On August 28, 2017, the Company entered into a Restructuring Agreement (the “Agreement”) with one of the institutional investors (the “Investor”) who was a party to the SPA. As of the date the Agreement was entered into, the Investor held $11,444,637 aggregate principal amount of Notes of which there was $10,092,857 aggregate Restricted Principal, (as defined in the Notes) of Notes (the “Restricted Notes”), secured by such aggregate cash amount held in a collateral account of the Company in the same amount (the “Restricted Cash”) and (y) $1,351,780 principal of Notes (the “Unrestricted Notes”), (ii) 4,200 shares of Series A Preferred Stock and (iii) 2,006 shares of Series B Convertible Preferred Stock.
Pursuant to the Agreement, (a) on the date thereof the Company and the Investor took the following actions (the “Initial Restructuring”): (i) the Investor released restrictions on $1,650,000 of Restricted Cash (the “Initial Release”), (ii) the Investor consented to the use of additional Restricted Cash to effect redemptions of the Series A Preferred Shares and the Series B Preferred Shares, (iii) the Investor cancelled $1,200,000 aggregate principal of the Notes (such portion of the Notes, the “Cancellation Note”), (iv) the Company redeemed all the Series A Preferred Shares outstanding for a cash payment to the Investor of $4.20 and (v) the Company redeemed the Series B Preferred Shares for a cash payment to the Investor of $2,006,000 and (b) upon the consummation of a reverse stock split of our Common Stock of at least twenty to one (the “Reverse Stock Split Event”, and such date, the “Reverse Stock Split Date”) by September 15, 2017, the Company and the Investor shall have taken the following actions (the “Additional Restructuring”, and together with the Initial Restructuring, the “Restructuring”): (i) the Investor shall consent to the use of Restricted Cash to effect redemptions of $4,000,000 aggregate Restricted Principal of the Restricted Notes (such portion of the Restricted Notes, the “Redemption Notes”), (ii) the Company shall redeem the Redemption Notes for a redemption price of $6.4 million (the “Redemption Price”) and (iii) the Company shall exchange (the “Exchange”), pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, an$2,436,852.80 aggregate principal amountRestricted Principal of those notes equal to $279,015.90the Restricted Notes (such portion of the Restricted Notes, the “Exchange Notes”, and together with the Redemption Notes, the “Restructured Notes”) for new warrants to purchase an aggregate of 44,642,544164 shares of ourits Common Stock and we shall redeem all(the “New Warrants”, as exercised, the Series C Preferred Shares then outstanding for a cash payment of $590,000 and (ii) upon“New Warrant Shares”). The New Warrants expire on the initial consummation, on or prior to December 15, 2017, by the Company of the offering contemplated by this registration statement on Form S-1 the following shall occur: (i) pursuant to Section 3(b) of the Restricted Notes, we shall be deemed (as adjusted downward by the Black-Scholes value of the warrants being issued in this offering) to have automatically, and irrevocably, adjusted the conversion price to 200% of the purchase price of a share of our common stock in the offering contemplated by this registration statement, (ii) the maturity date (as defined in the notes) shall automatically be extended to the earlier to occur of (x) the first42 month anniversary of the date of consummationissuance and bear an exercise price of $85,750 per share (which shall be adjusted to the new lower purchase price per share if there is a subsequent “down round” financing). The Investor, in lieu of an exercise of the offering contemplated by this registration statement and (y) December 30, 2018, (iii) until the earlier of (x) this maturity date and (y) the 75th calendar day after the date of consummationNew Warrants pursuant to a cash payment of the offering contemplated by this registration statement on Form S-1, all installments to be made under the notes shall be deemed automatically deferred with no conversions during that 75 day period, (iv) we agree to redeem any portion of the outstanding notes at any time requested by either investor thereto with $7.3 million in cash to be reduced by $0.6 million to redeem the Series C Preferred Stock remaining in the restricted accounts with respect to the 2016 convertible notes and (v) the conversion floor price on the notes is $0.05 and not subject to adjustments.
Theaggregate exercise price for the warrants issued in conjunction with the amended restructuring agreement is $0.35. The warrants contain a cashless exercise provision pursuant to which the warrants may be exercised for 133,927,632 shares of our common stock on or after the 75th day subsequent to the date of consummation of offering hereunder. On the 136th day subsequent to the date of consummation of the offering hereunder, there shall be a “true up” with regard to the issuance of shares upon exercise such that the difference between 133,927,632 shares and the number of shares that would be issuable ifNew Warrants being exercised, may exercise the exercise price were lowered to the average price per share of the variable weighted average price of our common stock for the five trading days commencing on the date which is 76 days after the date of consummation of the offering hereunder, but not lower than 33% of the variable weighted average price of a share of our common stock on the 81st date following the date of consummation of the offering hereunder. In lieu of the “true up”, on or before the 135th date following the date of consummation of the offering hereunder, we may buy out that provision for $6,138,349.80.
DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering (i) 422,535,211 units, each unit consisting of one share of our common stock and one Series C common warrant to purchase one share of our common stock, one Series D common warrant to purchase one share of our common stock and one Series E common warrant to purchase one share of our common stock common warrant to purchase one share of our common stock, or (ii) up to 422,535,211pre-funded units, eachpre-funded unit consisting of onepre-funded warrant to purchase one share of our common stock and one common Series C common warrant to purchase one share of our common stock, one Series D common warrant to purchase one share of our common stock and one Series E common warrant to purchase one share of our common stock warrant to purchase one share of our common stock. For eachpre-funded unit we sell, the number of units we are offering will be decreased on aone-for-one basis. The share of common stock and accompanying common warrant included in each unit will be issued separately, and thepre-funded warrant to purchase one share of common stock and the accompanying common warrants included in eachpre-funded unit will be issued separately. Units will not be issued or certificated. We are also registering the shares of common stock included in the units and the shares of common stock issuable from time to time upon exercise of thepre-funded warrants included inpre-funded units and common warrants included in the units and thepre-funded units offered hereby.
