Full Press Release Details
APPLIED DNA SCIENCES, INC.
50 HEALTH SCIENCES DRIVE
STONY BROOK, NEW YORK 11790
You are cordially invited to attend the 2014 Annual Meeting of Stockholders of Applied DNA Sciences, Inc. ("Applied DNA Sciences," the "Company," "we" or "us") to be held at 10:00 a.m., local time, on Thursday, August 28, 2014, at the Center of Excellence in Wireless and Information Technology, Stony Brook, New York 11790. Directions to the Center of Excellence in Wireless and Information Technology can be found on our website at www.adnas.com.
At the meeting you will be asked to elect five directors, to authorize our Board of Directors to effect, in its discretion, an amendment to our Certificate of Incorporation, as amended, to (i) effectuate a reverse stock split of our issued and outstanding common stock, par value $.001 per share, by a ratio of no less than one-for-forty and no more than one-for-sixty and (ii) reduce the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000 shares, at any time prior to December 31, 2014 and to ratify our appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014. In addition, we will be pleased to report on our affairs and a discussion period will be provided for questions and comments of general interest to stockholders. Detailed information with respect to these matters is set forth in the accompanying Proxy Statement. In addition, the Proxy Statement, Annual Report and a form of proxy card are available on the Internet at www.proxyvote.com.
We look forward to greeting personally those stockholders who are able to attend the meeting in person. However, whether or not you plan to be with us at the meeting, it is important that your shares be represented. Stockholders of record at the close of business on July 11, 2014 are entitled to notice of and to vote at the meeting. We will be using the "Notice and Access" method of providing proxy materials to you via the Internet. On or about July 15, 2014, we will mail to our stockholders a Notice of Availability of Proxy Materials containing instructions on how to access our Proxy Statement and our 2013 Annual Report and vote electronically via the Internet. The Notice also contains instructions on how to receive a paper copy of your proxy materials.
You may vote over the Internet, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. Please review the instructions on each of your voting options described in this proxy statement, as well as in the Notice you received in the mail.
Thank you for your ongoing support of Applied DNA Sciences.
| Very truly yours, | |||
| /s/ James A. Hayward | |||
| James A. Hayward | |||
| Chairman, President and Chief Executive Officer |
APPLIED DNA SCIENCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the 2014 Annual Meeting of Stockholders will be held on Thursday, August 28, 2014 at 10:00 a.m., local time, at the Center of Excellence in Wireless and Information Technology, Stony Brook, New York 11790 for the following purposes:
| to elect five (5) directors, constituting the entire Board of Directors, to serve for the ensuing year; | ||
| to authorize our Board of Directors to effect, in its discretion, an amendment to our Certificate of Incorporation, as amended, to (i) effectuate a reverse stock split of our issued and outstanding common stock, par value $.001 per share, by a ratio of no less than one-for-forty and no more than one-for-sixty and (ii) reduce the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000 shares, at any time prior to December 31, 2014; | ||
| to ratify the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014; and | ||
| to consider and act upon such other matters as may properly come before the meeting or any postponement or adjournment of the meeting. |
All stockholders of record at the close of business on July 11, 2014 are entitled to notice of and to vote at the meeting or any postponements or adjournments of the meeting. A list of stockholders eligible to vote at the meeting will be available for inspection at the meeting and for a period of ten days prior to the meeting during regular business hours at our corporate headquarters at Applied DNA Sciences, 50 Health Sciences Drive, Stony Brook, New York 11790.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials (Notice) you received in the mail, the section entitled "About the Annual Meeting" beginning on page 1 of this proxy statement or, if you requested to receive printed proxy materials, your enclosed proxy card.
| Dr. Ming-Hwa Benjamin Liang | |
| Secretary | |
| Stony Brook, New York | |
| July 15, 2014 |
APPLIED DNA SCIENCES, INC.
50 HEALTH SCIENCES DRIVE
STONY BROOK, NEW YORK 11790
Our Board of Directors has made this proxy statement and related materials available to you on the internet, or, upon your request, has delivered printed proxy materials to you by mail, in connection with the Board of Directors' solicitation of proxies for use at the 2014 Annual Meeting of Stockholders (the "Annual Meeting") of Applied DNA Sciences to be held on August 28, 2014, beginning at 10:00 a.m., local time, at the Center of Excellence in Wireless and Information Technology, Stony Brook, New York 11790, and at any postponements or adjournments of the Annual Meeting. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this proxy statement.
