Filed Pursuant to Rule 424(b)(5)
Registration No. 333-237772
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 30, 2020)
$1,060,000
SENIOR CONVERTIBLE NOTES DUE 2022
Shares of Common Stock Issuable Upon Conversion of the
Senior Convertible Notes due 2022
CV Sciences, Inc. (the “Company”, “we”, “us” or “our”) is offering
pursuant to this prospectus supplement and the accompanying base
prospectus, $1,060,000 in original principal amount of our senior
convertible notes due 2022 (each, a “Note,” and, collectively, the
“Notes”) and the shares of our common stock underlying the
Notes.
The Notes are being sold pursuant to the terms of a securities
purchase agreement dated November 14, 2021 (which we refer to
herein as the “Securities Purchase Agreement”), between us and each
investor in connection with this offering at the initial closing
thereunder. Upon our filing of an additional prospectus supplement
and supplemental indenture and our satisfaction of certain other
closing conditions, we may elect to consummate additional closings
of up to $4,240,000 in aggregate principal amount of Notes at
additional closings pursuant to the Securities Purchase Agreement.
However, we are not registering pursuant to this prospectus
supplement the issuance of any such Senior Convertible Notes due
2022 (or shares of common stock issuable upon conversion of such
Senior Convertible Notes due 2022) that may be issued, from time to
time, at such additional closings under the Securities Purchase
Agreement.
The Notes will be issued with a 6% original issue discount. The
Notes shall not bear interest except upon the occurrence (and
during the continuance) of an event of default. After the
occurrence and during the continuance of an event of default, the
notes will accrue interest at the rate of 15.0% per annum. Unless
earlier converted or redeemed, the Notes will mature on the date
that is the 6-month anniversary of the issuance date of the
applicable Note, subject to extension at the option of the holder
in certain circumstances as provided in the Note. All amounts due
under the Notes are convertible at any time, in whole or in part,
at the option of the holder into shares of our common stock at an
initial conversion price of $0.2611 per share, which conversion
price is subject to adjustment pursuant to the terms of the Notes.
The conversion price is subject to customary adjustments upon an
event of default, change of control, or upon any stock dividend,
stock split, stock combination, reclassification, or similar
transaction that proportionately decreases or increases the price
of our shares of common stock.
Additionally, subject to certain beneficial ownership limitations,
at any time, at the option of the holder, the holder may convert
all, or any part, of the Note into shares of our common stock (the
“Alternate Optional Conversion”) at the alternate conversion price
which is the lowest of the fixed conversion price then in effect;
and the greater of the $0.01, which we refer to herein as the
“floor price” and 90% of the arithmetic average of the three lowest
daily volume weighted average prices of our common stock during the
ten trading days immediately prior to such conversion and the
greater of the floor price and 97% of the lowest sale price of our
common stock on the applicable conversion date.
We do not intend to apply to list the Notes on any securities
exchange or to arrange for their quotation on any automated dealer
quotation system. Our common stock is traded on the OTC:QB
marketplace maintained by OTC Markets
Group, Inc. (the “OTC”), under the symbol “CVSI.” On November 12,
2021, the closing price of our common stock was $0.22 per
share.
We intend to use the net proceeds received from the sale of the
Notes for working capital and general corporate purposes. We will
not receive any additional proceeds if and when the Notes are
converted into shares of our common stock.
We estimate the expenses of this offering will be approximately
$150,000.
Our business and an investment in our securities involve
significant risks. These risks are described under the caption
“Risk Factors ” beginning on page S-5 of this prospectus supplement
and in the documents incorporated by reference into this prospectus
supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus supplement is November 14,
2021.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Prospectus Supplement |
|
Page |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prospectus |
|
Page |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the accompanying
prospectus that is also a part of this document. This prospectus
supplement and the accompanying prospectus, dated April 30, 2020,
are part of a registration statement on Form S-3 (File No.
333-237772) that we filed with the Securities and Exchange
Commission (the “SEC”), utilizing a “shelf” registration process.
Under the shelf registration process, we may offer and sell from
time to time in one or more offerings the securities described in
the accompanying prospectus.
This document is in two parts. The first part is this prospectus
supplement, which describes the securities we are offering and the
terms of the offering and also adds to and updates information
contained in the accompanying prospectus and the documents
incorporated by reference into the accompanying prospectus. The
second part is the accompanying prospectus, which provides more
general information, some of which may not apply to the securities
offered by this prospectus supplement. Generally, when we refer to
this “prospectus,” we are referring to both documents combined. To
the extent there is a conflict between the information contained in
this prospectus supplement, on the one hand, and the information
contained in the accompanying prospectus or any document
incorporated by reference therein, on the other hand, you should
rely on the information in this prospectus supplement. We urge you
to carefully read this prospectus supplement and the accompanying
prospectus and any related free writing prospectus, together with
the information incorporated herein and therein by reference as
described under the heading “Incorporation of Certain Information
by Reference,” before buying any of the securities being
offered.
You should rely only on the information that we have provided or
incorporated by reference in this prospectus supplement and the
accompanying prospectus and any related free writing prospectus
that we may authorize to be provided to you. We have not authorized
anyone to provide you with different information. No dealer,
salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus
supplement and the accompanying prospectus or any related free
writing prospectus that we may authorize to be provided to you. You
must not rely on any unauthorized information or representation.
This prospectus supplement is an offer to sell only the securities
offered hereby and only under circumstances and in jurisdictions
where it is lawful to do so. You should assume that the information
in this prospectus supplement and the accompanying prospectus or
any related free writing prospectus is accurate only as of the date
on the front of the document and that any information we have
incorporated by reference is accurate only as of the date of the
document incorporated by reference, regardless of the time of
delivery of this prospectus supplement and the accompanying
prospectus or any related free writing prospectus, or any sale of a
security.
This prospectus supplement contains summaries of certain provisions
contained in some of the documents described herein, but reference
is made to the actual documents for complete information. All of
the summaries are qualified in their entirety by the actual
documents. Copies of some of the documents referred to herein have
been filed, will be filed or will be incorporated by reference as
exhibits to the registration statement of which this prospectus
supplement is a part, and you may obtain copies of those documents
as described below under the heading “Where You Can Find More
Information.”
As used in this prospectus supplement, the terms “we”, “us”, “our”,
“Company”, “CVSI” and “CV Sciences” refer to CV Sciences, Inc., a
Delaware corporation.
This prospectus supplement, the accompanying prospectus and the
information incorporated herein and therein by reference include
trademarks, servicemarks and tradenames owned by us or other
companies. We use our trademarks, including CV Sciences and
PlusCBD™, in this prospectus supplement. Solely for convenience,
trademarks and tradenames referred to in this prospectus may appear
without the ® and ™ symbols, but those references are not intended
to indicate, in any way, that we will not assert, to the fullest
extent under applicable law, our rights or that the applicable
owner will not assert its rights, to these trademarks and
tradenames.
The industry and market data contained or incorporated by reference
in this prospectus supplement are based either on our management’s
own estimates or on independent industry publications, reports by
market research firms or other published independent sources.
