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The board of directors of the Company has concluded, in its good faith business judgment, that the issuance of the Securities is in the best interests of the Company. 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The Company's executive officers and directors have studied and fully understand the nature of the Securities being sold hereby and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Shares upon conversion of the Note and exercise of the Warrants is binding upon the Company and enforceable, except as otherwise described in this Subscription Agreement or the Note, regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.", "snippet_links": [{"key": "conversion-of-the-note", "type": "clause", "offset": [35, 57]}, {"key": "in-certain-circumstances", "type": "clause", "offset": [85, 109]}, {"key": "the-common-stock", "type": "clause", "offset": [200, 216]}, {"key": "prior-to-conversion", "type": "clause", "offset": [226, 245]}, {"key": "executive-officers-and-directors", "type": "clause", "offset": [273, 305]}, {"key": "securities-being-sold", "type": "definition", "offset": [358, 379]}, {"key": "dilutive-effect", "type": "clause", "offset": [428, 443]}, {"key": "the-company-has", "type": "clause", "offset": [471, 486]}, {"key": "good-faith", "type": "clause", "offset": [505, 515]}, {"key": "business-judgment", "type": "clause", "offset": [516, 533]}, {"key": "interests-of-the-company", "type": "clause", "offset": [569, 593]}, {"key": "obligation-to-issue", "type": "clause", "offset": [642, 661]}, {"key": "the-shares", "type": "clause", "offset": [662, 672]}, {"key": "exercise-of-the-warrants", "type": "clause", "offset": [705, 729]}, {"key": "upon-the-company", "type": "definition", "offset": [741, 757]}, {"key": "agreement-or", "type": "definition", "offset": [826, 838]}, {"key": "shareholders-of-the-company", "type": "clause", "offset": [935, 962]}], "size": 91, "hash": "8613a1d8fad13af38d4062114bd77cd3", "id": 7}, {"samples": [{"hash": "b7IzN88AZvt", "uri": "/contracts/b7IzN88AZvt#dilution", "label": "Subscription Agreement (Gase Energy, Inc.)", "score": 25.8952770233, "published": true}, {"hash": "UOKbaCC76i", "uri": "/contracts/UOKbaCC76i#dilution", "label": "Subscription Agreement (Next Graphite, Inc.)", "score": 25.3258037567, "published": true}, {"hash": "i2QNIbIuLHd", "uri": "/contracts/i2QNIbIuLHd#dilution", "label": "Subscription Agreement (Next Graphite, Inc.)", "score": 25.213552475, "published": true}], "snippet": "The Company\u2019s executive officers and directors understand the nature of the Purchased Securities being sold hereby and recognize that the issuance of the Purchased Securities will have a potential dilutive effect on the equity holdings of other holders of the Company\u2019s equity or rights to receive equity of the Company. The board of directors of the Company has concluded, in its good faith business judgment that the issuance of the Purchased Securities is in the best interests of the Company. 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The board of directors of the Company has concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company.", "snippet_links": [{"key": "executive-officers-and-directors", "type": "clause", "offset": [14, 46]}, {"key": "nature-of-the", "type": "clause", "offset": [62, 75]}, {"key": "securities-being-sold", "type": "definition", "offset": [76, 97]}, {"key": "issuance-of-the-securities", "type": "clause", "offset": [128, 154]}, {"key": "effect-on-the", "type": "clause", "offset": [186, 199]}, {"key": "equity-holdings", "type": "clause", "offset": [200, 215]}, {"key": "holders-of", "type": "clause", "offset": [225, 235]}, {"key": "to-receive", "type": "definition", "offset": [267, 277]}, {"key": "equity-of-the-company", "type": "clause", "offset": [278, 299]}, {"key": "the-company-has", "type": "clause", "offset": [327, 342]}, {"key": "good-faith", "type": "clause", "offset": [361, 371]}, {"key": "business-judgment", "type": "clause", "offset": [372, 389]}, {"key": "interests-of-the-company", "type": "clause", "offset": [441, 465]}], "size": 59, "hash": "2b8c7d787ea875f4a7861e323629451a", "id": 8}, {"samples": [{"hash": "jjNytLe3vO7", "uri": "/contracts/jjNytLe3vO7#dilution", "label": "Security Agreement (Iwt Tesoro Corp)", "score": 21.0, "published": true}, {"hash": "jJH28FpPUm5", "uri": "/contracts/jJH28FpPUm5#dilution", "label": "Security Agreement (NewMarket Technology Inc)", "score": 21.0, "published": true}, {"hash": "jG27NaSU6cJ", "uri": "/contracts/jG27NaSU6cJ#dilution", "label": "Security