdrawal, your broker may not vote with respect to this proposal and those votes will be deemed broker non-votes. Broker non-votes are not counted for the purpose of determining whether to effect the Reverse Split, and, therefore, will not have the effect of a negative vote with respect to the Reverse Split.
The advisory approval of the compensation of our named executive officers must receive “FOR” votes from at least a majority of shares represented either present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions from voting will have the same effect as a vote against the proposal. Broker non-votes will have no effect.
10. What happens if additional items are presented at the Annual Meeting?
We are not aware of any item that may be voted on at the Annual Meeting that is not described in this proxy statement. However, the holders of the proxies that we are soliciting will have the discretion to vote them in accordance with their best judgment on any additional matters that may be voted on, including matters incidental to the conduct of the Annual Meeting.
Record Date, Outstanding Shares, and Quorum11. Is my vote confidential?
Only holdersYou may elect that your identity and individual vote be held confidential by marking the appropriate box on your proxy card or ballot. Confidential elections will not apply to the extent that voting disclosure is required by law or is necessary or appropriate to assert or defend any claim relating to voting.
Confidentiality will also not apply with respect to any matter for which votes are solicited in opposition to the director nominees or voting recommendations of recordour Board, unless the persons engaging in the opposing solicitation provide stockholders with confidential voting comparable to that which we provide.
12. Where can I find the voting results?
We expect to announce preliminary voting results at the Annual Meeting and to publish final results in a Current Report on Form 8-K that we will file with the SEC within four business days following the meeting. The report will be available on our website at www.hopto.com.
13. What shares can I vote?
You are entitled to one vote for each share of our common stock that you owned at the close of business on June 25, 2018 (the “Record Date”) are entitled to notice of and to vote at ourOctober 22, 2020, the record date for the Annual Meeting and any adjournments or postponements thereof. As of(the “Record Date”). You may vote all shares owned by you on the Record Date, 9,804,400including (1) shares held directly in your name as the stockholder of record and (2) shares held for you as the beneficial owner through a bank, broker or other nominee. On the Record Date, 18,621,533 shares of our common stock were issued and outstanding.
Holders14. What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Most of our common stockstockholders hold their shares through a bank, broker or other nominee rather than having the shares registered directly in their own name. Summarized below are entitledsome distinctions between shares held of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, you are the stockholder of record of the shares. As the stockholder of record, you have the right to onegrant a proxy to vote your shares to representatives of the Corporation or to another person, or to vote your shares in person at the Annual Meeting, for each shareor any adjournment or postponement thereof. You have received either a proxy card to use in voting your shares or a notice of common stockinternet availability of our proxy materials, which instructs you how to vote.
Beneficial Owner
If your shares are held through a bank, broker or other nominee, it is likely that was issued and outstanding asthey are registered in the name of the Record Date.nominee and you are the beneficial owner of shares held in street name.
The presence, in person or by proxy,As the beneficial owner of stockholders holding at least a majority of our outstanding common stock will constitute a quorumshares held for your account, you have the transaction of business at ourright to direct the registered holder to vote your shares as you instruct, and you also are invited to attend the Annual Meeting. IfYour bank, broker, plan trustee or other nominee has provided a quorumvoting instruction card for you to use in directing how your shares are to be voted. However, since a beneficial owner is not presentthe stockholder of record, you may not vote your shares in person at the Annual Meeting, or any adjournment or postponement thereof, unless you obtain a legal proxy from the registered holder of the shares giving you the right to do so.
15. How can I vote in person at the Annual Meeting?
You may vote in person at the Annual Meeting, or any adjournment or postponement thereof, those shares that you hold in your name as the stockholder of record. You may vote in person shares for which you are the beneficial owner only by obtaining a legal proxy giving you the right to vote the shares from the bank, broker or other nominee that is the registered holder of your shares.
Even if you plan to attend the Annual Meeting, we expectrecommend that the meetingyou also submit your proxy or voting instructions as described below so that your vote will be adjournedcounted if you later decide not to attend.
16. How can I vote without attending the Annual Meeting?
Whether you hold your shares as a stockholder of record or postponedas a beneficial owner, you may direct how your shares are to solicit additional proxies.be voted without attending the Annual Meeting, or any adjournment or postponement thereof. If you are a stockholder of record, you may vote by submitting a proxy. If you hold shares as a beneficial owner, you may vote by submitting voting instructions to the registered owner of your shares will be counted towardsshares.
For directions on how to vote, please refer to the quorum only if you submit a validfollowing instructions and those included on your proxy or attend the Annual Meeting. Abstentions and “broker non-votes” are counted as present at our Annual Meeting for purposes of determining whether a quorum is present.
How to Vote
Voting in Person
All stockholders as of the close of business on June 25, 2018 can attend the Annual Meeting. If you plan to attend the Annual Meeting and wish to vote in person, you will be given a ballot at the Annual Meeting. You may vote at the Annual Meeting if you are a stockholder of record (your shares are directly registered in your name on our books and not held through a broker, bank or other nominee). In order to vote at the Annual Meeting shares held in “street name,” you must obtain a valid proxy from your broker, bank, or other nominee, and bring it to the meeting. Follow the instructions from your broker, bank, or other nominee included with these proxy materials, or contact your broker, bank, or other nominee to request a proxy form.voting instruction card.
Voting by ProxyInternet. Stockholders may vote over the internet by following the instructions on the proxy or voting instruction card.
We request that ourVoting by Telephone. Stockholders of record may vote by telephone by calling (800) 690-6903 and following the instructions. When voting by telephone, stockholders complete, date,must have available the control number included on their proxy card.
Most stockholders who are beneficial owners of their shares may vote by phone by calling the number specified on the voting instruction card provided by their bank, broker or nominee. These stockholders should check the card for telephone voting availability.
Voting by Mail. Stockholders may vote by mail by signing, dating and sign the accompanyingreturning their proxy and promptly return it in the accompanying envelope or otherwise mail it to us. All properly executed proxies that we receive prior to the vote at the Annual Meeting (that have not been revoked)voting instruction card.
17. How will my shares be voted?
Your shares will be voted in accordance with theas you specifically instruct on your proxy or voting instruction card. If you sign and return your proxy or voting instruction card without giving specific instructions, indicated on the proxies. All properly executed proxies that we receive prior to the vote at the Annual Meeting that do not provide any direction as to how to voteyour shares will be voted in accordance with the recommendations of our boardBoard and in the discretion of directors.the proxy holders on any other matters that properly come before the meeting.
18. Will shares I hold in my brokerage account be voted if I do not provide timely voting instructions?
If your shares are held in street name, you will need to follow the instructions from the institution that holds your shares regarding how to instruct your broker to vote your shares.
Revocation of Proxies
You can revoke your proxy at any time before your shares are voted at the Annual Meeting by (i) sendingthrough a written notice of revocation to Jean-Louis Casabonne, Secretary, hopTo Inc., 6 Loudon Road, Suite 200, Concord, New Hampshire 03301, (ii) submitting by mail another proxy dated as of a later date, or (iii) voting in person at the Annual Meeting. Merely attending the Annual Meeting will not revoke your proxy. All revocations of your proxy must be received prior to the voting of your shares at the Annual Meeting. Voting in person at the Annual Meeting will replace any previous votes submitted by proxy. If the Annual Meeting were to be postponed or adjourned, your proxy would still be valid andbrokerage firm, they will be voted atas you instruct on the postponed or adjourned meeting. You would still be able to revokevoting instruction card provided by your proxy until it was voted.
Voting Your Shares
broker. If you completesign and submitreturn your card without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board and in the discretion of the proxy voting instructions, the persons named as proxies will follow your instructions. If you submit your proxy voting instructions but do not direct how to vote on each item, the persons named as proxies will vote your shares:
The persons named as proxies will voteholders on any other mattersmatter that properly presented at the Annual Meeting in accordance with their best judgment. We have not received notice of other matters that may be properly presented for voting atcomes before the Annual Meeting.
Votes Required, Withholding Your Vote, Abstentions, and Broker Non-Votes
Brokers holding shares of record for a customer have the discretionary authority to vote them only on certain “routine” proposals if the brokers do not receive timely instructions from the customer regarding how the customer wants the sharesproposal to be voted. The ratification ofratify the appointment of our independent registered public accounting firmfirm. Your broker will be prohibited from voting your shares on any of the other proposals. These “broker non-votes” will be counted only for 2018 (Proposal 8)the purpose of determining whether a quorum is present at the meeting and not as votes cast.
19. Will shares that I own as a routine proposal. However, there are also certain proposals for which brokersstockholder of record be voted if I do not timely return my proxy card?
Shares that you own as a stockholder of record will be voted as you instruct on your proxy card. If you sign and return your proxy card without giving specific instructions, they will be voted in accordance with the recommendations of our Board and in the discretion of the proxy holders on any other matter that properly comes before the Annual Meeting.
If you do not timely return your proxy card, your shares will not be voted unless you or your proxy holder attends the Annual Meeting and any adjournment or postponement thereof and votes in person as described in Question 15.
20. When is the deadline to vote?
If you hold shares as the stockholder of record, your vote by proxy must be received before the polls close at the Annual Meeting and any adjournment or postponement thereof.
If you hold shares as a beneficial owner, please follow the voting instructions provided by your bank, broker or other nominee.
21. May I change or revoke my vote?
You may change your vote at any time prior to the vote at the Annual Meeting.
If you are a stockholder of record, you may change your vote by granting a new proxy bearing a later date (which automatically revokes the earlier proxy), by providing a written notice of revocation to our Corporate Secretary at the address in Question 24 prior to your shares being voted, or by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request.
For shares you hold as a beneficial owner, you may change your vote by timely submitting new voting instructions to your bank, broker or other nominee (which revokes your earlier instructions), or, if you have discretionary authorityobtained a legal proxy from the nominee giving you the right to vote if they do not receive timely instructions fromyour shares, by attending the customer. AllAnnual Meeting and voting in person.
22. Who will serve as inspector of elections?
The inspector of elections will be a representative of the proposals, other than Proposal 8, isCompany.
23. Who can attend the Annual Meeting?
You may attend the Annual Meeting and any adjournment or postponement thereof only if you were a non-routine matterstockholder of ours at the close of business on which brokers do not have discretionary authority to vote. Whenthe Record Date, or you hold a broker does not have discretionvalid proxy to vote on a particular matter andat the customer has not given timely instructions on howAnnual Meeting. You should be prepared to present photo identification to be admitted to the broker should vote, a “broker non-vote” results.Annual Meeting.
If you ownare not a stockholder of record but are the beneficial owner of shares held in street name through a bank, broker or other holder of record,nominee, in order to be admitted to the Annual Meeting you must instructprovide proof of beneficial ownership on the Record Date, such as your bank, brokermost recent account statement that includes the Record Date, a copy of the voting instruction card provided by your nominee, or other holdersimilar evidence of record how to vote on non-routine matters in ordershare ownership.
The meeting will begin promptly at 9:00 a.m., local time. Please allow ample time for them to vote your shares so that your vote can be counted on such proposals.check-in procedures.
Stockholder Proposals and Director Nominations
Proxy Solicitation24. What is the deadline to submit stockholder proposals to be included in the proxy materials for next year’s Annual Stockholders’ Meeting?
WeStockholder proposals that are intended to be included in our proxy materials for next year’s Annual Stockholders’ Meeting must be received by our Corporate Secretary no later than [●], 2021 and must be submitted to Corporate Secretary, HopTo, Inc., 6 Loudon Road, Suite 200, Concord NH 03301.
Proposals that are not timely submitted by [●], 2021 or are submitted to the incorrect address or other than to the attention of our Corporate Secretary will bear the entire cost of solicitation of proxiesbe considered untimely and may, at our discretion, be excluded from our proxy materials. Stockholder proponents must meet the eligibility requirements of the SEC’s Stockholder Proposal Rule (Rule 14a-8), and their proposals must comply with the requirements of that rule to be included in our proxy materials.
See Question 25 for a description of the procedures in our Bylaws through which stockholders including preparation, assembly, printing,may nominate and mailinginclude director candidates in our proxy statement.
25. How may I nominate director candidates or present other business for consideration at an annual stockholders’ meeting?
Stockholders who wish to (1) submit director nominees for inclusion in our proxy materials for next year’s annual stockholders’ meeting or (2) present other items of business directly at next year’s annual stockholders’ meeting must give written notice of their intention to do so in accordance with the deadlines described below to our Corporate Secretary at the address set forth in Question 24. Any such notice also must include the information required by our Bylaws (which may be obtained as provided in Question 27) and must be updated and supplemented as provided in the Bylaws.
Notice of director nominees, or for the presentation of other items of business, submitted must be received not less than ninety days nor more than 120 days prior to the first anniversary of the preceding year’s annual stockholders’ meeting. The period for the receipt from stockholders of any such notice for the 2021 annual stockholders’ meeting is currently set to begin on [●], 2021 and end on [●], 2021.
These above-mentioned notice requirements applicable under our advance notice Bylaws provisions do not apply to stockholder proposals intended for inclusion in our proxy materials under the SEC’s Stockholder Proposal Rule (Rule 14a-8). The deadline for receiving those proposals is set forth in Question 24.
26. How may I recommend candidates to serve as directors?
Stockholders may recommend director candidates for consideration by the Board by writing to our Corporate Secretary at the address set forth in Question 24. A recommendation must be accompanied by a statement from the candidate that he or she would give favorable consideration to serving on our Board and should include sufficient biographical and other information concerning the candidate and his or her qualifications to permit the Board to make an informed decision as to whether further consideration of the candidate would be warranted.
Obtaining Additional Information
27. How may I obtain financial and other information about the Corporation?
Our consolidated financial statements are included in our 2019 Annual Report on Form 10-K that accompanies this proxy statement.
We file our Annual Report on Form 10-K (the “Form 10-K”) with the SEC, located at 100 F Street, N.E., Washington, D.C. 20549, and our filings with the SEC can be accessed via the SEC’s website, www.sec.gov. The Form 10-K and other information that we file with the SEC are available on our website at www.hopto.com. We also will furnish a copy of the Form 10-K (excluding exhibits, except those that are specifically requested) without charge to any stockholder who so requests by writing to our Corporate Secretary at the address in Question 24.
By writing to us, stockholders also may obtain, without charge, a copy of our Bylaws, corporate governance guidelines, codes of conduct and Board committee charters. You also can view these materials on the internet by accessing our website at www.hopto.com.
28. What if I have questions for HopTo’s transfer agent?
If you are a stockholder of record and have questions concerning share certificates, dividend checks, ownership transfer or other matters relating to your share account, please contact our transfer agent, American Stock Transfer and Trust Company, at 6201 15th Avenue, Brooklyn NY 11219, or by calling (718) 921-8300.
29. How do I get additional copies of this proxy statement andor voting materials?
If you need additional copies of this proxy statement or voting materials, please contact us at:
HopTo, Inc.
