As filed with the Securities and Exchange Commission on May              , 2021

 

Registration No. 333-                     

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

Superconductor Technologies Inc.
(Exact name of registrant as specified in its charter)

 

 

 

Delaware   3663   77-0158076
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

15511 W State Hwy 71, Suite 110-105

Austin, TX 78738

 

(512) 650-7775
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Jeffrey A. Quiram

President and Chief Executive Officer

Superconductor Technologies Inc.

15511 W State Hwy 71, Suite 110-105

Austin, TX 78738

 

(512) 650-7775
(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

 

Ben D. Orlanski, Esq.

Matthew S. O’Loughlin, Esq.

Proskauer Rose LLP

2029 Century Park East,

Suite 2400

Los Angeles, CA 90067-3010

(310) 557-2900 - Telephone

(310) 557-2193 - Facsimile

  

James T. Walesa

Chief Executive Officer

Allied Integral United, Inc.

8800 Village Drive

Suite 106

San Antonio, Texas 78217

(210) 451-0939-Telephone

(210) 428-9786 - Facsimile

  

Jeffrey C. Gifford, Esq.

Richard L. Lieberman, Esq.

Dykema Gossett, PLLC

112 E. Pecan Street

Suite 1800

San Antonio, TX 78205

(210) 554-5500 – Telephone

(866) 219-0973 - Facsimile

  

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger described in the enclosed joint proxy and consent solicitation statement/prospectus have been satisfied or waived.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [  ]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ]   Accelerated filer [  ]   Non-accelerated filer [X]   Smaller reporting company [X]
            Emerging growth company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) [  ]

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) [  ]

 

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered  Amount to be Registered (1)   Proposed Maximum Offering Price per Share   Proposed Maximum Aggregate Offering Price   Amount of Registration Fee (8) 
Common Stock, Par Value $0.001 (2)   33,726,709    N/A   $6,794,086(5)  $741.23 
Common Stock, Par Value $0.001 (3)   1,273,292   $1.04   $1,324,223(6)  $144.47 
Common Stock, Par Value $0.001 (4)   See note(2)   $5.00   $11,318,955(7)  $1,234.90 
Total                 $2,120.61 

 

(1) Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”), there is also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions.
   
(2) Relates to common stock, $0.001 par value per share (“Superconductor Common Stock”), of Superconductor Technologies Inc., a Delaware corporation (“Superconductor”), after giving effect to the Reverse Stock Split (as defined below) issuable to holders of 920,407 shares of the common stock, $0.01 par value per share (“Clearday Common Stock”), of Allied Integral United, Inc., a Delaware corporation (“Clearday”) (or 1,840,814 after the proposed 2:1 forward stock split by Clearday prior to the closing of the merger); holders of 8,528,945 shares (or 17,057,890 after the proposed 2:1 forward stock split by Clearday prior to the closing of the merger) of 6.75% Series A Cumulative Convertible Preferred Stock, par value $0.01 per share of Clearday (“Clearday Series A Preferred”); holders of 471,858shares of 10.25% Series I Cumulative Convertible Preferred Stock (“Clearday Care Preferred”) issued by AIU Alternative Care, Inc., a Delaware corporation and a subsidiary of Clearday (“Clearday Care”); holders of 660,038 units of the limited partnership interests (“Clearday OZ LP Interests”) issued by Clearday Alternative Care OZ Fund LP, a Delaware limited partnership that is a subsidiary of Clearday Care (“Clearday OZ Fund”); and holders of warrants for the purchase of 1,131,896 shares of Clearday Common Stock, including warrants (“Clearday Warrants”) issued by Clearday (or 2,263,791 after the proposed 2:1 forward stock split by Clearday prior to the closing of the merger), in each case, in connection with the proposed merger (the “merger”) of AIU Special Merger Company, Inc., a wholly owned subsidiary of Superconductor (“Merger Sub”), with and into Clearday. The amount of Superconductor Common Stock to be registered is based on the estimated number of shares of Superconductor Common Stock that is expected to be issued pursuant to the merger and reserved for issuance upon the exchange or exercise of the Clearday Series A Preferred, the Clearday Care Preferred, the Clearday OZ LP Interests and the Clearday Warrants, based on the closing stock price of Superconductor on the OTCQB market on May 13, 2021 and taking into account the Reverse Stock Split of Superconductor Common Stock effective immediately prior to the merger and assuming and using such stock price to compute the number of shares of Superconductor Common Stock issued or to be issued on account of each outstanding share of Clearday Common Stock, Clearday Series A Preferred, Clearday Care Preferred, each unit of Clearday OZ LP Interest and each Clearday Warrant. The number of shares registered as provided includes the shares reserved for issuance upon exercise of the Clearday Warrants. The shares of the Clearday Care Preferred and Clearday OZ LP Interests are not effected by the proposed 2:1 forward stock split by Clearday prior to the closing of the merger.
   
(3) Consists of Superconductor Common Stock that may be issued to holders of Superconductor Common Stock immediately prior to the closing date of the merger so that Superconductor stockholders hold not less than 3.6% of the Superconductor Common Stock as of the closing date of the merger, determined on a fully diluted basis as defined by the merger agreement.
   
(4) Consists of Superconductor Common Stock that may be issued upon the exercise of the Clearday Warrants assumed by Superconductor as part of the merger. Such amount of shares are included in the “Amount to be Registered” above that are described in note (2).
   
(5) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f)(2) under the Securities Act. Clearday is a private company, and no market exists for its securities and Clearday has an accumulated capital deficit. Accordingly, for the purposes calculating the registration fee, the amount equal to one-third of the par value or the stated value of such securities is used. Each of the Clearday Common Stock and the Clearday Series A Preferred Stock have a par value of $0.01 per share. Each of the Clearday Care Preferred stock has a par value of $0.01 per share and the Clearday OZ LP Interests have a stated value of $10.00 per share or unit, respectively. The amount stated under “Proposed Maximum Aggregate Offering Price” reflects the aggregate par value and stated value of the securities described above. The Clearday securities described above will be cancelled in the proposed merger.
   
(6) Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act, based upon the average of the high and low trading prices of the Superconductor Common Stock on May 12, 2021 (within five business days prior to the date of this registration statement).
   
(7) Estimate solely for purposes of calculating the registration fee in accordance with Rule 457(g) under the Securities Act, based upon the assumed exercise price of the Clearday Warrants of $5.00 per share. Under the terms of the Clearday Warrants, the exercise price will be 50% of the trading price of the shares underlying the warrants on the first day such shares are publicly traded.
   
(8) This fee has been calculated pursuant to Section 6(b) of the Securities Act.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

  

 

  

 
 

 

The information in this preliminary joint proxy and consent solicitation statement/prospectus is not complete and may be changed. Superconductor may not sell the securities offered by this joint proxy and consent solicitation statement/prospectus until the registration statement filed with the Securities and Exchange Commission of which this document is a part, is declared effective. This joint proxy and consent solicitation statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any representation to the contrary is a criminal offense.

 

PRELIMINARY JOINT PROXY AND CONSENT SOLICATION STATEMENT/PROSPECTUS SUBJECT TO COMPLETION, DATED MAY_     _ 2021

 

LOGO  

 

TRANSACTION PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

Dear Stockholders of Superconductor Technologies Inc. and Allied Integral United, Inc.:

 

On May 14, 2021, Superconductor Technologies Inc. (“Superconductor”), AIU Special Merger Company, Inc., a wholly owned subsidiary of Superconductor (“Merger Sub”), and Allied Integral United, Inc., which conducts business under the name “Clearday” (“Clearday”), entered into an Agreement and Plan of Merger (as such agreement may be amended, the “merger agreement”), which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended. Subject to approval of stockholders of Superconductor and Clearday and the satisfaction or, to the extent permitted by law, waiver of certain other closing conditions, Clearday will acquire Superconductor through the merger of Merger Sub with and into Clearday, with Clearday surviving the merger and becoming a wholly owned subsidiary of Superconductor. Concurrent with the closing of the merger, Superconductor will amend its certificate of incorporation to change its name to “Clearday, Inc.” and effect certain other amendments that are described in the joint proxy and consent solicitation statement/prospectus provided to Superconductor stockholders, including an increase of the authorized shares of Superconductor Common Stock and a reverse stock split of the Superconductor Common Stock.

 

The merger will result in an acquisition of Superconductor by holders of securities issued by Clearday. If the merger is completed, then the stockholders of Superconductor will represent a small percentage of the total shares of Superconductor Common Stock after giving effect to the securities that will be issued in the merger and reserved for issuance upon the conversion or exchange of securities of Clearday.

 

If the merger is completed, each share of Clearday Common Stock (other than certain shares held by the parties to the merger, their affiliates and shares held by dissenting holders, as explained further below) will be converted into the right to receive shares of Superconductor Common Stock (and, if applicable, cash for fractional shares as described further below), less any applicable withholding taxes, equal to the Exchange Ratio (as defined in the merger agreement), ratably adjusted to reflect any stock split, reverse stock split, consolidation or combination of the securities of Superconductor or Clearday after the date of the merger agreement and prior to the Effective Time (as defined in the merger agreement).

 

 i
 

 

Each share of Clearday’s 6.75% Series A Cumulative Convertible Preferred Stock (“Clearday Series A Preferred”) that is not converted into shares of Clearday Common Stock by Clearday will remain outstanding and, in accordance with its terms, may be exchanged for shares of Superconductor Common Stock after giving effect to the Exchange Ratio.

 

In addition, Superconductor will assume the obligations under the warrants issued by Clearday, which may be exercised for Superconductor Common Stock (“Clearday Warrants”), and will assume the obligation to issue Superconductor Common Stock in respect of the 10.25% Series I Cumulative Convertible Preferred Stock (“Clearday Care Preferred”) issued by AIU Alternative Care, Inc., a Delaware corporation and a subsidiary of Clearday (“Clearday Care”); and units of the limited partnership interests (“Clearday OZ LP Interests”) issued by Clearday Alternative Care OZ Fund LP, a Delaware limited partnership that is a subsidiary of Clearday Care (“Clearday OZ Fund”). Clearday Care and Clearday OZ Fund are referred to collectively as the “Certain Clearday Subsidiaries”. For more details on the merger consideration, see “The Merger Agreement—Merger Consideration; Fractional Shares”.

 

Based on Superconductor’s closing stock price per share of $1.04 on May 13, 2021, the most recent practicable date for which such information was available prior to the date of this joint proxy and consent solicitation statement/prospectus, the estimated merger consideration would represent an aggregate amount of approximately 33,723,958 shares of Superconductor Common Stock to be (1) issued to holders of Clearday Common Stock, including shares of Clearday Series A Preferred stock that are converted into shares of Clearday Common Stock and (2) reserved for issuance upon exercise of the Clearday Warrants, Clearday Series A Preferred (that are not converted into shares of Clearday Common Stock), the Clearday Care Preferred and the Clearday OZ LP Interests. The result of the merger will be that Superconductor stockholders will, immediately after the merger, hold approximately 3.6% of the Superconductor Common Stock, determined on a fully diluted basis as defined in the merger agreement and subject to future dilution based on the potential exchange of Clearday Care Preferred and Clearday OZ LP Interests into Superconductor Common Stock. The value of the stock issued or reserved for issuance as part of the merger consideration will fluctuate with the market value of Superconductor Common Stock until the merger is completed. As a result, the value of the merger consideration, or the securities issued by Superconductor, could be greater than, less than or the same as the value of the merger consideration on the date of this joint proxy and consent solicitation statement/prospectus or at the time of the special meeting of the Superconductor stockholders.

 

Shares of Superconductor Common Stock are traded on the OTC Market OTCQB market under the symbol “SCON.” Superconductor Common Stock was previously reported on the Nasdaq Capital Market (“Nasdaq”) and such common stock was delisted, effective at the open of business on Wednesday, September 30, 2020 due to Superconductor’s non-compliance with Nasdaq Listing Rule 5550(a)(2), the minimum $1 bid price requirement.

 

The securities of Clearday and its subsidiaries are not traded on any public exchange or market. Superconductor urges you to obtain current market quotations for the shares of Superconductor Common Stock.

 

After completion of the merger, Superconductor will be renamed “Clearday, Inc.” and its common stock will continue to trade on the OTC Markets OTCQB. Superconductor will then assess its ability to list its common stock on Nasdaq or another exchange such as the NYSE American.

 

Superconductor is holding a special meeting of its stockholders to vote on the proposals necessary to complete the merger. Information about this meeting, the merger and the other business to be considered by stockholders at the special meeting is contained in the joint proxy statement and consent solicitation/prospectus provided to Superconductor stockholders. Any stockholder entitled to attend and vote at the special meeting is entitled to appoint a proxy to attend and vote on such stockholder’s behalf. Such proxy need not be a holder of Superconductor Common Stock.

 

 ii
 

 

After careful consideration, Superconductor’s board of directors (the “Superconductor Board”) has (i) determined that the merger and the other transactions contemplated by the merger agreement and the proposed reverse stock split are fair to, advisable and in the best interests of the Superconductor stockholders, (ii) authorized, approved and declared advisable the merger agreement, the merger, the other transactions contemplated by the merger agreement and the proposed reverse stock split and the agreements, certificates and instruments presented to the Superconductor Board related to the merger agreement and the merger and the proposed reverse stock split, (iii) recommended that the Superconductor stockholders vote to approve and adopt the merger agreement, the merger and the other matters and transactions contemplated by the merger agreement and the proposed reverse stock split and (iv) agreed to submit the merger agreement, all other matters contemplated by the merger agreement and the proposed reverse stock split to the Superconductor stockholders for their consideration and approval at the special meeting of the Superconductor stockholders.

 

Your vote is very important regardless of the number of shares of Superconductor Common Stock that you own. The merger cannot be completed without the adoption of the merger agreement and approval of the merger by the affirmative vote of a majority of the outstanding shares of Superconductor Common Stock entitled to vote at the special meeting. A failure to vote your shares, or to provide instructions to your broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the proposal to adopt the merger agreement and approve the merger.

 

Clearday is sending the accompanying joint proxy and consent solicitation statement/prospectus to its stockholders to request that they consider and consent to the proposals to approve and adopt the merger agreement and the merger, and a proposal to effect a 2–for-1 forward stock split of the Clearday Common Stock (“Clearday Stock Split”) effective immediately prior to the effective time of the merger, by executing and returning the written consent that Clearday furnishes with the accompanying joint proxy and consent solicitation statement/prospectus. AIU Alternative Care, Inc., a Delaware corporation and a subsidiary of Clearday (“Clearday Care”), and Clearday Alternative Care OZ Fund LP, a Delaware limited partnership that is a subsidiary of Clearday Care (“Clearday OZ Fund”) are also sending the accompanying joint proxy and consent solicitation statement/prospectus to their stockholders and holders of the limited partnership interests in Clearday OZ Fund to request their consent to the merger agreement, the merger, the other transactions contemplated by the merger agreement and the Clearday Stock Split and the amendments to the liquidation provisions of the Clearday Care preferred stock and the Clearday OZ Fund limited partnership units described in this joint proxy and consent solicitation statement/prospectus.

 

After careful consideration, Clearday’s board of directors (the “Clearday Board”) has (i) determined that the merger and the other transactions contemplated by the merger agreement and the Clearday Stock Split are fair to, advisable and in the best interests of the Clearday stockholders, (ii) authorized, approved and declared advisable the merger agreement, the merger, the other transactions contemplated by the merger agreement and the Clearday Stock Split and the agreements, certificates and instruments presented to the Clearday Board related to the merger agreement and the merger and the Clearday Stock Split, (iii) recommended that the Clearday stockholders vote to approve and adopt the merger agreement, the merger and the other matters and transactions contemplated by the merger agreement and the Clearday Stock Split, and (iv) agreed to submit the merger agreement, all other matters contemplated by the merger agreement and the Clearday Stock Split to the Clearday stockholders for their consideration by written consent in lieu of a special meeting. The Clearday Care board of directors and the general partner of Clearday OZ Fund has determined that the proposed amendments to the terms of the liquidation provisions of the terms of the Clearday Care Preferred and the limited partnership interests in Clearday OZ Fund are in the best interests in the Clearday Care and Clearday OZ Fund and have recommended that the holders of such securities approve such amendments. As of the date of this joint proxy and consent solicitation statement/prospectus, Clearday has received agreements to provide the consent to the merger agreement, all other matters contemplated by the merger agreement and the Clearday Stock Split, from each of its officers and directors and shareholders that hold 5% or more of its voting securities.

 

Clearday asks that the Clearday stockholders complete the written consent that will be provided by Clearday to its stockholders as soon as possible and return it promptly to Clearday by one of the means described in such written consent. A failure of a Clearday stockholder to vote their shares, or to provide instructions to their broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the merger and the Clearday Stock Split. Each of Clearday Care and Clearday OZ Fund are also asking for the consent to this merger from their preferred stockholders and limited partners.

 

More information about Superconductor, Clearday and the merger and the related transactions is contained in the accompanying joint proxy and consent solicitation statement/prospectus.

 

 iii
 

 

Superconductor and Clearday urge you to read the joint proxy statement and consent solicitation/prospectus and the annexes and exhibits carefully. In particular, you should carefully consider the matters discussed under “Risk Factors” beginning on page 36.

 

/s/ JEFFREY A. QUIRAM   /s/ JAMES T. WALESA
     
Jeffrey A. Quiram
President and Chief Executive Officer
Superconductor Technologies Inc.
  James T. Walesa
President and Chief Executive Officer
Allied Integral United, Inc. d/b/a Clearday

 

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the transactions described in this joint proxy statement and consent solicitation statement/prospectus or the securities to be issued pursuant to such transactions or passed upon the adequacy or accuracy of this joint proxy and consent solicitation statement/prospectus. Any representation to the contrary is a criminal offense.

 

The accompanying joint proxy and consent solicitation statement/prospectus is dated __________, 2021, and is first being mailed to Superconductor’s and Clearday’s stockholders on or about ____________, 2021.

 

 iv
 

 

LOGO

 

SUPERCONDUCTOR TECHNOLOGIES INC.

15511 W State Hwy 71, Suite 110-105

Austin, TX 78738

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

To be held on             , 2021

 

To the Stockholders of Superconductor Technologies Inc.:

 

We are pleased to invite you to attend the special meeting of stockholders of Superconductor Technologies Inc., a Delaware corporation (“Superconductor”), which will be held at Hill Country Galleria, 12600 Hill Country Blvd, Suite R-275, Bee Cave, Texas 78738, on ____________, 2021, at 10:00 a.m., local time, for the following purposes:

 

1.       Approval of the Issuance of Superconductor Common Stock and Preferred Stock. To vote on a proposal to approve the issuance and potential issuance of Superconductor Common Stock, in connection with the merger contemplated by the merger agreement dated as of May 14, 2021 (the “merger agreement”), which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, a copy of which new merger agreement is attached as Annex A to this joint proxy and consent solicitation statement/prospectus, to approve the change of control of Superconductor resulting from the issuance of such Superconductor Common Stock in the merger (the “Stock Issuance Proposal”);

 

2.       Approval of a Reverse Stock Split.  To vote on a proposal to approve an amendment to Superconductor’s certificate of incorporation, as amended (the “Superconductor Certificate of Incorporation”), to effect, if the price per share of Superconductor Common Stock is less than $10.00, a reverse stock split of the outstanding shares of Superconductor Common Stock, at a ratio (of up to 20-into-1) that would result in the opening price of the Superconductor Common Stock on the date of the closing of the merger to equal to $10.00 per share, as determined by the Superconductor Board, in the form attached as Annex B to this joint proxy and consent solicitation statement/prospectus (the “Reverse Stock Split Proposal”);

 

3.       Approval of Increase of Authorized Shares. To vote on a proposal to approve the amendment to the Superconductor Certificate of Incorporation to effect an increase of the number of authorized shares of Superconductor Common Stock from 25,000,000 shares to 60,000,000 shares, and to change the name of the corporation to “Clearday, Inc.”, in the form attached as Annex C to this joint proxy and consent solicitation statement/prospectus (the “Authorized Share Increase Proposal”);

 

4.       Merger-Related Compensation. To vote on a proposal to approve, by advisory (non-binding) vote, certain compensation arrangements that may be paid or become payable to Superconductor’s named executive officers in connection with the merger contemplated by the merger agreement (the “Merger-Related Compensation Proposal”); and

 

5.       Adjournment of the Special Meeting. To vote on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve Proposals 1, 2, 3 and 4 (the “Adjournment Proposal”).

 

Superconductor will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment thereof by or at the direction of the Superconductor Board. Please refer to the joint proxy and consent solicitation statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the special meeting.

 

 i
 

 

The Superconductor Board has fixed the close of business on                   , 2021 as the record date for the special meeting. Only Superconductor stockholders of record at that time are entitled to receive notice of, and to vote at, the special meeting or any adjournment thereof. A complete list of such stockholders will be available for inspection by any stockholder for any purpose germane to the special meeting during ordinary business hours for the 10 days preceding the special meeting at Superconductor’s principal place of business. The eligible Superconductor stockholder list will also be available at the special meeting for examination by any stockholder of record present at such meeting.

 

If you plan to attend the special meeting, admission will be by ticket only. If you are a stockholder of record (your shares are held in your name), you should bring the top portion of the proxy card, which will serve as your admission ticket. If you are a beneficial owner (your shares are held in the name of a bank, broker or other holder of record) and plan to attend the meeting in person, you must obtain an admission ticket in advance by writing to Superconductor, c/o Advantage Proxy, Inc., P.O. Box 13581, Des Moines, WA 98198. Please be sure to enclose proof of ownership, such as the voting instruction form from your broker or other nominee or an account statement. You will also be required to present valid, government-issued photo identification, such as a driver’s license or passport, to be admitted to the special meeting.

 

The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Superconductor Common Stock entitled to vote at the special meeting is necessary to constitute a quorum at the meeting. Abstentions will be counted towards a quorum; brokers may not exercise discretionary authority to vote on any of the proposals and therefore broker non-votes will not count toward a quorum. Approval of Proposal Nos. 1, 4 and 5 requires the affirmative vote of a majority of the votes cast by the shares of Superconductor Common Stock present in person or represented by proxy at the special meeting and entitled to vote thereon. Approval of Proposal Nos. 2 and 3 requires the affirmative vote of the holders of a majority of the shares of Superconductor Common Stock outstanding on the record date for the special meeting and entitled to vote thereon.

 

Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total and will have the same effect as “AGAINST” votes for Proposal Nos. 2 and 3, but will have no effect on Proposals No. 1, 4 and 5. Broker non-votes will have the same effect as “AGAINST” votes for Proposal Nos. 2 and 3, but will have no effect on Proposal Nos. 1, 4 and 5.

 

Each of Proposal Nos. 1, 2 and 3 are conditioned upon each other. Therefore, the merger cannot be consummated without the stockholders’ approval of Proposal Nos. 1, 2 and 3.

 

The Superconductor Board has unanimously approved and declared advisable the merger agreement and the transactions contemplated by the merger agreement, determined that the merger agreement and the transactions contemplated by the merger agreement are fair to and in the best interest of Superconductor and its stockholders, and unanimously recommends that Superconductor stockholders vote:

 

“FOR” the Stock Issuance Proposal (Proposal 1);
“FOR” the Reverse Stock Split Proposal (Proposal 2);
“FOR” the Authorized Share Increase Proposal (Proposal 3);
“FOR” the Merger-Related Compensation Proposal (Proposal 4); and
“FOR” the Adjournment Proposal (Proposal 5).

 

Your vote is very important regardless of the number of shares of Superconductor Common Stock that you own. A failure to vote your shares, or to provide instructions to your broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the merger.

 

Whether or not you plan to attend the special meeting in person, please submit your proxy promptly by telephone or via the internet in accordance with the instructions on the enclosed proxy card or complete, date, sign and promptly return the accompanying proxy card in the enclosed postage paid envelope to ensure that your shares will be represented and voted at the special meeting. If you date, sign and return your proxy card without indicating how you wish to vote, your proxy will be voted in accordance with the recommendation of the Superconductor Board and will be counted as a vote “FOR” Proposal Nos. 1 through 5. You may revoke your proxy at any time before the polls close at the special meeting by sending a written notice to the Corporate Secretary of Superconductor, by providing a duly executed proxy card bearing a later date than the proxy being revoked, by submitting a proxy on a later date by telephone or via the internet (only your last telephone or internet proxy will be counted) before 11:59 p.m., Eastern Time, on                  , 2021 or by attending the special meeting and voting in person.

 

 ii
 

 

Superconductor intends to hold the special meeting in person. However, Superconductor is actively monitoring the COVID-19 pandemic and is sensitive to the public health and travel concerns that stockholders may have and the protocols or guidance that federal, state and local governments and agencies such as the Center for Disease Control may impose. In the event it is not possible or advisable to hold the special meeting in person, Superconductor will announce alternative arrangements for the meeting as promptly as possible, which may include holding the special meeting solely by means of remote communication. If the special meeting will be held solely by remote communication, Superconductor will announce that fact as promptly as practicable, and details on how to participate will be issued by press release, posted on the website at which Superconductor’s proxy materials are available at www.suptech.com, and filed with the SEC as additional proxy material. Please monitor Superconductor’s website for updated information.

 

Submitting a proxy will not prevent you from voting in person, but it will help to ensure that your shares are voted at the special meeting and that a quorum is present and avoid added solicitation costs. Any eligible holder of Superconductor stock who is present at the special meeting may vote in person, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the special meeting in the manner described in the accompanying document. If your shares are held in the name of a broker, bank or other nominee, please follow the instructions on the voting instruction card furnished by the broker, bank or other nominee.

 

The enclosed joint proxy and consent solicitation statement/prospectus provides a detailed description of the merger and the merger agreement and the other matters to be considered at the special meeting. We urge you to carefully read this joint proxy and consent solicitation statement/prospectus, including any exhibits attached hereto and the annexes in their entirety. If you have any questions concerning the merger or this joint proxy and consent solicitation statement/prospectus, would like additional copies or need help voting your shares of Superconductor Common Stock, please contact Superconductor’s proxy solicitor:

 

Advantage Proxy, Inc.

 

Stockholders may call toll-free: 1-877-870-8565
Banks and brokers may call collect: 1-206-870-8565

 

This notice of special meeting is and the joint proxy and consent solicitation statement/prospectus relating to the merger and the related transactions will be available at www.suptech.com.

