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By Order of the Board of Directors,
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/s/ Oliver Wiedow
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President, Chief Executive Officer, Chief Financial
Officer and Director
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Irvine,
California
[•], 2020
IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON [•], 2020:
The proxy materials for the Special Meeting,
including the proxy statement, are available at: www.proxyvote.com
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Proteo, Inc.
PROXY STATEMENT FOR THE SPECIAL MEETING
OF STOCKHOLDERS
To Be Held [•], 2020
TABLE OF CONTENTS
[PRELIMINARY COPY—SUBJECT TO COMPLETION]
PROTEO, INC.
2102 Business Center Drive
Irvine, California 92612
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
To Be Held [•], 2020
GENERAL
INFORMATION
This proxy statement is being furnished
to stockholders in connection with the solicitation by the Board of Directors (the “Board”) of Proteo, Inc., a Nevada
corporation (the “Company,” “we,” “us” or “our”), of proxies for use at the Special
Meeting of Stockholders to be held on [•], 2020 at [9:00 a.m.] Pacific Time, or any adjournment thereof (the “Special
Meeting”) for the following purposes:
1. To consider
and vote upon a proposal to amend the Company’s Articles of Incorporation to effect a reverse split of the common stock,
par value $0.001 per share, of the Company (the “Common Stock”) in a ratio of 1-for-2,000 (the “Reverse Stock
Split”), which would result in (i) holdings prior to such split of fewer than 2,000 shares of Common Stock being converted
into a fractional share, which will then be immediately cancelled and converted into a right to receive the cash consideration
described in this proxy statement, and (ii) the Company having fewer than 500 stockholders of record, allowing the Company to deregister
its Common Stock under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and avoid the costs associated
with being a public reporting company (the “Reverse Stock Split Proposal” or “Proposal 1”).
2. To approve
the adjournment of the Special Meeting, if necessary, to solicit additional proxies in the event that there are not sufficient
votes at the time of the Special Meeting to approve the foregoing proposal (“Adjournment of Special Meeting Proposal”
or “Proposal 2”).
Due to the emerging public health impact
of the coronavirus outbreak (COVID-19) and to support the health and well-being of our employees and shareholders, the Special
Meeting will be held in a virtual meeting format only. You will not be able to attend the Special Meeting physically. You will
be able to attend the Special Meeting virtually and to vote and submit questions during the virtual Special Meeting by visiting
www.[•] and entering the 16-digit control number provided in your proxy materials. Using this control number, you will
be able to listen to the meeting live, submit questions and vote online. The Company encourages you to access the Special Meeting
before the start time of [9:00 a.m.] Pacific Time on [•], 2020. Please allow ample time for online check-in, which will begin
at [8:45] a.m., Pacific Time on [•], 2020. The Company’s management will be available to answer any questions you may
have immediately after the Special Meeting.
It is important that your shares be represented
at the virtual Special Meeting. You may vote during the Special Meeting by following the instructions available on the meeting
website during the meeting. We hope you will participate in the Special Meeting. However, even if you anticipate attending the
virtual meeting, we urge you to please vote your proxy either by mail, telephone or over the Internet in advance of the Special
Meeting to ensure that your shares will be represented.
The Board has fixed the close of business
on May 11, 2020 as the record date (the “Record Date”) for the determination of the stockholders entitled to notice
of, and to vote at, the Special Meeting and any postponement or adjournment thereof.
We are furnishing our proxy materials for
the Special Meeting, including the Notice of Special Meeting of Stockholders, this proxy statement and the proxy card, to our stockholders
over the Internet in accordance with the U.S. Securities and Exchange Commission (“SEC”) rules in lieu of mailing printed
copies. We believe that these rules allow us to provide our stockholders with the information they need, while lowering the
costs of delivery and reducing the environmental impact of the Special Meeting. As a result, our stockholders of record as of the
Record Date will receive in the mail a “Notice of Internet Availability of Proxy Materials” (the “Notice”)
with instructions on how to access and review the proxy materials on the Internet, how to authorize a proxy through the Internet
or through the mail, as well as how to request printed copies of the proxy materials. We will begin mailing the Notice to stockholders
on or about [•], 2020.
SUMMARY
OF TERMS OF REVERSE STOCK SPLIT
The following
summary term sheet, together with the section titled “Questions and Answers About the Reverse Stock Split and the Special
Meeting” that follows, highlights certain information about the proposed Reverse Stock Split, but may not contain all of
the information that is important to you. For a more complete description of the Reverse Stock Split, we urge you to carefully
read this proxy statement and all of its appendices before you vote.
Reverse Stock Split
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The Board has unanimously approved the
Reverse Stock Split in order to reduce the Company’s number of stockholders of record to fewer than 500 holders. If approved
at the Special Meeting, stockholders who own fewer than 2,000 shares of Common Stock on the Effective Date (as defined below) will
no longer be stockholders of the Company (“Cashed-Out Stockholders”). Stockholders holding 2,000 shares or more on
the Effective Date will remain stockholders of the Company after the Reverse Stock Split (“Continuing Stockholders”).
See “Special Factors” below.
If approved by stockholders at the Special
Meeting, the Company will effectuate the Reverse Stock Split by filing an amendment to the Company’s Articles of Incorporation
(the “Charter Amendment”) in substantially the form attached to this proxy statement as Appendix B with the
Nevada Secretary of State.
The effective time for the Reverse Stock
Split and the corresponding authorized stock reduction will be the date on which the Company files the Charter Amendment with the
office of the Nevada Secretary of State or such later date and time as specified in the Charter Amendment (the “Effective
Date”).
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Payment for Fractional Shares
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We will not issue fractional shares in
connection with the Reverse Stock Split. Cashed-Out Stockholders will receive a cash payment (without interest and subject to applicable
withholding taxes) in lieu of receiving a fractional post-split share (the “Cash-Out Payment”). The Cash-Out Payment
will be equal to (i) $0.03 multiplied by (ii) the number of pre-split shares of Common Stock owned by a Cashed-Out Stockholder
immediately prior to the Effective Date.
In addition, Continuing Stockholders who
would otherwise hold fractional shares because the number of shares of Common Stock they hold before the Reverse Stock Split is
not evenly divisible by the split ratio will be entitled to receive a cash payment (without interest and subject to applicable
withholding taxes) in lieu of receiving a fractional post-split share (the “Continuing Fractional Payment”). The Continuing
Fractional Payment will be equal to (i) $0.03 multiplied by (ii) the number of pre-split shares owned by a Continuing Stockholder
immediately prior to the Effective Date that resulted in the total number of pre-split shares owned by such Continuing Stockholder
not being evenly divisible by the split ratio, which, in any case, will be an amount less than 2,000 shares.
Any shares we purchase in connection with a Cash-Out Payment
or a Continuing Fractional Payment will be cancelled. See “Special Factors—Treatment of Fractional Shares” below.
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Stockholder Approval
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Approval of the Reverse Stock Split will
require the affirmative vote of the holders of a majority of the outstanding shares of Common Stock as of the Record Date. As of
the Record Date, our executive officers and directors and holders of more than 10% of our Common Stock, as a group, beneficially
own approximately [•]% of the outstanding shares of Common Stock. See “Special Factors—Principal Effects of the
Reverse Stock Split—Effects of the Reverse Stock Split on Our Affiliates” for more information. The transaction does
not require the approval of a majority of the unaffiliated stockholders.
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Purpose of Transaction
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The Reverse Stock Split is a necessary
step in the Company’s plan to terminate its public reporting obligations under the Exchange Act by reducing the number of
its stockholders of record to fewer than 500 holders and deregistering its class of Common Stock under the Exchange Act. See “—Purposes
of the Reverse Stock Split,” “—Advantages of the Reverse Stock Split,” “—Disadvantages of the
Reverse Stock Split” and “—Alternatives Considered” in “Special Factors” below.
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Reasons for Transaction
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The Board believes that the significant
costs and heightened disclosure obligations associated with being a public reporting company, the limited trading market and the
lack of analyst coverage for the Common Stock outweigh the perceived benefits of being a public reporting company. See “—Purpose
of the Reverse Stock Split,” “—Advantages of the Reverse Stock Split,” “—Disadvantages of the
Reverse Stock Split” and “—Alternatives Considered” in “Special Factors” below.
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Effects of Reverse Stock Split on Affiliates
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The Reverse Stock Split would not differentiate
among stockholders on the basis of affiliate status. The sole determining factor in whether a stockholder will become a Cashed-Out
Stockholder or a Continuing Stockholder as a result of the Reverse Stock Split is the number of shares held by such stockholder
immediately before the Effective Date as no fractional shares will be issued. As of April 30, 2020, approximately 260,697 shares
of our Common Stock, or 0.78% of the issued and outstanding shares of Common Stock on such date, were held by stockholders owning
fewer than 2,000 shares. Accordingly, the impact of the Reverse Stock Split, including the cashing out of fractional shares, on
the percentage ownership of Continuing Stockholders, including any affiliates, will be negligible.
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Fairness of Transaction
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The Board believes that the Cash-Out Payment
is fair to the Company’s stockholders, including its unaffiliated stockholders, and unanimously recommends that stockholders
vote to approve the Reverse Stock Split Proposal. See “Special Factors—Fairness of the Reverse Stock Split” below.
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Appraisal Rights
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Under Nevada law, our stockholders are
entitled to dissenters’ rights with respect to the Cash-Out Payment and the Continuing Fractional Payment. Upon effectiveness
of the Reverse Stock Split, any stockholder who believes that the Cash-Out Payment or the Continuing Fractional Payment of $0.03
per share is too low will have the right to object and have a court in Nevada determine the value of such stockholder’s shares,
and to be paid the appraised value determined by the court, which could be more or less than the Cash-Out Payment and the Continuing
Fractional Payment of $0.03 per share. A dissenters’ rights notice will be mailed to stockholders promptly after the effective
date of the Reverse Stock Split. See “—Dissenters’ Rights” and “—Stockholder Approval under
Nevada Law” in “Special Factors” below.
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Trading Market
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Following the transaction, we anticipate
that the market for shares of our Common Stock will be less active and may be eliminated altogether. Although shares of our Common
Stock are currently quoted on the Pink Open Market with “current information,” we will not be required to, and we may,
at any time in the future, decide to move to a lower tier and provide much more limited information, which would make the shares
even more illiquid.
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Schedule 13E-3 Filing
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The Reverse Stock Split is considered a
“going private” transaction as defined in Rule 13e-3 promulgated under the Exchange Act because it is intended to,
and, if completed, will enable us to terminate the registration of (or “deregister”) our Common Stock under the Exchange
Act and suspend our duty to file periodic reports and other information with the SEC thereunder.
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QUESTIONS
AND ANSWERS ABOUT THE REVERSE STOCK SPLIT AND THE SPECIAL MEETING
The following questions and answers are
intended to briefly address potential questions regarding the Reverse Stock Split and the Special Meeting. These questions and
answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information
contained elsewhere in this proxy statement, including the appendices to this proxy statement.
Where and when is the Special Meeting?
The Special Meeting will be held on [•],
2020 at [9:00 a.m.] Pacific Time. Due to the emerging public health impact of the coronavirus outbreak (COVID-19) and to support
the health and well-being of our employees and shareholders, the Special Meeting will be held in a virtual meeting format only.
You will not be able to attend the Special Meeting physically. You will be able to attend the Special Meeting virtually and to
vote and submit questions during the virtual Special Meeting by visiting www.[•] and entering the 16-digit control
number provided in your proxy materials. Using this control number, you will be able to listen to the meeting live, submit questions
and vote online. The Company encourages you to access the Special Meeting before the start time of [9:00 a.m.] Pacific Time on
[•], 2020. Please allow ample time for online check-in, which will begin at [8:45] a.m., Pacific Time on [•], 2020. The
Company’s management will be available to answer any questions you may have immediately after the Special Meeting.
Why is the Special Meeting virtual only?
Due to the emerging public health impact
of the coronavirus outbreak (COVID-19), the Special Meeting will be held in a virtual meeting format only. You will not be able
to attend the Special Meeting physically. Supporting the health and well-being of our employees and shareholders is one of our
top priorities.
What am I being asked to vote on at the
Special Meeting?
Our stockholders will consider and vote
upon Proposal 1 in order to amend the Company’s Articles of Incorporation to effect the Reverse Stock Split and Proposal
2 in order to approve the adjournment of the Special Meeting, if necessary, to solicit additional proxies in the event that there
are not sufficient votes at the time of the Special Meeting to approve Proposal 1.
What is the Reverse Stock Split?
The Reverse Stock Split is a reduction
of the number of our authorized and issued and outstanding Common Stock in a ratio of 2,000 shares prior to the Reverse Stock
Split to one share following the Reverse Stock Split. Stockholders that own less than 2,000 shares prior to the Reverse Stock
Split will cease to own any shares of our Common Stock following the Reverse Stock Split and instead will receive cash for
their shares. However, the number of authorized shares of Common Stock will not be reduced as a result of the Reverse Stock
Split. Consequently, the number of authorized but unissued shares of Common Stock will increase as a result of the Reverse
Stock Split.
