| | Page | |
PROSPECTUS SUMMARY OUR BUSINESS | 3 | | 1 | |
RISK FACTORS | 4 | | 2 | |
ABOUT THIS PROSPECTUS FORWARD-LOOKING STATEMENTS | 4 | | 3 | |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
| 5 |
USE OF PROCEEDS | 6 | | 3 | |
SELLING STOCKHOLDERS | | | 4 | |
PLAN OF DISTRIBUTION | 6 | | 8 | |
DESCRIPTION OF OUR CAPITAL STOCK | | | 9 | |
LEGAL MATTERS | 10 | | 12 | |
EXPERTS | 10 | | 12 | |
INCORPORATION BY REFERENCE
| 10 |
WHERE YOU CAN FIND MORE INFORMATION | 11 | | 13 | |
INCORPORATION OF DOCUMENTS BY REFERENCE | | | 13 | |
You should rely only on the information contained in this prospectus and in any prospectus supplement (including in any documents incorporated by reference herein or therein). We have not authorized anyone to provide you with any different information. We are offering to sell our securities, and seeking offers to buy, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus and any prospectus supplement is accurate only as of the date of this prospectus or such prospectus supplement, and the information contained in any document incorporated herein or therein by reference is accurate only as of the date of such document incorporated by reference, regardless of the time of delivery or any sale of our securities.
Company References
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 4 and our financial statements and the related notes incorporated by reference intoIn this prospectus, before making an investment decision.
As used in this prospectus,"Bioptix," "the Company," "we," "us," and "our" refer to Bioptix, Inc., a Colorado corporation, unless the context otherwise requires, referencesrequires.
OUR BUSINESS
Through our wholly owned subsidiary, BiOptix Diagnostics, Inc. ("BDI"), which we acquired in September 2016, we have developed a proprietary Enhanced Surface Plasmon Resonance technology platform for the detection of molecular interactions. We acquired a Surface Plasma Resonance (SPR) platform which seeks to “we,” “us,” “our,” “Venaxis”combine high sensitivity with microarray detection capability to allow researchers to understand whether their target molecules have functionality against the disease targeted. SPR is an advanced and “the Company” referhighly sensitive optical technology that can measure refractive index changes on a sensor chip's gold surface due to a change in mass that occurs during a binding event. This change can be used to monitor biological interactions such as the concentration of target molecules, kinetic rates and affinity constants.
BDI is a life science tools company that provides an affordable solution for drug discovery scientists who require label-free, real-time detection of bio-molecular interactions. BDI manufactures, sells and services instruments and consumables to pharmaceutical researchers allowing them to develop new drugs faster than by using older technologies such as enzyme-linked immunosorbent assay or "ELISA". BDI was originally established with technology developed in conjunction with Dr. John L. "Jan" Hall, Adjoint Professor, JILA (University of Colorado), who shared the Nobel Prize for Physics in 2005 for his work on laser-based precision spectroscopy and the optical frequency comb technique. SPR is the core of the BDI products and intellectual property. Dr. Hall, in conjunction with the scientists at BDI, created a common path interferometer that was commercialized to become the 404pi instrument.
When it was acquired by us in September 2016, BDI was in the initial stages of rolling out its first commercial product, the 404pi system. BDI's initial revenue was generated in 2014 with first sales to customers including sales to leading academic researchers and biotech companies. BDI did not experience any significant seasonality to its business and provided normal terms to its customers, generally 30-60 days, net. Currently there is no back-log of orders.
Following the September 2016 acquisition of BDI, we began hiring sales, marketing and operational employees, adding a total of eight employees to the operationstwelve hired in connection with the acquisition.
The BDI products include a reader instrument (404pi) and the consumable test products consisting of Venaxis, Inc.test chips (cassettes) and packaging. The instrument is assembled in-house using primarily off the shelf parts and certain customized components. Consumable test product components are manufactured at the BDI facility using certain sub-assemblies processed by third-party contractors. Raw materials and certain sub-components are acquired from a number of suppliers.
Venaxis® is focused on advancing products
Recent Developments
Effective January 14, 2017, we adopted a plan to exit this acquired business and commenced a significant reduction in the workforce. The decision to adopt this plan was made following an evaluation by the Company's Board of Directors in January 2017, of the estimated results of operations projected during the near to mid-term period for BDI, including consideration of product development required and updated sales forecasts, and estimated additional cash resources required. We are reviewing possible strategic alternatives relative to the business to maximize shareholder value. Our continuing evaluation following adoption of the plan, estimates that address unmet human diagnostic needs. We were formedwe will incur charges to operations in 2000early 2017 of approximately, $2.7 million, consisting of 1) write-down of tangible and intangible assets estimated at approximately $2.2 million, and 2) wind-down, severance and transaction expenses estimated at approximately $500,000.
Following the recent decision to produce purified proteins for diagnostic applications. To date,exit the BDI business, we have leveragedbegun evaluating potential strategic alternatives. We expect, in the near term, to establish the primary criteria we will consider as we evaluate our sciencenext steps and strategic path forward with the goal of maximizing value for our stockholders. Additionally, we will focus on attempting to locate an acquirer or partner for the BDI operations as well as continuing to attempt to locate an interested party for the appendicitis assets.
We also hold an exclusive license agreement with Washington University ("WU") in St. Louis which granted us an exclusive license and right to sublicense its technology for veterinary products worldwide, subject to certain exceptions. In July 2012, we granted Ceva Sante Animale S.A. ("Ceva") an exclusive royalty-bearing license to our intellectual property and other assets, relating to recombinant single chain reproductive hormone technology for use in non-human mammals. This license includes a sublicense of the technology licensed to us by WU. Ceva continues to advance development of our APPY1™the bovine rFSH product candidate and cumulative cash payments received to develop animal health-related assets, including intellectual property. In 2012,date by us from Ceva have been approximately $2 million.
On February 25, 2016, we out-licensed these animal health-related assets as partcompleted the sale of our business plancorporate headquarters, land and building, to focus our effort on human diagnostic productsa third party at a purchase price of $4,053,000. The sale generated approximately $1.8 million in net cash after expenses and technologies.