About the Annual Meeting
Why did I receive a notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?
In accordance with rules adopted by the Securities and Exchange Commission ("SEC"), we are providing access to our proxy materials over the internet. Accordingly, we are sending a Notice Regarding Availability of Proxy Materials (the "Notice") to our stockholders of record and beneficial owners as of the record date. The mailing of the Notice to our stockholders is scheduled to begin on or about July 15, 2014. All stockholders will have the ability to access the proxy materials and the Annual Report on Form 10-K for the fiscal year ended September 30, 2013 on a website referred to in the Notice or request to receive a printed set of the proxy materials and that Annual Report. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice. Stockholders may also request to receive proxy materials and our Annual Report on Form 10-K in printed form by mail or electronically by e-mail on an ongoing basis.
How do I get electronic access to the proxy materials?
The Notice will provide you with instructions regarding how to:
| View our proxy materials for the Annual Meeting on the internet; and | ||
| Instruct us to send our future proxy materials to you electronically by email. |
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you, and will reduce the impact of printing and mailing these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it.
What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the notice of meeting on the cover page of this proxy statement, consisting of the election of five directors, the authorization of our Board of Directors to effect, in its discretion, an amendment to our Certificate of Incorporation, as amended, to (i) effectuate a reverse stock split of our issued and outstanding common stock, par value $.001 per share, by a ratio of no less than one-for-forty and no more than one-for-sixty and (ii) reduce the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000 shares, at any time prior to December 31, 2014, and the ratification of the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014 and such other business that may properly come before the meeting. In addition, management will report on our performance during the fiscal year ended September 30, 2013 and more recent developments and respond to questions from stockholders. Our Board of Directors is not currently aware of any other matters which will come before the meeting.
How do proxies work?
The Board of Directors is asking for your proxy. Giving us your proxy means that you authorize us to vote your shares at the Annual Meeting in the manner you direct. You may vote for all, some, or none of our director nominees. You may vote for or against, or abstain from voting on, the authorization of our Board of Directors to effectuate a reverse stock split and reduce the authorized number of shares. You may also vote for or against the ratification of our selection of Marcum LLP as our independent registered public accounting firm.
Who is entitled to vote at the Annual Meeting?
Only stockholders of record at the close of business on July 11, 2014, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting, or any postponements and adjournments of the meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares you held on that date at the meeting, or any postponements or adjournments of the meeting.
On July 11, 2014, the record date for the meeting, there were 827,422,292 shares of common stock outstanding. Each outstanding share of Common Stock is entitled to one vote on each of the matters presented at the Annual Meeting or postponements and adjournments of the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the outstanding shares of common stock as of the record date will constitute a quorum, permitting the meeting to conduct its business. As of the record date, 827,422,292 shares of common stock, representing the same number of votes, were outstanding. Thus, the presence of holders representing at least 413,711,147 shares will be required to establish a quorum. If a stockholder abstains from voting as to any matter, then the shares held by such stockholder shall be deemed present at the meeting for purposes of determining a quorum. If a broker returns a "non-vote" proxy, indicating a lack of voting instructions by the beneficial holder of the shares and a lack of discretionary authority on the part of the broker to vote on a particular matter, then the shares covered by such non-vote proxy shall be deemed present at the meeting for purposes of determining a quorum, but otherwise shall have no effect since the shares are not entitled to vote with regard to a proposal.
How can I vote my shares?
In person. Shares held in your name as the stockholder of record may be voted by you in person at the Annual Meeting. Shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.
By proxy. Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. If you hold shares beneficially in street name, you may also vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by telephone or mail by following the instructions provided on the proxy card.
What happens if additional matters are presented at the Annual Meeting?
Other than the three items of business described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Ms. Debbie Bailey and Ms. Karol Gray, or either of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.
What if I am a beneficial owner and do not give voting instructions to my broker?
As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. You can vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered for vote.
| Non-Discretionary Items . The election of directors and the authorization of our Board of Directors to effect a reverse stock split are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. | ||
| Discretionary Items . The ratification of the appointment of Marcum LLP as our independent registered public accounting firm is a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion. |
We encourage you to provide instructions to your broker regarding the voting of your shares.
Can I change my vote or revoke my proxy?
