From the Office of the CEO regarding CCAJ reverse split
COASTAL CAPITAL ACQUISITION CORPORATION (OTCMKTS: CCAJ) CEO addresses reverse split
JACKSONVILLE, Fla., Dec. 09, 2022 (GLOBE NEWSWIRE) —
Our Board has determined that it is advisable and in the best interests of the Company and its stockholders, for us to amend our Charter to authorize our Board to effect a reverse stock split (the “Charter Amendment”) of our issued and outstanding shares of Common Stock at a one-for-ten (1:10) ratio (the “Reverse Split”). The Reverse Split was approved by our Board and stockholders on November 30, 2022. When implemented, the Reverse Split will have the effect of decreasing the number of shares of our Common Stock issued and outstanding. The authorized number of shares of Common Stock will not be affected by the Reverse Split.
The Reverse Split would be effectuated as soon as reasonably possible after receipt of FINRA approval of the Reverse Split. Prior to effectuation of the Reverse Split, the Board reserves the right to elect to abandon the Reverse Split if it determines, in its sole discretion, that the Reverse Split is no longer in the best interests of the Company and its stockholders.
Purpose and Rationale for the Reverse Split
Our shares currently trade on the OTC Bulletin Board as a penny stock. Trading of our Common Stock is currently volatile with pricing and volume fluctuations. At times, our Common Stock can trade thinly, adversely decrease to nominal levels of trading and may be avoided by retail and institutional investors, resulting in the impaired liquidity. An investor likely would find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our Common Stock on an over-the-counter market. Many investors likely would not buy or sell our Common Stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange, or other reasons.
As of December 7, 2022, our Common Stock closed at $0.0014 per share on the pink sheets. The Reverse Split would likely have the immediate effect of increasing the price of our Common Stock.
The Board believes that the increased market price of our Common Stock expected as a result of implementing the Reverse Split could improve the marketability and liquidity of our Common Stock and may encourage interest and trading in our Common Stock. The Reverse Split, if effected, could allow a broader range of institutions to invest in our Common Stock (namely, funds that are prohibited from buying stock whose price is below a certain threshold), potentially increasing the trading volume and liquidity of our Common Stock. The Reverse Split could help increase analyst and broker interest in the Common Stock, as their policies can discourage them from following or recommending companies with low stock prices. Because of the trading volatility often associated with low-priced stocks, 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. Some of those policies and practices may make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, a low 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 higher.
Other Effects. The Board also believes that decreasing the number of outstanding shares of our Common Stock will facilitate the ability of the Corporation to qualify for a more senior exchange such as OTC QB in the future. The Corporation’s ability to access its securities in connection with future financings and business acquisitions may be improved as a result of the Reverse Split.
Our Board does not intend for this transaction to be the first step in a series of plans or proposals effect a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Risks of the Proposed Reverse Split
We cannot assure you that the proposed Reverse Split will increase the price of our Common Stock.
If the Reverse Split is implemented, our Board expects that it will increase the market price of our Common Stock. However, the effect of the Reverse Split upon the market price of our Common Stock cannot be predicted with any certainty. The history of similar reverse stock splits for companies in similar circumstances is varied. It is possible that (i) the per share price of our Common Stock after the Reverse Split will not rise in proportion to the reduction in the number of shares of our Common Stock outstanding resulting from the Reverse Split, (ii) the increased market price per post-Reverse Split share, if any, may not be sustained, and may not result in facilitating a move to a more senior listing in the future, or (iii) the Reverse Split may not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks. Even if the Reverse Split is implemented, the market price of our Common Stock may decrease due to factors unrelated to the Reverse Split. In any case, the market price of our Common Stock will be based on other factors which may be unrelated to the number of shares outstanding, including our future performance. If the Reverse Split is consummated and the trading 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 Split.
A decline in the market price of our Common Stock after the Reverse Split is implemented may result in a greater percentage decline than would occur in the absence of a reverse stock split.
If the Reverse Split is implemented and the market price of our Common Stock declines, the percentage decline may be greater than would occur in the absence of a reverse stock split. The market price of our Common Stock will, however, also be based upon our performance and other factors, which are unrelated to the number of shares of Common Stock outstanding.
The proposed Reverse Split may decrease the liquidity of our Common Stock.
The liquidity of our Common Stock may be harmed by the proposed Reverse Split given the reduced number of shares of Common Stock that would be outstanding after the Reverse Split, particularly if the stock price does not increase as a result of the Reverse Split.
Principal Effects of the Reverse Split
After the effective date of the proposed Reverse Split, each stockholder will own a reduced number of shares of Common Stock. Except for adjustments that may result from the treatment of fractional shares as described below, the proposed Reverse Split will affect all stockholders uniformly. The proportionate voting rights and other rights and preferences of the holders of our Common Stock will not be affected by the proposed Reverse Split (other than as a result of the payment of cash in lieu of fractional shares). For example, a holder of 2% of the voting power of the outstanding shares of our Common Stock immediately prior to a Reverse Split would continue to hold 2% of the voting power of the outstanding shares of our Common Stock immediately after such Reverse Split. The number of stockholders of record also will not be affected by the proposed Reverse Split, except to the extent that any stockholder holds only a fractional share interest and receives cash for such interest after the Reverse Split.
The following table contains approximate number of issued and outstanding shares of Common Stock, and the estimated per share trading price following a 1:10 Reverse Split, without giving effect to any adjustments for fractional shares of Common Stock or the issuance of any derivative securities, as of December 7, 2022.
After Reverse Split Ratio
|Common Stock Authorized(1)||8,350,000,000||8,350,000,000|
|Common Stock Issued and Outstanding||1,049,739,050||104,973,905|
|Number of Shares of Common Stock Reserved for Issuance(2)||1,896,750,000||1,896,750,000|
|Number of Shares of Common Stock Authorized but Unissued and Unreserved||5,403,510,950||6,348,276,095|
|Price per share, based on the closing price of our Common Stock on December 7, 2022(3)||$0.0014||$0.014|
(1) The Reverse Split will not have any impact on the number of shares of Common Stock we are authorized to issue under our Charter.
(2) Includes (i) 82,250,000 shares of Common Stock issuable upon conversion of 41,125,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”); (ii) 164,500,000 shares of Common Stock issuable upon conversion of 41,125,000 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”); (iii) 900,000,000 shares of Common Stock issuable upon conversion of 150,000,000 shares of Series D Convertible Preferred Stock (the “Series D Preferred Stock”); and (iv) 750,000,000 shares of Common Stock issued pursuant to that certain Convertible Promissory Note dated January 2, 2013, for the benefit of European Chamber of Commerce for Investment Banks & Trusts, at a conversion price of $0.001 per share.
(3) The price per share indicated reflects solely the application of the applicable reverse split ratio to the closing price of the Common Stock on December 7, 2022.
After the effective date of the Reverse Split, our Common Stock would have a new committee on uniform securities identification procedures (CUSIP) number, a number used to identify our Common Stock.
Our Common Stock is currently registered under Section 12(g) of the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The proposed Reverse Split will not affect the registration of our Common Stock under the Exchange Act. Our Common Stock would continue to be reported on the OTC under the symbol “CCAJ”, assuming that we are able to regain compliance with the minimum bid price requirement, although it is likely that FINRA would add the letter “D” to the end of the trading symbol for a period of twenty trading days after the effective date of the Reverse Split to indicate that the Reverse Split had occurred.
Additional Q&A’s can be found on our website at: https://coastalcapitalac.com/investor-relations
Chief Executive Officer
Coastal Capital Acquisition Corporation
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