6 Loudon Road, Suite 200
Concord NH 03301
Attn: Investor Relations
investors@hopto.com
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the proxy card. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries, and custodians holding in their names sharesRecord Date, certain information regarding the beneficial ownership of our common stock beneficially owned by othersby:
| ● | each of the directors and named executive officers for the fiscal year ended December 31, 2019; | |
| ● | all of our current executive officers, director nominees and directors as a group; and | |
| ● | each person known by us to be beneficial owners of 5% or more of our outstanding common stock. |
Except as indicated in the footnotes to forwardthis table and under applicable community property laws, to such beneficial owners. We may reimburseour knowledge, the persons representing beneficial ownersnamed in the table have sole voting and investment power with respect to all shares of ourcommon stock. For the purposes of calculating percent ownership, as of the Record Date, approximately 18,621,533 shares of common stock were issued and outstanding, and, for their costs of forwarding solicitation materials to such beneficial owners. In addition to solicitationany individual who beneficially owns shares represented by useoptions exercisable within sixty days of the mails, proxies may be solicited by directors, officers, employees, or agentsRecord Date, these shares are treated as if outstanding for that person, but not for any other person.
Unless otherwise indicated, the address of our companyeach beneficial owner listed in person or by telephone or other means of communication. No additional compensation will be paid to directors, officers, or other regular employees of ours for such services.the table below is c/o HopTo, Inc., 6 Loudon Road, Suite 200, Concord NH 03301.
| Name and Address | Number of Shares of Common Stock Beneficially Owned (1) | Percent of Class (%)(2) | ||||||
| Jean-Louis Casabonne (3) | 56,769 | * | ||||||
| Jonathon R. Skeels (4) | 8,388,118 | 45.0 | % | |||||
| Thomas C. Stewart (5) | 173,436 | * | ||||||
| Richard C. Chernicoff (6) | 53,436 | * | ||||||
| All current executive officers and directors as a group (4 persons) | 8,671,759 | 46.6 | % | |||||
| JMI Holdings, LLC (2011 Family Series) (6) 111 Congress Avenue, Suite 2600 Austin, TX 78701-4062 | 1,713,843 | 9.2 | % | |||||
| David R. Wilmerding, III (7) 2 Hamill Road, Suite 272 Baltimore, MD 21117 | 961,010 | 5.1 | % | |||||
| Novelty Capital Partners LP (4) 620 Newport Center Drive, 11th Floor Newport Beach, CA 92660 | 8,388,118 | 45.0 | % | |||||
| * | Less than 1%. |
| (1) | As used in this table, beneficial ownership means the sole or shared power to vote, or direct the voting of, a security, or the sole or shared power to invest or dispose, or direct the investment or disposition, of a security. Except as otherwise indicated, based on information provided by the named individuals, all persons named herein have sole voting power and investment power with respect to their respective shares of our common stock, except to the extent that authority is shared by spouses under applicable law, and record and beneficial ownership with respect to their respective shares of our common stock. With respect to each stockholder, any shares issuable upon exercise of options and warrants held by such stockholder that are currently exercisable or will become exercisable within 60 days of the Record Date are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person. |
| (2) | Percentage ownership of our common stock is based on 18,621,533 shares of common stock outstanding as of the Record Date. |
| (3) | Based on information contained in Form 4 filed on August 20, 2020, Jean-Louis Casabonne, owns 56,769 shares of common stock. |
| (4) | Based on information contained in Form 4 filed on August 26, 2020, by Novelty Capital Partners LP, Jonathon R. Skeels as the sole general partner of Novelty Capital has sole voting and dispositive power with respect to 8,388,118 shares of our common stock. Mr. Skeels disclaims ownership of such shares, except to the extent of his indirect pecuniary interest therein. |
| (5) | Based on information contained in Form 4 filed on August 20, 2020, Thomas C. Stewart owns 173,436 shares of our common stock. |
| (6) | Based on information contained in Form 4 filed on August 20, 2020, Richard C. Chernicoff owns 53,436 shares of our common stock. |
| (7) | Based solely on information known to us, Charles E. Noell, III, John J. Moores and Bryant W. Burke share voting and dispositive power over these shares by virtue of being members of El Camino Advisors, LLC, the manager of JMI Holdings, LLC (2011 Family Series). JMI Holdings, LLC (2011 Family Series) owns 1,619,104 shares of our common stock and warrants to purchase 94,739 shares of our common stock. |
| (8) | Based on information contained in a Schedule 13G/A filed by David Wilmerding on January 23, 2019, and information known to us, Mr. Wilmerding has sole voting and dispositive power with respect to 844,736 shares of our common stock and warrants to purchase 116,274 shares of our common stock. |
Householding of Proxy MaterialsPROPOSALS TO BE VOTED ON
“Householding” is a program, approved by the SecuritiesProposals 1, 2, 3 and Exchange Commission, which allows companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports by delivering only one package of stockholder proxy materials to any household at which two or more stockholders reside. If you and other residents at your mailing address own shares of our common stock in street name, your broker or bank may have notified you that your household will receive only one copy of our proxy materials. Once you have received notice from your broker that they will be “householding” materials to your address, “householding” will continue until you4 are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account. If you hold shares of our common stock in your own name as a holder of record, “householding” will not apply to your shares.
Other Business; Adjournments
We do not expect that any matter other than the proposals presentedincluded in this proxy statement will be brought before our Annual Meeting. However, if other matters incident to the conduct of the Annual Meeting are properly presented at the Annual Meeting or any adjournment, postponement, or continuationdirection of the Annual Meeting, the persons named as proxies willour Board. Our Board recommends that you vote “FOR” each nominee in accordance with their best judgment with respect to those matters.
Adjournments may be made for the purposeProposal 1 and “FOR” each of among other things, soliciting additional proxies.
Proposals 2, 3 and 4.
PROPOSAL 1
AMENDMENT OF CERTIFICATE OF INCORPORATION TO DECLASSIFY THE BOARD
Currently, Article VIProposal 1: Election of the Company’s Certificate of Incorporation provides that the Board shall be divided into three classes of directors, elected to serve staggered terms of three years each, which means that only one class of the directors serving on the Board is elected each year. The Board has declared advisable and approved and is asking our stockholders to approve and adopt an amendment to the Company’s Certificate of Incorporation to eliminate the classified structure of our Board. If the amendment is approved, all directors elected at and after the 2018 Annual Meeting will be elected for one-year terms (the “Declassify Amendment”).
The Board recommends that our stockholders approve and adopt the Declassify Amendment that is the subject of this Proposal 1 as it will permit the stockholders to vote on the election of directors every year. If Proposal 1 is approved, the Company’s Certificate of Incorporation will be amended to delete Article VI authorizing the classified board structure.
The Purposes and General Effect of the Amendment
In order to optimize our corporate governance practices, the Board has determined that it is advisable and in the Company’s and our stockholders’ best interests to adopt the proposed Declassify Amendment and declassify the Board starting with the election of directors at the Annual Meeting. The Board recognizes that many investors believe that the election of directors is the primary means for stockholders to influence the Company’s practices and policies and hold management accountable for implementing those practices and policies. Similarly, many investors believe that a classified structure may reduce directors’ accountability to stockholders because such a structure does not enable stockholders to express their approval or other views on each director’s performance on an annual basis. Upon thoughtful consideration and consistent with the feedback received from stockholders, the Board determined that it is advisable and in the best interests of the Company and its stockholders to propose a declassification of the Board. The Board believes that declassification of the Board supports the Company’s commitment to strong corporate governance and stockholder democracy. The Board has determined that the Declassify Amendment represents a balanced and integrated approach designed to provide all of the Company’s stockholders a meaningful voice in electing directors and shaping the Company’s practices and policies.
Eachof our current directors will either, as applicable to such director, not stand for re-election or tender their resignations from the Board immediately prior to the Annual Meeting, with such resignations being immediately effective.
If our stockholders approve this Proposal 1 at the Annual Meeting, the four individuals nominated for election to our Board in Proposal 2 will serve for a one-year term until the annual meeting of stockholders in 2019. If our stockholders do not approve this Proposal 1, we will continue to have a classified Board structure and our stockholders will instead be asked to elect the four director nominees to the applicable class and for one, two or three year terms, in each case as described in Proposal 2. The Declassify Amendment would not change the present number of directors or the Board’s authority to change that number and to fill any vacancies or newly created directorships. The proposed Declassify Amendment would, however, result in directors being subject to removal with or without cause by the affirmative vote of the holders of a majority of the outstanding shares of voting stock of the Company entitled to vote at an election of directors. Presently, because the board is classified, directors can only be removed for cause and the Certificate of Incorporation presently provides that removal of directors requires the affirmative vote of the holders of at least 66 2/3% of the outstanding shares of voting stock of the Company entitled to vote at an election of directors.
If this Proposal 1 is approved and adopted by our stockholders at the Annual Meeting, the Company will cause the Declassify Amendment to become effective by filing a certificate of amendment setting forth the Declassify Amendment with the Secretary of State of the State of Delaware. .
The Proposed Amendment
If this Proposal 1 is approved and adopted by our stockholders at the Annual Meeting, the third, fourth and fifth paragraphs of Article VI of the Company’s Certificate of Incorporation will be amended as follows (marked to show changes; for reference only):
“At each annual meeting of stockholders, directors of the Corporation shall be elected to hold office until thenext annual meeting of stockholdersexpiration of the term for which they are elected or until their successors have been duly elected and qualifiedor until his or her earlier death, resignation or removal; except that if any such election shall not be so held, such election shall take place at a stockholders’ meeting called and held in accordance with the GCL.
The directors of the Corporation shall be divided into three (3) classes as nearly equal in size as is practicable, hereby designated Class I, Class II and Class III. For the purposes hereof, the initial Class I, Class II and Class III directors shall be those directors so designated by a resolution of the Board of Directors. At the first annual meeting of stockholders following the closing of the initial public offering of the Corporation’s Common Stock, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three (3) year. At the second annual meeting of stockholders following the closing of the initial public offering of the Corporation’s Common Stock, the term of officer of the Class II directors shall expire and Class II directors shall be elected for a full term of three (3) years. At the third annual meeting of stockholders following the closing of the initial public offering of the Corporation’s Common Stock, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three (3) years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three (3) years to succeed the directors of the class whose terms expire at such annual meeting. If the number of directors is hereafter changed, each director then serving as such shall nevertheless continue as a director of the Class of which he is a member until the expiration of his current term and any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable.
Vacancies occurring on the Board of Directors for any reason may be filled by vote of a majority of the remaining members of the Board of Directors, even if less than a quorum, at any meeting of the Board of Directors. A person so elected by the Board of Directors to fill a vacancy shall 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 shall have been duly elected and qualified.A director may be removed from office by the affirmative vote f the holders of 66 2/3% of the outstanding shares of voting stock of the Corporation entitled to vote at an election of directors.A director may be removed from office, with or without cause, by the affirmative vote of the holders of at least a majority of the outstanding shares of voting stock of the Corporation entitled to vote at an election of directors.”
As a result, the provision in the Certificate of Incorporation for a classified board would be eliminated and directors can be removed from office with or without cause by the affirmative vote of the holders of a majority of the outstanding shares of voting stock of the Company entitled to vote at an election of directors.
Conforming Amendment to Bylaws
In addition, our Board has conditionally approved a conforming amendment (the "Conforming Bylaw Amendment") to our Second Amended and Restated Bylaws, as amended ("Bylaws"), which currently provide in Section 1 of Article III that directors shall hold office until expiration of the term for which he or she is elected, Section 3 of Article III that the directors shall be divided into three (3) classes, and in Section 4 of Article III that a director may be removed from office by the affirmative vote of the holders of a majority (50.01%) of the outstanding voting stock of the corporation entitled to vote at an election of directors.. If Proposal 1 is approved and adopted by our stockholders, Sections 1, 3 and 4 of Article III of our Bylaws would be amended as follows (marked to show changes; for reference only):
“Section 1. Number, Tenure and Qualifications. The number of directors that shall constitute the whole board shall be determined by the board of directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 4 of this Article, and each director elected shall hold office until (a) his or her successor is elected and qualified, (b) thenext annual meeting of stockholdersexpiration of the term for which he or she is elected, or (c) his or her earlier resignation or removal, except that if any such election shall not be so held, such election shall take place at a stockholders’ meeting called and held in accordance with the DGCL. Directors need not be stockholders.”
“Section 3.Classes of Directors.· The directors of the corporation shall be divided into three (3) classes as nearly equal in size as is practicable,designated as Class I, Class II, and Class Ill. At the 2009 annual meeting of the stockholders, the term of the office of the Class I directors shall expire and Class I directors shall be elected for a full term of three (3) years. At the 2010 annual meeting of the stockholders, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three (3) years. At the 2011 annual meeting of stockholders, the term of office of the Class Ill directors shall expire and Class Ill directors shall be elected for a full term of three (3) years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three{3) years to succeed the directors of the class whose terms expire at such annual meeting, If the number of directors is hereafter changed, each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member until the expiration of this current term and any newly created directorships or decrease in directorships shall be so apportioned among the classes as to make all classes as nearly equal in number as is practicable.[Reserved].
Section 4. Vacancies. Except as otherwise provided by law, any vacancy on the board of directors (whether because of death, resignation, removal, an increase in the number of directors, or any other cause) may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and any director so chosen shall hold office until the next annual election at which directors of the applicable class are scheduled to be elected and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent (10%) of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. A director may be removed from office,with or without cause, by the affirmative vote of the holders of a majority(50.01%) of the outstanding voting stock of the corporation entitled to vote at an election of directors.”
As a result, the provision in the Bylaws for classes of directors would be eliminated, directors could be removed from office with or without cause by the affirmative vote of the holders of a majority of the outstanding shares of voting stock of the Company entitled to vote at an election of directors and the Conforming Bylaw Amendment would become effective.
Vote Required
Our Certificate of Incorporation provides that amendment of the Certificate of Incorporation set forth in this Proposal 1 be approved and adopted by the affirmative vote of the holders ofBoard currently has four members. Directors are elected at least 66-2/3% of outstanding shares of voting stock entitled to voteeach annual stockholders’ meeting for terms expiring at the Annual Meeting. Abstentions and broker non-votes, if any, will havenext annual stockholders’ meeting. Our Board has nominated the same effectfollowing four individuals for election as votes against this proposal.
Recommendationdirectors, all of the Board
|
PROPOSAL NO. 2
ELECTION OF DIRECTORS
Information Concerning Director Nominees
Our Certificate of Incorporation and Bylaws provide that the number of directors of the Companywhom currently are determined by the Board of Directors. Currently, there are three members on the Company’s Board of Directors. The three current members of our Board, John Cronin, Michael Brochu and Eldad Eilam, will either, as applicable to such director, not stand for re-election or tender their resignations from the Board immediately prior to the Annual Meeting, with his resignation being immediately effective. In connection with the nomination of the director-nominees in this Proposal 2, the Board of Directors will be increased to four effective upon their election. If Proposal 1 is approved and adopted by the stockholders at the Annual Meeting, upon his election, each of the four (4) director nominees named below will serve for a one-year term ending as of the annual meeting of stockholders in 2019.
