Forward Industries Inc
For the period ended Aug 8, 2025. Filed Jun 20, 2025.
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Aug 8, 2025 · Filed Jun 20, 2025
Contents
PROPOSAL 3. REINCORPORATION
Overview of the Proposed Reincorporation
The Board is recommending that shareholders approve reincorporating the Company from New York to Nevada (the “Nevada Reincorporation”). The Board believes it is appropriate and in the best interests of the Company and its shareholders to reincorporate in Nevada to position the Company for better corporate governance and more modern, flexible corporate laws, as detailed below.
The Nevada Reincorporation will be implemented through the merger of the Company with and into a wholly owned subsidiary corporation incorporated in the State of Nevada (the “Merger”). Our name following the Nevada Reincorporation will be Forward Industries, Inc. We will file the appropriate Merger documents with the Department of State of New York and Secretary of State of Nevada.
For purposes of the discussion below, the Company as it currently exists as a corporation organized under the laws of the government of New York is sometimes referred to as “Forward New York.”
The Board considered several factors in reaching this decision to approve the Nevada Reincorporation, such as corporate governance and our ability to raise additional financing. Our Board was advised of certain differences between New York and Nevada state corporate laws, and other advantages and disadvantages of the Nevada Reincorporation.
The Board believes that the choice of state domicile is important because state corporate law governs the internal affairs of a corporation. Management and boards of directors of corporations look to state corporate law and judicial interpretations of state law to guide their decision-making on many key issues, including appropriate governance policies and procedures, satisfaction of fiduciary obligations to shareholders, compliance with financial and legal requirements in the corporation’s business operations, and consideration of key strategic transactions for the corporation, including financings, mergers, acquisitions, and divestitures. The Company believes that it would be advantageous to complete the Nevada Reincorporation as soon as possible.
The Board believes that it is important for the Company to be able to draw upon the established statutory scheme of Nevada law in making legal and business decisions while helping to preserve the shareholder rights that our shareholders are accustomed to, in the interest of maximizing long-term shareholder value. Our Board believes that Nevada offers more protection to corporate officers and favorable indemnification provisions which may help the Company attract qualified officers and directors and potentially lower any future litigation costs. After careful consideration, the Board believes that it is in the best interests of the Company and its shareholders to complete the Nevada Reincorporation.
In order to reincorporate in Nevada, we recently formed a Nevada subsidiary and will merge the Company into it with the subsidiary being the surviving corporation.
Shareholders are urged to read this Information Statement carefully, including all of the related appendices attached to this Proxy Statement. The following discussion summarizes material provisions of the Nevada Reincorporation and is subject to and qualified in its entirety by the Merger Agreement in substantially the form attached hereto as Annex A (the “Merger Agreement”), the Nevada Articles of Incorporation in substantially the form attached hereto as Annex B; and the Nevada Bylaws in substantially the form attached hereto as Annex C. Prior to the consummation of the Nevada Reincorporation, the Company will file with the Secretary of State of the State of Nevada: (i) the Nevada Articles of Incorporation, and (ii) the Nevada Certificate of Designation, Preference and Rights (the “Certificate of Designation”) of the Series A-1 Convertible Preferred Stock (the “Series A-1”) and Series B Convertible Preferred Stock (the “Series B”), respectively. The Certificate of Designations for the Series A-1 and Series B are substantially similar to the Certificate of Designations with respect to the Series A-1 and Series B other than changes to conform the comparable provisions under New York law to the applicable provisions under Nevada law. Copies of our current New York Certificate of Incorporation (“New York Certificate”), current New York Certificate of Designation for Series A-1 and Series B and current bylaws (“New York Bylaws”) have been filed with the SEC as exhibits to our Annual Report on Form 10-K filed with the SEC on December 27, 2024. Copies will be sent to shareholders free of charge upon written request to:
Forward Industries, Inc.
700 Veterans Memorial Highway, Suite 100
Hauppauge, NY 11788
Attention: Investor Relations
Phone Number: 631-547-3055
Structure of the Nevada Reincorporation
To accomplish the Nevada Reincorporation, we recently incorporated a subsidiary as a Nevada corporation under Nevada law. We refer to this new subsidiary that will be named Forward Industries, Inc. as Forward Nevada in this Proxy Statement. Forward New York will then merge with and into Forward Nevada under the terms of an Agreement and Plan of Merger between Forward New York and Forward Nevada, which we refer to as the “Merger Agreement.” Forward Nevada will be the survivor in the Merger, and upon effectiveness of the Merger, each outstanding share of Forward New York common stock will automatically convert to one share Forward Nevada common stock without any action required by shareholders. The Series A-1 and Series B will also convert to Forward Nevada Series A-1 and Series B on a one-for-one basis.
The proposed Merger Agreement is included as Annex A. Forms of the Forward Nevada’s Articles of Incorporation and Nevada Bylaws are included as Annex B and Annex C of this Proxy Statement. Please read these documents in full rather than relying on any summary or description of their terms.
Impact on Our Business
Forward Nevada will carry on our business as before, with all of the same directors, officers, employees and properties. We will not move any employees or operations to Nevada. In general, the Nevada Reincorporation itself is not expected to change our business, management, fiscal year, assets or liabilities, or location of our facilities, which we expect will be the same immediately after the Nevada Reincorporation is completed as immediately before it is completed.
Other Aspects of the Nevada Reincorporation
In connection with the Nevada Reincorporation proposal, the Merger has three key components:
| · | the Nevada Articles of Incorporation, Series A-1 Certificate of Designation, Series B Certificate of Designation and the Nevada Bylaws; |
| · | the Merger Agreement between Forward New York and Forward Nevada; and |
| · | Forward Nevada’s assumption of the Company’s benefit plans and equity incentive plans under which grants of equity securities including restricted stock units, rights, and options may be made. |
No Tax or Accounting Effects
Forward Nevada will inherit Forward New York’s tax and financial history and attributes. While the Nevada Reincorporation is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code, shareholders should note that there can be no assurance that the Internal Revenue Service will agree with this tax treatment. However, shareholders should consult their own tax advisors regarding their specific tax circumstances, as this Proxy Statement does not constitute tax advice.
