SECURITIESAND EXCHANGE COMMISSION
ProxyStatement Pursuant to Section 14(a)
ofthe Securities Exchange Act of 1934 (Amendment No. )
Filedby the Registrant ☒
Filedby a Party other than the Registrant ☐
Checkthe appropriate box:
|☐||Confidential,for Use of the Commission Only (as permitted by Rule14a-6(e)(2))|
|☐||SolicitingMaterial under §240.14a-12|
SONNETBIOTHERAPEUTICS HOLDINGS, INC.
(Nameof Registrant as Specified in its Charter)
(Nameof Person(s) Filing Proxy Statement, if Other Than theRegistrant)
Paymentof Filing Fee (Check all boxes that apply):
|☐||Feepaid previously with preliminary materials|
|☐||Feecomputed on table in exhibit required by Item 25(b) per ExchangeAct Rules 14a-6(i)(1) and 0-11|
SONNET BIOTHERAPEUTICS HOLDINGS, INC.
100Overlook Center, Suite 102
Princeton,New Jersey 08540
|DearFellow Stockholder,||August, 2022|
Onbehalf of the Board of Directors and management of SonnetBioTherapeutics Holdings, Inc. (“we”, “us” and “our”), a Delawarecorporation, you are invited to attend a Special Meeting ofStockholders (the “Special Meeting”) to be held on September 15,2022 at 9:00 A.M. Eastern Time virtually via the Internet atwww.viewproxy.com/SONNSM/2022/VM.
Detailsof the business to be conducted at the Special Meeting aredescribed in this proxy statement.
Yourvote is important. Regardless of whether you plan to attend theSpecial Meeting virtually, please read the accompanying proxystatement and then submit your proxy to vote by Internet, telephoneor mail as promptly as possible. Returning your proxy will helpus assure that a quorum will be present at the Special Meeting andavoid the additional expense of duplicate proxy solicitations. Anystockholder attending the virtual Special Meeting may vote duringthe virtual meeting, even if he or she has previously voted. Pleaserefer to your proxy card for voting instructions. Submitting yourproxy promptly may save us additional expense in soliciting proxiesand will ensure that your shares are represented at the SpecialMeeting.
OurBoard of Directors has unanimously approved the proposals set forthin the proxy statement and recommends that you vote in favor ofeach such proposal.
|ChiefExecutive Officer and Chairman of the Board|
Ifyou have any questions or require any assistance in voting yourshares, please call:
200Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
SONNETBIOTHERAPEUTICS HOLDINGS, INC.
SPECIALMEETING OF STOCKHOLDERS
|Dateand Time||September15, 2022 at 9:00 A.M., Eastern Time.|
|Place||Solelyvirtual via the Internet atwww.viewproxy.com/SONNSM/2022/VM.|
|Itemsof Business||1.Adoption and approval of an amendment to our certificate ofincorporation, as amended (the “Charter”), to effect a reversestock split of our issued and outstanding shares of Common Stock,par value $0.0001 per share (the “Common Stock”), at a specificratio, ranging from one-for-two (1:2) to one-for-forty (1:40), atany time prior to the one-year anniversary date of the SpecialMeeting, with the exact ratio to be determined by the Board withoutfurther approval or authorization of our stockholders (the “ReverseSplit”); and|
|2.Approval of the adjournment of the Special Meeting to the extentthere are insufficient proxies at the Special Meeting to approvethe Reverse Split proposal.|
|Adjournmentsand Postponements||Anyaction on the items of business described above may be consideredat the Special Meeting at the time and on the date specified aboveor at any time and date to which the Special Meeting may beproperly adjourned or postponed.|
|RecordDate||August17, 2022 (the “Record Date”). Only stockholders of record holdingshares of our Common Stock, Series 3 Convertible Preferred Stock,par value $0.0001 per share (the “Series 3 Preferred Stock”), andSeries 4 Convertible Preferred Stock, par value $0.0001 per share(the “Series 4 Preferred Stock”), as of the close of business onthe Record Date are entitled to notice of and to vote at theSpecial Meeting.|
|MeetingAdmission||Youare invited to virtually attend the Special Meeting if you are astockholder of record or a beneficial owner of shares of our CommonStock, Series 3 Preferred Stock or Series 4 Preferred Stock as ofthe Record Date.|
|Availabilityof Proxy Materials||Ourproxy materials are also available on the internet at:proxyvote.com.|
|Voting||Ifyour shares are held in the name of a bank, broker or otherfiduciary, please follow the instructions on the proxy card.Whether or not you expect to attend virtually, we urge you tosubmit your proxy to vote your shares as promptly as possible byfollowing the instructions on your proxy card so that your sharesmay be represented and voted at the Special Meeting. Your vote isvery important.|
|BYORDER OF THE BOARD OF DIRECTORS,|
|Princeton,New Jersey||PANKAJMOHAN, PH.D.|
|August , 2022|
Chief Executive Officer and
Chairman of the Board of Directors
SONNETBIOTHERAPEUTICS HOLDINGS, INC.
100Overlook Center, Suite 102
Princeton,New Jersey 08540
Theenclosed proxy is solicited on behalf of the Board of Directors(the “Board”) of Sonnet BioTherapeutics Holdings, Inc. (the“Company,” “we,” “us,” or “our”), for use at the upcoming SpecialMeeting of Stockholders including any adjournment or postponementthereof (the “Special Meeting”) to be held on September 15, 2022 at9:00 A.M. Eastern Time we are planning to hold the Special Meetingvirtually via the Internet, or at such other time and place towhich the Special Meeting may be adjourned or postponed. In orderto attend our Special Meeting, you must log in towww.viewproxy.com/SONNSM/2022/VM using the password provided to youafter registration. Attendees will need to register prior to themeeting in order to receive access to the meeting. In addition,unless the context otherwise requires, references to “stockholders”are to the holders of our common stock, par value $0.0001 per share(the “Common Stock”), holders of our Series 3 Convertible PreferredStock, par value $0.0001 per share (“Series 3 Preferred Stock”),and holders of our Series 4 Convertible Preferred Stock , par value$0.0001 per share (“Series 4 Preferred Stock”, and together withthe Series 3 Preferred Stock, the “Preferred Stock”).
Thisproxy statement, the enclosed proxy card and a copy of our annualreport are first being mailed on or about August , 2022 tostockholders entitled to vote as of the close of business on August17, 2022 (the “Record Date”). These proxy materials containinstructions on how to access this proxy statement and our annualreport online at: proxyvote.com, and how to submit your proxy tovote via the internet, telephone and/or mail.
Thespecific proposals to be considered and acted upon at our SpecialMeeting are each described in this proxy statement. Onlystockholders holding shares of Common Stock, Series 3 PreferredStock and Series 4 Preferred Stock as of the close of business onthe Record Date are entitled to notice of and to vote at theSpecial Meeting. As of the Record Date, there were (i) 60,587,905shares of Common Stock issued and outstanding, (ii) 22,275 sharesof Series 3 Preferred Stock issued and outstanding, and (iii) 225shares of Series 4 Preferred Stock issued and outstanding. Holdersof record of shares of Common Stock have the right to vote on allmatters brought before the Special Meeting. Holders of record ofshares of Preferred Stock have the right to vote only on theReverse Stock Split Proposal (as defined herein). Holders of CommonStock and Preferred Stock will vote on the Reverse Stock SplitProposal as a single class.
Eachholder of record of our Common Stock is entitled to one vote pershare of Common Stock on each matter to be acted upon at theSpecial Meeting.
Eachholder of record of our Series 3 Preferred Stock is entitled to343.6426 votes per share of Series 3 Preferred Stock, calculated bydividing the stated value of $100 per share of the Series 3Preferred Stock by $0.291 per share, which is the conversion priceof the Series 3 Preferred Stock. The holders of record of ourSeries 3 Preferred Stock are entitled to vote only on the ReverseStock Split Proposal.