Our business strategy ismortgage payoffs. In addition to focus on products and technologiesagreeing to the sale, we rented back space in the building under short-term lease agreements that we believe have attractive worldwide markets and significant product margin potential. Our acute appendicitis test, APPY1, which isprovide storage space required for our current primary focus, meets these objectives. We may also pursue technologies under “in-licensing” agreements with third parties such as universities, researchers or individuals, add value by advancing the stagelevel of research and development on the technologies through proof of concept, and then either “out-license” to global diagnostic companies or continue with in-house development towards regulatory approval, product introduction and launch.operations.
APPY1 is a multi-marker blood test panel intended to be used by emergency department physicians to aid them in the evaluation of possible acute appendicitis in children, adolescent and young adult patients (ages 2 – 20) who present with abdominal pain. APPY1 is under the regulatory jurisdiction of the FDA. We are not aware of any blood test that is cleared by the FDA for the purpose of aiding in ruling out appendicitis, and are not aware of any competitors in this area. We expect that a principal benefit of APPY1 will be to provide physicians with objective information that will aid in the identification of patients at low risk for appendicitis, and thereby potentially reduce the exposure to radiation from, and the expense associated with, computed tomography (CT) scans that are often performed on these patients. In addition, we believe the test can potentially save significant costs through improved patient throughput in emergency departments. We have completed a design freeze for our APPY1 product candidate and, in early 2013, commenced a 2,000 patient, multi-center prospective pivotal clinical trial to be used in connection with our application for FDA clearance. We also have commenced initial marketing and commercialization activities for our CE marked APPY1 products in the European Union.
Recent Developments
Pivotal Clinic Study of APPY1. On September 26, 2013, we announced that the external Data and Safety Monitoring Board created as part of our pivotal clinical trial for our APPY1 Test had recommended continuation of the pivotal clinical trial, based upon completion of the final futility analysis included in the clinical trial design. The futility analysis, which consisted of an independent review of the validity, integrity, and clinical and scientific relevance of the ongoing study, was performed on the first 1,061 patients to complete the study. The pivotal study will enroll a total of 2,000 evaluable patients, of which approximately 1,500 have been enrolled to date. We anticipate enrollment completion by the end of 2013 and, subject to the clinical trial results, to file for FDA clearance in the first quarter of 2014.
European Market Development. While FDA clearance is being sought, an initial launch for the APPY1 Test is ongoing in select European countries. We have entered into commercial development agreements with a number of diagnostic test distributors in Italy, Turkey and the Benelux countries, and are pursuing commercial development agreements with such distributors in the U.K., France and Germany. Under these commercial development agreements, we are working to roll out our market development program for APPY1, including identification of initial hospitals and key opinion leaders in the European territories in which we are focused. Our strategy is to leverage the experience of key opinion leaders in select hospitals in order to generate additional meaningful, multinational field data for APPY1 products. We have received initial stocking orders for our APPY1 products under these relationships.
Company Information
We were organized as a Colorado corporationincorporated on July 24, 2000. Our principal executive offices are located at 1585 S. Perry Street, Castle Rock,2000 in the state of Colorado 80104. Our phone number is (303) 794-2000 and our Internet address is www.venaxis.com.under the name "AspenBio Pharma, Inc." In December 2012, we changed our name to Venaxis,"Venaxis, Inc. from AspenBio Pharma," and in 2016, in connection with our acquisition of BiOptix Diagnostics, Inc., we changed our name to "Bioptix, Inc." Our principal executive offices are located at 834-F South Perry Street, Suite 443, Castle Rock, CO 80104and our telephone number is (303) 794-2000. Our website address is www.venaxis.com. The information contained on, our website or any otheraccessible through, our website is not incorporated by reference in this prospectus and does not constitute a part of this prospectus.prospectus or any prospectus supplement.
RISK FACTORS
Investing in our securities involves a high degree of risk. YouBefore making an investment decision, you should carefully consider carefully the risks, incorporated by reference herein that areuncertainties and forward-looking statements described under “Risk Factors”"Risk Factors" in Item 1A of our Quarterlymost recent Annual Report on Form 10-Q10-K for the periodfiscal year ended June 30, 2013, as well as any applicable prospectus supplement and the reports we file from time to timeDecember 31, 2016 filed with the Securities and Exchange Commission (the “SEC”"SEC") that areon March 31, 2017, as well as information incorporated by reference ininto this prospectus. If any of the events described in such “Risk Factors” section occurs or thethese risks described in such “Risk Factors” section actually materialize,were to occur, our business, financial condition or results of operations cash flow or prospects could be materially adversely affected.
ABOUT THIS PROSPECTUS
This prospectus is part of a “shelf” registration statementwould likely suffer. In that we filed withevent, the SEC. By using a shelf registration statement, we may, from time to time, issue and sell our common stock in one or more offerings up to an aggregate maximum offering price of $20 million (or its equivalent in foreign or composite currencies). Each time we sell anyvalue of our securities could decline, and you could lose part or all of your investment. The risks and uncertainties we will provide a prospectus supplementdescribe are not the only ones facing us. Additional risks not presently known to us or that will contain more specific information about the offering and the terms of the securities being sold. Wewe currently deem immaterial may also add, update or changeimpair our business operations. In addition, our past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results in the prospectus supplement any of the information contained in this prospectus or the documents incorporated by reference.future. See "Forward-Looking Statements" below.
This prospectus provides you with a general description of the Company and our securities; for further information about our business and our securities, you should refer to the registration statement, the reports incorporated by reference in this prospectus, as described in “Where You Can Find More Information.”
