JERUSALEM, July 8, 2024
/PRNewswire/ -- Scinai Immunotherapeutics Ltd.
(Nasdaq: SCNI) (the "Company"), a biotechnology company
focused on developing inflammation and immunology (I&I)
biological products and on providing CDMO services through its
Scinai Bioservices business unit, today announced that it has
received an updated non-binding Letter of Intent ("LoI") from the
European Investment Bank (the "EIB"). This updated LoI outlines
specific indicative terms for converting the majority of the EIB's
loan into equity in the form of preferred shares (the "Preferred
Shares"), which are convertible into American Depositary Shares
("ADSs") representing 19.5% of the fully diluted capital of the
Company at the time of closing. The number of ADSs into which the
preferred shares would be convertible would be fixed and without
anti-dilution rights. The updated LoI does not require a variable
remuneration, which in the previous LOI included 3% royalty on the
Company's revenues and 5% of any equity raise up to a limit of
EUR 70 million, nor does it provide
for mandatory dividends or mandatory redemption. The amount of the
loan that would be converted is approximately $28 million, while approximately $270,000 will stay as a loan payable on
Dec 31st, 2031. As
previously announced, the Company received a Nasdaq Staff
determination letter regarding noncompliance with the minimum
shareholders' equity required for continued listing (under Listing
Rule 5550(b)(1) or the "Equity Requirement"). At a hearing
with the Nasdaq Hearings Panel (the 'Hearings Panel") held on
June 18, 2024, the Company presented
a plan to address the Equity Requirement matter by converting a
significant portion of the loan owed by the Company to the EIB into
equity and as announced on July 3,
2024 the Hearing Panel has determined to grant the Company's
request to continue its listing on The Nasdaq Stock Market, subject
to the Company meeting certain conditions, including filing on or
before August 14, 2024, a public
disclosure demonstrating compliance with the Equity
Requirement.
Based on the Company's initial analysis with the assistance of
an external advisor, the Company believes that this loan to equity
conversion would immediately eliminate the shareholders' deficit of
$5.1 million (as of March 31st, 2024) and create a shareholders'
equity surplus. The Company has prepared a white paper analyzing
the accounting impact of the transaction and advising whether the
conversion would be treated as equity, thereby enabling the Company
to regain compliance with the Stockholders' Equity Requirement (the
"Rule"). The above-mentioned white paper is still under review by
our independent registered public accounting firm.
As part of its plan to regain compliance, the Company plans to
file financial statements for the quarter ended June 30, 2024, to be reviewed by its independent
registered public accounting firm, Kesselman & Kesselman,
Certified Public Accountants (Isr.), a member of
PricewaterhouseCoopers International Limited. The Company expects
to include the LOI description and its accounting implications in
the subsequent events footnote for the Q2 2024 financials. The
Company believes that the substantial reduction in long-term
liabilities should not only enable it to regain compliance with the
Rule but should also allow it to remain compliant for the next 12
months.
Additional details of the proposed terms are described below.
The Company believes that these terms are very favorable to the
Company and its shareholders, and that the substantial reduction in
its long-term liabilities should improve its standing in the
financial community.
The implementation of the restructuring terms set out in the LOI
is subject to obtaining formal approval from the appropriate
governing bodies of the EIB, including any revised terms of the
Finance Contract. The implementation of these revised terms, once
approved, also remains subject to reaching an agreement on the
amendment of the Finance Contract and any other relevant legal
documentation, and the fulfilment of any conditions precedent, all
to the EIB's satisfaction. There is no guarantee that the parties
will execute any final documents revising the Finance Contract, and
if executed, that the final revised terms will reflect the terms
described herein. Because the terms of the LoI contemplate
the issuance of a class of preferred shares, consummation of the
conversion is also subject to an amendment to the Company's
articles of association, to be approved by shareholders,
authorizing the class of preferred shares.
The following is a summary of the material terms of the Term
Sheet. The Company and the EIB intend to enter into definitive
agreements amending the Finance Contract and related documents
reflecting the terms below. In addition to the terms below, such
definitive agreements may also include rights commonly granted to
purchasers of private securities of public companies:
- Reduction of Principal amount - The outstanding
principal amount owed by the Company to the EIB would be reduced to
approximately $270,000 (equal to
EUR 250,000). The outstanding amount
would have a maturity date of December 31,
2031, would not be prepayable in advance, and no interest
would accrue or be due and payable on such amount. The Security
Agreement between the parties would be amended to cover the new
outstanding principal amount and the EIB would have a first ranking
secured lien up to the new principal amount. The limitations on the
Company under the Finance Contact, including the ability to incur
certain indebtedness and enter certain mergers and acquisitions,
would continue to apply
- Preferred Shares - the remaining then-outstanding
principal amount and accrued interest (approximately $28 million) at the time of the restructuring
would be converted into 1,000 Preferred Shares with the following
rights and limitations:
a. Conversion rights - The Preferred Shares will be
convertible into a fixed number of ADS representing in the
aggregate 19.5% of total issued capital of the Company on a fully
diluted basis at the closing of the restructuring (with each
Preferred Share convertible to a fixed number of ADSs representing
0.0195% of the fully diluted share capital of the Company as of the
closing of the restructuring). No anti-dilution rights would attach
to the Preferred Shares.
b. Redemption Value - the Preferred Shares would
entitle the holders thereof to redemption payments in the aggregate
amount of $34 million ($34,000 per Preferred Share). In the event a
Preferred Share is converted into Ordinary Shares, the right to
receive such payment for such Preferred Share will be extinguished.
