REGISTRATION NO. 333-________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
| 84-1553387 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
401
Castle Rock, CO 80104
(Address, including zip code, and telephone number, including
area code of registrant'sregistrant’s principal executive offices)
Jeffrey G. McGonegal
401
Castle Rock, CO 80104
Copy to:
William R. Jackman, Esq. Rogers Towers, P.A. 1301 Riverplace Blvd., Suite 1500 Jacksonville, Florida 32207 Phone: 904-398-3911 Fax: 904-396-0663 | Benjamin W. Kennedy, Esq. Dickinson Wright PLLC 100 West Liberty Street, Suite 940 Reno, Nevada 89501 Phone: 775-343-7504 Fax: 844-670-6009 |
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. obox: [_]
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans,plants, check the following box. xbox: [X]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o [_]
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. o [_]
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. o [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of " large“large accelerated filer ", " accelerated filer "filer”, “accelerated filer”, “smaller reporting company” and " smaller reporting company "“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | Accelerated filer | Non-accelerated filer (do not check if smaller reporting company) | Smaller reporting company | Emerging growth company |
Title of each class of securities to be registered | Amount to be Registered(1) | Proposed maximum offering price per share | Proposed maximum aggregate offering price | Amount of registration fee | ||||||||||||
| Common stock, no par value per share | 900,000 | $ | 4.16 | (2) | $ | 3,739,500 | $ | 433.41 | ||||||||
| Common stock, no par value per share, issuable upon conversion of convertible promissory notes (3) | 1,957,161 | $ | 4.16 | (2) | $ | 8,132,004 | $ | 942.50 | ||||||||
| Common stock, no par value per share, issuable upon exercise of warrants | 2,800,000 | $ | 4.16 | (2) | $ | 11,634,000 | $ | 1,348.38 | ||||||||
| TOTAL | 5,657,161 | $ | 4.16 | $ | 23,505,504 | $ | 2,724.29 | * | ||||||||
The information in this prospectus is not complete and may be changed. WeThese securities may not sellbe sold until the registration statement relating to these securities or accept an offer to buy these securities untilthat has been filed with the Securities and Exchange Commission declares our registration statementis effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PROSPECTUS
This prospectus relates to the resale or other disposition from time to time of 5,657,161 up to 2,996,226 shares of Riot Blockchain, Inc. (“Riot,” the “Registrant,” or the “Company”) common stock, no par value per share, (the "Common Stock"), which includes (i) 900,000by the selling stockholders identified in this prospectus. Of these shares, 150,000 were issued as restricted shares of Common Stock, (ii) 1,957,161our common stock as additional inducement (the “Inducement Shares”) to the selling stockholders to enter into the financing transactions underlying this registration statement. The remaining shares to be registered consist of Common Stock938,082 shares (the “Conversion Shares”) issuable upon the conversion of outstanding 2% convertible promissory notes (the "Notes") and (iii) 2,800,000 shares of Common Stock issuable upon the exercise of outstanding warrantsSenior Secured Promissory Notes held by the selling stockholders named in this prospectus. We(the “Notes”) and 1,908,144 shares (the “Warrant Shares”) issuable upon the exercise of Warrants (the “Warrants”) by the selling stockholders. The Warrants and the Notes were issued pursuant to a series of Securities Purchase Agreements by and among the Company and the selling stockholders dated January 28, 2019.
The Company is not selling any shares of its common stock and will not receive any of the proceeds from the sale of sharesre-sale by the selling stockholders.
This prospectus inprovides you with a numbergeneral description of different ways and at varying prices.the securities so offered, which is not meant to be a complete description of each of the securities. We provide more information about how the selling stockholders may sell their shares of Common Stock in the section entitled "Plan of Distribution" on page 8. The selling stockholders willhave agreed to bear all commissions and discounts, if any, attributable to the sale or disposition of the shares, or interests therein. We will bear all costs, expenses and feesincurred in connection with the registration of these shares. The selling stockholders will pay or assume brokerage commissions and similar charges, if any, incurred for the resale of the shares. We will not be paying any underwriting discounts or commissions
The selling stockholders identified in this prospectus, or their pledgees, donees, transferees or other successors in interest, may offer their shares of our Common Stock from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. For additional information on the methods of sale that may be used by the selling stockholders, see the section entitled “Plan of Distribution” beginning on page 13 hereof. For information regarding the selling stockholder, see the section entitled “selling stockholders” beginning on page 12 hereof.
This prospectus provides you with a general description of the securities offered for sale, which is not meant to be a complete description of each of the securities. Each time our securities are offered and sold by the selling stockholders, we may provide you with a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add, update, or change information contained in this prospectus. You should carefully read this prospectus and the applicable prospectus supplement as well as the documents incorporated or deemed to be incorporated by reference in this prospectus and the applicable prospectus supplement before you purchase any of the securities offered hereunder.
Our Common Stockcommon stock is presently listedcurrently traded on Thethe NASDAQ Capital Market under the symbol "BIOP."“RIOT.” On July 17, 2017March 13, 2019, the last reported salesales price offor our Common Stockcommon stock was $4.00. The applicable$3.34 per share. Any prospectus supplement will contain information, where applicable, as to any other listing of the securities on Thethe NASDAQ Capital Market or any other securities market or other exchange of the securities, if any, covered by the prospectus supplement .supplement.
The aggregate market value of our outstanding common stock held by non-affiliates pursuant to General Instruction I.B.6 of Form S-3 was approximately $48,248,100
based on 14,747,809 shares of common stock outstanding, of which 14,445,537 shares were held by non-affiliates, and a last reported sale price on the NASDAQ Capital Market of $3.34 per share on March 13, 2019. Other than the shares issuable upon the conversion of the Notes and the exercise of the Warrants, we have not sold any securities pursuant to General Instruction I.B.6. of Form S-3 during the prior 12 calendar month period that ends on and includes the date of this prospectus.securities. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy ofdetermined if this prospectus is truthful or any accompanying prospectus supplement.complete. Any representation to the contrary is a criminal offense.
The date of this Prospectusprospectus is July 19, 2017.
_____________ , 2019| Page | ||||
| 1 | ||||
| SUMMARY | 2 | |||
| ABOUT RIOT BLOCKCHAIN | 2 | |||
| THE OFFERING | 10 | |||
| RISK FACTORS | ||||
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | ||||
| RATIO OF EARNINGS TO FIXED CHARGES | 11 | |||
| USE OF PROCEEDS | ||||
| DILUTION | 11 | |||
| SELLING STOCKHOLDERS | ||||
| DESCRIPTION OF COMMON STOCK | 13 | |||
| PLAN OF DISTRIBUTION | ||||
| LEGAL MATTERS | ||||
| EXPERTS | ||||
| WHERE YOU CAN FIND MORE INFORMATION | ||||
| INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE | ||||
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CALCULATION OF REGISTRATION FEE
| Title of each class of securities to be registered | Amount to be registered(1)(2) | Proposed maximum offering price per unit | Proposed maximum aggregate offering price(4) | Amount of registration fee(5) | ||||||||||||
Common stock, no par value | 2,996,226 | (6) | $ | 3.58 | (3) | $ | 10,726,489.08 | $ | 1,300.05 | |||||||
Total | $ | 10,726,489.08 | $ | 1,300.05 | ||||||||||||
| (1) | This estimated amount, as determined solely for the calculation of the registration fee, includes: (i) 150,000 shares issued to the selling stockholders as an inducement to enter into the financing agreements; (ii) shares issuable upon the conversion of the then outstanding principal balance of the Notes held by the selling stockholders, inclusive of accrued but unpaid interest thereon, as calculated based on the per share average of high and low prices of the Registrant’s common stock on the Nasdaq Capital Market on March 8, 2019 pursuant to Rule 457(c) of the Securities Act; and (iii) the resale of 1,908,144 of common stock issuable upon the exercise of the private placement warrants. |
| (2) | There is also being registered hereunder an indeterminate number of additional shares of common stock as shall be issuable pursuant to Rule 416 of the Securities Act of 1933, as amended (the “Securities Act”) to prevent dilution resulting from stock splits, stock dividends or similar transactions. |
| (3) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(g) of the Securities Act based on the high-low average price of shares of the Registrant’s common stock on the NASDAQ Capital Market as of March 8, 2019. |
| (4) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(g) of the Securities Act for the resale of the shares issuable upon the exercise of the Warrants and for the calculation of the registration fee in accordance with Rule 457(c) of the Securities Act based upon the per share average of high and low prices of the registrant’s common stock on the Nasdaq Capital Market on March 8, 2019 for the resale of the shares issuable upon the conversion of the Notes |
| (5) | As calculated pursuant to Rules 457(c) and 457(g) of the Securities Act. |
| (6) | Includes shares of common stock issuable for accrued interest under the terms of the promissory notes, computed to the maturity date. |
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process for the resale by the selling stockholders identified in this prospectus of: (i) 150,000 restricted shares of our common stock issued to the selling stockholders as an inducement to enter into the financing agreements; (ii) 938,082 shares of our common stock issuable to the selling stockholders upon the conversion of the Notes; and (iii) 1,908,144 shares of our common stock issuable to the selling stockholders upon the exercise of Warrants for the purchase of shares of our common stock, all of which are held in reserve pursuant to the Registration Rights Agreements by and among the selling stockholders and the Company. Under this “shelf” registration process, the selling stockholders may, from time to time, in one or more offerings, sell the shares of our common stock issuable upon the conversion of the Notes or exercise of the Warrants.
