PROPOSAL NO. 4 – APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
Our authorized capital stock presently consists of 100,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share. Our Board has adopted and is recommending that our stockholders approve a proposed amendment to our certificate of incorporation to increase the number of authorized shares of common stock from 100,000,000 to 200,000,000. The number of shares of preferred stock authorized for issuance would not be affected by the proposed amendment.
As of April 12, 2022, a total of:
• 36,329,342 shares of common stock were issued and outstanding;
• 1,861,273 shares of common stock were issuable upon the exercise of outstanding warrants;
• 12,621 shares of Series X1 preferred stock were issued and outstanding, which are convertible into 12,621,000 shares of common stock;
• 16,250 shares of Series X1 preferred stock were issuable upon the exercise of outstanding warrants, which are convertible into 16,250,000 shares of common stock;
• 5,048,014 shares of common stock were subject to outstanding stock options under the 2006 Plan and the 2014 Plan;
• 1,389,460 shares of common stock were subject to outstanding restricted stock units under the 2014 Plan; and
• 2,026,725 shares of common stock were reserved for future issuance under the 2014 Plan.
Accordingly, out of the 100,000,000 shares of common stock presently authorized, 75,525,814 shares of common stock are issued or reserved for issuance, and only 24,474,186 shares of common stock remain available for future issuance.
If stockholders approve the proposed amendment, the first paragraph of Article FOURTH of our certificate of incorporation will be deleted in its entirety and replaced by the following:
“FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 205,000,000 shares, consisting of (i) 200,000,000 shares of Common Stock, par value $0.001 per share (“Common Stock”), and (ii) 5,000,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”).”
The proposed amendment, if approved by our stockholders, would become effective upon the filing of an amendment to our certificate of incorporation with the Secretary of State of the State of Delaware, in the form of Appendix A hereto, or at the later time set forth in such amendment. Our Board reserves the right, notwithstanding stockholder approval and without further action by stockholders, to elect not to proceed with the proposed amendment if our Board determines that the proposed amendment is no longer in our best interests and the best interests of our stockholders.
If our stockholders approve the proposed amendment, subject to the discretion of our Board, we intend to file the amendment to our certificate of incorporation with the Secretary of State of the State of Delaware as soon as practicable after the Annual Meeting.
Reasons for the Proposed Increase
Over the past several years, we have used shares of our common stock to, among other things, engage in financings, compensate employees and for other general corporate purposes. The additional authorized shares of common stock permitted by the proposed amendment to our certificate of incorporation would allow us to continue to use common stock for purposes such as financings, providing equity incentives to our employees, officers or directors, business development activities and other general corporate purposes as our Board may approve. Our Board believes that having a sufficient number of authorized shares of our common stock provides flexibility to raise cash to carry out our overall strategy and allows us to engage in strategic activities without using our cash. We do not currently have any specific plans, proposals or arrangements, written or oral, to issue any of the proposed additional authorized shares of common stock for general corporate or any other purposes. Unless required by applicable law or stock exchange rules, no further vote of the holders of common stock will be required.
Potential Effects of the Proposed Increase
The additional shares of common stock for which authorization is sought would be identical in powers, privileges and rights to the shares of common stock that are now authorized. Holders of common stock do not have preemptive rights to subscribe to additional securities that we may issue.
The issuance of additional shares of common stock would not affect the rights of stockholders of currently outstanding common stock, except for effects incidental to increasing the number of shares of common stock outstanding, such as, among other things, having a dilutive effect on earnings per share and on stockholders’ equity and voting rights. Furthermore, future sales of substantial amounts of our common stock, or the perception that these sales might occur, could adversely affect the prevailing market price of our common stock or limit our ability to raise additional capital. Stockholders should recognize that, as a result of this proposal, they will own a smaller percentage of our shares relative to the total number of authorized shares than they presently own.
Our Board has not proposed this increase in the number of authorized shares with the intention of discouraging tender offers or takeover attempts. However, the availability of additional authorized shares for issuance may have the effect of discouraging a merger, tender offer, proxy contest or other attempt to obtain control.
Effectiveness of Amendment
If the proposed amendment is adopted, it will become effective upon the filing of a certificate of amendment to our certificate of incorporation with the Secretary of State of the State of Delaware.
Recommendation of our Board
OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.