The Company will pay the redemption payment only if and at
such time (i) as the Company elects, at its sole discretion, to
make any such redemption payments, provided that such redemption is
in compliance with applicable law, including the Company's
legal ability to pay a dividend to its shareholders, or (ii) in the
event of Liquidation (as defined in the Amended Articles) of the
Company, in which event the Company will first make the redemption
payment (either in whole or, if less than the entire amount, on a
pro rata basis based on the number of Preferred Shares held by each
holder) before making any payment to holders of Ordinary Shares.
The Preferred Shares will not be entitled to cumulative dividends
or any mandatory redemption except upon liquidation as stated
above.
c. Limit on Holdings of 4.99% of the Outstanding ADSs at
any time - the Preferred Shares would contain a provision
preventing the holder from converting such number of Preferred
Shares into ADSs to the extent that if, as a result of such
conversion, the holder would become the beneficial owner of more
than 4.99% of the Company's outstanding shares as determined under
the rules promulgated in the Securities Exchange Act of 1934, as
amended.
d. Veto Rights - the majority holders of the Preferred
Shares would also have veto rights over the ability of the Company
to (i) incur Indebtedness (as defined in the Amended Articles),
subject to certain exceptions, (ii) enter into an M&A Event (as
defined in the Amended Articles), (iii) voluntarily delist
the trading of the Company's securities on Nasdaq and (iv)
authorize the creation of any security having rights, preferences
and privileges equal to or greater than those of the Preferred
Shares, including the issuance of additional Preferred
Shares.
- Cancelation of variable remuneration rights –
a. the current requirement to pay to EIB 10% of the net
proceeds of all equity raises would be cancelled.
b. the current requirement to pay EIB 3% royalties once the
annual revenue threshold reaches EUR 5
million (approximately USD$5.4
million) would be cancelled.
The Company expects to file today a notice and proxy for a
scheduled a meeting of shareholders to be held on August 12, 2024, to amend the Company's articles
of association to authorize the creation of the Preferred Shares
and the issuance of the Preferred Shares in connection with the
proposed debt-to-equity conversion transaction with the EIB.
The Company will be working diligently in the coming month to
finalize all legal terms required for the official amendment of the
Financial Contract underlying the current venture loan being
converted to equity on terms specified above.
Scinai's management and board of directors extend their
appreciation and thanks to the EIB's officers for their relentless
support and is looking forward to completing this important
financial contract restructuring, which Scinai expects will propel
Scinai's plans to develop novel therapeutics for the treatment of
unmet needs within inflammation and immunology diseases.
About Scinai Immunotherapeutics
Scinai Immunotherapeutics Ltd. (Nasdaq: SCNI) is a
biopharmaceutical company with two complementary business units,
one focused on in-house development of inflammation and immunology
(I&I) biological therapeutic products beginning with an
innovative, de-risked pipeline of nanosized VHH antibodies
(NanoAbs) targeting diseases with large unmet medical needs, and
the other a boutique CDMO providing biological drug development,
analytical methods development, clinical cGMP manufacturing, and
pre-clinical and clinical trial design and execution services to
early stage biotech drug development programs. Company
website: www.scinai.com.
Company Contacts
Investor Relations | +972 8 930 2529
| ir@scinai.com
Business Development | +972 8 930 2529 | bd@scinai.com
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Litigation Reform Act of 1995. Words
such as "expect," "believe," "intend," "plan," "continue," "may,"
"will," "anticipate," and similar expressions are intended to
identify forward-looking statements. All statements, other than
statements of historical facts, are forward-looking statements.
Examples of such statements include, but are not limited to,
execution of a definitive agreement providing for revised terms of
the Finance Contract with EIB, the accounting impact of
execution of such revised terms and the ability of the Company to
regain and remain compliant with the continued listing standards of
Nasdaq. These forward-looking statements reflect management's
current views with respect to certain current and future events and
are subject to various risks, uncertainties and assumptions that
could cause the results to differ materially from those expected by
the management of Scinai Immunotherapeutics Ltd. Risks and
uncertainties include, but are not limited to, the risk that the
Company will not execute a definitive agreement with the EIB
providing for revised terms of the Finance Contract with EIB; the
risk that execution of such a definitive agreement will not resolve
the deficiency notice of Nasdaq with respect to the Company's
shareholders' equity; the risk that the Company will otherwise be
unable to regain compliance and remain compliant with the continued
listing requirements of Nasdaq irrespective of any such agreement
with the EIB; the risk of delay in, Scinai's inability to conduct,
or the unsuccessful results of, its research and development
activities, including the contemplated in-vivo studies and a
clinical trial; the risk that Scinai will not be successful in
expanding its CDMO business or in-license other NanoAbs; the risk
that Scinai may not be able to secure additional capital on
attractive terms, if at all; the risk that the therapeutic and
commercial potential of NanoAbs will not be met or that Scinai will
not be successful in bringing the NanoAbs towards
commercialization; the risk of a delay in the preclinical and
clinical trials data for NanoAbs, if any; the risk that our
business strategy may not be successful; the risk that the European
Investment Bank (EIB) may accelerate the financial facility under
its finance contract with Scinai; Scinai's ability to acquire
rights to additional product opportunities; Scinai's ability to
enter into collaborations on terms acceptable to Scinai or at all;
timing of receipt of regulatory approval of Scinai's manufacturing
facility in Jerusalem, if at all
or when required; the risk that the manufacturing facility will not
be able to be used for a wide variety of applications and other
vaccine and treatment technologies; and the risk that drug
development involves a lengthy and expensive process with uncertain
outcomes. More detailed information about the risks and
uncertainties affecting the Company is contained under the heading
"Risk Factors" in the Company's Annual Report on Form 20-F filed
with the Securities and Exchange Commission ("SEC") on May 15, 2024, and the Company's subsequent
filings with the SEC. Scinai undertakes no obligation to revise or
update any forward-looking statement for any reason.
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SOURCE Scinai Immunotherapeutics Ltd.