SCPS Scopus BioPharma Inc

PROPOSAL 1— AMENDMENT TO THE COMPANY’S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT

Our Board has adopted resolutions (1) declaring advisable an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split of our issued and outstanding Common Stock, as described below, and (2) directing that a proposal to approve the Reverse Stock Split be submitted to the holders of our Common Stock and Common Stock Equivalents for their approval.

The form of the proposed amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a Reverse Stock Split of our issued and outstanding Common Stock will be substantially as set forth on Appendix A (subject to any changes required by applicable law). If approved by our Stockholders, the Reverse Stock Split would permit (but not require) our Board to effect a Reverse Stock Split of our issued and outstanding Common Stock by a ratio of not less than 1-for-          and not more than 1-for-           , with the exact ratio to be set at a whole number 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 Stock 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:

Our Board reserves the right to elect to abandon the Reverse Stock Split, including any or all proposed Reverse Stock Split ratios, if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of the Company and its Stockholders.

Depending on the ratio for the Reverse Stock Split determined by our Board, Stockholders with less than          shares and no more than          shares of existing Common Stock, may be combined into one share of Common Stock. Any fractional shares will be rounded up to the next whole number. The amendment to our Amended and Restated Certificate of Incorporation to effect the Reverse Stock Split, if any, will include only the Reverse Stock 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.

Background and Reasons for the Reverse Stock Split; Potential Consequences of the Reverse Stock Split

Nasdaq Compliance. Our Common Stock is publicly traded and listed on The Nasdaq Capital Market under the symbol “SCPS.” Our Board authorized the Reverse Stock Split with the primary intent of increasing the per share trading price of our Common Stock in order to ensure that we regain compliance with the “minimum bid price” requirement for the continued listing of our Common Stock on The Nasdaq Capital Market which we believe helps support and maintain stock liquidity and Company recognition for our Stockholders. Accordingly, we believe that effecting the Reverse Stock Split is in the Company’s and our Stockholders’ best interests.

Companies listed on The Nasdaq Capital Market are subject to various rules and requirements imposed by the Nasdaq Stock Market LLC (“Nasdaq”) which must be satisfied in order to continue having their stock listed on the exchange (these are called Nasdaq’s Continued Listing Standards). One of these standards is the “minimum bid price” requirement set forth in Marketplace Rule 5450(a)(1), which requires that the bid price of the stock of listed companies be at least $1.00 per share (the “Minimum Bid Price Requirement”). A listed company risks being delisted and removed from Nasdaq if the closing bid price of its stock remains below $1.00 per share for an extended period of time.

We have received deficiency notification letters from the Listing Qualifications Staff of Nasdaq indicating that we are not in compliance with the Minimum Bid Price Requirement and certain Nasdaq listing rules relating to maintaining a minimum market value of listed securities of $50,000,000 (the “MVLS Requirement”) and a minimum market value of publicly held shares of $15,000,000 (the “MVPHS Requirement”). On July 13, 2022, we received an additional letter from Nasdaq stating that because we had not regained compliance with the MVLS Requirement as of July 12, 2022, trading of our Common Stock on Nasdaq would be suspended on July 22, 2022 and removed from listing and registration, unless we requested an appeal to a Nasdaq hearings panel by July 20, 2022, which we requested prior to such deadline. Such hearing occurred on August 25, 2022. In anticipation of the expiration of the MVPHS Requirement and Minimum Bid Price Requirement cure periods on August 30, 2022 and October 3, 2022, respectively, we addressed all three requirements as part of our compliance plan (“Compliance Plan”) during the hearing. By letter dated September 13, 2022, Nasdaq informed us of the Panel’s decision directing that the Company’s listing be transferred to the Nasdaq Capital Market, effective at the open of business on September 15, 2022, and our Common Stock will continue to be listed on that market subject to, among other things, the Company satisfying the Compliance Plan in full by no later than January 9, 2023. Our listing was transferred to the Nasdaq Capital Market on September 15, 2022. We failed to comply with milestone dates set forth in the Compliance Plan and did not timely inform Nasdaq of such failure. By letter dated December 1, 2022, Nasdaq informed us that the Panel has determined to grant the Company a final extension to such milestone dates and publicly reprimanded the Company. Such public reprimand, pursuant to Listing Rule 5815(c)(1)(D), was issued to the Company for its failure to comply with Listing Rule 5250(a)(1), requiring it to notify Nasdaq of certain significant developments that led to its prior representations about its ability to satisfy the terms of the Panel’s decision and, therefore, the Nasdaq Capital Market’s continued listing requirements being inaccurate. While we are continuing to use our best efforts to satisfy the Nasdaq Continued Listing Standards in full by no later than January 9, 2023, there can be no assurance that we will be able to do so as set forth in the Compliance Plan, as amended, or at all. Failure to do so would result in the delisting of our Common Stock from Nasdaq, which would likely have a material adverse effect on the trading and value of our Common Stock.

