Enveric Biosciences, Inc.

PROPOSAL 3:

CONDITIONAL APPROVAL TO EFFECT A REVERSE STOCK SPLIT

Background and Reasons for Reverse Stock Split

Maintain Nasdaq Listing

The Company is seeking a conditional approval to effect a reverse stock split so that it can move immediately to cure a bid price deficiency, if it arises, before January 28, 2026. Rules of Nasdaq Capital Market (“Nasdaq”), where our Common Stock is listed, require us to meet certain continued listing requirements, including maintaining our bid price at least at $1.00 per share (“Minimum Bid Price Requirement”). A failure to maintain the bid price at $1.00 per share for a period of 30 consecutive business days could result in a bid price deficiency. While the Company currently is not experiencing a bid price deficiency, we’re seeking this approval pre-emptively at the Annual Meeting in light of Nasdaq’s recent rule-making, which as explained below, limits a company’s ability to effect a reverse stock split, a tool most frequently used to cure a bid price deficiency, since such an action requires approval from its stockholders under most state laws. Since acquiring a stockholder approval could take up to a few months and incur additional expenses for the Company, and as explained below is not feasible due to the rule constraints, our Board has determined a conditional approval of the stockholders to implement a Reverse Stock Split, if necessary, to be in the best interest of our stockholders. For the sake of clarity, the Company currently is in compliance with the Minimum Bid Price Requirement. The Company is seeking this approval only as a risk mitigation strategy and as a pre-emptive measure to be deployed at the discretion of the Board in order to safeguard listing of our common stock on Nasdaq. We provide additional background and a description of the Nasdaq rule below.

On May 16, 2024, the Company was informed by Nasdaq that the Company had failed to meet its Minimum Bid Price Requirement for a period of 30 consecutive business days and was granted an extended compliance period to cure the bid price deficiency. In order to cure the deficiency, the Company implemented a Reverse Stock Split, effective January 29, 2025, whereby every 15 shares of our outstanding Common Stock was combined and reclassified into one share of Common Stock. Consequently, on March 4, 2025, Nasdaq listing qualifications department deemed that Company had regained compliance with the Minimum Bid Price Requirement.

Nasdaq Listing Rule 5810(c)(3)(A)(v) on excessive reverse stock splits sets forth that if a Company’s security fails to meet the Minimum Bid Price Requirement and the Company has effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the Company shall not be eligible for any compliance period and Nasdaq’s listing qualifications department shall issue a staff delisting determination with respect to that security (the “Delisting Determination”). Since the Company effected a reverse stock split on January 29, 2025 as described above, if it fails to meet the Minimum Bid Price Requirement prior to January 28, 2026, Nasdaq will likely issue a Delisting Determination without providing the Company recourse to the otherwise available compliance period of 180 days to cure the deficiency. However, upon receipt of a Delisting Determination, the Company may, under Nasdaq Rule 5815, request a written or oral hearing before a hearings panel (the “Hearings Panel”) to review the Delisting Determination, submit a written plan of compliance and request that the Hearings Panel grant an exception to the listing standards for a limited time period. In the event the Company receives a Delisting Determination prior to January 28, 2026 (one year from the date of its latest reverse stock split), the Board contemplates seeking a hearing before the Hearings Panel. Pursuant to Rule 5815(a)(1), subject to certain limitations, a timely request for a hearing shall ordinarily stay the suspension and delisting action pending the issuance of a written panel decision. During the stay period, the Board expects to evaluate its options, including effecting a reverse stock split, with the advice of its management and legal counsel to determine the best course of action to comply with the Minimum Bid Price Requirement. If the Board determines that the Reverse Stock Split appears to be the best option to satisfy the Minimum Bid Price Requirement, it expects to utilize the stockholder approval to effect the split within the approved Range with the expectation to regain compliance with the Minimum Bid Price Requirement prior to the hearing. Nasdaq listing rules require that the closing bid price of the Company remain at $1.00 per share or greater for 10 consecutive business days before declaring that the Company has regained compliance with the Minimum Bid Price Requirement, unless the staff exercises its discretion to extend this 10 day period.

Notwithstanding that the Company may acquire technical compliance with the Minimum Bid Price Requirement prior to the hearing, there is no guarantee that either the Nasdaq listing qualifications department or the Hearings Panel following the hearing will find the Company in compliance with this listing requirement, especially in light of its previous failure(s) to meet continued listing requirements and the implementation of a reverse stock split in a prior year period. Nasdaq claims discretionary authority to make such a determination based on its role in protecting the public interest, and absent any express obligation, the Hearings Panel may exercise its discretionary authority to reject the Company’s compliance plan or the action to implement the Reverse Stock Split.