Board:
| Jonathon | ||||
| Thomas C. Stewart | ||||
Jean Louis Casabonne | 62 | |||
| Richard S. Chernicoff | ||||
(1) Interim Chief Executive Officer, Chief Financial Officer, Secretary
Since September 2018, our Board has managed its affairs as a whole and, given the scope of our business and the size of our Board, has not found it necessary to subdivide into committees. We intend to reconstitute the audit committee and compensation committee when the complexity of our business or legal or listing rules require such committees.
When evaluatingProperly executed proxies will be voted for these four nominees, unless other instructions are specified. If any nominee should become unavailable to serve, the Director Nominees,proxies may be voted for a substitute nominee designated by our Board, or our Board may reduce the Board considered each individual’s professional experience, areasauthorized number of expertise and educational background in addition to general qualifications in order to maintaindirectors. In no event may the proxies be voted for more than four nominees. Election of directors requires the receipt of “FOR” votes constituting a Board that is strong and well-rounded in its collective knowledge and that can fulfill its responsibilities, perpetuate our long-term success and represent the interests of our stockholders. The current Board has evaluated the qualificationsplurality of the Director Nominees including:
While we presently have no knowledge that the Director Nominees will refuse or be unable to serve as directorsvotes cast for the prescribed term, the accompanying proxy card grants the proxy holders the power to vote the proxy for substitute nominees in the event that anyeach nominee becomes unavailable to serve.
IfProposal 1 is not approved and adopted by the stockholders at the Annual Meeting, upon his election, each director nominee will serve asassuming a Class I, Class II or Class III director for a term ending as of the respective annual meeting of stockholders set forth below for each such class:
quorum is present.
| NAME | AGE | POSITION | CLASS | Term Expiration | ||||||||||||
| Jonathon Richard Skeels | 36 | Nominee | II | 2019 | ||||||||||||
| Richard S. Chernicoff | 53 | Nominee | II | 2019 | ||||||||||||
| Thomas C. Stewart | 50 | Nominee | III | 2020 | ||||||||||||
| Jean-Louis Casabonne(1) | 60 | Nominee | I | 2021 | ||||||||||||
(1) InterimOur Board determined that each Messrs. Stewart, Casabonne and Chernicoff is an independent director. Our Board determines the independence of our directors by applying independence principles and standards established by Nasdaq. Based on these standards, our Board has determined that Mr. Skeels is not independent due to his position as our Chief Executive Officer and interim Chief Financial Officer, SecretaryOfficer. However, our Board has determined that Mr. Casabonne is independent, despite the fact that he was an officer of the Corporation within the past three years, because he ceased being an officer as of September 6, 2018, in 2018 his total compensation from the Corporation was less than $120,000, he has no relationship to our auditors. We have never employed or compensated any of his family members or their affiliates.
Information about the Director Nominees
Biographical information regarding each director nominee and his qualifications to serve as a director is set forth below. The year shown as election as a director is the year that the director was first elected as one of our directors. Unless otherwise indicated, each director has held his principal occupation or other positions with the same or predecessor organizations for at least the last five years. There are currently no family relationships among any of the Corporation’s director nominees or executive officers. None of our director nominees, directors or executive officers have been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years.
Jonathon Richard Skeels.R. Skeels has been Chief Executive Officer, Interim Chief Financial Officer and a member of our Board since September 2018. Mr. Skeels founded Novelty Capital, LLC, an investmentis the Founder and advisory firm focused on undervalued technology companies with meaningful intangible assets, such as intellectual property and net operating losses, and has served as Managing Partner of Novelty and its various affiliated entities since June 2014.Capital, LLC, a private investment firm. From September 2012 to June 2014, Mr. Skeels was Director of Business Development withheld various executive roles at IP Navigation Group, LLC a leading full service intellectual property monetization firm, where he focused on various projects, including building a financial products business and developing financing initiatives.firm. From May 2005 to August 2012, LLC, Mr. Skeels was Vice President and Senior Research Analyst atof Davenport & Company, LLC, a financial services firm in Richmond, VA, that manages over $10 billion, where he was a sell-side research analyst focused on advising leading institutional investors onresponsible for investments in publicly-traded technology companies. Mr. Skeels receivedholds a degreeBS from American University in Washington, DC.
Mr. Skeels brings to the CompanyCorporation experience in intellectual property,management and operations of our business, investing in technology companies, finance and capital markets, tax and business development.markets. Mr. Skeels, together with his affiliates, owns approximately 45.0% of our stock.
Richard S. Chernicoff.Thomas C. Stewart has been a member of our Board since September 2018. Mr. Chernicoff became chief executive officerStewart has been the Chief Financial Officer and member of Ideawerks Inc., a private equity firm specializing in acquisitions in March 2018. From October 2015 until March 2018, Mr. Chernicoff held various executive positions with Great Elm Capital Group, Inc., including interim chief executive officer from July 2016 to September 2017, and served on itsthe board of directors from March 2014 until March 2018. From March 2015 to July 2016,at Control Plane Corp since October 2019. Mr. ChernicoffStewart previously served as an Interim General Counsel at Marathon Patent Group, Inc. Previously, Mr. Chernicoff served asChief Financial Officer and a consultant with Tessera Intellectual Property Corp. from July 2011 to January 2013, and had served as presidentmember of the Intellectual Property and Micro-electronics Divisionboard of directors at Tessera, Inc. Prior to Tessera, he served as president of Unity Semiconductor Corporation, and had been vice president of Business Development at SanDisk Corp. Mr. Chernicoff was merger and acquisitions partner of Brobeck Phleger & Harrison, LLP from 2000 to 2003, where he obtained in-depth knowledge of intellectual property and other key value drivers for technology companies. He developed expertise in mergers and acquisitions and capital markets with Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Chernicoff began his career as a certified public accountant with Ernst & Young LLP. He also served on the staff of the Securities and Exchange Commission. Mr. Chernicoff has been a director of Diablo Technologies Inc. since January 2016, and was a director of Marathon Patent Group, Inc. (NASDAQ: MARA) from March 2015 until August 2017. Mr. Chernicoff received his B.S. in Accounting from California State University, Northridge and a J.D. from St. John’s University School of Law, New York. Mr. Chernicoff brings to the Company experience leading businesses and in mergers and acquisitions, finance, legal matters and accounting.
Thomas C. Stewart. Mr. Stewart has served as a director of Pop IQ, a wholly-owned subsidiary of Cali Group that provides facial recognition technology, since March 2018. Previously, he served as the chief financial officer and a director of SecureAuthSecurAuth Corporation from May 2007 to March 2018. From April 2001 to May 2007,September 2017. Mr. Stewart served in senior positions in both finance and marketing ofpreviously held various executive roles at Intel Corporation (NASDAQ: INTC). Mr. Stewart initially led Intel’s Strategicincluding Finance Team for the information technology group where he was responsible for strategic analysisManager Information Technology, 2000-2004 and financial controls for delivering best in class IT solutions for Intel Corporation in areas including PC clients, wireless networking, remote access/VPN and telephony. In addition to authoring white papers, Mr. Stewart has been a notable speaker at industry events because of his expertise in financial analysis of business technology decisions and return on investment of IT. At Intel, Mr. Stewart acted as strategic finance consultant to Intel Capital. In addition to investment portfolio analysis, he contributed financial analysis for several individual portfolio companies. Mr. Stewart relocated to Europe in 2004 to build a sales and marketing team targeting the IT system integrator channel. He managed the technical integration of newly developed Intel products into System Integrator partners responsible for more than $80M in Intel revenue. Early in his career, Mr. Stewart held management positions at data networking and application services firms, and served as one of the first product managers of FutureLink, a pioneer in the development of the application service provider (ASP) concept.Marketing Director, EMEA 2004-2007. Mr. Stewart holds a bachelor's degree in EconomicsBA from The Colorado College and an MBA from the University of California Irvine , Paul Merage School of Business. at Irvine.
Mr. Stewart brings to the CompanyCorporation experience in leading and growing software businesses and in finance, accounting, marketing and operations.
Jean-Louis Casabonne. Mr. Casabonne has served asbeen a member of our Chief Financial Officer and SecretaryBoard since May 2014, and as our Interim Chief Executive Officer since August 2017. Since July of 2017 he has served on a part-time basis. Since July 2017,September 2018. Mr. Casabonne has been the Chief Financial Officer of Kobie Marketing, Inc., since July 2017. Previously, Mr. Casabonne had served as our former Chief Financial Officer and Secretary from May 2014 to July 2017. From July 2017 to September 2018 he served on a privately held technology company. Previously, frompart-time basis as former Chief Financial Officer, Interim Chief Executive Officer and Secretary. From 2002 to 2011, Mr. Casabonne has served as the Chief Financial Officer of Quova, Inc., a venture backed company which he guided to profitability prior toand following its successful sale to Neustar, Inc. (NYSE:NSR). Following the sale of Quova to Neustar, Mr. Casabonne continued with Neustar from 2011 to 2014he served as a strategic evangelist and director of business development managing strategic relationships with key partners.at Neustar, Inc. from 2011 to 2014. From 1996 to 2002, Mr. Casabonne was a founder and controller for Inxight Software, a spin-out from Xerox Corporation. He became CFOChief Financial Officer and VPVice President of Operations for Inxight in 1999, managing finance, administration, legal affairs, information technology and customer support. From 1992 to 1996, Mr. Casabonne served in a number of senior financial positions for Xerox Corporation’s XSoft Division. Mr. Casabonne received his MBA and BS from Santa Clara University.
Mr. Casabonne brings to the CompanyCorporation experience in finance and accounting, and strategic development, management and operations of technology companies. Mr. Casabonne is an audit committee financial expert under the SEC’s rules.
Richard S. Chernicoff has been a member of our Board since September 2018. He is Chief Financial Officer of SunRise Memory Corp., a private semiconductor company. From January 2019 to September 2019, Mr. Chernicoff served as Chief Financial Officer of Perimeter Medical Imaging, Inc., a private equity-sponsored medical imaging company. Mr. Chernicoff served as a member of the board of directors of Great Elm Capital Group, Inc. from 2014 until 2018, and served as its interim Chief Executive Officer from July 2016 to September 2017. Mr. Chernicoff served as a member of the board of directors of Marathon Patent Group, Inc. from March 2015 to July 2017 and served as its interim general counsel. Mr. Chernicoff was with SanDisk Corporation where, as Senior Vice President, Business Development, his responsibilities included mergers and acquisitions, financings and joint ventures. Previously, Mr. Chernicoff was a mergers and acquisitions partner in the Los Angeles office of Brobeck, Phleger & Harrison LLP, a corporate lawyer in the Los Angeles office of Skadden, Arps, Slate, Meagher & Flom LLP, a member of the staff of the SEC in Washington, DC and an auditor in the Los Angeles office of Ernst & Young LLP. Mr. Chernicoff holds a BS from California State University, Northridge and a JD from St. John’s University School of Law.
Mr. Chernicoff brings to the Corporation experience leading businesses and in merger and acquisitions, legal and finance. Mr. Chernicoff is an audit committee financial expert under the SEC’s rules.
For the election of directors, the four nominees receiving the most “FOR” votes from the holders of shares present in person or represented by proxy and entitled to vote for the election of directors will be elected. Only votes “FOR” or “WITHHELD” will affect the outcome. Broker non-votes will have no effect.
THE BOARD RECOMMENDS YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
Proposal 2: Ratification of Independent Registered Public Accounting Firm
Our Board believes the continued retention of dbbMcKennon LLC (“dbbMcKennon”) as our independent registered public accounting firm is in our and our stockholders’ best interest. Ratification requires the receipt of “FOR” votes constituting a majority of the votes cast on the proposal at the Annual Meeting, assuming a quorum is present.
Representatives of dbbMcKennon are not expected to attend the Annual Meeting. Thus, it is not expected that they will have an opportunity to make a statement regarding their services, or be available to respond to questions. Our Board does not know of any direct or indirect financial interest of dbbMcKennon in the Corporation.
Our Board approved the appointment of dbbMcKennon as our independent registered public accounting firm, effective April 17, 2019, as described further below. Accordingly, and in connection therewith, we dismissed Marcum LLP (“Marcum”) as our independent registered public accounting firm effective as of that same date.
Marcum’s audit report for the fiscal years ended December 31, 2018 on our consolidated financial statements did not contain an adverse opinion or a disclaimer of opinion, nor was any such report qualified or modified as to uncertainty, audit scope or accounting principles. At no point during the fiscal years ended December 31, 2018 and the subsequent interim period through April 25, 2019 were there any “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between us and Marcum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Marcum, would have caused it to make reference to the subject matter of the disagreements in connection with its report. There were no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K) for us that occurred during the fiscal year ended December 31, 2018 and the subsequent interim period through April 25, 2019.
Our Board engaged dbbMcKennon as our new independent registered public accounting firm effective April 25, 2019 to perform independent audit services for the fiscal year ended December 31, 2019. During the fiscal years ended December 31, 2018 and the subsequent interim period through April 25, 2019, neither we nor anyone on our behalf consulted dbbMcKennon regarding either:
| ● | the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered with respect to the registrant’s consolidated financial statements in connection with which either a written report or oral advice was provided to the registrant that dbbMcKennon concluded was an important factor considered by the registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or | |
| ● | any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as defined in Item 304(a)(1)(v) of Regulation S-K). |
The following table presents aggregate fees billed to us for services rendered by dbbMcKennon and Marcum for the fiscal years ended December 31, 2019 and December 31, 2018:
| Category | 2019 | 2018 | ||||||
| Audit fees | $ | 147,200 | $ | 127,000 | ||||
| Audit-related fees | - | 62,300 | ||||||
| Tax fees | 17,900 | 17,000 | ||||||
| Totals | $ | 165,100 | $ | 207,100 | ||||
Audit fees include fees associated with our annual audit, the reviews of our quarterly reports on Form 10-Q, and assistance with and review of documents filed with the SEC. Audit-related fees include consultations regarding revenue recognition and new accounting pronouncements as they related to the financial reporting of certain transactions. Tax fees included tax compliance work and tax consultations.
Pre-Approval Policies and Procedures
Among its other duties, until it constitutes its audit committee, our Board, with the approval of all our independent directors, is responsible for appointing, setting compensation for and overseeing the work of the independent auditor. Our audit committee previously established a policy regarding pre-approval of all audit and non-audit services provided by the independent auditor. On an ongoing basis, management communicates specific projects and categories of service for which the advance approval is requested. Since September 2018, our Board has reviewed these requests and advises management if the Board approves the engagement of the independent auditor. From time to time, management reports to our Board regarding the actual spending for such projects and services compared to the approved amounts. All services performed by dbbMcKennon and Marcum for fiscal years 2019 and 2018 were approved in accordance with our pre-approval guidelines.
