THIS
INFORMATION STATEMENT IS BEING PROVIDED TO
YOU
BY THE BOARD OF DIRECTORS OF ATTIS INDUSTRIES INC.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED
NOT TO SEND US A PROXY
Attis
Industries Inc.
12540
Broadwell Road, Suite 2104
Milton,
GA 30004
Tel:
(678) 580-5661
INFORMATION
STATEMENT
(Definitive)
September
18, 2018
NOTICE
OF STOCKHOLDER ACTION BY WRITTEN CONSENT
GENERAL
INFORMATION
This Information Statement has been filed
with the Securities and Exchange Commission (the “
SEC
”) and is being sent, pursuant to Section 14C of the Exchange
Act, to the holders of record as of August 27, 2018 (the “
Record Date
”) of common stock, par value $0.025 per
share (the “
Common Stock
”), of Attis Industries Inc., a New York corporation (the “
Company
,”
“
we
,” “
our
” or “
us
”), to notify the Common Stockholders of the following:
On August 27, 2018, the Company received a written consent in lieu of a meeting by the holders of 53.2%
of the voting power of the Common Stock, including shares of preferred stock (the “
Majority Stockholders
”) authorizing
the following actions:
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●
|
approval of the issuance of shares of the Company’s common stock underlying (i) 2,500 shares of the Series F Preferred Stock, having such designations, rights and preferences as set forth in the Company’s Amendment to Certificate of Incorporation filed with the Secretary of State of the State of New York on August 28, 2018 (the “Series F Designations”), (ii) the senior secured convertible notes with an initial principal face amount of $5,439,000 issued on August 29, 2018 (collectively, the “Notes”) and (iii) warrants for the purchase of an aggregate of 4,532,500 shares of common stock issued on August 29, 2018, in the aggregate, in excess of 4,339,511, pursuant to conversion thereof in accordance with the Series F Designations and/or the terms and conditions of the Notes and/or Warrants, as applicable. Resulting in the issuance of common stock in excess of 19.99% of the amount of common stock issued and outstanding, in order to comply with NASDAQ Listing Rule 5635(d) and New York law (the “
Shareholder Approval
”); and
|
|
●
|
approval of increasing the number of shares of Common Stock the Company is authorized to issue from 150,000,000 to 250,000,000 as provided for herein (the “Increase in Authorized Shares”) and filing of an amendment to the Company’s Certificate of Incorporation to effect the Increase in Authorized Shares.
|
On
August 27, 2018, the Company’s Board of Directors (the “
Board
”) approved the issuance of the Series F
Preferred Stock, and the Increase in Authorized Shares and recommended for approval to the Majority Stockholder the Shareholder
Approval.
On
August 27, 2018, the Majority Stockholder approved the Shareholder Approval and the Increase in Authorized Shares by written consent
in lieu of a meeting in accordance with the New York Business Corporations Act. Accordingly, your consent is not required
and is not being solicited.
We will commence mailing the notice to the holders of Common Stock, warrant holders and holders
of the Company’s preferred stock on or about September 21, 2018.
PLEASE
NOTE THAT THIS IS NOT A REQUEST FOR YOUR VOTE OR A PROXY STATEMENT, BUT RATHER AN INFORMATION STATEMENT DESIGNED TO INFORM YOU
OF CERTAIN ACTIONS TAKEN BY THE MAJORITY STOCKHOLDER.
The
entire cost of furnishing this Information Statement will be borne by the Company. We will request brokerage houses, nominees,
custodians, fiduciaries and other like parties to forward this Information Statement to the beneficial owners of the Common Stock
held of record by them.
The
following table sets forth the name of the Majority Stockholder, the number of shares of Common Stock held by the Majority Stockholder,
the number of shares of Series A Preferred held by the Majority Stockholders, the total number of votes that the Majority Stockholder
voted in favor of the Actions and the percentage of the issued and outstanding voting equity of the Company that voted in favor
thereof.
Name of Majority Stockholder
|
|
Number of Shares of Common Stock held
|
|
|
Number of Shares of Series A Preferred held
|
|
|
Number of Votes held by Majority Stockholder
|
|
|
Number of Votes that Voted in favor of the Actions
|
|
|
Percentage of the Voting Equity that Voted in favor of the Actions
|
|
Jeffrey Cosman
|
|
|
1,358,660
|
|
|
|
51
|
|
|
|
24,970,898
|
|
|
|
24,970,898
|
|
|
|
53.2
|
%
|
TOTAL
|
|
|
1,358,660
|
|
|
|
51
|
|
|
|
24,970,898
|
|
|
|
24,970,898
|
|
|
|
53.2
|
%
|
ACTIONS:
APPROVAL OF THE ISSUANCE OF COMMON STOCK UPON THE CONVERSION OF THE COMPANY’S SERIES F PREFREED STOCK IN ORDER TO COMPLY
WITH NASDAQ LISTING RULE 5635(d); AND INCREASE IN AUTHORIZED SHARES OF THE COMPANY’S COMMON STOCK.
This
Information Statement contains a brief summary of the material aspects of the actions approved by the Board and the Majority Stockholder.
The
Shareholder Approval and Increase in Authorized Shares will become effective on the date that is twenty (20) calendar days after
the mailing of this information statement.
We
currently expect that such effective date will be on or about October 11, 2018.
APPROVAL
OF THE ISSUANCE OF COMMON STOCK UPON THE CONVERSION OF THE COMPANY’S SERIES F PREFREED STOCK IN ORDER TO COMPLY WITH NASDAQ
LISTING RULE 5635(d)
August
Private Placement
On
August 29, 2018 (the “Closing Date”), Attis Industries Inc. (the “Company”) closed its private placement
of senior secured convertible notes with an initial principal face amount of $5,439,000 (collectively, the “Notes”)
and warrants for the purchase of an aggregate of 4,532,500 shares of common stock (the “Common Stock”) of the Company
(subject to adjustment pursuant to the terms thereof) (collectively, the “Warrants”) having a per share purchase price
of $0.60, subject to adjustment as provided therein. The private placement resulted in gross proceeds to the Company of $4,900,000
(including $300,000 offset of certain of the Company’s outstanding indebtedness).