Although we believe these sources are reliable, we have not
independently verified the information and cannot guarantee its
accuracy and completeness, as industry and market data are subject
to change and cannot always be verified with complete certainty due
to limits on the availability and reliability of raw data, the
voluntary nature of the data gathering process and other
limitations and uncertainties inherent in any statistical survey of
market shares. Accordingly, you should be aware that the industry
and market data contained or incorporated by reference in this
prospectus supplement, and estimates and beliefs based on such
data, may not be reliable. Unless otherwise indicated, all
information contained or incorporated by reference in this
prospectus supplement concerning our industry in general or any
segment thereof, including
information regarding our general expectations and market
opportunity, is based on management’s estimates using internal
data, data from industry related publications, consumer research
and marketing studies and other externally obtained
data.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus,
including the documents incorporated by reference herein contain
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 Exchange Act. All statements other than
statements of historical facts contained in this prospectus and the
documents incorporated by reference herein, including statements
regarding our future results of operations and financial position,
business strategy, prospective products, product approvals,
research and development costs, timing and likelihood of success,
plans and objectives of management for future operations and future
results of anticipated products, are forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other important factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Such risks and uncertainties
include, without limitation:
•the
evolving and highly competitive markets in which we
operate;
•industry
trends in the markets in which we compete, including the demand for
and marketability of our products;
•our
ability to raise additional capital to finance our
activities;
•the
future trading of our common stock; our ability to operate as a
public company;
•our
ability to protect our proprietary information;
•the
evolution of legal and regulatory developments in the United States
and foreign countries impacting the industries in which we
operate;
•general
economic and business conditions;
•the
volatility of our operating results and financial
condition;
•our
ability to attract or retain qualified senior management
personnel;
•our
anticipated use of proceeds from this offering; and
•other
risks detailed from time to time in our filings with the SEC, or
otherwise.
In some cases, you can identify forward-looking statements by terms
such as “anticipates,” “believes,” “could,” “estimates,” “expects,”
“goal,” “intends,” “may,” “plans,” “potential,” “predicts,”
“projects,” “should,” “will,” “would,” the negative of these words
and words or similar expressions intended to identify
forward-looking statements. These statements reflect our views as
of the date on which they were made with respect to future events
and are based on assumptions and subject to risks and
uncertainties. The underlying information and expectations are
likely to change over time. Given these uncertainties, you should
not place undue reliance on these forward-looking statements as
actual events or results may differ materially from those projected
in the forward-looking statements due to various factors,
including, but not limited to, those set forth under the heading
“Risk Factors” in this prospectus supplement, in the accompanying
prospectus, and in our filings with the Securities and Exchange
Commission, or SEC. These forward-looking statements represent our
estimates and assumptions only as of the date of the document
containing the applicable statement.
You should understand that our actual future results may be
materially different from what we expect. We qualify all of the
forward-looking statements in the foregoing documents by these
cautionary statements. Unless required by law, we undertake no
obligation to update or revise any forward-looking statements to
reflect new information or future events or developments. Thus, you
should not assume that our silence over time means that actual
events are bearing out as expressed or implied in such
forward-looking statements. Before deciding to purchase our
securities in this offering, you should carefully
consider the risk factors discussed or incorporated by reference
herein, in addition to the other information set forth in this
prospectus supplement, the accompanying prospectus and in the
documents incorporated by reference.
PROSPECTUS SUPPLEMENT SUMMARY
This summary does not contain all the information that you should
consider before investing in the securities offered by this
prospectus supplement. You should carefully read the entire
prospectus supplement and the accompanying prospectus, including
the “Risk Factors” sections, as well as the financial statements
and the other information incorporated by reference herein and the
information in any free writing prospectus that we may authorize
for use in connection with this offering before making an
investment decision.
Overview
We operate two distinct business segments: a consumer product
division focused on manufacturing, marketing and selling hemp-based
cannabidiol (“CBD”) products to a range of market sectors; and a
drug development division focused on developing and commercializing
CBD-based novel therapeutics utilizing CBD. As of December 31,
2020, the Company’s PlusCBD™ products were sold at more than 7,300
retail locations throughout the United States, and it was the
top-selling brand of hemp-derived CBD in the natural product retail
market, according to SPINS, the leading provider of syndicated data
and insights for the natural, organic and specialty products
industry. Our state-of-the-art facility follows all guidelines for
Good Manufacturing Practices (GMP) and our hemp extracts are
processed, produced and tested throughout the manufacturing process
to confirm the cannabinoid content meets strict company standards.
With a commitment to science, PlusCBD™ benefits in healthy people
are supported by human clinical research data, in addition to three
published clinical case studies available on PubMed.gov. PlusCBD™
Oil was the first hemp CBD supplement brand to invest in the
scientific evidence necessary to receive self-affirmed Generally
Recognized as Safe (GRAS) status.
Current Operations
Consumer Products
We manufacture, market and sell consumer products containing
hemp-based CBD under our PlusCBD™ brand in a range of market
sectors including nutraceutical, beauty care and specialty foods.
As of December 31, 2020, we manufactured and distributed more than
50 products and we expect to continue to add new products to our
PlusCBD™ portfolio to enhance our line of CBD and hemp-based
consumer products. We also expect to develop and launch new brands
to more effectively market and sell certain products. Hemp-based
CBD is one of more than 100 cannabinoids found in hemp, and is
non-psychoactive. Our U.S.-based operations oversee our raw
material supply chain, raw material processing, product development
and manufacturing, and sales and marketing. We intend to continue
to scale operations to accommodate market conditions.
Specialty Pharmaceuticals
Our specialty pharmaceutical segment is developing cannabinoids to
treat medical indications. Cannabinoids are compounds derived from
the Cannabis sativa plant, which contain two primary cannabinoids,
CBD and tetrahydrocannabinol (“THC”). Clinical and preclinical data
suggest that CBD has promising results in treating a range of
medical indications. On January 4, 2016, we acquired drug
development assets in the acquisition of CanX, Inc., a
Florida-based specialty pharmaceutical corporation, utilizing CBD
as the active pharmaceutical ingredient.
Our first patent-pending product candidate, CVSI-007, combines CBD
and nicotine in treatment of smokeless tobacco use and addiction.
There are currently no drugs approved by the U.S. Food & Drug
Administration for treatment of smokeless tobacco use and
addiction. We believe this product candidate may provide treatment
options for this significant unmet medical need. CVSI-007 is based
on proprietary formulations, processes and technology. In May 2016,
we filed a patent application (Application No. 15/426,617, the "617
Patent") for these formulations and processes with the U.S. Patent
and Trademark Office (“USPTO”). On May 19, 2020, the USPTO issued a
patent pertaining to CVSI-007.
Corporate Information
Our principal corporate offices are located at 10070 Barnes Canyon
Road, San Diego, CA 92121, and our telephone number is (866)
290-2157. We maintain a website that contains information about us
at www.cvsciences.com. The information included on our website is
not, and should not be considered, a part of this prospectus or any
accompanying prospectus supplement.
Offering Summary
|
|
|
|
|
|
|
Issuer |
CV Sciences, Inc. |
|
Securities offered by us |
$1,060,000 in original principal amount of senior convertible notes
due 2022 (the “Notes”) to be issued pursuant to an indenture with
Wilmington Savings Fund Society, FSB, as the trustee.
This prospectus supplement also relates to the offering of shares
of our common stock issuable upon conversion of the
Notes.
|
|
Ranking |
All payments due shall be senior to all indebtedness of the Company
or any of our subsidiaries. |
|
Additional Closings |
Upon our filing of an additional prospectus supplement and
supplemental indenture and our satisfaction of certain other
closing conditions, we may elect to consummate additional closings
of up to $4,240,000 in aggregate principal amount of Notes at
additional closings pursuant to the Securities Purchase Agreement.