Yes. You may revoke your proxy by (1) following the instructions on the Notice and entering a new vote by mail or over the internet before the Annual Meeting or (2) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself revoke a proxy). Any written notice of revocation or subsequent proxy card must be received by the Secretary of the Company prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card should be hand delivered to the Secretary of the Company or sent to the Company's principal executive offices. If a broker, bank, or other nominee holds your shares, you must contact them in order to find out how to change your vote.
What are the Board of Directors' recommendations?
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If no instructions are indicated, the shares will be voted as recommended by the Board of Directors: in favor of our director nominees, for approval of authorizing our Board of Directors, in its discretion, to effect a reverse stock split and reduction in authorized shares and for the ratification of Marcum LLP as our independent registered public accounting firm. If any other matters are properly presented for consideration at the meeting, the individuals named as proxy holders, Ms. Debbie Bailey and Ms. Karol Gray, will vote the shares that they represent on those matters as recommended by the Board of Directors. If the Board of Directors does not make a recommendation, then they will vote in accordance with their best judgment. In summary, the Board of Directors recommends a vote:
| to approve Proposal No. 1, for election of the nominated slate of five directors to serve for the ensuing year; | ||
| to approve Proposal No. 2, for the authorization of our Board of Directors to effect, in its discretion, an amendment to our Certificate of Incorporation, as amended, to (i) effectuate a reverse stock split of our issued and outstanding common stock, par value $.001 per share, by a ratio of no less than one-for-forty and no more than one-for-sixty and (ii) reduce the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000 shares, at any time prior to December 31, 2014; and | ||
| to approve Proposal No. 3, for ratification of the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2014. |
Who will bear the cost of soliciting votes for the Annual Meeting?
We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials and/or vote over the internet, you are responsible for internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We have engaged Laurel Hill Advisory Group, LLC to assist in soliciting proxies on our behalf. Laurel Hill Advisory Group, LLC may solicit proxies personally, electronically or by telephone. We have agreed to pay Laurel Hill Advisory Group, LLC a fee of $9,000 for its services. We have also agreed to reimburse Laurel Hill Advisory Group, LLC for its reasonable out-of-pocket expenses and to indemnify Laurel Hill Advisory Group, LLC and its employees against certain liabilities arising from or in connection with the engagement.
Where can I find the voting results of the Annual Meeting?
We will announce preliminary voting results at the Annual Meeting. Voting results will also be disclosed on a Form 8-K filed with the SEC within four business days after the Annual Meeting, which will be available on our website.
We encourage you to vote by proxy over the internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card.
ELECTION OF DIRECTORS
Five directors (constituting the entire Board of Directors) are to be elected at the Annual Meeting to serve until the 2015 Annual Meeting of Stockholders or until their respective successors are elected and qualified. All of the nominees are our current directors and have been nominated for election by our Board of Directors. It is intended that the proxy in the form presented will be voted, unless otherwise indicated, for the election of these nominees to serve until the 2015 Annual Meeting of Stockholders or until their successors are elected and qualified. Our Certificate of Incorporation provides that the number of directors that constitute the whole Board of Directors shall be fixed exclusively in the manner designated in the Company's Bylaws, which provide that the number of directors is determined by resolution of the Board of Directors, provided the Board of Directors shall consist of at least one member. On July 11, 2011, Delabarta, Inc. ("Delabarta"), a wholly owned subsidiary of ABARTA, Inc. ("ABARTA"), participated as an investor in the Company's private placement of our common stock, described in our Current Report on Form 8-K filed with the SEC on July 15, 2011. In connection with the investment in the Company by Delabarta, we agreed to use best efforts to nominate its designee, Mr. John Bitzer, to the Board and elect Mr. Bitzer as a director within 30 days of the closing and to nominate and include Mr. Bitzer on the slate of nominees for the Board of Directors for election by stockholders at the annual meetings of stockholders for so long as Delabarta owns at least 2% of the outstanding shares of common stock.