Effect on our Outstanding Stock
You will receive one share of common stock of Forward Nevada in exchange for each existing share of common stock and holders of Series A-1 and Series B will receive one share of Series A-1 and Series B of Forward Nevada in exchange for each existing share of Series A-1 and Series B, respectively. However, you need not exchange your certificate(s) at any particular time. The Company will record the change in its records and will notify shareholders if and when certificate exchanges are required. Until such time, existing certificates will be deemed to represent an equivalent number of shares in Forward Nevada. Under Nevada and New York law, shareholders do not have dissenters’ or appraisal rights, or the right to receive cash instead of stock, in connection with this reincorporation.
The trading symbol for our common stock will remain “FORD.” Our common stock will continue to be listed on the Nasdaq Capital Market. We expect no interruption in trading.
We cannot predict whether the stock price for our common stock will increase, remain the same, or decrease if and when the Nevada Reincorporation is completed. We do not expect the reincorporation to have any direct effect on the market price of our stock.
The Reasons for Reincorporating in Nevada
The Board considered many factors in deciding to approve and recommend the Nevada Reincorporation. The principal reasons were:
| · | Nevada has a modern and flexible corporation law. |
| · | Nevada’s legislature is responsive to business needs, and we believe it is actively seeking to increase the number of Nevada corporations by making its corporate law attractive. |
| · | Nevada’s Eighth Judicial District, which is the largest judicial district in the state, has a designated business court devoted exclusively to corporate law issues to help institute case management plans minimizing the interruption of business operations. |
| · | Many large corporations are incorporated in Nevada in comparison to other states (other than Delaware). |
| · | Nevada law on elimination of director and officer liability and indemnification, with certain limited exceptions, of corporate agents provides more assurance for persons acting in these roles than does the law of other states. As a result, qualified persons may be more willing to serve in those roles for a Nevada corporation than for a corporation incorporated in New York or another state. |
We believe that the factors listed above will improve the Board’s ability to manage the Company for the benefit of all shareholders.
Impacts on Rights of Shareholders
As a New York corporation, the rights of shareholders and the duties of the Board are governed by the New York Business Corporation Law (the “NYBCL”), our New York Certificate, and our New York Bylaws. After the Nevada Reincorporation, the rights of shareholders and the duties of the Board will instead be governed by the Nevada Revised Statutes (“NRS”) the Nevada Articles of Incorporation, and the Nevada Bylaws. New York corporate law and Nevada corporate law are similar in many respects with respect to the rights of shareholders but have some differences (see below). In addition, the proposed Nevada Articles of Incorporation and Bylaws of Forward Nevada vary in certain respects from the existing New York Certificate and New York Bylaws of Forward New York. See the questions and answers below for a discussion of some of the differences. The changes in your rights are described in more detail in the sections below entitled “Significant Differences Between the Charters and Bylaws of Forward New York and Forward Nevada and Between the Corporation Laws of New York and Nevada.”
Opt Out of Nevada Revised Statutes Sections 78.411 to 78.444
Section 78.438 of the NRS restricts certain “business combinations” with certain “interested shareholders” for two years following the date that a person becomes an interested shareholder, unless the Board approved the combination before the person first became an interested shareholder or the Board and a vote of at least 60% of the remaining shareholders approve the business combination at an annual or special meeting. Further, even after the expiration of the two years, under Section 78.439 of the NRS, Nevada corporations are prohibited from engaging in a business combination with interested shareholders unless (i) the combination was approved by the Board before the person became an interested shareholder; (ii) the combination is approved by a majority of the disinterested shareholders; or (iii) the combination otherwise meets the requirements specified in Sections 78.411 to 78.444 of the NRS.
For purposes of Section 78.438 of the NRS, an interested shareholder is any person who is (i) the direct or indirect beneficial owner of 10% or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within two years immediately before the date in question was the direct or indirect beneficial owner of 10% or more of the voting power of the then outstanding shares of the corporation. A Nevada corporation may elect not to be governed by this law.
In the Nevada Reincorporation, Forward Nevada would elect to opt out of Sections 78.411 to 78.444 of the NRS, which means these anti-takeover protections would not apply to the Company after the Nevada Reincorporation. This could make it easier for third parties to acquire control of the Company without Board approval.
How Does the Proposed Nevada Articles of Incorporation of the Forward Nevada Differ from and How Is It Similar to the Existing New York Certificate?
Under the NYBCL and the New York Bylaws, holders of our common stock have the right to plurality voting in the election of directors. The proposed Nevada Articles of Incorporation also authorizes holders of Forward Nevada to use plurality voting in the election of directors.
Other differences between the existing and proposed charters and bylaws are described below in the section titled “Significant Differences Between the Charters and Bylaws of Forward New York and Forward Nevada and Between the Corporate Laws of New York and Nevada.”
How Is Nevada Corporate Law Different From and Similar to New York Corporate Law?