Eachholder of record of our Series 4 Preferred Stock is entitled to250,000,000 votes per share of Series 4 Preferred Stock, or anaggregate of 56,250,000,000 votes for all of the issued andoutstanding shares of Series 4 Preferred Stock as of the RecordDate; provided, that, such shares of Series 4 Preferred Stockshall, to the extent cast on the Reverse Stock Split Proposal, beautomatically and without further action of the holders thereofvoted in the same proportions as shares of Common Stock and Series3 Preferred Stock are voted on the Reverse Stock Split Proposal(excluding any shares of Common Stock and Series 3 Preferred Stockthat affirmatively abstain or are otherwise not voted). As anexample, if the holders of 50.5% of the outstanding Common Stockand Series 3 Preferred Stock voted at the Special Meeting are votedfor the Reverse Stock Split Proposal, 50.5% of the votes cast bythe holders of the Series 4 Preferred Stock shall be cast for theReverse Stock Split Proposal. The holders of record of our Series 4Preferred Stock are entitled to vote only on the Reverse StockSplit Proposal.
Inorder for any business to be conducted at the Special Meeting theholders of one-third of the voting power of the shares of thecapital stock of the Company issued and outstanding and entitled tovote at the Special Meeting must be represented at the SpecialMeeting, either in person, by means of remote communication in amanner, if any, authorized by the Board in its sole discretion, orrepresented by proxy. If a quorum is not present at the scheduledtime of the Special Meeting, the chairman of the meeting or, ifdirected to be voted on by the chairman of the meeting, thestockholders present or represented at the Special Meeting andentitled to vote thereon, although less than a quorum, may adjournthe Special Meeting until a quorum is present. The date, time andplace and the means of remote communication, if any, of theadjourned Special Meeting will be announced at the time theadjournment is taken, and no other notice will be given unless theadjournment is for more than 30 days, in which case a notice of theadjourned meeting will be given to each stockholder of recordentitled to vote at the Special Meeting. An adjournment will haveno effect on the business that may be conducted at the SpecialMeeting.
RequiredVote for Approval
|1.||Adoptionand approval of an amendment to our Amended and RestatedCertificate of Incorporation, as amended (the “Charter”), to effecta reverse stock split of our issued and outstanding shares ofCommon Stock, at a specific ratio, ranging from one-for-two (1:2)to one-for-forty (1:40), at any time prior to the one-yearanniversary date of the Special Meeting, with the exact ratio to bedetermined by the Board without further approval or authorizationof our stockholders (the “Reverse Split” and such proposal isreferred to herein as the “Reverse Stock Split Proposal”). TheReverse Stock Split Proposal must be approved by the affirmative(“FOR”) vote of a majority in voting power of the outstandingshares of Common Stock and Preferred Stock entitled to vote on theReverse Stock Split Proposal, voting together as a single class.Shares that are not represented at the Special Meeting, abstentionsand, if the Reverse Stock Split Proposal is deemed to be“non-routine” as described below, broker non-votes with respect tothe Reverse Stock Split Proposal will have the same effect as avote against the Reverse Stock Split Proposal. However, as furtherdiscussed under “Proposal No. 1 - Practical Effect of Abstentionsand Broker Non-Votes,” because the Series 4 Preferred Stock has250,000,000 votes per share on the Reverse Stock Split Proposal butsuch votes must be counted by the Company in the same proportion asthe aggregate shares of Common Stock and Series 3 Preferred Stockvoted on the Reverse Stock Split Proposal at the Special Meeting,the failure of a share of Common Stock to be voted on Proposal 1will effectively have no impact on the outcome of thevote.|
|2||Approvalof the Adjournment of the Special Meeting to the Extent There AreInsufficient Proxies at the Special Meeting to Approve Proposal No.1. To approve the adjournment of the Special Meeting in theevent that the number of shares of Common Stock present orrepresented by proxy at the Special Meeting and voting “FOR” theadoption of Proposal 1 are insufficient. This proposal requires theaffirmative (“FOR”) vote of a majority of votes cast by shares ofour Common Stock present or represented by proxy and entitled tovote at the Special Meeting. Abstentions and broker non-votes, ifany, with respect to this proposal are not counted as votes castand will not affect the outcome of this proposal.|
Abstentionsand Broker Non-Votes
Allvotes will be tabulated by the inspector of election appointed forthe Special Meeting, who will separately tabulate affirmative andnegative votes, abstentions and broker non-votes. An abstention isthe voluntary act of not voting for or against a particular matterby a stockholder who is present, virtually, in person or by proxy,at an Special Meeting and entitled to vote. A broker “non-vote”occurs when a broker nominee holding shares for a beneficial ownersubmits a proxy to vote on at least one “routine” proposal but doesnot vote on a given proposal because the nominee does not havediscretionary power for that particular item and has not receivedinstructions from the beneficial owner. If you hold your shares in“street name” through a broker or other nominee, your broker ornominee may not be permitted to exercise voting discretion withrespect to some of the matters to be acted upon. If you do not giveyour broker or nominee specific instructions regarding suchmatters, your broker may submit a proxy to vote on “routine”matters but not on “non-routine” matters and such proxy will bedeemed a “broker non-vote” with respect to such “non-routine”proposals.
Thequestion of whether your broker or nominee may be permitted toexercise voting discretion with respect to a particular matterdepends on whether the New York Stock Exchange (the “NYSE”) deemsthe particular proposal to be a “routine” matter and how yourbroker or nominee exercises any discretion they may have in thevoting of the shares that you beneficially own. Brokers andnominees can use their discretion to vote “uninstructed” shareswith respect to matters that are considered to be “routine,” butnot with respect to “non-routine” matters. Under the rules andinterpretations of the NYSE, “non-routine” matters are matters thatmay substantially affect the rights or privileges of stockholder,such as mergers, stockholder proposals, elections of directors(even if not contested), executive compensation (including anyadvisory stockholder votes on executive compensation and on thefrequency of stockholder votes on executive compensation), andcertain corporate governance proposals, even ifmanagement-supported. The determination of which proposals aredeemed “routine” versus “non-routine” may not be made by the NYSEuntil after the date on which this proxy statement has been mailedto you. As such, it is important that you provide votinginstructions to your bank, broker or other nominee, if you wish todetermine the voting of your shares.
Forany proposal that is considered a “routine” matter, your broker ornominee may vote your shares in its discretion either for oragainst the proposal in the absence of your instruction. For aproposal that is considered a “non-routine” matter for which you donot give your broker instructions, the shares will be treated asbroker non-votes. “Broker non-votes” occur when a broker or othernominee submits a proxy to vote on at least one “routine” proposaland indicates that it does not have, or is not exercising, votingauthority on matters deemed “non-routine.” Broker non-votes willnot be counted as having been voted on the applicable proposal.Therefore, if you are a beneficial owner and want to ensure thatshares you beneficially own are voted in favor or against any orall of the proposals in this proxy statement, the only way you cando so is to give your broker or nominee specific instructions as tohow the shares are to be voted. Under the applicable rulesgoverning such brokers, we believe Proposal 1 to approve anamendment to our Charter to effect the Reverse Split is likely tobe considered a “routine” item.
UnderDelaware law and our Amended and Restated Bylaws (our “Bylaws”),abstentions and, if such proposal is deemed to be “non-routine” asdescribed above, broker non-votes, if any, with respect to Proposal1 will have the same effect as a vote against such proposals.Abstentions and broker non-votes, if any, with respect to Proposal2 will not affect the outcome of such proposals. Accordingly, it isparticularly important that beneficial owners instruct theirbrokers how they wish to vote their shares. Abstention and brokernon-votes will be counted for purposes of determining whether thereis a quorum present at the Special Meeting.
