Leslie's, Inc.

AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE STOCK SPLIT

Overview

On July 11, 2025, the Board unanimously (1) approved a series of five alternative amendments to the Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock, par value $0.001 per share, at one of five reverse stock split ratios, 1-for-10, 1-for-15, 1-for-20, 1-for-25, or 1-for-30, and contemporaneously with such Reverse Stock Split, to effect a corresponding reduction in the number of authorized shares of common stock from 1,000,000,000 shares to 100,000,000, 66,666,667, 50,000,000, 40,000,000, or 33,333,333, respectively (the Reverse Stock Splits and corresponding reductions in the number of authorized shares of common stock are collectively referred to as the “Reverse Stock Split Amendments”), (2) directed that the Reverse Stock Split Amendments be submitted to our shareholders for their approval and adoption, and (3) recommended that our shareholders approve the Reverse Stock Split Amendments at this Special Meeting. If the Reverse Split Proposal is approved, the actual number of authorized shares of our common stock after giving effect to the Reverse Stock Split, if and when effected, will depend on the Reverse Stock Split ratio that is ultimately determined by the Board. The table below shows each Reverse Stock Split ratio and the corresponding reduced number of authorized shares of common stock for each of the five alternative Reverse Stock Split Amendments, identified as Amendments A through E.

If the Company’s shareholders approve the Reverse Split Proposal, the Board will have the authority, but not the obligation, in its sole discretion, at any time prior to the one-year anniversary of the date on which the Reverse Split Proposal is approved by the Company’s shareholders at the Special Meeting (the “Anniversary Date”), to elect without further action on the part of the shareholders, as it determines to be in the best interests of the Company and its shareholders, whether to effect a Reverse Stock Split and, if so, to determine the Reverse Stock Split ratio from among the approved proposed ratios, and to effect the Reverse Stock Split Amendment by filing an amendment to our Certificate of Incorporation in the form of the Certificate of Amendment attached as Annex A to this Proxy Statement. For the convenience of our shareholders, each of the five alternative amendments has been set forth in a single Annex, indicating in brackets the five Reverse Stock Split ratios and the corresponding reduced number of authorized shares and reduced number of authorized shares of common stock that we would be authorized to issue for each of the alternative Amendments A through E. If the Board determines to implement the Reverse Stock Split, only one of the Reverse Stock Split Amendments providing for the Reverse Stock Split ratio will ultimately be approved by the Board, filed with the

Secretary of State of the State of Delaware, and become effective. The Board will abandon all other Reverse Stock Split Amendments.

The Board reserves the right to elect to abandon any or all of the Reverse Stock Split Amendments, notwithstanding shareholder approval thereof, if it determines, in its sole discretion, that the Reverse Stock Split is no longer in the best interests of the Company and its shareholders.

Upon the effectiveness of the Reverse Stock Split, a corresponding reduction in the number of authorized shares and issued and outstanding shares of our common stock will occur as set forth in the table above and as further described below under “Principal Effects of the Reverse Stock Split on Our Common Stock.” If the Board abandons the Reverse Stock Split in its entirety and no Reverse Stock Split Amendment is approved, there will be no reduction in the number of authorized or issued and outstanding shares of our common stock.

Depending on the ratio for the Reverse Stock Split determined by the Board, 10, 15, 20, 25, or 30 shares of existing common stock, as determined by the Board, will be combined into one share of common stock. The number of shares of common stock issued and outstanding will therefore be reduced by an amount based upon the determined Reverse Stock Split ratio. For example, if you beneficially own 100 shares of common stock, assuming a 1-for-10 Reverse Stock Split ratio, then you will hold 10 shares of common stock following the effectiveness of the Reverse Stock Split. If the Reverse Stock Split Amendments are approved by our shareholders and the Board elects to effect the Reverse Stock Split at any time prior to the Anniversary Date, a Certificate of Amendment of the Certificate of Incorporation (each a “Reverse Stock Split Amendment Certificate”) that sets forth the applicable Reverse Stock Split Amendment and provides for the Reverse Stock Split ratio determined by the Board in its discretion will be filed with the Secretary of State of the State of Delaware with immediate effect (the “Effective Time”). At the Effective Time, all other Reverse Stock Split Amendments will be automatically abandoned.

