DEF 14A 1 def14a_101824.htm DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. )

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

PSYCHEMEDICS CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

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No fee required

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Fee paid previously with preliminary materials

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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

October 18, 2024

Dear Stockholders:

We cordially invite you to attend the 2024 Annual Meeting of Stockholders of Psychemedics Corporation (the “Company”), which will be held virtually on November 25, 2024 at 10:00 a.m. Eastern Time (the “Annual Meeting”).

The accompanying notice and proxy statement contain details concerning the matters to be considered during the Annual Meeting. At the Annual Meeting, you will be asked to consider and vote on the following matters:

Re-election of our current directors to our Board of Directors (the “Board”)

Approval, on a non-binding basis, of our executive compensation

Ratification of the appointment of our independent registered public accounting firm

Proposals to (a) amend our amended and restated certificate of incorporation to effect a reverse stock split of our common stock, at a ratio not less than 1-for- 4,000 and not greater than 1-for-6,000 (the “Reverse Stock Split”), followed immediately by a forward stock split of our common stock at the same ratio but inverse (i.e., if the Reverse Stock Split were 1-for-5,000, then the Forward Stock Split would be 5,000-for-1) (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Split”), and (b) ratify the terms and conditions of a Stock Purchase Agreement entered into by us on August 12, 2024 providing for, among other terms, the issuance and sale of up to 1,595,744 shares of our common stock to Mr. Kamin or his designee at a purchase price of $2.35 per share, for an aggregate purchase price of up to $3,750,000 (the “Stock Purchase Agreement,” and the Stock Purchase Agreement, including the transactions contemplated thereby, the Stock Split and the subsequent delisting and deregistration of the Company’s common stock as described herein, collectively, the “Transaction”) and approve the transactions contemplated by the Stock Purchase Agreement (such proposals, collectively, the “Transaction Proposals”).

If the Transaction Proposals are approved, we will file with the Secretary of State of the State of Delaware certificates of amendment to our amended and restated certificate of incorporation to effectuate the Reverse Stock Split, at which time (the “effective time”) each share of our common stock held by a stockholder of record owning immediately prior to the effective time fewer than the minimum number of shares, which, depending on the Stock Split ratios chosen by the Board, would be between 4,000 and 6,000 shares (the “Minimum Number”) would be converted into the right to receive $2.35 in cash, without interest (the “Cash Payment”), and such stockholders would no longer be our stockholders. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time (the “Continuing Stockholders”) would not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which would immediately follow the Reverse Stock Split, would reconvert whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of our common stock held by such Continuing Stockholders immediately prior to the effective time. As a result of the Forward Stock Split, the total number of shares of our common stock held by a Continuing Stockholder would not change as a result of the Stock Split.

The Stock Split and the transactions contemplated by the Stock Purchase Agreement are being undertaken as part of our plan to terminate the registration of (or “deregister”) our common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended, and suspend our duty to file periodic reports and other information with the Securities and Exchange Commission (the “SEC”) under Section 13(a) thereunder, and to delist our common stock from The Nasdaq Stock Market. As a result, (i) we would cease to file annual, quarterly, current and other reports and documents with the SEC, and stockholders would cease to receive annual reports and proxy statements required by the SEC, and (ii) our common stock would no longer be listed on The Nasdaq Stock Market. The primary purpose of the Stock Split is to enable us to maintain the number of record holders of our common stock below 300, which is the level at which SEC public reporting is required. As described below, the Board and the Transaction Committee of the Board (the “Transaction Committee”) have determined that the costs of being a public reporting company outweigh the benefits thereof.

Proposal to approve the adjournment of the Annual Meeting, from time to time, if necessary or appropriate, including to solicit additional proxies in favor of any proposal if there are insufficient votes at the time of such adjournment to approve such proposal or to ensure that any supplement or amendment to the proxy statement is timely provided to our stockholders

The Board recommends that you vote “FOR” approval of all of the proposals presented at the Annual Meeting. The accompanying proxy statement and its exhibits explain the various proposals and provide specific information about the Annual Meeting. Please read these materials carefully.

THE TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to please complete, sign and date the enclosed proxy card and return it in the enclosed envelope. The envelope requires no postage if mailed in the United States. If you attend the Annual Meeting, you may vote at the Annual Meeting, even if you have previously returned your proxy card, as described in the attached proxy statement.