What is the purpose of the Reverse Stock
Split?
The Board has determined that the costs
of being a SEC reporting company outweigh the benefits and, thus, it is no longer in our best interests or the best interests of
our stockholders, including our unaffiliated stockholders, for us to remain an SEC reporting company. The Reverse Stock Split will
enable us to terminate the registration of our Common Stock under the Exchange Act if, after the Reverse Stock Split, there are
fewer than 500 record holders of our Common Stock, and we make the necessary filings with the SEC. Our reasons for proposing the
Reverse Stock Split include the following:
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Annual cost savings we expect to realize as a result of the termination of the registration of our Common Stock under the Exchange
Act, including accounting, legal, printing and other miscellaneous costs associated with being a public reporting company, which
we estimate will be approximately $170,000 per year, which does not include estimated executive and administrative time incurred
in complying with public company requirements.
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The absence of many of the benefits to the Company and its stockholders that are associated with being a public reporting company,
particularly as reflected by the limited public trading volume, liquidity and analyst coverage of our Common Stock.
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The proposed Reverse Stock Split is expected to free management and staff time to focus on operating the business and growing
stockholder value.
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The ability of stockholders holding fewer than 2,000 shares of our Common Stock to liquidate their shares of Common Stock and
receive a price for such shares that we believe is fair (for the reasons set forth below under “Special Factors—Fairness
of the Reverse Stock Split”), without incurring brokerage commissions.
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How does the Board recommend that I vote
on Proposal 1 and Proposal 2?
The Board unanimously recommends that you
vote “FOR” Proposal 1.
The Board unanimously recommends that you
vote “FOR” Proposal 2.
Who is entitled to vote at the Special
Meeting?
Only holders of record of our Common Stock
as of the close of business on May 11, 2020 are entitled to notice of, and to vote at, the Special Meeting. At the close of business
on the Record Date, there were [•] shares of Common Stock outstanding. At the Special Meeting, each share of Common Stock
entitles the holder thereof to one vote.
What is a “quorum” for purposes
of the Special Meeting?
In order to conduct business at the Special
Meeting, a quorum of stockholders is necessary to hold a valid Special Meeting. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at the Special Meeting.
Your shares will be counted towards the
quorum if you:
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are present and vote in person at the Special Meeting; or
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have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction form by mail.
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Virtual attendance at the Special Meeting
constitutes presence in person for purpose of a quorum at the meeting. Abstentions will be counted towards the quorum requirement;
however, “broker non-votes” (as discussed below) will not be counted towards the quorum requirement.
What vote is required to approve Proposal
1 and Proposal 2?
Proposal 1 (Reverse Stock Split Proposal):
Once a quorum has been established, approval of Proposal 1 requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock as of the Record Date.
Proposal 2 (Adjournment of Special
Meeting Proposal): The affirmative vote of a majority of shareholders represented and voting at the Special Meeting is required
to approve Proposal 2 (Adjournment of Special Meeting Proposal).
How are broker non-votes counted?
Broker non-votes generally occur when shares
held by a broker, bank or other nominee for a beneficial owner (i.e., shares held in “street name”) are not voted with
respect to a proposal because the broker, bank or other nominee has not received voting instructions from the beneficial owner
and lacks discretionary authority to vote the shares. Such brokers, banks or other nominees normally have discretion to vote on
“routine matters” only, but not on non-routine matters, such as Proposal 1 and Proposal 2. Therefore, if your shares
are held in street name and you do not direct your broker, bank or other nominee how to vote your shares at the Special Meeting,
then the nominee cannot vote your shares on Proposal 1 or Proposal 2. Accordingly, this will result in a broker non-vote and will
have the effect of a vote against Proposal 1 and will have no effect on the outcome of Proposal 2.
Further, broker non-votes at the Special
Meeting will not be counted towards the quorum requirement.
How are abstentions counted?
A properly executed proxy marked “ABSTAIN”
with respect to either Proposal 1 or Proposal 2 will have the effect of a vote against the applicable proposal. However, such abstentions
will be counted towards the quorum requirement.
How do I vote?
Stockholders of Record. If your shares
are registered directly in your name with our transfer agent, Transfer Online (the “Transfer Agent”), you are considered,
with respect to those shares, the stockholder of record, and the Notice was sent directly to you by Transfer Online. You may vote
over the Internet, by telephone or by mail as described in the Notice. You can also vote in person by virtually attending the Special
Meeting and delivering your completed proxy card in person or by completing a ballot, which we will provide to you at the Special
Meeting. If you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or sign
and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner
recommended by the Board on all matters presented in this proxy statement. Therefore, unless there are different instructions on
the proxy card, all shares represented by valid proxies (and not revoked before they are voted) will be voted “FOR”
Proposal 1 and “FOR” Proposal 2.
Beneficial Owners of Shares Held in Street
Name. If your shares are held in street name, you are considered the beneficial owner of the shares, and the Notice or a voting
instruction form was forwarded to you by your broker, bank or other nominee. You may vote over the Internet, by telephone or by
mail as described in the Notice or voting instruction form. You are also invited to virtually attend the Special Meeting. Since
a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain
a “legal proxy” from your broker, bank or other nominee that holds your shares giving you the right to vote the shares
at the Special Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your
shares. However, if you do not provide such organization with specific voting instructions, this will result in a broker non-vote
and will have the effect of a vote against Proposal 1 and will have no effect on the outcome of Proposal 2. See “How are
broker non-votes counted?” above for additional information.
Can I revoke my proxy or change my vote?
If you are a stockholder of record, you
may revoke your proxy or change your vote at any time prior to the taking of the vote at the Special Meeting by:
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granting a new proxy bearing a later date by following the instructions provided in the Notice or the proxy card, which will
automatically revoke the previous proxy;
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providing a written notice of revocation to the Company’s Corporate Secretary at Proteo, Inc., c/o Proteo Biotech AG,
Am-Kiel-Kanal 44, D-24106 Kiel, Germany; or
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virtually attending the Special Meeting and voting in person.
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If you are a beneficial owner of shares
held in street name, you may revoke your proxy or change your vote at any time prior to the taking of the vote at the Special Meeting
by:
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submitting new voting instructions to your broker, bank or other nominee by following the instructions they provided; or
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if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares, by virtually
attending the Special Meeting and voting.
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Note that for both stockholders of record
and beneficial owners of shares held in street name, virtual attendance at the Special Meeting will not cause your previously granted
proxy to be revoked unless you specifically so request or vote at the Special Meeting.
Who pays for this proxy solicitation?
This solicitation is made on behalf of the
Board, and expenses in connection with the solicitation of proxies
will be paid by the Company. Proxies will be solicited principally by mail, but may also be solicited by personal conversations
or by telephone, electronic transmission, telex, facsimile or telegram by the directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for such services. Arrangements will also be made with certain brokerage
firms and certain other custodians, nominees and fiduciaries for the forwarding of solicitation materials to the beneficial owners
of Common Stock held of record by such persons, and such brokers, custodians, nominees and fiduciaries will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection therewith.
Am I entitled to appraisal rights in
connection with the Reverse Stock Split Proposal?
Under Nevada law, our stockholders are entitled
to dissenters’ rights with respect to the Cash-Out Payment and the Continuing Fractional Payment. Upon effectiveness of the
Reverse Stock Split, any stockholder who believes that the Cash-Out Payment or the Continuing Fractional Payment of $0.03 per share
is too low will have the right to object and have a court in Nevada determine the value of such stockholder’s shares, and
to be paid the appraised value determined by the court, which could be more or less than the Cash-Out Payment and the Continuing
Fractional Payment of $0.03 per share. A dissenters’ rights notice will be mailed to stockholders promptly after the effective
date of the Reverse Stock Split. See “—Dissenters’ Rights” and “—Stockholder Approval under
Nevada Law” in “Special Factors” below.
SPECIAL
FACTORS
This section provides information
concerning special factors relating to Proposal 1 and the proposed 1-for-2,000 Reverse Stock Split and related transactions, including
the cashing out of fractional shares following such split and subsequent anticipated SEC deregistration.
NEITHER THE REVERSE STOCK SPLIT NOR ANY
OF THE OTHER PROPOSED ACTIONS HAVE BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION; AND NEITHER
THE SEC NOR ANY STATE COMMISSION HAS PASSED UPON THE FAIRNESS OR MERITS OF THE REVERSE STOCK SPLIT OR UPON THE ACCURACY OR ADEQUACY
OF THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Overview
The Board has unanimously adopted
resolutions approving and recommending to the stockholders for their approval a reverse stock split of all of the outstanding shares
of Common Stock, whereby each 2,000 shares would be combined, converted and changed into one share of Common Stock. As described
in greater detail below, the Reverse Stock Split is proposed to decrease the number of stockholders of record to a number less
than 500 to, among other things, place the Company in a position to voluntarily deregister from the reporting requirements of the
Exchange Act.
Following the Reverse Stock Split,
the number of issued and outstanding shares of Common Stock would be reduced in accordance with the Reverse Stock Split ratio.
Except for adjustments that may result from the treatment of fractional shares, each stockholder will hold the same percentage
of the outstanding Common Stock immediately following the Reverse Stock Split as such stockholder held immediately prior to the
Reverse Stock Split. As described in greater detail below, as a result of the Reverse Stock Split, stockholders who hold less than
2,000 shares of Common Stock will no longer be stockholders of the Company on a post-split basis.
Board Deliberations
The Company is a clinical stage
drug development company and has historically relied on government grant funds, as well as proceeds from the sales of the Company’s
common and preferred stock, in order to fund its operations. The Company does not expect any further funding under its current
grant from the German State of Schleswig-Holstein after the scheduled expiration at the end of April 2020 (which has since been
extended through October 31, 2020). Due to recent developments, including the impact of the COVID-19 outbreak and disruptions in
government spending, the Company is unlikely to receive funding under a new grant. Further, the Company no longer expects to receive
further funding pursuant to its current agreement with one of its preferred stockholders. At this time, the Company cannot predict
the impact of COVID-19 outbreak on its ability to obtain financing necessary for the Company to fund its working capital requirements.
As a result, the Company’s management has been exploring strategic alternatives in order to meet the Company’s operating
cash flow requirements. However, there are no assurances that the Company will be successful in implementing a strategic plan in
order to address its liquidity constraints.
In light of the Company’s
current financial situation, particularly the need to significantly reduce costs, the Board has considered and deliberated the
advantages and disadvantages of a potential deregistration transaction. In connection with such assessment, the Board has considered
the costs and expenses of remaining a public company, the limited trading in the Common Stock and the other considerations set
forth under the sections “—Advantages of the Reverse Stock Split” and “—Disadvantages of the Reverse
Stock Split,” and has also considered other alternatives to the Reverse Stock Split, including those described under the
section “—Alternatives Considered.”
Following such deliberations
and after obtaining input with respect to the Reverse Stock Split and potential alternatives from the Company’s outside legal
counsel, as well as Diethelm Siebuhr, a significant stockholder, at a meeting of the Board held on April 20, 2020, the Board unanimously
approved taking all actions, including obtaining stockholder approval, to effectuate the Reverse Stock Split at a special meeting
of stockholders.
After review and discussion,
the Board determined that the proposed Reverse Stock Split is necessary to significantly reduce operating expenses and the execution
of the Company’s business plan. In addition, the Board determined that voluntarily deregistering is in the overall best interests
of the Company after carefully considering several factors, including:
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the costs of preparing and filing periodic reports with the SEC;
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the increased outside accounting, audit, legal and other costs and expenses associated with being a public company;
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the burdens placed on Company management to comply with reporting requirements; and
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the low trading volume in the Common Stock;
all as further disclosed below in the sections “—Advantages
of the Reverse Stock Split,” “—Disadvantages of the Reverse Stock Split” and “—Alternatives
Considered.”
As further disclosed under “—Advantages
of the Reverse Stock Split,” the Board has concluded that the costs of preparing and filing periodic reports with the SEC
and the increased outside accounting, audit, legal and other costs and expenses associated with being a public company outweigh
the perceived benefits of remaining a public company, particularly in light of the limited trading in the Common Stock. The Board
also believes the Reverse Stock Split would free management and staff time to focus on operating the business and growing stockholder
value. The Board also considered the fact that the notice of the Reverse Stock Split will provide an opportunity for its stockholders
to sell their holdings before the Reverse Stock Split or add to their holdings such that they would not have a fractional share
after the Reverse Stock Split.