The Board will determine the exact timing of the filing of the Reverse Stock Split Amendment Certificate based on its evaluation as to when the filing would be the most advantageous to the Company and its shareholders. If a Reverse Stock Split Amendment Certificate has not been filed with the Secretary of State of the State of Delaware prior to the Anniversary Date, then the Reverse Stock Split and all of the Reverse Stock Split Amendments will be automatically abandoned.

To avoid the existence of fractional shares of our common stock, shareholders who would otherwise hold fractional shares as a result of the Reverse Stock Split will be entitled to receive a cash payment (without interest) from the transfer agent as described under “Payment of Cash in Lieu of Issuing Fractional Shares.”

The Board reserves the right to abandon the Reverse Stock Split without further action by our shareholders at any time before the Effective Time even if the Reverse Stock Split Amendments have been approved by our shareholders. By voting in favor of the approval of the Reverse Stock Split Amendments, you also are expressly authorizing the Board to determine not to proceed with, and abandon, the Reverse Stock Split if it should so decide in its sole discretion.

Background and Reasons for the Reverse Stock Split

Our common stock trades on the Nasdaq Global Select Market under the symbol “LESL”.

As previously disclosed in our Current Report on Form 8-K filed with the SEC on April 30, 2025, we were notified by Nasdaq that we were not in compliance with the Listing Rule because the average closing price of a share of our common stock was less than $1.00 per share over a consecutive 30 trading-day period.

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we were given an initial compliance period of 180 calendar days (the “Compliance Period”), or until October 21, 2025, to regain compliance with the Listing Rule, during which time our common stock will continue to be listed on Nasdaq. In order to regain compliance with the Listing Rule, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period.

The reduction in the number of issued and outstanding shares of our common stock as a result of the Reverse Stock Split is, absent other factors, expected to proportionately increase the per share trading price of our common stock. Accordingly, the primary purpose of the Reverse Stock Split is to increase the per share price of our common stock as a means of regaining compliance with the Listing Rule, which the Board believes is our best means of increasing and maintaining the price of our common stock above $1.00 per share in compliance with the Listing Rule. It is also anticipated that an increase in the per share trading price of our common stock may encourage interest and trading in our common stock by (i) long-term investors who currently may not find our shares attractive due to the trading volatility often associated with lower priced stocks and (ii) indexes or funds with certain eligibility criteria. An increased share price can also make our common stock eligible for investment by brokerage houses and institutional investors that have internal policies and practices that prohibit them from investing in low-priced stocks, that discourage individual brokers from recommending low-priced stocks to their customers, or that restrict or limit the ability to purchase such stocks on margin. The Reverse Stock Split may also be beneficial for capital raising purposes and provide flexibility in using common stock as consideration in strategic transactions.

While our Board believes that the trading price of our common stock will increase if our shareholders approve and it decides to implement the Reverse Stock Split, there are a number of other factors and contingencies that can affect the trading price of our common stock, including factors that are entirely outside of our control. For example, factors such as our financial results, market conditions, and the market perception of our business may adversely affect the market price of our common stock. External factors such as interest rates and government actions related to trade policy can also affect stock prices. In addition, following the Reverse Stock Split, even if the trading price does increase, it may nevertheless fail to attract or satisfy the guidelines of indexes and funds or institutional and other investors and, consequently, the trading price and liquidity of our common stock may not improve. As a result, we cannot assure you that the Reverse Stock Split, if implemented, will result in the intended benefits described above. See “Risks of the Reverse Stock Split” below.

