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CONFIDENTIAL OFFERING MEMORANDUM — DATED MAY 24, 2023

THIS OFFERING MEMORANDUM HAS NOT BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE NOTES ARE BEING OFFERED AND SOLD ONLY TO QUALIFIED INSTITUTIONAL BUYERS WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT. THE NOTES AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, IF ANY, HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS.

OPTIWAVE SEMICONDUCTOR CORP.

$250,000,000

2.75% Convertible Senior Notes due 2028

Optiwave Semiconductor Corp. ("OWS," the "Company," "we," "us," or "our"), a Delaware corporation, is offering $250,000,000 aggregate principal amount of its 2.75% Convertible Senior Notes due 2028 (the "Notes"). The initial purchasers have been granted an option to purchase up to an additional $37,500,000 aggregate principal amount of Notes within 13 days of the closing date solely to cover over-allotments, if any.

The Notes will bear interest at 2.75% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2023. The Notes will mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.

The Notes will be convertible at an initial conversion rate of 10.5820 shares of the Company's common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $94.50 per share. This represents an approximately 28.8% conversion premium over the reference price of $73.38 per share, which was the closing sale price of OWS common stock on the Nasdaq Global Select Market ("Nasdaq") on May 23, 2023. The Company may elect to settle conversions of the Notes in cash, shares of common stock, or a combination thereof (the "net share settlement election").

The Notes will not be redeemable at the Company's option prior to June 6, 2026. On or after June 6, 2026, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect (initially $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If a "fundamental change" (as defined herein) occurs prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Notes will be the Company's senior unsecured obligations, ranking senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively subordinated to any of the Company's secured indebtedness to the extent of the value of the collateral securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company's subsidiaries.

In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (the "Capped Call Transactions") with Ridgepoint Capital Markets LLC and Northvane Financial Products LP (collectively, the "Capped Call Counterparties"). The Capped Call Transactions are expected to reduce potential dilution to the Company's common stock upon conversion of the Notes (or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be), with an effective cap price of $110.07 per share, which represents a premium of approximately 50.0% over the reference price of $73.38 per share. See "Description of the Capped Call Transactions."

CUSIP: 683742AA5 ISIN: US683742AA53 Nasdaq Ticker for Common Stock: OWS

Investing in the Notes involves a high degree of risk. See "Risk Factors" beginning on page 29.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense.

The initial purchasers expect to deliver the Notes to purchasers in book-entry form through The Depository Trust Company ("DTC") on or about May 30, 2023.

Lead Bookrunning Manager

Ridgepoint Capital Markets LLC

Co-Managers

Harborstone Securities Inc. Velthorn Zanthor & Co.

The Notes and the shares of common stock issuable upon conversion of the Notes, if any, have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. See "Transfer Restrictions."

May 24, 2023

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NOTICE TO INVESTORS / IMPORTANT NOTICES

Available Information

The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other information with the Securities and Exchange Commission (the "SEC"). The Company's Central Index Key ("CIK") number with the SEC is 0001823467. All such filings are publicly available through the SEC's Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov.

The Notes are being offered and sold in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act and Rule 144A thereunder. No registration statement has been, or will be, filed with the SEC in connection with the offering of the Notes or the shares of common stock issuable upon conversion of the Notes. The Company does not intend to file a resale registration statement (whether on Form S-1, Form S-3, or otherwise) covering the Notes or the shares of common stock issuable upon conversion of the Notes. No registration rights are being granted in connection with this offering. Accordingly, the Notes and the shares of common stock issuable upon conversion of the Notes, if any, may be resold only in transactions that are exempt from the registration requirements of the Securities Act, including pursuant to the exemption provided by Rule 144 under the Securities Act, subject to the applicable conditions and holding period requirements thereof. See "Transfer Restrictions."

Disclaimer Regarding Forward-Looking Statements

This Offering Memorandum contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements relate to future events or the Company's future financial performance and are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "potential," "continue," "intend," or the negative of these terms and similar expressions. Forward-looking statements in this Offering Memorandum include, but are not limited to, statements regarding:

• the Company's expectations regarding revenue growth, market share, and profitability;

• the anticipated use of the net proceeds from this offering;

• industry trends, including the growth of data-center interconnect and 5G infrastructure markets;

• the Company's product development timelines and technology roadmap;

• the Company's expectations regarding its competitive position and market opportunities;

• the anticipated effects of the Capped Call Transactions;

• the Company's anticipated capital expenditure requirements and financing needs;

• the expected accounting treatment of the Notes and the Capped Call Transactions; and

• general economic, political, and market conditions and their expected impact on the Company's business and operations.

These forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company's control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under "Risk Factors" and elsewhere in this Offering Memorandum, as well as in the Company's periodic filings with the SEC that are incorporated by reference herein.

Should one or more of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

Prospective investors should note that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in connection with this offering, because the Notes are being offered pursuant to an exemption from registration under the Securities Act.

Market Data and Industry Information

Market data and industry information used throughout this Offering Memorandum have been obtained from independent industry publications, government publications, reports by market research firms, and other published independent sources. Such data includes information from Brightwater Consulting Group, Dunmore Consulting Group, Granite Harbor Management Consulting, and other third-party industry research firms. While the Company believes these sources are reliable, the Company has not independently verified any such information and makes no representation as to the accuracy or completeness of such information. Some data is also based on the Company's good faith estimates, which are derived from its review of internal surveys and independent sources. Although the Company believes its estimates are reasonable, these estimates involve inherent uncertainties, and actual results may differ materially from the Company's expectations.

Notice to Qualified Institutional Buyers

This offering is being made solely to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act. Each purchaser of the Notes offered hereby will be deemed to have represented and agreed that it is a QIB within the meaning of Rule 144A and that it is acquiring the Notes for its own account or for the account of one or more QIBs. Each purchaser will also be deemed to have acknowledged that the Notes have not been, and will not be, registered under the Securities Act and may not be offered, resold, pledged, or otherwise transferred, except in compliance with the Securities Act and other applicable laws and subject to the transfer restrictions described under "Transfer Restrictions."

No Representation by Initial Purchasers

Each of Ridgepoint Capital Markets LLC, Harborstone Securities Inc., and Velthorn Zanthor & Co. (collectively, the "Initial Purchasers") has been engaged solely as an initial purchaser in connection with this offering. The Initial Purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Offering Memorandum or in any document incorporated by reference herein. Nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation by the Initial Purchasers as to the past or the future. The Initial Purchasers assume no responsibility for the accuracy or completeness of such information. Each person receiving this Offering Memorandum acknowledges that such person has not relied on the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision, and each such person must rely on its own examination of the Company, including the merits and risks involved, in making its investment decision.

This Offering Memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, the Notes in any jurisdiction in which such offer or solicitation would be unlawful. Neither the delivery of this Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Company since the date hereof, or that the information herein is correct as of any time subsequent to the date hereof.

SUMMARY

The following summary highlights selected information contained elsewhere in this Offering Memorandum and is qualified in its entirety by the more detailed information and financial data contained herein and in the documents incorporated by reference. This summary is not complete and does not contain all of the information that you should consider before investing in the Notes. You should read this entire Offering Memorandum carefully, including the "Risk Factors" section and the financial statements and notes thereto incorporated by reference herein, before making an investment decision.

The Company

Optiwave Semiconductor Corp. is a fabless semiconductor company that designs and develops radio frequency ("RF") and photonic integrated circuits ("ICs") for data-center interconnects and fifth-generation ("5G") wireless infrastructure applications. Founded in 2017, the Company has established itself as a leading provider of high-performance, energy-efficient semiconductor solutions that enable the high-speed, low-latency connectivity required by modern data centers and next-generation wireless networks.

The Company is incorporated in the State of Delaware, with Delaware file number 5738291, and its employer identification number ("EIN") is 82-4917263. Its principal executive offices are located at 4800 Great America Parkway, Suite 1200, San Jose, California 95054. The Company's common stock is listed on the Nasdaq Global Select Market under the ticker symbol "OWS."

For the fiscal year ended December 31, 2022 ("FY2022"), the Company reported revenue of $812.4 million and Adjusted EBITDA of $198.7 million. As of March 3, 2023, the Company had an approximate market capitalization of $4.3 billion, based on approximately 58.6 million diluted shares outstanding and a closing sale price of $73.38 per share on Nasdaq.

The Company's management team is led by Marcus Harding, Chief Executive Officer; Priya Nandakumar, Chief Financial Officer; David Shih, General Counsel; and Rachel Fontaine, Treasurer. The Board of Directors is chaired by Dr. Evelyn Matsuda, an independent director.

Summary of the Offering

The following is a summary of certain terms of the Notes. This summary is qualified in its entirety by the more detailed description contained in this Offering Memorandum under "Description of the Notes."

Summary of Capped Call Transactions

Concurrently with the pricing of the Notes, the Company entered into privately negotiated Capped Call Transactions with Ridgepoint Capital Markets LLC (allocated 60% of the notional amount) and Northvane Financial Products LP (allocated 40% of the notional amount). The Capped Call Transactions are designed to reduce the potential dilutive impact upon conversion of the Notes (or, at the Company's election if net share settlement applies, to offset cash payments the Company would be required to make in excess of the principal amount of converted Notes) up to the cap price. The key terms of the Capped Call Transactions are as follows:

• Lower Strike Price (Conversion Price): Approximately $94.50 per share, equal to the initial conversion price of the Notes;

• Upper Strike Price (Cap Price): $110.07 per share, representing a premium of approximately 50.0% over the reference price of $73.38 per share;

• Expiration Date: June 1, 2028, which matches the maturity date of the Notes;

• Aggregate Premium: $28,750,000, of which $17,250,000 was paid to Ridgepoint Capital Markets LLC and $11,500,000 was paid to Northvane Financial Products LP; and

• Documentation: 2002 ISDA Master Agreements and Confirmations between the Company and each Capped Call Counterparty, each dated May 30, 2023, governed by New York law.