Common Stock
The material terms and provisions of our common stock and each other class of our securities which qualifies or limits our common stock are described under the caption “Description of Capital Stock” in this prospectus.
Pre-FundedNew Warrants,
“Pre-funded” warrants provide any purchaser in this offering with the ability purchase more than 4.99% of our issued and outstanding common stock. This is accomplished through purchasing“pre-funded” warrants at a price equal to the purchase price for units, less $.01, which $.01 is the exercise price for the“pre-funded” warrants. Each“pre-funded” unit is exercisable into a unit as offered hereunder. Thus, the purchaser is paying essentially the purchase price for a unit at closing of the offering but is not deemed to beneficially own the shares of common stock included in the units until the purchaser exercises the“pre-funded” warrant. Once purchased, the purchase price of the“pre-funded” warrants is not refundable. While the warrant permits waiver of provisions by us and the holder of the warrant, this would not affect the“pre-funding” as that is the purchase price of the instrument which is paid at the time of closing and becomes part of our proceeds received from the offering. In addition, thepre-funded warrants are perpetual and do not have expiration date.
Duration and Exercise Price
Eachpre-funded warrant will have an initial exercise price per share equal to $0.01. Thepre-funded warrants will be immediately exercisable and may be exercised at any time until thepre-funded warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price. Thepre-funded warrants will be issued separately from the accompanying common warrants included in thepre-funded units, and may be transferred separately immediately thereafter.
Exercisability
Thepre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of thepre-funded warrant to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’spre-funded warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of thepre-funded warrants. Purchasers ofpre-funded units in this offering may also elect prior to the issuance of thepre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding common stock.
Cashless Exercise
If, at the time a holder exercises itspre-funded warrants, a registration statement registering the issuance of the shares of common stock underlying thepre-funded warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may electelecting instead to receive upon such exercise (either in whole or in part) the net numbertwo shares and one hundred and twenty-five thousandths of shares of common stock determined according to a formula set forth in thepre-funded warrants.
Transferability
Subject to applicable laws, apre-funded warrant may be transferred at the optionshare of the holder upon surrender of thepre-funded warrant to us together with the appropriate instruments of transfer.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of thepre-funded warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.
Trading Market
There is no trading market available for thepre-funded warrants on any securities exchange or nationally recognized trading system.
Right as a Stockholder
Except as otherwise provided in thepre-funded warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of thepre-funded warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise theirpre-funded warrants.
Warrants
The following is a summary of all material terms and provisions of the warrants that are being offered hereby, the form of which has been filed as an exhibit to the registration statement of which this prospectus is a part. We are offering Series C warrants, Series D warrants and Series E warrants. Where all three series of warrants contain identical terms, we have described below as pertaining to the warrants in general, and where the terms differ among the series of warrants, we have described those terms specifically with regard to each series of warrants. Prospective investors should carefully review the terms and provisions of the form of Series C warrant, Series D warrant and Series E warrant for a complete description of the terms and conditions of the warrants.
Duration and Exercise Price
Each warrant offered hereby will have an exercise price equal to (i) $ for the Series C warrants, (ii) $ for the Series D warrants and $ for the Series E warrants. The warrants will be immediately exercisable, and (i) the Series C warrants will expire on the fifth anniversary of the original issuance date, and (ii) the Series D warrants and Series E warrants will expire on the first anniversary of the original issuance date. The warrants will be issued separately from the common stock, and may be transferred separately immediately thereafter. Warrants will be issued in certificated form only.
Exercisability
The warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the warrant to the extent that the holder would own more than 4.99% of the outstanding common stock after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants.
Antidilution Protection
The Series C warrants and the Series D warrants shall contain a provision which generally (subject to exclusion of certain types of excluded securities as set forth in the warrants) provides for a reduction in the exercise price of those warrants to the sales price of any securities sold by the Company at a price less than the exercise price of the warrants in effect at the time of issuance of the lower priced securities. The anti-dilution protection is in effect during the entire term of the Series D warrants and ceases after the two year anniversary of the issuance date of the Series C warrants.
Cashless Exercise
If, at the time a holder exercises its warrant, there is no effective registration statement registering, or the prospectus contained therein is not available for an issuance of the shares underlying the warrant to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the warrant.
Fundamental Transactions
In the event of any fundamental transaction, as described in the warrants and generally including any merger with or into another entity, sale of all or substantially all of our assets, tender offer or exchange offer, or reclassification of our common stock, then upon any subsequent exercise of a warrant, the holder will have the right to receive as alternative consideration,Company’s Common Stock for each share of our common stock that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, the number of shares of common stock of the successor or acquiring corporation or of our company, if it is the surviving corporation, and any additional consideration receivable upon or as a result of such transaction by a holder of the number of shares of our common stock for which the warrant is exercisable immediately prior to such event. The Series C warrants and Series D warrants also contain an alternate consideration provision in the case of a fundamental transaction resulting in a change in the control which provides that the holder can request cash payment in an amount equal to the Black Scholes value of the remaining warrant at the time of the change in control.
Transferability
Subject to applicable laws and a standard legend with regard to restriction on transfer only in compliance with a public offering or an available exemption therefrom, the warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriate instruments of transfer.
No Listing
There is no established trading market for the warrants, and we do not expect an active trading market to develop. We do not intend to list the warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the warrants will be extremely limited.
Right as a Shareholder
Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.
