JERUSALEM - Scinai Immunotherapeutics Ltd. (NASDAQ:SCNI), a biotech company specializing in inflammation and immunology therapies, announced today it has received a non-binding Letter of Intent (LoI) from the European Investment Bank (EIB). The LoI proposes to convert approximately $27.6 million of EIB's loan into equity, specifically prefunded warrants exercisable into American Depositary Shares (ADSs) comprising 19.5% of Scinai's fully diluted capital at closing.
The conversion is expected to rectify the company's shareholders' deficit of $4.5 million, creating an estimated equity surplus of around $14.5 million. This financial restructuring could potentially address the Nasdaq's minimum shareholders' equity requirement, which Scinai previously did not meet. The company plans to present its compliance strategy to the Nasdaq Hearings Panel on June 18, 2024.
The proposed terms include amending the outstanding principal to EUR 250,000 (approximately $270,000) with a December 31, 2031 maturity, without accruing interest. Additionally, the EIB's net proceeds share from equity raises would be reduced from 10% to 5%, and a cap of EUR 70 million (approximately $75.6 million) would be applied to the 3% royalties on the company's revenues.
The implementation of these terms is contingent upon formal approval from EIB's governing bodies, agreement amendments, and satisfaction of conditions precedent. There is no assurance that the final revised terms, if executed, will reflect those described in the LoI.
Scinai's management expressed gratitude to the EIB for its support and looks forward to completing this financial restructuring. This move is anticipated to bolster Scinai's efforts in developing novel therapeutics for inflammation and immunology diseases.
The information reported is based on a press release statement.
In other recent news, Scinai Immunotherapeutics Ltd. has regained compliance with Nasdaq's minimum bid price requirement through a strategic adjustment in its share structure. This move increased the number of ordinary shares each American Depositary Share represents, effectively elevating the bid price above the minimum threshold.
However, Scinai still confronts challenges with Nasdaq's minimum shareholders' equity requirement. The company has entered discussions with the European Investment Bank (EIB) to potentially convert a significant portion of their loan into equity, a strategy that forms a central element of the compliance plan Scinai plans to present to a Nasdaq Hearings Panel. It's important to note that these terms are still under negotiation and require EIB's formal approval. Despite these developments, Scinai continues to strive for full compliance with Nasdaq's listing rules.
InvestingPro Insights
In light of Scinai Immunotherapeutics Ltd.'s (NASDAQ:SCNI) recent announcement regarding the potential conversion of a loan into equity, a glance at the company's financial health through InvestingPro's lens reveals some challenges. The company operates with a significant debt burden, as indicated by one of the InvestingPro Tips, and with a market capitalization of just $1.25 million, the financial restructuring could be critical for its continued operations.
Moreover, the company's stock price has experienced considerable volatility, suffering a sharp decline over various time frames, including a 35.16% drop over the last week and a staggering 79.93% fall over the past year. This level of price fluctuation underscores the company's urgent need for a solid financial strategy to reassure investors and stabilize its market position.
From a profitability standpoint, Scinai has struggled with weak gross profit margins and has not been profitable over the last twelve months, as highlighted by another InvestingPro Tip. This is further evidenced by an adjusted P/E ratio of -0.19, reflecting investor skepticism about the company's earnings potential.
For readers interested in a deeper analysis, InvestingPro offers additional insights and tips that could provide a more comprehensive understanding of Scinai's financial landscape. There are currently 13 more InvestingPro Tips available, which can be explored at https://www.investing.com/pro/SCNI. To gain access to these valuable insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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