You should rely only on the information contained in this prospectus and in any prospectus supplement (including in any documents incorporated by reference herein or therein). We have not authorized anyone to provide you with any different information. We are offering to sell our securities, and seeking offers to buy, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus and any prospectus supplement is accurate only as of the date of this prospectus or such prospectus supplement, and the information contained in any document incorporated herein or therein by reference is accurate only as of the date of such document incorporated by reference, regardless of the time of delivery or any sale of our securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). AllAct. Such forward-looking statements other thaninclude those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact, includedfact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or incorporatedimplied in this report regarding our strategy, future operations, collaborations, intellectual property, cash resources, financial position, future revenues, projected costs, prospects, plans, and objectives of management are forward-lookingsuch statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “continue,” “will,” and “would” and similar expressions are intended to
In some cases, you can identify forward-looking statements although not allby terminology, such as "expects," "anticipates," "intends," "estimates," "plans," "believes," "seeks," "may," "should", "could" or the negative of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements contain these identifying words. We cannot guaranteeare qualified in their entirety by reference to the factors discussed throughout this prospectus.
You should read this prospectus and the documents that we actually will achievereference herein and therein and have filed as exhibits to the plans, intentionsregistration statement, of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus or expectations disclosedsuch prospectus supplement only. Because the risk factors referred to above, as well as the risk factors referred to on page 4 of this prospectus and incorporated herein by reference, could cause actual results or outcomes to differ materially from those expressed in ourany forward-looking statements andmade by us or on our behalf, you should not place undue reliance on ourany forward-looking statements. There are a numberFurther, any forward-looking statement speaks only as of importantthe date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors that couldemerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those indicated or implied by forward-looking statements. These important factors include those set forth above under the heading “Risk Factors.” These factors and the other cautionary statements madecontained in this prospectus should be read as being applicable to all related forward-looking statements whenever they appear in this prospectus. In addition, any forward-looking statements represent our estimates only as of the date that this prospectus is filed with the SEC, and should not be relied upon as representing our estimates as of any subsequent date. We do not assume any obligation to update any forward-looking statements. We disclaimqualify all of the information presented in this prospectus and any intention or obligation to update or revise anyaccompanying prospectus supplement, and particularly our forward-looking statement, whether as a result of new information, future events or otherwise.statements, by these cautionary statements.
USE OF PROCEEDS
Unless otherwise indicated inThe net proceeds from any disposition of the applicable prospectus supplement, we intend to useshares covered hereby would be received by the netselling stockholders. We will not receive any of the proceeds from the sale of our Common Stock by the selling stockholders other than the net proceeds of any warrants exercised for cash.
DESCRIPTION OF TRANSACTIONS
On March 10, 2017, we sold $2,250,000 of units of our securities, pursuant to separate purchase agreements with certain of the selling stockholders, at a purchase price of $2.50 per unit. Each unit consists of one share of our Common Stock and a three year warrant to purchase one share of Common Stock, at an exercise price of $3.50 per share.
The warrants are exercisable, at any time on or after the sixth month anniversary of the date of issuance, at a price of $3.50 per share, subject to adjustment, and expire three years from the date of issuance. The holders may, subject to certain limitations, exercise the warrants on a cashless basis. We are prohibited from effecting an exercise of any warrant to the extent that, as a result of any such exercise, the holder would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of such warrant.
On March 15, 2017, we entered into separate securities purchase agreements pursuant to which we agreed to sell up to $4,750,000 of principal amount of Notes and three year warrants to certain of the selling stockholders. On March 16, 2017, we satisfied all closing conditions and closed the transaction. The Notes are convertible into shares of Common Stock at an initial conversion price of $2.50. Each warrant is exercisable into shares of Common Stock at an exercise price equal to $3.56 per share.
The Notes are convertible and the warrants are exercisable at any time after we have received approval of the transaction from our stockholders as required by Nasdaq Listing Rule 5635. We are prohibited from effecting a conversion of any Note or exercise of any warrant to the extent that, as a result of any such conversion or exercise, the holder would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of such Note or exercise of such warrant, as the case may be.
We have agreed to file a preliminary proxy statement within 45 days of closing of the March 16, 2017 transaction for a special meeting of our stockholders, in order to submit to our stockholders a proposal to approve an amendment to our Articles of Incorporation authorizing the creation of 15,000,000 shares of "blank check" preferred stock and, thereafter, we shall designate shares of preferred stock as "Series A Preferred Stock" by filing a Certificate of Designations, Preferences and Rights of 0% Series A Convertible Preferred Stock with the Secretary of State (such date of filing, the "Filing Date"). On the Filing Date, the Notes shall automatically, and without any further action on the part of the holders, be exchanged for shares of Series A Preferred Stock based on a ratio of $1.00 of stated value of Series A Preferred Stock for each $1.00 of then outstanding principal amount plus any accrued but unpaid interest thereon, pursuant to Section 3(a)(9) of the Securities Act.
SELLING STOCKHOLDERS
This prospectus relates to the sale or other disposition of up to 5,657,161 shares of our Common Stock by the selling stockholders named below, and their donees, pledgees, transferees or other successors-in-interest selling shares of Common Stock or interests in shares of Common Stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, which includes:
| (i) | 900,000 shares of Common Stock; |
| (ii) | 1,957,161 shares of Common Stock issuable upon the conversion of outstanding convertible promissory notes; and |
| (iii) | 2,800,000 shares of Common Stock issuable upon the exercise of outstanding warrants. |
The following table, based upon information currently known by us, sets forth as of April 14, 2017, (i) the number of shares held of record or beneficially by the selling stockholders as of such date (as determined below) and (ii) the number of shares that may be sold or otherwise disposed of under this prospectus togetherby each selling stockholder. Percentage ownership is based on 4,903,971 shares of Common Stock outstanding as of March 31, 2017, plus 500,000 shares of Common Stock held in escrow assumed offered in this offering, plus securities deemed to be outstanding with our existing cash resources,respect to individual stockholders pursuant to Rule 13d-3(d)(1) under the Exchange Act. Beneficial ownership includes shares of Common Stock plus any securities held by the holder exercisable for working capital and other general corporate purposes, including funding for further clinical development, seeking FDA clearance for APPY1, and for initial commercializationor convertible into shares of APPY1Common Stock within 60 days after March 31, 2017, in accordance with Rule 13d-3(d)(1) under the U.S. and the E.U. At this time, we have not determined the specific usesExchange Act. The inclusion of any offering proceeds,shares in this table does not constitute an admission of beneficial ownership for the selling stockholder named below. We do not know when or in what amounts a selling stockholder may sell or otherwise dispose of the amounts we plan to spend on any particular useshares of Common Stock covered hereby. The selling stockholders may not sell or the timing of such expenditures, which may vary significantly depending on various factors such as the results of our clinical trial currently in progress, our research and development activities, regulatory approvals, competition, marketing and sales, and the market acceptanceotherwise dispose of any products introduced by us or our partners. Pending applicationall of the net proceedsshares offered by this prospectus and may sell or otherwise dispose of shares covered hereby in transactions exempt from any particular offering, we intendthe registration requirements of the Securities Act. Because the selling stockholders may sell or otherwise dispose of some, all or none of the shares covered hereby, and because there are currently no agreements, arrangements or understandings with respect to invest such proceeds in short-term, interest-bearing, investment-grade securities.