Waivers and Amendments
Subject to certain exceptions, any term of the warrants may be amended or waived with our written consent and the written consent of the holders of at least a majority of the then-outstanding warrants
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain of the material U.S. federal income tax considerations with respect to the acquisition, ownership and disposition of the securities being sold in this offering applicable tonon-U.S. holders (as defined below) who purchase our common stock or warrantsWarrant Share exercised pursuant to this offering. This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (referred to as the “Code”), existing and proposed U.S. Treasury regulations promulgated thereunder, and administrative rulings and court decisions in effect as of the date hereof, all of which are subject to change at any time, possibly with retroactive effect. No ruling has been or will be sought from the Internal Revenue Service, or IRS, with respect to the matters discussed below, and there can be no assurance the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of our common stock or warrants, or that any such contrary position would not be sustained by a court.
provision. The discussion below of certain of the U.S. federal income tax consequences with respect to actual holders of common stock and warrants should also apply to holders of Units (as the deemed owners of the underlying common stock and warrants that comprise the Units).
For purposes of this discussion, a“non-U.S. holder” means a beneficial owner of our securities that, for U.S. federal income tax purposes, is not any of the following:
an individual who is a citizen or resident of the United States;
a corporation created or organized (or deemed to be created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source;
a trust if it either (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes; or
an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of our common stock or warrants, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership.Partnerships holding our common stock or warrants and partners in such partnerships are urged to consult their tax advisors as to the particular U.S. federal income tax consequences of acquiring, holding and disposing of our common stock and warrants.
It is assumed in this discussion that anon-U.S. holder holds shares of our common stock and warrants as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to anon-U.S. holder in light of such holder’s particular circumstances or that may be applicable to holders subject to special treatment under U.S. federal income tax laws (including, for example, financial institutions, dealers in securities, traders in securities that electmark-to-market treatment, insurance companies,tax-exempt entities, holders who acquired our common stock pursuant to the exercise of employee stock options or otherwise as compensation, controlled foreign corporations, passive foreign investment companies, entities or arrangements treated as partnerships for U.S. federal income tax purposes, holders subject to the alternative minimum tax, certain former citizens or former long-term residents of the United States, holders deemed to sell our common stock or warrants under the constructive sale provisions of the Code and holders who hold our common stock or warrants as part of a straddle, hedge, synthetic security or conversion transaction), nor does it address any aspects of the unearned income Medicare contribution tax enacted pursuant to the Health Care and Education Reconciliation Act of 2010. In addition, except to the extent provided below, this discussion does not address U.S. federal tax laws other than those pertaining to the U.S. federal income tax, nor does it address any aspects of U.S. state, local ornon-U.S. taxes. Accordingly, prospective investors are encouraged to consult with their own tax advisors regarding the U.S. federalnon-income, state, local,non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of our common stock and warrants.
THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK AND WARRANTS. HOLDERS OF OUR COMMON STOCK AND WARRANTS ARE ENCOURAGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL,NON-U.S. INCOME AND OTHER TAX LAWS) OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
Allocation of Purchase Price and Characterization of a Unit
There is no authority addressing the treatment, for U.S. federal income tax purposes, of securities with terms substantially the same as the units being offered in this offering, and, therefore, that treatment is not entirely clear. Each unit may be treated for U.S. federal income tax purposes as an investment unit consisting of one share of our common stock and three warrants (to purchase three shares of our common stock). If this is the case, then for U.S. federal income tax purposes, each holder of a unit may be required to allocate the purchase price of a unit among the shares of common stock and the warrants that comprise the unit based on the relative fair market value of each at the time of issuance. The price allocated to each such share or warrant generally will be the holder’s tax basis in such share or warrant, as the case may be.
Neither the foregoing description of the treatment of our common stock and warrants nor a holder’s purchase price allocation is binding on the IRS or the courts. Because there are no authorities that directly address instruments that are similar to the units, no assurance can be given that the IRS or the courts will agree with the characterization described above or the discussion below. Accordingly, each holder is advised to consult its own tax advisor regarding the risks associated with an investment in a unit (including alternative characterizations of a unit) and regarding an allocation of the purchase price among the common stock and the warrant that comprise a unit. The balance of this discussion generally assumes that the characterization of the units described above is respected for U.S. federal income tax purposes.
Dividends
As discussed above under “Price Range of Common Stock and Dividend Policy,” we currently have no plans to make distributions of cash or other property on our common stock. In the event that we do make distributions of cash or other property on our common stock, generally such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first reduce anon-U.S. holder’s adjusted basis in our common stock, but not below zero. Any excess will be treated as capital gain from the sale of our common stock in the manner described under “—Gain on Sale or Other Disposition of Our Common Stock” below. In general, dividends, if any, paid by us to anon-U.S. holder will be subject to U.S. withholding tax at a rate of 30% of the gross amount (or a reduced rate prescribed by an applicable income tax treaty) unless the dividends are effectively connected with a trade or business carried on by thenon-U.S. holder within the United States and, if required by an applicable income tax treaty, are attributable to a permanent establishment of thenon-U.S. holder within the United States. Dividends effectively connected with this U.S. trade or business, and, if required by an applicable income tax treaty, attributable to such a permanent establishment of thenon-U.S. holder, generally will not be subject to U.S. withholding tax if thenon-U.S. holder provides the applicable withholding agent with certain forms, including IRS FormW-8ECI (or any successor form), and generally will be subject to U.S. federal income tax on a net income basis, in the same manner as if thenon-U.S. holder were a U.S. person. Anon-U.S. holder that is a corporation and receives effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a 30% rate (or lower treaty rate), subject to certain adjustments.