Your prompt attention would be greatly appreciated.

	Sincerely,



	Brian Hullinger
	Chief Executive Officer and President

PSYCHEMEDICS CORPORATION

5220 Spring Valley Road

Dallas, Texas 75254

(800) 527-7424

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 25, 2024

The 2024 Annual Meeting of Stockholders of Psychemedics Corporation (the “Company”) will be held on November 25, 2024, at 10:00 a.m. Eastern Time (the “Annual Meeting”). There will be no physical meeting location for the Annual Meeting. The Annual Meeting will be a virtual stockholder meeting, conducted via live audio webcast, through which you can submit questions and vote online. To access the Annual Meeting, you must register to attend by visiting the website located at www.proxydocs.com/PMD and following the on-screen instructions. Once registration is complete, you will receive a custom meeting link at least one hour prior to the start of the meeting. The Annual Meeting will be held for the following purposes, as more fully described in the proxy statement (the “Proxy Statement”):

To elect directors of the Company for the ensuing year and until their respective successors are chosen and qualified.

To conduct a non-binding advisory vote on the compensation of the Company’s named executive officers.

To ratify the Audit Committee’s appointment of Whitley Penn LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024.

To consider and vote upon a proposal to amend the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s common stock at a ratio not less than 1-for-4,000 and not greater than 1-for-6,000 (the “Reverse Stock Split”), with the exact Reverse Stock Split ratio to be set within the foregoing range at the discretion of the Company’s Board of Directors (the “Reverse Stock Split Proposal”).

To consider and vote upon a proposal to amend the Company’s amended and restated certificate of incorporation to effect, immediately after the Reverse Stock Split, a forward stock split of the Company’s common stock at the same ratio but inverse (i.e., if the Reverse Stock Split were 1-for-5,000, then the Forward Stock Split would be 5,000-for-1) (the “Forward Stock Split”), with the exact Forward Stock Split ratio to be set within the foregoing range at the discretion of the Company’s Board of Directors (the “Forward Stock Split Proposal”). As a result of the Reverse Stock Split and the Forward Stock Split:

•

each share of common stock held by a stockholder of record owning fewer than the minimum number of shares of the Company’s common stock immediately prior to the effective time of the Reverse Stock Split (the “effective time”), which, depending on the Stock Split ratios chosen by the Company’s Board of Directors (the “Board”), would be between 4,000 and 6,000 shares (the “Minimum Number”) will be converted into the right to receive $2.35 in cash, without interest, at the effective time; and

•

each share of common stock held by a stockholder of record owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time will continue to represent one share of common stock after completion of the Reverse Stock Split and the Forward Stock Split.

Copies of the proposed amendments to the Company’s amended and restated certificate of incorporation are attached as Annex A and Annex B to the accompanying proxy statement.

To consider and vote on a proposal to ratify the terms and conditions of the Stock Purchase Agreement, dated August 12, 2024, by and among the Company, 3K Limited Partnership, Peter H. Kamin, the Peter H. Kamin Revocable Trust dated February 2003, the Peter H. Kamin Childrens Trust dated March 1997, the Peter H. Kamin GST Trust and the Peter H. Kamin Family Foundation (the “Stock Purchase Agreement”) and approve the transactions contemplated thereby (the “Stock Purchase Agreement Proposal”).

A copy of the Stock Purchase Agreement is attached as Annex C to the accompanying proxy statement.

To consider and vote on a proposal to approve the adjournment of the Annual Meeting, from time to time, if necessary or appropriate, including to solicit additional proxies in favor of any proposal if there are insufficient votes at the time of such adjournment to approve such proposal or establish a quorum or to ensure that any supplement or amendment to the proxy statement is timely provided to our stockholders.

To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting.

The Board has fixed the close of business on October 8, 2024 as the record date for the determination of stockholders entitled to receive notice of, and to vote at, the Annual Meeting.

