JAGX Jaguar Health Inc

PROPOSAL 3—APPROVAL OF THE ADOPTION OF THE AMENDMENT TO THE COI TO EFFECT THE REVERSE STOCK SPLIT

        At the Annual Meeting, stockholders will be asked to approve an amendment to our COI to effect a reverse stock split of our issued and outstanding Common Stock by a numerical ratio of not less than 1-for-11 and not more than 1-for-15, with the exact ratio, if approved and effected at all, to be set within that range at the discretion of the board of directors and publicly announced by the Company on or before June 30, 2018. The proposed amendment to the COI reflecting the Reverse Stock Split is included in Annex A to this Proxy Statement. By approving this proposal, stockholders would give the board of directors the authority, but not the obligation, to effect the Reverse Stock Split and full discretion to approve the ratio at which shares of Common Stock will be reclassified, from and including a ratio of 1-for-11 and up to and including a ratio of 1-for-15. The ratio (if any) selected by the board of directors for the Reverse Stock Split would be publicly disclosed by the Company to the stockholders on or before the date on which the amendment to the COI reflecting the Reverse Stock Split is filed with the Secretary of State of the State of Delaware.

        At a special meeting of stockholders on March 12, 2018 (the "2018 Special Meeting"), our stockholders approved a proposal that would allow us to effect a reverse stock split at any time prior to June 30, 2018 at a ratio not less than 1-for-1.2 and not greater than 1-for-10, with the exact ratio, if approved and effected at all, to be set within that range at the discretion of the board of directors before June 30, 2018 without further approval or authorization of the Company's stockholders. Since the special meeting, our board of directors has determined that a higher ratio for the reverse stock split and corresponding higher market price per share of Common Stock would be beneficial to the Company. As such, if this Proposal 3 is approved, the board of directors intends to effect the reverse stock split within the range specified in this Proposal 3 instead of the range specified in the reverse stock split proposal previously approved by the Company's stockholders at the 2018 Special Meeting.

        We are requesting stockholder approval to effect the Reverse Stock Split at a ratio of not less than 1-for-11 and not more than 1-for-15, with the exact ratio determined by the board of directors and publicly announced by the Company on or before June 30, 2018, to provide the board of directors with the flexibility to determine the appropriate ratio and timing for the Reverse Stock Split based upon our performance and other market factors. However, the board of directors reserves the right to elect not to proceed with the Reverse Stock Split, even if approved, and to abandon the Reverse Stock Split if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of our stockholders. No further action by the stockholders will be required for the board of directors to either implement or abandon the Reverse Stock Split.

        If the board of directors does not effect the Reverse Stock Split on or before June 30, 2018, any authority granted to the board of directors by our stockholders pursuant to this Proposal 3 will terminate.

Reasons for the Reverse Stock Split

        The board of directors has authorized the resolution to seek stockholder approval to effect the Reverse Stock Split with the primary intent of increasing the price of our Common Stock in order to meet The Nasdaq Capital Market's minimum price per share criteria for continued listing on that exchange. Our Common Stock is publicly traded and listed on The Nasdaq Capital Market under the symbol "JAGX." The board of directors believes that, in addition to increasing the price of our Common Stock, the reverse stock split would also reduce certain of our costs, such as Nasdaq listing fees, and make our Common Stock more attractive to a broader range of institutional and other investors. The combination of lower transaction costs and increased interest from institutional investors and investment funds may ultimately improve the trading liquidity of our Common Stock. Accordingly,

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we believe that authority granted to the board of directors to effect the Reverse Stock Split is in the Company's and the stockholders' best interests.

        On May 16, 2017, we received a letter from the Listing Qualifications Department of Nasdaq notifying us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price for the Company's listed securities was less than $1 for the previous 30 consecutive business days. Since we did not regain compliance with the minimum bid price requirement during the initial 180 calendar day grace period, on November 13, 2017, we requested and were granted a second 180 calendar day grace period, or until May 14, 2018, to regain compliance with the minimum bid price requirement. Since the Annual Meeting is scheduled for May 18, 2018, we intend to request a further extension from Nasdaq following the end of the second 180 calendar day grace period.