Generally, Nevada law places more authority in the hands of the directors and provides directors greater protection from liability, except where there is a breach of fiduciary duty involving intentional misconduct, fraud, or knowing violation of law, as specified in NRS section 78.138. This increased protection may limit shareholders’ ability to bring claims against directors compared to New York law. Some of the specific differences are:
| · | Both New York and Nevada law provide that shareholders only have the right to cumulate votes in the election of directors if specifically authorized by the corporation’s articles/certificate of incorporation. |
| · | Both New York and Nevada law have similar provisions in allowing a corporation to eliminate directors’ personal liability for actions they take in their role as directors and officers. New York law does not contain any statutory allowance to eliminate an officer’s personal liability for actions they take in their role as an officer, but Nevada law, in contrast, does. |
| · | Both New York and Nevada law allow a corporation to indemnify its directors, officers, and other corporate agents if they are sued or incur liability in the course of performing their duties for the corporation. To “indemnify” means to reimburse for personal liability and personal expenses, or to advance funds for expenses as incurred. |
| · | New York law permits shareholders to inspect the corporation’s shareholder list and corporation’s books and records upon showing a proper purpose and complying with statutory requirements. Inspection rights under Nevada law are narrower, as only a shareholder who has been a shareholder for at least six months immediately preceding the inspection demand or a shareholder owning at least 5% of the outstanding shares may inspect the corporation’s shareholder list and only a shareholder owning at least 15% of the outstanding shares may inspect the corporation’s books of account and financial statements for appropriate purposes under certain circumstances. Inspection rights under New York law are broader: any shareholder can inspect the list for any proper purpose upon five days’ written demand. |
| · | Both New York and Nevada require a majority of votes cast in favor of an action taken at a shareholder meeting to approve the action. Both New York and Nevada law require approval by a majority of the voting power to approve a merger or consolidation. The Nasdaq Listing Rules, which would apply to us since our common stock is listed on the Nasdaq Capital Market, would require shareholder approval if shares of common stock are issued in a change of control transaction. |
| · | Under New York law, any director or the entire board of directors may be removed for cause by the majority vote of the shareholders, unless the certificate of incorporation provides for a classified board or cumulative voting. Under New York law, for the shareholders to remove any or all directors without cause, the certificate of incorporation or bylaws must provide for such right. In contrast, Nevada law provides that, unless the articles of incorporation provide otherwise, at least two-thirds of the voting power of a corporation’s issued and outstanding stock is needed to remove any one or all of the directors, with or without cause. |
| · | Both New York and Nevada law allow shareholders to act by written consent provided that the holders of outstanding stock having the majority of voting power at a meeting consent to the action in writing in lieu of a meeting, except New York law requires the corporation to give prompt notice of the action to shareholders that did not give written consent. Nevada has no such notice requirement, although the Exchange Act overrides state law. |
| · | New York law provides that a corporation may declare and pay dividends only out of surplus, or if no surplus exists, out of net profits for the fiscal year the dividend is declared in or the preceding year provided that the corporation’s capital after the dividend payment is not less than the total capital amount represented by the issued and outstanding classes having a preference upon the distribution of assets, unless the certificate of incorporation further restricts. In contrast, Nevada law may make distributions, including dividends, to its shareholders provided that the corporation would be able to pay its debts as they become due and the corporation’s total assets would not be less than the total of its liabilities plus any amount needed if the corporation were to be dissolved to satisfy the preferential rights of shareholders. |
Further Discussion of the Reasons for Reincorporating in Nevada
The Board recommends the Nevada Reincorporation for several reasons. Generally, we believe that the Nevada Reincorporation will improve our ability to manage the Company for the benefit of shareholders. Further, Nevada has no state corporate income tax and no taxes on corporate shares.
Favorability of Nevada Law. Nevada has a modern statutory corporation law, has codified management-friendly standards of care for actions taken in response to takeover attempts, maintains limited liability protection for a corporation’s directors and officers, and has no state corporate income tax. These factors all provide the Board and management with greater certainty in discharging their duties and maintaining the success of the corporation as a whole.
Flexibility of Nevada Law*.*For many years, Nevada has followed a policy of encouraging corporations to incorporate in that state. It has done so by adopting and administering comprehensive and flexible corporate laws responsive to the legal and business needs of corporations. Historically, Nevada’s legislature has acted quickly and effectively to meet changing business needs. Further, Nevada’s largest judicial district has a dedicated business court for commercial litigation to help streamline commercial litigation.
Nevada as a Corporate Domicile. Among public companies, Nevada is one of the most common states of incorporation. Many companies have reincorporated in Nevada as we propose to do. Nevada has a modern and well-developed corporate law with management-friendly provisions.
Increased Ability to Attract and Retain Qualified Directors*.* The Board believes that a Nevada corporation has certain advantages in attracting qualified candidates to act as directors and officers.
Both New York and Nevada law permit a corporation to adopt charter provisions that reduce or limit the monetary liability of directors for breaches of their fiduciary duty in certain circumstances (except for breaches of the duty of loyalty, acts in bad faith, or transactions involving improper personal benefits) and provide for indemnification of directors and officers. The frequency of claims and litigation directed against directors and officers may discourage qualified persons from taking on these positions. The Company believes that, in general, Nevada law provides (i) greater protection to officers than New York law and (ii) broad indemnification for directors and officers.
With clearer corporation laws, directors and officers should be able to carry out their duties with more assurance that they are acting properly. A more developed and clearer corporation law should reduce the risk of liability and claims. Potential directors and officers can accept roles with the Company with less concern for their own financial risk.
To date, no persons invited to become a director or officer of the Company have declined because it was a New York corporation.
Anti-Takeover Provisions and Possible Effect on Takeover Offers
The Nevada laws and proposed Nevada Articles of Incorporation contain provisions that may deter unsolicited acquisition proposals by making it more difficult to acquire control of the Company without Board cooperation. The Board believes these provisions are in the shareholders’ best interests. However, they may also discourage a third party from proposing a transaction you would approve if given the opportunity to vote on it.
Existing Defensive Measures
In the discharge of its fiduciary obligations to our shareholders, the Board may consider in the future certain defensive strategies designed to enhance our ability to negotiate with an unsolicited bidder. We do not currently have in place any defensive measures such as a rights plan other than under normal New York law.