Should one or more of these nominees be unable to accept nomination or election as a director, the individuals named as proxies, Ms. Debbie Bailey and Ms. Karol Gray, will vote the shares that they represent for such other persons as the Board of Directors may recommend. The Board of Directors has no present knowledge that any of the persons named will be unavailable to serve. The directors standing for re-election are:
| Director | Age | Year First Became Director | Principal Occupation During the Past Five Years | ||
| James A. Hayward, Ph.D., Sc.D. | 61 | 2005 | Dr. James A. Hayward has been our Chief Executive Officer since March 17, 2006 and our President and the Chairman of the Board of Directors since June 12, 2007. He was previously our acting Chief Executive Officer since October 5, 2005. Dr. Hayward received his Ph.D. in Molecular Biology from the State University of New York at Stony Brook in 1983 and an honorary Doctor of Science from the same institution in 2000. His experience with public companies began with the co-founding of one of England's first biotechnology companies-Biocompatibles. Following this, Dr. Hayward was Head of Product Development for the Estee Lauder companies for five years. In 1990 he founded The Collaborative Group, a provider of products and services to the biotechnology, pharmaceutical and consumer-product industries based in Stony Brook, where he served as Chairman, President and Chief Executive Officer for 14 years. During this period, The Collaborative Group created several businesses, including The Collaborative BioAlliance, a contract developer and manufacturer of human gene products, that was sold to Dow Chemical in 2002, and Collaborative Labs, a service provider and manufacturer of ingredients for skincare and dermatology that was sold to Engelhard (now BASF) in 2004. |
| Our Board believes that Dr. Hayward's current role as our Chief Executive Officer and President, the capital investments he has made to the Company throughout his tenure with us and his former senior executive positions in our industry make him an important contributor to our Board. | |||||
| John Bitzer, III | 53 | 2011 | John Bitzer, III, joined the Board of Directors on August 10, 2011. Mr. Bitzer is President and Chief Executive Officer of ABARTA, Inc., a private, third-generation family holding-company with operations in the soft drink beverages, newspaper publishing, oil and gas exploration and development, and frozen food industries ("ABARTA"). In 1985, Mr. Bitzer began his career in sales for the Cleveland Coca-Cola Bottling Company. He has been Publisher of Atlantic City Magazine in Atlantic City, N.J. In 1994 he founded the ABARTA Media Group and held the position of Group Publisher. In 1997 he was named President and Chief Operating Officer of ABARTA and has been President and Chief Executive Officer since 1999. He is also a director of the Institute for Entrepreneurial Excellence at the University of Pittsburgh. Mr. Bitzer has a degree from the University of Southern California and an MBA from the University of Michigan. Our Board believes that Mr. Bitzer's professional and management experience in investing in and building growing enterprises make him an important contributor to the Board. | ||
| Charles Ryan | 50 | 2011 | Dr. Charles Ryan joined the Board of Directors on August 10, 2011. Dr. Ryan is the Senior Vice President, and Chief Intellectual Property Counsel at Forest Laboratories ("Forest"), a developer of branded drugs, where he has been employed since 2003. Forest, a wholly owned subsidiary of Actavis, develops and markets pharmaceutical products in a variety of therapeutic categories including central nervous system, cardiovascular, anti-infective, respiratory, gastrointestinal, and pain management medicine. Dr. Ryan has over 18 years' experience in managing all aspects of intellectual property litigation, conducting due diligence investigations and prosecuting patent and trademark applications in the pharmaceutical and biotechnology industries. Dr. Ryan earned a doctorate in oral biology and pathology from SUNY Stony Brook and a law degree from Western New England College School of Law. |
| Our Board believes that Mr. Ryan's expertise as chief intellectual property counsel at a global company make him an important contributor to the Board. | |||||
| Yacov Shamash | 64 | 2006 | Dr. Yacov Shamash has been a member of the Board of Directors since March 17, 2006. Dr. Shamash is Vice President of Economic Development at the State University of New York at Stony Brook. Since 1992, he has been the Dean of Engineering and Applied Sciences at the Harriman School for Management and Policy at the University, and Founder of the New York State Center for Excellence in Wireless Technologies at the University. Dr. Shamash developed and directed the NSF Industry/University Cooperative Research Center for the Design of Analog/Digital Integrated Circuits from 1989 to 1992 and also served as Chairman of the Electrical and Computer Engineering Department at Washington State University from 1985 until 1992. Dr. Shamash also serves on the Board of Directors of Keytronic Corp., Netsmart Technologies, Inc. American Medical Alert Corp., and Softheon Corp. | ||
| As Vice President of Economic Development at the State University of New York at Stony Brook, Dr. Shamash daily encounters leaders of businesses large and small, regional and global in their reach and, as a member of our Board, has played an integral role in our business development by providing the highest-level introductions to customers, channels to market and to the media. Dr. Shamash also brings to our Board his valuable experience gained from serving as a director at other private and public companies. | |||||