        In addition to establishing a mechanism for the price of our Common Stock to meet Nasdaq's minimum bid price requirement, we also believe that the Reverse Stock Split will make our Common Stock more attractive to a broader range of institutional and other investors. It is our understanding that the current market price of our Common Stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. It is also our understanding that many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because brokers' commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. However, some investors may view the Reverse Stock Split negatively because it reduces the number of shares of Common Stock available in the public market. Lastly, our board of directors is required to approve a reverse stock split no later than June 30, 2018 pursuant to the terms of the Preferred Stock Purchase Agreement.

        Reducing the number of outstanding shares of our Common Stock through the Reverse Stock Split is intended, absent other factors, to increase the per share market price of our Common Stock. However, other factors, such as our financial results, market conditions and the market perception of our business may adversely affect the market price of our Common Stock. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, that the market price of our Common Stock will increase following the Reverse Stock Split, that the market price of our Common Stock will not decrease in the future, or that our Common Stock will achieve a high enough price per share to permit its continued listing by Nasdaq.

Certain Risks Associated with the Reverse Stock Split

        In evaluating the proposed Reverse Stock Split, the board of directors also took into consideration certain risks associated with reverse stock splits generally, including the negative perception of reverse stock splits held by some investors, analysts and other stock market participants, the fact that the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels, and the risks described below.

         There can be no assurance that the total market capitalization of our Common Stock (the aggregate value of our Common Stock at the then market price) after the implementation of the Reverse Stock Split will be equal to or greater than the total market capitalization before the Reverse Stock Split or that the per share market price of our Common Stock following the Reverse Stock Split will increase in proportion to the reduction in the number of shares of our Common Stock outstanding before the Reverse Stock Split.

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        There can be no assurance that the market price per share of our Common Stock after the Reverse Stock Split will remain unchanged or increase in proportion to the reduction in the number of shares of our Common Stock outstanding before the Reverse Stock Split. For example, based on the closing price of our Common Stock on April 12, 2018, of $0.18 per share, if the board of directors were to implement the Reverse Stock Split and utilize a ratio of 1-for-11, we cannot assure you that the post-split market price of our Common Stock would be $1.98 (that is, $0.18 multiplied by 11) per share or greater. The market price of our Common Stock may fluctuate and potentially decline after the Reverse Stock Split.

        Accordingly, the total market capitalization of our Common Stock after the Reverse Stock Split when and if approved and effected may be lower than the total market capitalization before the Reverse Stock Split. Moreover, in the future, the market price of our Common Stock following the Reverse Stock Split may not exceed or remain higher than the market price prior to the Reverse Stock Split.

         If the Reverse Stock Split is approved and effected, the resulting per-share market price may not attract institutional investors or investment funds and may not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of our Common Stock may not improve.

        While the board of directors believes that a higher stock price may help generate investor interest, there can be no assurance that the Reverse Stock Split will result in a per-share market price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of our Common Stock may not necessarily improve.

         A decline in the market price of our Common Stock after the Reverse Stock Split is approved and effected may result in a greater percentage decline than would occur in the absence of the Reverse Stock Split.

        If the Reverse Stock Split is approved and effected and the market price of our Common Stock declines, the percentage decline may be greater than would occur in the absence of the Reverse Stock Split. The market price of our Common Stock will, however, also be based upon our performance and other factors, which are unrelated to the number of shares of Common Stock outstanding.

Effecting the Reverse Stock Split; Board Discretion to Implement Reverse Stock Split

        If approved by stockholders at the Annual Meeting and the board of directors decides that it is in the best interests of the Company and our stockholders to effect the Reverse Stock Split, the board of directors will establish an appropriate ratio for the Reverse Stock Split based on several factors existing at such time, the Company will publicly announce the ratio selected by the board of directors and we will subsequently file an amendment to the COI, in the form of the proposed amendment to COI attached in Annex A . The board of directors will consider, among other factors, prevailing market conditions, the likely effect of the Reverse Stock Split on the trading price of our Common Stock and on our compliance with applicable Nasdaq listing requirements, and the marketability and liquidity of our Common Stock. The board of directors will also determine the appropriate timing for filing the amendment to our COI with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. If, for any reason, the board of directors deems it advisable, the board of directors in its sole discretion, may abandon the Reverse Stock Split at any time prior to the effectiveness of the amendment to our COI, without further action by our stockholders. Assuming the board of directors determines that it is in the best interests of the Company and our stockholders to proceed with the Reverse Stock Split, the Reverse Stock Split will be effective as of the date and time set forth in the amendment to our COI that is filed with the Secretary of State of the State of Delaware (the "Effective Time").