The
Notes accrue interest at a rate of 8% per annum on the basis of a 360-day year, payable on the first day of each month, beginning
on the first such date after the Closing Date. If an Event of Default (as defined in the Notes) occurs, interest shall instead
accrue from the date of such Event of Default at the rate equal to the lesser of 18% per annum and the maximum amount permitted
by New York Law. The Notes reach full maturity on August 29, 2019.
Commencing
on November 27, 2018, and continuing on the first trading day of each of the following nine successive months thereafter (each,
an “Amortization Redemption Payment Date”) or such later date determined by the holder of a Note in a deferral notice,
the Company is obligated to make amortization payments that if paid in cash is equal to the product of: (a) (i) 115%, if the applicable
Amortization Redemption Payment Date occurs on or prior to the date that is the 180th calendar day immediately following the Closing
Date, or (ii) 120%, if the applicable Amortization Redemption Payment occurs on or after the date that is the 181st calendar day
immediately following the Closing Date, multiplied by (b) the sum of (i) one-tenth (1/10th) of the initial aggregate principal
amount of the Notes, (ii) 100% of all accrued and unpaid interest on the principal amount of the Notes that is subject to such
amortization payment, (iii) 100% of the Make-Whole Amount (as defined in the Notes) payable in respect of the principal amount
of the Notes that is subject to such amortization payment (as applicable), and (iv) all liquidated damages, costs of collection
and other amounts payable in respect of the Notes as of the applicable Amortization Redemption Payment Date for such amortization
payment. If on any day during the period commencing ten trading days prior to the applicable Amortization Redemption Payment Date
and including such Amortization Redemption Payment Date the Equity Conditions (as defined in the Notes) have not been satisfied
(or waived in writing by the holders of the Notes) (each an “Equity Conditions Failure”), the Company may, in its
sole discretion, make such amortization payment in a number of shares of Common Stock equal to the quotient obtained by dividing
(A) the sum of (i) one-tenth (1/10th) of the initial aggregate principal amount of the Notes, (ii) 100% of all accrued and unpaid
interest on the principal amount of the Notes that is subject to such amortization payment, (iii) 100% of the Make-Whole Amount
(as defined in the Notes) payable in respect of the principal amount of the Notes that is subject to such amortization payment
(as applicable), and (iv) all liquidated damages, costs of collection and other amounts payable in respect of the Notes as of
the applicable Amortization Redemption Payment Date for such amortization payment by (B) the lesser of (i) $0.60, subject to adjustment
as provided in the Notes, and (ii)
80% of the lowest VWAP (as defined in the Notes) during
the ten (10) consecutive trading days ending on the trading day that is immediately prior to the applicable Amortization Redemption
Payment Date (the “Amortization Conversion Rate”). Under the terms of the Notes, the Amortization Conversion Price
may not be less than $0.15 (subject to adjustment as provided in the Notes) (the “Conversion Price Floor”), provided,
that in the event that the Amortization Conversion Rate would otherwise be less than the Conversion Price Floor, the Company shall
pay to the holder of the Notes the Conversion Make-Whole Payment (as defined in the Notes) on such Amortization Redemption Payment
Date, provided further, that in the event that a Holder elects to defer an amortization payment, the Amortization Conversion Rate
to be calculated as of the delivery of the deferral notice
. In addition, subject
to certain limitations set forth in the Notes, the holder of a Note may convert the principal amount of such Note and other amounts
payable thereunder into shares of Common Stock at a conversion price equal to $0.60
, subject to adjustment as provided
in the Notes. Notwithstanding anything to the contrary provided herein or in the Notes, upon the date of an Event of Default,
the conversion price shall be equal to the lower of the applicable conversion price and 70% of the lowest VWAP during the 10 consecutive
trading days ending on the trading day immediately prior to the relevant conversion date.
Following
each issuance by the Company or any of its subsidiaries for capital-raising purposes of (i) common stock or common stock equivalents
for cash consideration, (ii) indebtedness, or (iii) a combination of units thereof, resulting in cash gross proceed to the Company
in an amount equal to or greater than $1,000,000, the Company is required to use 50% of such gross proceeds in excess of $1,500,000
to redeem in cash from each holder such amounts under the Notes. In addition, the Company may, at any time during which no Equity
Conditions Failure has occurred, redeem all, but not less than all, of the then-outstanding principal amount of each Note, plus
accrued but unpaid interest thereon, the Make-Whole Amount, liquidated damages and other amounts owing in respect thereof through
and including the redemption date for a cash redemption price equal to the product of: (a) (i) 115%, if the applicable redemption
date for such redemption occurs on or prior to the date that is the 180
th
calendar day following the Closing Date,
or (ii) 120%, if the applicable redemption date for such redemption occurs on or after the date that is the 181
st
calendar
day following the Closing Date, multiplied by (b) the sum of (i) the principal amount of each such Note that is subject to the
redemption, (ii) 100% of the accrued and unpaid interest on the principal amount of each such Note that is subject to such redemption,
(iii) 100% of the Make-Whole Amount payable in respect of the principal amount of each such Note that is subject to such redemption
(as applicable), and (iv) all liquidated damages, costs of collection and other amounts payable in respect of each such Note as
of the applicable redemption date for such redemption.
