Blueprint
SCHEDULE
14A
Consent
Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934 (Amendment No. 1)
Filed
by the
Registrant [ ]
Filed
by a Party other than the
Registrant [X]
Check
the appropriate box:
[X]
Preliminary Consent
Statement
[ ]
Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]
Definitive Consent
Statement
[ ]
Definitive
Additional Materials
[ ]
Soliciting Material
Pursuant to § 240.14a-12
Applied Energetics, Inc.
(Name
of Registrant as Specified In Its Charter)
Bradford T. Adamczyk
Jonathan R. Barcklow
Thomas C. Dearmin
John E. Schultz Jr.
Oak Tree Asset Management Ltd.
(Name
of Person(s) Filing Consent Statement, if other than the
Registrant)
Payment
of Filing Fee (check the appropriate box):
[X]
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No fee
required.
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[ ]
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Fee
computed on table below per Exchange Act Rule 14a-6(i)(4) and
0-11.
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Title
of each class of securities to which transaction
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Aggregate
number of securities to which transaction applies:
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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):
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Proposed
maximum aggregate value of transaction:
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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Amount
Previously Paid:
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Form,
Schedule or Registration Statement No.:
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Date
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[Revised Preliminary Consent Solicitation Statement – Subject
to Completion]
[●],
2018
To Our
Fellow Stockholders of Applied Energetics, Inc.:
This
Consent Statement and the enclosed WHITE consent card are being furnished
by Bradford T. Adamczyk, Jonathan R. Barcklow, Thomas C.
Dearmin, John E. Schultz Jr. and Oak Tree Asset Management Ltd.
(collectively, the “Investors,” “we” or
“us”), in connection with our solicitation of written
consents (the “Consent Solicitation”) from the
stockholders of Applied Energetics, Inc., a Delaware corporation
(“Applied Energetics” or the “Company”). We
collectively own approximately 3.63% of the outstanding common
stock of the Company.
We are
soliciting your consent for a number of proposals, the effect of
which will be to remove the sole member of the Board of Directors
of the Company (the “Board”) currently in office (and
any person who may be appointed by the incumbent director to fill
any vacancy or newly created directorship prior to the
effectiveness of these proposals) and to elect Mr. Adamczyk, Mr.
Barcklow and Mr. Dearmin (collectively, the “Nominees”)
as directors of the Company. By providing your consent,
you will help enable stockholders to reconstitute the Board and
management of the Company and ensure that the best interests of the
Company and all of its stockholders are being looked after by the
Board.
As you
probably know, the Company is in a severe financial condition. As
of September 30, 2017, the Company had $14,521 in cash and cash
equivalents. Its shares were delisted from The Nasdaq Stock Market
in January 2012, and have since traded on the OTCQB stock market.
As of [●], the closing price for a share of the
Company’s common stock was [●]. The Company suspended
its business activities in 2014 and reported under federal
securities laws as a “shell company” from the fourth
quarter of 2014 through the first quarter of 2017. Since the
Company’s delisting, its financial condition has continued to
deteriorate.
The
Company has not held an annual meeting of stockholders since 2011.
For almost two years, George P. Farley, age 78, has
served as the sole director and officer of the Company. In 2016
– while the Company was a “shell company” –
Mr. Farley, acting as the sole director and officer, caused the
Company to issue 25,000,000 shares of common stock of the Company
to himself. He also unilaterally set his 2016 compensation at
$175,000. Neither the share issuance nor Mr. Farley’s
compensation was approved by independent directors or the
Company’s stockholders.
Our
objective is to put in place a new Board that can execute
a strategy most likely to lead to a turnaround in the
Company’s financial performance and the realization of
its potential. If the Nominees are elected to the Board,
they intend to promptly appoint Mr. Dearmin – the
Company’s former President and Chief Executive Officer
– as Acting Chief Executive Officer until a permanent Chief
Executive Officer is retained. We believe that the Company has
technology that can be monetized in the defense and commercial
industries, and we are committed to implementing and overseeing a
business strategy designed to create stockholder value and
objectively consider a variety of strategic alternatives that might
be available to the Company. If our Consent Solicitation is
successful, the Nominees will constitute the Board.
We urge you to carefully consider the
information contained in the attached Consent Statement and then
support our efforts by promptly signing, dating and returning the
enclosed WHITE consent card by mailing it to our proxy solicitor,
Laurel Hill Advisory Group, at 2 Robbins Lane, Suite 201, Jericho,
New York 11753 or emailing it to us at aeinvestors1@gmail.com.
The attached Consent Statement and the enclosed WHITE consent card are first being
furnished to stockholders on or about [●]. We urge
you not to sign any revocation of consent card that may be sent to
you by Applied Energetics.
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Thank
you for your consideration,
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Bradford
T. Adamczyk
Jonathan
R. Barcklow
Thomas
C. Dearmin
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John E.
Schultz Jr.
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Oak
Tree Asset Management Ltd.
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__________________________
CONSENT STATEMENT
OF
BRADFORD T. ADAMCZYK, JONATHAN R. BARCKLOW, THOMAS C. DEARMIN, JOHN
E. SCHULTZ JR. AND OAK TREE ASSET MANAGEMENT LTD.
_________________________
PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE CONSENT CARD
TODAY
This
Consent Statement and the enclosed WHITE consent card are being furnished
by Bradford T. Adamczyk, Jonathan R. Barcklow, Thomas C. Dearmin,
John E. Schultz Jr. and Oak Tree Asset Management Ltd.
(collectively, the “Investors,” “we” or
“our”) in connection with our solicitation of written
consents (the “Consent Solicitation”) from you, holders
of shares of common stock, par value $0.001 per share (the
“Common Stock”), of Applied Energetics, Inc., a
Delaware corporation (“Applied Energetics” or the
“Company”). This Consent Solicitation is
not being made by or on behalf of the Company or its Board of
Directors (the “Board”).
A
solicitation of written consents is a process that allows a
corporation’s stockholders to act by submitting written
consents to any proposed stockholder actions in lieu of voting in
person or by proxy at an annual or special meeting of
stockholders. Whereas at an annual or special meeting of
stockholders, the election of directors requires a plurality of the
votes cast by the stockholders present in person or by proxy and
entitled to elect directors and the approval of other matters
generally requires a majority of the votes cast by the stockholders
present in person or by proxy (unless a greater vote is required by
the certificate of incorporation, the bylaws or applicable law),
the approval of all matters by written consent of stockholders
(including the Proposals (as defined below)) requires the
affirmative consent of the holders of record of a majority of the
outstanding shares of Common Stock entitled to vote.
We are
soliciting written consents from the holders of shares of Common
Stock to take the following actions (each, as more fully described
in this Consent Statement, a “Proposal” and together,
the “Proposals”), in the following order, in lieu of a
meeting of stockholders, in accordance with Delaware
law:
Proposal 1 - Repeal any provision of the
Amended and Restated By-Laws of the Company (the
“Bylaws”) in effect immediately prior to the time this
Proposal becomes effective that was not included in the Bylaws
filed by the Company with the Securities and Exchange Commission
(the “SEC”) as an exhibit to the Company’s
Quarterly Report on Form 10-Q on August 9, 2007, the last date of
reported changes to the Bylaws (“Proposal 1”). Proposal
1 is designed to prevent the current Board from taking actions to
amend the Bylaws in an attempt to nullify, impede or delay the
actions taken by stockholders under the Proposals.
Proposal 2 - Remove, with cause, George
P. Farley from the Board (and any person or persons, other than
those elected by this Consent Solicitation, elected, appointed or
designated by the Board (or any committee thereof) to fill any
vacancy or newly created directorship on or after October 31, 2017,
which is the last date the Company reported on the composition of
the Board in a filing with the SEC, and prior to the time that any
of the actions proposed to be taken by this Consent Solicitation
become effective) (“Proposal 2”).
Proposal 3 - Elect Bradford T. Adamczyk
to serve a term of three years and until his successor is duly
elected and qualified (or if he becomes unable or unwilling to
serve as a director of Applied Energetics prior to the
effectiveness of this Proposal, any other person who is designated
as a director nominee by the Investors) (“Proposal
3”).
Proposal 4 - Elect Jonathan R. Barcklow
to serve a term of two years and Thomas C. Dearmin to serve a term
of one year and, in each case, until their respective successors
are duly elected and qualified (Messrs. Adamczyk, Barcklow
and Dearmin are collectively referred to in this Consent Statement
as the “Nominees”) as directors on the Board (or if
either of them becomes unable or unwilling to serve as a director
of Applied Energetics or if the size of the Board is increased, in
either case prior to the effectiveness of this Proposal, any other
person who is designated as a Nominee by the Investors)
(“Proposal 4”).
If we
are successful in our Consent Solicitation, the Board will be
composed of the Nominees.
Each
Proposal will be effective without further action when we deliver
to Applied Energetics consents from the holders of a majority of
the outstanding shares of the Common Stock in accordance with
Section 228 of the General Corporation Law of the State of Delaware
(the “DGCL”). In order for the Proposals to
be adopted, Applied Energetics must receive the unrevoked written
consents signed and dated by the holders of a majority of the
outstanding shares of Common Stock as of the close of business on
the Record Date (as defined below), within 60 calendar days of the
date on which the first written consent is delivered to the
Company. For purposes of this Consent Solicitation, pursuant to
Section 213 of the DGCL, the “Record Date” shall be
deemed to be [●].
We
request that you promptly sign, date and return the WHITE consent
card to us by mailing it to our proxy solicitor, Laurel Hill
Advisory Group, at 2 Robbins Lane, Suite 201, Jericho, New York
11753 or emailing it to us at aeinvestors1@gmail.com.
If you
hold your shares of Common Stock registered in your own name (for
example, you hold a stock certificate in your name), you can submit
your consent by signing, dating and returning the WHITE consent
card to us. If you hold your shares in “street” name
with a bank, broker firm, dealer, trust company or other nominee,
you must either give instructions to your bank, broker firm,
dealer, trust company or other nominee on how to consent with
respect to your shares of Common Stock or you must obtain a
“legal proxy” authorizing you to execute a consent with
respect to your shares of Common Stock held in “street
name.” If you obtain a “legal proxy,” a copy of
the “legal proxy” and the signed and dated WHITE
consent card should be returned to us.
The
Investors are deemed participants in this Consent Solicitation. See
the section titled “INFORMATION ON THE PARTICIPANTS” on
page [●] of this Consent Statement for more
information.
This
Consent Statement and WHITE consent card are first being sent or
given to the stockholders of Applied Energetics on or about
[●], 2018.
WE URGE YOU TO ACT TODAY TO ENSURE THAT YOUR
CONSENT WILL COUNT.
We
reserve the right to submit to Applied Energetics consents at any
time following the first written consent delivered to Applied
Energetics. See the section below titled “CONSENT
PROCEDURE” for additional information regarding such
procedures.
As of
November 12, 2017, there were 157,785,520 shares of Common Stock
outstanding, as reported in the Company’s Quarterly Report on
Form 10-Q, filed with the SEC on November 14, 2017, each entitled
to one vote per share. The percentages of stock
ownership reported in this Consent Statement are based on such
157,785,520 shares of Common Stock outstanding. The
mailing address of the principal executive office of Applied
Energetics is 2480 W Ruthrauff Road, Suite 140 Q, Tucson, Arizona
85705.
As of
the date of this filing, the Investors were the beneficial owners
of an aggregate of 5,730,317 shares of Common Stock, constituting
approximately 3.63% of the outstanding shares of Common
Stock.
We urge
you to vote in favor of the Proposals by signing, dating and
returning the enclosed WHITE consent card. If you take
no action, you will in effect be rejecting the
Proposals. The failure to execute and return a consent,
“abstentions” and “withheld consents” will
have the same effect as a “no”
vote.
IMPORTANT
PLEASE READ THIS CAREFULLY
If your
shares of Common Stock are registered in your own name, please
submit your consent today by signing, dating and returning the
enclosed WHITE consent
card by mail, email or fax.
If you
hold your shares in “street” name with a bank, broker
firm, dealer, trust company or other nominee, only that nominee can
exercise the right to consent with respect to the shares of Common
Stock that you beneficially own through such nominee and only upon
receipt of your specific instructions. Accordingly, it is critical
that you promptly contact and give instructions to your bank,
broker firm, dealer, trust company or other nominee to execute a
consent in favor of the Proposals. We urge you to confirm in
writing your instructions to the person responsible for your
account and provide a copy of those instructions to us, c/o Laurel
Hill Advisory Group, 2 Robbins Lane, Suite 201, Jericho, New York
11753, so that we will be aware of all instructions given and can
attempt to ensure that such instructions are followed.