Voting,Revocation and Solicitation of Proxies
Theenclosed proxy is solicited by and on behalf of the Board, with thecost of solicitation borne by us. Solicitation may also be made byour directors and officers without additional compensation for suchservices. In addition to mailing proxy materials, the directors,officers and employees may solicit proxies in person, by telephoneor otherwise.
Wehave engaged Alliance Advisors LLC, to assist in the solicitationof proxies and provide related advice and informational support,for a services fee, plus customary disbursements, which are notexpected to exceed $7,500 in total. Alliance Advisors LLC willsolicit proxies on our behalf from individuals, brokers, banknominees and other institutional holders in the same mannerdescribed above. We have also agreed to indemnify Alliance AdvisorsLLC against certain claims.
Ifyour proxy is properly returned to us, the shares representedthereby will be voted at the Special Meeting in accordance with theinstructions specified thereon. If you return your proxy withoutspecifying how the shares represented thereby are to be voted, theproxy will be voted (i) FOR the Reverse Split (in the caseof the Series 4 Preferred Stock only, in the same proportions asshares of Common Stock and Series 3 Preferred Stock are voted onthe Reverse Stock Split Proposal); (ii) FOR the approval ofthe adjournment of the Special Meeting to the extent there areinsufficient proxies at the Special Meeting to approve Proposal 1;and (iii) at the discretion of the proxy holders, on any othermatter that may properly come before the Special Meeting or anyadjournment or postponement thereof.
Ifyou have additional questions, need assistance in submitting yourproxy or voting your shares of Common Stock or Preferred Stock, orneed additional copies of the proxy statement or the enclosed proxycard, please contact Alliance Advisors LLC.
200Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
Ifyou are a stockholder of record, you may revoke or change yourproxy at any time before the Special Meeting by filing, with ourChief Financial Officer at Sonnet BioTherapeutics Holdings, Inc.,100 Overlook Center, Suite 102, Princeton, New Jersey 08540, anotice of revocation or another signed proxy with a later date. Ifyou are a stockholder of record, you may also revoke your proxy byattending the Special Meeting and voting. Attendance at the SpecialMeeting alone will not revoke your proxy.
Ourstockholders have no dissenter’s or appraisal rights in connectionwith any of the proposals described herein.
Wewill bear the entire cost of solicitation, including thepreparation, assembly, printing and mailing of this proxy statementand the annual report, as well as the preparation and posting ofthis proxy statement, the annual report and any additionalsolicitation materials furnished to the stockholders. Copies of anysolicitation materials will be furnished to brokerage houses,fiduciaries and custodians holding shares in their names that arebeneficially owned by others so that they may forward thissolicitation material to such beneficial owners. In addition, wemay reimburse such persons for their costs in forwarding thesolicitation materials to such beneficial owners. The originalsolicitation of proxies may be supplemented by a solicitation bytelephone, e-mail or other means by our directors, officers oremployees. No additional compensation will be paid to theseindividuals for any such services. Except as described above, we donot presently intend to solicit proxies other than by e-mail,telephone and mail.
SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
Thefollowing table sets forth certain information as of August 11,2022 with respect to the beneficial ownership of common stock ofthe Company by the following: (i) each of the Company’s currentdirectors; (ii) each of the named executive officers; (iii) all ofthe current executive officers and directors as a group; and (iv)each person known by the Company to own beneficially more than fivepercent (5%) of the outstanding shares of the Company’s commonstock.
Forpurposes of the following table, beneficial ownership is determinedin accordance with the applicable SEC rules and the information isnot necessarily indicative of beneficial ownership for any otherpurpose. Except as otherwise noted in the footnotes to the table,the Company believes that each person or entity named in the tablehas sole voting and investment power with respect to all shares ofthe Company’s common stock shown as beneficially owned by thatperson or entity (or shares such power with his or her spouse).Under the SEC’s rules, shares of the Company’s common stockissuable under options that are exercisable on or within 60 daysafter August 11, 2022 (“Presently Exercisable Options”) are deemedoutstanding and therefore included in the number of shares reportedas beneficially owned by a person or entity named in the table andare used to compute the percentage of the common stock beneficiallyowned by that person or entity. These shares are not, however,deemed outstanding for computing the percentage of the common stockbeneficially owned by any other person or entity.
Thepercentage of the common stock beneficially owned by each person orentity named in the following table is based on 60,587,905 sharesof common stock issued and outstanding as of August 11, 2022 plusany shares issuable upon exercise of Presently Exercisable Optionsheld by such person or entity.
|Name and Address of Beneficial Owner*||Amount and Nature of Beneficial Ownership|
|Named ExecutiveOfficers, Executive Officers and Directors:|
|Pankaj Mohan, Ph.D.||1,297,225||(1)||2.1||%|
|John. K. Cini, Ph.D.||224,067||(6)||**|
|All current executive officers anddirectors as a group (9 persons)||1,827,566||(8)||3.0||%|
|Hudson Bay Master Fund Ltd.||3,400,000||(9)||5.3||%|
|(*)||Unlessotherwise indicated, the address is c/o Sonnet BioTherapeutics,Inc., 100 Overlook Center, Suite 102, Princeton, New Jersey,08540.|
|(1)||Includes(i) 930,705 shares of common stock held by the Mohan Family Office,over which Dr. Mohan has shared power to vote and dispose withSwati Mohan, his spouse; (ii) 7,992 shares of common stock heldindividually by Pankhuri Mohan, Dr. Mohan’s child, over which Dr.Mohan has shared power to vote and dispose with Pankhuri Mohan; and(iii) 4,262 shares of common stock issuable upon exercise ofwarrants held by the Mohan Family Office, over which Dr. Mohan hasshared power to vote and dispose with Swati Mohan, which areexercisable within 60 days of August 11, 2022. Excludes 320,135restricted stock units, which will be settled in shares of commonstock and do not vest within 60 days of August 11,2022.|
|(2)||Excludes14,152 restricted stock units, which will be settled in shares ofcommon stock and do not vest within 60 days of August 11,2022.|
|(3)||Includes1,278 shares of common stock issuable upon exercise of warrantswhich are exercisable within 60 days of August 11, 2022. Excludes14,152 restricted stock units, which will be settled in shares ofcommon stock and do not vest within 60 days of August 11,2022.|
|(4)||Excludes15,000 restricted stock units, which will be settled in shares ofcommon stock and do not vest within 60 days of August 11,2022.|
|(5)||Includes106 shares of common stock issuable upon exercise of warrants whichare exercisable within 60 days of August 11, 2022. Excludes 14,152restricted stock units, which will be settled in shares of commonstock and do not vest within 60 days of August 11,2022.|
|(6)||Excludes80,034 restricted stock units, which will be settled in shares ofcommon stock and do not vest within 60 days of August 11,2022.|
|(7)||Excludes66,951 restricted stock units, which will be settled in shares ofcommon stock and do not vest within 60 days of August 11,2022.|
|(8)||Includes5,646 shares of common stock issuable upon exercise of warrantswhich are exercisable within 60 days of August 11,2022.|
|(9)||Basedon the information provided in the Schedule 13G filed with the SECon February 3, 2022 by Hudson Bay Capital Management LP (the“Investment Manager”) with respect to itself and Sander Gerber.Hudson Bay Capital Management LP serves as the investment managerto Hudson Bay Master Fund Ltd., in whose name the securitiesreported herein are held. As such, the Investment Manager may bedeemed to be the beneficial owner of all shares of common stockunderlying the warrants held by Hudson Bay Master Fund Ltd. SanderGerber serves as the managing member of Hudson Bay Capital GP LLC,which is the general partner of the Investment Manager. Mr. Gerberdisclaims beneficial ownership of these securities. The address forthe Investment Manager and Mr. Gerber is 28 Havemeyer Place, 2ndFloor, Greenwich, Connecticut 06830.|
PROPOSALNO.1: ADOPTION AND APPROVAL OF AN AMENDMENT TO OUR CHARTER TOEFFECT A REVERSE STOCK SPLIT OF OUR ISSUED AND OUTSTANDING SHARESOF COMMON STOCK, AT A SPECIFIC RATIO, RANGING FROM ONE-FOR-TWO(1:2) TO ONE-FOR-FORTY (1:40)AT ANY TIME PRIOR TO THE ONE-YEARANNIVERSARY DATE OF THE SPECIAL MEETING, WITH THE EXACT RATIO TO BEDETERMINED BY THE BOARD
OurBoard has determined that it is advisable and in the best interestsof the Company and its stockholders, for us to amend our Charter toauthorize our Board to effect a reverse stock split (the “CharterAmendment”) of our issued and outstanding shares of Common Stock ata specific ratio, ranging from one-for-two (1:2) to one-for-forty(1:40) (the “Approved Split Ratios”), to be determined by the Board(the “Reverse Split”). A vote for this Proposal 1 will constituteapproval of the Reverse Split that, once authorized by the Boardand effected by filing the Charter Amendment with the Secretary ofState of the State of Delaware, will combine between two and fortyshares of our Common Stock into one share of our Common Stock. Ifimplemented, the Reverse Split will have the effect of decreasingthe number of shares of our Common Stock issued andoutstanding.