Anon-U.S. holder of shares of our common stock who wishes to claim the benefit of an applicable treaty rate (and avoid backup withholding, as discussed below) for dividends generally will be required (a) to complete IRS FormW-8BEN (or other applicable form) and certify under penalty of perjury that such holder is not a “United States person” as defined under the Code and is eligible for treaty benefits, or (b) if shares of our common stock are held through certain foreign intermediaries (including certain foreign partnerships), satisfy the relevant certification requirements of applicable U.S. Treasury Regulations. This certification must be provided to us or our paying agent prior to the payment to thenon-U.S. holder of any dividends, and may be required to be updated periodically.
Gain on Disposition of our Securities
Subject to the discussions below of backup withholding and the Foreign Account Tax Compliance Act (“FATCA”) legislation, any gain realized by anon-U.S. holder on the sale or other disposition of our securities generally will not be subject to United States federal income tax, unless:
the gain is effectively connected with a trade or business carried on by thenon-U.S. holder within the United States (in which case the branch profits tax discussed above may also apply if thenon-U.S. holder is a corporation) and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment of thenon-U.S. holder maintained in the United States;
thenon-U.S. holder is an individual and is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are satisfied; or
we are or have been a U.S. real property holding corporation (a “USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the disposition or the period that thenon-U.S. holder held such securities.
Gain described in the first bullet point above will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in much the same manner as if such holder were a resident of the United States. Anon-U.S. holder that is a corporation may also be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.
Gain recognized by an individual described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), but may be offset by U.S.-source capital losses (even though the individual is not considered a resident of the United States), provided that thenon-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe that we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends on the fair market value of our interests in real property located within the United States relative to the fair market value of our interests in real property located outside the United States and our other business assets, however, there can be no assurance that we will not become a USRPHC in the future. Even if we were or were to become a USRPHC at any time during this period, generally gains realized upon a disposition of shares of our common stock (but not our warrants) by anon-U.S. holder that did not directly or indirectly own more than 5% of our common stock during this period would not be subject to U.S. federal income tax, provided that our common stock is “regularly traded on an established securities market” (within the meaning of Section 897(c)(3) of the Code). We expect our common stock to be “regularly traded” on an established securities market, although we cannot guarantee it will be so traded.
Acquisition of Common Stock Warrants Pursuant to the Exercise of a Warrant
Anon-U.S. holder generally will not recognize gain or loss upon the acquisition of common stock pursuant to the exercise of a warrant for cash. Common stock acquired pursuant to the exercise of a warrant for cash generally will have a tax basis equal to thenon-U.S. holder’s tax basis in the warrant, increased by the amount paid to exercise the warrant. The holding period of such common stock generally would begin on the day after the date of receipt of such common stock upon exercise of the warrant and will not include the period during which thenon-U.S. holder held the warrant. If a warrant is allowed to lapse unexercised, anon-U.S. holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant.
The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may betax-free, either because the exercise is not a gain realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In eithertax-free situation, anon-U.S. holder’s basis in the common stock or warrant received would equal the holder’s basis in the warrant. If the cashless exercise were treated as not being a gain realization event, anon-U.S. holder’s holding period in the common stock or warrant would be treated as commencing on the date following the date of exercise of the warrant. If the cashless exercise were treated as a recapitalization, the holding period of the common stock or warrant would include the holding period of the warrant being exercised. It is also possible that a cashless exercise could be treated as a taxable exchange in which gain or loss would be recognized. In such event, anon-U.S. holder could be deemed to have surrendered warrants equal to the number of shares of common stock and warrants having a value equal to the exercise price for the total number of warrants to be exercised. Thenon-U.S. holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the common stock or warrants represented by the warrants deemed surrendered and thenon-U.S. holder’s tax basis in the warrants deemed surrendered. In this case, anon-U.S. holder’s tax basis in the common stock received or warrants would equal the sum of the fair market
value of the common stock or warrants represented by the warrants deemed surrendered and thenon-U.S. holder’s tax basis in the warrants exercised. Anon-U.S. holder’s holding period for the common stock would commence on the date following the date of exercise of the warrant. Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly,non-U.S. holders should consult their tax advisors regarding the U.S. federal income tax consequences of a cashless exercise.
If the cashless exercise of a warrant results in taxable gain to anon-U.S. holder, then the consequences to such holder will be as described above under “—Gain on Disposition of our Securities.”
Under Section 305 of the Code, an adjustment to the number of shares of common stock or warrants that will be issued on the exercise of the warrants, or an adjustment to the exercise price of the warrants, may be treated as a constructive distribution to anon-U.S. holder of the warrants if, and to the extent that, such adjustment has the effect of increasing suchnon-U.S. holder’s proportionate interest in the “earnings and profits” or assets of our company, depending on the circumstances of such adjustment (for example, if such adjustment is to compensate for a distribution of cash or other property to stockholders of our company). Adjustments to the exercise price of warrants made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing dilution of the interest of the holders of the warrants should generally not be considered to result in a constructive distribution. Any such constructive distribution would be taxable whether or not there is an actual distribution of cash or other property. See “Dividends”.
Information Reporting and Backup Withholding
As discussed above under “Price Range of Common Stock and Dividend Policy,” we currently have no plans to pay regular dividends on our common stock. In the event that we do pay dividends, generally we or certain financial middlemen must report annually to the IRS and to eachnon-U.S. holder the amount of dividends paid to, and the tax withheld with respect to, eachnon-U.S. holder. These reporting requirements apply regardless of whether withholding was reduced or eliminated. Copies of this information also may be made available under the provisions of a specific treaty or agreement with the tax authorities in the country in which thenon-U.S. holder resides or is established.
U.S. backup withholding (currently at a rate of 28%) is imposed on certain payments to persons that fail to furnish the information required under the U.S. information reporting requirements. Dividends paid to anon-U.S. holder of our common stock generally will be exempt from backup withholding if thenon-U.S. holder provides to the applicable withholding agent a properly executed IRS FormW-8BEN,W-8BEN-E orW-8ECI (as applicable) or otherwise establishes an exemption.