You should not assume that the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate on any date subsequent to the date set forth on the front of the applicable document. You should also not assume that any information we have developed a proprietary Enhanced Surface Plasmon Resonance technology platform forincorporated by reference is correct on any date subsequent to the detectiondate of molecular interactions. We acquired a Surface Plasma Resonance (SPR) platform which seeks to combine high sensitivity with microarray detection capability to allow researchers to understand whether their target molecules have functionality against the disease targeted. SPRdocument incorporated by reference, even though this prospectus, any applicable prospectus supplement or any related free writing prospectus is an advanced and highly sensitive optical technology that can measure refractive index changesdelivered, or securities are sold, 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.later date.
You should only rely on the information contained or incorporated by reference in this prospectus, any prospectus supplement or any related free writing prospectus. We have not authorized anyone to provide you with information different from what is contained or incorporated by reference into this prospectus, applicable prospectus supplement or any related free writing prospectus. If any person does provide you with information 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 consumablesdiffers from what is contained or incorporated by reference in this prospectus, applicable prospectus supplement or any related free writing prospectus, you should not rely on it. No dealer, salesperson or other person is authorized to pharmaceutical researchers allowing themgive any information or to develop new drugs faster than by using older technologies suchrepresent anything not contained in this prospectus, applicable prospectus supplement or any related free writing prospectus. You should assume that the information contained in this prospectus, any prospectus supplement or any related free writing prospectus is accurate only 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 productsdate on the front of the document and intellectual property. Dr. Hall,that any information contained in conjunction withany document we have incorporated by reference therein is accurate only as of the scientists at BDI, createddate on its face, regardless of the time of delivery of this prospectus, any prospectus supplement, any related free writing prospectus or any sale of a common path interferometer that was commercializedsecurity under this registration statement. These documents are not an offer to becomesell or a solicitation of an offer to buy these securities in any circumstances under which the 404pi instrument.
unlawful.
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Company InformationBackground
In September 2017, we changed our state of incorporation to Nevada from Colorado. Our principal executive offices are located at 834-F South Perry202 6th Street, Suite 443,401, Castle Rock, CO 80104 and our telephone number is (303) 794-2000. Our website address is www.venaxis.com.www.riotblockchain.com. The information contained on, or accessible through, our website is not part of this prospectus.
Management Changes
The Company experienced significant changes to its management and board of directors in 2018 and 2019, including: (i) the resignation of its chief executive officer and chairman of the board of directors, John O’Rourke on September 8, 2018, (ii) the subsequent appointment of Christopher Ensey as the Company’s Interim Chief Executive Officer, (iii) the appointment of Remo Mancini as chairman of the board of directors, who had previously served as a member of the board of directors beginning on his appointment in February 2018; (iv) as of October 22, 2018, Mr. Andrew Kaplan resigned as an independent member of the board of directors; (v) as of October 23, 2018, Mr. Benjamin Yi was appointed to serve as an independent member of the board of directors; (vi) the termination of Mr. Ensey as Interim Chief Executive Officer effective February 5, 2019; and (vii) the appointment of Mr. Jeffrey G. McGonegal as Chief Executive Officer of the Company effective February 6, 2019.
These changes to the management and the board of directors of the Company during 2018 and 2019 have been made according to the needs and strategic vision of the Company. Management and the board of directors believe these changes will enable the Company to achieve its short- and long-term goals of (1) improving the operational effectiveness of its mining operations, (2) developing its RiotX exchange, (3) raising additional capital, and (4) improving the efficiency and cost-effectiveness of its operations and management over the medium and long terms.
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Digital Currency Mining Operations
Overview of Mining Operations
The primary focus of the Company is our digital currency mining operations. Digital currencies are digital or virtual currencies used as a medium of exchange outside of the traditional state-backed fiat currencies. Digital or “crypto” currencies rely on complex cryptographically recorded data entries known as “blocks” on decentralized digital ledger system known as a blockchain. Blocks are added to the blockchain chronologically and, once added, are unchangeable. Thus, digital currencies are seen as a secure means of storing and recording information regarding a transaction or set of transactions. To incentivize the creation of blocks for the blockchain, digital currency tokens are awarded on a per block basis for block creation, a process which is known in the industry as mining.
The Company’s mining operations focus primarily on bitcoin mining. Bitcoin mining entails solving complex mathematical problems using custom designed and programmed application-specific integrated circuit computers (referred to as miners). Bitcoin miners provide transaction verification services to a given blockchain by solving complex algorithms to encode additional blocks into the blockchain, which blocks serve as immutable records of transactions once added to the blockchain. When a miner is successful in adding a block to the blockchain, it is rewarded with a fixed number of bitcoin. Blocks are added to the blockchain on a first-to-finish basis, meaning that the first miner to solve an algorithm and verify a given transaction is the only miner to receive a bitcoin reward. This first-to-finish environment has created a computing power “arms race” whereby miners are encouraged through competition to allocate ever-increasing computing power (known as “hash rate”) to solving algorithms. The resulting energy costs are substantial, and, in light of the recent decline in the market price of bitcoin and other “benchmark” digital currencies such as bitcoin cash, litecoin, and ethereum, the profitability of mining operations has been reduced as competition increases to solve each block. The Company’s digital currency mining operations operate at a maximum hash rate of 95 petahash per second.
In response to these factors, the Company has entered into mining pools, whereby multiple miners allocate their collective computing powers to solving a given algorithm thereby increasing the collective hash rate devoted to a given algorithm. By pooling their efforts, miners in a pool are more likely to verify a given transaction and add a block to the Blockchain than miners acting individually. Pool miners are awarded a fractional reward based on the hash rate each contributed to the pool on a given transaction, regardless of whether the individual miner actually solved the applicable algorithm. Miners are allocated a share of every reward obtained by the pool, and thus the risk of not solving the algorithm first is reduced. The Company participates in pools on an at-will basis, and is under no obligation to remain in a given pool and may terminate its engagement with a given pool at any time. Presently, management believes participating in mining pools is the most efficient means of mining digital currencies, but is under no obligation, nor does it provide any assurance that it will continue to do so in the future.