However, we are not registering pursuant to this prospectus
supplement the issuance of any such Senior Convertible Notes due
2022 (or shares of common stock issuable upon conversion of such
Senior Convertible Notes due 2022) that may be issued, from time to
time, at such additional closings under the Securities Purchase
Agreement. |
|
Maturity Date |
May 17, 2022 (unless earlier converted or redeemed, but subject to
extension at the option of the holder in certain
circumstances). |
|
Original Issue Discount |
6% original issue discount. |
|
Default Interest |
15% per annum, upon the occurrence (and during the continuance) of
an event of default. Such default interest will cease to accrue in
the event of a cure of such event of default. |
|
Conversion |
|
|
Fixed Conversion at Option of Holder |
Each holder of Notes may convert all, or any part, of the
outstanding principal, and interest of the Notes, at any time at
such holder’s option, into shares of our common stock at the
initial fixed conversion price of $0.2611, which is subject
to: |
|
•proportional
adjustment upon the occurrence of any stock split, stock dividend,
stock combination, reclassification and/or similar
transactions;
|
|
•full-ratchet
adjustment if we issue securities in the future at a per share
price less than the fixed conversion price then in
effect.
|
|
Voluntary Adjustment Right |
Subject to the rules and regulations of the by OTC Markets Group,
Inc., we have the right, at any time with the written consent of
the holders, to lower the fixed conversion price to any amount and
for any period of time deemed appropriate by our board of
directors. |
|
Additional Adjustment to Fixed Conversion Price on Additional
Closings |
Upon each additional closing, the fixed conversion price of all
Notes are subject to downward adjustment if the fixed conversion
price then in effect is greater than the lower of: |
|
•120%
of the closing bid price of our common stock on the trading day
immediately preceding such additional closing date;
and
|
|
•120%
of the arithmetic average of the volume weighted average price of
our common stock on the five trading days preceding the additional
closing.
|
|
Alternate Optional Conversion |
At any time, at the option of the holder, the holder may convert
all, or any part, of the Note into shares of common stock at an
“Alternate Conversion Price” equal to the lesser of: |
|
•the
fixed conversion price then in effect; and
|
|
•the
greater of:
|
|
•the
floor price; and
|
|
|
|
|
|
|
|
•90%
of the arithmetic average of the three lowest daily volume weighted
average prices of our common stock during the ten trading days
immediately prior to such conversion and the greater of the floor
price; and
|
|
•97%
of the lowest sale price of our common stock on the applicable
conversion date.
|
|
Alternate Event of Default Conversion |
If an event of default has occurred under the Notes, each holder
may alternatively elect to convert the Note at the Alternate
Conversion Price, subject to an additional 15% redemption
premium. |
|
Beneficial Ownership Limitation on Conversion |
Conversions and issuance of our common stock pursuant to the Notes
are prohibited if such conversion or issuance would cause the
applicable holder (together with its affiliates) to beneficially
own in excess of 4.99% of the outstanding shares of our common
stock (which percentage is subject to increase to 9.99% or
decrease, at the option of such holder, except that any raise will
only be effective upon 61-days’ prior notice to us). |
|
Company Optional Redemption Rights |
At any time no event of default or equity condition failure exists,
we may redeem all or any portion of the Notes outstanding in cash
at a 15% redemption premium to the greater of the face value and
the equity value of our common stock underlying the
Notes.
The
Company may deliver no more than one such redemption notice during
any twenty (20) trading day period. |
|
Holder Optional Redemption Rights |
|
|
Event of Default Redemption |
Upon an event of default, each holder of Notes may require us to
redeem in cash all, or any portion, of the Notes at a 15%
redemption premium (or 10% if such event of default is a price
default) to the greater of the face value and the equity value of
our common stock underlying the Notes. |
|
Change of Control Redemption |
In connection with a change of control of the Company, each holder
of Notes may require us to redeem in cash all, or any portion, of
the Notes at a 15% redemption premium redemption premium to the
greater of the equity value of our common stock underlying the
Notes and the equity value of the change of control consideration
payable to the holder of our common stock underlying the
Notes. |
|
Subsequent Placement Optional Redemption |
Upon a subsequent placement, each holder of Notes may require us to
use up to 20% of the gross proceeds of such subsequent placement
(less any reasonable placement agent, underwriter and/or legal fees
and expenses) to redeem in cash all, or any portion, of the Notes,
at a 5% redemption premium. |
|
Use of Proceeds |
We intend to use the net proceeds from the sale of such securities
for working capital and general corporate purposes. We are
restricted from using the proceeds from the sale of the Notes for
satisfaction of indebtedness of the Company or any of its
subsidiaries, the redemption or repurchase of any securities of the
Company or its subsidiaries, or the settlement of any outstanding
litigation. Please see the section entitled “Use of Proceeds” in
this prospectus supplement. |
|
Risk Factors |
See “Risk Factors” in this prospectus supplement as well as the
other information contained in this prospectus supplement and the
accompanying prospectus before making a decision to invest in our
common stock. |
|
No Listing of Notes |
We do not intend to apply for listing of the Notes on any
securities exchange. |
|
Trading Market |
Our common stock is traded on the OTC:QB marketplace maintained by
OTC Markets Group, Inc. (the “OTC”), under the symbol
“CVSI.” |
RISK FACTORS
Investing in our securities involves a high degree of risk. You
should carefully consider the risks described below and all other
information contained in this prospectus supplement and the
accompanying prospectus and incorporated by reference in this
prospectus supplement and the accompanying prospectus, and in any
free writing prospectus that we have authorized for use in
connection with this offering, before purchasing shares of our
common stock. These risks and uncertainties are not the only ones
facing us. Additional risks and uncertainties that we are unaware
of, or that we currently deem immaterial, also may become important
factors that affect us. If any of such risks or the risks described
below or in our SEC filings occur, our business, financial
condition or results of operations could be materially and
adversely affected. In that case, the trading price of our common
stock could decline, and you may lose some or all of your
investment.
Risks Related to This Offering
The market price for our common stock is particularly volatile
given our small and thinly traded public float, which could lead to
wide fluctuations in our share price. You may be unable to sell any
common stock that you hold upon conversion at or above your
conversion price, which may result in substantial losses to
you.
The market for our common stock is characterized by significant
price volatility when compared to the shares of larger, more
established companies that have large public floats, and we expect
that our share price will continue to be more volatile than the
shares of such larger, more established companies for the
indefinite future. The volatility in our share price is
attributable to a number of factors. First, as noted above, our
common stock is, compared to the shares of such larger, more
established companies, thinly traded. The price for our shares
could, for example, decline precipitously in the event that a large
number of our common stock is sold on the market without
commensurate demand. Secondly, an investment in our securities is a
speculative or “risky” investment due to our lack of significant
profits to date. As a consequence of this enhanced risk, more
risk-adverse investors may, under the fear of losing all or most of
their investment in the event of negative news or lack of progress,
be more inclined to sell their shares on the market more quickly
and at greater discounts than would be the case with the stock of a
larger, more established company that trades on a national
securities exchange and has a large public float. Many of these
factors are beyond our control and may decrease the market price of
our common stock regardless of our operating
performance.
There is currently no established trading market for the Notes and
we do not expect that one will develop.
There currently is no established trading market for the Notes. In
addition, we do not intend to apply for listing of the Notes on any
securities exchange or to arrange for their quotation on any
automated dealer quotation system, and we do not intend to make a
market in the Notes and do not expect that one will develop. As a
result, we cannot assure you that an active trading market will
develop for the Notes. If an active trading market does not develop
or is not maintained, the liquidity of the Notes may be adversely
affected. In that case, you may not be able to sell your Notes at a
particular time, or you may not be able to sell your Notes at a
favorable price.
The sale or availability for sale of shares issuable upon
conversion of the Notes may depress the price of our common stock
and encourage short sales by third parties, which could further
depress the price of our common stock.
To the extent that the purchasers of the Notes sell shares of our
common stock issued upon conversion of the Notes, the market price
of such shares may decrease due to the additional selling pressure
in the market. In addition, the risk of dilution from issuances of
such shares may cause stockholders to sell their shares of our
common stock, which could further contribute to any decline in the
price of our common stock. Any downward pressure on the price of
our common stock caused by the sale or potential sale of such
shares could encourage short sales by third parties. In a short
sale, a prospective seller borrows shares from a stockholder or
broker and sells the borrowed shares. The prospective seller hopes
that the share price will decline, at which time the seller can
purchase shares at a lower price for delivery back to the lender.
The seller profits when the share price declines because it is
purchasing shares at a price lower than the sale price of the
borrowed shares. Such sales could place downward pressure on the
price of our common stock by increasing the number of shares of our
common stock being sold, which could further contribute to any
decline in the market price of our common stock.
