PROPOSAL
3 - REVERSE STOCK SPLIT
The
Company’s Certificate of Incorporation currently authorizes the issuance of 100,000,000 shares of common stock, par value $0.0001 per share. On April 6, 2020, the Company had 32,600,118 shares of common stock issued and outstanding and 30,582,351
shares of common stock reserved pursuant to outstanding warrants, options or restricted stock units or reserved for future issuance under the Company’s equity incentive plans.
The Board
has unanimously approved an amendment to the Company’s Certificate of Incorporation to effect a reverse split of the Company’s common stock any time prior to the first anniversary of its approval by the stockholders at a ratio in the range of
1-for-5 to 1-for-30, to be determined at the discretion of the Board, whereby each outstanding 5 to 30 shares would be combined, converted and changed into 1 share of the Company’s common stock. A copy of the certificate of amendment (the “Certificate
of Amendment”) to the Certificate of Incorporation is attached hereto as Appendix A.
If the
Certificate of Amendment is approved by a majority of the Company’s stockholders, the Board will have discretion to determine, as it deems to be in the best interest of the Company’s stockholders, the specific ratio to be used within the range
described above and the timing of the reverse stock split, which must occur any time prior to the first anniversary of its approval by the stockholders. The Board believes that stockholder approval of the range of reverse stock split ratios (as
opposed to approval of a single reverse stock split ratio) provides the Board with maximum flexibility to achieve the purpose of a reverse stock split, as discussed below, and therefore is in the best interests of the Company and its stockholders.
The Board
may, in its discretion, determine not to effect the reverse stock split if it determines, subsequent to obtaining stockholder approval, that such action is not in the best interests of the Company. By voting in favor of the reverse stock split, you
are expressly authorizing the Board to determine not to proceed with, and abandon, the reverse stock split if it should so decide.
The Board
has recommended that the proposed Certificate of Amendment to effect the reverse stock split be presented to the Company’s stockholders for approval.
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Reasons for the Reverse Stock Split
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As
previously disclosed in a current report on Form 8-K filed on December 20, 2019, on December 17 , 2019, the Listing Qualifications Staff of The NASDAQ Stock Market LLC notified the Company that, based upon the closing bid price of the Company’s
common stock for the 30 prior consecutive business days, the Company no longer satisfied the minimum $1.00 closing bid price requirement, as set forth in Nasdaq Listing Rule 5550(a)(2), and had been provided a 180-day grace period to regain
compliance with that requirement, through June 15, 2020.
The Board
is asking the stockholders to grant it the authority, at its discretion, to effect a reverse stock split, which the Board believes is an effective way to increase the minimum bid price of our common stock proportionately and put us in a position to
regain compliance with Nasdaq Listing Rule 5550(a)(2).
The Board
believes that maintaining the listing of the Company’s common stock on Nasdaq is in the best interests of the Company and its stockholders. The Board believes that the delisting of the Company’s common stock from Nasdaq would impair our ability to
raise additional funds and result in lower prices and larger spreads in the bid and ask prices for the Company’s common stock, among other things. See “Certain Risk Factors Associated with the Reverse Stock Split” below for more information.
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Determination of the Reverse Stock Split Ratio
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In
determining the ratio to be used, the Board will consider various factors, including but not limited to, (i) the potential impact and anticipated benefits to the Company and its stockholders, (ii) market conditions and existing and expected market
price of the Company’s common stock at such time, (iii) the number of shares that will be outstanding after the reverse stock split, (iv) the stockholders’ equity at such time and (v) the trading volume of the Company’s common stock at such time.