We have not proposed the Reverse Split Proposal in response to any effort of which we are aware to accumulate our shares of common stock or obtain control of the Company, nor is it a plan by management to recommend a series of similar actions to our Board or our shareholders. Notwithstanding the expected decrease in the number of outstanding shares of common stock if the Reverse Stock Split is implemented, our Board does not intend for the Reverse Stock Split to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Risks Related to the Reverse Stock Split

We cannot assure you that the Reverse Stock Split, if implemented, will increase the price of our common stock and have the desired effects.

If the Reverse Stock Split is approved by shareholders and implemented by the Board, we expect that the market price of our common stock will increase and that we will be able to achieve the goals described under “Reasons for the Reverse Stock Split” in this proposal, including satisfying the Listing Rule. However, the effect of the Reverse Stock Split upon the market price of our common stock cannot be predicted, and the history of similar stock splits for similarly situated companies is varied. It is possible that, even if the Reverse Stock Split is implemented, the trading price of our common stock does not increase in proportion to the reduction in the number of shares of our common stock outstanding, and will not attract brokers and investors who do not trade in lower priced stocks. Further, regardless of whether the Reverse Stock Split is implemented, the market price of our common stock may decrease due to factors unrelated to the Reverse Stock Split, including our performance, as well as factors unrelated to the Company and that are entirely outside of our control. Additionally, if the Reverse Stock Split is implemented and the trading price of our common stock subsequently declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than it would have been in the absence of the Reverse Stock Split.

The Reverse Stock Split may adversely affect the liquidity of our common stock.

If implemented, the Reverse Stock Split will reduce the number of outstanding shares of our common stock. A lower number of outstanding shares could significantly reduce the trading volume and otherwise adversely affect the liquidity of our common stock, particularly if the stock price does not increase as a result of the Reverse Stock Split or subsequently declines.

Additionally, if the Reverse Stock Split is implemented, it will increase the number of shareholders who own “odd lots” (less than 100 shares) of our common stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. Therefore, those shareholders who own fewer than 100 shares following the Reverse Stock Split may be required to pay higher transaction costs if they sell their common stock. And an increase in the number of holders who may have difficulty transacting in our common stock could further adversely affect the liquidity of our common stock.

Recent amendments to the Listing Rule may make it more difficult for us to maintain our listing with Nasdaq.

On January 15, 2025, the SEC approved an amendment to the Listing Rule which limits the conditions under which a listed company can use a reverse stock split to meet Nasdaq’s minimum price criteria. In particular, the amendment provides that if a company executes a reverse stock split to regain compliance with the Listing Rule but its stock price falls below $1.00 per share within one year after the split, the company will not be granted a new Compliance Period to address the bid price deficiency. Instead, Nasdaq will move forward with delisting proceedings. If the Reverse Stock Split is implemented, the amendment to the Listing Rule may cause the Board to choose a higher split ratio than it otherwise would have deemed appropriate and would make it more difficult for us to maintain our Nasdaq listing if our stock price dropped below the listing requirements in the future.

Interest of Certain Persons in Matters to be Acted Upon

Certain of our directors and officers have an interest in this Reverse Split Proposal as a result of their ownership of shares of common stock and equity awards. See “Beneficial Ownership of Securities.” However, because the Reverse Stock Split will affect all shareholders uniformly other than in respect of the treatment of fractional shares as described below, we do not believe that any director or officer has a substantial interest, direct or indirect, by security holdings or otherwise, in the Reverse Split Proposal that is different from, disproportionate to, or greater than the interests of any of our other shareholders.