 

By Order of the Superconductor Technologies Inc. Board of Directors,

 

/s/ JEFFREY A. QUIRAM    
     
Jeffrey A. Quiram President and Chief Executive Officer    

 

Austin, Texas

 


                             , 2021

 

 iii
 

 

 

8800 Village Drive, Suite 106

San Antonio, Texas 78217

 

NOTICE OF SOLICITATION OF WRITTEN CONSENT

 

(Please note that a written consent is solicited and that you are not requested to send to us a proxy)

 

To the Holders of:

 

Common Stock issued by Allied Integral United, Inc., d/b/a Clearday (“Clearday”), par value $0.01 per share (“Clearday Common Stock”).
   
Series A 6.75% Cumulative Convertible Preferred Stock, par value $0.01 per share (“Clearday Series A Preferred Stock” and together with Clearday Common Stock, “Clearday Stock”) issued by Clearday.
   
10.25% Series I Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Clearday Care Preferred”), issued by AIU Alternative Care, Inc. (“Clearday Care”).
   
Units of limited partnership interests (the “Clearday OZ LP Interests”) issued by Clearday Alternative Care OZ Fund LP (“Clearday OZ Fund”).

 

The board of directors of Clearday (the “Clearday Board”) on behalf of Clearday and its subsidiaries Clearday Care and Clearday OZ Fund, are pleased to deliver to you the accompanying joint proxy and consent solicitation statement/prospectus to request the holders of the securities described above, in each case, as of the close of business on the record date execute and return the enclosed written consent (the “Written Consent’) for the purposes described below.

 

1.Approval of merger agreement, the merger, and Any Other Transactions Contemplated Thereby or Related Thereto. To adopt the Agreement and Plan of Merger, dated May 14, 2021 (as such agreement may be amended, the “merger agreement”), which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended, which new merger agreement is attached as Annex A to this joint proxy and consent solicitation statement/prospectus, pursuant to which Merger Sub will merge (the “merger”) with and into Clearday, with Clearday surviving as a direct wholly owned subsidiary of Superconductor (the “Clearday Merger Proposal”);

 

2.Approval of a Stock Split. To vote on a proposal to approve an amendment to Clearday’s certificate of incorporation, as amended (the “Clearday Certificate of Incorporation”) to effect a forward stock split of the outstanding shares of Clearday Common Stock, at a ratio of 2-for-1 (the “Clearday Stock Split Proposal”);

 

3.Approval of Proposal to Amend the Terms of the Clearday Care Preferred An amendment to the liquidation terms of the 10.25% Series I Cumulative Convertible Preferred Stock, par value $0.01 per share, issued by Clearday Care, so that the redemption amount may be paid with shares of the common stock of Superconductor (the “Preferred Stock Redemption Proposal”); and

 

4.Approval of Proposal to Amend the Terms of the Clearday OZ Fund Limited Partnership Agreement. To approve an amendment to Section 9 of the limited partnership agreement of Clearday OZ Fund so that the redemption amount may be paid with shares of the common stock of Superconductor (the “LP Redemption Proposal”).

 

The record date for the consent solicitation (the “Clearday Record Date”) is the close of business on ________, 2021, Written Consents are effective within 60 days of the first date on which a consent is so delivered to Clearday by an eligible Clearday stockholder.

 

 i
 

 

This joint proxy and consent solicitation statement/prospectus describes the merger and the actions to be taken in connection with the merger and provides additional information about the parties involved. Please carefully read this joint proxy and consent solicitation statement/prospectus, including any exhibits attached hereto in their entirety.

 

The Clearday Board has unanimously approved and declared advisable the merger agreement and the transactions contemplated thereby, including, but not limited to, the merger, and each of the other proposals describe above, and has determined that such contemplated actions are fair and in the best interests of each of the holders of the securities described above, and unanimously recommends that the holders of the securities described above consent to the Clearday Merger Proposal, the Clearday Stock Split Proposal, the Preferred Stock Redemption Proposal, the LP Redemption Proposal and any other transactions contemplated thereby.

 

Your consent is very important regardless of the number of shares that you own. Please complete, date and sign the Written Consent furnished with the accompanying joint proxy and consent solicitation/prospectus and return is promptly to Clearday by one of the means described in the Written Consent.

 

Only the consent of the holders of

 

A majority of the Clearday Stock is required for the approval of the Clearday Merger Proposal and the Clearday Stock Split Proposal;

 

A majority of the Clearday Care Preferred is required for the approval of the Preferred Stock Redemption Proposal; and

 

A majority of the Clearday OZ LP Interests is required for the approval of the LP Redemption Proposal.

 

See the “The Solicitation of Consents by Clearday Stockholders” section of this joint proxy and consent solicitation statement/prospectus for more information regarding the Written Consent and its solicitation. Additionally, if you have any questions concerning the merger or this joint proxy and consent solicitation statement/prospectus, would like additional copies or need help voting your shares of Clearday Stock, please contact Clearday’s agent in connection with the consent solicitation:

 

Advantage Proxy, Inc.

Stockholders may call toll-free: 1-877-870-8565

Banks and brokers may call collect: 1-206-870-8565

 

By Order of the Clearday Board of Directors,

 

/s/ JAMES T. WALESA  
James T. Walesa
President and Chief Executive Officer
Allied Integral United, Inc. d/b/a Clearday
 

_________________
                             , 2021

 

 ii
 

 

WHERE YOU CAN FIND MORE INFORMATION

 

Superconductor files annual, quarterly and current reports and other information with the SEC. Superconductor’s SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov.

 

As of the date of this joint proxy and consent solicitation statement/prospectus, Superconductor has filed a registration statement on Form S-4 to register with the SEC the Superconductor Common Stock that will be issued or reserved for issuance in the merger. This joint proxy and consent solicitation statement/prospectus is a part of that registration statement and constitutes a prospectus of Superconductor, as well as a proxy statement of Superconductor for the special meeting and a consent solicitation statement for the purpose of Clearday’s solicitation of stockholder written consents.

 

Superconductor has supplied all information contained in this joint proxy and consent solicitation statement/prospectus relating to Superconductor and Clearday has supplied all information contained in this joint proxy and consent solicitation statement/prospectus relating to Clearday.

 

If you would like to request documents from Superconductor or Clearday, please send a request in writing to either Superconductor or Clearday at the following addresses:

 

Superconductor Technologies Inc.

15511 W State Hwy 71, Suite 110-105

Austin, TX 78735

Attention: Chief Financial Officer

Telephone: (512) 650-7775

 

Allied Integral United, Inc.

8800 Village Drive, Suite 106

San Antonio, TX 78217

Attention: Chief Executive Officer

Telephone: (210) 451-0939

 

If you are a Superconductor stockholder or a Clearday Stockholder and would like additional copies, without charge, of this joint proxy and consent solicitation statement/prospectus or if you have questions about the merger, including the procedures for voting your shares, you should contact Superconductor’s proxy solicitor:

 

ADVANTAGE PROXY, INC.

Stockholders may call toll-free: 1-877-870-8565

Banks and brokers may call collect: 1-206-870-8565

 

To ensure timely delivery of these documents, any request should be made no later than                 to receive them before the Superconductor special meeting.

 

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TABLE OF CONTENTS

 

  Page
ABOUT THIS JOINT PROXY AND CONSENT SOLICITATION STATEMENT/PROSPECTUS 1
QUESTIONS & ANSWERS 4
SUMMARY 16
MARKET PRICE AND DIVIDEND INFORMATION 35
RISK FACTORS 36
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 60
THE MERGER 61
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER 93
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE SUPERCONDUCTOR REVERSE STOCK SPLIT 96
THE MERGER AGREEMENT 98
COMPARISON OF STOCKHOLDER RIGHTS 111
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMBINED COMPANY FOLLOWING THE MERGER 119
RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF SUPERCONDUCTOR 127
RELATED PARTY TRANSACTIONS OF DIRECTORS AND EXECUTIVE OFFICERS OF CLEARDAY 127
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION 129
DESCRIPTION OF BUSINESS—SUPERCONDUCTOR 138
SUPERCONDUCTOR EXECUTIVE COMPENSATION 143
Market Price and Dividend Information for Superconductor Common Stock 146
SUPERCONDUCTOR’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 147
DESCRIPTION OF SUPERCONDUCTOR CAPITAL STOCK 155
PRINCIPAL STOCKHOLDERS OF SUPERCONDUCTOR 160
THE SUPERCONDUCTOR SPECIAL MEETING 161
MATTERS BEING SUBMITTED TO A VOTE OF SUPERCONDUCTOR’S STOCKHOLDERS 164
DESCRIPTION OF BUSINESS—CLEARDAY 174
DESCRIPTION OF CAPITAL STOCK OF CLEARDAY 190
CLEARDAY EXECUTIVE COMPENSATION 197
CLEARDAY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 200
THE SOLICITATION OF CONSENTS BY CLEARDAY STOCKHOLDERS 214
PRINCIPAL STOCKHOLDERS OF CLEARDAY 216
LEGAL MATTERS 217
EXPERTS 217
OTHER MATTERS 217
WHERE YOU CAN FIND MORE INFORMATION 218

 

 i
 

 

 

ABOUT THIS JOINT PROXY AND CONSENT SOLICITATION STATEMENT/PROSPECTUS

 

This joint proxy and consent solicitation statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Superconductor (File No. 333-                       ), constitutes a prospectus of Superconductor under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of Superconductor Common Stock (as defined below) issuable to the holders of:

 

Clearday Common Stock;

 

Clearday Series A Preferred;

 

Clearday Warrants;

 

Clearday Care Preferred; and

 

Clearday OZ LP Interests,

 

in each case, in the proposed merger of Merger Sub with and into Clearday (each as defined below).

 

All references in this joint proxy and consent solicitation statement/prospectus to “Superconductor” or “STI” refer to Superconductor Technologies Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise. All references in this joint proxy and consent solicitation statement/prospectus to “Clearday” or “AIU” refer to Allied Integral United, Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise. All references in this joint proxy and consent solicitation statement/prospectus to “Merger Sub” refer to AIU Special Merger Company, Inc., a Delaware corporation and wholly owned subsidiary of Superconductor, unless the context requires otherwise.

 

Certain capitalized terms are used in this joint proxy and consent solicitation statement/prospectus, including the following:

 

   ● “AIU”—Allied Integral United, Inc., a party to the merger agreement.
     
  “Certain Clearday Subsidiaries”—Clearday Care and Clearday OZ Fund, collectively.
     
  “Clearday”—Allied Integral United, Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise.
     
  “Cares Act” —The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Coronavirus Response and Relief Supplemental Appropriations Act of 2021.
     
  “Clearday Care” —AIU Alternative Care, Inc., a Delaware corporation and a subsidiary of Clearday.
     
  “Clearday Care Preferred” —the shares of 10.25% Series I Cumulative Convertible Preferred Stock, par value $0.01 per share, issued by Clearday Care.
     
  “Clearday Common Stock” —the shares of common stock, $0.01 par value per share, issued by Clearday.
     
  “Clearday OZ Fund” —Clearday OZ Fund LP, a Delaware limited partnership that is a subsidiary of Clearday Care.
     
  “Clearday OZ LP Interests” —the units of limited partnership interests issued by Clearday OZ Fund.
     
  “Clearday Record Date” —the record date for consent solicitation of Clearday Stockholders, set for the close of business on _________, 2021.
     
  “Clearday Series A Preferred Stock”—the shares of 6.75% Series A Cumulative Convertible Preferred Stock, par value $0.01, issued by Clearday.

  

 

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“Clearday Warrants”—warrants issued by Clearday providing the right and option to purchase shares of Clearday Common Stock.
    
“combined company”—Superconductor and its subsidiaries after giving effect to the merger of Merger Sub with and into Clearday thereby making Clearday a wholly owned subsidiary of Superconductor.
    
“GAAP”—United States generally accepted accounting principles.
    
“MCA”—Memory Care America LLC and its subsidiaries, which are the entities that conduct Clearday’s residential care business.
    
“merger agreement”—the Agreement and Plan of Merger, dated as of May 14, 2021, by and among Superconductor, Merger Sub and Clearday, which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended.
    
“Merger Sub”—AIU Special Merger Company, Inc., a Delaware corporation and a wholly owned subsidiary of Superconductor.
    
“Superconductor”—Superconductor Technologies Inc., a Delaware corporation, and/or its consolidated subsidiaries, unless the context requires otherwise.
    
“Superconductor Common Stock”—the shares of common stock, $0.001 par value, issued by Superconductor.
    
 

“True up shares” —means the shares of Superconductor Common Stock that are issued in connection with the merger to the holders of the Superconductor Common Stock and Superconductor Convertible Rights as of the effective time of the merger, as further described under “The Merger Agreement—Merger Consideration; Fractional Shares”.

 

Except as specifically indicated, the following information and all other information contained in this joint proxy and consent solicitation statement/prospectus does not give effect to the Reverse Stock Split Proposal (as defined below) and does give effect, where applicable, to the one-for-ten reverse stock split by Superconductor on July 24, 2018 and the one-for-ten reverse stock split by Superconductor on September 10, 2020.

 

Superconductor has supplied all information contained or attached to this joint proxy and consent solicitation statement/prospectus relating to Superconductor and Merger Sub and Clearday has supplied all such information relating to Clearday. In connection with its solicitation of the vote of the holders of the Clearday Common Stock and the Clearday Series A Preferred Stock, Clearday Care Preferred stock and Clearday OZ LP Interests, Clearday may provide additional information to such holders that is not inconsistent with any of the information regarding Superconductor, the merger, the merger agreement and other information provided in this joint proxy and consent solicitation statement/prospectus.

 

You should rely only on the information contained in or attached as an exhibit to this joint proxy and consent solicitation statement/prospectus. Superconductor and Clearday have not authorized anyone to provide you with information that is different from that contained in or attached as an exhibit to this joint proxy and consent solicitation statement/prospectus. This joint proxy and consent solicitation statement/prospectus is dated as of the date set forth above on the cover page of this joint proxy and consent solicitation statement/prospectus, and you should not assume that the information contained in this joint proxy and consent solicitation statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information attached as an exhibit to this joint proxy and consent solicitation statement/prospectus is accurate as of any date other than the date of the exhibit. Neither the mailing of this joint proxy and consent solicitation statement/prospectus to Superconductor stockholders nor the issuance by Superconductor of shares of Superconductor Common Stock pursuant to the merger agreement will create any implication to the contrary.

 

The market data and the forward looking statements provided in this joint proxy statement and consent solicitation/prospectus have not been revised in consideration of the unprecedented economic and social events arising from and related to the coronavirus pandemic (“COVID-19”), unless expressly indicated.

 

 

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TRADEMARKS, TRADE NAMES AND SERVICE MARKS

 

This joint proxy statement and consent solicitation/prospectus contains references to trademarks and service marks of Superconductor and Clearday, and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this joint proxy statement and consent solicitation/prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that Superconductor or Clearday will not assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensor to these trademarks, service marks and trade names. Superconductor and Clearday do not intend its use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Clearday is a registered trademark of AIU.

 

INDUSTRY AND MARKET DATA

 

Each of Superconductor and Clearday have obtained the market and competitive position data used throughout this joint proxy statement and consent solicitation/prospectus from their own research, surveys or studies conducted by third parties and industry or general publications. Industry publications and surveys generally state that they have obtained information from sources believed to be reliable. Estimates involve risks and uncertainties, and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” in this prospectus.

 

This joint proxy and consent solicitation statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

 

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QUESTIONS & ANSWERS

 

The following questions and answers briefly address some commonly asked questions about the merger, the merger agreement and the special meeting. They may not include all the information that is important to stockholders of Superconductor and Clearday and the holders of the Clearday Care Preferred and Clearday OZ LP Interests. Holders of such securities should carefully read this entire joint proxy and consent solicitation statement/prospectus, including the annexes and the other documents referred to or attached as an exhibit hereto.

 

Q:What is the merger?

 

A:Superconductor, Merger Sub and Clearday have entered into an Agreement and Plan of Merger, dated as of May 14, 2021 (the “merger agreement”), which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended. A copy of the merger agreement is attached as Annex A to this joint proxy and consent solicitation statement/prospectus. The merger agreement contains the terms and conditions of the proposed acquisition of Superconductor by Clearday. Under the merger agreement, subject to satisfaction or, to the extent permitted by law, waiver of the conditions set forth in the merger agreement and described hereinafter, Merger Sub will merge with and into Clearday, with Clearday continuing as the surviving company and a wholly owned subsidiary of Superconductor (the “merger”). As a result of the merger, Superconductor will continue to be a publicly held company. Concurrent with the closing of the merger, Superconductor will amend its certificate of incorporation to change its name to “Clearday, Inc.”

 

Q:

What is the Superconductor reverse stock split that is included in the merger and why is it necessary?

 

A:Immediately prior to the effective time of the merger, the outstanding shares of Superconductor Common Stock will be reclassified into a lesser number of shares to be determined by the Superconductor board of directors (the “Superconductor Board”) and Clearday. Superconductor agreed to pursue a reverse stock split in the merger agreement because the Superconductor Board believes that the reverse stock split is likely to be necessary to: (1) bring the share price of the Superconductor Common Stock above the price per share threshold so that the Superconductor Common Stock will not be subject to the SEC’s “Penny Stock Rules,” by providing a price per share that is expected to satisfy the requirements of certain financial advisors who have policies to discourage their clients from investing in “penny stocks” (as defined by the SEC); (2) bring the share price of Superconductor Common Stock above the price per share threshold so that Superconductor Common Stock will satisfy one of the listing requirements for the Nasdaq Capital Market (“Nasdaq”) or another exchange; and (3) provide a price per share that is equal to $10.00 which enables Clearday to compute the number of its fully diluted shares of its common stock, including shares that would be issued in exchange of the Clearday Care Preferred and the Clearday OZ LP Interests, which calculation is required for Clearday to allocate the shares of Superconductor Common Stock that will be issued or reserved for issuance under the merger agreement to the holders of Clearday’s Common Stock, the Clearday Series A Preferred, the Clearday Warrants, the Clearday Care Preferred and the Clearday OZ LP Interests.

 

Q:Why am I receiving these materials?

 

A:You are receiving this joint proxy and consent solicitation statement/prospectus because you have been identified as a stockholder of Superconductor or a stockholder of Clearday as of the applicable record date, and (i) if you are a stockholder of Superconductor, you are entitled to notice of, and to vote at, the special meeting of Superconductor stockholders (the “special meeting”) or (ii) if you are a stockholder of Clearday (or a holder of the Clearday Care Preferred or the Clearday OZ LP Interests), you are entitled to sign and return to Clearday a written consent (the “Written Consent”), if you choose to do so. This document serves as:

 

a proxy statement of Superconductor used to solicit proxies for the special meeting;

 

 

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a prospectus of Superconductor used to offer shares of Superconductor Common Stock in exchange for shares of Clearday Common Stock and Clearday Series A Preferred Stock, as applicable, in the merger; and

 

a consent solicitation of Clearday, Clearday Care and Clearday OZ Fund used to solicit the Written Consent of Clearday stockholders and the holders of the Clearday Care Preferred and the Clearday OZ LP Interests for the adoption of the merger agreement and the approval of the merger and related transactions and adoption (as described below).

 

Q:What will Clearday stockholders receive in the merger?

 

A: Immediately prior to the effective time of the merger,
   
  Clearday expects to convert 50% of its issued and outstanding shares of Clearday Series A Preferred stock to shares of its Clearday Common Stock at a ratio of 1:1 (and may convert a larger amount); and
    
  will then effect a 2:1 forward stock split (so each share of outstanding Clearday Common Stock will result in 2 shares of outstanding Clearday Common Stock);
    
  If the merger is completed, then
   

Each share of Clearday Common Stock (other than certain shares held by the parties to the merger, their affiliates and shares held by dissenting holders, as explained further below) will be converted into the right to receive shares of Superconductor Common Stock (and, if applicable, cash for fractional shares as described below), less any applicable withholding taxes, equal to the Exchange Ratio (as defined in the merger agreement), ratably adjusted to reflect any stock split, reverse stock split, consolidation or combination of the securities of Superconductor or Clearday after the date of the merger agreement and prior to the Effective Time (as defined in the merger agreement); and

 

  Each share of Clearday Series A Preferred that is not converted into shares of Clearday Common Stock by Clearday will remain outstanding and, in accordance with its terms, may be exchanged for shares of Superconductor Common Stock after giving effect to the Exchange Ratio.
    
  For more details on the merger consideration, see “The Merger Agreement—Merger Consideration; Fractional Shares”.

 

In addition, Superconductor will assume the Clearday Warrants, and will assume the obligation to issue Superconductor Common Stock in respect of the Clearday Care Preferred issued by Clearday Care; and the Clearday OZ LP Interests issued by Clearday OZ Fund. For more details on the merger consideration, see “The Merger Agreement—Merger Consideration; Fractional Shares”.

 

Based on Superconductor’s closing stock price of $1.04 on May 13, 2021, the most recent practicable date for which such information was available prior to the date of this joint proxy and consent solicitation statement/prospectus, the estimated merger consideration would represent an aggregate amount of approximately 33,723,958 shares of Superconductor Common Stock to be (1) issued to holders of Clearday Common Stock, including shares of Clearday Series A Preferred stock that are converted into shares of Clearday Common Stock and (2) reserved for issuance upon exercise or conversion of the Clearday Series A Preferred stock (that are not so converted), the Clearday Warrants, the Clearday Care Preferred stock and the Clearday OZ LP Interests. The result of the merger will be that Superconductor stockholders will, immediately after the merger, hold approximately 3.6% of the Superconductor Common Stock, determined on a fully diluted basis as defined in the merger agreement and subject to future dilution based on the potential exchange of Clearday Care Preferred and Clearday OZ LP Interests into Superconductor Common Stock. The value of the stock issued or reserved for issuance as part of the merger consideration will fluctuate with the market value of Superconductor Common Stock until the merger is completed. As a result, the value of the merger consideration, or the securities issued by Superconductor, could be greater than, less than or the same as the value of the merger consideration on the date of this joint proxy and consent solicitation statement/prospectus or at the time of the special meeting of the Superconductor stockholders. Shares of Superconductor Common Stock are currently traded on the OTC Markets OTCQB under the symbol “SCON”. The securities of Clearday and its subsidiaries are not traded on any public exchange or market. Superconductor urges you to obtain current market quotations for the shares of Superconductor Common Stock.

 

 

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No fractional shares of Superconductor Common Stock will be issued in the merger. Each holder of shares of Clearday or holder of securities that may be converted or exchanged for securities issued by Clearday and who otherwise would have been entitled to a fraction of a share of Superconductor Common Stock will be entitled to receive, in lieu of such fractional share, cash (without interest) in an amount as described below under the heading “The Merger Agreement—Merger Consideration; Fractional Shares”. No such holder of a fractional share interest will be entitled to dividends, voting rights or any other rights in respect of any fractional share.

 

The Certain Clearday Subsidiaries will have as of the closing date of the merger a significant amount of aggregate liquidation preferences, which as of December 31, 2020 is approximately $12,250,000.

 

In addition, as of March 31, 2021, Clearday had outstanding Clearday Series A Preferred, of which approximately 50% will be converted into Clearday Common Stock prior to the effective time of the merger and will have an aggregate liquidation preference of approximately $93,500,000 on the date the merger is consummated, assuming that Clearday does not cause a conversion of more shares of Clearday Series A Preferred stock. It is a condition to closing the merger that the aggregate liquidation preferences of all such preferred stock of Clearday and its subsidiaries does not exceed $125,000,000, and Clearday may cause a conversion of a larger number of its Clearday Series A Preferred to satisfy this condition (the “Preferred Conversion”) or for any other reason. Preferred liquidation preferences are senior in rights to dividends and payments on liquidation or sale compared to the rights of common stock. There is no assurance that Superconductor will not issue additional preferred equity in the future.

 

For more details on the merger consideration, see “The Merger Agreement—Merger Consideration; Fractional Shares”.

 

Q:What will happen to my Superconductor Common Stock?

 

A:If the Reverse Stock Split Proposal is approved, Superconductor will complete the Reverse Stock Split prior to the merger. There will not be any other changes to your shares of Superconductor Common Stock prior to the merger. However, your holdings of Superconductor Common Stock as a percentage of the total outstanding shares will be reduced (or diluted) as a result of the shares of (i) Superconductor Common Stock issued, and (ii) Superconductor Common Stock reserved for issuance as part of the merger consideration. In addition, if the “true up” shares are issued, holders of Superconductor Common Stock will receive additional shares prior to the merger. See “The Merger Agreement – Merger Consideration; Fractional Shares”.

 

Q:What equity stake will Superconductor stockholders hold in Superconductor immediately following the merger?

 

A:

As noted above, based on the stock price of the Superconductor Common Stock as of the most recent practicable date for which such information was available prior to the date of this joint proxy and consent solicitation statement/prospectus, the Superconductor stockholders will hold approximately 3.6% of the Superconductor Common Stock, determined on a fully diluted based as defined in the merger agreement, as of the closing of the merger. The equity stake is based on an agreed upon relative value of Superconductor of approximately $12,761,000 compared to approximately $338 million for Clearday. However, such values do not purport to be the fair market values of either Superconductor, Clearday or the combined company, and were used solely to determine the exchange ratio.

 

 

-6-
 

 

 

 Q:Is there any cash component of the merger consideration?
   
A:No. All of the merger consideration are securities issued by Superconductor and Superconductor Common Stock that is reserved for issuance, other than payments for Clearday stockholders that have perfected their appraisal rights and the amount to pay for fractional shares that will result from the merger.

 

Q:When do Superconductor and Clearday expect to complete the transaction?

 

A:Superconductor and Clearday are working to complete the transaction as soon as practicable after this joint proxy and consent solicitation statement/prospectus and the referenced stockholder consents and approvals are obtained. Superconductor currently expects that the transaction will be completed prior to September 30, 2021. Neither Superconductor nor Clearday can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including obtaining the necessary regulatory approvals. However, if the merger is not completed on or prior to October 31, 2021, then each of Superconductor and Clearday has a right to terminate the merger agreement under its terms.

 

Q:What are the conditions to completion of the merger?

 

A:In addition to the Superconductor stockholders’ approval of and the Clearday stockholders’ consent to the proposals described above, completion of the merger is subject to the satisfaction of a number of other conditions, including: (i) no governmental authority of any competent jurisdiction having issued or entered any order or enacted or promulgated any applicable law after the date of the merger agreement having the effect of restraining, enjoining or otherwise prohibiting the completion of the merger, (ii) the absence of a material adverse effect (as defined in the merger agreement) by either Superconductor or Clearday and (iii) that the current and future liabilities incurred (whether or not accrued and payable) of Superconductor are not more than the amount specified in the merger agreement.

