PROPOSAL NO. 1—APPROVAL OF CONVERSION OF SERIES B PREFERRED STOCK
Overview
On July 2, 2024, we entered into the Securities Purchase Agreement with the purchasers party thereto, pursuant to which we issued and sold an aggregate of 3,563,247 shares of our Common Stock and 2,937,903 shares of our Series B Preferred Stock (the “Private Placement”). The Series B Preferred Stock is intended to have rights that are generally equivalent to shares of our Common Stock, provided that the Series B Preferred Stock does not have the right to vote on most matters (including the election of directors). Subject to the approval of Proposal No. 1 and certain beneficial ownership limitations set by each holder, each share of Series B Preferred Stock will automatically convert into one share of Common Stock. Proposal No. 1 would provide the necessary approval to permit such conversion. Assuming approval of Proposal No. 1 and subject to certain beneficial ownership limitations, 2,937,903 shares of Common Stock are issuable upon conversion of the above-described Series B Preferred Stock.
Description of Series B Preferred Stock
Conversion. Following stockholder approval of Proposal 1, effective as of 5:00 p.m., Eastern Time, on the third business day after the date on which such stockholder approval is received, each share of Series B Preferred Stock will automatically convert into one share of Common Stock (the “Automatic Conversion”). The Automatic Conversion is subject to certain beneficial ownership limitations, including that a holder of Series B Preferred Stock is prohibited from converting shares of Series B Preferred Stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 0% and 19.9%) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”). Following the Automatic Conversion, each share of Series B Preferred Stock that is not otherwise converted into Common Stock as a result of the Beneficial Ownership Limitation shall be convertible, at any time and from time to time, at the option of the holder thereof, into one share of Common Stock, subject to the Beneficial Ownership Limitation and only to the extent the same shall have ceased to apply.
Voting Rights. Except as otherwise required by law (e.g. voting on a change to the authorized shares of Series B Preferred Stock or the rights of such shares as required by the DGCL) and the Certificate of Designation of Preferences, Rights and Limitations of Series B Non-Voting Convertible Preferred Stock (the “Certificate of Designation”), the Series B Preferred Stock does not have voting rights. However, as long as any shares of Series B Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock, (b) alter or amend the Certificate of Designation, or (c) amend the Charter or other organizational documents in any matter that adversely affects any rights of the holders of Series B Preferred Stock.
Dividends. Holders of Series B Preferred Stock are entitled to receive dividends on shares of Series B Preferred Stock equal, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of common stock.
Liquidation and Dissolution. The Series B Preferred Stock ranks on parity with Common Stock and any outstanding Series A Preferred Stock upon any liquidation, dissolution or winding-up of the Company.
Preemptive Rights. The Series B Preferred Stock does not have preemptive rights.
Redemption. The Series B Preferred Stock is not redeemable.
Reasons for Stockholder Approval. Our common stock is listed on The Nasdaq Global Market, and, as such, we are subject to the applicable rules of Nasdaq, including Nasdaq Listing Rule 5635(d), which requires stockholder approval prior to the issuance of 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance at a price that is less than the Minimum Price (as defined in the Nasdaq Listing Rules). Thus, in order to permit the issuance of Common Stock upon conversion of the Series B Preferred Stock, we must first obtain stockholder approval of this issuance. This Special Meeting is being called for the purpose of obtaining such stockholder approval.
Interests of Certain Parties. When considering our Board of Directors’ recommendation that our stockholders vote in favor of Proposal No. 1, our stockholders should be aware that certain of our directors and officers have