Determination of the Ratio for the Reverse Stock Split

If the Reverse Split Proposal is approved by our shareholders and the Board determines that the Reverse Stock Split is advisable and in the best interests of the Company and our shareholders at that time, the Board may select the split ratio, acting in its sole discretion, and implement the Reverse Stock Split at any time before the Anniversary Date. In determining which split ratio to use and thus which Reverse Stock Split Amendment to effect and whether and when to effect the Reverse Stock Split following the receipt of shareholder approval, the Board may consider numerous factors, including the historical and then-prevailing trading price and trading volume of our common stock, the number of shares of our common stock outstanding immediately before and after the Reverse Stock Split, the projected performance of our common stock, the anticipated impact of the Reverse Stock Split on the trading price and trading volume of our common stock at different Reverse Stock Split ratios, Nasdaq’s minimum per share trading requirement, recent amendments to the Listing Rule that increase the risk of delisting after effectuating a reverse stock split, which Reverse Stock Split ratio would result in the least administrative costs to us, and prevailing market conditions and general economic trends. The purpose of submitting a series of alternative Reverse Stock Split Amendments for shareholder approval rather than a specific ratio is to give the Board the flexibility in implementing the Reverse Stock Split to meet business needs as they arise, to take advantage of favorable opportunities and to respond to changing market conditions, such as higher inflation, higher interest rates, and related factors. If our Board chooses to implement the Reverse Stock Split, we will make a public announcement regarding the determination of the Reverse Stock Split ratio.

Principal Effects of the Reverse Stock Split on Our Common Stock

If implemented, immediately following the Effective Time, each shareholder will own a reduced number of shares of our common stock, depending on the final split ratio adopted by the Board. Except for adjustments that may result from the treatment of fractional shares as described below, the Reverse Stock Split will affect all shareholders uniformly and the proportionate voting rights and other rights and preferences of the holders of our common stock will remain the same. For example, a holder of 2% of the voting power of the outstanding shares of our common stock immediately prior to the Reverse Stock Split would continue to hold 2% of the voting power of the outstanding shares of our common stock immediately after the Effective Time, subject to the treatment of any fractional shares as described herein. The number of shareholders of record also will not be affected by the proposed Reverse Stock Split, except to the extent that any shareholder holds only a fractional share interest following the Reverse Stock Split and receives cash for such interest. Additionally, if the Reverse Stock Split is implemented, the number of authorized shares of our common stock available under the Certificate of Incorporation will contemporaneously be reduced in proportion to the Reverse Stock Split ratio.

The following table sets forth the estimated trading price and approximate number of authorized, issued and outstanding, and reserved shares of common stock following a 1-for-10 split, 1-for-20 split, and 1-for-30 split without giving effect to any adjustments for the cash-out of fractional shares or the issuance of any derivative securities, as of July 14, 2025.

(1)

Assumes the trading price of our common stock moves in direct proportion to the Reverse Stock Split ratio.

(2)

Represents shares available for future issuance pursuant to the Company’s 2020 Omnibus Incentive Plan (the “Incentive Plan”), excluding shares issuable under outstanding equity awards.

(3)

Represents shares issuable upon exercise of outstanding stock options and upon vesting of other equity awards.

If the Reverse Stock Split is implemented, the CUSIP number for our common stock will change following the Effective Time.

Our common stock is currently registered under Section 12(b) of the Exchange Act, and we are subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Stock Split will not affect the registration of our common stock or our reporting obligations under the Exchange Act. Our common stock will continue to trade on Nasdaq under the symbol “LESL”.

Effect on Equity Compensation Arrangements

If the Reverse Stock Split is effected, the terms of equity awards granted under the Incentive Plan will automatically be proportionally adjusted pursuant to the terms of the Incentive Plan to maintain their economic value:

•

Stock Options—The per share exercise price of outstanding stock options will be increased and the number of shares of common stock issuable upon exercise of such options will be decreased proportionately with the Reverse Stock Split ratio;

•

Restricted Stock Units and Performance Units—The number of shares issuable under outstanding restricted stock units and performance stock units (“PSUs”) and all other outstanding equity-based awards other than stock options will be reduced proportionately by the split ratio and any applicable stock price-based performance metrics for any PSUs will be adjusted accordingly; and

•

Shares Available for Issuance under the Incentive Plan—The number of shares of common stock authorized for future issuance under the Incentive Plan will be proportionately reduced by the split ratio and similar adjustments will be made to other relevant provisions of the Incentive Plan.