Alternatively, you must obtain a “legal proxy” from the
record holder authorizing you to execute the consent card. If you
execute a consent card pursuant to a “legal proxy,” a
copy of that “legal proxy” should accompany your
consent card when you return it to us.
Execution and
delivery of a consent by a record holder of shares of Common Stock
will be presumed to be a consent with respect to all shares held by
such record holder unless the consent specifies
otherwise.
Only
holders of record of shares of Common Stock as of the close of
business on the Record Date will be entitled to consent to the
Proposals. If you are a stockholder of record as of the close of
business on the Record Date, you will retain your right to consent
even if you sell your shares of Common Stock after the Record
Date.
If you
take no action, you will in effect be rejecting the Proposals.
Abstentions, withheld consents and failures to consent will have
the same effect as rejecting the Proposals.
If you
have any questions regarding the Proposals, please contact Thomas
C. Dearmin at (949) 842-2844 or aeinvestors1@gmail.com. If you
have any questions regarding your WHITE consent card or need
assistance in executing your consent, please contact our proxy
solicitor as follows:
Laurel Hill Advisory Group
2
Robbins Lane, Suite 201
Jericho,
New York 11753
Banks
and Brokers Call (516) 933-3100
All
Others Call Toll-Free (888) 742-1305
QUESTIONS AND ANSWERS ABOUT THIS CONSENT SOLICITATION
The
following are some of the questions you, as a stockholder, may have
and answers to those questions. The following is not meant to be a
substitute for the information contained in the remainder of this
Consent Statement, and the information contained below is qualified
by the more detailed descriptions and explanations contained
elsewhere in this Consent Statement. We urge you to carefully read
this entire Consent Statement prior to making any decision on
whether to grant any consent hereunder.
WHO IS MAKING THE SOLICITATION?
The
solicitation is being made by the Investors, being Bradford T.
Adamczyk, Jonathan R. Barcklow, Thomas C. Dearmin, John E. Schultz
Jr. and Oak Tree Asset Management Ltd. As of the date of this
filing, the Investors were the beneficial owners of an aggregate of
5,730,317 shares of Common Stock, constituting approximately 3.63%
of the currently issued and outstanding shares of Common
Stock. Mr. Dearmin is a former officer and director of
the Company, and Mr. Schultz is a former consultant to the Company.
For additional information on the participants in this
solicitation, please see the section titled “INFORMATION
ON THE PARTICIPANTS” on page [●] of this Consent
Statement.
WHAT ARE WE ASKING THAT THE STOCKHOLDERS CONSENT TO?
We are
asking you to consent to three corporate
actions. Proposal 1 seeks to repeal any provision of the
Bylaws in effect immediately prior to the time such Proposal
becomes effective that was not included in the Bylaws filed by the
Company with the SEC as an exhibit to its Quarterly Report on Form
10-Q on August 9, 2007. Proposal 2 seeks to remove, with
cause, George P. Farley, and each other member of the Board, if
any, appointed to the Board (or any committee thereof) to fill any
vacancy since October 31, 2017, which is the last date on which the
Company confirmed the composition of the Board in a filing with the
SEC, and immediately prior to the effectiveness of these
Proposals. Proposal 3 and Proposal 4 seek to elect the
Nominees to the Board. See the section below titled “THE
PROPOSALS” beginning on page [●] of this Consent
Statement for more information.
WHO ARE THE NOMINEES THAT WE ARE PROPOSING TO ELECT TO THE
BOARD?
We are
asking you to elect each of the Nominees, being Bradford T.
Adamczyk, Jonathan R. Barcklow and Thomas C. Dearmin, to serve
as a director of Applied Energetics. As described in this Consent
Statement, Mr. Adamczyk and Mr. Dearmin are stockholders of the
Company. With the exception of Mr. Dearmin, who served as
President, Chief Executive Officer, Chief Financial Officer and
Vice Chairman of the Company (under its former name, Ionatron,
Inc.) at various times from 2004 to 2007, none of the Nominees has
or has ever had any business or financial ties to the Company. For
information regarding the Nominees, please see the section below
titled “INFORMATION ABOUT THE NOMINEES” on page
[●] of this Consent Statement.
WHY ARE WE SOLICITING YOUR CONSENT?
This
solicitation is being undertaken in order to elect the Nominees to
the Board. We are disappointed with the Company and believe Mr.
Farley, as the sole director and officer of the Company, has not
taken actions to maximize stockholder value and has engaged in
self-dealing transactions by causing the Company to issue shares to
him and setting his own compensation. For information
regarding the reasons we are soliciting your consent, please see
the section below titled “REASONS FOR OUR SOLICITATION”
beginning on page [●] of this Consent Statement.
DO THE ORGANIZATIONAL DOCUMENTS OF THE COMPANY PERMIT STOCKHOLDERS
TO TAKE ACTION BY WRITTEN CONSENT?
Yes. Section
228 of the DGCL expressly provides that a corporation’s
stockholders are permitted to take action by written consent
“[u]nless otherwise provided in the certificate of
incorporation.” In addition, Delaware courts have
held that the power of stockholders to act by written consent may
be modified or eliminated only by the certificate of incorporation
and have accordingly invalidated bylaws that effectively prohibit
stockholder action by written consent (see, e.g., Allen v. Prime Computer, Inc., 540 A.2d
417 (Del. 1988)). Neither the Company’s Certificate of
Incorporation, as amended (“Certificate of
Incorporation”) nor its Bylaws restrict the power of the
stockholders to act by written consent.
IF THE CONSENT SOLICITATION IS SUCCESSFUL, WILL IT HAVE ANY EFFECT
ON THE MATERIAL AGREEMENTS OF THE COMPANY?
Yes.
The Certificate of Incorporation includes a Certificate of
Designation of Series A Redeemable Convertible Preferred Stock (the
“Certificate of Designation”), which sets forth the
terms of the Company’s Series A redeemable convertible
preferred stock (the “Series A Preferred Stock”).
According to the Company’s Form 10-Q for the period ended
September 30, 2017, filed with the SEC on November 14, 2017, there
were 13,602 shares of Series A Preferred Stock outstanding as of
September 30, 2017.
The
Certificate of Designation allows each holder of Series A Preferred
Stock in the event of a “Change of Control” (as defined
in the Certificate of Designation) to require the Company to
purchase such holder’s Series A Preferred Stock at a purchase
price defined therein, which is generally equal to 101% of the
$25.00 per share liquidation preference of the Series A Preferred
Stock plus all accrued and unpaid and accumulated dividends. The
Certificate of Designation defines a “Change of
Control” as, among other things, when “during any
period of two consecutive years, the Continuing Directors cease for
any reason to constitute a majority of the Board of
Directors.” The Certificate of Designation defines
“Continuing Director” as any director who was (1) a
member of the Board on the date of the initial issuance of the
Series A Preferred Stock (which was in October 2005) or (2)
nominated for election or elected to the Board with the approval of
a majority of the Continuing Directors who were members of the
Board at the time of such nomination or election.
According to the
Company’s Form 10-K for the period ended December 31, 2016,
filed with the SEC on March 31, 2017, the cost to the Company of
having to purchase the Series A Preferred Stock in the event of a
Change in Control was equal to the liquidation preference of
approximately $340,000 plus unpaid dividends of approximately
$119,000 as of December 31, 2016. According to the Company’s
Form 10-Q for the period ended September 30, 2017, filed with the
SEC on November 14, 2017, dividend arrearage as of September 30,
2017, was approximately $145,000. As a result, the cost to the
Company of having to purchase the Series A Preferred Stock if a
Change in Control occurs could be at least $485,000, which would
have a material and adverse effect on the Company’s financial
condition.
On
January 26, 2018, the Investors requested Mr. Farley, acting as the
sole member of the Board and as a Continuing Director, to approve
the nomination of the Nominees for purposes of the Certificate of
Designation. If Mr. Farley does not approve the nomination of the
Nominees and the Consent Solicitation is successful, it would
likely give rise to the right of the holders of the Series A
Preferred Stock to require the Company to purchase their shares to
the extent the Company has legally available funds.
WHO IS ELIGIBLE TO CONSENT TO THE PROPOSALS?
If you
are a holder of Common Stock as of the close of business on the
Record Date, you have the right to consent to the Proposals. Under
Delaware law, the Record Date will be used to determine
stockholders entitled to give their written consent to the
Proposals pursuant to this Consent Solicitation. Please see the
section below titled “CONSENT PROCEDURES” beginning on
page [●] of this Consent Statement.
WHEN IS THE DEADLINE FOR SUBMITTING CONSENTS?
We urge
you to submit your consent as soon as possible. In order
for the Proposals to be adopted, Applied Energetics must receive
unrevoked written consents signed by the holders of a majority of
the outstanding shares of Common Stock as of the close of business
on the Record Date, within 60 calendar days of the first date on
which a written consent is delivered to the
Company. Effectively,
this means that you have until [●] to consent to the
Proposals. However, we reserve the right to submit to the
Company consents at any time following the first date on which a
written consent is submitted to the Company in order to adopt the
Proposals. WE URGE YOU TO ACT
PROMPTLY TO ENSURE THAT YOUR CONSENT WILL
COUNT.
For
more information about submitting consents, please see the section
below titled “CONSENT PROCEDURES” beginning on page
[●] of this Consent Statement.
HOW MANY CONSENTS MUST BE RECEIVED IN ORDER TO ADOPT THE PROPOSALS
AND WHEN WILL THE PROPOSALS BECOME EFFECTIVE?
The
Proposals will be adopted and become effective when properly
completed, unrevoked consents are signed by the holders of a
majority of the outstanding shares of Common Stock as of the close
of business on the Record Date and delivered to the Company in
accordance with applicable law.
According to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on
November 14, 2017, as of November 12, 2017 there were 157,785,520
shares of Common Stock outstanding, each entitled to one consent
per share. Cumulative voting is not permitted. On that basis, the
consent of the holders of at least 78,892,761 shares of Common
Stock would be necessary to effect these Proposals.
For
more information, please see the section below titled
“CONSENT PROCEDURES” beginning on page [●]
of this Consent Statement.
WHAT SHOULD YOU DO TO CONSENT TO THE PROPOSALS?
Record Holders: If your shares of
Common Stock are registered in your own name, please submit your
consent to us by signing, dating and returning the enclosed WHITE
consent card by emailing it to aeinvestors1@gmail.com or
mailing it to us at Laurel Hill Advisory Group, at 2 Robbins Lane,
Suite 201, Jericho, New York 11753.
Street Name Holders:
●
If you hold your
shares in “street” name with a bank, broker firm,
dealer, trust company or other nominee, only that nominee can
exercise the right to provide consent with respect to the shares of
Common Stock you beneficially own through such nominee and only
upon receipt of your specific instructions. Accordingly, it is
critical that you promptly give instructions to your bank, broker
firm, dealer, trust company or other nominee to execute a consent
in favor of the Proposals with respect to the shares you
beneficially own through such nominee. Please follow the
instructions to consent provided on the enclosed WHITE consent
card. If your bank, broker firm, dealer, trust company or other
nominee provides for consent instructions to be delivered to them
by telephone or Internet, instructions will be included on the
enclosed WHITE consent card. We urge you to confirm in writing your
instructions to the person responsible for your account and provide
a copy of those instructions to us, c/o Laurel Hill Advisory Group,
2 Robbins Lane, Suite 201, Jericho, New York 11753, so that we will
be aware of all instructions given and can attempt to ensure that
such instructions are followed.
●
Alternatively, you
can obtain a “legal proxy” from the record holder
authorizing you to execute a consent with respect to the Common
Stock held by such record holder on your behalf. Please act
promptly to request a “legal proxy” through your bank,
broker firm, dealer, trust company or other nominee. If you execute
a written consent pursuant to a “legal proxy,” the
“legal proxy” should accompany the written consent when
you return it to us.
For
more information, please see the section below titled
“CONSENT PROCEDURES” beginning on page [●] of
this Consent Statement.
CAN YOU REVOKE YOUR CONSENT?
