DEF: Genprex Seeks Shareholder Approval for Reverse Stock Split and Capital Raise to Maintain Nasdaq Listing

Genprex, Inc. is calling its 2025 Annual Meeting of Stockholders to vote on critical proposals including a reverse stock split to regain Nasdaq compliance, an equity incentive plan amendment, and approval for a significant common stock issuance to Lincoln Park Capital Fund, LLC.

Summary

• Genprex, Inc. will hold its 2025 Annual Meeting of Stockholders virtually on Friday, August 15, 2025, at 9:30 a.m. Central Time.
• Key proposals include the election of William R. Wilson, Jr. as a Class II director, ratification of WithumSmith+Brown, PC as the independent auditor for fiscal year 2025, and an advisory vote on executive compensation.
• Stockholders will vote on amending and restating the 2018 Equity Incentive Plan to increase authorized shares by an additional 6,500,000 and extend its term to June 30, 2035.
• Approval is sought for the issuance of more than 20% of outstanding common stock to Lincoln Park Capital Fund, LLC, as required by Nasdaq Listing Rule 5635(d), under a purchase agreement for up to $12.5 million worth of common stock.
• A reverse stock split is proposed, with a ratio ranging from one-for-ten (1:10) to one-for-fifty (1:50), to be implemented at the Board's discretion prior to December 31, 2026, aimed at regaining Nasdaq's $1.00 minimum bid price requirement.
• The Company reported a net loss of $(21,388,282) for 2024, compared to $(30,860,461) in 2023 and $(23,740,621) in 2022.
• Total Stockholder Return (TSR) based on an initial $100 investment was $(90.74) for 2024 and $(84.14) for 2023, following a positive $10.69 for 2022.
• As of June 30, 2025, there were 33,145,048 shares of common stock outstanding.
• The Company has already issued 1,186,859 commitment shares and 4,057,850 purchase shares to Lincoln Park Capital Fund, LLC as of June 30, 2025, totaling 5,244,709 shares under the purchase agreement.

Sentiment

Score: 3

Explanation: The document outlines necessary corporate actions to address critical issues like Nasdaq non-compliance and funding. While these actions are crucial for survival, the underlying financial performance (consistent losses, negative TSR) and the need for a reverse split indicate significant challenges. The capital raise is positive for liquidity but comes with substantial dilution. The overall sentiment is cautious, reflecting the company's defensive posture and inherent risks of a clinical-stage biotech without revenue.

Positives

• The company is proactively seeking stockholder approval for key corporate actions, including a capital raise and equity plan, demonstrating adherence to corporate governance.
• The agreement with Lincoln Park Capital Fund, LLC provides a potential source of up to $12.5 million in capital, which is crucial for ongoing business needs and development.
• The proposed reverse stock split aims to maintain the company's Nasdaq listing, which is vital for liquidity and attracting a broader range of institutional investors.
• The Board believes its compensation policies are effective in motivating executive officers and enhancing long-term stockholder value.

Negatives

• The company is not in compliance with Nasdaq's $1.00 minimum bid price requirement, facing potential delisting.
• Genprex reported significant net losses for fiscal years 2022, 2023, and 2024, indicating a lack of profitability.
• Total Stockholder Return (TSR) has been negative for 2023 and 2024, reflecting poor stock performance.
• The issuance of shares under the Lincoln Park agreement will result in dilution for existing stockholders.
• The company has changed its independent registered public accounting firm multiple times recently (Daszkal, CohnReznick, WithumSmith+Brown), which can be a red flag for investors.
• The unexpected passing of former President and CEO J. Rodney Varner and the termination of the Executive Vice President, General Counsel, and Chief Strategy Officer indicate recent management instability.

Risks

• Failure to obtain stockholder approval for the Nasdaq Proposal could limit the company's ability to raise capital through the Lincoln Park agreement, potentially forcing it to seek alternative, less favorable financing or curtail operations.
• The reverse stock split may not effectively increase the stock price proportionally or sustain it above the $1.00 minimum bid price, leading to continued Nasdaq non-compliance and potential delisting.
• Even if the reverse stock split is implemented, the market price of the common stock may decline due to other factors unrelated to the split, potentially resulting in a greater percentage decline.
• Recent Nasdaq rule changes mean that if a reverse stock split is implemented and the minimum bid price requirement is subsequently failed within one year, the company may not be eligible for any compliance period, leading to immediate delisting proceedings.
• The company requires substantial additional capital for its preclinical and clinical development and commercialization readiness activities, and there is no assurance that such funding will be available on favorable terms or at all.
• The successful development of the company's current and potential product candidates is uncertain, making it difficult to estimate actual funding requirements and posing a risk to future operations if funds are insufficient.
• The issuance of additional shares under the Lincoln Park agreement will dilute the ownership and voting power of existing stockholders.

Future Outlook

The company's future outlook is heavily dependent on its ability to raise substantial additional capital to fund preclinical and clinical development, regulatory affairs, and commercialization readiness activities. The successful development of its product candidates is uncertain, and the company acknowledges that it may need to seek alternative financing if the proposed capital raise is not fully realized. The company aims to maintain its Nasdaq listing to support its capital-raising efforts and business plans.