Under U.S. Treasury regulations, the payment of proceeds from the disposition of our common stock or warrants by anon-U.S. holder effected at a U.S. office of a broker generally will be subject to information reporting and backup withholding, unless the beneficial owner, under penalties of perjury, certifies, among other things, its status as anon-U.S. holder or otherwise establishes an exemption. The certification procedures described in the above paragraph will satisfy these certification requirements as well. The payment of proceeds from the disposition of our common stock or warrants by anon-U.S. holder effected at anon-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except that information reporting (but generally not backup withholding) may apply to payments if the broker is:
a U.S. person;
a “controlled foreign corporation” for U.S. federal income tax purposes;
a foreign person, 50% or more of whose gross income from certain periods is effectively connected with a U.S. trade or business; or
a foreign partnership if at any time during its tax year (a) one or more of its partners are U.S. persons who, in the aggregate, hold more than 50% of the income or capital interests of the partnership or (b) the foreign partnership is engaged in a U.S. trade or business.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to anon-U.S. holder can be credited against thenon-U.S. holder’s U.S. federal income tax liability, if any, and any excess refunded, provided that the required information is furnished to the IRS in a timely manner.
Legislation Affecting Taxation of Securities Held by or Through Foreign Entities
Withholding taxes may be imposed under FATCA on certain types of payments made tonon-U.S. financial institutions and certain othernon-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends paid on, or gross proceeds from the sale or other disposition of, our common stock or warrants paid to a “foreign financial institution” or a“non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) thenon-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution ornon-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments tonon-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under the applicable Treasury Regulations and IRS guidance, withholding under FATCA generally will apply to payments of dividends on our common stock, as well as to payments of gross proceeds from the sale or other disposition of such stock or warrants on or after January 1, 2019. Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
UNDERWRITING
We have entered into an underwriting agreement with the underwriter named below. Oppenheimer & Co. Inc. is acting as the sole underwriter in this offering. The underwriting agreement provides for the purchase of a specific number of units by the underwriter. Subject to the terms and conditions of the underwriting agreement, Oppenheimer & Co. Inc. has agreed to purchase the number of unitstransactions set forth opposite its name below.
| | | | | | | | |
Underwriter
| | Number of
Units | | | Number of
Pre-Funded
Units | |
Oppenheimer & Co. Inc.
| | | | | | | | |
Total
| | | | | | | | |
The underwriter has agreed to purchase all of the securities offered by this prospectus (other than those covered by the over-allotment option described below) if any are purchased.
The securities comprising the units and pre-funded units should be ready for delivery on or about , 2017 against payment in immediately available funds. , 2017 is the 2nd trading day following the date of this prospectus. The underwriter is offering the units and pre-funded units subject to various conditions and may reject all or part of any order. The underwriter proposes to offer the units and pre-funded units directly to the public at the public offering price that appears on the cover page of this prospectus. In addition, the underwriter may offer some of the units to other securities dealers at such price less a concession not in excess of $ per unit. After the securities are released for sale to the public, the underwriter may change the offering price and other selling terms at various times. The underwriter has advised us that it does not intend to confirm sales to any account over which it exercises discretionary authority.
Discounts, Commissions and Expenses
We estimate that the total fees and expenses payable by us, excluding underwriting discounts and commissions, will be approximately $ . The following table shows the underwriting discounts to be paid to the underwriter by us in connection with this offering:
| | | | | | | | | | | | | | | | |
| | Per Unit | | | Per
Pre-Funded
Unit | | | Total
Without
Exercise
of Over
Allotment
Option | | | Total With Full
Exercise of
Over-Allotment
Option | |
Public Offering Price per Unit (1)(2)
| | | | | | | | | | | | | | | | |
Underwriting Discount
| | $ | | | | | | | | | | | | | | |
Proceeds to us
| | | | | | | | | | | | | | | | |
(1) | The public offering price and underwriting discount per unit corresponds to (i) a public offering price per share of common stock of $ and (ii) a public offering price per Series C common warrant of $ , Series D common warrant of $ and Series E common warrant of $ . |
(2) | The public offering price and underwriting discount per pre-funded unit corresponds to (i) a public offering price per pre-funded warrant of $ and (ii) a public offering price per Series C common warrant of $ , Series D common warrant of $ and Series E common warrant of $ . |
We estimate the total expenses payable by us for this offering to be approximately $ which amount includes (i) the underwriting discount of $ ($ if the over-allotment option is exercised in full), (ii) the reimbursement of expenses of the underwriter, including its legal fees and expenses, in connection with this offering equal to $125,000, and (iii) other estimated company expenses of approximately $ which includes legal, accounting and printing costs and various fees associated with the registration and listing of our shares.
Over-allotment Option
We have granted to the underwriter an over-allotment option exercisable not later than 45 days after the date of this prospectus to purchase up to 63,380,281 additional shares of common stock and/or Series C warrants, Series D warrants and Series E warrants equal to 15% of the number of shares of common stock sold in the primary offering and/or 15% of the Series C common warrants, the Series D common warrants and Series E common warrants sold in the primary offering, in any combination thereof, at the public offering price per share of common stock and the public offering price per Series C common warrant, Series D common warrant and Series E common warrant set forth on the cover page hereto less the underwriting discounts and commissions. The underwriter may exercise the option solely to cover overallotments, if any,herein were being made in connection with this offering. If any additional shares of common stock and/or Series C warrants, Series D warrants and/or Series E warrants are purchased, the underwriter will offer these shares of common stock and/or warrants on the same terms as those on which the other securities are being offered. If this option is exercised in full, the total price to the public will be $ and the total gross proceeds to us will be $ .