The
Notes and Warrants were issued pursuant to the terms of that certain Securities Purchase Agreement dated August 29, 2018 (the
“Note and Warrant Purchase Agreement”) among the Company and the purchasers identified therein (the “Purchasers”),
which, among other things, requires the Company to file an Information Statement on Schedule 14C relating to required approvals
obtained by written consent of the Company’s shareholders and, in addition, prohibits the Company from, among other things,
without the prior written consent of the Purchasers (i) while the Notes remain outstanding, reducing the conversion or exchange
prices of certain outstanding securities convertible into shares of the Company’s common stock or increasing the number
of shares of common stock issuable thereunder, (ii) engaging in certain variable rate transactions until the later of twelve months
from the Closing Date or the date on which the Notes are no longer outstanding, and (iii) while the Notes remain outstanding,
engaging in any agreement, plan, arrangement or transaction structured in accordance with, based upon, or related or pursuant
to Section 3(a)(9) or Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”).
To
induce the Purchasers to effect the transactions contemplated by the Note and Warrant Purchase Agreement, the Company, certain
of its subsidiaries (collectively, with the Company, the “Debtors”), the Purchasers and MEF I, L.P., a Delaware limited
partnership, as collateral agent, entered into that certain Security Agreement (the “Security Agreement”) dated as
of the Closing Date, pursuant to which the Debtors pledged a perfected, first priority security interest in and to, a lien upon
and a right of set-off against all of their respective right and title to, and interest in, the assets of the Debtors. Subject
to certain exclusions, the collateral includes, without limitation,
those
certain receivables and the following personal property of the Debtors, whether presently owned or existing or hereafter acquired
or coming into existence, wherever situated, and all additions and accessions thereto and all substitutions and replacements thereof,
and all proceeds, products and accounts thereof, including, without limitation, all proceeds from the sale or transfer of the
collateral and of insurance covering the same and of any tort claims in connection therewith, and all dividends, interest, cash,
notes, securities, equity interest or other property at any time and from time to time acquired, receivable or otherwise distributed
in respect of, or in exchange for, any or all of the equity interests of the Debtors (other than the Company) owned, directly
or indirectly, by the Company: (i) all goods, including, without limitation, (A) all machinery, equipment, computers, motor vehicles,
trucks, tanks, boats, ships, appliances, furniture, special and general tools, fixtures, test and quality control devices and
other equipment of every kind and nature and wherever situated, together with all documents of title and documents representing
the same, all additions and accessions thereto, replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with any Debtor’s businesses and all improvements thereto; and
(B) all inventory; (ii) all contract rights and other general intangibles, including, without limitation, all partnership interests,
membership interests, stock or other securities, rights under any of the organizational documents of the Debtors, agreements related
to the Pledged Securities, licenses, distribution and other agreements, computer software (whether “off-the-shelf”,
licensed from any third party or developed by any Debtor), computer software development rights, leases, franchises, customer
lists, quality control procedures, grants and rights, goodwill, intellectual property and income tax refunds; (iii) all accounts,
together with all instruments, all documents of title representing any of the foregoing, all rights in any merchandising, goods,
equipment, motor vehicles and trucks which any of the same may represent, and all right, title, security and guaranties with respect
to each account, including any right of stoppage in transit; (iv) all documents, letter-of-credit rights, instruments and chattel
paper; (v) all commercial tort claims; (vi) all deposit accounts and all cash (whether or not deposited in such deposit accounts);
(vii) all investment property; (viii) all supporting obligations; (ix) all files, records, books of account, business papers,
and computer programs; and (x) the products and proceeds of all of the foregoing collateral set forth in clauses (i)-(ix) above.
Upon an event of default, the Purchaser will have the right to exercise certain remedies, including the right to take possession
of the collateral. In addition to the Security Agreement, the Company granted a security interest in the Company’s intellectual
property rights to the Purchasers pursuant to the terms of that certain Intellectual Property Security Agreement, dated as of
the Closing Date (the “IP Security Agreement”). The obligations of the Company under the Notes, the Warrants and the
other documents and instruments executed in connection with the transactions contemplated by the Purchase Agreement, are guaranteed,
jointly and severally, by each of the other Debtors pursuant to that certain Subsidiary Guarantee, dated as of the Closing Date
(the “Subsidiary Guaranty”).
Contemporaneously
with the execution of the Note and Warrant Purchase Agreement, the Company entered into that certain Registration Rights Agreement
(the “Note and Warrant Registration Rights Agreement”), by and among the Company and the Purchasers, pursuant to which
the Company agreed to file with the Securities and Exchange Commission, a registration statement on Form S-1 for the registration
of shares of Common Stock issuable to the Purchasers upon conversion of the Notes and the Warrants, subject to certain conditions
and limitations set forth therein.
On
the Closing Date, the Company also entered into that certain payoff letter (the “Payoff Letter”) with Goldman Sachs
Specialty Lending Group, L.P. (“GSSLG”). Pursuant to the Payoff Letter, the Company fully satisfied its outstanding
obligations under that certain Second Amended and Restated Credit and Guaranty Agreement dated April 20, 2018 (the “Second
Amended and Restated Credit Agreement”), by and among the Company, certain subsidiaries of the Company and GSSLG, and each
of the other credit documents entered into therewith (collectively, the “GS Credit Documents”), including the term
loan (the “GS Term Loan”) thereunder in an amount of approximately $8,700,000, by (i) making a cash payment of $3,000,000
to Goldman Sachs Specialty Lending Holdings, Inc. (“GS Holdings”) and (ii) issuing to Goldman Sachs & Co. LLC
(“GS,” as designee of GS Holdings) 2,500 shares of Series F Preferred Stock (the “Series F Preferred Stock”)
of the Company pursuant to the terms of that certain Securities Purchase Agreement, dated as of the Closing Date, by and between
the Company and GS Holdings (the “Series F Purchase Agreement”). Upon delivery of the cash payment and issuance of
the shares of Series F Preferred Stock required under the Payoff Letter, the parties terminated the Second Amended and Restated
Credit Agreement, the other GS Credit Documents and the GS Term Loan thereunder.