For additional context, please see the question titled “What are the consequences if the Conditional Reverse Stock Split Proposal is not approved by stockholders?” on page 3, and risk factor titled “Nasdaq May Not Find Us In Compliance Of The Minimum Bid Price Requirement Despite Implementing A Reverse Stock Split” on page 22 of this proxy statement.

Proposed Amendment

Our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), currently authorizes the Company to issue a total of 120,000,000 shares of capital stock, consisting of 100,000,000 shares of Common Stock, and 20,000,000 shares of Preferred Stock. The Company is seeking approval of its stockholders to authorize the Company’s Board to effect a Reverse Stock Split of the Common Stock at a ratio between 1-for-5 and 1-for-50, including shares held by the Company as treasury shares, with the exact ratio within such range to be determined by the Board of the Company at its discretion. For the sake of clarity, the stockholder approval to effect a Reverse Stock Split will only be used to comply with the Minimum Bid Price Requirement if and only if the Company receives a Delisting Determination from Nasdaq, and for no other reason. Further, the stockholder approval will expire automatically on January 28, 2026.

On March 26, 2025, subject to stockholder approval, the Board approved a conditional Reverse Stock Split as part of its strategy to mitigate risks associated with delisting of its Common Stock by Nasdaq. The primary goal of the Reverse Stock Split, if effected, will be to increase the per share market price of our Common Stock to meet the Minimum Bid Price Requirement for continued listing on Nasdaq. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Board has determined that seeking an advance stockholder approval to effect a Reverse Stock Split as an attempt to avoid potential delisting of its Common Stock is advisable and in the best interests of the Company and its stockholders and is submitting the amendment for consideration by our stockholders at the Annual Meeting.

The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 promulgated under the Exchange Act. The Reverse Stock Split is not intended to modify the rights of existing stockholders in any material respect.

If the Conditional Reverse Stock Split Proposal is approved by our stockholders and the Reverse Stock Split is effected, up to every 50 shares of our outstanding Common Stock would be combined and reclassified into one share of Common Stock. The actual timing for implementation of the Reverse Stock Split would be determined by the Board based upon its evaluation as to if and when such action would be most advantageous to the Company and its stockholders, provided however that the Board shall be authorized to effect the Reverse Stock Split only if the Company receives a Delisting Determination from Nasdaq, which authority shall automatically expire on January 28, 2026. If the Board determines that it is in the best interests of the Company and its stockholders to effect the Reverse Stock Split, it will hold a Board meeting to determine the ratio of the Reverse Stock Split. For additional information concerning the factors the Board will consider in deciding whether to effect the Reverse Stock Split, see “—Determination of the Reverse Stock Split Ratio” and “—Board Discretion to Effect the Reverse Stock Split.”

The text of the proposed amendment to the Company’s Charter to effect the Reverse Stock Split is included as Annex A to this proxy statement (the “Reverse Stock Split Charter Amendment”). If the Conditional Reverse Stock Split Proposal is approved by the Company’s stockholders, the Company will have the authority to file the Reverse Stock Split Charter Amendment with the Secretary of State of the State of Delaware, which will become effective upon its filing; provided, however, that the Reverse Stock Split Charter Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the Board deems necessary and advisable.

Risks Associated with the Reverse Stock Split

Nasdaq May Not Find Us In Compliance Of The Minimum Bid Price Requirement Despite Implementing A Reverse Stock Split

As noted above, Nasdaq’s excessive Reverse Stock Split rule sets forth in section 5810(c)(3)(A)(v) that if a Company’s security fails to meet the Minimum Bid Price Requirement and the Company has already effected a Reverse Stock Split over the prior one-year period or has effected one or more Reverse Stock Splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the Company shall not be eligible for any compliance period and Nasdaq’s listing qualifications department shall issue a Delisting Determination. The company is seeking conditional approval of a Reverse Stock Split so that it can undertake emergency action to counter the Delisting Determination with the belief that implementing the reverse stock split will help the Company obtain compliance with the Minimum Bid Price Requirement during the pending of a hearing before the Hearings Panel and that such action would demonstrate renewed compliance before the Hearings Panel. Even if we are effective in implementing a Reverse Stock Split on an emergency basis, the Hearings Panel may not find us in compliance with the continued listing standards and decide to suspend or delist the Company’s Common Stock at the conclusion of the hearing. This may lead to other risks associated with implementing a Reverse Stock Split (described below) and subject the Company to an additional one-year restriction under Nasdaq’s excessive Reverse Stock Split rule.

The Reverse Stock Split May Lead to a Decrease in our Overall Market Capitalization.