Agreement (Path 1 Network Technologies Inc)", "score": 21.0, "published": true}], "snippet": "It specifically acknowledges that the Parent\u2019s obligation to issue the shares of Common Stock upon exercise of the Warrants is binding upon the Parent and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Parent.", "snippet_links": [{"key": "the-parent", "type": "clause", "offset": [34, 44]}, {"key": "obligation-to-issue", "type": "clause", "offset": [47, 66]}, {"key": "shares-of-common-stock", "type": "clause", "offset": [71, 93]}, {"key": "exercise-of-the-warrants", "type": "clause", "offset": [99, 123]}, {"key": "binding-upon", "type": "clause", "offset": [127, 139]}, {"key": "other-shareholders", "type": "clause", "offset": [247, 265]}], "size": 53, "hash": "c226356ade9fa1f2577f1fff0680535e", "id": 9}, {"samples": [{"hash": "8pllXyrvPcO", "uri": "/contracts/8pllXyrvPcO#dilution", "label": "At Market Issuance Sales Agreement", "score": 30.8144779205, "published": true}, {"hash": "fWR6tsODHfA", "uri": "/contracts/fWR6tsODHfA#dilution", "label": "At Market Issuance Sales Agreement", "score": 24.9082813263, "published": true}, {"hash": "5wGrcOkOm0u", "uri": "/contracts/5wGrcOkOm0u#dilution", "label": "At Market Issuance Sales Agreement", "score": 24.9082813263, "published": true}], "snippet": "If you invest in our Common Stock, you will experience immediate and substantial dilution to the extent of the difference between the public offering price of our Common Stock in this offering and the adjusted net tangible book value per share of our Common Stock immediately after the offering. Our net tangible book value per share is determined by subtracting our total liabilities from our total tangible assets, which is total assets less intangible assets, and dividing this amount by the number of shares of Common Stock outstanding. The historical net tangible book value of our Common Stock as of June 30, 2021 was approximately $(15,490,000), or $(0.21) per share, based on 72,742,689 shares of Common Stock outstanding at June 30, 2021. After giving effect to our sale in this offering of shares of our Common Stock in the aggregate amount of $48,537,500 at an assumed offering price of $8.74 per share (the last reported sale price of our Common Stock on the Nasdaq Capital Market on October 22, 2021) and after deducting the sales agent commissions and our estimated offering expenses payable by us, our as adjusted net tangible book value as of June 30, 2021 would have been approximately $31,541,375, or $0.40 per share of Common Stock. This represents an immediate increase in net tangible book value of $0.61 per share to existing stockholders and immediate dilution in net tangible book value of $8.34 per share to new investors purchasing our Common Stock in this offering at the assumed public offering price. The following table illustrates this dilution on a per share basis: Assumed offering price per share $ 8.74 Historical net tangible book value per share as of June 30, 2021 $ (0.21) Increase in net tangible book value per share attributable to this offering $ 0.61 As adjusted net tangible book value per share after this offering $ 0.40 Dilution per share to new investors $ 8.34 The table above assumes for illustrative purposes that an aggregate of 5,553,490 shares of our Common Stock are sold at a price of $8.74 per share, for aggregate gross proceeds of approximately $48,537,500. The shares sold in this offering, if any, will be sold from time to time at various prices. An increase of $1.00 per share in the price at which the shares are sold from the assumed public offering price of $8.74 per share shown in the table above, assuming all of our Common Stock in the aggregate amount of approximately $48,537,500 is sold at that price, would increase the dilution in net tangible book value per share to new investors in this offering to $9.33 per share, after deducting commissions and estimated offering expenses payable by us. A decrease of $1.00 per share in the price at which the shares are sold from the assumed public offering price of $8.74 per share shown in the table above, assuming all of our Common Stock in the aggregate amount of approximately $48,537,500 is sold at that price, would decrease the dilution in net tangible book value per share to new investors in this offering to $7.34 per share, after deducting commissions and estimated offering expenses payable by us. This information is supplied for illustrative purposes only. The above discussion and table are based on 72,742,689 shares of our Common