Yes. An
executed consent card may be revoked at any time by marking,
dating, signing and delivering a written revocation before the time
that the action authorized by the executed consent becomes
effective. The delivery of a subsequently dated consent card that
is properly completed will constitute a revocation of any earlier
consent. The revocation may be delivered either to the Company or
to Laurel Hill Advisory Group, 2 Robbins Lane, Suite 201, Jericho,
New York 11753. Please see the section below titled “CONSENT
PROCEDURES” beginning on page [●] of this Consent
Statement.
WHOM SHOULD YOU CONTACT IF YOU HAVE QUESTIONS ABOUT THE
SOLICITATION?
If you
have questions about the Proposals, please contact Thomas C.
Dearmin at (949) 842-2844 or aeinvestors1@gmail.com. If you
have questions regarding your WHITE consent card or need assistance
executing your consent, please contact our proxy solicitor as
follows:
Laurel Hill Advisory Group
2
Robbins Lane, Suite 201
Jericho,
New York 11753
Banks
and Brokers Call (516) 933-3100
All
Others Call Toll-Free (888) 742-1305
INFORMATION ON THE PARTICIPANTS
This
Consent Solicitation is being made by the Investors, who are
considered the participants in this Consent
Solicitation.
The
principal business address of each Investor is disclosed in Annex I
of this Consent Statement.
As of
the date of this filing, the Investors beneficially owned an
aggregate of 5,730,317 shares of Common Stock, constituting
approximately 3.63% of the shares of Common Stock outstanding,
which are beneficially owned as follows:
●
Bradford T.
Adamczyk: 1,235,081 total shares of Common Stock, of which (i)
671,482 shares are held directly and (ii) 563,599 shares are held
indirectly through MoriahStone Investment Management, for which Mr.
Adamczyk is the sole owner and manager;
●
Thomas C. Dearmin:
2,612,724 total shares of Common Stock held indirectly through the
Dearmin Family Trust, for which Mr. Dearmin serves as
trustee;
●
John E. Schultz
Jr.: 1,132,470 total shares of Common Stock, of which (i) 358,798
shares are held directly, (ii) 3,350 shares are held indirectly
through Optima Venture Partners LLC, for which Mr. Schultz is the
95% owner and manager and (iii) 770,322 shares are held indirectly
by Mr. Schultz’s wife; and
●
Oak Tree Asset
Management Ltd., of which Mr. Schultz is the 99% owner and
President and Corporate Manager: 750,042 total shares of Common
Stock held directly. 500,000 of those shares of Common Stock were
issued as payment for services that Mr. Schultz rendered to the
Company in March 2017.
The
Investors intend to consent in favor of the Proposals with respect
to their shares of Common Stock.
The
Investors may be deemed to have formed a “group,”
within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934 (the “Exchange Act”), with respect to their
voting control over such shares of Common Stock.
Please
see Annex I for additional information about the participants and
all transactions in the Common Stock effectuated by the
participants during the past two years.
REASONS FOR OUR SOLICITATION
Our
objective is to put in place a new Board that can execute a
strategy most likely to lead to a turnaround in financial
performance and the realization of Applied Energetics’
potential. We believe that the Company has potentially valuable
assets and are committed to adopting and overseeing a business
strategy designed to create value for stockholders.
The
Company’s shares were delisted from The Nasdaq Stock Market
(“Nasdaq”) on January 6, 2012. Since then, the Common
Stock has traded on the OTCQB under the ticker “AERG.”
In October 2014, the Board determined that the Company suspended
its business activities. In the fourth quarter of 2014, the Company
started reporting under federal securities laws as a “shell
company” (as such term is defined in Rule 12b-2 of the
Exchange Act), which continued until the first quarter of 2017. The
Company has not held an annual meeting of stockholders since
2011.
Since
February 2016, George P. Farley, age 78, has served as the sole
director and officer of the Company, holding the titles of
Chairman, Chief Executive Officer and Principal Financial Officer.
Mr. Farley, who joined the Board in 2004, was last elected by the
stockholders as a director in 2009, so his three-year term as
director would have expired at the 2012 annual meeting of
stockholders if such a meeting had been held. Under Delaware law
and the Company’s Certificate of Incorporation, he remains in
office as a director until his successor is duly elected. Mr.
Farley is also the sole member of the Company’s Audit
Committee, Compensation Committee and Nominating and Corporate
Governance Committee. Mr. Farley, together with an entity that is
controlled by one of his family members, owns 25,000,000 shares of
Common Stock, or approximately 15.9% of the outstanding shares of
Common Stock. As described below, Mr. Farley issued such shares to
himself while serving as the sole director and officer of the
Company.
Our
knowledge and assessment of the Company’s current financial
condition and prospects is limited by the lack of information
disclosed by the Company. To our knowledge, the Company no longer
has a functional office or headquarters. The Company’s
disclosures filed with the SEC, however, indicate that the Company
continues to be in severe financial condition, increasing the
prospect that the Company may ultimately become bankrupt. For
example, the Company’s operations in 2016 resulted in a net
loss of approximately $(493,000), an increase of approximately
$(269,000) compared to the approximately $(224,000) net loss for
2015. As of September 30, 2017, the Company had $14,521 in cash and
cash equivalents and reported a net loss of $(464,285) for the
nine-months ended September 30, 2017. On several occasions, the
Company has been late in making required filings with the
SEC.
While
serving as the sole director and officer of the Company, we believe
Mr. Farley has engaged in self-dealing transactions, despite the
Company’s dire financial condition. According to the
Company’s SEC filings:
●
On March 23, 2016,
Mr. Farley caused the Company to issue 20,000,000 shares of Common
Stock to himself at a price of $0.001 per share. Mr. Farley
subsequently gifted these shares to AnneMarieCo, LLC, which is an
entity beneficially owned by a family member of Mr.
Farley.
●
On March 30, 2016,
Mr. Farley caused the Company to issue an additional 5,000,000
shares of Common Stock to himself.
●
In 2016, Mr.
Farley, as the sole director and member of the Compensation
Committee, awarded himself annual compensation of $175,000,
consisting of a salary of $150,000 and stock awards equal to
$25,000. Because of its poor financial condition and lack of cash,
the Company only paid Mr. Farley $24,500 of his salary in 2016.
However, Mr. Farley, as the sole director, directed the Company to
accrue his salary annually and pay it when the Company has
sufficient funds, despite the Company’s lack of
operations.
●
According to the
Company’s Quarterly Report on Form 10-Q for the period ended
September 30, 2017 filed with the SEC on November 14, 2017, the
Company had accrued officer compensation of $233,000, even though
Mr. Farley is the only officer, and accrued compensation of
$245,733.
●
In late 2017, Mr.
Farley caused the Company to file with the SEC a registration
statement on Form S-1 which, among other things, registers and
offers to sell the 20,000,000 shares of Common Stock that he had
issued to himself and subsequently gifted to one of his family
members. In November 2017, the Company’s registration
statement was declared effective by the SEC.
The
combined 25,000,000 shares of Common Stock that Mr. Farley caused
the Company to issue to himself in March 2016 and which are now
held by him or controlled by his family member constituted
approximately 16.2% of the outstanding shares of Common Stock at
such time (as reported by Mr. Farley in a Schedule 13D filed with
the SEC on April 5, 2016) and constitute approximately 15.9% of the
shares of Common Stock currently outstanding (based on the
157,785,520 shares of Common Stock reported as outstanding in the
Company’s Quarterly Report on Form 10-Q filed with the SEC on
November 14, 2017).
Neither
the March 2016 share issuances, Mr. Farley’s 2016 or 2017
compensation nor the registration of Mr. Farley’s family
member’s shares of Common Stock were approved by independent
directors or by the Company’s stockholders. In fact, the
March 2016 share issuances to Mr. Farley occurred approximately one
month after the resignation of the last director whom the Company
identified as being independent, leaving Mr. Farley as the only
Board member. In addition, the share issuances were taken by the
Company while it was essentially non-operational and maintaining a
“shell company” status. Mr. Farley has not provided any
evidence to support the fairness of the process or price of the
share issuances or his compensation.
Also in
March 2016, Mr. Farley caused the Company to purportedly amend its
Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 125,000,000 to 500,000,000 (the
“2016 Amendment”). The 2016 Amendment was effected in
connection with Mr. Farley’s decision to cause the Company to
issue 25,000,000 shares of Common Stock to himself, as described
above. Under Delaware law, however, the 2016 Amendment required
stockholder approval. Mr. Farley claims that the approval was
obtained in April 2012, even though he apparently waited almost
four years to effect it.
In or
around January 2017, three of the Company’s stockholders,
including the Company’s then largest unaffiliated
stockholder, filed a lawsuit against Mr. Farley in the Court of
Chancery of the State of Delaware. The lawsuit, styled Superius Securities Group, Inc. et al. v.
George Farley, et al. (CA No. 2017-0024-VCMR), asserted that
Mr. Farley acted without proper stockholder approval to effect the
2016 Amendment and breached his fiduciary duties of loyalty,
honesty and due care by issuing shares of stock to himself and the
Company’s legal counsel at below fair market value and
failing to pursue corporate opportunities allegedly in the best
interests of the Company and its stockholders. In addition, the
plaintiffs alleged that Mr. Farley was in possession of material,
nonpublic information when he caused the Company to issue
25,000,000 shares of Common Stock to himself. On August 4, 2017,
the lawsuit was dismissed without prejudice.
Mr.
Farley has also caused the Company to engage in various financing
transactions that have been dilutive to stockholders,
including:
●
issuing convertible
notes on September 15, 2017 and October 18, 2017 in the amount of
$53,000 and $33,000, respectively, for which the Company has
reserved 36,369,879 shares of Common Stock and 18,062,397 shares of
Common Stock, respectively;
●
issuing warrants to
a note holder to purchase 1,320,598 shares of Common Stock at an
exercise price of $0.0301, which warrants are exercisable over a
seven-year period from the date of issuance; and
●
issuing a
convertible note on January 8, 2018, to borrow $105,000 at an
initial interest rate of 12% payable on August 28, 2018 (with any
amount of principal or interest on the convertible note which is
not paid when due bearing interest at the rate of 24% per annum
from the due date thereof until payment). The convertible note is
convertible into shares of Common Stock, provided that the number
of shares of Common Stock issuable on any conversion is limited to
4.99% of the Company’s then issued and outstanding Common
Stock but such limit may be increased to 9.99% of the
Company’s then issued and outstanding Common Stock upon 61
days prior notice to the Company. The Company, at the request of
the noteholder, has reserved 40,000,000 shares of its authorized
but unissued Common Stock for conversion. In connection with the
convertible note, the Company entered into a security agreement
pledging substantially all of its assets except for those related
to Laser Guided Energy as collateral. The terms of the convertible
note were described in a Current Report on Form 8-K filed by the
Company with the SEC on January 16, 2018, but the Company did not
disclose a copy of the note.
It is
unclear how the proceeds from these financing transactions have
been used, and we are concerned that they may have been used to pay
Mr. Farley’s compensation.
As
described below in the section titled “BACKGROUND OF THE
CONSENT SOLICITATION,” Mr. Farley has also refused financing
proposals that were conditioned on his resignation because of his
desire to maintain control of the Company.
BACKGROUND OF THE CONSENT SOLICITATION
Bradford T.
Adamczyk first acquired shares of Common Stock in 2009. Thomas C.
Dearmin first acquired shares of Common Stock in 2004 when the
Company acquired Ionatron, Inc., of which he was a significant
stockholder. Jonathan R. Barcklow is not a current stockholder,
having divested his shares of Common Stock in 2006. John E. Schultz
Jr. first acquired his shares of Ionatron, Inc. in 2004, which was
later acquired by the Company. 500,000 shares of Common Stock that
are held by Oak Tree Asset Management Ltd., of which Mr. Schultz
owns 99% and is President and Corporate Manager, were issued to it
by the Company as compensation for services that Mr. Schultz
rendered in the first quarter of 2017, which services consisted of
assisting the Company in raising $62,500 from third-party investors
to help the Company pay for audit and financial reporting
expenses.
