2 ballot items.
Shareholders will vote on approving the issuance of 85,906,957 shares in connection with debt and preferred-stock conversions and authorizing a reverse stock split of the Common Stock at a ratio of no more than 1-for-5, with the Board recommending FOR both proposals.
Approve the issuance of 85,906,957 shares of Common Stock pursuant to the conversion at $1.00 per share of $84,726,777 of indebtedness owed to entities controlled or owned by Richard Tsai, plus the one-for-one conversion of 1,180,180 shares of Series A-1 Preferred Stock held by entities controlled or owned by him.
Proposal 1 asks shareholders to approve the issuance of 85,906,957 shares of Common Stock resulting from specified debt and preferred-stock conversions. The debt component consists of $59,722,260 of exchangeable notes held by Giant Wisdom Ventures Limited and $25,004,517 of loans from TAG Holdings Limited, both converted at $1.00 per share. The proposal also covers the one-for-one conversion of 1,180,180 Series A-1 Preferred Stock shares held through entities controlled or owned by Richard Tsai. The Company is seeking approval principally to satisfy Nasdaq Listing Rule 5635 requirements relating to change-of-control and large discounted issuances. The proposal is also a central element of the Company’s plan to respond to Nasdaq’s deficiency notice concerning failure to maintain the required $35 million market value of listed securities. Management states that approval would strengthen the balance sheet, reduce debt, support continued-listing compliance, and provide a basis for future growth. If approved, Tsai’s beneficial ownership is expected to rise from approximately 18.8% to approximately 83.7% of outstanding Common Stock, creating substantial dilution for existing shareholders and concentrating voting control. The filing warns that failure to approve could leave the Company unable to implement a significant part of its Nasdaq compliance plan and could increase delisting risk, while approval could also result in reduced public float, less trading liquidity, and possible downward pressure if Tsai later sells shares. The Board unanimously recommends voting FOR the proposal because it views the financial, balance-sheet, and listing-compliance benefits as being in the best interests of the Company and its shareholders.
Approve an amendment to the Certificate of Incorporation authorizing the Board, in its sole discretion, to implement within one year a reverse stock split of the Common Stock at a ratio of no more than 1-for-5, with the exact ratio selected by the Board.
Proposal 2 asks shareholders to approve an amendment to the Certificate of Incorporation permitting a reverse stock split of the Common Stock at a ratio of no more than 1-for-5. The Board would have sole discretion to select the exact ratio and timing, provided the action occurs within one year after the Special Meeting. Approval would authorize, but not require, the Board to proceed, and the Board could abandon the transaction before filing the amendment if circumstances change. Management’s primary objective is to increase the per-share trading price and improve the Company’s ability to meet Nasdaq Capital Market continued-listing requirements. The Company also expects a higher share price could make the stock more acceptable to institutional and professional investors whose policies restrict low-priced securities. The filing notes potential ancillary benefits from reducing administrative and transactional costs and improving the economics of trading for some shareholders. A reverse split would combine up to five existing shares into one share, while fractional shares would be rounded up rather than paid in cash. The split would not change the Common Stock’s par value, and management expects proportionate adjustments to options, warrants, convertible securities, and restricted stock awards. The filing cautions that the market price may not rise proportionately, total market capitalization could decline, and the intended listing or investor-attraction benefits are not assured. The Board unanimously recommends voting FOR the proposal.
| # | Owner | % of shares | Shares | Value |
|---|---|---|---|---|
| 1 | Yorkville Advisors Global, LP | 2.34% | 480,426 | $1M |
| 2 | VANGUARD CAPITAL MANAGEMENT LLC | 1.02% | 208,981 | $566K |
| 3 | UBS Group AG | 0.94% | 192,748 | $522K |
| 4 | GEODE CAPITAL MANAGEMENT, LLC | 0.75% | 153,984 | $417K |
| 5 | GOLDMAN SACHS GROUP INC | 0.47% | 96,948 | $263K |
| 6 | VANGUARD FIDUCIARY TRUST CO | 0.47% | 96,874 | $263K |
| 7 | Arax Advisory Partners | 0.41% | 83,537 | $226K |
| 8 | UBS Group AG | 0.21% | 43,563 | $118K |
| 9 | NORTHERN TRUST CORP | 0.20% | 40,392 | $109K |
| 10 | MARSHALL WACE, LLP | 0.18% | 36,400 | $99K |
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