Independent Directors’ Report
Our Board also has determined that each of our directors Jean-Louis Casabonne, Richard S. Chernicoff and Thomas C. Stewart is financially literate and an audit committee financial expert as defined by the rules of the SEC. While we currently do not have an audit committee, the three directors named below have been delegated with the authority to determine matters typically associated with an audit committee and the Board has adopted an audit committee charter, which is posted on our website at www.hopto.com.
Since September 2018, our Board’s responsibilities include appointing our independent registered public accounting firm, pre-approving both audit and non-audit services to be provided by the firm and providing oversight of our financial reporting process. In fulfilling the Board’s oversight responsibilities, our independent directors meet with our independent registered public accounting firm and management to review accounting, auditing, internal controls and financial reporting matters.
It is not our Board’s responsibility to plan or conduct audits or to determine that our financial statements and disclosures are complete, accurate and in accordance with accounting principles generally accepted in the United States and applicable laws, rules and regulations. Management is responsible for our financial statements, including the estimates and judgments on which they are based, as well as our financial reporting processes, accounting policies, internal accounting controls, disclosure controls and procedures, and risk management. Our independent registered public accounting firm is responsible for performing an audit of our annual financial statements, expressing an opinion as to the conformity of the annual financial statements with accounting principles generally accepted in the United States, expressing an opinion as to the effectiveness of our internal control over financial reporting and reviewing our quarterly financial statements.
Our Board discussed with dbbMcKennon the matters required to be discussed by the rules of the Public Company Accounting Oversight Board Auditing Standard No. 1301, “Communications with Audit Committees,” which requires the independent registered public accounting firm to communicate information to an audit committee regarding the scope and results of its audit of our financial statements, including information with respect to the firm’s responsibilities under auditing standards generally accepted in the United States, significant accounting policies, management judgments and estimates, any significant unusual transactions or audit adjustments, any disagreements with management and any difficulties encountered in performing the audit and other such matters required to be discussed with an audit committee by those standards.
Our Board also received from dbbMcKennon a report providing the disclosures required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our Board concerning independence. Marcum also has discussed its independence with our independent directors and confirmed in the report that, in its professional judgment, it is independent of us within the meaning of the federal securities laws.
Our Board also has reviewed and discussed with our senior management the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 and management’s reports on the financial statements and internal controls. Management has confirmed to our Board that the financial statements have been prepared with integrity and objectivity and that management has maintained an effective system of internal controls. dbbMcKennon has expressed its professional opinions that the financial statements conform with accounting principles generally accepted in the United States. In addition, our Chief Executive Officer, who is also our interim Chief Financial Officer, has reviewed with the Board the certifications that were filed with the SEC pursuant to the requirements of the Sarbanes-Oxley Act of 2002 and the policies and procedures management has adopted to support the certifications.
Based on these considerations, the undersigned independent directors and financial experts of the Board have recommended that our audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2019 for filing with the SEC.
| Jean-Louis Casabonne | |
| Richard S. Chernicoff | |
| Thomas C. Stewart |
The ratification of the selection of dbbMcKennon as our independent registered public accounting firm for the fiscal year ending December 31, 2020 must receive “FOR” votes from at least a majority of shares present in person or by proxy and entitled to vote on such proposal. Abstentions will have the same effect as a vote against such proposal. Broker non-votes will have no effect.
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 2 RELATING TO THE RATIFICATION OF THE APPOINTMENT OF DBBMCKENNON AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
Proposal 3 — Amendment to Charter to Effect a Reverse Stock Split of Not Less Than 1-for-20 and Not More Than 1-for-100
Our Board has unanimously approved, and recommended that our stockholders approve, an amendment to our Charter, to effect a reverse stock split at a ratio of not less than 1-for-20 and not more than 1-for-100 and a proportionate reduction of the number of authorized shares of our common stock (the “Reverse Split Amendment”), with the exact ratio to be set within this range by our Board in its sole discretion, with the final decision of whether to proceed with the Reverse Split and the effective time of the Reverse Split to be determined by the Board, in its sole discretion. If the stockholders approve the Reverse Split, and the Board decides to implement it, the Reverse Split will become effective as of the close of business, Eastern Time, on a date to be determined by the Board that will be specified in the Reverse Split Amendment to be filed with the Secretary of State of the State of Delaware (the “Effective Time”). If the Board does not decide to implement the Reverse Split within 12 months from the date of the Annual Meeting, the authority granted by stockholder approval of this proposal to implement the Reverse Split will terminate.
The Reverse Split will be effected simultaneously for all our outstanding common stock and will affect all holders of our common stock uniformly. No fractional shares of common stock will be issued as a result of the Reverse Split. Instead, any stockholder who would have been entitled to receive a fractional share as a result of the Reverse Split will receive a cash payment in lieu of such fractional shares, as described below. Each stockholder will hold the same percentage of common stock outstanding immediately following the Reverse Split as that stockholder held immediately prior to the Reverse Split, except to the extent that the Reverse Split results in shareholders receiving cash in lieu of fractional shares, as described below. The Reverse Split will not change the par value of our common stock. However, as part of the Reverse Split Amendment, the number of authorized shares of common stock will be reduced by a proportionate amount. Outstanding shares of common stock resulting from the Reverse Split will remain fully paid and non-assessable.
The text of the proposed Reverse Split Amendment to effect the Reverse Split is included as Appendix A to this proxy statement. The text of the proposed Reverse Split Amendment is subject to revision to include the Reverse Split ratio, as determined by our Board in the manner described herein, and such changes as may be required by the Secretary of State of the State of Delaware or as our Board deems necessary and advisable to effect the proposed Reverse Split Amendment.
Criteria to Be Used for Decision to Apply the Reverse Split
If our stockholders approve the Reverse Split, our Board will be authorized to proceed with the Reverse Split. The exact ratio of the Reverse Split, within the 1-for-20 to 1-for-100 range, would be determined by our Board, in its sole discretion, and publicly announced by us prior to the Effective Time. In determining whether to proceed with the Reverse Split and setting the appropriate ratio for the Reverse Split, our Board will consider, among other things, factors such as:
| ● | the historical trading prices and trading volume of our common stock; | |
| ● | the number of shares of our common stock outstanding; | |
| ● | the then-prevailing and expected trading prices and trading volume of our common stock and the anticipated impact of the Reverse Split on the trading market for our common stock; | |
| ● | the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; | |
| ● | business developments affecting us; and | |
| ● | prevailing general market and economic conditions. |
Reasons for the Reverse Split
The Board believes the Reverse Split could help improve our and our subsidiaries’ profile with potential customers and reduce administrative expenses associated with investor communication efforts. The Board reserves the right to elect to abandon the Reverse Split, notwithstanding stockholder approval thereof, if it determines, in its sole discretion, that the Reverse Split is no longer in our best interests.
Procedure for Effecting Reverse Split and Exchange of Stock Certificates
If the Reverse Split is approved by our stockholders, the Reverse Split would become effective at such time as it is deemed by our Board to be in the best interests of the Corporation and its stockholders and we file the Reverse Split Amendment with the Secretary of State of the State of Delaware. Upon the filing of the Reverse Split Amendment, all our existing common stock will be converted into a new number of shares of common stock as set forth in the Reverse Split Amendment.
As soon as practicable after the Effective Time, stockholders will be notified that the Reverse Split has been effected. If you hold shares of common stock in a book-entry form, you will receive a transmittal letter from our transfer agent as soon as practicable after the Effective Time with instructions on how to exchange your shares. After you submit your completed transmittal letter, a transaction statement will be sent to your address of record as soon as practicable after the effective date of the Reverse Split indicating the number of shares of common stock you hold. In addition, if you are entitled to a payment of cash in lieu of fractional shares, a check will be mailed to you at your registered address as soon as practicable after the Effective Time. By signing and cashing this check, you will warrant that you owned the shares of our common stock for which you received a cash payment. See “Fractional Shares.”
Some stockholders hold their shares of common stock in certificate form or a combination of certificate and book-entry form. We expect that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates, if applicable. If you are a stockholder holding pre-Reverse Split shares in certificate form, you will receive a transmittal letter from our transfer agent as soon as practicable after the Effective Time. The transmittal letter will be accompanied by instructions specifying how you can exchange your certificate representing the pre-Reverse Split shares of our common stock for a statement of holding.
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. If you are entitled to a payment of cash in lieu of fractional shares, payment will be made as described under “Fractional Shares.”
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM FROM OUR TRANSFER AGENT.
Effect on Beneficial Holders of Common Stock
We intend to treat stockholders holding shares of our common stock in “street name” (that is, held through a bank, broker or other nominee) in the same manner as stockholders of record whose shares of common stock are registered in their names, including with respect to the cash out of fractional shares. Banks, brokers or other nominees will be instructed to effect the Reverse Split for their beneficial holders holding our common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the Reverse Split. If a stockholder holds shares of our common stock with a bank, broker or other nominee and has any questions in this regard, stockholders are encouraged to contact their bank, broker or other nominee.
Principal Effects of the Reverse Split
If the Reverse Split is approved and our Board elects to effect the Reverse Split, the number of outstanding shares of common stock will be reduced in proportion to the ratio of the Reverse Split chosen by our Board. You should recognize that if the Reverse Split is effectuated you will own fewer shares than you presently own (a number equal to the number of shares owned immediately prior to the filing of Reverse Split Amendment divided by the ratio of the Reverse Split). The Reverse Split will affect all of our stockholders uniformly and we do not expect that it will affect any stockholder’s percentage ownership interests in the Company or proportionate voting power, except to the extent that the Reverse Split results in stockholders receiving cash in lieu of fractional shares, as described below
Common Stock
With the exception of the number of shares issued and outstanding and except to the extent that the Reverse Split results in stockholders receiving cash in lieu of fractional shares, the rights and preferences of outstanding shares of common stock prior and subsequent to the Reverse Split would remain the same. Holders of our common stock would continue to have no preemptive rights. Following the Reverse Split, each full share of our common stock resulting from the Reverse Split would entitle the holder thereof to one vote per share and would otherwise be identical to the shares of our common stock immediately prior to the Reverse Split.
Preferred Stock
The Reverse Split will not reduce the number of authorized shares of preferred stock or otherwise have any impact on our authorized preferred stock, with the exception that the conversion ratio for the number of shares each share of preferred stock is convertible into and the voting ratio for such shares shall be proportionately adjusted.
Effects of the Reverse Split on our 2008 Incentive Stock Plan and Outstanding Equity Awards and Outstanding Warrants
If the Reverse Split is implemented, the number and type of shares subject to our 2008 Incentive Stock Plan and outstanding awards and/or unexercised options exercisable for shares of common stock shall be adjusted by the Board. The Board may also make provision for a cash payment to the holder of such outstanding awards in exchange for the cancellation of the outstanding award. In addition, the number of shares of common stock issuable upon the exercise of outstanding warrants to purchase 481,335 shares of common stock will be reduced.
Effects of the Reduction of Authorized Common Stock
We are currently authorized under our Charter to issue up to a total of 200,000,000 shares of capital stock, comprised of 195,000,000 shares of common stock and 5,000,000 shares of preferred stock. If the Reverse Split is approved and effected, it will reduce the total number of shares of common stock that we are authorized to issue by a proportionate amount. The decrease in the number of authorized shares of common stock would result in fewer shares of authorized but unissued common stock being available for future issuance for various purposes, including raising capital or making acquisitions. However, we believe that if the Reverse Split is approved and effected, the amount of authorized but unissued shares of common stock and preferred stock will be sufficient for our future needs.
The Reverse Split will not reduce the number of authorized shares of preferred stock or otherwise have any impact on the preferred stock except as set forth above.
Accounting Matters
As a result of the Reverse Split, the stated capital on our balance sheet attributable to the common stock, which consists of the par value per share of the common stock multiplied by the aggregate number of shares of common stock issued and outstanding, will be reduced in proportion to the size of the Reverse Split subject to an adjustment in respect of the treatment of fractional shares. Correspondingly, our additional paid-in capital account, which consists of the difference between our stated capital and the aggregate amount paid to the Corporation upon issuance of all currently outstanding shares of the common stock, will be credited with the amount by which the stated capital is reduced.
Fractional Shares
We will not issue fractional shares in connection with the Reverse Split. Instead, any fractional share resulting from the Reverse Split because the stockholder (whether a record holder or beneficial owner) owns a number of shares not evenly divisible by the exchange ratio will be cancelled, with such holder to receive cash in lieu of the fractional share. The cash amount to be paid to each stockholder will be equal to the resulting fractional interest in one share of our common stock to which the stockholder would otherwise be entitled, multiplied by the sixty-day volume weighted average closing trading price of our common stock on the trading day immediately preceding the effective date of the Reverse Split. We do not anticipate that the aggregate cash amount paid by us for fractional interests will be material to us.
Risks Associated with the Reverse Split
There can be no assurance that the Reverse Split would have the desired effects on the common stock. The Board, however, believes that the risks described below are offset by the prospect that the Reverse Split may, by increasing the per share price, make an investment in the common stock more attractive for certain investors.
The Reverse Split could result in a significant devaluation of our market capitalization and trading price of the common stock.
The Board expects that the Reverse Split of the outstanding common stock will increase the market price of the common stock. However, we cannot be certain whether the Reverse Split would lead to a sustained increase in the trading price or the trading market for the common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:
| ● | the market price per share of the common stock after the Reverse Split will rise in proportion to the reduction in the number of pre-split shares of common stock outstanding before the Reverse Split; | |
| ● | the Reverse Split will result in a per share price that will attract brokers and investors, including institutional investors, who do not trade in lower priced stocks; | |
| ● | the Reverse Split will result in a per share price that will increase our ability to attract and retain employees and other service providers; and | |
| ● | the Reverse Split will increase the trading market for the common stock, particularly if the stock price does not increase as a result of the reduction in the number of shares of common stock available in the public market. |
The market price of our common stock will also be based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Split is consummated and the trading price of the common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Split. Furthermore, the liquidity of our common stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Split and this could have an adverse effect on the market price of our common stock. If the market price of the common stock declines subsequent to the effectiveness of the Reverse Split, this will detrimentally impact our market capitalization and the market value of our public float.
The Reverse Split may result in some stockholders owning “odd lots” that may be more difficult to sell or require greater transaction costs per share to sell.
The Reverse Split may result in some stockholders owning “odd lots” of less than 100 shares of common stock on a post-split basis. These odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “round lots” of even multiples of 100 shares.
Depending on the Reverse Split ratio, certain stockholders may no longer have any equity interest in the Corporation.
Based on the Reverse Split of all of the outstanding shares of our common stock at a ratio between 1-for-20 and 1-for-100, certain stockholders might be fully cashed out in the Reverse Split and thus, after the Reverse Split takes effect, such stockholders would no longer have any equity interest in the Corporation and therefore would not participate in our future earnings or growth, if any.
The Reverse Split may not help generate additional investor interest.
There can be no assurance that the Reverse Split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our common stock may not necessarily improve.