| Our Board believes that Dr. Shamash's professional and management experience, service on other companies' boards and education make him an important contributor to our Board. |
| Sanford R. Simon | 71 | 2006 | Dr. Sanford R. Simon has been a member of the Board of Directors since March 17, 2006. Dr. Simon has been a Professor of Biochemistry, Cell Biology and Pathology at Stony Brook since 1997. He joined the faculty at Stony Brook as an Assistant Professor in 1969 and was promoted to Associate Professor with tenure in 1975. Dr. Simon was a member of the Board of Directors of The Collaborative Group from 1995 to 2004. From 1967 to 1969 Dr. Simon was a Guest Investigator at Rockefeller University. Dr. Simon received a B.A. in Zoology and Chemistry from Columbia University in 1963, a Ph.D. in Biochemistry from Rockefeller University in 1967, and studied as a postdoctoral fellow with Nobel Prize winner Max Perutz in Cambridge, England. He maintains an active research laboratory studying aspects of cell invasion in cancer and inflammation and novel strategies of drug delivery; he also teaches undergraduate, graduate, medical and dental students. | ||
| Dr. Simon is an expert at the use of large biomolecules in commercial media, and we have made use of his expertise in formulating DNA into commercial carriers for specific customers. As a member of our Board, Dr. Simon has advised us on patents, provided technical advice, and introduced us to corporate partners and customers. Our Board believes that Dr. Simon's professional experience, expertise, and education make him an important contributor to our Board. |
The Board of Directors recommends a vote "FOR" the election of each of the nominees to the Board of Directors set forth in this Proposal No. 1.
The five nominees who receive the highest number of affirmative votes of the shares present in person or represented by proxy and entitled to vote, a quorum being present, will be elected as our directors. It is intended that the proxy in the form presented will be voted, unless otherwise indicated, for the election of these nominees. Abstentions, broker non-votes and instructions on the accompanying proxy card to withhold authority to vote for one or more nominees will result in the respective nominees receiving fewer votes. However, the number of votes otherwise received by the nominee will not be reduced by such action. In the absence of instructions to the contrary, the shares represented thereby will be voted "FOR" all the nominees set forth above.
AUTHORIZATION OF REVERSE STOCK SPLIT AND REDUCTION IN AUTHORIZED SHARES
Our Board of Directors has approved an amendment to our Certificate of Incorporation, as amended, to effect a reverse stock split which combines the outstanding shares of our common stock into a lesser number of outstanding shares. If approved by the stockholders as proposed, our Board of Directors would have the sole discretion to effect the amendment and reverse stock split at any time prior to December 31, 2014, and to fix the specific ratio for the combination, provided that the ratio would be not less than 1-for-40 and not more than 1-for-60. In addition, the amendment to our Certificate of Incorporation would reduce the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000 shares. Our Board of Directors would also have discretion to abandon the amendment prior to its effectiveness. Our Board of Directors is hereby soliciting stockholder approval for the reverse stock split and reduction in authorized shares proposal.
If approved by our stockholders, the reverse stock split proposal would permit (but not require) our Board of Directors to effect a reverse stock split of our outstanding common stock at any time by a ratio of not less than 1-for-40 and not more than 1-for-60 with the specific ratio to be fixed within this range by our Board of Directors in its sole discretion. We believe that enabling our Board of Directors to fix the specific ratio of the reverse stock split within the stated range will provide us with the flexibility to implement it in a manner designed to maximize the anticipated benefits for our stockholders. In fixing the ratio, our Board of Directors may consider, among other things, factors such as: the historical trading price and trading volume of our common stock; the number of shares of our common stock outstanding; the then-prevailing trading price and trading volume of our common stock; the anticipated impact of the reverse stock split on the trading market for our common stock; and prevailing general market and economic conditions.
The reverse stock split and reduction in authorized shares, if approved by our stockholders, would become effective upon the filing of the amendment to our Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware, or at the later time set forth in the amendment. The exact timing of the amendment will be determined by our Board of Directors based on its evaluation as to if and when such action will be the most advantageous to our company and our stockholders. In addition, our Board of Directors reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to abandon the amendment and the reverse stock split and reduction in authorized shares if, at any time prior to the effectiveness of the filing of the amendment with the Secretary of State of the State of Delaware, our Board of Directors, in its sole discretion, determines that it is no longer in our best interest and the best interests of our stockholders to proceed.
