Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended September 30, 2024. There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024, except for the item listed below.
Entity-Wide Risks
Actions of activist stockholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition and/or share price.
Our Board of Directors and management team value constructive input from investors and are committed to acting in the best interests of all our stockholders. However, activist stockholders who disagree with the composition of the Board of Directors, our strategy, or the way the Company is managed may seek to effect change through various strategies and channels, such as through commencing a proxy contest, making public statements critical of our performance or business or engaging in other similar activities. Responding to such actions by activist investors can be costly and time-consuming, disruptive to our operations and divert the attention of management, our Board of Directors and our employees, and our ability to execute our strategic plan also could be impaired as a result.
In January 2023, the Company entered into a cooperation and support agreement (the “Cooperation Agreement”) with Alexander C. Kinzler , the Company’s then CEO and President in his capacity as a stockholder , Ned L. Sherwood and certain entities affiliated with Mr. Sherwood, with respect to a potential proxy contest at our 2023 annual meeting of stockholders. Under the terms of the Cooperation Agreement, Mr. Sherwood and his affiliated entities agreed to limit their beneficial and economic ownership of the Company to 28% of the outstanding common stock of the Company for the first 12 months of the agreement and 30% for the second 12-month period. The Cooperation Agreement expired in early February 2025. In both private and public communications, both before and after the expiration of the Cooperation Agreement, Mr. Sherwood has made certain proposals regarding the composition of the Board and the Company’s management team. He also has indicated, through public and private communications, that he intends to nominate a group of candidates to stand for election at the Company’s next annual meeting of stockholders.
In connection with the pending termination of the Cooperation Agreement, in late 2024, our Board authorized the creation of an ad hoc special committee of the Board for the purpose of considering various matters relating to the pending expiration of the Cooperation Agreement and a possible proxy contest or other actions initiated by Mr. Sherwood and his affiliated entities. We have been required to retain the services of various professionals to advise us on matters relating to Mr. Sherwood, including legal and financial advisors. In the event of a proxy contest, we could be required to incur substantially increased legal, public relations and other advisory fees and proxy solicitation expenses. In addition, perceived uncertainties as to our future direction, strategy or leadership created as a consequence may result in the loss of potential business opportunities, harm our ability to attract new or retain existing directors and employees, disrupt relationships with the Company, and the market price of our common stock could also experience periods of increased volatility as a result.
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