The Reverse Stock Split may be viewed negatively by the market and, consequently, could lead to a decrease in our overall market capitalization. If the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, then the value of our Company, as measured by our market capitalization, will be reduced. Additionally, any reduction in our market capitalization may be magnified if the Hearings Panel ultimately determines against maintaining our Nasdaq listing, and as a result of the smaller number of total shares of Common Stock outstanding following the Reverse Stock Split.

The Reverse Stock Split May Not Increase the Price of our Common Stock Over the Long-Term.

As noted above, the principal purpose of the Reverse Stock Split is to increase the trading price of our Common Stock to meet the minimum stock price standards of The Nasdaq Capital Market. However, the effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will accomplish this objective for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock by a multiple of the Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock may be affected by other factors which may be unrelated to the number of shares outstanding, including the Company’s business and financial performance, general market conditions, and prospects for future success.

The Reverse Stock Split May Decrease the Liquidity of our Common Stock.

The Board believes that the Reverse Stock Split may result in an increase in the market price of our Common Stock, which could lead to increased interest in our Common Stock and possibly promote greater liquidity for our stockholders. However, the Reverse Stock Split will also reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of the Reverse Stock Split.

The Reverse Stock Split May Result in Some Stockholders Owning “Odd Lots” That May Be More Difficult to Sell or Require Greater Transaction Costs per Share to Sell.

If the Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Common Stock.

Potential Consequences if the Conditional Reverse Stock Split Proposal is Not Approved

If the Conditional Reverse Stock Split Proposal is not approved by our stockholders, our Board will not have the authority to effect the Reverse Stock Split Charter Amendment to, among other things, facilitate the continued listing of our Common Stock on Nasdaq by increasing the per share trading price of our Common Stock to help ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement. Any inability of our Board to effect the Reverse Stock Split could expose us to delisting from Nasdaq.

Determination of the Reverse Stock Split Ratio

The Board believes that stockholder approval of a range of potential Reverse Stock Split ratios is in the best interests of our Company and stockholders because it is not possible to predict market conditions at the time the Reverse Stock Split would be implemented. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split ratio to be selected by our Board will be not more than 1-for-50.

The selection of the specific Reverse Stock Split ratio will be based on several factors, including, among other things:

We believe that granting our Board the authority to set the ratio for the Reverse Stock Split is essential because it allows us to take these factors into consideration and to react to changing market conditions. If the Board chooses to implement the Reverse Stock Split, the Company will make a public announcement regarding the determination of the Reverse Stock Split ratio.

Board Discretion to Effect the Reverse Stock Split

If the Conditional Reverse Stock Split Proposal is approved by our stockholders, the Board will have the discretion to implement the Reverse Stock Split or to not effect the Reverse Stock Split at all. If the Board believes that trading price of our Common Stock could increase without effecting the Reverse Stock Split, the Reverse Stock Split may not be necessary. Following the Reverse Stock Split, if implemented, there can be no assurance that the market price of our Common Stock will rise in proportion to the reduction in the number of outstanding shares resulting from the Reverse Stock Split or that the market price of the post-split Common Stock can be maintained above $1.00. There also can be no assurance that our Common Stock will not be delisted from Nasdaq for other reasons.

If our stockholders approve the Conditional Reverse Stock Split Proposal at the annual meeting, the Reverse Stock Split will be effected, if at all, only upon a determination by the Board that the Reverse Stock Split is in the best interests of the Company and its stockholders at that time. No further action on the part of the stockholders will be required to either effect or abandon the Reverse Stock Split. If our Board does not implement the Reverse Stock Split prior to January 28, 2026, the authority granted in this proposal to implement the Reverse Stock Split will terminate and the Reverse Stock Split Charter Amendment will be abandoned.

The market price of our Common Stock is dependent upon our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Stock Split. Furthermore, the reduced number of shares that will be outstanding after the Reverse Stock Split could significantly reduce the trading volume and otherwise adversely affect the liquidity of our Common Stock.

We have not proposed the Reverse Stock Split in response to any effort of which we are aware to accumulate our shares of Common Stock or obtain control of the Company, nor is it a plan by management to recommend a series of similar actions to our Board or our stockholders. Notwithstanding the decrease in the number of outstanding shares of Common Stock following the Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.

Effects of the Reverse Stock Split on Issued and Outstanding Shares.

