PROPOSAL 4 – AMENDMENT OF 2021 EMPLOYEE STOCK PURCHASE PLAN
Our Board believes our 2021 ESPP is important to enhance our ability to attract and retain the services of employees upon whose judgment, initiative, and efforts the successful conduct and development of our business largely depends. We are asking our stockholders to approve an amendment to our 2021 ESPP (the “ESPP Amendment”) to increase the number of shares of Common Stock reserved for issuance under the plan by 500,000 shares. The Board, upon the recommendation of our Compensation Committee, unanimously approved the ESPP Amendment, subject to stockholder approval at the Annual Meeting.
If the ESPP Amendment is approved, the total number of shares authorized for issuance under our 2021 ESPP will increase to an aggregate of 524,051 shares, inclusive of awards previously granted by our Board subject to stockholder approval of this Proposal No. 4. If the ESPP Amendment is not approved, our 2021 ESPP will remain in effect according to its current terms.
Purpose of Our 2021 ESPP and Rationale for ESPP Amendment
Our 2021 ESPP was adopted in connection with our initial public offering to offer eligible employees an opportunity to acquire or increase their ownership interests in the Company, giving participants a meaningful equity stake in our business and an interest in the success and increased value of the Company, and encouraging them to remain employed with the Company. No shares have been issued to date under our 2021 ESPP.
There were initially 128,900 shares of Common Stock reserved for issuance under our 2021 ESPP, and under the 2021 ESPP’s “evergreen” provision, the share reserve increases annually by 1% of the outstanding Common Stock as of December 31 of the prior year. The number of shares of Common Stock available under our 2021 ESPP will continue to increase in future years through January 31, 2031 pursuant to our 2021 ESPP’s evergreen provision.
However, as a result the Reverse Stock Split consummated in October 2024, the number of shares of Common Stock reserved for issuance under our 2021 ESPP was substantially reduced. As of June 17, 2025, only 24,051 shares of Common Stock remain reserved for issuance under our 2021 ESPP, which is not sufficient for anticipated levels of future participation in the plan, and the utility of our 2021 ESPP will be limited. Our Board believes it is in the best interest of our stockholders to seek an increase in the number of shares of our Common Stock reserved for issuance under our 2021 ESPP so we can continue to motivate and incentivize our employees, encourage employee performance that drives stockholder value over the long term, and fulfill the objectives of our compensation strategy.
In considering our recommendation to increase the number of shares of our Common Stock reserved for issuance under our 2021 ESPP by 500,000 shares, our Board considered a number of factors, including: the historical and projected participation in level under our 2021 ESPP by our eligible employees, including the level of payroll deductions anticipated to be authorized by eligible employees; and the significant reduction in the trading price, and increased volatility, of our Common Stock in recent years, which has resulted in an overall diminution in the value of our previously issued equity awards.
In light of the foregoing, our Board believes the additional share request to be appropriate and necessary to meet the objectives of our equity compensation program, and to be in the best interest of our stockholders.
If this Proposal No. 4 is approved by our stockholders at the Annual Meeting, we intend to register the shares of Common Stock available for issuance under our 2021 ESPP on a registration statement on Form S-8 under the Securities Act as soon as reasonably practicable following receipt of approval.
A copy of the ESPP Amendment is attached to this Proxy Statement as Appendix B.
Material Features of Our 2021 ESPP
The following provides a summary of the material features of our 2021 ESPP. This summary does not purport to be a complete description of all of the provisions of our 2021 ESPP and is qualified in its entirety by the plan document of our 2021 ESPP, filed as an exhibit to our Annual Report.
Our 2021 ESPP is designed to allow our eligible employees to purchase shares of our Common Stock, at periodic intervals, with their accumulated payroll deductions. Our 2021 ESPP consists of two components: a Section 423 component, which is intended to qualify under Section 423 of the Code and a non-Section 423 component, which need not qualify under Section 423 of the Code.