Holders of the Notes will not be entitled to any rights with
respect to our common stock but will be subject to all changes made
with respect to our common stock.
Holders of the Notes will not be entitled to any rights with
respect to our common stock, but holders of the Notes will be
subject to all changes affecting our common stock. For example, if
an amendment is proposed to our certificate of incorporation
requiring stockholder approval and the record date for determining
the stockholders of record entitled to vote on the amendment occurs
prior to the relevant holder acquiring shares of our common stock
as a result of conversion of such holder’s Notes or the repayment
of such Notes in the form of common stock, such holder will not be
entitled to vote on the amendment, although such holder will
nevertheless be subject to any changes in the powers, preferences
or special rights of our common stock.
U.S. broker-dealers may be discouraged from effecting transactions
in shares of our common stock because they may be considered penny
stocks and thus be subject to the penny stock rules.
The SEC has adopted a number of rules to regulate a “penny stock”
that restricts transactions involving stock which is deemed to be a
penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3,
15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These
rules may have the effect of reducing the liquidity of penny
stocks. “Penny stocks” generally are equity securities with a price
of less than $5.00 per share (other than securities registered on
certain national securities exchanges or traded on Nasdaq if
current price and volume information with respect to transactions
in such securities is provided by the exchange or system). Our
shares of common stock are a “penny stock” within the meaning of
the rules. The additional sales practice and disclosure
requirements imposed upon U.S. broker-dealers may discourage such
broker-dealers from effecting transactions in shares of our common
stock, which could severely limit the market liquidity of such
shares of common stock and impede their sale in the secondary
market.
A U.S. broker-dealer selling a penny stock to anyone other than an
established customer or “accredited investor” (generally, an
individual with a net worth in excess of $1,000,000 or an annual
income exceeding $200,000, or $300,000 together with his or her
spouse) must make a special suitability determination for the
purchaser and must receive the purchaser’s written consent to the
transaction prior to sale, unless the broker-dealer or the
transaction is otherwise exempt. In addition, the “penny stock”
regulations require the U.S. broker-dealer to deliver, prior to any
transaction involving a “penny stock”, a disclosure schedule
prepared in accordance with SEC standards relating to the “penny
stock” market, unless the broker-dealer or the transaction is
otherwise exempt. A U.S. broker-dealer is also required to disclose
commissions payable to the U.S. broker-dealer and the registered
representative and current quotations for the securities. Finally,
a U.S. broker-dealer is required to submit monthly statements
disclosing recent price information with respect to any “penny
stock” held in a customer’s account and information with respect to
the limited market in “penny stocks”.
You should be aware that, according to the SEC, the market for
“penny stocks” has suffered in recent years from patterns of fraud
and abuse. Such patterns include (i) control of the market for the
security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and
misleading press releases; (iii) “boiler room” practices involving
high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (iv) excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, resulting in investor losses. Our management is aware of the
abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the
market, management will strive within the confines of practical
limitations to prevent the described patterns from being
established with respect to our securities.
If and when a larger trading market for our common stock develops,
the market price of our common stock is still likely to be highly
volatile and subject to wide fluctuations, and you may be unable to
resell your shares at or above the price at which you acquired
them.
The market price of our common stock may be highly volatile and
could be subject to wide fluctuations in response to a number of
factors that are beyond our control, including, but not limited
to:
•variations
in our revenues and operating expenses;
•actual
or anticipated changes in the estimates of our operating results or
changes in stock market analyst recommendations regarding our
common stock, other comparable companies or our industry
generally;
•market
conditions in our industry, the industries of our customers and the
economy as a whole;
•actual
or expected changes in our growth rates or our competitors’ growth
rates;
•developments
in the financial markets and worldwide or regional
economies;
•Global
economic disruptions such as the current coronavirus (COVID-19)
pandemic;
•announcements
of innovations or new products or services by us or our
competitors;
•announcements
by the government relating to regulations that govern our
industry;
•sales
of our common stock or other securities by us or in the open
market; and
•changes
in the market valuations of other comparable
companies.
In addition, if the market for consumer CBD products or the stock
market in general experiences loss of investor confidence, the
trading price of our common stock could decline for reasons
unrelated to our business, financial condition or operating
results. The trading price of our shares of common stock might also
decline in reaction to events that affect other companies in our
industry, even if these events do not directly affect us. Each of
these factors, among others, could harm the value of your
investment in our securities. In the past, following periods of
volatility in the market, securities class-action litigation has
often been instituted against companies. Such litigation, if
instituted against us, could result in substantial costs and
diversion of management’s attention and resources, which could
materially and adversely affect our business, operating results and
financial condition.
In making your investment decision, you should understand that we
have not authorized any other party to provide you with information
concerning us or this offering.
You should carefully evaluate all of the information in this
prospectus supplement before investing in our company. We may
receive media coverage regarding our company, including coverage
that is not directly attributable to statements made by our
officers, that incorrectly reports on statements made by our
officers or employees, or that is misleading as a result of
omitting information provided by us, our officers or employees. We
have not authorized any other party to provide you with information
concerning us or this offering, and you should not rely on this
information in making an investment decision.
We do not anticipate paying dividends on our common stock in the
foreseeable future; you should not buy our securities if you expect
dividends.
The payment of dividends on our common stock will depend on
earnings, financial condition and other business and economic
factors affecting us at such time as our board of directors may
consider relevant. If we do not pay dividends, our common stock may
be less valuable because a return on your investment will only
occur if our stock price appreciates.
We currently intend to retain our future earnings to support
operations and to finance expansion and, therefore, we do not
anticipate paying any cash dividends on our common stock in the
foreseeable future.
You may experience additional dilution in the future.
We may acquire other technologies or finance strategic alliances by
issuing our equity or equity-linked securities, which may result in
additional dilution to our stockholders.
We have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our management will have broad discretion in the application of the
net proceeds from this offering, including for any of the purposes
described in the section of this prospectus supplement entitled
“Use of Proceeds.” The failure by our management to apply these
funds effectively could harm our business.
Exercise of options may have a dilutive effect on your percentage
ownership of common stock upon conversion \ of the Notes and may
result in a dilution of your voting power and an increase in the
number of shares of common stock eligible for future resale in the
public market, which may negatively impact the trading price of our
shares of common stock.
The exercise of some or all of our outstanding convertible
securities could result in significant dilution in the percentage
ownership interest of investors in this offering and in the
percentage ownership interest of our existing common stockholders
and in a significant dilution of voting rights and earnings per
share.
As of June 30, 2021, we have options to purchase 39,333,180 shares
of our common stock outstanding and exercisable at an average price
of $0.47 per share.
In addition to the dilutive effects described above, the exercise
of those securities would lead to an increase in the number of
shares of common stock eligible for resale in the public market.
Sales of substantial numbers of such shares of common stock in the
public market could adversely affect the market price of our shares
of common stock. Substantial dilution and/or a substantial increase
in the number of shares of common stock available for future resale
may negatively impact the trading price of our shares of common
stock.
We may seek to raise additional funds, finance acquisitions or
develop strategic relationships by issuing securities that would
dilute the ownership of the common stock. Depending on the terms
available to us, if these activities result in significant
dilution, it may negatively impact the trading price of our shares
of common stock.
We have financed our operations, and we expect to continue to
finance our operations, acquisitions, if any, and the development
of strategic relationships by issuing equity and/or convertible
securities, which could significantly reduce the percentage
ownership of our existing stockholders. Further, any additional
financing that we secure may require the granting of rights,
preferences or privileges senior to, or pari passu with, those of
our common stock. Any issuances by us of equity securities may be
at or below the prevailing market price of our common stock and in
any event may have a dilutive impact on your ownership interest,
which could cause the market price of our common stock to decline.