The proposed form of amendment to our Certificate of Incorporation, as amended, to effect the reverse stock split and reduction in authorized shares is attached as Appendix A to this Proxy Statement. Any amendment to our Certificate of Incorporation, as amended, to effect the reverse stock split will include the exchange ratio fixed by our Board of Directors, within the range approved by our stockholders.
Reasons for Proposed Amendment
Reverse Stock Split. Our Board of Directors' primary reason for approving and recommending the reverse stock split is to increase the per share price of our common stock to meet the listing requirements of either the NASDAQ Capital Market ("NASDAQ") or the NYSE MKT ("NYSE MKT"). Our Board of Directors believes that attaining and maintaining the listing of our common stock on NASDAQ or NYSE MKT is in the best interests of our company and our stockholders. As of July 11, 2014, our common stock has traded on the OTC Market's electronic interdealer quotation QB system ("OTCQB") in a 52 week closing price range from $0.09 to $0.20 per share. NASDAQ requires a minimum bid price of $4.00 or a minimum closing price of $2.00 or $3.00 per share (depending upon the applicable listing standard) in connection with the initial listing application while the NYSE MKT requires a minimum price of $2.00 or $3.00 per share in connection with the initial listing application. We are also required to meet additional conditions to list our common stock on NASDAQ or NYSE MKT and there is no guarantee that we will be able to meet those conditions. We will submit an application to list our common stock on NASDAQ or NYSE MKT at such time as determined prudent by our Board of Directors.
In addition, if our common stock were listed on NASDAQ or NYSE MKT, our Board of Directors believes that the liquidity in the trading of our common stock could be significantly enhanced, which could result in an increase in the trading price. However, despite approval of the reverse stock split by our stockholders and the implementation thereof by our Board of Directors, there is no assurance that our minimum bid price would be or remain following the reverse stock split over NASDAQ's or NYSE MKT's minimum bid price requirement, and our common stock could fail to attain the minimum bid price requirement necessary to be listed on NASDAQ or NYSE MKT.
Our Board of Directors further believes that an increased stock price may encourage investor interest and improve the marketability of our common stock to a broader range of investors. We believe that the reverse stock split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current market price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because brokers' commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. We believe that the reverse stock split will make our common stock a more attractive and cost effective investment for many investors, which should enhance the liquidity available to the holders of our common stock. Accordingly, we believe that approval of the reverse stock split is in our Company's and our stockholders' best interests.
Reducing the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of our common stock. However, other factors, such as our financial results, general market conditions and the market perception of our company, may adversely affect the market price of our common stock. As a result, there can be no assurance that the reverse stock split, if completed, will result in the intended benefits described above, that the market price of our common stock will increase following the reverse stock split or that the market price of our common stock will not decrease in the future. Additionally, we cannot assure you that the market price per share of our common stock after a reverse stock split will increase in proportion to the reduction in the number of shares of our common stock outstanding before the reverse stock split. Accordingly, the total market capitalization of our common stock after the reverse stock split may be lower than the total market capitalization before the reverse stock split.
Our Board of Directors is also mindful about the potential dilutive effect on existing stockholders. For the reasons discussed in this proposal, our Board of Directors has approved and recommended a range of exchange ratios to address NASDAQ and the NYSE MKT's listing price requirement in a more targeted fashion.
Decrease in Authorized Shares. We are currently authorized to issue 1,350,000,000 shares of common stock. Although the proposed reverse stock split described in this Proposal No. 2 will not affect the rights of stockholders or any stockholders' proportionate equity interest in the Company (except to the extent of a cash-out or rounding up of fractional share interests as further described below), the number of authorized shares of common stock will not be reduced proportionately to the ratio in the reverse stock split. Accordingly, if the Board of Directors implements the reverse stock split, there will be a significant number of authorized but unissued shares of our common stock available as compared to the number of shares of common stock then issued and outstanding. For example, if a 1-for-50 reverse stock split is implemented, we would have approximately 16,548,446 shares of common stock issued and outstanding (based on the number of shares issued and outstanding on July 11, 2014, the record date), with 1,333,451,554 shares of common stock available for issuance. Because the Board is mindful about the potential dilutive effect on existing stockholders, and because the approved and recommended range of exchange ratios would result in more shares becoming available than the Board believes are necessary for reasonably foreseeable future needs, the Board of Directors has also approved and recommended an amendment to our certificate of incorporation to decrease, subject to stockholder approval and implementation of the reverse stock split, the authorized number of shares of our common stock from 1,350,000,000 to 500,000,000. Our Board of Directors believes this number of authorized shares of common stock will provide the Company sufficient shares of authorized capital available to be issued for any proper corporate purpose without further stockholder action.
