OpenWorld Inc (OPNW) Risk Analysis

Immediately following this offering, we expect that some Open World securityholders will beneficially own more than 50% of the voting power of the combined company's outstanding common stock. Under the Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a controlled company and is permitted to elect to rely, and may rely, on certain exemptions from corporate governance requirements, including: - an exemption from the requirement that a majority of its board of directors be independent directors; and - an exemption from the requirement that its compensation committee be comprised entirely of independent directors and have a written charter addressing the committee's purpose and responsibilities. If the combined company relies on any such exemptions, our current stockholders who remain stockholders of the combined company and the combined company's investors would not have the same protections afforded to stockholders of companies that are subject to these corporate governance requirements. The combined company's status as a controlled company could make the combined company's common stock less attractive to certain investors, could limit the oversight of management by the combined company's board of directors, and could adversely affect the trading price or liquidity of the combined company's common stock. In addition, the Open World securityholders holding more than 50% of the voting power of the combined company, either individually or if applicable as a group, will be able to exert significant influence over the outcome of matters requiring stockholder approval of the combined company, including the election of directors, mergers, acquisitions, dispositions, financing transactions, and other significant corporate actions, which may conflict with the interests of its other stockholders. As a company operating in the crypto infrastructure and token launch services industry, where regulatory expectations and market practices continue to evolve, such concentration of control could also influence its approach to governance, compliance, or risk tolerance in ways that other stockholders may not view as favorable.

Upon completion of the Merger, Open World securityholders will become our stockholders as stockholders of the combined company. Our business currently differs, and may differ in the future, in certain respects from that of Open World and certain adjustments may be made to our business as a result of the Merger. Accordingly, the results of operations of the combined company and the market price of the combined company's common stock after the completion of the Merger may be affected by factors different from those currently affecting our results of operations and market price of our common stock prior to completion of the Merger.

After the Closing, our current stockholders will own a significantly smaller percentage of the combined company than their ownership of VerifyMe prior to the Merger. Immediately after the Closing, our stockholders as of immediately prior to the Closing, are expected to own approximately 10% of the outstanding shares of the combined company, and Open World securityholders are expected to own approximately 90% of the outstanding shares of the combined company. The exact equity stake of our stockholders and Open World securityholders in the combined company immediately following the Effective Time will depend on the Fully Diluted Parent Common Stock and Fully Diluted Company Shares (each as defined in the Merger Agreement) determined immediately prior to the Closing. As a result of this reduced ownership percentage, our current stockholders will be able to exercise significantly less influence over the management and policies of the combined company following the Merger than they currently exercise over VerifyMe. Similarly, Open World securityholders who become our stockholders will own a majority of the outstanding shares of common stock of the combined company.

Certain of our and Open World officers and directors participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the combined company, severance benefits, the acceleration of certain outstanding equity awards, and continued indemnification. For example, after the Merger, Scott Greenberg, our current Chairman will continue as a director of the combined company and may receive cash and other compensation from the combined company. Additionally, Adam Stedham, our Chief Executive Officer and President, and Jennifer Cola, our Chief Financial Officer, will continue as officers of the combined company pursuant to written employment agreements. Further, upon the Effective Time of the Merger, the vesting of certain outstanding equity awards held by our directors and officers will accelerate. These interests, among others, may influence our and Open World's officers and directors to support or approve the Merger.

Under the Merger Agreement, each ordinary shares of Open World (other than excluded shares and dissenting shares), and certain other Open World securities, as set forth in the Merger Agreement, will be converted or have the right to convert into a number of shares of our common stock equal to the Exchange Ratio. The Exchange Ratio is fixed and will not be adjusted based on changes in the market price of our common stock or the economic performance of either party prior to the Closing. If the market price of our common stock increases before the Closing, Open World securityholders may receive consideration with a higher dollar value than was negotiated at the time the Merger Agreement was executed. Conversely, if the market price of our common stock decreases before the Closing, Open World securityholders may receive consideration with a lower dollar value. The Merger Agreement does not contain a price-based termination right.

In addition to certain provisions of our amended and restated articles of incorporation, as amended, and our amended and restated by-laws, certain provisions of our outstanding warrants could make it more difficult or expensive for a third party to acquire us. The warrants prohibit us from engaging in certain transactions constituting "fundamental transactions" unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.

Nasdaq requires that the trading price of its listed stocks remain above one dollar in order for stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from the Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders' equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and warrants and would impair your ability to sell or purchase our common stock or warrants when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock or warrants to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.

In general, our Board of Directors may issue, without a vote of our stockholders, one or more additional series of preferred stock that have more than one vote per share, although the Company's ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board of Directors could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for stockholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

Our common stock has experienced, and is likely to experience, in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be stable or appreciate over time.

Sales of large blocks of our common stock could depress the price of our common stock. The existence of these shares and shares of common stock issuable upon conversion of outstanding shares of Series B Convertible Preferred Stock, warrants and options create a circumstance commonly referred to as an "overhang" which can act as a depressant to our common stock price. The existence of an overhang, whether or not sales have occurred or are occurring, also could make our ability to raise additional financing through the sale of equity or equity-linked securities more difficult in the future at a time and price that we deem reasonable or appropriate. If our existing stockholders and investors seek to sell a substantial number of shares of our common stock, such selling efforts may cause significant declines in the market price of our common stock.