	By order of the Board of Directors,

	/s/ Patrick J. Kinney, Jr.
	Patrick J. Kinney, Jr.
	Secretary

YOUR VOTE IS IMPORTANT

YOU ARE URGED TO VOTE, SIGN, DATE, AND RETURN THE ACCOMPANYING ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION, BY EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING AND VOTING AT THE VIRTUAL ANNUAL MEETING.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR OUR ANNUAL MEETING TO BE HELD VIRTUALLY ON NOVEMBER 25, 2024: This Proxy Statement, our Annual Report for the fiscal year ended December 31, 2023 and the Proxy Card are available at our website, www.proxydocs.com/PMD. To view these materials please have your control number(s) available that appears on your proxy card.

TABLE OF CONTENTS

ABOUT THE ANNUAL MEETING	1
SUMMARY TERM SHEET	2
The Transaction	2
Purpose of and Reasons for the Transaction	2
Effects of the Transaction	3
Transaction Committee and Board Recommendations of the Transaction	4
Reservation of Rights	4
Fairness of the Transaction	5
Position of the Investors as to the Fairness of the Transaction	5
Advantages of the Transaction	6
Disadvantages of the Transaction	7
The Stock Purchase Agreement and Funding of the Reverse Stock Split	8
Potential Conflicts of Interests of Officers, Directors, and Certain Affiliated Persons	8
Vote Required for Approval of the Transaction Proposals at the Annual Meeting	9
Treatment of Beneficial Holders (Stockholders Holding Shares in “Street Name”)	9
Determination of Stockholders of Record	10
Effectiveness of the Stock Split	10
Financing for the Stock Split	10
Recent Market Prices of the Company’s Common Stock	10
No Appraisal or Dissenters’ Rights	11
Material U.S. Federal Income Tax Consequences	11
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION	11
What proposals am I being asked to vote on relating to the Transaction?	11
What is the purpose of the Stock Split?	12
What does the deregistration of our common stock mean?	12

What is the OTC Pink Market?	12
What will I receive in the Stock Split?	12
What potential conflicts of interest are posed by the Transaction?	12
Why is the Company proposing to carry out a Forward Stock Split following the Reverse Stock Split?	13
What if I hold fewer than the Minimum Number and hold all of my shares in “street name”?	13
What happens if I own beneficially a total number of shares of common stock equal to or greater than the Minimum Number of shares or more shares of common stock, but I hold fewer than the Minimum Number of record in my name and fewer than the Minimum Number with my broker in “street name”?	13
If I own fewer than the Minimum Number, is there any way I can continue to be a stockholder of the Company after the Reverse Stock Split?	14
Is there anything I can do if I own a number of shares of common stock equal to or greater than the Minimum Number, but would like to take advantage of the opportunity to receive cash for my shares as a result of the Reverse Stock Split?	14
Could the Stock Split not happen?	14
What are the material terms of the Stock Purchase Agreement?	14
Will my shares be voted if I do not vote?	14
What vote is required to approve the Transaction Proposals?	15
What will happen if the Transaction Approvals are approved by the Company’s stockholders?	15
What will happen if the Transaction Proposals are not approved?	15
If the Transaction Proposals are approved by the stockholders, can the Board determine not to proceed with the Stock Split?	15
What are the federal income tax consequences of the Stock Split to me?	16
Should I send in my certificates now?	16
What is the total cost of the Transaction to the Company?	16
Am I entitled to appraisal rights in connection with the Transaction?	16
SPECIAL FACTORS RELATING TO THE TRANSACTION	16
Purpose of and Reasons for the Transaction	16
Background of the Transaction	19

Alternatives to the Transaction	26
Effects of the Transaction	26
Reservation of Rights	32
Nasdaq Capital Market Listing; OTC Pink Market	32
Fairness of the Transaction	32
Disadvantages of the Transaction	34
Position of the Investors as to the Fairness of the Transaction	36
Fairness Opinion of Financial Advisor	41
Financial Forecast Information	52
Material U.S. Federal Income Tax Consequences	62
Potential Conflicts of Interests of Officers, Directors, and Certain Affiliated Persons	65
Source of Funds and Expenses	66
Stockholder Approval	66
Effective Date	67
Termination of Transaction	67
Exchange of Certificates and Payment for Fractional Shares	68
No Appraisal or Dissenters’ Rights	70
Escheat Laws	70
Regulatory Approvals	70
Litigation	70
BOARD OF DIRECTORS AND DIRECTOR NOMINEES	71
CORPORATE GOVERNANCE	73