The Board does not propose to make any adjustments to the number of authorized shares of preferred stock.
Determination of Ratio
The ratio of the reverse stock split, if approved and implemented, will be a ratio of not less than 1-for-40 and not more than 1-for-60, as determined by our Board of Directors in its sole discretion. Our Board of Directors believes that stockholder approval of a range of potential exchange ratios, rather than a single exchange ratio, is in the best interests of our stockholders because it provides our Board of Directors with the flexibility to achieve the desired results of the reverse stock split and because it is not possible to predict market conditions at the time the reverse stock split would be implemented. The denominator of the exchange ratio is referred to as the "exchange denominator." If our stockholders approve this proposal, our Board of Directors would carry out a reverse stock split only upon its determination that a reverse stock split would be in the best interests of our stockholders at that time. Our Board of Directors would then set the ratio for the reverse stock split in an amount it determines is advisable and in the best interests of the stockholders considering relevant market conditions at the time the reverse stock split is to be implemented. In determining the ratio, following receipt of stockholder approval, our Board of Directors may consider, among other things:
The purpose of asking for authorization to implement the reverse stock split at a ratio to be determined by our Board of Directors, as opposed to a ratio fixed in advance, is to give our Board of Directors the flexibility to take into account then-current market conditions and changes in price of our common stock and to respond to other developments that may be deemed relevant when considering the appropriate ratio.
Potential Effects of Proposed Amendment
Reverse Stock Split. If our stockholders approve the reverse stock split and our Board of Directors effect it, the reverse stock split will affect all holders of our common stock uniformly (except to the extent of a cash-out or rounding up of fractional share interests as further described below).
As permitted by Delaware law, each holder of fewer shares of common stock prior to the reverse split (also referred to as a "Cashed-Out Stockholder") than the denominator of the exchange ratio will not receive fractional shares in the reverse split, but in lieu of such fractional share interests shall be entitled to receive a cash payment as described below. However, if a stockholder holds a number of shares of common stock equal to or in excess of the denominator of the exchange ratio at the effective time of the reverse split, any fractional share resulting from the reverse split will not be cashed out, and instead, the number of post-reverse split shares to which the stockholder is entitled will be rounded up to the next whole number of post-reverse split shares.
If our stockholders approve this proposal at the annual meeting and the reverse split is completed, the Company will pay cash for the fractional share interests of stockholders who hold fewer than the number of shares equal to the denominator of the exchange ratio prior to the reverse split. The Company will pay to each registered stockholder who holds fewer than the number of shares of common stock equal to the denominator of the exchange ratio immediately prior to the reverse split an amount, for each share of common stock held immediately prior to the reverse split, equal to the average per-share closing price of the common stock on the OTCQB for the ten (10) consecutive trading days ending on the last trading day prior to the effective date of the reverse split (the "Cash-Out Payment").
If approved by the stockholders at the annual meeting and implemented by the Board of Directors, the reverse split will affect our stockholders as follows, assuming an exchange ratio of 1-for-50:
| Stockholder Prior to Reverse Stock Split | Net Effect After Completion of Reverse Stock Split | |
| Registered stockholders holding 50 or more shares of common stock | Any fractional share resulting from the reverse split will not be cashed out, and instead, the number of post-reverse split shares to which the stockholder is entitled will be rounded up to the next whole number of post-reverse split shares. | |
| Registered stockholders holding fewer than 50 shares of common stock | Shares will be converted into the right to receive a cash payment per share equal to the average per-share closing price of the common stock on the OTCQB for the ten (10) consecutive trading days ending on the last trading day prior to the effective date of the reverse split. | |
| Stockholders holding common stock in street name or through a nominee (such as a bank or broker) | The Company expects that the reverse split will treat stockholders holding common stock in street name or through a nominee (such as a bank or broker), and those persons holding shares of common stock as nominees for others, in the same manner as stockholders whose shares are registered in their names on the books of the Company. Nominees will be advised that they may effect the reverse split for their beneficial holders. However, nominees may have different procedures and stockholders holding shares in street name should contact their nominees to be advised of any procedures such holders may need to follow in order to obtain the same treatment as registered stockholders or rights such holders may have to retain beneficial ownership of such shares. |
The reverse stock split will not change the terms of our common stock. After the reverse stock split, the shares of our common stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to our common stock now authorized. Our common stock will remain fully paid and non-assessable.