Indemnification
Pursuant to the underwriting agreement, we have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriter or such other indemnified parties may be required to make in respect of those liabilities.
Lock-Up Agreements
We have agreed not to (i) offer, pledge, issue, sell, contract to sell, purchase, contract to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock; (ii) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of shares of common stock; or (iii) file any registration statement with the SEC relating to the offering of any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock, without the prior written consent of the underwriter for a period of 90 days following the date of this prospectus, subject to an18-day extension under certain circumstances (the“Lock-up Period”), for a price less than the public offering price per unit. This consent may be given at any time without public notice. These restrictions on future issuances do not apply to the securities to be sold in this offering.
In addition, each of our directors and executive officers has entered into alock-up agreement with the underwriter. Under thelock-up agreements, the directors and executive officers may not, directly or indirectly, (i) offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, or announce the intention to otherwise dispose of, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations promulgated under the Securities Act or securities convertible into or exercisable or exchangeable for our common stock, (ii) enter into any swap, hedge or similar agreement or arrangement that transfers in whole or in part, the economic risk of ownership of the beneficially owned shares or securities convertible into or exercisable or exchangeable for common stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or (iii) engage in any short selling of the common stock or securities convertible into or exercisable or exchangeable for common stock for a period of 90 days following the date of closing of this offering. The restrictions on future dispositions by our directors and officers are subject to exceptions
for (i) one or more bona fide gift transfers of securities to immediate family members or to a trust, family partnership or family company the beneficiaries of which are exclusively members of immediate family, (ii) by will or intestate succession upon the death or (iii) as a bona fide gift. In addition, these restrictions shall not apply to sales of common stock by our directors and executive officers (i) pursuant to any trading plan established pursuant to Rule10b5-1 of the Exchange Act, (ii) constituting restricted stock outstanding prior to the date hereof that vests during theLock-Up Period, solely to the extent necessary to generate proceeds to fund any income taxes resulting from such vesting, and (iii) issued upon the exercise of stock options granted prior to the date hereof and scheduled to expire within six (6) months of the date hereof, solely to the extent necessary to generate proceeds to fund the exercise price thereof and any income taxes resulting from such exercise.
Price Stabilization, Short Positions and Penalty Bids
Rules of the Securities and Exchange Commission may limit the ability of the underwriter to bid for or purchase shares before the distribution of the shares is completed. However, the underwriter may engage in the following activities in accordance with the rules:
Stabilizing transactions – The underwriter may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the shares, so long as stabilizing bids do not exceed a specified maximum.
Over-allotments and syndicate covering transactions – The underwriter may sell more shares of our common stock in connection with this offering than the number of shares than they have committed to purchase. This overallotment creates a short position for the underwriter. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriter’s over-allotment option to purchase additional shares in this offering described above. The underwriter may close out any covered short position either by exercising their over-allotment option or by purchasing shares in the open market. To determine how they will close the covered short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market, as compared to the price at which they may purchase shares through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriter must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that, in the open market after pricing, there may be downward pressure on the price of the shares that could adversely affect investors who purchase shares in this offering.
Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. A naked short position occurs if the underwriter sells more shares than could be covered by the over-allotment option. This position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
Penalty bids. If the underwriter purchases shares in the open market in a stabilizing transaction or syndicate covering transactions, it may reclaim a selling concession from selling group members who sold those shares as part of this offering.
Similar to other purchase transactions, the underwriter’s purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of the shares of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the shares if it discourages resales of the shares.
Neither we nor any underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any underwriter make any representation that the underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Other Relationships
Upon completion of this offering, we have granted the underwriter a right of first refusal to act as sole underwriter or exclusive placement agent in connection with any subsequent public or private offering of equity securities or other capital markets financing by us. This right of first refusal extends for 12 months from the closing date of this offering. The terms of any such engagement of the underwriter will be determined by separate agreement.
Conflicts of Interest
The underwriter is a full-service financial institution engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The underwriter and its respective affiliates may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business for which they may receive customary fees and reimbursement of expenses. In the ordinary course of its various business activities, the underwriter and its respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Electronic Delivery of Preliminary Prospectus
A prospectus in electronic format may be delivered to potential investors by the underwriter participating in this offering. The prospectus in electronic format will be identical to the paper version of such preliminary prospectus. Other than the prospectus in electronic format, the information on any underwriter’s web site and any information contained in any other web site maintained by an underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part.
Selling Restrictions
BELGIUM
The offering is exclusively conducted under applicable private placement exemptions and therefore it has not been and will not be notified to, and this document or any other offering material relating to the securities has not been and will not be approved by, the Belgian Banking, Finance and Insurance Commission (“Commission bancaire, financière et des assurances/Commissie voor het Bank-, Financie- en Assurantiewezen”). Any representation to the contrary is unlawful.
The underwriter has undertaken not to offer sell, resell, transfer or deliver directly or indirectly, any securities, or to take any steps relating/ancillary thereto, and not to distribute or publish this document or any other material relating to the securities or to the offering in a manner which would be construed as: (a) a public offering under the Belgian Royal Decree of 7 July 1999 on the public character of financial transactions; or (b) an offering of securities to the public under Directive 2003/71/EC which triggers an obligation to publish a prospectus in Belgium. Any action contrary to these restrictions will cause the recipient and the issuer to be in violation of the Belgian securities laws.