The
Series F Purchase Agreement contains substantially similar covenants to those contained in the Note and Warrant Purchase Agreement.
The Company also entered into a letter agreement with GS dated as of the Closing Date (the “GS Side Letter”), which
provides GS with additional rights, including, among other things, (i) subject to certain exceptions stated therein, an obligation
to refer potential purchasers of the Company’s securities (including potential purchasers of newly-issued securities from
the Company or outstanding securities) to GS to purchase shares of Series F Preferred Stock held by GS, and following any such
referral, giving GS 90 days to negotiate the sale of all or a portion of the shares of Series F Preferred Stock held by GS to
such potential purchaser, and (ii) following the issuance on or after November 27, 2018
by
the Company or any of its subsidiaries for capital-raising purposes of Common Stock or Common Stock Equivalents (as defined in
the Series F Purchase Agreement) for cash consideration (a “Qualified Subsequent Financing”),
a
requirement to use 50% of the gross proceeds of such Qualified Subsequent Financing to redeem, simultaneously with the closing
of such Qualified Subsequent Financing, shares of Series F Preferred Stock at a price equal to 120% of the stated value of such
shares set forth in the Company’s Certificate of Incorporation, plus accrued and unpaid dividends thereon, and certain other
fees or liquidated damages.
Contemporaneously
with the execution of the Series F Purchase Agreement, the Company entered into that certain Amended and Restated Registration
Rights Agreement (the “Series F Registration Rights Agreement”), by and between the Company and GS, pursuant to which
the Company agreed, among other things, to file with the Securities and Exchange Commission, a registration statement on Form
S-1 for the registration of shares of all of the Common Stock issued to GS and all of the shares of Common Stock issuable to GS
upon conversion of the Series F Preferred Stock, subject to certain conditions and limitations set forth therein.
In
addition to the cash payments required under the Payoff Letter, the Company used the proceeds of the transactions contemplated
by the Note and Warrant Purchase Agreement to satisfy $942,500 of outstanding obligations under existing promissory notes and
certain transaction expenses and for other general corporate purposes.
The
Company utilized the services of Garden State Securities, Inc., a FINRA-registered placement agent, for the private placement
of the Notes and the Warrant to the Purchasers. In connection with such private placement, the Company paid such placement agent
an aggregate cash fee of $300,000, of which $150,000 was paid on the Closing Date, and will issue to such placement agent or its
designees a warrant to acquire approximately 783,000 shares of Common Stock.
The
foregoing descriptions of the Note and Warrant Purchase Agreement, the Notes, the Warrants,
Note
and Warrant Registration Rights Agreement, the Series F Purchase Agreement, the GS Side Letter, the Series F Registration Rights
Agreement, the Payoff Letter,
the Security Agreement, the IP Security Agreement and the Subsidiary Guaranty do not purport
to be complete and are qualified in their entirety by reference to the Note and Warrant Purchase Agreement, the Notes, the Warrants,
Note and Warrant Registration Rights Agreement, the Series F Purchase Agreement, the GS
Side Letter, the Series F Registration Rights Agreement, the Payoff Letter,
the Security Agreement, the IP Security Agreement
and the Subsidiary Guaranty, which are filed as Exhibits 4.1, 4.2 and 4.3, 4.4, 4.5, 4.6, 4.7, 10.1, 10.2, 10.3, 10.4 to the Company’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4, 2018, respectively, and incorporated
herein by reference.
The
Notes, the Warrants, the shares of Series F Preferred Stock, and the Common Stock issuable upon conversion or exercise thereof
have been sold and issued and will be issued in accordance with and reliance on the exemption from registration provided by Section
4(a)(2) and a safe harbor thereunder pursuant to Regulation D of the Securities Act.
On
August 29, 2018, the Company also issued 600,000 fully-vested shares of Company Common Stock to a consultant for services provided
to the Company for no additional purchase price. The 600,000 shares of Common Stock issued to the consultant were issued in accordance
with and reliance on the exemption from registration provided by Section 4(a)(2) and a safe harbor thereunder pursuant to Regulation
D of the Securities Act.
In
connection with the closing of the Purchase Agreement, on August 28, 2019, the Company filed a Certificate of Amendment with the
New York State Department of State in contemplation of the issuance of shares of Series F Preferred Stock to GS, to increase the
number of authorized shares of the Company’s Series F Preferred Stock from 3,600 to 5,001 shares. The Company further amended
its Certificate of Incorporation to provide that until shareholder approval is effective, only 2,500.02 shares of Series F Preferred
Stock presently outstanding may convert to shares of Common Stock. The Company filed a copy of the Certificate of Amendment as
Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 4,
2018
The
shares of Series F Stock have a stated value of $1,000.00 per share, are convertible into Common Stock at a price of the greater
of $0.50 per share or 100% of the lowest closing market price per share for the thirty days prior to conversion, subject to certain
adjustments and beneficial ownership limitations. Shares of the Series F Stock are non-voting. The shares of Series F Stock rank
senior to the common stock.
Based
on the Series F Conversion Price (and provided the Company has sufficient authorized shares of Common Stock to allow for such
conversion), provided that no adjustments were required to the Series F Conversion Price, up to a maximum of 5,000,000 shares
of Common Stock would be issuable upon conversion of 2,500 shares of Series F Preferred Stock. Based on the conversion price and
terms and conditions of the Notes, (and provided the Company has sufficient authorized shares of Common Stock to allow for such
conversion), provided that no adjustments were required to the Notes, up to a maximum of 43,512,000 shares of Common Stock would
be issuable upon conversion of the Notes. Based on the conversion price and terms and conditions of the Warrants, (and provided
the Company has sufficient authorized shares of Common Stock to allow for such conversion), provided that no adjustments were
required to the Warrants, up to a maximum of 4,532,500 shares of Common Stock would be issuable upon conversion of the Warrants.