The primary intent of the Reverse Stock Split is to increase the market price of our Common Stock to enhance our ability to regain compliance with the Minimum Bid Price Requirement. However, even if we effect the Reverse Stock Split and regain compliance with the Minimum Bid Price Requirement, we may not be able to cure our noncompliance with the MVLS Requirement and the MVPHS Requirement and still may be delisted from Nasdaq. The Reverse Stock Split could enhance our ability to regain compliance with the MVLS Requirement and the MVPHS Requirement if reducing the number of outstanding shares of our Common Stock, and thereby increasing the per share market price of our Common Stock, increases demand for our Common Stock and correspondingly increases the market value for our Common Stock to more than $50,000,000 and the market value of our publicly held shares of Common Stock to more than $15,000,000. The additional potential investors described below could also provide additional alternatives for regaining compliance with the MVLS Requirement and the MVPHS Requirement following the Reverse Stock Split. However, we cannot provide any assurance that (i) any increase our stock price would remain following the Reverse Stock Split; (ii) we would again meet or exceed the MVLS Requirement or the MVPHS Requirement; or (iii) we would satisfy the other requirements for continued listing on The Nasdaq Capital Market.

Financial Planning Flexibility. The Board believes it is in the best interest of the Company to approve the Certificate of Amendment to effect the Reverse Stock Split of the Company’s issued and outstanding Common Stock to give the Company greater flexibility in considering and planning for future potential business needs. The Reverse Stock Split will result in authorized and unissued shares becoming available for general corporate purposes as the Board may determine from time to time, including for use for future capital raises and transactions.

Additional Potential Investors. In addition to bringing the per share trading price of our Common Stock back above $1.00, we also believe that the Reverse Stock Split will make our Common Stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our Common Stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. 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.

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 trading 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 per share trading 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 per share trading price of our Common Stock will increase following the Reverse Stock Split or that the per share trading price of our Common Stock will not decrease in the future.

Procedure for Implementing the Reverse Stock Split

The Reverse Stock Split, if approved by our Stockholders, would become effective upon the filing (the “Effective Time”) of a certificate of amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. The exact timing of the filing of the certificate of amendment that will effect the Reverse Stock Split will be determined by our Board based on its evaluation as to when such action will be the most advantageous to the Company and our Stockholders. In addition, our Board reserves the right, notwithstanding Stockholder approval and without further action by the Stockholders, to elect not to proceed with the Reverse Stock Split if, at any time prior to filing the amendment to the Company’s Amended and Restated Certificate of Incorporation, our Board, in its sole discretion, determines that it is no longer in our best interest and the best interests of our Stockholders to proceed with the Reverse Stock Split.

Effect of the Reverse Stock Split on Holders of Outstanding Common Stock

As of December      , 2022 there were       shares outstanding. Depending on the ratio for the Reverse Stock Split determined by our board of directors, a minimum of       and a maximum of       shares of existing Common Stock will be combined into one new share of Common Stock. The table below shows, as of December      , 2022, the number of outstanding shares of Common Stock that would result from the listed hypothetical Reverse Stock Split ratios (without giving effect to the treatment of fractional shares):

The actual number of shares issued after giving effect to the Reverse Stock Split, if implemented, will depend on the Reverse Stock Split ratio that is ultimately determined by our Board.

