Seelos will incur significant increased costs as a result of operating as a public company, Seelos' management has limited experience managing a public
company, and Seelos' management will be required to devote substantial time to new compliance initiatives.
Seelos will incur significant legal, accounting and other expenses that Seelos did not incur as a private company. In addition, the Sarbanes-Oxley Act, the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") as well as rules subsequently implemented by the SEC and Nasdaq have imposed
various requirements on public companies. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt
additional rules and regulations in these areas. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to
substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact (in ways Seelos cannot currently anticipate) the manner in which Seelos
operates Seelos' business. Seelos' management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will
increase Seelos' legal and financial compliance costs and will make some activities more time-consuming and costly. For example, Seelos expects these rules and regulations to make it more
difficult and more expensive for Seelos to obtain director and officer liability insurance and Seelos may be required to incur substantial costs to maintain Seelos' current levels of such insurance
As a publicly traded company, Seelos will incur legal, accounting and other expenses associated with the SEC reporting requirements applicable to a company whose
securities are registered under the Exchange Act, as well as corporate governance requirements, including those under the Sarbanes-Oxley Act, the Dodd-Frank Act and other rules
implemented by the SEC and Nasdaq. The expenses incurred by public companies generally to meet SEC reporting, finance and accounting and corporate governance requirements have
been increasing in recent years as a result of changes in rules and regulations and the adoption of new rules and regulations applicable to public companies.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about Seelos' business, Seelos' stock price and trading
volume could decline.
The trading market for Seelos' common stock depends, in part, on the research and reports that securities or industry analysts publish about Seelos or its
business. If one or more of the analysts who cover Seelos downgrade Seelos' stock or publish inaccurate or unfavorable research about Seelos' business, Seelos' stock price would likely
decline. In addition, if Seelos' operating results fail to meet the forecast of analysts, Seelos' stock price would likely decline. If one or more of these analysts cease coverage of Seelos or fail to
publish reports on Seelos regularly, demand for Seelos' common stock could decrease, which might cause Seelos' stock price and trading volume to decline.
Sales of a substantial number of shares of Seelos' common stock in the public market by Seelos' existing stockholders, future issuances of Seelos' common
stock or rights to purchase Seelos' common stock, could cause Seelos' stock price to fall.
Sales of a substantial number of shares of Seelos' common stock by Seelos' existing stockholders in the public market, or the perception that these sales might
occur, could depress the market price of Seelos' common stock and could impair Seelos' ability to raise capital through the sale of additional equity securities. Seelos is unable to predict the
effect that such sales may have on the prevailing market price of Seelos' common stock.
The Financing Warrants contain price-based adjustment provisions which, if triggered, may cause substantial additional dilution to Seelos'
On October 16, 2018, we entered into a Securities Purchase Agreement with STI and the investors listed on the Schedule of Buyers attached thereto, as
amended (the "Financing SPA"), pursuant to which, among other things, we agreed to issue warrants to purchase 1,463,519 Common Shares (the "Financing
The Financing Warrants contain price-based adjustment provisions, pursuant to which the number of shares of Seelos' common stock that are issuable upon exercise of
the Financing Warrants may be adjusted upward based upon the volume weighted average trading price of Seelos' common stock and in the event of certain dilutive issuances by Seelos. Even
if Seelos' stock increases in value, the number of shares of Seelos' common stock issuable upon exercise of the Financing Warrants may still increase. The circumstances under which the
number of shares of Seelos' common stock issuable upon exercise of the Financing Warrants may be adjusted upward are set forth in the Financing Warrants.
If the Financing Warrants are exercised, additional shares of Seelos' common stock will be issued, which will result in dilution to our then-existing stockholders and
increase the number of shares eligible for resale in the public market. Assuming (i) a total of 6,221,984 shares of Seelos' common stock issued and outstanding, (ii) the issuance of the
maximum number of Converted Additional Shares and (iii) ignoring restrictions in the Financing SPA preventing exercises of Financing Warrants if the exercising investor would beneficially own
in excess of 4.99% or 9.99% of the outstanding common stock of Seelos (including the shares of common stock issuable upon such exercise), following the issuance of the maximum number
of shares issuable upon exercise of the Financing Warrants, the investors would hold an aggregate of approximately 80.2% of Seelos' total outstanding common stock following such issuance.
Sales of substantial numbers