Oklahoma City Mining Facility
Beginning in February of 2018, we relocated our mining operations to our Oklahoma City facility, which is leased by our subsidiary, Kairos. As of the date of this prospectus, we moved all of our 8,000 digital currency “miners,” which includes 7,500 model S9 and 500 model L3+ miners to our Oklahoma City facility. These miners have been installed and operational since being deployed in June of 2018. Kairos leased the Oklahoma City facility from 7725 Reno #1, L.L.C. (“7725 Reno”) by a lease agreement dated February 27, 2018, as amended on March 26, 2018 (the “Lease”). Effective as of November 29, 2018, Kairos amended the Lease with 7725 Reno by: (i) extending the initial term of the Lease through August 15, 2019; (ii) effective as of December 1, 2018, changing the monthly rent for the Lease as follows: (a) $235,000 for December of 2018, (b) $230,000 for January of 2019, and (c) $190,000 per month thereafter for the duration of the Lease, including any renewals; (iii) reducing the monthly electricity usage charges due under the Lease; (iv) providing that Kairos will reimburse 7725 Reno for up to $14,000 of the costs of installing electricity metering devices in the facility; and (v) Kairos will have the option to renew the Lease for up to two (2) three (3) month periods after the expiration of the initial term of the Lease. Under the initial terms of the Lease, the Company was required to pay for 12 megawatts of power per month, regardless of the actual power consumption by its miners. Before upgrades were made to the software of our miners which made our mining activities much more energy efficient, this fixed cost arrangement was beneficial to the Company, as the Company had access to the allotted 12 megawatts of power each month during a time of peak demand for electric power. When the original lease was entered into, computing power, and therefore electricity, was in high demand among competitors in the bitcoin mining marketplace, and management believed that securing access to 12 megawatts of electric power per month at a fixed price was a sound business decision given those conditions. Subsequent changes to the software of our miners and facility improvements have made the miners far more energy-efficient and therefore this fixed cost arrangement had become cost-inefficient, as the Company used less than the allotted 12 megawatts of power per month. Accordingly, for these reasons and other economic factors, the Company renegotiated the Lease.
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The changes to the Lease will not impact the number of miners deployed at the facility. The Company’s monthly electricity usage costs are now variable, rather than fixed under the Lease, and are assessed at a lower rate per kilowatt/hour for the electricity used. The reduction in the base rent was the product of negotiations between the Company and 7725 Reno and reflects changes to the economics of the Lease, rather than any change in the leased space or the number of deployed miners. These changes to the Lease will allow the Company to be more responsive to changes in the profitability of its digital currency mining operations.
The Company can, under the amended Lease, decide to reduce or temporarily switch off, any number of its miners in the facility and therefore reduce its variable electricity costs for that period. Whereas under the original lease agreement, the Company would have still incurred the same electricity cost, regardless of actual electricity use. These changes allow the Company to monitor its monthly costs by optimizing its mining performance by operating its miners at less than full capacity during times of peak electricity rates.
Miners generate a substantial amount of heat when operating, which heat must be dissipated to avoid damaging the miners’ circuitry. Heat dissipation requires significant electrical power. As the hash rate produced from operation of the miners is increased, so too is the electricity used both in operation and from heat dissipation. Accordingly, the electricity cost incurred in operation of the miners increases exponentially as the hash rate produced is increased. This increased electricity usage comes at substantial cost to the Company, and, accordingly, when the conversion spot price of bitcoin declines, the profitability of operating the mine at peak capacity declines. In addition to the need to dissipate the heat generated from the operation of the miners, environmental heat must also be dissipated. Under the original lease agreement, the Company incurred the same electricity cost regardless of electricity used, so it was negatively incentivized to reduce or halt its mining activities in response to dips in the conversion spot price of bitcoin. Under the amended Lease, however, the Company can reduce or even halt the operation of its miners temporarily in response to changing market conditions and see a corresponding reduction of its electricity costs for its facility. Furthermore, the Company expends electricity in dissipating environmental heat affecting its miners. As the environmental heat increases, so does the amount of electricity required to dissipate that heat. In times of extreme heat, the cost of dissipating the heat from operation of the miners can be substantial. Accordingly, running the Company’s miners at peak capacity during times of high heat is more expensive for the Company. Because the amended lease does not have a fixed power cost built in, the Company can reduce, increase, or even shut off the mining power devoted to the miners when environmental factors or market forces contract the net revenue generated from the Company’s mining activities, without incurring the high fixed power cost required under the original lease. This variability in the Company’s power costs resulting from the operation of its mining facility makes the Company’s mining activities more responsive to variables affecting the cost of digital currency mining, therefore bringing more of the Company’s variable expenses under the Lease within management’s control.
Development of a U.S.-based Digital Currency Exchange
Overview of the RiotX Exchange
In addition to those business developments previously reported by the Company in its annual report on Form 10-K, quarterly reports on Form 10-Q, and periodic reports on Form 8-K, the Company has continued its exploration of the development of a U.S.-based digital currency exchange. The Company has been investigating and pursuing the regulatory pathway for the launch of a digital currency exchange in the United States since the beginning of 2018. The Company’s planned digital currency exchange under the name “RiotX” is being developed by and is contemplated to be operated through the Company’s subsidiary, RiotX Holdings, Inc. (“RiotX Holdings”). The Company believes its development of RiotX could provide a hedge against fluctuations in the price of bitcoin and other digital currencies by providing for the ready exchange of digital currencies similar to how a fiat currency exchange operates. The Company believes that, by providing a stable and secure platform for the exchange of digital currencies, it will attract significant trading volume, thereby providing the Company with consistent revenue per trade, independent of the price of any one digital currency. The Company intends to launch RiotX for the exchange of bitcoin, bitcoin cash, litecoin, and ethereum (the “Exchanged Currencies”), both for other of the Exchanged Currencies and for U.S. Dollars. The Company has selected the Exchanged Currencies for exchange on RiotX based on internal and external reviews, and will only include those currencies for which it has full regulatory and legal authorization to include.
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The Company views its RiotX exchange as being comprised of three core services: (i) Banking Services; (ii) a Trading Engine; and (iii) Digital Wallet Services. The Company intends to provide each of these services by engaging experienced third party vendors in the industry through software-as-a-service agreements, which will be reviewed on a case-by-case basis by the Company’s management, along with external advisors and legal counsel, and will ultimately be subject to review by the Company’s board of directors. The Company plans to only contract with companies that have established track records as industry leaders, which comply with federal, state and local laws, and, if required are in compliance with U.S. securities law to provide such services. The Company assesses each vendor using a risk management process that evaluates key risk factors related to their performance and their potential impact on the Company, including, without limitation, its capital structure, financial condition and liquidity. The Company has engaged external advisors and legal counsel to review contracts and conduct due diligence related to financial stability and performance, and cybersecurity procedures. Additionally, the Company assesses each vendor as they relate to its regulatory compliance framework needs such as reporting, fraud monitoring, “know your customer,” anti-money laundering, and data privacy standards to ensure compliance with applicable rules, regulations, and industry best practices.
Agreements with Third Party Vendors
As the Company continues to explore and develop its planned U.S.-based digital currency exchange, it will continue to develop relationships with third party vendors to support the RiotX exchange. As of the date of this prospectus, the Company has entered into several such relationships with third parties to provide RiotX with these core services.