Each time we issue securities, we will provide a prospectus supplement that will contain information about how we intend to use the proceeds from each such offering.
We cannot guarantee that we will receive any proceeds in connection with any offering hereunder because we may choose not to issuesale of any of the securitiesshares, we cannot estimate the number of the shares that will be held by the selling stockholders after completion of the offering. However, for purposes of the following table, we have assumed that all of the shares covered hereby are sold by the selling stockholders pursuant to this prospectus.
None of the selling stockholders has held any position or office, or has otherwise had a material relationship, with us or any of our subsidiaries within the past three years other than as a result of the ownership of our shares or other securities. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of Common Stock, except to the extent authority is shared by their spouses under applicable law. Unless otherwise indicated below, to our knowledge, no persons named in the table are a broker-dealer or affiliate of a broker-dealer. Unless otherwise indicated, all address are c/o Bioptix, Inc., 834-F South Perry Street, Suite 443, Castle Rock, CO 80104.
Name of Selling Stockholder | | Number of Shares of Common Stock Beneficially Owned Before this Offering | | | Percentage of Common Stock Beneficially Owned Before this Offering** | | | Shares of Common Stock Offered in this Offering | | | Shares of Common Stock Beneficially Owned After this Offering | | | Percentage of Common Stock Beneficially Owned After this Offering** | |
Acquisition Group Limited | | | 200,000 | (1) | | | 3.63 | % | | | 200,000 | (1) | | | 0 | | | | * | |
Andrew Schwartzberg | | | 549,800 | (2) | | | 9.99 | % | | | 900,000 | (2) | | | 0 | | | | * | |
Erick Richardson | | | 200,000 | (3) | | | 3.63 | % | | | 200,000 | (3) | | | 0 | | | | * | |
Melechdavid Inc. | | | 340,000 | (4) | | | 6.10 | % | | | 340,000 | (4) | | | 0 | | | | * | |
Mark Groussman c/f Alivia Groussman UTMA/FL | | | 80,000 | (5) | | | 1.47 | % | | | 80,000 | (5) | | | 0 | | | | * | |
Mark Groussman c/f Asher Groussman UTMA/FL | | | 80,000 | (6) | | | 1.47 | % | | | 80,000 | (6) | | | 0 | | | | * | |
Barry Honig | | | 543,860 | (7) | | | 9.99 | % | | | 406,017 | (8) | | | 504,000 | (9) | | | 8.53 | % |
GRQ Consultants, Inc. Roth 401K FBO Barry Honig | | | 596,400 | (10) | | | 9.99 | % | | | 1,015,042 | (11) | | | 30,600 | | | | * | |
Titan Multi-Strategy Fund I, Ltd. | | | 598,100 | (12) | | | 9.99 | % | | | 1,624,066 | (13) | | | 15,000 | | | | * | |
US Commonwealth Life, A.I. Policy No. 2013-17 | | | 40,602 | (14) | | | 0.75 | % | | | 40,602 | (14) | | | 0 | | | | * | |
Robert R. O'Braitis | | | 81,204 | (15) | | | 1.48 | % | | | 81,204 | (15) | | | 0 | | | | * | |
Stockwire Research Group, Inc. | | | 40,602 | (16) | | | 0.75 | % | | | 40,602 | (16) | | | 0 | | | | * | |
Aifos Capital LLC | | | 121,805 | (17) | | | 2.20 | % | | | 121,805 | (17) | | | 0 | | | | * | |
Stetson Capital Management, LLC | | | 283,400 | (18) | | | 4.99 | % | | | 406,017 | (19) | | | 7,500 | | | | * | |
JAD Capital Inc. | | | 81,204 | (20) | | | 1.48 | % | | | 81,204 | (20) | | | 0 | | | | * | |
Richard Molinsky | | | 97,789 | (21) | | | 1.80 | % | | | 40,602 | (22) | | | 57,187 | | | | 1.05 | % |
* Less than 1%.
