• | the Board believes that the increase in the number of available shares of Common Stock following the Reverse Stock Split will provide the Company with the ability to support its future anticipated growth and would provide greater flexibility to consider and respond to future business opportunities and needs as they arise, including equity financings and stock-based acquisitions of new technology and product development candidates; |
• | the Board believes a higher stock price may help generate investor interest in the Company and help the Company attract and retain employees. |
If the reverse stock split successfully increases the per share price of our Common Stock, the Board also believes this increase may increase trading volume in our Common Stock and facilitate future financings by the Company.
Issuance of Preferred Stock
On May 2, 2022, the Company closed a preferred stock offering, in which the Company issued 1,000,006 shares of Series A Preferred Stock with an aggregate stated value of $20 million and 250,005 shares of Series B Preferred Stock with an aggregate stated value of $5 million. Total gross proceeds from the offering, before deducting the placement agent’s fees and other estimated offering expenses, is approximately $25 million. Each share of Preferred Stock has a purchase price of $19.00, representing an original issue discount of 5% of the $20.00 stated value of each share. Each share of Preferred Stock is convertible into shares of Common Stock at an initial conversion price of $0.45 per share.
Each share of Series A Preferred Stock outstanding on the Record Date has a number of votes equal to the number of shares of Common Stock issuable upon conversion of such share (whether or not such shares are then convertible). Accordingly, as of the Record Date, each share of Series A Preferred Stock has approximately 44.444 votes, which is determined by dividing $20.00, the stated value of one share of Series A Preferred Stock, by $0.45, the conversion price. As of the Record Date, there were 1,000,006 shares of our Series A Preferred Stock issued and outstanding, convertible into an aggregate of 44,444,710 shares of Common Stock. The holders of the Series A Preferred Stock have agreed to not transfer their shares of Series A Preferred Stock until after the Special Meeting, attend the Special Meeting, vote all shares of Series A Preferred Stock in favor of the Reverse Stock Split Proposal, and, upon request by the Company, grant the Company or its designee an irrevocable proxy to vote all shares of Series A Preferred Stock in favor of the Reverse Stock Split Proposal.
Each share of Series B Preferred Stock outstanding on the Record Date entitles the holder thereof to 15,000 votes on the Reverse Stock Split. As of the Record Date, there were 250,005 shares of our Series B Preferred Stock issued and outstanding, convertible into an aggregate of 11,111,333 shares of Common Stock. The holders of the Series B Preferred Stock have agreed to not transfer their shares of Series B Preferred Stock until after the Special Meeting, attend the Special Meeting, vote all shares of Series B Preferred Stock in the same proportion as the aggregate shares of Common Stock (excluding any shares of Common Stock that are not voted) and Series A Preferred Stock are voted on the Reverse Stock Split Proposal and, upon request by the Company, grant the Company or its designee an irrevocable proxy to vote the shares of Series B Preferred Stock in accordance with the above. As an example, if 70% of the aggregate votes cast by Common Stock and Series A Preferred Stock voting on the Reverse Stock Split Proposal are voted in favor thereof and 30% of the aggregate votes cast by Common Stock and Series A Preferred Stock voting on the Reverse Stock Split Proposal are voted against such Proposal, then 70% of the votes entitled to be cast by Series B Preferred Stock will be cast in favor of the Proposal and 30% of such votes will be cast against the Proposal.
Nasdaq Requirements for Continued Listing
As previously disclosed in our Current Report on Form 8-K filed on November 19, 2021, the Company received a deficiency letter from the Nasdaq Stock Market (“Nasdaq”) notifying the Company that the closing bid price for the Common Stock was below the minimum $1.00 per share requirement for 30 consecutive business days for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”), and the Company has been provided an initial period of 180 calendar days to regain compliance with the Bid Price Requirement. To regain compliance with the Bid Price Requirement, the closing bid price for the Common Stock must be at least $1.00 for a minimum of 10 consecutive business days.
One of the effects of the reverse stock split will be to effectively increase the proportion of authorized shares that are unissued relative to those that are issued. This could result in the Company’s management being able to issue more