(i) Banking Services
As previously reported in the Company’s Current Report on Form 8-K filed on October 29, 2018, as amended, the Company’s subsidiary, Logical Brokerage, entered into a material definitive agreement with Synapse Financial Technologies, Inc. (“SynapseFi”), and its partner, Evolve Bancorp, Inc., through its subsidiary, Evolve Bank & Trust (collectively, “Evolve”), to provide RiotX with banking services and transactional support (the “SynapseFi Agreement”). SynapseFi’s proprietary software technologies will provide the RiotX exchange with secure banking services to enable RiotX users to efficiently and securely create accounts to hold, transfer, and deliver Exchanged Currencies, allowing RiotX users to make deposits and take withdrawals of fiat currencies into and from their RiotX user accounts. SynapseFi is an industry leader in the provision of Application Program Interfaces (“API”) to the financial services industry. SynapseFi’s APIs provide a secure and stable means of communication between users and financial institutions, while providing security and compliance assurances to financial institutions. Under the terms of the SynapseFi Agreement, SynapseFi will engage Evolve, or any prospectus supplement.successor financial institution designated by SynapseFi, to provide banking services directly to RiotX and its end users. SynapseFi’s API will allow RiotX to easily communicate user requests to Evolve, while assisting Evolve with managing the risks and compliance concerns associated with the exchange of digital currencies. Pursuant to the terms of the SynapseFi Agreement, the Company has agreed to permit SynapseFi to conduct periodic security, compliance and risk reviews, and audits of RiotX on behalf of Evolve as a means of ensuring continued compliance. The SynapseFi Agreement is a significant milestone in the development of the planned RiotX exchange.
The SynpaseFi Agreement will enable RiotX users to gain access to accredited banking institutions, and it will provide the Company with assurances through its Application Program Interfaces (“API”) of the identity and location of RiotX users. The API provided by SynapseFi will enable the Company to track and identify its users in order to prevent fraud and improper use of its RiotX exchange. As the Company has previously disclosed, regulatory compliance has been and continues to be a top priority for its development of RiotX, including complying with territorial restrictions on the exchange of digital currencies. For example, SynapseFi’s API will enable to Company to know where the user is when accessing RiotX, thereby enabling the Company to prevent a user from Montana, a state where the exchange of digital currencies is permitted, from traveling to neighboring Wyoming, where the exchange of digital currencies is not permitted, and using RiotX in the prohibited jurisdiction.
(ii) Trading Engine
On August 31st, 2018, the Company signed a Software Licensing and Subscription Services Agreement (the “Coinsquare Agreement”) with Coinsquare to provide the Company with a comprehensive digital currency exchange platform inclusive of a Trading Engine and Digital Wallet Services. Under the Coinsquare Agreement, Coinsquare would have been responsible for the day to day management, hosting, customer support and other operational services. In total, the Coinsquare Agreement constituted an initial cost for the first year in excess of $1,500,000 and an equity grant of 9.9% of the equity interest in RiotX Holdings, as well as an additional 450,000 shares of the Company’s common stock. The Coinsquare Agreement was terminated by mutual agreement of the Company and Coinsquare on September 17, 2018, as reported by the Company in its Current Report on Form 8-K filed on September 18, 2018. Termination of the Coinsquare Agreement caused the Company to search for replacement third party service vendors to fulfil the roles which would have been performed by Coinsquare under the Coinsquare Agreement.
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As reported in the Company’s press release disclosed in its Current Report on Form 8-K filed on November 28, 2018, RiotX Holdings, Inc. entered into a Master Services Agreement with Shift Markets, Ltd. (“Shift”) to provide the Company with a license to use Shift’s exchange trading platform on RiotX. After conducting a search and review of third party service vendors to provide RiotX with a Trading Engine, the Company selected Shift for RiotX. The agreement between RiotX Holdings and Shift (the “Shift Agreement”) provides the RiotX exchange with a license to use Shift’s proprietary Trading Engine, which allows for the efficient and effective exchange of the Exchanged Currencies for other of the Exchanged Currencies and for U.S. Dollars.
Shift will only replace the Trading Engine component of the services which were to be provided to RiotX by Coinsquare under the Coinsquare Agreement. As a result, the Company plans to take on the role of customer support, account management and operations internally and is seeking out a third party Digital Wallet Services provider. In order to accommodate this change, the Company has revised its operating budget for RiotX to include a reallocation of the costs for headcount and other internal investments that were previously supported by Coinsquare.
The Shift Agreement is for an initial term of 12 months, which may be renewed for a period of 6 months by the Company. The Shift Agreement is payable in two separate amounts: an initial set up charge, and recurring monthly fees. The recurring monthly charges will not accrue and become payable prior to (i) integration of Shift’s trading engine into the RiotX exchange is completed, and (ii) the RiotX exchange becomes operational and is launched by the Company. The Shift Agreement may be terminated at will by the Company, upon delivery of 60 days’ notice to Shift. Termination of the Shift Agreement will terminate all performance obligations of Shift and the Company.
The selection and integration of a Trading Engine into the planned digital currency exchange represents a milestone in the development of RiotX. While Shift Markets will provide a necessary tool to the Company’s planned digital currency exchange, the Shift Agreement itself is financially immaterial to the Company, representing less than 5% of the Company’s operating budget for its planned RiotX exchange, its contract price is less than 10% of the contract price of the Coinsquare Agreement, and it does not include an equity grant. Shift, while an effective service provider, is not so unique to the market for exchange platform technologies to be material to the Company’s strategic vision or success. Management believes the Shift Agreement will ultimately prove beneficial to the Company and its planned digital currency exchange, and that it represents an important milestone in the development timeline of its planned digital currency exchange.
(iii) Digital Wallet Services
The Company plans to integrate a third party service vendor’s Digital Wallet Services technology into the RiotX exchange which, along with Shift’s Trading Engine and SynapseFi’s Banking Services, will complete the development of RiotX. Digital Wallet Services will provide RiotX exchange users with secured digital means of storing digital currencies for exchange on RiotX. Digital Wallet Services are a core component of the Company’s planned RiotX exchange, and will be integrated into RiotX by Shift as soon as a service vendor is selected and an agreement is finalized. Once the Company has consummated an agreement with an appropriate Digital Wallet Services provider, the Company will be in a position to start bringing its RiotX digital currency exchange online in those jurisdictions where it has obtained regulatory approval.
6
Project Timeline for RiotX
The Company anticipates launching its RiotX digital currency exchange by the end of the second quarter of 2019, which plan is subject to change based on several factors as discussed in this prospectus. Once RiotX is online, the Company plans to offer services in a limited number of states in order to validate the performance of the system and debug any potential issues with the software. Throughout this time, the Company plans to increase staff levels to support additional users and refine its procedures for compliance, security and general support of RiotX. As the Company obtains the necessary regulatory approval in a given jurisdiction, the Company intends to bring RiotX online in that jurisdiction, with the ultimate goal of bringing RiotX online in all 50 states except Hawaii and Wyoming by the end of 2019. The regulatory hurdles faced by the Company, and its progress in this regard, is discussed in greater detail under the section titled Regulatory Framework of RiotX¸ below. Management believes this timeline is achievable, but, in light of difficulties in obtaining regulatory approval, reaching software-as-a-service agreements with third party vendors, and capital restrictions affecting the Company, this timeline may be delayed.
Reaching software-as-a-service agreements with third party vendors for the RiotX exchange has delayed the Company’s development of the RiotX exchange. Termination of the Coinsquare Agreement required the Company to replace Coinsquare with other providers that would fulfill various technology components (such as the Trade Matching Engine and Digital Wallet Service for RiotX), as well as customer support and management services, all of which were to be handled by Coinsquare staff under the original Coinsquare Agreement. In addition to allocating its own personnel and resources to handling the customer service and troubleshooting aspects of the RiotX exchange, which would have been handled by Coinsquare under the Coinsquare Agreement, the Company must integrate its strategic partnerships with third party vendors like Shift and SynapseFi into the RiotX exchange to provide the Company with the necessary services for the development and operation of RiotX.
The Coinsquare Agreement would have fulfilled many of the outstanding development milestones for the planned RiotX exchange, but after termination of the Coinsquare Agreement, the Company entered into the SynapseFi Agreement to provide RiotX with the necessary banking services. Additionally, the Company entered into the Shift Agreement to provide RiotX with a license to use Shift’s exchange Trading Engine platform. Finally, the Company is working towards contracting with a third party vendor to provide RiotX with Digital Wallet Services. With the Shift and SynapseFi agreements in place, once the Company has secured a digital wallet service provider, it will be in a position to deploy the RiotX exchange in all jurisdictions in which it has obtained regulatory approval.
