APPROVAL OF THE REVERSE SPLIT
General
Our Board has approved, subject to stockholder approval, an amendment to our certificate of incorporation to effect a Reverse Split of our issued and outstanding common stock within a range from 1-for-4 to 1-for-10. The primary reasons for the Reverse Split are (i) to enable us to regain compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) and (ii) to provide additional shares for issuance in connection with future financings and other business purposes. Our common stock will be delisted from Nasdaq if we do not receive stockholder approval to effect the Reverse Split.
The form of the proposed amendment to our certificate of incorporation to effect the Reverse Split will be substantially as set forth on Annex B (subject to any changes required by applicable law). If approved by our stockholders, the Reverse Split proposal would permit (but not require) our Board to effect the Reverse Split at any time prior to March 17, 2020 by a ratio of not less than 1-for-4 and not more than 1-for-10, with the exact ratio to be set within this range as determined by our Board in its sole discretion. We believe that enabling our Board to set the ratio within the stated range will provide us with the flexibility to implement the Reverse Split in a manner designed to maximize the anticipated benefits for our stockholders. In determining a ratio, if any, following the receipt of stockholder approval, our Board may consider, among other things, factors such as:
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Nasdaq’s minimum bid price requirement;
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the historical trading price and trading volume of our common stock;
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the number of shares of our common stock outstanding;
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the then-prevailing trading price and trading volume of our common stock and the anticipated impact of the Reverse Split on the trading market for our common stock; and
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prevailing general market and economic conditions.
The amendment to our certificate of incorporation to effect the Reverse Split will include only the Reverse Split ratio determined by our Board to be in the best interests of our stockholders and all of the other proposed amendments at different ratios will be abandoned.
Unless specifically stated, share amounts and share prices have not been adjusted in this proxy statement to give effect to the proposed Reverse Split.
Reasons for the Reverse Split
Our common stock is currently quoted on Nasdaq Capital Market. On September 19, 2019, we received a letter from the Listing Qualifications staff of Nasdaq notifying us that we were no longer in compliance with the minimum bid price requirement for continued listing on Nasdaq. Nasdaq Listing Rule 5550(a)(2) requires listed companies to maintain a minimum bid price of $1.00 per share. The letter noted that the bid price of our common stock was below $1.00 for the 30-day period ending September 18, 2019. The notification letter advised us that we had 180 days, or until March 17, 2020, to regain compliance with the minimum bid price requirement by having a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. Our goal, through the Reverse Split, is to increase our stock price so that it enables us to satisfy the minimum bid price requirement within the timeframe allotted by Nasdaq.
On the Record Date, after giving effect to shares that are reserved for issuance pursuant to outstanding options, warrants, convertible notes and our 2015 Omnibus Equity Incentive Plan (the “2015 Plan”), we had only 5,114,400 shares of common stock available for issuance under our current certificate of incorporation. In addition, on January 9, 2020, we completed a private placement of warrants to purchase 8,700,000 shares of common stock (the “Placement Warrants”) for which no shares have been reserved and, therefore, the Placement Warrants will not be exercisable unless and until we have additional shares available for issuance. In the future, we will need to raise additional funds in order to complete the Phase 4 clinical trials required by the FDA as part of its approval of Probuphine, as well as to fund our research and development programs. Because the Reverse Split will result in a reduction in the total share count of our