Management Comments

• "Our Board of Directors believes that... the election of the director nominee identified herein; the appointment of WithumSmith+Brown, PC as our independent registered public accounting firm for the year ending December 31, 2025; the compensation of our Named Executive Officers for the year ended December 31, 2024, as described in this proxy statement, was appropriate; the Companys amended and restated Plan; the issuance of more than 20% of the Companys issued and outstanding common stock pursuant to the Companys purchase agreement with Lincoln Park; an amendment to the Companys Charter to effect a reverse stock split of the Companys issued shares of common stock, at a specific ratio, ranging from one-for-ten (1:10) to one-for-fifty (1:50), at any time prior to December 31, 2026, subject to our Board of Directors determination, in its sole discretion, whether or not to implement the reverse stock split and, if so, at what specific ratio within the foregoing range, without further approval or authorization of the Companys stockholders; and the adjournment of the Annual Meeting, if necessary, to solicit additional proxies if the number of shares of common stock present or represented by proxy at the Annual Meeting and voting FOR any of the foregoing proposals presented are insufficient to approve any of said proposals, are advisable and in the best interests of the Company and its stockholders."
• "Our Board strongly believes that the Reverse Split is necessary to maintain our listing on Nasdaq."
• "The Board and the Compensation Committee believe that our companys compensation policies and practices are effective in achieving our goals of motivating our executive officers to further the Companys long-term strategic plans, enhancing long-term stockholder value and attracting and retaining the highest quality executive and key employee talent available."
• "The Company will use the net proceeds from the offering as described in the Registration Statement or the SEC Documents."

Industry Context

As a clinical-stage gene therapy company, Genprex operates in a high-risk, high-reward segment of the biotechnology industry. Companies in this sector typically incur significant R&D expenses and net losses for extended periods as they advance product candidates through preclinical and clinical trials, often without generating revenue. Maintaining a public listing, especially on Nasdaq, is critical for these companies to access capital markets for funding their extensive development pipelines. The proposed reverse stock split and capital raise reflect common strategies employed by small-cap biotech firms to address listing compliance and secure financing in a capital-intensive industry.

Comparison to Industry Standards

• The company's consistent net losses are typical for a clinical-stage gene therapy company that has not yet commercialized products, similar to many early-stage biotech firms that prioritize R&D over immediate profitability.
• The negative Total Stockholder Return (TSR) for 2023 and 2024 is indicative of the high volatility and risk associated with clinical-stage biotech investments, where stock performance is often tied to clinical trial milestones and funding news rather than traditional financial metrics.
• The need for a reverse stock split to maintain Nasdaq listing is a common challenge for smaller biotechnology companies whose stock prices may fall below minimum requirements due to market sentiment, dilution from prior capital raises, or lack of significant positive news.
• The reliance on equity financing, such as the purchase agreement with Lincoln Park Capital Fund, LLC, is standard practice for pre-revenue biotech companies to fund their operations and clinical programs, as traditional debt financing is often unavailable or too costly.

Management Changes

Corporate Governance

Legal Proceedings

• No action, suit, inquiry, notice of violation, proceeding or investigation pending or threatened against or affecting the Company or any Subsidiary that would have a Material Adverse Effect, except as disclosed in SEC Documents.
• No Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty that would have a Material Adverse Effect.
• No pending or contemplated investigation by the SEC involving the Company or any current or former director or officer.
• The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary.

Related Party Transactions

• Royalty payments to Introgen Research Institute, Inc. (IRI): The company is obligated to pay IRI a royalty of 1% of net sales of licensed products and 1% of certain other payments related to intellectual property licensed from the University of Texas MD Anderson Cancer Center. IRI was formed by the company's former CEO, J. Rodney Varner, and is owned by trusts of his descendants.
• Separation Agreement with Catherine M. Vaczy: The company entered into a separation agreement with its former Executive Vice President, General Counsel and Chief Strategy Officer, Catherine M. Vaczy, effective June 21, 2024. This agreement included an aggregate of $350,000 in cash and expense reimbursement as separation payments, and full vesting of 6,125 unvested RSUs and 4,374 unvested options.

Stakeholder Impact

• Shareholders: Will experience dilution from the issuance of new shares under the Lincoln Park agreement. The proposed reverse stock split aims to maintain Nasdaq listing, which could positively impact liquidity and investor interest, but also carries the risk of further price decline or delisting if unsuccessful. Voting rights and economic interests will be proportionally affected by the reverse split.
• Employees and Executives: The amended equity incentive plan is designed to attract, retain, and motivate key personnel through competitive equity compensation awards. Executive compensation is subject to an advisory vote by stockholders.
• Creditors: The potential capital raise through the Lincoln Park agreement could improve the company's financial position and ability to meet its obligations, which would be beneficial for creditors.
• Customers/Suppliers: No direct impact mentioned, but the company's ability to raise capital and continue R&D efforts is crucial for its long-term viability and potential product development, which would indirectly benefit future customers.

Next Steps

• Hold the 2025 Annual Meeting of Stockholders on August 15, 2025, to vote on the proposed corporate actions.
• If approved, the Board of Directors will determine the specific ratio for the reverse stock split (1:10 to 1:50) and implement it prior to December 31, 2026.
• If the Nasdaq Proposal is approved, the company will be able to issue additional shares to Lincoln Park Capital Fund, LLC beyond the 19.99% Exchange Cap.
• The company will continue to use net proceeds from the Lincoln Park agreement for working capital, R&D, regulatory affairs, clinical trials, and other corporate purposes.
• The company will file final voting results in a Current Report on Form 8-K with the SEC within four business days of the Annual Meeting.

Key Dates

Recommendation

Keywords

SEC filing, Proxy Statement, Annual Meeting, Reverse Stock Split, Nasdaq Listing, Capital Raise, Equity Incentive Plan, Lincoln Park Capital Fund, Corporate Governance, Executive Compensation, Clinical-stage gene therapy, Shareholder Vote, Dilution, Financial Performance, Risk Factors