The effective conversion price of the Notes, taking into account the Capped Call Transactions, is approximately $110.07 per share. However, the Capped Call Transactions will not offset potential dilution or cash payments above the cap price. The Capped Call Transactions are separate from the Notes and are not part of the terms of the Notes, and holders of the Notes will have no rights with respect to the Capped Call Transactions. See "Description of the Capped Call Transactions."

Summary Use of Proceeds

The following table sets forth the estimated sources and uses of funds in connection with this offering, assuming the Initial Purchasers' over-allotment option is exercised in full:

The Company intends to use the net proceeds from this offering to fund the cost of the Capped Call Transactions (from gross proceeds of the offering), to repay $75,000,000 of outstanding borrowings under the Company's existing senior secured revolving credit facility with Crestline National Bank, N.A., and to use the remainder for general corporate purposes, including working capital, potential acquisitions, and capital expenditures. The Company has not identified any specific acquisitions that are probable or committed at this time. See "Use of Proceeds."

RISK FACTORS

An investment in the Notes involves a high degree of risk. You should carefully consider the risks described below together with all of the other information contained in this Offering Memorandum and in the documents incorporated by reference herein before making an investment decision. If any of the following risks actually occur, the Company's business, financial condition, results of operations, and prospects could be materially and adversely affected, the trading price of the Notes and the Company's common stock could decline, and you could lose all or a part of your investment. The risks described below are not the only risks the Company faces. Additional risks not presently known to the Company or that the Company currently deems immaterial may also impair the Company's business operations and financial condition.

Risks Related to the Notes

The Notes are unsecured and effectively subordinated to any existing and future secured indebtedness.

The Notes are the Company's senior unsecured obligations. As such, the Notes are effectively subordinated to all of the Company's existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. As of May 23, 2023, the Company maintained a $300,000,000 senior secured revolving credit facility (the "Revolving Credit Facility") with Crestline National Bank, N.A., as administrative agent, and Piedmont Commerce Bank and Lakeshore Federal Credit Corp. as syndicate lenders. The Revolving Credit Facility is secured by substantially all of the assets of the Company, including intellectual property, accounts receivable, inventory, equipment, and general intangibles. As of May 23, 2023, $75,000,000 was outstanding under the Revolving Credit Facility, which the Company intends to repay in full from the proceeds of this offering.

However, even after repayment of the outstanding balance, the Revolving Credit Facility will remain in place and available for future borrowings through its maturity date of August 15, 2026. If the Company were to draw upon the Revolving Credit Facility in the future and were subsequently unable to pay its debts, holders of secured indebtedness, including lenders under the Revolving Credit Facility, would be entitled to proceed against the collateral securing their indebtedness and would have priority over the holders of the Notes with respect to such collateral. In the event of a bankruptcy, liquidation, dissolution, or similar proceeding, the assets of the Company that secure the Revolving Credit Facility or any other secured indebtedness would be available to satisfy obligations under the Notes only after all secured indebtedness has been satisfied from such assets.

In addition, the Notes are structurally subordinated to all liabilities, including trade payables, of any of the Company's current and future subsidiaries, because any right of the Company to receive assets of any of its subsidiaries upon such subsidiary's liquidation or reorganization, and the consequent right of the holders of the Notes to participate in those assets, would be effectively subordinated to the claims of that subsidiary's creditors.

The conditional conversion feature may adversely affect the value of the Notes.

The Notes are convertible only upon the satisfaction of certain conditions, as described under "Description of the Notes — Conversion Rights — Conditions to Conversion." Until those conditions are satisfied, holders will not be able to convert their Notes and will not be entitled to receive any shares of common stock or cash in respect of conversion value. If the conditions to conversion are not satisfied, holders may not be able to receive the value of the consideration into which the Notes are convertible. Furthermore, the Company's election to settle conversions through net share settlement means that, even when conversion conditions are satisfied, holders may receive cash up to the principal amount and shares of common stock (if any) only for the conversion value in excess of the principal amount. There can be no assurance that the conversion value of the Notes will equal or exceed the principal amount of the Notes at any time, and holders who convert may receive less than the full value they might have expected.

An active trading market may not develop for the Notes.

The Notes are a new issue of securities for which there is no established trading market. The Notes are being offered and sold to QIBs in reliance on Rule 144A under the Securities Act, and no registration statement has been, or is expected to be, filed with the SEC with respect to the Notes or the shares of common stock issuable upon conversion of the Notes. The Company has not applied, and does not intend to apply, to list the Notes on any securities exchange or automated quotation system. The Company has not granted, and does not intend to grant, any registration rights in connection with this offering. Although the Initial Purchasers have informed the Company that they intend to make a market in the Notes, they are not obligated to do so and may discontinue any market-making activity at any time without notice. There can be no assurance that an active trading market for the Notes will develop or, if such a market does develop, that it will be maintained. If an active trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected. In that event, the trading price of the Notes may be lower than the initial offering price, and holders may not be able to sell their Notes when desired or at prices they consider acceptable.

The Company's ability to redeem the Notes may adversely affect holders.

The Notes are not redeemable prior to June 6, 2026. On or after June 6, 2026, the Company may redeem the Notes for cash if the last reported sale price of the Company's common stock has been at least 130% of the then-effective conversion price (initially $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. If the Company exercises its redemption right, holders will receive the redemption price (100% of the principal amount plus accrued and unpaid interest), but will be required to surrender their Notes and will lose the future benefit of holding the Notes, including the right to convert the Notes at a time when it may be more favorable to do so. Although holders will have the right to convert their Notes after receiving a redemption notice and prior to the redemption date, the trading price of the Company's common stock may decline after the redemption notice is given, and holders may receive less value upon conversion than they would have received had the Company not exercised its redemption right. In addition, holders whose Notes are called for redemption may find it difficult to reinvest the redemption proceeds in comparable securities offering similar conversion features, interest rates, or other terms.

Fundamental Change provisions may not protect holders in all circumstances.

If a "Fundamental Change" occurs prior to the maturity date of the Notes, holders will have the right to require the Company to repurchase their Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest. However, the definition of Fundamental Change in the Indenture may not cover all transactions that a holder might consider to be a change of control or that might otherwise adversely affect the value of the Notes. For example, certain leveraged recapitalizations, refinancings, restructurings, or other transactions that may significantly increase the Company's level of indebtedness may not constitute a Fundamental Change. In addition, certain transactions involving the acquisition of less than a specified percentage of the Company's outstanding voting stock may not constitute a Fundamental Change, even though such transactions could have a material adverse effect on the Company and the value of the Notes. Furthermore, in the event of a Fundamental Change, there can be no assurance that the Company will have sufficient funds to repurchase all Notes tendered by holders.

The conversion rate may not be adjusted for all dilutive events.

The conversion rate of the Notes is subject to adjustment in connection with certain events, including stock dividends, stock splits, rights offerings, certain distributions of assets or securities, cash dividends exceeding a specified threshold, tender or exchange offers, and other customary events described under "Description of the Notes — Conversion Rights — Anti-Dilution Adjustments." However, the conversion rate will not be adjusted for other events, such as a third-party tender offer for the Company's common stock or an issuance of common stock for cash, that may adversely affect the trading price of the Notes or the common stock. There can be no assurance that an event that adversely affects the value of the Notes will result in an adjustment to the conversion rate.

Absence of prior public market for the Notes.

The Notes are a new issue of securities with no established trading market. The Company has not applied, and does not intend to apply, for listing of the Notes on any securities exchange or automated quotation system. The Initial Purchasers have informed the Company that they intend to make a market in the Notes; however, the Initial Purchasers are under no obligation to do so and may discontinue any market-making activity at any time without notice to any person. If no active trading market develops for the Notes, holders may not be able to resell their Notes at their fair market value or at all, and the price at which holders are able to sell their Notes may be significantly less than the price paid for the Notes.

Risks Related to the Capped Call Transactions

The Capped Call Transactions may affect the trading price of the common stock.

In connection with hedging their positions under the Capped Call Transactions, the Capped Call Counterparties (Ridgepoint Capital Markets LLC and Northvane Financial Products LP) and/or their respective affiliates expect to purchase shares of the Company's common stock and/or enter into various derivative transactions with respect to the Company's common stock concurrently with, or shortly after, the pricing of the Notes. Such hedging activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the Notes at that time. In addition, the Capped Call Counterparties and/or their respective affiliates may modify their hedge positions from time to time by entering into or unwinding various derivatives and/or purchasing or selling shares of the Company's common stock or other securities in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period relating to a conversion of Notes, following any repurchase of Notes, following any early termination of any portion of the Capped Call Transactions, or near the maturity date of the Notes). Such activity could cause or avoid an increase or a decrease in the market price of the Company's common stock or the Notes, which could affect the ability of holders to convert the Notes and, to the extent the activity occurs during any observation period relating to a conversion of Notes, could affect the number of shares and value of the consideration that holders will receive upon conversion of the Notes.

The Company will not benefit from the Capped Call Transactions if the stock price exceeds the cap price.

The Capped Call Transactions have a cap price of $110.07 per share. To the extent that the market price of the Company's common stock exceeds the cap price upon conversion of the Notes or at maturity, the Capped Call Transactions will not fully offset the potential dilution to the Company's common stock or the potential cash payments the Company is required to make in excess of the principal amount of the converted Notes. The Company's stockholders will experience dilution to the extent the market price of the Company's common stock exceeds the cap price.

Risks Related to the Company's Common Stock

The price of OWS common stock may be volatile.

The market price of the Company's common stock has been, and may continue to be, volatile and subject to wide fluctuations in response to various factors, including those specific to the Company and those related to the semiconductor industry and broader market conditions. The semiconductor industry is subject to significant cyclicality, and the Company's financial performance is particularly dependent on data-center and 5G capital spending cycles, which can be influenced by macroeconomic conditions, technology adoption rates, competitive dynamics, and regulatory developments. The Company's market capitalization was approximately $4.3 billion as of March 3, 2023. Factors that may contribute to the volatility of the Company's stock price include:

• quarterly variations in the Company's operating results compared to market expectations;

• changes in financial estimates by securities analysts;

• announcements of new products, technological innovations, or competitive developments;

• changes in market valuations of similar companies;

• general market conditions, including recession or economic downturn concerns;

• semiconductor industry cyclicality and supply chain disruptions;

• geopolitical events, trade policies, and export control regulations affecting the semiconductor industry;

• volume and timing of orders received by the Company; and

• sales of the Company's common stock by significant stockholders, directors, or officers.