** Based on 4,903,971 shares of Common Stock outstanding as of April 14, 2017.
| (1) | Adam Arviv is the President of Acquisition Group Limited. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 100,000 shares of Common Stock of which 55,556 shares are held in escrow pending certain release conditions being met and (ii) 100,000 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 55,556 shares are held in escrow pending certain release conditions being met. The address for this selling stockholder is 118 Yorkville Ave, Suite 604, Toronto, Ontario M5RIC2. |
| (2) | Represents (i) 450,000 shares of Common Stock of which 250,000 shares are held in escrow pending certain release conditions being met and (ii) 100,440 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 250,000 shares are held in escrow pending certain release conditions being met. Excludes 349,590 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. The address for this selling stockholder is 1 Greentree Court Bethesda, MD 20817. |
| (3) | Represents (i) 100,000 shares of Common Stock of which 55,556 shares are held in escrow pending certain release conditions being met and (ii) 100,000 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 55,556 shares are held in escrow pending certain release conditions being met. The address for this selling stockholder is 11290 Chalon Road, Los Angeles CA 90049. |
| (4) | Mark Groussman is the President of Melechdavid Inc. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 170,000 shares of Common Stock of which 94,445 shares are held in escrow pending certain release conditions being met and (ii) 170,000 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 94,445 shares are held in escrow pending certain release conditions being met. The address for this selling stockholder is 5154 La Gorce Drive Miami Beach, FL 33140. |
| (5) | Mark Groussman is the Custodian of Mark Groussman c/f Alivia Groussman UTMA/FL. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 40,000 shares of Common Stock of which 22,222 shares are held in escrow pending certain release conditions being met and (ii) 40,000 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 22,222 shares are held in escrow pending certain release conditions being met. The address for this selling stockholder is 5154 La Gorce Drive Miami Beach, FL 33140. |
| (6) | Mark Groussman is the Custodian of Mark Groussman c/f Asher Groussman UTMA/FL. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 40,000 shares of Common Stock of which 22,222 shares are held in escrow pending certain release conditions being met and (ii) 40,000 shares of Common Stock issuable upon exercise of outstanding warrants of which warrants to purchase 22,222 shares are held in escrow pending certain release conditions being met. The address for this selling stockholder is 5154 La Gorce Drive Miami Beach, FL 33140. |
| (7) | Represents (i) 29,815 shares of Common Stock, (ii) 443,585 shares of Common Stock held by GRQ Consultants, Inc. 401K ("401K"), (iii) 30,600 shares of Common Stock held by GRQ Consultants, Inc. Roth 401K FBO Barry Honig ("Roth 401K") and (iv) 39,860 shares of Common Stock issuable upon exercise of outstanding warrants held by Mr. Honig. Mr. Honig is the trustee of 401K and Roth 401K in such capacity holds voting and dispositive power over the securities held by such entities. Excludes (i) 170,000 shares of Common Stock issuable upon conversion of a convertible promissory note, which contains a 4.99% beneficial ownership limitation, (ii) 160,140 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation, (iii) 515,042 shares of Common Stock issuable upon conversion of a convertible promissory note, which contains a 4.99% beneficial ownership limitation, and (iv) 500,000 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. The notes and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 555 S. Federal Highway, #450, Boca Raton, FL 33432. |
| (8) | Represents (i) 206,017 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 200,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. |
| (9) | Represents (i) 29,815 shares of Common Stock, (ii) 443,585 shares of Common Stock held by 401K and (iii) 30,600 shares of Common Stock held by Roth 401K. Mr. Honig is the trustee of 401K and Roth 401K and in such capacity holds voting and dispositive power over the securities held by such entities. |
| (10) | Represents (i) 30,600 shares of Common Stock and (ii) 500,000 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. Excludes 515,042 shares of Common Stock issuable upon conversion of a convertible promissory note, which contains a 4.99% beneficial ownership limitation. Mr. Honig is the trustee of Roth 401K and in such capacity holds voting and dispositive power over the securities held by such entity. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 555 S. Federal Highway, #450, Boca Raton, FL 33432. |
| (11) | Represents (i) 515,042 shares of Common Stock issuable upon conversion of a convertible promissory note and (iii) 500,000 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. |
| (12) | Jonathan Honig is the Manager of Titan Multi-Strategy Fund I, Ltd. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 15,000 shares of Common Stock and (ii) 583,774 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. Excludes (i) 824,066 shares of Common Stock issuable upon conversion of a convertible promissory note, which contains a 4.99% beneficial ownership limitation and (ii) 216,226 shares of Common Stock issuable upon exercise of outstanding warrants, which contains a 9.99% beneficial ownership limitation. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 5825 Windsor Court, Boca Raton, FL 33496. |
| (13) | Represents (i) 824,066 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 800,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. |
| (14) | Candice Merren-Yates and Ghislian Ghyoot are the Authorized Signatories of US Commonwealth Life, A.I. Policy No. 2013-17. In such capacity they share voting and dispositive control over the securities held by such entity. Represents (i) 20,602 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 20,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 304 Ponce de Leon, Suite 1000, San Juan, Puerto Rico, 00918. |
| (15) | Represents (i) 41,204 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 40,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. Mr. O'Braitis is affiliated with a broker-dealer and may be deemed a statutory underwriter of the shares. The address for this selling stockholder is 43811 Grantner Pl, Ashburn, VA 20147. |
| (16) | Adrian James is the President & CEO of Stockwire Research Group, Inc. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 20,602 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 20,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 3736 Bee Caves Road, Suite 1-105, Austin, TX 78746. |
| (17) | Edward Karr is the Managing Member of Aifos Capital LLC. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 61,805 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 60,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is Aifos Capital LLC, CP 5452, CH-1211 Geneva 11, Switzerland. |
| (18) | John Stetson is the Managing Member of Stetson Capital Management, LLC. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 7,500 shares of Common Stock, (ii) 75,900 shares of Common Stock issuable upon conversion of a convertible promissory note and (iii) 200,000 shares of Common Stock issuable upon exercise of outstanding warrants. Excludes 130,117 shares of Common Stock issuable upon conversion of a convertible promissory note, which contains a 4.99% beneficial ownership limitation. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 68 Fiesta Way, Ft. Lauderdale, FL 33301. |
| (19) | Represents (i) 206,017 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 200,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. |
| (20) | Jason Theofilos is the Director of JAD Capital Inc. In such capacity he has voting and dispositive control over the securities held by such entity. Represents (i) 41,204 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 40,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 120 East Beaver Creek Road, Suite 200, Richmond Hill, Ontario, Canada L4B 4V1. |
| (21) | Represents (i) 57,187 shares of Common Stock, (ii) 20,602 shares of Common Stock issuable upon conversion of a convertible promissory note and (iii) 20,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. The address for this selling stockholder is 51 Lord's Highway East, Weston, CT 06883. |
| (22) | Represents (i) 20,602 shares of Common Stock issuable upon conversion of a convertible promissory note and (ii) 20,000 shares of Common Stock issuable upon exercise of outstanding warrants. The note and warrants cannot be converted or exercised without further shareholder approval. The notes and warrants are being held in escrow pending certain release conditions being met. |