The timeline to launch the RiotX exchange will depend on several factors including, but not limited to: performance of the Company and its ability to finance its deployment; the federal and state regulatory landscape; the ability of the Company to secure proper licensing in each state in which it intends to operate; the Company’s technology implementation schedule; and the Company’s ability to raise capital to continue funding the development of the RiotX exchange. Any delay in these factors, as well as additional unforeseen or unforeseeable factors, may result in the delay of the launch of the RiotX exchange platform.
Cost of Development and Operation of RiotX
Prior to the anticipated launch by the end of the second quarter of 2019, the Company estimates the initial development costs of launching the RiotX exchange inclusive of software development, license applications, legal fees, and general overhead should not exceed $250,000. This estimate is based on current projections, and is subject to change as factors such as protracted legal costs affect the cost profile of the development of the RiotX exchange. Once operational, the RiotX exchange budget for 2019, inclusive of the contract costs of the Shift and SynapseFi agreements, as well as the to-be-determined Digital Wallet Services provider agreement, employee, utility, regulatory, and legal costs, is not anticipated to exceed $2,000,000 per year. Factors such as rapid growth, changes in the regulatory landscape, and changes in our business plan could have a material adverse effect on these estimates, and, as such, these costs are subject to change over time. You should not assume that the estimates disclosed under this subheading of this prospectus are accurate on any date subsequent to the date set forth on the front of this prospectus. You should also not assume that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus, any applicable prospectus supplement or any related free writing prospectus is delivered, or securities are sold, on a later date.
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Regulatory Framework of RiotX
As of the date of this prospectus, RiotX is licensed and/or approved in five states and has pending licenses in another 17 states, with review in another two states. The Company plans to be operational in 24 states by the launch date of RiotX by the end of the first quarter of 2019. However, management continues to work towards the long-term goal of obtaining regulatory approval of the RiotX exchange in all 50 U.S. states, with the exception of Hawaii and Wyoming, by the end of 2019, which timeline is subject to delays caused by regulatory review, market forces, and other factors which may be outside of the Company’s control.
In furtherance of its plan to obtain regulatory compliance, the Company purchased 92.5% of Logical Brokerage, which is an introducing broker registered with the Commodities Futures Trading Commission and the National Futures Administration, in March of 2018. The Company subsequently obtained a Money Services Business License from FinCEN in May of 2018. The Company then obtained a Money Transmitter License from the State of Florida in June 2018. In October of 2018, Logical Brokerage and RiotX were approved for application in a consortium of 17 states for fast track approval for Money Transmitter Licenses. We expect to receive these licenses in the first quarter of 2019. In December of 2018, RiotX obtained a Sellers-Issuers of Payment Instruments and Money Transmitter License from the State of Georgia. By the end of the first quarter of 2019, the Company plans for RiotX to be approved in 24 states in the United States. These additional licenses may permit the Company to explore additional exchange developments in the future, including a possible digital currencies futures exchange.
Throughout 2019, the Company plans to pursue additional money transmitter licenses in the United States for RiotX, as well as a New York State Bitlicense, which will license the RiotX exchange to engage in cryptocurrency business in New York. The New York State Bitlicense is seen as a benchmark license in the cryptocurrency business, and has traditionally been difficult to obtain. In the third and fourth quarter of 2018, however, New York State regulators have increased the number of New York State Bitlicenses issued, and have done so at a greater frequency than in previous quarters. While management does not believe this bears any indication on its own application, management believes this movement indicates increasing action by New York State regulators to grant state licenses. The Company may not, however, ever succeed in obtaining a New York State Bitlicense for RiotX, and RiotX may therefore never obtain regulatory approval to conduct cryptocurrency business in New York. This lack of regulatory approval in one of the largest and most economically important states in the United States could have a detrimental effect on the planned RiotX exchange, which may have a material negative impact on our business operations.
Business Risks Associated with RiotX
The Company has devoted significant resources to the development of the planned RiotX exchange and the Company may lose most or all of its investment if RiotX fails. If the Company faces significant delays in the deployment of RiotX, or if the development costs of RiotX become unbearable, the Company may have to reduce or even halt its efforts to develop and deploy RiotX. If the Company is unsuccessful in the deployment of RiotX, it may lose most or all of the capital it has invested into the exchange. Additionally, if RiotX is not adopted by users, it may never gain traction in the market and become viable long-term. These risks to the deployment and adoption of RiotX pose significant risks to the capital the Company has invested in RiotX and the Company may be unable to sustain significant short and long-term increases in the costs associated with RiotX.
8
Description of the Private Placement
On January 28, 2019, as reported by the Company on its current report on Form 8-K filed on February 1, 2019 (the “Financing 8-K”), the Company completed a private placement financing (the “Financing”) with the selling stockholders for $3,000,000 in proceeds in exchange for issuing Senior Secured Convertible Promissory Notes (the “Notes”), which are convertible into shares of our common stock up to the aggregate principal balance of the Notes, $3,358,333.34, subject to certain beneficial ownership and anti-dilution restrictions as detailed in the Notes. These Warrants are exercisable following the six (6) month anniversary of their issuance, for a period of five (5) years after the date of issuance, at $1.94 per share, for a maximum aggregate value of up to $3,701,799.36. Additionally, we are registering for resale 150,000 restricted shares of our common stock issued as an inducement (the “Inducement Shares”) to the selling stockholders for entering into the financing transactions. In addition to the Notes, we also issued warrants as additional consideration (the “Warrants”) for the purchase of up to 1,908,144 shares of our common stock.
The Notes are convertible into shares of our common stock at any time after the effective date of the Notes, provided, however, that at no time will the Company be required to issue Conversion Shares in excess of the aggregate number of shares of our common stock that we may issue without breaching our obligations under the rules or regulations of the NASDAQ Capital Market. In connection with the issuance of the Notes, each of the Investors entered into a Securities Purchase Agreement, a Security Agreement, a Warrant Agreement, and a Registration Rights Agreement in order to complete and secure the Transaction (the “Financing Agreements”). The Company further agreed not to effectuate a reverse split while the Notes are outstanding and will be liable for liquidated damages if it does pursue a reverse split. This is in addition to any other rights the Investors hold.
The maturity date of the Notes is twelve months from the Effective Date. The Notes accrue interest at a rate of 8% per annum (with twelve months of interest guaranteed). The Notes may be prepaid in any amount, subject to the following prepayment penalties: (1) during the first thirty (30 days after the Effective Date, any amount prepaid will be subject to a 5% prepayment penalty; (2) during the next thirty (30) days thereafter, any amount prepaid will be subject to a 10% prepayment penalty; (3) during the next thirty (30) days thereafter, any amount prepaid will be subject to a 15% prepayment penalty; (4) during the next thirty (30) days thereafter, any amount prepaid will be subject to a 20% prepayment penalty; and (5) any amount prepaid after the 120th calendar day after the Effective Date will be subject to a 25% prepayment penalty. Under the Notes, the Company will be subject to certain penalties in the event of default, which could be substantial.
Pursuant to a Registration Rights Agreement between the Company and each of the selling stockholders (the “Registration Rights Agreements”), the Company has agreed, among other things, to file with the SEC a registration statement covering the shares issuable under the transaction documents on or before March 14, 2019 and to use its reasonable best efforts to cause such registration statement to become effective on or before April 29, 2019. Pursuant to which the Company has filed the registration statement to which this prospectus relates.