Stock price volatility may adversely affect the market price of the Notes and could affect the ability of holders to convert the Notes at favorable prices.

Conversion of the Notes and exercise of the Capped Call may result in dilution.

The conversion of the Notes into shares of the Company's common stock would dilute the ownership interests of existing stockholders to the extent the Company delivers shares upon conversion. The maximum number of shares issuable upon conversion of the Notes (at the initial conversion rate of 10.5820 shares per $1,000 principal amount) is 2,645,500 shares for the base offering and approximately 3,042,325 shares if the Initial Purchasers' over-allotment option is exercised in full. Based on the approximately 58.6 million diluted shares outstanding as of the reference date, the conversion of the Notes (including the over-allotment amount) would represent dilution of approximately 5.2%. Any sales in the public market of shares of common stock issuable upon conversion of the Notes could adversely affect the prevailing market prices of the Company's common stock, and the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depress the price of the Company's common stock.

Risks Related to the Company's Business

Dependence on Third-Party Foundries and Supply Chain. The Company operates a fabless business model, meaning it does not own or operate semiconductor fabrication facilities. The Company relies on third-party foundries and assembly/test subcontractors to manufacture, assemble, and test its semiconductor products. This dependence subjects the Company to risks including capacity constraints, production delays, quality control issues, and potential increases in manufacturing costs. Disruptions at the Company's primary foundries or in the broader semiconductor supply chain could materially and adversely affect the Company's ability to fulfill customer orders and could harm its business, financial condition, and results of operations.

Competition. The markets for RF and photonic ICs are intensely competitive and subject to rapid technological change. The Company competes with other semiconductor companies, some of which have greater financial, technical, manufacturing, and marketing resources than the Company. Increased competition could lead to pricing pressure, reduced gross margins, and loss of market share. The Company's ability to compete successfully depends on factors both within and outside its control, including the performance, reliability, and cost-effectiveness of its products, its ability to innovate and bring new products to market in a timely manner, and the strength of its customer relationships.

Customer Concentration. A significant portion of the Company's revenue is derived from a limited number of large customers, including hyperscale data-center operators, telecommunications original equipment manufacturers ("OEMs"), and networking equipment manufacturers. The loss of any of these key customers, or a significant reduction in orders from any of them, could have a material adverse effect on the Company's revenue and results of operations. In addition, the data-center and 5G infrastructure spending cycles are influenced by macroeconomic conditions and technology adoption rates, which can be unpredictable.

intellectual Property Risks. The Company's success depends, in part, on its ability to protect its intellectual property, including patents, trade secrets, copyrights, and trademarks. There can be no assurance that the Company's intellectual property rights will provide adequate protection against competitors or that the Company's products will not be found to infringe on the intellectual property rights of others. The Company could be subject to costly and time-consuming intellectual property litigation, which could divert management attention and resources and could result in injunctions preventing the Company from selling certain products or requiring the Company to pay significant royalties.

Regulatory and Export Compliance. The semiconductor industry is subject to extensive government regulation, including export control laws and regulations administered by the U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), and similar agencies in other countries. Changes in export control regulations or trade policies, including those related to semiconductor technology exports to certain countries, could restrict the Company's ability to sell its products in key markets, increase compliance costs, and adversely affect the Company's revenue and profitability.

General Economic and Market Conditions. The Company's business and financial performance are affected by general economic conditions, including macroeconomic trends, interest rates, inflation, currency fluctuations, and geopolitical developments. A prolonged economic downturn, a recession, or other adverse economic conditions could reduce demand for the Company's products and adversely affect its financial condition and results of operations.

Risks Related to Tax Treatment

The Notes are expected to be treated as variable rate debt instruments for U.S. federal income tax purposes. The tax treatment of the Notes, including the proper characterization of interest income, original issue discount, conversion, and disposition, is subject to various uncertainties and may be subject to differing interpretations. Furthermore, there is uncertainty regarding the proper tax treatment of the Capped Call Transactions for U.S. federal income tax purposes, including whether the Capped Call Transactions should be treated as integrated with the Notes or as separate prepaid forward contracts on the Company's common stock. The Company intends to treat the Capped Call Transactions as separate transactions from the Notes for U.S. federal income tax purposes; however, no assurance can be given that the Internal Revenue Service ("IRS") will agree with this characterization. If the IRS successfully challenges the Company's characterization, the tax treatment of the Notes and the Capped Call Transactions could be adversely affected. Holders are urged to consult their own tax advisors regarding the U.S. federal, state, local, and foreign tax consequences of acquiring, owning, converting, and disposing of the Notes. See "Material U.S. Federal Income Tax Considerations."

USE OF PROCEEDS

The following table sets forth the estimated sources and uses of funds in connection with this offering, assuming the Initial Purchasers' over-allotment option is exercised in full:

Sources:

Uses:

The Company intends to use a portion of the gross proceeds from this offering to pay the aggregate premium of $28,750,000 in respect of the Capped Call Transactions with Ridgepoint Capital Markets LLC and Northvane Financial Products LP. See "Description of the Capped Call Transactions."

The Company further intends to use $75,000,000 of the net proceeds from this offering to repay in full the outstanding balance under the Company's existing Revolving Credit Facility, described below. After giving effect to such repayment, the Company will have no outstanding borrowings under the Revolving Credit Facility, although the full $300,000,000 commitment under the facility will remain available for future borrowings through its maturity date.

The remainder of the net proceeds, estimated at $176,800,000 (assuming full exercise of the over-allotment option), will be used for general corporate purposes, which may include working capital, potential acquisitions, and capital expenditures. The Company has not identified any specific acquisitions that are probable or committed at this time. Pending the application of the net proceeds as described above, the Company expects to invest the net proceeds in short-term, investment-grade, interest-bearing securities and money market funds.

Revolving Credit Facility

The Company is party to a Credit Agreement, dated as of August 15, 2021, as amended, among the Company, as borrower, Crestline National Bank, N.A., as administrative agent, and the lenders party thereto (including Piedmont Commerce Bank and Lakeshore Federal Credit Corp.), providing for a $300,000,000 senior secured revolving credit facility. The Revolving Credit Facility matures on August 15, 2026. As of May 23, 2023, $75,000,000 was outstanding under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility bear interest at the Company's election at either (a) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.50% to 2.25% per annum or (b) the base rate plus an applicable margin ranging from 0.50% to 1.25% per annum, in each case depending on the Company's consolidated total net leverage ratio. The Revolving Credit Facility is secured by a first-priority lien on substantially all of the assets of the Company, including intellectual property, accounts receivable, inventory, equipment, and general intangibles.

In connection with this offering, the Company obtained a Limited Consent and Waiver, dated May 22, 2023 (the "Limited Consent"), from the requisite lenders under the Credit Agreement, pursuant to Section 7.01(b) of the Credit Agreement, to permit the incurrence of the Notes as "Permitted Additional Indebtedness" thereunder. The Limited Consent confirms that the issuance of the Notes, the execution and delivery of the Indenture, and the entry into the Capped Call Transactions do not result in a Default or Event of Default (each as defined in the Credit Agreement) under the Credit Agreement.

General Corporate Purposes

The Company intends to use the remaining net proceeds from this offering for general corporate purposes. General corporate purposes may include, but are not limited to, funding working capital requirements, making capital expenditures related to the expansion and enhancement of the Company's design and engineering capabilities, and pursuing strategic acquisitions or investments in businesses or technologies complementary to the Company's existing operations. The Company has not identified any specific acquisitions that are probable or committed at this time. The amounts and timing of actual expenditures in any category may vary significantly from the Company's current intentions depending on numerous factors, including those described in "Risk Factors" and the overall economic and competitive environment.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of March 31, 2023 (i) on an actual basis and (ii) on an as adjusted basis to give effect to (a) the issuance and sale of $287,500,000 aggregate principal amount of Notes (assuming full exercise of the Initial Purchasers' over-allotment option), (b) the application of the net proceeds as described under "Use of Proceeds," (c) the payment of the $28,750,000 aggregate premium for the Capped Call Transactions, and (d) the payment of the Initial Purchasers' discount and estimated offering expenses.

You should read this table in conjunction with the Company's consolidated financial statements and the related notes thereto incorporated by reference in this Offering Memorandum.

Accounting Notes:

Under Accounting Standards Codification Topic 470-20, Debt — Debt with Conversion and Other Options ("ASC 470-20"), as simplified by Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), the Notes are accounted for entirely as a liability. No portion of the proceeds from the issuance of the Notes is allocated to an equity component. The Notes will be recorded at their principal amount less issuance costs, and such issuance costs will be amortized to interest expense over the term of the Notes using the effective interest method.

The Capped Call Transactions are classified in stockholders' equity and are not subject to remeasurement as long as they continue to meet the conditions for equity classification under ASC 815-40. The $28,750,000 aggregate cost of the Capped Call Transactions has been recorded as a reduction to additional paid-in capital in the as adjusted column above.

The as adjusted cash and cash equivalents balance reflects total gross proceeds of $287,500,000, less the Initial Purchasers' discount of $5,750,000, less the Capped Call cost of $28,750,000, less estimated offering expenses of $1,200,000, less the repayment of $75,000,000 outstanding under the Revolving Credit Facility, resulting in a net increase to cash of approximately $176,800,000.

DESCRIPTION OF THE NOTES

The following description is a summary of the material provisions of the Notes and the Indenture governing the Notes. This summary does not purport to be complete and is qualified in its entirety by reference to the provisions of the Notes and the Indenture, including the definitions of certain terms used therein. Copies of the Indenture and the form of Note may be obtained upon request from the Trustee at the address set forth below. The following summary uses terms that are defined in the Indenture, and readers are referred to the Indenture for the full definition of such terms.