Accordingly,stockholders are asked to adopt and approve the Charter Amendmentset forth in Appendix A to effect the Reverse Split as set forth inthe Charter Amendment, subject to the Board’s determination, in itssole discretion, whether or not to implement the Reverse Split, aswell as the specific ratio within the range of the Approved SplitRatios, and provided that the Reverse Split must be effected on orprior to the one-year anniversary date of the Special Meeting. Thetext of Appendix A remains subject to modification to include suchchanges as may be required by the Secretary of State of the Stateof Delaware and as our Board deems necessary or advisable toimplement the Reverse Split.
Ifadopted and approved by the holders of our outstanding votingsecurities, the Reverse Split would be applied at an Approved SplitRatio approved by the Board prior to the one-year anniversary dateof the Special Meeting. The Board reserves the right to elect toabandon the Reverse Split if it determines, in its sole discretion,that the Reverse Split is no longer in the best interests of theCompany and its stockholders.
Purposeand Rationale for the Reverse Split
AvoidDelisting from the Nasdaq. On October 4, 2021, we received aletter from the Listing Qualifications Staff (the “Staff”) of TheNasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon theclosing bid price of the Common Stock for the last 30 consecutivebusiness days, we are not currently in compliance with therequirement to maintain a minimum bid price of $1.00 per share forcontinued listing on The Nasdaq Capital Market (the “Notice”). Wewere provided a compliance period of 180 calendar days from thedate of the Notice, or until April 4 2022, to regain compliancewith the minimum closing bid requirement. On March 21, 2022, wesubmitted a request to Nasdaq for an additional 180-day extensionto regain compliance with the minimum closing bid requirement. OnApril 6, 2022, we received a letter from Nasdaq advising that wehad been granted a 180-day extension to October 3, 2022 to regaincompliance. If at any time before October 3, 2022, the closing bidprice of our Common Stock closes at or above $1.00 per share for aminimum of 10 consecutive business days, subject to Nasdaq’sdiscretion to extend this period to 20 consecutive business days,Nasdaq will provide written notification that we have achievedcompliance with the minimum bid price requirement, and the matterwould be resolved. If we do not regain compliance during thecompliance period ending October 3, 2022, Nasdaq will providenotice that our Common Stock will be subject to delisting. We wouldthen be entitled to appeal that determination to a Nasdaq hearingspanel.
Failureto approve the Reverse Split may potentially have serious, adverseeffects on us and our stockholders. Our Common Stock could bedelisted from Nasdaq because shares of our Common Stock maycontinue to trade below the requisite $1.00 per share price neededto maintain our listing in accordance with the minimum bid pricerequirement. Our shares may then trade on the OTC Bulletin Board orother small trading markets, such as the pink sheets. In thatevent, our Common Stock could trade thinly as a microcap or pennystock, adversely decrease to nominal levels of trading and may beavoided by retail and institutional investors, resulting in theimpaired liquidity of our Common Stock.
As ofAugust 12, 2022, our Common Stock closed at $0.298 per share on TheNasdaq Capital Market. The Reverse Split, if effected, would likelyhave the immediate effect of increasing the price of our CommonStock as reported on The Nasdaq Capital Market, therefore reducingthe risk that our Common Stock could be delisted fromNasdaq.
OurBoard strongly believes that the Reverse Split is necessary tomaintain our listing on Nasdaq. Accordingly, the Board has approvedresolutions proposing the Charter Amendment to effect the ReverseSplit and directed that it be submitted to our stockholders foradoption and approval at the Special Meeting.
Managementand the Board have considered the potential harm to us and ourstockholders should Nasdaq delist our Common Stock from trading.Delisting could adversely affect the liquidity of our Common Stocksince alternatives, such as the OTC Bulletin Board and the pinksheets, are generally considered to be less efficient markets. Aninvestor likely would find it less convenient to sell, or to obtainaccurate quotations in seeking to buy, our Common Stock on anover-the-counter market. Many investors likely would not buy orsell our Common Stock due to difficulty in accessingover-the-counter markets, policies preventing them from trading insecurities not listed on a national exchange, or otherreasons.
OtherEffects. The Board also believes that the increased marketprice of our Common Stock expected as a result of implementing theReverse Split could improve the marketability and liquidity of ourCommon Stock and may encourage interest and trading in our CommonStock. The Reverse Split, if effected, could allow a broader rangeof institutions to invest in our Common Stock (namely, funds thatare prohibited from buying stock whose price is below a certainthreshold), potentially increasing the trading volume and liquidityof our Common Stock. The Reverse Split could help increase analystand broker interest in the Common Stock, as their policies candiscourage them from following or recommending companies with lowstock prices. Because of the trading volatility often associatedwith low-priced stocks, many brokerage houses and institutionalinvestors have internal policies and practices that either prohibitthem from investing in low-priced stocks or tend to discourageindividual brokers from recommending low-priced stocks to theircustomers. Some of those policies and practices may make theprocessing of trades in low-priced stocks economically unattractiveto brokers. Additionally, because brokers’ commissions onlow-priced stocks generally represent a higher percentage of thestock price than commissions on higher-priced stocks, a low averageprice per share of our Common Stock can result in individualstockholders paying transaction costs representing a higherpercentage of their total share value than would be the case if theshare price were higher.
OurBoard does not intend for this transaction to be the first step ina series of plans or proposals effect a “going private transaction”within the meaning of Rule 13e-3 of the Exchange Act.
Risksof the Proposed Reverse Split
We cannot assure you that the proposed Reverse Split will increasethe price of our Common Stock and have the desired effect ofmaintaining compliance with Nasdaq.
Ifthe Reverse Split is implemented, our Board expects that it willincrease the market price of our Common Stock so that we are ableto regain and maintain compliance with the Nasdaq minimum bid pricerequirement. However, the effect of the Reverse Split upon themarket price of our Common Stock cannot be predicted with anycertainty, and the history of similar stock splits for companies inlike circumstances is varied. It is possible that (i) the per shareprice of our Common Stock after the Reverse Split will not rise inproportion to the reduction in the number of shares of our CommonStock outstanding resulting from the Reverse Split, (ii) the marketprice per post-Reverse Split share may not exceed or remain inexcess of the $1.00 minimum bid price for a sustained period oftime, or (iii) the Reverse Split may not result in a per shareprice that would attract brokers and investors who do not trade inlower priced stocks. Even if the Reverse Split is implemented, themarket price of our Common Stock may decrease due to factorsunrelated to the Reverse Split. In any case, the market price ofour Common Stock will be based on other factors which may beunrelated to the number of shares outstanding, including our futureperformance. If the Reverse Split is consummated and the tradingprice of our Common Stock declines, the percentage decline as anabsolute number and as a percentage of our overall marketcapitalization may be greater than would occur in the absence ofthe Reverse Split. Even if the market price per post-Reverse Splitshare of our Common Stock remains in excess of $1.00 per share, wemay be delisted due to a failure to meet other continued listingrequirements, including Nasdaq requirements related to the minimumstockholders’ equity, minimum number of shares that must be in thepublic float and the minimum market value of the publicfloat.