FRANCE
Neither this prospectus nor any other offering material relating to the securities has been submitted to the clearance procedures of theAutorité des marchés financiersin France. The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the securities has been or will be: (a) released, issued, distributed or caused to be released, issued or distributed to the public in France; or (b) used in connection with any offer for subscription or sale of the securities to the public in France. Such offers, sales and distributions will be made in France only: (i) to qualified investors (investisseurs qualifiés) and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in and in accordance with ArticlesL.411-2,D.411-1,D.411-2,D.734-1,D.744-1,D.754-1 andD.764-1 of the FrenchCode monétaire et financier; (ii) to investment services providers authorised to engage in portfolio management on behalf of third parties; or (iii) in a transaction that, in accordance with articleL.411-2-II-1°-or-2°-or 3° of the FrenchCode monétaire et financierand article211-2 of the General Regulations (Règlement Général) of theAutorité des marchés financiers, does not constitute a public offer (appel public à l’épargne). Such securities may be resold only in compliance with ArticlesL.411-1,L.411-2,L.412-1 andL.621-8 throughL.621-8-3 of the FrenchCode monétaire et financier.
UNITED KINGDOM/GERMANY/NORWAY/THE NETHERLANDS
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State other than the offers contemplated in this prospectus in name(s) of Member State(s) where prospectus will be approved or passported for the purposes of anon-exempt offer once this prospectus has been approved by the competent authority in such Member State and published and passported in accordance with the Prospectus Directive as implemented in name(s) of relevant Member State(s) only required where specific regulatory approvals being sought except that an offer to the public in that Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
(a) | to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities; |
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; |
(c) | by the underwriter to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or |
(d) | in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
provided that no such offer of securities shall result in a requirement for the publication by issuer or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
The underwriter has represented, warranted and agreed that:
(a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (theFSMA)) received by it in connection with the issue or sale of any securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and |
(b) | it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
ISRAEL
In the State of Israel, the securities offered hereby may not be offered to any person or entity other than the following:
(c) | a fund for joint investments in trust (i.e., mutual fund), as such term is defined in the Law for Joint Investments in Trust, 5754-1994, or a management company of such a fund; |
(d) | a provident fund as defined in Section 47(a)(2) of the Income Tax Ordinance of the State of Israel, or a management company of such a fund; |
(e) | an insurer, as defined in the Law for Oversight of Insurance Transactions, 5741-1981, (d) a banking entity or satellite entity, as such terms are defined in the Banking Law (Licensing), 5741-1981, other than a joint services company, acting for their own account or for the account of investors of the type listed in Section 15A(b) of the Securities Law 1968; |
(f) | a company that is licensed as a portfolio manager, as such term is defined in Section 8(b) of the Law for the Regulation of Investment Advisors and Portfolio Managers, 5755-1995, acting on its own account or for the account of investors of the type listed in Section 15A(b) of the Securities Law 1968; |
(g) | a company that is licensed as an investment advisor, as such term is defined in Section 7(c) of the Law for the Regulation of Investment Advisors and Portfolio Managers, 5755-1995, acting on its own account; |
(h) | a company that is a member of the Tel Aviv Stock Exchange, acting on its own account or for the account of investors of the type listed in Section 15A(b) of the Securities Law 1968; |
(i) | an underwriter fulfilling the conditions of Section 56(c) of the Securities Law, 5728-1968; |
(j) | a venture capital fund (defined as an entity primarily involved in investments in companies which, at the time of investment, (i) are primarily engaged in research and development or manufacture of new technological products or processes and (ii) involve above-average risk); |
(k) | an entity primarily engaged in capital markets activities in which all of the equity owners meet one or more of the above criteria; and |
(l) | an entity, other than an entity formed for the purpose of purchasing securities in this offering, in which the shareholders equity (including pursuant to foreign accounting rules, international accounting regulations and U.S. generally accepted accounting rules, as defined in the Securities Law Regulations (Preparation of Annual Financial Statements), 1993) is in excess of NIS 250 million. |
Any offeree of the securities offered hereby in the State of Israel shall be required to submit written confirmation that it falls within the scope of one of the above criteria. This prospectus will not be distributed or directed to investors in the State of Israel who do not fall within one of the above criteria.
ITALY
The offering of the securities offered hereby in Italy has not been registered with the Commissione Nazionale per la Società e la Borsa (“CONSOB”) pursuant to Italian securities legislation and, accordingly, the securities offered hereby cannot be offered, sold or delivered in the Republic of Italy (“Italy”) nor may any copy of this prospectus or any other document relating to the securities offered hereby be distributed in Italy other than to professional investors (operatori qualificati) as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of 1 July, 1998 as subsequently amended. Any offer, sale or delivery of the securities offered hereby or distribution of copies of this document or any other document relating to the securities offered hereby in Italy must be made:
(a) | by an investment firm, bank or intermediary permitted to conduct such activities in Italy in accordance with Legislative Decree No. 58 of 24 February 1998 and Legislative Decree No. 385 of 1 September 1993 (the “Banking Act”); |
(b) | in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy; and |
(c) | in compliance with any other applicable laws and regulations and other possible requirements or limitations which may be imposed by Italian authorities. |
SWEDEN
This prospectus has not been nor will it be registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this prospectus may not be made available, nor may the securities offered hereunder be marketed and offered for sale in Sweden, other than under circumstances which are deemed not to require a prospectus under the Financial Instruments Trading Act (1991: 980). This offering will only be made to qualified investors in Sweden. This offering will be made to no more than 100 persons or entities in Sweden.
SWITZERLAND
The securities offered pursuant to this prospectus will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute a public offering prospectus as that term is understood pursuant to art. 652a or art. 1156 of the Swiss Federal Code of Obligations. The issuer has not applied for a listing of the securities being offered pursuant to this prospectus on the SWX Swiss Exchange or on any other regulated securities market, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the relevant listing rules. The securities being offered pursuant to this prospectus have not been registered with the Swiss Federal Banking Commission as foreign investment funds, and the investor protection afforded to acquirers of investment fund certificates does not extend to acquirers of securities.