As used in this section, references to "Company," "OWS," "we," "us," and "our" refer solely to Optiwave Semiconductor Corp. and not to any of its subsidiaries.

General Terms

The Notes are issued under an Indenture, dated as of May 30, 2023 (the "Indenture"), between Optiwave Semiconductor Corp. and Broadmere Trust Company, N.A., as trustee (the "Trustee"). The Notes are designated as the Company's "2.75% Convertible Senior Notes due 2028."

The Notes are limited to $250,000,000 aggregate principal amount (or $287,500,000 aggregate principal amount if the Initial Purchasers exercise their over-allotment option in full). The Notes mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.

The Notes bear interest at a rate of 2.75% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2023, to holders of record at the close of business on the immediately preceding May 15 or November 15 (each, a "Regular Record Date"), as applicable. Interest on the Notes accrues from June 1, 2023, or from the most recent date to which interest has been paid or duly provided for. Interest is computed on the basis of a 360-day year consisting of twelve 30-day months. The first interest payment on December 1, 2023 will reflect interest accrued from June 1, 2023 through November 30, 2023.

The annual aggregate interest payable on the Notes, assuming the over-allotment option is exercised in full, is $7,906,250 ($287,500,000 × 2.75%).

The Notes are issued in registered form in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The Notes are issued in book-entry form and are represented by one or more global notes deposited with Broadmere Trust Company, N.A., as custodian for The Depository Trust Company (DTC Participant No. 2174), and registered in the name of Cede & Co., DTC's nominee. Beneficial interests in the global notes are shown on, and transfers thereof are effected only through, records maintained by DTC and its participants.

CUSIP: 683742AA5 ISIN: US683742AA53

Ranking

The Notes are the Company's senior unsecured obligations and rank:

• senior in right of payment to any indebtedness of the Company that is expressly subordinated in right of payment to the Notes;

• equal in right of payment with all of the Company's existing and future senior unsecured indebtedness that is not so subordinated, including any trade payables;

• effectively subordinated in right of payment to all of the Company's existing and future secured indebtedness, including borrowings under the Revolving Credit Facility, to the extent of the value of the assets securing such indebtedness; and

• structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of the Company's current or future subsidiaries.

As of May 23, 2023, and after giving effect to this offering and the application of the net proceeds as described under "Use of Proceeds," the Company would have had approximately $287,500,000 of total indebtedness (consisting solely of the Notes), of which none would have been secured indebtedness. The Company had no subsidiary indebtedness. The Revolving Credit Facility, while having no outstanding balance on an as adjusted basis, provides for up to $300,000,000 of secured borrowings, which, if drawn, would rank effectively senior to the Notes to the extent of the collateral securing the Revolving Credit Facility.

The Indenture does not limit the amount of additional indebtedness (including secured indebtedness and indebtedness of subsidiaries) that the Company or its subsidiaries may incur.

Interest

The Notes bear interest at a rate of 2.75% per annum, accruing from June 1, 2023. Interest is payable semi-annually in arrears on June 1 and December 1 of each year to holders of record at the close of business on the immediately preceding May 15 or November 15, respectively (whether or not a business day). The first interest payment will be made on December 1, 2023.

Interest on the Notes is computed on the basis of a 360-day year consisting of twelve 30-day months. If an interest payment date falls on a day that is not a business day, the interest payment will be made on the next succeeding business day, without any additional interest accruing as a result of such delay.

Conversion Rights

Conversion Rate and Conversion Price

The Notes are convertible into shares of the Company's common stock at an initial conversion rate of 10.5820 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $94.50 per share (calculated as $1,000 ÷ 10.5820). The initial conversion price represents a premium of approximately 28.8% over the reference price of $73.38 per share, which was the closing sale price of OWS common stock on Nasdaq on May 23, 2023.

The conversion rate and the corresponding conversion price are subject to adjustment under certain circumstances described below under "— Anti-Dilution Adjustments."

Conditions to Conversion

Prior to the close of business on the business day immediately preceding March 1, 2028, the Notes will be convertible only under the following circumstances:

1. Stock Price Condition. During any calendar quarter commencing after the calendar quarter ending on September 30, 2023 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (initially, $122.85 per share);

2. Trading Price Condition. During the five business day period after any 10 consecutive trading-day period (the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day;

3. Specified Corporate Events. Upon the occurrence of specified corporate events as described in the Indenture, including, but not limited to, certain distributions, recapitalizations, and business combination transactions; and

4. Notice of Redemption. If the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called for redemption.

From and after March 1, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date (June 1, 2028), holders may convert their Notes at any time, regardless of whether any of the foregoing conditions has been satisfied.

Settlement Method. The Company may elect to settle conversions of the Notes in cash, shares of common stock, or a combination of cash and shares of common stock (referred to as the "net share settlement election"). If the Company elects net share settlement, the Company will pay cash up to the aggregate principal amount of the Notes being converted and will deliver shares of common stock (if any) in respect of the remainder of its conversion obligation in excess of the aggregate principal amount being converted. The Company's election with respect to settlement method will be made by providing written notice to the Trustee and the holders on or before the relevant conversion date (or, in the case of a notice of redemption, at the time of such notice).

If the Company has not made a valid settlement election prior to the relevant conversion date, the Company will be deemed to have elected combination settlement with a specified dollar amount per $1,000 principal amount of Notes equal to $1,000.

Maximum Shares. Based on the initial conversion rate of 10.5820 shares per $1,000 principal amount:

• Base Offering: 250,000 Notes × 10.5820 shares = 2,645,500 shares

• Including Over-Allotment: 287,500 Notes × 10.5820 shares ≈ 3,042,325 shares

The foregoing share numbers do not give effect to any potential increase in the conversion rate as a result of anti-dilution adjustments or a Make-Whole Fundamental Change adjustment.

Anti-Dilution Adjustments. The conversion rate is subject to adjustment upon the occurrence of the following events:

1. the issuance of shares of common stock as a dividend or distribution to all or substantially all holders of common stock, or a subdivision, combination, or reclassification of the Company's common stock (stock split or reverse stock split);

2. the issuance to all or substantially all holders of common stock of rights, options, or warrants entitling them to subscribe for or purchase shares of common stock (or securities convertible into common stock) at a price per share less than the average of the last reported sale prices of the common stock for the 10 consecutive trading-day period ending on, and including, the trading day immediately preceding the date of announcement of such issuance;

3. the distribution to all or substantially all holders of common stock of shares of the Company's capital stock (other than common stock), evidences of indebtedness, assets, property, rights, options, or warrants (excluding dividends or distributions referred to in clause (1) or (2) above and excluding spin-offs as described in the Indenture);

4. the payment of any cash dividend or distribution to all or substantially all holders of common stock that, together with all other cash dividends and distributions paid during the 365-day period ending on the record date for such distribution, exceeds a specified threshold per share of common stock (as set forth in the Indenture);

5. the completion by the Company or any of its subsidiaries of a tender offer or exchange offer for shares of common stock where the value of the aggregate consideration paid per share exceeds the average of the last reported sale prices of the common stock for the 10 consecutive trading-day period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made; and

6. other customary anti-dilution adjustments as specified in the Indenture.

No adjustment to the conversion rate will be made if holders of the Notes participate (as a result of holding the Notes, and at the same time as common stockholders participate) in any of the transactions described above. In no event will the conversion rate exceed 14.8147 shares per $1,000 principal amount of Notes, subject to adjustment in the same manner as the conversion rate as set forth in the Indenture.

Make-Whole Fundamental Change

If a "Make-Whole Fundamental Change" (as defined in the Indenture) occurs prior to the maturity date, and a holder elects to convert its Notes in connection with such Make-Whole Fundamental Change, the Company will, under certain circumstances, increase the conversion rate for the Notes so converted by a number of additional shares of common stock (the "additional shares"), as specified in the make-whole table set forth in the Indenture and attached hereto as Annex B.

The number of additional shares, if any, by which the conversion rate will be increased will be determined by reference to the make-whole table set forth in Annex B based on the date on which the Make-Whole Fundamental Change occurs or becomes effective (the "effective date") and the "stock price" in such Make-Whole Fundamental Change. The "stock price" is the consideration paid (or deemed paid) per share of common stock in the Make-Whole Fundamental Change, or, in certain other cases, the average of the last reported sale prices of the common stock over the five trading-day period ending on, and including, the trading day immediately preceding the effective date.

A conversion of Notes will be deemed to be "in connection with" a Make-Whole Fundamental Change if the notice of conversion is received by the Conversion Agent during the period from, and including, the effective date of the Make-Whole Fundamental Change to, and including, the business day immediately prior to the related Fundamental Change repurchase date (or, if there is no related Fundamental Change repurchase date, the 35th trading day immediately following the effective date of the Make-Whole Fundamental Change).

Optional Redemption

The Notes are not redeemable at the Company's option at any time prior to June 6, 2026.

On or after June 6, 2026, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect (initially, $94.50 × 130% = $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company elects to redeem less than all of the outstanding Notes, at least $50,000,000 aggregate principal amount of Notes must be outstanding and not subject to redemption after giving effect to such partial redemption.

The Company will provide at least 30, and not more than 60, calendar days' notice of redemption to each holder of Notes to be redeemed, the Trustee, and DTC. If the Company provides notice of redemption, holders may convert their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.