The foregoing description of the Financing Agreements are not complete and are qualified in their entirety by reference to the form of the Notes, Warrants the Securities Purchase Agreements, Security Agreements, and Registration Rights Agreements are filed as exhibits to the Company’s previous current report on Form 8-K filed on February 01, 2019 and which are incorporated by reference herein. The representations, warranties and covenants made in such agreements were made solely for the benefit of the parties to such agreements, including, in some cases, for the purpose of allocating risk among the parties thereto, and should not be deemed to be a representation, warrant or covenant to you. Moreover, such representations, warranties or covenants were made only as of the date of such agreements. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of the Company’s affairs.
9
THE OFFERING
This prospectus relates to the resale of shares of our common stock by the selling stockholders. Upon effectiveness of the registration statement to which this prospectus relates, the selling stockholders will be able to: (i) sell shares of our common stock issuable to them upon the conversion of the Notes for a maximum aggregate value of up to $3,358,333; (ii) sell the 150,000 Inducement Shares; and (iii) sell the shares issuable upon the exercise of the Warrants for the purchase of up to 1,908,144 shares of our common stock at an exercise price of $1.94 per share.
The selling stockholders, their successors, transferees, pledgees, donees or successors, may offer to sell the shares being offered in the prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. Our common stock is listed on the NASDAQ Capital Market under the symbol “RIOT.”
We have agreed to register the offer and sale of the common stock in satisfaction of the Registration Rights Agreements we have granted to the selling stockholders. We will not receive any proceeds from the sale of the securities by the selling stockholders. Provided we have an effective registrations statement covering the shares issuable upon the exercise of the Warrants at the time they are exercised by the Selling stockholders, we will receive the exercise price of $1.94 per share upon the exercise of each of the Warrants issued pursuant to the Financing. The Warrants are exercisable for shares of our common stock on a one-(1) for-one (1) basis, meaning that each Warrant may be exchanged for a single share of our common stock upon satisfaction of the exercise conditions of such Warrants.
RISK FACTORS
Investing in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully consider the risks, uncertainties and forward-looking statements describedall risk factors set forth in the applicable prospectus supplement and the documents incorporated by reference in this prospectus, including the risk factors discussed under "Risk Factors"the heading “Risk Factors” in Item 1A of our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 20162017, as amended, and each subsequently filed quarterly report on Form 10-Q, current reports on Form 8-K, and our other public filings with the Securities and Exchange Commission (the "SEC") on March 31, 2017, as well as informationSEC to date, which may be amended, supplemented or superseded from time to time by the other reports we file with the SEC in the future.
In addition to those risk factors incorporated by reference intoherein, the Company has identified the following uncertainties and risk factors which may affect our business:
The value of shares being registered is significant in relation to our trading volume.
Absent an effective registration statement, all of the shares being registered for sale on behalf of the selling stockholders are presently restricted securities bearing a restrictive legend informing all potential purchasers on the statutory restrictions on the resale of said securities. The Company has filed this registration statement to register these restricted securities for sale on the public market by the selling stockholders and thereby remove the restrictive legends on such securities. These restricted securities, if sold on the public market all at once or at or about the same time after the removal of the restrictive legends, could depress the trading market price of shares of our common stock during the period the registration statement to which this prospectus andrelates remains effective by substantially increasing the additional risk factor set forth below. If anyvolume of these risks were to occur, our business, financial condition or results of operations would likely suffer. In that event,common stock then trading on the public market. This depression in the trading value of our securitiesshares could, decline, and youin addition to the adverse effect on our present shareholders described above, could lose part or allhinder our ability to raise capital by reducing the trading value of your investment. The risks and uncertainties we describe areour shares. Any outstanding shares not sold by the only ones facing us. Additional risks not presently knownselling stockholders pursuant to us or that we currently deem immaterial may also impair 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 resultsthis prospectus will remain as restricted shares in the future. See "Forward-Looking Statements" below.
CAUTIONARY 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"), and Section 21E of the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. We believe these forward-looking statements are reasonable; however, you should not place undue reliance on any forward-looking statements, which are based on current expectations. 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 implied in such statements.
In some cases, you can identify forward-looking statements by terminology, such as "expects," "anticipates," "intends," "estimates," "plans," "believes," "seeks," "may," "should", "could"“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 are qualified in their entirety by reference to the factors discussed throughout this prospectus. We intend for these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of complying with these safe harbor provisions.
You should read this prospectus and the documents that we reference herein and therein and have filed as exhibits to the registration statement, of which this prospectus and any prospectus supplement 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 such 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 any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the 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.events, except as may be required under applicable law. New factors emerge 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 actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this prospectus and any accompanying prospectus supplement, and particularly our forward-looking statements, by these cautionary statements.
RATIO OF EARNINGS TO FIXED CHARGES
The only securities offered under this registration statement are shares of our common stock; however, if we offer debt securities and/or preference equity securities under this prospectus, we will, if required at that time, provide a ratio of earnings to fixed charges and/or ratio of earnings to combined fixed charges and preference dividends to earnings, respectively, in the applicable prospectus supplement for such offering.
USE OF PROCEEDS
The selling stockholders will pay any underwriting discounts and commissions and expenses incurred by the selling stockholders for brokerage, accounting, tax or legal services or any other expenses incurred by the selling stockholders in disposing of onethe shares sold hereunder. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees, fees and expenses of our counsel and our independent registered accountants.
DILUTION
Holders of shares of our common stock included as part of the shares of our common stock offered by this prospectus supplement and the accompanying prospectus will experience an immediate dilution in the net tangible book value of their common stock from the public offering of our common stock. Dilution per share represents the difference between the public offering price per share of our Common Stockcommon stock and a three year warrant to purchase onethe adjusted net tangible book value per share of Common Stock, at an exercise price of $3.50 per share.
11
SELLING STOCKHOLDERS
The shares of common stock being offered by the selling stockholders are those previously issued to the selling stockholders on January 28, 2019. For additional information regarding the issuances of those shares and outstanding Common Stock, until afterthe relationship between the selling stockholders and the Company, has received approval from NASDAQ and holdersplease see “About Riot Blockchain – Description of its Common Stock,Private Placement” above. We are registering the shares of common stock in order to remain compliant with NASDAQ Listing Rule 5635. We are also prohibitedpermit the resale of the same by the selling stockholders from effectingtime to time.
According to the Financing Agreements, the beneficial ownership of our common stock for each of the selling stockholders, respectively, is capped at a maximum of 4.99% of the total outstanding shares of our common stock at a given time (the “Beneficial Ownership Cap”), which Beneficial Ownership Cap may be expanded to 9.99% of the outstanding shares of our common stock at a given time upon delivery of notice to the Company of a selling shareholder’s election to raise its Beneficial Ownership Cap.
The aggregate conversion of any Note or exercisethe Notes to shares of any warrant to the extent that, as a result of any such conversion or exercise, the holder would beneficially own more than 4.99% or 9.99%, respectively,our common stock is capped at 19.99% of the number ofthen outstanding shares of Common Stock outstanding immediately after giving effect toour common stock such that, in the event full conversion of the Notes would result in the issuance of shares of Common Stockour common stock in an amount exceeding 19.99% of our then outstanding common stock, then such issuance would be barred by the Financing Agreements.
The Warrants are subject to a cap on the issuance of shares upon their exercise such that, in the event the exercise of the Warrants would result in the issuance of a number of shares greater than 19.99% of the then outstanding shares of our common stock, then such issuance would be blocked by the Financing Agreements. However, for purposes of this table, we have assumed that, after completion of this offering, not of the shares issuable upon conversion of such Notethe Notes or exercise of such warrant, as the case may be.