iii

General	73
Independence	73
Corporate Governance Guidelines	73
Certain Relationships and Related Transactions	74
Board of Directors Meetings and Committees	74
Diversity	75
Board Leadership Structure, Risk Oversight, Executive Sessions of Nonemployee Directors, and Communications Between Stockholders and the Board	76
Fees Payable to Our Independent Auditor for 2023 and 2022	77
Report of the Audit Committee	77
Director Compensation	78
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	80
PROPOSAL 1 ELECTION OF DIRECTORS	82
EXECUTIVE OFFICERS	83
EXECUTIVE COMPENSATION	84
Overview of Compensation Program	84
Compensation Philosophy and Objectives	84
Role of Executive Officers in Compensation Decisions	84
Setting Executive Compensation	84
2023 Executive Compensation Components	85
Tax and Accounting Implications	86
Summary of Cash and Certain Other Compensation	86
Employment Contracts	87
Potential Payments upon Termination and Change in Control	89
Equity Compensation Plan Information	89
Pay Versus Performance	89

PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT	92
PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION	94
PROPOSAL 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	96
PROPOSAL 4 AMENDMENTS TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT	97
PROPOSAL 5 AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A FORWARD STOCK SPLIT	99
PROPOSAL 6 RATIFICATION OF THE TERMS AND CONDITIONS OF THE STOCK PURCHASE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT	100
PROPOSAL 7 APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY OR APPROPRIATE, INCLUDING TO SOLICIT ADDITIONAL PROXIES IF THERE ARE INSUFFICIENT VOTES AT THE TIME OF THE ANNUAL MEETING TO APPROVE ANY PROPOSAL OR TO ESTABLISH QUORUM	103
INFORMATION ABOUT THE COMPANY	104
Market Price of Common Stock	104
Dividends	104
Stockholders	105
The Filing Persons	105
Stock Purchases by Filing Persons	105

Directors and Executive Officers	105
OTHER MATTERS	106
Voting Procedures	106
Other Proposed Action	106
Stockholder Communications	106
Stockholder Proposals and Nominations for Director	106
Delinquent Section 16(a) Reports	107
Can I Change My Vote After I Have Voted?	108
Incorporation By Reference	108
Annual Report on Form 10-K	108
FINANCIAL INFORMATION	109
Summary Historical Financial Information	109
Pro Forma Consolidated Financial Statements (Unaudited)	109

Annex A – FORM OF CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PSYCHEMEDICS CORPORATION	A-1

Annex B – FORM OF CERTIFICATE OF AMENDMENT OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PSYCHEMEDICS CORPORATION	B-1

Annex C – STOCK PURCHASE AGREEMENT	C-1

Annex D – FAIRNESS OPINION OF FINANCIAL ADVISOR	D-1

ABOUT THE ANNUAL MEETING

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Psychemedics Corporation, a Delaware corporation (“we,” “us,” “our,” or the “Company”), with its principal executive offices at 5220 Spring Valley Road, Dallas, Texas 75254, for use at the 2024 Annual Meeting of Stockholders to be held on November 25, 2024 and at any adjournment or postponement thereof (the “Annual Meeting”). The enclosed proxy relating to the Annual Meeting is solicited on behalf of the Board. We have retained Alliance Advisors, LLC to assist in the solicitation of proxies for a fee of approximately $15,000, plus reimbursement of related expenses. In addition to solicitation by mail, our directors, officers and employees may solicit proxies on behalf of the Company, without additional compensation, by telephone, facsimile, mail, on the Internet or at the Annual Meeting. We may reimburse banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of our stock. It is expected that this proxy statement and the accompanying proxy will be mailed to stockholders on or about October 18, 2024.

Only stockholders of record at the close of business on October 8, 2024 will be entitled to receive notice of, and to vote at, the Annual Meeting. As of that date, there were outstanding and entitled to vote 5,894,461 shares of our common stock, $0.005 par value (the “common stock”). Each such stockholder is entitled to one vote for each share of common stock so held and may vote such shares either personally or by proxy.