The adjustments above, as required by the Incentive Plan and in accordance with the Reverse Stock Split ratio, would result in approximately the same value of shares of common stock being delivered, upon the exercise, vesting or conversion such securities, or available for future issuance under the Incentive Plan, immediately following the Reverse Stock Split as was the case immediately preceding the Reverse Stock Split, except for adjustments that may result from the treatment of fractional shares. Pursuant to the terms of the Incentive Plan, any fractional shares of common stock that would otherwise be issuable upon exercise or vesting of outstanding awards as a result of the Reverse Stock Split will be canceled for no consideration.

Procedures for Implementation

Set forth below are descriptions of how the Reverse Stock Split would be effected for beneficial holders and registered holders.

•

Beneficial Holders. Beneficial holders are shareholders who hold their shares of our common stock in street name through a broker, bank or other agent. We intend to treat shares held by shareholders through a broker, bank, or other agent in the same manner as registered shareholders. Brokers, banks, and other agents will be instructed to effect the Reverse Stock Split for their beneficial holders holding our common stock in street name. However, these brokers, banks, and other agents may have different procedures than registered shareholders for processing the Reverse Stock Split. Shareholders who hold shares of our common stock with a broker, bank, or other agent and who have any questions in this regard are strongly encouraged to contact their brokers, banks, or other agents for more information.

•

Registered Holders. Registered holders are shareholders who hold their shares of our common stock directly with Computershare Trust Company, N.A., our transfer agent (“Computershare”). All of our registered shareholders hold their shares through “book-entry” positions. These shareholders do not have certificates evidencing their ownership of our common stock. As soon as practicable after the Effective Time, registered “book-entry” shareholders will be notified by our transfer agent that the Reverse Stock Split has been effected. If you hold shares of common stock in book-entry form, you will not need to take action to receive whole shares of post-Reverse Stock Split common stock as the exchange will be automatic. As soon as practicable after the Effective Time, Computershare will send to your registered address a notice that the Reverse Stock Split has been effected and a transmittal letter along with a statement of ownership indicating the number of post-Reverse Stock Split shares of common stock you hold. If applicable, a check representing a cash payment in lieu of fractional shares will also be mailed to your registered address as soon as practicable after the Effective Time. See “Payment of Cash in Lieu of Issuing Fractional Shares” below.

Authorized Shares of Common Stock

We are currently authorized under our Certificate of Incorporation to issue up to a total of 1,000,000,000 shares of common stock. The Reverse Stock Split will decrease the number of authorized shares of common stock under our Certificate of Incorporation by the same ratio as that used to decrease the number of our outstanding shares of common stock in the Reverse Stock Split.

Payment of Cash in Lieu of Issuing Fractional Shares

The Reverse Stock Split will affect all of our shareholders uniformly and will not affect any shareholder’s percentage ownership interests, except to the extent of the impact of fractional shares. We do not currently intend to issue fractional shares of our common stock in connection with the Reverse Stock Split.

If the Reverse Stock Split is implemented, as soon as practicable after the Effective Time, Computershare will aggregate all fractional shares of our common stock that would otherwise have been issuable as a result of the Reverse Stock Split (the “Aggregated Fractional Shares”) and sell them at the then-prevailing prices on the open market, on behalf of those shareholders who would otherwise be entitled to receive such fractional shares of our common stock as a result of the Reverse Stock Split (i.e., shareholders that hold a number of pre-Reverse Stock Split shares of common stock not evenly divisible by the Reverse Stock Split ratio determined by the Board). We expect that Computershare will conduct the sale in an orderly fashion at a reasonable pace and that it may take several days to sell all of the Aggregated Fractional Shares. After the completion of such sale, shareholders of record who otherwise would be entitled to receive fractional shares will instead receive their respective pro rata share of the total proceeds of that sale (the “Total Sale Proceeds”).

