SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Merger, there has been a limited public market for our common stock. As described below, only a limited number of shares of our common stock will be available for sale in the public market for a period of several months after consummation of the Merger due to contractual and legal restrictions on resale described below. Future sales of our common stock in the public market either before (to the extent permitted) or after restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing price of our common stock at such time and our ability to raise equity capital at a time and price we deem appropriate.
As of November 15, 2017, we had 39,300,823 shares of common stock outstanding, of which our directors and executive officers beneficially own an aggregate of 12,481,486 shares. Of those outstanding shares, no shares of our common stock are freely tradable, without restriction, as of the date of this prospectus. No shares issued in connection with the Merger or the Private Placement can be publicly sold under Rule 144 promulgated under the Securities Act until 12 months after the date of filing of our Form 8-K.
Sale of Restricted Shares
Of the approximately 39,300,823 shares of common stock outstanding upon completion of the closings of the Private Placement, all of such shares will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below.
In connection with the Merger and the initial closing of the Private Placement, holders of approximately 27.7 million shares of our common stock have agreed, subject to certain exceptions, not to dispose of or hedge any shares of common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of the lock-up agreement continuing through the date nine months after the date of the Merger and the initial closing of the Private Placement, except with our prior written consent.
Shares of our common stock issued pursuant to certain payments to the Placement Agents in connection with the Private Placement will also be subject to a lock-up agreement for a period of 18 months.
Following the lock-up periods set forth in the agreements described above, and assuming that no parties are released from these agreements and that there is no extension of the lock-up period, certain of the shares of common stock that are restricted securities or are held by our affiliates as of the date of the Merger will be eligible for sale in the public market in compliance with Rule 144 under the Securities Act.
Pursuant to Rule 144 promulgated under the Securities Act, sales of the securities of a former shell company, such as us, under that rule are not permitted (i) until at least 12 months have elapsed from the date on which our Form 8-K was filed with the SEC and (ii) unless at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Current Reports on Form 8-K. We intend to register such shares for sale under the Securities Act, but are currently a “voluntary filer” and are not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. As a result, unless we register such shares for sale under the Securities Act, most of our stockholders will be forced to hold their shares of our common stock for at least that 12-month period before they are eligible to sell those shares, and even after that 12-month period, sales may not be made under Rule 144 unless we and the selling stockholders are in compliance with other requirements of Rule 144.