Proposed Defense Measures in the Nevada Articles of Incorporation and Nevada Bylaws
Like many other states, Nevada permits a corporation to adopt measures designed to reduce its vulnerability to unsolicited takeover attempts. We are not proposing the Nevada Reincorporation to prevent an unsolicited takeover attempt and are not aware of any present effort by any person to acquire control of the company, obtain representation on the Board or take any action that would materially affect the governance of the company.
Our proposed Nevada Articles of Incorporation and Nevada Bylaws contain provisions which could operate to delay, defer, or prevent a change of control of the Company or an extraordinary corporate transaction such as a merger, reorganization, tender offer or sale of all or substantially all of our assets. These provisions and certain provisions of the proposed Nevada Articles of Incorporation and proposed Nevada Bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. Specifically, the following provisions may have anti-takeover effects:
| · | The Nevada Bylaws will require that stockholders seeking to nominate a person to the board of directors at an annual meeting must deliver detailed notice to the Company no earlier than the 120th calendar day, and no later than the 90th calendar day, prior to the anniversary date of the immediately preceding annual meeting. If the current year’s meeting is called for a date that is not within 30 days of the anniversary of the previous year’s annual meeting, such notice must be received no later than 10 calendar days following the day on which public announcement of the date of the annual meeting is first made. |
| · | The NRS and the Nevada Bylaws will require the affirmative vote of at least two-thirds of the voting power of the issued and outstanding stock of the Company entitled to vote in order to remove an incumbent director; and |
| · | Our Nevada Articles of Incorporation will authorize “blank check” preferred stock with such rights, preferences, and privileges, including voting rights, as the Board may determine in compliance with Nevada law. Such preferred stock could be issued to affiliates or other persons whose interests align with incumbent management, subject to the Board’s fiduciary duties and applicable securities laws. |
These provisions, together with provisions of the NRS, could have the effect of delaying, deferring or preventing an attempted takeover or change of control of the Company, or making such an attempt more difficult. Additionally, in most jurisdictions it remains unclear how a court would interpret and whether it would enforce some of these provisions, resulting in added uncertainty. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder, and that there is uncertainty as to whether a state or federal court would enforce these charter provisions.
We believe that unsolicited takeover attempts may be unfair or disadvantageous to us and our shareholders because, among other reasons:
| · | an uninvited acquirer may time its takeover bid to take advantage of temporarily depressed stock prices; |
| · | an uninvited acquirer may design its bid to preclude or minimize the possibility of more favorable competing bids or alternative transactions; |
| · | an uninvited acquirer may acquire only a controlling interest in the corporation’s stock, without affording all shareholders the opportunity to receive the same economic benefits; and |
| · | a non-negotiated acquisition of a controlling interest may put us in default under certain contractual arrangements that prohibit a “change of control” without the prior written consent of the other contracting party. |
Defensive measures encourage a potential bidder to negotiate with the Board. Despite our belief in its benefits to shareholders, the Nevada Reincorporation may be disadvantageous to our existing shareholders. For example, we might not approve of a takeover attempt that a majority of shareholders may deem to be in their best interests or in which shareholders may receive a substantial premium over the then current market value for their shares. The Nevada Reincorporation could discourage such an offer. As a result, an existing shareholder might wish to participate in an unsolicited tender offer but not have an opportunity to do so. In addition, to the extent that provisions of Nevada law enable us to resist a takeover or a change in control, certain features of the Nevada Reincorporation will make it more difficult for shareholders to change the existing Board and management.
Certain Significant Differences and Similarities between the Corporation Laws of New York and Nevada
Shareholder Derivative Suits
A derivative suit is a legal action brought by one or more shareholders or shareholders in the name of, and for the benefit of, the corporation, after the corporation has failed to pursue the claim. Both Nevada and New York law provide that a shareholder bringing a derivative action must have been a shareholder at the time the claim arose, or must have later acquired the stock by operation of law.
Effectiveness of Nevada Reincorporation
We anticipate that we will cause the Nevada Reincorporation to become effective as soon as reasonably practicable upon the approval of our shareholders, subject to the completion of certain legal formalities, including obtaining certain consents and approvals by third parties with respect to certain contracts to which we are a party and providing certain notices to regulatory authorities. The Merger Agreement provides that it may be terminated and the Nevada Reincorporation may be abandoned at any time prior to completion by the Board of either the Company or Forward Nevada or both, notwithstanding any obtained shareholder approvals of the principal terms of the Merger Agreement or its adoption by Forward Nevada’s sole shareholder. Therefore, the Board could determine whether to delay or not to proceed with the Nevada Reincorporation. Furthermore, the Merger Agreement may be amended at any time prior to the date the Nevada Reincorporation is completed, either before or after the shareholders have voted to adopt this proposal, subject to applicable law.
Significant Differences and Similarities Between the Charters and Bylaws of Forward New York and Forward Nevada and Between the Corporate Laws of New York and Nevada
The following summarizes a comparison of certain key provisions between the New York Certificate and New York Bylaws and proposed Nevada Articles of Incorporation and Nevada Bylaws, as well as certain provisions of New York and Nevada corporate laws. The comparison highlights important differences, but is not intended to list all differences, and is qualified in its entirety by reference to such documents and to the respective General Corporation Laws of the States of New York and Nevada. Shareholders are encouraged to read the Nevada Articles of Incorporation, the Nevada Bylaws, the New York Certificate and the New York Bylaws in their entirety. The proposed Nevada Articles of Incorporation and Nevada Bylaws are attached to this Proxy Statement. Our current New York Certificate, and our New York Bylaws, are filed publicly as exhibits to our periodic reports with the SEC.