PLAN OF DISTRIBUTION
WeEach selling stockholder of the Common Stock and any of their pledgees, assignees and successors-in-interest may, sell the securities being offered hereby from time to time, sell any or all of their shares of Common Stock on The NASDAQ Capital Market or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one or more of the following ways:
methods when selling shares:
· | through one or more underwriters;· | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
· | through dealers, who may act as agents or principal (including a · | block tradetrades in which a broker or dealer so engagedthe broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction);transaction; |
· | directly to one or more purchasers;· | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
· | through agents;· | an exchange distribution in accordance with the rules of the applicable exchange; |
· | through registered direct offerings;· | privately negotiated transactions; |
· | as part· | settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a collaboration with a third party;part; |
| · | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; |
| · | through “at the market” offerings, within the meaningwriting or settlement of Rule 415(a)(4) of the Securities Act, tooptions or other hedging transactions, whether through a market maker or into an existing trading market on anoptions exchange or otherwise; |
· | in privately negotiated transactions; and· | a combination of any such methods of sale; or |
· | in any combination of these methods of sale. |
We will set forth in a prospectus supplement the terms of the offering of securities, including:
· | the name or names of any agents, underwriters or dealers; |
· | the terms of the securities being offered, including the purchase price and the proceeds we will receive from the sale; |
· | any underwriting discounts and commissions or agency fees and other items constituting underwriters’ or agents’ compensation; |
· | any over-allotment options under which underwriters may purchase additional securities from us; and |
· | any discounts or concessions allowed or reallowed or paidmethod permitted pursuant to dealers.applicable law. |
The distributionselling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the Common Stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may be effected from time to time insell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more transactions at a fixed pricederivative securities which require the delivery to such broker-dealer or prices,other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be changed, at market prices prevailing atdeemed to be "underwriters" within the timemeaning of sale, at prices related to the prevailing market prices, or at negotiated prices.
Underwriters, dealers, agents and others that participate in the distribution of the securities may be underwriters as defined in the Securities Act andof 1933, as amended, in connection with such sales. In such event, any discountscommissions received by such broker-dealers or commissions they receive from usagents and any profit on theirthe resale of the securitiesshares purchased by them may be treated asdeemed to be underwriting commissions or discounts and commissions under the Securities Act. In no event willAct of 1933, as amended. Each selling stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the total amount of cash compensation paidCommon Stock.
We are required to underwriters, placement agents, dealers or brokers exceed 10%pay certain fees and expenses incurred by us incident to the registration of the gross proceeds of the offering.shares. We will identify in the applicable prospectus supplement any underwriters, dealers, agents and others and will describe their compensation. We may have agreements with underwriters, dealers, agents and othersagreed to indemnify themthe selling stockholders against specified civilcertain losses, claims, damages and liabilities, including liabilities under the Securities Act. Underwriters, dealers, agentsAct of 1933, as amended.
Because selling stockholders may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended, they will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as amended may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the selling stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and others may engagewithout the requirement to be in transactionscompliance with Rule 144(c)(1) and otherwise without restriction or perform services for us inlimitation pursuant to Rule 144 or (ii) all of the ordinary courseshares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of their businesses.
If required under applicable state securities laws, wesimilar effect. The resale shares will sell the securitiesbe sold only through registered or licensed brokers or dealers.dealers if required under applicable state securities laws. In addition, in somecertain states, wethe resale shares may not sell securitiesbe sold unless they have been registered or qualified for sale in the applicable state or unless we have complied with an exemption from anythe registration or qualification requirements.requirement is available and is complied with.
Agents
WeUnder applicable rules and regulations under the Securities Exchange Act of 1934, as amended, any person engaged in the distribution of the resale shares may designate agents who agreenot simultaneously engage in market making activities with respect to solicit purchasesthe Common Stock for the applicable restricted period, of their appointment oras defined in Regulation M, prior to sell securities on a continuing basis. Unless the prospectus supplement provides otherwise, agents will act on a best efforts basis for the period of their appointment. Agents may receive compensation in the form of commissions, discounts or concessions from us. Agents may also receive compensation from the purchaserscommencement of the securities for whom they sell as principals. Each particular agent will receive compensation in amounts negotiated in connection withdistribution. In addition, the sale, which might be in excess of customary commissions.
Underwriters
If we use underwriters for a sale of securities, the underwriters will acquire the securities for their own account. The underwriters may resell the securities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securitiesselling stockholders will be subject to the conditions set forth in the applicable underwriting agreement. Unless the prospectus supplement provides otherwise, underwriters will be obligated to purchase allprovisions of the securities offeredSecurities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the Common Stock by the selling stockholders or any other person. We will make copies of this prospectus supplement. We may change from time to time any initial public offering price and any discounts or concessions the underwriters allow or reallow or pay to dealers. We may use underwriters with whom we have a material relationship, and we may offer the securitiesavailable to the public through an underwriting syndicateselling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or through a single underwriter. We will describe in the prospectus supplement naming the underwriter the nature of any such relationship and underwriting arrangement.
Dealers
We also may sell securitiesprior to a dealer as principal. If we sell our securities to a dealer as a principal, then the dealer may resell those securities to the public at varying prices to be determined by such dealer at the time of resale. The name of the dealer and the terms of the transactions will be set forth in the applicable prospectus supplement.
Direct Sales and Institutional Purchases
We may also sell securities directly to one or more purchasers, in which case underwriters or agents would not be involved in the transaction.
Further, we may authorize agents, underwriters or dealers to solicit offerssale (including by certain types of institutional investors to purchase securities from us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in an applicable prospectus supplement.
Stabilization Activities
Any underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordancecompliance with Regulation MRule 172 under the Exchange Act. Overallotment involves sales in excessSecurities Act of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long1933, as the stabilizing bids do not exceed a specified maximum. Short covering transactions involve purchases in the open market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Such activities may cause the price of the securities to be higher than they would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. These transactions may be effected on the Nasdaq Capital Market or otherwise.amended).