Stock outstanding as of June 30, 2021, which excludes as of such date: \u2022 1,071,782 shares of Common Stock reserved for issuance upon the exercise of outstanding options granted under our equity incentive plans with a weighted average exercise price of $0.82 per share; \u2022 4,665,000 shares of Common Stock issuable upon vesting of outstanding restricted stock units granted; \u2022 1,190,332 additional shares of Common Stock reserved for future issuance under our 2018 Equity Incentive Plan; \u2022 272,942 shares of Common Stock reserved for issuance under our 2018 Employee Stock Purchase Plan; \u2022 5,616,112 shares of Common Stock issuable upon exercise of outstanding warrants with a weighted average exercise price of $8.40 per share; and \u2022 2,060,000 shares of Common Stock to be issued upon exercise of outstanding warrants on October 22, 2021 at an exercise price of $2.25 per share for aggregate gross proceeds of approximately $4.6 million. In addition, the above discussion and table do not include the up to approximately $24 million worth of shares of our Common Stock that remained available for sale at June 30, 2021, under the Sales Agreement. Between July 1, 2021 and the date of this prospectus supplement, we sold an aggregate of 12,164,728 shares of our Common Stock for gross proceeds of approximately $24 million under the Sales Agreement. The above illustration of dilution per share to investors participating in this offering assumes no exercise of outstanding options to purchase our Common Stock or outstanding warrants to purchase shares of our Common Stock. To the extent that any of these outstanding options or warrants are exercised or we issue additional shares under our equity incentive plans, there will be further dilution to new investors. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.", "snippet_links": [{"key": "invest-in", "type": "clause", "offset": [7, 16]}, {"key": "to-the-extent", "type": "clause", "offset": [90, 103]}, {"key": "public-offering-price", "type": "definition", "offset": [134, 155]}, {"key": "tangible-book-value-per-share", "type": "definition", "offset": [214, 243]}, {"key": "the-offering", "type": "definition", "offset": [282, 294]}, {"key": "total-liabilities", "type": "definition", "offset": [367, 384]}, {"key": "total-tangible-assets", "type": "definition", "offset": [394, 415]}, {"key": "total-assets", "type": "definition", "offset": [426, 438]}, {"key": "intangible-assets", "type": "definition", "offset": [444, 461]}, {"key": "shares-of-common-stock-outstanding", "type": "definition", "offset": [505, 539]}, {"key": "based-on", "type": "definition", 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The Company\u2019s executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded in its good faith business judgment that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to Section 2.2(c), its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.", "snippet_links": [{"key": "stock-issuable", "type": "clause", "offset": [31, 45]}, {"key": "put-shares", "type": "clause", "offset": [49, 59]}, {"key": "in-certain-circumstances", "type": "clause", "offset": [87, 111]}, {"key": "the-common-stock", "type": "clause", "offset": [202, 218]}, {"key": "during-the-period", "type": "clause", "offset": [228, 245]}, {"key": "the-effective-date", "type": "clause", "offset": [254, 272]}, {"key": "commitment-period", "type": "definition", "offset": [292, 309]}, {"key": "executive-officers-and-directors", "type": "clause", "offset": [325, 357]}, {"key": "the-transactions-contemplated-by-this-agreement", "type": "clause", "offset": [406, 453]}, {"key": "dilutive-effect", "type": "clause", "offset": [495, 510]}, {"key": "the-company-has", "type": "clause", "offset": [538, 553]}, {"key": "good-faith", "type": "clause", "offset": [571, 581]}, {"key": "business-judgment", "type": "clause", "offset": [582, 599]}, {"key": "interests-of-the-company", "type": "clause", "offset": [634, 658]}, {"key": "subject-to-section", "type": "clause", "offset": [704, 722]}, {"key": "obligation-to-issue", "type": "clause", "offset": [735, 754]}, {"key": "upon-the-company", "type": "definition", "offset": [781, 797]}, {"key": "shareholders-of-the-company", "type": "clause", "offset": [900, 927]}], "size": 165, "hash": "1099cf122898056903c8b980b8665844", "id": 4}, {"samples": [{"hash": "hgQkrGUlygg", "uri": "/contracts/hgQkrGUlygg#dilution", "label": "Purchase Agreement (Lithium Exploration Group, Inc.)", "score": 29.3860378265, "published": true}, {"hash": "eis2UDQXoYt", "uri": "/contracts/eis2UDQXoYt#dilution", "label": "Purchase