No Going Private Transaction
The number of stockholders following any Reverse Split will decrease to the extent that any holder of less than a full share of common stock is cashed out pursuant to the Reverse Split, but the Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act and the implementation of the proposed Reverse Split will not cause us to go private. As we currently have less than 300 shareholders of record, the consummation of the Reverse Split does not enhance our ability or otherwise enable us to delist and deregister. We have no plan at the date of this proxy statement to take the Company private.
No Appraisal Rights
Stockholders do not have appraisal rights under Delaware state law or under our Charter or Bylaws in connection with the Reverse Split.
Material United States Federal Income Tax Consequences of the Reverse Split
The following discussion is a summary of the material U.S. federal income tax consequences of the Reverse Split to us and to U.S. Holders (as defined below) that hold shares of our common stock as capital assets (i.e., for investment) for U.S. federal income tax purposes. This discussion is based upon current U.S. tax law, which is subject to change, possibly with retroactive effect, and differing interpretations. Any such change may cause the U.S. federal income tax consequences of the Reverse Split to vary substantially from the consequences summarized below. We have not sought and will not seek any rulings from the Internal Revenue Service (the “IRS”) regarding the matters discussed below and there can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Reverse Split.
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or any other entity or arrangement treated as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if (1) its administration is subject to the primary supervision of a court within the United States and all of its substantial decisions are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code, or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.
This summary does not address all aspects of U.S. federal income taxation that may be relevant to U.S. Holders in light of their particular circumstances or to stockholders who may be subject to special tax treatment under the Internal Revenue Code, including, without limitation, dealers in securities, commodities or foreign currency, persons who are treated as non-U.S. persons for U.S. federal income tax purposes, certain former citizens or long-term residents of the United States, insurance companies, tax-exempt organizations, banks, financial institutions, small business investment companies, regulated investment companies, real estate investment trusts, retirement plans, persons whose functional currency is not the U.S. dollar, traders that mark-to-market their securities or persons who hold their shares of our common stock as part of a hedge, straddle, conversion or other risk reduction transaction. If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of the partnership (or other entity treated as a partnership) and a partner in the partnership will generally depend on the status of the partner and the activities of such partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purposes) holding our common stock and the partners in such entities should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Split to them.
The state and local tax consequences, alternative minimum tax consequences, non-U.S. tax consequences and U.S. estate and gift tax consequences of the Reverse Split are not discussed herein and may vary as to each U.S. Holder. Furthermore, the following discussion does not address any tax consequences of transactions effectuated before, after or at the same time as the Reverse Split, whether or not they are in connection with the Reverse Split. This discussion should not be considered as tax or investment advice, and the tax consequences of the Reverse Split may not be the same for all stockholders. U.S. Holders should consult their own tax advisors to understand their individual federal, state, local, and foreign tax consequences.
We believe that the Reverse Split should constitute a reorganization under Section 368(a)(1)(E) of the Code. Accordingly, we should not recognize taxable income, gain or loss in connection with the Reverse Split.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
Reservation of Right to Abandon the Reverse Split
The Board reserves the right to not file the Reverse Split Amendment to effect the Reverse Split and to abandon any Reverse Split without further action by our stockholders at any time before the effectiveness of the filing of such Charter amendment with the Secretary of the State of the State of Delaware, even if this proposal is approved by our stockholders at the Annual Meeting. By voting in favor of this proposal, you are expressly also authorizing the Board to delay, not proceed with, and abandon, the proposed Reverse Split if it should so decide, in its sole discretion, that such action is in the best interests of our stockholders.
Vote Required to Approve Reverse Split Amendment
Approval of the Reverse Split Amendment and to authorize our Board, if in its judgment it is necessary, to effect the Reverse Split requires an affirmative vote of a majority of the common stock outstanding and entitled to vote at the Annual Meeting. Abstentions and instructions withholding authority to vote for this proposal will count as a vote against the proposal. The Reverse Split Amendment and the Reverse Split is a “non-routine” matter. Therefore, if you do not instruct your broker how to vote with respect to the withdrawal, your broker may not vote with respect to this proposal and those votes will be deemed broker non-votes. Broker non-votes are not counted for the purpose of determining whether to effect the Reverse Split, and, therefore, will not have the effect of a negative vote with respect to the Reverse Split.
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 3.
Proposal 4: Advisory Vote on the 2019 Compensation of Our Named Executive Officers
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are asking stockholders to approve an advisory resolution on the compensation of the named executive officers, as reported in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our fiscal 2019 executive compensation. Significant information about our executive compensation is provided in this proxy statement under the heading “Compensation of Directors and Executive Officers.”
We are asking our stockholders to vote in favor of the following resolution:
“RESOLVED, that the stockholders of HopTo, Inc. approve, on an advisory basis, the compensation of the named executive officers, as disclosed in HopTo, Inc.’s Proxy Statement for the 2020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the U.S. Securities and Exchange Commission, including the information under the heading “Compensation of Directors and Executive Officers — Compensation Discussion and Analysis,” the compensation tables and narrative disclosure.”
Approval requires the receipt of “FOR” votes constituting a majority of the votes cast on the proposal at the Annual Meeting, assuming a quorum is present.
To the extent there is a significant vote against the compensation of our named executive officers, we will consider our stockholders’ concerns and our Board will evaluate what actions may be necessary or appropriate to address those concerns.
The advisory approval of the compensation of our named executive officers must receive “FOR” votes from at least a majority of shares represented either present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions from voting will have the same effect as a vote against the proposal. Broker non-votes will have no effect.
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 4.
| 20 |
Our business and affairs are managed, and all corporate powers are exercised under the direction of our Board. Our Board establishes fundamental corporate policies and oversees our performance and our Chief Executive Officer and other officers to whom our Board has delegated authority to manage day-to-day business operations.
Our Board has adopted corporate governance guidelines that set forth expectations for directors, director independence standards, board committee structure and functions, and other policies for the Corporation’s governance. It also has adopted a Code of Business Conduct that applies to members of our Board, our executive officers as well as all of our employees. Until September 2018, several standing and special committees assisted our Board in carrying out its responsibilities. Each operated under a written charter adopted by our Board.
Our corporate governance guidelines, standing committee charters, and codes of conduct are posted on our website at www.hopto.com. Paper copies may be obtained upon request by writing to: Corporate Secretary, 6 Loudon Road, Suite 200, Concord NH 03301.
Functions
In addition to its general oversight role, our Board performs a number of specific functions, including:
| ● | Hiring and firing our executive officers and overseeing their performance and that of other senior management in our operations; | |
| ● | Planning for management succession; | |
| ● | Guiding corporate strategy; | |
| ● | Reviewing and monitoring strategic, financial and operating plans and budgets and their development and implementation by management; | |
| ● | Assessing and monitoring risks and risk-management strategies; | |
| ● | Suggesting, reviewing and approving significant corporate actions; | |
| ● | Reviewing and monitoring processes designed to maintain our integrity, including financial reporting, compliance with legal and regulatory obligations, and relationships with stockholders, employees, customers, suppliers and others; and | |
| ● | Selecting director nominees, appointing board committee members, forming board committees and overseeing effective corporate governance. |
Leadership Structure
Our Board retains the flexibility to determine on a case-by-case basis whether the positions of Chief Executive Officer and Chairman of the Board should be combined or separated and whether an independent director should serve as Chairman. This flexibility permits our Board to organize its functions and conduct its business in a manner it deems most effective in then prevailing circumstances. Our Board has determined that its leadership structure is appropriate in light of our current management framework. Currently, our Chief Executive Officer serves as a director on our Board, and the Board does not have a Chairman.
Our Board believes that its independence and oversight of management is maintained effectively through this flexible leadership structure, our Board’s composition and sound corporate governance policies and practices.
Director Share Ownership Guidelines
Our Board has not established director share ownership guidelines. We prohibit shorting our stock by our directors and executive officers.
Board Meetings; Executive Sessions; Annual Stockholders’ Meetings
At regularly scheduled Board meetings, directors review and discuss management reports regarding our performance, prospects and plans, as well as significant opportunities and immediate issues facing us. At least once a year, our Board also reviews management’s long-term strategic and financial plans.
The Chief Executive Officer proposes the agenda for Board meetings. Directors are encouraged to propose agenda items, and any director also may raise at any meeting subjects that are not on the agenda. Information and other materials important to understanding the business to be conducted at Board meetings are from time to time distributed in writing to the directors in advance of the meeting. Additional information may be presented at the meeting. An executive session of independent members of our Board is held at each regular Board meeting, and any director may call for an executive session at any Board meeting.
During the fiscal year ended December 31, 2019, our Board held six meetings. Each then-director attended either in person or by electronic means all of the meetings of our Board on which they served during fiscal year 2019.
We have not established a policy with respect to Board nominees attending our annual stockholders’ meetings. Last year, all but one of our Board nominees attended our annual stockholder’s meeting.
Evaluation of Board and Director Performance
Our Board annually reviews the individual performance and qualifications of each director who may wish to be considered for nomination to an additional term.
Risk Oversight
Our Board is responsible for the general oversight of risks that affect us. Our Board receives regular reports on our operations from our Chief Executive Officer, as well as other members of management. Our Board reviews these reports and makes inquiries in their business judgment.
Until September 2018, our Board also fulfilled its oversight role through the operations of its various committees, including an audit committee. Since September 2018, our Board, with the full participation of our independent directors, has handled all oversight activities, including responsibility for risk oversight in connection with its review of our financial reports filed with the SEC. Our Board receives reports from our Chief Financial Officer and our independent auditors in connection with the review of our quarterly and annual financial statements regarding significant financial transactions, accounting and reporting matters, critical accounting estimates and management’s exercise of judgment in accounting matters. When reporting on such matters, our independent auditors also provide their assessment of management’s report and conclusions.
Succession Planning and Management Development
Until September 2018, our compensation committee oversaw and evaluated leadership succession planning practices and results. Until September 2018, our compensation committee reported annually to our Board on succession planning, including policies and principles for executive officer selection. Currently, our Board oversees and evaluates succession planning practices and results and all other former compensation committee functions.
Review of Related Person Transactions
SEC rules require us to disclose certain transactions involving more than $120,000 in which we are a participant and any of our directors, nominees as directors or executive officers, or any member of their immediate families, has or will have a direct or indirect material interest. Our Board must review and approve or ratify any such “related person transaction” that is required to be disclosed. Other than Backstop Agreement (defined and described below under “Certain Relationships and Related Transactions, and Director Independence”), there have been no transactions or proposed transactions requiring review during fiscal year 2019 and through the date of the mailing of this proxy statement.
The Board has delegated to the independent members of the Board the responsibility to review and approve all transactions or series of transactions in which we or a subsidiary is a participant, the amount involved exceeds $120,000 and a “related person” (as defined in Item 404 of Regulation S-K) has a direct or indirect material interest. Transactions that fall within this definition will be referred to the independent members of our Board for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, such directors will decide whether or not to approve the transaction and will approve only those transactions that are in our best interests.
Board Access to Senior Management, Independent Accountants and Counsel
Directors are elected by a “plurality”have complete access to our independent registered public accounting firm, senior management and other employees. They also have complete access to counsel, advisors and experts of the voting powertheir choice with respect to any issues relating to our Board’s discharge of our common stock. Plurality means that the nominees with the largest number of votes are elected, up to the maximum number of directors to be chosen (in this case, four directors). Stockholders can either vote “FOR” the nominee or withhold authority to vote for the nominee. However, shares that are withheld will have no effect on the outcome of the election of directors. Broker non-votes also will not have any effect on the outcome of the election of the directors.
|
its duties.
BOARD MEETINGS AND COMMITTEESRetirement Policy
During fiscal year 2017,We have not established a Board retirement policy.
Committees of our Board held eight meetings. of Directors
Our Board has two separately designated committees: our Audit Committeecommittees, an audit committee and our Compensation Committee. Each membera compensation committee, each of these standing committees has been determined to meetwhich does not currently have any members or activities separate from the standards for director independence underBoard. It is the rulesintention of the SecuritiesBoard to reconstitute the audit committee and Exchange Commission (the “SEC”) and is an “independent director” as defined under NASDAQcompensation committee when required by the complexity of the business or legal or listing standards.
requirements. Our Board has determined not to establish a nominating committee. Nominees for election as directors are selected by our Board. Each committee has the power to engage independent legal, financial or other advisors, as it may deem necessary, without consulting or obtaining the approval of our Board or any of our officers. Each then-director attended, either in person or by electronic means, all of the meetings of our Board of Directors and Board committees on which they served during fiscal year 2017.
Committees of the Board of Directors
Audit Committee
The current membersUntil September 2018, our audit committee reviewed our internal accounting procedures and considers and reports to our Board with respect to other auditing and accounting matters, including the selection of our Audit Committee are Michael A. Brochu and Eldad Eilam. Our Audit Committee held four meetings during the 2017 fiscal year, and is primarily responsible for hiring our independent auditors, approving the services performed byscope of annual audits, fees to be paid to our independent auditors and reviewing their reports regardingthe performance of our accounting practicesindependent auditors. Our audit committee relied on the expertise and systemsknowledge of internal accounting controls.management and the independent auditors in carrying out its oversight responsibilities. On a routine basis, our audit committee met separately with our independent auditors and invites select employees who work under the Chief Financial Officer to participate in its meetings. Our Board determinedaudit committee charter requires that each of the members of our Audit Committee members is “independent” pursuant to the rules of The NASDAQ Stock Market andaudit committee be independent, as defined under SEC rules and Nasdaq listing standards, and that Mr. Brochu is an “auditat least one member of our audit committee have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual’s financial expert” as definedsophistication, including having been a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibilities. The responsibilities and activities of our audit committee are described in greater detail in our audit committee charter; however, currently, the functions of the audit committee are served by applicable SEC rules.the Board, in particular our independent directors on the Board.
Compensation Committee
The current membersUntil September 2018, the compensation committee of our Compensation CommitteeBoard acted on behalf of our Board to review, adopt and oversee our compensation and employee benefit programs and practices. Currently, the functions of the compensation committee are Michael A. Brochu and John Cronin. Our Compensation Committee did not meet duringserved by the 2017 fiscal year as compensation matters were discussedBoard, in full Board meetings. Our Compensation Committee is primarily responsible for reviewing and approvingparticular our general compensation policies and setting bothindependent directors on the cash and non-cash compensation levels for our executive officers. Our Compensation Committee annually reviews and determines both the cash and non-cash components of compensation paid to our directors and executive officers. In years past, the Compensation Committee has utilized information published by independent organizations, such as the American Electronics Association and Culpepper and Associates, for background information as to general compensation levels currently being offered in our industry. Our executive officers do not perform any role in determining or recommending the amount or form of executive or director compensation. Our Compensation Committee also administers our stock-based compensation plans. Our Compensation Committee does not have a charter.Board.
All members of the Compensation Committee are non-employee directors and are “independent” pursuant to the rules of The NASDAQ Stock Market.
CORPORATE GOVERNANCE
Board Leadership Structure
The roles of Chairman andFor executives other than our Chief Executive Officer, historically have been heldour compensation committee considered evaluations and recommendations submitted to our compensation committee by different individuals. Our Board believes that this structure provides an efficient and effective leadership model for our Company, facilitates efficient and open communication between our directors and management team, and helps to involve our other independent Board members in Board activities and decision making.