If the Reverse Stock Split is effected, it will reduce the total number of issued and outstanding shares of Common Stock, including shares held by the Company as treasury shares, by a Reverse Stock Split ratio between 1-for-5 and 1-for-50. Accordingly, each of our stockholders will own fewer shares of Common Stock as a result of the Reverse Stock Split. However, the Reverse Stock Split will affect all stockholders uniformly and will not affect any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split would result in an adjustment to a stockholder’s ownership of Common Stock due to the treatment of fractional shares in the Reverse Stock Split. Therefore, voting rights and other rights and preferences of the holders of Common Stock will not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). Common stock issued pursuant to the Reverse Stock Split will remain fully paid and nonassessable, and the par value per share of Common Stock will remain $0.01.

As of the Record Date, the Company had 2,471,656 shares of Common Stock outstanding. For purposes of illustration, if the Reverse Stock Split is effected at a ratio of 1-for-5 or 1-for-50, the number of issued and outstanding shares of Common Stock after the Reverse Stock Split would be approximately 494,331 shares and 49,433 shares, respectively.

Effects of the Reverse Stock Split on Authorized Share Capital.

The total number of shares of capital stock that we are authorized to issue will not be affected by the Reverse Stock Split. We are currently authorized to issue a maximum of 100,000,000 shares of our Common Stock. As of the Record Date, there were 2,471,656 shares of our Common Stock issued and outstanding. Although the number of authorized shares of our Common Stock will not change as a result of the Reverse Stock Split, the number of shares of our Common Stock issued and outstanding will be reduced in proportion to the ratio selected by the Board. Thus, the Reverse Stock Split, if effected, will effectively increase the number of authorized and unissued shares of our Common Stock available for future issuance by the amount of the reduction effected by the Reverse Stock Split.

Following the Reverse Stock Split, the Board will have the authority, subject to applicable securities laws, to issue all authorized and unissued shares without further stockholder approval, upon such terms and conditions as the Board deems appropriate, which would be dilutive to our current shareholders ownership. We do not currently have any plans, proposals or understandings to issue the additional shares that would be available if the Reverse Stock Split is approved and effected, but some of the outstanding shares include warrants, which could be exercised after the Reverse Stock Split Charter Amendment is effected.

Effects of the Reverse Stock Split on Outstanding Equity Awards and Plans.

If the Reverse Stock Split is effected, the terms of equity awards granted under the Enveric Biosciences, Inc. 2020 Long-Term Incentive Plan, as amended (the “Incentive Plan”), including the per share exercise price of options and the number of shares issuable under such options, will be proportionally adjusted to maintain their economic value, subject to adjustments for any fractional shares as described herein. In addition, the total number of shares of Common Stock that may be the subject of future grants under the Incentive Plan, as well as any plan limits on the size of such grants will be adjusted and proportionately decreased as a result of the Reverse Stock Split. The number and exercise prices of outstanding warrants that we have issued will be correspondingly adjusted.

Effects of the Reverse Stock Split on Voting Rights.

Proportionate voting rights and other rights of the holders of Common Stock would not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). For example, a holder of 1% of the voting power of the outstanding Common Stock immediately prior to the effective time of the Reverse Stock Split would continue to hold 1% of the voting power of the outstanding Common Stock after the Reverse Stock Split.

Effects of the Reverse Stock Split on Regulatory Matters.

The Company is subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Stock Split will not affect the Company’s obligation to publicly file financial and other information with the SEC.

Treatment of Fractional Shares in the Reverse Stock Split

The Company does not intend to issue fractional shares in the event that a stockholder owns a number of shares of Common Stock that is not evenly divisible by the Reverse Stock Split ratio. If the Reverse Stock Split is effected, each fractional share of Common Stock will be:

Effective Time of the Reverse Stock Split

If the Conditional Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split would become effective, if at all, when the Reverse Stock Split Charter Amendment is accepted and recorded by the office of the Secretary of State of the State of Delaware. However, notwithstanding approval of the Conditional Reverse Stock Split Proposal by our stockholders, the Board will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split.

Mechanics of the Reverse Stock Split

If the Reverse Stock Split is approved and effected, beginning on the effective date of the Reverse Stock Split, each certificate representing pre-split shares will, until surrendered and exchanged as described below, for all corporate purposes, be deemed to represent, respectively, only the number of post-split shares.

Exchange of Share Certificates

If the Reverse Stock Split is effected, each certificate representing pre-Reverse Stock Split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split Common Stock at the effective time of the Reverse Stock Split. As soon as practicable after the effective time of the Reverse Stock Split, the Transfer Agent will mail a letter of transmittal to the Company’s stockholders containing instructions on how a stockholder should surrender its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock to the Transfer Agent in exchange for certificate(s) representing post-Reverse Stock Split shares of Common Stock. No certificate(s) representing post-Reverse Stock Split shares of Common Stock will be issued to a stockholder until such stockholder has surrendered all certificate(s) representing pre-Reverse Stock Split shares of Common Stock, together with a properly completed and executed letter of transmittal, to the Transfer Agent. No stockholder will be required to pay a transfer or other fee to exchange its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock for certificate(s) representing post-Reverse Stock Split shares of Common Stock registered in the same name. In connection with the Reverse Stock Split, the CUSIP number for the Common Stock will change from its current CUSIP number. This new CUSIP number will appear on any new stock certificates issued representing post-split shares.