We may also raise additional funds through the incurrence of debt
or the issuance or sale of other securities or instruments senior
to our shares of common stock. The holders of any securities or
instruments we may issue may have rights superior to the rights of
our common stockholders. If we experience dilution from issuance of
additional securities and we grant superior rights to new
securities over common stockholders, it may negatively impact the
trading price of our shares of common stock.
The ongoing coronavirus (COVID-19) pandemic has caused global
economic disruption, which may cause our common stock to drop and
make it difficult for you to sell the common stock you
hold.
In December 2019, a novel strain of coronavirus (“COVID-19”) was
reported in Wuhan, China. The COVID-19 pandemic, as it was declared
by the World Health Organization, has continued to spread and has
already caused severe global disruptions. The extent of COVID-19’s
effect on our market performance and stock price will depend on
future developments, including the duration, spread and intensity
of the pandemic, all of which are uncertain and difficult to
predict considering the rapidly evolving landscape. If an active
and liquid trading market does not develop or if developed cannot
be sustained, you may have difficulty selling any of our common
stock that you hold. The market price of our common stock may
decline below the conversion price, and you may not be able to sell
your shares of our common stock at or above the price you paid, or
at all.
USE OF PROCEEDS
We will have broad discretion in the use of the net proceeds from
the sale of the Notes offered under this prospectus supplement. We
intend to use the net proceeds from the sale of such securities for
working capital and general corporate purposes. We may also use a
portion of the net proceeds to acquire or invest in complementary
businesses, products and technologies. Although we have no specific
agreements, commitments or understandings with respect to any
acquisition, we evaluate acquisition opportunities and engage in
related discussions with other companies from time to
time.
The principal purposes of this offering are to increase our
operating and financial flexibility. As of the date of this
prospectus supplement, we cannot specify with certainty all of the
particular uses for the net proceeds we will have upon completion
of this offering. Accordingly, our management will have broad
discretion in the application of net proceeds, if any.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common
stock. Our Board of Directors has sole discretion to declare
dividends. We currently intend to retain all available funds and
any future earnings to support our operations and finance the
growth and development of our business. We do not intend to pay
cash dividends on our common stock for the foreseeable future. Any
future determination related to our dividend policy will be made at
the discretion of our board of directors and will depend upon,
among other factors, our results of operations, financial
condition, capital requirements, contractual restrictions, business
prospects and other factors our board of directors may deem
relevant.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of June 30, 2021:
•on
an actual basis; and
•on
a pro forma basis to reflect the sale of Notes in the aggregate
original principal amount of $5.3 million after deducting fees and
expenses.
You should read this table along with our unaudited consolidated
financial statements and related notes for the six months ended
June 30, 2021 as well as the other financial information
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
(Unaudited) |
|
Pro Forma Adjustments |
|
Pro Forma (unaudited) |
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash |
|
2,961,000 |
|
5,300,000 |
|
8,261,000 |
|
Other assets |
|
24,849,000 |
|
|
|
24,849,000 |
|
Total Assets |
|
27,810,000 |
|
5,300,000 |
|
33,110,000 |
|
Current Liabilities |
|
14,563,000 |
|
5,300,000 |
|
19,863,000 |
|
Long Term Liabilities (and non-current Operating Lease
liabilities) |
|
3,270,000 |
|
|
|
3,270,000 |
|
Total Liabilities |
|
17,833,000 |
|
5,300,000 |
|
23,133,000 |
|
|
|
|
|
|
|
|
|
Stockholder Equity |
|
9,977,000 |
|
|
|
9,977,000 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’
equity
|
|
27,810,000 |
|
5,300,000 |
|
33,110,000 |
DESCRIPTION OF SECURITIES BEING OFFERED
We are offering pursuant to an indenture (as supplemented by the
first supplemental indenture) with Wilmington Savings Fund Society,
FSB, as trustee), senior convertible notes due 2022, in the
aggregate original principal amount of $1,060,000, which we refer
to herein as the “Notes”, which Notes shall be convertible into
shares of our common stock. The Notes are being sold pursuant to
this prospectus supplement, the indenture, the first supplemental
indenture and the terms of a securities purchase agreement dated
November 14, 2021 (which we refer to herein as the “Securities
Purchase Agreement”) between us and each purchaser in connection
with this offering.
The following is a description of the material terms of the Notes,
the indenture, the first supplemental indenture and our common
stock. It does not purport to be complete. This summary is subject
to and is qualified by reference to all the provisions of the
Notes, the indenture and the first supplemental indenture,
including the definitions of certain terms used therein. We urge
you to read these documents and the securities purchase agreement
because they, and not this description, define your rights as a
Holder of the Notes. You may request copies of the Notes,
indenture, first supplemental indenture and securities purchase
agreement as set forth under the caption “Where You Can Find More
Information.”
Description of Notes
We will issue the Notes as senior unsecured obligations of the
Company under an indenture, which will be dated as of the closing
date of this offering, between us and Wilmington Savings Fund
Society, FSB, as trustee, as supplemented by a first supplemental
indenture thereto, dated November 17, 2021, establishing the terms
and conditions of the Notes. We refer to the indenture without
supplement as the “base indenture.” We refer to the supplement to
the base indenture as the “first supplemental indenture.” We refer
to the base indenture as supplemented by the first supplemental
indenture as the “indenture.” The terms of the Notes include those
provided in the indenture and those made part of the indenture by
reference to the Trust Indenture Act.
The following description of the particular terms of the Notes
supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the debt
securities set forth in the accompanying prospectus supplement, to
which reference is hereby made. Terms not defined in this
description have the meanings given to them in the
indenture.
The Notes will be issued at a 6% original issue discount. The Notes
will be issued in certificated form and not as global
securities.
Initial Closing; Additional Closings
At the initial closing of this offering, we will issue $1,060,000
in aggregate principal amount of Notes to certain institutional
investors.
Upon our filing of an additional prospectus supplement and
supplemental indenture and our satisfaction of certain other
closing conditions, we may elect to consummate additional closings
of up to $4,240,000 in aggregate principal amount of Notes at
additional closings pursuant to the Securities Purchase Agreement.
However, we are not registering pursuant to this prospectus
supplement the issuance of any such Senior Convertible Notes due
2022 (or shares of common stock issuable upon conversion of such
Senior Convertible Notes due 2022) that may be issued, from time to
time, at such additional closings under the Securities Purchase
Agreement.
The additional closing conditions include, without
limitation:
•our
filing with the Securities and Exchange Commission of a new
prospectus supplement and due execution and delivery of an
indenture supplement with respect to the Senior Convertible Notes
due 2022 to be issued at such additional closing;
•less
than $106,000 in aggregate principal amount of Notes remaining
outstanding;
•the
daily dollar trading volume of our common stock over the fifteen
trading days preceding the additional closing is not less than
$75,000;
•our
volume weighted average price of our common stock during the
fifteen trading days before the additional closing exceeds $0.15;
and
•the
satisfaction of certain equity conditions set forth in the
Securities Purchase Agreement and the Notes.
Ranking
The Notes will be the senior unsecured obligations of the Company
and not the financial obligations of our subsidiaries. The Notes
will be senior to all other indebtedness of the Company and/or any
of our subsidiaries.
Maturity Date
Unless earlier converted, or redeemed, the Notes will mature on May
17, 2022, the six-month anniversary of their issuance date, which
we refer to herein as the “Maturity Date”, subject to the right of
the investors to extend the date:
•if
an event of default under the Notes has occurred and is continuing
(or any event shall have occurred and be continuing that with the
passage of time and the failure to cure would result in an event of
default under the Notes); and
•for
a period of 20 business days after the consummation of a
fundamental transaction if certain events occur.
We are required to pay, on the Maturity Date, all outstanding
principal, accrued and unpaid interest and accrued and unpaid late
charges on such principal and interest, if any.