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        At the Effective Time, without any further action on the part of the Company or our stockholders, the outstanding shares of Common Stock held by stockholders of record as of the Effective Time will be converted into a lesser number of shares of Common Stock based on the ratio selected by the board of directors and publicly announce by the Company. For example, if the board of directors approves a ratio of 1-for-12, a stockholder who holds 1,200 shares of Common Stock as of the Effective Time will hold 100 shares of Common Stock following the Reverse Stock Split.

Effect on Outstanding Shares, Options, and Certain Other Securities

        If the Reverse Stock Split is approved and effected, the number of shares of our Common Stock owned by each stockholder will be reduced in the same proportion as the reduction in the total number of shares outstanding, such that the percentage of our Common Stock owned by each stockholder will remain unchanged, except for any de minimis change resulting from the treatment of any fractional shares that such stockholder would have received as a result of the Reverse Stock Split. The number of shares of Common Stock that may be received upon conversion, exercise or exchange, as the case may be, of outstanding options or other securities convertible into, or exercisable or exchangeable for, shares of our Common Stock, and the exercise or conversion prices for these securities, will also be adjusted in accordance with their terms, as of the Effective Time.

Effect on Registration and Stock Trading

        Our Common Stock is currently registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we are subject to the periodic reporting and other requirements of the Exchange Act. The proposed Reverse Stock Split will not affect the registration of our Common Stock under the Exchange Act. If the Reverse Stock Split is approved and effected, our Common Stock will receive a new CUSIP number.

Mechanics of Reverse Split

        If this Proposal 3 is approved by the stockholders at the Annual Meeting and the board of directors decides that it is in the best interests of the Company and our stockholders to effect the Reverse Stock Split, our stockholders will be notified of the ratio for the Reverse Stock Split selected by the board of directors and that the Reverse Stock Split has been approved and effected. The mechanics of the Reverse Stock Split will differ depending upon whether a stockholder holds its shares of Common Stock in brokerage accounts or "street name" or whether the shares are registered directly in a stockholder's name and held in book-entry form or certificate form.

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Our stockholders who hold shares of Common Stock in "street name" through a nominee (such as a bank or broker) will be treated in the same manner as stockholders whose shares are registered in their names, and nominees will be instructed to effect the Reverse Stock Split for their beneficial holders. However, nominees may have different procedures for processing the reverse stock split and stockholders holding shares in "street name" are encouraged to contact their nominees.



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Our registered stockholders may hold some or all of their shares of Common Stock electronically in book-entry form under the direct registration system for securities. These stockholders will not have stock certificates evidencing their ownership of our Common Stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts. Stockholders holding registered shares of our Common Stock in book-entry form need not take any action to receive post-Reverse Stock Split shares as a transaction statement will automatically be sent to the stockholder's address of record indicating the number of shares held.

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Some of our registered stockholders hold all their shares of Common Stock in certificate form or a combination of certificate and book-entry form. Stockholders holding shares of Common Stock in certificate form will receive a transmittal letter from the Transfer Agent as soon as practicable after the Effective Date of the Reverse Stock Split. The letter of transmittal will contain instructions for the surrender of stock certificates received prior to the Effective Time (the "Old Certificates") to the Transfer Agent in exchange for new certificates representing the appropriate number of whole shares of Common Stock giving effect to the Reverse Stock Split. No new stock certificates will be issued to any stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed Letter of Transmittal, to the Transfer Agent. The stockholders will then receive, at their option, either a new certificate or certificates or book-entry shares representing the number of whole shares of Common Stock into which their pre-Reverse Stock Split shares have been converted as a result of the Reverse Stock Split. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and to only represent the number of whole shares of post-Reverse Stock Split Common Stock to which the stockholders are entitled. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

