|
|
|
perceptions about securities that are traded on the OTC Market;
|
|
|
|
the lack of publicly available historical financial information regarding the Company and its subsidiaries; and
|
|
|
|
general political or economic conditions.
|
In recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on
the market price of securities issued by many companies across many industries. These changes may occur without regard to the financial condition or operating performance of the affected companies. Accordingly, the price of the Companys common
stock could fluctuate based upon factors that have little or nothing to do with the Company, and these fluctuations could materially reduce the trading price of the Companys common stock.
The concentration of ownership of the Companys capital stock among a small number of stockholders could allow such stockholders to exert
significant influence over the Companys business plans and strategic objectives, control all matters submitted to the Companys stockholders for approval, or deter a change in control transaction, any of which could negatively affect the
trading price or trading volume of the Companys common stock.
As of May 31, 2020, the Company had
54,863,305 shares of common stock outstanding. As of the same date, Amun held 20,000,000 shares of the Companys common stock, representing approximately 28.0% of the fully diluted shares of capital stock of the Company, and
Southshore held 4,000,000 shares of the Companys Series C Convertible Redeemable Preferred Stock, representing approximately 23.1% of the fully diluted shares of capital stock of the Company (in each case assuming the full conversion of
the Series C Convertible Redeemable Preferred Stock into common stock). The shares of Series C Convertible Redeemable Preferred Stock are generally authorized to vote with the Companys common stock. As a result, Amun and Southshore
collectively control a majority of the voting power of the Companys outstanding capital stock and, therefore, are able to exercise significant influence over the establishment and implementation of the Companys business plans and
strategic objectives, as well as to control all matters submitted to the Companys stockholders for approval. These stockholders may manage the Companys business in ways in which certain investors disagree and may be adverse to their
interests. This concentration of ownership may also have the effect of delaying, deterring or preventing a change in control transaction, depriving the Companys stockholders of an opportunity to receive a premium for their capital stock, or
otherwise negatively affecting the trading price or trading volume of the Companys common stock.
Mr. Bartlett, one of the
Companys directors, may be deemed to be the beneficial owner of the shares of the Companys common stock held by Amun due to his status as a member of the board of managers of Amun, and his indirect ownership of 19.6% of the outstanding
equity of Amun. In addition, Mr. Bartlett may be deemed to be the beneficial owner of the shares of the Companys Series C Convertible Redeemable Preferred Stock held by Southshore due to his status as a member of the board of
managers of Southshore, and his direct or indirect ownership of 19.6% of the outstanding equity of Southshore. Accordingly, Mr. Bartlett may be able to exercise influence over decisions involving the voting or disposition of shares of the
Companys capital stock. However, Mr. Bartlett does not control voting or investment decisions made by either Amun or Southshore.
The
Company may suspend its obligation to comply with SEC filing requirements in future periods, and thereby cease filing reports and other information with the SEC, which could have the effect of reducing the trading volume and trading price of the
Companys common stock.
In February 2012, the Companys predecessor, Harbor Biosciences, Inc., filed a Form 15 with
the SEC to deregister its common stock pursuant to Section 12(g) of the Exchange Act. The filing of the Form 15 had the effect of suspending the Companys obligation, pursuant to Section 15(d) of the Exchange Act, to file reports and other
information with the SEC. As a result, prior to this Annual Report, the last periodic report filed by the Company was the Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the SEC on January 20, 2012. As of
January 1, 2020, the Company no longer met the eligibility criteria under Rule 12h-3 of the Exchange Act to suspend its reporting obligations under Section 15(d) of the Exchange Act. As a result, the Company determined that
it is currently required to file reports and other information with the SEC pursuant to Section 15(d) of the Exchange Act.
The Company
has incurred significant direct and indirect costs, and diversion of management time and resources, as a result of the requirement to comply with certain reporting obligations under the Exchange Act, including those incurred in connection with the
preparation and filing of this Annual Report, the audit of the financial statements contained in this Annual Report in accordance with SEC rules and the Public Company Accounting Oversight Board (United States) standards, and compliance with certain
provisions of the Sarbanes-Oxley Act of 2002. The Company expects to incur significant additional costs relating to its public reporting obligations, which could have a negative impact on the Companys results of operations.
The Company would again become eligible to suspend its public reporting obligations if it (i) determines it has fewer than 300 stockholders of
record (as determined in accordance with applicable SEC rules) as of certain points in time, (ii) does not file registration statements pursuant to the Securities Act, and (iii) meets certain other requirements under applicable SEC rules. In the
event the Company becomes eligible to suspend its public reporting obligations in future periods, it may elect to take the actions necessary to suspend those obligations, which would result in the Company no longer being required to file SEC
reports. If the Company ceases filing reports and other information with the SEC, it would significantly reduce the amount of publicly available information about the Company and its subsidiaries, which could have the effect of reducing the trading
volume and trading price of the Companys common stock.
In addition, notwithstanding that the Company is currently required to file
certain reports and information with the SEC pursuant to Section 15(d) of the Exchange Act, the Company does not have a class of securities registered pursuant to Section 12 of the Exchange Act. As a result, the Company is not required to comply
with, and does not intend to follow, certain disclosure requirements typically applicable to public reporting companies, including the requirement to file proxy statements, information statements, tender offer disclosures, and beneficial ownership
filings. Accordingly, there may be significantly less information available about the Company, including its governance policies and ownership structure, than is available for other public reporting companies, which may reduce demand for the
Companys common stock and further reduce the trading volume and trading price.
23