Fundamental Change Put

If a "Fundamental Change" (as defined in the Indenture) occurs prior to the maturity date, each holder of the Notes will have the right to require the Company to repurchase for cash all of such holder's Notes, or any portion thereof that is equal to $1,000 or an integral multiple of $1,000 in excess thereof, on a date specified by the Company that is not less than 20, nor more than 35, business days

CONFIDENTIAL OFFERING MEMORANDUM — DATED MAY 24, 2023
THIS OFFERING MEMORANDUM HAS NOT BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE NOTES ARE BEING OFFERED AND SOLD ONLY TO QUALIFIED INSTITUTIONAL BUYERS WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT. THE NOTES AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES, IF ANY, HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS.
OPTIWAVE SEMICONDUCTOR CORP.
$250,000,000
2.75% Convertible Senior Notes due 2028
Optiwave Semiconductor Corp. ("OWS," the "Company," "we," "us," or "our"), a Delaware corporation, is offering $250,000,000 aggregate principal amount of its 2.75% Convertible Senior Notes due 2028 (the "Notes"). The initial purchasers have been granted an option to purchase up to an additional $37,500,000 aggregate principal amount of Notes within 13 days of the closing date solely to cover over-allotments, if any.
The Notes will bear interest at 2.75% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2023. The Notes will mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.
The Notes will be convertible at an initial conversion rate of 10.5820 shares of the Company's common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $94.50 per share. This represents an approximately 28.8% conversion premium over the reference price of $73.38 per share, which was the closing sale price of OWS common stock on the Nasdaq Global Select Market ("Nasdaq") on May 23, 2023. The Company may elect to settle conversions of the Notes in cash, shares of common stock, or a combination thereof (the "net share settlement election").
The Notes will not be redeemable at the Company's option prior to June 6, 2026. On or after June 6, 2026, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect (initially $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If a "fundamental change" (as defined herein) occurs prior to the maturity date, holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Notes will be the Company's senior unsecured obligations, ranking senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively subordinated to any of the Company's secured indebtedness to the extent of the value of the collateral securing such indebtedness; and structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company's subsidiaries.
In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (the "Capped Call Transactions") with Ridgepoint Capital Markets LLC and Northvane Financial Products LP (collectively, the "Capped Call Counterparties"). The Capped Call Transactions are expected to reduce potential dilution to the Company's common stock upon conversion of the Notes (or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be), with an effective cap price of $110.07 per share, which represents a premium of approximately 50.0% over the reference price of $73.38 per share. See "Description of the Capped Call Transactions."
CUSIP: 683742AA5 ISIN: US683742AA53 Nasdaq Ticker for Common Stock: OWS
Investing in the Notes involves a high degree of risk. See "Risk Factors" beginning on page 29.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offense.
The initial purchasers expect to deliver the Notes to purchasers in book-entry form through The Depository Trust Company ("DTC") on or about May 30, 2023.
Lead Bookrunning Manager
Ridgepoint Capital Markets LLC
Co-Managers
Harborstone Securities Inc.                    Velthorn Zanthor & Co.
The Notes and the shares of common stock issuable upon conversion of the Notes, if any, have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. See "Transfer Restrictions."
May 24, 2023
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NOTICE TO INVESTORS / IMPORTANT NOTICES
Available Information
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other information with the Securities and Exchange Commission (the "SEC"). The Company's Central Index Key ("CIK") number with the SEC is 0001823467. All such filings are publicly available through the SEC's Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov.
The Notes are being offered and sold in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act and Rule 144A thereunder. No registration statement has been, or will be, filed with the SEC in connection with the offering of the Notes or the shares of common stock issuable upon conversion of the Notes. The Company does not intend to file a resale registration statement (whether on Form S-1, Form S-3, or otherwise) covering the Notes or the shares of common stock issuable upon conversion of the Notes. No registration rights are being granted in connection with this offering. Accordingly, the Notes and the shares of common stock issuable upon conversion of the Notes, if any, may be resold only in transactions that are exempt from the registration requirements of the Securities Act, including pursuant to the exemption provided by Rule 144 under the Securities Act, subject to the applicable conditions and holding period requirements thereof. See "Transfer Restrictions."
Disclaimer Regarding Forward-Looking Statements
This Offering Memorandum contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements relate to future events or the Company's future financial performance and are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "potential," "continue," "intend," or the negative of these terms and similar expressions. Forward-looking statements in this Offering Memorandum include, but are not limited to, statements regarding:
•  the Company's expectations regarding revenue growth, market share, and profitability;
•  the anticipated use of the net proceeds from this offering;
•  industry trends, including the growth of data-center interconnect and 5G infrastructure markets;
•  the Company's product development timelines and technology roadmap;
•  the Company's expectations regarding its competitive position and market opportunities;
•  the anticipated effects of the Capped Call Transactions;
•  the Company's anticipated capital expenditure requirements and financing needs;
•  the expected accounting treatment of the Notes and the Capped Call Transactions; and
•  general economic, political, and market conditions and their expected impact on the Company's business and operations.
These forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company's control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under "Risk Factors" and elsewhere in this Offering Memorandum, as well as in the Company's periodic filings with the SEC that are incorporated by reference herein.
Should one or more of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.
Prospective investors should note that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in connection with this offering, because the Notes are being offered pursuant to an exemption from registration under the Securities Act.
Market Data and Industry Information
Market data and industry information used throughout this Offering Memorandum have been obtained from independent industry publications, government publications, reports by market research firms, and other published independent sources. Such data includes information from Brightwater Consulting Group, Dunmore Consulting Group, Granite Harbor Management Consulting, and other third-party industry research firms. While the Company believes these sources are reliable, the Company has not independently verified any such information and makes no representation as to the accuracy or completeness of such information. Some data is also based on the Company's good faith estimates, which are derived from its review of internal surveys and independent sources. Although the Company believes its estimates are reasonable, these estimates involve inherent uncertainties, and actual results may differ materially from the Company's expectations.
Notice to Qualified Institutional Buyers
This offering is being made solely to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act. Each purchaser of the Notes offered hereby will be deemed to have represented and agreed that it is a QIB within the meaning of Rule 144A and that it is acquiring the Notes for its own account or for the account of one or more QIBs. Each purchaser will also be deemed to have acknowledged that the Notes have not been, and will not be, registered under the Securities Act and may not be offered, resold, pledged, or otherwise transferred, except in compliance with the Securities Act and other applicable laws and subject to the transfer restrictions described under "Transfer Restrictions."
No Representation by Initial Purchasers
Each of Ridgepoint Capital Markets LLC, Harborstone Securities Inc., and Velthorn Zanthor & Co. (collectively, the "Initial Purchasers") has been engaged solely as an initial purchaser in connection with this offering. The Initial Purchasers make no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this Offering Memorandum or in any document incorporated by reference herein. Nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation by the Initial Purchasers as to the past or the future. The Initial Purchasers assume no responsibility for the accuracy or completeness of such information. Each person receiving this Offering Memorandum acknowledges that such person has not relied on the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision, and each such person must rely on its own examination of the Company, including the merits and risks involved, in making its investment decision.
This Offering Memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, the Notes in any jurisdiction in which such offer or solicitation would be unlawful. Neither the delivery of this Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Company since the date hereof, or that the information herein is correct as of any time subsequent to the date hereof.
SUMMARY
The following summary highlights selected information contained elsewhere in this Offering Memorandum and is qualified in its entirety by the more detailed information and financial data contained herein and in the documents incorporated by reference. This summary is not complete and does not contain all of the information that you should consider before investing in the Notes. You should read this entire Offering Memorandum carefully, including the "Risk Factors" section and the financial statements and notes thereto incorporated by reference herein, before making an investment decision.
The Company
Optiwave Semiconductor Corp. is a fabless semiconductor company that designs and develops radio frequency ("RF") and photonic integrated circuits ("ICs") for data-center interconnects and fifth-generation ("5G") wireless infrastructure applications. Founded in 2017, the Company has established itself as a leading provider of high-performance, energy-efficient semiconductor solutions that enable the high-speed, low-latency connectivity required by modern data centers and next-generation wireless networks.
The Company is incorporated in the State of Delaware, with Delaware file number 5738291, and its employer identification number ("EIN") is 82-4917263. Its principal executive offices are located at 4800 Great America Parkway, Suite 1200, San Jose, California 95054. The Company's common stock is listed on the Nasdaq Global Select Market under the ticker symbol "OWS."
For the fiscal year ended December 31, 2022 ("FY2022"), the Company reported revenue of $812.4 million and Adjusted EBITDA of $198.7 million. As of March 3, 2023, the Company had an approximate market capitalization of $4.3 billion, based on approximately 58.6 million diluted shares outstanding and a closing sale price of $73.38 per share on Nasdaq.
The Company's management team is led by Marcus Harding, Chief Executive Officer; Priya Nandakumar, Chief Financial Officer; David Shih, General Counsel; and Rachel Fontaine, Treasurer. The Board of Directors is chaired by Dr. Evelyn Matsuda, an independent director.
Summary of the Offering
The following is a summary of certain terms of the Notes. This summary is qualified in its entirety by the more detailed description contained in this Offering Memorandum under "Description of the Notes."
Summary of Capped Call Transactions
Concurrently with the pricing of the Notes, the Company entered into privately negotiated Capped Call Transactions with Ridgepoint Capital Markets LLC (allocated 60% of the notional amount) and Northvane Financial Products LP (allocated 40% of the notional amount). The Capped Call Transactions are designed to reduce the potential dilutive impact upon conversion of the Notes (or, at the Company's election if net share settlement applies, to offset cash payments the Company would be required to make in excess of the principal amount of converted Notes) up to the cap price. The key terms of the Capped Call Transactions are as follows:
•  Lower Strike Price (Conversion Price): Approximately $94.50 per share, equal to the initial conversion price of the Notes;
•  Upper Strike Price (Cap Price): $110.07 per share, representing a premium of approximately 50.0% over the reference price of $73.38 per share;
•  Expiration Date: June 1, 2028, which matches the maturity date of the Notes;
•  Aggregate Premium: $28,750,000, of which $17,250,000 was paid to Ridgepoint Capital Markets LLC and $11,500,000 was paid to Northvane Financial Products LP; and