 

For more information, see “The Merger Agreement—Conditions to the Completion of the Merger”.

 

Q:Who will be the directors of Superconductor following the merger?

 

A:Immediately following the effective time of the merger, the board of directors of the combined company will consist of seven directors. These directors are expected to be Jeffrey A. Quiram and the following six directors that are designated by Clearday:

 

Name   Age   Current Principal Affiliation
James T. Walesa   60   Chairman and Chief Executive Officer of Clearday
BJ Parrish   48   Director and Chief Operating Officer of Clearday
Jeffrey A. Quiram   60   Director and Chief Executive Officer of Superconductor
Alan Channing   75   Designee of Clearday
Elizabeth M. Caveness   56   Designee of Clearday
Jeffrey W. Coleman   45   Designee of Clearday
Robert J. Watson, Jr.   44   Designee of Clearday

 

Q:Who will be the senior officers of Superconductor immediately following the merger?

 

A:Immediately following the consummation of the merger, the executive management team of the combined company is expected to be composed of the members of the Clearday senior management team prior to the merger:

 

Name   Title
James T. Walesa   Chief Executive Officer
BJ Parrish   Chief Operating Officer
Linda Carrasco   President—Memory Care America LLC
Gary Sawina   Executive Vice President—Director of Real Estate Operations
Richard M. Morris   Executive Vice President and General Counsel
Randall Hawkins   Executive Vice President and Chief Financial Officer

 

 

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Q:What am I being asked to vote on or consent to, and why is this approval necessary?

 

A1:Superconductor stockholders are being asked to vote on the following proposals:

 

1.Proposal No. 1: Approval of the issuance of Superconductor Common Stock and Preferred Stock. To vote on a proposal to approve the issuance and potential issuance of Superconductor Common Stock, as contemplated by the merger agreement which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended, and the transactions contemplated thereby (the “merger”), a copy of which merger agreement is attached as Annex A to this joint proxy and consent solicitation statement/prospectus, and to approve the change of control of Superconductor resulting from the issuance of such Superconductor Common Stock in the merger (the “Stock Issuance Proposal”);

 

2.Proposal No. 2: Approval of a Reverse Stock Split. To vote on a proposal to approve an amendment to Superconductor’s certificate of incorporation, as amended (the “Superconductor Certificate of Incorporation”) to, if the price per share of Superconductor Common Stock is less than $10.00, effect a reverse stock split of the outstanding shares of Superconductor Common Stock, at a ratio (of up to 20-into-1) that would result in the opening price of the Superconductor Common Stock on the closing date of the merger to equal to $10.00 per share, as determined by the Superconductor Board, in the form attached as Annex B to this joint proxy and consent solicitation statement/prospectus (the “Reverse Stock Split Proposal”);

 

3.Proposal No. 3: Approval of Increase of Authorized Shares. To vote on a proposal to approve the amendment to the Superconductor Certificate of Incorporation to effect an increase of the number of authorized shares of Superconductor Common Stock from 25,000,000 shares to 60,000,000 shares and change the name of the corporation to “Clearday, Inc.”, in the form attached as Annex C to this joint proxy and consent solicitation statement/prospectus (the “Authorized Share Increase Proposal”);

 

4.Proposal No. 4: Merger-Related Compensation. To vote on a proposal to approve, by advisory (non-binding) vote, certain compensation arrangements that may be paid or become payable to Superconductor’s named executive officers in connection with the merger contemplated by the merger agreement (the “Merger-Related Compensation Proposal”); and

 

5.Proposal No. 5: Adjournment of the Special Meeting. To vote on a proposal to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve Proposal Nos. 1, 2, 3 and 4 (the “Adjournment Proposal”).

 

Approval of Proposal Nos. 1, 2 and 3 by Superconductor stockholders is required for completion of the merger.

 

  A2: Clearday stockholders and holders of the Clearday Care Preferred and the Clearday OZ LP Interests are being asked to consent to the following:

 

1.Proposal No. 1: Approval of Merger Agreement, the Merger, and Any Other Transactions Contemplated Thereby. To approve the adoption of the merger agreement, pursuant to which Merger Sub will merge with and into Clearday, with Clearday surviving as a direct wholly owned subsidiary of Superconductor.

 

Written consent by the majority of Clearday stockholders is required for completion of the merger.

 

2.Proposal No. 2: Approval of Clearday Stock Split Proposal. To approve an amendment to Clearday’s certificate of incorporation, as amended (the “Clearday Certificate of Incorporation”) to effect a forward stock split of the outstanding shares of Clearday Common Stock, at a ratio of 2-for-1 (the “Clearday Stock Split Proposal”).

 

 

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Written consent by the majority of Clearday stockholders is required for the approval of this proposal.

 

3.Proposal No. 3: Approval of Proposal to Amend the Terms of the Clearday Care Preferred. To approve an amendment to Section 7 of the certificate of designation of the Clearday Care Preferred so that the redemption amount may be paid with shares of the common stock of Superconductor (the “Preferred Stock Redemption Proposal”).

 

Written consent by the majority of the holders of the Clearday Care Preferred stock is required for the approval of this proposal.

 

4.Proposal No. 4: Approval of Proposal to Amend the Terms of the Clearday OZ Fund Limited Partnership Agreement. To approve an amendment to Section 9 of the limited partnership agreement of Clearday OZ Fund so that the redemption amount may be paid with shares of the common stock of Superconductor (the “LP Redemption Proposal”).

 

Written consent by the majority of the holders of the Clearday OZ LP Interests is required for the approval of this proposal.

 

Q:How many votes do I have?

 

A:

Each Superconductor stockholder is entitled to one vote for each share of Superconductor Common Stock held of record as of                    (the “Superconductor Record Date”). As of the close of business on the Superconductor Record Date, there were                    shares of Superconductor Common Stock outstanding.

 

Each holder of Clearday Common Stock is entitled to one vote per share of such security outstanding on the Clearday Record Date, and each holder of Clearday Series A Preferred Stock is entitled to one vote to the extent that such security may be converted into shares of Clearday Common Stock as of the close of business on the Clearday Record Date. As of the close of business on the Clearday Record Date there were _________ shares of Clearday Common Stock and _________ shares of Clearday Series A Preferred Stock issued and outstanding which are entitled to be converted into shares of Clearday Common Stock. The form of the Written Consent that will be provided to a holder of the Clearday Common Stock and Clearday Series A Preferred Stock will indicate the number of votes that such holder is entitled to cast.

 

As summarized below, there are some important distinctions between shares held of record and those owned beneficially in “street name”.

 

Q: What constitutes a quorum for the Superconductor special meeting?

 

A:

The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Superconductor Common Stock entitled to vote at the special meeting is necessary to constitute a quorum. Abstentions (shares present at the meeting in person or by proxy that are voted ABSTAIN) will be counted towards a quorum; brokers may not exercise discretionary authority to vote on any of the proposals and therefore broker non-votes will not count toward a quorum.

 

Q:As a Superconductor stockholder, how does the Superconductor Board recommend that I vote?

 

A:The Superconductor Board unanimously recommends that Superconductor stockholders vote:

 

“FOR” the Stock Issuance Proposal (Proposal 1);
    
“FOR” the Reverse Stock Split Proposal (Proposal 2);

 

 

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“FOR” the Authorized Share Increase Proposal (Proposal 3);
    
“FOR” the Merger-Related Compensation Proposal (Proposal 4); and
    
“FOR” the Adjournment Proposal (Proposal 5).

 

Q:As a Clearday stockholder, how does the board of directors of Clearday (the “Clearday Board”) recommend that I vote?

 

A:After careful consideration, the Clearday Board recommends that Clearday stockholders execute the Written Consent to approve and adopt (1) the merger, the merger agreement, and the transactions contemplated therein, substantially in accordance with the terms of the merger agreement and the other agreements contemplated by the merger agreement, and (2) the Clearday Stock Split Proposal, and (3) the holders of the Clearday Care Preferred to approve the Preferred Stock Redemption Proposal and (4) holders of the Clearday OZ LP Interests to approve the LP Redemption Proposal, each as described in this joint proxy and consent solicitation statement/prospectus.

 

Q:Why did the Superconductor Board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?

 

A:For additional information regarding the Superconductor Board’s reasons for approving and recommending the adoption of the merger agreement and the transactions contemplated thereby, including the merger, see “The Merger—Superconductor’s Reasons for the Merger; Recommendation of the Superconductor Board of Directors”.

 

Q:What happens if any of Proposal Nos. 1, 2 or 3 is not approved by Superconductor’s stockholders?

 

A:Superconductor has invested significant time and incurred, and expects to continue to incur, significant expenses related to the proposed merger with Clearday. The merger cannot be completed unless Proposal Nos. 1, 2 and 3 are approved. In the event that the merger is not completed, Superconductor will have a much smaller asset base, consisting mostly of its proprietary Sapphire Cryocooler and most of its related patents, and a very limited ability to continue operations without obtaining additional financing, and there can be no assurance that any additional financing will be available on terms that are acceptable (or at all). Although the Superconductor Board may elect to, among other things, attempt to complete another strategic transaction if the merger with Clearday is not completed, the Superconductor Board may instead divest all or a portion of Superconductor’s remaining business or take steps necessary to liquidate or dissolve Superconductor’s business and assets if a viable alternative strategic transaction is not available. If Superconductor decides to dissolve and liquidate its assets, Superconductor would be required to pay all of its debts and contractual obligations, and to set aside certain reserves for potential future claims. There can be no assurances as to the amount, if any, or timing of available cash left to distribute to Superconductor’s stockholders after paying the debts and Superconductor’s other obligations and setting aside funds for reserves. Given the above factors, if a merger is not consummated with Clearday in the near future, Superconductor will likely be required to liquidate or declare bankruptcy, in which case there would likely be no payments to or value for common stockholders.

 

Q:Do any of Superconductor’s directors or executive officers have interests in the merger that may differ from those of Superconductor stockholders?

 

A:Superconductor’s directors and executive officers have certain interests in the merger that may differ from the interests of Superconductor stockholders generally. The Superconductor Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger and in recommending that Superconductor stockholders approve the proposals described above. For more information regarding these interests, see “The Merger—Interests of Directors and Executive Officers of Superconductor in the Merger”.

 

Q:What happens if any of Clearday Proposal Nos. 1, 2, 3 or 4 is not approved by Clearday’s stockholders?

 

A:The merger cannot be completed unless Proposal Nos. 1 and 2 are approved. Proposal Nos. 3 and 4 are requested by Clearday to improve the capital structure of Clearday. In the event that the merger is not completed, Clearday expects to pursue alternatives to becoming a public company and accessing the public capital markets, including an initial public offering through an underwritten or direct offering or merging with another public company, or may pursue an alternative to any such transaction such as an investment from one or more private funds or a leveraged recapitalization.

 

 

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Q:Do any of Clearday’s directors or executive officers have interests in the merger that may differ from those of Clearday’s stockholders?

 

A:Clearday’s directors and executive officers have certain interests in the merger that may differ from the interests of Clearday stockholders generally. The Clearday Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger and in recommending that Clearday stockholders consent to the proposal described above. For more information regarding these interests, see “The Merger—Interests of Clearday’s Directors and Executive Officers in the Merger”.

 

Q:As a Superconductor stockholder, why am I being asked to consider and vote on a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation?

 

A:Under SEC rules, Superconductor is required to seek an advisory (non-binding) vote with respect to the compensation that may be paid or become payable to its named executive officers that is based on, or otherwise relates to, the merger.

 

Q: What happens if the Merger-Related Compensation Proposal is not approved?

 

A:Approval of the Merger-Related Compensation Proposal is not a condition to completion of the merger, and because the vote on the Merger-Related Compensation Proposal is advisory only, it will not be binding on Superconductor. Accordingly, if Proposal Nos. 1, 2 and 3 are approved and the other conditions to closing are satisfied or waived, the merger will be completed even if the Merger-Related Compensation Proposal is not approved. If the merger is completed, the merger-related compensation will be payable to Superconductor’s named executive officers, subject only to the conditions applicable thereto, regardless of the outcome of the vote on the Merger-Related Compensation Proposal.

 

Q:What do I need to do now?

 

A:After carefully reading and considering the information contained in this joint proxy and consent solicitation statement/prospectus, please vote your shares of Superconductor Common Stock or complete the enclosed written consent to vote your shares of Clearday Common Stock, as applicable, as soon as possible so that your shares will be represented either at the special meeting or in the solicited written consent. Please follow the instructions set forth on the enclosed written consent or the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

 

Please do not submit your stock certificates. You will not be required to do anything with your stock certificate.

 

Q:Does my vote matter?

 

A:For Superconductor stockholders, yes. The merger cannot be completed unless (1) the Stock Issuance Proposal is approved by a majority of the votes cast by the shares of Superconductor Common Stock present in person or represented by proxy at the special meeting and (2) the Reverse Stock Split Proposal and the Authorized Share Increase Proposal are approved by the holders of a majority of the shares of Superconductor Common Stock outstanding on the Superconductor Record Date. Further, if you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the effect of a vote cast “AGAINST” the Reverse Stock Split Proposal and the Authorized Share Increase Proposal. The merger cannot be completed if either the Stock Issuance Proposal, the Reverse Stock Split Proposal or the Authorized Share Increase Proposal are not approved. The Superconductor Board unanimously recommends that stockholders vote “FOR” Proposal Nos. 1 through 5.

 

 

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For Clearday stockholders, yes. The merger and the amendment of the Clearday Certificate of Incorporation to effect the Clearday Stock Split Proposal cannot be completed unless the holders of a majority of the issued and outstanding shares of Clearday Common Stock complete the enclosed Written Consent to approve and adopt the merger agreement, the merger and the other transactions and actions contemplated therein. Since there is no mechanism for abstaining or for voting “AGAINST” the Clearday proposal, abstentions and non-votes will, as a practical matter, have the same effect as a vote cast “AGAINST” the Clearday proposal.

 

Q: As a Superconductor stockholder of record, how do I vote?

 

A:If you are a Superconductor stockholder as of the Superconductor Record Date, you are entitled to receive notice of, and cast a vote at, the special meeting. Each holder of Superconductor Common Stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of Superconductor Common Stock that such holder owned of record as of the record date. You may submit your proxy before the special meeting in one of the following ways:

 

Telephone voting—use the toll-free number shown on your proxy card;
   

Via the Internet—visit the website shown on your proxy card to vote via the Internet at www.suptech.com; or

   
Mail—complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

 

If you are a stockholder of record, you may also cast your vote in person at the special meeting.

 

If your shares are held in “street name” through a broker, bank or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the meeting will need to obtain a “legal proxy” form from their broker, bank or other nominee.

 

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

  

A:You are a “stockholder of record” if your shares are registered directly in your name with Superconductor’s transfer agent, Computershare Trust Company, N.A. As a Superconductor stockholder of record, you have the right to vote in person at the special meeting. You may also vote by internet, telephone or mail, as described in the notice and above under the heading “How do I vote?” You are deemed to beneficially own shares in “street name” if your shares are held by a bank, brokerage firm or other nominee or other similar organization. Your bank, brokerage firm or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. If you beneficially own your shares, you are invited to attend the special meeting of Superconductor stockholders; however, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

 

Q:If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

A:If your shares are held in “street name” in a stock brokerage account or by a broker, bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Superconductor or by voting in person at the special meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee. Your broker, bank or other nominee is obligated to provide you with a voting instruction card for you to use.

 

Brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner. It is expected that all proposals to be voted on at the special meeting are “non-routine” matters. Broker non-votes occur when a broker or nominee is not instructed by the beneficial owner of shares to vote on a particular proposal for which the broker does not have discretionary voting power. Broker non-votes will not be counted towards a quorum at the special meeting.

 

 

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If you are a beneficial owner of Superconductor Common Stock and you do not instruct your broker, bank or other nominee on how to vote your shares:

 

your broker, bank or other nominee may not vote your shares on the Reverse Stock Split Proposal or the Authorized Share Increase Proposal, which broker non-votes, if any, will have the same effect as a vote “AGAINST” such proposal; and
   
your broker, bank or other nominee may not vote your shares on the Stock Issuance Proposal, the Merger-Related Compensation Proposal or the Adjournment Proposal, which broker non-votes, if any, will have no effect on the outcome of such proposal (assuming a quorum is present).

 

Q: When and where is the special meeting? What must I bring to attend the special meeting?

  

A:The Superconductor special meeting will be held at Hill Country Galleria, 12600 Hill Country Blvd, Suite R-275, Bee Cave, Texas 78738, on                          at 10:00 a.m. (Austin, Texas time). Subject to space availability, all stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 9:00 a.m. (CST).

  

Superconductor intends to hold the special meeting in person. However, Superconductor is actively monitoring the COVID-19 pandemic and is sensitive to the public health and travel concerns that stockholders may have and the protocols or guidance that federal, state and local governments and agencies such as the Center for Disease Control may impose. In the event it is not possible or advisable to hold the special meeting in person, Superconductor will announce alternative arrangements for the meeting as promptly as possible, which may include holding the special meeting solely by means of remote communication. If the special meeting will be held solely by remote communication, Superconductor will announce that fact as promptly as practicable, and details on how to participate will be issued by press release, posted on the website at which Superconductor’s proxy materials are available at www.suptech.com, and filed with the SEC as additional proxy material. Please monitor Superconductor’s website for updated information.

 

If you plan to attend the special meeting, admission will be by ticket only and you must bring a valid, government-issued photo identification. If you are a registered stockholder (your shares are held in your name), you should bring the top portion of the proxy card, which will serve as your admission ticket. If you are a beneficial owner (your shares are held through a broker, bank or other holder of record) you must obtain an admission ticket in advance by writing to Superconductor Technologies Inc., c/o Advantage Proxy, Inc., P.O. Box 13581, Des Moines, WA 98198. Please be sure to enclose proof of ownership, such as the voting instruction form from your broker or other nominee or an account statement.

 

Q: What if I fail to vote or abstain?

 

A:For purposes of the special meeting, an abstention or failure to vote (or to instruct your broker to vote if your shares are held in “street name”) occurs when a stockholder attends the special meeting in person and does not vote or returns a proxy with an “abstain” instruction. Failures to vote and abstentions will be counted towards the vote total and will have the same effect as “AGAINST” votes for the Reverse Stock Split Proposal and the Authorized Share Increase Proposal, but will have no effect on the Stock Issuance Proposal, the Merger-Related Compensation Proposal and the Adjournment Proposal.

 

 

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Q: What will happen if I return my proxy or voting instruction card without indicating how to vote?

 

A:If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the Superconductor Common Stock represented by your proxy will be voted as recommended by the Superconductor Board with respect to that proposal.

 

Q:What happens if I sell my shares of Superconductor Common Stock after the record date but before the special meeting?

 

A:The Superconductor Record Date (the close of business on             ) is earlier than the date of the special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Superconductor Common Stock after the Superconductor Record Date but before the date of the special meeting, you will retain your right to vote at the special meeting. However, you will not have the right to receive the merger consideration to be received by the stockholders in the merger. In order to receive the merger consideration, you must hold your shares through completion of the merger.

 

Q: May I change or revoke my vote after I have delivered my proxy or voting instruction card?

 

A:Yes. If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do so in one of the following ways:

 

(1)logging onto the website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so;

 

(2)sending a notice of revocation to the corporate secretary of Superconductor;

 

(3)sending a completed proxy card bearing a later date than your original proxy card; or

 

(4)attending the special meeting and voting in person.

 

If you choose any of the first three methods, you must take the described action such that Superconductor receives your revocation no later than the beginning of the special meeting.

 

If your shares are held in an account at a broker, bank or other nominee and you have delivered your voting instruction card or otherwise given instruction on how to vote your shares to your broker, bank or other nominee, you should contact your broker, bank or other nominee to change your vote.

 

Q: Where can I find the voting results of the special meeting?

 

A:The preliminary voting results will be announced at the special meeting. In addition, within four business days following certification of the final voting results, Superconductor intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

Q: What are the material U.S. federal income tax consequences of the merger?

 

A:Superconductor and Clearday intend to report the merger as a tax-deferred “reorganization” for United States federal income tax purposes within the meaning of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”) or a tax-free “exchange” under Section 351 of the Internal Revenue Code, and it is a condition to closing that Clearday receive an opinion from legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization, Clearday stockholders generally will not recognize any gain or loss upon the exchange of Clearday Common Stock (including such shares of Clearday Series A Preferred stock that are so converted to Clearday Common Stock) for Superconductor Common Stock in connection with the merger, except with respect to cash received in lieu of a fractional share of Superconductor Common Stock. Neither Superconductor nor Clearday intends to request any ruling or other guidance from the Internal Revenue Service (“IRS”) on the United States federal income tax treatment of the merger and no assurance can be given that the IRS would not challenge such treatment. The qualification of the merger as a tax-deferred reorganization is not a condition to closing and the merger agreement does not include any covenant requiring Superconductor to ensure that the merger qualifies as a tax-deferred reorganization.

 

 

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Another tax consequence of the merger concerns the limitation of net operating losses (“NOLs”) incurred by Superconductor prior to the merger. Specifically, Superconductor’s benefit of its NOLs will be limited by the Internal Revenue Code because of the change of control of Superconductor resulting from the merger.

 

Tax matters are very complicated, and the tax consequences of the merger to a particular Superconductor or Clearday stockholder will depend in part on such stockholder’s circumstances. Accordingly, Superconductor and Clearday urge you to consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled, “Material United States Federal Income Tax Consequences of the Merger” beginning on page 93.

 

Q:Are there any risks that I should consider in deciding whether to vote in favor of the merger and the related proposals?

 

A:Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 36. You also should read and carefully consider the risk factors of Superconductor in the documents that are attached as an exhibit to this joint proxy and consent solicitation statement/prospectus.

 

Q: Do I have appraisal rights in connection with the transaction?

 

A:Superconductor is not a constituent entity in the merger. Under the Delaware General Corporation Law (the “DGCL”), no stockholder of Superconductor shall have any right to the appraisal of their shares of Superconductor Common Stock. Holders of Clearday Common Stock are entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. For more information about such rights, please see the provisions of Section 262 of the DGCL attached as Annex E and the section titled “The Merger—Appraisal Rights and Dissenters’ Rights”.

 

Q:What will happen to Superconductor stock-based awards?

 

A:The terms of each outstanding stock option of Superconductor and each other equity incentive award will not be changed by the terms of the merger. Each such stock option or equity incentive award will be modified to provide the lower number of shares of Superconductor Common Stock and higher exercise price, to appropriately reflect the reverse stock split of Superconductor.

 

Q: Whom should I contact if I have any questions about the proxy materials or voting?

 

A:

If you have any questions about the proxy materials, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy and consent solicitation statement/prospectus or the enclosed proxy card, you should contact Advantage Proxy, Inc., the proxy solicitation agent for Superconductor, toll-free at 1-877-870-8565 or 1-206-870-8565 (bankers and brokers call collect).

 

 

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SUMMARY

 

This summary highlights selected information contained in this joint proxy and consent solicitation statement/prospectus and does not contain all the information that may be important to you. Superconductor and Clearday urge you to read carefully this joint proxy and consent solicitation statement/prospectus in its entirety, including the annexes. Additional, important information, which Superconductor and Clearday also urge you to read, is contained in the documents attached as an exhibit to this joint proxy and consent solicitation statement/prospectus. See “Where You Can Find More Information”. Certain capitalized terms and references are described under “About This Joint Proxy and Consent Solicitation Statement/Prospectus”.

 

The Parties to the Merger

 

Superconductor

 

Superconductor was incorporated in Delaware on May 11, 1987 and has been a leading company in developing and commercializing high temperature superconductor (“HTS”) materials and related technologies. Superconductivity is the unique ability to conduct electricity with little or no resistance when cooled to “critical” temperatures. HTS materials are a family of elements that demonstrate superconducting properties at temperatures significantly warmer than previous superconducting materials. Electric currents that flow through conventional conductors encounter resistance. This resistance requires power to overcome and generates heat. HTS materials can substantially improve the performance characteristics of electrical systems, reduce power loss, and lower heat generation providing extremely high current carrying density and zero resistance to direct current.

 

During the first quarter of 2020, Superconductor committed to a cost reduction plan for the purpose of extending its operating capital (in light of Superconductor’s cash limitations that have been previously disclosed in its filings with the SEC) and aligning its personnel needs and capital requirements as Superconductor explores strategic alternatives. The cost reduction plan included maintaining operations of the Superconductor’s cryogenics initiatives while ceasing additional manufacturing of the Superconductor’s HTS Conductus® wire. The cost reduction plan also included a reduction in force to result in the termination of 19 employees or approximately 70% of the Superconductor’s employee workforce as of January 22, 2020. The cost reduction plan did not materially affect the Sapphire Cryocooler product and Superconductor expects that, after the merger, this product may be used in research and development by Clearday of advance air quality products. The merger is one of the strategic alternatives that was considered by Superconductor. The financial statements that are included in this joint proxy and consent solicitation statement/prospectus have been prepared on the basis of a continuing company.

 

Superconductor’s principal executive offices are located at 15511 W State Hwy 71, Suite 110-105, Austin, TX 78738, and its telephone number is (512) 650-7775. Superconductor’s website address is www.suptech.com. Information contained on Superconductor’s website does not constitute part of this joint proxy and consent solicitation statement/prospectus. Superconductor Common Stock is publicly traded, currently on the OTC Markets OTCQB under the symbol “SCON”. Additional information about Superconductor is included in documents attached as an exhibit to this joint proxy and consent solicitation statement/prospectus. Please see “Where You Can Find More Information”.

 

Clearday

 

Clearday was incorporated on December 20, 2017 and commenced its business on December 31, 2018 when it acquired private funds that were engaged in several businesses, including five memory care facilities. Since December 2018, Clearday has utilized its knowledge of the longevity market, elder care best-practices, and its significant experience in treating dementia, to develop and provide innovative, tech-enabled platform in alignment with the changing characteristics, expectations, and behaviors of the longevity consumer market. After the merger is effective, Superconductor will change its name to “Clearday, Inc.” and continue the businesses of Clearday and Superconductor’s business related to its Sapphire Cryocooler product, which is expected to be utilized in the further commercialization of advance air quality products.