The following tables set forth, to our knowledge, information about the selling stockholders a proposal to approve an amendment to our Articlesas 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.this prospectus:
| • | the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by the selling stockholders; | |
| • | the number of shares of common stock beneficially owned by the selling stockholders as of March 14, 2019, assuming: (1) the conversion of the three Senior Secured Promissory Notes held by the selling stockholders on that date and (2) the exercise of Warrants held by the selling stockholders on that date, without regard to any limitations on exercises prior to the sale of the shares covered by this prospectus; | |
| • | the number of shares that may be offered by the selling stockholders pursuant to this prospectus, including each selling shareholder’s share of the 150,000 Inducement Shares issued to them by the Company; | |
| • | the number of shares to be beneficially owned by the selling stockholders and their affiliates following the sale of any shares covered by this prospectus; and | |
| • | the percentage of our issued and outstanding common stock to be beneficially owned by the selling stockholders and their affiliates following the sale of all shares covered by this prospectus. |
The Lead Investor is Barry Honig, who is also a selling stockholder, both individually and through GRQ Consultants, Inc. Roth 401K FBO Barry Honig, for which Mr. Honig is trustee.
| Selling stockholders | Shares Beneficially Owned Before Offering (1) | Total Shares Offered By Selling Shareholder | Shares Beneficially Owned After Offering (1) (2) | Percentage of Beneficial Ownership After Offering (1) (2) | ||||||||||||
| Oasis Capital, LLC | 1,508,707 | (3) | 1,508,707 | 0 | 0 | |||||||||||
| Harbor Gates Capital, LLC | 991,679 | (4) | 991,679 | 0 | 0 | |||||||||||
| SG3 Capital, LLC | 495,840 | (5) | 495,840 | 0 | 0 | |||||||||||
| (3) | Includes 75,000 inducement shares, up to 472,533 shares issuable upon the conversion of |
| (4) | Includes 50,000 Inducement Shares, up to 310,366 shares issuable upon the conversion of a Senior Secured Promissory Note and 631,313 shares issuable upon the exercise of Warrants. |
| (5) | Includes 25,000 Inducement Shares, up to 155,183 shares issuable upon the conversion of a Senior Secured Promissory Note and 315,657 shares issuable upon the exercise of Warrants. |
*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.years. Unless otherwise indicated below,above, to our knowledge, all persons named in the tabletables have sole voting and investment power with respect to their shares of Common Stock,or common stock, except to the extent authority is shared by their spouses under applicable law. Unless otherwise indicated below,above, to our knowledge, no persons named in the table are a broker-dealer or affiliate of aaffiliated with any broker-dealer. Unless otherwise indicated, all addresses 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) | 3.64 | % | 200,000 | (1) | 0 | * | ||||||||||||
| Northurst Inc. | 554,100 | (2) | 9.99 | % | 800,000 | (2) | 0 | * | ||||||||||||
| Erick Richardson | 200,000 | (3) | 3.64 | % | 200,000 | (3) | 0 | * | ||||||||||||
| Melechdavid Inc. | 340,000 | (4) | 6.11 | % | 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 | 543,000 | (7) | 9.99 | % | 406,017 | (8) | 504,000 | (9) | 8.53 | % | ||||||||||
| GRQ Consultants, Inc. Roth 401K FBO Barry Honig | 595,600 | (10) | 9.99 | % | 1,015,042 | (11) | 30,600 | * | ||||||||||||
| Titan Multi-Strategy Fund I, Ltd. | 592,400 | (12) | 9.99 | % | 1,704,066 | (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) | 2.21 | % | 121,805 | (17) | 0 | * | ||||||||||||
| Stetson Capital Management, LLC | 283,300 | (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 | % | |||||||||||
| Alan Honig | 20,000 | (23) | 0.19 | % | 20,000 | (23) | 0 | * | ||||||||||||
General
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Corporate Stock Transfer, Inc., Denver, Colorado.
Listing
Our common stock is currently traded on the NASDAQ Capital Market under the symbol “RIOT.”
Warrants for the purchase of common stock or preferred stock will be offered and exercisable for U.S. dollars only. Warrants will be issued in registered form only.
Upon receipt of payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, forward the purchased securities. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants.
Prior to the exercise of any securities warrants to purchase preferred stock or common stock, holders of the warrants will not have any of the rights of holders of the common stock or preferred stock purchasable upon exercise, including in the case of securities warrants for the purchase of common stock or preferred stock, the right to vote or to receive any payments of dividends on the preferred stock or common stock purchasable upon exercise.
PLAN OF DISTRIBUTION
As of the date of this prospectus, we have not been advised by the selling stockholders as to any plan of distribution for the shares being offered by this prospectus. The selling stockholders may choose not to sell any of those shares. Those shares may, from time to time, be offered for sale by the selling stockholders, or by their permitted pledgees, donees, transferees, assignees, or other successors in interest, either directly or by such selling stockholder or other person, or through underwriters, dealers or agents.
The selling stockholders and other persons participating in the sale or distribution of the shares will be subject to applicable provision of the Exchange Act, and the rules and regulations thereunder, including Regulation M. Regulation M may limit the timing of purchases and sales of any of the shares by the selling stockholders and any other person. The anti-manipulation rules under the Exchange Act may apply to the sales of shares in the market and to the activities of the selling stockholders and their affiliates. Furthermore, Regulation M may restrict the ability of any person engages in the distribution of the shares to engage in market-making activities with respect to the particular shares being distributed for a period of up to five (5) business days before the distribution. These restrictions may affect the marketability of the shares and the ability of any person to engage in market-making activities with respect to the shares.
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A selling stockholder may use any one or more of the following methods when selling shares:
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The selling stockholders may also sell shares under Rule 144 underof the Securities Act, of 1933, as amended, if an applicable exception is available to them, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealersbroker-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,shares of our common stock, 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 sell these securities.institutions. 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 derivative securities which require the delivery to such broker-dealerbroker-dealers or 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 deemed to be "underwriters"“underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit made on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended.securities Act. Each selling stockholderSelling 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 Common Stock.our stock.
If the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933, as amended.
We agreed to keep this prospectus effective until the earlierall of (i) the date on which the shares may be resoldissued or issuable to the selling stockholders pursuant to the Financing Agreements have been sold by the selling stockholders without registration and without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitationunder this prospectus, pursuant to Rule 144 or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act, or pursuant any other rule of similar effect. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition,additional, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act, of 1934, as amended, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the Common Stockshares of our common stock registered hereunder for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including Regulation M, which may limit the timing of the purchases and sales of shares of the Common Stockour common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 underof the Securities Act of 1933, as amended)Act).
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will beby this prospectus have been passed upon for us by counsel. AdditionalDickinson Wright PLLC, Reno, Nevada. If certain legal matters may bein connection with an offering of the securities covered by this prospectus and a related prospectus supplement are passed upon for us or any underwriters, dealers or agents, by counsel for the underwriters, if any, of such offering, that wecounsel will namebe named in the applicablerelated prospectus supplement.supplement for such offering.