Interest
The Notes shall not bear interest except upon the occurrence (and
during the continuance) of an event of default (see “Events of
Default” below). After the occurrence and during the continuance of
an event of default, the Notes will accrue interest at the rate of
15.0% per annum. The interest shall be computed on the basis of a
360-day year and twelve 30-day months, and shall be payable in
arrears on the first trading day of each such calendar month in
which interest accrues or otherwise in accordance with the terms of
the Notes. If a holder elects to convert or redeem all or any
portion of a Note prior to the Maturity Date, all accrued and
unpaid interest on the amount being converted or redeemed will also
be payable. If we elect to redeem all or any portion of a Note
prior to the Maturity Date, all accrued and unpaid interest on the
amount will also be payable.
Late Charges
We are required to pay a late charge of 15% on any amount of
principal or other amounts that are not paid when due.
Conversion
Fixed Conversions at Option of Holder
Each holder of Notes may convert all, or any part, of the
outstanding principal and interest of the Notes, at any time at
such holder’s option, into shares of our common stock at the
initial fixed conversion price of $0.2611, which is subject
to:
•proportional
adjustment upon the occurrence of any stock split, stock dividend,
stock combination and/or similar transactions; and
•full-ratchet
adjustment in connection a subsequent offering at a per share price
less than the fixed conversion price then in effect.
Voluntary Adjustment Right
Subject to the rules and regulations of the OTC Markets Group,
Inc., we have the right, at any time with the written consent of
the holders, to lower the fixed conversion price to any amount and
for any period of time deemed appropriate by our board of
directors.
Adjustment to Fixed Conversion Price on Additional
Closings
Upon each additional close, the fixed conversion price of all Notes
are subject to downward adjustment if greater than the lower
of:
•120%
of the closing bid price of our common stock on the trading day
immediately preceding such additional closing date;
and
•120%
of the arithmetic average of the volume weighted average prices of
our common stock on the five trading days preceding the additional
closing.
Alternate Optional Conversions
Alternate Optional Conversion
At any time, at the option of the holder, the holder may convert
all, or any part, of the Note into shares of common stock at an
“Alternate Conversion Price” equal to the lesser of:
•the
fixed conversion price then in effect; and
•the
greater of:
◦the
floor price of $0.01; and
◦90%
of the arithmetic average of the three lowest daily volume weighted
average prices of our common stock during the ten trading days
immediately prior to such conversion and the greater of the floor
price; and
◦97%
of the lowest sale price of the common stock on the applicable
conversion date.
Alternate Event of Default Optional Conversion
If an event of default has occurred under the Notes, each holder
may alternatively elect to convert the Note at the Alternate
Conversion Price described above, subject to an additional 15%
premium.
Beneficial Ownership Limitation on Conversion
The Notes may not be converted and shares of common stock may not
be issued under Notes if, after giving effect to the conversion or
issuance, the applicable holder of Notes (together with its
affiliates, if any) would beneficially own in excess of 4.99% of
our outstanding shares of common stock, which we refer to herein as
the “Note Blocker”. The Note Blocker may be raised or lowered to
any other percentage not in excess of 9.99% at the option of the
applicable holder of Notes, except that any raise will only be
effective upon 61-days’ prior notice to us.
Fundamental Transactions
The Notes prohibit us from entering specified fundamental
transactions (including, without limitation, mergers, business
combinations and similar transactions) unless we (or our successor)
is a public company that assumes in writing all of our obligations
under the Notes.
Change of Control Redemption Right
In connection with a change of control of the Company, each holder
may require us to redeem in cash all, or any portion, of the Notes
at the greater of the face value, a 15% redemption premium to the
equity value of our common stock underlying the Notes and the
equity value of the change of control consideration payable to the
holder of our common stock underlying the Notes.
The equity value of our common stock underlying the Notes is
calculated using the greatest closing sale price of our common
stock during the period immediately preceding the consummation or
the public announcement of the change of control and ending the
date the holder gives notice of such redemption.
The equity value of the change of control consideration payable to
the holder of our common stock underlying the Notes is calculated
using the aggregate cash consideration per share of our common
stock to be paid to the holders of our common stock upon the change
of control.
Covenants
The Notes contain a variety of obligations on our part not to
engage in specified activities, which are typical for transactions
of this type, as well as the following covenants:
•we
and our subsidiaries will not (directly or indirectly) incur any
other indebtedness except for permitted indebtedness;
•we
and our subsidiaries will not (directly or indirectly) will not
incur any liens, except for permitted liens;
•we
and our subsidiaries will not, directly or indirectly, redeem or
repay all or any portion of any indebtedness (except for certain
permitted indebtedness) if at the time the payment is due or is
made or, after giving effect to the payment, an event constituting,
or that with the passage of time and without being cured would
constitute, an event of default has occurred and is
continuing;
•in
connection with a fundamental transaction, we and our subsidiaries
will not redeem, repurchase or pay any dividend or distribution on
our respective capital stock;
•we
and our subsidiaries will not sell, lease, assign, transfer or
otherwise dispose of any of our assets or any assets of any
subsidiary, except for permitted dispositions (including sales of
assets in the ordinary course of business);
•we
and our subsidiaries will not (directly or indirectly) engage in a
material line of business substantially different from those lines
of business as of the date of the issuance of the
Notes;
•we
and our subsidiaries will not initially, directly or indirectly,
permit any indebtedness to mature or accelerate prior to the
Maturity Date of the Notes;
•we
and our subsidiaries will maintain and our existence, rights, and
privileges, to become or remain, duly qualified and in good
standing in each jurisdiction in which the transaction of its
business makes such qualification necessary;
•we
and our subsidiaries will maintain and preserve, all of its
properties which are necessary or useful in the proper conduct of
our business;
•we
and our subsidiaries will take all action necessary or advisable to
maintain all of our the intellectual property rights (as defined in
the Securities Purchase Agreement) that are necessary or material
to the conduct of our business in full force and
effect;
•we
and our subsidiaries will maintain insurance with in such amounts
and covering such risks as is required by any governmental
authority having jurisdiction with respect thereto or as is in
accordance with sound business practice by similarly situated
companies;
•we
and our subsidiaries will not, (directly or indirectly), enter
into, renew, extend or be a party to, any transaction or series of
related transactions with any affiliate, except transactions in the
ordinary course of business and on terms that are comparable to an
arm’s length transaction with a non-affiliate;
•we
will not, directly or indirectly, without the prior written consent
of the holders of a majority in aggregate principal amount of the
Notes then outstanding, (i) issue any Notes (other than as
contemplated by this offering) or (ii) issue any other securities
that would cause a breach or default under the Notes;
•we
will not plead or assert in any way against the holders that it is
entitled to any benefit or advantage under any usury laws;
and
•we
and our subsidiaries will pay when due all taxes, fees or other
charges of any nature whatsoever now or hereafter imposed or
assessed us.
Events of Default
Under the terms of the first supplemental indenture, the events of
default contained in the base indenture shall not apply to the
Notes. Rather, the Notes contain standard and customary events of
default including but not limited: (i) the suspension from trading
or the failure to list our common stock within certain time
periods; (ii) failure to make payments when due under the Notes;
and (iii) bankruptcy or insolvency of the Company.
If an event of default occurs, each holder may require us to redeem
all or any portion of the Notes (including all accrued and unpaid
interest and late charges thereon), in cash, at the greater of the
face value and a 15% redemption premium
or (10% if such event of default is a price default) to the greater
of the face value and the equity value of our common stock
underlying the Notes.
The equity value of our common stock underlying the Notes is
calculated using the greatest closing sale price of our common
stock on any trading day immediately preceding such event of
default and the date we make the entire payment
required.
Subsequent Placement Option Redemption Right of Holder
If we consummate a subsequent public or private offering of
securities of the Company, including, without limitation, any
equity security or any equity-linked or related security, any
convertible securities, any debt, any preferred stock or any
purchase rights (each referred to herein as a subsequent
placement), each holder of Notes may require us to use up to 20% of
the gross proceeds of such subsequent placement (less any
reasonable placement agent, underwriter and/or legal fees and
expenses) to redeem in cash all, or any portion, of the Notes, at a
5% redemption premium.