The Annual Meeting will be held as a virtual meeting only, via a live audio webcast. There will be no physical meeting location for the Annual Meeting. You will be able to attend the meeting online and vote your shares electronically during the meeting by visiting www.proxydocs.com/PMD and entering your control number included in your proxy materials or on your proxy card. You must register by November 24, 2024 by 5:00 p.m. Eastern Time to participate in the Annual Meeting. Upon completing your registration, you will receive further instructions by email, including a unique link that will allow you to access the Annual Meeting. Even though the Annual Meeting is being held virtually, stockholders will have the ability to participate in, hear others, and ask questions during the Annual Meeting.

Your vote is important. Even if you plan to attend the Annual Meeting, we urge you to vote by proxy in advance. You may vote your shares by using one of the following methods in advance of the Annual Meeting:

(1) you may vote by mail by marking your proxy card, and then date, sign and return it in the postage-paid envelope provided; or

(2) you may vote electronically by accessing the website located at www.proxydocs.com/PMD and following the on-screen instructions; or

(3) you may vote by using a telephone at (866) 586-3113 and following the voting instructions.

Please have your proxy card in hand when going online. If you instruct the voting of your shares electronically or by telephone, you do not need to return your proxy card.

If your shares are held in “street name” (held in the name of a bank, broker or other holder of record), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting also will be offered to stockholders owning shares through certain banks or brokers. If your shares are not registered in your own name and you plan to vote your shares at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy or broker’s proxy card and vote your shares online at the time of the meeting.

The meeting webcast will begin promptly at 10:00 a.m. Eastern Time on November 25, 2024. Online check-in will begin promptly at 9:45 a.m. Eastern Time on that date, and you should allow ample time for the online check-in procedures. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting.

SUMMARY TERM SHEET

The following summary term sheet, together with the “Questions and Answers” section that follows, highlights certain information about the Transaction (as defined below), but may not contain all of the information that is important to you. For a more complete description of the Transaction, including the Stock Split and the Stock Purchase Agreement (each as defined below) and the transactions contemplated thereby, we urge you to carefully read this proxy statement and all of its annexes before you vote. For your convenience, we have directed your attention to the location in this proxy statement where you can find a more complete discussion of the items listed below.

The Transaction

A Transaction Committee of the Board comprised solely of independent directors (the “Transaction Committee”) has recommended to the Board, and participating members of the Board have each approved, the Transaction, which consists of (1) amendments to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s common stock, par value $0.005 per share (the “common stock”), at a ratio not less than 1-for-4,000 and not greater than 1-for-6,000 (the “Reverse Stock Split”), followed immediately by a forward stock split of the Company’s common stock at a ratio not less than 4,000-for-1 and not greater than 6,000-for-1 (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Split”), and (2) the entry into the Stock Purchase Agreement entered into by us on August 12, 2024 for the issuance and sale of up to 1,595,744 shares of our common stock to Mr. Kamin or his designee at a purchase price of $2.35 per share, for an aggregate purchase price of up to $3,750,000 (the “Stock Purchase Agreement,” and the Stock Purchase Agreement, including the transactions contemplated thereby, the Stock Split and the subsequent delisting and deregistration of the Company’s common stock as described in this proxy statement, collectively, the “Transaction”) and the transactions contemplated thereby, in each case as part of the Company’s plan to terminate the registration of (or “deregister”) the common stock under Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and suspend the Company’s duty to file periodic reports and other information with the Securities and Exchange Commission (the “SEC”) under Section 13(a) thereunder, and to delist the common stock from the Nasdaq Capital Market.

Stockholders owning fewer than the minimum number of shares immediately prior to the effective time of the Reverse Stock Split, which, depending on the Stock Split ratios chosen by the Board, would be between 4,000 and 6,000 (the “Minimum Number”), whom we refer to as “Cashed Out Stockholders,” will receive $2.35 in cash, without interest, for each share held at the effective time of the Reverse Stock Split (the “effective time”), and they will no longer be stockholders of the Company.

Stockholders who own a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time, whom we refer to as “Continuing Stockholders,” will not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split that will immediately follow the Reverse Stock Split will reconvert whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of common stock they held immediately before the effective time. As a result, the total number of shares of common stock held by a Continuing Stockholder will not change.

See “Special Factors Relating to the Transaction — Effects of the Transaction” beginning on page 26.