| Provision | Current New York Provision | Proposed Change for Reincorporation |
|---|---|---|
| Authorized Shares | 44,000,000 of authorized capital, 40,000,000 shares of which are designated common stock, $0.01 par value per share and 4,000,000 shares of “blank check” preferred stock, par value $0.01 per share. | No change. |
| Annual Election of Directors | Under New York law, the directors are elected at a shareholder meeting at which a quorum is present. The New York Bylaws provide for the annual election of all directors. | No change. The NRS provides directors must be elected at the annual meeting of the shareholders. The Nevada Bylaws provide for the annual election of all directors. |
| Number of Directors | Under New York law, a corporation’s board of directors must consist of one or more individuals, with the number fixed by or in the manner provided in the bylaws, action of shareholders, or by the board under the specific provisions of the bylaws adopted by the shareholders. The New York Bylaws provide that the Company shall have between three and seven directors. | The NRS provides that a corporation must have at least one director and may provide in its articles of incorporation or bylaws for a fixed or variable number of directors, and for the manner in which the number of directors may be increased or decreased. Unless otherwise provided in the articles of incorporation, directors need not be shareholders. The Nevada Bylaws provide that the Board will consist of not less than one member, the number to be determined by resolution of the Board. |
| Vote Required to Elect Directors | Under New York law, unless the certificate of incorporation or bylaws provide otherwise, the directors are elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote in the election at a shareholders meeting at which a quorum is present. The New York Bylaws provided for plurality voting. | No change. The NRS provides that, unless the articles of incorporation or bylaws require more than a plurality of the votes cast, directors must be elected at the annual meeting of the shareholders by a plurality of the votes cast at the election. The Nevada Articles of Incorporation and Nevada Bylaws do not contain provisions requiring more than a plurality of the votes cast for the election of directors. |
|---|---|---|
| Cumulative Voting | New York law provides that a corporation’s certificate of incorporation may provide for cumulative voting. The New York Bylaws do not provide for cumulative voting. | The NRS provides that a corporation’s articles of incorporation may provide for cumulative voting. No change. The Nevada Articles of Incorporation do not provide for cumulative voting. |
| Removal of Directors | Under New York law, any director, or the entire board, may be removed, with cause, with the approval of a majority of the outstanding shares entitled to vote at an election of directors, unless the certificate of incorporation provides for a classified board or if the corporation has cumulative voting. The certificate of incorporation or bylaws may provide that any or all of the directors may be removed without cause by vote of the shareholders. The New York Bylaws permit directors to be removed at any time with or without cause at a special meeting of shareholders called expressly for that purpose, or for cause by the affirmative vote of two thirds of the directors then in office without counting the vote of the interested director. | Under NRS 78.335, any one or all of the directors of a corporation may be removed by the holders of not less than two-thirds of the voting power of a corporation’s issued and outstanding voting stock. Nevada law does not distinguish between removal of directors with or without cause. The Nevada Bylaws conform to Nevada law, permitting a director to be removed by shareholders, with our without cause, by the affirmative vote of two-thirds of the voting power of outstanding shares of the outstanding capital stock. |
| Filling a Vacancy on the Board | New York law provides that vacancies on the board resulting from an increase in the number of directors or other vacancies for any reason except the removal of directors without cause may be filled by vote of the board, unless the certificate provides otherwise. Vacancies created by reason of the removal of directors without cause shall be filled by the shareholders, unless the certificate of bylaws provide otherwise. However, whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or, if no such director is in office, by the board or shareholders, as the case may be. The New York Bylaws provide that any vacancy occurring in the Board may be filled by the affirmative vote of the majority of the remaining directors and such term will only be until the next election of directors by the shareholders. | Nevada law provides that all vacancies on the board of directors of a Nevada corporation may be filled by a majority of the remaining directors, though less than a quorum, unless the articles of incorporation provide otherwise. Unless otherwise provided in the articles of incorporation or bylaws, directors chosen to fill any other vacancies will hold office until a successor is elected and qualified, or until the director resigns or is removed. The Nevada Bylaws provide that any vacancy on the Board, including a newly-created directorship, may be filled by a majority vote of the remaining directors. Any director so chosen shall hold office for the unexpired portion of the term of the class of directors in which the new directorship was created or the vacancy occurred and until his or her successor shall have been elected and shall have been elected and qualified or until any such director’s earlier death, resignation or removal. |
| Advance Notice of Shareholder Proposals and Director Nominations | New York does not have any laws relating to the advance notice of shareholder proposals and director nominations. However, the New York Bylaws provide that if a shareholder wishes to nominate a director for election or submit other matters to be considered at an annual meeting, the shareholder must deliver written notice with certain information contained therein no later than the close of business on the 120th day and no earlier than the close of business on the 150th day prior to the first anniversary of the preceding year’s annual meeting. | Nevada does not have any laws relating to the advance notice of shareholder proposals and director nominations. However, the Nevada Bylaws provide that if a shareholder wishes to nominate a director for election, the shareholder must deliver written notice with certain information contained therein no earlier than 120 days and no later than 90 days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice must be received no later 10 calendar days following the day on which public announcement of the date of the annual meeting is first made. |
|---|---|---|
| Ability of Shareholders to Call Special Meetings | Under New York law, a special meeting of shareholders may be called by the board of directors or by such persons as may be authorized by the certificate of incorporation or by the bylaws. The New York Bylaws provide that special meetings of the shareholders can be called at any time by (i) the President; (ii) the Chairman of the Board; (iii) the majority vote of the Board; or (iv) Qualified Shareholders holding at least 30% of all votes entitled to be cast on any issue proposed to be considered at the special meeting. | Nevada law provides that unless otherwise provided in a corporation’s articles of incorporation or bylaws, the entire board of directors, any two directors, or the president of the corporation may call annual or special meetings of the shareholders. Under the Nevada Bylaws, special meetings of the shareholders, for any purpose, may be called only by the (i) Board, (ii) the Chief Executive Officer, or (iii) the Chairman of the Board. For business to be properly brought before a special meeting of shareholders, the notice of the meeting sent by or at the direction of the person calling the meeting must set forth the nature of the business to be considered. A person or persons who have made a written request for a special meeting pursuant to the Nevada Bylaws may provide the information required for notice of a shareholder proposal simultaneously with the written request for the meeting submitted to the Secretary or within ten calendar days after delivery of the written request for the meeting to the Secretary. |
