Reasons for the Reverse Stock Split
Our primary objective in effectuating the Reverse Stock Split would be to attempt to raise the per-share trading price of our Common Stock to continue our listing on The Nasdaq Capital Market. To maintain listing, the Nasdaq Capital Market requires, among other things, that our Common Stock maintain a minimum closing bid price of $1.00 per share.
As previously disclosed, on September 30, 2022, we received a notice from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) informing us that because the closing bid price for our Common Stock listed on Nasdaq was below $1.00 per share for 30 consecutive business days, we did not comply with the minimum closing bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Rule”). The Nasdaq notification has no immediate effect on the listing or trading of our Common Stock on The Nasdaq Capital Market. We have been provided an initial compliance period of 180 calendar days, or until March 29, 2023, to regain compliance with the Minimum Bid Rule. During the compliance period, our shares of Common Stock will continue to be listed and traded on The Nasdaq Capital Market. To regain compliance, the closing bid price of our Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during the 180-calendar day grace period.
In the event we are not in compliance with the Minimum Bid Rule by March 29, 2023, we may be afforded a second 180 calendar day grace period. To qualify, we would be required to meet the continued listing requirements for market value of publicly held shares and all other listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Rule. In addition, we would be required to provide written notice of our intention to cure the minimum bid price deficiency during this second 180-day compliance period by effecting a reverse stock split, if necessary. If we meet these requirements, Nasdaq will inform us that we have been granted an additional 180 calendar days to regain compliance. However, if it appears to the Listing Qualifications Department that we will not be able to cure the deficiency, or if we are otherwise not eligible, Nasdaq will provide notice that our securities will be subject to delisting.
While we intend to continue actively monitor the bid price for our Common Stock between now and March 29, 2023 and consider available options to resolve the deficiency and regain compliance with the Minimum Bid Rule, there is no assurance that we will be eligible for an additional compliance period or that our Common Stock will not be delisted from Nasdaq for failing to satisfy the Minimum Bid Rule.
As previously disclosed, on August 19, 2022, we received a second letter from Nasdaq notifying us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) (the “Minimum Equity Rule”) requires companies listed on The Nasdaq Capital Market to maintain stockholders’ equity of at least $2,500,000. We reported a stockholders’ deficit of $4,838,000 on our consolidated balance sheet for the quarter ended June 30, 2022 and we do not currently satisfy the alternative standards based on market value of listed securities or net income from continuing operations.
This notice of noncompliance has no immediate impact on the continued listing or trading of our Common Stock on The Nasdaq Capital Market, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other continued listing requirements. On October 12, 2022, we submitted to Nasdaq a plan to regain compliance with the Minimum Equity Rule. If our plan is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of Nasdaq’s letter to evidence compliance. In the event our plan is not accepted, we would have an opportunity to appeal that decision before an independent hearing panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing. We intend to take all reasonable measures available to regain compliance with the Minimum Equity Rule and remain listed on the Nasdaq. However, there can be no assurance that Nasdaq will grant our request for an extension or that we will ultimately regain compliance with all applicable requirements for continued listing.
Although we expect that the Reverse Stock Split would increase the bid price per share of our Common Stock above the $1.00 per share minimum price for the required number of days, thereby satisfying this listing requirement. However, there can be no assurance that the Reverse Stock Split would have that effect, initially or in the future, or that it would enable us to maintain the listing of our Common Stock on The Nasdaq Capital Market for any particular duration. We are not aware of any present efforts by anyone to accumulate our Common Stock, and the proposed Reverse Stock Split is not intended to be an anti-takeover device.