Stockholders who hold uncertificated shares of Common Stock electronically in “book-entry” form will have their holdings electronically adjusted by the Transfer Agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Stock Split. If any certificate(s) or book-entry statement(s) representing pre-Reverse Stock Split shares of Common Stock to be exchanged contain a restrictive legend or notation, as applicable, the certificate(s) or book-entry statement(s) representing post-Reverse Stock Split shares of Common Stock will contain the same restrictive legend or notation.

Any stockholder whose share certificate(s) representing pre-Reverse Stock Split shares of Common Stock has been lost, stolen or destroyed will only be issued post-Reverse Stock Split Common Stock after complying with the requirements that the Company and the Transfer Agent customarily apply in connection with lost, stolen or destroyed certificates.

STOCKHOLDERS SHOULD NOT DESTROY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK UNTIL THEY ARE REQUESTED TO DO SO.

Appraisal Rights

Under the Delaware General Corporation Law, our stockholders are not entitled to appraisal or dissenter’s rights with respect to the Reverse Stock Split, and we will not independently provide our stockholders with any such rights.

Regulatory Approvals

The Reverse Stock Split will not be consummated, if at all, until after approval of the Company’s stockholders is obtained. The Company is not obligated to obtain any governmental approvals or comply with any state or federal regulations prior to consummating the Reverse Stock Split other than the filing of the Reverse Stock Split Charter Amendment with the Secretary of State of the State of Delaware.

Accounting Treatment of the Reverse Stock Split

If the Reverse Stock Split is effected, the par value per share of our Common Stock will remain unchanged at $0.01. Accordingly, on the effective date of the Reverse Stock Split, the stated capital on the Company’s consolidated balance sheets attributable to our Common Stock will be reduced in proportion to the size of the Reverse Stock Split ratio, and the additional paid-in-capital account will be increased by the amount by which the stated capital is reduced. Our stockholders’ equity, in the aggregate, will remain unchanged. Per share net income or loss will be increased because there will be fewer shares of Common Stock outstanding. The Common Stock held in treasury will be reduced in proportion to the Reverse Stock Split ratio. The Company does not anticipate that any other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, will arise as a result of the Reverse Stock Split.

Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a discussion of certain material U.S. federal income tax consequences of the Reverse Stock Split. This discussion is included for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant to stockholders in light of their particular circumstances. This discussion is based on the Code and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion.

All stockholders are urged to consult with their own tax advisors with respect to the tax consequences of the Reverse Stock Split. This discussion does not address the tax consequences to stockholders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, partnerships, nonresident alien individuals, broker-dealers and tax-exempt entities, persons holding shares as part of a straddle, hedge, conversion transaction or other integrated investment, U.S. holders (as defined below) subject to the alternative minimum tax or the unearned income Medicare tax and U.S. holders whose functional currency is not the U.S. dollar. This summary also assumes that the pre-Reverse Stock Split shares of Common Stock were, and the post-Reverse Stock Split shares of Common Stock will be, held as a “capital asset,” as defined in Section 1221 of the Code.

As used herein, the term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:

In general, no gain or loss should be recognized by a stockholder upon the exchange of pre-Reverse Stock Split Common Stock for post-Reverse Stock Split Common Stock. The aggregate tax basis of the post-Reverse Stock Split Common Stock should be the same as the aggregate tax basis of the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split. A stockholder’s holding period in the post-Reverse Stock Split Common Stock should include the period during which the stockholder held the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split.

As noted above, we will not issue fractional shares of Common Stock in connection with the Reverse Stock Split. In certain circumstances, stockholders who would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional fraction of a share of Common Stock to round up to the next whole post-Reverse Stock Split share of Common Stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of Common Stock is not clear.

The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Reverse Stock Split.

Vote Required

The approval of the Conditional Reverse Stock Split Proposal requires the affirmative “FOR” vote of the majority of the votes cast by holders of Common Stock entitled to vote on the proposal. Since abstentions are not considered votes cast, they will have no effect on this proposal.

Board Recommendation

Our Board recommends a vote “FOR” the approval of the Conditional Reverse Stock Split Proposal.