| Quorum for Shareholder Meeting | Under New York law, the holders of a majority of the votes of shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business, provided that when a specified item of business is required to be voted on by a particular class or series of shares, voting as a class, the holders of a majority of the votes of shares of such class or series shall constitute a quorum for the transaction of such specified item of business. The New York Bylaws provide that the holders of a majority of shares entitled to vote then issued and outstanding, present in person or represented by proxy, shall constitute a quorum. | Nevada law provides that a majority of the voting power, which includes the voting power that is present in person or by proxy, regardless of whether the proxy has authority to vote on any matter, constitutes a quorum for the transaction of business unless the Articles of Incorporation or the Company’s bylaws provide different proportions. Under the Nevada Bylaws, the holders of 33.3% of voting power of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person, present by means of remote communication, or represented by proxy, shall constitute a quorum. |
| Shareholder Action by Written Consent | New York law provides that, if the certificate of incorporation permits, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting on written consent if the holders of outstanding shares having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting. Additionally, the NYBCL requires the corporation to give prompt notice of the taking of corporate action without a meeting by less than unanimous written consent to those shareholders that did not consent in writing. If the certificate of incorporation does not permit the foregoing, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting on written consent if signed by the holders of all outstanding shares entitled to vote thereon. The New York Certificate does not permit shareholders to take action by written consent by less than all of the holders. | Nevada law provides that, unless the articles of incorporation or bylaws provide otherwise, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if the holders of outstanding stock having the majority of voting power that would be necessary to authorize or take such action at a meeting consent to the action in writing. The Nevada Bylaws provide that any action required or permitted by Nevada law to be taken at a meeting of shareholders may be taken without a meeting if, before or after the action, a written consent to the action is signed by shareholders holding a majority of the voting power of the Company or, if different, the proportion of voting power required to take the action at a meeting of shareholders. |
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| Dividends, Repurchases and Redemption | New York law provides that, unless further restricted in the certificate of incorporation, a corporation may declare and pay dividends only out of surplus (defined as the excess of net assets over stated capital), or if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding year, as long as the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. The New York Bylaws provide that the Board may fix a record date for the payment of dividends or distributions. | Nevada law provides that a corporation may make distributions to its shareholders, including by the payment of dividends, provided that, after giving effect to the distribution, the corporation would be able to pay its debts as they become due and the corporation’s total assets would not be less than the sum of its total liabilities plus any amount needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights of shareholders whose rights are superior to those receiving the distribution. The Nevada Bylaws provide that, subject to the provisions of Nevada law and the Articles of Incorporation, the Board may authorize, and the Company may make distributions to its shareholders in cash, property (other than shares of the Company), or a dividend of shares of the Company. |
| Amendment of Bylaws | Under New York law, initial bylaws shall be adopted by the corporation’s incorporators at the organization meeting. Thereafter, bylaws may be amended, adopted, or repealed by a majority of the votes cast of shareholders entitled to vote in the election of directors. If the certificate of incorporation or bylaws adopted by shareholders so provide, the bylaws may be adopted, amended, or repealed by the board of directors. The New York Certificate of Incorporation is silent as to the power to amend the Company’s bylaws. However, the New York Bylaws provide that the bylaws may be repealed or amended, and new bylaws may be adopted, by the shareholders or the Board. | Nevada law provides that, unless otherwise prohibited by any bylaw adopted by the shareholders, the directors may adopt, amend or repeal any bylaw, including any bylaw adopted by the shareholders. The articles of incorporation may grant the authority to adopt, amend or repeal bylaws exclusively to the directors. The Nevada Articles of Incorporation grant the Board the power to amend the Company’s bylaws. The Nevada Bylaws provide that the Board shall have the exclusive power to amend or repeal the Company’s bylaws, or to adopt new bylaws. |
| Restrictions on Transactions with Interested Shareholders | New York law generally prohibits interested shareholders from entering into certain types of business combinations with a New York corporation for a period of five years after becoming an interested shareholder, unless the board of directors approves either the business combination or the acquisition of stock by the interested shareholder before the interested shareholder acquires his or her shares. Under the NYBCL, an “interested shareholder” is generally a beneficial owner of at least 20% of the corporation’s outstanding voting stock. “Business combinations” include mergers and consolidations between corporations or with an interested shareholder; sales, leases, mortgages or other dispositions to an interested shareholder of assets with an aggregate market value which either equals 10% or more of the corporation’s consolidated assets or outstanding stock, or represents 10% or more of the consolidated earning power or net income of the corporation; issues and transfers to an interested shareholder of stock with an aggregate market value of at least 5% of the aggregate market value of the outstanding stock of the corporation; liquidation or dissolution of the corporation proposed by or in connection with an interested shareholder; reclassification or recapitalization of stock that would increase the proportionate stock ownership of an interested shareholder; and the receipt by an interested shareholder of any benefit from loans, guarantees, pledges or other financial assistance or tax benefits provided by the corporation. After a five-year period, NYBCL allows such business combination if it is approved by a majority of the voting stock not owned by the interested shareholder or by an affiliate or associate of the interested shareholder. Business combinations are also permitted when certain statutory “fair price” requirements are met. | Under Nevada Law, an “interested shareholder” may not engage in a “business combination” such as a merger or consolidation with a corporation for two years after the person first became an interested shareholder unless the combination or the transaction meets all of the requirements of the articles of incorporation and (a) is approved by the board of directors before the person first became an interested shareholder or (b) is approved by the board of directors and the combination is approved at an annual or special meeting of the shareholders of the corporation, and not by written consent, by the affirmative vote of the holders of stock representing at least 60 percent of the outstanding voting power of the corporation not beneficially owned by the interested shareholder or the affiliates or associates of the interested shareholder. A Nevada corporation may elect not to be governed by these provisions in its original articles of incorporation. The Nevada Articles of Incorporation include a provision electing not to be governed by these provisions. |