In
2001, Mr. Dearmin and a colleague started the development work
which led to the founding of Ionatron, Inc. in 2002. On March 18,
2004, the Company acquired Ionatron, Inc. and appointed Mr. Dearmin
as the President, Chief Executive Officer, Chief Financial Officer
and as a director of the Company. Mr. Dearmin served as the
President, Chief Executive Officer and Chief Financial Officer of
the Company from 2004 until 2006. In August 2006, he resigned his
officer positions but served as Vice Chairman until February 18,
2007 and remained a director until May 11, 2007. From March 2004
until May 2007, Mr. Dearmin helped the Company raise approximately
$26,543,750 in funding for its operations. Around the time of Mr.
Dearmin’s departure from the Company in 2007, it had over
$30,000,000 in total assets and no long-term debt.
During
the third quarter of 2016, Mr. Dearmin and Mr. Farley had numerous
conversations about the Company’s potential and
reconstituting management and raising capital in order to turn the
Company around and increase stockholder value. During this time,
Mr. Dearmin also spoke with numerous potential investors and some
existing stockholders of the Company to assess their interest in
participating in a financing transaction. This culminated in a
financing proposal by a group of investors to attempt to restart
the Company, but the proposal was rejected by Mr.
Farley.
In
October 2016, Mr. Barcklow, Mr. Dearmin and several other potential
investors, including some existing stockholders of the Company, met
with Mr. Farley and Stephen W. McCahon, a consultant to and former
officer of the Company, in Alexandria, Virginia to discuss the
Company’s status and strategy. At this meeting, Mr. Barcklow
and Mr. Dearmin emphasized their view that the Company had
potentially valuable technology, including patents and other
intellectual property, that could be used in the defense industry
and for commercial purposes. Also at this meeting, Mr. Barcklow,
Mr. Dearmin and the investors present discussed a proposed
financing for the Company to help fund its operations. During the
discussion, Mr. Farley initially indicated that he would be willing
for Mr. Dearmin to serve as Chief Executive Officer. After several
hours, however, Mr. Farley left the meeting and indicated he was
not interested in working with Mr. Barcklow, Mr. Dearmin or the
other potential investors present at the meeting.
In
September 2017, Mr. Dearmin and Mr. Barcklow led a group of
interested investors in discussions with Mr. Farley about how to
revive the Company and build stockholder value, including through a
recapitalization and installing new management. During these
discussions, Mr. Dearmin and Mr. Barcklow informed Mr. Farley that
the interested investors’ willingness to participate in a
financing was conditioned on Mr. Farley’s resignation and a
repurchase of most of his shares of Common Stock. Mr. Farley
refused to agree to any financing unless he remained on the Board
and maintained his then-existing salary.
Between
October and December 2017, Mr. Dearmin had occasional telephone
calls with Mr. Farley to discuss the Company’s strategy, but
they could not agree on a path forward for the Company. During that
time, the Investors decided that the best path forward for the
Company was to remove Mr. Farley from his positions at the
Company.
On
January 18, 2018, Mr. Dearmin informed Mr. Farley of the charges to
remove him for cause.
Also on
January 18, 2018, Oak Tree Asset Management Ltd. and Mr. Adamczyk
sent a demand to the Company pursuant to Section 220 of the DGCL to
inspect a copy of the Company’s stockholder list to conduct
this Consent Solicitation.
On
January 23, 2018, Mr. Farley sent an email to Mr. Schultz stating
that he would not authorize the Company to provide the stockholder
list that was requested by Oak Tree Asset Management Ltd. and Mr.
Adamczyk.
On or
around January 24, Oak Tree Asset Management Ltd. and Mr. Adamczyk
sent a demand to the Company pursuant to Section 220 of the DGCL to
inspect certain books and records of the Company relating to, among
other things, the March 2016 share issuance to Mr. Farley, Mr.
Farley’s decision to set his own compensation, the
registration statement filed by the Company with the SEC to
register the 20,000,000 shares of Common Stock owned by an entity
controlled by one of Mr. Farley’s family members and the
convertible note that the Company announced in an SEC filing on
January 16, 2018, and which was entered into on January 8,
2018.
OUR PLANS FOR THE COMPANY
If our
Consent Solicitation is successful, the Nominees will constitute
the Board and will promptly remove Mr. Farley as an officer of the
Company and appoint Mr. Dearmin as the Acting Chief Executive
Officer of the Company. Mr. Dearmin, who is willing to accept that
position, has over thirty years of experience in compound
semiconductor opto-electronic technology as well as seasoned
experience serving as a chief executive officer. He also has
significant knowledge of the Company’s technology and
industry, having formed Ionatron, Inc. in June 2002, which was
acquired by the Company in 2004, and having served as the
Company’s President, Chief Executive Officer and Chief
Financial Officer from March 2004 until August 2006, as Vice
Chairman of the Company from August 2006 until February 2007 and as
a director of the Company from March 2004 until May 2007. Mr.
Dearmin has indicated that he is willing to serve as Acting Chief
Executive Officer without compensation until the Company has
improved its cash position, at which time his compensation would be
determined by the Board.
Despite
the Company’s current financial situation, we believe the
Company’s intellectual property, including ten patent
applications, that allows sole source procurement for certain
directed energy applications has potentially significant value for
stockholders. We believe a reconstituted Board and management team
can use this intellectual property to pursue government contracts
as well as explore commercial applications in areas such as medical
imaging, manufacturing 4.0, novel LED technologies and certain next
generation PV solar technology.
The
Company will likely need to undertake various financing
transactions to raise the funds necessary to help turn around the
Company’s financial condition and prospects and execute a new
strategy. As of the date of this Consent Statement, we estimate
that an initial financing of debt or equity securities of
approximately $1,500,000 will be necessary as soon as practicable
after the Nominees are elected to the Board to provide working
capital to fund the Company’s business operations and that an
additional debt or equity financing of up to $10,000,000 may be
required within 12 months after the initial financing. The timing
and amount of funding to be raised in either financing, however,
could be different depending on, among other factors, the
Company’s financial condition and market conditions. These
possible financings are estimates and based only on our review of
publicly available information about the Company’s current
financial condition and could change materially after the
conclusion of the Consent Solicitation because, for example, we may
learn after the Nominees are elected to the Board that the
financial condition of the Company is worse than we expected or
because Mr. Farley takes actions in response to the Consent
Solicitation that harm the Company or limit the Company’s
alternatives. The Company’s stockholders should also be aware
that any such financings could be structured in a variety of ways,
including registered offerings of debt or equity securities,
private placements of debt or equity securities, term loans or
other secured or unsecured debt from lenders, that we or other
stockholders may participate in any such financings, that equity
financings could be dilutive to stockholders and that the Company
may not be able to raise sufficient funds to continue its
operations.
We
intend to identify other potential candidates for the Board who
possess military, scientific or other backgrounds and experiences
that are relevant to the Company and would assist the Board in
discharging its duties. We also intend to identify a permanent
Chief Executive Officer to lead the Company. We further intend to
investigate various actions taken by Mr. Farley, including the
Company’s issuance of 25,000,000 shares of Common Stock to
him in 2016.
INFORMATION ABOUT THE NOMINEES
Name and Business Address
|
Age
|
Principal Occupation for Past Five Years and
Directorships
|
Bradford T. Adamczyk
16A
Harston
109
Repulse Bay Road
Repulse
Bay, 00000
Hong
Kong
|
48
|
Mr.
Adamczyk has over 20 years of experience in investments and
financial analysis. Currently, he is the founder and portfolio
manager of MoriahStone Investment Management, started in 2013.
MoriahStone Investment Management specializes in both public
equities and small-cap private companies. Prior to founding
MoriahStone, he was a senior securities analyst at Columbus Circle
Investors in Stamford, CT, where he focused on technology
investments, including software and the internet. Mr. Adamczyk also
worked at a New York-based investment fund, Williamson McAree
Investment Partners, covering technology, retail, energy and other
growth opportunities. Mr. Adamczyk started his financial career at
Morgan Stanley after receiving his MBA from the University of
Michigan. He received his undergraduate degree from Western
Michigan University, graduating Magna Cum Laude.
Mr.
Adamczyk’s qualifications as a director include his expertise
in finance and his experience working with other companies to
overcome near-term financial or strategic challenges.
|
Jonathan R. Barcklow
6412
Brandon Ave. #335
Springfield,
VA 22150
|
34
|
Mr.
Barcklow has over 12 years of experience in advisory and management
consulting services in federal defense and civilian agencies. He
has spent his career in consulting services with both
PriceWaterhouseCoopers and KPMG, LLP. Since 2010, Mr. Barcklow has
served as a Director in KPMG’s Federal Advisory Services
Practice and has led KPMG’s Digital Innovation Service Line
for its Federal Practice. Mr. Barcklow also serves as the account
lead for some of KPMG’s Department of Defense strategy
contracts. Over his career, Mr. Barcklow has been a consultant for
a number of federal agencies, including the Department of Veterans
Affairs, Department of Homeland Security, Federal Emergency
Management Agency, National Science Foundation, Department of the
Navy, Marine Corp, Defense Logistics Agency, Office of the
Secretary of Defense, and the Deputy Chief Management Office. His
work primarily focuses on large-scale strategic transformations,
technology and innovation, including big data, advanced analytics,
digital experience, blockchain, and Internet of Things (IoT), as
well as financial management and compliance.
Mr.
Barcklow’s qualifications as a director include his
experience in management consulting and his knowledge of the
defense industry and government contracting.
|
Thomas C. Dearmin
12
Goodyear, Suite 110
Irvine,
CA 92618
|
60
|
Mr.
Dearmin has over 30 years of experience in compound semi-conductor
opto-electronic technology. Since January 2012, Mr. Dearmin has
served as the President and Chief Executive Officer of SCS Energy
Solutions, a provider of solar energy, LED lighting and energy
storage solutions to commercial customers. Mr. Dearmin is
experienced in, among other things, novel laser and compound
semi-conductor technology, which is the foundation of various LED
and SSD technologies. He has experience in establishing and
operating compound semi-conductor manufacturing
plants.
Mr.
Dearmin’s qualifications as a director include his experience
serving as a chief or senior executive officer of technology
companies, his familiarity with the Company and its technologies
through his previous positions at the Company and Ionatron, Inc.
and his knowledge of the defense industry.
|
None of
the organizations or corporations referenced in this section with
respect to any Nominee is a parent, subsidiary or other affiliate
of Applied Energetics and none of the Nominees is or has been a
director or officer of the Company, other than Mr. Dearmin, who was
an employee, held various officer titles and was a director of the
Company between 2004 and 2007.
Because
the Common Stock was delisted from Nasdaq in 2012 and now trades on
the OTCQB, the Company is not subject to stock exchange
requirements that a majority of the Board be independent and we are
not aware of any independence standards that the Company has
adopted with respect to its directors or committee members.
However, we believe that each Nominee would qualify as an
“independent” director under Nasdaq’s listing
standards, with the exception of Mr. Dearmin if the Board appoints
him as Acting Chief Executive Officer of the Company.
None of
Mr. Adamczyk, Mr. Barcklow or Mr. Dearmin are receiving any
compensation from any person for serving as a nominee or will
receive any compensation from any person (other than the Company)
for his services as director of the Company if elected. If elected,
the Nominees will be entitled to such compensation from the Company
as may be determined by the Board; however, the Nominees do not
currently intend to pay themselves compensation for serving as
directors until the Company has improved its cash position, at
which time their compensation would be determined by the
Board.
As of
the date of this filing, Mr. Adamczyk and Mr. Dearmin beneficially
own an aggregate of 3,847,805 shares of Common Stock, constituting
approximately 2.4% of the shares of Common Stock outstanding, as
follows:
●
Bradford T.
Adamczyk: 1,235,081 total shares of Common Stock, of which (i)
671,482 shares are held directly and (ii) 563,599 shares are held
indirectly through MoriahStone Investment Management, for which Mr.
Adamczyk is the sole owner and manager; and
●
Thomas C. Dearmin:
2,612,724 total shares of Common Stock held indirectly through the
Dearmin Family Trust, for which Mr. Dearmin serves as
trustee.
Mr.
Barcklow is no longer a stockholder of the Company.
The
Nominees may be deemed to have formed a “group,” within
the meaning of Section 13(d)(3) of the Exchange Act, with respect
to their voting control over such shares of Common
Stock.
For
information regarding the Nominees and the transactions during the
past two years by the Nominees in Applied Energetics securities,
see Annex I.