Passive Market Making
Any underwriters who are qualified market makers on the Nasdaq Capital Market may engage in passive market making transactions on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M, during the business day prior to the pricing of the offering, before the commencement of offers or sales. Passive market makers must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
Costs
We will bear all costs, expenses and fees in connection with the registration of the securities, as well as the expense of all commissions and discounts, if any, attributable to sales of the securities by us.
DESCRIPTION OF OUR CAPITAL STOCK
OurGeneral
The following description of our capital stock summarizes the material terms and provisions of our Common Stock. For the complete terms of our Common Stock, please refer to our Articles of Incorporation and our Bylaws that are incorporated by reference into the registration statement of which this prospectus is a part or may be incorporated by reference in this prospectus. The terms of these securities may also be affected by the Colorado Revised Statutes. The summary below is qualified in its entirety by reference to our amended and restated Articles of Incorporation and our amended and restated Bylaws.
As of the date of this prospectus, our authorized capital stock consistsconsisted of 60,000,000 shares of common stock,Common Stock, no par value per share. As of September 30, 2013, we had 21,454,380 outstandingthe date of this prospectus, there were 4,903,971 shares of common stock.our Common Stock issued and outstanding.
As of September 30, 2013, we had 1,220,149 shares of common stock issuable upon the exercise of outstanding options granted under our stock option plans at a weighted average exercise price of $8.70 per share, 4,622,505 shares of common stock issuable upon exercise of options granted outside of our stock option plans and warrants at a weighted average exercise price of $1.82 per share, and 692,056 shares of common stock available for future issuance under our stock option plans.Common Stock
Holders of common stockCommon Stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders, except that in the election of directors each shareholder shall have as many votes for each share held by him, her or it as there are directors to be elected and for whose election the shareholder has a right to vote. Cumulative voting is not permitted. Generally, all matters to be voted on by shareholders must be approved by a majority, or, in the case of the election of directors, by a plurality, of the votes cast at a meeting at which a quorum is present.
Holders of outstanding shares of our common stockCommon Stock are entitled to those dividends declared by the Board of Directors out of legally available funds, and, in the event of our liquidation, dissolution or winding up of our affairs, holders are entitled to receive ratably our net assets available to the shareholders. Holders of our outstanding common stockCommon Stock have no preemptive, conversion or redemption rights. All of the issued and outstanding shares of our common stockCommon Stock are, and all unissued shares of our common stock,Common Stock, when offered and sold will be, duly authorized, validly issued, fully paid and nonassessable. To the extent that additional shares of our common stockCommon Stock may be issued in the future, the relative interests of the then existing shareholders may be diluted.
Warrants
On March 10, 2017, we issued to purchasers of our units warrants to purchase an aggregate of 900,000 shares of Common Stock. The warrants are exercisable at a price of $3.50 per share, subject to adjustment, and expire three years from the date of issuance. The holders may, subject to certain limitations, exercise the warrants on a cashless basis. We are prohibited from effecting an exercise of any warrant to the extent that, as a result of any such exercise, the holder would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of such warrant. 55.5556% of the warrants (and common stock) issued to each investor are being held in escrow pending the satisfaction of certain release conditions.
On March 16, 2017, we issued warrants to purchase an aggregate of 1,900,000 shares of Common Stock with each warrant based upon the number of shares of Common Stock equal to 100% of such investor's subscription amount divided by the conversion price of $2.50. The warrants are exercisable at a price of $3.56 per share, subject to adjustment, and expire three years from the date of issuance. The holders may, subject to certain limitations, exercise the warrants on a cashless basis. We are prohibited from effecting an exercise of any warrant to the extent that, as a result of any such exercise, the holder would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of such warrant. The exercise of these warrants is subject to approval of the transaction from our stockholders as required by Nasdaq Listing Rule 5635. The Notes and warrants issued to each investor are being held in escrow pending the satisfaction of certain release conditions.
If we, at any time while the warrants are outstanding: (i) pay a stock dividend or otherwise make a distribution or distributions payable in shares of Common Stock or any Common Stock equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of the warrants), (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issue, in the event of a reclassification of shares of the Common Stock, any shares of capital stock, then the exercise price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.
Convertible Promissory Notes
The Notes are convertible at a per share price of $2.50 per share, subject to adjustment, at any time after we have received approval of the transaction from our stockholders as required by Nasdaq Listing Rule 5635. The number of shares of Common Stock issuable upon a conversion shall be determined by the quotient obtained by dividing the outstanding principal amount of such holder's Note to be converted by the conversion price. We are prohibited from effecting a conversion of any Note to the extent that, as a result of any such exercise, the holder would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of such Note.
Except as otherwise provided in the Note, we may not prepay or redeem the Note in whole or in part without the prior written consent of the holder, and to the extent we agree with other holders to prepay or redeem other Notes in whole or in part, we shall offer such prepayment or redemption of the Note on a pro rata basis on the same terms and conditions.
If we, at any time while the Note is outstanding: (i) pay a stock dividend or otherwise make a distribution or distributions payable in shares of Common Stock or any Common Stock equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of the Notes), (ii) subdivide outstanding shares of Common Stock into a larger number of shares, (iii) combine (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issue, in the event of a reclassification of shares of the Common Stock, any shares of capital stock, then the conversion price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.
Holders of the Notes shall be entitled to receive, and we shall pay, cumulative interest on the outstanding principal amount of the Note at the annual rate of two (2%) percent (all subject to increase as set forth in the Note), payable on the maturity date of September 16, 2018 in cash or shares issuable in lieu of the cash payment of interest on the Notes in accordance with the terms of the Notes. Interest on the Notes shall be calculated on the basis of a 360-day year and the actual number of days elapsed. Payments made in connection with the Notes shall be applied first to amounts due thereunder other than principal and interest, thereafter to interest and finally to principal. Conversion privileges set forth in the Notes shall remain in full force and effect immediately from the date thereof and until the Note is paid in full.