A decline in the market price of our Common Stock after the ReverseSplit is implemented may result in a greater percentage declinethan would occur in the absence of a reverse stocksplit.
Ifthe Reverse Split is implemented and the market price of our CommonStock declines, the percentage decline may be greater than wouldoccur in the absence of a reverse stock split. The market price ofour Common Stock will, however, also be based upon our performanceand other factors, which are unrelated to the number of shares ofCommon Stock outstanding.
The proposed Reverse Split may decrease the liquidity of our CommonStock.
Theliquidity of our Common Stock may be harmed by the proposed ReverseSplit given the reduced number of shares of Common Stock that wouldbe outstanding after the Reverse Split, particularly if the stockprice does not increase as a result of the ReverseSplit.
Determinationof the Ratio for the Reverse Split
IfProposal 1 is approved by stockholders and the Board determinesthat it is in the best interests of the Company and itsstockholders to move forward with the Reverse Split, the ApprovedSplit Ratio will be selected by the Board, in its sole discretion.However, the Approved Split Ratio will not be less than a ratio ofone-for-two (1:2) to one-for-forty (1:40). In determining whichApproved Split Ratio to use, the Board will consider numerousfactors, including the historical and projected performance of ourCommon Stock, prevailing market conditions and general economictrends, and will place emphasis on the expected closing price ofour Common Stock in the period following the effectiveness of theReverse Split. The Board will also consider the impact of theApproved Split Ratios on investor interest. The purpose ofselecting a range is to give the Board the flexibility to meetbusiness needs as they arise, to take advantage of favorableopportunities and to respond to a changing corporate environment.Based on the number of shares of Common Stock issued andoutstanding as of August 17, 2022, after completion of the ReverseSplit, we will have between 30,293,953 and 1,514,698 shares ofCommon Stock issued and outstanding, depending on the ApprovedSplit Ratio selected by the Board.
PrincipalEffects of the Reverse Split
Afterthe effective date of the proposed Reverse Split, each stockholderwill own a reduced number of shares of Common Stock. Except foradjustments that may result from the treatment of fractional sharesas described below, the proposed Reverse Split will affect allstockholders uniformly. The proportionate voting rights and otherrights and preferences of the holders of our Common Stock will notbe affected by the proposed Reverse Split (other than as a resultof the payment of cash in lieu of fractional shares). For example,a holder of 2% of the voting power of the outstanding shares of ourCommon Stock immediately prior to a Reverse Split would continue tohold 2% of the voting power of the outstanding shares of our CommonStock immediately after such Reverse Split. The number ofstockholders of record also will not be affected by the proposedReverse Split, except to the extent that any stockholder holds onlya fractional share interest and receives cash for such interestafter the Reverse Split.
Thefollowing table contains approximate number of issued andoutstanding shares of Common Stock, and the estimated per sharetrading price following a 1:2 to 1:40 Reverse Split, without givingeffect to any adjustments for fractional shares of Common Stock orthe issuance of any derivative securities, as of August 17, 2022.The Reverse Split will not have any impact on the number of sharesof Common Stock we are authorized to issue under ourCharter.
AfterEach Reverse Split Ratio
|CommonStock Issued and Outstanding||60,587,905||30,293,953||3,029,395||1,514,698|
|Numberof Shares of Common Stock Reserved for Issuance||54,876,235||33,237,091||(2)||3,323,709||(2)||1,661,855||(2)|
|Numberof Shares of Common Stock Authorized but Unissued andUnreserved||9,535,860||61,468,956||118,646,896||121,823,447|
|Priceper share, based on the closing price of our Common Stock on August12, 2022||$||0.298||$||0.596||(3)||$||5.96||(3)||$||11.92||(3)|
|(1)||TheReverse Split will not have any impact on the number of shares ofCommon Stock we are authorized to issue under ourCharter.|
|(2)||Includes(i) shares of Common Stock underlying unvested restricted stockunits under the 2020 Plan, (iii) shares of Common Stock availablefor future issuance under the 2020 Plan, (iv) shares of CommonStock issuable upon exercise of outstanding warrants, (v) shares ofCommon Stock issuable upon conversion of Series 3 Preferred Stock,(vi) shares of Common Stock issuable upon conversion of Series 4Preferred Stock and (v) shares of Common Stock underlying theSeries 3 Warrants.|
|(3)||Theprice per share indicated reflects solely the application of theapplicable reverse split ratio to the closing price of the CommonStock on August 12, 2022.|
Afterthe effective date of the Reverse Split, our Common Stock wouldhave a new committee on uniform securities identificationprocedures (CUSIP) number, a number used to identify our CommonStock.
OurCommon Stock is currently registered under Section 12(b) of theExchange Act, and we are subject to the periodic reporting andother requirements of the Exchange Act. The proposed Reverse Splitwill not affect the registration of our Common Stock under theExchange Act. Our Common Stock would continue to be reported onNasdaq under the symbol “SONN”, assuming that we are able to regaincompliance with the minimum bid price requirement, although it islikely that Nasdaq would add the letter “D” to the end of thetrading symbol for a period of twenty trading days after theeffective date of the Reverse Split to indicate that the ReverseSplit had occurred.
Effecton Outstanding Derivative Securities
TheReverse Split will require that proportionate adjustments be madeto the conversion rate, the per share exercise price and the numberof shares issuable upon the exercise or conversion of the followingoutstanding derivative securities issued by us, in accordance withthe Approved Split Ratio (all figures are as of August 17, 2022 andare on a pre-Reverse Split basis), including:
|●||51,789,524shares of Common Stock issuable upon exercise of outstandingwarrants, with a weighted average exercise price of $1.45 pershare;|
|●||674,185shares of Common Stock underlying unvested restricted stock unitsunder the 2020 Plan;|
|●||2,412,526shares of Common Stock that are available for future issuance underthe 2020 Plan;|
|●||7,654,642shares of Common Stock issuable upon conversion of Series 3Preferred Stock;|
|●||77,323shares of Common Stock issuable upon conversion of Series 4Preferred Stock; and|
|●||3,865,982shares of Common Stock underlying the Series 3 Warrants with anexercise price of $0.291.|
Theadjustments to the above securities, as required by the ReverseSplit and in accordance with the Approved Split Ratio, would resultin approximately the same aggregate price being required to be paidunder such securities upon exercise, and approximately the samevalue of shares of Common Stock being delivered upon such exerciseor conversion, immediately following the Reverse Split as was thecase immediately preceding the Reverse Split.
Effecton Equity Incentive Plans
As ofAugust 17, 2022, we had 674,185 shares of Common Stock underlyingunvested restricted stock units under the 2020 Plan and 2,412,526shares of Common Stock available for issuance under the 2020 Plan.Pursuant to the terms of the 2020 Plan, the Board, or a designatedcommittee thereof, as applicable, will adjust the number of sharesof Common Stock underlying outstanding awards, the exercise priceper share of outstanding stock options and other terms ofoutstanding awards issued pursuant to the 2020 Plan to equitablyreflect the effects of the Reverse Split. The number of sharessubject to vesting under restricted stock awards and the number ofshares issuable as contingent consideration as part of anacquisition by the Company will be similarly adjusted, subject toour treatment of fractional shares. Furthermore, the number ofshares available for future grant under the 2020 Plan will besimilarly adjusted.