As further disclosed under “—Disadvantages
of the Reverse Stock Split,” the Board also considered the requirement that stockholders owning less than 2,000 shares of
record surrender their shares and accept the Cash-Out Payment as part of the Reverse Stock Split, thereby foregoing any opportunity
to participate in any possible future increases in value of the Common Stock. The Board also considered the possible significant
decline in value and liquidity of the Common Stock following the Reverse Stock Split. In particular, the Board noted that the Common
Stock may suffer further illiquidity following the Reverse Stock Split as a result of the reduced number of shares of Common Stock
and any increase in the stock price triggered by the Reverse Stock Split. The decreased liquidity of the Common Stock, coupled
with an absence of publicly available information, may further decrease the value of the shares owned by Continuing Stockholders.
Neither the Board nor management
believes the Reverse Stock Split itself will be a change factor for better performance of the Company, but the Board believes the
Reverse Stock Split is a vehicle the Company can use to reduce costs and redirect time and resources currently devoted to regulatory
and reporting compliance, assuming the Company’s stockholders of record are reduced below 500 and the Company is able to
deregister with the SEC.
As further disclosed under “—Alternatives
Considered,” the Board also considered issuer purchases and maintaining the status quo as alternatives but concluded ultimately
that the proposed Reverse Stock Split was the best method and was in the best interests of the Company and its stockholders. As
further disclosed under “—Fairness of the Reverse Stock Split,” the Board has further determined that the Reverse
Stock Split is substantively and procedurally fair to the unaffiliated stockholders.
Purpose of the Reverse Stock Split
The Common Stock is
currently traded on the Pink Open Market under the symbol “PTEO.” As of April 30, 2020, there were approximately
1,774 stockholders of record of the Company. We estimate that if the Reverse Stock Split is approved and implemented, the
approximate number of record stockholders will be approximately 396.
The primary purpose of the Reverse
Stock Split is to enable us to reduce the number of our stockholders of record to fewer than 500 so that we may terminate our public
reporting obligations under the Exchange Act. This will allow:
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Cost savings of time and money derived from termination of the registration of our Common Stock under the Exchange Act and
suspension of our duties to file periodic reports with the SEC and comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”) and other SEC requirements
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Reduction of the administrative burden and expense of maintaining many small stockholders’ accounts
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Liquidation by small stockholders of their shares of our Common Stock at a market price, without
having to pay brokerage commissions
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If approved by stockholders at
the Special Meeting, the Company will effectuate the Reverse Stock Split by filing the Charter Amendment in substantially the form
attached to this proxy statement as Appendix B with the Nevada Secretary of State.
Principal Effects of the Reverse Stock Split
After the Effective Date, each
stockholder will own a reduced number of shares of Common Stock. However, we expect that the market price of Common Stock immediately
after the Reverse Stock Split will increase substantially above the market price of Common Stock immediately prior to the Reverse
Stock Split. The proposed Reverse Stock Split will be effected simultaneously for all Common Stock, and the ratio for the Reverse
Stock Split will be the same for all Common Stock. The Reverse Stock Split will affect all stockholders uniformly and will not
affect any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split
would result in any of the stockholders owning a fractional share and except for the negligible aggregate effect of the reduction
in the total number of shares outstanding as described below. For example, a holder of 2% of the voting power of the outstanding
shares of Common Stock immediately prior to the Reverse Stock Split would continue to hold approximately 2% of the voting power
of the outstanding shares of Common Stock immediately after the Reverse Stock Split. The number of stockholders of record will
be reduced by the proposed Reverse Stock Split to the extent that the Reverse Stock Split results in any stockholders owning only
a fractional share as described below.
Our Common Stock is currently
registered under Section 12(g) of the Exchange Act, and we are subject to the periodic reporting and other requirements of the
Exchange Act. If the Reverse Stock Split is approved and implemented, the number of record stockholders will be reduced to below
500. Following the Reverse Stock Split, we intend to file a Form 15 to deregister our Common Stock with the SEC and become a non-reporting
company under the Exchange Act. As of the date of the filing of the Form 15, our obligations to file reports under the Exchange
Act, including Forms 10-K, 10-Q and 8-K, will be immediately suspended. We expect the deregistration of our Common Stock to become
effective 90 days after filing the Form 15. Upon deregistration of our Common Stock, our obligation to comply with any other Exchange
Act requirements, such as those under the proxy rules, Section 16(b) and certain beneficial ownership reporting requirements, will
also be terminated.
The respective rights, preferences
or limitations of our Common Stock will remain the same after the proposed Reverse Stock Split as before the split, except to the
extent that the Reverse Stock Split would result in any of the stockholders owning a fractional share. For example, the rights
of stockholders regarding voting, dividends, liquidation or other rights of the Common Stock will remain the same and will not
change as a result of the proposed Reverse Stock Split. In addition, we have decided not to adjust the par value of our Common
Stock in connection with the Reverse Stock Split.
As of April 30, 2020, approximately
260,697 shares of our Common Stock, or 0.78% of the issued and outstanding shares of Common Stock on such date, were held by stockholders
owning fewer than 2,000 shares. Accordingly, the impact of the Reverse Stock Split, including the cashing out of fractional shares,
on the percentage ownership of Continuing Stockholders, including any affiliates, will be negligible.
If the Reverse Stock Split is
approved and implemented, the approximate number of record stockholders is anticipated to be approximately 396. This would represent
an anticipated reduction of approximately 1,378 pre-split record stockholders out of the approximately 1,774 stockholders of record
as of April 30, 2020.
Effects of the Reverse Stock Split on Our Affiliates
The Reverse Stock Split would
not differentiate among stockholders on the basis of affiliate status. The sole determining factor in whether a stockholder will
become a Cashed-Out Stockholder or a Continuing Stockholder as a result of the Reverse Stock Split is the number of shares held
by such stockholder immediately before the Effective Date as no fractional shares will be issued. The beneficial ownership percentage
of shares of our Common Stock held by Continuing Stockholders, including any affiliates, after the Reverse Stock Split, may, however,
increase or decrease as a result of any purchases, sales and other transfers of shares of our Common Stock by such stockholders
prior to the Effective Date. However, the impact of the Reverse Stock Split, including the cashing out of fractional shares, on
the percentage ownership of Continuing Stockholders, including any affiliates, will be negligible.
As of April 30, 2020, 22,452,359
shares of our Common Stock, or approximately 67.3% of the 33,379,350 issued and outstanding shares of Common Stock on such date,
were beneficially held, directly or indirectly, by our executive officers and directors and holders of more than 10% of our Common
Stock. The table below reflects the pre-split and an estimate of the post-split beneficial ownership of the Company’s Common
Stock at April 30, 2020 with respect to our executive officers and directors and holders of more than 10% of our Common Stock.
At April 30, 2020, there were 33,379,350 shares of Common Stock outstanding. The percentage calculation post-split is based on
the assumption that approximately 16,446 shares of our Common Stock will remain outstanding after the Reverse Stock Split.
Name
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Common Stock Beneficially Owned
Pre-Split (1)
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|
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Percentage of Class
Pre-Split
|
|
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Common Stock Beneficially Owned
Post-Split (1)
|
|
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Percentage of Class
Post-Split
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Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
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Oliver Wiedow (Chief Executive Officer, Chief Financial Officer and Director)
|
|
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6,380,000
|
|
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19.1%
|
|
|
|
3,190
|
|
|
19.4%
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Birge Bargmann (Chief Executive Officer of Proteo Biotech AG)
|
|
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6,300,000
|
|
|
|
18.9%
|
|
|
|
3,150
|
|
|
19.2%
|
Jork von Reden (Director)
|
|
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1,100,000
|
|
|
|
3.3%
|
|
|
|
550
|
|
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3.3%
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Hartmut Weigelt (Director)
|
|
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56,000
|
|
|
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*
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|
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28
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|
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*
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Juergen Paal (Chief Operating Officer of Proteo Biotech AG)
|
|
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116,359
|
|
|
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*
|
|
|
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58
|
|
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*
|
|
|
|
|
|
|
|
|
|
|
|
|
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10% or Greater Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
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Diethelm Siebuhr
|
|
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4,250,000
|
|
|
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12.7%
|
|
|
|
2,125
|
|
|
12.9%
|
Kai Bartels
|
|
|
4,250,000
|
|
|
|
12.7%
|
|
|
|
2,125
|
|
|
12.9%
|
_______________
* Less
than 1%
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Except as indicated by footnote, and subject to community property laws
where applicable, the persons or entities named in the table above have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them. Includes executive officers of the Company’s wholly-owned subsidiary,
Proteo Biotech AG.
|
Additionally, following deregistration,
directors, executive officers and 10% stockholders and their affiliates will be relieved of certain SEC reporting requirements
and “short-swing profit” trading provisions under Section 16 of the Exchange Act with respect to our Common Stock,
and public disclosure of information regarding their compensation and stock ownership will no longer be required. The Company after
deregistration would also no longer be prohibited, pursuant to Section 402 of the Sarbanes-Oxley Act, from making personal loans
to directors or executive officers.
We do not have any agreement,
arrangement or understanding, whether written or unwritten, with any of our affiliates pursuant to which we are obligated to pay
to any affiliate compensation, whether present, deferred or contingent, that is based on, or otherwise relates to, the Reverse
Stock Split. All of our officers and directors will continue in such capacity after the Reverse Stock Split.
To the extent known by the Company,
our executive officers and directors and holders of more than 10% of our Common Stock intend to vote for the Reverse Stock Split.
None of our executive officers and directors or holders of more than 10% of our Common Stock will be entitled to a Cash-Out Payment
or a Continuing Fractional Payment, except for payment for any fractional shares that may result from the Reverse Stock Split.
Treatment of Fractional Shares
No scrip or fractional shares would be issued
if, as a result of the Reverse Stock Split, a stockholder would otherwise become entitled to a fractional share. Instead, Cashed-Out
Stockholders will receive a Cash-Out Payment (without interest and subject to applicable withholding taxes) in lieu of receiving
a fractional post-split share. The Cash-Out Payment will be equal to (i) $0.03 multiplied by (ii) the number of pre-split shares
of Common Stock owned by a Cashed-Out Stockholder immediately prior to the Effective Date.
In addition, Continuing Stockholders who
would otherwise hold fractional shares because the number of shares of Common Stock they hold before the Reverse Stock Split is
not evenly divisible by the split ratio will be entitled to receive a Continuing Fractional Payment (without interest and subject
to applicable withholding taxes) in lieu of receiving a fractional post-split share. The Continuing Fractional Payment will be
equal to (i) $0.03 multiplied by (ii) the number of pre-split shares owned by a Continuing Stockholder immediately prior to the
Effective Date that resulted in the total number of pre-split shares owned by such Continuing Stockholder not being evenly divisible
by the split ratio, which, in any case, will be an amount less than 2,000 shares. For example, if a Continuing Stockholder owns
8,200 shares of Common Stock immediately prior to the Effective Date, such stockholder will own four shares of Common Stock following
the Reverse Stock Split and will be entitled to a Continuing Fractional Payment of $6 (i.e., $0.03 multiplied by the 200 shares
not evenly divisible).
Stockholders would not be entitled to receive
interest for the period between the Effective Date and the date payment is made for their fractional shares. The ownership of a
fractional interest will not give the holder thereof any voting, dividend or other rights except to receive payment as described
herein. Any shares we purchase in connection with a Cash-Out Payment or a Continuing Fractional Payment will be cancelled.
As a result of the Reverse Stock Split,
Cashed-Out Stockholders will no longer be stockholders of the Company on a post-split basis. In other words, any holder of 1,999
or fewer shares of Common Stock prior to the Effective Date would only be entitled to receive cash for the fractional share of
Common Stock such stockholder would otherwise hold on a post-split basis. The actual number of stockholders that will be eliminated
will depend on the actual number of stockholders holding less than 2,000 shares of Common Stock on the Effective Date. Reducing
the number of post-split stockholders is the purpose of the Reverse Stock Split.
If you do not hold sufficient shares of
pre-split Common Stock to receive at least one post-split share of Common Stock and you want to hold Common Stock after the Reverse
Stock Split, you may do so by taking either of the following actions far enough in advance so that it is completed before the Reverse
Stock Split is effected:
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·
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purchase a sufficient number of shares of Common Stock so that you would hold at least 2,000
shares of Common Stock in your account prior to the implementation of the Reverse Stock Split that would entitle you to receive
at least one share of Common Stock on a post-split basis; or
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|
|
|
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·
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if applicable, consolidate your accounts so that you hold at least 2,000 shares of Common Stock in one account prior to
the Reverse Stock Split that would entitle you to at least one share of Common Stock on a post-split basis. Common stock held in
registered form (that is, shares held by you in your own name on the Company’s share register maintained by the Transfer
Agent) and Common Stock held in street name for the same investor would be considered held in separate accounts and would not be
aggregated when implementing the Reverse Stock Split. In addition, shares of Common Stock held in registered form but in separate
accounts by the same investor would not be aggregated when implementing the Reverse Stock Split.