 

 

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Clearday’s primary strategy is to disrupt the traditional senior care model by providing:

 

  innovative longevity care and wellness product and service solutions to older consumers and their caregivers, primarily virtually through digital channels with its Clearday at Home service which provides an innovative, tech-enabled platform that makes high-quality longevity care more accessible, affordable, and empowering for older Americans and those who love them;
     
  a membership-based adult day care model under its Clearday Clubs brand that will provide high-quality, daytime-only care primarily for individuals with Alzheimer’s disease, other dementias, or other lifestyle-limiting chronic health conditions through its physical locations;
     
  memory care facilities that focus on treating residents suffering from any of the 25 diagnoses of dementia (including Alzheimer’s disease) which may be treated in a residential care facility.

 

By combining traditional residential care services with a broader assortment of accessible, affordable and flexible care options, supported by innovative technology and care and wellness products, Clearday enables a care spectrum that includes methods and therapies to increase cognitive function and abilities that Clearday believes is superior to the current continuum of care for the rapidly aging U.S. consumer market, which generally focuses on different types of residential care and skilled nursing facilities. Clearday believes that its investment and operation of its 5 MCA residential communities has provided it an extensive understanding of the longevity market, which it defines as adults that are 50 years of age or older. Clearday believes that this consumer segment currently represents approximately 45% of the U.S. consumer market. Based on certain industry publications and surveys, Clearday believes that, subject to the disruption resulting from the COVID-19 pandemic, the spending power of U.S. consumers over 60 years old will be approximately $7.6 trillion annually, a figure that will likely grow as age demographics continue to shift to longer lifespans. The number of Americans age 65 and over is projected to nearly double from 52 million in 2018 to 95 million in 2060. All of these consumers will need care as they grow older, and Clearday believes its portfolio of traditional, alternative, and technology-enabled businesses is aligned to address the diverse needs of these older Americans and their caregivers.

 

Clearday believes the U.S. elder care system is a growing market. According to market research:

 

there are 72 million Americans over the age 65;

 

there are approximately 16 million Americans that provide unpaid care for people with Alzheimer’s or other dementias, which represents a significant number of people that could enter or return to the paid work force if alternatives such as affordable adult day care were available;

 

7.2 million Americans today live with Alzheimer’s disease or other dementias and it is expected that over the next 20 years, the total number of those living with Alzheimer’s disease or other dementias in the U.S. is expected to approximately double from 7.2 million to nearly 13 million, with 8.5 million women and 4.5 million men;

 

the care to the elderly is primarily the obligation of unpaid family members:

 

o83% of the help provided to older adults in the United States comes from family members, friends or other unpaid caregivers;

 

o16 million U.S. adults provide unpaid care to a loved one over 50 years of age;

 

oAlmost 24 hours per week are spent providing unpaid care;

 

o40.5 hours per week are spent providing care to some who reside with them; and

 

o75% of all unpaid caregivers are women.

 

Clearday presently serves the longevity care market, with a focus on memory care, through its residential facilities and its virtual service for disabled persons, the elderly, and persons diagnosed with intellectual and developmental disabilities.

 

Clearday believes that the traditional longevity care services often rely on an array of residential care options, referred to as a “continuum of care,” as seniors move on a journey through communities—independent living, assisted living, skilled care and memory care and then the end of their journey. Clearday believes that this business model - which has a focus on capital intensive low profit margin residential care facilities - is not sustainable and profitable. Clearday’s focus is to provide sustainable services that enable seniors to age in place and innovative products that improve health and wellness and provides a full spectrum of care through services and products. Clearday believes that this business model has high growth and profit potential. There are over 28,500 residential care communities in the United States. These communities have been battered by COVID-19 and are not favored by the longevity market for numerous reasons, including that seniors simply do not want to go to a “home”. Seniors prefer to “age in place”. 90% of U.S. seniors plan to stay in their own home for the next 5-10 years. Clearday understands the changing market dynamics and the growing demand for a new generation of longevity care solutions with better care and greater access and lower cost.

 

 

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Innovation by Leveraging Technologies

 

Clearday pursues businesses that are focused on the longevity care and wellness industry for the more than 110 million Americans that are over 50 years of age. Clearday has focused on the following developments during 2020 and 2021 to respond to challenges of the COVID-19 pandemic and serve the multi-billion dollar longevity care and wellness market:

 

Clearday Innovative Business   Status
Virtual day care service (“Clearday at Home”)  

Developed during 2020 and 2021 and sales began in the second quarter of 2021 through consumer and business to business (B2B) sales channels.

       
Physical adult day care service (“Clearday Clubs”)  

Developed during 2019 and 2020 and is expected to begin in the second quarter of 2021 through an acquisition.

       
Development or sales of innovative products to protect people from harmful pathogens, including COVID-19.  

Clearday has been reselling a mechanical antimicrobial solution and has offered an application service since Q3 2020.

 

Clearday has developed products that significantly increase the air quality of interior space during 2020 and has begun the sale and commercialization of these products in Q2 2021.

 

Clearday intends to continue its business development to address changing consumer preferences and regulatory requirements. Clearday’s products and services may be modified as part of Clearday’s continuing business strategy to provide a full care spectrum to older Americans to enhance their lives at a cost that is significantly lower than many competitors that historically service this market with traditional (residential care) services.

 

Clearday at Home

 

Clearday at Home is a unique digital service offering to the multi-billion home care industry with proprietary modern, innovative care products and services, with the goal of enabling seniors to stay in their homes longer and delay the need for residential care. Clearday recently launched its virtual offering of in-home care services through a digital network that makes a senior’s day more healthy, social and uplifting. The Clearday at Home service is a scalable, economic and effective platform that may reach the adult market. Clearday at Home connects the senior and their loved ones to others with similar experiences and challenges with proprietary programing that includes a range of activities, including physical and mental exercises to improve individuals that are challenged by dementia or other cognitive issues. Some of these programs are coordinated with the client’s at home care giver and greatly assist integrated plans of care. Such products and services are expected to be integrated with Clearday Clubs and other Clearday businesses.

 

Clearday believes that the longevity care spectrum will be significantly improved by providing a home health option that integrates with a broader range of care offerings. Clearday plans to improve the traditional home health care model with technologies and superior point of care service through clinicians and graduates of its proprietary Technicians of Cognitive Care program. One component of Clearday’s care spectrum is its proprietary B.E.S.T. test (Behavior / Engagement / Stimulation / Temperament) which measures certain indicators of dementia and other cognitive challenges and enables Clearday to provide a customized plan of care that may be monitored by a person’s caregiver and regularly assessed and updated on a monthly or other basis.

 

Clearday believes that its business model provides superior client attention and service experience for the informal family caregivers of senior citizens, who often are the primary point of contact for coordinating care services. Clearday’s tech-enabled care model is planned to coordinate a range of health and wellness issues that are often not given significant attention or provided in a unified and coordinated model. Clearday residential services may be integrated with its facilities, such as adult day care and specialty clinics, to provide a broader, more flexible assortment services to this market segment.

 

 

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Adult Day Care—Clearday Clubs

 

Each of Clearday’s adult day care models provide care that is significantly less expensive than residential care alternatives. Clearday Clubs will be characterized by welcoming facilities, trained staff, and personalized care programs that may be tailored to individual member needs. Clearday believes that current adult day care market participants include many smaller local businesses that do not provide the level of technology-enabled care, proven programming, and best practices expertise that will be provided by Clearday. Using the MCA residential facilities as a foundation and center for innovation, Clearday will soon acquire an existing adult day care center in San Antonio and is branding it as Clearday Patriot, an adult day care offering that primarily services military veterans. Clearday is improving a floor in its headquarter building in San Antonio, Texas to offer its first Clearday Clubs, its proprietary, membership-based daily care service centers, to provide a high-standard, technology-enabled care option to the longevity market.

 

The foundation of Clearday Clubs adult day care business is next generation integrated facilities that use its proprietary model to provide exceptional, innovative weekday care for older adults with physical or cognitive needs. This business includes a range of activities and services for the longevity care market that will focus on improving the lives of senior citizens. Clearday believes that its adult day care model will increase senior citizen independence and social engagement and assist family members to provide preferred age-in-home solutions. Clearday expects to locate its adult day care facilities near employment hubs or medical service communities, such as medical offices, hospitals or other traditional and alternative patient care facilities permitting close proximity for easy “drop off” and “pick up” and coordinated care by its client’s medical and other care professionals.

 

Residential Memory Care—Memory Care America LLC

 

Clearday’s significant investment in the residential care market has been through its five MCA residential memory care facilities. This investment provided the foundation for Clearday’s broader, integrated longevity care and wellness offerings. MCA’s residential communities, which operate in four U.S. states, employ industry best practices for the care of persons suffering from any of the 25 diagnoses of dementia that may be treated in a residential care facility (including Alzheimer’s disease), as well as those individuals with other cognitive or physical challenges. Clearday believes that its best practices, specialized programming and activities, personalized resident experiences, staff development and training techniques, and unique facility designs differentiate Clearday’s MCA communities, and provide Clearday centers to innovate newer care and wellness offerings with similar market differentiation advantages. Additionally, MCA’s protocols have protected its residents from health issues including COVID-19 as evidenced that less than 5 residents have been diagnosed with COVID-19 and there have not been any resident deaths related to this virus.

 

Proprietary Education Programs—Technicians of Cognitive Care

 

Clearday believes that MCA’s customer compliments, the low number of COVID-19 adverse incidents for residents, and the low number of behavioral incidents by residents which have been realized after MCA began offering Clearday Restore, support that MCA is recognized in their communities for providing exemplary care, primarily because of well-trained and attentive staff, including certified nursing assistants (or “CNAs”). Based on its staff development and training capabilities, Clearday has developed a proprietary training program that is modeled on the excellent quality standards that have been established by MCA in their residential care facilities.

 

Clearday’s training program—Technicians of Cognitive Care—emulates its continuing education and training programs provided by MCA. Graduates of the Technicians of Cognitive Care program will provide an important resource to Clearday and its care and wellness businesses. Clearday believes that by staffing its Clearday Clubs, home care services offerings, and its other care and wellness services with graduates of its Technicians of Cognitive Care program, it is able to distinguish Clearday from many of its competitors. Clearday initiated its Technician of Care program in MCA during the fourth quarter of 2019. This proprietary continuing education program may also provide Clearday with an advantage in an elder care services environment that is experiencing acute shortages of trained professionals. The overall supply of trained senior caregivers is growing at an estimated 14% annual rate, while the overall demand for trained senior caregivers is growing at an estimated 60% annually. This caregiver shortage is more urgent for those needing specialized Alzheimer’s and other dementia care, with demand in this sector growing at an estimated 120%.

 

Products

 

Clearday is developing a multi-channel distribution system for products that focus on improving the health and care of older consumers. Clearday’s initial product line includes:

 

A proprietary product developed by Clearday and a leading ISO 9001 engineering firm (whose client mandates include NASA and NATO) that incorporates the Superconductor Sapphire Cryocooler and enhances internal atmospheres and greatly improves air quality by removing harmful particulates to mitigate aerosol transmission of viruses and pathogens, which is one of the more significant issues in protecting people from the spread of COVID-19, influenza and other diseases, reduces CO2 (carbon dioxide) and enhances oxygen levels.

   

The distribution of a mechanical antimicrobial solution that instantly kills many harmful pathogens, including COVID-19, legionnaires disease and influenza, and is long-lasting, easy to use, safe and non-toxic.

 

 

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Other Care and Wellness Services

 

Clearday plans to expand its products and services targeted to the longevity care and wellness markets. Clearday believes that one of its competitive advantages is its deep understanding of the longevity care and wellness market, as well as its ability to apply this understanding consistently across a diverse array of care delivery channels.

 

Business Strategy

 

Clearday’s mission is to be a leading provider in the longevity care and wellness market by providing more cheerful, more engaging and more affordable alternatives to traditional elder care solutions that will:

 

offer a full care spectrum for older Americans that is more encompassing and effective than the traditional offerings that focus generally on a real estate centric continuum of residential care, from independent living, to assisted living, to skilled nursing facilities, often in the form of an integrated campus or affiliated facilities;

 

leverage technology to enhance the customer experience and quality of product and service offerings, with a lower cost structure than is possible for less automated, legacy care service providers;

 

require less capital investment than traditional residential care facilities and other customary care services offerings targeted to older Americans; and

 

provide exemplary care to older Americans facing dementia and other lifestyle-limiting physical and cognitive issues.

 

Clearday’s strategy is initially focused on the continued development and rapid expansion of Clearday at Home and its Clearday Club facilities. Clearday at Home has been acquiring members primarily through social media advertising campaigns and through its business to business (B2B) sales strategy which focuses on corporate sponsorship and affiliates with business providers such as home care agencies.

 

Clearday plans to expand their number of Clearday Club locations in the near future through organic growth by leasing facilities, and may also selectively acquire adult day care centers that are local and continue its business or revitalize such adult day care center and rebrand it as a Clearday Club. Clearday will soon acquire one day care center, is building out a Clearday Club at its headquarter location and has identified several other lease locations in the San Antonio, Texas area. The per customer costs (Clearday Club member) for Clearday Clubs are significantly less than the per resident costs that Clearday incurs for its MCA facilities and Clearday expects that the Clearday Club strategy will increase its operating margins.

 

 

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Clearday expects to locate facilities in high traffic areas near significant employers and will also seek to work with large employers to locate on corporate campuses. Clearday believes that employers who have adopted and promoted the growth of childcare service options with employee support and benefit subsidies may support and subsidize adult day care in a similar fashion.

 

Competitive Strengths

 

Clearday believes that its business plan enjoys many competitive strengths, including that Clearday:

 

is not burdened with legacy technologies that limit innovation and restrict the launch of new products and services;

 

is able to quickly and efficiently develop dynamic new virtual and other service and product offerings in response to emerging market demands, including an ability to innovate new care techniques and therapies and that continue Clearday’s core strategy to offer a full spectrum of care in a manner that protects its customers from infectious diseases, including COVID-19;

 

does not have the burden of existing lease and facilities cost for its innovative virtual and adult day care businesses, and will be able to take advantage of significant lease opportunities as commercial landlords seek to increase occupancy with tenants that are resistant to e-commerce market pressures;

 

is able to offer a more diverse, flexible, and affordable care spectrum, including its proprietary B.E.S.T. test enabling Clearday to offer numerous points of non-residential care when compared to many competitors that focus generally on a real estate centric continuum of residential care, from independent living, to assisted living, to skilled nursing facilities, often in the form of an integrated campus or affiliated facilities;

 

has a deep knowledge of the memory care market and has developed proprietary therapies and services that improve the lives of people that are challenged with dementia or other cognitive issues;

 

has an innovative Clearday Clubs model that provides its members (customers) with an array of options, discounts and benefits, including cross marketing adult day care centers with respite care in its residential centers so that a member of a Clearday Club can take time in Clearday’s 24/7 residential care centers, permitting the family to take trips for vacation or business travel; and

 

Clearday’s existing MCA communities also have several competitive advantages, including:

 

MCA is well positioned in a market with consistent growing demand;

 

MCA facilities have specific architecture and designs to improve the care and wellness of residents with memory care issues;

 

MCA’s senior executives enjoy an excellent reputation with the applicable state regulatory authorities and have decades of experience in caring for older Americans in the evolving regulatory environment;

 

MCA communities have successfully navigated the COVID-19 pandemic and are some of the safest residential communities;

 

MCA’s senior executives have a proven ability to continue care during pandemic and other emergencies, including the current COVID-19 pandemic, hurricanes and other significant disruptions.

 

 

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Principal Offices

 

Clearday sponsored an opportunity fund that provided investors with the ability to utilize the significant tax advantages of investing in designated “qualified opportunity zones,” within the meaning of Tax Cuts and Jobs Act (the “TCJA”). This sponsored fund acquired the building at 8800 Village Drive, San Antonio, Texas, a 3-story medical office building located in San Antonio, Texas that is located on 0.84 acres and has approximately 22,265 rentable square feet. Clearday intends to use most of the ground floor for an adult day care center and a retail location for products that target the longevity market. Some of the office space is used for Clearday’s executive offices, its initial educational center that will further develop and offer Clearday’s Technicians of Cognitive Care program and its production facilities for Clearday at Home.

 

Clearday’s principal executive offices are located at 8800 Village Drive, Suite 106, San Antonio, Texas 78217, and its telephone number is (210) 451-0839. Clearday’s website address is www.myclearday.com. Information contained on Clearday’s website does not constitute part of this joint proxy and consent solicitation statement/prospectus. Clearday’s stock is not publicly traded on any market or exchange and Clearday is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Merger Sub

 

AIU Special Merger Company, Inc. is a Delaware corporation and wholly owned subsidiary of Superconductor. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement. The principal executive offices of Merger Sub and its web address and telephone number are the same as those of Superconductor.

 

The Merger (Page 61)

 

A summary of the terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this joint proxy and consent solicitation statement/prospectus. Superconductor encourages you to read the merger agreement carefully, and in its entirety, as it is the legal document that governs the merger.

 

On May 14, 2021, Superconductor, Merger Sub and Clearday entered into the merger agreement which terminated, without any liability, a prior agreement and plan of merger among such parties dated as of February 26, 2020, as amended. The terms and conditions of the merger agreement provides that, in accordance with the DGCL, Merger Sub will merge with and into Clearday, with Clearday continuing as the surviving company and a wholly owned subsidiary of Superconductor. In connection with the merger, Superconductor shall increase the number of its authorized shares, complete a reverse stock split and change its name to Clearday, Inc. Stockholder approval is not required to effect the name change. Under the terms of the merger agreement, holders of Superconductor Common Stock as of record immediately prior to the closing date of the merger, may be issued additional shares of Superconductor Common Stock, referred to as “True Up Shares” so that the Superconductor stockholders hold not less than 3.6% of the Superconductor Common Stock as of the closing date of the merger, determined on a fully diluted basis as defined by the merger agreement.

 

Merger Consideration (Page 86)

 

In general, the merger agreement provides that Superconductor will issue or reserve for issuance shares of Superconductor Common Stock and allocates the fully diluted shares of Superconductor immediately after giving effect to the merger, in the aggregate, to the holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities, on the one hand, and the holders of Clearday securities and holders of Clearday options, warrants and convertible or exchangeable securities, on the other hand. The merger agreement determines the exchange ratio assuming that the aggregate value of the combined company is $350 million and that the aggregate value allocated to the holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities is equal to approximately 3.6% of the combined company’s equity, determined on a fully diluted basis as defined by the merger agreement. Such values do not purport to be the fair market values of either Superconductor, Clearday or the combined company, and were used solely to determine the exchange ratio and are not a statement or prediction of fair market value or the share price of the combined company after the merger.

 

 

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Under the terms of the merger agreement:

 

1.The exchange ratio is determined assuming the aggregate value of the combined company (Superconductor at the effective time of the merger) is equal to not less than $350 million and the minimum number of shares of Superconductor Common Stock at the effective time of the merger, determined on a fully diluted basis, as defined by the merger agreement, is not less than 35,000,000 (the “Minimum Post Merger Outstanding Shares”);

 

2.Prior to the closing of the merger, Superconductor will effect a reverse stock split in a ratio so that the Superconductor Common Stock price will be equal to $10.00 per share on the opening of market on the closing date of the merger,

 

For example, if the price per share of Superconductor Common Stock immediately prior to the closing date of the merger is $2.00 per share, then the reverse stock split would be 1:5 shares and assuming there were 2,750,000 shares of Superconductor Common Stock issued and outstanding (on a fully diluted basis), then there will be 550,000 shares of Superconductor Common Stock issued and outstanding (on a fully diluted basis) after the reverse stock split;

 

3.The holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities will receive not less than the SCON Ratio (defined in the merger agreement as 3.64%) of the aggregate number of shares of Superconductor Common Stock at the effective time of the merger (determined on a fully diluted basis as defined by the merger agreement), which will be not less than the number of Minimum Post Merger Outstanding Shares;

 

4.If after giving effect to the reverse stock split effected in connection with the merger (which is Proposal No. 2), the number of shares of Superconductor Common Stock (determined on a fully diluted basis as defined in the merger agreement) held by the holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities is less than SCON Ratio of the number of Minimum Post Merger Outstanding Shares, then at the effective time of the merger, Superconductor will issue shares (or “True Up Shares”) of its common stock;

 

For example, if as noted above, there are 550,000 shares outstanding, then 726,042 shares will be issued or reserved for issuance for the benefit of the holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities.

 

The number of shares of Superconductor Common Stock (determined on a fully diluted basis as defined in the merger agreement) will be equal to or more than 1,276,042 (the minimum number of shares) when the price per share of Superconductor Common Stock prior to the closing date of the merger is equal to $4.65 before giving effect to the Reverse Stock Split.

 

5.At the effective time of the merger, Superconductor will issue or reserve for issuance for the benefit of the holders of the Clearday securities and holders of Clearday options, warrants and convertibles or exchangeable securities (including the Clearday Care Preferred and the Clearday OZ LP Interests) a number of shares of Superconductor Common Stock equal to the greater of (x) 33,723,958 or (y) the amount equal to (1) the number of shares of Superconductor Common Stock issued and outstanding (determined on a fully diluted basis as defined in the merger agreement) divided by the SCON Ratio, (2) less the number of shares of Superconductor Common Stock then issued and outstanding (determined on a fully diluted basis as defined in the merger agreement).

 

The following table provides certain examples of the shares of Superconductor Common Stock that would be issued or reserved for issuance for the benefit of the holders of Superconductor securities and the holders of Superconductor options, warrants and convertible or exchangeable securities and the holders of the Clearday securities and holders of Clearday options, warrants and convertibles or exchangeable securities (including the Clearday Care Preferred and the Clearday OZ LP Interests) under the terms of the merger agreement:

 

 

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Premerger $ / SCON Common Stock   SCON Shares Outstanding Pre Reverse Stock Split *  SCON Shares Post Reverse Stock Split   Minimum Number of SCON Shares Allocated to Pre Merger SCON Holders   True up shares   SCON Common Stock Allocated to Clearday   Total Shares Post Merger 
$2.00    2,750,000    550,000    1,276,042    726,041.67    33,723,958    35,000,000 
$4.65    2,750,000    1,278,750    1,278,750    -    33,795,536    35,000,000 
$4.68    2,750,000    1,278,750    1,278,750    -    34,013,571    35,300,571 
$5.00    2,750,000    1,375,000    1,375,000    -    36,339,286    37,714,286 
$6.00    2,750,000    1,650,000    1,650,000    -    43,607,143    45,257,143 

 

* Assumes 2,750,000 shares of Superconductor Common Stock outstanding. The shares of Superconductor Common Stock that are held by AIU will not be considered issued and outstanding for such purposes under the terms of the merger agreement.

 

Based on Superconductor’s closing stock price of $1.04 on May 13, 2021, the most recent practicable date for which such information was available prior to the date of this joint proxy and consent solicitation statement/prospectus, the estimated merger consideration would represent an aggregate amount of approximately 33,723,958 shares of Superconductor Common Stock to be (1) issued to holders of Clearday Common Stock, including shares of Clearday Series A Preferred stock that are converted into shares of Clearday Common Stock and (2) reserved for issuance upon exercise or conversion of Clearday Warrants, Clearday Series A Preferred Stock (that are not so converted), Clearday Care Preferred and Clearday OZ LP Interests. The result of the merger will be that Superconductor stockholders will, immediately after the merger, hold approximately 3.6% of the Superconductor Common Stock, determined on a fully diluted basis as defined by the merger agreement and subject to future dilution based on the potential exchange of Clearday Care Preferred and Clearday OZ LP Interests into Superconductor Common Stock. The value of the stock issued or reserved for issuance as part of the merger consideration will fluctuate with the market value of Superconductor Common Stock until the merger is completed. As a result, the value of the merger consideration, or the securities issued by Superconductor, could be greater than, less than or the same as the value of the merger consideration on the date of this joint proxy and consent solicitation statement/prospectus or at the time of the special meeting of the Superconductor stockholders.

 

The Certain Clearday Subsidiaries will have as of the merger closing date a significant amount of aggregate liquidation preferences, which as of March 31, 2021 is approximately $12,100,000. In addition, as of March 31, 2021, Clearday had outstanding Clearday Series A Preferred, of which approximately 50% will be converted into Clearday Common Stock prior to the effective time of the merger and would have an aggregate liquidation preference of approximately $93,500,000 prior to the closing of the merger, assuming that Clearday does not cause a conversion of more shares of Clearday Series A Preferred stock. It is a condition to closing the merger that the aggregate liquidation preferences of all such preferred stock of Clearday and its subsidiaries does not exceed $125,000,000, and Clearday may cause a conversion of a larger number of its Clearday Series A Preferred to satisfy this condition or for any other reason. Preferred liquidation preferences are senior in rights to dividends and payments on liquidation or sale compared to the rights of common stock. There is no assurance that Superconductor will not issue additional preferred equity in the future.

 

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Conversion of Clearday Common and Preferred Stock (Page 86)

 

Upon the effectiveness of the merger, each share of Clearday Common Stock (other than certain shares held by the parties to the merger, their affiliates and shares held by dissenting holders, as explained further below) will be converted into the right to receive shares of Superconductor Common Stock (and, if applicable, cash for fractional shares as described below), less any applicable withholding taxes, equal to the Exchange Ratio (as defined in the merger agreement), ratably adjusted to reflect any stock split, reverse stock split, consolidation or combination of the securities of Superconductor or Clearday after the date of the merger agreement and prior to the Effective Time (as defined in the merger agreement). For more details on the merger consideration, see “The Merger Agreement—Merger Consideration; Fractional Shares”. Each share of Clearday Series A Preferred that is not converted into shares of Clearday Common Stock by Clearday will remain outstanding and, in accordance with its terms, may be exchanged for shares of Superconductor Common Stock after giving effect to the Exchange Ratio.

 

Treatment of Equity Awards (Page 86)

 

Treatment of Superconductor Stock Options and Other Equity Incentive Awards (Page 86)

 

The terms of each outstanding stock option of Superconductor and each other equity incentive award will not be changed by the terms of the merger. Each such stock option or equity incentive award will be modified to provide the lower number of shares of Superconductor Common Stock and higher exercise price to appropriately reflect the reverse stock split of Superconductor.

 

Treatment of Clearday Restricted Shares (Page 87)

 

The only outstanding restricted share awards that have been issued by Clearday are shares of issued and outstanding shares of Clearday’s common stock which will be exchanged for shares of Superconductor Common Stock.