Each of the Nominees
has consented to being
named as a nominee in this Consent Statement and has confirmed his
willingness to serve on the Board if elected. We do not
expect that any of the Nominees will be unable to stand for
election, but in the event that a vacancy in the slate of Nominees
should occur unexpectedly, the shares of Common Stock represented
by the WHITE consent card will be voted for a substitute
candidate selected by a majority of the Investors. We are not
required to identify or give notice to the Company of the
nomination of any substitute candidates in order to comply with the
Certificate of Incorporation or the Bylaws. If we determine to add
nominees for any reason, we will supplement this Consent Statement
to identify the new nominee, disclose whether such new nominee has
consented to being named in the supplemented Consent Statement and
include other disclosures required by federal securities
laws.
A
stockholder may consent to the election of less than all of the
Nominees by designating on the consent form the names of one or
more Nominees who are not to be elected. A stockholder may
consent to the removal of only certain existing directors by
designating the names of one or more directors who are not to be
removed; however, as of the date of this filing, there is only one
director of the Company in office.
If
Proposal 3 is approved, Mr. Adamczyk will be elected to serve a
term of three years and until his successor is duly elected and
qualified. If Proposal 4 is adopted, Mr. Barcklow will be elected
to serve a term of two years and Mr. Dearmin will be elected to
serve a term of one year and, in each case, until their respective
successors are duly elected and qualified.
If
Proposal 3 is approved, Mr. Adamczyk, acting as the sole director
at such time, intends immediately prior to election of the other
Nominees pursuant to Proposal 4 to fix the size of the Board at
three. He would then allow the stockholders, acting by this Consent
Solicitation, to fill the other two directorships pursuant to
Proposal 4. If less than all of the Nominees are elected to the
Board, then Mr. Adamczyk, acting as the sole director at such time,
intends to immediately fix the size of the Board at a number equal
to the number of Nominees that will be elected.
The
Investors have structured the election of the Nominees in the
manner described in the preceding paragraph in order to designate
the class in which each Nominee will serve on the Board and because
the Company’s Certificate of Incorporation provides that the
number of directors comprising the Board shall be such number as
may be from time to time fixed by resolution of the Board. We do
not know whether the size of the Board has been determined by the
Board even though there is only one director currently serving, so
the first Nominee who is elected will immediately fix the size of
the Board. The Investors reserve the right, in accordance with
Delaware law and the Company’s Certificate of Incorporation,
for Mr. Adamczyk, if he is elected to the Board pursuant to
Proposal 3, to use his authority as the sole member of the Board to
immediately fill the vacancies which are in effect after he fixes
the size of the Board as described above with the other Nominees,
but only if there are sufficient consents from the stockholders to
elect any such Nominee.
THE PROPOSALS
PROPOSAL 1 – REPEAL OF ADDITIONAL BYLAWS OR BYLAW
AMENDMENTS
Proposal 1 is to
adopt a resolution which would repeal each provision of the Bylaws
or amendments of the Bylaws that are in effect immediately prior to
the time this Proposal becomes effective that were not included in
the Bylaws filed by the Company with the SEC as an exhibit to its
Quarterly Report on Form 10-Q on August 9, 2007 (the last date of
reported changes to the Bylaws, as confirmed most recently in
Amendment No. 4 to the Registration Statement on Form S-1 filed by
the Company with the SEC on October 31, 2017).
The
following is the text of the proposed resolution:
“RESOLVED,
that any provision of the Amended and Restated By-Laws of Applied
Energetics, Inc. (the “Company”) in effect as of
immediately prior to the adoption of this resolution that was not
included in the Amended and Restated By-Laws of the Company filed
by the Company with the SEC as an exhibit to its Quarterly Report
on Form 10-Q on August 9, 2007 (the last date of reported changes
to the Bylaws) (other than any amendment to the Amended and
Restated By-Laws of the Company adopted by the stockholders of the
Company), be and is hereby repealed.”
This
Proposal is designed to prevent the current Board from taking
actions to amend the Bylaws in an attempt to nullify, impede or
delay the actions taken by stockholders under these Proposals or
otherwise frustrate the will of
stockholders.
If the
Board does not effect any change to the version of the Bylaws filed
by the Company with the SEC as an exhibit to its Quarterly Report
on Form 10-Q on August 9, 2007, this Proposal will have no
effect. If, however, the incumbent Board has made
changes since that date, this Proposal will restore the Bylaws to
the version that was made publicly available in such filing with
the SEC on August 9, 2007. We are not currently aware of
any specific provisions of the Bylaws that would be repealed by the
adoption of this Proposal.
WE
URGE YOU TO CONSENT TO PROPOSAL 1.
PROPOSAL 2 – REMOVAL OF DIRECTORS
Stockholders are
being asked to approve this Proposal to remove, with cause, George
P. Farley as a director and to remove any other person or persons,
other than those elected by this Consent Solicitation, elected or
appointed to the Board since October 31, 2017 (which is the last
date on which the Company confirmed the composition of the Board in
a filing with the SEC, as reported in its Amendment No. 4 to the
Registration Statement on Form S-1 filed with the SEC on October
31, 2017) and immediately prior to the effectiveness of Proposal
3. This is intended to remove all incumbent directors
and address the possibility that the current director might attempt
to add directors to the Board, including but not limited to filling
existing vacancies or newly created vacancies.
Section
141(k) of the DGCL provides that, in the case of a corporation
whose board is classified, any director or the entire board of
directors of the corporation may be removed only with cause by the
holders of a majority of the outstanding shares entitled to vote at
an election of directors. The Company’s Certificate of
Incorporation classifies the Board into three classes, although Mr.
Farley has been the sole director since February 2016.
Under
Delaware law, the right to remove directors has been found to be a
“fundamental element of stockholder authority.” Section
141(k) of the DGCL provides that in the case of a classified board
of directors (such as the Board), any director or the entire board
of directors of a Delaware corporation may be removed only for
cause. “Cause” is not explicitly defined in Section 141
of the DGCL, but Delaware courts have found “cause” to
include, among other things, “harassment and obstruction of
the corporate business,” “malfeasance in office, gross
misconduct or neglect, false or fraudulent misrepresentation
inducing the director’s appointment, willful conversion of
corporate funds, a breach of the obligation to make full
disclosure, incompetency, gross inefficiency, and moral
turpitude.” In accordance with Section 141(k), removal may
occur only with the approval of stockholders representing a
majority of the shares of Common Stock outstanding.
If
Proposal 2 is approved, it is possible that Mr. Farley will
challenge the validity of his removal for cause. If that happens, a
court would have to determine whether Mr. Farley was validly
removed. If a court determined that Mr. Farley was not validly
removed, then any actions taken by the Board consisting of the
Nominees would likely be invalid. In addition, there can be no
assurance as to how long it would take for a court to make such a
determination. The pendency of such a court proceeding could create
uncertainty with respect to the management and operations of the
Company and also discourage third parties from providing equity or
debt financing to the Company until the proceeding is finally
resolved.
The
Investors believe that, for the reasons set forth under the section
above entitled “REASONS FOR OUR SOLICITATION” and
“BACKGROUND OF THE CONSENT SOLICITATION” in this
Consent Statement, there is cause to remove Mr. Farley, including,
without limitation, his March 2016 self-dealing share issuances,
his actions setting his own compensation, his actions to register
his family member’s shares, his failure to cause the Company
to hold an annual meeting of stockholders since 2011, his refusal
to consider potential financing transactions because they were
premised on his departure from the Company and his failure to cause
the Company to elect his successor despite the fact that his
three-year term of office should have ended in 2012.
In
addition, the Investors believe there is cause to remove any other
person or persons, other than those elected by this Consent
Solicitation, elected or appointed to the Board since October 31,
2017 and immediately prior to the effectiveness of Proposal 3. This
is because we believe the Board’s election or appointment of
any such person in response to this Consent Solicitation or other
actions taken by the Investors or other stockholders to thwart the
Nominees from becoming directors would be unlawful under Delaware
law, including under cases such as MM Companies, Inc. v. Liquid Audio,
Inc., 813 A.2d 1118 (Del. 2003), and Blasius Industries, Inc. v. Atlas
Corporation, 564 A.2d 651 (Del. 1988).
In the
event that there is more than one director prior to the
effectiveness of Proposal 3, a stockholder may consent to the
removal of only certain existing directors by designating in the
consent form the names of one or more directors who are not to be
removed.
Even if
Proposal 2 is not approved, Mr. Farley’s term as director has
expired, subject to the election of his successor. He was last
elected by the stockholders as a director in 2009, so his
three-year term as director would have expired at the 2012 annual
meeting of stockholders if such a meeting had been held. His term
will therefore end once his successor is elected. As explained
below in the section entitled “PROPOSAL 3 – ELECTION OF
DIRECTORS” in this Consent Statement, we believe the election
of Mr. Adamczyk pursuant to Proposal 3 should constitute the
election of Mr. Farley’s successor and therefore end his term
as director, regardless of whether he is validly removed for cause
pursuant to Proposal 2.
WE
URGE YOU TO CONSENT TO PROPOSAL 2.
PROPOSAL 3 – ELECTION OF MR. ADAMCZYK
Proposal 3 is to
elect Mr. Adamczyk to serve a term of three years and until his
successor is duly elected and qualified. If Proposal 2 is approved,
Mr. Farley will have been removed from the Board and Mr. Adamczyk
would be elected to fill the resulting vacancy.
Mr.
Farley was last elected by the stockholders as a director in 2009,
so his three-year term as director would have expired at the 2012
annual meeting of stockholders if such a meeting had been held.
Under Delaware law and the Certificate of Incorporation, a director
continues to serve until his or her successor is elected.
Generally, under Delaware law and the Certificate of Incorporation,
any action that can be taken by the Company’s stockholders at
an annual or special meeting of stockholders can also be taken by
action by written consent. Section 211(b) of the DGCL states that
action by less-than-unanimous written consent can dispense with the
requirement of an annual meeting of stockholders at which directors
are elected but only if all of the directorships to which directors
could be elected at an annual meeting held at the effective of such
action by written consent are vacant and are filled by such action.
That will not be the case in connection with the Consent
Solicitation because all of the directorships will not be vacant
since Mr. Farley is on the Board. However, we believe Mr.
Farley’s successor can still be elected by written consent in
the context of a classified board of directors of a corporation
that has not held an annual meeting of stockholders in more than
six years, provided that such election by written consent does not
dispense with the requirement that the Company hold an annual
meeting of stockholders. Mr. Adamczyk is willing to stand for
reelection at the Company’s next annual meeting of
stockholders if required by Delaware law. As a result, the approval
of Proposal 3 should be effective to elect Mr. Adamczyk and
therefore end Mr. Farley’s term even if Proposal 2 is not
approved or Mr. Farley successfully challenged whether he was
validly removed for cause. However, if a court disagreed with this
conclusion because it decided Mr. Farley’s successor can only
be elected at an annual meeting of stockholders, then Mr.
Adamczyk’s election pursuant to Proposal 3 would only be
effective if Mr. Farley was validly removed for cause pursuant to
Proposal 2.
If
Proposal 3 is approved, Mr. Adamczyk, acting as the sole director
at such time, intends immediately prior to election of the other
Nominees pursuant to Proposal 4 to fix the size of the Board at
three. He would then allow the stockholders, acting by this Consent
Solicitation, to fill the other two directorships pursuant to
Proposal 4. If less than all of the Nominees will be elected to the
Board pursuant to Proposal 4, then Mr. Adamczyk, acting as the sole
director at such time, intends to immediately fix the size of the
Board at a number equal to the number of Nominees that will be
elected. In addition, if Mr. Adamczyk is elected to the Board, then
in accordance with Delaware law and the Certificate of
Incorporation, he may use his authority as the sole member of the
Board to immediately fill the vacancies which are in effect after
he fixes the size of the Board with the other Nominees, but only if
there are sufficient consents from the stockholders to elect any
such Nominee.
For
more information about Mr. Adamczyk, please see the section
entitled “INFORMATION ABOUT THE NOMINEES” in this
Consent Statement.
WE
URGE YOU TO CONSENT TO PROPOSAL 3.
PROPOSAL 4 – ELECTION OF MR. BARCKLOW AND MR.
DEARMIN
Proposal 4 is to
elect Mr. Barcklow to serve a term of two years and to elect Mr.