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| Shareholder Vote Required to Approve Merger or Sale of Company | New York law requires authorization by a majority of outstanding shares entitled to vote, as well as approval by the board of directors, with respect to the terms of a merger or consolidation of the corporation, except in limited circumstances. | Nevada law requires authorization by a majority of outstanding shares entitled to vote, as well as approval by the board of directors, with respect to the terms of a merger or a sale of substantially all of the assets of the corporation, except in limited circumstances. |
| Indemnification and Advancement of Expenses | Under New York law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) because that person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against reasonable expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if (a) the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and (b) with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. With respect to actions by or in the right of the corporation, no indemnification shall be made with respect to (1) a threatened action, or a pending action which is settled or otherwise disposed of, or (2) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. The New York Bylaws authorize indemnification to the fullest extent permitted by law. Notwithstanding such indemnification, no indemnification is permitted if (i) a judgment or other final adjudication adverse to such person establishes that his or her acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he or she personally gained in fact a financial profit or other advantage to which he or she was not legally entitled; (ii) there has been a settlement approved by the court and the indemnification would be inconsistent with any condition with respect to indemnification expressly imposed by the court in approving the settlement; and (iii) in the event of a proceeding by or in the right of the corporation to procure a judgment in its favor, no indemnification may be made if it is settled or otherwise disposed of or such person shall have been finally adjudged liable to the corporation, unless (and only to the extent that) the court in which the action was brought, or if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper. | Under Nevada law, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding if the person is not liable or acted in good faith in a manner which he or she reasonably believed to be in or not opposed to the best interest of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. With respect to actions by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit is brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which such court shall deem proper. Further, a director or officer who is successful, on the merits or otherwise in defending any proceeding subject to the NRS’ indemnification provisions shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith. The Nevada Articles of Incorporation and Nevada Bylaws provide for indemnification to the fullest extent permitted by Nevada law. |
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| Elimination of Director Personal Liability for Monetary Damages | Under the NYBCL, the corporation’s Certificate of Incorporation can eliminate or limit directors’ personal liability to the corporation or its shareholders for breach of their duty of care. However, a corporation may not limit directors’ liability in certain circumstances, such as those in bad faith, involving intentional misconduct or violating the duty of loyalty. NYBCL imposes statutory liability upon the directors if they vote or concur in one of the following: (i) declaring a dividend or other distribution contrary to the NYBCL or Certificate of Incorporation; (ii) repurchasing by the corporation of its own shares contrary to the NYBCL or Certificate of Incorporation; (iii) the distribution of assets to shareholders after dissolution of the corporation without paying or adequately providing for all known liabilities of the corporation, excluding any claims not filed by creditors within the time limit set in a notice given to creditors; (iv) making of any loan contrary to section 714 of NYBCL. The New York Certificate limits the liability of directors to the fullest extent permitted by law. | Under Nevada law, unless the articles of incorporation provide otherwise, neither a director nor an officer of a Nevada corporation will be held personally liable to the corporation, its shareholders or its creditors unless the director or officer committed both a breach of fiduciary duty and such breach was accompanied by intentional misconduct, fraud, or knowing violation of law. The Nevada Articles of Incorporation provide for the limitation of liability of officers and directors to the fullest extent provided by law. |
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| Inspection of Shareholders’ List | Under New York law, any shareholder upon five days’ written demand may inspect the corporation’s shareholder list and other books and records for a proper purpose. | Under Nevada law, a shareholder who has been a shareholder for at least six months, or who owns at least 5% of outstanding shares, upon written demand may inspect the corporation’s shareholder list for a proper purpose. |
| Approval of Certain Corporate Transactions | Under New York law, a contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, firm, association, or other entity in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall not 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 such director’s interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the board or committee, and the board or committee approves such contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the disinterested directors are insufficient to constitute an act of the board, by unanimous vote of the disinterested directors; or (2) if the material facts as to such director’s interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the shareholders entitled to vote thereon, and such contract or transaction is approved by vote of such shareholders; or (3) the transaction is fair and reasonable to the corporation at the time it is approved. | Under Nevada law, a contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other organization in which one or more of its directors or officers are directors or officers, or are financially interested, is not void or voidable solely for that reason, if one or more of the following circumstances exist: (1) the director’s or officer’s interest is known to the board of directors and the transaction is approved by the board in good faith without counting the vote or votes of the interested director or officer; (2) the common interest is known to the shareholders, and they approve or ratify the transaction in good faith by a majority vote of shareholders; (3) the common interest is not known to the interested director or officer at the time the transaction is brought before the board; or (4) the transaction is fair to the corporation at the time it is authorized or approved. |
| Class Voting in Certain Corporate Transactions | New York law does not generally require class voting, except in connection with certain amendments to the corporation’s certificate of incorporation. | Nevada law likewise does not generally require class voting, except in connection with certain amendments to the corporation’s certificate of incorporation. |