Role ofChief Executive Officer on which compensation determinations were then made. In the Board of Directors in Risk Oversight
One of the responsibilitiescase of our Board is to review and evaluateChief Executive Officer, the process used to assess major risks facing our Company and to periodically review assessments preparedevaluation of his or her performance was conducted by our senior management of such risks,compensation committee, which determined whether, and if so in what manner, to recommend to the full Board any adjustments to his or her compensation as well as options for their mitigation. Frequent interaction between our directors and members of senior management assist in this effort. Communications between our Board and senior management regarding long-term strategic planning and short-term operational practices include matters of material risk inherent in our business.awards to be granted. Our compensation committee does not determine non-employee director compensation.
Our Board also plays an active role, as a whole and at the committee level, in overseeing managementEach member of our risks. Our entire Board is formally apprised at least annually of our enterprise risk management efforts. Our Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. Our Audit Committee is responsible for overseeing the management of financial and accounting risks. Our Compensation Committee is responsible for overseeing the management of risk-taking relating to executive compensation plans and arrangements. While each committee is responsible for the evaluation and management of such risks, our entire Board is regularly informed through committee reports.
Code of Business and Ethical Conduct
The Board has establishedwas a corporate Code of Conduct which qualifies as a “code of ethics”“non-employee” director as defined by Item 406 of Regulation S-Kunder Section 16 of the Exchange Act and applies toAct. Our compensation committee operated under a written charter adopted by our Board, a current copy of which is available in the Company’s principal executive officer, principal financial officer, principal accounting officer and all other officers, directors, and employees. Among other matters, the Codecorporate governance section of Conduct is designed to deter wrongdoing and to promote:
A full text of our Code of Conduct is published on our website at www.hopto.com under the tab Code of Conduct. If we amend our Code of Conduct as it applies to the principal executive officer, principal financial officer, principal accounting officer or controller (or persons performing similar functions) or grant a waiver from any provision of the Code of Conduct to any such person, we shall disclose such amendment or waiver on our website at www.hopto.com.
Director Independence
Our Board has determined that each of Jonathon R. Skeels, Richard S. Chernicoff and Thomas C. Stewart, who collectively would constitute a majorityThe charter of our new Board, meets the general independence criteria set forth in the NASDAQ Marketplace rules. In addition,compensation committee provided that any independent compensation consultant engaged by our Board has made a subjective determination ascompensation committee works for our compensation committee, not our management, with respect to each of the foregoing individuals that no relationships exist that, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Related-Party Transactions
John Cronin
ipCapital Group, Inc.
John Cronin, a member of our Board since August 9, 2011, is the founder, managingexecutive and director and chairman of ipCapital Group, Inc. (“ipCapital”), an intellectual property strategy firm.
On October 11, 2011, we engaged ipCapital to assist us in the execution of our strategic decision to significantly strengthen, grow and commercially exploit our intellectual property assets. Our engagement agreement with ipCapital, which has been amended three times, affords us the right to request ipCapital to perform a number of diverse services, employing its proprietary processes and methodologies, to facilitate our ability to identify and extract from our current intellectual property base new inventions, potential patent applications, and marketing and licensing opportunities.
For the fiscal years ended December 31, 2018 and 2017, there were no services performed, additional charges incurred or payments made to ipCapital under the agreement.
In addition to the fees we agreed to pay ipCapital for its services, we issued ipCapital a five-year warrant to purchase up to 26,667 shares of our common stock at an initial price of $3.90 per share. Half of the warrant (13,333 shares) has a time-based vesting condition, with such vesting to occur in three equal annual installments. The first, second, and third vesting installments occurred on October 11, 2012, 2013, and 2014. Theremaining 13,333 shares became fully vested upon the completion to our satisfaction of all services that we requested from ipCapital under the engagement agreement, prior to the signing of the amendments. Such performance was deemed satisfactory during 2012. We believe that thesefees, together with the issuance of the warrant, constitute no greater compensation than we would be required to pay an unaffiliated person for
substantially similar services.matters.
Director Nominations and Qualifications for Director Nominees
Our Board does not have a nominating committee. Our Board has determined that given its relatively small size, the function of a nominating committee could be performed by our Board as a whole without unduly burdening the duties and responsibilities of our Board members. The nomination of each of the director nominees standing for election at the Annual Meeting was unanimously approved by our Board.
Our Board does not have written guidelines regarding the qualifications or diversity of properly submitted candidates for membership on our Board. Qualifications for consideration as a new director nominee may vary according to the particular areas of expertise being sought as a complement to the existing Board composition. In reviewing nominations, our Board will consider, among other things, an individual’s business experience, industry experience, financial background, breadth of knowledge about issues affecting us, time available for meetings and consultation regarding company matters and other particular skills and experience possessed by the individual.
Stockholder Nominations and Bylaw Procedures
Our Bylaws establish procedures pursuant to which a stockholder may nominate a person for election to our Board. Our Bylaws are available at our website at: investors.hopto.com.
To nominate a person for election toCommunications with our Board a stockholder must provide for each proposed nominee name, age, business address and residence address of such person; the principal occupation or employment of such person; the class and number of shares of capital stock of the Company that are beneficially owned by such person, if any, and any other direct or indirect pecuniary or economic interest in any capital stock of the corporation of such person, including, without limitation, any derivative instrument, swap, option, warrant, short interest, hedge or profit sharing arrangement and all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected, a description of all arrangements or understandings between such stockholder or beneficial owner and any other person or persons (including their names) in connection with the nomination and of any material interest in such nomination of such stockholder and the beneficial owner, if any, on whose behalf the nomination is made; provided, that the Company may require any proposed nominee to furnish such other information as may be reasonably required by the corporation to determine the qualifications of such nominee to serve as a director of the Company. Such notice must also contain information about the stockholder making the nomination and the beneficial owner, if any, on behalf of whom the nomination is made, including name and address, class and number of shares owned, and representations regarding the intention to make such a nomination. We may require any proposed nominee to furnish information concerning his or her eligibility to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence of the nominee.
Deadlines to Submit Nominations
To nominateStockholders and other interested parties may contact any member (or all members) of our Board (including, without limitation, the non-management directors as a person for electiongroup), any committee of our Board or the Chair of any such committee by mail. All such correspondence may be sent addressed to our Board, at our annual meeting of stockholders, written notice of a stockholder nomination must be delivered to ourany committee or any individual director, c/o Corporate Secretary, not later than the close of business 90 nor earlier than the close of business 120 days prior to the one year anniversary of the date on which we first mailed the proxy materials for the prior year’s annual meeting. However, if our annual meeting is advanced or delayed by more than 30 days from the anniversary of the previous year’s meeting, a stockholder’s written notice will be timely if it is delivered by the later of the 90th day prior to such annual meeting or the 10th day following the announcement of the date of the meeting. This year, our proxy statement is being mailed on or about August [●], 2018; therefore, since there has not been an annual meeting since 2015, notice by a stockholder, to be timely received, must be received by our Secretary not later than the close of business on the 10th day following the day on which public disclosure of the date of the meeting was first made.
Stockholder nominations must be addressed to Jean-Louis Casabonne, Secretary, and must be mailed to him at hopToHopTo, Inc., 6 Loudon Road, Suite 200, Concord New HampshireNH 03301.
All stockholder communications will be opened and reviewed by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to the directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to our Board or any group or committee of directors, the Corporate Secretary will make sufficient copies and send one copy to each director who is a member of the group or committee to which the envelope is addressed.
Board Interlocks and Insider Participation
None of our independent directors during fiscal 2019:
| ● | was an officer or employee of ours or any of our subsidiaries; | |
| ● | was formerly an officer of ours or any of our subsidiaries; or | |
| ● | (except as described herein) had any relationship requiring disclosure by us under the SEC’s rules requiring disclosure of related party transactions in this proxy statement. |
Delinquent Section 16(a) Reports
Pursuant to Section 16(a) of the Exchange Act, our directors and executive officers, and any persons holding more than 10% of our common stock, are required to report their beneficial ownership and any changes therein to the SEC and to us. Specific due dates for those reports have been established, and we are required to report herein any failure to file such reports by those due dates. Based solely on a review of copies of such reports and written representations delivered to us by such persons, we believe that during the fiscal year ended December 31, 2019, all Section 16(a) filing requirements applicable to the executive officers, directors and stockholders were timely satisfied, except those that were unintentionally filed late due to administrative delays.
Certain Relationships and Related Transactions, and Director Independence
Our Charter, Bylaws and indemnification agreements with our directors and executive officers obligate us to indemnify our directors and executive officers. We have also purchased director and officer indemnification insurance.
Our Code of Conduct provides our written policies and procedures for the review of any activities by a director, executive officer or employee or members of their immediate families which create or appear to create an actual or potential conflict between the individual’s interests and our interests. Our audit committee (or our Board in lieu thereof) is responsible for interpreting our Code of Conduct, reviewing reports of alleged breaches of such Code of Conduct and granting waivers of or approving amendments of such Code of Conduct. Our audit committee (or our Board in lieu thereof) is responsible for reviewing past or proposed transactions between us and related persons.
Our Code of Conduct requires all of our employees, executives, directors, agents and representatives, including contractors and contingent workers, to avoid any activity or personal interest that creates or appears to create a conflict of interest with us, and requires all of our personnel to disclose any such activity or interest to management. Our employees and directors must disclose any relationship with outside firms where they have any influence on transactions involving purchases, contracts or leases with such firm. Employees are directed to report such potential or actual conflicts to their supervisors, the Chief Financial Officer or Chief Executive Officer, and management is directed to review and make a report to the Chief Financial Officer or Chief Executive Officer. Our Chief Financial Officer or Chief Executive Officer or his/her designee then reviews the situation, and if an actual conflict of interest exists, must disclose such facts and circumstances to our audit committee (or our Board in lieu thereof), which oversees treatment of such issues and reviews and resolves the individual matters presented.
Our directors and executive officers are required to obtain the prior written approval of our audit committee (or our Board in lieu thereof), or its designated member, following the full disclosure of all facts and circumstances before making any investment, accepting any position or benefits, or participating in any transaction or business arrangement that creates or appears to create a conflict of interest.
On January 31, 2020, the Corporation and all of our directors entered into a Backstop Agreement (the “Backstop Agreement”), with certain accredited investors, including Novelty Capital Partners LP (with its affiliates, “Novelty”), which is controlled by our Chief Executive Officer and interim Chief Financial Officer, Jonathon Skeels, and is one of our significant stockholders. The Backstop Agreement was unanimously approved by the Board, including all of our independent directors. Pursuant to the Backstop Agreement, such investors agreed to purchase in a private placement, at $0.30 per share, up to $2.41 million of shares of our common stock in connection with the closing of our subscription rights offering to all of our stockholders in March 2020. We consummated the Backstop Agreement transactions on August 13, 2020, and Novelty acquired 6,905,326 shares of our common stock pursuant to the Backstop Agreement.
| Name | Age | Position | ||
| Jonathon R. Skeels | 38 | Chief Executive Officer and interim Chief Financial Officer |
Jonathon R. Skeels. For biographical information on Mr. Skeels, see “Proposal 1: Election of Independent DirectorsDirectors.”
The Corporation entered into an employment letter (“Employment Agreement”) with Mr. Skeels for his service as Chief Executive Officer and interim Chief Financial Officer, effective as of July 1, 2020. Pursuant to the Employment Agreement, Mr. Skeels is entitled to receive a base salary of $200,000 per year and other compensation to be determined from time to time by the Corporation in its sole discretion.
The independent members of our Board meet in executive session, without any employee directors or other members of management in attendance, at least annually and additionally, as circumstances warrant.
Stockholder Communication with Board Members
We maintain contact information for stockholders, both telephone and email, on our website (http://www.investors.hopto.com) under the heading “FAQs” where a stockholder will find our telephone number and mailing address as well as a link for providing email correspondenceEmployment Agreement also entitles Mr. Skeels to Investor Relations. Communications sent to Investor Relations and specifically marked as a communication for our Board will be forwarded to our Board or specific members of our Board as directedparticipate in the stockholder communication. In addition, communicationsCorporation’s employee benefit plans and be reimbursed for our Board received via telephone or mail are forwardedexpenses incurred in connection with his service to our Board by onethe Corporation. If Mr. Skeels’ employment is terminated without cause (as defined in the Employment Agreement) the Corporation will, against the receipt of our employees.
a mutual release, pay Mr. Skeels an amount equal to 12 months of his annual base salary and pay the premiums for continuation of Mr. Skeels and his family’s health insurance for up to 12 months following his termination.
Board Member Attendance at Annual Meetings
Our Board does not have a formal policy regarding attendance of directors at our annual stockholder meetings. The Company last held an annual meeting in 2015, however, none of the then-current directors attended as their attendance was not required.
EXECUTIVE OFFICERS
Jean-Louis Casabonne currently serves as our Interim Chief Executive Officer, Chief Financial Officer and Secretary, and is a director nominee. Please refer to Proposal 1 – Election of Directors –Director Nominees for Mr. Casabonne’s biography.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation we paid to ourthe named executive officers for the fiscal years ended December 31, 2017 and 2016:periods indicated.
| Name and Principal Position | Year | Salary($) | Bonus($) | Stock Award($) | Option Awards($) | All Other Compensation($) | Total($) | |||||||||||||||||||||
| Eldad Eilam (1) | 2017 | 179,366 | (5) | — | — | — | 916 | (3) | 180,282 | |||||||||||||||||||
| Former CEO, President | 2016 | 275,000 | (5) | — | — | — | 3,470 | (3) | 278,470 | |||||||||||||||||||
| Jean-Louis Casabonne (2) | 2017 | 163,662 | (5) | — | — | — | 903 | (4) | 164,565 | |||||||||||||||||||
| Interim CEO, CFO, Secretary | 2016 | 225,000 | (5) | — | — | — | 2,903 | (4) | 227,903 | |||||||||||||||||||
| Name and Principal Position | Year | Salary $ | Bonus $ | Stock Awards $ | Option Awards $ | All Other Compensation $ | Total $ | |||||||||||||||||||
| Jonathon R. Skeels (1) | 2019 | — | — | — | — | — | — | |||||||||||||||||||
| CEO, Interim CFO | 2018 | — | — | — | — | — | — |
| (1) | Mr. | |
Mr. Casabonne has beenwas employed sincein May 2014 and continuescontinued to be employed on an at-will, part time, basis. Mr. Casabonne is paid on an hourly basis for hours worked using as a basisreceived an annual base salary of $225,000 or $108 per hour, and iswas eligible for an annual performance-based bonus up to 30% of his annual base salary that iswas based on goals and achievements mutually set by Mr. Casabonne and management. In 2014, Mr. Casabonne was awarded equity compensation equivalent to 66,667 shares of hopTo Inc.Corporation common stock.stock and forfeited the outstanding shares at December 31, 2018. Mr. Casabonne resigned from his position and accepted a new role as board of directors in September 2018.