Backgroundon our Series 3 Preferred Stock and Series 4 PreferredStock
OnAugust 15, 2022, we closed a preferred stock financing, in which weissued an aggregate of 22,275 shares of Series 3 Preferred Stockand 225 shares of Series 4 Preferred Stock. The shares of PreferredStock have a stated value of $100 per share and are convertible,following the effective date of the Reverse Split, into anaggregate of 7,654,642 shares of Common Stock with respect to theSeries 3 Preferred Stock and into an aggregate of 77,323 shares ofCommon Stock with respect to the Series 4 Preferred Stock. Theterms of the Series 3 Preferred Stock are set forth in aCertificate of Designation of Preferences, Rights and Limitationsof Series 3 Convertible Preferred Stock (the “Series 3 Certificateof Designation”), and the terms of the Series 4 Preferred Stock areset forth in a Certificate of Designation of Preferences, Rightsand Limitations of Series 4 Convertible Preferred Stock (the“Series 4 Certificate of Designation”, and together with the Series3 Certificate of Designation, the “Certificates of Designation”),each filed with the State of Delaware and effective on August 15,2022.
Theshares of Preferred Stock do not have any voting rights except withrespect to the Reverse Stock Split Proposal presented at thisSpecial Meeting and at any adjournments or postponements thereof,or otherwise as required by law or as set forth in the Certificatesof Designation.
Eachholder of record of our Series 3 Preferred Stock is entitled to anaggregate of 343.6426 votes per share of Series 3 Preferred Stock,calculated by dividing the stated value of $100 per share of theSeries 3 Preferred Stock by $0.291 per share, which is the MinimumPrice as defined in Nasdaq Listing Rule 5635(d) immediatelypreceding the execution and delivery of the Securities PurchaseAgreement, dated August 15, 2022, pursuant to which the Companyissued the Series 3 Preferred Stock (the “PurchaseAgreement”)..
Eachholder of record of our Series 4 Preferred Stock is entitled to250,000,000 votes per share of Series 4 Preferred Stock, or anaggregate of 56,250,000,000 votes for all of the issued andoutstanding shares of Series 4 Preferred Stock as of the RecordDate; provided, that, such shares of Series 4 Preferred Stockshall, to the extent cast on the Reverse Stock Split Proposal, beautomatically and without further action of the holders thereofvoted in the same proportions as shares of Common Stock and Series3 Preferred Stock are voted on the Reverse Stock Split Proposal(excluding any shares of Common Stock and Series 3 Preferred Stockthat are not voted). As an example, if the holders of 50.5% of theoutstanding Common Stock and Series 3 Preferred Stock voted at theSpecial Meeting are voted for the Reverse Stock Split Proposal,50.5% of the votes cast by the holders of the Series 4 PreferredStock shall be deemed to be cast for the Reverse Stock SplitProposal.
Theshares of Preferred Stock are outstanding as of the Record Date. Inthe Purchase Agreement, the holders of the Preferred Stock agreedto vote their shares at the Special Meeting FOR the Reverse StockSplit Proposal (in the case of the Series 4 Preferred Stock only,in the same proportions as shares of Common Stock and Series 3Preferred Stock are voted on the Reverse Stock SplitProposal).
Theproposed Reverse Split would become effective on the date of filingof the Charter Amendment with the office of the Secretary of Stateof the State of Delaware unless another effective date is set forthin the Charter Amendment. On the effective date, shares of CommonStock issued and outstanding shares of Common Stock held intreasury, in each case, immediately prior thereto will be combinedand reclassified, automatically and without any action on the partof our stockholders, into new shares of Common Stock in accordancewith the Approved Split Ratio set forth in this Proposal 1. If theproposed Charter Amendment is not adopted and approved by ourstockholders, the Reverse Split will not occur.
Treatmentof Fractional Shares
Nofractional shares of Common Stock will be issued as a result of theReverse Split. Instead, in lieu of any fractional shares to which astockholder of record would otherwise be entitled as a result ofthe Reverse Split, we will pay cash (without interest) equal tosuch fraction multiplied by the average of the closing sales pricesof our Common Stock on the Nasdaq during regular trading hours forthe five consecutive trading days immediately preceding theeffective date of the Reverse Split (with such average closingsales prices being adjusted to give effect to the Reverse Split).After the Reverse Split, a stockholder otherwise entitled to afractional interest will not have any voting, dividend or otherrights with respect to such fractional interest except to receivepayment as described above.
Uponstockholder adoption and approval of this Proposal 1, if the Boardelects to implement the proposed Reverse Split, stockholders owningfractional shares will be paid out in cash for such fractionalshares. For example, assuming the Board elected to consummate anApproved Split Ratio of 1:10, if a stockholder held eleven sharesof Common Stock immediately prior to the Reverse Split, then suchstockholder would be paid in cash for the one share of Common Stockbut will maintain ownership of the remaining shares of CommonStock.
Recordand Beneficial Stockholders
Ifthe Reverse Split is authorized by our stockholders and our Boardelects to implement the Reverse Split, stockholders of recordholding some or all of their shares of Common Stock electronicallyin book-entry form under the direct registration system forsecurities will receive a transaction statement at their address ofrecord indicating the number of shares of Common Stock they holdafter the Reverse Split along with payment in lieu of anyfractional shares. Non-registered stockholders holding Common Stockthrough a bank, broker or other nominee should note that suchbanks, brokers or other nominees may have different procedures forprocessing the consolidation and making payment for fractionalshares than those that would be put in place by us for registeredstockholders. If you hold your shares with such a bank, broker orother nominee and if you have questions in this regard, you areencouraged to contact your nominee.
Ifthe Reverse Split is authorized by the stockholders and our Boardelects to implement the Reverse Split, stockholders of recordholding some or all of their shares in certificate form willreceive a letter of transmittal, as soon as practicable after theeffective date of the Reverse Split. Our transfer agent will act as“exchange agent” for the purpose of implementing the exchange ofstock certificates. Holders of pre-Reverse Split shares will beasked to surrender to the exchange agent certificates representingpre-Reverse Split shares in exchange for post-Reverse Split sharesand payment in lieu of fractional shares (if any) in accordancewith the procedures to be set forth in the letter oftransmittal.
Untilsurrender, each certificate representing shares before the ReverseSplit would continue to be valid and would represent the adjustednumber of whole shares based on the approved exchange ratio of theReverse Split selected by the Board. No new post-Reverse Splitshare certificates will be issued to a stockholder until suchstockholder has surrendered such stockholder’s outstandingcertificate(s) together with the properly completed and executedletter of transmittal to the exchange agent.
STOCKHOLDERSSHOULD NOT DESTROY ANY PRE-REVERSE SPLIT STOCK CERTIFICATE ANDSHOULD NOT SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DOSO.
Thepar value per share of Common Stock would remain unchanged at$0.0001 per share after the Reverse Split. As a result, on theeffective date of the Reverse Split, the stated capital on ourbalance sheet attributable to the Common Stock will be reducedproportionally, based on the Approved Split Ratio selected by theBoard, from its present amount, and the additional paid-in capitalaccount shall be credited with the amount by which the statedcapital is reduced. The per share Common Stock net income or lossand net book value will be increased because there will be fewershares of Common Stock outstanding. The shares of Common Stock heldin treasury, if any, will also be reduced proportionately based onthe Approved Split Ratio selected by the Board. Retroactiverestatement will be given to all share numbers in the financialstatements, and accordingly all amounts including per share amountswill be shown on a post-split basis. We do not anticipate that anyother accounting consequences would arise as a result of theReverse Split.
Ourstockholders are not entitled to dissenters’ or appraisal rightsunder the Delaware General Corporation Law with respect to thisProposal 1 and we will not independently provide our stockholderswith any such right if the Reverse Split is implemented.
