We have managed our long-term stockholder dilution by limiting the number of equity incentive awards granted. The Board and the Compensation Committee of the Board, or the Compensation Committee, monitors our stock award burn rate and dilution, among other factors, in its efforts to maximize stockholders’ value by granting what, in the Board’s or Compensation Committee’s judgment, are the appropriate number of equity incentive awards necessary to attract, reward, and retain employees, consultants and directors based on the Company’s business plan and anticipated grants.
As of May 15, 2020, the record date for the Annual Meeting, the per-share closing price of our common stock as reported on the Nasdaq Capital Market was $0.37, and there were 68,746,070 shares of our common stock outstanding. As of the record date, the 4,658,803 new shares we are asking for under the Amended 2018 Plan represent approximately 5.0% of our common stock issued and outstanding and issuable upon the exercise of outstanding pre-funded warrants and approximately 2.7% of our common stock, calculated on a fully-diluted basis and including for the purposes of such calculation: (i) the vesting and exercise, in full, of all outstanding stock awards and (ii) the exercise, in full, of all outstanding warrants to purchase common stock (disregarding any exercise limitations contained therein). If our stockholders do not approve this Proposal 2, the Company strongly believes that it will be unable to successfully use equity as part of its compensation program, as most of its competitors in the industry do, putting the Company at a significant disadvantage and compromising its ability to enhance stockholder value. Therefore, we believe that approval of this request is in the best interest of our stockholders and our Company.
If this Proposal 2 is approved by our stockholders, the Amended 2018 Plan will become effective as of the date of the Annual Meeting. In the event that our stockholders do not approve this Proposal 2, the Amended 2018 Plan will not become effective, and the 2018 Plan will continue to be effective in accordance with its current terms.
Description of the Amended 2018 Plan
The material features of the Amended 2018 Plan are outlined below. The following description of the Amended 2018 Plan is a summary only and is qualified in its entirety by reference to the complete text of the Amended 2018 Plan. Stockholders are urged to read the actual text of the Amended 2018 Plan in its entirety, a copy of which is attached to this Proxy Statement as Appendix 12.
Purpose
The Amended 2018 Plan is designed to secure and retain the services of our employees and directors, provide incentives for our employees and directors to exert maximum efforts for the success of the Company and its affiliates, and provide a means by which our employees and directors may be given an opportunity to benefit from increases in the value of our common stock.
Types of Awards
The Amended 2018 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards.
Shares Available for Awards (before any adjustment to reflect the Reverse Stock Split)
Subject to adjustment for certain changes in our capitalization, including the Reverse Stock Split, , and subject to increase pursuant to the annual “evergreen” provision described below, the aggregate number of shares of our common stock that may be issued under the Amended 2018 Plan, or the Share Reserve, will not exceed 6,158,257 shares, which is the sum of (i) 4,658,803 new shares, plus (ii) 1,000,000 shares originally added to the Share Reserve in connection with our adoption of the 2018 Plan, plus (iii) the number of shares that were otherwise available for future grants under the 2006 Plan as of the effectiveness of the 2018 Plan on August 21, 2018, that became available for the grant of stock awards under the 2018 Plan, plus (iv) the Prior Plan’s Returning Shares (as defined below), as such shares become available from time to time.
The term “Prior Plan’s Returning Shares” refers to the following shares of our common stock subject to any stock awards granted under the 2006 Plan that were outstanding as of August 21, 2018, the date of the underwriting agreement relating to our initial public offering, that thereafter (i) expire or terminate for any reason