Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
The discussion of our business and operations should be read together with the risk factors contained in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. In addition to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, the following risk factor should be carefully considered in evaluating us and our business.
Actions of activist stockholders have caused and could continue to cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.
We have been and may continue to be subject to proposals by stockholders urging us to take certain corporate actions. If activist stockholder activities continue, our business could be adversely affected because responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees. For example, we have been and may continue to be required to retain the services of various professionals to advise us on activist stockholder matters, including legal, financial, and communications advisers, the costs of which may negatively impact our future financial results. This may be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel. In addition, actions of activist shareholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
On March 10, 2024, Blackwells Capital LLC and certain of its affiliates (collectively, “Blackwells”) submitted materials to the Company purporting to provide notice (the “Purported Nominating Notice”) of Blackwells’ intent to nominate four individuals for election to our board of directors and submit non-binding business proposals for stockholder consideration at the Annual Meeting. After reviewing the Purported Nominating Notice, the board of directors determined that the Purported Nominating Notice failed to comply with the advance notice provisions under the Company’s Bylaws (including among other reasons Blackwells’ failure to disclose its continued interest in acquiring the Company) and, as a result, determined Blackwells’ nominations to be invalid. On March 22, 2024, Blackwells filed a preliminary proxy statement with the SEC to solicit proxies in support of its purported nominees and business proposals set forth in the Purported Nominating Notice. On March 24, 2024, the Company brought suit against Blackwells in the United States District Court for the Northern District of Texas, seeking injunctive relief against the solicitation of proxies by Blackwells and a declaratory judgment that Blackwells’ nomination is invalid and, as a result, that Blackwells’ slate of purported nominees is invalid and ineligible to stand for election by the Company’s stockholders. On April 3, 2024, Blackwells filed its definitive proxy statement with the SEC.
As previously disclosed, the Company has postponed the Annual Meeting, previously scheduled to be held on May 15, 2024, to July 30, 2024, and the record date for the 2024 Annual Meeting will be May 2, 2024. The litigation between the Company and Blackwells is currently stayed.
We believe that the purported nominees and non-binding business proposals set forth in Blackwells’ proxy materials cannot properly be brought before the Annual Meeting and, unless ordered to do so by a court of competent jurisdiction (a “Valid Court Order”), the Company will not recognize or tabulate any proxies or votes in favor of Blackwells' purported nominees or non-binding business proposals at the Annual Meeting. In the event a Valid Court Order is issued, the Company will amend this proxy statement and furnish to stockholders a new universal proxy card which will include Blackwells’ director candidates and non-binding business proposals, and the Company will provide stockholders with sufficient time to receive such proxy materials and cast their votes on such new universal proxy card prior to the Annual Meeting (or any postponement or adjournment thereof). We expect if a Valid Court Order is issued and an ongoing proxy contest between the Company and Blackwells occurs, such contest will divert significant financial and operational resources from the Company and may negatively affect our stock price and overall financial and operational performance.
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