EXPERTS
The consolidated balance sheet of Riot Blockchain, Inc. (formerly: Bioptix, Inc.) as of December 31, 2017, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended have been audited by MNP LLP, as stated in their report, which is incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The consolidated balance sheet of Riot Blockchain, Inc. (formerly: Bioptix, Inc.) and Subsidiary,subsidiary as of December 31, 2016, and the related consolidated statements of operations, stockholders'stockholders’ equity, and cash flows for the year then ended, have been audited by EisnerAmper LLP, independent registered public accounting firm, as stated in their report which is incorporated herein by reference, which report includes an explanatory paragraph relating to auditing the adjustments to the 2015 financial statements to retrospectively reflect the reverse stock split.reference. Such financial statements have been incorporated herein by reference in reliance on the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and currentspecial reports, proxy statements andalong with other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. You may also read without charge, and copy the documentsany document we file at the SEC's public reference rooms in Washington, D.C.SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549, or in New York, New York and Chicago, Illinois. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost.D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.Public Reference Room. Our SEC filings are also available toon our website, https://ir.riotblockchain.com/under the public at no cost from the SEC'sheading “Investors.” The information on this website at http://www.sec.gov. In addition, we make available on or through our Internet site copiesis expressly not incorporated by reference into, and does not constitute a part of, these reports as soon as reasonably practicable after we electronically file or furnish them to the SEC. Our Internet site can be found at www.venaxis.com.this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus is part of thea registration statement butfiled with the registration statement includes and incorporates by reference additional information and exhibits.SEC. The Securities and Exchange Commission permitsSEC allows us to "incorporate“incorporate by reference"reference” into this prospectus the information contained in documentsthat we file with the Securities and Exchange Commission,them, which means that we can disclose important information to you by referring you to those documents rather than by including them in this prospectus. Information that isdocuments. The information incorporated by reference is considered to be part of this prospectus, and you should read it with the same care that you read this prospectus. Informationinformation that we file later with the Securities and Exchange CommissionSEC will automatically update and supersede the information that is either contained, orthis information. The following documents are incorporated by reference in this prospectus, and will be considered to bemade a part of this prospectus from the date those documents are filed. We have filed with the Securities and Exchange Commission, and incorporate by reference in this prospectus:
Annual Report on Form 10-K for the year ended December 31, 30, 2018 and our annual report on Form 10-K/A filed on June 29, 2018; |
| Quarterly Report on Form 10-Q |
| Quarterly Report on Form 10-Q filed on August 14, 2018; |
| ● | Quarterly Report on Form 10-Q filed on August 14, 2018; |
| ● | Quarterly Report on Form 10-Q filed on November 19, 2018 pursuant to Rule 12b-25 extension, as amended on January 11, 2019 and March 9, 2019; |
| ● | Definitive Proxy Statement and definitive additional materials on Schedule 14A filed on |
| Current Reports on Form 8-K or Form 8-K/A (excluding any reports or portions thereof that are deemed to be furnished and not filed) filed on January |
We also incorporate by reference into this prospectus all additional documents (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on such form that we fileare related to such items) that are filed by us with the Securities and Exchange Commission under the terms of SectionsSEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that are made(i) after the date of the initial registration statement butand prior to effectiveness of the registration statement and after, or (ii) from the date of this prospectus but prior to the termination of the offering of the securities covered by this prospectus. We are not, however, incorporating, in each case, any. These documents or information that we are deemed to furnishinclude periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and not file in accordance with Securities and Exchange Commission rules.Current Reports on Form 8-K, as well as proxy statements.
You may request, and we will provide you with, a copy of these filings, at no cost, by calling us at (303) 545-5550794-2000 or by writing to us at the following address:
Castle Rock, CO 80104
(303) 794-2000
PROSPECTUS
RIOT BLOCKCHAIN, INC.
2,996,226 Shares of Common Stock
___________, 2019
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate of the feescosts and expenses relating topayable by the issuance and distribution of the securities being registered hereby,Registrant in connection with this offering, other than underwriting discountscommissions and commissions,discounts, all of which shall be borne by the Registrant. All of such fees and expenses,are estimated except for the SEC registration fee are estimated:fee.
| Item | Amount | |||
| SEC registration fee | $ | 1,300 | ||
| Printing and engraving expenses | 3,000 | |||
| Legal fees and expenses | 30,000 | |||
| Accounting fees and expenses | 15,000 | |||
| Transfer agent and registrar’s fees and expenses | 1,000 | |||
| Miscellaneous expenses | 700 | |||
| Total | $ | 51,000 | ||
Item 15. Indemnification of Directors and Officers.
| SEC registration fee | $ | 2,724 | ||
| Transfer agent's fees and expenses | $ | 1,000 | ||
| Legal fees and expenses | $ | 10,000 | ||
| Printing fees and expenses | $ | 1,000 | ||
| Accounting fees and expenses | $ | 7,500 | ||
| Miscellaneous fees and expenses | $ | 776 | ||
| Total | $ | 23,000 |
Nevada Revised Statutes Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe his/her conduct was unlawful.
Under Nevada Revised Statutes Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined such officer or director did not meet the standards.
Our Articles of Incorporation and Bylaws require us to indemnifyprovide that our officers and directors employeesshall be indemnified and agentsheld harmless to the fullest extent legally permissible under the laws of the State of Nevada against reasonably incurredall expenses, liability and loss (including legal fees),attorneys' fees, judgments, penalties, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by them in the settlement ofconnection with any civil, criminal, administrative or investigative action, suit or proceeding related to their service as an officer or director. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. We must pay the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined that such person conducted himself in good faith andby a court of competent jurisdiction that he reasonably believed (i) inis not entitled to be indemnified by us. Such right of indemnification shall not be exclusive of any other right which such directors or officers may have or hereafter acquire.
Our Articles of Incorporation provide that we may adopt bylaws to provide at all times the casefullest indemnification permitted by the laws of conduct in his official capacity, that his conduct wasthe State of Nevada, and may purchase and maintain insurance on behalf of any of officers and directors. The indemnification provided in our best interest, (ii) in all other cases (except criminal proceedings) that his conduct was at least not opposedArticles of Incorporation shall continue as to our best interests, or (iii) in the case of any criminal proceeding, that hea person who has not reasonable causeceased to believe that his conduct was unlawful.
Our Bylaws provide that a claim for indemnification against such liabilities (other than the payment by us of expenses incurreddirector 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 us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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Item 16. Exhibits.
| Exhibit | |||
| Number | Description of Document | ||
| 4.1 | |||
Form of Senior Secured Promissory Note† | |||
| 4.6 | Form of Warrant Agreement† | ||
| 5.1 | |||
| 10.01 | Form of Securities Purchase Agreement† | ||
| 10.02 | Form of Security Agreement† | ||
| 10.03 | Form of Registration Rights Agreement† | ||
| 23.1 | |||
| 23.2 | |||
| 23.3 | Consent of | ||
| 24.1 | Power of Attorney (included on the signature |
*To be filed with applicable prospectus supplement
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Sectionsection 10(a)(3) of the Securities Act of 1933;Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent20% change in the maximum aggregate offering price set forth in the "Calculation“Calculation of Registration Fee"Fee” table in the effective registration statement; andstatement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided,, however, that paragraphsParagraphs (a)(1)(i), (a)(1)(ii), and (a)(1)(iii) aboveof this section do not apply if the registration statement is on Form S-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Sectionsection 13 or Sectionsection 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is a part of the registration statement.
(2)�� That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
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(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant'sregistrant’s annual report pursuant to Sectionsection 13(a) or Sectionsection 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan'splan’s annual report pursuant to Sectionsection 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has 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 the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant 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, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(d) The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
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 19th14th day of July, 2017.March, 2019.
| /s/ | ||
Chief Executive Officer (Principal Executive Officer) | ||
| /s/ Robby Chang | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby appoint Michael M. Beeghley and appoints Jeffrey G. McGonegal and Robby Chang, and each of them, as theirhis true and lawful attorneys-in-fact and agents, with full power of substitution to execute in their names and on behalf of the Registrant and each such person, individuallyre-substitution, for him and in each capacity stated below, one or morehis name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendmentsamendments) to this Registration Statement and registration statements filedany Registration Statement (including any amendment thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise) to this Registration Statement as the attorney-in-fact acting on the premise shall from time to time deem appropriate and to file any such amendment to this Registration Statementthe same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission.Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statementregistration statement has been signed by the following persons in the capacities and on the dates indicated.
| Name | Title | Date | ||||
/s/ Jeffrey G. McGonegal | Chief Executive Officer | |||||
| Jeffrey G. McGonegal | ||||||
(Principal Executive Officer) | ||||||
/s/ Robby Chang | Chief Financial Officer | |||||
| Robby Chang | ||||||
(Principal Financial and Accounting Officer) | ||||||
/s/ Remo Mancini | Director; Chairman | |||||
| /s/ | Director | |||||
| /s/ Jason Les | Director | March 14, 2019 | ||||
| Jason Les |
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