Purpose of and Reasons for the Transaction

The primary purpose of the Transaction is to enable the Company to maintain the number of record holders of its common stock below 300, which is the level at which SEC public reporting is required. After the completion of the Transaction, we intend to delist our common stock from the Nasdaq Capital Market and cease registration of our common stock under the Exchange Act. As a result, effective on and following the termination of the registration of our common stock under the Exchange Act, the Company would no longer be subject to the reporting requirements under the Exchange Act, or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act and the listing standards of a national stock exchange. Our common stock would not be eligible for listing on the New York Stock Exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market.

The Transaction Committee and the Board has determined that the costs of being an SEC reporting company outweigh the benefits and, thus, it is no longer in the best interests of our stockholders, including our unaffiliated stockholders (consisting of stockholders other than our executive officers, directors and stockholders who own more than 10% of our outstanding common stock), for us to remain an SEC reporting company.

The principal reasons for the Board approving the proposed “going dark” transaction and recommending that stockholders approve each of the Transaction Proposals (as defined below) are as follows: (1) the Company’s public cost structure is disproportionate to the sales level of its business; (2) the Company’s revenues have declined in recent years, making our public company cost structure even more unsustainable; (3) the Company currently realizes none of the traditional benefits of public company status; (4) public company status requires significant management time and limits operational flexibility; (5) our common stock has limited trading volume and liquidity for small stockholdings and the Transaction will allow our smallest stockholders with the ability to liquidate their holdings in the Company and receive a fair price in cash for their shares, without incurring brokerage commissions; and (6) the Board decision to approve the proposed “going dark” transaction and its specific terms was the result of an independent and rigorous process to determine the best course for all the Company’s stockholders.

See “Special Factors Relating to the Transaction — Purpose of and Reasons for the Transaction” beginning on page 16.

Purpose and Reasons of the Investors for the Transaction

Under the SEC rules governing “going-private” transactions, the Investors are affiliates of the Company who may be engaged directly or indirectly in the Stock Split and, therefore, required to express their reasons for the Transaction to the Company’s unaffiliated stockholders, as defined in Rule 13e-3 of the Exchange Act. The Investors are making the statements included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. For the Investors, the primary purpose of the Transaction is to enable the Company to maintain the number of record holders of its common stock below 300, which is the level at which SEC public reporting is required. After the completion of the Transaction, the Company intends to delist the common stock from the Nasdaq Capital Market and to cease registration of our common stock under the Exchange Act. As a result, effective on and following the termination of the registration of the Company’s common stock under the Exchange Act, the Company would no longer be subject to the reporting requirements under the Exchange Act, or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act and the listing standards of a national stock exchange. The Transaction Committee and the Board have determined that the costs of being an SEC reporting company outweigh the benefits and, thus, it is no longer in the best interests of Comapny stockholders, including Company unaffiliated stockholders (consisting of stockholders other than Company executive officers, directors and stockholders who own more than 10% of Company outstanding common stock), for the Company to remain an SEC reporting company.

The Investors believe that the structuring of the Transaction is appropriate because it will result in significant cost and time savings for the Company, which is expected to save approximately $845,000 annually by eliminating the costs associated with public reporting and related obligations. In addition, management and employees will be able to focus more on the Company’s operations instead of dedicating substantial time to compliance tasks. The Transaction also provides an opportunity for stockholders holding fewer than the Minimum Number to liquidate their holdings at a fair price without incurring brokerage fees, particularly given the limited liquidity of the Company’s common stock.

Effects of the Transaction

As a result of the Transaction:

We expect to maintain the number of our stockholders of record below 300, which will allow us to cease the registration of our shares of common stock under the Exchange Act. Effective on and following the termination of the registration of our common stock under the Exchange Act, we will no longer be subject to any reporting requirements under the Exchange Act or the rules of the SEC applicable to SEC reporting companies. We will, therefore, cease to file annual, quarterly, current, and other reports and documents with the SEC, and stockholders will cease to receive annual reports and proxy statements required by the SEC.

We will no longer be subject to the provisions of the Sarbanes-Oxley Act and other requirements applicable to a public company, including those required by the listing standards of a national stock exchange.

Our executive officers, directors and 10% stockholders will no longer be subject to the reporting requirements of Section 16 of the Exchange Act or be subject to the prohibitions against retaining short-swing profits in our shares of common stock. Persons acquiring 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.