After the effective time of the reverse stock split, we will continue to be subject to the periodic reporting and other requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The reverse stock split is not intended as, and will not have the effect of, a "going private transaction" as described by Rule 13e-3 under the Exchange Act.
If we fail to meet the requirements specified in NASDAQ or NYSE MKT's listing standards, our common stock will continue to be quoted on the OTCQB under the symbol "APDN."
After the effective time of a reverse stock split, the post-split market price of our common stock may be less than the pre-split price multiplied by the exchange ratio. In addition, a reduction in number of shares of our common stock outstanding may impair the liquidity for our common stock, which may reduce the value of our common stock.
The availability of a substantial number of authorized but unreserved shares of our common stock resulting from the reverse stock split, under various scenarios, may be construed as having an anti-takeover effect by permitting the issuance of shares of our common stock to purchasers who might oppose a hostile takeover bid or oppose any efforts to amend or repeal certain provisions in our Certificate of Incorporation or bylaws as then in effect. The proposal to effectuate the reverse stock split did not result from our knowledge of any specific effort to accumulate our securities or to obtain control of us by means of a merger, tender offer, proxy solicitation in opposition to management or otherwise, and our Board of Directors did not authorize the reverse stock split to increase the authorized shares of our common stock to enable us to frustrate any efforts by another party to acquire a controlling interest or to seek representation on our Board of Directors.
Reduction of Authorized Shares. Future issuances of common stock or securities convertible into common stock could have a dilutive effect on the earnings per share, book value per share, voting power and percentage interest of holdings of current stockholders. In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of the Company. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company. This Proposal No. 2 is not being presented with the intent that it be used to prevent or discourage any acquisition attempt, but nothing would prevent the Board from taking any appropriate actions not inconsistent with its fiduciary duties.
Beneficial Holders of Common Stock
Upon the implementation of the reverse stock split, we intend to treat shares held by stockholders through a bank, broker or other nominee in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding our common stock in "street name." However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split. Stockholders who hold shares of our common stock with a bank, broker or other nominee and who have any questions in this regard are encouraged to contact their banks, brokers or other nominees.
Registered "Book-Entry" Holders of Common Stock
Certain of the registered holders of our common stock may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have stock certificates evidencing their ownership of our common stock. They are, however, provided with statements reflecting the number of shares registered in their accounts. Stockholders who hold shares electronically in book-entry form with our transfer agent will not need to take action to receive evidence of their shares of post-reverse stock split common stock.
Holders of Certificated Shares of Common Stock
Stockholders holding shares of our common stock in certificated form will be sent a transmittal letter by our transfer agent after the effective time of the reverse stock split. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing shares of our common stock (the "Old Certificates") to our transfer agent in exchange for certificates representing the appropriate number of shares of post-reverse stock split common stock (the "New Certificates"). No New Certificates will be issued to a stockholder until such stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to our transfer agent. No stockholder will be required to pay a transfer or other fee to exchange his, her or its Old Certificates. Stockholders will then receive a New Certificate(s) representing the number of shares of our common stock to which they are entitled as a result of the reverse stock split. Until surrendered, we will deem outstanding Old Certificates held by stockholders to be cancelled and only to represent the number of shares of post-reverse stock split common stock to which these stockholders are entitled. Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Certificates. If an Old Certificate has a restrictive legend on its reverse side, the New Certificate will be issued with the same restrictive legend on its reverse side.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
We will not issue fractional shares in connection with the reverse stock split. Instead, stockholders who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by the denominator of the exchange ratio will automatically be entitled to receive an additional fraction of a share of our common stock to round up to the next whole share (except that the Company will make a Cash-Out Payment to each registered stockholder who holds fewer than the number of shares of common stock equal to the denominator of the exchange ratio immediately prior to the reverse split).