Treatment of Fractional Shares

        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, based on the Reverse Stock Split ratio approved by our board of directors, will be entitled to receive cash (without interest or deduction) in lieu of such fractional shares from our transfer agent, upon receipt by our transfer agent of a properly completed and duly executed transmittal letter and, where shares are held in certificated form, the surrender of all old certificate(s), in an amount per share equal to the product obtained by multiplying (a) the closing price per share of our Common Stock on the effective date for the Reverse Stock Split as reported on the Nasdaq Stock Market by (b) the fraction of the share owned by the stockholder, without interest. The ownership of a fractional share interest will not give the holder any voting, dividend or other rights, except to receive the above-described cash payment.

Effect on Authorized but Unissued Shares of Capital Stock

        Currently, we are authorized to issue up to a total of 500,000,000 shares of Common Stock, of which [127,732,271] shares were issued and outstanding as of the Record Date, 50,000,000 shares of non-voting common stock, of which 42,617,893 shares were issued and outstanding as of the Record Date, and 10,000,000 shares of Preferred Stock, of which 5,524,926 were issued and outstanding as of the Record Date.

        In the event the board of directors decides to effect the Reverse Stock Split following stockholder approval of this Proposal 3 and Proposal 4 is approved at the Annual Meeting, the board of directors will also effect an amendment to the COI, which will result in a decrease in the authorized number of shares of our Common Stock to 150,000,000, regardless of the applicable Reverse Stock Split ratio set by the board of directors, concurrently with the amendment to our COI to effect the Reverse Stock Split. In the event the board of directors decides to effect the Reverse Stock Split following stockholder approval of this Proposal 3 and Proposal 4 is not approved at the Annual Meeting, the authorized number of shares of our Common Stock will remain at 500,000,000, regardless of the applicable Reverse Stock Split ratio set by the board of directors. The Reverse Stock Split, if approved and effected, will not have any effect on the authorized number of shares of our non-voting common stock or Preferred Stock.

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Accounting Consequences

        The Reverse Stock Split will not affect the par value of our Common Stock per share, which will remain $0.0001 par value per share. As a result, as of the Effective Time, the total of the stated capital attributable to Common Stock and the additional paid-in capital account on our balance sheet will not change due to the Reverse Stock Split. Reported per share net income or loss will be higher because there will be fewer shares of Common Stock outstanding.

No Going Private Transaction

        Notwithstanding the decrease in the number of outstanding shares following the implementation of the Reverse Stock Split, the board of directors does not intend for this transaction to be the first step in a "going private transaction" within the meaning of Rule 13e-3 of the Exchange Act, and the implementation of the proposed Reverse Stock Split will not cause the Company to go private.

No Dissenters' Rights

        Under the General Corporation Law of the State of Delaware (the "DGCL"), stockholders will not be entitled to dissenters' rights with respect to the proposed amendment to our COI to effect the reverse stock split, and we do not intend to independently provide stockholders with any such right.

Reservation of Right to Abandon the Amendment to our COI

        The board of directors reserves the right to abandon the proposed amendment to our COI described in this Proposal 3 without further action by our stockholders at any time before the Effective Time, even if stockholders approve the this Proposal 3 at the Annual Meeting. By voting in favor of the Reverse Stock Split, stockholders are also expressly authorizing the board of directors to determine not to proceed with, and abandon, the Reverse Stock Split if it should so decide.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

        The following discussion is a summary of the material U.S. federal income tax consequences of the proposed reverse stock split to U.S. Holders (as defined below) of our Common Stock. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the "IRS"), in each case in effect as of the date of this proxy statement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below and there can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the proposed reverse stock split.

        For purposes of this discussion, a "U.S. Holder" is a beneficial owner of our Common Stock that, for U.S. federal income tax purposes, is or is treated as (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or any other entity or arrangement treated as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust if (1) its administration is subject to the primary supervision of a court within the United States and all of its substantial decisions are subject to the control of one or more "United States persons" (within the meaning of Section 7701(a)(30) of the Code), or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

        This discussion is limited to U.S. Holders who hold our Common Stock as a "capital asset" within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion

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does not address all U.S. federal income tax consequences relevant to the particular circumstances of a U.S. Holder, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to U.S. Holders that are subject to special rules, including, without limitation, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, grantor trusts, tax-exempt organizations, brokers, dealers or traders in securities, commodities or currencies, stockholders who hold our Common Stock as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal income tax purposes, U.S. Holders that have a functional currency other than the U.S. dollar, or U.S. Holders who actually or constructively own 10% or more of our voting stock.