As of December 31, 2019, we did not have any outstanding equity awards.
Outstanding Equity Awards at Fiscal Year-EndCompensation of Our Board of Directors
| Outstanding Equity Awards at December 31, 2017 | ||||||||||||||||||||
| Option Awards | ||||||||||||||||||||
| Name | Number of Underlying Securities (1) | Number of Underlying Securities unvested | Number of Underlying Securities unearned | Option Exercise Price $ | Option Expiration Date | |||||||||||||||
| Jean-Louis Casabonne, Interim CEO, CFO, Secretary | 57,911 | (2) | 15,108 | 15,108 | 1.80 | 08/04/2025 | ||||||||||||||
We reimburse our non-employee directors for all reasonable out-of-pocket expenses incurred in the performance of their duties as directors. In May 2020, we agreed to pay each of our non-employee directors for their service on our Board from September 2018 through September 2020 in the amount of $22,958 with each non-employee director required to use the after-tax proceeds to purchase common stock of the Corporation pursuant to the Backstop Agreement.
Compensation of Directors — Fiscal 2019
During the fiscal year ended December 31, 2017,2019, our non-employee directors were eligible to be compensated at the rate of $1,000did not receive compensation for attendance at each meeting oftheir service on our Board, $500 if their attendance was via telephone, $500 for attendance at each meeting of a Board committee, and a $1,500 quarterly retainer.Board. As of December 31, 2017, $64,0002019, $85,600 of the boardBoard fees earned by prior members of our Board were accrued and not yet paid (see Note 54 to our Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017)2019). In January 2020, we issued 120,000 shares of common stock to two former members of our Board which were previously committed to them and settled a total of $39,600 of Board fees that were accrued and not yet paid as of December 31, 2019.
| Name | Fees Earned or Paid in Cash | Option Awards | All Other Compensation | Total | ||||||||||||
| Michael A. Brochu | $ | 10,000 | $ | — | $ | — | $ | 10,000 | ||||||||
| John Cronin | $ | 10,000 | $ | — | $ | — | $ | 10,000 | ||||||||
| Eldad Eilam | $ | 6,000 | $ | — | $ | — | $ | 6,000 | ||||||||
| Name | Year | Fees Earned or Paid in Cash (1) | Option Awards | All Other Compensation | Total | |||||||||||||
| Thomas C. Stewart | 2019 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Richard C. Chernicoff | 2019 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Jean-Louis Casabonne | 2019 | $ | — | $ | — | $ | — | $ | — | |||||||||
| Jonathon R. Skeels | 2019 | $ | — | $ | — | $ | — | $ | — |
| (1) | As discussed above, we made a lump sum payment to our directors for service from August 2018 to September 2020. |
Compensation Risk Management
As part of its annual review of our executive compensation program, the Compensation CommitteeBoard reviews with management the design and operation of our incentive compensation arrangements for senior management, including executive officers, to determine if such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Company.us. The Compensation CommitteeBoard considers, among other things, the features of the Company’sour compensation program that are designed to mitigate compensation-related risk, such as the performance objectives and target levels for incentive awards (which are based on overall Company performance), and our compensation recoupment policy. The Compensation CommitteeBoard also considers our internal control structure which, among other things, limits the number of persons authorized to execute material agreements, requires approval of our board of directors for matters outside of the ordinary course and our whistle blower program. Based upon the above, the Compensation CommitteeBoard has concluded that any risks arising from the Company’sour compensation plans, policies and practices are not reasonably likely to have a material adverse effect on the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED STOCKHOLDER MATTERS
As of the Record Date of June 25, 2018, there were 9,804,400 shares of our common stock outstanding. The following table presents information regarding the beneficial ownership of our common stock as of such date by:
| Common Stock | ||||||||
| Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned (1) (2) | Percent of Class (%) | ||||||
Novelty Capital Partners, LP(3) 520 Newport Center Drive, 12th floor Newport Beach, CA 92660 | 975,711 | 9.95 | % | |||||
JMI Holdings, LLC (2011 Family Series)(4) 111 Congress Avenue, Suite 2600 Austin, TX 78701-4062 | 936,232 | 8.5 | % | |||||
Baltimore, MD David R. Wilmerding, III(5) 2518 Caves Road Owings Mill, MD 21117-2354 | 961,010 | 8.5 | % | |||||
Jon C. Baker(6) 101 St. Johns Road Baltimore, MD 21210 | 894,378 | 7.8 | % | |||||
Austin Marxe, David Greenhouse and Adam C. Stettner(7) 527 Madison Avenue, Suite 2600 New York, NY 10022 | 912,657 | 7.6 | ||||||
| Eldad Eilam | 231,194 | 2.4 | % | |||||
| Michael A. Brochu(8) | 144,791 | 1.5 | % | |||||
| John Cronin(8) | 82,864 | * | ||||||
| Jean-Louis Casabonne(8) | 82,525 | * | ||||||
| Jonathon Richard Skeels | ||||||||
| Richard S. Chernicoff | ||||||||
| Thomas C. Stewart | ||||||||
| All Current Directors and Executive Officers as a Group (4 individuals) | 541,374 | 3.9 | % | |||||
* Less than 1%
PROPOSAL 3
AMENDMENT OF CERTIFICATE OF INCORPORATION
REGARDING STOCKHOLDER ACTION
BY WRITTEN CONSENT
Currently, our Certificate of Incorporation states in Article VII that stockholders shall have no right to take any action by written consent without a meeting. Our Board has declared advisable and approved and recommends that the stockholders approve and adopt an amendment to our Certificate of Incorporation repealing this provision and thereby permitting stockholders to act by written consent without a meeting as provided under Delaware General Corporation Law (“DGCL”). Such permission is to be consistent with applicable law and consistent with giving stockholders the fullest power to act in accordance therewith, including stockholder ability to initiate any topic for written consent consistent with applicable law. The Board believes that the ability to actbywrittenconsentinlieuof ameetingis ameans by whichstockholderscan raiseimportantmattersoutsidethenormalannualmeetingcycle.If stockholders approve this proposal, we will file a certificate of amendment of our Certificate of Incorporation with the Delaware Secretary of State and make a corresponding amendment to our Second Amended and Restated Bylaws (“Bylaws”). Under the DGCL, unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. This ability to act by written consent is currently not available to stockholders under our Certificate of Incorporation and would be reinstituted if this Proposal 3 is approved by the stockholders at the Annual Meeting.
The Proposed Amendment
If Proposal 3 is approved and adopted by our stockholders at the Annual Meeting, we will file a certificate of amendment to our Certificate of Incorporation, which repeals and deletes in its entirely the first sentence of Article VII of our Certificate of Incorporation as follows:
Stockholders of the Corporation shall take action by meetings held pursuant to this Amended and Restated Certificate of Incorporation and the Bylaws and shall have no right to take any action by written consent without a meeting.
Conforming Amendment to the Bylaws
Our Bylaws also currently include a conforming section that prohibits stockholders to take any action by written consent without a meeting. Conditioned upon approval by the stockholders of the proposed amendment in this Proposal 3 and the filing of the amendment to the Certification of Incorporation with the Secretary of State of the State of Delaware, our Board has approved to delete in its entirety Section 10 of Article II of our Bylaws to eliminate the prohibition on stockholders to act by written consent (marked to show changes; for reference only):
“Section 10.[Reserved].No Informal Action by Stockholders.Stockholders of the corporation shall have no right to take any action by written consent without a meeting.”
Furthermore, conditioned upon approval by the stockholders of the proposed amendment in this Proposal 3 and the filing of the amendment to the Certification of Incorporation with the Secretary of State of the State of Delaware, our Board has approved to amend Section 5 of Article VIII regarding the setting of a record date as follows (marked to show changes; for reference only):
“Section 5. Fixing Record Date.In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
(a) In order that the corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
(c) Unless otherwise restricted by the certificate of incorporation, in order that the corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board of Directors, (i) when no prior action of the Board of Directors is required by law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation in accordance with applicable law, and (ii) if prior action by the Board of Directors is required by law, the record date for such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.”
The effectiveness of these amendments to the Bylaws is conditioned upon, and would only take effect concurrently with, the filing of the amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware.
As a result of the amendments to the Certificate of Incorporation and Bylaws, the stockholders would be permitted to take any action consistent with applicable law by written consent.
Required Vote
Our Certificate of Incorporation provides that amendment of the Certificate of Incorporation as set forth in this Proposal 3 be approved and adopted by the affirmative vote of the holders of at least 66-2/3% of outstanding shares of voting stock entitled to vote at the Annual Meeting. Abstentions and broker non-votes, if any, will have the same effect as votes against this proposal.
Recommendation of the Board
THE BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL 3 TO AMEND ARTICLE VII OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO REPEAL THE PROVISION PROHIBITING STOCKHOLDERS FROM TAKING ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
PROPOSAL 4
AMENDMENT OF ARTICLE V OF THE CERTIFICATE OF INCORPORATION CHANGING THE SUPER-MAJORITY VOTING REQUIREMENT TO A MAJORITY VOTING REQUIREMENT RELATING TO THE AMENDMENT OF OUR BYLAWS
Currently, Article V of our Certificate of Incorporation requires the affirmative vote of holders of at least 66 2/3% of our outstanding shares of voting stock entitled to vote at an election of directors for stockholders to amend our Bylaws. After due consideration, our Board has determined that it is advisable and in the Company’s best interests and in the best interests of our stockholders to amend our Certificate of Incorporation to eliminate this supermajority stockholder vote requirement. Our Board has declared advisable and approved, and recommends that the stockholders approve and adopt an amendment of our Certificate of Incorporation and is accordingly submitting the proposed amendment for approval by our stockholders. If the proposed amendment is approved, our Bylaws may be amended by a simple majority of the voting power of our outstanding stock.
The Proposed Amendment
If Proposal 4 is approved and adopted by our stockholders at the Annual Meeting, we will file a certificate of amendment to our Certificate of Incorporation, which amends the second sentence of Article V of our Certificate of Incorporation as follows (marked to show changes; for reference only):
“In addition, the Bylaws may be amended by the affirmative vote of holders of at leasta majority66 2/3% of the outstanding shares of voting stock of the Corporation entitled to vote at an election of directors.”
Rationale and Background
Supermajority voting requirements are intended to facilitate corporate governance stability by requiring broad stockholder consensus to effect certain changes. However, as corporate governance standards have evolved, many investors and commentators now view these provisions as limiting a board’s accountability to stockholders and the ability of stockholders to effectively participate in corporate governance. Our Board is committed to good corporate governance and has carefully considered the advantages and disadvantages of supermajority voting provisions.
In the past, our Board has determined that maintaining supermajority voting provisions was in the best interests of the Company and its stockholders. Specifically, the Board believes that (1) fundamental corporate changes should require broad consensus among stockholders and (2) the supermajority vote provisions provide protection against unfair, potentially abusive takeover attempts by encouraging acquirers to negotiate directly with the Board, ensuring that the Board can negotiate fair and adequate offers that maximize value for our stockholders and protect against abusive or coercive takeover tactics.
However, the Board believes that eliminating the supermajority voting requirement for stockholders with respect to amendments to our Bylaws strikes an appropriate balance between enhancing accountability to stockholders and preserving the protections to our stockholders. Removing the supermajority voting requirements for stockholders on this matter will enhance the accountability of our Board to our stockholders and eliminate the ability of a minority of stockholders to frustrate future amendments to our Bylaws that the Board may recommend and a majority vote of stockholders may support. After weighing these factors, the Board determined that eliminating the supermajority vote requirement with respect to amendments to our Bylaws would be in the best interests of the Company and its stockholders.
Conforming Amendment to the Bylaws
Our Bylaws also currently include a conforming supermajority stockholder vote requirement with respect to amendments to the Bylaws. Conditional upon approval by the stockholders of the proposed amendment in this Proposal 4 and the filing of the amendment to the Certification of Incorporation with the Secretary of State of the State of Delaware, our Board has approved the following amendment to the second sentence of Section 1 of Article X of our Bylaws to change the supermajority stockholder vote requirement to a majority vote requirement with respect to amendments to the Bylaws (marked to show changes; for reference only):
“All such amendments must be approved by either the holders of a at leasta majoritysixty-six and two-thirds percent (66 2/3%)of the outstanding capital stock entitled to vote thereon or by the board of directors.”
The effectiveness of the amendment to the Bylaws is conditioned upon, and would only take effect concurrently with, the filing of the amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware.
Required Vote
Our Certificate of Incorporation provides that amendment of the Certificate of Incorporation as set forth in this Proposal 4 be approved and adopted by the affirmative vote of the holders of at least 66-2/3% of outstanding shares of voting stock entitled to vote at the Annual Meeting. Abstentions and broker non-votes, if any, will have the same effect as votes against this proposal.
THE BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL 4 TO AMEND ARTICLE V OF THE COMPANY’S CERTIFICATE OF INCORPORATION TO CHANGE THE SUPER-MAJORITY VOTING REQUIREMENT TO A MAJORITY VOTE REQUIREMENT RELATING TO THE AMENDMENT OF OUR BYLAWS.
PROPOSAL 5
AMENDMENT OF CERTIFICATE OF INCORPORATION TO ADD A NEW ARTICLE THAT REQUIRES ANY RELATED PARTY TRANSACTION BE APPROVED BY EITHER THE UNANIMOUS AFFIRMATIVE VOTE OF DISINTERESTED DIRECTORS OR AFFIRMATIVE VOTE OF A MAJORITY OF OUTSTANDING SHARES OF STOCK
Our Board has declared advisable and approved, and recommends that the stockholders approve and adopt, an amendment to our Certificate of Incorporation that, notwithstanding Section 144 of the DGCL, all related party transactions (as described below) are required to be approved by either the unanimous approval of disinterested directors or affirmative vote of a majority of outstanding shares of stock of the Company entitled to vote at an election of directors (the “Related Party Amendment”). The approval requirements of the Related Party Amendment, by its terms, will automatically terminate on December 31, 2019. If stockholders approve this Proposal 5, we will file a certificate of amendment of our Certificate of Incorporation with the Delaware Secretary of State.
Rationale and Background
Section 144 of the DGCL, which set forth the approval requirements for related party transactions, provides that no contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if:
(1) The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) The material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the stockholders.
The Related Party Amendment would impose additional requirements to approve a related party transaction. The Related Party Amendment would provide, that notwithstanding Section 144 of the DGCL, A related party transaction requires the unanimous approval (as opposed to a majority) of the disinterested directors of the Board of Directors (not including any committee of the Board) or the approval by the stockholders; the fairness of the transaction at time of approval is not a requirements that by itself would permit the related party transaction to occur. The Board believes that in light of the transition to a new Board of Directors and because the Company is not currently listed on a national stock exchange requiring it to maintain certain corporate governance standards, the Related Party Amendment provides heightened protection to the Company’s stockholders with respect to related party transactions. After due consideration, our Board has determined that it is advisable and in the Company’s best interests and in the best interests of our stockholders to amend our Certificate of Incorporation with the Related Party Amendment.