The Reverse Stock Split will affect all holders of our Common Stock uniformly and will not affect any Stockholder’s percentage ownership interest in the Company, except that as described below in “Fractional Shares,” record holders of Common Stock otherwise entitled to a fractional share as a result of the Reverse Stock Split will be rounded up to the next whole number. In addition, the Reverse Stock Split will not affect any Stockholder’s proportionate voting power (subject to the treatment of fractional shares).

The implementation of the Reverse Stock Split will result in an increased number of available authorized shares of Common Stock. The resulting increase in such availability in the authorized number of shares of Common Stock could have a number of effects on the Company's Stockholders depending upon the exact nature and circumstances of any actual issuances of authorized but unissued shares. Because holders of Common Stock have no preemptive rights to purchase or subscribe for any unissued stock of the Company, the issuance of additional shares of authorized Common Stock that will become newly available as a result of the implementation of the Reverse Stock Split will reduce the current Stockholders' percentage ownership interest in the total outstanding shares of Common Stock. Additionally, the increase in available authorized shares for issuance could have an anti-takeover effect, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of the Company more difficult. For example, additional shares could be issued by the Company to dilute the stock ownership or voting rights of persons seeking to obtain control of the Company, even if the persons seeking to obtain control of the Company offer an above-market premium that is favored by a majority of the independent Stockholders. Similarly, the issuance of additional shares to certain persons allied with the Company's management could have the effect of making it more difficult to remove the Company's current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. The Company’s Amended and Restated Certificate of Incorporation and Bylaws also include provisions that may have anti-takeover consequences. The Company has no plans or proposals to adopt other provisions or enter into other arrangements that may have material anti-takeover consequences. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company, and this proposal is not being presented with the intent that it be utilized as a type of anti- takeover device.

The Company may issue the additional shares of authorized Common Stock that will become available as a result of the Reverse Stock Split without the additional approval of its Stockholders.

The Reverse Stock Split may result in some Stockholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares.

After the Effective Time, our Common Stock will have new Committee on Uniform Securities Identification Procedures (CUSIP) numbers, which is a number used to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock certificates with the new CUSIP numbers by following the procedures described below. After the Reverse Stock Split, we will continue to be subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended. Our Common Stock will continue to be listed on the Nasdaq Capital Market under the symbol “SCPS”, subject to any decision of Nasdaq to delist our Common Stock.

Beneficial Holders of Common Stock (i.e. Stockholders who hold in street name)

Upon the implementation of the Reverse Stock Split, we intend to treat shares held by Stockholders through a bank, broker, custodian or other nominee in the same manner as registered Stockholders whose shares are registered in their names. Banks, brokers, custodians or other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding our Common Stock in street name. However, these banks, brokers, custodians or other nominees may have different procedures than registered Stockholders for processing the Reverse Stock Split. Stockholders who hold shares of our Common Stock with a bank, broker, custodian or other nominee and who have any questions in this regard are encouraged to contact their banks, brokers, custodians or other nominees.

Registered “Book-Entry” Holders of Common Stock (i.e. Stockholders that are registered on the transfer agent’s books and records but do not hold stock certificates)

Certain of our registered holders of Common Stock may hold some or all of their shares electronically in book-entry form with the transfer agent. These Stockholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.

Stockholders who hold shares electronically in book-entry form with the transfer agent will not need to take action (the exchange will be automatic) to receive whole shares of post-Reverse Stock Split Common Stock, subject to adjustment for treatment of fractional shares.

Holders of Certificated Shares of Common Stock

Until surrendered, we will deem outstanding certificates representing shares of our Common Stock (the “Old Certificates”) held by Stockholders to be cancelled and only to represent the number of whole shares of post-Reverse Stock Split Common Stock to which these Stockholders are entitled, subject to the treatment of fractional shares. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for certificates representing the appropriate number of whole shares of post-Reverse Stock Split Common Stock (the “New Certificates”). If an Old Certificate has a restrictive legend on the back of the Old Certificate, the New Certificate will be issued with the same restrictive legends that are on the back of the Old Certificate.

STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

Fractional Shares

We do not currently intend to issue fractional shares in connection with the Reverse Stock Split. Therefore, we will not issue certificates representing fractional shares. In lieu of issuing fractions of shares, we will round up to the next whole number.

Effect of the Reverse Stock Split on Employee Plans, Options, Restricted Stock Awards and Units, Warrants, and Convertible or Exchangeable Securities

Based upon the Reverse Stock Split ratio determined by the Board, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of Common Stock. This would result in approximately the same aggregate price being required to be paid under such options, warrants, convertible or exchangeable securities upon exercise, and approximately the same value of shares of Common Stock being delivered upon such exercise, exchange or conversion, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split. The number of shares deliverable upon settlement or vesting of restricted stock awards will be similarly adjusted, subject to our treatment of fractional shares. The number of shares reserved for issuance pursuant to these securities will be proportionately based upon the Reverse Stock Split ratio determined by the Board, subject to our treatment of fractional shares.

Accounting Matters

The proposed amendment to the Company’s Amended and Restated Certificate of Incorporation will not affect the par value of our Common Stock per share, which will remain $0.001 par value per share. As a result, as of the Effective Time, 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.

Certain Federal Income Tax Consequences of the Reverse Stock Split

The following summary describes certain material U.S. federal income tax consequences of the Reverse Stock Split to holders of our Common Stock:

Unless otherwise specifically indicated herein, this summary addresses the tax consequences only to a beneficial owner of our Common Stock that is a citizen or individual resident of the United States, a corporation organized in or under the laws of the United States or any state thereof or the District of Columbia or otherwise subject to U.S. federal income taxation on a net income basis in respect of our Common Stock (a “U.S. holder”). A trust may also be a U.S. holder if (1) a U.S. court is able to exercise primary supervision over administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. An estate whose income is subject to U.S. federal income taxation regardless of its source may also be a U.S. holder. This summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also does not address the tax consequences to (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our Common Stock as part of a position in a “straddle” or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our Common Stock as “capital assets” (generally, property held for investment). The following summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable Treasury Regulations thereunder, judicial decisions and Internal Revenue Service (“IRS”) rulings, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Tax consequences under state, local, foreign, and other laws are not addressed herein. Each Stockholder should consult their tax advisor as to the particular facts and circumstances which may be unique to such Stockholder and also as to any estate, gift, state, local or foreign tax considerations arising out of the Reverse Stock Split.

If a partnership (or other entity classified 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. Partnerships that hold our Common Stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.

PLEASE CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.

Tax Consequences of the Stockholders

The Reverse Stock Split is intended to qualify as a tax-free recapitalization under the Code. Assuming the Reverse Stock Split so qualifies, then generally, for U.S. federal income tax purposes, no gain or loss will be recognized by the Company in connection with the Reverse Stock Split, and no gain or loss will be recognized by the Stockholders that exchange their pre-split shares for post-split shares. The aggregate tax basis of the post-split shares received will be equal to the aggregate tax basis of the pre-split shares exchanged therefore, and the holding period of the post-split shares received will include the holding period of the pre-split shares exchanged.

The U.S. federal income tax consequences of the rounded-up share are unclear. A U.S. holder of a pre-split share may recognize income or gain to the extent that the value of the rounded-up share exceeds the tax basis of the post-split fractional share so “rounded-up.” Each U.S. holder should consult with their tax advisor with respect to the computation of gain or loss and adjusted tax basis in the shares issued in the Reverse Stock Split (including the rounded-up shares) based on their specific facts.

No Appraisal Rights

Under Delaware law and our charter documents, holders of our Common Stock will not be entitled to dissenter’s rights or appraisal rights with respect to the Reverse Stock Split.

Board Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE A REVERSE STOCK SPLIT OF OUR ISSUED AND OUTSTANDING COMMON STOCK.