Company pursuant to which, among other things, each such stockholder agreed, solely in his or her capacity as a stockholder, to vote all of his or her shares of Common Stock in favor of the
approval of the North Run Proposal.
Reasons for Seeking Stockholder Approval
Our Common Stock is listed on the Nasdaq Capital Market, and as such, we are subject to the Nasdaq Listing Rules. In order to comply with the Nasdaq Listing
Rules and to satisfy conditions under the Purchase Agreement, we are seeking stockholder approval of this proposal.
Under Nasdaq Listing Rule 5635(b),
stockholder approval is required prior to the issuance of securities when the issuance or potential issuance will result in a change of control of a company. This rule does not specifically define when a change in control of a company may be deemed
to occur for this purpose; however, Nasdaq suggests in its guidance that a change of control would occur, subject to certain limited exceptions, if after a transaction an investor (or a group of investors) would hold 20% or more of a companys
then-outstanding capital stock and such ownership or voting power would be the companys largest ownership position. As of immediately prior to the Private Placement, North Run beneficially owned 1,100,592 shares, or approximately 9.9%, of our
outstanding Common Stock. Based on shares outstanding as of June 2, 2023 (and assuming that all Warrants have been exercised solely for cash), the transactions contemplated by the Private Placement would result in North Run holding 57.0% of the
voting power of the Company and 55.1% of the beneficial ownership of the Company. Accordingly, we are also seeking stockholder approval pursuant to Nasdaq Listing Rule 5635(b). Stockholders should note that a change of control as
described under Rule 5635(b) applies only with respect to the application of such rule, and does not necessarily constitute a change of control for purposes of Delaware law or our organizational documents. Our Board of Directors
determined that the Private Placement, the Purchase Agreement and the issuance of the securities thereunder were in the best interests of our company and its stockholders.
Effect of Approval
If the
North Run Proposal is approved, all shares of Series A Convertible Preferred Stock held by North Run and its affiliates will, at the election of North Run, be convertible into an aggregate of 7,940,446 shares of our Common Stock and, prior to their
conversion, can be voted on an as-converted-to-Common-Stock basis without restriction by the Beneficial Ownership Limitation.
Additionally, if the North Run Proposal is approved, North Run will have the ability to acquire up to 4,367,246 shares of Common Stock by exercising the Warrants. If the North Run Proposal is approved, based on shares outstanding as of June 2,
2023 (and assuming that no Warrants have been exercised), North Run would hold, as of June 2, 2023, 47.2% of the voting power of the Company and 47.3% of the beneficial ownership of the Company, without any restriction of the Beneficial
Ownership Limitation. If the North Run Proposal is approved, based on shares outstanding as of June 2, 2023 (and assuming that all Warrants have been exercised solely for cash), North Run would hold, as of June 2, 2023, 57.0% of the voting
power of the Company and 57.0% of the beneficial ownership of the Company.
Consequences if Stockholder Approval Is Not
Obtained
If our stockholders do not approve the North Run Proposal at the Special Meeting, North Run and its affiliates will not be able to vote or
convert their shares of Series A Convertible Preferred Stock or exercise the Warrants in excess of the Beneficial Ownership Limitation on any matter brought for a stockholder vote. Additionally, if our stockholders do not approve this proposal by
August 16, 2023, we would be obligated to include this proposal for stockholder approval again at our annual stockholder meeting held in 2024 and subsequent annual meetings until stockholder approval is obtained. The Company would bear the
costs associated with including this proposal for stockholder approval at subsequent annual stockholder meetings.
Interests
of Certain Persons in the North Run Proposal
Certain of our directors and existing stockholders may have interests that may be different from, or in
addition to, the interests of other of our stockholders. In particular, North Run and directors Thomas B. Ellis and Todd B.
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