DEF 14C: Cemtrex, Inc. Announces Reverse Stock Split to Regain Nasdaq Compliance

Cemtrex, Inc. plans a reverse stock split with a ratio between 1-for-10 and 1-for-20 to meet Nasdaq's minimum bid price requirement.

Summary

• Cemtrex, Inc. is implementing a reverse stock split to comply with Nasdaq's minimum bid price requirement.
• The reverse split ratio will be between 1-for-10 and 1-for-20, determined by the Board of Directors within the next 12 months.
• The Board of Directors approved the reverse split on July 22, 2024, and stockholders holding a majority of voting stock approved it via written consent on the same date.
• The company received notification from Nasdaq on June 14, 2024, that it no longer meets the minimum bid price requirement of $1.00 per share.
• The reverse split aims to increase the stock price to meet Nasdaq's requirements and attract a broader range of investors.
• The company's costs for preparing, printing, and mailing the information statement are estimated at approximately $10,000.
• As of July 22, 2024, there were 16,952,270 shares of Common Stock, 50,000 shares of Series C Preferred Stock, and 2,392,727 shares of Series 1 Preferred Stock outstanding.
• Saagar Govil holds 39,962 shares of Common Stock, 132,298 shares of Series 1 Preferred Stock, and 50,000 shares of Series C Preferred Stock, representing 88.80% of the voting equity.
• The reverse split will become effective upon filing the Reverse Split Amendment with the Office of the Secretary of State of the State of Delaware.
• The company does not intend to issue fractional shares; instead, fractional shares will be rounded up to the next whole share.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the reverse split is intended to improve the company's position, it also carries risks and uncertainties. The action is necessary for Nasdaq compliance, but its success is not guaranteed.

Positives

• The reverse split aims to increase the stock price, potentially meeting Nasdaq's minimum bid price requirement.
• A higher stock price may attract a broader range of institutional and other investors.
• The reverse split will make the common stock more attractive and cost-effective for many investors, potentially enhancing liquidity.
• The Board retains the authority not to effect the Reverse Split even though it has already obtained stockholder approval.

Negatives

• There is no assurance that the reverse split will result in a sustained increase in the stock price.
• The market price of the common stock may decline after the reverse split.
• The total market capitalization of the common stock after the reverse split may be lower than before.
• The reverse split may result in some stockholders owing odd lots of less than 100 shares of our common stock on a post-split basis.
• The liquidity of the common stock could be adversely affected by the reduced number of shares outstanding after the Reverse Split.

Risks

• The reverse split may not improve the trading liquidity of the common stock.
• The market price per new share after the reverse split may not increase in proportion to the reduction in the number of old shares.
• The company completed a prior reverse split in January 2023, after which the trading price of our common stock fell significantly.
• The reverse split may result in some stockholders owing odd lots of less than 100 shares of our common stock on a post-split basis.
• The company has outstanding warrants to purchase 50,009,047 shares of common stock at an exercise price of $0.85 per share (the Adjustable Warrants) that provide that upon the completion of the Reverse Split the exercise price of warrants will be reduced to the lowest daily volume weighted average price during the five consecutive trading days prior to the date of such Reverse Split and the five consecutive trading days after the date of such Reverse Split (assuming such price is less than the exercise price then in effect), and the number of warrant shares issuable shall be increased such that the aggregate exercise price payable thereunder, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price on the date of issuance.

Future Outlook

The company aims to increase its stock price to meet Nasdaq's requirements and attract a broader range of investors. The Board has the discretion to implement the reverse split within the next 12 months or abandon it if deemed not in the best interest of the company and stockholders.

Management Comments

• The Board believes the consummation of the Reverse Split and the continued listing of our common stock on Nasdaq will make our common stock more attractive to a broader range of institutional and other investors.
• Saagar Govil, Chairman, CEO, & President: The Reverse Split Amendment to effect the proposed Reverse Split of our issued and outstanding common stock is necessary for us to increase the trading price of our common stock and meet the Minimum Bid Price Requirement of Nasdaq.

Industry Context

Reverse stock splits are a common strategy for companies facing delisting from exchanges due to low share prices. This action aims to improve the stock's appeal to institutional investors and maintain exchange listing compliance.

Comparison to Industry Standards

• Many companies in similar situations, such as those in the biotechnology or small-cap technology sectors, have used reverse stock splits to maintain listing requirements.
• The success of a reverse stock split in increasing and sustaining the stock price varies widely and depends on the company's underlying financial performance and market conditions.
• Compared to companies like DryShips Inc. which had multiple reverse splits and still faced delisting, Cemtrex's success will depend on its ability to improve its financial performance and market perception.

Stakeholder Impact

• Shareholders may experience a change in the number of shares they own, but their percentage ownership will remain the same (except with respect to Fractional Shares and the Adjustable Warrants).
• The reverse split may affect the liquidity and marketability of the common stock.
• The company's ability to raise additional funds and grow its business depends on the success of the reverse split.

Next Steps

• The Board of Directors will determine the exact ratio of the reverse split within the range of 1-for-10 to 1-for-20.
• The company will file the Reverse Split Amendment with the Office of the Secretary of State of the State of Delaware.
• The company will notify stockholders of the effective date of the reverse split.
• Stockholders holding certificated shares will receive instructions on how to exchange their old certificates for new ones.

Key Dates

Keywords

reverse stock split, Nasdaq, minimum bid price, common stock, Cemtrex, compliance, stock split, stock