MaterialFederal U.S. Income Tax Consequences of the ReverseSplit
Thefollowing is a summary of certain material U.S. federal income taxconsequences of a Reverse Split to our stockholders. The summary isbased on the Internal Revenue Code of 1986, as amended (the“Code”), applicable Treasury Regulations promulgated thereunder,judicial authority and current administrative rulings and practicesas in effect on the date of this Proxy Statement. Changes to thelaws could alter the tax consequences described below, possiblywith retroactive effect. We have not sought and will not seek anopinion of counsel or a ruling from the Internal Revenue Serviceregarding the federal income tax consequences of a Reverse Split.This discussion only addresses stockholders who hold Common Stockas capital assets. It does not purport to be complete and does notaddress stockholders subject to special tax treatment under theCode, including, without limitation, financial institutions,tax-exempt organizations, insurance companies, dealers insecurities, foreign stockholders, stockholders who hold theirpre-reverse stock split shares as part of a straddle, hedge orconversion transaction, and stockholders who acquired theirpre-reverse stock split shares pursuant to the exercise of employeestock options or otherwise as compensation. If a partnership (orother entity treated as a partnership for U.S. federal income taxpurposes) is the beneficial owner of our common stock, the U.S.federal income tax treatment of a partner in the partnership willgenerally depend on the status of the partner and the activities ofthe partnership. Accordingly, partnerships (and other entitiestreated as partnerships for U.S. federal income tax purpose)holding our common stock and the partners in such entities shouldconsult their own tax advisors regarding the U.S. federal incometax consequences of the proposed Reverse Split to them. Inaddition, the following discussion does not address the taxconsequences of the Reverse Split under state, local and foreigntax laws. Furthermore, the following discussion does not addressany tax consequences of transactions effectuated before, after orat the same time as the Reverse Split, whether or not they are inconnection with the Reverse Split.
Ingeneral, the federal income tax consequences of a Reverse Splitwill vary among stockholders depending upon whether they receivecash for fractional shares or solely a reduced number of shares ofCommon Stock in exchange for their old shares of Common Stock. Webelieve that because the Reverse Split is not part of a plan toincrease periodically a stockholder’s proportionate interest in ourassets or earnings and profits, the Reverse Split should have thefollowing federal income tax effects. The Reverse Split is expectedto constitute a “recapitalization” for U.S. federal income taxpurposes pursuant to Section 368(a)(1)(E) of the Code. Astockholder who receives solely a reduced number of shares ofCommon Stock will not recognize gain or loss. In the aggregate,such a stockholder’s basis in the reduced number of shares ofCommon Stock will equal the stockholder’s basis in its old sharesof Common Stock and such stockholder’s holding period in thereduced number of shares will include the holding period in its oldshares exchanged. The Treasury Regulations provide detailed rulesfor allocating the tax basis and holding period of shares of commonstock surrendered in a recapitalization to shares received in therecapitalization. Stockholders of our common stock acquired ondifferent dates and at different prices should consult their taxadvisors regarding the allocation of the tax basis and holdingperiod of such shares.
Astockholder that, pursuant to the proposed Reverse Split, receivescash in lieu of a fractional share of our common stock shouldrecognize capital gain or loss in an amount equal to thedifference, if any, between the amount of cash received and theportion of the stockholder’s aggregate adjusted tax basis in theshares of our common stock surrendered that is allocated to suchfractional share. Such capital gain or loss will be short term ifthe pre-Reverse Split shares were held for one year or less at theeffective time of the Reverse Split and long term if held for morethan one year. Stockholders should consult their own tax advisorsregarding the tax consequences to them of a payment for fractionalshares.
Wewill not recognize any gain or loss as a result of the proposedReverse Split.
Astockholder of our common stock may be subject to informationreporting and backup withholding on cash paid in lieu of afractional share in connection with the proposed Reverse Split. Astockholder of our common stock will be subject to backupwithholding if such stockholder is not otherwise exempt and suchstockholder does not provide its taxpayer identification number inthe manner required or otherwise fails to comply with backupwithholding tax rules. Backup withholding is not an additional tax.Any amounts withheld under the backup withholding rules may berefunded or allowed as a credit against a stockholder’s U.S.federal income tax liability, if any, provided the requiredinformation is timely furnished to the Internal Revenue Service.Stockholders of our common stock should consult their own taxadvisors regarding their qualification for an exemption from backupwithholding and the procedures for obtaining such anexemption.
THEPRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAINFEDERAL U.S. INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT AND DOESNOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALLPOTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWNTAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGNAND OTHER TAX CONSEQUENCES OF THE REVERSE SPLIT IN LIGHT OF YOURSPECIFIC CIRCUMSTANCES.
RequiredVote and Recommendation
Inaccordance with our Charter, Bylaws and Delaware law, and asfurther discussed above under Abstentions and BrokerNon-Votes, approval and adoption of this Proposal 1 requiresthe affirmative (“FOR”) vote of a majority in voting power of theoutstanding shares of Common Stock and Preferred Stock entitled tovote on this Proposal 1, voting together as a single class.Abstentions and broker non-votes, if any, will have the same effectas a vote “AGAINST” this Proposal 1.
PracticalEffect of Abstentions and Broker Non-Votes
Pleasenote that if you prefer that the Proposal 1 not be approved, youshould cast your vote against the proposal. Approval of thisProposal 1 requires the affirmative vote of the majority in votingpower of the outstanding shares of our Common Stock and PreferredStock entitled to vote on the proposal, voting as a single class.Since the Series 4 Convertible Preferred Stock has 250,000,000votes per share on the proposal and votes of the shares of Series 4Preferred Stock, when cast, are automatically voted in the sameproportion as the aggregate shares of Common Stock and Series 3Preferred Stock that are voted on this proposal, the failure of ashare of Common Stock to be voted will effectively have no impacton the outcome of the vote. Therefore, shares of Common Stockaffirmatively voted against the proposal will have the effect ofcausing the proportion of Series 4 Convertible Preferred Stockvoted against the proposal to increase accordingly and viceversa.
OURBOARD RECOMMENDS A VOTE “FOR” PROPOSAL ONE.
PROPOSALNO. 2: APPROVAL OF THE ADJOURNMENT OF THE SPECIALMEETING
TOTHE EXTENT THERE ARE INSUFFICIENT PROXIES AT THEMEETING
TOAPPROVE ANY ONE OR MORE OF THE FOREGOING PROPOSALS.
Adjournmentof the Special Meeting
Inthe event that the number of shares of Common Stock and PreferredStock present or represented by proxy at the Special Meeting andvoting “FOR” the adoption of any one or more of the foregoingproposals are insufficient to approve any such proposal, we maymove to adjourn the Special Meeting in order to enable us tosolicit additional proxies in favor of the adoption of any suchproposal. In that event, we will ask stockholders to vote only uponthe adjournment proposal and not on any other proposal discussed inthis proxy statement. If the adjournment is for more than thirty(30) days, a notice of the adjourned meeting shall be given to eachstockholder of record entitled to vote at the meeting.
Forthe avoidance of doubt, any proxy authorizing the adjournment ofthe Special Meeting shall also authorize successive adjournmentsthereof, at any meeting so adjourned, to the extent necessary forus to solicit additional proxies in favor of the adoption of anysuch proposal.
RequiredVote and Recommendation
Inaccordance with our Charter, Bylaws and Delaware law, and asfurther discussed above under Abstentions and BrokerNon-Votes, approval and adoption of this Proposal 2 requiresthe affirmative (“FOR”) vote of a majority of votes cast by sharesof our Common Stock present or represented by proxy and entitled tovote at the Special Meeting and voting affirmatively or negativelyon such matter. Unless otherwise instructed on the proxy or unlessauthority to vote is withheld, shares represented by executedproxies will be voted “FOR” this proposal. Abstentions and brokernon-votes, if any, with respect to this proposal are not counted asvotes cast and will not affect the outcome of thisproposal.
