TO APPROVE CERTIFICATE OF AMENDMENT NO. 2 OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF FIREFLY NEUROSCIENCE, INC., AS AMENDED
Overview
Our Amended and Restated Certificate of Incorporation, as amended (the “Certificate”), currently authorizes the Company to issue a total of 5,001,000,000 shares, consisting of 5,000,000,000 shares of Common Stock, par value $0.0001 per share, and 1,000,000 shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”). Our Board of Directors has approved, and is seeking stockholder approval of the Certificate of Amendment No. 2 of Amended and Restated Certificate of Incorporation of Firefly Neuroscience, Inc., as amended (the “Certificate of Amendment”), to implement a reduction in the total number of authorized shares from 5,001,000,000 to 101,000,000, consisting of (i) 100,000,000 shares of Common Stock, par value $0.0001 per share, and (ii) 1,000,000 shares of Preferred Stock, par value $0.0001 per share (the “Authorized Share Reduction”).
The Board has unanimously determined that the Certificate of Amendment is advisable and in the best interests of the Company and our stockholders, and recommends that our stockholders approve the Certificate of Amendment. In accordance with the General Corporation Law of the State of Delaware (the “DGCL”), we are hereby seeking approval of the Certificate of Amendment by our stockholders.
Purpose of the Authorized Share Reduction
The primary purpose of the Authorized Share Reduction is to reduce the Company’s future annual franchise taxes to be paid to the State of Delaware. Delaware franchise taxes are calculated based, in part, on the total number of shares of stock a corporation is authorized to issue under its certificate of incorporation. As a result, companies with higher authorized share counts typically incur higher franchise tax obligations. By reducing the total number of authorized shares from 5,001,000,000 to 101,000,000, if the Authorized Share Reduction is approved, the Company anticipates that its annual Delaware franchise taxes will be reduced substantially, thereby preserving capital that can be directed toward the Company’s operations and strategic initiatives.
The Board believes that the reduced number of authorized shares will be sufficient to meet the Company’s projected capital stock needs for the foreseeable future. These needs include capital-raising transactions, the issuance of equity-based compensation under the Company’s existing or future equity incentive plans, and strategic transactions that may involve the issuance of Common Stock or other equity or equity-linked securities. The Board will continue to evaluate the Company’s capitalization requirements and may recommend future amendments to the certificate of incorporation if circumstances warrant an increase in authorized shares.
Effects of the Authorized Share Reduction
If the Board exercises its authority to file the Certificate of Amendment and the Authorized Share Reduction is effected, the total number of authorized shares will be decreased from 5,001,000,000 to 101,000,000, consisting of 100,000,000 authorized shares of Common Stock and 1,000,000 authorized shares of Preferred Stock (none of which shares of Preferred Stock are currently outstanding). The Certificate of Amendment will not change the par value of the shares of Common Stock or Preferred Stock, affect the number of shares of Common Stock outstanding, affect the rights or privileges of holders of shares of Common Stock, or have any effect on any outstanding securities, including outstanding equity awards, that are exercisable, convertible or exchangeable for shares of Common Stock.
Effecting the Certificate of Amendment could potentially adversely affect the Company. The decrease in the number of shares of Common Stock that would be authorized, but not issued or outstanding, could result in less latitude for the Board to issue shares of Common Stock in the future, including when we determine doing so would be in the best interests of the Company and the stockholders, such as in connection with possible future financings, acquisitions, stock dividends and other corporate purposes.
In the event the Board determines that it would be in the Company’s best interests to issue a number of shares of Common Stock in excess of the number of shares then authorized but unissued and unreserved, the Company would be required to seek stockholder approval to increase the number of authorized shares of Common Stock. If the stockholders do not approve such increase in a timely manner, or at all, the Company may be unable to take advantage of one or more opportunities that might otherwise be advantageous to the Company and its stockholders. However, the Board believes that these risks are outweighed by the anticipated benefits of reducing the amount of the Company’s Delaware franchise tax obligations.