Based on the number of shares of Common Stock outstanding as of the Record Date, but without accounting for the limitations on
ownership set forth in the Series F Designations, the Notes and Warrants, or any adjustments to Series F Conversion Price, such
shares would represent approximately 70.96% of our total outstanding shares (giving effect to issuances pursuant to such
2,500 shares of Series F Preferred Stock, the Note and the Warrants, but without giving effect to the conversion or exercise of
other shares of convertible preferred stock and/or warrants, including any additional shares that may be issuable pursuant to
such securities as a result of antidilution adjustments to the price of such securities resulting from the provisions of the Notes).
The issuance of such shares may result in significant dilution to our shareholders, and afford them a smaller percentage interest
in the voting power, liquidation value and aggregate book value of the Company; adjustments to the Series F Conversion Price could
result in further dilution. The sale or any resale of the Common Stock issued upon conversion of Series F Preferred Stock, Notes
and Warrants, could cause the market price of our Common Stock to decline as well as result in substantial dilution to other shareholders
since the Series F shareholders, holders of the Notes and Warrants may ultimately convert and sell the full amount issuable on
conversion. This means that our current shareholders will own a smaller interest in our company and will have less ability to
influence significant corporate decisions requiring shareholder approval.
The Shareholder Approval is required for the Company to comply with NASDAQ Marketplace Rule 5635(d), which
requires shareholder approval prior to the issuance of securities in connection with a transaction other than a public offering
involving (1) the sale, issuance or potential issuance by the Company of common stock (or securities convertible into or exercisable
for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or
Substantial Shareholders (as defined in the NASDAQ Marketplace Rules) of the Company equals 20% or more of common stock or 20%
or more of the voting power outstanding before the issuance; or (2) the sale, issuance or potential issuance by the Company of
common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% or more
of the voting power outstanding before the issuance for less than the greater of book or market value of the stock. Accordingly,
until the Shareholder Approval is effective, the Company may not issue shares of Common Stock upon conversion of the Series F Preferred
Stock, Notes and/or Warrants in excess of 4,339,511.
Effect
of Proposal on Current Shareholders.
The issuance of such shares may result in
significant dilution to our shareholders and afford them a smaller percentage interest in the voting power, liquidation value
and aggregate book value of the Company. The sale or any resale of the Common Stock issued upon conversion of Series F Preferred
Stock could cause the market price of our Common Stock to decline as well as result in substantial dilution to other shareholders
since the Stockholders may ultimately convert and sell the full amount issuable on conversion. This means that our current shareholders
will own a smaller interest in our company and will have less ability to influence significant corporate decisions requiring shareholder
approval.
Further
Information.
The
terms of the Certificate of Designation for the Series F Preferred Stock, the Securities Purchase Agreement, Form of Registration
Rights Agreement and the Senior Secured Convertible Note are complex and only briefly summarized above. For further information,
please refer to the descriptions contained in the Company’s Current Report on Form 8-K filed with the SEC on September 4,
2018, and the transaction documents filed as exhibits to such report. The discussion herein is qualified in its entirety by reference
to such filed transaction documents.
Dissenters’
Rights.
Under
the New York Business Corporation Law, stockholders will not be entitled to dissenters’ rights with respect to the Shareholder
Approval, and we do not intend to independently provide stockholders with such rights.
AMENDMENT
TO COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE COMPANY’S AUTHORIZED SHARES
The
holder of at least a majority of the voting equity of the Company, on August 27, 2018, authorized the increase of our shares of
authorized Common Stock from 150,000,000 to 250,000,000.
The
holder of at least the majority of outstanding shares of our Common Stock believes that it is advisable and in the best interests
of the Company and its shareholders effect an Increase of Authorized Shares in order to provide additional shares that could be
issued for raising of additional equity capital or other financing activities, stock dividends or the exercise of stock options
and warrants and to provide additional shares that could be issued in an acquisition or other form of business combination and
to better position the Company for future trading should a transaction be entered into and completed. The future issuance of additional
shares of Common Stock on other than a pro rata basis to existing stockholders will dilute the ownership of the current stockholders,
as well as their proportionate voting rights.
THERE
CAN BE NO ASSURANCE THAT A SUITABLE BUSINESS OPPORTUNITY WILL BE EFFECTED FOLLOWING THE COMPLETION OF THE INCREASE IN AUTHORIZED
SHARES OF COMMON STOCK.
Attached as
Exhibit A
and incorporated herein by reference is the text of the Certificate of Amendment to Certificate of Incorporation (the “Amended
Certificate”) as approved by the holder of at least a majority of the outstanding shares of Common Stock. The Increase in
Authorized Shares will be effected by filing the Restated Certificate with the Secretary of State of New York, which is expected
to occur approximately twenty (20) days after the mailing of this Information Statement. The Increase in Authorized Shares will
become effective upon such filing.
Effects
of Amendment.
The
following table summarizes the principal effects of the Increase in the Authorized Shares:
|
|
Pre-Increase
|
|
|
Post-Increase
|
|
Common Shares
|
|
|
|
|
|
|
|
|
Issued and Outstanding
|
|
|
22,308,409
|
|
|
|
22,308,409
|
|
Authorized
|
|
|
150,000,000
|
|
|
|
250,000,000
|
|
Potential
Anti-takeover effects of the increase in authorized shares.