        If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Common Stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purposes) holding our Common Stock and the partners in such entities should consult their own tax advisors regarding the U.S. federal income tax consequences of the proposed reverse stock split to them.

        In addition, the following discussion does not address the U.S. federal estate and gift tax, alternative minimum tax, or state, local and non-U.S. tax law consequences of the proposed reverse stock split. Furthermore, the following discussion does not address any tax consequences of transactions effectuated before, after or at the same time as the proposed reverse stock split, whether or not they are in connection with the proposed reverse stock split.

        Each stockholder should consult his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the reverse stock split, as well as the consequences arising under the laws of any other taxing jurisdiction, including any state, local or foreign income tax consequences.

        The proposed reverse stock split is intended to be treated as a "recapitalization" for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E) of the Code. As a result, a U.S. Holder generally should not recognize gain or loss upon the proposed reverse stock split for U.S. federal income tax purposes. A U.S. Holder's aggregate adjusted tax basis in the shares of our Common Stock received pursuant to the proposed reverse stock split should equal the aggregate adjusted tax basis of the shares of our Common Stock exchanged therefor. The U.S. Holder's holding period in the shares of our Common Stock received pursuant to the proposed reverse stock split should include the holding period in the shares of our Common Stock exchanged therefor. U.S. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of Common Stock surrendered in a recapitalization to shares received in the recapitalization. U.S. Holders of shares of our Common Stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

        The U.S. federal income tax discussion set forth above does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular stockholder in light of such stockholder's circumstances and income tax situation. Accordingly, we urge you to consult with your own tax advisor with respect to all of the potential U.S. federal, state, local and foreign tax consequences to you of the reverse stock split.

Consequences if the Reverse Split is Not Approved

        In the event that the Reverse Stock Split is not approved, we intend to actively monitor the trading price of our Common Stock on The Nasdaq Capital Market and will consider available options to resolve our non-compliance with the Nasdaq listing rules. We believe that our ability to remain listed on The Nasdaq Capital Market would be significantly and negatively affected if the Reverse Stock Split is not approved. If we are unable to achieve an increase in our stock price and our Common Stock is

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subsequently delisted, we could experience significant negative impacts including the acceleration of our outstanding debt with Kingdon Capital Management L.L.C. In addition, if our Common Stock is delisted it will significantly and negatively affect our ability to obtain alternative debt or equity financing in order to support Company operations.

Demand Letter

        The Company has recently received a demand letter from a law firm representing a purported stockholder, relating to certain approvals obtained at the 2018 Special Meeting. The demand letter alleges that the Company miscalculated the votes with respect to (i) the proposal to amend the COI as filed with Secretary of State of the State of Delaware on March 15, 2018, which increased the authorized shares of Common Stock from 250,000,000 to 500,000,000 (the "Share Increase Proposal") and (ii) the proposal to amend the COI to effect a reverse stock split at a ratio of not less than 1-for-1.2 and not greater than 1-for-10, with the exact ratio, if approved and effected at all, to be set within that range at the discretion of the Company's board of directors before June 30, 2018 without further approval or authorization of the Company's stockholders (the "Former Reverse Stock Split Proposal"). As previously indicated, we did not implement the Former Reverse Stock Split Proposal.

        Specifically, the demand letter alleges that the votes with respect to the Share Increase Proposal and the Former Reverse Stock Split Proposal were not calculated in accordance with the disclosures made in the proxy statement for the 2018 Special Meeting. The proxy statement for the 2018 Special Meeting disclosed that the Share Increase Proposal and the Former Reverse Stock Split Proposal were "non-routine" matters and that shares held by banks and brokers acting as nominees for certain holders would not be voted with respect to the Share Increase Proposal and/or the Reverse Stock Split Proposal if they did not receive voting instructions from their clients. The demand letter alleges that some banks and brokers voted certain uninstructed shares in favor of the Share Increase Proposal and the Former Reverse Stock Split Proposal and that the votes by these banks and brokers should not have been counted.