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Stockholders should be aware that, under
the escheat laws of the various jurisdictions where stockholders reside, where the Company is domiciled and where the funds for
fractional shares would be deposited, sums due to stockholders in payment for fractional shares that are not timely claimed after
the effective time may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise
entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.
Advantages of the Reverse Stock Split
Cost Savings
The costs of being a public reporting company
are significant and have increased over the years, including as a result of compliance with the internal control assessment and
audit requirements of Section 404 and other requirements imparted by the Sarbanes-Oxley Act and the Dodd–Frank Wall Street
Reform and Consumer Protection Act. These and other requirements increase audit fees and other costs of compliance, such as outside
securities legal counsel fees, as well as outside director fees and insurance premiums to cover potential liability faced by our
officers and directors. We also incur substantial indirect costs as a result of, among other things, our management’s time
expended to prepare and review our public filings.
The Board believes that by deregistering
our shares of Common Stock and suspending our periodic reporting obligations, we will realize estimated annual cost savings of
approximately $170,000, which represents a significant part of our operating expense. These potential cost savings reflect, among
other things: (i) a reduction in audit, legal and other fees required for publicly held companies, (ii) the elimination of various
internal costs associated with filing periodic reports with the SEC, and (iii) the reduction or elimination of various clerical
and other expenses associated with being a public company.
Additionally, the Reverse Stock Split is
expected to reduce the administrative burden and expense of maintaining many small stockholders’ accounts. A large number
of stockholders own less than 2,000 shares, which is less, and in many cases substantially less, than $50 in value at current market
prices. The Company believes that it is uneconomical for the Company to continue to maintain share positions of such a small size.
These small positions will be cashed out as a result of the Reverse Stock Split.
Limited Liquidity of Common Stock
The Board further believes that
the perceived benefits of remaining a public company are outweighed by the costs, particularly in light of the limited public trading
value, liquidity and analyst coverage of the Common Stock. The Common Stock is traded on the Pink Open Market under the symbol
“PTEO.” As of April 30, 2020, the Company had outstanding 33,379,350 shares of Common Stock. Over the twelve-month
period ending April 30, 2020, the average daily trading volume of the Common Stock on the OTCQB, for a portion of such period,
and the Pink Open Market, for a portion of such period, as applicable, was approximately 16,000 shares, or less than 0.05% of the
total outstanding shares as of April 30, 2020. We are not aware of any analyst coverage of the Common Stock.
Additional Potential Management Resources Arising
from Reduced Disclosure Obligations
Another benefit is that the proposed
Reverse Stock Split would free management and staff time to focus on operating the business and growing stockholder value. In particular,
our management will also be able to focus on long-term growth without undue emphasis on short-term financial results that is often
expected of SEC reporting companies.
Opportunity for Cashed Out Stockholders to
Sell Their Holdings at Current Market Trading Price Without Brokerage Fees or Commissions
The Reverse Stock Split provides
an opportunity for Cashed Out Stockholders to liquidate their shares, at a price that we believe is both fair and attractive, without
incurring brokerage fees or commissions. Given the current lack of market activity in our Common Stock, this is an opportunity
that might not otherwise be available to our stockholders. For a further discussion on the Board’s determination regarding
the fairness of the Cash-Out Payment, please see the section entitled “—Fairness of the Reverse Stock Split”
below.
In addition, stockholders with
less than 2,000 pre-split shares could buy additional shares, at a relatively low cost per share, to get to 2,000 by the Effective
Date and thereby avoid the cash-out if they prefer. Similarly, stockholders with slightly more than 2,000 pre-split shares could
sell some shares to get under the 2,000 share level if they prefer.
Disadvantages of the Reverse Stock Split
Holders of Less Than 2,000 Shares of Record Will Be Required
to Give Up Their Shares and Accept Cash Consideration
The Reverse Stock Split of 1-for-2,000
will force stockholders who own less than 2,000 shares of record to be cashed-out for the Cash-Out Payment. Other than acquiring
more shares of stock before the Effective Date, stockholders may only vote against the Reverse Stock Split Proposal, but if the
proposal is approved and the Reverse Stock Split is implemented, stockholders who own less than 2,000 shares of record will be
required to sell for the Cash-Out Payment.
Substantial or Complete Reduction of Public Sale Opportunities
for our Stockholders
Following the transaction, we
anticipate that the market for shares of our Common Stock will be less active and may be eliminated altogether. While shares may
still be quoted on the Pink Open Market, such market may be highly illiquid. Further, we may, at any time in the future, decide
to move to a lower tier on the Pink Open Market and provide much more limited information, as discussed further below.
Loss of Certain Publicly Available Information
Upon terminating the registration
of our Common Stock under the Exchange Act, our duty to file periodic reports with the SEC will be suspended. The information regarding
our operations and financial results that is currently available to the general public and our investors will not be available
after we have terminated our registration, unless we voluntarily elect to continue providing such information to the public. Although
shares of our Common Stock are currently quoted on the Pink Open Market with “current information,” we will not be
required to, and we may, at any time in the future, decide to move to a lower tier and provide much more limited information, which
would make the shares even more illiquid. Accordingly, investors seeking information about us may have to contact us directly to
request such information. We cannot assure you that we will provide the requested information to an investor. While the Board acknowledges
the circumstances in which such termination of publicly available information may be disadvantageous to some of our stockholders,
the Board believes that the overall benefit to the Company of no longer being a public reporting company substantially outweighs
the disadvantages.
If the Company is no longer subject
to certain liability provisions of the Exchange Act, including those associated with officer certifications required by Sarbanes-Oxley,
stockholders will find that the information provided to them is more limited and that their recourse for alleged false or misleading
statements is also more limited.
Possible Significant Decline in the Value and Liquidity
of the Common Stock
The market price of our Common
Stock is based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse
Stock Split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as
a percentage of our overall market capitalization may be greater than would occur in the absence of a Reverse Stock Split. In many
cases, both the total market capitalization of a company and the market price of a share of such company’s common stock following
a reverse stock split are lower than they were before the reverse stock split.
Furthermore, the liquidity of
our Common Stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Stock
Split, as well as any increase in the stock price triggered by the Reverse Stock Split.
The decreased liquidity of the
Common Stock, coupled with an absence of publicly available information, may further decrease the value of the shares owned by
continuing stockholders.
Inability to Participate in any Future Increases in Value
of our Common Stock
Cashed Out Stockholders will
have no further financial interest in the Company and therefore will not have the opportunity to participate in any potential appreciation
in the value of our shares. The Board believes that the Reverse Stock Split is nonetheless fair to our unaffiliated stockholders
because those stockholders are being cashed out at a fair price for their shares. For a further discussion on the Board’s
determination regarding the fairness of the Cash-Out Payment, please see the section entitled “—Fairness of the Reverse
Stock Split” below.
Alternatives Considered
The Board considered alternatives
to the termination of the registration of Common Stock under Section 12(g) of the Exchange Act and the subsequent suspension of
the Company’s reporting obligation the Exchange Act, including alternative transactions to reduce the number of stockholders,
but concluded ultimately that the proposed Reverse Stock Split was the best method and was in the best interests of the Company
and its stockholders. When considering the various alternatives to the Reverse Stock Split, the primary focus was the level of
assurance that the selected alternative would result in us having fewer than 500 stockholders of record, thus allowing us to achieve
our objective of terminating registration of our Common Stock under the Exchange Act, the time frame within which such alternative
could reasonably be expected to be achieved, again relative to the other alternatives under consideration, as well as the potential
costs of the alternative transactions. Among various alternatives discussed by the Board were:
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·
|
Sale of the Company or substantially all of its assets. Under this alternative, we would
attempt to sell (subject to the stockholders’ approval) the Company or substantially all of the assets of the Company. However,
without costly engagement of an investment banking firm or a business broker to market the Company or its assets, sale efforts
may be ineffective in reaching potential buyers (if any). The Board concluded that, under the current conditions, the interest
in the market to purchase the shares or assets of the Company (or its wholly-owned subsidiary Proteo Biotech AG) is extremely low
or absent. Further, this alternative would take an extended amount of time while likely incurring significant legal and audit fees
to complete, and, there would be no assurance that a potential buyer would be found or, if found, such potential buyer would proceed
to completion of the acquisition.
|
|
·
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Dissolution of the Company and liquidation of its assets. Under this alternative, we
would (subject to the stockholders’ approval) dissolve the Company under Nevada law and wind up and liquidate the Company’s
assets. However, winding up and selling (as part of liquidation) the Company’s assets would require costly engagement of
an investment banking firm or a business broker to market the Company’s assets in order to reach potential buyers (if any).
Even after filing a Certificate of Dissolution, the Company may still be deemed to have such number of record stockholders in excess
of the Exchange Act Rule 12g-4 thresholds. Accordingly, the Company would likely be required to continue its reporting under the
Exchange Act until the time all assets and liabilities of the Company are wound up and sorted out pursuant to state law, which
would continue to be costly for the Company.
|
|
·
|
Other transactions. The Board also considered other possible transactions, such as purchases
of shares on the open market or an issuer tender offer. However, the Board concluded that these and similar transactions would
be more costly, including due to higher legal costs and other transactional expenses, lack certainty in reducing the number of
stockholders of record to fewer than 500 and/or take a longer time to effectuate.
|
The Board also considered doing
nothing or maintaining the status quo. The Board concluded, however, that, in light of the Company’s current situation, particularly
the need to significantly reduce operating expenses, maintaining the status quo would result in the Company continuing to be burdened
by the costs and expenses of remaining a public company without enjoying the benefits traditionally associated with public reporting
company status.
For the reasons discussed above,
the Board unanimously agreed that the Reverse Stock Split was the most expeditious and economical way of proceeding with the deregistration
of the Common Stock under the Exchange Act.
Fairness of the Reverse Stock Split
The Board has fully reviewed
and considered the terms, purpose, alternatives and effects of the Reverse Stock Split, and has unanimously determined that the
transaction is in the Company’s best interests and is substantively and procedurally fair to the unaffiliated stockholders.
The Reverse Stock Split does
not require the approval of a majority of our unaffiliated stockholders. Despite the foregoing, the Board believes that the Reverse
Stock split is substantively and procedurally fair to each differently-impacted group of stockholders—those stockholders
who will be cashed out and those stockholders who will be Continuing Stockholders. In other words, the Reverse Stock split will
not be applied to stockholders differently on the basis of affiliate status. The Board bases its belief on:
|
·
|
the requirement that the Reverse Stock Split Proposal receive a majority vote of all outstanding
Common Shares;
|
·
the Cash-Out Payment, which the Board believes is fair to our stockholders (as discussed below); and
|
·
|
the possibility, although not the assurance, that stockholders may be able to change their status
from Cashed-Out Stockholder to Continuing Stockholder (or vice versa) as they see fit.
|
In addition, Continuing Stockholders
have the advantage of continuing as stockholders in a company that will not be subject to the costs associated with being a public
company. These savings are expected to significantly decrease our ongoing expenses.
The Board believes the Cash-Out
Payment of $0.03 per share is fair to our stockholders as it represents a premium of 32.6% over the average 10-day closing price,
or a 14.0% premium over the average 20-day closing price, as of and including April 17, 2020, the last trading date prior to the
date the Board approved the Reverse Stock Split and the related actions.
The Board considered the net
book value per share of our Common Stock in relation to the Cash-Out Payment. The net book value per share of our Common Stock
was equal to approximately negative $0.03 as of December 31, 2019. Net book value is defined generally as total assets minus
total liabilities. While the Board considered the relationship of market value to net book value in its deliberations, the Board
does not view net book value alone to be a material indicator of the fair value of our Common Stock but rather indicative of historical
costs. The Board notes that net book value does not take into account our future prospects, market conditions, trends in the industry
in which we conduct our business or the business risks inherent in competing with other companies in the same industry. The Board
further notes that net book value does not state all assets and liabilities at market value, nor does it take into account the
other considerations that might be part of a transaction between a willing buyer and a willing seller.
The Board did not seek to establish,
and did not consider, a going concern valuation because the Board determined that the costs associated with engaging an independent
financial advisor to assist the Board in analyzing and providing an accurate estimate of our going concern value exceeded the anticipated
benefits of such analysis. In addition, the Board believes that the market value determined by the public trading market reflected
any value attributable to the Company as a going concern.
In reaching its conclusion as
to fairness, the Board did not consider the liquidation value of the Company, as there is no present intention of liquidating the
Company. Further, the Board believes that a liquidation process would involve substantial legal fees, costs of sale and other expenses
that would reduce any amounts that stockholders might receive upon liquidation. In addition, the Board believes that the value
of the Company’s assets that might be realized in liquidation may be substantially less than its going concern value.
The Board did not request or
rely on a fairness opinion on behalf of unaffiliated stockholders or potential Cashed-Out Stockholders. The potential costs of
such an opinion were considered to be quite substantial compared to any potential value of such an opinion.
