PROPOSAL 3
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO EFFECT AUTHORIZED SHARE INCREASE
At a board meeting held on August 2, 2021, our Board of Directors approved a resolution authorizing and recommending that our stockholders approve an amendment to the Company’s Restated Certificate of Incorporation, as amended to date (the “Certificate of Amendment”) to increase the number of authorized shares of capital stock from 201,000,000 shares to 301,000,000 shares by adding 100,000,000 authorized shares of Common Stock (being referred to as the “Authorized Share Increase”). The Authorized Shares Increase will become effective upon filing of the Certificate of Amendment with the Delaware Secretary of State. The form of Certificate of Amendment is attached as Annex A to this Proxy Statement.
Purpose of Authorized Share Increase
The Board has approved the Authorized Share Increase, which would have the effect of increasing the number of authorized shares of capital stock from 201,000,000 shares to 301,000,000 shares by adding 100,000,000 authorized shares of Common Stock.
In addition to the 143,549,735 shares outstanding on the date of this Proxy Statement, we have reserved:
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12,536,250 shares of Common Stock for the issuance upon exercise of currently outstanding options granted under our 2018 Equity Incentive Plan and our 2010 Stock Option and Incentive Plan;
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4,412,901 additional shares of Common Stock reserved for grant under our 2018 Equity Incentive Plan;
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25,287,738 shares of our common stock issuable upon conversion of convertible promissory notes at an average conversion price of $0.15 per share; and
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25,390,685 shares of Common Stock for issuance upon exercise of outstanding warrants currently held by investors.
Therefore, as of the date of this Proxy Statement, we only have 1,988,060 shares of Common Stock authorized and available for future issuance or reservation.
To date, we have not commercialized any of our product candidates and have financed our operations in part through the sale of Common Stock and other securities. Based on the $0.16 per share closing price of our Common Stock on the OTC markets on October 1, 2021, the 1,988,060 remaining authorized, but unissued and unreserved shares gives us very little headroom to utilize our equity securities to raise additional capital. We are also exploring the future possibility of seeking to have our Common Stock traded on Nasdaq or another national exchange. Without increasing our authorized, but unissued, shares of Common Stock, we may find it difficult, if not impossible, to raise additional capital if required to finance our operations, and we would also be unable to consider an uplisting of our Common Stock to a national exchange, if desired or otherwise feasible in the future, Thus, we believe it important for all stockholders to vote in Favor of this proposal.
Authorizing additional shares of Common Stock does not mean that we will use all or any such shares in the future, as we currently have no plans to use such shares. However, our inability to raise additional capital, if warranted, due to the absence of adequate authorized, but unissued and unreserved common stock, would likely jeopardize our ability to continue operations.
If the Authorized Share Increase is approved, we will have 101,988,060 shares of Common Stock authorized and available for issuance or reservation.
Rights of Common Stock
The additional common stock to be authorized by the Authorized Share Increase would have rights identical to the currently outstanding Common Stock. The Authorized Share Increase and any issuance of additional Common Stock will not affect the rights of the holders of our Common Stock, except for the effects incidental to increasing the number of shares of Common Stock outstanding, such as dilution of