        The Company is currently evaluating the demand letter. The Company believes that the Share Increase Proposal and the Former Reverse Stock Split Proposal were both approved by the requisite vote under the DGCL, our COI and our Bylaws. Moreover, even if such approvals were not properly obtained, the Company has not yet issued any of the 250,000,000 additional shares of Common Stock authorized by the amendment to the Certificate of Incorporation previously filed with the Secretary of State of the State of Delaware or effected any reverse stock split within the range approved at the 2018 Special Meeting.

Required Vote of Stockholders

        The vote required to approve Proposal 3 is the affirmative vote of the holders of a majority of the outstanding shares of Common Stock and Preferred Stock (on an as converted to Common Stock basis, subject to the 19.99% Limitation) as of the Record Date, present in person or represented by proxy at the Annual Meeting and entitled to vote, voting together as a single class. As a result, abstentions will have the same practical effect as a vote against Proposal 3.

         The board of directors unanimously recommends that the stockholders vote "FOR" Proposal No. 3 to effect a reverse stock split at a ratio of not less than 1-for-11 and not greater than 1-for-15, with the exact ratio, if approved and effected at all, to be set within that range at the discretion of the board of directors and publicly announced by the Company on or before June 30, 2018, without further approval or authorization of our stockholders.

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PROPOSAL 4—APPROVAL OF THE ADOPTION OF THE AMENDMENT TO THE COI TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK

        At the Annual Meeting, holders of our Common Stock will be asked to approve an amendment to our COI to decrease the number of authorized shares of Common Stock to 150,000,000 shares, contingent upon the Reverse Stock Split being approved and effected in accordance with Proposal 3. The proposed amendment to the COI reflecting the decrease to the Company's authorized shares of Common Stock is included in Annex B to this Proxy Statement.

        In the event that the board of directors decides to effect the Reverse Stock Split following stockholder approval of Proposal 3 and this Proposal 4 is approved at the Annual Meeting, the board of directors will also effect an amendment to our COI that will result in a decrease in the number of authorized shares of Common Stock from 500,000,000 to 150,000,000, concurrently with the amendment to our COI to effect the Reverse Stock Split. In the event that (i) Proposal 3 is approved by our stockholders at the Annual Meeting and the board of directors decides to effect the Reverse Stock Split following such approval and (ii) this Proposal 4 is not approved at the Annual Meeting, the authorized number of shares of our Common Stock will remain at 500,000,000.

        Even if Proposal 3 is approved at the Annual Meeting, the board of directors may determine in its sole discretion not to effect the Reverse Stock Split and not to file any amendments to our COI. If the board of directors determines not to implement the Reverse Stock Split in accordance with Proposal 3 on or before June 30, 2018, the number of authorized shares of our Common Stock will not be reduced to 150,000,000 in accordance with this Proposal 4, even if this proposal is approved at the Annual Meeting. If the board of directors determines to change the number of authorized shares of our Common Stock other than a reduction to 150,000,000 concurrently with effecting the Reverse Stock Split in accordance with Proposal 3, further stockholder approval would be required prior to the Company implementing any such change in the number of authorized shares of our Common Stock.

        If Proposal 3 is not approved, then we will not amend our COI to decrease the number of authorized shares of Common Stock.

        No changes to the COI are being proposed with respect to the number of authorized shares of non-voting common stock or Preferred Stock.

Reasons for the Amendment

        In the event that the Reverse Stock Split is approved and effected in accordance with Proposal 3, the board of directors believes, based on current information, that we will need fewer authorized shares of Common Stock to meet our projected capital stock needs for capital-raising transactions, issuance of equity-based compensation and, to the extent opportunities may arise in the future, strategic transactions that may involve our issuance of stock-based consideration. Therefore, the board of directors is seeking approval of an amendment to our COI to reduce our authorized capital stock.