Dearmin to serve a term of one year and, in each case, until their
respective successors are duly elected and qualified. Proposal 4
will become effective immediately after Proposal 3 is adopted and
Mr. Adamczyk has fixed the size of the Board at a number equal to
the number of Nominees that will be elected.
A
stockholder may consent to the election of less than all of the
Nominees in Proposal 4 by designating on the consent form the names
of the Nominee who is not to be elected.
For
more information about Mr. Barcklow and Mr. Dearmin, please see the
section entitled “INFORMATION ABOUT THE NOMINEES” in
this Consent Statement.
WE
URGE YOU TO CONSENT TO PROPOSAL 4.
CONSENT PROCEDURES
Section
228 of the DGCL states that, unless the certificate of
incorporation of a Delaware corporation otherwise provides, any
action required to be taken at any annual or special meeting of
stockholders of that corporation, or any action that may be taken
at any annual or special meeting of those 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, is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote thereon were present and voted, and those consents
are delivered to the corporation by delivery to its registered
office in Delaware, its principal place of business or an officer
or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are
recorded. Delivery made to a corporation’s
registered office shall be by hand or by certified or registered
mail, return receipt requested.
The
Company’s Certificate of Incorporation does not limit the
power of stockholders to take any action required or permitted to
be taken at any annual or special meeting by a written consent, if
signed by the holders of Common Stock representing at least a
majority of the votes entitled to be cast on the
matter.
Each
Proposal will become effective only if properly executed and dated
consents to that Proposal are returned by holders of at least a
majority of the outstanding shares of Common Stock as of the Record
Date in accordance with Section 228 of the DGCL. The failure to
properly execute and return a consent will have the same effect as
voting against the Proposals. According to the Company’s
Quarterly Report on Form 10-Q filed with the SEC on November 14,
2017, as of November 12, 2017, there were 157,785,520 shares of
Common Stock, each entitled to one consent per share. Cumulative
voting is not permitted. On that basis, the consent of the holders
of at least 78,892,761 shares of Common Stock would be necessary to
approve each of the Proposals.
A
stockholder may consent to the election of less than all of the
Nominees by designating the names of one or more Nominees who are
not to be elected in the space provided in the consent
form.
Section
213(b) of the DGCL provides that the record date for determining
the stockholders of a Delaware corporation entitled to consent to
corporate action in writing without a meeting, when no prior action
by the corporation’s board of directors is required and the
board has not fixed a record date, will 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 by delivery to its
registered office in Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book
in which proceedings of meetings of the stockholders are recorded.
Delivery made to a corporation’s registered office shall be
by hand or by certified or registered mail, return receipt
requested. For purposes of this Consent Solicitation,
pursuant to Section 213 of the DGCL, the “Record Date”
shall be deemed to be [●] as a result of our delivery of a
signed and dated consent to the Company
on such date.
If your
shares of Common Stock are registered in your own name, please
submit your consent to us today by signing, dating and returning
the enclosed WHITE consent card via mail or overnight
delivery to Laurel Hill Advisory Group, 2 Robbins Lane, Suite 201,
Jericho, New York 11753 or via email to aeinvestors1@gmail.com.
A
telegram, cablegram or other electronic transmission consenting to
an action to be taken and transmitted by a stockholder or
proxyholder, or by a person or persons authorized to act for a
stockholder or proxyholder, shall be deemed to be written and
signed for purposes of Section 228 of the DGCL, provided that any
such telegram, cablegram or other electronic transmission sets
forth or is delivered with information from which the Company can
determine that the telegram, cablegram or other electronic
transmission was transmitted by the stockholder or proxyholder or
by a person or persons authorized to act for the stockholder or
proxyholder and the date on which such stockholder or proxyholder
or authorized person or persons transmitted such telegram,
cablegram or electronic transmission.
If you
hold your shares in “street” name with a bank, broker
firm, dealer, trust company or other nominee, only that nominee can
exercise the right to provide consent with respect to the shares of
Common Stock you beneficially own through such nominee and only
upon receipt of your specific instructions. Accordingly, it is
critical that you promptly give instructions to consent to the
Proposals to your bank, broker firm, dealer, trust company or other
nominee. Please follow the instructions to consent provided on the
enclosed WHITE consent
card. If your bank, broker firm, dealer, trust company or other
nominee provides for consent instructions to be delivered to them
by telephone or Internet, instructions will be included on the
enclosed WHITE consent
card. We urge you to confirm in writing your instructions to the
person responsible for your account and provide a copy of those
instructions to us, c/o Laurel Hill Advisory Group, 2 Robbins Lane,
Suite 201, Jericho, New York 11753, so that we will be aware of all
instructions given and can attempt to ensure that such instructions
are followed. Alternatively, you can request a “legal
proxy” from your bank, broker firm, dealer, trust company or
other nominee that allows you to consent with respect to the shares
of Common Stock of which you are the beneficial owner. If you
execute a written consent pursuant to a legal proxy, you must
provide us with a copy of the “legal proxy” when you
return the written consent to us.
Execution and
delivery of a consent by a record holder of shares of Common Stock
will be presumed to be a consent with respect to all shares held by
such record holder unless the consent specifies
otherwise. Only holders of record of shares of Common
Stock as of the close of business on the Record Date will be
entitled to consent to the Proposals. If you are a stockholder of
record as of the close of business on the Record Date, you will
retain your right to consent even if you sell your shares of Common
Stock after the Record Date.
IF
YOU TAKE NO ACTION, YOU WILL IN EFFECT BE REJECTING THE PROPOSALS.
ABSTENTIONS, WITHHELD CONSENTS AND FAILURES TO CONSENT WILL HAVE
THE SAME EFFECT AS REJECTING THE PROPOSALS.
If you
have any questions regarding the Proposals, please contact Thomas
C. Dearmin at (949) 842-2844 or aeinvestors1@gmail.com. If you
have questions regarding your WHITE consent card or need assistance
in executing your consent, please contact our proxy solicitor,
Laurel Hill Advisory Group, by mail at 2 Robbins Lane, Suite 201,
Jericho, New York 11753 or by phone at (516) 933-3100 (banks and
brokers) or (888) 742-1305 (all others).
If any
of the Proposals become effective as a result of this Consent
Solicitation, prompt notice will be given under Section 228(e) of
the DGCL to stockholders who have not consented in writing to the
Proposals and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting if the record date for
notice of such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were
delivered to the Company in accordance with Section 228 of the
DGCL. We will bear the costs of this Consent Solicitation and, if
successful, we may seek reimbursement of these costs from the
Company. The Board, which will consist of our Nominees, would be
required to evaluate the requested reimbursement consistent with
their fiduciary duties to the Company and its
stockholders. Costs related to the solicitation of
consents include expenditures for attorneys, advisors, printing,
advertising, postage and related expenses and fees.
Holders
of record of the shares of Common Stock as of the close of business
on the Record Date are entitled to consent to our Proposals. To be
effective, the requisite consents must be delivered to the Company
within 60 calendar days of the date on which the first written
consent is delivered to the Company.
An
executed consent card may be revoked at any time by marking,
dating, signing and delivering a written revocation before the time
that the action authorized by the executed consent becomes
effective. A revocation may be in any written form validly signed
by the record holder as long as it clearly states that the consent
previously given is no longer effective. The delivery of a
subsequently dated consent card that is properly completed will
constitute a revocation of any earlier consent. The revocation may
be delivered either to the Company or to us in case of Laurel Hill
Advisory Group, 2 Robbins Lane, Suite 201, Jericho, New York 11753.
Although a revocation is effective if delivered to the Company, we
request that either the original or photostatic copies of all
revocations of consents be mailed or delivered to us at the address
set forth above, so that we will be aware of all revocations and
can more accurately determine if and when consents to the Proposals
have been received from the holders of record of a majority of the
shares of Common Stock outstanding on the Record Date.
APPRAISAL/DISSENTER RIGHTS
Stockholders are
not entitled to appraisal or dissenters’ rights under
Delaware law in connection with the Proposals or this Consent
Statement.
PROCEDURAL INSTRUCTIONS
You may
consent to any of the Proposals on the enclosed WHITE consent card
by marking the “CONSENT” box and signing, dating and
returning the WHITE consent card provided. You may also withhold
your consent with respect to any of the proposals on the enclosed
WHITE consent card by marking the “WITHHOLD CONSENT”
box, and signing, dating and returning the WHITE consent card. You
may abstain from consenting to any of the proposals on the enclosed
WHITE consent card by marking the “ABSTAIN” box and
signing, dating and returning the WHITE consent card.
Your
executed consent card should be returned to us by mailing it to our
proxy solicitor, Laurel Hill Advisory Group, at 2 Robbins Lane,
Suite 201, Jericho, New York 11753 or by emailing it to us at
aeinvestors1@gmail.com. If you
hold your shares in “street” name and execute the
written consent pursuant to a “legal proxy” from your
bank, broker firm, dealer, trust company or other nominee, a copy
of the “legal proxy” should accompany the written
consent when you return it to us.
IF
A STOCKHOLDER EXECUTES AND DELIVERS A WHITE CONSENT CARD, BUT FAILS
TO CHECK A BOX MARKED “CONSENT,” “WITHHOLD
CONSENT” OR “ABSTAIN” FOR A PROPOSAL, THAT
STOCKHOLDER WILL BE DEEMED TO HAVE CONSENTED TO THAT PROPOSAL,
EXCEPT THAT THE STOCKHOLDER WILL NOT BE DEEMED TO CONSENT TO THE
ELECTION OF ANY DIRECTOR WHOSE NAME IS WRITTEN IN THE APPLICABLE
SPACE PROVIDED IN ACCORDANCE WITH THE INSTRUCTION TO PROPOSAL 4 ON
THE CONSENT CARD.
YOUR
CONSENT IS IMPORTANT. PLEASE SIGN AND DATE THE ENCLOSED WHITE
CONSENT CARD AND RETURN IT BY MAIL OR EMAIL PROMPTLY. FAILURE TO
SIGN AND RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS REJECTING
THE PROPOSALS.
If you
have questions about how to execute the consent card, you can
contact our proxy solicitor as follows:
Laurel Hill Advisory Group
2
Robbins Lane, Suite 201
Jericho,
New York 11753
Banks
and Brokers Call (516) 933-3100
All
Others Call Toll-Free (888) 742-1305
SOLICITATION OF CONSENTS
The
solicitation of consents pursuant to this Consent Solicitation is
being made by the Investors. Consents may be solicited from less
than all of the Company’s stockholders. Consents may be
solicited by mail, facsimile, telephone, telegraph, email,
Internet, in person and by advertisements.
We will
solicit proxies from individuals, brokers, banks, bank nominees and
other institutional holders. If we request banks, brokerage houses
and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of the shares of
Common Stock they hold of record, we will reimburse these record
holders for their reasonable out-of-pocket expenses in so
doing.
The
entire expense of our solicitation of consents is being borne by
the Nominees. The costs of this solicitation are currently
estimated to be approximately $150,000. We estimate that through
the date hereof the expenses in connection with this solicitation
are approximately $30,000.
We have
retained Laurel Hill Advisory Group, LLC (“Laurel
Hill”) for consent solicitation services for an initial
retainer of $10,000. Under its engagement letter, Laurel Hill will
also receive $60,0000 if our consent solicitation is successful. In
addition, if Laurel Hill is requested to make calls to or receive
calls from individual retail investors, we will pay Laurel Hill
$5.50 per call. We have agreed to reimburse Laurel Hill for its
reasonable out-of-pocket expenses and fees and, subject to certain
terms and conditions, to indemnify Laurel Hill against all claims
liabilities, claims, losses, expenses and costs arising out or
relating to the rendering of such services by Laurel Hill. It is
anticipated that approximately 15 people will be employed by Laurel
Hill in connection with the solicitation of written consents for
the Proposals.
OTHER INFORMATION
Important Notice Regarding the Availability of this Consent
Statement
This
Consent Statement and all other solicitation materials in
connection with this Consent Solicitation are available on the
Internet, free of charge, at [●]. This Consent Statement and
all other solicitation materials filed with the SEC in connection
with this Consent Solicitation are also available on the
SEC’s website, free of charge, at
http://www.sec.gov.
Security Ownership of Certain Beneficial Owners and Management of
Applied Energetics
Information
regarding security ownership of certain beneficial owners and
management of the Company is included in Annex II of this Consent
Statement.