 

Treatment of Clearday Stock Warrants (Page 87)

 

Upon completion of the merger, each then-outstanding Clearday Warrant will be assumed by Superconductor and amended to represent a right to purchase shares of Superconductor Common Stock, where: (1) the number of shares of Superconductor Common Stock will equal the number of shares underlying such Clearday Warrant multiplied by the Exchange Ratio and (2) the other terms of such warrant will be substantially similar to the terms of such Clearday Warrant, as appropriately amended. The only Clearday Warrants that are outstanding as of the date of the merger agreement were warrants issued by Clearday in the offering of the Clearday Care Preferred and the Clearday OZ LP Interests. Each such Clearday Warrant provides for the purchase of one share of Clearday Common Stock, subject to customary adjustments for fundamental transactions, including the merger, for an exercise price per share equal to 50% of the volume weighted average price of Superconductor Common Stock for the 20 trading days prior to the effective date of the merger, adjusted as appropriate for the number of shares of such common stock issued in exchange for one share of Clearday Common Stock.

 

Treatment of Clearday Subsidiary Securities (Page 87)

 

Clearday has two subsidiaries that have issued securities that may be exchanged for Clearday Common Stock: (1) Clearday Care Preferred issued by Clearday Care; and (2) Clearday OZ LP Interests issued by Clearday OZ Fund.

 

 

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Upon completion of the merger, each share of Clearday Care Preferred and each Clearday OZ LP Interest will continue in full force and effect, except that the securities that will be issued upon exchange of the Clearday Care Preferred or the Clearday OZ LP Interests will be Superconductor Common Stock and not Clearday Common Stock. There will not be any change in the terms for the exchange of such securities for Superconductor Common Stock. Each share of Clearday Care Preferred and each Clearday OZ LP Interest, after giving effect to the merger, may be exchanged at the option of the holder of such security for shares of Superconductor Common Stock at the ratio that is equal to (A) the $10.00 per share original purchase price (or equivalent purchase price for the Clearday OZ LP Interests), (B) divided by the amount equal to (i) the volume weighted average price (“VWAP”) of the common stock (which, after the merger, will be Superconductor Common Stock) over the 20 days prior to the exchange date; (ii) multiplied by 80%. Other that the security that is subject to the holder’s exchange right is Superconductor Common Stock, there will not be any change in the exchange ratio, price or other terms of these securities.

 

Recommendation of the Superconductor Board of Directors (Page 165)

 

After careful consideration of various factors described in “The Merger—Superconductor’s Reasons for the Merger; Recommendation of the Superconductor Board of Directors,” the Superconductor Board unanimously recommends that holders of Superconductor Common Stock vote:

 

“FOR” the Stock Issuance Proposal (Proposal 1);
   
“FOR” the Reverse Stock Split Proposal (Proposal 2);
   
“FOR” the Authorized Share Increase Proposal (Proposal 3);
   
“FOR” the Merger-Related Compensation Proposal (Proposal 4); and
   
“FOR” the Adjournment Proposal (Proposal 5).

 

Interests of Directors and Executive Officers of Superconductor in the Merger (Page 81)

 

Superconductor’s directors and executive officers have certain interests in the merger that may differ from the interests of Superconductor stockholders generally. The Superconductor Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger and in recommending that the stockholders approve the proposals described above.

 

Additional interests of the directors and executive officers of Superconductor in the merger include, but are not limited to:

 

Specified officers of Superconductor have existing contractual rights under their employment or change in control agreements with Superconductor (as applicable, the “Existing Agreements”) to change in control or severance cash payments, totaling approximately $1.5 million in the aggregate, payable following a termination of employment without cause or for good reason within twenty-four months following the closing of the merger, or, in the case of Jeffrey A. Quiram, Chief Executive Officer of Superconductor, with respect to the closing of the merger, regardless of any termination of employment. The officers have agreed to amend their Existing Agreements (such amendments, collectively, the “Officer Agreements”) such that, their change in control or severance payments will be made in the form of shares of Superconductor Common Stock rather than (except in certain circumstance at Clearday’s option) in cash. The number of shares of Superconductor Common Stock delivered to each officer will equal the product of (i) a fraction, the numerator of which is the change in control or severance payment payable to the officer under their Existing Agreement and the denominator of which is the aggregate change in control or severance payments payable to all of the officers under their Existing Agreements (i.e., $1.5 million), and (ii) a fraction, the numerator of which is $1 million and the denominator of which is the volume weighted average closing price of the Company’s common stock on the OTC QB market (or, if applicable, the closing price on a national securities exchange) for the 30 OTC QB market (or, if applicable, the closing price on a national securities exchange) trading days immediately prior to the date that the change in control or severance payments are made under the Existing Agreements, which is the 183rd day after the Effective Time; provided, however, that the price is subject to a floor equal to the lowest price Clearday issues common stock or common stock equivalents during the 183 days after the Effective Time, if such stock is sold in an arms’ length transaction for proceeds of at least $ 1million, or in a registered transaction other than an “at the market” offering. Clearday may, at its option, elect to pay the cash value of any shares that would otherwise have been issued. Accordingly, the maximum aggregate value of the Officer Agreements is equal to $1 million.

  

For a more complete description of the interests in the merger of the directors and executive officers of Superconductor that are different from, or in addition to, those of Superconductor stockholders generally, see “The Merger—Interests of Directors and Executive Officers of Superconductor in the Merger”.

 

All of Superconductor’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the merger agreement and coverage pursuant to insurance policies maintained by Superconductor and will receive continuing or “tail” director and officer insurance coverage. Jeffrey A. Quiram, a director and the Chief Executive Officer of Superconductor, will remain as a director of Superconductor after the merger and receive director fees.

 

 

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Superconductor Special Meeting (Page 156)

 

Time, Place and Purpose of the Special Meeting (Page 156)

 

The special meeting to consider and vote upon the adoption of the merger agreement and the other matters will be held at the offices of Superconductor at Hill Country Galleria, 12600 Hill Country Blvd, Suite R-275, Bee Cave, Texas 78738, on                , at 10:00 a.m. (Austin, Texas time).

 

At the special meeting, Superconductor stockholders will be asked to consider and vote upon (1) the Stock Issuance Proposal, (2) the Reverse Stock Split Proposal, (3) the Authorized Share Increase Proposal, (4) the Merger-Related Compensation Proposal and (5) the Adjournment Proposal.

 

Record Date; Shares Outstanding and Entitled to Vote (Page164)

 

You are entitled to receive notice of, and to vote at, the special meeting if you are an owner of record of shares of Superconductor Common Stock as of the close of business on                , the Superconductor Record Date. On the Superconductor Record Date, there were                     shares of Superconductor Common Stock outstanding and entitled to vote. Stockholders will have one vote on all matters properly coming before the special meeting for each share of Superconductor Common Stock owned by such stockholders on the Superconductor Record Date.

 

Quorum Requirement; Proxies; Counting Your Vote (Page 163)

 

The presence at the special meeting, in person or by proxy, of the holders of a majority of the shares of Superconductor Common Stock issued and outstanding on the Superconductor Record Date for the special meeting will constitute a quorum for the transaction of business. Abstentions will be counted towards a quorum; brokers may not exercise discretionary authority to vote on any of the proposals and therefore broker non-votes will not count toward a quorum.

 

Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope or may vote in person by appearing at the special meeting. If your shares of Superconductor Common Stock are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Superconductor Common Stock using the instructions provided by your bank, brokerage firm or other nominee.

 

Vote Required (Page 160)

 

Approval of the Stock Issuance Proposal, the Merger-Related Compensation Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast by the shares of Superconductor Common Stock present in person or represented by proxy at the special meeting. Approval of the Reverse Stock Split Proposal and the Authorized Share Increase Proposal require the affirmative vote of the holders of a majority of the shares of Superconductor Common Stock outstanding on the Superconductor Record Date for the special meeting.

 

Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “FOR” and “AGAINST” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total and will have the same effect as “AGAINST” votes for the Reverse Stock Split Proposal and the Authorized Share Increase Proposal, but will have no effect on the Stock Issuance Proposal, the Merger-Related Compensation Proposal and the Adjournment Proposal. Broker non-votes will have the same effect as “AGAINST” votes for the Reverse Stock Split Proposal and the Authorized Share Increase Proposal, but will have no effect on Stock Issuance Proposal, the Merger-Related Compensation Proposal and the Adjournment Proposal.

 

How to Change Your Vote (Page 163)

 

If you are a record holder, you may change or revoke your vote before your proxy is voted at the special meeting as described herein. You may do this in one of the following ways: (1) by logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case, if you are eligible to do so; (2) by sending a notice of revocation to the corporate secretary of Superconductor; (3) by sending a completed proxy card bearing a later date than your original proxy card; or (4) by attending the special meeting and voting in person. If you choose any of the first three methods, you must take the described action such that Superconductor receives your revocation no later than the beginning of the special meeting.

 

 

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Voting by Superconductor Directors and Executive Officers

 

At the close of business on May 12, 2021, the most recent practicable date for which such information was available, Superconductor directors and executive officers and their affiliates were entitled to vote 8,375 shares of Superconductor Common Stock, which represents less than 1% of the shares of common stock outstanding on that date. The number and percentage of shares of Superconductor Common Stock owned by directors and executive officers of Superconductor and their affiliates as of the Superconductor Record Date are not expected to be meaningfully different from the number and percentage reflected in this Section. Superconductor currently expects its directors and executive officers to vote their shares of Superconductor Common Stock in favor of all proposals to be voted on at the special meeting, but no director or executive officer has entered into any agreement obligating him or her to do so. The number of shares reflected above does not include shares subject to or underlying outstanding stock options. For information with respect to Voting by Superconductor Directors and Executive Officers, please see “The Merger—Interests of Directors and Executive Officers of Superconductor in the Merger”.

 

Recommendation by the Superconductor Financial Advisor (Page 74)

 

Sanli Pastore & Hill delivered its opinion to the Superconductor Board that, as of May 14, 2021, and based upon and subject to the various assumptions made, the merger consideration was fair, from a financial point of view, to Superconductor. The opinion does not speak as of the time the merger will be completed or any date other than the date of such opinion. The opinion does not reflect changes that have occurred after the date of the opinion, including changes to the operations and prospects of Superconductor or Clearday, changes in general market and economic conditions or regulatory or other factors. See “The Merger—Opinion of Sanli Pastore & Hill”.

 

Directors and Executive Officers of the Combined Company Following the Merger (Page 103)

 

Effective as of the closing of the merger, the combined company’s senior officers are anticipated to include the following:

 

Name   Title
James T. Walesa   Chief Executive Officer
BJ Parrish   Chief Operating Officer
Linda Carrasco   President—Memory Care America LLC
Randall Hawkins   Executive Vice President and Chief Financial Officer
Richard M. Morris   Executive Vice President and General Counsel
Gary Sawina   Executive Vice President—Director of Real Estate Operations

 

Immediately following the effective time of the merger, the board of directors of the combined company will consist of seven directors. Pursuant to the terms of the merger agreement, these directors will be:

 

Name   Age   Current Principal Affiliation
James T. Walesa   60   Chairman and Chief Executive Officer of Clearday
BJ Parrish   48   Director and Chief Operating Officer of Clearday
Elizabeth M. Caveness   56   Designee of Clearday
Alan Channing  

75

 

Designee of Clearday

Jeffrey W. Coleman   45   Designee of Clearday
Jeffrey A. Quiram  

60

 

Director and Chief Executive Officer of Superconductor

Robert J. Watson, Jr.   44   Designee of Clearday

 

 

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Recommendation of the Clearday Board of Directors (Page 72)

 

After careful consideration of various factors described in “The Merger—Clearday’s Reasons for the Merger,” the Clearday Board unanimously recommends that the holders of Clearday Common Stock consent to the merger agreement, the merger, and any other transactions contemplated thereby.

 

Interests of Clearday’s Directors and Executive Officers in the Merger (Page81)

 

Clearday’s directors and executive officers have certain interests in the merger that may differ from the interests of Clearday stockholders generally. The Clearday Board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the merger and in recommending that the stockholders approve the proposals described above.

 

The Clearday director and executive officers have equity incentive compensation that are described in this joint proxy and consent solicitation statement/prospectus. Such equity incentive compensation may be monetized more readily if Clearday becomes a public company, such as through this merger.

 

For information with respect to the interest of Clearday Directors and Executive Officers in the merger and the transactions contemplated thereby, please see “The Merger—Interests of Clearday’s Directors and Executive Officers in the Merger.

 

Information about Clearday’s Consent Solicitation (Page 216)

 

The Clearday Board will solicit the stockholders of Clearday to consent to the merger agreement and the transactions contemplated thereby, including, but not limited to, the merger, by signing and submitting the Written Consent in the form provided by Clearday. You can participate and submit such Written Consent if you owned Clearday Common Stock at the close of business on the Clearday Record Date, which is _________, 2021. As of the close of business on the Clearday Record Date there were 920,407 shares of Clearday Common Stock and 8,528,945 shares of Clearday Series A Preferred Stock outstanding (which does not include shares of Clearday Series A Preferred Stock that accrue on account of a dividend and have not been issued). A Clearday stockholder can cast one vote and thereby provide “consent” for each share of Clearday Common Stock and one vote for each shares of Clearday Series A Preferred that may then be converted into a share of Clearday Common Stock, in each case owned on the Clearday Record Date.

 

Approval of such proposal by Written Consent requires consent from the holders of a majority of the issued and outstanding shares of Clearday Common Stock and Clearday’s Series A Preferred Stock voting as a single class.

 

Voting by Clearday Directors and Executive Officers (Page 85)

 

As of May 12, 2021, Clearday directors and executive officers and their affiliates were entitled to vote approximately 2,061,000 aggregate shares of Clearday Common Stock and Clearday Series A Preferred as of the Clearday Record Date, which represents approximately 22% of the aggregate votes such securities that may be cast. The number and percentage of shares of Clearday Common Stock and Clearday Series A Preferred owned by directors and officers of Clearday and their affiliates as of the Clearday Record Date are not expected to be meaningfully different from the number and percentages reflected in this section. Clearday’s directors and executive officers have agreed to provide their consent to the merger agreement, the merger and all other transactions relative thereto. The number of shares reflected above does not include shares subject to or underlying outstanding stock options. For information with respect to voting by Clearday Directors and Executive Officers, please see “The Merger—Interests of Clearday’s Directors and Executive Officers in the Merger”.

 

Risk Factors (Page 36)

 

Superconductor and Clearday are subject to various risks associated with their businesses and their industries. In addition, the merger poses a number of risks to each of Superconductor and Clearday and their respective stockholders. Superconductor and Clearday stockholders should carefully read this proxy and consent solicitation statement/prospectus and especially consider the factors discussed in “Risk Factors”.

 

 

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Some of the risks associated with the merger include, but are not limited to, the following:

 

 

Superconductor’s stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger; 

     
 

Each party is subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations and Superconductor is required to pay a significant fee if it accepts a higher and better offer;

     
 

The lack of a public market for Clearday’s capital stock makes it difficult to evaluate the fairness of the merger;

     
 

Superconductor stockholders will have a reduced ownership, voting interest and consequently significantly less influence over the policies of the combined company after the merger and will be subject to future dilution from Clearday preferred instruments;

     
 

The executive officers and directors of both Clearday and Superconductor have interests in the merger that may differ from Clearday stockholders’ interests;

     
 

Superconductor and Clearday may become involved in securities litigation or stockholder derivative litigation in connection with the merger, and this could harm the combined company’s business.

 

Some of the risks associated with Superconductor and its business include, but are not limited to the following:

 

 

Superconductor has a history of losses and may never become profitable;

     
  Superconductor consummated various asset sales that fundamentally change its risk profile and business opportunities;

 

 

Superconductor has a significant number of outstanding warrants and options, and future sales of the shares obtained upon their exercise could adversely affect the market price of its common stock;

     
 

Superconductor’s corporate governance structure may prevent its acquisition by another company at a premium over the public trading price of its shares.

 

Some of the risks associated with Clearday and the combined company post-merger include, but are not limited to the following:

 

 

The COVID-19 pandemic has caused significant market disruptions and may have longer-term effects that the combined company cannot predict;

     
 

Clearday’s planned business and growth strategy may not yield anticipated returns, may result in disruptions to the business of, may strain management resources and/or may be dilutive to Superconductor stockholders;

     
  Clearday’s strategy includes businesses that are in development or early stages and such strategies and businesses include additional venture stage risks
     
 

Non-core assets that are held for disposition are treated differently under GAAP;

     
 

Operators of senior care facilities must comply with governmental reimbursement program rules, regulations and certification requirements, and fraud and abuse regulations and are subject to new legislative developments and healthcare policy changes;

     
 

The planned care and wellness business may require the combined company to make significant capital expenditures to maintain and improve care centers;

     
 

Superconductor’s pre-merger NOL carryforwards and certain other tax attributes will be subject to limitations;

     
 

Other than with respect to MCA residential care business, Clearday has a limited history of operations and there are risks and uncertainties associated with operating and growing an emerging business within an emerging industry;

     
 

If the merger does not qualify as a reorganization under Section 368(a) of the Internal Revenue Code, or as an “exchange” satisfying the requirements of Section 351(a) of the Code, the stockholders of Clearday may be required to pay substantial U.S. federal income taxes as a result of the merger.

 

Risks related to the Superconductor Reverse Stock Split, the combined company’s common stock and that may generally apply to an investment in securities include, but are not limited to, the following:

 

  An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all;
     
  The market price of the combined company’s common stock may decline as a result of the merger, including as a result of some Clearday stockholders adjusting their portfolios, or for other reasons;
   
 

Superconductor depends on specific patents and licenses to technologies and its ability to protect its patents and other proprietary rights is uncertain;

     
 

Federal, state and local employment related laws and regulations could increase the combined company’s cost of doing business, and the combined company may fail to comply with such laws and regulations;

     
 

The combined company expects to incur substantial expenses related to the completion of the merger;

     
 

The combined company will depend on key personnel whose continued service is not guaranteed;

     
 

The combined company will rely on information technology and systems in its operations, and any material failure, inadequacy, interruption or security failure of that technology or those systems could materially and adversely affect the combined company;

     
 

The combined company’s operations will be subject to risks from adverse weather and climate events and its insurance may not cover potential losses, including from adverse weather conditions, natural disasters and other events;

     
 

Current government policies regarding interest rates and trade policies may cause a recession;

     
 

Compliance with regulation of corporate governance and public disclosure may result in additional expenses and divert management’s attention from operating the combined company’s business, which could have a material adverse effect on the combined company’s business;

     
 

Delaware law could discourage a change in control, or an acquisition of the combined company by a third party, even if the acquisition would be favorable to stockholders;

     
 

The combined company is expected to take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result in its common stock being less attractive to investors;

     
  The market price and volume of Superconductor Common Stock fluctuates significantly and could result in substantial losses for individual investors.

 

Regulatory Approvals (Page 104)

 

There are no approvals of any government authority or agency that is applicable to the merger or any other transactions contemplated by this joint proxy and consent solicitation statement/prospectus other than:

 

the filing of the applicable certificates under the DGCL;

 

state filings required by Clearday with respect to the change of control of its MCA communities; and

 

Superconductor must comply with applicable federal and state securities laws and the filing of this joint proxy and consent solicitation statement/prospectus with the SEC. Superconductor is also soliciting the consent of its stockholders regarding the issuance of the stock by Superconductor in connection with the merger as if the rules and regulations of Nasdaq in connection with the issuance of shares of Superconductor Common Stock were applicable prior to the effective date of the merger.

 

Clearday has recently acquired an adult day care center that is located in San Antonio, Texas. Additionally, the continued operation by MCA of its residential care facilities will require consents from the applicable governmental agencies, such as the Texas Health and Human Services Commission. Clearday expects to be able to obtain such consents.

 

Conditions to the Completion of the Merger (Page 104)

 

The completion of the merger is subject to customary conditions, which as of the date of this joint proxy and consent solicitation statement/prospectus, including the following conditions that have not already been satisfied:

 

1.Proposal Nos. 1, 2 and 3 being approved by Superconductor stockholders at the special meeting;

 

2.Proposal Nos. 1 and 2 being consented to by a majority of stockholders of Clearday;

 

3.the adoption of the merger agreement by the Clearday stockholders; and

 

4.this joint proxy and consent solicitation statement/prospectus being declared effective by the SEC.

 

Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including:

 

1.subject to certain exceptions, the accuracy of the representations and warranties of the other party;

 

2.subject to certain exceptions, performance by the other party of its obligations under the merger agreement;

 

3.the absence of any Material Adverse Effect (as defined in the merger agreement) on the other party;

 

4.the absence of any law, order, injunction, decree or other legal restraint preventing the completion of the merger or making the completion of the merger illegal;

 

 

 

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5.that Superconductor’s adjusted net working capital computed in accordance with the terms of the merger agreement is not less than negative $250,000, counting proceeds of Paycheck Protection Program and similar COVID related government programs as current assets, but not counting the debt from such programs as current liabilities for this purpose;

 

6.Superconductor shall deliver to Clearday’s tax counsel or tax accounting firm letters (in substantially the agreed form exchanged between the parties prior to the date hereof) containing reasonable and customary representations of its officers (solely in their corporate capacities) and not requiring any representations inconsistent with the representations of Superconductor any agreement herein or inconsistent with the Superconductor’s SEC Documents, for the purposes of assisting Clearday in connection with the preparation of a tax opinion from Dykema Gossett, PLLC or any other law or accounting firm reasonably acceptable to Clearday to the effect that the Merger will be treated for U.S. federal income tax purposes as a reorganization qualifying under the provisions of Section 368(a) of the Code or a tax-free exchange under Section 351 of the Code; and

 

7.Clearday having completed the Preferred Conversion.

 

The parties expect to complete the merger after all of the conditions to the merger in the merger agreement are satisfied or waived, including after Superconductor receives approval from its stockholders of Proposal Nos. 1, 2 and 3 at the special meeting and after Clearly receives consent from its stockholders of Proposal Nos. 1 and 2. For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Completion of the Merger”.

 

Timing of the Merger (Page 108)

 

The parties expect the transaction to be completed prior to the end of the third quarter of 2021. Neither Superconductor nor Clearday can predict, however, the actual date on which the transaction will be completed because it is subject to conditions beyond each company’s control, including the effectiveness of this Registration Statement on Form S-4 of which this joint proxy and consent solicitation statement/prospectus forms a part. If the merger is not completed by October 31, 2021 (the “Termination Date”), then each of Superconductor and Clearday have the right to terminate the merger agreement. For a more complete description of the conditions to the merger, see “The Merger Agreement—Conditions to the Completion of the Merger”.

 

No Solicitation (Page 106)

 

As more fully described in this joint proxy and consent solicitation statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, each of Superconductor and Clearday has agreed that each such person and their subsidiaries will not, and will not authorize or permit their representatives to, directly or indirectly, until the earlier of the closing of the merger or the Termination Date:

 

(1) initiate, solicit, knowingly encourage or facilitate (including by way of furnishing nonpublic information or assistance) any inquiries or the making of any proposal or offer or other action, including any proposal or offer to its stockholders that constitutes, or may reasonably be expected to lead to, any of the following transactions (each, a “Competing Transaction”): (i) merger, consolidation, share exchange, business combination or similar transaction involving the applicable party or its subsidiaries; (ii) sale, lease, exchange, mortgage, pledge, transfer or other disposition of 45% or more of the cost basis of the assets (including by means of an issuance, sale or other disposition of voting securities) of the applicable party or its subsidiaries, taken as a whole, or of 45% or more of any class of voting securities of the applicable party or its subsidiaries (as a whole), in a single transaction or series of related transactions, excluding any bona fide financing transactions that do not, individually or in the aggregate, have as a purpose or effect the sale or transfer of control of such assets; or (iii) tender offer or exchange offer for 45% or more of any class of voting securities of the applicable party or its subsidiaries (as a whole);

 

(2) engage in, continue or otherwise participate in any discussions or negotiations with any person regarding, or furnish in furtherance of such inquiries or to obtain a Competing Transaction, or

 

(3) otherwise enter into or effectuate a Competing Transaction.

 

The merger agreement includes certain exceptions to the non-solicitation covenant. Superconductor may accept an unsolicited Superior Competing Transaction (as defined below) after providing notice of at least three business days to the other party that provides the terms and other relevant documentation regarding such Superior Competing Transaction. For a more complete description of the limitations on solicitation of acquisition proposals from third parties and the ability of the Superconductor Board to change its recommendation for the transaction, see “The Merger Agreement—No Solicitation”, and the merger agreement attached as Annex A to this joint proxy and consent solicitation statement/prospectus.

 

 

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Termination of the Merger Agreement; Termination Fee (Page 108)

 

The merger agreement may be terminated by mutual written consent of Superconductor and Clearday at any time prior to the completion of the merger. In addition, the merger agreement may be terminated as follows:

 

by either Superconductor or Clearday if:
   
the merger has not been completed on or before October 31, 2021, except that this right to terminate the merger agreement is not available to any party that materially fails to comply with any obligation of such party set forth in the merger agreement;
   
upon a breach of a representation, warranty, covenant or agreement of the other party;
   
there is a governmental authority of any competent jurisdiction having issued or entered any order or enacted or promulgated any applicable law after the date of the merger agreement having the effect of restraining, enjoining or otherwise prohibiting the completion of the merger; or
   
the stockholder approval has not been obtained at the special meeting or at any adjournment or postponement of such meeting at which a vote on the adoption of the merger agreement was taken;
   
by Clearday if Superconductor accepts a Superior Competing Transaction; or
   

by either party if the board of directors of the other party shall have withdrawn, qualified or modified in a manner adverse to the other party, or shall have failed to make when required, or certain other events regarding the applicable board’s recommendation.

 

If the merger agreement is terminated as described above, the merger agreement will become void and of no effect, without liability of any party to the other party, subject to certain exceptions, including that:

 

the confidentiality agreement entered into by Superconductor and Clearday in connection with entering into the merger agreement, the provisions of the merger agreement with respect to certain indemnification obligations and certain other provisions, including with respect to the termination fee, will survive any termination of the merger agreement; and
   
there shall not be any release of liability of a party for fraud or a willful breach or Superconductor’s failure to pay the merger consideration by issuing the shares of Superconductor Common Stock upon the satisfaction or waiver of the conditions to closing set forth in the merger agreement.

 

If Superconductor terminates the merger agreement because (1) it has delivered a Superior Notice (as defined in the merger agreement), (2) the Superconductor Board changes its recommendation of the merger to its stockholders or (3) Superconductor knowingly and materially breaches its obligation to call or hold the special meeting or to cause this joint proxy and consent solicitation statement/prospectus to be mailed to its stockholders in advance of the special meeting, then Superconductor will pay to Clearday a break-up fee of up to $300,000. Superconductor also agrees that if the merger agreement is terminated due to a failure to obtain approval from Superconductor’s stockholders and, after the date of the merger agreement and prior to such termination, Superconductor were to consummate certain competing transactions within a 12 month period, then Superconductor would also pay Clearday such break-up fee.