The Proposed Amendment
If Proposal 5 is approved and adopted by our stockholders at the Annual Meeting, we will file a certificate of amendment to our Certificate of Incorporation, which adds a new Article X to our Certificate of Incorporation as follows:
“ARTICLE X
Notwithstanding Section 144, or any successor provision, of the Delaware General Corporation Law, no contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the Corporation’s directors or officers, are directors or officers, or have a financial interest, shall be authorized, permitted or valid, and such contract or transaction shall be deemed to be void, unless (1) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Corporation’s Board of Directors, and the Board of Directors in good faith authorizes the contract or transaction by the unanimous vote of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Corporation’s stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by affirmative vote of the holders of a majority of the outstanding shares of voting stock entitled to vote at an election of directors. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors which authorizes the contract or transaction. The requirements of this Article X will automatically terminate and will no longer be effective on December 31, 2019 at 12:01 a.m. Eastern Standard Time.”
Conforming Amendment to the Bylaws
Section VI of our Bylaws is consistent with Section 144 of the DGCL regarding approval of related party transactions. Conditional upon approval by the stockholders of the proposed amendment in this Proposal 5 and the filing of the amendment to the Certification of Incorporation with the Secretary of State of the State of Delaware, our Board has approved the following amendment to Article VI of our Bylaws (marked to show changes; for reference only):
“ARTICLE VI
INTERESTED DIRECTORS AND OFFICERS
Section 1. Notwithstanding Section 144, or any successor provision, of the Delaware General Corporation Law, no contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the corporation’s directors or officers, are directors or officers, or have a financial interest, shall be authorized, permitted or valid, and such contract or transaction shall be deemed to be void, unless
(a) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Corporation’s Board of Directors, and the Board of Directors in good faith authorizes the contract or transaction by the unanimous vote of the disinterested directors, even though the disinterested directors be less than a quorum; or
(2) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Corporation’s stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by affirmative vote of the holders of a majority of the outstanding shares of voting stock entitled to vote at an election of directors.
Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors which authorizes the contract or transaction. The requirements of this Section 1 of Article VI will automatically terminate and will no longer be effective on December 31, 2019 at 12:01 a.m. Eastern Standard Time.
Section 2. After December 31, 2019 at 12:01 a.m. Eastern Standard Time, the terms of this Section 2 of Article VI shall be effective.No contract or transaction between or among the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or a committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if:
(a) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(b) The material facts as to his or her relationship or interests and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee thereof, or the stockholders.
The common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee that authorizes the contract or transaction.
The effectiveness of the amendment to the Bylaws is conditioned upon, and would only take effect concurrently with, the filing of the amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware.
Required Vote
Our Certificate of Incorporation provides that amendment of the Certificate of Incorporation as set forth in this Proposal 5 be approved and adopted by the affirmative vote of the holders of at least a majority of outstanding shares of voting stock entitled to vote at the Annual Meeting. Abstentions and broker non-votes, if any, will have the same effect as votes against this proposal.
THE BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL 5 TO AMEND THE COMPANY’S CERTIFICATE OF INCORPORATION TO ADD A NEW ARTICLE THAT REQUIRES ANY RELATED PARTY TRANSACTION BE APPROVED BY EITHER THE UNANIMOUS AFFIRMATIVE VOTE OF DISINTERESTED DIRECTORS OR AFFIRMATIVE VOTE OF A MAJORITY OF OUTSTANDING SHARES OF STOCK.
PROPOSAL NO. 6
GRANT OF STOCK TO TWO DIRECTORS
Our two non-employee directors, Mike Brochu and John Cronin, were awarded 120,000 each of our common stock on July 23, 2018 as a supplemental directors fee. This supplemental fee is in recognition of their long-term, uninterrupted service to the Company, in particular during periods when the Company greatly benefited from, and needed, the stability and experience they provided. The Board unanimously decided these awards were merited, however, the Board believed that one half of each award, or 60,000 shares each, should be subject to stockholder approval. Accordingly, the Board is recommending that stockholders approve an award of 60,000 shares of fully vested common stock to each of Mike Brochu and John Cronin. If stockholders do not approve these awards, the stock subject to those awards will be returned to the Company, but the balance of the 120,000 share awards (i.e., the remaining 60,000) are fully vested and are not subject to a vote and will remain in place in accordance with their terms.
Required VoteOther Matters
Our Board decided in its discretion to make the awards of 60,000 shares of common stock to each to Mike Brochu and John Cronin be subject to approval by the affirmative vote of the majority of votes cast at the Annual Meeting. Abstentions and broker non-votes, if any, will have no effect on the vote outcome for this proposal.
|
PROPOSAL NO. 7
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
We are required to submit a separate non-binding stockholder vote to approve the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the compensation tables and narrative discussion). This vote is not intended to address any specific item of compensation or the compensation of any particular officer, but rather to provide stockholders with an opportunity to make an advisory vote with respect to the overall compensation of our named executive officers and our compensation practices. Our stockholders are provided the opportunity to make this advisory vote on executive compensation at each annual meeting.
This proposal, commonly known as a “Say-on-pay,” permits stockholders to endorse or not endorse our executive compensation through the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the compensation tables and narrative discussion).”
Because the stockholders’ vote is advisory, it will not be binding on the Board. However, the Board’s Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. The affirmative vote of the holders of a majority of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the advisory Say-on-pay proposal. Abstentions will be counted as present at the meeting for purposes of determining whether a quorum exists and will have the effect of a vote against the proposal. Broker non-votes will be counted as present at the meeting for purposes of determining whether a quorum exists and will have no effect on the outcome.
PROPOSAL NO. 8
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2018
Our Audit Committee has appointed Marcum LLP to audit our accounts for the fiscal year ending December 31, 2018. Such firm, which has served as our independent registered public accounting firm since May 2018, has reported to us that none of its members has any direct financial interest or material indirect financial interest in our Company.
As previously reported in a Current Report on Form 8-K filed April 26, 2017, the Company’s prior independent registered public accounting firm Macias Gini & O’Connell LLP (“MGO”) notified the Company that MGO was resigning as the Company’s independent accountant on April 22, 2018. On May 8, 2018, the Company appointed Marcum LLP as the Company’s independent registered public accounting firm. This change in the Company’s independent registered public accounting firm was approved by the Audit Committee of our Board on May 8, 2018.
During the fiscal years ended December 31, 2016, and 2017, and the subsequent interim period through May 8, 2018, the Company has not consulted with neither Marcum nor MGO regarding either (i) the application of accounting principles to a specific transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report or oral advice was provided to the Company that Marcum concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
A representative of Marcum is expected to attend the Annual Meeting and will be afforded the opportunity to make a statement and/or respond to appropriate questions from stockholders.
Fees for professional services rendered to us by MGO, our independent registered public accounting firm engaged to provide audits for the fiscal years ended December 31, 2017 and 2016, were:
| 2017 | 2016 | |||||||
| Audit fees | $ | 131,600 | $ | 147,500 | ||||
| Audit-related fees | 8,000 | - | ||||||
| Tax fees | 10,000 | 11,800 | ||||||
| All other fees | - | - | ||||||
| Total | $ | 149,600 | $ | 159,300 | ||||
Audit fees include fees associated with our annual audit, the reviews of our quarterly reports on Form 10-Q, and assistance with and review of documents filed with the Securities and Exchange Commission. Audit-related fees include consultations regarding revenue recognition and new accounting pronouncements as they related to the financial reporting of certain transactions. Tax fees included tax compliance and tax consultations.
The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services and other services performed by our independent registered public accounting firm. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that fiscal year, the Audit Committee must approve the permitted service before the independent registered public accounting firm is engaged to perform it.
The affirmative vote of the holders of a majority of our common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the ratification of the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Abstentions and broker non-votes, if any, will be counted as present at the meeting for purposes of determining whether a quorum exists, and will have the effect of a vote against the proposal.
|
REPORT OF AUDIT COMMITTEE
The information contained in this Audit Committee Report shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this information by reference) and shall not otherwise be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934 (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).
The functions of our Audit Committee (references in this section to “we” and “our” mean the Audit Committee) are primarily focused on three areas:
We operate under a written charter, which has been approved by the board of directors. The Company has made the Audit Committee charter available on its website at http://www.hopto.com.
We meet with management periodically to consider the adequacy of the Company’s internal controls and the objectivity of the Company’s financial reporting. We discuss these matters with the Company’s independent registered public accounting firm and with appropriate financial personnel. We periodically (at least annually) meet privately with both the independent registered public accounting firm and the Company’s financial personnel, each of which has unrestricted access to us. We also appoint the independent registered public accounting firm and review its performance and independence from management. In addition, we review the Company’s financing plans.
Management is responsible for the financial reporting process, including the system of internal control, and the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Company’s independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing and are not experts in the fields of accounting or auditing, including with respect to auditor independence. We rely on, without independent verification, the information provided to us and on the representations made by management and the independent registered public accounting firm.
In this context, we held one meeting during fiscal year 2017. The meetings were designed, among other things, to facilitate and encourage communication among us, management, the internal accountants and the Company’s independent registered public accounting firm for fiscal year 2017, Macias Gini & O’Connell LLP (“MGO”). We discussed with MGO the overall scope and plans for their audit. We also met with MGO, with and without management present, to discuss the results of their audit and quarterly reviews and the Company’s internal controls. We reviewed and discussed the audited consolidated financial statements for the fiscal year ended December 31, 2017 with management and with MGO.
We also discussed with MGO the audited financial statements for fiscal year ending December 31, 2017, and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, the conduct of the audit of the Company’s consolidated financial statements, and the matters required to be discussed with the Audit Committee by applicable auditing standards of the Public Company Accounting Oversight Board.
We have received the written disclosures and the letter from MGO required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with us concerning independence, and we discussed with MGO their independence from the Company. When considering MGO’s independence, we considered whether their provision of services to us beyond those rendered in connection with their audit and review of the Company’s consolidated financial statements was compatible with maintaining their independence. We also reviewed, among other things, the amount of fees paid to MGO for audit and non-audit services (primarily tax services).
Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee charter, we recommended to the Board of Directors that the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2017 be included in the Company’s annual report on Form 10-K for filing with the Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires our officers, directors, and persons owning more than ten percent of a registered class of our equity securities (“ten percent stockholders”) to file reports of ownership and changes of ownership with the SEC. To the best of our knowledge, based solely on review of the copies of such reports and amendments thereto furnished to us, we believe that during the fiscal year ended December 31, 2017, all of our officers, directors, and ten percent stockholders complied with all applicable filing requirements.
OTHER MATTERS
Our Board of Directors knows of no other matters to be brought before the Annual Meeting. However, if other matters should come before the meeting,Annual Meeting, it is the intention of each person named in the proxy to vote in accordance with his judgment on such matters.
2019 STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for stockholder action consistent with regulations of the SEC. In order for stockholder proposals for the fiscal year 2019 annual meeting to be eligible for inclusion in our proxy statement, our Secretary must receive them at our principal offices not later than a reasonable time before we print and send our proxy materials for the 2019 annual meeting. We will consider a reasonable time to be the same deadline had we maintained our regularly scheduled annual meetings, which is January 31, 2019. Such proposals should be submitted, in writing, to hopTo Inc., Attn: Jean-Louis Casabonne, Secretary, 6 Loudon Road, Suite 200, Concord, New Hampshire 03301.
Under Rule 14a-4 promulgated under the Exchange Act, if a proponent of a proposal that is not intended to be included in the proxy statement fails to notify us of such proposal at least 45 days prior to the anniversary of the mailing date of the preceding year’s proxy statement or a reasonable time before we send our proxy materials for such meeting if the date of the meeting has changed by more than 30 days from the prior year, then we will be allowed to use our discretionary voting authority under proxies solicited by us when the proposal is raised at such annual meeting of stockholders, without any discussion of the matter in the proxy statement. We were not notified of any stockholder proposals to be addressed at our Annual Meeting, and will therefore be allowed to use our discretionary voting authority if any stockholder proposals are raised at the Annual Meeting.
ACCOMPANYING INFORMATIONAccompanying Information
Accompanying this proxy statement is a copy of our annual report to stockholdersAnnual Report on Form 10-K for our fiscal year ended December 31, 2017.2019. Such annual report includes our audited consolidated financial statements for the two fiscal years ended December 31, 20172019 and December 31, 2016.2018. No part of such annual report shall be regarded as proxy-soliciting material or as a communication by means of which any solicitation is being or is to be made.
BY ORDER OF THE BOARD OF DIRECTORS
CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF HOPTO INC. HOPTO INC., a corporation duly organized and existing under the General Corporation Law of the State Delaware (the “Corporation”), does hereby certify that: 1. The amendments to the Corporation’s Amended and Restated Certificate of Incorporation set forth below were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware and have been consented to by the stockholders of the Corporation at a meeting called in accordance with Section 222 of the General Corporation Law of the State of Delaware. 2. Article IV of the Corporation’s Amended and Restated Certificate of Incorporation is amended and restated in its entirety to read as follows: “ARTICLE IV The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares that the Corporation is authorized to issue is [Two Hundred Million (200,000,000) shares. One Hundred Ninety Five Million (195,000,000)][1] shares shall be Common Stock, par value $0.0001 per share, and Five Million (5,000,000) shares shall be Preferred Stock, par value $0.01 per share. Upon this Certificate of Amendment becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Time”), every [_______] (YY)[2] shares of the Corporation’s Common Stock issued and outstanding or held by the Corporation in treasury stock shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one share of Common Stock without increasing or decreasing the par value of each share of Common Stock (the “Reverse Split”); provided, however, no fractional shares shall be issued in connection with the Reverse Split. Stockholders who otherwise would be entitled to receive fractional shares of Common Stock shall be entitled to receive a cash amount equal to the resulting fractional interest in one share of Common Stock to which the stockholder would otherwise be entitled, multiplied by the sixty (60) day volume weighted average closing trading price of the Common Stock on the trading day immediately preceding the Effective Time of the Reverse Split. The Preferred Stock may be issued from time to time in one or more series, without further stockholder approval. The Board of Directors of the Corporation is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon each series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. The rights, privileges, preferences and restrictions of any such additional series may be subordinated to, pari passu with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote), or senior to any of those of any present or future class or series of Preferred Stock or Common Stock. The Board of Directors is also authorized to increase or decrease the number of shares of any series prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.” 3. The foregoing amendment shall be effective as of 4:30 p.m., Eastern Time, on _______, 2020. 1The current total authorized shares and total authorized common shares numbers are to be reduced based on the proportional reduction of the total authorized common shares in accordance with the reverse split reduction ratio. 2 Reference to “YY” is to a number of not less than 20 and not more than 100 as selected by the Board of Directors.
IN WITNESS WHEREOF, said Corporation has caused this Certificate of Amendment to be signed by its duly authorized officer on this ___ day of _____ 2020.
[Proxy Card to be inserted] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||