The Board did not have the benefit
of any firm offers made within the past two years regarding the merger or consolidation of the Company with or into any other company,
the sale or other transfer of all or a substantial portion of the assets of the Company or a purchase of the Company’s Common
Stock that would enable the purchaser to exercise control of the Company to consider as part of its deliberations.
In evaluating the fairness of
the Reverse Stock Split with respect to the unaffiliated stockholders in particular, the Board also noted that the transaction
would not differentiate among stockholders on the basis of affiliate status. The sole determining factor in whether a stockholder
will become a Cashed-Out Stockholder or a Continuing Stockholder as a result of the Reverse Stock Split is the number of shares
held by such stockholder immediately before the Effective Date as no fractional shares will be issued. Accordingly, we did not
retain an unaffiliated representative to act solely on behalf of our unaffiliated stockholders for the purpose of negotiating the
terms of the Reverse Stock Split or preparing a report covering the fairness of the Reverse Stock Split. Furthermore, the proposed
Reverse Stock Split does not require the separate approval of stockholders unaffiliated with the Company.
Furthermore, although stockholders
with less than 2,000 shares of our Common Stock will be cashed out mandatorily if the Reverse Stock Split is approved, the Board
considered that this potentially coercive impact of the transaction is minimized by the ability of stockholders with less than
2,000 pre-split shares to buy additional shares, at a relatively low cost per share, to get to 2,000 by the Effective Date and
thereby avoid the cash-out if they prefer.
The Board also considered the
advantages and disadvantages of the Reverse Stock Split discussed in the sections “—Advantages of the Reverse Stock
Split,” “—Disadvantages of the Reverse Stock Split” and “—Alternatives Considered” in
reaching its conclusion as to the substantive and procedural fairness of the Reverse Stock Split to our unaffiliated stockholders.
The Board did not assign specific weight to each advantage and disadvantage in a formulaic fashion. However, the Board noted in
their analysis that the Company historically had limited trading activity and coupled with the costs associated with remaining
a public company supported the conclusion that the Company needed to effectuate a Reverse Stock Split.
We have not made any special
provision in connection with the Reverse Stock Split to grant stockholders access to our corporate files or to obtain counsel or
appraisal services at our expense. The Board determined that these steps were not necessary to ensure the fairness of the Reverse
Stock Split. In particular, the Board determined that such steps would be costly, time consuming and would not provide any meaningful
additional benefits. Additionally, the Board believes that this proxy statement, together with our other filings with the SEC,
provide adequate information for our stockholders to make an informed decision with respect to the Reverse Stock Split.
Exchange of Stock Certificates
As soon as practicable after
the Effective Date, stockholders will be notified that the Reverse Stock Split has been effected. The Transfer Agent will act as
“exchange agent” for purposes of implementing the exchange of stock certificates. If any of your shares are held in
certificated form (that is, you do not hold all of your shares electronically in book-entry form), you will receive a letter of
transmittal from the Company’s exchange agent as soon as practicable after the Effective Date, which will contain instructions
on how to obtain post-split shares. You must complete, execute and submit to the exchange agent the letter of transmittal in accordance
with its instructions and surrender your stock certificate(s) formerly representing shares of stock prior to the Reverse Stock
Split (or an affidavit of lost stock certificate containing an indemnification of the Company for claims related to such lost stock
certificate). Upon receipt of your properly completed and executed letter of transmittal and your stock certificate(s), you will
be issued the appropriate number of shares of Common Stock either as stock certificates (including legends, if appropriate) or
electronically in book-entry form, as determined by the Company. This means that, instead of receiving a new stock certificate,
you may receive a direct registration statement that indicates the number of post-split shares you own in book-entry form. At any
time after receipt of your direct registration statement, you may request a stock certificate representing your post-split ownership
interest. If you are entitled to payment in lieu of any fractional share interest, the exchange agent will deliver to you the Cash-Out
Payment or the Continuing Fractional Payment, as the case may be, as described under “—Treatment of Fractional Shares.”
No direct registration statements, new stock certificates or payments in lieu of fractional shares will be issued to a stockholder
until such stockholder has properly completed and executed a letter of transmittal and surrendered such stockholder’s outstanding
certificate(s) to the exchange agent. If you hold any or all of your shares electronically in book-entry form, please see the section
below under the heading “—Effect on Registered Book-Entry Holders.”
YOU SHOULD NOT SEND STOCK CERTIFICATES
TO US OR THE EXCHANGE AGENT UNTIL AFTER YOU HAVE RECEIVED A LETTER OF TRANSMITTAL AND ANY ACCOMPANYING INSTRUCTIONS.
Effect on Beneficial Owners
Stockholders holding Common Stock
through a bank, broker or other nominee should note that such banks, brokers or other nominees may have different procedures for
processing the Reverse Stock Split than those that would be put in place by the Company for registered stockholders that hold such
shares directly, and their procedures may result, for example, in differences in the precise cash amounts being paid by such nominees
in lieu of a fractional share. If you hold your shares with such a bank, broker or other nominee and if you have questions in this
regard, you are encouraged to contact your bank, broker or nominee. Any Cash-Out Payment or Continuing Fractional Payment to be
paid in lieu of any fractional share interest will be made in accordance with the practices and procedures of The Depository Trust
Company (DTC).
Effect on Registered Book-Entry Holders
The Company’s registered
stockholders may hold some or all of their shares electronically in book-entry form under the direct registration system for securities.
These stockholders will not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided
with a statement reflecting the number of shares registered in their accounts.
|
·
|
If you hold shares in a book-entry form, you do not need to take any action to receive your post-split
shares or your cash payment in lieu of any fractional share interest, if applicable. If you are entitled to post-split shares,
a transaction statement will automatically be sent to your address of record indicating the number of shares you hold.
|
|
·
|
If you are entitled to payment in lieu of any fractional share interest, the exchange agent will
deliver to you the Cash-Out Payment or the Continuing Fractional Payment, as the case may be, as described under “—Treatment
of Fractional Shares.”
|
Termination of the Reverse Stock Split
Under applicable Nevada Law,
the Board has a duty to act in the best interests of our stockholders. Accordingly, the Board reserves the right to abandon the
Reverse Stock Split, if for any reason the Board determines that, in the best interests of our stockholders, it is not advisable
to proceed with the Reverse Stock Split, even assuming the stockholders approve the Reverse Stock Split by vote. Although the Board
presently believes that the Reverse Stock Split is in our best interests and has recommended a vote “FOR” Proposal
1, the Board nonetheless believes that it is prudent to recognize that circumstances could possibly change such that it might not
be appropriate or desirable to effect the Reverse Stock Split at that time. Such reasons include, but are not limited to:
|
·
|
any change in the nature of our stockholdings prior to the Effective Date, which would result
in us being unable to reduce the number of record holders of our shares to below 500 as a result of the Reverse Stock Split;
|
|
·
|
any change in the number of our shares that will be exchanged for cash in connection with the
Reverse Stock Split that would increase the cost and expense of the Reverse Stock Split from that which is currently anticipated;
or
|
|
·
|
any change in our financial condition that would render the Reverse Stock Split inadvisable.
|
If the Board decides to withdraw
the Reverse Stock Split, whether before or after the time the Special Meeting is held, the Board will promptly notify our stockholders
of the decision by public announcement.
Accounting Consequences
The par value per share of the
Common Stock would remain unchanged at $0.001 per share after the Reverse Stock Split. As a result, on the Effective Date, the
par value on the Company’s balance sheet attributable to the Common Stock will be reduced proportionally from its present
amount, and the additional paid in capital account shall be credited with the amount by which the par value for total shares outstanding
post-split is reduced. The per share Common Stock net income or loss and net book value will be increased because there will be
fewer shares of Common Stock outstanding. The Company does not anticipate that any other accounting consequences would arise as
a result of the Reverse Stock Split.
Stockholder Approval under Nevada Law
Pursuant to Sections 78.2055
and Section 78.390 of the Nevada Revised Statutes (the “NRS”), the Board approved the Reverse Stock Split. Section
78.2055 of the NRS requires stockholder approval of the Reverse Stock Split. No vote, approval or consent of the Company’s
stockholders is required in connection with the termination of the registration of Common Stock under Section 12(g) of the Exchange
Act and the subsequent suspension of the Company’s reporting obligation under the Exchange Act. The Board knows of no other
matters other than that described in this proxy statement which have been recently approved or considered by the holders of Common
Stock.
Dissenters’ Rights
Pursuant to Chapter 92A (Section 300 through
500 inclusive) of the NRS (“Chapter 92A”), any stockholder receiving a Cash-Out Payment or Continuing Fractional Payment
is entitled to dissent to the Reverse Stock Split, and obtain payment of the fair value of the shares. In the context of the Reverse
Stock Split, Chapter 92A provides that stockholders may elect to have the Company purchase pre-Reverse Stock Split shares that
would become fractional shares as a result of the Reverse Stock Split for a cash price that is equal to the “fair value”
of such shares, as determined in a judicial proceeding in accordance with the provisions of Chapter 92A. The fair value of the
shares of any stockholder means the value of such shares immediately before the effectuation of the Reverse Stock Split, excluding
any appreciation or depreciation in anticipation of the Reverse Stock Split, unless exclusion of any appreciation or depreciation
would be inequitable.
Chapter 92A is set forth in its entirety
in Appendix C to this Proxy Statement. If you wish to exercise your dissenters’ rights or preserve the right to do
so, you should carefully review Appendix C to this proxy statement. If you fail to comply with the procedures specified
in Chapter 92A in a timely manner, you may lose your dissenters’ rights. Because of the complexity of those procedures, you
should seek the advice of counsel if you are considering exercising your dissenters’ rights.
Chapter 92A sets forth that, if a stockholder
wishes to assert dissenter’s rights with respect to its Common Stock, the stockholder (a) must deliver to the Company, before
the vote is taken, written notice of the stockholder’s intent to demand payment for his or her shares if the proposed action
is effectuated, and (b) must not vote, or cause or permit to be voted, any of his or her Common Stock in favor of the proposed
action.
Within 10 days after the effectuation of
the Reverse Stock Split, the Company will send a written notice (a “Dissenters’ Rights Notice”) to all the record
stockholders of the Company entitled to dissenters’ rights. The Dissenters’ Rights Notice will be accompanied by (i)
a form for demanding payment from the Company that includes the date of the first announcement to the news media or to the stockholders
of the terms of the proposed action and requires that the person asserting dissenter’s rights certify whether or not they
acquired beneficial ownership of the shares before that date; (ii) a copy of the provisions of Chapter 92A; and (iii) a brief description
of the procedures that a stockholder must follow to exercise dissenter’s rights.
In order to maintain eligibility to exercise
dissenters’ rights under Chapter 92A, you must take the following actions by the date set forth in the Dissenters’
Rights Notice, which shall not be less than 30 nor more than 60 days after the Dissenters’ rights notice is delivered: (i)
deliver a written demand for payment on the form provided in the Dissenters’ Rights Notice; (ii) certify whether you acquired
beneficial ownership of the shares before the date set forth in the Dissenters’ Rights Notice; and (iii) deliver the certificates
representing the dissenting shares to the Company.
Within 30 days after receipt of a demand
for payment, the Company must pay each dissenter who complied with the provisions of Chapter 92A the amount the Company estimates
to be the fair value of such shares, plus interest from the effective date of the Reverse Stock Split. The rate of interest shall
be the average rate currently paid by the Company on its principal bank loans. The payment will be accompanied by the following:
(i) financial statements for the Company for the year ended December 31, 2019 and the most recent interim financial statements;
(ii) a statement of the Company’s estimate of the fair value of the shares; and (iii) a statement of the dissenter’s
rights to demand payment under NRS 92A.480 and that if any such stockholder does not do so within the period specified, such stockholder
shall be deemed to have accepted such payment in full satisfaction of the corporation’s obligations under Chapter 92A. If
the Company does not deliver payment within 30 days of receipt of the demand for payment, the dissenting stockholder may enforce
the dissenter’s rights by commencing an action in Clark County, Nevada or if the dissenting stockholder resides or has its
registered office in Nevada, in the county where the dissenter resides or has its registered office.
If a dissenting stockholder disagrees with
the amount of the Company’s payment, then the dissenting stockholder may, within 30 days of such payment, (i) notify the
Company in writing of the dissenting stockholder’s own estimate of the fair value of the dissenting shares and the amount
of interest due, and demand payment of such estimate, less any payments made by the Company, or (ii) reject the offer by the Company
if the dissenting stockholder believes that the amount offered by the Company is less than the fair value of the dissenting shares
or that the interest due is incorrectly calculated. If a dissenting stockholder submits a written demand as set forth above and
the Company accepts the offer to purchase the shares at the offer price, then the stockholder will be sent a check for the full
purchase price of the shares within 30 days of acceptance.