Stockholder Proposals
Under
SEC Rule 14a-8, a stockholder can submit a proposal for inclusion
in the Company’s proxy statement in connection with a
stockholders meeting. The proposal must be received at the
Company’s principal executive offices not less than 120
calendar days before the date of the Company’s proxy
statement released to stockholders in connection with the previous
year’s annual meeting. However, SEC Rule 14a-8 provides that
if the Company did not hold an annual meeting the previous year, or
if the date of this year’s annual meeting has been changed by
more than 30 days from the date of the previous year’s
meeting, then the deadline is a reasonable time before the Company
begins to print and send its proxy materials. Because the Company
has not held an annual meeting of stockholders since 2011 and the
Investors have no knowledge of when or if the Company intends to
hold an annual meeting or send proxy materials, we are unable to
calculate the date by which a stockholder’s proposal should
be provided to the Company for inclusion in the Company’s
proxy statement.
We note
that the Bylaws require stockholders to provide notice of proposals
or nominations of persons for election as directors to be
considered at an annual or special meeting of stockholders. The
Bylaws generally provide that such notice must be received at the
principal executive offices of the Company not less than 50 days
nor more than 75 days prior to the meeting, provided that in the
event that less than 65 days’ notice or prior public
disclosure of the date of the meeting is given, notice by the
stockholder must be received by the Company not later than the
close of business on the tenth day following the earlier of the day
on which (i) such notice of the date of the meeting was mailed or
(ii) such public disclosure was made. The Investors have no
knowledge of when or if the Company intends to hold a stockholders
meeting or file a proxy statement in connection with a stockholders
meeting.
Forward-Looking Statements
This
Consent Statement contains “forward-looking statements”
(as defined in the Private Securities Litigation Reform Act of
1995). Forward-looking statements may be identified by the use of
the words “anticipate,” “expect,”
“intend,” “plan,” “should,”
“could,” “would,” “may,”
“will,” “believe,” “estimate,”
“potential” or “continue” and variations or
similar expressions. These statements are based on our current
expectations and involve risks and uncertainties, which may cause
results to differ materially from those set forth in the
statements. The forward-looking statements may include statements
regarding actions to be taken by us, including in the section above
titled “Our Plans for the Company.” You should not
place undue reliance on any such statements, and any
forward-looking statements made in this Consent Statement are
qualified in their entirety by these cautionary statements. There
can be no assurance that the actual results or developments
anticipated by the Investors will be realized or, even if
substantially realized, that they will have the expected
consequences to, or effects on, the Company or its business,
operations or financial condition. Except to the extent required by
applicable law, the Investors undertake no obligation to update
publicly or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
Information Concerning Applied Energetics
Except
as otherwise noted herein, the information in this Consent
Statement concerning the Company has been taken from or is based
upon documents and records on file with the SEC and other publicly
available information. Although we do not have any
knowledge indicating that any statement contained herein is untrue,
we do not take responsibility, except to the extent imposed by law,
for the accuracy or completeness of statements taken from public
documents and records that were not prepared by us or on our
behalf, or for any failure of the Company to disclose events that
may affect the significance or accuracy of such
information.
Conclusion
We urge
you to carefully consider the information contained in the attached
Consent Statement and then support our efforts by signing, dating
and returning the enclosed WHITE consent card today.
Thank
you for your support,
Bradford T.
Adamczyk
Jonathan R.
Barcklow
Thomas
C. Dearmin
John E.
Schultz Jr.
Oak
Tree Asset Management Ltd.
[●],
2018
ANNEX I
INFORMATION CONCERNING THE PARTICIPANTS IN THE CONSENT
SOLICITATION
Bradford T.
Adamcyzk is a United States citizen. His principal business address
is 16A Harston, 109 Repulse Bay Road, Repulse Bay, 00000, Hong
Kong.
Jonathan R.
Barcklow is a United States citizen. His principal business address
is 6412 Brandon Ave., #335, Springfield, VA 22150.
Thomas
C. Dearmin is a United States citizen. His principal business
address is 12 Goodyear, Suite 110, Irvine, CA 92618.
John E.
Schultz Jr. is a United States citizen. His principal business
address is 300 E Bonita Ave., #4092, San Dimas, CA
91773.
Oak
Tree Asset Management Ltd. is a Nevada corporation and 99% owned by
John E. Schultz Jr., who is its President and Corporate Manager.
Its principal business address is 1702 ‘A’ Street,
Suite C, Sparks, NV 89431.
Except
as set forth in the Consent Statement or this Annex I, (i) during
the past ten years, no Investor has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors);
(ii) no Investor in this Consent Solicitation directly
or indirectly beneficially owns any securities of Applied
Energetics; (iii) no Investor owns any securities of Applied
Energetics which are owned of record but not beneficially; (iv) no
Investor has purchased or sold any securities of Applied Energetics
during the past two years; (v) no part of the purchase price or
market value of the securities of Applied Energetics owned by any
Investor is represented by funds borrowed or otherwise obtained for
the purpose of acquiring or holding such securities; (vi) no
Investor is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any
securities of Applied Energetics, including, but not limited to,
joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses
or profits, or the giving or withholding of proxies; (vii) no
associate of any Investor owns beneficially, directly or
indirectly, any securities of Applied Energetics; (viii) no
Investor owns beneficially, directly or indirectly, any securities
of any parent or subsidiary of Applied Energetics; (ix) no Investor
or any of his, her or its associates was a party to any
transaction, or series of similar transactions, since the beginning
of Applied Energetics’ last fiscal year, or is a party to any
currently proposed transaction, or series of similar transactions,
to which Applied Energetics or any of its subsidiaries was or is to
be a party, in which the amount involved exceeds $120,000; (x) no
Investor or any of his, her or its associates has any arrangement
or understanding with any person with respect to any future
employment by Applied Energetics or its affiliates, or with respect
to any future transactions to which Applied Energetics or any of
its affiliates will or may be a party; and (xi) no person,
including any of the Investors, who is a party to an arrangement or
understanding pursuant to which the Nominees are proposed to be
elected has a substantial interest, direct or indirect, by security
holdings or otherwise in any matter to be acted on as set forth in
this Consent Statement. There are no
material proceedings to which any Investor or any of his, her or
its associates is a party adverse to Applied Energetics or any of
its subsidiaries or has a material interest adverse to Applied
Energetics or any of its subsidiaries. With respect to each of the
Investors, none of the events enumerated in Item 401(f)(1)-(8) of
Regulation S-K of the Exchange Act occurred during the past ten
years except as set forth in this Annex I.
In July
2006, class action lawsuits were brought in the U.S. District Court
for the District of Arizona styled Wood v. Ionatron, Inc. and Deedon v. Ionatron, Inc. (Nos. CV
06-354-TUC-CKJ and CV 06-377-TUC-CKJ) by stockholders of the
Company against the Company (then known as Ionatron, Inc.) and its
two founders, including Mr. Dearmin, for alleged violations of
federal securities laws. The plaintiffs alleged, among other
things, securities fraud under Section 10(b) of the Exchange Act
and Rule 10b-5 and control person liability under Section 20(a) of
the Exchange Act. The lawsuits were dismissed with prejudice in
September 2009 pursuant to a settlement agreement which was
approved by the U.S. District Court. Pursuant to the settlement
agreement, the defendants paid $5.3 million in cash and the Company
issued common stock valued at $1.2 million to the plaintiff class.
There was no admission of liability by any of the
defendants.
On July
23, 2017, Mr. Dearmin was charged in Dana Point, California, by the
Orange County Sheriff’s Department, arising from the
accidental discharge of a firearm, for the crimes of violation of
California Penal Code § 246.3(a) (discharge of a firearm with
gross negligence) and violation of California Penal Code §
148(a)(1) (delaying a peace officer in the performance of his
duties). Those charges are presently pending in the Orange County
Superior Court. Mr. Dearmin has pleaded not guilty to those charges
and is contesting them in the Orange County Superior
Court.
TRANSACTIONS BY THE PARTICIPANTS IN THE SECURITIES OF APPLIED
ENERGETICS DURING THE PAST TWO YEARS
This
Annex I sets forth information with respect to each purchase and
sale of shares of Common Stock that were effectuated by an
Investor, or affiliates of an Investor, during the past two
years. Unless otherwise indicated, all transactions were
effectuated in the open market through a broker.
Bradford
T. Adamczyk
Trade
Date
|
Shares
Purchased (Sold)
|
Price
Per Share ($)
|
May 24,
2016
|
(50,000)
|
$0.105
|
May 25,
2016
|
(25,000)
|
$0.09
|
May 26,
2016
|
(37,500)
|
$0.09
|
May 26,
2016
|
(30,600)
|
$0.08
|
May 27,
2016
|
(47,701)
|
$0.09
|
May 31,
2016
|
(55,000)
|
$0.0615
|
May 31,
2016
|
(50,000)
|
$0.0615
|
June 1,
2016
|
(20,400)
|
$0.0605
|
June 1,
2016
|
(100,000)
|
$0.052002
|
June 2,
2016∗
|
5,100
|
$0.057
|
June
27, 2016
|
(10,000)
|
$0.071
|
June
29, 2016
|
(10,200)
|
$0.0731
|
* This
transaction relates to shares owned directly by Mr. Adamczyk. All
other trades reflected in the chart are attributable to MoriahStone
Investment Management, for which Mr. Adamczyk is the sole owner and
manager.
Thomas
C. Dearmin
Trade
Date
|
Shares
Purchased (Sold)
|
Price
Per Share ($)
|
November
22, 2016
|
(173,200)
|
$0.03197
|
John
E. Schultz Jr.
Trade
Date
|
Shares
Purchased (Sold)
|
Price
Per Share ($)
|
January
4, 2018
|
223
|
$0.06
|
January
3, 2018
|
42,400
|
$0.0514
|
December
27, 2017
|
1,466
|
$0.0549
|
December
26, 2017
|
10,000
|
$0.0506
|
December
26, 2017
|
19,100
|
$0.049
|
December
22, 2017
|
10,000
|
$0.06
|
December
22, 2017
|
26,000
|
$0.0496
|
December
15, 2017
|
37,975
|
$0.0295
|
December
15, 2017
|
96,114
|
$0.036
|
December
15, 2017
|
66,028
|
$0.035
|
December
15, 2017*
|
3,350
|
$0.0345
|
December
14, 2017
|
2,085
|
$0.038
|
December
14, 2017
|
16,175
|
$0.036
|
December
14, 2017
|
32,230
|
$0.038
|
August
21, 2017
|
(49,000)
|
$0.041
|
August
16, 2017
|
(1,000)
|
$0.041
|
August
15, 2017
|
(40,000)
|
$0.04
|
August
15, 2017
|
(10,000)
|
$0.04026
|
August
9, 2017
|
(33,664)
|
$0.0439
|
August
9, 2017
|
(77,640)
|
$0.0418
|
August
9, 2017
|
(10,000)
|
$0.04161
|
August
9, 2017
|
(66,336)
|
$0.042
|
August
9, 2017
|
(10,073)
|
$0.04
|
August
9, 2017
|
(2,387)
|
$0.0439
|
March
7, 2017
|
12,500
|
$0.0376
|
March
1, 2017
|
7,900
|
$0.043
|
March
1, 2017
|
79,100
|
$0.0437
|
February
21, 2017
|
69,200
|
$0.036
|
February
21, 2017
|
100,000
|
$0.038
|
February
16, 2017
|
(50,000)
|
$0.04
|
February
16, 2017
|
(9,200)
|
$0.041
|
February
16, 2017
|
(10,000)
|
$0.047
|
February
14, 2017
|
(17,810)
|
$0.0439
|
February
14, 2017
|
(200,000)
|
$0.0439
|
July
29, 2016
|
(25,000)
|
$0.07
|
July
29, 2016
|
(10,000)
|
$0.071
|
July 5,
2016
|
(5,000)
|
$0.068
|
July 5,
2016
|
(4,000)
|
$0.07
|
July 1,
2016
|
(6,000)
|
$0.08
|
June
17, 2016
|
(26,000)
|
$0.07
|
June 9,
2016
|
(26,000)
|
$0.06
|
May 23,
2016
|
(11,660)
|
$0.146
|
May 23,
2016
|
(6,000)
|
$0.14509
|
May 23,
2016
|
6,000
|
$0.09561
|
May 23,
2016
|
11,660
|
$0.10
|
May 8,
2016
|
100,000
|
$0.04
|
May 3,
2016
|
10,000
|
$0.04161
|
May 3,
2016
|
101,905
|
$0.042
|
March
31, 2016
|
99,609
|
$0.0125
|
March
29, 2016
|
104,196
|
$0.011
|
March
26, 2016
|
2,100
|
$0.01
|
|
|
|
* This
transaction relates to shares held by Optima Venture Partners LLC,
for which Mr. Schultz is the 95% owner and manager.