Specifically, these shareholders will be entitled to a cash payment (without interest), in lieu of any fractional shares, in an amount equal to: (a) their respective fractional share interest, multiplied by (b) a share price equal to (i) the Total Sale Proceeds divided by (ii) the Aggregated Fractional Shares. If a shareholder is entitled to a cash payment in lieu of any fractional share, a check will be mailed to the shareholder’s registered address as soon as practicable after completion of the sale of the Aggregated Fractional Shares. By signing and cashing the check, shareholders will warrant that they owned the shares of common stock for which they received such cash payment.

Other than the right to receive the cash payment described above, a fractional shareholder will not retain any voting, dividend or other rights that accompany shares of our common stock. Because cash payments will be made in lieu of fractional shares, the Reverse Stock Split could have the effect of reducing the number of our shareholders, to the extent there are shareholders who hold fewer than the number of shares of our common stock that will be combined into one (1) share (based on the Reverse Stock Split ratio determined by the Board). Reducing the number of post-Reverse Stock Split shareholders is not, however, a purpose or objective of this proposal.

Shareholders should be aware that, under the escheat laws of various jurisdictions, sums due for fractional interests that are not timely claimed after the Effective Time may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by us or Computershare concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, if applicable, shareholders otherwise entitled to receive such funds, but who do not receive them due to, for example, their failure to timely comply with Computershare’s instructions, will have to seek to obtain such funds directly from the state to which they were paid.

Accounting Treatment and Effect on Par Value

The Reverse Stock Split will not affect the par value of our common stock, which will remain at $0.001 per share. As a result, the stated capital on our balance sheet attributable to common stock, which consists of the par value per share of common stock multiplied by the aggregate number of shares of common stock issued as of the date of such balance sheet, will be reduced in proportion to the Reverse Stock Split ratio upon implementation (subject to minor adjustments in respect of the treatment of fractional shares). Our additional paid-in capital account, which consists of the difference between our stated capital and the aggregate amount paid to us upon issuance of all currently issued shares of common stock, will be credited with the corresponding amount by which the stated capital is reduced. Our total shareholders’ equity, in the aggregate, will remain unchanged as a result of the Reverse Stock Split and the contemporaneous decrease in authorized shares of our common stock. After the implementation of the Reverse Stock Split, our net income (loss) per share and the net book value per share of common stock will increase, as compared to the per share amounts absent the Reverse Stock Split, because there will be fewer shares of common stock outstanding. All historic amounts in our financial statements and related footnotes for periods prior to the Reverse Stock Split will be adjusted to reflect the Reverse Stock Split in future SEC filings and in our investor materials. The Company does not anticipate that any other accounting consequences would arise as a result of the Reverse Stock Split.

Material U.S. Federal Income Tax Considerations Related to the Reverse Split Proposal

The discussion below is a summary of material U.S. federal income tax considerations related to the Reverse Stock Split generally applicable to beneficial holders of shares of our common stock and does not purport to be a complete discussion of all possible tax considerations or consequences. This summary addresses only those shareholders who hold their pre-Reverse Stock Split shares as “capital assets” as defined in the Internal Revenue Code of 1986, as amended (the “Code”) and will hold the post-Reverse Stock Split shares as capital assets. This discussion does not address all U.S. federal income tax considerations or consequences that could be relevant to particular shareholders in light of their individual circumstances or to shareholders that are subject to special rules, such as financial institutions, regulated investment companies, real estate investment trusts, persons holding shares as part of a hedging, integrated, or conversion transaction or a straddle, tax-exempt organizations, persons that hold shares in an individual retirement account, 401(k) plan or similar tax-favored account, persons who hold their shares as “qualified small business stock” under Sections 1045 and 1202 of the Code, insurance companies, traders or dealers in securities, persons who acquired their shares as compensation, partnerships or other pass-through entities for U.S. federal income tax purposes, and non-U.S. shareholders. The following summary is based upon the provisions of the Code, applicable Treasury Regulations thereunder, judicial decisions, and current administrative rulings, as of the date hereof, all of which are subject to change, possibly on a retroactive basis.