If a demand for payment remains unsettled,
the Company must commence a proceeding in the Clark County, Nevada district court within 60 days after receiving the demand. Each
dissenter who is made a party to the proceeding shall be entitled to a judgment in the amount, if any, by which the court finds
the fair value of the dissenting shares, plus interest, exceeds the amount paid by the Company. The value so determined could be
more or less than the $0.03 per share to be paid in connection with the Reverse Stock Split. If a proceeding is commenced to determine
the fair value of the Common Stock, the costs of such proceeding, including the reasonable compensation and expenses of any appraisers
appointed by the court, shall be assessed against the Company, unless the court finds the dissenters acted arbitrarily, vexatiously
or not in good faith in demanding payment. The court may also assess the fees and expenses of the counsel and experts for the respective
parties, in amounts the court finds equitable against the Company if the court finds that (i) the Company did not comply with Chapter
92A or (ii) against either the Company or a dissenting stockholder, if the court finds that such party acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by Chapter 92A.
A person having a beneficial interest in
shares that are held of record in the name of another person, such as a broker, fiduciary, depository or other nominee, must act
to cause the record holder to follow the requisite steps properly and in a timely manner to perfect dissenters’ rights of
appraisal.
If the shares are owned of record by a person
other than the beneficial owner, including a broker, fiduciary (such as a trustee, guardian or custodian), depositary or other
nominee, the written demand for dissenters’ rights of appraisal must be executed by or for the record owner. If shares are
owned of record by more than one person, as in joint tenancy or tenancy in common, the demand must be executed by or for all joint
owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal for a stockholder
of record, provided that the agent identifies the record owner and expressly discloses, when the demand is made, that the agent
is acting as agent for the record owner. If a stockholder owns shares through a broker who in turn holds the shares through a central
securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the
depository nominee and must identify the depository nominee as the record holder of such shares.
A record holder, such as a broker, fiduciary,
depository or other nominee, who holds shares as a nominee for others, will be able to exercise dissenters’ rights of appraisal
with respect to the shares held for all or less than all of the beneficial owners of those shares as to which such person is the
record owner. In such case, the written demand must set forth the number of shares covered by the demand. Where the number of shares
is not expressly stated, the demand will be presumed to cover all shares outstanding in the name of such record owner.
The foregoing summary of the rights of dissenting
stockholders under Chapter 92A does not purport to be a complete statement of the procedures to be followed by stockholders desiring
to exercise any dissenters’ rights of appraisal rights available under Chapter 92A. The preservation and exercise of dissenters’
rights of appraisal require strict adherence to the applicable provisions of Chapter 92A, and the foregoing summary is qualified
in its entirety by reference to Appendix C to this proxy statement. The Company has not made any provision to obtain counsel
or appraisal services for unaffiliated stockholders.
Sources of Funds and Expenses
Because we do not know how many
fractional shares will result from the Reverse Stock Split, we are unable to determine the exact cost of the Reverse Stock Split.
However, based on information that we have received from the Transfer Agent, as well as our estimates of other Reverse Stock Split
expenses, we estimate the total cash requirement of the Reverse Stock Split to us will be approximately $91,000. This amount includes
approximately $21,000 needed to cash out fractional shares, approximately $50,000 of legal fees, approximately $10,000 for transfer
agent costs and approximately $10,000 of other costs, including costs of printing and mailing, to effect the Reverse Stock Split.
This total amount could be larger or smaller depending on, among other things, the ultimate number of fractional shares due to
any purchases, sales and other transfers of our shares of Common Stock by our stockholders prior to the Effective Date. The Company
plans to pay out all the costs of the Reverse Stock Split from the Company’s available cash resources.
Trading Market and Price
Our Common Stock is currently
traded on the Pink Open Market under the symbol “PTEO.” The following table sets forth, for the fiscal periods indicated,
the range of high and low sales prices of our Common Stock.
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
|
Low
|
|
1st Quarter
|
|
$
|
0.09
|
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.03
|
|
|
$
|
0.07
|
|
|
$
|
0.05
|
|
2nd Quarter
|
|
$
|
0.03
|
(1)
|
|
$
|
0.02
|
(1)
|
|
$
|
0.19
|
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
|
$
|
0.05
|
|
3rd Quarter
|
|
|
–
|
|
|
|
–
|
|
|
$
|
0.35
|
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
|
$
|
0.03
|
|
4th Quarter
|
|
|
–
|
|
|
|
–
|
|
|
$
|
0.18
|
|
|
$
|
0.03
|
|
|
$
|
0.08
|
|
|
$
|
0.03
|
|
_______________
|
(1)
|
Through April 30, 2020.
|
Dividends
We have never paid a cash dividend on our
Common Stock. We do not intend to pay any cash dividends on our common stock in the foreseeable future.
Prior Public Offerings
We have not made an underwritten
public offering of our Common Stock for cash during the three years preceding the date of this proxy statement.
Prior Stock Purchases
We have not repurchased any shares of our
Common Stock in the past two years.
Conduct of Our Business after the Reverse
Stock Split
As described in this
proxy statement, the Company’s management has been exploring strategic alternatives in order to meet the Company’s
operating cash flow requirements, particularly as a result of the impact due to the recent COVID-19 outbreak. However, no plans
or proposals to effect any extraordinary corporate transaction, such as a merger, reorganization or liquidation, a sale or transfer
of any material amount of our assets, a change in management, a material change in our indebtedness or capitalization, or any other
material change in our corporate structure or business have been formalized, although these various alternatives continue to be
evaluated. We currently expect to conduct our business and operations after the Effective Date in substantially the same manner
as currently conducted, subject to the Company’s ability to implement a strategic plan in order to address its liquidity
constraints. However, there are no assurances that the Company will be successful in implementing any such strategic plan. Except
as described in this proxy statement with respect to the use of funds to finance the Reverse Stock Split and related costs and
our plans to deregister our Common Stock under the Exchange Act, the Reverse Stock Split is not anticipated to have a material
effect upon the conduct of our business.
Summary Financial Information
The summary consolidated
financial information attached as Appendix A to this proxy statement was derived from our audited consolidated financial
statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. This financial information is only
a summary and should be read in conjunction with our historical financial statements and the accompanying footnotes. Please see
the information set forth below under “Where You Can Find More Information.”
Past Contacts, Transactions, Negotiations
and Agreements
The following sets
forth certain information required pursuant to Item 1005(a) of Regulation M-A regarding certain transactions that occurred during
the past two years:
|
·
|
On December 30, 2000, the Company entered into a thirty-year license agreement, beginning January
1, 2001 (the “License Agreement”), with Dr. Oliver Wiedow, the owner and inventor of several patents, patent rights
and technologies related to Elafin. Mr. Wiedow currently serves as the Company President, Chief Executive Officer and Chief Financial
Officer and is a member of the Company’s Board. Pursuant to the License Agreement, the Company agreed to pay Dr. Wiedow an
annual license fee of 110,000 Euros for a period of six years. The License Agreement was amended in December 2008 to waive non-payment
defaults and to defer the due dates of each payment. In July 2011, in February 2012, February 2013, June 2014, and again in April
2017, Dr. Wiedow agreed in writing to waive the non-payment defaults and agreed to defer the due dates of the payments for the
outstanding balance of 570,000 Euro. As a result, the outstanding balance of 570,000 Euros is due on June 30, 2020. While the total
amount owed does not currently bear interest, the amended License Agreement provides that any late payment shall be subject to
interest at an annual rate equal to the German Base Interest Rate plus six percent. In the event that the Company’s financial
condition improves, the parties can agree to increase and/or accelerate the payments.
|
|
|
|
|
·
|
The amended License Agreement also
modified the royalty payment such that the Company will not only pay Dr. Wiedow a three percent royalty on gross revenues from
the Company’s sale of products based on the licensed technology but also three percent of the license fees (including upfront
and milestone payments and running royalties) received by the Company or its subsidiary from their sublicensing of the licensed
technology.
|
|
|
|
|
·
|
No royalty expense has been recognized
under the License Agreement since the Company has yet to generate any related revenues. At December 31, 2019 and 2018, the Company
has accrued approximately $639,000 and $652,000, respectively, of licensing fees payable to Dr. Wiedow. The decrease is solely
due to the strengthening of U.S. Dollar relative to the Euro. The Company owed Euro 570,000 under the licensing agreement at both
December 31, 2019 and 2018.
|
|
·
|
On February 28, 2020, the Company entered into a purchase agreement with Kai Bartels pursuant to
which the Company agreed to issue and sell to Mr. Bartels 4,250,000 shares of Common Stock at a price of $0.0247 per share, for
an aggregate purchase price of $104,975. The purchase price was equal to the closing price of Common Stock as quoted on the OTCQB
on February 25, 2020. in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, by
virtue of the exemptions available under Regulation S and the rules promulgated thereunder.
|
|
·
|
On February 29, 2020, the Company entered into a purchase agreement with Diethelm Siebuhr pursuant
to which the Company agreed to issue and sell to Mr. Siebuhr 4,250,000 shares of Common Stock at a price of $0.0247 per share,
for an aggregate purchase price of $104,975. The purchase price was equal to the closing price of Common Stock as quoted on the
OTCQB on February 25, 2020.
|
|
·
|
On December 12, 2018, the Company entered into a purchase agreement with Jork von Reden pursuant
to which the Company agreed to issue and sell to Mr. von Reden 1,000,000 shares of Common Stock at a price of $0.08 per share,
for an aggregate purchase price of $80,000. The purchase price was equal to the closing price of Common Stock as quoted on the
OTCQB on December 6, 2018. Mr. von Reden is a member of the Company’s Board.
|
Certain Information Concerning the Company’s
Directors and Executive Officers
The following sets
forth certain information with respect to the Company’s directors and executive officers:
Name
|
Information About Occupation(s) or Employment
|
Citizenship
|
Oliver Wiedow
|
President, Chief Executive Officer, Chief Financial Officer
of Proteo, Inc., a clinical stage drug development company
Address: 2102 Business Center Drive, Irvine, California
92612
Dates: November 2018 to current
Chair of the Supervisory Board of Proteo Biotech AG, Germany
Address: Am Kiel-Kanal 44, 24106 Kiel, Germany
Dates: 2000 to current
Professor for Dermatology at the Dept. of Dermatology, University
of Kiel
Address: Arnold-Heller-Straße 3,
24105 Kiel, Germany
Dates: 1999 to current
|
German
|
Jork von Reden
|
Managing Director of CFI Innovation GmbH Berlin Unternehmensberatung
und Beteiligungen Management consulting and investments
Address: Normannenstraße 4, 14129 Berlin, Germany
Dates: 2016 to current
Managing Director of Wind Energy Trust Sp.zo.o, Szczecin,
Development, financing and marketing of wind energy projects in Poland
Address: 72-006 Mierzyn Teczowa, Poland
Dates: 2009 to current
|
German
|
Hartmut Weigelt
|
Professor of Applied Biological Science at the University
of Applied Sciences in Hamm, Northrhrine-Westfalia, University for Logistics and Economy
Address: Platz der Deutschen Einheit 1, 59065 Hamm, Germany
Dates: 2008 to current
Professor of Applied Biological Science at the praxisHochschule/
University of Applied Sciences Cologne
Address: Neusserstrasse 99; 50670 Köln, Germany
Dates: 2014 to current
|
German
|
Birge Bargmann
|
Chief Executive Officer, of Proteo, Biotech AG, a clinical
stage drug development company
Address: Am Kiel-Kanal 44, 24106 Kiel, Germany
Dates: 2005 to current
President, Chief Executive Officer, Chief Financial Officer
of Proteo, Inc., a clinical stage drug development company
Address: 2102 Business Center Drive, Irvine, California
92612
Dates: 2005 to November 2018
|
German
|
Juergen Paal
|
Chief Executive Officer, of Proteo, Biotech AG, a clinical
stage drug development company
Address: Am Kiel-Kanal 44, 24106 Kiel, Germany
Dates: 2014 to current
|
German
|
None of the Company’s directors or
officers have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors).
None of the Company’s directors or
officers was a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed
without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities
laws.
Material U.S. Federal Income Tax Consequences of the Reverse
Stock Split
The following is a general discussion of
certain material U.S. federal income tax consequences of the Reverse Stock Split to U.S. holders (defined below) of our stock.
This discussion is for general information purposes only, is not intended as tax advice to any person or entity. All stockholders
are urged to consult with their own tax advisors with respect to the tax consequences of the Reverse Stock Split in light of their
particular situation. This discussion assumes that each of the pre-split shares were, and the post-split shares will be, held as
“capital assets,” as defined in Section 1221 of the Code.