•  Documentation: 2002 ISDA Master Agreements and Confirmations between the Company and each Capped Call Counterparty, each dated May 30, 2023, governed by New York law.
The effective conversion price of the Notes, taking into account the Capped Call Transactions, is approximately $110.07 per share. However, the Capped Call Transactions will not offset potential dilution or cash payments above the cap price. The Capped Call Transactions are separate from the Notes and are not part of the terms of the Notes, and holders of the Notes will have no rights with respect to the Capped Call Transactions. See "Description of the Capped Call Transactions."
Summary Use of Proceeds
The following table sets forth the estimated sources and uses of funds in connection with this offering, assuming the Initial Purchasers' over-allotment option is exercised in full:
The Company intends to use the net proceeds from this offering to fund the cost of the Capped Call Transactions (from gross proceeds of the offering), to repay $75,000,000 of outstanding borrowings under the Company's existing senior secured revolving credit facility with Crestline National Bank, N.A., and to use the remainder for general corporate purposes, including working capital, potential acquisitions, and capital expenditures. The Company has not identified any specific acquisitions that are probable or committed at this time. See "Use of Proceeds."
RISK FACTORS
An investment in the Notes involves a high degree of risk. You should carefully consider the risks described below together with all of the other information contained in this Offering Memorandum and in the documents incorporated by reference herein before making an investment decision. If any of the following risks actually occur, the Company's business, financial condition, results of operations, and prospects could be materially and adversely affected, the trading price of the Notes and the Company's common stock could decline, and you could lose all or a part of your investment. The risks described below are not the only risks the Company faces. Additional risks not presently known to the Company or that the Company currently deems immaterial may also impair the Company's business operations and financial condition.
Risks Related to the Notes
The Notes are unsecured and effectively subordinated to any existing and future secured indebtedness.
The Notes are the Company's senior unsecured obligations. As such, the Notes are effectively subordinated to all of the Company's existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. As of May 23, 2023, the Company maintained a $300,000,000 senior secured revolving credit facility (the "Revolving Credit Facility") with Crestline National Bank, N.A., as administrative agent, and Piedmont Commerce Bank and Lakeshore Federal Credit Corp. as syndicate lenders. The Revolving Credit Facility is secured by substantially all of the assets of the Company, including intellectual property, accounts receivable, inventory, equipment, and general intangibles. As of May 23, 2023, $75,000,000 was outstanding under the Revolving Credit Facility, which the Company intends to repay in full from the proceeds of this offering.
However, even after repayment of the outstanding balance, the Revolving Credit Facility will remain in place and available for future borrowings through its maturity date of August 15, 2026. If the Company were to draw upon the Revolving Credit Facility in the future and were subsequently unable to pay its debts, holders of secured indebtedness, including lenders under the Revolving Credit Facility, would be entitled to proceed against the collateral securing their indebtedness and would have priority over the holders of the Notes with respect to such collateral. In the event of a bankruptcy, liquidation, dissolution, or similar proceeding, the assets of the Company that secure the Revolving Credit Facility or any other secured indebtedness would be available to satisfy obligations under the Notes only after all secured indebtedness has been satisfied from such assets.
In addition, the Notes are structurally subordinated to all liabilities, including trade payables, of any of the Company's current and future subsidiaries, because any right of the Company to receive assets of any of its subsidiaries upon such subsidiary's liquidation or reorganization, and the consequent right of the holders of the Notes to participate in those assets, would be effectively subordinated to the claims of that subsidiary's creditors.
The conditional conversion feature may adversely affect the value of the Notes.
The Notes are convertible only upon the satisfaction of certain conditions, as described under "Description of the Notes — Conversion Rights — Conditions to Conversion." Until those conditions are satisfied, holders will not be able to convert their Notes and will not be entitled to receive any shares of common stock or cash in respect of conversion value. If the conditions to conversion are not satisfied, holders may not be able to receive the value of the consideration into which the Notes are convertible. Furthermore, the Company's election to settle conversions through net share settlement means that, even when conversion conditions are satisfied, holders may receive cash up to the principal amount and shares of common stock (if any) only for the conversion value in excess of the principal amount. There can be no assurance that the conversion value of the Notes will equal or exceed the principal amount of the Notes at any time, and holders who convert may receive less than the full value they might have expected.
An active trading market may not develop for the Notes.
The Notes are a new issue of securities for which there is no established trading market. The Notes are being offered and sold to QIBs in reliance on Rule 144A under the Securities Act, and no registration statement has been, or is expected to be, filed with the SEC with respect to the Notes or the shares of common stock issuable upon conversion of the Notes. The Company has not applied, and does not intend to apply, to list the Notes on any securities exchange or automated quotation system. The Company has not granted, and does not intend to grant, any registration rights in connection with this offering. Although the Initial Purchasers have informed the Company that they intend to make a market in the Notes, they are not obligated to do so and may discontinue any market-making activity at any time without notice. There can be no assurance that an active trading market for the Notes will develop or, if such a market does develop, that it will be maintained. If an active trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely affected. In that event, the trading price of the Notes may be lower than the initial offering price, and holders may not be able to sell their Notes when desired or at prices they consider acceptable.
The Company's ability to redeem the Notes may adversely affect holders.
The Notes are not redeemable prior to June 6, 2026. On or after June 6, 2026, the Company may redeem the Notes for cash if the last reported sale price of the Company's common stock has been at least 130% of the then-effective conversion price (initially $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. If the Company exercises its redemption right, holders will receive the redemption price (100% of the principal amount plus accrued and unpaid interest), but will be required to surrender their Notes and will lose the future benefit of holding the Notes, including the right to convert the Notes at a time when it may be more favorable to do so. Although holders will have the right to convert their Notes after receiving a redemption notice and prior to the redemption date, the trading price of the Company's common stock may decline after the redemption notice is given, and holders may receive less value upon conversion than they would have received had the Company not exercised its redemption right. In addition, holders whose Notes are called for redemption may find it difficult to reinvest the redemption proceeds in comparable securities offering similar conversion features, interest rates, or other terms.
Fundamental Change provisions may not protect holders in all circumstances.
If a "Fundamental Change" occurs prior to the maturity date of the Notes, holders will have the right to require the Company to repurchase their Notes at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest. However, the definition of Fundamental Change in the Indenture may not cover all transactions that a holder might consider to be a change of control or that might otherwise adversely affect the value of the Notes. For example, certain leveraged recapitalizations, refinancings, restructurings, or other transactions that may significantly increase the Company's level of indebtedness may not constitute a Fundamental Change. In addition, certain transactions involving the acquisition of less than a specified percentage of the Company's outstanding voting stock may not constitute a Fundamental Change, even though such transactions could have a material adverse effect on the Company and the value of the Notes. Furthermore, in the event of a Fundamental Change, there can be no assurance that the Company will have sufficient funds to repurchase all Notes tendered by holders.
The conversion rate may not be adjusted for all dilutive events.
The conversion rate of the Notes is subject to adjustment in connection with certain events, including stock dividends, stock splits, rights offerings, certain distributions of assets or securities, cash dividends exceeding a specified threshold, tender or exchange offers, and other customary events described under "Description of the Notes — Conversion Rights — Anti-Dilution Adjustments." However, the conversion rate will not be adjusted for other events, such as a third-party tender offer for the Company's common stock or an issuance of common stock for cash, that may adversely affect the trading price of the Notes or the common stock. There can be no assurance that an event that adversely affects the value of the Notes will result in an adjustment to the conversion rate.
Absence of prior public market for the Notes.
The Notes are a new issue of securities with no established trading market. The Company has not applied, and does not intend to apply, for listing of the Notes on any securities exchange or automated quotation system. The Initial Purchasers have informed the Company that they intend to make a market in the Notes; however, the Initial Purchasers are under no obligation to do so and may discontinue any market-making activity at any time without notice to any person. If no active trading market develops for the Notes, holders may not be able to resell their Notes at their fair market value or at all, and the price at which holders are able to sell their Notes may be significantly less than the price paid for the Notes.
Risks Related to the Capped Call Transactions
The Capped Call Transactions may affect the trading price of the common stock.
In connection with hedging their positions under the Capped Call Transactions, the Capped Call Counterparties (Ridgepoint Capital Markets LLC and Northvane Financial Products LP) and/or their respective affiliates expect to purchase shares of the Company's common stock and/or enter into various derivative transactions with respect to the Company's common stock concurrently with, or shortly after, the pricing of the Notes. Such hedging activity could increase (or reduce the size of any decrease in) the market price of the Company's common stock or the Notes at that time. In addition, the Capped Call Counterparties and/or their respective affiliates may modify their hedge positions from time to time by entering into or unwinding various derivatives and/or purchasing or selling shares of the Company's common stock or other securities in secondary market transactions prior to the maturity of the Notes (and are likely to do so during any observation period relating to a conversion of Notes, following any repurchase of Notes, following any early termination of any portion of the Capped Call Transactions, or near the maturity date of the Notes). Such activity could cause or avoid an increase or a decrease in the market price of the Company's common stock or the Notes, which could affect the ability of holders to convert the Notes and, to the extent the activity occurs during any observation period relating to a conversion of Notes, could affect the number of shares and value of the consideration that holders will receive upon conversion of the Notes.
The Company will not benefit from the Capped Call Transactions if the stock price exceeds the cap price.
The Capped Call Transactions have a cap price of $110.07 per share. To the extent that the market price of the Company's common stock exceeds the cap price upon conversion of the Notes or at maturity, the Capped Call Transactions will not fully offset the potential dilution to the Company's common stock or the potential cash payments the Company is required to make in excess of the principal amount of the converted Notes. The Company's stockholders will experience dilution to the extent the market price of the Company's common stock exceeds the cap price.
Risks Related to the Company's Common Stock
The price of OWS common stock may be volatile.