The
implementation of the Increase in Authorized Shares will have the effect of increasing the proportion of unissued authorized shares
to issued shares. Under certain circumstances this may have an anti-takeover effect. These authorized but unissued shares could
be used by the Company to oppose a hostile takeover attempt or to delay or prevent a change of control or changes in or removal
of the Board, including a transaction that may be favored by a majority of our shareholders or in which our shareholders might
receive a premium for their shares over then-current market prices or benefit in some other manner. For example, without further
stockholder approval, the Board could issue and sell shares, thereby diluting the stock ownership of a person seeking to effect
a change in the composition of our Board or to propose or complete a tender offer or business combination involving us and potentially
strategically placing shares with purchasers who would oppose such a change in the Board or such a transaction.
Although
an increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have a potential anti-takeover
effect, the proposed amendments to our Certificate of Incorporation is not in response to any effort of which we are aware to
accumulate the shares of our Common Stock or obtain control of the Company. There are no plans or proposals to adopt other provisions
or enter into other arrangements that may have material anti-takeover consequences.
The
Board does not intend to use the consolidation as a part of or a first step in a “going private” transaction pursuant
to Rule 13e-3under the Securities Exchange Act of 1934, as amended. Moreover, we are currently not engaged in any negotiations
or otherwise have no specific plans to use the additional authorized shares for any acquisition, merger or consolidation.
Dissenters’
Rights.
No
dissenters’ or appraisal rights are available to our stockholders under the New York Business Corporation Law in connection
with the proposed amendment to our Certificate of Incorporation to effect the Increase in Authorized Shares.
Actions
to be taken.
This
Information Statement contains a brief summary of the material aspects of the actions approved by the Board and the Majority Stockholder.
The
Shareholder Approval and Increase in Authorized will become effective on the date that is twenty (20) calendar days after the
mailing of this information statement to stockholders.
We
currently expect that such effective date will be on or about October 11, 2018.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August
31, 2018, certain information regarding beneficial ownership of our Common Stock (a) by each person known by us to be the beneficial
owner of more than five percent of the outstanding shares of Common Stock, Series A preferred stock, Series D preferred stock
and Series E preferred stock, Series F Preferred Stock and Series G Preferred Stock (b) by each director of the Company, (c) by
the named executive officers (determined in accordance with Item 402 of Regulation S-K) and (d) by all of our current executive
officers and directors as a group.
We
have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission (“SEC”).
Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities
named in the table below have sole voting and investment power with respect to all shares of Common Stock, Series A Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G Preferred Stock that they beneficially
own, subject to applicable community property laws.
Applicable percentage ownership is based
on 22,308,409 shares of Common Stock outstanding as of August 31, 2018. In computing the number of shares of Common Stock
beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Common Stock
subject to options held by that person or entity that are currently exercisable or that will become exercisable within 60 days
of August 31, 2018. In addition, as of August 31, 2018, 51 shares of Series A Preferred Stock, 106,950 shares of Series D Preferred
Stock, 161,000 shares of Series E Preferred Stock, 3,978 shares of Series F Preferred Stock and 202,600 shares of Series G Preferred
Stock were outstanding. We did not deem such options or shares of Preferred Stock outstanding, however, for purposes of computing
the percentage ownership of any other person. Unless otherwise indicated, the address of each beneficial owner listed in the table
below is c/o Attis Industries Inc., 12540 Broadwell Road, Suite 210, Milton, GA 30004.
Name
and Address of Beneficial Owner
|
|
Common
Stock Owned Beneficially
|
|
|
Percent
of Class
|
|
|
Series
A Preferred Stock Owned Beneficially
|
|
|
Percent
of Class
|
|
|
Series
D Preferred Stock Owned Beneficially
|
|
|
Percent
of Class
|
|
|
Series
E Preferred Stock Owned Beneficially
|
|
|
Percent
of Class
|
|
|
Series
F Preferred Stock Owned Beneficially
|
|
|
Percent
of
Class Owned Beneficially
|
|
|
Series
G Preferred Stock Owned Beneficially
|
|
|
Percent
of Class Owned Beneficially
|
|
Named
Executive Officers and Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
S. Cosman, Chief Executive Officer, Chairman
|
|
|
1,358,660
|
(1)
|
|
|
6.09
|
%
|
|
|
51
|
|
|
|
100.00
|
%
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
Chris
Diaz, Chief Financial Officer
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
Joseph
Ardagna, Director
|
|
|
21,583
|
(4)
|
|
|
*
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
Jackson
Davis, Director
|
|
|
21,583
|
(4)
|
|
|
*
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
Thomas
Cowee, Director
|
|
|
21,583
|
(4)
|
|
|
*
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
All
directors and officers as a group (5 persons)
|
|
|
1,423,409
|
|
|
|
6.38
|
%
|
|
|
51
|
|
|
|
100.00
|
%
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
5%
or greater shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clayton
Struve
175 W. Jackson Blvd.,
Suite 440
Chicago, IL 60604 (3)
|
|
|
2,394,927
|
|
|
|
10.74
|
%
|
|
|
―
|
|
|
|
―
|
|
|
|
97,850
|
|
|
|
91.49
|
%
|
|
|
150,000
|
|
|
|
93.168
|
%
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
YA
II PN, Ltd.