Investors are advised to contact their legal, financial or tax advisers to obtain an independent assessment of the financial and tax consequences of an investment in securities.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Wexler, Burkhart, Hirschberg & Unger, LLP, Garden City, New York, including the validity of the common stock offered hereby.
EXPERTS
The audited consolidated financial statements of Delcath Systems, Inc. as and for the year ended December 31, 2016, incorporated by reference in this prospectus and elsewhere in this registration statement have been so incorporated by reference in reliance upon the report of Grant Thornton, LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information filedexemption from registration provided by us at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. You may obtain information on the operationRule 4(a)(2) of the Public Reference Room by calling the SEC at(800) SEC-0330. The SEC maintains a website that contains reports, proxy statementsSecurities Act of 1933, as amended (the “1933 Act”) and other information regarding issuers that file electronically with the SEC, including Delcath Systems, Inc. The addressRule 144(d)(3)(ii) of the SEC website is http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC’s rules allow us to “incorporate1933 Act. As a result of not having effected a reverse stock split by reference” information into this prospectus. This means that we can disclose important information to you by referring you to another document. The information incorporated by reference is considered to be a part of this prospectus. This prospectus incorporates by reference the documents listed below:
our Annual Report on Form10-K for the fiscal year ended December 31, 2016, as amended by our Form10-K/A for the fiscal year ended December 31, 2016;
our Quarterly Report on Form10-Q for the quarter ended March 31, 2017 and our Quarterly Report on Form10-Q for the quarter ended June 30, 2017;
our Definitive Proxy Statement on Schedule 14A, filed on April 29, 2017, our Definitive Proxy Statement on Schedule 14A, filed on July 26, 2017, and our Definitive Information Statement on Schedule 14C, filed on October 4, 2017;
our Current Reports on Form8-K, filed on January 26, 2017, January 30, 2017, FebruarySeptember 15, 2017, February 15, 2017, February 22, 2017, February 23, 2017, March 9, 2017, April 3, 2017 April 27, 2017, June 5, 2017, June 16, 2017, July 3, 2017, July 6, 2017, July 12, 2017, July 26, 2017, August 2 , 2017, August 8, 2017, August 21, 2017, August 28, 2017, September 5, 2017, September 13, 2017, September 21, 2017, September 21, 2017 and October 11, 2017; and
the description of our common stock contained in our Registration Statement on Form8-A filed on September 22, 2000, including all amendments and reports filed for the purpose of updating such description.
Any statement made in this prospectus or in a document incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus modifies or supersedes that statement. Any statement so modified or superseded willAdditional Restructuring did not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
We will provide to each person, including any beneficial owner, to whom a prospectus is delivered, without charge upon written or oral request, a copy of any or all of the documents that are incorporated by reference into this prospectus, other than exhibits which are specifically incorporated by reference into such documents. Requests should be directed our Secretary at Delcath Systems, Inc., 1633 Broadway, Suite 22C, New York, New York 10019 or by calling us at212-489-2100.occur.
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2015 AND THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND JUNE 30, 2016
Incorporated by reference from our Annual Report on Form10-K for the year ended December 31, 2016 filed with the SEC on March 29, 2017 and our Quarterly Report on Form10-Q for the quarter ended June 30, 2017, filed with the SEC on August 8, 2017.
MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEARS ENDED DECEMBER 31, 2016 AND DECEMBER 31, 2016 AND THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND JUNE 30, 2016
Incorporated by reference from our Annual Report on Form10-K for the year ended December 31, 2016 filed with the SEC on March 29, 2017 and our Quarterly Report on Form10-Q for the quarter ended June 30, 2017, filed with the SEC on August 8, 2017.
422,535,211 Units
Each Unit Consisting of One Share of Common Stock
and
One Series C Warrant to Purchase one Share of Common Stock
and
One Series D Warrant to Purchase one Share of Common Stock
and
One Series E Warrant to Purchase one Share of Common Stock
Delcath Systems, Inc.
PRELIMINARY PROSPECTUS
Oppenheimer & Co.
, 2017
PART II
Item 13. Other expenses of issuance and distributionINFORMATION NOT REQUIRED IN PROSPECTUS
| Item 13. | Other Expenses of Issuance and Distribution. |
The following table sets forth the costs and expenses, other than underwriting discounts and commissionsunderwriter fees to be paid by us in connection with the sale of the units, warrants andshares of our common sharesstock being registered hereby. All amounts are estimates except for the SEC registration fee, and the FINRA filing fee and the NASDAQ listing fee. All such expenses will be borne by the Company.
| SEC registration fee | | $ | 12,357 | | | $ | 6,568 | |
| | | | |
FINRA filing fee | | | 10,175 | | | | 8,090 | |
NASDAQ listing fee | | | | 50,000 | |
Legal fees and expenses | | | 150,000 | | | | 100,000 | |
Accounting fees and expenses | | | 40,000 | | | | 75,000 | |
Printing and engraving expenses | | | 30,000 | | | | 5,000 | |
Transfer agent and registrar fees and expenses | | | 10,000 | | | | 10,000 | |
Warrant agent fees and expenses | | | | 5,000 | |
Other expenses | | | 15,000 | | | | 15,342 | |
| | | | | | |
Total | | $ | 267,532 | | | $ | 275,000 | |
| | | | | | |
Item 14. Indemnification of directors and officers
| Item 14. | Indemnification of Directors and Officers. |
Section 102(b)(7) of the DGCLDelaware’s General Corporation Law (“DGCL”) allows a corporation to provide in its certificate of incorporation that a director of the corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation provides for this limitation of liability.
Section 145 of the DGCL, or Section 145, provides that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, were or are a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation’s best interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred.
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Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145.
Our amended and restated bylaws provides that we must indemnify our directors and officers to the fullest extent permitted by the DGCL and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking, by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified.
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