The market price of the Company's common stock has been, and may continue to be, volatile and subject to wide fluctuations in response to various factors, including those specific to the Company and those related to the semiconductor industry and broader market conditions. The semiconductor industry is subject to significant cyclicality, and the Company's financial performance is particularly dependent on data-center and 5G capital spending cycles, which can be influenced by macroeconomic conditions, technology adoption rates, competitive dynamics, and regulatory developments. The Company's market capitalization was approximately $4.3 billion as of March 3, 2023. Factors that may contribute to the volatility of the Company's stock price include:
•  quarterly variations in the Company's operating results compared to market expectations;
•  changes in financial estimates by securities analysts;
•  announcements of new products, technological innovations, or competitive developments;
•  changes in market valuations of similar companies;
•  general market conditions, including recession or economic downturn concerns;
•  semiconductor industry cyclicality and supply chain disruptions;
•  geopolitical events, trade policies, and export control regulations affecting the semiconductor industry;
•  volume and timing of orders received by the Company; and
•  sales of the Company's common stock by significant stockholders, directors, or officers.
Stock price volatility may adversely affect the market price of the Notes and could affect the ability of holders to convert the Notes at favorable prices.
Conversion of the Notes and exercise of the Capped Call may result in dilution.
The conversion of the Notes into shares of the Company's common stock would dilute the ownership interests of existing stockholders to the extent the Company delivers shares upon conversion. The maximum number of shares issuable upon conversion of the Notes (at the initial conversion rate of 10.5820 shares per $1,000 principal amount) is 2,645,500 shares for the base offering and approximately 3,042,325 shares if the Initial Purchasers' over-allotment option is exercised in full. Based on the approximately 58.6 million diluted shares outstanding as of the reference date, the conversion of the Notes (including the over-allotment amount) would represent dilution of approximately 5.2%. Any sales in the public market of shares of common stock issuable upon conversion of the Notes could adversely affect the prevailing market prices of the Company's common stock, and the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depress the price of the Company's common stock.
Risks Related to the Company's Business
Dependence on Third-Party Foundries and Supply Chain. The Company operates a fabless business model, meaning it does not own or operate semiconductor fabrication facilities. The Company relies on third-party foundries and assembly/test subcontractors to manufacture, assemble, and test its semiconductor products. This dependence subjects the Company to risks including capacity constraints, production delays, quality control issues, and potential increases in manufacturing costs. Disruptions at the Company's primary foundries or in the broader semiconductor supply chain could materially and adversely affect the Company's ability to fulfill customer orders and could harm its business, financial condition, and results of operations.
Competition. The markets for RF and photonic ICs are intensely competitive and subject to rapid technological change. The Company competes with other semiconductor companies, some of which have greater financial, technical, manufacturing, and marketing resources than the Company. Increased competition could lead to pricing pressure, reduced gross margins, and loss of market share. The Company's ability to compete successfully depends on factors both within and outside its control, including the performance, reliability, and cost-effectiveness of its products, its ability to innovate and bring new products to market in a timely manner, and the strength of its customer relationships.
Customer Concentration. A significant portion of the Company's revenue is derived from a limited number of large customers, including hyperscale data-center operators, telecommunications original equipment manufacturers ("OEMs"), and networking equipment manufacturers. The loss of any of these key customers, or a significant reduction in orders from any of them, could have a material adverse effect on the Company's revenue and results of operations. In addition, the data-center and 5G infrastructure spending cycles are influenced by macroeconomic conditions and technology adoption rates, which can be unpredictable.
intellectual Property Risks. The Company's success depends, in part, on its ability to protect its intellectual property, including patents, trade secrets, copyrights, and trademarks. There can be no assurance that the Company's intellectual property rights will provide adequate protection against competitors or that the Company's products will not be found to infringe on the intellectual property rights of others. The Company could be subject to costly and time-consuming intellectual property litigation, which could divert management attention and resources and could result in injunctions preventing the Company from selling certain products or requiring the Company to pay significant royalties.
Regulatory and Export Compliance. The semiconductor industry is subject to extensive government regulation, including export control laws and regulations administered by the U.S. Department of Commerce's Bureau of Industry and Security ("BIS"), the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), and similar agencies in other countries. Changes in export control regulations or trade policies, including those related to semiconductor technology exports to certain countries, could restrict the Company's ability to sell its products in key markets, increase compliance costs, and adversely affect the Company's revenue and profitability.
General Economic and Market Conditions. The Company's business and financial performance are affected by general economic conditions, including macroeconomic trends, interest rates, inflation, currency fluctuations, and geopolitical developments. A prolonged economic downturn, a recession, or other adverse economic conditions could reduce demand for the Company's products and adversely affect its financial condition and results of operations.
Risks Related to Tax Treatment
The Notes are expected to be treated as variable rate debt instruments for U.S. federal income tax purposes. The tax treatment of the Notes, including the proper characterization of interest income, original issue discount, conversion, and disposition, is subject to various uncertainties and may be subject to differing interpretations. Furthermore, there is uncertainty regarding the proper tax treatment of the Capped Call Transactions for U.S. federal income tax purposes, including whether the Capped Call Transactions should be treated as integrated with the Notes or as separate prepaid forward contracts on the Company's common stock. The Company intends to treat the Capped Call Transactions as separate transactions from the Notes for U.S. federal income tax purposes; however, no assurance can be given that the Internal Revenue Service ("IRS") will agree with this characterization. If the IRS successfully challenges the Company's characterization, the tax treatment of the Notes and the Capped Call Transactions could be adversely affected. Holders are urged to consult their own tax advisors regarding the U.S. federal, state, local, and foreign tax consequences of acquiring, owning, converting, and disposing of the Notes. See "Material U.S. Federal Income Tax Considerations."
USE OF PROCEEDS
The following table sets forth the estimated sources and uses of funds in connection with this offering, assuming the Initial Purchasers' over-allotment option is exercised in full:
Sources:
Uses:
The Company intends to use a portion of the gross proceeds from this offering to pay the aggregate premium of $28,750,000 in respect of the Capped Call Transactions with Ridgepoint Capital Markets LLC and Northvane Financial Products LP. See "Description of the Capped Call Transactions."
The Company further intends to use $75,000,000 of the net proceeds from this offering to repay in full the outstanding balance under the Company's existing Revolving Credit Facility, described below. After giving effect to such repayment, the Company will have no outstanding borrowings under the Revolving Credit Facility, although the full $300,000,000 commitment under the facility will remain available for future borrowings through its maturity date.
The remainder of the net proceeds, estimated at $176,800,000 (assuming full exercise of the over-allotment option), will be used for general corporate purposes, which may include working capital, potential acquisitions, and capital expenditures. The Company has not identified any specific acquisitions that are probable or committed at this time. Pending the application of the net proceeds as described above, the Company expects to invest the net proceeds in short-term, investment-grade, interest-bearing securities and money market funds.
Revolving Credit Facility
The Company is party to a Credit Agreement, dated as of August 15, 2021, as amended, among the Company, as borrower, Crestline National Bank, N.A., as administrative agent, and the lenders party thereto (including Piedmont Commerce Bank and Lakeshore Federal Credit Corp.), providing for a $300,000,000 senior secured revolving credit facility. The Revolving Credit Facility matures on August 15, 2026. As of May 23, 2023, $75,000,000 was outstanding under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility bear interest at the Company's election at either (a) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) plus an applicable margin ranging from 1.50% to 2.25% per annum or (b) the base rate plus an applicable margin ranging from 0.50% to 1.25% per annum, in each case depending on the Company's consolidated total net leverage ratio. The Revolving Credit Facility is secured by a first-priority lien on substantially all of the assets of the Company, including intellectual property, accounts receivable, inventory, equipment, and general intangibles.
In connection with this offering, the Company obtained a Limited Consent and Waiver, dated May 22, 2023 (the "Limited Consent"), from the requisite lenders under the Credit Agreement, pursuant to Section 7.01(b) of the Credit Agreement, to permit the incurrence of the Notes as "Permitted Additional Indebtedness" thereunder. The Limited Consent confirms that the issuance of the Notes, the execution and delivery of the Indenture, and the entry into the Capped Call Transactions do not result in a Default or Event of Default (each as defined in the Credit Agreement) under the Credit Agreement.
General Corporate Purposes
The Company intends to use the remaining net proceeds from this offering for general corporate purposes. General corporate purposes may include, but are not limited to, funding working capital requirements, making capital expenditures related to the expansion and enhancement of the Company's design and engineering capabilities, and pursuing strategic acquisitions or investments in businesses or technologies complementary to the Company's existing operations. The Company has not identified any specific acquisitions that are probable or committed at this time. The amounts and timing of actual expenditures in any category may vary significantly from the Company's current intentions depending on numerous factors, including those described in "Risk Factors" and the overall economic and competitive environment.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March 31, 2023 (i) on an actual basis and (ii) on an as adjusted basis to give effect to (a) the issuance and sale of $287,500,000 aggregate principal amount of Notes (assuming full exercise of the Initial Purchasers' over-allotment option), (b) the application of the net proceeds as described under "Use of Proceeds," (c) the payment of the $28,750,000 aggregate premium for the Capped Call Transactions, and (d) the payment of the Initial Purchasers' discount and estimated offering expenses.
You should read this table in conjunction with the Company's consolidated financial statements and the related notes thereto incorporated by reference in this Offering Memorandum.
Accounting Notes:
Under Accounting Standards Codification Topic 470-20, Debt — Debt with Conversion and Other Options ("ASC 470-20"), as simplified by Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"), the Notes are accounted for entirely as a liability. No portion of the proceeds from the issuance of the Notes is allocated to an equity component. The Notes will be recorded at their principal amount less issuance costs, and such issuance costs will be amortized to interest expense over the term of the Notes using the effective interest method.
The Capped Call Transactions are classified in stockholders' equity and are not subject to remeasurement as long as they continue to meet the conditions for equity classification under ASC 815-40. The $28,750,000 aggregate cost of the Capped Call Transactions has been recorded as a reduction to additional paid-in capital in the as adjusted column above.
The as adjusted cash and cash equivalents balance reflects total gross proceeds of $287,500,000, less the Initial Purchasers' discount of $5,750,000, less the Capped Call cost of $28,750,000, less estimated offering expenses of $1,200,000, less the repayment of $75,000,000 outstanding under the Revolving Credit Facility, resulting in a net increase to cash of approximately $176,800,000.
DESCRIPTION OF THE NOTES