This discussion is for general information only and should not be considered as tax or investment advice. This summary does not address any U.S. federal tax consequences other than U.S. federal income tax consequences (such as estate or gift tax consequences), nor does it address the Medicare contribution tax on net investment income, the alternative minimum tax or any U.S. state, local, or non-U.S. tax consequences. The tax consequences of the Reverse Stock Split may not be the same for all shareholders. Shareholders should consult their tax advisors to understand their individual federal, state, local, and non-U.S. tax consequences.

If an entity (or arrangement) classified as a partnership for U.S. federal income tax purposes holds shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If a holder of our common stock is a partner of a partnership holding shares of our common stock, such holder should consult his or her tax advisor.

Tax Consequences to the Company

The Reverse Stock Split is intended to be treated as a “recapitalization” pursuant to Section 368(a)(1)(E) of the Code for U.S. federal income tax purposes. Accordingly, we should not recognize gain or loss as a result of the Reverse Stock Split.

Tax Consequences to U.S. Shareholders

Assuming this Reverse Stock Split qualifies as a recapitalization for U.S. federal income tax purposes:

•

Shareholders should not recognize any gain or loss as a result of the Reverse Stock Split (except for cash, if any, received in lieu of a fractional share of common stock);

•

The aggregate basis of the shares held by a shareholder immediately after the Reverse Stock Split, including any fractional share of common stock not actually received, should be equal to the aggregate basis of such shareholder’s pre-Reverse Stock Split shares;

•

The holding period of the shares owned immediately after the Reverse Stock Split, including any fractional share of common stock not actually received, should include the shareholder’s holding period before the Reverse Stock Split; and

•

In general, a shareholder who receives a cash payment in lieu of a fractional share will recognize capital gain or loss equal to the difference between the amount of cash received in lieu of the fractional share and the portion of the shareholder’s tax basis of the shares surrendered in the Reverse Stock Split that is allocable to the fractional share. Such gain or loss generally will be long-term capital gain or loss if the shareholder’s holding period in its shares surrendered in the Reverse Stock Split (as described above) is more than one year as of the Effective Time. The deductibility of capital losses is subject to limitations.

Individual tax circumstances can vary, and shareholders should consult their tax advisors regarding the tax effects to them, based on their particular circumstances. Shareholders that have acquired different blocks of our common stock at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregated adjusted basis among, and the holding period of, our common stock.

Information returns generally will be required to be filed with the U.S. Internal Revenue Service (the “IRS”) with respect to the payment of cash in lieu of a fractional share made pursuant to the Reverse Stock Split unless such shareholder is an exempt recipient and timely and properly establishes with the applicable withholding agent the exemption. In addition, payments of cash in lieu of a fractional share made pursuant to the Reverse Stock Split may, under certain circumstances, be subject to backup withholding, unless a shareholder timely provides to the applicable withholding agent proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the applicable requirements of the backup withholding rules. Any amounts withheld under the backup withholding rules are not additional tax and may be refunded or credited against the shareholder’s U.S. federal income tax liability, provided that the shareholder timely furnishes the required information to the IRS. Shareholders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.

THE ABOVE DISCUSSION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES. IT WAS WRITTEN SOLELY IN CONNECTION WITH THE INFORMATION PROVIDED HEREIN IN CONNECTION WITH THE REVERSE STOCK SPLIT.

Appraisal Rights

Under the Delaware General Corporation Law, our shareholders are not entitled to appraisal or dissenter’s rights with respect to the Reverse Stock Split, and we will not independently provide our shareholders with any such rights.

Required Vote

This proposal requires the approval of the affirmative vote of the holders of a majority in voting power of the votes cast. Abstentions and broker non-votes, if any, are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal.

Recommendation

The Company’s Board of Directors unanimously recommends that shareholders vote FOR the Reverse Split Proposal.