 

If Clearday terminates the merger agreement because its board changes its recommendation of the merger to its stockholders or it knowingly and materially breaches its obligation to seek its stockholders’ consent to adopt the merger agreement, the merger and the other transactions and actions contemplated by the merger agreement (including to cause this joint proxy and consent solicitation statement/prospectus to be mailed to its stockholders in advance of the Clearday Stockholder Action (as defined in the merger agreement)), then Clearday will pay to Superconductor a break-up fee equal to $800,000 less the amount of the Operating Payments (as defined below) that have been paid. If Clearday terminates the merger agreement because it failed to obtain the required stockholder approval, then Clearday will pay to Superconductor a break-up fee equal to $300,000 less the amount of the Operating Payments that have been paid.

 

 

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In the event of termination of the merger agreement by either Clearday or Superconductor, the merger agreement will become void and have no effect, without any liability or obligation on the part of Clearday, on the one hand, or Superconductor, on the other hand, other than for the obligations that specifically survive such termination, including: the confidentiality provisions, including the mutual nondisclosure agreement among Superconductor and Clearday and the payment of break-up fees, to the extent applicable on the date of such termination; provided that nothing in the merger agreement shall operate to relieve any person of liability for fraud or a material breach or Superconductor’s failure to pay the merger consideration upon the satisfaction or waiver of the conditions to closing of the merger.

 

For a more complete description of each party’s termination rights and the termination fee obligations of Superconductor in connection with its acceptance of a competing or superior offer, see “The Merger Agreement—Termination Rights” and “The Merger Agreement—Effect of Termination”, and the merger agreement attached as Annex A to this joint proxy and consent solicitation statement/prospectus.

 

Appraisal Rights of Superconductor (Page 89)

 

Under the DGCL, the stockholders of Superconductor do not have any appraisal rights. Holders of Clearday Common Stock are entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. For more information about such rights, please see the provisions of Section 262 of the DGCL attached as Annex E and the section titled “The Merger—Appraisal Rights and Dissenters’ Rights”.

 

Comparison of Stockholder Rights (Page 111)

 

Both Superconductor and Clearday are incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of each are currently, and will continue to be, governed by the DGCL. If the merger becomes effective, Clearday stockholders will become stockholders of Superconductor and, as such, their rights will be governed by the DGCL, Superconductor’s amended and restated bylaws (the “Superconductor Bylaws”) and the Superconductor Certificate of Incorporation. A comparison of the rights of Superconductor stockholders contained in the Superconductor Certificate of Incorporation and Superconductor Bylaws to the rights of Clearday stockholders under Clearday’s certificate of incorporation and bylaws, each as amended is described under “Comparison Of Stockholder Rights”.

 

Material U.S. Federal Income Tax Consequences of the Merger (Page 93)

 

Superconductor and Clearday expect that the merger will qualify as a “reorganization” under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code or a tax-free “exchange” under Section 351 of the Internal Revenue Code, and it is a condition to closing that Clearday receive an opinion from legal counsel to the effect that the merger will so qualify. If the merger qualifies as a reorganization or a tax-free “exchange”, Clearday stockholders generally will not recognize any gain or loss upon the exchange of Clearday Common Stock for Superconductor Common Stock, except with respect to cash received in lieu of a fractional share of Superconductor Common Stock.

 

Clearday stockholders are urged to read the discussion in the section entitled “Material United States Federal Income Tax Consequences of the Merger”. This discussion does not address any non-U.S. tax consequences, nor does it pertain to any state or local income or other tax consequences. Furthermore, the U.S. federal income tax consequences described above may not apply to all holders of Clearday common stock or Clearday preferred stock. You are urged to consult their tax advisors as to the United States federal income tax consequences of the merger, as well as the effect of state, local and non-United States tax laws.

 

 

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Material U.S. Federal Income Tax Consequences of the Superconductor Reverse Stock Split and True Up Shares (Page 164)

 

A Superconductor U.S. stockholder generally should not recognize gain or loss upon the Superconductor Reverse Stock Split or the issuance of any True Up Shares, except possibly to the extent such Superconductor U.S. stockholder receives a whole share of Superconductor Common Stock in lieu of a fractional share of Superconductor Common Stock.

 

Superconductor stockholders are urged to read the discussion in the section entitled “Material U.S. Federal Income Tax Consequences of the Superconductor Reverse Stock Split” and to consult their tax advisors as to the United States federal income tax consequences of the proposed Superconductor reverse stock split, as well as the effect of state, local and non-United States tax laws.

 

Accounting Treatment (Page 89)

 

Clearday prepares its financial statements in accordance with accounting principles generally accepted in the United States, which are referred to collectively as GAAP. The merger will be accounted for as an acquisition of Superconductor by Clearday under the acquisition method of accounting in accordance with GAAP. Clearday will be treated as the acquiror for accounting purposes.

 

 

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MARKET PRICE AND DIVIDEND INFORMATION

 

Superconductor

 

Superconductor Common Stock trades on the OTC Markets OTCQB under the symbol “SCON”. The following table details the high and low closing prices for the Superconductor Common Stock as reported by OTC Markets OTCQB for the periods indicated. The following information does not give effect to the Superconductor reverse stock split described in Proposal No. 2, and does give effect, where applicable, to the one-for-ten reverse stock split by Superconductor on July 24, 2018 and the one-for-ten reverse stock split by Superconductor on September 10, 2020.

 

   Price Range 
   High   Low 
2018        
First Quarter  $149.00   $93.00 
Second Quarter  $109.00   $85.00 
Third Quarter  $128.80   $14.70 
Fourth Quarter  $25.00   $10.30 
2019          
First Quarter  $25.80   $12.50 
Second Quarter  $18.60   $7.00 
Third Quarter  $10.70   $4.80 
Fourth Quarter  $7.90   $1.20 
2020          
First Quarter  $3.10   $1.40 
Second Quarter  $5.80   $1.80 
Third Quarter *  $5.70   $1.40 
Fourth Quarter  $1.79   $0.79 
2021          
First Quarter   $2.00   $0.79 
Second Quarter   $0.79   $2.00 
Third Quarter to May 13, 2021  $1.40   $1.03 

 

* The common stock of Superconductor was delisted from the Nasdaq Capital Market, effective September 30, 2020.

 

The prices noted above, do not give effect of the Reverse Stock Split described in Proposal No. 2.

 

Following the consummation of the merger, Superconductor Common Stock will be listed under the combined company’s new name, “Clearday, Inc.” As of the Clearday Record Date, Clearday had approximately 20 common stockholder of record and approximately 400 Clearday Series A Preferred stockholders of record.

 

As of the Superconductor Record Date, Superconductor had approximately 10 stockholders of record.

 

Superconductor has never paid cash dividends and intends to employ all available funds in the development of its business. Superconductor has no plans to pay cash dividends in the near future. Superconductor’s ability to declare or pay dividends on shares of Superconductor Common Stock is subject to the requirement that Superconductor pay an equivalent dividend on each outstanding share of Superconductor Preferred Stock (on an as-converted basis).

 

No assurance can be given concerning the market price of Superconductor Common Stock before or after the completion of the merger. Changes in the market price of Superconductor Common Stock prior to the completion of the merger will affect the market value of the merger consideration that Clearday stockholders and other holders of securities issued by Clearday or certain of its subsidiaries will receive upon completion of the merger. The exchange ratio is provided in the merger agreement as the greater of (i) a specified value of Superconductor or (ii) the aggregate market value of Superconductor Common Stock, based on the price of the Superconductor Common Stock immediately prior to the closing of the merger. Accordingly, the market price of Superconductor Common Stock (and therefore the value of the merger consideration) as of the merger closing could be greater than, less than or the same as shown in the table above. Accordingly, Superconductor stockholders are advised to obtain current market quotations for Superconductor Common Stock in deciding whether to vote in favor of the merger and related proposals.

 

Clearday

 

Clearday is a private company and its shares of common stock are not publicly traded. There has never been, nor is there expected to be in the future, a public market for Clearday’s common stock.

 

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RISK FACTORS

 

You should consider the following factors in evaluating the proposals described in this joint proxy and consent solicitation statement/prospectus, the merger, the issuance of the securities as part of the merger consideration pursuant to the terms of the merger agreement, the proposed Superconductor reverse stock split and increase in the authorized number of shares and the combined company following the merger. These factors should be considered in conjunction with the other information included or attached as an exhibit hereto by Superconductor in this joint proxy and consent solicitation statement/prospectus.

 

Risks Related to the Merger

 

The merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all and the failure to complete the merger could have material adverse effects on Superconductor’s business and prospects, resulting in a likely bankruptcy.

 

The completion of the merger is subject to a number of conditions, including, among other things, receipt of the Superconductor stockholder approval and the Written Consent, which make the completion and timing of the completion of the merger uncertain. See “The Merger Agreement—Conditions to the Completion of the Merger,” for a more detailed discussion of these conditions. The failure to satisfy all of the required conditions could delay the completion of the merger for a significant period of time or prevent it from occurring at all. Any delay in completing the merger could cause Superconductor not to realize some or all of the benefits (or to realize them on a different timeline than expected) from the merger that Superconductor expects to achieve if the merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to closing the merger will be satisfied or waived or that the merger will be completed.

 

If the merger is not completed, Superconductor’s ongoing business may be materially and adversely affected by not realizing any of the benefits of having completed the merger. Superconductor does not have any significant business opportunities that are not related to its Sapphire Cryocooler product, has limited its expenses and has focused primarily on the merger with Clearday. If the merger is not consummated, then it is likely that Superconductor would likely not:

 

have sufficient funds to maintain operations or pay its obligations that have been incurred in connection with the merger; and

 

have sufficient funds to seek other strategic alternatives.

 

In such case, Superconductor would likely need to file for bankruptcy protection, resulting in no payment for stockholders and no value to the Superconductor common stock.

 

Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the merger and could materially and adversely impact Superconductor.

 

Also, subject to limited exceptions, either Superconductor or Clearday may terminate the merger agreement if the merger has not been completed by October 31, 2021.

 

Superconductor’s stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

 

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the merger, Superconductor’s stockholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. The significant businesses of the combined company will be the Clearday businesses. Significant financial resources, management attention and other resources will be required for Clearday to continue to develop and expand its longevity care and wellness businesses. There can be no assurance that such development and expansion will be successful.

 

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Each party is subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations and Superconductor is required to pay a significant fee if it accepts a higher and better offer.

 

Under the terms of the merger agreement, each of Superconductor and Clearday is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect each’s ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend certain contracts, acquire or dispose of assets above a certain threshold, incur certain indebtedness or incur certain capital expenditures. Such limitations could adversely affect Superconductor or Clearday’s business and operations prior to the completion of the merger.

 

The merger agreement contains provisions that make it more difficult for Superconductor to be acquired by any party other than Clearday. Under the terms of the merger agreement, Superconductor is subject to a more limited set of restrictions on the conduct of its business prior to completing the merger, which restrict its ability to seek any other strategic alternatives. Such limitations could adversely affect Superconductor’s value in any such strategic alternative, which may be more than the value of Superconductor provided under the merger agreement. The merger agreement also provides for a substantial payment by Superconductor to Clearday in the event that the Superconductor Board changes its recommendations regarding the merger.

 

The merger agreement provides that Superconductor has a limited right to accept a higher or better offer with respect to any of the following, referred to in the merger agreement as a “Competing Transaction”: (i) any merger, consolidation, share exchange, business combination or similar transaction involving the applicable party or its subsidiaries; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 45% or more of the cost basis of the assets (including by means of an issuance, sale or other disposition of voting securities) of the applicable party or its Subsidiaries, taken as a whole, or of 45% or more of any class of voting securities of the applicable party or its Subsidiaries (as a whole), in a single transaction or series of related transactions, excluding any bona fide financing transactions that do not, individually or in the aggregate, have as a purpose or effect the sale or transfer of control of such assets; or (iii) any tender offer or exchange offer for 45% or more of any class of voting securities of the applicable party or its subsidiaries (as a whole). Further, Superconductor is required to pay to Clearday a break-up fee of up to $300,000 if it accepts any Competing Transaction or if the Superconductor Board changes its recommendation to the Superconductor stockholders for approval of the matters described in this joint proxy and consent solicitation statement/prospectus. These provisions of the merger agreement make it less likely that Superconductor will be able to pursue and accept strategic alternatives, even if the Superconductor Board would then determine that such action may be in the best interests of the Superconductor stockholders.

 

Because the lack of a public market for Clearday’s capital stock makes it difficult to evaluate the fairness of the merger, Clearday stockholders may receive consideration in the merger that is greater than or less than the fair market value of Clearday’s capital stock and/or Superconductor may issue more securities than the relative fair market value of Clearday’s capital stock thereby diluting the existing stockholders of Superconductors more than the relative fair market values of Superconductor and Clearday prior to the merger.

 

The outstanding capital stock of Clearday is privately held and is not traded in any public market. The lack of a public market and comparable public companies makes it extremely difficult to determine the fair market value of Clearday’s capital stock and the value of Clearday’s businesses. Because the percentage of Superconductor equity to be issued to Clearday’s shareholders was determined based on negotiations between the parties, it is possible that the value of the Superconductor securities to be received by Clearday holders will be less than the fair market value of their Clearday capital stock or that Superconductor may pay more than fair market value for Clearday’s capital stock. The merger agreement determines the exchange ratio by assuming that the aggregate value of the combined company is $350 million. This amount has been determined by the private negotiations between Parent and AIU and may not be relied upon as the value of the combined company that will be represented by common stock price of Superconductor after the merger on the OTCBB. Such values do not purport to be the fair market values of either Superconductor, Clearday or the combined company, and were used solely to determine the exchange ratio and are not a statement or prediction of fair market value or the share price of the combined company after the merger.

 

The opinion received by the Superconductor Board from Sanli Pastore & Hill has not been, and is not expected to be, updated to reflect changes in circumstances that may have occurred since the date of the opinion.

 

Sanli Pastore & Hill delivered its opinion to the Superconductor Board that, as of the date of their report, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in its opinion, the merger consideration was fair, from a financial point of view, to Superconductor. Such opinion should not be relied upon as a valuation of Clearday and does not speak as of the time the merger will be completed or any date other than the date of such opinion. The opinion does not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Superconductor or Clearday, changes in general market and economic conditions or regulatory or other factors. Any such changes may materially alter or affect the relative values of Superconductor and Clearday. Sanli Pastore & Hill does not have any obligation to update, revise or reaffirm its opinion to reflect subsequent developments and has not done so. See “The Merger—Opinion of Sanli Pastore & Hill”.

 

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Clearday is not required to obtain and has not obtained an opinion from an independent investment banking or accounting firm, and consequently, you may have no assurance from an independent source that the price Clearday is paying for Superconductor is fair from a financial point of view.

 

Clearday is not required to obtain, and has not obtained, an opinion from an independent investment banking or accounting firm that the price it is paying to acquire Superconductor is fair from a financial point of view. The Clearday Board did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the business combination. In analyzing the business combination, the Clearday Board and Clearday’s management conducted due diligence on Superconductor and researched the industry in which Superconductor operates and concluded that the business combination and the acquisition of certain intellectual property rights related to Superconductor’s proprietary Sapphire Cryocooler was in the best interests of Clearday and its stockholders. Accordingly, investors will be relying solely on the judgment of the Clearday Board in valuing Superconductor’s business, and the Clearday Board may not have properly valued the business.

 

The unaudited pro forma condensed combined financial information in this joint proxy and consent solicitation statement/prospectus is presented for illustrative purposes only and may not be reflective of the operating results and financial condition of the combined company following completion of the merger.

 

The unaudited pro forma condensed combined financial information in this joint proxy and consent solicitation statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Superconductor’s actual financial position or results of operations would have been had the merger been completed on the dates indicated after giving effect to the merger as described in the footnotes presented in such pro forma statements. The unaudited pro forma condensed combined financial information is subject to a number of assumptions that are described in the notes to such unaudited pro forma condensed combined financial information. Such assumptions may differ from the facts that would have been present and may differ materially. Further, Superconductor’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma condensed combined financial information that is included in this joint proxy and consent solicitation statement/prospectus. The unaudited pro forma condensed combined financial information has been prepared with the expectation, as of the date of this joint proxy and consent solicitation statement/prospectus, that Superconductor will be identified as the acquiror under GAAP and reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of the party that is determined to be the acquiree under GAAP as of the date of the completion of the merger. In addition, subsequent to the closing date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the unaudited pro forma condensed combined financial information reflected in this document. For further discussion, see “Unaudited Pro Forma Condensed Combined Financial Information”.

 

Superconductor stockholders will have a reduced ownership and voting interest after the merger and will exercise significantly less influence over the policies of the combined company following the merger than they now have on the policies of Superconductor.

 

Superconductor stockholders presently have the right to vote in the election of the Superconductor Board and on other matters affecting Superconductor. Upon the completion of the merger, the Superconductor stockholders will own a significantly smaller percentage of the Superconductor Common Stock, on a fully diluted basis. As a result, current Superconductor stockholders will have significantly less influence on the management and policies of combined company after the merger is consummated than they have now.

 

The current Superconductor stockholders will not have the right, even if voting as a single group, to elect any of the directors of Superconductor after the merger and the directors of Superconductor before the merger will not be on the Superconductor Board after the merger with the exception of Jeffrey Quiram, and there is no obligation of any stockholder to reelect such director or for the Governance and Nominating Committee of the combined company to nominate such individual for re-election after the merger.

 

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As of December 31, 2020, Superconductor had outstanding options exercisable for an aggregate of 7,863 shares of Superconductor Common Stock at a weighted average exercise price of $255.90 per share and warrants to purchase up to 623,921 shares of Superconductor Common Stock at a weighted average exercise price of $44.80 per share. While these options and/or warrants are, as of the date of this filing, “out of the money,” if the price of Superconductor Common Stock (adjusted for any stock splits) were to exceed the exercise price of these options or warrants, then it becomes more likely that the holders of such securities will exercise them. In that case, current stockholders of Superconductor Common Stock would, as a group, receive substantially less than the equity stake described above to the extent that the currently “out of the money” options or warrants were to be exercised. Superconductor cannot predict if its stock price will rise or if the options or warrants will ever become “in the money”.

 

Superconductor’s stockholders will be subject to future dilution from Clearday preferred instruments.

 

Clearday Care Preferred Stock and Clearday OZ LP Interests will be convertible after the merger into Superconductor Common stock based on a 20% discount to then prevailing market prices. Depending on the prevailing prices at the time of any such conversion, there could be significant additional dilution to all common stockholders of Superconductor. On the other hand, there may be little or no dilution if the Superconductor Common Stock appreciates sufficiently before any conversion. The merger does not provide any antidilution protection to Superconductor stockholders from conversions of Clearday Care Preferred Stock and Clearday OZ LP Interests. Rather, the potential for dilution is but one of many factors the Superconductor Board considered in approving the merger. However, there is a risk that the dilution is material if there were to be significant conversions of Clearday Care Preferred Stock and Clearday OZ LP Interests into Superconductor Common Stock at low prevailing stock prices.

 

After the merger, the Clearday Care Preferred Stock and Clearday OZ LP Interests may be exchanged for Superconductor Common Stock at an exchange price that is the stated value of such securities (effectively, the issue price), plus the accrued and unpaid interest on such amount at an annual rate of 10.25% divided by 80% of the price of the Superconductor Common Stock, which provides a 20% discount. Should the price of the Superconductor Common Stock after the merger decrease, then the number of shares that are represented by such Certain Clearday Subsidiary securities will increase. If the Superconductor Common Stock price decreases by $1.00 (from $10.00 per share at the merger closing), then based on the value of the securities issued by the Certain Clearday Subsidiaries as of March 31, 2021 of approximately $12.1 million, approximately 167,500 additional shares of Superconductor Common Stock would be required to be issued.

 

Accordingly, Superconductor stockholders should understand that the initial aggregate percentage that they own, individually or as a group, immediately after the merger is subject to future dilution, even if no new securities are ever issued, but rather such dilution could arise by virtue solely of existing Clearday securities converting into common securities.

 

Clearday preferred stock has liquidation preferences that will be senior to Superconductor Common Stock

 

Prior to the merger, Clearday subsidiaries had outstanding shares of Clearday Care Preferred and Clearday OZ LP Interests that, as of March 31, 2021, have an aggregate liquidation preferences of approximately $12,100,000. In addition, Clearday had outstanding Clearday Series A Preferred, which will remain outstanding if not converted by Clearday in connection with the merger, has as of March 31, 2021, an aggregate liquidation preference of approximately $93,500,000, after giving effect to the conversion of 50% of the Clearday Series A Preferred stock on the effective time of the merger. It is a condition to closing the merger that the aggregate liquidation preferences of all such preferred stock of Clearday and its subsidiaries does not exceed $125,000,000, and Clearday may convert a larger number of its Clearday Series A Preferred stock to satisfy this condition or for any other reason. Preferred liquidation preferences are senior in rights to dividends and payments on liquidation or sale compared to the rights of common stock. There is no assurance that Superconductor will not issue additional preferred equity in the future.

 

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The Clearday Series A Preferred, Clearday Care Preferred and the Clearday OZ LP Interests have rights that are different and superior to the rights of the Superconductor Common Stock.

 

Upon completion of the merger, holders of the Clearday Series A Preferred stock, Clearday Care Preferred and Clearday OZ LP Interests, have preferred rights as holders of such securities, including their right to convert or exchange such securities for shares of the combined company common stock and a preferred right to dividends and distributions for the business segment that includes Clearday’s innovative care and wellness businesses. The tech-enabled longevity care and wellness business will be conducted through Clearday Care and Clearday OZ Fund. The holders of securities issued by these Clearday securities have a preferred right to distributions. Accordingly, unless and until such conversion or exchange, the holders of securities have a superior right to the assets of these businesses than the holders of the current holders of the Superconductor Common Stock.

  

Superconductor’s executive officers and directors have interests in the merger that may differ from stockholders’ interests.

 

When considering the recommendation of the Superconductor Board that Superconductor stockholders approve the proposals described in this joint proxy statement and consent solicitation/prospectus, Superconductor stockholders should be aware that directors and executive officers of Superconductor have certain interests in the merger that may differ from the interests of Superconductor stockholders. The Superconductor Board was aware of these interests and considered them, among other matters, when it unanimously approved the merger agreement and in making its recommendations that the Superconductor stockholders approve the proposals described in this joint proxy and consent solicitation statement/prospectus. Additional interests of the directors and executive officers of Superconductor include, but are not limited to, the treatment in the merger of Superconductor equity incentive awards and the benefits of certain specified executives under the Officer Agreements that provide for settlement of certain change in control or severance payments that Superconductor’s executive officers are, by reason of their respective employment or severance agreements with Superconductor, entitled to receive in cash upon a qualifying termination of employment following the completion of the merger or, in the case of Mr. Quiram, with respect to the closing of the merger, regardless of any termination. See “The Merger—Interests of Directors and Executive Officers of Superconductor in the Merger” for a more detailed description of these interests. As a result of these interests, the directors and executive officers of Superconductor might be more likely to support and to vote in favor of the proposals described in this joint proxy statement and consent solicitation/prospectus than if they did not have these interests. Superconductor stockholders should consider whether these interests might have influenced these directors and executive officers to recommend approving the proposals described in this joint proxy statement and consent solicitation/prospectus.

 

Clearday’s executive officers and directors have interests in the merger that may differ from Clearday stockholders’ interests.

 

In considering the recommendation of the Clearday Board with respect to adopting the merger agreement, Clearday’s stockholders should be aware that directors and executive officers of Superconductor have certain interests in the merger that may differ from the interests of Superconductor stockholders. The Superconductor Board was aware of these interests and considered them, among other matters, when it unanimously approved the merger agreement and in making its recommendations that the Superconductor stockholders approve the proposals described in this joint proxy and consent solicitation statement/prospectus. James Walesa and BJ Parrish, the sole directors and, each, an executive officer of Clearday, have interests in the merger that differ from the interests of other Clearday’s stockholders as they each have received equity compensation that will be more readily monetized b Clearday becoming a public company, and will each be an executive officer of a public company with the potential for future compensation, including equity based incentive compensation. See “The Merger—Interests of Clearday’s Directors and Executive Officers in the Merger” for a more detailed description of these interests. As a result of these interests, the directors and executive officers of Clearday might be more likely to support and to vote in favor of the proposals described in this joint proxy statement and consent solicitation/prospectus than if they did not have these interests. Clearday stockholders should consider whether these interests might have influenced these directors and executive officers to recommend approving the proposals described in this joint proxy statement and consent solicitation/prospectus.

 

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Superconductor and Clearday may become involved in securities litigation or stockholder derivative litigation in connection with the merger, and this could divert the attention of Superconductor and Clearday management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.

 

Securities litigation or stockholder derivative litigation may follow the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Superconductor and Clearday may become involved in this type of litigation in connection with the merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of Superconductor, Clearday and the combined company. The financial position of Superconductor is such that it may not be able to fully defend and exercise its rights to defend itself in any such litigation which may cause Superconductor to accept a settlement that would not be acceptable.

 

Risks Related to Superconductor and its Business

 

Superconductor has a history of losses and may never become profitable.

 

In each of its last five years, Superconductor has experienced significant net losses and negative cash flows from operations. In 2020, Superconductor incurred a net loss of $3 million and had negative cash flows from operations of $3.1 million. In 2019, Superconductor incurred a net loss of $9.2 million and had negative cash flows from operations of $8.8 million. Superconductors independent public accounting firm has included in its audit reports an explanatory paragraph expressing substantial doubt about Superconductor’s ability to continue as a going concern.

 

Superconductor consummated various asset sales that fundamentally change its risk profile and business opportunities.

 

In order to enter into a possible merger with Clearday, Superconductor has effected certain transactions, including a cost reduction plan that was announced January 28, 2020 and sold, in separate transactions, assets that are not related to the Sapphire Cryocooler product and its related technologies. Accordingly, the risks of and opportunities for Superconductor have changed significantly since December 2019. If the proposed merger is not consummated, Superconductor will need to consummate a similar merger or sale with another party or enter into another business and there can be no assurance that Superconductor will be able to successfully pursue any such alternative. Superconductor does not currently have a business plan for its Sapphire Cryocooler assets and patents and would likely have to liquidate if the merger with Clearday is not consummated or other merger partner could not be found, of which there is no assurance. If Superconductor were to liquidate the cash distribution to shareholders would be very limited in amount, if any.