The following description is a summary of the material provisions of the Notes and the Indenture governing the Notes. This summary does not purport to be complete and is qualified in its entirety by reference to the provisions of the Notes and the Indenture, including the definitions of certain terms used therein. Copies of the Indenture and the form of Note may be obtained upon request from the Trustee at the address set forth below. The following summary uses terms that are defined in the Indenture, and readers are referred to the Indenture for the full definition of such terms.
As used in this section, references to "Company," "OWS," "we," "us," and "our" refer solely to Optiwave Semiconductor Corp. and not to any of its subsidiaries.
General Terms
The Notes are issued under an Indenture, dated as of May 30, 2023 (the "Indenture"), between Optiwave Semiconductor Corp. and Broadmere Trust Company, N.A., as trustee (the "Trustee"). The Notes are designated as the Company's "2.75% Convertible Senior Notes due 2028."
The Notes are limited to $250,000,000 aggregate principal amount (or $287,500,000 aggregate principal amount if the Initial Purchasers exercise their over-allotment option in full). The Notes mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.
The Notes bear interest at a rate of 2.75% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2023, to holders of record at the close of business on the immediately preceding May 15 or November 15 (each, a "Regular Record Date"), as applicable. Interest on the Notes accrues from June 1, 2023, or from the most recent date to which interest has been paid or duly provided for. Interest is computed on the basis of a 360-day year consisting of twelve 30-day months. The first interest payment on December 1, 2023 will reflect interest accrued from June 1, 2023 through November 30, 2023.
The annual aggregate interest payable on the Notes, assuming the over-allotment option is exercised in full, is $7,906,250 ($287,500,000 × 2.75%).
The Notes are issued in registered form in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The Notes are issued in book-entry form and are represented by one or more global notes deposited with Broadmere Trust Company, N.A., as custodian for The Depository Trust Company (DTC Participant No. 2174), and registered in the name of Cede & Co., DTC's nominee. Beneficial interests in the global notes are shown on, and transfers thereof are effected only through, records maintained by DTC and its participants.
CUSIP: 683742AA5 ISIN: US683742AA53
Ranking
The Notes are the Company's senior unsecured obligations and rank:
•  senior in right of payment to any indebtedness of the Company that is expressly subordinated in right of payment to the Notes;
•  equal in right of payment with all of the Company's existing and future senior unsecured indebtedness that is not so subordinated, including any trade payables;
•  effectively subordinated in right of payment to all of the Company's existing and future secured indebtedness, including borrowings under the Revolving Credit Facility, to the extent of the value of the assets securing such indebtedness; and
•  structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of the Company's current or future subsidiaries.
As of May 23, 2023, and after giving effect to this offering and the application of the net proceeds as described under "Use of Proceeds," the Company would have had approximately $287,500,000 of total indebtedness (consisting solely of the Notes), of which none would have been secured indebtedness. The Company had no subsidiary indebtedness. The Revolving Credit Facility, while having no outstanding balance on an as adjusted basis, provides for up to $300,000,000 of secured borrowings, which, if drawn, would rank effectively senior to the Notes to the extent of the collateral securing the Revolving Credit Facility.
The Indenture does not limit the amount of additional indebtedness (including secured indebtedness and indebtedness of subsidiaries) that the Company or its subsidiaries may incur.
Interest
The Notes bear interest at a rate of 2.75% per annum, accruing from June 1, 2023. Interest is payable semi-annually in arrears on June 1 and December 1 of each year to holders of record at the close of business on the immediately preceding May 15 or November 15, respectively (whether or not a business day). The first interest payment will be made on December 1, 2023.
Interest on the Notes is computed on the basis of a 360-day year consisting of twelve 30-day months. If an interest payment date falls on a day that is not a business day, the interest payment will be made on the next succeeding business day, without any additional interest accruing as a result of such delay.
Conversion Rights
Conversion Rate and Conversion Price
The Notes are convertible into shares of the Company's common stock at an initial conversion rate of 10.5820 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $94.50 per share (calculated as $1,000 ÷ 10.5820). The initial conversion price represents a premium of approximately 28.8% over the reference price of $73.38 per share, which was the closing sale price of OWS common stock on Nasdaq on May 23, 2023.
The conversion rate and the corresponding conversion price are subject to adjustment under certain circumstances described below under "— Anti-Dilution Adjustments."
Conditions to Conversion
Prior to the close of business on the business day immediately preceding March 1, 2028, the Notes will be convertible only under the following circumstances:
1.  Stock Price Condition. During any calendar quarter commencing after the calendar quarter ending on September 30, 2023 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (initially, $122.85 per share);
2.  Trading Price Condition. During the five business day period after any 10 consecutive trading-day period (the "measurement period") in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate on each such trading day;
3.  Specified Corporate Events. Upon the occurrence of specified corporate events as described in the Indenture, including, but not limited to, certain distributions, recapitalizations, and business combination transactions; and
4.  Notice of Redemption. If the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called for redemption.
From and after March 1, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date (June 1, 2028), holders may convert their Notes at any time, regardless of whether any of the foregoing conditions has been satisfied.
Settlement Method.  The Company may elect to settle conversions of the Notes in cash, shares of common stock, or a combination of cash and shares of common stock (referred to as the "net share settlement election"). If the Company elects net share settlement, the Company will pay cash up to the aggregate principal amount of the Notes being converted and will deliver shares of common stock (if any) in respect of the remainder of its conversion obligation in excess of the aggregate principal amount being converted. The Company's election with respect to settlement method will be made by providing written notice to the Trustee and the holders on or before the relevant conversion date (or, in the case of a notice of redemption, at the time of such notice).
If the Company has not made a valid settlement election prior to the relevant conversion date, the Company will be deemed to have elected combination settlement with a specified dollar amount per $1,000 principal amount of Notes equal to $1,000.
Maximum Shares.  Based on the initial conversion rate of 10.5820 shares per $1,000 principal amount:
•  Base Offering: 250,000 Notes × 10.5820 shares = 2,645,500 shares
•  Including Over-Allotment: 287,500 Notes × 10.5820 shares ≈ 3,042,325 shares
The foregoing share numbers do not give effect to any potential increase in the conversion rate as a result of anti-dilution adjustments or a Make-Whole Fundamental Change adjustment.
Anti-Dilution Adjustments.  The conversion rate is subject to adjustment upon the occurrence of the following events:
1.  the issuance of shares of common stock as a dividend or distribution to all or substantially all holders of common stock, or a subdivision, combination, or reclassification of the Company's common stock (stock split or reverse stock split);
2.  the issuance to all or substantially all holders of common stock of rights, options, or warrants entitling them to subscribe for or purchase shares of common stock (or securities convertible into common stock) at a price per share less than the average of the last reported sale prices of the common stock for the 10 consecutive trading-day period ending on, and including, the trading day immediately preceding the date of announcement of such issuance;
3.  the distribution to all or substantially all holders of common stock of shares of the Company's capital stock (other than common stock), evidences of indebtedness, assets, property, rights, options, or warrants (excluding dividends or distributions referred to in clause (1) or (2) above and excluding spin-offs as described in the Indenture);
4.  the payment of any cash dividend or distribution to all or substantially all holders of common stock that, together with all other cash dividends and distributions paid during the 365-day period ending on the record date for such distribution, exceeds a specified threshold per share of common stock (as set forth in the Indenture);
5.  the completion by the Company or any of its subsidiaries of a tender offer or exchange offer for shares of common stock where the value of the aggregate consideration paid per share exceeds the average of the last reported sale prices of the common stock for the 10 consecutive trading-day period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made; and
6.  other customary anti-dilution adjustments as specified in the Indenture.
No adjustment to the conversion rate will be made if holders of the Notes participate (as a result of holding the Notes, and at the same time as common stockholders participate) in any of the transactions described above. In no event will the conversion rate exceed 14.8147 shares per $1,000 principal amount of Notes, subject to adjustment in the same manner as the conversion rate as set forth in the Indenture.
Make-Whole Fundamental Change
If a "Make-Whole Fundamental Change" (as defined in the Indenture) occurs prior to the maturity date, and a holder elects to convert its Notes in connection with such Make-Whole Fundamental Change, the Company will, under certain circumstances, increase the conversion rate for the Notes so converted by a number of additional shares of common stock (the "additional shares"), as specified in the make-whole table set forth in the Indenture and attached hereto as Annex B.
The number of additional shares, if any, by which the conversion rate will be increased will be determined by reference to the make-whole table set forth in Annex B based on the date on which the Make-Whole Fundamental Change occurs or becomes effective (the "effective date") and the "stock price" in such Make-Whole Fundamental Change. The "stock price" is the consideration paid (or deemed paid) per share of common stock in the Make-Whole Fundamental Change, or, in certain other cases, the average of the last reported sale prices of the common stock over the five trading-day period ending on, and including, the trading day immediately preceding the effective date.
A conversion of Notes will be deemed to be "in connection with" a Make-Whole Fundamental Change if the notice of conversion is received by the Conversion Agent during the period from, and including, the effective date of the Make-Whole Fundamental Change to, and including, the business day immediately prior to the related Fundamental Change repurchase date (or, if there is no related Fundamental Change repurchase date, the 35th trading day immediately following the effective date of the Make-Whole Fundamental Change).
Optional Redemption
The Notes are not redeemable at the Company's option at any time prior to June 6, 2026.
On or after June 6, 2026, the Company may redeem for cash all or any portion of the Notes, at its option, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect (initially, $94.50 × 130% = $122.85 per share) for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.
The redemption price will be equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company elects to redeem less than all of the outstanding Notes, at least $50,000,000 aggregate principal amount of Notes must be outstanding and not subject to redemption after giving effect to such partial redemption.
The Company will provide at least 30, and not more than 60, calendar days' notice of redemption to each holder of Notes to be redeemed, the Trustee, and DTC. If the Company provides notice of redemption, holders may convert their Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date.
Fundamental Change Put
If a "Fundamental Change" (as defined in the Indenture) occurs prior to the maturity date, each holder of the Notes will have the right to require the Company to repurchase for cash all of such holder's Notes, or any portion thereof that is equal to $1,000 or an integral multiple of $1,000 in excess thereof, on a date specified by the Company that is not less than 20, nor more than 35, business days

CONFIDENTIAL OFFERING MEMORANDUM — DATED MAY 24, 2023

OPTIWAVE SEMICONDUCTOR CORP.

NOTICE TO INVESTORS / IMPORTANT NOTICES

SUMMARY

RISK FACTORS

USE OF PROCEEDS

CAPITALIZATION

DESCRIPTION OF THE NOTES

CUSIP: 683742AA5 ISIN: US683742AA53

Record

Parties

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