1012 Springfield Avenue, Mountainside, NJ 07092 (5)
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
2,222.24
|
|
|
|
44.44
|
%
|
|
|
11,750
|
|
|
|
5.8
|
%
|
Walter
H. Hall, former President, former Chief Operating Officer and former Director
|
|
|
1,031,260
|
(6)
|
|
|
4.62
|
%
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
EXO
Opportunity Fund LLC c/o Sonageri & Fallon LLC, 411 Hackensack Avenue, Hackensack, New Jersey 07601 (7)
|
|
|
1,000,000
|
|
|
|
4.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,250
|
|
|
|
18.9
|
%
|
Goldman
Sachs & Co. LLC
200 West Street, New York,
New York 10282
|
|
|
421,236
|
|
|
|
1.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500.00
|
|
|
|
50.00
|
%
|
|
|
|
|
|
|
|
|
GreenShift
Corporation Corporation 5950 Shiloh Road East,
Suite N
Alpharetta, GA 30005 (8)
|
|
|
1,000,000
|
|
|
|
4.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,000
|
|
|
|
64.1
|
%
|
Gaula
Ventures LLC McFarlin Lane, Milton, Georgia 30004 (9)
|
|
|
1,000,000
|
|
|
|
4.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,600
|
|
|
|
11.15
|
%
|
Total
|
|
|
8,270,832
|
|
|
|
37.1
|
%
|
|
|
51
|
|
|
|
100.00
|
%
|
|
|
97,850
|
|
|
|
91.49
|
%
|
|
|
150,00000
|
|
|
|
93.68
|
%
|
|
|
4,722.24
|
|
|
|
94.44
|
%
|
|
|
202,600
|
|
|
|
100
|
|
*
Less than 1%
(1)
|
Includes 1,560 shares
of the Common Stock of the Company issued to Rush the Puck, LLC, a limited liability company in which Mr. Cosman and his wife
are the sole members and 20,000 shares of the Common Stock of the Company issued, in the aggregate, to four limited liability
companies in which Mr. Cosman is the manager. Includes 302,663 warrants to purchase Common Stock at an exercise price of $5.16
per share. Does not reflect voting power conferred by ownership of Series A Preferred Stock.
|
(2)
|
Excludes 3,750 non-employee
options to purchase Common Stock at $20 per share.
|
|
|
(3)
|
Includes 181,598
warrants to purchase Common Stock at an exercise price of $5.16 per share; does not include (i) 978,500 shares of Common Stock
underlying shares of Series D Preferred Stock, which may not be converted to the extent that it would result in such owner
holding more than 4.99%, unless waived upon 60 days’ notice, but shall in no event exceed 19.99%, of the Company’s
outstanding shares, (ii) 1,100,000 shares of Common Stock underlying shares of Series E Preferred Stock, the conversion terms
of which are subject to the Shareholder Approval and which may not be converted to the extent that it would result in such
owner holding more than 4.99%, unless waived upon 60 days’ notice, but shall in no event exceed 19.99%, of the Company’s
outstanding shares, (iii) 1,467,750 warrants to purchase Common Stock at an exercise price of $1.44 per share, which may not
be exercised to the extent that it would result in such owner holding more than 4.99%, unless waived upon 60 days’ notice,
but shall in no event exceed 19.99%, of the Company’s outstanding shares; and (v) 1,650,000 warrants to purchase Common
Stock at an exercise price of $1.20 per share, which may not be exercised to the extent that it would result in such owner
holding more than 4.99%, unless waived upon 60 days’ notice, but shall in no event exceed 19.99%, of the Company’s
outstanding shares.
|
|
|
(4)
|
Excludes 3,750 non-employee
options to purchase Common Stock at $20.00 per share.
|
(5)
|
YA II PN, Ltd. (“YA”)
is the holder of 2,222.24 shares of Series F Convertible Preferred Stock and 11,750 of Series G Convertible Preferred Stock.
Yorkville Advisors Global, LP (“Yorkville LP”) is YA’s investment manager and Yorkville Advisors Global
II, LLC (“Yorkville LLC”) is the General Partner of Yorkville LP. All investment decisions for YA are made by
Managing Member, Matthew Beckman. D-Beta One Equity, Ltd. (“D-Beta One”) is the holder of warrants to purchase
750,000 shares of the Company’s common stock at an exercise price of $0.49356 per share. Delta Beta Advisors, LLC (“D-Beta”)
is D-Beta One’s investment manager. All investment decisions for D-Beta are made by D-Beta’s Managing Member,
Matthew Beckman. YA and D-Beta One may be deemed affiliates of one another through common management and ownership.
|
|
|
(6)
|
As of the date hereof,
Mr. Hall beneficially owns 1,031,260 shares of the issued and outstanding common stock of the Issuer, comprised of: (i) 175,350
shares of common stock owned directly by Mr. Hall; and (ii) 857,910 shares, based on the assumed exercise of options having
a $1.06 per share exercise price for a period of five years owned directly by Mr. Hall. Therefore, in the aggregate, Mr. Hall
may cast 1,031,260 of 17,981,326 votes, equivalent to approximately 5.735%.
|
(7)
|
EXO Opportunity
Fund LLC (“EXO”) beneficially owns 1,000,000 shares of common stock and is the holder of 37,250 shares of Series
G Convertible Preferred Stock. All investment decisions for EXO are made by EXO's Manager, Mary Carroll. Acutus Capital LLC
is the sole member of EXO, and James Sonageri is the sole member and manager of Acutus Capital LLC.
|
|
|
(8)
|
GreenShift Corporation
(“GreenShift”) beneficially owns 1,000,000 shares of common stock and is the holder of 130,000 shares of Series
G Convertible Preferred Stock. All investment decisions for GreenShift are made by GreenShift’s Chief Executive Officer,
Kevin Kreisler. Viridis Capital LLC is the owner of 80% of the capital stock of GreenShift, and Mr. Kreisler is the sole member
and manager of Viridis Capital LLC.
|
|
|
(9)
|
Gaula Ventures LLC
(“Gaula”) beneficially owns 1,000,000 shares of common stock and is the holder of 22,600 shares of Series G Convertible
Preferred Stock. All investment decisions for Gaula are made by Gaula’s Manager, David Winsness. Mr. Winsness is the
owner of the majority equity interests in Gaula.
|
Other than the pledge by Mr. Cosman of 51 shares of Series A Preferred Stock, which may become effective
on May 17, 2019, subject to the occurrence of certain events, as has been disclosed in the Company’s Current Report on Form
8-K filed with the SEC on May 23, 2018, there
are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change in control of the Company.