We have agreed to file a preliminary proxy statement for a special meeting of our stockholders, in order to submit to our stockholders a proposal to approve an amendment to our Articles of Incorporation authorizing the creation of 15,000,000 shares of "blank check" preferred stock and, thereafter, we shall designate shares of preferred stock as "Series A Preferred Stock" by filing a Certificate of Designations, Preferences and Rights of 0% Series A Convertible Preferred Stock with the Secretary of State. On the Filing Date, the Notes shall automatically, and without any further action on the part of the holders, be exchanged for shares of Series A Preferred Stock based on a ratio of $1.00 of stated value of Series A Preferred Stock for each $1.00 of the then outstanding principal amount plus any accrued but unpaid interest thereon, pursuant to Section 3(a)(9) of the Securities Act. The Notes and warrants issued to each investor are being held in escrow pending the satisfaction of certain release conditions.
Anti-Takeover Effects of Certain Provisions of our Articles of Incorporation, Bylaws and the Colorado Revised Statutes ("CRS")
Certain provisions of our Articles of Incorporation and Bylaws, which are summarized in the following paragraphs, may have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the Articles of Incorporation and Bylaws and Colorado law, as applicable, among other things:
● | provide the board of directors with the ability to alter the Bylaws without stockholder approval; |
| |
● | place limitations on the removal of directors; and |
| |
● | provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum. |
These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with our board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause our market price of our common stock to decline.
Limitations on Liability, Indemnification of Officers and Directors and Insurance
Our Articles of Incorporation and Bylaws require us to indemnify any person entitled to indemnity under the CRS, as it currently exists or may be amended, to the fullest extent permitted by the CRS, and, to the maximum extent permitted by the CRS, purchase and maintain insurance providing such indemnification.
Our Bylaws specifically sets forth that we shall indemnify any proper person against reasonably incurred expenses (including attorneys' fees), judgments, penalties, fines (including any excise tax assessed with respect to an employee benefit plan) and amounts paid in settlement reasonably incurred by him in connection with such action, suit or proceeding if it is determined that he conducted himself in good faith and that he reasonably believed (i) in the case of conduct in his official capacity with the corporation, that his conduct was in the corporation's best interests, or (ii) in all other cases (except criminal cases), that his conduct was at least not opposed to the corporation's best interests, or (iii) in the case of any criminal proceeding, that he had no reasonable cause to believe his conduct was unlawful. Official capacity means, when used with respect to a director, the office of director and, when used with respect to any other proper person, the office in a corporation held by the officer or the employment, fiduciary or agency relationship undertaken by the employee, fiduciary, or agent on behalf of the corporation.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock areCommon Stock will be available for future issuancesissuance without shareholder approval and could be utilizedyour approval. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporateto fund acquisitions and as employee benefit plans.compensation. The existence of authorized but unissued and unreserved common stockshares of Common Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Transfer Agent and Registrar
Item 14. Other Expenses of Issuance and Distribution.
Our Articles of Incorporation and Bylaws require us to indemnify our officers, directors, employees and agents against reasonably incurred expenses (including legal fees), judgments, penalties, fines and amounts incurred in the settlement of any action, suit or proceeding if it is determined that such person conducted himself in good faith and that he reasonably believed (i) in the case of conduct in his official capacity, that his conduct was in the Company’sour best interest, (ii) in all other cases (except criminal proceedings) that his conduct was at least not opposed to the Company’sour best interests, or (iii) in the case of any criminal proceeding, that he has not reasonable cause to believe that his conduct was unlawful.
This determination shall be made by a majority vote of directors at a meeting at which a quorum is present, provided however that the quorum can only consist of directors not parties to the proceeding. If a quorum cannot be obtained, the determination may be made by a majority vote of a committee of the board, consisting of two or more directors who are not parties to the proceeding. Directors who are parties to the proceeding may participate in the designation of members to serve on the committee. If a quorum of the board or a committee cannot be established, the determination may be made (i) by independent legal counsel selected by a vote of the board of directors or committee in the manner described in this paragraph or, if a quorum cannot be obtained or a committee cannot be established, by independent legal counsel selected by a majority of the full board (including directors who are parties to the proceeding) or (ii) by a vote of the shareholders. Any officer, director, employee or agent may seek court-ordered indemnification from the court conducting the proceeding. The court may then determine whether such person should be entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the Companyus is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Section 7−109−103 of the Act provides, that a corporation organized under Colorado law shall be required to indemnify a person who is or was a director of the corporation or an individual who, while serving as a director of the corporation, is or was serving at the corporation’scorporation's request as a director, an officer, an agent, an associate, an employee, a fiduciary, a manager, a member, a partner, a promoter, or a trustee of, or to hold any similar position with, another domestic or foreign corporation or other person or of an employee benefit plan (a “Director”"Director") of the corporation and who was wholly successful, on the merits or otherwise, in the defense of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal (a “Proceeding”"Proceeding"), in which he was a party, against reasonable expenses incurred by him in connection with the Proceeding, unless such indemnity is limited by the corporation’s articlescorporation's Articles of incorporation.Incorporation.
Section 7−109−102 of the Act provides, generally, that a corporation may indemnify a person made a party to a Proceeding because the person is or was a Director against any obligation incurred with respect to a Proceeding to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or reasonable expenses incurred in the Proceeding if the person conducted himself or herself in good faith and the person reasonably believed, in the case of conduct in an official capacity with the corporation, the person’sperson's conduct was in the corporation’scorporation's best interests and, in all other cases, his or her conduct was at least not opposed to the corporation’scorporation's best interests and, with respect to any criminal proceedings, the person had no reasonable cause to believe that his or her conduct was unlawful. A corporation may not indemnify a Director in connection with any Proceeding by or in the right of the corporation in which the Director was adjudged liable to the corporation or, in connection with any other Proceeding charging that the Director derived an improper personal benefit, whether or not involving actions in an official capacity, in which Proceeding the Director was judged liable on the basis that he or she derived an improper personal benefit. Any indemnification permitted in connection with a Proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with such Proceeding.
Item 16. Exhibits.
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on this Form S-3 and has duly caused this registration statementRegistration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Castle Rock, State of Colorado on the 15th20th day of November, 2013.April, 2017.