OURBOARD RECOMMENDS A VOTE “FOR” PROPOSAL TWO.
StockholderProposals for 2023 Annual Meeting
Anystockholder desiring to present a proposal for inclusion in theproxy statement to be acted upon at our 2023 Annual Meeting ofStockholders in accordance with Exchange Act Rule 14a-8 must ensurethat the proposal is received by us at our principal executiveoffice no later than December 12, 2022, which is 120 calendar daysbefore April 11, 2023, the anniversary date of this proxystatement’s release to stockholders in connection with the AnnualMeeting. Such proposal must also comply with the requirements as toform and substance established by the SEC if such proposals are tobe included in the proxy statement and form of proxy. Any suchproposal shall be mailed to: Sonnet BioTherapeutics Holdings, Inc.,100 Overlook Center, Suite 102, Princeton, New Jersey 08540, Attn.:Secretary.
Householdingof Proxy Materials
Somebanks, brokers and other nominee record holders may beparticipating in the practice of “householding” proxy statements.This means that only one copy of this proxy statement may have beensent to multiple stockholders in the same household. We willpromptly deliver a separate copy of this proxy statement to anystockholder upon written or oral request to: Sonnet BioTherapeuticsHoldings, Inc., 100 Overlook Center, Suite 102, Princeton, NewJersey 08540, Attn.: Secretary or by phone at (609) 375-2227. Anystockholder who wants to receive a separate copy of this proxystatement, or of our proxy statements or annual reports in thefuture, or any stockholder who is receiving multiple copies andwould like to receive only one copy per household, should contactthe stockholder’s bank, broker, or other nominee record holder, orthe stockholder may contact us at the address and phone numberabove.
Atthe date of this proxy statement, we know of no other matters,other than those described above, that will be presented forconsideration at the Special Meeting. If any other business shouldcome before the Special Meeting, it is intended that the proxyholders will vote all proxies using their best judgment in theinterest of the Company and the stockholders.
Thesolicitation of proxies pursuant to this proxy statement is beingmade by us. Proxies may be solicited, among other methods, by mail,facsimile, telephone, telegraph, Internet and in person.
Theexpenses of preparing, printing and distributing this proxystatement and the accompanying form of proxy and the cost ofsoliciting proxies will be borne by us.
Copiesof soliciting materials will be furnished to banks, brokeragehouses and other custodians, nominees and fiduciaries forforwarding to the beneficial owners of shares of Common Stock andPreferred Stock for whom they hold shares, and we will reimbursethem for their reasonable out-of-pocket expenses in connectiontherewith.
Wehave engaged Alliance Advisors LLC, to assist in the solicitationof proxies and provide related advice and informational support,for a services fee, plus customary disbursements, which are notexpected to exceed $200,000 in total. Alliance Advisors LLC willsolicit proxies on our behalf from individuals, brokers, banknominees and other institutional holders in the same mannerdescribed above. We have also agreed to indemnify Alliance AdvisorsLLC against certain claims.
REGARDLESSOF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING
VIRTUALLY,PLEASE READ THE PROXY STATEMENT AND THEN SUBMIT A PROXY TOVOTE
BYINTERNET, TELEPHONE OR MAIL AS PROMPTLY AS POSSIBLE TO ENSURETHAT
YOURSHARES ARE REPRESENTED AT THE SPECIAL MEETING.
|ByOrder of the Board of Directors|
|ChiefExecutive Officer and Chairman of the Board|
Ifyou have any questions or require any assistance in voting yourshares, please call:
200Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
CERTIFICATEOF AMENDMENT TO THE
SONNETBIOTHERAPEUTICS HOLDINGS, INC.
SonnetBioTherapeutics Holdings, Inc. (the “Corporation”), a corporationorganized and existing under and by virtue of the GeneralCorporation Law of the State of Delaware, does hereby certify asfollows:
FIRST:That a resolution was duly adopted on August __, 2022, by the Boardof Directors of the Corporation pursuant to Section 242 of theGeneral Corporation Law of the State of Delaware setting forth anamendment to the certificate of incorporation of the Corporation,as heretofore amended (the “Charter”) and declaring said amendmentto be advisable. The stockholders of the Corporation duly approvedand adopted said proposed amendment at a special meeting ofstockholders held on September 15, 2022, in accordance with Section242 of the General Corporation Law of the State of Delaware. Theproposed amendment, which has been duly adopted in accordance withSection 242 of the General Corporation Law of the State ofDelaware, is as follows:
ArticleFOURTH of the Charter be and hereby is further amended bydeleting the provisions following the second paragraph of ArticleFOURTH and inserting the following at the end of ArticleFOURTH:
Uponeffectiveness (“Effective Time”) of this Certificate of Amendment,a one-for-1 reverse stock split (the“Reverse Split”) of the Corporation’s Common Stock shall becomeeffective, pursuant to which each  shares of CommonStock either issued and outstanding or held by the Corporation intreasury immediately prior to the Effective Time (“Old CommonStock”) shall be reclassified into one share of Common Stockautomatically and without any action by the holder thereof upon theEffective Time and shall represent one share of Common Stock fromand after the Effective Time (“New Common Stock”), with nocorresponding reduction in the number of authorized shares ofCommon Stock.
Nofractional shares of Common Stock will be issued in connection withthe Reverse Split. Stockholders who otherwise would be entitled toreceive fractional shares, will be entitled to receive cash(without interest) in lieu of fractional shares, equal to suchfraction multiplied by the average of the closing sales prices ofthe Common Stock on the exchange the Corporation is currentlytrading during regular trading hours for the five consecutivetrading days immediately preceding the date of the Effective Time(with such average closing sales prices being adjusted to giveeffect to the Reverse Split).
Eachholder of record of a certificate or certificates for one or moreshares of the Old Common Stock shall be entitled to receive as soonas practicable, upon surrender of such certificate, a certificateor certificates representing the whole number of shares of NewCommon Stock to which such holder shall be entitled pursuant to theprovisions of the immediately preceding paragraphs as well as cashin lieu of any fractional shares of New Common Stock to which suchholder may be entitled). Any certificate for one or more shares ofthe Old Common Stock not so surrendered shall. from and after theEffective Time, automatically and without the necessity ofpresenting the same for exchange, be deemed to represent thatnumber of whole shares of the New Common Stock into which theshares of the Old Common Stock previously represented by suchcertificate have been reclassified (as well as the right to receivecash in lieu of fractional shares of New Common Stock after theEffective Time upon the surrender thereof).
SECOND:That said amendment will have an Effective Time of 5:00 P.M.,Eastern Time, on the filing date of this Certificate of Amendmentto the Charter
INWITNESS WHEREOF, the Corporation has caused this Certificate ofAmendment to be signed by its President and Chief Executive Officerthis ___ day of September, 2022.
|Presidentand Chief Executive Officer|
1Shall be a whole number equal to or greater than [two (2)] andequal to or lesser than [forty (40)], which number is referred toas the “Reverse Split Factor” (it being understood that any ReverseSplit Factor within such range shall, together with the remainingprovisions of this Certificate of Amendment not appearing inbrackets, constitute a separate amendment being approved andadopted by the Board of Directors of the Corporation and thestockholders of the Corporation in accordance with Section 242 ofthe General Corporation Law of the State of Delaware). The Board ofDirectors of the Corporation shall select the Reverse Split Factorprior to the filing of the Certificate of Amendment and anyamendment not setting forth the Reverse Split Factor selected bythe Board of Directors and included in the Certificate of Amendmentfiled with the Secretary of State shall be automatically abandonedupon the filing of such Certificate of Amendment.
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