PROPOSAL 1 - APPROVAL, FOR PURPOSES OF NASDAQ LISTING RULES 5635(B) AND 5635(D), OF THE ISSUANCE TO
YORKVILLE OF SHARES OF OUR CLASS A COMMON STOCK IN EXCESS OF THE EXCHANGE CAP
At the Special Meeting, our stockholders will be asked
to approve, for purposes of Nasdaq Listing Rules 5635(b) and 5635(d), the issuance of shares of our Class A Common Stock to Yorkville pursuant to the SEPA, which shares may represent more than 20% of our issued and outstanding Common Stock as
of December 14, 2024.
Standby Equity Purchase Agreement
As previously disclosed, on December 14, 2023 (the SEPA Effective Date), we entered into the SEPA with an entity managed by
Yorkville. Pursuant to the SEPA, we have the option (but not the obligation) to sell to Yorkville, and Yorkville is required to subscribe for, an aggregate amount of up to $100 million of shares of our Class A Common Stock, at our request
at any time, from time to time, until the 36-month anniversary of the SEPA Effective Date, subject to the terms and conditions of the SEPA, including certain beneficial ownership limitations described in the
SEPA and the Exchange Cap (as defined below).
Each purchase that we request Yorkville make pursuant to the SEPA (each, a Company
Advance) may be for a number of shares of Class A Common Stock not to exceed the greater of (i) 500,000 shares of Class A Common Stock or (ii) 100% of the average daily volume weighted average price of the Class A Common Stock
as reported by Bloomberg L.P. (VWAP) traded during the five trading days immediately preceding a Company Advance. For so long as any Promissory Note remains outstanding, Yorkville may also require the Company to issue a Company Advance
under the SEPA (each an Investor Advance, and collectively with all Company Advances, the Advances) for such number of shares of Class A Common Stock as is requested by the Investor, subject to the terms and conditions
of the SEPA, including certain beneficial ownership limitations described in the SEPA and the Exchange Cap (as defined below), and provided that the proceeds from the sale and issuance of any such shares are first applied toward the outstanding
principal amount under one or more Promissory Notes (as defined below).
In addition to our raising capital through the Advances,
Yorkville agreed to advance us an aggregate principal amount of up to $3.5 million, which amount was increased to $4.5 million (the Pre-Paid Advance) on February 5, 2024 pursuant to
the Supplemental Agreement, in exchange for our issuance to Yorkville of promissory notes that are convertible into shares of our Class A Common Stock (the Promissory Notes). We received $2.0 million of the Pre-Paid Advance on the SEPA Effective Date, an additional Pre-Paid Advance in the amount of $1.0 million on February 5, 2024, and the remaining $1.5 million of
the Pre-Paid Advance will be funded when we obtain stockholder approval of the issuance of any shares to Yorkville pursuant to the SEPA, including upon conversion of the Promissory Notes, representing more
than 19.99% of the aggregate number of shares of our Common Stock or voting power issued and outstanding as of the SEPA Effective Date (the Exchange Cap). As of the Record Date, 1,052,257 shares of Class A Common Stock had been
issued upon conversion of the Promissory Notes and the aggregate principal amount remaining outstanding under the Promissory Notes was $2,250,000.
The foregoing descriptions of the SEPA, the Supplemental Agreement and the Promissory Notes are not complete and are qualified in their
entirety by reference to the SEPA, the Supplemental Agreement and the Promissory Notes, which are filed as exhibits to our Current Reports on Form 8-K filed with the SEC on December 18, 2023,
December 20, 2023 and February 8, 2024.
Nasdaq Stockholder Approval Requirements
We are subject to the rules and regulations of the Nasdaq Stock Market (Nasdaq) because our Class A Common Stock is listed on
Nasdaq. Accordingly, in addition to the contractual obligations and conditions described above, we are seeking stockholder approval in order to comply with Nasdaq Listing Rules 5635(b) and 5635(d).
Pursuant to Nasdaq Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities that will result in a change of
control of a listed company, which for purposes of Nasdaq Listing Rule 5635(b) is
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