Effects of the Amendment

        The decrease of the number of shares of authorized Common Stock (if it is approved by the Company's stockholders at the Annual Meeting) will not change any rights of any holder of our Common Stock as such decrease would only apply to unissued authorized Common Stock. Voting rights of the holders of the issued shares of Common Stock will remain the same.

        The proposed amendment to our COI would decrease the total number of authorized shares of our Common Stock to 150,000,000 shares. However, the proposed amendment would not change any of the current rights and privileges of our Common Stock or its par value.

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        In addition, the amendment proposed in this Proposal 4 would not be expected to limit our ability to use the remaining number of authorized shares of Common Stock for appropriate future corporate purposes, including equity financing transactions, debt-for-equity refinancing transactions, refinancing transactions with an equity component, acquisitions involving equity consideration and other equity considerations that the board of directors may determine to be in the best interests of the Company and its stockholders from time to time. If the Reverse Stock Split is approved and effected (assuming a reverse stock split ratio 11-to-1) in accordance with Proposal 3 and the number of authorized shares of Common Stock is reduced in accordance with this Proposal 4, we will have approximately 130 million shares of Common Stock available for future use, which we believe is a sufficient number of authorized but unissued shares given our currently anticipated needs.

        The proposed decrease in the number of authorized shares of our Common Stock could have adverse effects on us. We will have less flexibility to issue shares of Common Stock, including in connection with a potential merger or acquisition, other strategic transaction or follow-on offering if the number of authorized shares of our Common Stock is reduced. In the event that our board of directors determines that it would be in the best interests of the Company and its stockholders to issue a number of shares of Common Stock in excess of the number of then authorized but unissued and unreserved shares, we would be required to seek the approval of our stockholders to increase the number of shares of authorized Common Stock. If we are not able to obtain the approval of our stockholders for such an increase in a timely fashion, we may be unable to take advantage of opportunities that might otherwise be advantageous to us and our stockholders.

Required Vote of Stockholders

        The vote required to approve Proposal 4 is the affirmative vote of the holders of a majority of the outstanding shares of Common Stock and Preferred Stock (on an as converted to Common Stock basis, subject to the 19.99% Limitation) as of the Record Date, present in person or represented by proxy at the Annual Meeting and entitled to vote, voting together as a single class and entitled to vote. As a result, abstentions will have the same practical effect as a vote against Proposal 4.

         The board of directors unanimously recommends that the stockholders vote "FOR" Proposal No. 4 to amend our Third Amended and Restated Certificate of Incorporation to decrease the number of authorized shares of Common Stock to 150,000,000, contingent upon the Reverse Stock Split being approved and effected in accordance with Proposal 3.

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CORPORATE GOVERNANCE

Information Regarding the Board of Directors

        Our board of directors currently consists of eight (8) members, James J. Bochnowski, Lisa A. Conte, Jeffery C. Johnson, Folkert W. Kamphuis, John Micek III, Jiahao Qiu, Jonathan B. Siegel and Zhi Yang, Ph.D., who are divided into three classes with staggered three-year terms. Seven (7) members of our board of directors are elected by holders of the Common Stock, voting as a separate class. The holders of the Preferred Stock, voting as a separate class, are entitled to elect two directors (the "Series A Directors"), subject to certain limitations set forth in the Certificate of Designation of the Series A Convertible Participating Preferred Stock (the "Certificate of Designation"). As of the date of this Proxy Statement, the holders of Preferred Stock have designated one Series A Director, Mr. Johnson.

        Pursuant to the COI, the term of the three (3) Class III directorships will expire on the date of the Annual Meeting. We currently anticipate that the holders of the Preferred Stock, voting together as a separate class, will re-elect Mr. Johnson as a Class III director, who will serve and hold office for a three-year term expiring in 2021. We do not currently intend to nominate Mr. Kamphuis or Dr. Yang for reelection. Effective as of the date of the Annual Meeting, the number of authorized directorships will be reduced to seven (7) directors, consisting of three Class I Directors, two Class II Directors and two Class III Directors (both of which will be Series A Directors). Accordingly, we anticipate that one (1) of the Class III directorships will remain vacant until such directorship is filled by the holders of the Preferred Stock in accordance with our bylaws and the Certificate of Designation.

        The following table lists our directors, their respective ages and positions as of April 11, 2018: