Filed pursuant
to Rule 424(b)(5)
Registration No. 333-267066
PROSPECTUS SUPPLEMENT
(To Prospectus dated September 2, 2022)
$10,000,000
of Common Stock
We have
entered into a Sales Agreement (the “Sales Agreement”), dated October 21, 2024, with Roth Capital Partners, LLC (the
“Sales Agent”), relating to the shares of our Common Stock, par value $0.05 per share (the “Common Stock”),
offered by this prospectus supplement. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our
Common Stock having an aggregate offering price of up to $10,000,000 from time to time through or to the Sales Agent, as agent
or principal.
Sales of
Common Stock, if any, under this prospectus supplement and the accompanying prospectus may be made in transactions that are deemed
to be “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities
Act”). The Sales Agent is not required to sell any specific number or dollar amount of shares, but will act as sales agent
on a commercially reasonable efforts basis consistent with its normal trading and sales practices. There is no arrangement for
funds to be received in any escrow, trust or similar arrangement.
We will
pay the Sales Agent a fixed commission, in an amount up to 3.0% of the gross sales price per share of Common Stock issued by us
and sold through them as our Sales Agent under the Sales Agreement. In connection with the sale of Common Stock on our behalf,
the Sales Agent will be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation
to the Sales Agent will be deemed to be underwriting commissions or discounts. We have also agreed to provide indemnification
and contribution to the Sales Agent with respect to certain liabilities, including liabilities under the Securities Act.
As of October
17, 2024, we had 1,210,471 authorized but unissued shares of Common Stock available for issuance (after deducting the number of
shares outstanding and reserved for issuance and (i) giving effect to the 1-for-50 reverse stock split, which became effective
as of October 17, 2024, and (ii) giving effect to an aggregate of 110,982 shares of common stock issuable upon the exercise of
any outstanding shares of preferred stock, equity incentive plan, equity stock purchase plans, SUNation inducement shares and
convertible debt. Based on 1,210,471 authorized shares of Common Stock available for issuance and an assumed offering price of
$5.51 per share, which was the last reported sale price of our Common Stock on the Nasdaq Capital Market on October 17, 2024,
we would be able to issue and sell shares under the Sales Agreement for a maximum of approximately $6.67 million, notwithstanding
the $10,000,000 maximum aggregate offering amount set forth in this prospectus supplement. In no event will we sell, pursuant
to the registration statement of which this prospectus supplement forms a part, more shares than we have available and authorized
for issuance.
Our shares
of Common Stock are traded on the Nasdaq Capital Market under the symbol “PEGY”.
Investment
in our Common Stock involves risks. See the section entitled “Risk Factors” on page S-10 of this prospectus supplement
and the risk factors contained in the documents incorporated by reference in this prospectus supplement and the accompanying prospectus
for a discussion of certain factors which should be considered before investing in our Common Stock.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Roth Capital
Partners
The date
of this prospectus supplement is October 21, 2024.
TABLE
OF CONTENTS
PROSPECTUS
SUPPLEMENT
PROSPECTUS
No dealer,
salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus supplement
or the accompanying prospectus. You must not rely on any unauthorized information or representations. This prospectus supplement
and the accompanying prospectus are an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus supplement and the accompanying prospectus is current
only as of their respective dates.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the U.S. Securities
and Exchange Commission, or SEC, utilizing a “shelf” registration process. This document is in two parts. The first
part is this prospectus supplement, which describes the specific terms of this offering and also adds to and updates information
contained in the accompanying prospectus and the documents incorporated by reference herein. The second part, the accompanying
prospectus, provides more general information. Generally, when we refer to this prospectus, we are referring to both parts of
this document combined. To the extent there is a conflict between the information contained in this prospectus supplement and
the information contained in the accompanying prospectus or any document incorporated by reference therein filed prior to the
date of this prospectus supplement, you should rely on the information in this prospectus supplement; provided that if any statement
in one of these documents is inconsistent with a statement in another document having a later date-for example, a document incorporated
by reference in the accompanying prospectus-the statement in the document having the later date modifies or supersedes the earlier
statement.
We
further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any
document that is incorporated by reference herein were made solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation,
warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made.
Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state
of our affairs.
You
should rely only on the information contained in this prospectus supplement or the accompanying prospectus or incorporated by
reference herein. We have not authorized anyone to provide you with information that is different. The information contained in
this prospectus supplement or the accompanying prospectus or incorporated by reference herein or therein is accurate only as of
the respective dates thereof, regardless of the time of delivery of this prospectus supplement and the accompanying prospectus
or of any sale of our Common Stock. It is important for you to read and consider all information contained in this prospectus
supplement and the accompanying prospectus, including the documents incorporated by reference herein and therein, in making your
investment decision. This prospectus supplement contains summaries of certain provisions contained in some of the documents described
herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety
by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated
by reference as exhibits to the registration statement of which this prospectus supplement is a part, and you may obtain copies
of those documents as described below under the heading “Where You Can Find More Information” and “Incorporation
of Certain Information by Reference” in this prospectus supplement and in the accompanying prospectus, respectively.
We
are offering to sell, and seeking offers to buy, the securities offered by this prospectus supplement only in jurisdictions where
offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering
of the securities offered by this prospectus supplement in certain jurisdictions may be restricted by law. For investors outside
of the United States: neither we nor the Sales Agent have done anything that would permit this offering or possession or distribution
of this prospectus supplement and accompanying prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. Persons outside the United States who come into possession of this prospectus supplement and the accompanying
prospectus must inform themselves about, and observe any restrictions relating to, the offering of the Common Stock and the distribution
of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying
prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy,
any securities offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which
it is unlawful for such person to make such an offer or solicitation.
When
used herein, unless the context requires otherwise, references to the “Company,” “we,” “our”
and “us” refer to Pineapple Energy Inc., a Minnesota corporation.
All
trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience,
the trademarks and trade names in this prospectus are referred to without the ® and ™ symbols, but such references
should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable
law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a
relationship with, or endorsement or sponsorship of us by, any other companies.
Except
as otherwise indicated, all information in this prospectus supplement gives effect to a 1-for-50 reverse stock split of our Common
Stock, which became effective as of October 17, 2024. However, share and per share amounts in the accompanying prospectus and
certain of the documents incorporated by reference herein prior to October 17, 2024, have not been adjusted to give effect to
the reverse stock split.
CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS
This
prospectus supplement and the documents incorporated by reference in this prospectus supplement contain, and our officers and
representatives may from time to time make, “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which include information relating to future events, future financial performance, financial projections, strategies, expectations,
competitive environment and regulation. Words such as “may,” “should,” “could,” “would,”
“predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,”
“intends,” “plans,” “believes,” “estimates,” “goal,” “seek,”
“project,” “strategy,” “likely,” and similar expressions, as well as statements in future
tense, identify forward-looking statements. Forward-looking statements are neither historical facts, nor should they be read as
a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved.
Forward-looking statements are based on information we have when those statements are made or management’s good faith belief
as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance
or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that
could cause such differences include, but are not limited to:
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● |
our growth strategy
depends on the continued origination of solar installation agreements; |
| |
● |
if we fail to manage
our operations and growth effectively, we may be unable to execute our business plan, maintain high levels of customer service
or adequately address competitive challenges; |
| |
● |
we need to raise
additional capital to fund our operations and repay our obligations, which funding may not be available on favorable terms
or at all and may lead to substantial dilution to our existing shareholders. Further, there is substantial doubt about our
ability to continue as a going concern, which conditions may adversely affect our stock price and our ability to raise capital; |
| |
● |
our Common Stock
may be delisted from The Nasdaq Capital Market if we cannot increase the share price within the time period and for the duration
as required by The Nasdaq Capital Market; |
| |
● |
we may face claims
for monetary damages, penalties, and other significant items pursuant to existing contractual arrangements, as well as litigation
or threatened litigations, which, if material, may strain our cashflow and operations, as well as take away substantial time
and attention from management that is necessary to for business operations and potential growth opportunities; |
| |
● |
we depend on a limited
number of suppliers of solar energy system components and technologies to adequately meet demand for our solar energy systems; |
| |
● |
increases in the
cost of our solar energy systems due to tariffs and other trade restrictions imposed by the U.S. government could have a material
adverse effect on our business, financial condition and results of operations; |
| |
● |
our operating results
and our ability to grow may fluctuate from quarter to quarter and year to year, which could make our future performance difficult
to predict and could cause our operating results for a particular period to fall below expectations; |
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● |
we may have difficulty
integrating any new businesses we may acquire with our existing operations or otherwise obtaining the strategic benefits of
the acquisition; |
| |
● |
if we are unable
to make acquisitions on economically acceptable terms, our future growth would be limited, and any acquisitions we may make
could reduce, rather than increase, our cash flows; |
| |
● |
product liability
and property damage claims against us or accidents could result in adverse publicity and potentially significant monetary
damages; |
| |
● |
we will not be able
to insure against all potential risks and we may become subject to higher insurance premiums; |
| |
● |
damage to our brand
and reputation or change or loss of use of our brand could harm our business and results of operations; |
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● |
the loss of one
or more members of our senior management or key employees may adversely affect our ability to implement our strategy; |
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● |
our inability to
protect our intellectual property could adversely affect our business. We may also be subject to intellectual property rights
claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit
our ability to use certain technologies; |
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● |
we may be subject
to interruptions or failures in our information technology systems; |
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● |
our information
technology systems may be exposed to various cybersecurity risks and other disruptions that could impair our ability to operate,
adversely affect our business, and damage our brand and reputation; |
| |
● |
our failure to hire
and retain a sufficient number of key employees, such as installers and electricians, would constrain our growth and our ability
to timely complete projects; |
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● |
our business is
concentrated in certain markets, putting us at risk of region-specific disruptions; |
| |
● |
if sufficient additional
demand for residential solar energy systems does not develop or takes longer to develop than we anticipate, our ability to
originate solar installation agreements may decrease; |
| |
● |
our business prospects
are dependent in part on a continuing decline in the cost of solar energy system components and our business may be adversely
affected to the extent the cost of these components stabilize or increase in the future; |
| |
● |
we face competition
from centralized electric utilities, retail electric providers, independent power producers and renewable energy companies; |
| |
● |
developments in
technology or improvements in distributed solar energy generation and related technologies or components may materially adversely
affect demand for our offerings; |
| |
● |
a material reduction
in the retail price of electricity charged by electric utilities or other retail electricity providers could harm our business,
financial condition and results of operations; |
| |
● |
terrorist or cyberattacks
against centralized utilities could adversely affect our business; |
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● |
climate change may
have long-term impacts on our business, industry, and the global economy; |
| |
● |
increases in the
cost of our solar energy systems due to tariffs imposed by the U.S. government could have a material adverse effect on our
business, financial condition and results of operations; |
| |
● |
we are not currently
regulated as an electric public utility under applicable law, but may be subject to regulation as an electric utility in the
future; |
| |
● |
electric utility
policies and regulations, including those affecting electric rates, may present regulatory and economic barriers to the purchase
and use of solar energy systems that may significantly reduce demand for our solar energy systems and adversely impact our
ability to originate new solar installation agreements; |
| |
● |
we rely on net metering
and related policies to sell solar systems to our customers in most of our current markets, and changes to policies governing
net metering may significantly reduce demand for electricity from residential solar energy systems and thus for our installation
services; |
| |
● |
a customer’s
decision to procure installation services from us depends in part on the availability of rebates, tax credits and other financial
incentives. The expiration, elimination or reduction of these rebates, credits or incentives or our ability to monetize them
could adversely impact our business; |
| |
● |
technical
and regulatory limitations regarding the interconnection of solar energy systems to the electrical grid may significantly
delay interconnections and customer in-service dates, harming our growth rate and customer satisfaction; and |
| |
● |
compliance
with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements
may result in potentially significant monetary penalties, operational delays and adverse publicity. |
While
we believe these expectations, assumptions, beliefs, estimates, projections, intentions and strategies are reasonable, such forward-looking
statements are only predictions and involve known and unknown risks and uncertainties, most of which are difficult to predict
and many of which are beyond our control. Actual results and timing of certain events may differ materially from those anticipated
in these forward-looking statements as a result of various factors. You should consider these factors carefully in evaluating
forward-looking statements contained in this prospectus supplement and the documents incorporated by reference into this prospectus
supplement and are cautioned not to place undue reliance on such statements, which speak only as of the date of this prospectus
supplement.
We undertake
no obligation to update forward-looking statements except as may be required under applicable securities laws. See an additional
discussion under the heading “Risk Factors” in this prospectus supplement, any related free writing prospectus, and
in our most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q.
PROSPECTUS
SUPPLEMENT SUMMARY
This
summary highlights selected information about us, this offering and information appearing elsewhere in this prospectus supplement,
in the accompanying prospectus and in the documents incorporated by reference herein and therein. This summary is not complete
and does not contain all the information you should consider before investing in our securities pursuant to this prospectus supplement
and the accompanying prospectus. Before making an investment decision, to fully understand this offering and its consequences
to you, you should carefully read this entire prospectus supplement and the accompanying prospectus, including “Risk Factors,”
the financial statements, and related notes, and the other information incorporated by reference herein and therein. When used
herein, unless the context requires otherwise, references to the “Company,” “we,” “our” and
“us” refer to Pineapple Energy Inc., a Minnesota corporation.
Company
Overview
Our vision
is to power the energy transition through grass-roots growth of solar electricity paired with battery storage. We are a growing
domestic operator and consolidator of residential and commercial solar, battery storage, and grid services solutions. Our strategy
is focused on acquiring, integrating, and growing leading local and regional solar, storage, and energy services companies nationwide.
Today,
we are primarily engaged in the sale, design, and installation of photovoltaic solar energy systems and battery storage systems
through our Hawaii-based Hawaii Energy Connection (“HEC”) and New York-based SUNation (as defined below) entities.
We install systems that provide clean, reliable solar energy typically at savings relative to traditional utility offerings. Our
primary customers are residential homeowners, commercial owners, municipal and institutional customers, as well as owners of pre-existing
photovoltaic and energy storage systems that are in need of service.
Through
our E-Gear, LLC (“E-Gear”) business, we also develop, manufacture, and sell patented technologies related to edge-of-grid
energy management software and related hardware technology, such as energy management control devices. These products allow homeowners
to get the most out of their installed photovoltaic solar energy systems and utility grid support benefits. Our primary customers
for this technology are energy services companies and other utilities.
Corporate
Information
We are currently
a Minnesota corporation organized in 1969 that operates directly and through our subsidiaries located in the United States (“U.S.”).
On October 10, 2024, we filed a definitive proxy statement pursuant to which we have scheduled a special meeting of our shareholders
to be held on November 4, 2024. At this meeting, our shareholders will be voting on three proposals: a proposal to re-domesticate
the Company from Minnesota to Delaware, to change our Company name to SUNation Energy, Inc. and on an adjournment proposal, should
we need to postpone or adjourn this special shareholder meeting for any reason. If our re-domestication proposal is approved,
then we will no longer be a Minnesota corporation, and will instead be a Delaware corporation upon the filing of a certificate
of incorporation with the Secretary of State of the state of Delaware. Our second proposal involves a change to our Company’s
name which, if approved, will be SUNation Energy, Inc. For more information about these proposals, and other information related
thereto, please see our definitive proxy statement filed with the Securities and Exchange Commission, which can be found at www.sec.gov,
as well as any amendments that may be made thereto.
On March
28, 2022, we completed our previously announced merger transaction with Pineapple Energy LLC (“Pineapple Energy”)
in accordance with the terms of that certain Agreement and Plan of Merger dated March 1, 2021, as amended by an Amendment No.
1 to Merger Agreement dated December 16, 2021 (collectively the “merger agreement”), by and among us, Helios Merger
Co., a Delaware corporation and a wholly-owned subsidiary of ours (the “Merger Sub”), Pineapple Energy LLC, a Delaware
limited liability company, Lake Street Solar LLC as the Members’ Representative, and Randall D. Sampson as the Shareholders’
Representative, pursuant to which the Merger Sub merged with and into Pineapple Energy, with Pineapple Energy surviving the merger
as a wholly-owned subsidiary of ours (the “merger”). Following the closing of the merger, we changed our name from
Communications Systems, Inc. to Pineapple Holdings, Inc. and commenced doing business using the Pineapple name, and subsequently,
on April 13, 2022, changed our name to Pineapple Energy Inc.
In addition,
on March 28, 2022 and immediately prior to the closing of the merger, Pineapple Energy completed its acquisition of substantially
all of the assets of two Hawaii-based solar energy companies, HEC and E-Gear. On November 9, 2022, we purchased the equity of
New York-based SUNation Solar Systems, Inc. and five of its affiliated entities (collectively “SUNation”).
Recent
Developments
Minnesota
Lease Termination
On
October 14, 2024, the Company entered into a lease termination agreement with our Minnesota office landlord for the property located
at 10900 Red Circle Drive, Minnetonka, MN 55343, pursuant to which we will pay a termination fee totaling $189,000 to be paid
at $13,500 per month for a period of fourteen (14) months from entry into this lease termination, as well as the Company waiving
its right to its original security deposit provided at entry into the original lease in the amount of $35,434. This lease termination
will result in a net cost savings to the Company of approximately $480,000 over the course of the lease agreement.
Principal
Place of Business
As part
of, and consistent with, our proposed re-domestication of the Company from Minnesota to Delaware, and with the changes in executive
management that have taken place over the course of the past few months, we are in the process of transitioning our principal
place of business from Minnesota to our New York office location located at 171 Remington Boulevard, Ronkonkoma, NY 11779.
Reverse
Stock Split
On July
19, 2024, the Company’s shareholders approved a reverse stock split of the Company’s common stock at a ratio within
a range of 1-for-2 and 1-for-200 and granted the Company’s board of directors the discretion to determine the timing and
ratio of the split within such range.
On October
2, 2024, the Company’s board of directors determined to effectuate the reverse stock split of the common stock at a 1-for-50
ratio (the “Reverse Stock Split”) and approved an amendment (“Reverse Stock Split Amendment”) to the Fourth
Amended and Restated Articles of Incorporation of the Company to effectuate the Reverse Stock Split. Effective October 17, 2024,
the Company amended its Fourth Amended and Restated Articles of Incorporation to implement the Reverse Stock Split. The Company’s
common stock began trading on a split-adjusted basis when the market opened on October 17, 2024 (the “Effective Date”).
The trading symbol for the Company’s common stock will remain “PEGY.” The Company was assigned a new CUSIP number
(72303P404) in connection with the reverse split.
As a result
of the Reverse Stock Split, at 12:01 a.m. Central Time on the Effective Date, every 50 shares of common stock then issued and
outstanding automatically were combined into one share of common stock, with no change in par value per share. No fractional shares
were outstanding following the Reverse Stock Split, and any fractional shares that would have resulted from the Reverse Stock
Split were settled in cash. The number of shares of common stock outstanding was reduced from 67,260,696 to 1,345,214. The total
number of shares authorized for issuance was reduced to 2,666,667 in proportion to the Reverse Stock Split ratio.
Effective
as of the same time as the Reverse Stock Split, the number of shares of common stock available for issuance under the Company’s
equity compensation and incentive plans, shares of common stock issuable upon exercise or vesting of equity awards, exercise of
any outstanding warrants, any outstanding shares of preferred stock, SUNation inducement shares and applicable portions of convertible
debt were automatically reduced in proportion to the Reverse Stock Split ratio and caused a proportionate increase in exercise
price or share-based performance criteria, if any, applicable to such awards, convertible or exercisable securities.
As more
fully described on our Current Report on Form 8-K, dated October 4, 2024, we received a notification from Nasdaq’s Listing
Qualifications Department (the “Staff”) of The Nasdaq Stock Market informing us that for the 30 consecutive business
days through September 30, 2024, the Company’s common stock had not maintained a minimum closing bid price of $1.00 per
share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Minimum Bid
Price Requirement”). Accordingly, in response to and in compliance with the October 1, 2024 Staff letter, we have filed
an appeal on October 8, 2024 with the Nasdaq hearing panel, which automatically stays any suspension or delisting action pending
the hearing.
In relevant
part, to this end, the board of directors of the Company determined to effectuate the stockholder approved stock split (noted
above) on a 1-50 ratio, which has increased our price per common share above the Minimum Bid Price Requirement in the immediate
term. In the event that the Company regains compliance with the Minimum Bid Price Requirement for a sufficient period of time
prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out of the hearings process
altogether.
Decathlon
and Hercules Loan Amendment
Effective
September 20, 2024, the Company entered into a third amendment to the Loan and Security Agreement, dated as of December 11, 2020,
by and between Pineapple Energy LLC as Borrower and Hercules Capital, Inc. (“Hercules”) as lender and agent (as amended,
the “Loan Agreement”) with Hercules (the “Third Amendment”). Pursuant to, and subject to the terms and
conditions of, the Third Amendment, Hercules waived the payment of outstanding principal due and payable on October 1, 2024 pursuant
to Section 2.1(c) of the Loan Agreement, effective September 20, 2024. Notwithstanding this waiver, Pineapple Energy LLC will
continue to make payment of monthly interest due and payable on October 1, 2024, and will resume making regular monthly payments
of principal on November 1, 2024, in each case, pursuant to Section 2.1(c) of the Loan Agreement.
Effective
September 12, 2024, Decathlon Growth Credit, LLC (as assignee of Decathlon Specialty Finance, LLC (“Decathlon”)) entered
into a Second Amendment (the “Second Amendment”) with respect to the Revenue Loan and Security Agreement dated June
1, 2023 among Decathlon (as lender), the Company (as borrower), and Pineapple Energy LLC, SUNation Solar Systems, Inc., SUNation
Commercial, Inc., SUNation Service, LLC, SUNation Roofing, LLC and SUNation Energy, LLC (as guarantors) (the “Decathlon
Agreement”) with the Company and the guarantors. Pursuant to the Second Amendment, Decathlon consented to the Company making
its monthly payment under the Decathlon Agreement that was originally due on September 15, 2024 by or before October 15, 2024,
which was made on September 30, 2024, and the payment due on October 15, 2024, may be made on or by October 31, 2024.
Conduit
Agreement
As previously
disclosed, on July 22, 2024, Pineapple Energy Inc. (the “Company”) obtained bridge loan financing for working capital
purposes from Conduit Capital U.S. Holdings LLC (“Conduit”), an unaffiliated lender. On such date, Conduit loaned
the principal sum of $500,000 to the Company on an original issue (“OID”) basis of 20% and accordingly, Conduit advanced
$400,000 to the Company (the “Initial Conduit Loan”). The Initial Conduit Loan will accrue interest on the unpaid
principal amount, without deduction for the OID, at an annual rate of 20%. Commencing on October 21, 2024 through and including
July 21, 2025 (the “Maturity Date”), the Company may request that Conduit provide additional advances for working
capital on identical terms, conditions and interest rate as the Initial Conduit Loan on an OID basis, up to an aggregate principal
sum of $500,000, and Conduit shall have the right, without commitment or obligation to make such requested loan(s) by advancing
80% of the principal thereof. All such loans are secured by a pledge of all of the Company’s assets. The agreement was evidenced
by the Secured Credit Agreement, dated July 22, 2024, between the Company and Conduit and the Secured Credit Note, dated July
22, 2024, between the Company and Conduit (the “Original Note”).
On September
9, 2024, the Company and Conduit entered into an Amended and Restated Convertible Secured Note (the “First Amended Note”)
which amended the Original Note, which provides for an additional principal advance of $120,000 (the “Second Advance”).
The First Amended Note also provides that Conduit may convert all or any portion of the Second Advance and all accrued but unpaid
interest thereon into a number of shares (the “Note Conversion Shares”) of the Company’s common stock, par value
$0.05 per share (the “Common Stock”), calculated as the total dollar amount to be converted divided by $22.50 (the
“Conversion Price”).
On September
23, 2024, the Company and Conduit entered into a further amended and restated convertible secured credit note (the “Second
Amended Note”), which amends and restates the First Amended Note. Under the terms of the Second Amended Note, Conduit loaned
an additional principal sum of $380,000 to the Company (the “Third Advance”) on an OID basis of 20%. Additionally,
pursuant to the Second Amended Note, Conduit was granted a demand registration right, which is in addition to the piggyback registration
rights set forth in the First Amended Note, which registration rights are inclusive of all convertible shares issuable for the
Second Advance and Third Advance, if converted; however, all out of pocket costs and expenses incurred in connection with this
demand registration right shall borne by Conduit. The Third Advance, together with all accrued but unpaid interest thereon, are
convertible into shares of Common Stock at the Conversion Price.
Share
Exchange
On
September 9, 2024, the Company entered into a Securities Exchange Agreement with the holders of the Series A Preferred Stock and
Warrants to cancel and retire the Series A Preferred Stock and the Warrants in exchange for shares of Series
C Convertible Preferred Stock of the Company (the “Series C Preferred Stock”), convertible
at the conversion price of $22.50 per share (post reverse split) for up to an aggregate of 1,246,262 shares (post reverse split)
of Common Stock (the “Exchange”). The Series C Preferred Stock does not contain any of the price resets set forth
in the Series A Preferred Stock, except in the case of stock splits, recapitalizations and similar transactions by the Company.
The Exchange transaction closed on September 10, 2024.
Quarterly
Financial Update
We have
not finalized our financial statements for the quarter ended September 30, 2024. Based upon our current preliminary estimates
and information available to us as of the date of this prospectus supplement, we expect to report that we generated net sales
of approximately $14.0-$15.0 million for the quarter ended September 30, 2024.
In addition,
we expect to report that we had net cash, cash equivalents and restricted cash of approximately $2.2 million as of September 30,
2024.
The estimates
of our net sales for the quarter ended September 30, 2024 and our cash and cash equivalents as of September 30, 2024 are preliminary
and actual amounts that we report will be subject to our financial closing procedures and any final adjustments that may be made
prior to the time that our financial results for the year ended September 30, 2024 are finalized and filed with the Securities
and Exchange Commission. The preliminary financial information included herein has been prepared by and is the responsibility
of our management. UHY LLP has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary
financial information and does not express an opinion or any other form of assurance with respect thereto. As we complete our
financial closing procedures and finalize our financial results for the nine-months ended September 30, 2024, we will be required
to make significant judgments in a number of areas. While we are currently unaware of any items that would require us to make
adjustments to the financial information set forth above, it is possible that we may identify such items and that any resulting
changes could be material. Accordingly, undue reliance should not be placed on these preliminary estimates. These preliminary
estimates are not necessarily indicative of any future period and should be read together with “Risk Factors, and our financial
statements and related notes included elsewhere or incorporated by reference in this prospectus supplement and the accompanying
prospectus.
The foregoing
summary of recent developments is not complete and is not intended to be comprehensive. For additional material information about
the Company, our business, operations, board, management and risk factors and more, all of which are incorporated by reference
into this prospectus supplement, you should carefully review our annual report on Form 10-K, our quarterly reports on Form 10-Q,
our Current Reports on Form 8-K and our proxy statements filed on Form 14A, in each case as amended and supplemented. You may
obtain copies of those documents as described below under the heading “Where You Can Find More Information” and “Incorporation
of Certain Information by Reference” in this prospectus supplement.
THE OFFERING
| Issuer |
|
Pineapple
Energy Inc. |
| |
|
|
| Common
Stock offered by us |
|
Shares
of our Common Stock having an aggregate offering price of up to $10,000,000 |
| |
|
|
| Common
Stock to be outstanding after this Offering(1) |
|
Up
to 2,555,685 shares, after giving effect to the assumed sale of 1,210,471 shares of our Common Stock, which, at a price of
$5.51 per share, which was the closing price of our Common Stock on the Nasdaq Capital Market on October 17, 2024, would be
the maximum amount of shares of Common Stock available for issuance (after giving effect to the reservation of 1,456,196 shares
of Common Stock for issuance pursuant to outstanding securities, debt and equity incentive and compensation plans as of October
17, 2024 (as more set forth in the table below). The actual number of shares issuable in this Offering is limited by the number
of authorized shares of Common Stock under our Articles of Incorporation (2,666,667), unless and until our proposal to redomesticate
to the State of Delaware is approved by our stockholders in accordance with the definitive proxy statement, dated October
10, 2024, together with the Delaware certificate of incorporation included therein; and which will also depend on the price
at which shares are sold from time to time during this offering |
| |
|
|
| Form
of Offering |
|
At
the market offering” of our Common Stock that may be made from time to time through or to the Sales Agent, as agent
or principal. See “Plan of Distribution” on page S-16 of this
prospectus supplement |
| |
|
|
| Nasdaq
Capital Market symbol |
|
PEGY |
| |
|
|
| Use
of proceeds |
|
We
currently intend to use the net proceeds from this offering under this prospectus supplement for working capital and general
corporate purposes. See “Use of Proceeds” on page S-15 of this
prospectus supplement. |
| |
|
|
| Risk
Factors |
|
See
“Risk Factors” on page S-10 and the other information included
or incorporated by reference in this prospectus supplement and the accompanying prospectus for a discussion of certain factors
you should carefully consider before deciding to invest in shares of our Common. |
The
number of shares of Common Stock to be outstanding after this offering, as reflected above, is based on 1,345,214 shares of Common
Stock outstanding at October 17, 2024 (as adjusted for the reverse stock split which became effective on October 17, 2024) and
excludes the following:
| |
● |
75,521
shares of Common Stock issuable upon conversion of Series C Convertible Preferred Stock shares outstanding at a conversion
price of $22.50 per share |
| |
● |
12,719
shares of Common Stock issuable pursuant to our 2022 Equity Incentive Plan |
| |
● |
400
shares of Common Stock issuable pursuant to our 2022 Employee Stock Purchase Plan |
| |
● |
120
shares of Common Stock issuable pursuant to our SUNation Inducement Grants |
| |
● |
22,222
shares of Common Stock issuable pursuant to conversion of existing convertible debt |
Except as otherwise
indicated, all information in this prospectus supplement gives effect to a 1-for-50 reverse stock split of our Common Stock, which
became effective as of October 17, 2024. However, share and per share amounts in the accompanying prospectus and certain of the
documents incorporated by reference herein prior to October 17, 2024, have not been adjusted to give effect to the reverse stock
split.
RISK FACTORS
You
should carefully consider the risks described below before making an investment decision. The risks described below are not the
only ones we face, and are in addition to the risk factors set forth in our annual report on Form 10-K and in our quarterly reports
on Form 10-Q. Additional risks we are not presently aware of or that we currently believe are immaterial or very preliminary may
also impair our business operations, financial condition or results of operations. Our business, financial condition or results
of operations could be harmed by any of these risks. The trading price of our Common Stock could decline due to any of these risks,
and you may lose all or part of your investment. In assessing these risks, you should also refer to the risk factors and other
information contained or incorporated by reference into this prospectus supplement and the accompanying prospectus, specifically
including the risk factors contained in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as filed
with the SEC, which are incorporated in this prospectus by reference in their entirety, as well as any amendment or updates to
our risk factors reflected in subsequent filings with the SEC, including any free writing prospectus that we may authorize for
use in connection with this offering.
Risks
Related to This Offering
Management
will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
Our
management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in
ways that do not improve our results of operations or enhance the value of our Common Stock. Our failure to apply these funds
effectively could have a material adverse effect on our business and cause the price of our Common Stock to decline.
The Common Stock offered
hereby will be sold in “at the market offerings,” and investors who buy shares at different times will likely pay
different prices.
Investors
who purchase shares in this offering at different times will likely pay different prices, and so may experience different outcomes
in their investment results. We will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares
sold, and there is no minimum or maximum sales price. Investors may experience a decline in the value of their shares as a result
of share sales made at prices lower than the prices they paid.
You
may experience future dilution as a result of future equity offerings and other issuances of our Common Stock or other securities,
including securities that are exercisable for or convertible into Common Stock. In addition, this offering and future equity offerings
and other issuances of our Common Stock or other securities may adversely affect our Common Stock price.
In
order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible
into or exchangeable for our Common Stock at prices that may not be the same as the price per share in this offering. We may not
be able to sell shares or other securities in any other offering at a price per share that is equal to or greater than the price
per share paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights
superior to existing stockholders. The price per share at which we sell additional shares of our Common Stock or securities convertible
into Common Stock in future transactions may be higher or lower than the price per share in this offering. You will incur dilution
upon exercise of any outstanding stock options, warrants or upon the issuance of shares of Common Stock under our stock incentive
programs. In addition, the sale of shares in this offering and any future sales of a substantial number of shares of our Common
Stock in the public market, or the perception that such sales may occur, could adversely affect the price of our Common Stock.
We cannot predict the effect, if any, that market sales of those shares of Common Stock or the availability of those shares of
Common Stock for sale will have on the market price of our Common Stock.
You
may experience immediate and substantial dilution in the book value per share of the Common Stock you purchase.
Because
the price per share of our Common Stock being offered is substantially higher than the as adjusted net tangible book value per
share of our Common Stock, you may suffer immediate and substantial dilution with respect to the net tangible book value of the
Common Stock you purchase in this offering. After giving effect to the sale of 1,210,471 shares of Common Stock at an assumed
price of $5.51 per share, and after deducting the estimated offering-related expenses payable by us, our as adjusted net tangible
book value as of June 30, 2024 would have been approximately $(25.1) million, or $(18.53) per share. This amount represents an
immediate increase in the adjusted net tangible book value of $24.04 per share to investors purchasing shares of our Common Stock
in this offering. See “Dilution” for a more detailed discussion of the dilution you may incur in connection with this
offering.
Sales of a substantial
number of our shares of Common Stock in the public market could cause our stock price to fall.
We may issue
and sell additional shares of Common Stock in the public markets, including during this offering. As a result, a substantial number
of shares of our Common Stock may be sold in the public market. Sales of a substantial number of shares of our Common Stock in
the public markets, including during this offering, or the perception that such sales could occur, could depress the market price
of our Common Stock and impair our ability to raise capital through the sale of additional equity securities.
An
active trading market for our Common Stock may not be sustained.
Although
our Common Stock is listed on The Nasdaq Capital Market, the market for our Common Stock has demonstrated varying levels of trading
activity. Furthermore, the current level of trading may not be sustained in the future. The lack of an active market for our Common
Stock may impair investors’ ability to sell their shares at the time they wish to sell them or at a price that they consider
reasonable, may reduce the fair market value of their shares and may impair our ability to raise capital to continue to fund operations
by selling shares and may impair our ability to acquire additional intellectual property assets by using our shares as consideration.
The exercise of our outstanding
options, warrants and settlement of our outstanding convertible notes will dilute stockholders and could decrease our stock price.
The exercise
of our outstanding options, warrants and the settlement of our outstanding convertible notes may adversely affect our stock price
due to sales of a large number of shares or the perception that such sales could occur. These factors also could make it more
difficult to raise funds through future offerings of our securities, and could adversely impact the terms under which we could
obtain additional equity capital. Exercise of outstanding options, warrants and the settlement of our outstanding convertible
notes or any future issuance of additional shares of Common Stock or other equity securities, including but not limited to options,
warrants, restricted stock units or other derivative securities convertible into our Common Stock, may result in significant dilution
to our stockholders and may decrease our stock price.
The actual number of shares
we will issue under the Sales Agreement, at any one time or in total, is uncertain.
Subject
to certain limitations in the Sales Agreement and compliance with applicable law, we have the discretion to deliver a sales notice
to the Sales Agent at any time throughout the term of the Sales Agreement. The number of shares that are sold by the Sales Agent
after delivery of a sales notice will fluctuate based on the market price of the Common Stock during the sales period and limits
we set with the Sales Agent. Because the price per share of each share sold will fluctuate based on the market price of our Common
Stock during the sales period, it is not possible at this stage to predict the number of shares that will ultimately be issued.
In addition, dependent upon our per share stock price, we may not have a sufficient number of authorized shares to sell up to
the maximum dollar amount under the Sales Agreement. If this were to occur, may be faced with limited options to finance certain
operations, to pay debt or expand operations or acquire entities in roll-up transactions involving our equity.
Our
stock price may be subject to substantial volatility, and stockholders may lose all or a substantial part of their investment.
Our
Common Stock currently trades on The Nasdaq Capital Market. There is limited public float, and trading volume historically has
been low and sporadic. As a result, the market price for our Common Stock may not necessarily be a reliable indicator of our fair
market value. The price at which our Common Stock trades may fluctuate as a result of a number of factors, including the number
of shares available for sale in the market, quarterly variations in our operating results, actual or anticipated announcements
of new releases by us or competitors, the gain or loss of significant customers, changes in the estimates of our operating performance,
market conditions in our industry and the economy as a whole.
Because
we do not anticipate paying any cash dividends on our Common Stock in the foreseeable future, capital appreciation, if any, will
be your sole source of gain.
We
have never paid or declared any cash dividends on our Common Stock. We currently intend to retain earnings, if any, to finance
the growth and development of our business and we do not anticipate paying any cash dividends in the foreseeable future. As a
result, only appreciation of the price of our Common Stock will provide a return to our stockholders.
Our
failure to maintain compliance with the Nasdaq Stock Market’s continued listing requirements could result in the delisting
of our common stock.
Our
common stock is currently listed on The Nasdaq Capital Market. In order to maintain this listing, we must satisfy minimum financial
and other requirements. On October 1, 2024, we received a letter (the “Minimum Bid Price Deficiency Letter”) from
the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) notifying the
Company that, for the 30 consecutive business day period from August 16 through September 30, 2024, the Company’s common
stock had not maintained a minimum closing bid price of $1.00 per share (the “Minimum Bid Price Requirement”) required
for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2).
Pursuant
to the previously disclosed Nasdaq hearing panel decision, dated July 18, 2024, the Company was subject to a mandatory panel monitor
(“Panel”) under Nasdaq’s listing Rule 5815(d)(4)(B) for a period of one year. Accordingly, due to the most recent
minimum bid price deficiency, the Staff notified the Company that it will not be afforded a 180-day cure period (as we had received
for our prior minimum bid price deficiency). Instead, the Company was offered an opportunity to appeal any deficiency related
to a delisting determination to Nasdaq by or before October 8, 2024, which appeal we timely filed on October 8, 2024.
The
hearing request automatically stays any suspension or delisting action pending the hearing and the expiration of any additional
extension period if granted by the Panel following the hearing. In the event that the Company regains compliance with the Minimum
Bid Price Requirement prior to any scheduled hearing date, then a hearing may not be necessary, as the Company may be mooted out
of the hearings process.
To
this end, the stockholders of the Company had approved a share consolidation on July 19, 2024, pursuant to which the board of
directors of the Company has effectuated a 1-50 reverse stock split on October 17, 2024 in relevant part to resolve the above
noted Nasdaq listing compliance deficiency prior to such hearing date. There can be no assurance that the Panel will grant the
Company an additional extension period or that the Company will ultimately regain compliance with all applicable requirements
for continued listing on The Nasdaq Capital Market.
The
perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading
volume of our common stock. If our common stock is delisted from Nasdaq, the delisting could: substantially decrease trading in
our common stock; adversely affect the market liquidity of our common stock as a result of the loss of market efficiencies associated
with Nasdaq and the loss of federal preemption of state securities laws; adversely affect our ability to issue additional securities
or obtain additional financing in the future on acceptable terms, if at all; result in the potential loss of confidence by investors,
suppliers, partners and employees and fewer business development opportunities; and result in limited analyst interest. Additionally,
the market price of our common stock may decline further, and shareholders may lose some or all of their investment.
Changes
in our business strategy or restructuring of our businesses may increase our costs or otherwise affect our businesses.
We
continually review our operations with a view toward reducing our cost structure, including, but not limited to, reducing our
labor cost-to-revenue ratio, improving process and system efficiencies and increasing our revenues and operating margins. Despite
these efforts, we have needed and may continue to need to adjust our business strategies to meet these changes, or we may otherwise
find it necessary to restructure our operations or particular businesses or assets. When these changes or events occur, we may
incur costs to change our business strategy and may need to write down the value of assets or sell certain assets. Additionally,
any of these events could result in disruptions or adversely impact our relationships with our workforce, suppliers and customers.
In any of these events our costs may increase, and we may have significant charges or losses associated with the write-down or
divestiture of assets and our business may be materially and adversely affected.
We
may not fully realize the anticipated benefits from our restructuring efforts.
In
regard to our realigned strategy and exploration of strategic alternatives, we may not achieve the expected benefits of such activities.
Our ability to achieve the anticipated cost savings and other benefits from our restructuring, or other efforts within expected
time frames is subject to many estimates and assumptions, and may vary materially based on factors such as market conditions and
the effect of our efforts on our work force. These estimates and assumptions are subject to significant economic, competitive
and other uncertainties, some of which are beyond our control. There can be no assurance that we will fully realize the anticipated
positive impacts to our operations, liquidity or future financial results from our current or future efforts. If our estimates
and assumptions are incorrect or if other unforeseen events occur, we may not achieve the cost savings expected from such strategic
alternative efforts, and our business and results of operations could be adversely affected.
We
have significant obligations under payables and debt obligations and other contracts. Our ability to operate as a going concern
are contingent upon successfully obtaining additional financing and/or renegotiating terms of selected existing indebtedness in
the near future. Failure to do so could adversely affect our ability to continue or successfully grow our operations.
If
capital is not available or we are not able to agree on reasonable terms with our lenders or creditors, we may then need to scale
back or postpone our organic growth plans, reduce expenses, and/or curtail future acquisition plans to manage our liquidity and
capital resources. From time to time, we receive claims for significant monetary damages, penalties, or seeking additional securities.
Such claims, if material, and if accurate, can place significant pressure on our financials, cashflow, operations and place a
strain on management’s time and focus, each of which could result in a material adverse event in relation to our operations
and future prospects. Additionally, as a result of certain prior securities offerings involving convertible or exercisable securities
containing anti-dilution provisions that provided for significant per share price reset features, causing more shares to be issued
than initially anticipated, we have faced periods of time where we were ultimately required to seek shareholder approval to increase
our authorized share capital, in large measure to satisfy the conversion, exercise, exchange or delivery of such shares, which
is a time consuming and costly approval processes. While we have ultimately satisfied our delivery obligations, including the
issuance of shares under these securities, failing to satisfy or timely satisfy such contractual obligations could lead to material
financial claims, and if proven accurate, could subject us to substantial financial penalties and damages, potentially materially
impacting the Company’s financial stability, interrupt operations and cause reputational harm. For example, we have informally
received a financial claim alleging liquidated damages, which we have begun to investigate. If such preliminary claim is ultimately
found accurate or substantial, we may not be able timely pay, finance, refinance or otherwise extend or repay our past, current
or future obligations if and as they arise, which could materially impact our ability to continue to operate as a going concern.
We
need to obtain substantial additional financing arrangements to provide working capital and growth capital. If financing is not
available to us on acceptable terms when needed, our ability to continue to fund our operations and grow our business would be
materially adversely impacted.
Distributed
solar power is a capital-intensive business that relies heavily on the availability of debt and equity financing sources to fund
solar energy system purchase, design, engineering and other capital and operational expenditures. Our future success depends in
part on our ability to raise capital from third-party investors and commercial sources, such as banks and other lenders, on competitive
terms to help finance the deployment of our solar energy systems. We seek to minimize our cost of capital in order to improve
profitability and maintain the price competitiveness of the electricity produced by the payments for and the cost of our solar
energy systems. We rely on access to capital, including through equity financing, convertible notes, revenue loans and other forms
of debt facilities, asset-backed securities and loan-backed securities, to cover the costs related to bringing our solar energy
systems in service.
To
meet the capital and liquidity needs of our business, we will need to obtain additional debt or equity financing from current
and new investors. We have limited cash resources with which to operate our business and we may have difficulty in accessing financing
on a timely basis or at all. The contract terms in certain of our existing investment and securities documents contain various
conditions, penalty and liquidated damages clauses. If we are not able to satisfy such conditions due to events related to our
business, a specific investment fund, developments in our industry, including tax or regulatory changes, or otherwise, and as
a result, we are unable to draw on existing funding commitments or raise capital through equity, equity derivative or debt instruments,
we could experience a material adverse effect on our business, liquidity, financial condition, results of operations and prospects.
Any delays in accessing financing could have an adverse effect on our ability to pay our operational expenses, make capital expenditures,
repay loans and fund other general corporate purposes. Further, our flexibility in planning for and reacting to changes in our
business may be limited and our vulnerability to adverse changes in general economic, industry, regulatory and competitive conditions
may be increased.
If
any of our current debt or equity investors decide not to invest in us in the future for any reason or decide to invest at levels
inadequate to support our anticipated needs or materially change the terms under which they are willing to provide future financing,
we will need to identify new investors and financial institutions to provide financing and negotiate new financing terms. In addition,
our ability to obtain additional financing through the asset-backed securities market, loan-backed securities market or other
secured debt markets is subject to our having sufficient assets eligible for securitization as well as our ability to obtain appropriate
credit ratings. If we are unable to raise additional capital in a timely manner, our ability to meet our capital needs and fund
future growth and profitability may be limited.
Delays
in obtaining financing could cause delays in expansion in existing markets or entering into new markets and hiring additional
personnel. Any future delays in capital raising could similarly cause us to delay deployment of a substantial number of solar
energy systems for which we have signed solar service agreements with customers. Our future ability to obtain additional financing
depends on banks’ and other financing sources’ continued confidence in our business model and the renewable energy
industry as a whole. It could also be impacted by the liquidity needs of such financing sources themselves. We face intense competition
from a variety of other companies, technologies and financing structures for such limited investment capital. If we are unable
to continue to offer a competitive investment profile, we may lose access to these funds or they may only be available to us on
terms less favorable than those received by our competitors. Any inability to secure financing could lead us to cancel planned
installations, impair our ability to accept new customers or increase our borrowing costs, any of which could have a material
adverse effect on our business, financial condition and results of operations.
Litigation
brought by third parties claiming breach of contract, contractual defaults or other claims for may be costly and time consuming.
Although
we may, from time to time, be involved in litigation and government proceedings, as well as contractual financial claims arising
in the course of business, we are not a party to any litigation or governmental or other proceeding that we believe will have
a material adverse impact on our financial position, results of operations or liquidity. These claims have in the past, and may
in the future, arise from a wide variety of business practices and initiatives, including current or new product releases, significant
business transactions, securities offerings, convertible notes, warrants, loans, warranty or product claims, employment practices,
and regulation, among other matters. Adverse outcomes in some or all of these claims may result in significant monetary damages
or injunctive relief that could adversely affect our ability to conduct our business. Litigation threatened litigation and other
claims are subject to inherent uncertainties and management’s view of these matters may change in the future. A material
adverse impact in our consolidated financial statements could occur for the period in which the effect of an unfavorable outcome
becomes probable and reasonably estimable.
If
we become involved in material litigation or a significant number of litigations, we may incur substantial expense defending these
claims and the proceedings may divert the attention of management, even if we prevail. An adverse outcome could have a material
adverse impact on our business, including causing us to seek protection under the bankruptcy laws, forcing us to reduce or discontinue
our operations entirely, subject us to significant liabilities, allow our competitors to market competitive products without a
license from us, prohibit us from marketing our products or require us to seek licenses from third parties that may not be available
on commercially reasonable terms, if at all. If a judgment is entered against us, and we are unable to satisfy the judgment, a
plaintiff may attempt to levy on our assets. We may be forced to sell material assets to satisfy such judgment, which may, in
turn, force us to reduce or discontinue our operations.
USE OF
PROCEEDS
We
may issue and sell shares of our Common Stock having an aggregate gross offering price of up to $10,000,000 from time to time
using this prospectus supplement. The amount of proceeds we will receive from this offering, if any, will depend upon the number
of shares of Common Stock sold and the market price at which they are sold. Because there is no minimum offering amount required
as a condition to this offering, the actual total offering amount, commissions and proceeds to us, if any, are not determinable
at this time. There can be no assurance that we will be able to sell any shares under or fully utilize the Sales Agreement with
the Sales Agent.
We
currently intend to use the net proceeds from the sale of the securities offered under this prospectus supplement for working
capital and general corporate purposes. Although we may use a portion of the net proceeds of this offering for the acquisition
or licensing, as the case may be, of additional technologies, other assets or businesses, to repay certain debt obligations, if
triggered, or for other strategic investments or opportunities, we have no current understandings, agreements or commitments to
do so.
Our
management will have broad discretion in the application of the net proceeds from this offering and could use them for purposes
other than those contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management
chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that
may not positively impact our results of operations or increase the market value of our Common Stock. Pending any use, as described
above, we plan to deposit the net proceeds in money market or similar interest-bearing accounts with our primary bank or otherwise
invest the net proceeds in high-quality, short-term, interest-bearing securities.
DILUTION
If
you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the public offering
price per share and the as adjusted net tangible book value per share after this offering. The net tangible book value of our
common stock on June 30, 2024, was approximately $(29.4) million, or approximately $(202.88) per share of common stock on a post
1-for-50 reverse stock split adjusted basis. We calculate net tangible book value per share by dividing the net tangible book
value, which is tangible assets less total liabilities, by the number of outstanding shares of our common stock. Dilution with
respect to net tangible book value per share represents the difference between the amount per share paid by purchasers of shares
of common stock in this offering and the as adjusted net tangible book value per share of our common stock immediately after this
offering.
After
giving effect to an assumed sale of 544,465 shares of our common stock pursuant to this prospectus supplement and the accompanying
prospectus in the aggregate amount of approximately $3 million at an assumed price of $5.51 per share, and after deducting commissions
and estimated offering expenses payable by us (estimated at $300,000), our as adjusted net tangible book value as of June 30,
2024 would have been approximately $(26.7) million, or approximately $(38.72) per share on a post 1-for-50 reverse stock split
adjusted basis. This represents an immediate increase in net tangible book value of approximately $164.16 per share of common
stock to our existing stockholders and an immediate dilution in net tangible book value of approximately $44.23 per share to purchasers
of our common stock in this offering, as illustrated by the following table:
| Assumed Public offering price per share |
|
|
$5.51 |
| Historical net tangible book value per share as of June 30, 2024 |
|
$(202.88) |
|
| Increase in net tangible book value per share after giving effect to this offering |
|
$164.16 |
|
| As adjusted net tangible book value per share after this offering |
|
|
$(38.72) |
| Dilution per share to new investors in this offering |
|
|
$44.23 |
Based
on 144,865 shares of common stock outstanding as of June 30, 2024. This information
is supplied for illustrative purposes only, and will adjust based on the actual offering prices, the actual number of shares that
we offer and sell in this offering and other terms of each sale of shares in this offering.
Except
as otherwise indicated, all information in this Dilution section gives effect to the Company’s 1-for-50 reverse stock split
of its Common Stock, which became effective as of October 17, 2024.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do
not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at
the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial
condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors
that our Board of Directors may deem relevant. In addition, the terms of our revolving credit facility place certain limitations
on the amount of cash dividends we can pay, even if no amounts are currently outstanding.
PLAN OF
DISTRIBUTION
We previously
entered into the Sales Agreement with Roth Capital Partners, LLC, under which we may issue and sell shares of our Common Stock
having an aggregate offering price of up to $10,000,000 from time to time through or to the Sales Agent, as agent or principal.
The Sales
Agreement provides that sales of our Common Stock, if any, under this prospectus supplement may be made in sales deemed to be
“at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act.
The Sales
Agent will offer shares of our Common Stock at prevailing market prices subject to the terms and conditions of the Sales Agreement
as agreed upon by us and the Sales Agent. We will designate the number of shares which we desire to sell, the time period during
which sales are requested to be made, any limitation on the number of shares that may be sold in one day and any minimum price
below which sales may not be made. Subject to the terms and conditions of the Sales Agreement, the Sales Agent will use its commercially
reasonable efforts consistent with its normal trading and sales practices and applicable laws and regulations to sell on our behalf
all of the shares requested to be sold by us. We or the Sales Agent may suspend the offering of the shares of Common Stock being
made through the Sales Agent under the Sales Agreement at any time upon proper notice to the other party.
Settlement
for sales of Common Stock will occur on the first trading day, or any such shorter settlement cycle as may be in effect under
Exchange Act Rule 15c6-1 from time to time, following the date on which any sales are made, or on some other date that is agreed
upon by us and the Sales Agent in connection with a particular transaction, in return for payment of the net proceeds to us. Sales
of shares of our Common Stock as contemplated in this prospectus supplement and the accompanying base prospectus will be settled
through the facilities of The Depository Trust Company or by such other means as we and the Sales Agent may agree upon. There
is no arrangement for funds to be received in an escrow, trust or similar arrangement.
We will
pay the Sales Agent a commission in an amount up to 3.0% of the gross sales price of the shares of our Common Stock that the Sales
Agent sells pursuant to the Sales Agreement. Because there is no minimum offering amount required as a condition to this offering,
the actual total offering amount, commissions and proceeds to us, if any, are not determinable at this time. Pursuant to the terms
of the Sales Agreement, we agreed to reimburse the Sales Agent for the documented fees and costs of its legal counsel reasonably
incurred in connection with entering into the transactions contemplated by the Sales Agreement in an amount not to exceed $50,000
in the aggregate. We will report at least quarterly the number of shares of our Common Stock sold through the Sales Agent under
the Sales Agreement, the net proceeds to us and the compensation paid by us to the Sales Agent in connection with the sales of
shares of our Common Stock.
In connection
with the sales of shares of our Common Stock on our behalf, the Sales Agent will be deemed to be an “underwriter”
within the meaning of the Securities Act, and the compensation paid to the Sales Agent will be deemed to be underwriting commissions
or discounts. We have agreed in the Sales Agreement to provide indemnification and contribution to the Sales Agent with respect
to certain liabilities, including liabilities under the Securities Act.
The offering
of shares of our Common Stock pursuant to this prospectus supplement will terminate upon the earlier of the sale of all of the
shares of our Common Stock provided for in this prospectus supplement or termination of the Sales Agreement as permitted therein.
To the extent
required by Regulation M, the Sales Agent will not engage in any market making activities involving our Common Stock while the
offering is ongoing under this prospectus supplement.
The Sales
Agent and certain of its affiliates may in the future engage in investment banking and other commercial dealings in the ordinary
course of business with us or our affiliates. The Sales Agent and its affiliates may in the future receive customary fees and
expenses for these transactions. In addition, in the ordinary course of its various business activities, the Sales Agent and its
affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative
securities) and financial instruments (which may include bank loans) for its own account and for the accounts of its customers.
Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The Sales Agent
or its affiliates may also make investment recommendations and/or publish or express independent research views in respect of
such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions
in such securities and instruments.
This prospectus
supplement and the accompanying base prospectus may be made available in electronic format on a website maintained by the Sales
Agent, and the Sales Agent may distribute this prospectus supplement and the accompanying base prospectus electronically.
The foregoing
does not purport to be a complete statement of the terms and conditions of the Sales Agreement. A copy of the Sales Agreement
is included as an exhibit to our Current Report on Form 8-K, filed with the SEC on October 21, 2024, which is incorporated by
reference herein.
LEGAL
MATTERS
The
validity of the securities offered hereby will be passed upon for us by Rimon P.C. Certain legal matters with respect to this
offering will be passed upon for the Sales Agent by Ellenoff Grossman & Schole LLP, New York, New York.
EXPERTS
The
consolidated balance sheets of the Company and its subsidiaries as of December 31, 2023 and the related consolidated statements
of operations and comprehensive loss, stockholders’ equity, and cash flows for the year then ended have been audited by
UHY LLP, independent registered public accounting firm, as stated in their report which is incorporated herein, which report includes
an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going
concern. Such financial statements are incorporated herein in reliance on the report of such firm given upon their authority as
experts in accounting and auditing. The consolidated balance sheets of the Company and its subsidiaries as of December 31, 2022
and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the
year then ended have been audited by Baker Tilly US, LLP, independent registered public accounting firm, as stated in their report
which is incorporated herein. Such financial statements are incorporated herein in reliance on the report of such firm given upon
their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the information and periodic reporting requirements of the Exchange Act, and we file annual, quarterly, and current
reports, proxy statements and other information with the SEC. We also filed a registration statement on Form S-3, including exhibits,
under the Securities Act with respect to the shares of Common Stock offered by this prospectus supplement. This prospectus supplement
and the accompanying prospectus are a part of the registration statement, but do not contain all of the information included in
the registration statement or the exhibits. The SEC maintains a web site, www.sec.gov, that contains reports, proxy and
information statements and other information regarding issuers that file electronically with the SEC. You may review the registration
statement and any other document we file on the SEC’s web site. Our SEC filings are also available to the public on our
website, https://pineappleenergy.com/. The information on our website, however, is not, and should not be deemed to be,
a part of this prospectus supplement. You may also request a copy of these filings, at no cost, by writing us at 171 Remington
Boulevard, Ronkonkoma, NY 11779, Attention: Corporate Secretary.
We are “incorporating
by reference” specified documents that we file with the SEC, which means:
| ● |
|
incorporated
documents are considered part of this prospectus supplement; |
| |
|
|
| ● |
|
we
are disclosing important information to you by referring you to those documents; and |
| |
|
|
| ● |
|
information
that we file with the SEC will automatically update and supersede information contained in this prospectus supplement. |
We incorporate
by reference into this prospectus supplement the documents listed below and any future filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act (i) after the date of filing of the registration statement of which this prospectus
supplement is a part and prior to the effectiveness of such registration statement, and (ii) on or after the date of this prospectus
supplement until the earlier of the date on which all of the securities registered hereunder have been sold or the registration
statement of which this prospectus supplement is a part has been withdrawn:
INCORPORATION
OF CERTAIN information BY REFERENCE
The
SEC allows us to incorporate by reference the information and reports we file with it, which means that we can disclose important
information to you by referring you to these documents. The information incorporated by reference is an important part of this
prospectus supplement. We are incorporating by reference the documents listed below, which we have already filed with the SEC:
| ● |
|
our
Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on April
1, 2024, as amended on Form 10-K/A, filed with the SEC
on April
29, 2024 |
| ● |
|
our
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2024, filed with the SEC on May
10, 2024,
and June 30, 2024, filed with the SEC on August 19, 2023 |
| ● |
|
our
Current Reports on Form 8-K, filed with the SEC on April
15, 2024, April
22, 2024, May
17, 2024, May
22, 2024, May
22, 2024, May
23, 2024, June
3, 2024, June
17, 2024, July
1, 2024, July
8, 2024, July
25, 2024, July
26, 2024, August
23, 2024, September
4, 2024, September
9, 2024, September
26, 2024, October
4, 2024, October
17, 2024 and October 21, 2024 (other than any portions
thereof deemed furnished and not filed) |
| ● |
|
our
definitive proxy statement on Schedule 14A filed with the SEC on March
6, 2024, as amended on March
29, 2024 and April
8, 2024; definitive proxy statement on Schedule 14A filed
with the SEC on May
29, 2024, as amended on June
12, 2024, June
13, 2024, June
13, 2024, June
24, 2024, June
25, 2024, July
8, 2024 and July
9, 2024; and definitive proxy statement on Schedule 14A
filed with the SEC on October
10, 2024, as amended on October
18, 2024 |
| ● |
|
the
description of our Common Stock contained in our Form 8-A filed with the SEC on December
30, 2009 |
In
addition, all documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering (excluding any information furnished rather than filed) shall be deemed to be incorporated by reference
into this prospectus supplement.
Notwithstanding
the statements in the preceding paragraphs, no document, report or exhibit (or portion of any of the foregoing) or any other information,
including any exhibits under Item 9.01, that we have “furnished “ to the SEC pursuant to the Exchange Act shall be
incorporated by reference into this prospectus.
We
will furnish without charge to you, on written or oral request, a copy of any or all of the documents incorporated by reference
in this prospectus, including exhibits to these documents. You should direct any requests for documents to:
Pineapple
Energy Inc.
171 Remington
Blvd.
Ronkonkoma,
NY 11779
Attention:
Corporate Secretary
Telephone (631) 750 9454
You
also may access these filings on our website at https://pineappleenergy.com/. We do not incorporate the information on our website
into this prospectus or any supplement to this prospectus and you should not consider any information on, or that can be accessed
through, our website as part of this prospectus or any supplement to this prospectus (other than those filings with the SEC that
we specifically incorporate by reference into this prospectus or any supplement to this prospectus).
Any
statement contained in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a statement contained in this prospectus modifies, supersedes
or replaces such statement.
PROSPECTUS
Pineapple
Energy Inc.
$100,000,000
Preferred Stock
Common Stock
Debt Securities
Stock Purchase Contracts
Warrants
Rights
Units
9,411,744 Shares of Common Stock
Offered by the Selling Stockholders
We
may offer and sell, from time to time in one or more offerings, up to $100,000,000 in the aggregate of preferred stock, common stock,
debt securities, stock purchase contracts, warrants, rights and units, in any combination. In addition, the selling stockholders may
offer and sell, from time to time, up to an aggregate of 9,411,744 shares of common stock under this prospectus. We will not receive
any of the proceeds from the sale of shares of our common stock by the selling stockholders.
On September 15, 2021,
we entered into an Amended and Restated Securities Purchase Agreement (the “securities purchase agreement”) with the
selling stockholders for a private placement of our Series A convertible preferred stock and common stock warrants.
The number of shares of common stock offered for sale by the selling stockholders consists of 200% of the 2,352,936
shares of our common stock that may be issued upon conversion, at an initial conversion price of $13.60 per share,
of the Series A convertible preferred stock issued under the securities purchase agreement and 200% of the 2,352,936
shares of our common stock that may be issued, at an initial exercise price of $13.60 per share, upon the exercise
of warrants issued under the securities purchase agreement.
This
prospectus provides you with a general description of the securities that may be offered. Each time either we or any of the
selling stockholders offer and sell securities using this prospectus, we will provide a supplement to this prospectus that contains
specific information about the offering, as well as the amounts, prices and terms of the securities. The supplement may also add, update
or change information contained in this prospectus with respect to that offering. You should carefully read this prospectus and the applicable
prospectus supplement before you invest in any of our securities.
We
may offer and sell the securities described in this prospectus and any prospectus supplement to or through one or more underwriters,
dealers and agents, or directly to purchasers, or through a combination of these methods. In addition, the selling stockholders may
offer and sell shares of our common stock from time to time, together or separately. If any underwriters, dealers or agents are involved
in the sale of any of the securities, their names and any applicable purchase price, fee, commission or discount arrangement between
or among them will be set forth, or will be calculable from the information set forth, in the applicable prospectus supplement. See the
sections of this prospectus entitled “About this Prospectus” and “Plan of Distribution” for more information.
This prospectus may not be used to offer and sell our securities unless accompanied by a prospectus supplement describing the method
and terms of the offering of such securities.
Investing
in our securities involves risks. See “Risk Factors” beginning on page 5 of this prospectus and any similar section
contained in the applicable prospectus supplement concerning factors you should consider before investing in our securities.
Our
common stock is listed on the Nasdaq Capital Market under the symbol “PEGY.” On August 24, 2022 the last reported
sale price of our common stock on the Nasdaq Capital Market was $3.31 per share.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is September 2, 2022.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission, or the SEC, using a “shelf”
registration process. By using a shelf registration statement, we may sell securities described in this prospectus from time to time
and in one or more offerings up to a total dollar amount of $100,000,000, and the selling stockholders may from time to time in one
or more offerings sell up to 9,411,744 shares of our common stock.
Each
time that we offer and sell securities using this prospectus, we will
provide a prospectus supplement to this prospectus that contains specific information about the securities being offered and sold
and the specific terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may
contain material information relating to these offerings. The prospectus supplement may also add, update or change information
contained in this prospectus with respect to that offering. If there is any inconsistency between the information in this prospectus
and the applicable prospectus supplement, you should rely on the prospectus supplement, provided that if any statement in one of
these documents is inconsistent with a statement in another document having a later date - for example, a document incorporated by
reference in this prospectus or any prospectus supplement - the statement in the later- dated document modifies or supersedes the
earlier statement.
The
rules of the SEC allow us to incorporate by reference information into this prospectus. This information incorporated by reference is
considered to be a part of this prospectus, and information that we file later with the SEC, to the extent incorporated by reference,
will automatically update and supersede this information. See “Incorporation of Certain Information by Reference” on page
7 of this prospectus. Before purchasing any securities, you should carefully read both this prospectus and the applicable prospectus
supplement, together with the additional information described under the heading “Where You Can Find More Information” on
page 7 of this prospectus.
Neither
we, nor the selling stockholders, have authorized
any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should
not rely on it. We and the selling stockholders will not make an offer to sell these securities in any jurisdiction where the
offer or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable prospectus supplement
to this prospectus is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate
only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition, results
of operations and prospects may have changed since those dates.
This
prospectus incorporates by reference, and any prospectus supplement or free writing prospectus may contain and incorporate by
reference, certain market and industry data obtained from independent market research, industry publications and surveys, governmental
agencies and publicly available information. Industry surveys, publications and forecasts generally state that the information
contained therein has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness
of such information. We believe the data from such third-party sources to be reliable. However, we have not independently verified
any of such data and cannot guarantee its accuracy or completeness. Similarly, internal market research and industry forecasts,
which we believe to be reliable based upon our management’s knowledge of the market and the industry, have not been verified
by any independent sources. While we are not aware of any misstatements regarding the market or industry data presented herein,
our estimates involve risks and uncertainties and are subject to change based on various factors.
References
in this prospectus to “Pineapple”, “we”, “our”, “us” and the “Company”
refer to Pineapple Energy Inc., a Minnesota corporation, and its subsidiaries.
PROSPECTUS
SUMMARY
This
summary highlights certain information about us and selected information contained elsewhere in or incorporated by reference into
this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding
to invest in our common stock. For a more complete understanding of our company, we encourage you to read and consider carefully
the more detailed information in this prospectus, including the information incorporated by reference in this prospectus, and
the information under the heading “Risk Factors” in this prospectus, beginning on page 5, before making an investment
decision.
Our
Company
Overview
We
are a growing domestic operator and consolidator of residential solar, battery storage, and grid service solutions. Our focus
is acquiring and growing leading local and regional solar, storage and energy service companies nationwide. Through our HEC business,
we also operate as a recognized solar integrator, dedicated to providing affordable energy solutions in Hawaii with our offerings
of solar panels, communication filters, web monitoring systems, batteries, water heating systems, and other related products that
help residential and commercial users reduce electric costs and earn tax credits related to installing renewable energy systems.
Our E-Gear business is a renewable energy innovator that offers proprietary patented and patent pending edge-of-grid energy management
and storage solutions that offer intelligent and real-time adaptive control, flexibility, visibility, predictability and support
to energy consumers, energy service companies, and utilities.
Our
Corporate Information
Our
principal offices are located at 10900 Red Circle Drive Minnetonka, MN 55343 and the telephone number at that location is (952)
996-1674. Our website address is www.pineappleenergy.com. Information contained on our website is not incorporated by reference
into this prospectus, and you should not consider information contained on our website as part of this prospectus or part of any
prospectus supplement.
The
names “Pineapple Energy,” “Sungevity,” “Horizon Solar Power,” “Hawaii Energy Connection”
and “E Gear” and our logos are our material trademarks. All other trademarks and trade names appearing in this prospectus
are the property of their respective owners.
Securities
that may be Offered
| Issuer | Pineapple
Energy Inc. |
| Securities Offered | We
may offer up to $100,000,000 of: |
| ● | stock
purchase contracts; |
| | We may also offer
securities of the types listed above that are convertible or exchangeable into one or more of the securities
listed above. |
| | In
addition, the selling stockholders may offer and sell, from time to time, up to an aggregate
of 9,411,744 shares of common stock under this prospectus.The number of shares of common
stock offered for sale by the selling stockholders consists of (1) 200% of the 2,352,936
shares of our common stock that may be issued upon conversion, at an initial conversion price
of $13.60 per share, of the Series A convertible preferred stock issued under the securities
purchase agreement and (2) 200% of the 2,352,936 shares of our common stock that may be issued,
at an initial exercise price of $13.60 per share, upon the exercise of warrants issued
under the securities purchase agreement.
|
| Use
of Proceeds | We
intend to use the net proceeds from the sale of any securities offered by us for general corporate purposes unless otherwise indicated
in the applicable prospectus supplement. |
| | We
will not receive any of the proceeds from the sale of shares of our common stock by the selling
stockholders.
|
| Risk
Factors | Investing
in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus, and
any other risk factors described in a prospectus supplement and in the documents incorporated herein and therein by reference,
for a discussion of certain factors that you should carefully consider before deciding to invest in our common stock. |
| Nasdaq
Capital Market Symbol | PEGY |
RISK
FACTORS
Investment
in any securities offered pursuant to this prospectus and the applicable prospectus supplement involves a high degree of risk.
You should carefully consider the risk factors included in, or incorporated by reference into, this prospectus, as updated by
our subsequent filings under the Exchange Act, and the risk factors and other information contained in the applicable prospectus
supplement before acquiring any of such securities. Additional risks and uncertainties not presently known to us or that are currently
not believed to be significant to our business may also affect our actual results and could harm our business, financial condition
and results of operations. The occurrence of any of these risks might cause you to lose all or part of your investment in the
offered securities.
Risks
Related to This Offering and Our Common Stock
The
market price for our common stock has experienced significant price and volume volatility and is likely to continue to experience
significant volatility in the future, which may cause the value of any investment in our common stock to decline.
Our
stock price and the stock prices of companies similar to us have been highly volatile. In addition, stock markets generally have recently
experienced volatility. Our stock price has experienced significant price and volume volatility , and our stock price is likely to experience
significant volatility in the future. On January 3, 2022 (the first trading day of 2022), March 25, 2022 (the trading day prior to the
closing of the merger of Commercial Systems, Inc. and Pineapple Energy LLC) and August 24, 2022, the last reported sale price
for our common stock on the Nasdaq Capital Market was $9.80, $8.89 and $3.31 per share, respectively. The price of our common
stock may decline and the value of any investment in our common stock may be reduced regardless of our performance. Further, the daily
trading volume of our common stock has historically been relatively low. As a result of the low volume, our shareholders may be unable
to sell significant quantities of common stock in the public trading markets without a significant reduction in the price of our common
shares. The trading price of our common stock may be influenced by factors beyond our control, such as the volatility of the financial
markets in general, including in reaction to the ongoing COVID-19 pandemic, uncertainty surrounding the U.S. economy, conditions and
trends in the markets we serve, changes in the estimation of the future size and growth rate of our markets, publication of research
reports and recommendations by financial analysts relating to our business, the business of our competitors or the retail industry, changes
in market valuation or earnings of our competitors or other small capitalization companies, sales of our common stock by our principal
shareholders, and the trading volume of our common stock. The historical market prices of our common stock may not be indicative of future
market prices and we may be unable to sustain or increase the value of our common stock. Further, we have historically used equity incentive
compensation as part of our overall compensation arrangements. The effectiveness of equity incentive compensation in retaining key employees
may be adversely impacted by volatility in our stock price. Significant declines in our stock price may also interfere with our ability,
if needed, to raise additional funds through equity financing or to finance strategic transactions with our stock.
Any
inability or perceived inability of investors to realize a gain on an investment in our common stock could have an adverse effect
on our business, financial condition and results of operations by potentially limiting our ability to attract and retain qualified
employees and to raise capital. In addition, there may be increased risk of securities litigation following periods of fluctuations
in our stock price. Securities class action lawsuits are often brought against companies after periods of volatility in the market
price of their securities. These and other consequences of volatility in our stock price which could be exacerbated by macroeconomic
conditions that affect the market generally, or our industries in particular, could have the effect of diverting management’s
attention and could materially harm our business.
Management
will have broad discretion as to the use of the proceeds from an offering, and we may not use the proceeds effectively.
You
will be relying on the judgment of our management with regard to the use of net proceeds from an offering, and you will not have
the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Our management
will have broad discretion in the application of the net proceeds from an offering and could spend the proceeds in ways that do
not improve our results of operations or enhance the value of our common stock. Our failure to apply these funds effectively could
have a material adverse effect on our business and cause the price of our common stock to decline.
You
may experience dilution as a result of this or future offerings.
In
order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible
into or exchangeable for our common stock. We cannot assure you that we will be able to sell shares or other securities in any
other offering at a price per share that is equal to or greater than the price per share paid by investors in this offering, and
investors purchasing our shares or other securities in the future could have rights superior to existing shareholders. The price
per share at which we sell additional shares of our common stock or other securities convertible into or exchangeable for our
common stock in future transactions may be higher or lower than the price per share in this offering.
Resales
of our common stock in the public market during an offering by our stockholders may cause the market price of our common stock
to fall.
We
may issue common or preferred stock from time to time in connection with an offering. This issuance from time to time of these
new shares, or our ability to issue these shares in this offering, could result in resales of our by our current stockholders
concerned about the potential dilution of their holdings. In turn, these resales could have the effect of depressing the market
price for our common stock.
We
are not currently paying dividends and will likely continue not paying cash dividends on our common stock for the foreseeable
future.
We
have never paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock for the
foreseeable future. Investors should not rely on an investment in us if they require income generated from dividends paid on our
capital stock. Any income derived from our common stock may only come from a rise in the market price of our common stock, which
is uncertain and unpredictable.
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and, in accordance with these requirements, we are required to file periodic reports and other information with the
SEC. The SEC maintains an Internet website at www.sec.gov that contains our filed reports, proxy and information statements,
and other information we file electronically with the SEC.
Additionally,
we make our SEC filings available, free of charge, on our website at www.pineappleenergy.com as soon as reasonably practicable
after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than the
filings incorporated by reference in this prospectus, is not, and should not be, considered part of this prospectus, is not incorporated
by reference into this document, and should not be relied upon in connection with making any investment decision with respect
to the securities.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
We
“incorporate by reference” into this prospectus certain information we file with the SEC, which means that we can
disclose important information to you by referring you to those documents. The information incorporated by reference is an important
part of this prospectus. Some information contained in this prospectus updates the information incorporated by reference, and
information that we file subsequently with the SEC will automatically update this prospectus as well as our other filings with
the SEC. In other words, in the case of a conflict or inconsistency between information set forth in this prospectus and information
incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.
We incorporate by reference the documents listed below and any filings we make with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act (i) following the date of the registration statement that contains this prospectus but prior to the
effectiveness of such registration statement or (ii) after the date of this prospectus and prior to the time that all the securities
offered by this prospectus are sold (in each case, other than any portions of any such documents that are not deemed “filed”
under the Exchange Act in accordance with the Exchange Act and applicable SEC rules):
| ● | our
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on
March 14, 2022; |
| ● | our
prospectus, dated February 3, 2022, filed with the SEC on February 3, 2022 pursuant to
Rule 424(b) under the Securities Act, relating to our registration statement on Form
S-4, as amended (File No. 333-260999); |
| ● | our
Current Reports on Form 8-K (other than portions thereof furnished under Item 2.02 or Item 7.01 of
Form 8-K and exhibits accompanying such reports that are related to such items) filed with the SEC on January 4, 2022,
February 9, 2022, February 15, 2022, February 16, 2022, February 28, 2022, March 16, 2022, March 18,
2022, March 23, 2022, March 25, 2022, March 29,2022, April 13, 2022, April 28, 2022, May 19, 2022, June 8, 2022 and June 15, 2022;
and
|
| ● | the
description of our common stock contained in our registration statement on Form 8-A,
which was filed with the SEC on January 24, 2003, including any amendment or report filed
with the SEC for the purpose of updating such description. |
All
reports and other documents we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering, including all such documents we may file with the SEC after the date of the initial registration
statement and prior to the effectiveness of the registration statement, but excluding any information furnished to, rather than
filed with, the SEC, will also be incorporated by reference into this prospectus and deemed to be part of this prospectus from
the date of the filing of such reports and documents. You may request a copy of these filings, other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing, at no cost, by writing to or telephoning us at
the following:
Pineapple
Energy Inc.
10900 Red Circle Drive
Minnetonka,
MN 55343
Attention: Corporate Secretary
(952) 996-1674
You
should rely only on the information incorporated by reference or presented in this prospectus or the applicable prospectus supplement.
Neither we nor any underwriters or agents have authorized anyone else to provide you with different information. We are not making
an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information
in this prospectus or the applicable prospectus supplement is accurate as of any date other than the dates on the front of those
documents.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. The forward-looking statements involve substantial risks
and uncertainties. All statements, other than statements related to present facts or current conditions or of historical facts,
contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future
revenues, and projected costs, prospects, plans and objectives of management, are forward-looking statements. Accordingly, these
statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed
in them. The words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “ongoing,” “plan,”
“potential,” “predict,” “project,” “should,” “target,” “will,”
“would,” or the negative of these terms or other comparable terminology are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words. Any forward-looking statements are qualified in their
entirety by reference to the factors discussed throughout our SEC reports, and in particular those factors discussed under the
heading “Risk Factors” beginning on page 5 of this prospectus and in the other documents incorporated herein by reference,
as the same may be updated from time to time by our future filings under the Exchange Act.
You
should assume that the information appearing in this prospectus, any accompanying prospectus supplement, any related free writing
prospectus and any document incorporated herein by reference is accurate as of its date only. Because the risk factors referred
to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made
by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made. New factors emerge from time to time, and it is not possible for us to predict
which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
All written or oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this
prospectus are expressly qualified in their entirety by the risk factors and cautionary statements contained in and incorporated
by reference into this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions
to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence
of unanticipated events.
Factors
that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited
to, the following:
| ● | our
competitive position and other key competitive factors; |
| ● | the
market for renewable energy, including solar energy; |
| ● | the
reduction, elimination, or expiration of government subsidies, policies, and support
programs for solar energy projects; |
| ● | the
impact of public policies, such as tariffs or other trade remedies imposed on solar cells
and modules; |
| ● | our
ability to consummate successful acquisitions; |
| ● | our
ability to raise capital to finance acquisitions; |
| ● | the
severity and duration of the COVID-19 pandemic, including its potential impact on our
business, financial condition, and results of operations; |
| ● | interest
rate fluctuations and our customers’ ability to secure financing; |
| ● | our
ability to execute on our long-term strategic plans; |
| ● | the
inability of our customers and counterparties to perform under their contracts with us; |
| ● | our
ability to attract new customers and to develop and maintain existing customer and supplier
relationships; |
| ● | the
supply and price of components and raw materials; |
| ● | supply
chain disruption, including canceled shipments by logistic providers, and the cost of
fuel; |
| ● | our
ability to protect our intellectual property; |
| ● | our
continued investment in R&D; |
| ● | our
ability to attract and retain key executive officers and associates; |
| ● | changes
in, or the failure to comply with, government regulations and environmental, health,
and safety requirements; |
| ● | general
economic and business conditions, including those influenced by U.S., international,
and geopolitical events; |
| ● | our
environmental responsibility; |
| ● | our
ability to prevent and/or minimize the impact of cyber-attacks or other breaches of our
information systems; |
| ● | effects
arising from pending litigation; and |
| ● | all
other matters discussed in our other filings with the SEC. |
USE
OF PROCEEDS
We
intend to use the net proceeds from the sale of any securities for general corporate purposes unless otherwise indicated in the
applicable prospectus supplement. General corporate purposes may include the repayment of outstanding indebtedness, working capital,
general and administrative expenses, capital expenditures and acquisitions. We have not yet determined the amount of net proceeds
to be used specifically for any of the foregoing purposes. Accordingly, our management will have significant discretion and flexibility
in applying the net proceeds from the sale of these securities.
We
will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.
SELLING STOCKHOLDERS
The
common stock being offered by the selling stockholders pursuant to this prospectus consists of (1) 200% of the 2,352,936 shares of our
common stock that may be issued upon conversion, at an initial conversion price of $13.60 per share, of the Series A convertible preferred
stock issued under the securities purchase agreement and (2) 200% of the 2,352,936 shares of our common stock that may be issued, at
an initial exercise price of $13.60 per share, upon the exercise of warrants issued under the securities purchase agreement. We
previously registered 10,614,239 shares of our common stock for resale by the selling stockholders (the
“Previously Registered Shares”) pursuant to a registration statement on Form S-3 (Registration Statement No. 333-262893)
that was declared effective on March 24, 2022 (the “Previous Registration Statement”). The 10,614,239 shares of common stock
consisted of (1) 200% of the 2,352,936 shares of our common stock that may be issued upon conversion, at an initial conversion price
of $13.60 per share, of the Series A convertible preferred stock issued under the securities purchase agreement, (2) 200% of the 2,352,936
shares of our common stock that may be issued, at an initial exercise price of $13.60 per share, upon the exercise of warrants issued
under the securities purchase agreement, and (3) the aggregate 1,202,495 shares of our common stock that may be purchased by the selling
stockholders under certain stock transfer agreements. The number of shares that were registered pursuant to the Previous Registration
Statement was based on our good faith estimate of the maximum number of shares that could be sold by the selling stockholders at the
time of filing. However, because the trading price of our common stock on the Nasdaq Capital Market has decreased since the effective
date of the Previous Registration Statement our good faith estimate of the maximum number of shares that could be issued upon the conversion
of the Series A convertible preferred stock and the exercise of the warrants has increased, as the conversion and exercise price of each
security, respectively, is subject to downward adjustment in the event that we sell, enter into an agreement to sell, grant any
option to purchase or sell or grant any right to reprice or otherwise dispose of or issue (or announce any sale, grant or any option
to purchase or other disposition), any common stock or common stock equivalents entitling any person to acquire shares of common stock
at an effective price per share that is lower than the then conversion price of $13.60 of the Series A convertible preferred stock or
the exercise price of $13.60 of the warrants, subject to certain exceptions. The conversion price and/or exercise price would be adjusted
to the lower of (i) the price in such dilutive issuance or (ii) the lowest volume-weighted average price of our common stock in the five
consecutive trading dates following the announcement of such dilutive issuance. The last reported sale price of our common stock on the
Nasdaq Capital Market on the effective date of the Previous Registration Statement was $8.56 per share, while the last reported sale
price of our common stock on August 24, 2022 was $3.31 per share.
We are
registering these shares of common stock in order to permit the selling stockholders to offer for resale from time to time the shares
that they may acquire upon conversion of the Series A convertible preferred stock or the exercise of the warrants issued pursuant to
the securities purchase agreement. Except for the executing the securities purchase agreement and other documentation related to such
offering, the selling stockholders have not had any material relationship within the past three years with us or any of our affiliates.
The table
below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by each of
the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling stockholder
as of August 15, 2022. In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect
to securities and includes the shares issuable pursuant to securities that are exercisable within 60 days of August 15, 2022. Shares
issuable pursuant to securities are deemed outstanding for computing the percentage of the person holding securities but are not outstanding
for computing the percentage of any other person. The percentage ownership information in the third column is based on the 7,435,586
shares of common stock outstanding as of August 15, 2022.
The fourth
column lists the shares of common stock being offered by this prospectus by the selling stockholders. In accordance with the terms of
a registration rights agreement with the selling stockholders, this prospectus covers the resale of the sum of:
| |
● |
200% of
the 2,352,936 shares of our common stock that may be issued upon conversion, at an initial conversion price of $13.60 per share,
of the Series A convertible preferred stock issued under the securities purchase agreement; and |
| |
● |
200% of
the 2,352,936 shares of our common stock that may be issued, at an initial exercise price of $13.60 per share, upon the exercise
of warrants issued under the securities purchase agreement. |
For purposes
of the fifth and sixth column, we have assumed that each selling stockholder will have sold all of our common stock covered by this prospectus
upon the completion of the offering. However, the selling stockholders may sell all, some or none of their shares in this offering. See
“Plan of Distribution”.
Under
the terms of the Certificate of Designation with respect to the Series A convertible preferred stock, a selling stockholder may not convert
the Series A convertible preferred stock to the extent such conversion would cause such selling stockholder, together with its affiliates
and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% or 9.99%, as applicable, of
our then outstanding common stock following such conversion, excluding for purposes of such determination shares of common stock issuable
upon conversion of shares of Series A convertible preferred stock which have not been converted and issuable upon exercise of warrants
which have not been exercised. Also, under the warrants, a selling stockholder may not exercise the warrant to the extent such exercise
would cause such selling stockholder, together with its affiliates and attribution parties, to beneficially own a number of shares of
common stock which would exceed 4.99% or 9.99%, as applicable, of our then outstanding common stock following such conversion, excluding
for purposes of such determination shares of common stock issuable upon conversion of shares of Series A convertible preferred stock
which have not been converted and issuable upon exercise of warrants which have not been exercised. The number of shares in the second
and fifth columns do not reflect these limitations, but the percentages set forth in the third and sixth columns give effect to these
limitations. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
| |
|
Shares
Beneficially Owned
Prior to the Offering |
|
Number of
Shares
Being |
|
Shares
Beneficially
Owned After Completion
of the Offering |
| Name of Selling Stockholder |
|
Number |
|
Percentage |
|
Offered |
|
Number |
|
Percentage |
| Bigger Capital Fund LP (1) |
|
238,970 |
|
|
3.11% |
|
|
477,940 |
|
|
0 |
|
|
0% |
|
| Cavalry Fund I LP (2) |
|
160,146 |
|
|
2.11% |
|
|
320,292 |
|
|
0 |
|
|
0% |
|
| Cavalry Investment Fund LP (3) |
|
82,500 |
|
|
1.10% |
|
|
165,000 |
|
|
0 |
|
|
0% |
|
| Anson East Master Fund LP (4) |
|
183,822 |
|
|
2.41% |
|
|
367,644 |
|
|
0 |
|
|
0% |
|
| Anson Investments Master Fund LP (5) |
|
551,470 |
|
|
4.99% |
|
|
1,102,940 |
|
|
0 |
|
|
0% |
|
| Sabby Volatility Warrant Master Fund, LTD (6) |
|
955,882 |
|
|
4.99% |
|
|
1,911,764 |
|
|
0 |
|
|
0% |
|
| Empery Asset Master LTD (7) |
|
327,204 |
|
|
4.22% |
|
|
654,408 |
|
|
0 |
|
|
0% |
|
| Empery Tax Efficient LP (8) |
|
87,940 |
|
|
1.17% |
|
|
175,880 |
|
|
0 |
|
|
0% |
|
| Empery Tax Efficient III, LP (9) |
|
99,558 |
|
|
1.32% |
|
|
199,116 |
|
|
0 |
|
|
0% |
|
| Hudson Bay Master Fund Ltd. (10) |
|
735,294 |
|
|
9.00% |
|
|
1,470,588 |
|
|
0 |
|
|
0% |
|
| CVI Investments, Inc. (11) |
|
750,000 |
|
|
4.99% |
|
|
1,500,000 |
|
|
0 |
|
|
0% |
|
| Evergreen Capital Management LLC (12) |
|
294,116 |
|
|
3.81% |
|
|
588,232 |
|
|
0 |
|
|
0% |
|
| District 2 Capital Fund LP (13) |
|
238,970 |
|
|
3.11% |
|
|
477,940 |
|
|
0 |
|
|
0% |
|
| |
(1) |
The number of shares in the second column includes (a) 119,485 shares
of common stock issuable upon conversion of 1,625 shares of Series A convertible preferred stock, and (b) 119,485 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 238,970 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 1,625 shares of Series A convertible preferred
stock, and (b) 238,970 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Bigger Capital Fund GP, LLC (“Bigger GP”) is a general partner of Bigger Capital Fund, LP (“Bigger Capital”)
and District 2 Capital LP (“District 2”) is the investment manager of District 2 Capital Fund LP (“District 2 CF”).
Michael Bigger is the managing member of Bigger GP and District and District 2 Holdings LLC (“District 2 Holdings”),
which is the managing member of District 2 GP LLC (“District 2 GP”), the general partner of District 2 CF. Therefore,
Mr. Bigger, District 2, District 2 Holdings and District 2 CF may be deemed to be the beneficial owner, and have the shared power
to dispose of or direct the disposition, of the shares reported as beneficially owned by District 2 CF and Mr. Bigger and Bigger
GP may be deemed to be the beneficial owner, and have the shared power to dispose of or direct the disposition, of the shares reported
as beneficially owned by Bigger Capital and District 2 CF. |
| |
(2) |
The number of shares in the second column includes (a) 80,073 shares
of common stock issuable upon conversion of 1,089 shares of Series A convertible preferred stock, and (b) 80,073 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 160,146 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 1,089 shares of Series A convertible preferred
stock, and (b) 160,146 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Calvary Fund I Management LLC is the general partner of Cavalry Fund I, LP. Thomas Walsh is the Manager of Cavalry Fund
I Management, LLC. As such Cavalry Fund I Management, LLC and Mr. Walsh may be deemed to beneficially own the securities held by
Cavalry Fund I, LP. Mr. Walsh has sole voting and dispositive power with respect to the shares of common stock held by Cavalry Fund
I LP. The address of Cavalry Fund I LP is 82 E. Allendale Road, Suite 5B, Saddle River, New Jersey 07458. |
| |
(3) |
The number of shares in the second column includes (a) 41,250 shares
of common stock issuable upon conversion of 561 shares of Series A convertible preferred stock, and (b) 41,250 shares of common stock
issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 82,500 shares of common stock, representing
200% of the number of shares of common stock issuable upon conversion of 561 shares of Series A convertible preferred stock, and
(b) 82,500 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of warrants.
Calvary Fund I Management LLC is the general partner of Cavalry Fund I, LP. Thomas Walsh is the Manager of Cavalry Fund I Management,
LLC. As such Cavalry Fund I Management, LLC and Mr. Walsh may be deemed to beneficially own the securities held by Cavalry Fund I,
LP. Mr. Walsh has sole voting and dispositive power with respect to the shares of common stock held by Cavalry Fund I LP. The address
of Cavalry Fund I LP is 82 E. Allendale Road, Suite 5B, Saddle River, New Jersey 07458. |
| |
(4) |
The number of shares in the second column includes (a) 91,911 shares
of common stock issuable upon conversion of 1,250 shares of Series A convertible preferred stock, and (b) 91,911 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 183,822 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 1,250 shares of Series A convertible preferred
stock, and (b) 183,822 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Anson Advisers Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson East Master Fund LP (“Anson”),
hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP
LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc.
Mr. Wilson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary
interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road,
George Town, Grand Cayman KY1-9008, Cayman Islands. |
| |
(5) |
The number of shares in the second column includes (a) 275,735 shares
of common stock issuable upon conversion of 3,750 shares of Series A convertible preferred stock, and (b) 275,735 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 551,470 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 3,750 shares of Series A convertible preferred
stock, and (b) 551,470 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“Anson”),
hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management
GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc.
Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary
interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road,
George Town, Grand Cayman KY1-9008, Cayman Islands. |
| |
(6) |
The number of shares in the second column includes (a) 477,941 shares
of common stock issuable upon conversion of 6,500 shares of Series A convertible preferred stock, and (b) 477,941 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 955,882 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 6,500 shares of Series A convertible preferred
stock, and (b) 955,882 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Sabby Management, LLC is the investment manager of Sabby Volatility Warrant Master Fund, Ltd. and shares voting and investment
power with respect to these shares in this capacity. As manager of Sabby Management, LLC, Hal Mintz also shares voting and investment
power on behalf of Sabby Volatility Warrant Master Fund, Ltd. The address of the Sabby Volatility Warrant Master Fund, Ltd. is c/o
Sabby Management, LLC, 10 Mountainview Road, Suite 205, Upper Saddle River, NJ 07458. Each of Sabby Management, LLC and Hal Mintz
disclaims beneficial ownership over the securities listed except to the extent of their pecuniary interest therein. |
| |
(7) |
The number of shares in the second column includes (a) 163,602 shares
of common stock issuable upon conversion of 2,225 shares of Series A convertible preferred stock, and (b) 163,602 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 327,204 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 2,225 shares of Series A convertible preferred
stock, and (b) 327,204 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd (“EAM”), has discretionary authority
to vote and dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane,
in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting
power over the shares held by EAM. EAM, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. |
| |
(8) |
The number of shares in the second column includes (a) 43,970 shares
of common stock issuable upon conversion of 598 shares of Series A convertible preferred stock, and (b) 43,970 shares of common stock
issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 87,940 shares of common stock, representing
200% of the number of shares of common stock issuable upon conversion of 598 shares of Series A convertible preferred stock, and
(b) 87,940 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of warrants.
Empery Asset Management LP, the authorized agent of Empery Tax Efficient, LP (“ETE”), has discretionary authority to
vote and dispose of the shares held by ETE and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane,
in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting
power over the shares held by ETE. ETE, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. |
| |
(9) |
The number of shares in the second column includes (a) 49,779 shares
of common stock issuable upon conversion of 677 shares of Series A convertible preferred stock, and (b) 49,779 shares of common stock
issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 99,558 shares of common stock, representing
200% of the number of shares of common stock issuable upon conversion of 677 shares of Series A convertible preferred stock, and
(b) 99,558 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of warrants.
Empery Asset Management LP, the authorized agent of Empery Tax Efficient III, LP (“ETE III”), has discretionary authority
to vote and dispose of the shares held by ETE III and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan
Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and
voting power over the shares held by ETE III. ETE III, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. |
| |
(10) |
The number of shares in the second column includes (a) 367,647 shares
of common stock issuable upon conversion of 5,000 shares of Series A convertible preferred stock,, and (b) 367,647 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 735,294 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 5,000 shares of Series A convertible preferred
stock, and (b) 735,294 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Hudson Bay Capital Management LP, the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power
over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson
Bay Capital Management LP. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these securities.
The business address for this selling stockholder is c/o Hudson Bay Capital Management LP, 28 Havemeyer Place, 2nd
Floor, Greenwich, CT 06830. |
| |
(11) |
The number of shares in the second column includes (a) 375,000 shares
of common stock issuable upon conversion of 5,100 shares of Series A convertible preferred stock, and (b) 375,000 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 750,000 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 5,100 shares of Series A convertible preferred
stock, and (b) 750,000 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Heights Capital Management, Inc., the authorized agent of CVI Investments, Inc. (“CVI”), has discretionary
authority to vote and dispose of the shares held by CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger,
in his capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to have investment discretion and voting
power over the shares held by CVI. Mr. Kobinger disclaims any such beneficial ownership of the shares. CVI Investments, Inc.is affiliated
with one or more FINRA member, none of whom are currently expected to participate in the resales pursuant to this prospectus. |
| |
(12) |
The number of shares in the second column includes (a) 147,058 shares
of common stock issuable upon conversion of 2,000 shares of Series A convertible preferred stock, and (b) 147,058 shares of common
stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 294,116 shares of common stock,
representing 200% of the number of shares of common stock issuable upon conversion of 2,000 shares of Series A convertible preferred
stock, and (b) 294,116 shares of common stock, representing 200% of the number of shares of common stock issuable upon exercise of
warrants. Jeffrey Pazdro is the managing member of Evergreen Capital Management LLC (“Evergreen”) and has sole voting
control and investment discretion over the securities held by Evergreen. Mr. Pazdro disclaims beneficial ownership over the securities
listed except to the extent of his pecuniary interest therein. The principal business address of Evergreen is 156 West Saddle River
Road, Saddle River, NJ 07458. |
| |
(13) |
The number of shares in the second column
includes (a) 119,485 shares of common stock issuable upon conversion of 1,625 shares of Series A convertible preferred stock, and
(b) 119,485 shares of common stock issuable upon exercise of warrants. The number of shares in the fourth column includes (a) 238,970
shares of common stock, representing 200% of the number of shares of common stock issuable upon conversion of 1,625 shares of Series
A convertible preferred stock, and (b) 238,970 shares of common stock, representing 200% of the number of shares of common stock
issuable upon exercise of warrants. Bigger Capital Fund GP, LLC (“Bigger GP”) is a general partner of Bigger Capital
Fund, LP (“Bigger Capital”) and District 2 Capital LP (“District 2”) is the investment manager of District
2 Capital Fund LP (“District 2 CF”). Michael Bigger is the managing member of Bigger GP and District and District 2 Holdings
LLC (“District 2 Holdings”), which is the managing member of District 2 GP LLC (“District 2 GP”), the general
partner of District 2 CF. Therefore, Mr. Bigger, District 2, District 2 Holdings and District 2 CF may be deemed to be the beneficial
owner, and have the shared power to dispose of or direct the disposition, of the shares reported as beneficially owned by District
2 CF and Mr. Bigger and Bigger GP may be deemed to be the beneficial owner, and have the shared power to dispose of or direct the
disposition, of the shares reported as beneficially owned by Bigger Capital and District 2 CF.
|
DESCRIPTION
OF SECURITIES
The
following summary of the general terms and provisions of our capital stock does not purport to be complete and is based upon and
qualified by reference to our amended and restated articles of incorporation, restated bylaws and the certificate of designation
for our Series A convertible preferred stock (the “CoD”). We encourage you to read our amended and restated articles
of incorporation, restated bylaws, the CoD and the applicable provisions of the Minnesota Business Corporation Act, or MBCA, for
additional information.
Authorized
Shares of Capital Stock
As
of the date hereof, our authorized is 37,500,000 shares of common stock, par value $0.05 per share and 3,000,000 shares of preferred
stock, $1.00 par value per share. As of August 15, 2022, we had 7,435,586 shares of common stock outstanding and 32,000 shares
of Series A convertible preferred stock outstanding.
Preferred
Stock
The
following is a summary of material terms of our Series A convertible preferred stock.
Generally,
holders of the Series A convertible preferred stock are not entitled to voting rights. However, as long as any shares of Series
A convertible preferred stock are outstanding, we may not, without the affirmative vote of the Required Holders (as defined in
the CoD):
| ● | alter
or change adversely the powers, preferences or rights given to the Series A convertible
preferred stock or alter or amend the CoD; |
| ● | authorize
or create any class of stock ranking as to redemption senior to the Series A convertible
preferred stock; |
| ● | amend
our amended and restated articles of incorporation or other charter documents in any
manner that adversely affects any rights of the holders of Series A convertible preferred
stock; |
| ● | increase
the number of authorized shares of Series A convertible preferred stock; or |
| ● | enter
into any agreement with respect to any of the foregoing. |
Each
share of Series A convertible preferred stock will be convertible, at any time after issuance and at the option of the holder,
into a number of shares of our common stock determined by dividing the “Stated Value” of such share by the “Conversion
Price.” The Stated Value per share of Series A convertible preferred stock is $1,000 and the Conversion Price per share
of Series A convertible preferred stock is $13.60, subject to adjustment. The shares of common stock issuable upon conversion
of the Series A convertible preferred stock are referred to as the “conversion shares.”
The
conversion price is subject to adjustment if, at any time while the Series A convertible preferred stock is outstanding, we issue,
sell, publicly announces the contemplated issuance or sale of, or are deemed to have issued or sold, any shares of common stock
or common stock equivalents for an effective price per share that is lower than the then conversion price, subject to limited
exceptions for exempt issuances. In the case of any such dilutive issuance, the conversion price then in effect will be reduced
to an amount equal to the lesser of the effective price per share in such dilutive issuance and the lowest volume weighted average
price (VWAP) of our common stock on any trading day during the 5 trading days immediately following the public announcement of
the execution of the dilutive issuance. If we enter into a Variable Rate Transaction, despite the prohibition set forth in the
securities purchase agreement, we will be deemed to have issued common stock or common stock equivalents at the lowest possible
price, conversion price or exercise price at which such securities may be issued, converted or exercised.
We
will not effect any conversion of the Series A convertible preferred stock, and a holder will not have the right to convert any
portion of the Series A convertible preferred stock, to the extent that, after giving effect to the conversion, such holder together
with such holder’s affiliates and other attribution parties would beneficially own in excess of the beneficial ownership
limitation. The beneficial ownership limitation is 4.99% (or, upon election by a holder prior to the issuance of any Series A
convertible preferred stock, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the
issuance of shares of common stock issuable upon conversion of the Series A convertible preferred stock held by the applicable
holder. A holder, upon notice to us, may increase or decrease its applicable beneficial ownership limitation provided that the
beneficial ownership limitation in no event exceeds 9.99% of the number of shares of common stock outstanding immediately after
giving effect to the issuance of shares of common stock upon conversion of Series A convertible preferred stock held by the holder.
Any increase in the beneficial ownership limitation will not be effective until the 61st day after such notice is delivered to
us and will only apply to the holder giving the notice and no other holder.
If
we fail to deliver the conversion shares by the required delivery date and shares of common stock are purchased to deliver in
satisfaction of a sale by such converting holder of the conversion shares, we will have an obligation to make a cash payment and,
that the converting holder’s option, to issue shares to that holder. The cash obligation will be equal to the amount, if
any, by which (x) such holder’s total purchase price (including any brokerage commissions) for the common stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of common stock that such holder was entitled to receive from the
conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions). If the converting holder requires us to issue shares, then we must either reissue
(if surrendered) the shares of Series A convertible preferred stock equal to the number of shares of Series A convertible preferred
stock submitted for conversion (in which case, such conversion will be deemed rescinded) or deliver to such holder the number
of shares of common stock that would have been issued if we had timely complied with its delivery requirements.
If
after the 10th trading day following the effective date of the registration statement for the conversion shares, the volume weighted
average price (VWAP) for each trading day during any 10 consecutive trading day period exceeds 200% of the then effective conversion
price and the daily dollar trading volume for our common stock exceeds $5 million on each trading day during this period, we may
require each holder to convert all or part of such holder’s Series A convertible preferred stock plus all accrued but unpaid
dividends thereon and all liquidated damages and other amounts due in respect of the Series A convertible preferred stock. For
any shares of Series A convertible preferred stock that remain unconverted and outstanding because of the beneficial ownership
limitation, we may elect to repurchase all or a portion of such unconverted shares from each such holder at a price per unconverted
share of Series A convertible preferred stock equal to the quotient obtained by dividing the stated value by the then-current
conversion price and then multiplying such quotient by the greater of (i) the closing sale price of the common stock on the date
of the forced conversion and (ii) the closing sale price of the common stock as of the trading day immediately prior to the date
of the notice of repurchase.
If
there is any Fundamental Transaction (as defined in the CoD) while the Series A convertible preferred stock is outstanding, then,
upon any subsequent conversion of the Series A convertible preferred stock, the holder will have the right to receive, for each
conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction
(without regard to any beneficial ownership limitation), the number of shares of common stock of the successor or acquiring corporation
or of us, if it is the surviving corporation, and any additional consideration receivable as a result of such Fundamental Transaction
by a holder of the number of shares of common stock for which the Series A convertible preferred stock is convertible immediately
prior to such Fundamental Transaction (without regard to any beneficial ownership limitation). We must cause any successor entity
in a Fundamental Transaction in which we are not the survivor to assume in writing all of the obligations of us under the CoD.
The CoD provides that the consummation of the transactions contemplated by the merger agreement will not be deemed a Fundamental
Transaction. The term Fundamental Transaction has substantially the same meaning as in the warrant issued in the PIPE Offering.
Common
Stock
Holders
of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders
and do not have cumulative voting rights. Except as otherwise provided by law, our amended and restated articles of incorporation
or our restated bylaws, matters will generally be decided by the vote of the holders of a majority of the voting power present
in person (which includes attendance by means of remote communication) or represented by proxy. Our restated bylaws provide that
the authorized number of directors will be fixed by the shareholders at each annual meeting and that either the shareholders or
the board of directors may increase or decreases the number of directors. Our board of directors is not classified.
Holders
of our common stock are entitled to receive dividends declared by our board of directors out of funds legally available for the
payment of dividends. In the event of any liquidation, dissolution or winding-up of our affairs, holders of common stock will
be entitled to share ratably in our assets that are remaining after payment or provision for payment of all of our debts and obligations.
Holders
of common stock have no preemptive, conversion or subscription rights, and there are no redemption provisions applicable to the
common stock.
All
outstanding shares of our common stock are fully paid and nonassessable.
The
transfer agent and registrar for our common stock is Equiniti Trust Company, 1110 Centre Pointe Curve, Suite 101, South St. Paul,
Minnesota 55120-4100.
Our
common stock is currently listed on The Nasdaq Stock Market LLC under the trading symbol “PEGY.”
Registration
Rights Agreement
In
connection with the securities purchase agreement, we entered into a registration rights agreement dated September 15, 2021 with the
selling stockholders. Pursuant to the registration rights agreement, we agreed to file a registration statement to register for resale
common stock issuable upon conversion of the Series A convertible preferred stock and the common stock issuable upon exercise of the
warrants issued pursuant to the securities purchase agreement.
Anti-Takeover
Effects of Provisions of Our Amended and Restated Articles of Incorporation, the Restated Bylaws and Minnesota Law
Specific
provisions of Minnesota law, our amended and restated articles of incorporation and restated bylaws may be deemed to have an anti-takeover
effect.
Our
restated bylaws establish an advance notice procedure with regard to (i) certain business to be brought before our annual meeting
of shareholders and (ii) the nomination by shareholders of candidates for election as directors.
Properly
Brought Business
Our
restated bylaws provide that at the annual meeting only such business may be conducted as is of a nature that is appropriate for
consideration at an annual meeting and has been either specified in the notice of the meeting, otherwise properly brought before
the meeting by or at the direction of our board of directors, or otherwise properly brought before the meeting by a shareholder
who has given timely written notice to our Secretary of the shareholder’s intention to bring the business before the meeting.
To be timely, the notice must be given by such shareholder to our Secretary not less than 45 days or more than 75 days prior to
a meeting date corresponding to the previous year’s annual meeting. Notice relating to the conduct of such business at an
annual meeting must contain certain information as described in our restated bylaws, which are available for inspection by shareholders
at our principal executive offices pursuant to Section 302A.441, subd. 4 of the Minnesota Statutes. Nothing in our restated bylaws
precludes discussion by any shareholder of any business properly brought before the annual meeting in accordance with the restated
bylaws.
Shareholder
Nominations
Our
restated bylaws provide that a notice of proposed shareholder nominations for the election of directors must be timely given in
writing to our Secretary prior to the meeting at which directors are to be elected. To be timely, the notice must be given by
the shareholder to our Secretary not less than 45 days or more than 75 days prior to a meeting date corresponding to the previous
year’s annual meeting. The notice to us from a shareholder who intends to nominate a person at the meeting for election
as a director must contain certain information as described in our restated bylaws, which are available for inspection by shareholders
as described above. If the presiding officer of a meeting of shareholders determines that a person was not nominated in accordance
with the foregoing procedure, that person will not be eligible for election as a director.
Shareholder
Meetings
Under
our restated bylaws, regular meetings of our shareholders may be called only by our board of directors, or by written consent
of all the shareholders entitled to vote at the annual meeting. If the board fails to designate a time for a regular meeting for
any consecutive period of 15 months, the board must cause such regular meeting to be called within 90 days of receipt of the written
demand of any shareholder owning one percent or more of all voting shares of the corporation
Under
our restated bylaws, special meetings of our shareholders may be called by the chief executive officer, the chief financial officer,
any two or more directors, or upon request by shareholders holding ten percent or more of the voting power of the shareholders.
Voting
Percentage Approval Required for Designated Actions
In
addition to any affirmative vote required by law or our amended and restated articles of incorporation, the following actions
require the affirmative vote of not less than two-thirds of the votes entitled to be cast by the holders of all then outstanding
shares of voting stock, voting together as a single class:
(a)
any sale, lease, mortgage, pledge, transfer, exchange or other disposition of all or substantially all of the property and assets
of the corporation to any person;
(b)
any reclassification of securities (including any combination of shares or reverse stock split), or recapitalization or reorganization
of the corporation, or any merger, consolidation or statutory exchange of shares of the corporation or any subsidiary with any
other corporation (other than a merger of a wholly owned subsidiary of the corporation into the corporation or the merger of two
or more wholly owned subsidiaries of the corporation;
(c)
the adoption of plan or proposal for the liquidation or dissolution of the corporation; and
(d)
any agreement, contract or other arrangement or understanding providing for one or more of the foregoing.
In
addition to any affirmative vote required by law or our amended and restated articles of incorporation, a Business Combination
(as defined in the amended and restated articles of incorporation) requires the affirmative vote of not less than 80% of the votes
entitled to be cast by the holders of all then outstanding shares of voting stock, voting together as a single class. This requirement
is not applicable, however, if the particular Business Combination is either (a) approved by a majority of the Continuing Directors
(as defined in our amended and restated articles of incorporation), or (b) meets specific requirements with respect to price and
approval process. Repeal or amendment of this requirement in the amended and restated articles of incorporation requires affirmative
vote of not less than 80% of the votes entitled to be cast by the holders of all then outstanding shares of voting stock, voting
together as a single class.
Provisions
of Minnesota Law
The
following provisions of the MBCA may have an effect of delaying, deterring or preventing an unsolicited takeover of us or make
an unsolicited takeover of us more difficult.
● MBCA
Section 302A.553, (Power to acquire shares) subd 3, limitation on share purchases prohibits a publicly held corporation such as
us from purchasing shares entitled to vote for more than market value from a person that beneficially owns more than 5% of the
voting power of the corporation if the shares have been beneficially owned for less than two years unless the purchase or agreement
to purchase is approved at a meeting of shareholders by the affirmative vote of the holders of a majority of the voting power
of all shares entitled to vote or the corporation makes an offer, of at least equal value per share, to all shareholders for all
other shares of that class or series and any other class or series into which they may be converted.
● MBCA
Section 302A.671 (Control share acquisitions) provides that shares of an “issuing public corporation,” such as us,
acquired by an “acquiring person” in a “control share acquisition” that exceed the threshold of voting
power of any of the three ranges identified below will not have voting rights, unless the issuing public company’s shareholders
vote to accord these shares the voting rights normally associated with these shares. A “control share acquisition”
is an acquisition, directly or indirectly, by an “acquiring person” (as defined in the MBCA) of beneficial ownership
of shares of an issuing public corporation that, but for Section 302A.671, would, when added to all other shares of the issuing
public corporation beneficially owned by the acquiring person, entitle the acquiring person, immediately after the acquisition,
to exercise or direct the exercise of a new range of voting power of the issuing public corporation with any of the following
three ranges: (i) at least 20 percent but less than 33-1/3 percent; (ii) at least 33-1/3 percent but less than or equal to 50
percent; and (iii) over 50 percent. The issuing public company also has an option to call for redemption all, but not less than
all, shares acquired in the control share acquisition that exceed the threshold of voting power of any of the specified ranges
at a price equal to the fair market value of the shares at the time the call is given if (i) the acquiring person fails to deliver
the information statement to the issuing public company by the tenth day after the control share acquisition; or (ii) shareholders
have voted not to accord voting rights to the shares acquired in the control share acquisition.
● MBCA
Section 302A.673 (Business combinations) prohibits a public Minnesota corporation, such as us, from engaging in a business combination
with an interested shareholder for a period of four years after the date of the transaction in which the person became an interested
shareholder, unless either (i) the business combination or (ii) the acquisition by which the person becomes an interested shareholder
is approved in a prescribed manner before the person became an interested shareholder. The term “business combination”
includes mergers, asset sales and other transactions resulting in a financial benefit to the interested shareholder. An “interested
shareholder” is a person who is the beneficial owner, directly or indirectly, of 10% or more of a corporation’s voting
stock, or who is an affiliate or associate of the corporation, and who, at any time within four years before the date in question,
was the beneficial owner, directly or indirectly, of 10% or more of the corporation’s outstanding voting stock.
● If
a takeover offer is made for our stock, MBCA Section 302A.675 (Takeover offer; fair price) precludes the offeror from acquiring
additional shares of stock (including in acquisitions pursuant to mergers, consolidations or statutory share exchanges) within
two years following the completion of the takeover offer, unless shareholders selling their shares in the later acquisition are
given the opportunity to sell their shares on terms that are substantially the same as those contained in the earlier takeover
offer. A “takeover offer” is a tender offer that results in an offeror who owned ten percent or less of a class of
our shares acquiring more than ten percent of that class, or that results in the offeror increasing its beneficial ownership of
a class of our shares by more than ten percent of the class, if the offeror owned ten percent or more of the class before the
takeover offer. Section 302A.675 does not apply if a committee of our board of directors formed in accordance with Section 302A.675
approves the proposed acquisition before any shares are acquired pursuant to the earlier tender offer.
DESCRIPTION
OF DEBT SECURITIES
This
section describes the general terms and provisions of our debt securities, which could be senior debt securities or subordinated
debt securities. A prospectus supplement will describe the specific terms of the debt securities offered through that prospectus
supplement and any general terms outlined in this section that will not apply to those debt securities.
The
senior debt securities will be issued under an indenture, referred to herein as the “senior indenture,” between us
and the trustee named in the applicable prospectus supplement. The subordinated debt securities will be issued under an indenture,
referred to herein as the “subordinated indenture,” between us and the trustee named in the applicable prospectus
supplement.
We
have summarized the anticipated material terms and provisions of the senior and subordinated indentures in this section. We have
also filed the forms of the indentures summarized in this section as exhibits to the registration statement of which this prospectus
is a part. You should read the applicable indenture for additional information before you buy any debt securities. The summary
that follows includes references to section numbers of the indentures so that you can more easily locate these provisions.
General
The
debt securities will be our direct unsecured obligations. Neither of the indentures limits the amount of debt securities that
we may issue. Both indentures permit us to issue debt securities from time to time and debt securities issued under an indenture
will be issued as part of a series that has been established by us under such indenture.
The
senior debt securities will be unsecured and will rank equally with all of our other unsecured unsubordinated debt. The subordinated
debt securities will be unsecured and will rank equally with all of our other subordinated debt securities and, together with
such other subordinated debt securities, will be subordinated to all of our existing and future Senior Debt (as defined below).
See “- Subordination” below.
The
debt securities are our unsecured senior or subordinated debt securities, as the case may be, but our assets include equity in
our subsidiaries. As a result, our ability to make payments on our debt securities may depend in part on our receipt of dividends,
loan payments and other funds from our subsidiaries. In addition, if any of our subsidiaries becomes insolvent, the direct creditors
of that subsidiary will have a prior claim on its assets. Our rights and the rights of our creditors, including your rights as
an owner of our debt securities, will be subject to that prior claim, unless we are also a direct creditor of that subsidiary.
This subordination of creditors of a parent company to prior claims of creditors of its subsidiaries is commonly referred to as
structural subordination.
Unless
otherwise specified in the applicable prospectus supplement, we may, without the consent of the holders of a series of debt securities,
issue additional debt securities of that series having the same ranking and the same interest rate, maturity date and other terms
(except for the price to public and issue date) as such debt securities. Any such additional debt securities, together with the
initial debt securities, will constitute a single series of debt securities under the applicable indenture. No additional debt
securities of a series may be issued if an event of default under the applicable indenture has occurred and is continuing with
respect to that series of debt securities.
A
prospectus supplement relating to a series of debt securities being offered will include specific terms relating to the offering.
These terms will include some or all of the following:
| ● | the
title and type of the debt securities; |
| ● | any
limit on the total principal amount of the debt securities of that series; |
| ● | the
price at which the debt securities will be issued; |
| ● | the
date or dates on which the principal of and premium, if any, on the debt securities will
be payable; |
| ● | the
maturity date or dates of the debt securities or the method by which those dates can
be determined; |
| ● | if
the debt securities will bear interest: |
| ● | the
interest rate on the debt securities or the method by which the interest rate may be
determined; |
| ● | the
date from which interest will accrue; |
| ● | the
record and interest payment dates for the debt securities; and |
| ● | the
first interest payment date; |
| ● | the
place or places where: |
| ● | we
can make payments on the debt securities; |
| ● | the
debt securities can be surrendered for registration of transfer or exchange; and |
| ● | notices
and demands can be given to us relating to the debt securities and under the applicable
indenture; |
| ● | any
optional redemption provisions that would permit us to elect redemption of the debt securities,
or the holders of the debt securities to elect repayment of the debt securities, before
their final maturity; |
| ● | any
sinking fund provisions that would obligate us to redeem the debt securities before their
final maturity; |
| ● | whether
the debt securities will be convertible and, if so, the terms and conditions of any such
conversion; |
| ● | if
the debt securities will be issued in bearer form, the terms and provisions contained
in the bearer securities and in the applicable indenture specifically relating to the
bearer securities; |
| ● | whether
all or part of the debt securities will not be issued as permanent global securities
and the extent to which the description of the book-entry procedures described below
under “- Book- Entry, Delivery and Form” will not apply to such global securities - a
“global security” is a debt security that we issue in accordance with the
applicable indenture to represent all or part of a series of debt securities; |
| ● | whether
all or part of the debt securities will be issued in whole or in part as temporary global
securities and, if so, the depositary for those temporary global securities and any special
provisions dealing with the payment of interest and any terms relating to the ability
to exchange interests in a temporary global security for interests in a permanent global
security or for definitive debt securities; |
| ● | whether
any additional amounts will be payable; |
| ● | the
denominations of the debt securities, if other than $1,000 and any integral multiple
thereof for registered securities, and $5,000 for bearer securities; |
| ● | any
portion of the principal amount of debt securities that shall be payable upon acceleration; |
| ● | the
currency or currencies in which the debt securities will be denominated and payable,
if other than U.S. dollars and, if a composite currency, any special provisions relating
thereto; |
| ● | any
circumstances under which the debt securities may be paid in a currency other than the
currency in which the debt securities are denominated and the manner in which the exchange
rate shall be determined; |
| ● | whether
the provisions described below under the heading “- Defeasance” will not
apply to the debt securities; |
| ● | any
events of default that will apply to the debt securities in addition to those contained
in the applicable indenture; |
| ● | any
additions or changes to the covenants contained in the applicable indenture and the ability,
if any, of the holders to waive our compliance with those additional or changed covenants; |
| ● | the
identity of the trustee, security registrar and paying agent for the debt securities; |
| ● | any
material tax implications of the debt securities; |
| ● | any
special provisions relating to the payment of any additional amounts on the debt securities;
and |
| ● | any
other terms of the debt securities. |
When
we use the term “holder” in this prospectus with respect to a registered debt security, we mean the person in whose
name such debt security is registered in the security register.
Exchange
and Transfer
At
the option of the holder, any debt securities of a series can be exchanged for other debt securities of that series so long as
the other debt securities are denominated in authorized denominations and have the same aggregate principal amount and same terms
as the debt securities that were surrendered for exchange, subject to limitations with respect to bearer securities in global
form. The debt securities may be presented for registration of transfer, duly endorsed or accompanied by a satisfactory written
instrument of transfer, at the office or agency maintained by us for that purpose in any place of payment that we may designate.
However, holders of global securities may transfer and exchange global securities only in the manner and to the extent set forth
under “- Book-Entry, Delivery and Form” below. There will be no service charge for any registration of transfer or
exchange of the debt securities, but we may require holders to pay any tax or other governmental charge payable in connection
with a transfer or exchange of the debt securities. If the applicable prospectus supplement refers to any office or agency, in
addition to the security registrar, initially designated by us where holders can surrender the debt securities for registration
of transfer or exchange, we may at any time rescind the designation of any such office or agency or approve a change in the location.
However, we will be required to maintain an office or agency in each place of payment for that series.
We
will not be required to:
| ● | issue,
register the transfer of or exchange debt securities to be redeemed for a period of 15
calendar days preceding the mailing of the relevant notice of redemption; or |
| ● | register
the transfer of or exchange any registered debt security selected for redemption, in
whole or in part, except the unredeemed or unpaid portion of that registered debt security
being redeemed in part. |
Interest
and Principal Payments
Payments.
Holders may present debt securities for payment of principal, premium, if any, and interest, if any, register the transfer
of the debt securities and exchange the debt securities at the agency maintained by us for such purpose and identified in the
applicable prospectus supplement. We refer to the applicable trustee acting in the capacity of a paying agent for the debt securities
as the “paying agent.”
Any
money that we pay to the paying agent for the purpose of making payments on the debt securities and that remains unclaimed two
years after the payments were due will, at our request, be returned to us and after that time any holder of a debt security can
only look to us for the payments on the debt security.
Recipients
of Payments. The paying agent will pay interest to the person in whose name the debt security is registered at the close
of business on the applicable record date. However, upon maturity, redemption or repayment, the paying agent will pay any interest
due to the person to whom it pays the principal of the debt security. The paying agent will make the payment on the date of maturity,
redemption or repayment, whether or not that date is an interest payment date. An “interest payment date” for any
debt security means a date on which, under the terms of that debt security, regularly scheduled interest is payable.
Book-Entry
Debt Securities. The paying agent will make payments of principal, premium, if any, and interest, if any, to the account
of The Depository Trust Company, referred to herein as “DTC,” or other depositary specified in the applicable prospectus
supplement, as holder of book-entry debt securities, by wire transfer of immediately available funds. The “depositary”
means the depositary for global securities issued under the applicable indenture and, unless provided otherwise in the applicable
prospectus supplement, means DTC. We expect that the depositary, upon receipt of any payment, will immediately credit its participants’
accounts in amounts proportionate to their respective beneficial interests in the book-entry debt securities as shown on the records
of the depositary. We also expect that payments by the depositary’s participants to owners of beneficial interests in the
book-entry debt securities will be governed by standing customer instructions and customary practices and will be the responsibility
of those participants.
Certificated
Debt Securities. Except as indicated below for payments of interest at maturity, redemption or repayment, the paying agent
will make payments of interest either:
| ● | by
check mailed to the address of the person entitled to payment as shown on the security
register; or |
| ● | by
wire transfer to an account designated by a holder, if the holder has given written notice
not later than 10 calendar days prior to the applicable interest payment date. |
Redemption
and Repayment of Debt Securities
Optional
Redemption by Us. If applicable, the prospectus supplement will indicate the terms of our option to redeem the debt securities.
We will mail a notice of redemption to each holder which, in the case of global securities, will be the depositary, as holder
of the global securities, by first-class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed
for redemption, or within the redemption notice period designated in the applicable prospectus supplement, to the address of each
holder as that address appears upon the books maintained by the security registrar.
A
partial redemption of the debt securities may be effected by such method as required by us, the registrar or the trustee, and
may provide for the selection for redemption of a portion of the principal amount of debt securities held by a holder equal to
an authorized denomination. If we redeem less than all of the debt securities and the debt securities are then held in book-entry
form, the redemption will be made in accordance with the depositary’s customary procedures. We have been advised that it
is DTC’s practice to determine by the lot the amount of each participant in the debt securities to be redeemed.
Unless
we default in the payment of the redemption price, on and after the redemption date interest will cease to accrue on the debt
securities called for redemption.
Repayment
at Option of Holder. If applicable, the prospectus supplement relating to a series of debt securities will indicate that
the holder has the option to have us repay a debt security of that series on a date or dates specified prior to its stated maturity
date. Unless otherwise specified in the applicable prospectus supplement, the repayment price will be equal to 100% of the principal
amount of the debt security, together with accrued interest to the date of repayment.
Each
holder desiring to exercise such holder’s option for repayment shall surrender the debt security to be repaid, together
with written notice of the exercise, at least 30 days but not more than 45 days prior to the repayment date, at any of our offices
or agencies in a place of payment, setting forth the principal amount of the debt security, the principal amount of the debt security
to be repaid, and in the case of partial repayment, shall specify the denomination or denominations of the debt securities of
the same series and the portion of the principal amount which is not to be repaid.
Exercise
of the repayment option by the holder of a debt security will be irrevocable. The holder may exercise the repayment option for
less than the entire principal amount of the debt security but, in that event, the principal amount of the debt security remaining
outstanding after repayment must be an authorized denomination.
If
a debt security is represented by a global security, the depositary or the depositary’s nominee will be the holder of the
debt security and therefore will be the only entity that can exercise a right to repayment. In order to ensure that the depositary’s
nominee will timely exercise a right to repayment of a particular debt security, the beneficial owner of the debt security must
instruct the broker or other direct or indirect participant through which it holds an interest in the debt security to notify
the depositary of its desire to exercise a right to repayment. Different firms have different cut-off times for accepting instructions
from their customers and, accordingly, each beneficial owner should consult the broker or other direct or indirect participant
through which it holds an interest in a debt security in order to ascertain the cut-off time by which an instruction must be given
in order for timely notice to be delivered to the depositary.
We
may purchase debt securities at any price in the open market or otherwise. Debt securities so purchased by us may, at our discretion,
be held or resold or surrendered to the applicable trustee for cancellation.
Denominations
Unless
we state otherwise in the applicable prospectus supplement, the debt securities may be issued in registered form in denominations
of $1,000 each and integral multiples of $1,000 in excess thereof, or in bearer form in denominations of $5,000.
Consolidation,
Merger or Sale
Each
of the indentures permits a consolidation or merger between us and another entity, subject to certain conditions. They also permit
the sale or transfer by us of all or substantially all of our property and assets. These transactions are permitted if:
| ● | the
resulting or acquiring entity, if other than us, is organized and existing under the
laws of a domestic jurisdiction and assumes all of our responsibilities and liabilities
under the applicable indenture, including the payment of all amounts due on the debt
securities and performance of the covenants in the applicable indenture; and |
| ● | immediately
after giving effect to the transaction, no event of default under the applicable indenture
exists. |
If
we consolidate or merge with or into any other entity or sell or lease all or substantially all of our assets according to the
terms and conditions of the indentures, the resulting or acquiring entity will be substituted for us in the indentures with the
same effect as if it had been an original party to the indentures. As a result, such successor entity may exercise our rights
and powers under the indentures, in our name and, except in the case of a lease of all or substantially all of our properties,
we will be released from all our liabilities and obligations under the indentures and under the debt securities.
Modification
and Waiver
Under
each of the indentures, certain of our rights and obligations and certain of the rights of holders of the debt securities may
be modified or amended with the consent of the holders of at least a majority of the aggregate principal amount of the outstanding
debt securities of all series of debt securities affected by the modification or amendment, acting as one class. However, the
following modifications and amendments will not be effective against any holder without its consent:
| ● | a
change in the stated maturity date of any payment of principal or interest; |
| ● | a
reduction in payments due on the debt securities; |
| ● | a
change in the place of payment or currency in which any payment on the debt securities
is payable; |
| ● | a
limitation of a holder’s right to sue us for the enforcement of payments due on
the debt securities; |
| ● | a
reduction in the percentage of outstanding debt securities required to consent to a modification
or amendment of the applicable indenture or required to consent to a waiver of compliance
with certain provisions of the applicable indenture or certain defaults under the applicable
indenture; |
| ● | a
reduction in the requirements contained in the applicable indenture for quorum or voting; |
| ● | a
limitation of a holder’s right, if any, to repayment of debt securities at the
holder’s option; and |
| ● | a
modification of any of the foregoing requirements contained in the applicable indenture. |
Under
each of the indentures, the holders of at least a majority of the aggregate principal amount of the outstanding debt securities
of all series of debt securities affected by a particular covenant or condition, acting as one class, may, on behalf of all holders
of such series of debt securities, waive compliance by us with any covenant or condition contained in the applicable indenture
unless we specify that such covenant or condition cannot be so waived at the time we establish the series.
In
addition, under each of the indentures, the holders of a majority in aggregate principal amount of the outstanding debt securities
of any series of debt securities may, on behalf of all holders of that series, waive any past default under the applicable indenture,
except:
| ● | a
default in the payment of the principal of or any premium or interest on any debt securities
of that series; or |
| ● | a
default under any provision of the applicable indenture which itself cannot be modified
or amended without the consent of the holders of each outstanding debt security of that
series. |
Events
of Default
Unless
otherwise specified in the applicable prospectus supplement, an “event of default,” when used in the senior indenture
or the subordinated indenture with respect to any series of debt securities issued thereunder, means any of the following:
| ● | failure
to pay interest on any debt security of that series for 30 days after the payment is
due; |
| ● | failure
to pay the principal of or any premium on any debt security of that series when due; |
| ● | failure
to deposit any sinking fund payment on debt securities of that series when due; |
| ● | failure
to perform any other covenant in the applicable indenture that applies to debt securities
of that series for 90 days after we have received written notice of the failure to perform
in the manner specified in the applicable indenture; |
| ● | certain
events in bankruptcy, insolvency or reorganization; or |
| ● | any
other event of default that may be specified for the debt securities of that series when
that series is created. |
If
an event of default for any series of debt securities occurs and continues, the trustee or the holders of at least 25% in aggregate
principal amount of the outstanding debt securities of the series may declare the entire principal of all the debt securities
of that series to be due and payable immediately. If such a declaration occurs, the holders of a majority of the aggregate principal
amount of the outstanding debt securities of that series can, subject to conditions, rescind the declaration.
Each
of the indentures requires us to file an officers’ certificate with the applicable trustee each year that states, to the
knowledge of the certifying officers, whether or not any defaults exist under the terms of the applicable indenture. The applicable
trustee may withhold notice to the holders of debt securities of any default, except defaults in the payment of principal, premium,
interest or any sinking fund installment, if it considers the withholding of notice to be in the interest of the holders. For
purposes of this paragraph, “default” means any event which is, or after notice or lapse of time or both would become,
an event of default under the applicable indenture with respect to the debt securities of the applicable series.
Other
than its duties in the case of a default, a trustee is not obligated to exercise any of its rights or powers under the applicable
indenture at the request, order or direction of any holders, unless the holders offer that trustee security or indemnity satisfactory
to the trustee. If satisfactory indemnification is provided, then, subject to other rights of the trustee, the holders of a majority
in principal amount of the outstanding debt securities of any series may, with respect to the debt securities of that series,
direct the time, method and place of:
| ● | conducting
any proceeding for any remedy available to the trustee; or |
| ● | exercising
any trust or power conferred upon the trustee. |
The
holder of a debt security of any series will have the right to begin any proceeding with respect to the applicable indenture or
for any remedy only if:
| ● | the
holder has previously given the trustee written notice of a continuing event of default
with respect to that series; |
| ● | the
holders of at least 25% in aggregate principal amount of the outstanding debt securities
of that series have made a written request of, and offered reasonable indemnification
to, the trustee to begin such proceeding; |
| ● | the
trustee has not started such proceeding within 60 days after receiving the request; and |
| ● | the
trustee has not received directions inconsistent with such request from the holders of
a majority in aggregate principal amount of the outstanding debt securities of that series
during those 60 days. |
However,
the holder of any debt security will have an absolute right to receive payment of principal of and any premium and interest on
the debt security when due and to institute suit to enforce this payment, subject to limitations with respect to subordinated
debt securities.
Defeasance
Defeasance
and Discharge. At the time that we establish a series of debt securities under the applicable indenture, we can provide
that the debt securities of that series are subject to the defeasance and discharge provisions of that indenture. Unless we specify
otherwise in the applicable prospectus supplement, the debt securities offered thereby will be subject to the defeasance and discharge
provisions of the applicable indenture, and we will be discharged from our obligations on the debt securities of that series if:
| ● | we
deposit with the applicable trustee, in trust, sufficient money or, if the debt securities
of that series are denominated and payable in U.S. dollars only, Eligible Instruments,
to pay the principal, any interest, any premium and any other sums due on the debt securities
of that series, such as sinking fund payments, on the dates the payments are due under
the applicable indenture and the terms of the debt securities; |
| ● | we
deliver to the applicable trustee an opinion of counsel that states that the holders
of the debt securities of that series will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit and will be subject to federal income
tax on the same amounts and in the same manner and at the same times as would have been
the case if no deposit, defeasance and discharge had been made; and |
| ● | if
the debt securities of that series are listed on any domestic or foreign securities exchange,
the debt securities will not be delisted as a result of the deposit. |
When
we use the term “Eligible Instruments” in this section, we mean monetary assets, money market instruments and securities
that are payable in U.S. dollars only and essentially risk free as to collection of principal and interest, including:
| ● | monetary
assets, money market instruments and securities that are payable in U.S. dollars only
and essentially risk free as to collection of principal and interest; or |
| ● | direct
obligations of the United States for the payment of which its full faith and credit is
pledged, or obligations of a person controlled or supervised by and acting as an agency
or instrumentality of the United States if the timely payment of the obligation is unconditionally
guaranteed as a full faith and credit obligation by the United States. |
In
the event that we deposit money and/or Eligible Instruments in trust and discharge our obligations under a series of debt securities
as described above, then:
| ● | the
applicable indenture, including, in the case of subordinated debt securities, the subordination provisions contained in the subordinated
indenture, will no longer apply to the debt securities of that series; however, certain obligations to compensate, reimburse and
indemnify the trustee, to register the transfer and exchange of debt securities, to replace lost, stolen or mutilated debt securities,
to maintain paying agencies and the trust funds and to pay additional amounts, if any, required as a result of U.S. withholding taxes imposed on payments to non-U.S. persons will continue to apply; and
|
| ● | holders
of debt securities of that series can only look to the trust fund for payment of principal,
any premium and any interest on the debt securities of that series. |
Defeasance
of Certain Covenants and Certain Events of Default. At the time that we establish a series of debt securities under the
applicable indenture, we can provide that the debt securities of that series are subject to the covenant defeasance provisions
of that indenture. Unless we specify otherwise in the applicable prospectus supplement, the debt securities offered thereby will
be subject to the covenant defeasance provisions of the applicable indenture, and if we make the deposit and deliver the opinion
of counsel described above in this section under the heading “- Defeasance and Discharge,” we will not have to comply
with any covenant we designate when we establish the series of debt securities. In the event of a covenant defeasance, our obligations
under the applicable indenture and the debt securities, other than with respect to the covenants specifically designated upon
establishing the debt securities, will remain in effect.
If
we exercise our option not to comply with certain covenants as described above and the debt securities of the series become immediately
due and payable because an event of default has occurred, other than as a result of an event of default specifically relating
to any of such covenants, the amount of money and/or Eligible Instruments on deposit with the applicable trustee will be sufficient
to pay the principal, any interest, any premium and any other sums, due on the debt securities of that series, such as sinking
fund payments, on the date the payments are due under the applicable indenture and the terms of the debt securities, but may not
be sufficient to pay amounts due at the time of acceleration. However, we would remain liable for the balance of the payments.
Subordination
The
subordinated debt securities will be subordinate to all of our existing and future Senior Debt, as defined below. Our “Senior
Debt” includes the senior debt securities and means the principal of, premium, if any, and interest on, rent under, and
any other amounts payable on or in or in respect of any of our indebtedness (including, without limitation, any obligations in
respect of such indebtedness and any interest accruing after the filing of a petition by or against us under any bankruptcy law,
whether or not allowed as a claim after such filing in any proceeding under such bankruptcy law), whether outstanding on the date
of the senior indenture or thereafter created, incurred, assumed, guaranteed or in effect guaranteed by us (including all deferrals,
renewals, extensions, refinancings or refundings of, or amendments, modifications or supplements to the foregoing). However, Senior
Debt does not include:
| ● | any
liability for federal, state, local or other taxes owed or owing by us; |
| ● | our
indebtedness to any of our subsidiaries; |
| ● | our
trade payables and accrued expenses (including, without limitation, accrued compensation)
for goods, services or materials purchased or provided in the ordinary course of business;
and |
| ● | any
particular indebtedness in which the instrument creating or evidencing the same expressly
provides that such indebtedness shall not be senior in right of payment to, or is pari
passu with, or is subordinated or junior to, the subordinated debt securities. |
If
certain events in bankruptcy, insolvency or reorganization occur, we will first pay all Senior Debt, including any interest accrued
after the events occur, in full before we make any payment or distribution, whether in cash, securities or other property, on
account of the principal of or interest on the subordinated debt securities. In such an event, we will pay or deliver directly
to the holders of Senior Debt any payment or distribution otherwise payable or deliverable to holders of the subordinated debt
securities. We will make the payments to the holders of Senior Debt according to priorities existing among those holders until
we have paid all Senior Debt, including accrued interest, in full. Notwithstanding the subordination provisions discussed in this
paragraph, we may make payments or distributions on the subordinated debt securities so long as:
| ● | the
payments or distributions consist of securities issued by us or another company in connection
with a plan of dissolution, reorganization, readjustment or winding up; and |
| ● | payment
on those securities is subordinate to outstanding Senior Debt and any securities issued
with respect to Senior Debt under such plan of dissolution, reorganization, readjustment
or winding up at least to the same extent provided in the subordination provisions of
the subordinated debt securities. |
If
such events in bankruptcy, insolvency or reorganization occur, after we have paid in full all amounts owed on Senior Debt:
| ● | the
holders of subordinated debt securities, |
| ● | together
with the holders of any of our other obligations ranking equal with those subordinated
debt securities, |
will
be entitled to receive from our remaining assets any principal, premium or interest due at that time on the subordinated debt
securities and such other obligations before we make any payment or other distribution on account of any of our capital stock
or obligations ranking junior to those subordinated debt securities.
If
we violate the subordinated indenture by making a payment or distribution to holders of the subordinated debt securities before
we have paid all of the Senior Debt in full, then such holders of the subordinated debt securities will be deemed to have received
the payments or distributions in trust for the benefit of, and will have to pay or transfer the payments or distributions to,
the holders of the Senior Debt outstanding at the time. The payment or transfer to the holders of the Senior Debt will be made
according to the priorities existing among those holders. Notwithstanding the subordination provisions discussed in this paragraph,
holders of subordinated debt securities will not be required to pay, or transfer payments or distributions to, holders of Senior
Debt so long as:
| ● | the
payments or distributions consist of securities issued by us or another company in connection
with a plan of reorganization or readjustment; and |
| ● | payment
on those securities is subordinated to outstanding Senior Debt and any securities issued
with respect to Senior Debt under such plan of reorganization or readjustment at least
to the same extent provided in the subordination provisions of those subordinated debt
securities. |
| ● | Because
of the subordination, if we become insolvent, holders of Senior Debt may receive more,
ratably, and holders of the subordinated debt securities having a claim pursuant to those
securities may receive less, ratably, than our other creditors. |
We
may modify or amend the subordinated indenture as provided under “- Modification and Waiver” above. However, the modification
or amendment may not, without the consent of the holders of all Senior Debt outstanding, modify any of the provisions of the subordinated
indenture relating to the subordination of the subordinated debt securities in a manner that would adversely affect the holders
of Senior Debt.
Payment
of Additional Amounts
Unless
we specify otherwise in the applicable prospectus supplement, we will not pay any additional amounts on the debt securities offered
thereby to compensate any beneficial owner for any United States tax withheld from payments on such debt securities.
Book-Entry,
Delivery and Form
We
have obtained the information in this section concerning DTC, Clearstream Banking S.A., or “Clearstream,” and Euroclear
Bank S.A./N.V., as operator of the Euroclear System, or “Euroclear,” and the book-entry system and procedures from
sources that we believe to be reliable, but we take no responsibility for the accuracy of this information. This information could
change at any time. In addition, we have no control over DTC, Clearstream or Euroclear, or any of their participants, and therefore
we take no responsibility for their activities.
Unless
otherwise specified in the applicable prospectus supplement, the debt securities will be issued as fully registered global securities
that will be deposited with, or on behalf of, DTC and registered, at the request of DTC, in the name of Cede & Co. Beneficial
interests in the global securities will be represented through book-entry accounts of financial institutions acting on behalf
of beneficial owners as direct or indirect participants in DTC. The direct and indirect participants will remain responsible for
keeping account of their holdings on behalf of their customers. Investors may elect to hold their interests in the global securities
through either DTC (in the United States) or (in Europe) through Clearstream or through Euroclear. Investors may hold their interests
in the global securities directly if they are participants of such systems, or indirectly through organizations that are participants
in these systems. Interests held through Clearstream and Euroclear will be recorded on DTC’s books as being held by the
U.S. Depositary for each of Clearstream and Euroclear (the “U.S. Depositaries”), which U.S. Depositaries will, in
turn, hold interests on behalf of their participants’ customers’ securities accounts. Unless otherwise specified in
the applicable prospectus supplement, beneficial interests in the global securities will be held in denominations of $1,000 and
multiples of $1,000 in excess thereof. Except as set forth below, the global securities may be transferred, in whole and not in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
Debt
securities represented by a global security can be exchanged for definitive securities in registered form only if:
| ● | DTC
notifies us that it is unwilling or unable to continue as depositary for that global
security and we do not appoint a qualified successor depositary within 90 days after
receiving that notice; |
| ● | at
any time DTC ceases to be a clearing agency registered under the Exchange Act and we
do not appoint a successor depositary within 90 days after becoming aware that DTC has
ceased to be registered as a clearing agency; |
| ● | we
in our sole discretion determine that such global security will be exchangeable for definitive
securities in registered form or elect to terminate the book-entry system through DTC
and notify the applicable trustee of our decision; or |
| ● | an
event of default with respect to the debt securities represented by that global security
has occurred and is continuing. |
A
global security that can be exchanged as described in the preceding sentence will be exchanged for definitive securities issued
in authorized denominations in registered form for the same aggregate amount. The definitive securities will be registered in
the names of the owners of the beneficial interests in the global security as directed by DTC.
We
will make principal and interest payments on all debt securities represented by a global security to the paying agent which in
turn will make payment to DTC or its nominee, as the case may be, as the sole registered owner and the sole holder of the debt
securities represented by a global security for all purposes under the applicable indenture. Accordingly, we, the applicable trustee
and any paying agent will have no responsibility or liability for:
| ● | any
aspect of DTC’s records relating to, or payments made on account of, beneficial
ownership interests in a debt security represented by a global security; |
| ● | any
other aspect of the relationship between DTC and its participants or the relationship
between those participants and the owners of beneficial interests in a global security
held through those participants; or |
| ● | the
maintenance, supervision or review of any of DTC’s records relating to those beneficial
ownership interests. |
We
understand that DTC’s current practice is to credit direct participants’ accounts on each payment date with payments
in amounts proportionate to their respective beneficial interests in the principal amount of such global security as shown on
DTC’s records, upon DTC’s receipt of funds and corresponding detail information. The underwriters or agents for the debt securities represented by a global security will initially designate the accounts to be credited. Payments by participants
to owners of beneficial interests in a global security will be governed by standing instructions and customary practices, as is
the case with securities held for customer accounts registered in “street name,” and will be the sole responsibility
of those participants, and not of DTC or its nominee, the trustee, any agent of ours, or us, subject to any statutory or regulatory
requirements. Book-entry notes may be more difficult to pledge because of the lack of a physical note.
DTC
So
long as DTC or its nominee is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered
the sole owner and holder of the debt securities represented by that global security for all purposes of the debt securities.
Owners of beneficial interests in the debt securities will not be entitled to have debt securities registered in their names,
will not receive or be entitled to receive physical delivery of the debt securities in definitive form and will not be considered
owners or holders of debt securities under the applicable indenture. Accordingly, each person owning a beneficial interest in
a global security must rely on the procedures of DTC and, if that person is not a DTC participant, on the procedures of the participant
through which that person owns its interest, to exercise any rights of a holder of debt securities. The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of the securities in certificated form. These laws may
impair the ability to transfer beneficial interests in a global security. Beneficial owners may experience delays in receiving
distributions on their debt securities since distributions will initially be made to DTC and must then be transferred through
the chain of intermediaries to the beneficial owner’s account.
We
understand that, under existing industry practices, if we request holders to take any action, or if an owner of a beneficial interest
in a global security desires to take any action which a holder is entitled to take under the applicable indenture, then DTC would
authorize the participants holding the relevant beneficial interests to take that action and those participants would authorize
the beneficial owners owning through such participants to take that action or would otherwise act upon the instructions of beneficial
owners owning through them.
Beneficial
interests in a global security will be shown on, and transfers of those ownership interests will be effected only through, records
maintained by DTC and its participants for that global security. The conveyance of notices and other communications by DTC to
its participants and by its participants to owners of beneficial interests in the debt securities will be governed by arrangements
among them, subject to any statutory or regulatory requirements in effect.
We
understand that DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization”
within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within
the meaning of the New York Uniform Commercial Code and a “clearing agency” registered under the Exchange Act. DTC
is a wholly owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company
for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated subsidiaries.
DTC
holds the securities of its participants and facilitates the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of its participants. The electronic book-entry system eliminates
the need for physical certificates. DTC’s participants include securities brokers and dealers, including underwriters, banks,
trust companies, clearing corporations and certain other organizations, some of which, and/or their representatives, own DTCC.
Banks, brokers, dealers, trust companies and others that clear through or maintain a custodial relationship with a participant,
either directly or indirectly, also have access to DTC’s book-entry system. The rules applicable to DTC and its participants
are on file with the SEC.
The
above information with respect to DTC has been provided for informational purposes only and is not intended to serve as a representation,
warranty or contract modification of any kind.
Clearstream
We
understand that Clearstream was incorporated under the laws of Luxembourg as an international clearing system. Clearstream holds
securities for its participating organizations, or “Clearstream Participants,” and facilitates the clearance and settlement
of securities transactions between Clearstream Participants through electronic book-entry changes in accounts of Clearstream Participants,
thereby eliminating the need for physical movement of certificates. Clearstream provides to Clearstream Participants, among other
things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream interfaces with domestic securities markets in several countries. As a professional depositary,
Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of the Financial Sector (Commission de
Surveillance du Secteur Financier). Clearstream Participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Clearstream’s
U.S. Participants are limited to securities brokers and dealers and banks. Indirect access to Clearstream is also available to
others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream
Participant either directly or indirectly.
Distributions
with respect to debt securities held beneficially through Clearstream will be credited to cash accounts of Clearstream Participants
in accordance with its rules and procedures, to the extent received by the U.S. Depositary for Clearstream.
Euroclear
We
understand that Euroclear was created in 1968 to hold securities for participants of Euroclear, or “Euroclear Participants,”
and to clear and settle transactions between Euroclear Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear performs various other services, including securities lending and borrowing and interacts with
domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V., or the “Euroclear Operator,”
under contract with Euroclear plc, a U.K. corporation. All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not Euroclear plc. Euroclear
plc establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks, including central
banks, securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available
to other firms that clear through or maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
Euroclear is an indirect participant in DTC.
The
Euroclear Operator is a Belgian bank. As such it is regulated by the Belgian Banking and Finance Commission and the National Bank
of Belgium.
Securities
clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System, and applicable Belgian law, which we will refer to herein as the
“Terms and Conditions.” The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear Participants, and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions
with respect to debt securities held beneficially through Euroclear will be credited to the cash accounts of Euroclear Participants
in accordance with the Terms and Conditions, to the extent received by the Euroclear Operator.
We
further understand that investors that acquire, hold and transfer interests in the debt securities by book-entry through accounts
with the Euroclear Operator or any other securities intermediary are subject to the laws and contractual provisions governing
their relationship with their intermediary, as well as the laws and contractual provisions governing the relationship between
such an intermediary and each other intermediary, if any, standing between themselves and the global securities.
Global
Clearance and Settlement Procedures
Unless
otherwise specified in the applicable prospectus supplement, initial settlement for the debt securities will be made in immediately
available funds. Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules
and will be settled in immediately available funds using DTC’s Same-Day Funds Settlement System. Secondary market trading
between Clearstream Participants and/or Euroclear Participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Clearstream and Euroclear and will be settled using the procedures applicable to conventional
eurobonds in immediately available funds.
Cross-market
transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the
relevant European international clearing system by its U.S. Depositary; however, such cross-market transactions will require delivery
of instructions to the relevant European international clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver instructions to its U.S. Depositary to take action to effect
final settlement on its behalf by delivering or receiving debt securities through DTC, and making or receiving payment in accordance
with normal procedures for same- day funds settlement applicable to DTC. Clearstream Participants and Euroclear Participants may
not deliver instructions directly to their respective U.S. Depositaries.
Because
of time-zone differences, credits of debt securities received through Clearstream or Euroclear as a result of a transaction with
a DTC participant will be made during subsequent securities settlement processing and dated the business day following the DTC
settlement date. Such credits or any transactions in such debt securities settled during such processing will be reported to the
relevant Euroclear Participants or Clearstream Participants on such business day. Cash received in Clearstream or Euroclear as
a result of sales of debt securities by or through a Clearstream Participant or a Euroclear Participant to a DTC participant will
be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account
only as of the business day following settlement in DTC.
If
the debt securities are cleared only through Euroclear and Clearstream (and not DTC), you will be able to make and receive through
Euroclear and Clearstream payments, deliveries, transfers, exchanges, notices, and other transactions involving any securities
held through those systems only on days when those systems are open for business. Those systems may not be open for business on
days when banks, brokers, and other institutions are open for business in the United States. In addition, because of time-zone
differences, U.S. investors who hold their interests in the securities through these systems and wish to transfer their interests,
or to receive or make a payment or delivery or exercise any other right with respect to their interests, on a particular day may
find that the transaction will not be effected until the next business day in Luxembourg or Brussels, as applicable. Thus, U.S.
investors who wish to exercise rights that expire on a particular day may need to act before the expiration date.
Although
DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of debt securities among
participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform such procedures
and such procedures may be modified or discontinued at any time. Neither we nor any paying agent will have any responsibility
for the performance by DTC, Euroclear or Clearstream or their respective direct or indirect participants of their obligations
under the rules and procedures governing their operations.
Conversion
and Exchange
If
any offered debt securities are convertible at the option of the holders or exchangeable at our option, the prospectus supplement
relating to those debt securities will include the terms and conditions governing any conversions and exchanges.
Governing
Law
The
indentures are, and the debt securities will be, governed by and will be construed in accordance with New York law.
DESCRIPTION
OF WARRANTS
Outstanding
Warrants
As
of August 15, 2022, we had 2,352,936 shares of the common stock that may be issued upon the exercise of outstanding warrants,
of which 2,352,936 are fully exercisable (our “outstanding warrants”). The warrants expire five years from the date
of the grant. The following table summarizes information regarding warrants outstanding at August 15, 2022:
Grant
Date |
Warrants
Outstanding |
Warrants
Exercisable |
Exercise
Price
(Per Share) |
Expiration
Date |
| March
28, 2022 |
2,352,936 |
2,352,936 |
$13.60 |
March
28, 2027 |
The
exercise price of our outstanding warrants is subject to adjustment if, after September 15, 2021, we issue, sell, publicly announce
the contemplated issuance or sale of, or are deemed to have issued or sold, any shares of common stock for a consideration per
share less than a price equal to the exercise price in effect immediately prior to such issuance or sale or deemed issuance or
sale. In the case of any such dilutive issuance, the exercise price then in effect will be reduced to an amount equal to the lesser
of the consideration per share in such dilutive issuance and the lowest volume weighted average price (“VWAP”) of
our common stock on any trading day during the five trading days immediately following the public announcement of the execution
of the dilutive issuance. Additionally, the number of warrant shares issuable under an outstanding warrant will be increased such
that the aggregate exercise price payable under the warrant, after taking into account the decrease in the exercise price in connection
with the dilutive issuance, will be equal to the aggregate exercise price prior to such adjustment.
An
outstanding warrant may be exercised by payment of the aggregate exercise price in cash or, if the exercise of the warrant occurs
after the deadline for effectiveness of the registration statements required by the registration rights agreement entered into
with the warrant holders and a registration statement covering the issuance or resale of the shares of common stock issuable upon
exercise of the warrant is not available for the issuance or resale, by a cashless exercise in which the holder will receive a
net number of shares of common stock upon exercise.
The
outstanding warrants contain a call provision under which we may call for cancellation of all or any portion of a warrant for
which an exercise notice has not yet been delivered for consideration equal to $0.001 per warrant share. This call right may be
exercised by us upon proper notice only if:
| ● | the
VWAP of our common stock for each of 10 consecutive trading days exceeds 300% of the
then current exercise price; |
| ● | the
average daily dollar volume for such 10 consecutive trading day measurement period exceeds
$5,000,000 per trading day; and |
| ● | the
holder of the warrant is not in possession of any information that constitutes, or might
constitute, material, non-public information which was provided by our company, any of
our subsidiaries, or any of their officers, directors, employees, agents or affiliates. |
We
may not enter into or be party to a Fundamental Transaction (as further described below) unless the successor entity to such Fundamental
Transaction assumes in writing all of our obligations under the warrants. In addition, prior to the consummation of any Fundamental
Transaction pursuant to which holders of our common stock are entitled to receive securities, cash, assets or other property with
respect to or in exchange for the our common stock, we must make appropriate provision to ensure that, and any applicable successor
entity must ensure that, the warrant holder will thereafter have the right to receive upon exercise of the warrant at any time
after the consummation of such event, shares of common stock or capital stock of the successor entity or, if so elected by the
warrant holder, in lieu of the shares of common stock (or other securities, cash, assets or other property) issuable upon exercise
of the warrant prior to such event, such shares of stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the warrant holder would have been entitled to receive upon the consummation
of such event or the record date resulting in such event, had the warrant been exercised immediately prior to such event or the
record date such event (without regard to any limitations on exercise of the warrant). In the event of a change of control, at
the request of the warrant holder or at our election delivered before the 60th day after the consummation of such change of control,
we (or the successor entity) will purchase the warrant from the warrant holder by paying to the holder cash in an amount equal
to the Black-Scholes value of the remaining unexercised portion of the warrant on the date of such change of control.
Under
the Outstanding Warrants, the term Fundamental Transaction includes one or more related transactions in which we, directly or
indirectly, will:
| ● | consolidate
or merge with or into (whether or not we are the surviving corporation) another entity;
or |
| ● | sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the properties
or assets of company or any of our “significant subsidiaries” to one or more
entities; or |
| ● | make,
or allow one or more entities to make, or allow our company to be subject to or have
shares of common stock be subject to or party to one or more entities making, a purchase,
tender or exchange offer that is accepted by the holders of at least either (i) 50% of
the outstanding shares of common stock, (ii) 50% of the outstanding shares of common
stock calculated as if any shares of common stock held by all entities making or party
to, or affiliated with any entities making or party to, such offer were not outstanding;
or (iii) such number of shares of common stock such that all entities making or party
to, or affiliated with any entity making or party to, such offer, become collectively
the beneficial owners of at least 50% of the outstanding shares of common stock; or |
| ● | consummate
a stock purchase agreement or other business combination with one or more entities whereby
all such entities, individually or in the aggregate, acquire, either (i) at least 50%
of the outstanding shares of common stock, (ii) at least 50% of the outstanding shares
of common stock calculated as if any shares of common stock held by all the entities
making or party to, or affiliated with any entity making or party to, such stock purchase
agreement or other business combination were not outstanding; or (iii) such number of
shares of common stock such that the entities become collectively the beneficial owners
of at least 50% of the outstanding shares of common stock; or |
| ● | reorganize,
recapitalize or reclassify shares of common stock; or |
| ● | allow
any entity individually or the entities in the aggregate to be or become the beneficial
owner, directly or indirectly, of either (x) at least 50% of the aggregate ordinary voting
power represented by issued and outstanding shares of common stock, (y) at least 50%
of the aggregate ordinary voting power represented by issued and outstanding shares of
common stock not held by all such entities as of the date of the securities purchase
agreement calculated as if any shares of common stock held by all such entities were
not outstanding, or (iii) a percentage of the aggregate ordinary voting power represented
by issued and outstanding shares of common stock or other equity securities of sufficient
to allow such entities to effect a statutory short form merger or other transaction requiring
other shareholders to surrender their common stock without approval of our shareholders. |
The
outstanding warrants contain provisions limiting the exercise by a holder based on beneficial ownership. Specifically, a holder
will be prohibited, subject to certain exceptions, from exercising a warrant to the extent that immediately prior to or after
giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 4.99%
of the total number of shares of common stock then issued and outstanding, which percentage may be changed at the holder’s
election to a lower percentage at any time or to a higher percentage not to exceed 9.99% upon 61 days’ notice to us.
Additionally,
so long as the warrant remains outstanding, we are obligated to at all times keep reserved for issuance a number of shares of
common stock at least equal to 200% of the maximum number of shares of common stock as are issuable upon exercise of the outstanding
warrants without regard to any limitations on exercise.
Additional
Warrants
We
may issue warrants for the purchase of shares of our common stock or preferred stock or of debt securities. We may issue warrants
independently or together with other securities, and the warrants may be attached to or separate from any offered securities.
Each series of warrants will be issued under a separate warrant agreement to be entered into between us and the investors or a
warrant agent. The following summary of material provisions of the warrants and warrant agreements are subject to, and qualified
in their entirety by reference to, all the provisions of the warrant agreement and warrant certificate applicable to a particular
series of warrants. The terms of any warrants offered under a prospectus supplement may differ from the terms described below.
We urge you to read the applicable prospectus supplement and any related free writing prospectus, as well as the complete warrant
agreements and warrant certificates that contain the terms of the warrants.
The
particular terms of any issue of warrants will be described in the prospectus supplement relating to the issue. Those terms may
include:
| ● | the
number of shares of common stock or preferred stock purchasable upon the exercise of
warrants to purchase such shares and the price at which such number of shares may be
purchased upon such exercise; |
| ● | the
designation, stated value and terms (including, without limitation, liquidation, dividend,
conversion and voting rights) of the series of preferred stock purchasable upon exercise
of warrants to purchase preferred stock; |
| ● | the
principal amount of debt securities that may be purchased upon exercise of a debt warrant
and the exercise price for the warrants, which may be payable in cash, securities or
other property; |
| ● | the
date, if any, on and after which the warrants and the related debt securities, preferred
stock or common stock will be separately transferable; |
| ● | the
terms of any rights to redeem or call the warrants; |
| ● | the
date on which the right to exercise the warrants will commence and the date on which
the right will expire; |
| ● | a
discussion of certain United States federal income tax consequences applicable to the
warrants; and |
| ● | any
additional terms of the warrants, including terms, procedures, and limitations relating
to the exchange, exercise and settlement of the warrants. |
Holders
of equity warrants will not be entitled to:
| ● | vote,
consent or receive dividends; |
| ● | receive
notice as stockholders with respect to any meeting of stockholders for the election of
our directors or any other matter; or |
| ● | exercise
any rights as stockholders of Pineapple. |
Each
warrant will entitle its holder to purchase the principal amount of debt securities or the number of shares of preferred stock
or common stock at the exercise price set forth in, or calculable as set forth in, the applicable prospectus supplement. Unless
we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up
to the specified time on the expiration date that we set forth in the applicable prospectus supplement. After the close of business
on the expiration date, unexercised warrants will become void.
A
holder of warrant certificates may exchange them for new warrant certificates of different denominations, present them for registration
of transfer and exercise them at the corporate trust office of the warrant agent or any other office indicated in the applicable
prospectus supplement. Until any warrants to purchase debt securities are exercised, the holder of the warrants will not have
any rights of holders of the debt securities that can be purchased upon exercise, including any rights to receive payments of
principal, premium or interest on the underlying debt securities or to enforce covenants in the applicable indenture. Until any
warrants to purchase common stock or preferred stock are exercised, the holders of the warrants will not have any rights of holders
of the underlying common stock or preferred stock, including any rights to receive dividends or payments upon any liquidation,
dissolution or winding up on the common stock or preferred stock, if any.
DESCRIPTION
OF STOCK PURCHASE CONTRACTS
We
may issue stock purchase contracts, including contracts obligating holders to purchase from us and contracts obligating us to
sell to the holders, a specified number of shares of common stock or other securities at a future date or dates. The price per
share of the securities and the number of shares of the securities may be fixed at the time the stock purchase contracts are issued
or may be determined by reference to a specific formula set forth in the stock purchase contracts. The stock purchase contracts
may be issued separately or as part of units consisting of a stock purchase contract and warrants or other securities or debt
obligations of third parties, including U.S. treasury securities, securing the holders’ obligations to purchase the securities
under the stock purchase contracts. The stock purchase contracts may require us to make periodic payments to the holders of the
stock purchase contracts or vice versa, and such payments may be unsecured or prefunded on some basis. They may also require holders
to secure their obligations thereunder in a specified manner and in certain circumstances we may deliver newly issued prepaid
stock purchase contracts, or prepaid securities, upon release to a holder of any collateral securing such holder’s obligations
under the original stock purchase contract.
The
stock purchase contracts, and, if applicable, collateral or depositary arrangements will be filed with the SEC in connection with
the offering of stock purchase contracts. The prospectus supplement and any incorporated documents relating to any stock purchase
contracts that we offer will include specific terms relating to the offering, including, among other matters:
| ● | If
applicable, a discussion of material U.S. federal income tax considerations; and |
| ● | Any
other information we think important about the stock purchase contracts. |
DESCRIPTION
OF RIGHTS
We
may issue rights to purchase our common stock. The rights may or may not be transferable by the persons purchasing or receiving
the rights. In connection with any rights offering, we may enter into a standby underwriting or other arrangement with one or
more underwriters or other persons pursuant to which such underwriters or other persons would purchase any offered securities
remaining unsubscribed for after such rights offering. Each series of rights will be issued under a separate rights agent agreement
to be entered into between us and one or more banks, trust companies or other financial institutions, as rights agent, that we
will name in the applicable prospectus supplement. The rights agent will act solely as our agent in connection with the rights
and will not assume any obligation or relationship of agency or trust for or with any holders of rights certificates or beneficial
owners of rights.
The
prospectus supplement and any incorporated documents relating to any rights that we offer will include specific terms relating
to the offering, including, among other matters:
| ● | the
date of determining the security holders entitled to the rights distribution; |
| ● | the
aggregate number of rights issued and the aggregate number of shares of common stock
purchasable upon exercise of the rights; |
| ● | the
conditions to completion of the rights offering; |
| ● | the
date on which the right to exercise the rights will commence and the date on which the
rights will expire; and |
| ● | a
discussion of certain United States federal income tax consequences applicable to the
rights offering. |
Each
right would entitle the holder of the rights to purchase for cash shares of common stock at the exercise price set forth in the
applicable prospectus supplement. Rights may be exercised at any time up to the close of business on the expiration date for the
rights provided in the applicable prospectus supplement. After the close of business on the expiration date, all unexercised rights
will become void.
If
less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to
persons other than our security holders, to or through agents, underwriters or dealers or through a combination of such methods,
including pursuant to standby arrangements, as described in the applicable prospectus supplement.
DESCRIPTION
OF UNITS
We
may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series.
We may evidence each series of units by unit certificates that we will issue under a separate agreement. We may enter into unit
agreements with a unit agent. Each unit agent will be a bank or trust company that we select. We will indicate the name and address
of the unit agent in the applicable prospectus supplement relating to a particular series of units.
The
following description, together with the additional information included in any applicable prospectus supplement, summarizes the
general features of the units that we may offer under this prospectus. You should read any prospectus supplement and any free
writing prospectus that we may authorize to be provided to you related to the series of units being offered, as well as the complete
unit agreements that contain the terms of the units. Specific unit agreements will contain additional important terms and provisions
and we will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference
from another report that we file with the SEC, the form of each unit agreement relating to units offered under this prospectus.
If
we offer any units, certain terms of that series of units will be described in the applicable prospectus supplement, including,
without limitation, the following, as applicable:
| ● | the
title of the series of units; |
| ● | identification
and description of the separate constituent securities comprising the units; |
| ● | the
price or prices at which the units will be issued; |
| ● | the
date, if any, on and after which the constituent securities comprising the units will
be separately transferable; |
| ● | a
discussion of certain United States federal income tax considerations applicable to the
units; and |
| ● | any
other terms of the units and their constituent securities. |
PLAN
OF DISTRIBUTION
We
or the selling stockholders may sell securities in any one or more of the following ways from time to time:
| ● | to
or through underwriters (including through syndicates or acting alone for resale); |
| ● | to
or through brokers or dealers; |
| ● | directly
by us to purchasers, including through a specific bidding, auction or other process; |
| ● | upon
the exercise of subscription rights that may be distributed to our stockholders; |
| ● | an
exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately
negotiated transactions; |
| ● | settlement
of short sales entered into after the effective date of the registration statement of which
this prospectus is a part; |
| ● | broker-dealers
may agree with the selling stockholders to sell a specified number of such shares at a stipulated
price per share; |
| ● | through
the writing or settlement of options or other hedging transactions, whether such options
are listed on an options exchange or otherwise; or |
| ● | through
a combination of any of these methods of sale; or |
| ● | by
any other method permitted by law. |
The
selling stockholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. If
the shares of common stock are sold by the selling stockholders through underwriters or broker-dealers, the selling stockholders will
be responsible for underwriting discounts or commissions or agent’s commissions. Further, the selling stockholders may sell all,
some or none of the shares registered pursuant to this prospectus.
The
applicable prospectus supplement and/or other offering material will contain the terms of the transaction, name or names of any
underwriters, dealers, or agents and the respective amounts of securities underwritten or purchased by them, the initial public
offering price of the securities, and the applicable agent’s commission, dealer’s purchase price or underwriter’s
discount. Any dealers and agents participating in the distribution of the securities may be deemed to be underwriters, and compensation
received by them on resale of the securities may be deemed to be underwriting discounts.
Sales
of the securities may be effected from time to time in one or more transactions, including negotiated transactions:
| ● | at
a fixed price or prices, which may be changed; |
| ● | at
market prices prevailing at the time of sale; |
| ● | at
prices related to prevailing market prices; |
| ● | at
varying prices determined at the time of sale; or |
Any
initial offering price, dealer purchase price, discount or commission may be changed from time to time. The securities may be
distributed from time to time in one or more transactions, at negotiated prices, at a fixed price or fixed prices (that may be
subject to change), at market prices prevailing at the time of sale, at various prices determined at the time of sale or at prices
related to prevailing market prices.
Offers
to purchase securities may be solicited directly by us, the selling stockholders, or by agents designated by us or the selling
stockholders from time to time. Any such agent may be deemed to be an underwriter, as that term is defined in the Securities Act,
of the securities so offered and sold.
If
underwriters or dealers acting as principal are utilized in the sale of any securities in respect of which this prospectus is
being delivered, such securities will be acquired by the underwriters or dealers for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriters or dealers at the time of sale. Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more underwriters. If any underwriter or underwriters are
utilized in the sale of securities, unless otherwise indicated in the applicable prospectus supplement and/or other offering material,
the obligations of the underwriters are subject to certain conditions precedent, and the underwriters will be obligated to purchase
all such securities if any are purchased.
If
a dealer is utilized in the sale of the securities in respect of which this prospectus is delivered, we will sell such securities
to the dealer, as principal. The dealer may then resell such securities to the public at varying prices to be determined by such
dealer at the time of resale. Transactions through brokers or dealers may include block trades in which brokers or dealers will
attempt to sell shares as agent but may position and resell as principal to facilitate the transaction or in crosses, in which
the same broker or dealer acts as agent on both sides of the trade. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act, of the securities so offered and sold.
Offers
to purchase securities may be solicited directly by us or the selling stockholders and the sale thereof may be made directly to
institutional investors or others, who may be deemed to be underwriters within the meaning of the Securities Act with respect to any
resale thereof.
If
so indicated in the applicable prospectus supplement and/or other offering material, we or the selling stockholders may authorize
agents and underwriters to solicit offers by certain institutions to purchase securities at the public offering price set forth in the
applicable prospectus supplement and/or other offering material pursuant to delayed delivery contracts providing for payment and delivery
on the date or dates stated in the applicable prospectus supplement and/or other offering material. Such delayed delivery contracts will
be subject only to those conditions set forth in the applicable prospectus supplement and/or other offering material.
Agents,
underwriters and dealers may be entitled under relevant agreements to indemnification against certain liabilities, including liabilities
under the Securities Act, or to contribution with respect to payments which such agents, underwriters and dealers may be required
to make in respect thereof. The terms and conditions of any indemnification or contribution will be described in the applicable
prospectus supplement and/or other offering material.
We
or the selling stockholders may also sell shares of our common stock through various arrangements involving mandatorily or optionally
exchangeable securities, and this prospectus may be delivered in connection with those sales.
We
or the selling stockholders may enter into derivative, sale or forward sale transactions with third parties, or sell securities
not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement and/or
other offering material indicates, in connection with those transactions, the third parties may sell securities covered by this prospectus
and the applicable prospectus supplement and/or other offering material, including in short sale transactions and by issuing securities
not covered by this prospectus but convertible into, or exchangeable for or representing beneficial interests in such securities covered
by this prospectus, or the return of which is derived in whole or in part from the value of such securities. The third parties may use
securities received under derivative, sale or forward sale transactions, or securities pledged by us or borrowed from us or others to
settle those sales or to close out any related open borrowings of stock, and may use securities received from us in settlement of those
transactions to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and
will be identified in the applicable prospectus supplement (or a post-effective amendment) and/or other offering material.
Underwriters,
broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from us or the selling stockholders.
Underwriters, broker-dealers or agents may also receive compensation from the purchasers of shares for whom they act as agents or to
whom they sell as principals, or both. Compensation as to a particular underwriter, broker-dealer or agent might be in excess of customary
commissions and will be in amounts to be negotiated in connection with transactions involving shares. In effecting sales, broker-dealers
may arrange for other broker-dealers to participate in the resales.
Each
series of securities will be a new issue and, other than the common stock, which is listed on the Nasdaq Capital Market, will
have no established trading market. We may elect to list any series of securities on an exchange, and in the case of the common
stock, on any additional or substitute exchange, but, unless otherwise specified in the applicable prospectus supplement and/or
other offering material, we shall not be obligated to do so. No assurance can be given as to the liquidity of the trading market
for any of the securities.
Agents,
underwriters and dealers may engage in transactions with, or perform services for us and our respective subsidiaries in the ordinary
course of business.
Any
underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance
with Regulation M under the Exchange Act. Overallotment involves sales in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified
maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed
to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities
originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities may cause the
price of the securities to be higher than it would otherwise be.
If
commenced, the underwriters may discontinue any of the activities at any time. An underwriter may carry out these transactions on the
Nasdaq Capital Market, any additional or substitute exchange on which our common stock is listed, in the over-the-counter market or otherwise.
We and the selling stockholders do not make any representation or prediction as to the direction or magnitude of any effect that
the transactions described above might have on the price of the securities. In addition, we do not make any representation that underwriters
will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice.
The
place and time of delivery for securities will be set forth in the accompanying prospectus supplement and/or other offering material
for such securities.
To
comply with applicable state securities laws, the securities offered by this prospectus will be sold, if necessary, in such jurisdictions
only through registered or licensed brokers or dealers. In addition, securities may not be sold in some states unless they have
been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and is complied with.
LEGAL
MATTERS
Faegre
Drinker Biddle & Reath LLP will pass upon the validity of the securities offered hereby, unless otherwise indicated in the applicable
prospectus supplement. Additional legal matters may be passed upon for us, the selling stockholders or any underwriters, dealers
or agents, by counsel named in the applicable prospectus supplement.
EXPERTS
The
consolidated financial statements incorporated in this prospectus by reference from our Annual Report on Form 10-K for the year
ended December 31, 2021, filed with the SEC on March 14, 2022, and the financial statements incorporated in this prospectus by
reference from our Current Report on Form 8-K, filed on May 19, 2022, have been audited by Baker Tilly US, LLP, an independent
registered public accounting firm, as stated in their reports, which are incorporated herein by reference. Such financial statements
have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
2,702,703
Shares of Common Stock
PROSPECTUS
SUPPLEMENT
Sole Placement
Agent
Roth Capital
Partners
The date
of this prospectus supplement is October 21, 2024
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