This discussion does not address the tax
consequences of the Reverse Stock Split arising pursuant to the unearned income Medicare contribution tax, the laws of any state,
local, or non-U.S. jurisdiction, any U.S. federal estate or gift tax consequences, or any U.S. federal tax consequences other than
the material federal income tax consequences specifically addressed below. This discussion is based on the Internal Revenue
Code of 1986, as amended (the “Code”), and current Treasury Regulations, administrative rulings and court decisions,
all of which are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of,
and the conclusions reached in, this discussion. This discussion does not address the tax consequences to stockholders who are
subject to special tax rules, such as banks, insurance companies, regulated investment companies, financial institutions, personal
holding companies, partnerships (or entities treated as partnerships for U.S. federal income tax purposes), stockholders who are
not U.S. holders (as defined herein), U.S. holders whose functional currency is not the U.S. dollar, stockholders who hold their
shares as “qualified small business stock” or “Section 1244” stock, broker-dealers (or other dealers in
securities), stockholders who hold their stock as part of a straddle, hedge, conversion transaction, or other integrated investment,
holders that received their stock pursuant to the exercise of employee stock options or otherwise as compensation, retirement plans,
tax-exempt entities, or persons subject to the alternative minimum tax.
If an entity treated as a partnership for
U.S. federal income tax purposes owns shares, the U.S. federal income tax treatment of a partner in such partnership generally
will depend upon the status of the partner and the activities of the partnership. Partnerships that are owners of shares,
and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal, state, and local tax, non-U.S.
tax, and non-income tax consequences to them of the Reverse Stock Split.
We have not sought any ruling from the Internal
Revenue Service (“IRS”), nor have we sought an opinion from legal counsel with respect to the statements made and conclusions
reached throughout this general discussion. There can be no assurance that the IRS would agree with the statements and conclusions
set forth throughout this discussion, nor is there any assurance that such statements and conclusions will be sustained by a court
if challenged by the IRS.
OTHER
MATTERS
No matters, other than the Reverse Stock
Split Proposal and the Adjournment of Special Meeting Proposal (if necessary) will be presented for action at the Special Meeting.
|
By Order of the Board of Directors,
|
|
|
|
/s/ Oliver Wiedow
|
|
President, Chief Executive Officer, Chief Financial Officer and Director
|
|
|
Dated: [•], 2020
APPENDIX A
SUMMARY FINANCIAL INFORMATION
PROTEO, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
|
|
December 31,
|
|
December 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
99,543
|
|
|
$
|
89,132
|
|
Research supplies
|
|
|
47,402
|
|
|
|
57,785
|
|
Grant funds receivable
|
|
|
34,060
|
|
|
|
37,562
|
|
Prepaid expenses and other current assets
|
|
|
53,949
|
|
|
|
64,543
|
|
Total current assets
|
|
|
234,954
|
|
|
|
249,022
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
3,483
|
|
|
|
4,929
|
|
Total assets
|
|
$
|
238,437
|
|
|
$
|
253,951
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
109,585
|
|
|
$
|
127,217
|
|
Total current liabilities
|
|
|
109,585
|
|
|
|
127,217
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES
|
|
|
|
|
|
|
|
|
Accrued licensing fees
|
|
|
639,290
|
|
|
|
652,359
|
|
Other liabilities
|
|
|
142,438
|
|
|
|
145,396
|
|
Total long term liabilities
|
|
|
781,728
|
|
|
|
797,755
|
|
Total liabilities
|
|
|
891,313
|
|
|
|
924,972
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Non-voting preferred stock, par value $0.001 per share; 10,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series A, 723,590 shares issued and outstanding at December 31, 2019 and 2018
|
|
|
724
|
|
|
|
724
|
|
Series B-1, 120,000 shares and 100,000 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
|
|
120
|
|
|
|
100
|
|
Series B-2, 159,800 shares and 0 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
|
|
160
|
|
|
|
–
|
|
Common stock, par value $0.001 per share; 300,000,000 shares authorized; 24,879,350 and 24,379,350 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
|
|
24,880
|
|
|
|
24,380
|
|
Additional paid-in capital
|
|
|
9,385,584
|
|
|
|
9,144,464
|
|
Accumulated other comprehensive loss
|
|
|
(33,613
|
)
|
|
|
(31,231
|
)
|
Accumulated deficit
|
|
|
(10,030,731
|
)
|
|
|
(9,812,564
|
)
|
|
|
|
|
|
|
|
|
|
Total Proteo, Inc. Stockholders' Deficit
|
|
|
(652,876
|
)
|
|
|
(674,127
|
)
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
|
|
|
–
|
|
|
|
3,106
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(652,876
|
)
|
|
|
(671,021
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
238,437
|
|
|
$
|
253,951
|
|
|
|
|
|
|
|
|
|
|
Book value per share
|
|
$
|
(0.03
|
)
|
|
$
|
(0.03
|
)
|
PROTEO, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
|
|
2019
|
|
2018
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
Development Agreement
|
|
$
|
–
|
|
|
$
|
99,100
|
|
Net Grant revenue
|
|
|
–
|
|
|
|
106,892
|
|
|
|
|
–
|
|
|
|
205,992
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
215,208
|
|
|
|
208,736
|
|
Research and development, net of grants
|
|
|
30,004
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES
|
|
|
245,212
|
|
|
|
208,736
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(245,212
|
)
|
|
|
(2,744
|
)
|
|
|
|
|
|
|
|
|
|
INTEREST AND OTHER INCOME, NET
|
|
|
23,939
|
|
|
|
41,985
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(221,273
|
)
|
|
$
|
39,241
|
|
|
|
|
|
|
|
|
|
|
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
|
|
(3,106
|
)
|
|
|
3,106
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO PROTEO, INC.
|
|
$
|
(218,167
|
)
|
|
$
|
36,135
|
|
|
|
|
|
|
|
|
|
|
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
|
|
|
(2,382
|
)
|
|
|
(1,404
|
)
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
(220,549
|
)
|
|
$
|
34,731
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS PER SHARE
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
24,860,172
|
|
|
|
23,898,528
|
|
APPENDIX B
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION
OF
PROTEO, INC.
APPENDIX C
RIGHTS OF DISSENTING OWNERS UNDER NEVADA
LAW
NRS 92A.300 Definitions. As
used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words and terms defined in NRS
92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those sections.
NRS 92A.305 “Beneficial
stockholder” defined. “Beneficial stockholder” means a person who is a beneficial owner of shares
held in a voting trust or by a nominee as the stockholder of record.
NRS 92A.310 “Corporate
action” defined. “Corporate action” means the action of a domestic corporation.
NRS 92A.315 “Dissenter”
defined. “Dissenter” means a stockholder who is entitled to dissent from a domestic corporation’s
action under NRS 92A.380 and who exercises that right when and in the manner required by NRS 92A.400 to 92A.480,
inclusive.
NRS 92A.320 “Fair
value” defined. “Fair value,” with respect to a dissenter’s shares, means the value of the
shares determined:
1. Immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation
or depreciation in anticipation of the corporate action unless exclusion would be inequitable;
2. Using customary and current valuation concepts and techniques generally employed for similar businesses in the context
of the transaction requiring appraisal; and
3. Without discounting for lack of marketability or minority status.
NRS 92A.325 “Stockholder”
defined. “Stockholder” means a stockholder of record or a beneficial stockholder of a domestic corporation.
NRS 92A.330 “Stockholder
of record” defined. “Stockholder of record” means the person in whose name shares are registered
in the records of a domestic corporation or the beneficial owner of shares to the extent of the rights granted by a nominee’s
certificate on file with the domestic corporation.
NRS 92A.335 “Subject
corporation” defined. “Subject corporation” means the domestic corporation which is the issuer
of the shares held by a dissenter before the corporate action creating the dissenter’s rights becomes effective or the surviving
or acquiring entity of that issuer after the corporate action becomes effective.
NRS 92A.340 Computation
of interest. Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed from
the effective date of the action until the date of payment, at the rate of interest most recently established pursuant to NRS
99.040.
NRS 92A.350 Rights
of dissenting partner of domestic limited partnership. A partnership agreement of a domestic limited partnership
or, unless otherwise provided in the partnership agreement, an agreement of merger or exchange, may provide that contractual rights
with respect to the partnership interest of a dissenting general or limited partner of a domestic limited partnership are available
for any class or group of partnership interests in connection with any merger or exchange in which the domestic limited partnership
is a constituent entity.
NRS 92A.360 Rights
of dissenting member of domestic limited-liability company. The articles of organization or operating agreement
of a domestic limited-liability company or, unless otherwise provided in the articles of organization or operating agreement, an
agreement of merger or exchange, may provide that contractual rights with respect to the interest of a dissenting member are available
in connection with any merger or exchange in which the domestic limited-liability company is a constituent entity.
NRS 92A.370 Rights
of dissenting member of domestic nonprofit corporation.
1. Except as otherwise provided in subsection 2, and unless otherwise provided in the articles or bylaws, any member
of any constituent domestic nonprofit corporation who voted against the merger may, without prior notice, but within 30 days after
the effective date of the merger, resign from membership and is thereby excused from all contractual obligations to the constituent
or surviving corporations which did not occur before the member’s resignation and is thereby entitled to those rights, if
any, which would have existed if there had been no merger and the membership had been terminated or the member had been expelled.
2. Unless otherwise provided in its articles of incorporation or bylaws, no member of a domestic nonprofit corporation,
including, but not limited to, a cooperative corporation, which supplies services described in chapter 704 of NRS to
its members only, and no person who is a member of a domestic nonprofit corporation as a condition of or by reason of the ownership
of an interest in real property, may resign and dissent pursuant to subsection 1.
NRS 92A.380 Right
of stockholder to dissent from certain corporate actions and to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390 and subject to the limitation in paragraph
(f), any stockholder is entitled to dissent from, and obtain payment of the fair value of the stockholder’s shares in the
event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation is a constituent entity:
(1) If approval by the stockholders is required for the merger by NRS 92A.120 to 92A.160, inclusive, or the
articles of incorporation, regardless of whether the stockholder is entitled to vote on the plan of merger;
(2) If the domestic corporation is a subsidiary and is merged with its parent pursuant to NRS 92A.180; or
(3) If the domestic corporation is a constituent entity in a merger pursuant to NRS 92A.133.
(b) Consummation of a plan of conversion to which the domestic corporation is a constituent entity as the corporation whose
subject owner’s interests will be converted.
(c) Consummation of a plan of exchange to which the domestic corporation is a constituent entity as the corporation whose
subject owner’s interests will be acquired, if the stockholder’s shares are to be acquired in the plan of exchange.
(d) Any corporate action taken pursuant to a vote of the stockholders to the extent that the articles of incorporation, bylaws
or a resolution of the board of directors provides that voting or nonvoting stockholders are entitled to dissent and obtain payment
for their shares.
(e) Accordance of full voting rights to control shares, as defined in NRS 78.3784, only to the extent provided for pursuant
to NRS 78.3793.
(f) Any corporate action not described in this subsection pursuant to which the stockholder would be obligated, as a result
of the corporate action, to accept money or scrip rather than receive a fraction of a share in exchange for the cancellation of
all the stockholder’s outstanding shares, except where the stockholder would not be entitled to receive such payment pursuant
to NRS 78.205, 78.2055 or 78.207. A dissent pursuant to this paragraph applies only to the fraction of a share,
and the stockholder is entitled only to obtain payment of the fair value of the fraction of a share.
2. A stockholder who is entitled to dissent and obtain payment pursuant to NRS 92A.300 to 92A.500, inclusive,
must not challenge the corporate action creating the entitlement unless the action is unlawful or constitutes or is the result
of actual fraud against the stockholder or the domestic corporation.
3. Subject to the limitations in this subsection, from and after the effective date of any corporate action described
in subsection 1, no stockholder who has exercised the right to dissent pursuant to NRS 92A.300 to 92A.500, inclusive,
is entitled to vote his or her shares for any purpose or to receive payment of dividends or any other distributions on shares.
This subsection does not apply to dividends or other distributions payable to stockholders on a date before the effective date
of any corporate action from which the stockholder has dissented. If a stockholder exercises the right to dissent with respect
to a corporate action described in paragraph (f) of subsection 1, the restrictions of this subsection apply only to the shares
to be converted into a fraction of a share and the dividends and distributions to those shares.
NRS 92A.390 Limitations
on right of dissent: Stockholders of certain classes or series; action of stockholders not required for plan of merger; shares
of stock not issued and outstanding on date of first announcement of proposed action.
1. There is no right of dissent pursuant to paragraph (a), (b), (c) or (f) of subsection 1 of NRS 92A.380 in
favor of stockholders of any class or series which is:
(a) A covered security under section 18(b)(1)(A) or (B) of the Securities Act of 1933, 15 U.S.C. § 77r(b)(1)(A) or (B),
as amended;
(b) Traded in an organized market and has at least 2,000 stockholders and a market value of at least $20,000,000, exclusive
of the value of such shares held by the corporation’s subsidiaries, senior executives, directors and beneficial stockholders
owning more than 10 percent of such shares; or
(c) Issued by an open end management investment company registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, 15 U.S.C. §§ 80a-1 et seq., as amended, and which may be redeemed at the option of the holder at
net asset value,
Ê unless
the articles of incorporation of the corporation issuing the class or series or the resolution of the board of directors approving
the plan of merger, conversion or exchange expressly provide otherwise.