DELIVERY
OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
If
hard copies of the materials are requested, we will send only one Information Statement and other corporate mailings to stockholders
who share a single address unless we received contrary instructions from any stockholder at that address. This practice, known
as “householding,” is designed to reduce our printing and postage costs. However, the Company will deliver promptly
upon written or oral request a separate copy of the Information Statement to a stockholder at a shared address to which a single
copy of the Information Statement was delivered. You may make such a written or oral request by (a) sending a written notification
stating (i) your name, (ii) your shared address and (iii) the address to which the Company should direct the additional copy of
the Information Statement, to Attis Industries Inc., 12540 Broadwell Road, Suite 2104, Milton, GA 30004.
If
multiple stockholders sharing an address have received one copy of this Information Statement or any other corporate mailing and
would prefer the Company to mail each stockholder a separate copy of future mailings, you may mail notification to, or call the
Company at, its principal executive offices. Additionally, if current stockholders with a shared address received multiple copies
of this Information Statement or other corporate mailings and would prefer the Company to mail one copy of future mailings to
stockholders at the shared address, notification of such request may also be made by mail or telephone to the Company’s
principal executive offices.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This
Information Statement may contain “forward-looking statements” made under the “safe harbor” provisions
of the Private Securities Litigation Reform Act of 1995. The statements include, but are not limited to, statements concerning
the effects of the Shareholder Approval and statements using terminology such as “expects,” “should,”
“would,” “could,” “intends,” “plans,” “anticipates,” “believes,”
“projects” and “potential.” Such statements reflect the current view of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions. Known and unknown risks, uncertainties and other factors
could cause actual results to differ materially from those contemplated by the statements.
In
evaluating these statements, you should specifically consider various factors that may cause our actual results to differ materially
from any forward-looking statements. You should carefully review the risks listed, as well as any cautionary language, in this
Information Statement and the risk factors detailed under “Risk Factors” in the documents incorporated by reference
in this Information Statement, which provide examples of risks, uncertainties and events that may cause our actual results to
differ materially from any expectations we describe in our forward-looking statements. There may be other risks that we have not
described that may adversely affect our business and financial condition. We disclaim any obligation to update or revise any of
the forward-looking statements contained in this Information Statement. We caution you not to rely upon any forward-looking statement
as representing our views as of any date after the date of this Information Statement. You should carefully review the information
and risk factors set forth in other reports and documents that we file from time to time with the SEC.
ADDITIONAL
INFORMATION
We
are subject to the disclosure requirements of the Exchange Act, and in accordance therewith, file reports, information statements
and other information, including annual and quarterly reports on Form 10-K and 10-Q, respectively, with the SEC. Reports and other
information filed by the Company can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street,
N.E., Washington, DC 20549. In addition, the SEC maintains a web site on the Internet (
http://www.sec.gov
) that contains
reports, information statements and other information regarding issuers that file electronically with the SEC through the Electronic
Data Gathering, Analysis and Retrieval System.
A
copy of any public filing is also available, at no cost, by writing to Attis Industries Inc., 12540 Broadwell Road, Suite 2104,
Milton, GA 30004. Any statement contained in a document that is incorporated by reference will be modified or superseded for all
purposes to the extent that a statement contained in this Information Statement (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to such previous statement. Any statement so modified
or superseded will not be deemed a part of this Information Statement except as so modified or superseded.
This
Information Statement is provided to the holders of Common Stock of the Company only for information purposes in connection with
the Actions, pursuant to and in accordance with Rule 14c-2 of the Exchange Act. Please carefully read this Information Statement.
By
Order of the Board of Directors
Jeffrey
Cosman
Chairman
and Chief Executive Officer
Dated:
September 20, 2018
Exhibit A
CERTIFICATE
OF AMENDMENT
OF
THE
CERTIFICATE
OF INCORPORATION
OF
ATTIS
INDUSTRIES INC.
Under
Section 805 of the Business Corporation Law
FIRST:
The name of the corporation is Attis Industries Inc. (the “
Corporation
”). The name under which it was originally
formed is “CIP, Inc.”
SECOND:
The certificate of incorporation of the Corporation (such certificate of incorporation, as amended or restated and in effect
thereafter,
the “
Certificate of Incorporation
”) was filed by the New York State Department of State on November 12, 1993.
THIRD:
The Certificate of Incorporation is hereby amended as follows:
Paragraph
FOURTH of the Certificate of Incorporation relating to:
Capitalization
of the corporation and the designation of classes of preferred stock, pursuant to the authority granted to the Board in this Certificate
of Incorporation is amended as follows, to effect the increase in the number of shares of Common Stock that the corporation is
authorized to issue, without effecting in any way the number, designations, rights, or preferences of any shares of Preferred
Stock:
|
A.
|
The
first clause of the first sentence thereof will be deleted in its entirety and replaced
with the following:
|
“The
aggregate number of shares which the corporation shall have the authority to issue shall be Two Hundred Fifty-Five Million (255,000,000)
shares, as follows:”
|
B.
|
Part
“a.”, immediately following the first clause of the first sentence thereof,
will be deleted in its entirety and replaced with the following:
|
“Common
Stock: Of the total authorized capital stock, the corporation shall have the authority to issue Two Hundred Fifty Million (250,000,000)
shares having a par value of $0.025 each, which shares shall be designated “Common Stock.”
[Remainder
of Page Intentionally Left Blank]
FOURTH:
The certificate of amendment was authorized by: the vote of the board of directors followed by a vote of a majority of all outstanding
shares entitled to vote thereon at a meeting of shareholders.
|
|
|
Name: Jeffrey S. Cosman
Title: Chief Executive Officer
|
[Certificate
of Amendment to Certificate of Incorporation of Attis Industries Inc.]