result,
as of the effective time of the Reverse Stock Split, the stated capital attributable to common stock on our balance sheet would
decrease, and the additional paid-in capital account on our balance sheet would increase by an offsetting amount. Following
the Reverse Stock Split, the reported per-share net income or loss would be higher because there would be fewer shares
of common stock outstanding, and we would adjust historical per share amounts set forth in our future financial statements.
Reservation
of Right to Abandon the Amendment to our Restated Certificate of Incorporation, As Amended
Our
Board of Directors reserves the right to abandon the amendment to our amended and restated certificate of incorporation, as amended,
described in this proposal without further action by our stockholders at any time before the effective time, even if stockholders
approve such amendment at the special meeting. By voting in favor of the amendment to our amended and restated certificate of
incorporation, as amended, stockholders are also expressly authorizing the Board of Directors to determine not to proceed with
and abandon the Reverse Stock Split if it should so decide.
Material
U.S. Federal Income Tax Consequences of the Reverse Stock Split
The
following discussion summarizes the material U.S. federal income tax consequences of the proposed Reverse Stock Split to us and
to U.S. Holders (as defined below). This discussion is based on the Internal Revenue Code of 1986, as amended, which we refer
to as the Code, U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative
pronouncements of the U.S. Internal Revenue Service, which we refer to as the IRS, in each case in effect as of the date of this
proxy statement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation
may be applied retroactively in a manner that could adversely affect a U.S. Holder. We have not sought and will not seek any rulings
from the IRS regarding the matters discussed below, and there can be no assurance that the IRS or a court will not take a contrary
position to that discussed below regarding the tax consequences of the proposed Reverse Stock Split.
For
purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income
tax purposes, is or is treated as (i) an individual who is a citizen or resident of the United States; (ii) a corporation
(or any other entity or arrangement treated as a corporation) created or organized under the laws of the United States, any state
thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless
of its source; or (iv) a trust if (1) its administration is subject to the primary supervision of a court within the
United States and all of its substantial decisions are subject to the control of one or more “United States persons”
(within the meaning of Section 7701(a)(30) of the Code ), or (2) it has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a United States person.
This
discussion is limited to U.S. Holders who hold our common stock as a “capital asset” within the meaning of Section 1221
of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences
relevant to the particular circumstances of a U.S. Holder, including the impact of the Medicare contribution tax on net investment
income. In addition, it does not address consequences relevant to U.S. Holders that are subject to special rules, including, without
limitation, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, grantor
trusts, tax-exempt organizations, dealers or traders in securities, commodities or currencies, stockholders who hold
our common stock as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal
income tax purposes, persons whose functional currency is not the U.S. dollar, persons who acquired their comment stock pursuant
to the exercise of employee stock options or otherwise as compensation, or U.S. Holders who actually or constructively own 10%
or more of our voting stock.
If
a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common
stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner
and the activities of the partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal
income tax purposes) holding our common stock and the partners in such entities should consult their own tax advisors regarding
the U.S. federal income tax consequences of the proposed Reverse Stock Split to them.
In
addition, the following discussion does not address the U.S. federal estate and gift tax, alternative minimum tax, or state, local, and non-U.S. tax law
consequences of the proposed Reverse Stock Split. Furthermore, the following discussion does not address any tax consequences
of transactions effectuated before, after, or at the same time as the proposed Reverse Stock Split, whether or not they are in
connection with the proposed Reverse Stock Split. This discussion should not be considered as tax or investment advice, and the
tax consequences of the proposed Reverse Stock Split may not be the same for all stockholders.
Each
stockholder should consult his, her or its own tax advisors concerning the particular U.S. federal tax consequences of the proposed
Reverse Stock Split, as well as the consequences arising under the laws of any other taxing jurisdiction, including any state,
local or foreign tax consequences.
Tax
Consequences to the Company. The proposed Reverse Stock Split is intended to be treated as a “recapitalization”
pursuant to Section 368(a)(1)(E) of the Code. As a result, we should not recognize taxable income, gain, or loss in connection
with the proposed Reverse Stock Split.
Tax
Consequences to U.S. Holders. A U.S. Holder generally should not recognize gain or loss upon the proposed Reverse
Stock Split for U.S. federal income tax purposes, except with respect to cash received in lieu of a fractional share of our common
stock, as discussed below. A U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock received pursuant
to the proposed
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Molecular Templates, Inc. | 2023 Proxy Statement |