2. The applicability of subsection 1 must be determined as of:
(a) The record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders
to act upon the corporate action requiring dissenter’s rights; or
(b) The day before the effective date of such corporate action if there is no meeting of stockholders.
3. Subsection 1 is not applicable and dissenter’s rights are available pursuant to NRS 92A.380 for the
holders of any class or series of shares who are required by the terms of the corporate action to accept for such shares anything
other than:
(a) Cash;
(b) Any security or other proprietary interest of any other entity, including, without limitation, shares, equity interests
or contingent value rights, that satisfies the standards set forth in subsection 1 at the time the corporate action becomes effective;
or
(c) Any combination of paragraphs (a) and (b).
4. There is no right of dissent for any holders of stock of the surviving domestic corporation if the plan of merger
does not require action of the stockholders of the surviving domestic corporation under NRS 92A.130.
5. There is no right of dissent for any holders of stock of the parent domestic corporation if the plan of merger does
not require action of the stockholders of the parent domestic corporation under NRS 92A.180.
6. There is no right of dissent with respect to any share of stock that was not issued and outstanding on the date of
the first announcement to the news media or to the stockholders of the terms of the proposed action requiring dissenter’s
rights.
NRS 92A.400 Limitations
on right of dissent: Assertion as to portions only to shares registered to stockholder; assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter’s rights as to fewer than all of the shares registered in his
or her name only if the stockholder of record dissents with respect to all shares of the class or series beneficially owned by
any one person and notifies the subject corporation in writing of the name and address of each person on whose behalf the stockholder
of record asserts dissenter’s rights. The rights of a partial dissenter under this subsection are determined as if the shares
as to which the partial dissenter dissents and his or her other shares were registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter’s rights as to shares held on his or her behalf only if the beneficial
stockholder:
(a) Submits to the subject corporation the written consent of the stockholder of record to the dissent not later than the
time the beneficial stockholder asserts dissenter’s rights; and
(b) Does so with respect to all shares of which he or she is the beneficial stockholder or over which he or she has power
to direct the vote.
NRS 92A.410 Notification
of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenter’s rights is submitted to a vote at a stockholders’
meeting, the notice of the meeting must state that stockholders are, are not or may be entitled to assert dissenter’s rights
under NRS 92A.300 to 92A.500, inclusive. If the domestic corporation concludes that dissenter’s rights are
or may be available, a copy of NRS 92A.300 to 92A.500, inclusive, must accompany the meeting notice sent to those
stockholders of record entitled to exercise dissenter’s rights.
2. If the corporate action creating dissenter’s rights is taken by written consent of the stockholders or without
a vote of the stockholders, the domestic corporation shall notify in writing all stockholders of record entitled to assert dissenter’s
rights that the action was taken and send them the dissenter’s notice described in NRS 92A.430.
NRS 92A.420 Prerequisites
to demand for payment for shares.
1. If a proposed corporate action creating dissenter’s rights is submitted to a vote at a stockholders’
meeting, a stockholder who wishes to assert dissenter’s rights with respect to any class or series of shares:
(a) Must deliver to the subject corporation, before the vote is taken, written notice of the stockholder’s intent to
demand payment for his or her shares if the proposed action is effectuated; and
(b) Must not vote, or cause or permit to be voted, any of his or her shares of such class or series in favor of the proposed
action.
2. If a proposed corporate action creating dissenter’s rights is taken by written consent of the stockholders,
a stockholder who wishes to assert dissenter’s rights with respect to any class or series of shares must not consent to or
approve the proposed corporate action with respect to such class or series.
3. A stockholder who does not satisfy the requirements of subsection 1 or 2 and NRS 92A.400 is not entitled
to payment for his or her shares under this chapter.
NRS 92A.430 Dissenter’s
notice: Delivery to stockholders entitled to assert rights; contents.
1. The subject corporation shall deliver a written dissenter’s notice to all stockholders of record entitled to
assert dissenter’s rights in whole or in part, and any beneficial stockholder who has previously asserted dissenter’s
rights pursuant to NRS 92A.400.
2. The dissenter’s notice must be sent no later than 10 days after the effective date of the corporate action
specified in NRS 92A.380, and must:
(a) State where the demand for payment must be sent and where and when certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to what extent the transfer of the shares will be restricted
after the demand for payment is received;
(c) Supply a form for demanding payment that includes the date of the first announcement to the news media or to the stockholders
of the terms of the proposed action and requires that the person asserting dissenter’s rights certify whether or not the
person acquired beneficial ownership of the shares before that date;
(d) Set a date by which the subject corporation must receive the demand for payment, which may not be less than 30 nor more
than 60 days after the date the notice is delivered and state that the stockholder shall be deemed to have waived the right to
demand payment with respect to the shares unless the form is received by the subject corporation by such specified date; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
NRS 92A.440 Demand
for payment and deposit of certificates; loss of rights of stockholder; withdrawal from appraisal process.
1. A stockholder who receives a dissenter’s notice pursuant to NRS 92A.430 and who wishes to exercise
dissenter’s rights must:
(a) Demand payment;
(b) Certify whether the stockholder or the beneficial owner on whose behalf he or she is dissenting, as the case may be, acquired
beneficial ownership of the shares before the date required to be set forth in the dissenter’s notice for this certification;
and
(c) Deposit the stockholder’s certificates, if any, in accordance with the terms of the notice.
2. If a stockholder fails to make the certification required by paragraph (b) of subsection 1, the subject corporation
may elect to treat the stockholder’s shares as after-acquired shares under NRS 92A.470.
3. Once a stockholder deposits that stockholder’s certificates or, in the case of uncertified shares makes demand
for payment, that stockholder loses all rights as a stockholder, unless the stockholder withdraws pursuant to subsection 4.
4. A stockholder who has complied with subsection 1 may nevertheless decline to exercise dissenter’s rights and
withdraw from the appraisal process by so notifying the subject corporation in writing by the date set forth in the dissenter’s
notice pursuant to NRS 92A.430. A stockholder who fails to so withdraw from the appraisal process may not thereafter withdraw
without the subject corporation’s written consent.
5. The stockholder who does not demand payment or deposit his or her certificates where required, each by the date set
forth in the dissenter’s notice, is not entitled to payment for his or her shares under this chapter.
NRS 92A.450 Uncertificated
shares: Authority to restrict transfer after demand for payment. The subject corporation may restrict the transfer
of shares not represented by a certificate from the date the demand for their payment is received.
NRS 92A.460 Payment
for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for payment pursuant to NRS
92A.440, the subject corporation shall pay in cash to each dissenter who complied with NRS 92A.440 the amount the subject
corporation estimates to be the fair value of the dissenter’s shares, plus accrued interest. The obligation of the subject
corporation under this subsection may be enforced by the district court:
(a) Of the county where the subject corporation’s principal office is located;
(b) If the subject corporation’s principal office is not located in this State, in the county in which the corporation’s
registered office is located; or
(c) At the election of any dissenter residing or having its principal or registered office in this State, of the county where
the dissenter resides or has its principal or registered office.
Ê The
court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the
date of payment, a statement of income for that year, a statement of changes in the stockholders’ equity for that year or,
where such financial statements are not reasonably available, then such reasonably equivalent financial information and the latest
available quarterly financial statements, if any;
(b) A statement of the subject corporation’s estimate of the fair value of the shares; and
(c) A statement of the dissenter’s rights to demand payment under NRS 92A.480 and that if any such stockholder
does not do so within the period specified, such stockholder shall be deemed to have accepted such payment in full satisfaction
of the corporation’s obligations under this chapter.
NRS 92A.470 Withholding
payment for shares acquired on or after date of dissenter’s notice: General requirements.
1. A subject corporation may elect to withhold payment from a dissenter unless the dissenter was the beneficial owner
of the shares before the date set forth in the dissenter’s notice as the first date of any announcement to the news media
or to the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, within 30 days after receipt of a demand for payment
pursuant to NRS 92A.440, the subject corporation shall notify the dissenters described in subsection 1:
(a) Of the information required by paragraph (a) of subsection 2 of NRS 92A.460;
(b) Of the subject corporation’s estimate of fair value pursuant to paragraph (b) of subsection 2 of NRS 92A.460;
(c) That they may accept the subject corporation’s estimate of fair value, plus interest, in full satisfaction of their
demands or demand appraisal under NRS 92A.480;
(d) That those stockholders who wish to accept such an offer must so notify the subject corporation of their acceptance of
the offer within 30 days after receipt of such offer; and
(e) That those stockholders who do not satisfy the requirements for demanding appraisal under NRS 92A.480 shall
be deemed to have accepted the subject corporation’s offer.
3. Within 10 days after receiving the stockholder’s acceptance pursuant to subsection 2, the subject corporation
shall pay in cash the amount offered under paragraph (b) of subsection 2 to each stockholder who agreed to accept the subject corporation’s
offer in full satisfaction of the stockholder’s demand.
4. Within 40 days after sending the notice described in subsection 2, the subject corporation shall pay in cash the
amount offered under paragraph (b) of subsection 2 to each stockholder described in paragraph (e) of subsection 2.
NRS 92A.480 Dissenter’s
estimate of fair value: Notification of subject corporation; demand for payment of estimate.
1. A dissenter paid pursuant to NRS 92A.460 who is dissatisfied with the amount of the payment may notify
the subject corporation in writing of the dissenter’s own estimate of the fair value of his or her shares and the amount
of interest due, and demand payment of such estimate, less any payment pursuant to NRS 92A.460. A dissenter offered payment
pursuant to NRS 92A.470 who is dissatisfied with the offer may reject the offer pursuant to NRS 92A.470 and
demand payment of the fair value of his or her shares and interest due.
2. A dissenter waives the right to demand payment pursuant to this section unless the dissenter notifies the subject
corporation of his or her demand to be paid the dissenter’s stated estimate of fair value plus interest under subsection
1 in writing within 30 days after receiving the subject corporation’s payment or offer of payment under NRS 92A.460 or 92A.470 and
is entitled only to the payment made or offered.
NRS 92A.490 Legal
proceeding to determine fair value: Duties of subject corporation; powers of court; rights of dissenter.
1. If a demand for payment pursuant to NRS 92A.480 remains unsettled, the subject corporation shall commence
a proceeding within 60 days after receiving the demand and petition the court to determine the fair value of the shares and accrued
interest. If the subject corporation does not commence the proceeding within the 60-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded by each dissenter pursuant to NRS 92A.480 plus interest.
2. A subject corporation shall commence the proceeding in the district court of the county where its principal office
is located in this State. If the principal office of the subject corporation is not located in this State, the right to dissent
arose from a merger, conversion or exchange and the principal office of the surviving entity, resulting entity or the entity whose
shares were acquired, whichever is applicable, is located in this State, it shall commence the proceeding in the county where the
principal office of the surviving entity, resulting entity or the entity whose shares were acquired is located. In all other cases,
if the principal office of the subject corporation is not located in this State, the subject corporation shall commence the proceeding
in the district court in the county in which the corporation’s registered office is located.
3. The subject corporation shall make all dissenters, whether or not residents of Nevada, whose demands remain unsettled,
parties to the proceeding as in an action against their shares. All parties must be served with a copy of the petition. Nonresidents
may be served by registered or certified mail or by publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under subsection 2 is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value.
The appraisers have the powers described in the order appointing them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a judgment:
(a) For the amount, if any, by which the court finds the fair value of the dissenter’s shares, plus interest, exceeds
the amount paid by the subject corporation; or
(b) For the fair value, plus accrued interest, of the dissenter’s after-acquired shares for which the subject corporation
elected to withhold payment pursuant to NRS 92A.470.
NRS 92A.500 Assessment
of costs and fees in certain legal proceedings.
1. The court in a proceeding to determine fair value shall determine all of the costs of the proceeding, including the
reasonable compensation and expenses of any appraisers appointed by the court. The court shall assess the costs against the subject
corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable,
to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment.
2. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts
the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the court finds the subject corporation did not substantially
comply with the requirements of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided
by NRS 92A.300 to 92A.500, inclusive.
3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should not be assessed against the subject corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the costs against the subject corporation,
except that the court may assess costs against all or some of the dissenters who are parties to the proceeding, in amounts the
court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding.
5. To the extent the subject corporation fails to make a required payment pursuant to NRS 92A.460, 92A.470 or 92A.480,
the dissenter may bring a cause of action directly for the amount owed and, to the extent the dissenter prevails, is entitled to
recover all expenses of the suit.
6. This section does not preclude any party in a proceeding commenced pursuant to NRS 92A.460 or 92A.490 from
applying the provisions of NRS 17.117 or N.R.C.P. 68.
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PROTEO, INC.