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| Appraisal Rights | Under the NYBCL, dissenting holders of common stock who follow prescribed statutory procedures are entitled to appraisal rights in certain circumstances, including any plan of merger or consolidation to which the corporation is a party, a share exchange, any sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation which requires shareholder approval except that the right shall not be available: (i) to a shareholder of the parent corporation in a merger between a parent and a subsidiary corporations; or (ii) to a shareholder of the surviving corporation in a merger authorized by the NYBCL, other than a merger specified above, unless such merger effects one or more of the changes specified in subparagraph 806(b)(6) of NYBCL in the rights of the shares held by such shareholder; or (iii) to a shareholder for the shares of any class or series of stock, which shares or depository receipts, at the record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to vote upon the plan of merger or consolidation, were listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. The New York Certificate and New York Bylaws do not contain any provisions regarding appraisal rights. | Under Nevada law, a shareholder has the right to dissent from, and to obtain payment of the fair value of his shares in the event of: (1) the consummation of a plan of merger to which the corporation is a party if (a) approval by the shareholders is required for the merger or the articles of incorporation, regardless of whether the shareholder is entitled to vote on the plan of merger or (b) the corporation is a subsidiary and is merged with its parent; (2) the consummation of a plan of conversion to which the corporation is a party as the corporation whose subject owner’s interests will be converted; (3) the consummation of a plan of exchange to which the corporation is a party as the corporation whose subject owner’s interests will be acquired, if the shareholder’s shares are to be acquired in the plan of exchange; or (4) any corporate action taken pursuant to a vote of the shareholders to the extent that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or non-voting shareholders are entitled to dissent and obtain payment for their shares. Notwithstanding the paragraph above, unless the articles of incorporation expressly provide otherwise, shareholders have no right of dissent with respect to a plan of merger, conversion or exchange in favor of shareholders of any class or series of shares that: (a) is a “covered security” under Section 18(b)(1)(A) or (B) of the Securities Act, or (b) is traded in an organized market and held by at least 2,000 shareholders, and has a market value of at least $20 million, exclusive of the value of such shares held by the corporation’s subsidiaries, senior executives, directors and beneficial shareholders owning more than 10 percent of such shares. Notwithstanding the foregoing, dissenters’ rights are available to shareholders if the shareholders are required to accept anything other than cash or shares of any class or series of shares of any corporation, or any other proprietary interest of any other entity, in exchange for their shares, provided that the standards set forth in item (a) or (b) in the preceding sentence are satisfied with respect to their shares at the time the corporate action becomes effective. The Nevada Articles of Incorporation and the Nevada Bylaws do not contain any provisions regarding appraisal rights. |
| Dissolution | Under New York law, dissolution must be approved by two-thirds of all outstanding shares entitled to vote thereon, unless the certificate of incorporation requires a different proportion (not less than a majority). Upon such approval, a certificate of dissolution shall be executed and filed with the department of state. | Under Nevada law, after the board of directors approves of the corporation’s dissolution, the directors must recommend the dissolution to the shareholders, who must approve the dissolution. Shareholders may act by written consent to approve of the dissolution. If the dissolution is approved by the directors and shareholders the corporation shall file a notice with the Secretary of State. |
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| Shareholder Derivative Suits | Under New York law, a shareholder may bring a derivative action if the shareholder was a shareholder at the time of the transaction of which they complain or thereafter acquired the shares by operation of law. Additionally, the complaint must set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort. | Under Nevada law, a shareholder may only bring a derivative action if: (1) the shareholder was a shareholder at the time of the transaction of which they complain or thereafter acquired the shares by operation of law; and (2) the shareholder fairly and adequately represents the interests of the corporation in enforcing the right of the corporation. Additionally, the shareholder must first make a written demand on the corporation to take suitable action before filing the derivative suit, unless such demand would be futile. |
Interest of Our Directors and Executive Officers in the Nevada Reincorporation
Our directors and executive officers may have interests in the Nevada Reincorporation transaction that are different from, or in addition to, the interests of the shareholders generally, which may present actual or potential conflicts of interest. For example, the Nevada Reincorporation provides our officers and directors more clarity and certainty in the reduction of their potential personal liability and strengthens the ability of directors to resist coercive and inadequate takeover bids. The Board has considered these interests, among other matters, in reaching its decision to approve the Nevada Reincorporation and to recommend that our shareholders vote in favor of this proposal.
U.S. Federal Income Tax Consequences
The following discussion is a summary of certain U.S. federal income tax consequences of the Nevada Reincorporation to the Company of U.S. holders that hold shares of our common stock as capital assets for U.S. federal income tax purposes. The discussion is based on the Code**,** regulations promulgated under the Code by the U.S. Treasury Department (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. Such change could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described herein.
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 U.S. holders who may be subject to special tax treatment under the Code, including, without limitation, dealers in securities, commodities or foreign currency, 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, persons subject to the alternative minimum tax or Medicare contribution tax on net investment income, persons who hold their shares of our common stock as part of a hedge, straddle, conversion or other risk reduction transaction, persons who hold their shares of our common stock as “qualified small business stock” under Section 1045 and/or 1202 of the Code, or who acquired their shares of the Company’s common stock pursuant to the exercise of compensatory stock options, the vesting of previously restricted shares of stock or otherwise as compensation.
The state and local tax consequences of the Nevada Reincorporation are beyond the scope of this discussion. This discussion should not be considered as tax or investment advice, and the tax consequences of the Nevada Reincorporation may not be the same for all U.S. holders. Shareholders should consult their own tax advisors to understand their individual federal, state, local**,**and foreign tax consequences.
Tax Consequences to the Company*.*The Nevada Reincorporation is intended to constitute a “reorganization” within the meaning of Section 368(a)(1)(F) of the Code. The tax consequences described below assume that the Nevada Reincorporation is properly characterized as a reorganization.
The Company would not recognize any taxable income, gain or loss as a result of the Nevada Reincorporation. In addition, the Company does not expect the Nevada Reincorporation to affect the Company’s ability to utilize the Company’s net operating loss carryforwards.
Tax Consequences to U.S. Holders*.*U.S. holders generally will not recognize gain or loss as a result of the Nevada Reincorporation. The aggregate tax basis of Forward Nevada common stock received by each U.S. holder will equal the aggregate tax basis of the Forward New York common stock surrendered by such U.S. holder in exchange therefor.
The holding period of the Forward Nevada common stock received by each U.S. holder will include the period during which such U.S. holder held the Forward New York common stock surrendered in exchange therefor.
The Board recommends a vote**“FOR”** the Nevada Reincorporation.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.