 

Superconductor has a $1,600,000 preferred interest in Clearday’s San Antonio headquarters building and such amount does not increase based on interest or other factors. Superconductor consented to Clearday borrowing $1 million from a bank, pledging such headquarters building as collateral. Clearday has advised Superconductor that Clearday does not have any plans to sell or market such building, nor is Superconductor attempting to sell or market its interest in the building. Accordingly, Superconductor cannot rely on funds from its interest in the Clearday San Antonio headquarters to generate cash in the near term, nor can it be certain of the value of such interest if it were to seek to market it.

 

Risks Related to Superconductor’s Common Stock

 

Superconductor has a significant number of outstanding warrants and options, and future sales of the shares obtained upon exercise of these options or warrants could adversely affect the market price of its common stock.

 

As of December 31, 2020, Superconductor had outstanding options exercisable for an aggregate of 7,863 shares of Superconductor Common Stock at a weighted average exercise price of $255.90 per share and warrants to purchase up to 623,921 shares of Superconductor Common Stock at a weighted average exercise price of $44.80 per share. The holders may sell these shares in the public markets from time to time under a registration statement or under Rule 144, without limitations on the timing, amount or method of sale. As its stock price rises, the holders may exercise their warrants and options and sell a large number of shares. This could cause the market price of its common stock to decline.

 

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Superconductor’s stock price is volatile.

 

The market price of Superconductor’s Common Stock has been, and is expected to be, subject to significant volatility. The value of the Superconductor Common Stock may decline regardless of its operating performance or prospects. Factors affecting its market price include:

 

market perception as to the merger and the information provided about Clearday when and if it becomes available, including the risks related to the Clearday business, and the impact on Superconductor should the merger not occur;

 

Superconductor’s perceived prospects and liquidity with and without the consummation of the merger;

 

the impact of Superconductor’s decision to sell certain assets that are not related to its Sapphire Cryocooler assets as part of its cost reduction plan and plan to sell assets including relating to its Conductus wire initiative;

 

variations in Superconductor’s operating results and whether it has achieved key business targets;

 

changes in, or Superconductor’s failure to meet, earnings estimates;

 

changes in securities analysts’ buy/sell recommendations;

 

differences between Superconductor’s reported results and those expected by investors and securities analysts;

 

announcements of new contracts by Superconductor or its competitors;

 

market reaction to any acquisitions, joint ventures or strategic investments announced by Superconductor or its competitors; and

 

general economic, political or stock market conditions.

 

Recent events have caused stock prices for many companies, including Superconductor, to fluctuate in ways unrelated or disproportionate to their operating performance. The general economic, political and stock market conditions that may affect the market price of Superconductor’s Common Stock are beyond Superconductor’s control. The market price of Superconductor’s Common Stock at any particular time may not remain the market price in the future.

 

Superconductor’s corporate governance structure may prevent its acquisition by another company at a premium over the public trading price of its shares.

 

It is possible that the acquisition of a majority of Superconductor’s outstanding voting stock by another company could result in Superconductor’s stockholders receiving a premium over the public trading price for Superconductor’s shares. Provisions of the Superconductor Certificate of Incorporation and the Superconductor Bylaws, and of Delaware corporate law could delay or make more difficult an acquisition of the company by merger, tender offer or proxy contest, even if it would create an immediate benefit to Superconductor’s stockholders. For example, Superconductor’s Certificate of Incorporation does not permit stockholders to act by written consent, and its bylaws generally require ninety days advance notice of any matters to be brought before the stockholders at an annual or special meeting.

 

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In addition, Superconductor’s board of directors has the authority to issue up to 2,000,000 shares of preferred stock and to determine the terms, rights and preferences of this preferred stock, including voting rights of those shares, without any further vote or action by the stockholders. At March 31, 2021, 1,370,710 shares of preferred stock remained unissued. The rights of the holders of common stock may be subordinate to, and adversely affected by, the rights of holders of preferred stock that may be issued in the future. The issuance of preferred stock could also make it more difficult for a third party to acquire a majority of Superconductor’s outstanding voting stock, even at a premium over its public trading price.

 

Furthermore, Superconductor’s Certificate of Incorporation also provides for a classified board of directors with directors divided into three classes serving staggered terms. These provisions may have the effect of delaying or preventing a change in control of us without action by Superconductor’s stockholders and, therefore, could adversely affect the price of Superconductor’s stock or the possibility of sale of shares to an acquiring person.

 

Risks Related to Clearday and, after the Merger, the Combined Company

 

The recent unprecedented events related to the COVID-19 pandemic have caused significant market disruptions and may have longer-term effects that the combined company cannot predict.

 

The recent unprecedented events related to the COVID-19 pandemic have caused significant market disruptions and may have longer-term effects that the combined company cannot predict. The equity and other market professionals continue to assess the consequences of the global pandemic and the extent and effectiveness of government responses, the responses of the Federal Reserve Bank and other governmental and non-governmental organizations cannot be predicted.

 

The residents of Clearday’s MCA communities and the clients of Clearday at Home and Clearday adult day care programs are primarily older individuals with pre-existing conditions, including conditions that significantly compromise their immunity. The additional procedures undertaken by MCA and the adult day care businesses will likely result in reduced operating cash flow and profit margins. Although Clearday has procedures that address infectious diseases and contamination in a community environment, Clearday is not able to provide assurance that the communities will not be significant affected, including widespread contagion that could result in a suspension or closing of a facility. Additionally, state or federal regulatory authorities may require, and industry groups may provide, additional measures that could limit the number of individuals that may be treated at a facility, require additional staff or employees or other measures that may require significant investment or operating cost. The additional costs have primarily resulted from regulatory requirements to increase staff and provide quarantine areas. Additionally, during the initial stage of the COVID-19 pandemic, admissions to Clearday’s residential care facilities were suspended and adult day care centers were closed.

 

During such occasions, Clearday may experience a decline in clients. Further, depending on the severity of any occurrence, Clearday may be required to incur costs to identify, contain and remedy the impacts of those occurrences at MCA communities or adult day care facilities. As a result, these occurrences could significantly adversely affect the results of operations.

 

The proposed adult day care business has greater risks with respect to COVID-19 and other pandemics due to, among other reasons, that appropriate regulatory agencies may close such businesses, limit the capacity of such businesses, or require additional procedures or capital expenditures designed to protect customers that are costly. During the COVID-19 pandemic, many states closed adult day care centers for a period of time.

 

The additional procedures and precautions undertaken by adult day care businesses, such as MCA, in response to COVID-19 will likely result in reduced operating cash flow and profit margins.

 

Although Clearday has procedures that address infectious diseases and contamination in a community environment, Clearday is not able to provide assurance that the communities will not be significantly affected, including widespread contagion that could result in suspending or closing a facility. Depending on the severity of any occurrence, Clearday may be required to incur costs to identify, contain and remedy the impacts of those occurrences at MCA communities and their adult day care facilities.

 

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Additionally, state or federal regulatory authorities may require, industry groups may provide or Clearday may otherwise determine that it would be prudent, to implement certain additional measures and/or quarantine procedures that may require significant investment and/or operating costs, such measures may include limiting the number of individuals that may be treated at a facility while requiring additional staff to manage treatment during the COVID-19 pandemic. During this time, Clearday may also experience a decline in occupancy due to residents terminating their agreements due to the uncertainty of COVID-19 and its effects on adult day care businesses and senior living facilities. Such investments and increased costs may adversely affect Clearday’s operations. The extent and duration of the impact of the COVID-19 pandemic on Clearday’s overall business is uncertain, and its ability to raise capital could be impaired.

 

Any other severe cold and flu season, epidemics or any other widespread illnesses could adversely affect the occupancy of Clearday’s senior living communities and facilities.

 

The revenues of the combined company will be dependent on occupancy at the MCA communities and the members of the Clearday Clubs and any other adult day care facility or other longevity care and wellness center that will be owned or operated by the combined company. Even if the disruption to the markets and facilities are not as pronounced as during the COVID-19 pandemic, there could be significant reduction in the combined company’s revenues and there could be government or other regulatory intervention that materially increase costs, which would likely materially reduce the operating results of the combined company.

 

Clearday’s longevity care and wellness business has significant concentration in industry and geographic areas which exposes the combined company to changes in market conditions in this industry and in those areas.

 

Clearday’s existing five residential care facilities are located in the Little Rock Arkansas area (1), Naples, Florida (1), Simpsonville, South Carolina (1) and the San Antonio / Austin area of Texas (2). Clearday expects to grow its adult day care business primarily in specified markets in Texas and continue offering such services in Naples, Florida. Accordingly, the combined company will have a high concentration in select geographic markets. Additionally, all of the combined company’s business, other than related to its non-core assets, are engaged or will be engaged in the longevity care and wellness industry. As a result of this industry and geographic concentrations, the conditions affecting older Americans and the of local economies and real estate markets, changes in governmental rules and regulations, particularly with respect to senior citizens, acts of nature and other factors that may result in a decrease in demand for the combined company’s services in these areas could have an adverse effect on Clearday’s revenues, results of operations and cash flow. In addition, the combined company will be particularly susceptible to revenue loss, cost increases or damage caused by severe weather conditions or natural disasters such as hurricanes, wildfires, earthquakes or tornadoes in those areas.

 

Circumstances that adversely affect the ability of older adults or their families to pay Clearday for its adult day care services could cause its revenues and results of operations to decline.

 

Clearday expects that payment for its adult day care services will be private pay and not rely on government benefits, such as Medicare and Medicaid, which are generally not available for such services, and for benefits or payments available to veterans through the United States Department of Veterans Affairs. Clearday has currently priced the basic service fee for its adult day care centers at a monthly amount that is generally expected to be less than the monthly payment benefits to retirees from the Social Security Administration and Clearday expects that older adults that live with family members will have sufficient funds to pay such service fees and their other household expenses. There can be no assurance that the expected service fee by Clearday will be at an amount that can be afforded by Clearday’s target market for its Clearday Clubs. Economic downturns, higher levels of unemployment among family members, lower levels of consumer confidence, stock market volatility and/or changes in demographics, including the unprecedented effects of the COVID-19 pandemic, could adversely affect the ability of older adults to afford Clearday’s expected adult day care service fees and could result in decreased fees and revenues resulting in a decline of Clearday’s estimated operating results as many of the operating costs for an adult day care center will not vary in relation to a decrease in club members or revenues.

 

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Clearday may not be able to operate its business or implement the business strategies as described in this joint proxy statement and consent solicitation/prospectus.

 

Clearday intends to develop and expand new businesses including in the areas of home care services and products and provide services or otherwise have revenue from related services which may include retail sales of products including products that incorporate the technology of the Superconductor Sapphire Cryocooler, providing other longevity care services. Clearday continues to evaluate such opportunities and other strategies or business opportunities that Clearday believes would be complimentary to its existing businesses, specifically, its residential care facilities, and where Clearday may benefit from certain synergies in management and leverage of assets. There can be no assurance, however, that Clearday will be able to implement its business strategy in a manner that realizes any of its intended benefits, including that Clearday will be able to acquire, internally develop or enter into strategic alliances for intended or prospective business lines.

 

Clearday’s planned business and growth strategy may not yield anticipated returns, may result in disruptions to the business of, may strain management resources and/or may be dilutive to Superconductor stockholders.

 

Clearday’s business and growth strategies involve the development (by organic growth or, to a lesser extent, through acquisitions) of businesses that are focused on tech-enabled longevity care and wellness. In evaluating the combined company’s business opportunities, Clearday will make certain assumptions regarding the expected future performance and prospects. However, newly acquired businesses or investments in businesses may fail to perform as expected, and Clearday may not be able to manage those businesses in a manner that meets its expectations. In particular, Clearday’s acquisition activities may be subject to the following risks:

 

  Clearday may acquire businesses that do not realize the synergies that it expects and require substantially greater investment than it anticipated;
     
  Clearday may acquire or invest in businesses that realize net cash losses initially and/or for a period of time that is longer than Clearday anticipated;
     
  if Clearday finances acquisitions by incurring debt, the combined company’s cash flow may be insufficient to meet the required principal and interest payments;
     
  Clearday may be unable to quickly and efficiently integrate new acquisitions, and as a result the combined company’s results of operations and financial condition could be adversely affected;
     
  Clearday’s operating expenses may exceed budgeted amounts;
     
  Management may be diverted from operations; and
     
  Clearday may be required to have management teams that are not proven or that do not, for any number of reasons, perform as expected.

 

If Clearday cannot operate acquired businesses to meet its financial expectations, the combined company’s financial condition, results of operations, cash flow and per share trading price of the combined company’s Common Stock could be adversely affected.

 

Clearday may use securities of the combined company and/or its subsidiaries as consideration in connection with its acquisition strategy which could result in significant dilution to the relative ownership interest of holders of the combined company’s capital stock prior to such acquisitions.

 

In addition, it is likely that the combined company will use its or a subsidiary’s securities as consideration, in part or whole, for the purchase of acquired businesses as part of its asset and business acquisition strategy. Such securities may carry rights or preferences different from or superior to those of the combined company’s common stock. Moreover, if such securities include the combined company’s common stock or securities senior to or pari passu to or convertible or exchangeable into shares of the combined company’s common stock, the relative ownership interest of the holders of the combined company’s capital stock would be subject to dilution.

 

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Clearday’s strategy includes businesses that are in development or early stages and such strategies and businesses include additional venture stage risks and there is no assurance that Clearday may be able to develop its businesses organically or through acquisitions.

 

A fundamental strategy of Clearday is the continued development of its services, including Clearday at Home and Clearday Clubs as well as related businesses. Clearday at Home conducted a limited or “soft” launch in March 2021 and does not have any material revenues as of March 31, 2021. Clearday Clubs is expected to launch with its initial location to be branded as Clearday Patriot by the acquisition of an adult day care center in San Antonio, Texas. The combined company’s ability to successfully execute future development in accordance with its business plan, or at all, will be impacted by a number of factors, including the ability to sell its remaining non-core assets, the availability of additional financing, including additional equity financing, on terms acceptable to the combined company, the availability of government programs such as the Cares Act, market trends, the ability to identify and execute business opportunities, including acquisitions that meet the parameters of the Clearday business plan, and increased competition for sites for the expansion opportunities or acquisitions. The development and acquisitions of future businesses may result in unforeseen operating difficulties and may require additional financial resources and attention from management. Failure to identify suitable development or acquisition businesses, effectively execute the Clearday business strategy or operating difficulties of businesses that Clearday may acquire in the future could have an adverse effect on the combined company’s financial condition, results of operations, cash flows and liquidity.

 

The combined company will require additional capital and there is no assurance that any debt or equity financing will be available on acceptable terms, if at all.

 

To the extent that the combined company develops its business through financing, including additional equity financing, there cannot be assurance that financing will be available on acceptable terms, if at all, or that the combined company may be able to satisfy the conditions precedent required to secure borrowings or utilize credit facilities, which could reduce the number, or alter the type, of investments that the combined company would make otherwise and the ability for it to expand its businesses. Any such limitation on such financing or sales of non-core assets may reduce income. To the extent that financing proves to be unavailable when needed, the combined company may also be compelled to modify its business strategy. Any failure to obtain financing or realize the sale of the non-core assets may have a material adverse effect on the continued development or growth of the combined company’s businesses after the merger. The non-binding expression of interest from A.G.P. / Alliance Global Partners (“AGP”) to manage a public offering of up to $10 million if the merger is consummated is subject to the discretion of AGP and other factors. There is no assurance that the public market conditions, the market acceptance of the combined company, the price and volume of the combined company common stock after the merger and other factors, will enable any such offering will be consummated on terms acceptable to the combined company or that AGP will then decide that it would then manage or participate in any such offering.

 

If Clearday fails to identify and quickly respond to changes and trends in longevity care and wellness preferences, its business, financial condition, results of operations and prospects will be adversely impacted.

 

Clearday expects to provide services to the longevity care and wellness industry and expects the products and services to be subject to dynamic changes. The needs and preferences of older adults have generally changed over the past several years, including preferences to reside in their homes longer or permanently, as well as changes in services and offerings, including delivery of home healthcare services, utilization of outpatient rehabilitation services and services that address their increasing desire to maintain active lifestyles. If Clearday fails to identify such changes and quickly and successfully respond to such changes to deliver accepted products and services, then competitors will be able to successfully penetrate the markets that Clearday will operate and Clearday will not be able to successfully grow or maintain its businesses, which would adversely affect its business, financial condition, results of operations and prospects.

 

The combined company may be not be able to realize the anticipated benefits of the merger.

 

The success of the merger will depend, primarily, on Clearday’s ability to implement its business plan, specifically the development and expansion of its longevity care and wellness businesses including adult day care centers. The Clearday business plan requires additional funding and the expected source of funds from the sale of noncore assets may be delayed and may not general sufficient funds, and there may not be sufficient alternative sources of funds. Additionally, the valuation of Clearday agreed in the merger condition is based significantly on financial projections that include assumptions and, accordingly, are uncertain. If Clearday is unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected, and the value of the combined company common stock may decline.

 

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After the completion of the merger, the combined company will be more leveraged than it is currently and the financing arrangements that the combined company may enter into may, under certain circumstances, contain restrictions and limitations that could impact its ability to operate its business.

 

In connection with the merger, the combined company will, on a consolidated basis, increase the long term debt and lease obligations arising from the consolidation of the financial position of Clearday. Clearday has incurred the long term debt, primarily, in connection with the financing of (1) long term assets that are now held for sale, including commercial properties and hotel properties, and (2) the financing of the MCA Naples facility and operations. Some of this indebtedness is owed to affiliates or former affiliates of Clearday. The increased indebtedness of the combined company after the completion of the merger may have the effect, among other things, of reducing the flexibility of the combined company to respond to changing business and economic conditions, requiring the combined company to use increased amounts of cash flow to service indebtedness and increasing the combined company’s borrowing costs.

 

Non-core assets that are held for disposition are treated differently under GAAP.

 

A material amount of the assets on the Clearday balance sheet are held for disposition. These assets are treated differently under GAAP than the assets that are used in Clearday’s operating longevity care and wellness business. These differences are described in greater detail in the footnotes to the audited financial statements that are incorporated into this joint proxy and consent solicitation statement/prospectus, including that these assets are not subject to depreciation and Clearday has not been subject to depreciation expense with respect to these assets from and after December 31, 2018.

 

The non-core assets may not have the net realizable value that is estimated.

 

The combined company intends to finance, in part, its development and expansion of its tech-enabled longevity care and wellness businesses by the sale of its remaining non-core assets. A significant amount of the non-core assets of Clearday have been sold since January 1, 2019 and the net proceeds have been used in Clearday’s operations and business development. The combined company is not expected to make additional investments in any of these assets to be able to reposition the asset to achieve their highest or best use or otherwise achieve a better value. Further, certain non-core assets may require additional investment to maintain, such as replacement or repairs, and deferring maintenance and other related costs could decrease the net realizable value of the non-core assets. There can be no assurance that the value of the non-core assets will be able to be sold for the net realizable value that is estimated or the amount that such assets are on the financial statements of Clearday. Clearday expects that the two limited service hotels will be disposed of at a loss. Any shortfall in the net realizable value may require the combined company to acquire other sources of capital, which may not be available at all or on terms that are acceptable.

 

Operators of senior care facilities must comply with the rules and regulations of governmental reimbursement programs and certification requirements, fraud and abuse regulations and are subject to new legislative developments.

 

The healthcare industry is highly regulated by federal, state and local licensing requirements, facility inspections, reimbursement policies, regulations concerning capital and other expenditures, certification requirements and other laws, regulations and rules. Any failure to comply with such laws, requirements and regulations could affect the combined company’s operators’ ability to operate the facilities that the combined company owns or finances. Healthcare operators are subject to federal and state laws and regulations that govern financial and other arrangements between healthcare providers. These laws prohibit certain direct and indirect payments or fee-splitting arrangements between healthcare providers that are designed to induce or encourage the referral of patients to, or the recommendation of, a particular provider for medical products and services. They also require compliance with a variety of safety, health, staffing and other requirements relating to the design and conditions of the licensed facility and quality of care provided.

 

These regulations may also enable the regulatory agency to place liens on properties. Possible sanctions for violation of these laws and regulations include loss of licensure or certification, the imposition of civil monetary and criminal penalties, and potential exclusion from the Medicare and Medicaid programs. Failure of the combined company to comply with these rules or regulations could have an adverse effect on the combined company’s financial condition or results of operations.

 

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In addition, this area of the law currently is subject to intense scrutiny. Additional laws and regulations may be enacted or adopted that could require changes in the design of the properties and the combined company’s joint venture’s operations and thus increase the costs of these operations.

 

Private third-party payers continue to try to reduce healthcare costs.

 

Private third-party payers such as insurance companies continue their efforts to control healthcare costs through direct contracts with healthcare providers, increased utilization review practices and greater enrollment in managed care programs and preferred provider organizations. These third-party payers increasingly demand discounted fee structures and the assumption by healthcare providers of all or a portion of the financial risk. These efforts of third-party payers to limit the amount of payments that the combined company or others may receive for healthcare services could adversely affect the combined company and would adversely affect the combined company even if such insurance policies do not cover residential or non-residential care facilities that the combined company will operate as the total household cash flow would be reduced and there would be less funds available for the combined company’s services. At the same time, as a result of competitive pressures, the combined company’s ability to maintain operating margins through price increases to private pay options may be limited.

 

Healthcare policy changes, including proposals to reform the U.S. healthcare system, may harm the combined company’s future business.

 

Healthcare costs have risen significantly over the past decade. There have been and continue to be proposals by legislators, regulators and third-party payors to keep these costs down. Each of Superconductor and Clearday is unable to assess with certainty the extent of governmental requirements and regulations that will apply to the combined company care and wellness businesses.

 

The Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010 (together, the “Healthcare Reform Act”) is a sweeping measure intended to expand healthcare coverage within the U.S., primarily through the imposition of health insurance mandates on employers and individuals, the provision of subsidies to eligible individuals enrolled in plans offered on the health insurance exchanges, and the expansion of the Medicaid program. This law has substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. In addition, the Healthcare Reform Act imposes an annual fee, which will increase annually, on sales by branded pharmaceutical manufacturers starting in 2011. The financial impact of these discounts, increased rebates and fees and the other provisions of the legislation on the combined company’s business is unclear and there can be no assurance that the combined company’s business will not be materially adversely affected. In addition, these and other ongoing initiatives in the United States have increased and will continue to increase pressure on pricing and operations of residential and non-residential care facilities. The announcement or adoption of any government initiatives could have an adverse effect on potential revenues from any product that the combined company may successfully develop.

 

Moreover, additional legislative or regulatory changes remain possible and appear likely. In this regard, the TCJA, signed into law in December 2017, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Healthcare Reform Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. The nature and extent of any additional legislative or regulatory changes to the Healthcare Reform Act are uncertain at this time. The combined company expects that the Healthcare Reform Act, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future could have a material adverse effect on the combined company’s industry generally. In addition to the Healthcare Reform Act, there will continue to be proposals by legislators at both the federal and state levels, regulators and third party payors to keep healthcare costs down while expanding individual healthcare benefits.

 

Various healthcare reform proposals have also emerged at the state level. The combined company cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on the combined company. However, an expansion in government’s role in the U.S. healthcare industry may lower the revenues for future products and adversely affect the combined company’s future business, possibly materially.

 

Clearday is unable to determine the effect of any regulatory changes effected by the administration of President Biden.

 

Healthcare and elder care are important political issues. President Biden has indicated that he will use Presidential executive orders to achieve policy goals and objectives. In addition, such policy goals and objectives may be realized through legislation that is sponsored or otherwise supported by President Biden’s administration. Clearday is unable to assess the consequences to improvements to the healthcare systems and that may be realized by such actions, including any effect of increased costs or taxes.

 

President Biden and the certain leaders in the U.S. Congress have proposed a national minimum wage of $15.00 per hour. This and other labor related actions may increase the cost of the combined company. The extent of such actions cannot be predicted with any certainty.

 

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The planned care and wellness business may require the combined company to make significant capital expenditures to maintain and improve care centers.

 

The combined company’s planned adult day care and clinics and related facilities may require from time to time significant expenditures to address required ongoing maintenance or to make them more attractive to the combined company’s clients. Physical characteristics of facilities are mandated by various government authorities; changes in these regulations may require the combined company to make significant expenditures. In addition, the combined company may often be required to make significant capital expenditures when the combined company acquires, leases or manages new facilities. The combined company’s available financial resources may be insufficient to fund these expenditures. The combined company may be unable to pay increased rent at any facility without experiencing losses.

 

Because the merger will result in an ownership change under Section 382 of the Internal Revenue Code for Superconductor, Superconductor’s pre-merger NOL carryforwards and certain other tax attributes will be subject to limitations.

 

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code (“Section 382”), the corporation’s NOL carryforwards and certain other tax attributes arising before the ownership change are subject to limitations on use after the ownership change. In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period. Similar rules may apply under state tax laws. The merger will result in an ownership change for Superconductor and, accordingly, Superconductor’s NOL carryforwards and certain other tax attributes will be subject to limitations (or disallowance) on their use after the merger. Based on the expected valuation of Superconductor on the Closing Date, it is likely that the Section 382 limitation will cause a significant portion of Superconductor’s net operating loss carryforwards to never be utilized. In addition, if Superconductor is determined to have discontinued its historic business following the merger, subject to certain exceptions, the Section 382 limitation could eliminate all possibility of utilizing Superconductor’s NOL carryforwards. Additional ownership changes in the future could result in additional limitations on Superconductor’s, Clearday’s and the combined company’s NOL carryforwards. Consequently, even if the combined company achieves profitability, it may not be able to utilize a material portion of Superconductor’s, Clearday’s and the combined company’s NOL carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

 

Clearday has a limited history of operations and its Clearday at Home and Clearday Care adult day care businesses are each an emerging business that will expose the combined company to the risks and uncertainties associated with operating and growing an emerging business within an emerging industry.