Agreement (Lithium Exploration Group, Inc.)", "score": 29.3832988739, "published": true}, {"hash": "8TEdXbEMfn8", "uri": "/contracts/8TEdXbEMfn8#dilution", "label": "Purchase Agreement (Lithium Exploration Group, Inc.)", "score": 29.1724853516, "published": true}], "snippet": "Any shares of the Company's common stock issued to the Purchaser in connection with any agreements between the parties hereto, in the event such shares are issued may have a dilutive effect on the ownership interests of the other shareholders (and Persons having the right to become shareholders) of the Company. The Company's executive officers and directors have studied and fully understand the nature of the Securities being sold hereby and recognize that they have such a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment that such issuance is in the best interests of the Company.", "snippet_links": [{"key": "shares-of-the-company", "type": "definition", "offset": [4, 25]}, {"key": "issued-to", "type": "definition", "offset": [41, 50]}, {"key": "the-purchaser", "type": "clause", "offset": [51, 64]}, {"key": "in-connection-with", "type": "clause", "offset": [65, 83]}, {"key": "the-parties-hereto", "type": "clause", "offset": [107, 125]}, {"key": "in-the-event", "type": "clause", "offset": [127, 139]}, {"key": "effect-on-the", "type": "clause", "offset": [183, 196]}, {"key": "ownership-interests", "type": "definition", "offset": [197, 216]}, {"key": "other-shareholders", "type": "clause", "offset": [224, 242]}, {"key": "persons-having", "type": "clause", "offset": [248, 262]}, {"key": "right-to", "type": "definition", "offset": [267, 275]}, {"key": "executive-officers-and-directors", "type": "clause", "offset": [327, 359]}, {"key": "securities-being-sold", "type": "definition", "offset": [412, 433]}, {"key": "the-company-has", "type": "clause", "offset": [530, 545]}, {"key": "good-faith", "type": "clause", "offset": [564, 574]}, {"key": "business-judgment", "type": "clause", "offset": [575, 592]}, {"key": "interests-of-the-company", "type": "clause", "offset": [627, 651]}], "size": 46, "hash": "16fffec4a88c6699865df3983c25273e", "id": 10}], "next_curs": "ClESS2oVc35sYXdpbnNpZGVyY29udHJhY3Rzci0LEhZDbGF1c2VTbmlwcGV0R3JvdXBfdjU2IhFkaWx1dGlvbiMwMDAwMDAwYQyiAQJlbhgAIAA=", "clause": {"children": [["", ""], ["indemnification", "Indemnification"], ["counterparts", "Counterparts"], ["assignment", "Assignment"], ["notices", "Notices"]], "parents": [["representations-and-warranties-of-the-company", "Representations and Warranties of the Company"], ["company-representations-and-warranties", "Company Representations and Warranties"], ["company-representations-etc", "COMPANY REPRESENTATIONS, ETC"], ["additional-representations-and-warranties", "Additional Representations and Warranties"], ["miscellaneous", "Miscellaneous"]], "title": "Dilution", "size": 3271, "id": "dilution", "related": [["anti-dilution", "Anti-Dilution", "Anti-<strong>Dilution</strong>"], ["anti-dilution-rights", "Anti-Dilution Rights", "Anti-<strong>Dilution</strong> Rights"], ["protection-against-dilution", "Protection Against Dilution", "Protection Against <strong>Dilution</strong>"], ["antidilution", "Antidilution", "Antidilution"], ["anti-dilution-provisions", "Anti-Dilution Provisions", "Anti-<strong>Dilution</strong> Provisions"]], "related_snippets": [], "updated": "2026-05-17T04:23:05+00:00", "also_ask": ["What are the most effective negotiation levers for limiting dilution risk?", "Which anti-dilution provisions are essential to include for investor protection?", "What are the most common pitfalls or loopholes in dilution clauses?", "How do dilution protections in this agreement compare to market standards?", "What factors most influence a court\u2019s willingness to enforce anti-dilution provisions?"], "drafting_tip": "Define 'dilution' precisely to avoid ambiguity; specify triggering events to ensure clarity; outline remedies to facilitate enforceability.", "explanation": "A dilution clause defines how a party's ownership percentage in a company may decrease if new shares are issued. Typically, this clause applies to shareholders, especially early investors, and outlines the circumstances under which their stake can be reduced, such as during additional funding rounds or the issuance of stock options to employees. Its core function is to clarify the potential impact of future equity issuances on existing ownership, helping parties understand and manage the risk of their investment being diluted over time."}, "json": true, "cursor": ""}}