We will have no ability to access the public capital markets or to use public securities in attracting and retaining executives and other employees, and we will have a decreased ability to use stock to acquire other companies.

Our shares of common stock will no longer be traded on the Nasdaq Capital Market and will not be eligible for listing on the New York Stock Exchange or The Nasdaq Stock Market. Any trading in our common stock after the Stock Split and deregistration under the Exchange Act will only occur in privately negotiated sales and potentially on the OTC Pink Market, if one or more brokers chooses to make a market for our common stock there, subject to applicable regulatory requirements; however, there can be no assurances regarding any such trading.

Holders of fewer than the Minimum Number immediately prior to the effective time of the Reverse Stock Split will receive a cash payment of $2.35, without interest, for each share of common stock they hold, will no longer have any ownership interest in us, and will cease to participate in any of our future earnings and growth.

Holders of a number of shares of common stock equal to or greater than the Minimum Number immediately prior the effective time of the Reverse Stock Split will not receive any payment for their shares and, immediately following the Forward Stock Split, will continue to hold the same number of shares as before the Reverse Stock Split.

Options evidencing rights to purchase shares of our common stock would be unaffected by the Stock Split because such options will, after the Stock Split, be exercisable into the same number of shares of our common stock as they were before the Stock Split.

Since our obligation to file periodic and other filings with the SEC will be suspended, Continuing Stockholders will no longer have access to publicly filed audited financial statements, information about executive compensation and other information about us and our business, operations and financial performance. We intend to continue to prepare audited annual financial statements and periodic unaudited financial statements and plan to make available to our stockholders audited annual financial statements only. Nonetheless, Continuing Stockholders will have significantly less information about the Company and our business, operations, and financial performance than they have currently. We will continue to hold stockholder meetings as required under Delaware law, including annual meetings, or take actions by written consent of our stockholders in lieu of meetings.

The Continuing Stockholders will have less influence on all matters submitted to a vote of the stockholders because Mr. Kamin’s beneficial ownership will increase from approximately 10.99%, as of October 8, 2024, to 34.94% of our outstanding common stock, based on an assumed Reverse Stock Split of 1-for-5,000, and Mr. Kamin, through 3K, will have rights to designate directors to serve on the Board, as described below. Pursuant to the terms of the Stock Purchase Agreement, in connection with each annual or special meeting of stockholders of the Company occurring after the closing of the transactions contemplated by the Stock Purchase Agreement at which directors of the Company are to be elected, the Company will be required to include two individuals designated by 3K, an affiliate of Mr. Kamin, as nominees for election to the Board and the Company will not be permitted to increase the size of the Board to more than five directors, in each case subject to certain exceptions. The combined effect of Mr. Kamin’s increased beneficial ownership and director designation rights will reduce the influence of other Continuing Stockholders.

See “Special Factors Relating to the Transaction — Effects of the Transaction” beginning on page 26, “Special Factors Relating to the Transaction — Fairness of the Transaction” beginning on page 32, and “Special Factors Relating to the Transaction — Potential Conflicts of Interests of Officers, Directors, and Certain Affiliated Persons” beginning on page 65.

Transaction Committee and Board Recommendations of the Transaction

The Board established the Transaction Committee to consider the potential benefits and costs of a “going dark” transaction to the Company’s stockholders, develop the specific terms of such transaction and make a recommendation to the Board.

The Transaction Committee consists of Robyn Davis (Chair) and Drew Reynolds, each of whom is independent within the meaning of Rule 4200 of the Nasdaq Marketplace Rules and Rule 10A-3(b) of the Exchange Act. The Transaction Committee retained Mirus Securities, Inc. (“Mirus”), an investment banking firm, which has provided the Transaction Committee with a fairness opinion as to the Cash Payment to be paid in the Reverse Stock Split, a copy of which is attached to this proxy statement as Annex D. No member of the Transaction Committee received any compensation for their work on the Transaction Committee, other than their regular Board fees paid pursuant to the Board compensation policy described elsewhere in this proxy statement.

The Transaction Committee and the Board determined that the Transaction is substantively and procedurally fair to, and in the best interests of, and the price to be paid per fra