 

Each of the innovative care solutions and the adult day care business to be conducted by Clearday Care is significant to Clearday’s growth opportunities and plans. These businesses include the virtual day care business and the adult day care services through physical locations. Clearday does not have any material operational history in such businesses by which potential investors can evaluate its past performance and likelihood of success. As of the date of this joint proxy and consent solicitation statement/prospectus, the adult day care business does not include any operating adult day care centers that were developed by Clearday or use its proprietary Clearday Clubs format. The financial position and results of operations of Clearday, including the audited financial statements that are included in this joint proxy and consent solicitation statement/prospectus, are not indicative of the tech-enabled longevity care and wellness businesses that the combined company intends to pursue after the merger, including the adult day care facilities under the Clearday Clubs brand. Such Clearday businesses do not have any earnings history for investors to estimate the combined company’s future level of sales or profitability or whether Clearday will in fact have sales or profitability. As a result of such industry and geographic focus, the conditions affecting older Americans as well as the local economies and real estate markets in such geographic areas, including, but not limited to, changes in governmental rules and regulations (particularly with respect to senior citizens), acts of nature and other factors that may result in a decrease in demand for the combined company’s services in these areas could have an adverse effect on Clearday’s revenues, results of operations and cash flow. A core component of the combined company’s strategy is the development and expansion of its tech-enabled longevity care and wellness businesses and to fund such plan in part by the sale of non-core assets such as commercial properties, including, but not limited to, two limited service hotels. The combined company’s ability to successfully execute future development in accordance with its business plan, or at all, will be impacted by a number of factors, including the ability to sell non-core assets, the availability of financing on terms acceptable to the combined company, market trends, the ability to identify and execute business opportunities (including acquisitions that meet the parameters of the Clearday business plan), and increased competition for sites for the expansion opportunities or acquisitions. Any such limitation on any such financing or sale of non-core assets may reduce income.

 

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If Clearday fails to identify such changes and quickly and successfully respond to such changes to deliver accepted products and services, then competitors will be able to successfully penetrate the markets in which Clearday operates which may limit Clearday’s ability to successfully grow and/or maintain its businesses, which would adversely affect its business, financial condition, results of operations and prospects.

 

If the merger does not qualify as a reorganization under Section 368(a) of the Internal Revenue Code, or as an “exchange” satisfying the requirements of Section 351(a) of the Internal Revenue Code, the stockholders of Clearday may be required to pay substantial U.S. federal income taxes as a result of the merger.

 

Superconductor and Clearday intend, and Clearday will be relying on the opinion of Dykema Gossett, PLLC (“Dykema”), that the merger will qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code. or as an “exchange” satisfying the requirements of Section 351(a) of the Internal Revenue Code Superconductor and Clearday currently anticipate that the U.S. holders of shares of Clearday capital stock generally will not recognize taxable gain or loss as a result of the merger. However, neither Superconductor nor Clearday has requested, or intends to request, a ruling from the IRS with respect to the tax consequences of the merger, and there can be no assurance that the companies’ position or the opinion of Dykema would be sustained if challenged by the IRS. Accordingly, if there is a final determination that the merger does not qualify as a “reorganization” under Section 368(a) of the Internal Revenue Code, or as an “exchange” under Section 351(a) of the Internal Revenue Code, and is taxable for U.S. federal income tax purposes, Clearday stockholders generally would recognize taxable gain or loss on their receipt of Superconductor Common Stock in connection with the merger equal to the difference between such stockholder’s adjusted tax basis in their shares of Clearday capital stock and the fair market value of the Superconductor Common Stock and cash received in lieu of fractional shares, if any. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see the section entitled “Material United States Federal Income Tax Consequences of the Merger”.

 

Risks Related to the Superconductor Reverse Stock Split, True Up Shares and the Combined Company’s Common Stock

 

An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.

 

Prior to the merger, there had been no public market for Clearday’s capital stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active market for its common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

 

The market price of the combined company’s common stock may decline as a result of the merger, including as a result of some Clearday stockholders adjusting their portfolios.

 

The market price of the combined company’s common stock may decline after the merger if, among other things, the holders of securities issued by Clearday, Clearday Care and Clearday OZ Fund may opt to sell the shares of the combined company’s securities that are issued to such holders in the merger or that such holder may acquire by exchange of shares of Clearday Series A Preferred, Clearday Care Preferred and Clearday OZ LP Interests. The holders of the Clearday Series A Preferred and the holders of Superconductor Common Stock issued in the merger, have a lower cost basis than the combined company’s common stock price, and the holders of the Clearday Care Preferred and Clearday OZ LP Interests have the right to exchange their Clearday Care Preferred and Clearday OZ LP Interests at a discount to the trading price of the combined company’s Common Stock. These facts, as well as others, may result in increased sales of the combined company’s common stock which may result in the decrease of the market price, even if the fair value per share is greater.

 

The Reverse Stock Split and the receipt of True Up Shares, if any, may be treated as a taxable distribution to you.

 

A U.S. Holder of Superconductor Common Stock generally should not recognize gain or loss in the proposed Superconductor Reverse Stock Split or issuance of True Up Shares, if any, for U.S. federal income tax purposes, except with respect to cash received in lieu of a fractional share of Superconductor Common Stock, as discussed below. This position is not binding on the IRS or the courts, however. For instance, if the distribution of True Up Shares is deemed to be part of a “disproportionate distribution” under Section 305 of the Internal Revenue Code, the receipt of True Up Shares may be treated as the receipt of a taxable distribution equal to the fair market value of the True Shares. Any such distribution would be treated as dividend income to the extent of Superconductor’s current and accumulated earnings and profits, if any, with any excess being treated as a return of capital to the extent thereof and then as capital gain. Each U.S. Holder of shares of Superconductor Common Stock is urged to consult his, her or its own tax advisor with respect to the particular tax consequences of the Reverse Stock Split and issuance of True Up Shares.

 

Risk Factors That May Generally Apply To an Investment In Securities

 

The price of the combined company’s common stock may decrease after the closing date of the merger.

 

The market price of the combined company’s common stock may decline as a result of the merger for a number of reasons, including if:

 

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the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts;

 

the planned development and expansion by the combined company of the adult day care business is delayed or not successful;

 

the effect of the merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or

 

investors react negatively to the effect on the combined company’s business and prospects from the merger.

 

Superconductor’s ability to protect its patents and other proprietary rights is uncertain, exposing Superconductor to possible losses of competitive advantage.

 

Superconductor’s efforts to protect its proprietary rights may not succeed in preventing infringement by others or ensure that these rights will provide us with a competitive advantage. Pending patent applications may not result in issued patents and the validity of issued patents may be subject to challenge. Third parties may also be able to design around the patented aspects of the products. Additionally, certain of the issued patents and patent applications are owned jointly with third parties. Because any owner or co-owner of a patent can license its rights under jointly-owned patents or applications, inventions made by us jointly with others are not subject to Superconductor’s exclusive control. Any of these possible events could result in losses of competitive advantage.

 

Superconductor depends on specific patents and licenses to technologies, and it will likely need additional technologies in the future that it may not be able to obtain.

 

Superconductor utilizes technologies under licenses of patents from others for its products. These patents may be subject to challenge, which may result in significant litigation expense (which may or may not be recoverable against future royalty obligations). Additionally, Superconductor may be required to utilize intellectual property rights owned by others and may seek licenses to do so. Such licenses may not be obtainable on commercially reasonable terms, or at all. It is also possible that Superconductor may inadvertently utilize intellectual property rights held by others, which could result in substantial claims.

 

Intellectual property infringement claims against Superconductor could materially harm results of operations.

 

Superconductor’s products incorporate a number of technologies, including high-temperature superconductor technology, technology related to other materials, and electronics technologies. Superconductor’s patent positions, and that of other companies using high-temperature superconductor technology, is uncertain and there is significant risk that others, including its competitors or potential competitors, have obtained or will obtain patents relating to its products or technologies or products or technologies planned to be introduced by us.

 

Superconductor believes that patents may be or have been issued, or applications may be pending, claiming various compositions of matter used in its products. Superconductor may need to secure one or more licenses of these patents. There can be no assurances that such licenses could be obtained on commercially reasonable terms, or at all. Superconductor may be required to expend significant resources to develop alternatives that would not infringe such patents or to obtain licenses to the related technology. Superconductor may not be able to successfully design around these patents or obtain licenses to them and may have to defend ourselves at substantial cost against allegations of infringement of third party patents or other rights to intellectual property. In those circumstances, Superconductor could face significant liabilities and also be forced to cease the use of key technology.

 

Other parties may have the right to utilize technology important to Superconductor’s business.

 

Superconductor utilize certain intellectual property rights under non-exclusive licenses or have granted to others the right to utilize certain intellectual property rights licensed from a third party. Because Superconductor may not have the exclusive rights to utilize such intellectual property, other parties may be able to compete with us, which may harm Superconductor’s business.

 

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The combined company will face significant competition.

 

The combined company will compete with numerous care and wellness companies, including developers, owners and operators of residential and non-residential facilities, many of which own or operate facilities that are similar to the combined company’s current and planned facilities in the same markets in which the combined company are, or will be located. The combined company will compete with numerous other managers and operators of care and wellness businesses that are focused on the longevity market, including adult day care centers and products that compete with products that will be distributed by Clearday. Some of the combined company’s competitors are larger and have greater financial resources than the combined company and some of the combined company’s competitors are not for profit entities which have endowment income and may not face the same financial pressures as the combined company. The combined company cannot be sure that it will be able to attract a sufficient number of clients or residents at rates that will generate acceptable returns or that the combined company will be able to attract employees and keep wages and other employee benefits, insurance costs and other operating expenses at levels which will allow the combined company to compete successfully and operate profitably.

 

The combined company’s competition may also be from senior housing, senior healthcare, home healthcare, medical and healthcare providers that expand their services or otherwise provide comparable services or utilize tech-enabled products and services that the combined company will utilize. Any such companies or combination of companies may have referral or strategic relationships that reduce the number of consumers that would otherwise use the combined company’s products or services. In recent years, a significant number of new senior age communities and services have been developed and continue to be developed. Accordingly, the combined company expects to have increased competitive pressures, particularly in certain geographic markets where the combined company intends to operate longevity care services. These competitive challenges may prevent the combined company from establishing, maintaining or improving revenues, which may adversely affect the combined company.

 

Federal, state and local employment related laws and regulations could increase the combined company’s cost of doing business, and the combined company may fail to comply with such laws and regulations.

 

The combined company’s operations are subject to a variety of federal, state and local employment related laws and regulations, including, but not limited to, the U.S. Fair Labor Standards Act, which governs matters such as minimum wages, the Family and Medical Leave Act, overtime pay, compensable time, recordkeeping and other working conditions, and a variety of similar laws that govern these and other employment related matters. Because labor represents (and will represent) a significant portion of the combined company’s ordinary operating expenses from its care and wellness businesses, compliance with these evolving laws and regulations could substantially increase the combined company’s cost of doing business, while failure to do so could subject the combined company to significant back pay awards, fines and lawsuits. The combined company’s failures to comply with federal, state and local employment related laws and regulations could have a material adverse effect on the combined company’s business, financial condition and results of operations.

 

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The combined company may fail to comply with laws governing the privacy and security of personal information, including relating to health information.

 

The combined company will be required to comply with federal and state laws governing the privacy, security, use and disclosure of personally identifiable information and protected health information. State laws also govern protected health information, and rules regarding state privacy rights. Other federal and state laws govern the privacy of other personally identifiable information. If the combined company fails to comply with applicable federal or state standards, then the combined company could be subject to civil sanctions and criminal penalties, which could materially and adversely affect the combined company’s business, financial condition and results of operations.

 

The combined company expects to incur substantial expenses related to the completion of the merger.

 

The combined company will incur substantial expenses in connection with the completion of the merger. The substantial majority of these costs will be non-recurring expenses related to the merger, including legal expenses and payments related to the change of control of Superconductor resulting from the merger, including the registration of Superconductor Common Stock provided as the merger consideration under this joint proxy and consent solicitation statement/prospectus.

 

The combined company will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

 

The combined company will incur significant legal, accounting and other expenses, including costs associated with public company reporting requirements. The combined company will also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and any exchange that the combined company may have its securities listed. These rules and regulations are expected to increase the combined company’s legal and financial compliance costs and to make some activities more time consuming and costly. For example, the combined company’s management team will consist primarily of the executive officers of Clearday prior to the merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations also may make it difficult and expensive for the combined company to obtain directors’ and officers’ liability insurance. As a result, it may be more difficult for the combined company to attract and retain qualified individuals to serve on the combined company’s board of directors or as executive officers of the combined company, which may adversely affect investor confidence in the combined company and could cause the combined company’s business or stock price to suffer.

 

The certificate of incorporation of the combined company will provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers or other employees.

 

The certificate of incorporation of the combined company will provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on the combined company’s behalf, any action asserting a breach of fiduciary duty owed by any of its directors, officers or other employees to the combined company or its stockholders, any action asserting a claim against it arising pursuant to any provisions of the DGCL, its certificate of incorporation or its bylaws, or any action asserting a claim against it that is governed by the internal affairs doctrine; provided, that these choice of forum provisions do not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers or other employees, which may discourage such lawsuits against the combined company and its directors, officers and other employees. If a court were to find the choice of forum provision contained in the certificate of incorporation to be inapplicable or unenforceable in an action, the combined company may incur additional costs associated with resolving such action in other jurisdictions.

 

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The combined company may become subject to litigation, which could have an adverse effect on its performance.

 

The combined company may from time to time become subject to litigation, including claims relating to its operations. The combined company’s planned businesses include adult day care and its planned in-home care which are businesses that are regulated and have a high risk for plaintiff actions. Some of these claims may result in significant defense costs and potentially significant judgments against the combined company, some of which are not, or cannot be, insured against. The combined company generally intends to vigorously defend itself; however, the combined company cannot be certain of the ultimate outcomes of any claims that may arise in the future. Resolution of these types of matters against the combined company may result in the combined company having to pay significant fines, judgments, or settlements, which, if uninsured, or if the fines, judgments, and settlements exceed insured levels, could adversely impact the combined company’s earnings and cash flows, thereby having an adverse effect on the combined company’s financial condition, results of operations, cash flow and per share trading price of the combined company’s Common Stock. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of the combined company’s insurance coverage, which could adversely impact the combined company’s results of operations and cash flows, expose the combined company to increased risks that would be uninsured, and/or adversely impact its ability to attract officers and directors.

 

The combined company will depend on key personnel whose continued service is not guaranteed.

 

The combined company’s ability to manage its business and anticipated future growth depends, in large part, upon the efforts of key personnel, particularly James Walesa, now Clearday’s Chairman and Chief Executive Officer, and B.J. Parrish, now Clearday’s director and Chief Operating Officer. Such key personnel have extensive knowledge and relationships and exercise substantial influence over the combined company’s operational, financing, acquisition and disposition activity.

 

Clearday will appoint the directors to the board of directors of the combined company as described elsewhere in this joint proxy and consent solicitation statement/prospectus. There is significant competition in the care and wellness industry for experienced personnel and there is a risk that the combined company may not be able to retain the combined company’s key personnel. The loss of services of one or more members of the combined company’s management team, or the combined company’s inability to attract and retain highly qualified personnel, could adversely affect the combined company’s business, diminish the combined company’s investment opportunities and weaken the combined company’s relationships with lenders, business partners, existing and prospective tenants and industry personnel, which could adversely affect the combined company.

 

Increases in the combined company’s labor costs may have a material adverse effect.

 

The combined company will compete with other senior living community and day care operators, among others, to attract and retain qualified personnel responsible for the day to day operations of the combined company’s current and planned care and wellness businesses. The market for qualified staff, including professional staff such as nurses, therapists and other healthcare professionals, is highly competitive, and periodic or geographic area shortages of such healthcare professionals may require the combined company to increase the wages and benefits that the combined company offers to its employees in order to attract and retain such personnel or to utilize temporary personnel at an increased cost. In addition, employee benefit costs, including health insurance and workers’ compensation insurance costs, have materially increased in recent years and the combined company cannot predict the future impact of the Healthcare Reform Act, the repeal or replacement of the Healthcare Reform Act or any other future healthcare legislation, on the cost of employee health insurance. Increasing employee health insurance and workers’ compensation insurance costs may materially and adversely affect the combined company’s earnings. From time to time labor unions may attempt to organize the combined company’s employees. If the combined company’s employees were to unionize, it could result in business interruptions, work stoppages, the degradation of service levels due to work rules, or increased operating expenses that may adversely affect the combined company’s results of operations.

 

The combined company cannot be sure that labor costs will not increase or that any increases will be recovered by corresponding increases in the rates that the combined company will charge to the combined company’s clients or otherwise. Any significant failure by the combined company to control labor costs or to pass any increases on to clients through rate increases could have a material adverse effect on the combined company’s business, financial condition and results of operations. Further, increased costs charged to the combined company’s clients may reduce the combined company’s occupancy and growth.

 

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The combined company will rely on information technology and systems in its operations, and any material failure, inadequacy, interruption or security failure of that technology or those systems could materially and adversely affect the combined company.

 

The combined company will rely on information technology and systems, including the internet and commercially available software, to process, transmit, store and safeguard information and to manage or support a variety of the combined company’s business processes, including financial transactions and maintenance of records, which may include personally identifiable information of employees, residents and clients. If the combined company experiences security breaches or other similar failures, or other inadequacies or interruptions of the combined company’s information technology, the combined company could incur material costs and losses and the combined company’s operations could be disrupted as a result. Further, third-party vendors could experience similar events with respect to their information technology and systems that impact the products and services they provide to the combined company. The combined company will rely on commercially available systems, software, tools and monitoring, as well as the combined company’s internal procedures and personnel, to provide security for processing, transmitting, storing and safeguarding confidential resident, customer and vendor information, such as personally identifiable information related to its employees and others, including the combined company’s residents and clients, and information regarding their and the combined company’s financial accounts. The combined company will take various actions, and incur significant costs, to maintain and protect the operation and security of its information technology and systems, including the data maintained in those systems. However, it is possible that these measures will not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.

 

Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information. The cybersecurity risks to the combined company and its third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetuate illegal or fraudulent activities against the combined company, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in the combined company’s or third parties’ information technology networks and systems or operations. Any failure to maintain the security, proper function and availability of the combined company’s information technology and systems, or certain third party vendors’ failure to similarly protect their information technology and systems that are relevant to the combined company or its operations, or to safeguard the combined company’s business processes, assets and information could result in financial losses, interrupt the combined company’s operations, damage the combined company’s reputation, cause the combined company to be in default of material contracts and subject the combined company to liability claims or regulatory penalties. Any or all of the foregoing could materially and adversely affect the combined company’s business and the value of the combined company’s securities.

 

Changes in tax laws or other actions could have a negative effect on the combined company.

 

At any time, the federal or state income tax laws, or the administrative interpretations of those laws, may be amended. Federal and state tax laws are constantly under review by persons involved in the legislative process, the IRS, the U.S. Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect the combined company. The administration of President Biden has recently proposed changes to the Internal Revenue Code that, if enacted, could have adverse tax consequences for the combined company after the merger. Such proposals are subject to significant changes. There cannot be any assurances as to any changes in the Internal Revenue Code that may be implemented, including any that may be adverse to the combined company after the merger.

 

The combined company’s insurance may not cover potential losses, including from adverse weather conditions, natural disasters and other events.

 

The combined company expects to carry commercial property, liability and terrorism insurance coverage on the businesses that the combined company will conduct. The combined company may select policy specifications and insured limits that the combined company believes to be appropriate and adequate given the relative risk of loss, the cost of the coverage and industry practice. However, Superconductor and Clearday do not expect to carry insurance for losses such as loss from riots or war because such coverage is not available or is not available at commercially reasonable rates. Some of the combined company policies, including those covering losses due to terrorism, are expected to be insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses, which could adversely affect the combined company’s operations. The combined company may discontinue terrorism or other insurance if the cost of premiums for any such policies exceeds, in the combined company’s judgment, the expected benefit from carrying the policies. If following the termination or failure to renew any insurance policy the combined company experiences an adverse uninsured event, the combined company may be required to incur significant costs, which could materially adversely affect the combined company’s business and financial performance. Additionally, insurance to cover the risk of business interruptions may not be available or available at commercially reasonable rates and may not cover the specific events that require a closure of interrupt of any of the combined company’s businesses.

 

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If the combined company experiences a loss that is uninsured or that exceeds policy limits, the combined company could lose the capital invested in the assets and businesses that that was made. Furthermore, the combined company may not be able to obtain adequate insurance coverage at reasonable costs in the future as the costs associated with property and casualty renewals may be higher than anticipated.

 

The combined company’s operations will be subject to risks from adverse weather and climate events.

 

Severe weather may have an adverse effect on certain senior living or adult day care facilities to be operated by the combined company and by the non-core assets that are owned by the combined company. Flooding caused by rising sea levels and severe weather events, including hurricanes, tornadoes and widespread fires have had and may have in the future an adverse effect on such assets and facilities and result in significant losses to the combined company and interruption of the combined company’s business. The combined company may incur significant costs and losses as a result of these activities, both in terms of operating, preparing and repairing the combined company’s senior living communities or adult day care centers or the hotels or the properties owned by the combined company in anticipation of, during and after a severe weather or climate-related event and in terms of potential lost business due to the interruption in operations that may not be adequately covered by insurance.

 

Terrorist attacks or riots in any locations in which the combined company acquires properties could significantly impact the demand for, and value of, the combined company’s properties.

 

Terrorist attacks and other acts of terrorism or war or riots would severely impact the demand for, and value of, the combined company’s planned businesses. Terrorist attacks in any of the metropolitan areas in which the combined company expects to have operations also could directly impact the value of the combined company through damage, destruction, loss or increased security costs, and could thereafter materially impact the availability or cost of insurance to protect against such acts. A decrease in demand could make it difficult to maintain the expansion of the adult day care business in accordance with the business plan. To the extent that any future terrorist attack otherwise disrupts Clearday’s planned businesses, it may impair the ability to make timely payments to fund operations, which would harm the operating results and could materially and adversely affect the combined company.

 

Current government policies regarding interest rates and trade policies may cause a recession.

 

The U.S. Federal Reserve policy regarding the timing and amount of future increases in interest rates and changing U.S. and other countries’ trade policies may hinder the growth of the U.S. economy. It is unclear whether the U.S. economy will be able to withstand these challenges and continue sustained growth. Economic weakness in the U.S. economy generally or a new U.S. recession would likely adversely affect the combined company’s financial condition, including by limiting the combined company’s ability to pay rent and causing the value of the combined company’s owned and operated senior living communities, shopping centers and the combined company’s hotel properties and of the combined company’s securities to decline. Further, general economic conditions, such as inflation, commodity costs, fuel and other energy costs, costs of labor, insurance and healthcare, interest rates, and tax rates, affect the combined company’s operating and general and administrative expenses, and the combined company has no control or limited ability to control such factors. Such economic uncertainties and conditions may adversely affect the combined company and others, including the combined company’s landlords, the owner of the combined company’s managed residential and non-residential care facilities and the combined company’s clients, such as by reducing access to funding or credit, increasing the cost of credit, limiting the ability to manage interest rate risk and increasing the risk that obligations will not be fulfilled, as well as other impacts which the combined company is unable to fully anticipate.

 

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As a “smaller reporting company,” Superconductor may avail itself of reduced disclosure requirements, which may make Superconductor Common Stock less attractive to investors.

 

Superconductor is, and the combined company will continue to be after the merger, a “smaller reporting company” under applicable SEC rules and regulations. As a “smaller reporting company,” Superconductor has, and the combined company will, rely on exemptions from certain disclosure requirements that are applicable to other public companies. The combined company may continue to rely on such exemptions for so long as it remains a “smaller reporting company”. These exemptions include reduced financial disclosure, reduced disclosure obligations regarding executive compensation, and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. The combined company’s reliance on these exemptions may result in the public finding that the combined company’s common stock to be less attractive and adversely impact the market price of the combined company’s common stock or the trading market thereof.

 

Each of Superconductor and Clearday have not, and the combined company expects to not, pay cash dividends on the common stock and investors may have to sell their shares in order to realize value for their investment.

 

Neither Superconductor nor Clearday has paid any cash dividends on its common stock and does not intend to pay cash dividends in the foreseeable future. The combined company intends to use its cash for reinvestment in the development and expansion of the care and wellness businesses. As a result, investors may have to sell their shares of common stock to realize any of their investment.

 

The combined company’s internal controls over financial reporting may not be effective which could have a significant and adverse effect on Superconductor’s business and reputation.

 

Superconductor is subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC thereunder (“Section 404”). Section 404 requires Superconductor to report on the design and effectiveness of Superconductor’s internal controls over financial reporting. Clearday has not been subject to such internal controls.

 

Some, but not all, of Clearday’s officers and directors have experience as officers or directors of a public company. Clearday’s internal controls have certain material weaknesses, including insufficient segregation of duties regarding MCA. Clearday has instituted efforts to remediate these concerns and enhance Clearday’s internal control environment to remediate these issues by the end of 2021. However, any failure to maintain effective controls could result in significant deficiencies or material weaknesses and cause the combined company to fail to meet its periodic reporting obligations, or result in material misstatements in the combined company’s financial statements. The combined company may also be required to incur costs to improve its internal control system and hire additional personnel. This could negatively impact the combined company’s results of operations.

 

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses and divert management’s attention from operating the combined company’s business, which could have a material adverse effect on the combined company’s business.

 

There have been other changing laws, regulations and standards relating to corporate governance and public disclosure in addition to the Sarbanes-Oxley Act, as well as new regulations promulgated by the SEC and rules promulgated by the national securities exchanges. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, the combined company’s efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. The combined company board members, Chief Executive Officer and Chief Financial Officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, the combined company may have difficulty attracting and retaining qualified board members and executive officers, which could have a material adverse effect on the combined company’s business. If the combined company’s efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, the combined company may incur additional expenses to comply with standards set by regulatory authorities or governing bodies which would have a material adverse effect on the combined company’s business and results of operations.

 

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Delaware law could discourage a change in control, or an acquisition of the combined company by a third party, even if the acquisition would be favorable to stockholders.

 

The DGCL contains provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of the combined company, even when these attempts may be in the best interests of stockholders. Delaware law imposes conditions on certain business combination transactions with “interested stockholders”. These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in the combined company’s control or management, including transactions in which stockholders might otherwise receive a premium for their shares of common stock over then current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.

 

The combined company board has the authority to issue “Blank Check” Preferred Stock, which could affect the rights of holders of the combined company’s common stock and may delay or prevent a takeover that could be in the best interests of the combined company’s stockholders.

 

The board of the combined company will have the authority to issue shares of preferred stock (the “Series Preferred Stock”), in one or more series and to fix the number of shares constituting any such series, the voting powers, designation, preferences and relative participation, optional or other special rights and qualific