Oak
Tree Asset Management Ltd.
Trade
Date
|
Shares
Purchased (Sold)
|
Price
Per Share ($)
|
January
4, 2018
|
42
|
$0.0595
|
September
26, 2017
|
(1,600)
|
$0.029
|
September
26, 2017
|
(8,600)
|
$0.030029
|
September
22, 2017
|
(20,000)
|
$0.0326
|
September
21, 2017
|
(10,000)
|
$0.033
|
September
21, 2017
|
(10,000)
|
$0.03365
|
September
5, 2017
|
(62,139)
|
$0.0325
|
August
31, 2017
|
(8,061)
|
$0.0301
|
August
31, 2017
|
(29,800)
|
$0.031
|
August
29, 2017
|
(36,000)
|
$0.031
|
August
29, 2017
|
(10,000)
|
$0.032
|
August
28, 2017
|
(64,000)
|
$0.037
|
August
7, 2017
|
(15,000)
|
$0.0401
|
August
2, 2017
|
(10,000)
|
$0.05
|
July
28, 2017
|
(25,000)
|
$0.066
|
July
24, 2017
|
(65,600)
|
$0.055
|
July
24, 2017
|
(21,600)
|
$0.05
|
July
24, 2017
|
(31,722)
|
$0.056
|
July
24, 2017
|
(13,874)
|
$0.067
|
July
24, 2017
|
(393)
|
$0.068
|
July
24, 2017
|
(4,011)
|
$0.062
|
July
24, 2017
|
(10,000)
|
$0.06
|
July
24, 2017
|
(13,000)
|
$0.0601
|
June
23, 2017
|
(60,000)
|
$0.0687
|
June
20, 2017
|
(66,000)
|
$0.068
|
June
20, 2017
|
(24,000)
|
$0.0651
|
June
20, 2017
|
(10,000)
|
$0.06569
|
June
13, 2017
|
(60,000)
|
$0.0702
|
April
4, 2017
|
(100,000)
|
$0.03
|
April
3, 2017
|
(60,000)
|
$0.03
|
April
3, 2017
|
(31,710)
|
$0.031
|
March
9, 2017
|
5,000
|
$0.036287
|
March
7, 2017
|
5,000
|
$0.035
|
March
1, 2017
|
(10,000)
|
$0.0523
|
March
1, 2017
|
(79,600)
|
$0.0437
|
March
1, 2017
|
(8,200)
|
$0.044
|
March
1, 2017
|
(3,300)
|
$0.045
|
March
1, 2017
|
(6,900)
|
$0.046
|
September
28, 2016
|
(36,400)
|
$0.056
|
March
28, 2016
|
110,000
|
$0.01
|
March
24, 2016
|
14,300
|
$0.007
|
March
23, 2016
|
15,000
|
$0.0075
|
March
22, 2016
|
97,100
|
$0.006
|
March
18, 2016
|
101,000
|
$0.0043
|
March
18, 2016
|
3,000
|
$0.005
|
March
15, 2016
|
191,600
|
$0.0038
|
March
10, 2016
|
75,000
|
$0.0038
|
March
4, 2016
|
79,400
|
$0.0039
|
March
3, 2016
|
30,000
|
$0.0035
|
February
24, 2016
|
113,200
|
$0.0041
|
February
8, 2016
|
10,000
|
$0.0044
|
February
8, 2016
|
138,800
|
$0.0045
|
February
8, 2016
|
50,000
|
$0.0038
|
February
8, 2016
|
30,000
|
$0.0042
|
February
8, 2016
|
40,000
|
$0.0043
|
February
8, 2016
|
120,000
|
$0.0045
|
ANNEX II
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
APPLIED ENERGETICS
The
information set forth in this Annex II is based solely upon the
Company’s publicly available registration statement on Form
S-1/A filed with the SEC on October 31, 2017.
Security Ownership of Certain Beneficial Owners and Management of
Applied Energetics
The
following table sets forth information regarding the beneficial
ownership of Common Stock, based on information provided by the
persons named below in publicly available filings, as of March 29,
2017:
●
each
of the Company’s directors and executive
officers;
●
all
directors and executive officers of the Company as a group;
and
●
each
person known by the Company to beneficially own more than five
percent of the outstanding shares of Common Stock.
Unless
otherwise indicated, the address of each beneficial owner is care
of Applied Energetics, 2480 W Ruthrauff Road, Suite 140 Q, Tucson,
Arizona 85705. Unless otherwise indicated, the Company has stated
that it believes that all persons named in the following table have
sole voting and investment power with respect to all shares of
Common Stock that they beneficially own.
For
purposes of this table, a person is deemed to be the beneficial
owner of the securities if that person has the right to acquire
such securities within 60 days of October 16, 2017, upon the
exercise of options or warrants. In determining the percentage
ownership of the persons in the table below, we assumed in each
case that the person exercised all options which are currently held
by that person and which are exercisable within such 60 day period,
but that options and warrants held by all other persons were not
exercised, and based the percentage ownership on 157,785,520 shares
outstanding on October 16, 2017.
Name of Beneficial Owner
|
Number of Shares Beneficially Owned (1)
|
Percentage of Shares Beneficially Owned (1)
|
George
P. Farley
|
5,000,000
|
(2)
|
3.2%
|
Stephen W.
McCahon
|
17,927,861
|
(3)
|
11.4%
|
AnneMarieCo,
LLC
|
20,000,000
|
(5)
|
12.7%
|
Stein
Riso Mantel McDonough, LLP
|
10,000,000
|
(5)
|
6.3%
|
Superius
Securities Group Inc. Profit Sharing Plan
|
8,535,997
|
(4)
|
5.4%
|
All
directors and executive officers as a group (1 person)
|
5,000,000
|
|
3.2%
|
(1)
Computed based
upon the total number of shares of Common Stock, restricted shares
of Common Stock and shares of common stock underlying options held
by that person that are exercisable within 60 days of the Record
Date.
(2)
Based
on information contained in a report on Schedule 13D filed with the
SEC on February 24, 2017. Mr. Farley denies beneficial ownership of
Common Stock owned by family partnerships.
(3)
Based
on information contained in a report on Schedule 13D filed with the
SEC on February 24, 2017. Based on information known by the
Company, Mr. McCahon’s address is C/O Applied Optical
Sciences, 4595 Palo Verde Rd. Suite 517, Tucson, Arizona
85714.
(4)
Based
on information contained in a report on Schedule 13G filed with the
SEC on October 29, 2009. The address of Superius Securities Group
Inc. Profit Sharing Plan is 94 Grand Ave., Englewood, NJ
07631.
(5)
Based
on information known by the Company.
[Revised Preliminary Consent Solicitation Statement – Subject
to Completion]
[FORM OF CONSENT CARD]
CONSENT OF STOCKHOLDERS OF APPLIED ENERGETICS, INC. TO ACTION
WITHOUT A MEETING:
THIS CONSENT SOLICITATION IS BEING MADE BY BRADFORD T. ADAMCZYK,
JONATHAN R. BARCKLOW, THOMAS C. DEARMIN, JOHN E. SCHULTZ JR. AND
OAK TREE ASSET MANAGEMENT LTD. (COLLECTIVELY, THE
“INVESTORS”)
Unless
otherwise indicated below, the undersigned, a stockholder of
record, or duly authorized proxy thereof, of Applied Energetics,
Inc. (the “Company”) as of [●]
(the “Record
Date”), hereby consents, pursuant to Section 228 of
the General Corporation Law of the State of Delaware with respect
to all shares of common stock of the Company, par value $0.001 per
share (the “Shares”), held by the
undersigned, to the taking of the following actions without a
meeting of the stockholders of the Company:
IF NO BOX IS MARKED FOR A PROPOSAL, THE UNDERSIGNED WILL BE DEEMED
TO CONSENT TO SUCH PROPOSAL, EXCEPT THAT THE UNDERSIGNED WILL NOT
BE DEEMED TO CONSENT TO THE ELECTION OF ANY DIRECTOR WHOSE NAME IS
WRITTEN IN THE SPACE PROVIDED.
THE INVESTORS RECOMMEND THAT YOU CONSENT TO PROPOSALS
1-4.
|
1.
|
Approval
of the following resolution: RESOLVED, that any provision of the
Amended and Restated By-Laws of Applied Energetics, Inc. (the
“Company”) in effect as of
immediately prior to the adoption of this resolution that was not
included in the Amended and Restated By-Laws of the Company filed
by the Company with the SEC as an exhibit to its Quarterly Report
on Form 10-Q on August 9, 2007 (the last date of reported changes
to the Bylaws) (other than any amendment to the Amended and
Restated By-Laws of the Company adopted by the stockholders of the
Company), be and is hereby repealed.
|
|
|
|
|
|
CONSENT
☐
|
|
WITHHOLD
CONSENT ☐
|
|
ABSTAIN
☐
|
|
2.
|
The
removal, with cause, of George P. Farley as a director and any
other person or persons, other than those elected by the
stockholders acting by this written consent, elected or appointed
to the Board of Directors of the Company since October 31, 2017 and
immediately prior to the effectiveness of this
proposal.
|
|
|
|
|
|
CONSENT
☐
|
|
WITHHOLD
CONSENT ☐
|
|
ABSTAIN
☐
|
|
3.
|
The
election of Bradford T. Adamczyk (or if any such person becomes
unable or unwilling to serve as a director of the Company prior to
the effectiveness of this proposal, any other person selected by
the Investors), to serve a term of three years (or such shorter
term as required by Delaware law) and until his successor is duly
elected and qualified.
|
|
|
|
|
|
CONSENT
☐
|
|
WITHHOLD
CONSENT ☐
|
|
ABSTAIN
☐
|
|
4.
|
The
election of Jonathan R. Barcklow, to serve a term of two years and
until his successor is duly elected, and Thomas C. Dearmin, to
serve a term of one year and until his successor is duly elected
and qualified (or if any such person becomes unable or unwilling to
serve as a director of the Company or if the size of the Board of
Directors is increased, in either case prior to the effectiveness
of this proposal, any other person selected by the Investors), with
such elections to be effective immediately after Proposal 3 has
been approved and Mr. Adamczyk has fixed the size of the Board of
Directors.
|
|
|
|
|
|
CONSENT
☐
|
|
WITHHOLD
CONSENT ☐
|
|
ABSTAIN
☐
|
Note to Proposal 4: To withhold
authority to consent to the election of one or more of the
Nominees, check the “CONSENT” box above and write the
candidate(s) name(s) for whom you wish to withhold your consent in
the following space:
___________________________________________________________________________________________
IN THE ABSENCE OF WITHHOLDING OF CONSENTS OR ABSTENTION BEING
INDICATED ABOVE, THE UNDERSIGNED HEREBY CONSENTS TO EACH ACTION
LISTED ABOVE.
|
Date:
|
|
|
|
(include
month, date and year)
|
|
|
|
|
|
|
|
Signature
|
|
|
|
|
|
|
|
|
|
|
|
Signature (if held jointly)
|
|
|
|
|
|
|
|
|
|
|
|
Title(s):
|
|
|
|
|
Please
sign exactly as name appears on stock certificates. When shares are
held by joint tenants, both should sign. In case of joint owners,
EACH joint owner should sign. If a corporation or other entity,
please sign in full corporate/entity name by an authorized officer.
When signing as attorney, executor, administrator, trustee,
guardian, corporate officer, etc., give full title as such. If you
hold your shares in “street name” and have obtained a
“legal proxy” from the record holder, please provide a
copy of the “legal proxy” with this consent
card.
THIS
SOLICITATION IS BEING MADE BY THE INVESTORS AND NOT ON BEHALF OF
THE COMPANY OR ITS BOARD OF DIRECTORS.
PLEASE
SIGN, DATE AND RETURN YOUR CONSENT PROMPTLY.