Company Optional Redemption Rights
At any time no event of default or equity condition failure exists,
we may redeem all or any portion of the Notes outstanding in cash a
15% redemption premium to the greater of the face value and the
equity value of our common stock underlying the Notes.
The equity value of our common stock underlying the Notes is
calculated using the greatest closing sale price of our common
stock on any trading day during the period commencing on the date
immediately preceding such date we notify the applicable holder of
such redemption election and the date we make the entire payment
required.
The Company may deliver no more than one such redemption notice
during any twenty (20) trading day period.
Changes to the Base Indenture
We and the trustee may amend or supplement the base indenture with
the consent of each holder of Notes then outstanding (excluding any
Notes held by us or any of our subsidiaries). However, any such
amendment, waiver or supplement may not amend or waive the
subordination provisions contained in the base indenture or in the
first supplemental indenture in any manner adverse to the holders
of the Notes then outstanding.
Changes to the First Supplemental Indenture
Subject to the provisions in the first supplemental indenture
requiring that none of the securities issued under the indenture,
including the Notes, shall be represented by global securities and
the rights of the holders of the Senior Notes, the first
supplemental indenture may be amended by the written consent of the
Company and the holders of a majority of the aggregate principal
amount of the Notes then outstanding. Subject to the provisions in
the first supplemental indenture requiring that none of the
securities issued under the indenture, including the Notes, shall
be represented by global securities and the rights of the holders
of the Senior Notes, no provision of the first supplemental
indenture may be waived other than in writing signed by the party
against whom enforcement is sought.
Changes to the Notes
Each Note may not be changed or amended without the prior written
consent of the holder of such Note.
Reports
So long as any Notes are outstanding, we will be required to
deliver to the trustee, within 15 calendar days after have filed
with the Securities and Exchange Commission, copies of our
quarterly and annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing
as the Securities and Exchange Commission may from time to time by
rules and regulations prescribe) which we are required to file with
the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act. Documents filed by us with the
Securities and Exchange Commission via its EDGAR system (or any
successor thereto) will be deemed to be filed with the trustee as
of the time such documents are so filed. In the event we are at any
time no longer subject to the reporting requirements of Section 13
or 15(d) of the Exchange Act, so long as any of the Notes are
outstanding we must continue to file with the Securities and
Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by the Securities and Exchange
Commission, such of the supplementary and periodic information,
documents and reports which may be required under Section 13 of the
Exchange Act in respect of a security listed and registered on a
national securities exchange as may be prescribed from time to time
in such rules and regulations (unless the Securities and Exchange
Commission will not accept such
a filing) and make such information available to the trustee, the
Holders of the Notes, securities analysts and prospective
investors. The delivery of any such reports, information and
documents is for informational purposes only and the trustee’s
receipt of such shall not constitute its actual or constructive
knowledge or notice of any information contained therein or
determinable from information contained therein. The trustee shall
have no duty to monitor or confirm, on a continuing basis or
otherwise, the Company’s or any other person’s compliance with any
of the covenants under the indenture, to determine whether such
reports, information or documents are available on the Securities
and Exchange Commission’s website (including the EDGAR system or
any successor system,) the Company’s website or otherwise, to
examine such reports, information, documents and other reports to
ensure compliance with the provisions of this Indenture, or to
ascertain the correctness or otherwise of the information or the
statements contained therein.
Calculations in Respect of the Notes
We will be responsible for making all calculations called for under
the Notes. These calculations include, but are not limited to,
determinations of the prices of our common stock, the conversion
price of the Notes, accrued interest payable on the Notes, the
number of shares of our common stock issuable in connection with
payments of principal and interest under the Notes. We will make
all these calculations in good faith and, absent manifest error,
our calculations will be final and binding on Holders of Notes. We
will provide a schedule of our calculations to the trustee, and the
trustee has no duty to make any calculations and is entitled to
rely conclusively upon the accuracy of our calculations without
independent verification.
Form, Denomination and Registration
The Notes will be issued: (i) in certificated form; (ii) without
interest coupons; and (iii) in minimum denominations of $1,000
principal amount and whole multiples of $1,000.
Excluded Provisions of the Base Indenture
We have elected, through the first supplemental indenture, that
none of the following provisions of the base indenture shall be
applicable to the Notes and any analogous provisions (including
definitions related thereto) of the first supplemental indenture
shall govern:
•Definition
of “Business Day” in Section 1.1;
•Definition
of “Event of Default” in Section 6.1;
•Definition
of “Subsidiary” in Section 1.1;
•Definition
of "Global Security" or "Global Securities" in Section
1.1;
•Section
10.7 (Legal Holiday);
•Section
2.11 (Temporary Securities);
•Section
2.8 (Mutilated, Destroyed, Lost and Stolen
Securities);
•Section
2.13 (Defaulted Interest);
•Section
6.2 (Acceleration of Maturity; Rescission and
Annulment)
•Section
6.13 (Waiver of Past Defaults)
•Section
6.7 (Limitation on Suits);
•Section
9.1 (Supplemental Indentures - Without Consent of
Holders);
•Section
9.2 (Supplemental Indentures - With Consent of
Holders);
•Article
III (Redemption);
•Article
V (Successors);
•Article
VIII (Satisfaction and Discharge; Defeasance); and
•Article
XI (Sinking Funds).
Governing Law
The Notes will be governed by, and construed in accordance with,
the laws of Illinois without regard to its conflicts of law
principles.
Information Concerning the Trustee
We have appointed Wilmington Savings Fund Society, FSB, as the
trustee under the indenture. The sole duty of the trustee is to
function as the registrar for the Notes. We will function as
payment agent under the Notes. From time to time, we may maintain
deposit accounts and conduct other banking transactions with the
trustee to be appointed under the indenture or its affiliates in
the ordinary course of business. The indenture provides that if and
when the trustee becomes our creditor (or any other obligor under
the Notes), the trustee shall be subject to the provisions of the
Trust Indenture Act regarding collection of claims against us (or
any obligor).
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal
income tax considerations to U.S. Holders (as defined below) of the
purchase, ownership and disposition of our notes and any of our
common stock received upon their conversion. This summary does not
purport to deal with all aspects of U.S. federal income taxation
that may be relevant to an investor’s decision to purchase notes,
nor any tax consequences arising under the laws of any state,
locality or foreign jurisdiction. This summary is not intended to
be applicable to all categories of investors, such as dealers in
securities, banks, thrifts or other financial institutions,
insurance companies, regulated investment companies, tax-exempt
organizations, U.S. expatriates, persons that hold the notes or
common stock as part of a straddle, conversion transaction or
hedge, persons who own 10% or more of our outstanding stock,
persons that are required to accelerate the recognition of any item
of gross income with respect to the notes as a result of such
income being recognized on an applicable financial statement,
persons deemed to sell the notes or the common stock under the
constructive sale provisions of the U.S. Internal Revenue Code of
1986, as amended, or the Code, a U.S. Holder (as defined below)
whose “functional currency” is other than the U.S. dollar, or
persons who acquire or are deemed to have acquired the notes in an
exchange or for property other than cash, or holders subject to the
alternative minimum tax, each of which may be subject to special
rules. In addition, this discussion is limited to persons who hold
the notes and common stock as “capital assets” (generally, property
held for investment) within the meaning of Code Section 1221 and
acquire the notes in connection with this offering.
If an entity treated as a partnership for U.S. federal income tax
purposes holds the notes or the common stock, the U.S. federal
income tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership.
Partners of partnerships holding the notes or the common stock are
encouraged to consult their own tax advisors.
The following discussion of U.S. federal income tax matters is
based on the Code, judicial decisions, administrative
pronouncements, and existing and proposed regulations issued by the
U.S. Department of the Treasury, all of which are subject to
change, possibly with retroactive effect. References in the
following discussion to “we” and “us” are to CV Sciences and its
subsidiaries on a consolidated basis.
PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE UNITED STATES FEDERAL, STATE, LOCAL AND OTHER
TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP, CONVERSION AND
DISPOSITION OF THE NOTES.
U.S. Federal Income Taxation of U.S. Holders
As used in this section, a “U.S. Holder” is a beneficial owner of
notes or common stock that is: (1) an individual citizen or
resident alien of the United States, (2) a corporation or other
entity that is taxable as a corporation, created or organized under
the laws of the United States or any state or political subdivision
thereof (including the District of Columbia), (3) an estate, the
income of which is subject to U.S. federal income taxation
regardless of its source, and (4) a trust, if (A) a U.S. court can
exercise primary supervision over the administration of such trust
and one or more U.S. persons has the authority to control all
substantial decisions of the trust or (B) the trust has made an
election to be treated as a U.S. person for U.S. federal income tax
purposes.
Payment of Interest
Stated Interest.
Interest on a note generally will be includable in the income of a
U.S. Holder as ordinary income at the time such interest is
received or accrued, in accordance with such holder's regular
method of accounting for U.S. federal income tax
purposes.
Original Issue Discount.
We issued the notes at a substantial discount from their principal
amount at maturity. For United States federal income tax purposes,
the difference between the issue price and the stated principal
amount at maturity of each note constitutes original issue discount
(“OID”). A U.S. Holder will be required to include OID in its gross
income periodically over the term of the notes before receipt of
the cash or other payment attributable to such income.
The amount of OID a U.S. Holder must include in gross income as it
accrues is the sum of the daily portions of OID with respect to the
note for each day during the taxable year or portion of a taxable
year on which the U.S. Holder holds the note. The daily portion is
determined by allocating to each day of an accrual period a
pro rata
portion of an amount equal to the adjusted issue price of the note
at the beginning of the accrual period multiplied by the yield to
maturity of the note. The accrual period of a note may be of any
length the U.S. Holder chooses and may vary in length over the term
of the note, provided that each accrual period is no longer than
one year and each scheduled payment of principal or interest occurs
either on the final day of an accrual period or on the first day of
an accrual period.
The issue price of a note for OID purposes is the first price at
which a substantial amount of notes are sold to investors
(excluding sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement
agents, or wholesalers), which price is expected to be the issue
price shown on the cover of this Prospectus. The adjusted issue
price of the note at the start of any accrual period is the issue
price of the note increased by the accrued original issue discount
for each prior accrual period.
Under these rules, a U.S. Holder will be required to include in
gross income increasingly greater amounts of OID in each successive
accrual period. Any amount included in income as OID will increase
a U.S. Holder’s basis in the note.
Sale, Exchange or Redemption of a Note or Conversion of a Note
Solely in Exchange for Cash
Upon the sale, exchange or redemption of a note or conversion of a
note solely in exchange for cash, a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (1)
the amount of cash proceeds and the fair market value of any
property received on the sale, exchange, redemption or conversion,
except to the extent such amount is attributable to accrued
interest not previously included in income, which is taxable as
ordinary income, and (2) such U.S. Holder's adjusted tax basis in
the note. A U.S. Holder's adjusted tax basis in a note generally
will equal the cost of the note to such U.S. Holder plus the
amount, if any, of OID included in gross income as of the date of
sale, exchange, redemption or conversion of the note, and the
amount, if any, included in income on an adjustment to the
conversion rate of the notes, as described in "Adjustments to
Conversion Rate" below. U.S. Holders are encouraged to consult
their tax advisors regarding the treatment of capital gains (which
may be taxed at lower rates than ordinary income for U.S. Holders
who are individuals, trusts or estates) and capital losses (the
deductibility of which is subject to limitations).
Adjustments to Conversion Rate
The conversion rate of the notes is subject to adjustment under
certain circumstances, as described under "Description of
Notes—Adjustment To Conversion Rate." In the event of an adjustment
to the conversion rate of the notes as a result of taxable
dividends to holders of our common stock or certain other events,
including upon a make-whole fundamental change in certain
circumstances, holders of the notes may be treated as having
received a constructive distribution for U.S. federal income tax
purposes, even if such holder does not exercise its conversion
privilege. In addition, a failure to adjust (or to adjust
adequately) the conversion rate after an event that increases a
noteholder’s proportionate interest in our assets or earnings and
profits could be treated as a constructive distribution. Any such
constructive distribution will be taxable as a dividend to the
extent of our current and accumulated earnings and profits. As a
result, U.S. Holders could have taxable income as a result of an
event pursuant to which no cash or property is received. It is not
clear whether any such dividend will be eligible for the reduced
tax rate available to certain non-corporate U.S. Holders with
respect to “qualified dividend income” as discussed below under
“—Taxation of Distributions on Common Stock.”
Conversion of the Notes Into Common Stock
A U.S. Holder generally will not recognize any income, gain or loss
upon conversion of a note into common stock except with respect to
cash received in lieu of a fractional share of common stock. A U.S.
Holder's tax basis in the common stock received on conversion of a
note will be the same as such U.S. Holder's adjusted tax basis in
the note at the time of conversion, reduced by any basis allocable
to a fractional share interest, and the holding period for the
common stock received on conversion will generally include the
holding period of the note converted. However, to the extent that
any common stock received upon conversion is considered
attributable to accrued interest not previously included in income
by the U.S. Holder, it will be taxable as ordinary income. A U.S.
Holder's tax basis in shares of common stock considered
attributable to accrued interest generally will equal the amount of
such accrued interest included in income, and the holding period
for such shares will begin on the date of conversion.
Cash received in lieu of a fractional share of common stock upon
conversion will be treated as a payment in exchange for the
fractional share of common stock. Accordingly, the receipt of cash
in lieu of a fractional share of common stock
generally will result in capital gain or loss, measured by the
difference between the cash received for the fractional share and
the U.S. Holder's adjusted tax basis in the fractional share, and
will be taxable as described below under "Sale, Exchange or Other
Disposition of Common Stock."
Taxation of Distributions on Common Stock
Distributions, if any, paid on our common stock generally will be
includable in a U.S. Holder’s income as dividend income to the
extent made from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles.
Distributions in excess of our current and accumulated earnings and
profits will be treated first as a non-taxable return of capital to
the extent of the U.S. Holder’s tax basis in his common stock on a
dollar-for-dollar basis and thereafter as capital gain. Such
distributions should qualify for taxation at preferential rates in
the case of a U.S. Holder which is an individual, trust or estate,
provided that such holder meets certain holding period and other
requirements.
Sale, Exchange or Other Disposition of Common Stock
Upon the sale, exchange or other disposition of common stock, a
U.S. Holder generally will recognize capital gain or capital loss
equal to the difference between the amount realized on such sale or
exchange and such holder’s adjusted tax basis in such common stock.
U.S. Holders are encouraged to consult their tax advisors regarding
the treatment of capital gains (which may be taxed at lower rates
than ordinary income for U.S. Holders who are individuals, trusts
or estates) and capital losses (the deductibility of which is
subject to limitations). A U.S. Holder's gain or loss will
generally be treated (subject to certain exceptions) as gain or
loss from sources within the United States for U.S. foreign tax
credit limitation purposes.
Additional Tax on Investment Income
A U.S. Holder that is an individual, estate, or, in certain cases,
a trust, will generally be subject to a 3.8% tax on the lesser of
(1) the U.S. Holder's net investment income for the taxable year
and (2) the excess of the U.S. Holder's modified adjusted gross
income for the taxable year over a certain threshold (which in the
case of individuals is between $125,000 and $250,000). A U.S.
Holder's net investment income will generally include interest
income and gain on the disposition of securities. This tax is in
addition to any income taxes due on such investment income. U.S.
Holders are encouraged to consult their tax advisors regarding the
applicability of the 3.8% tax on net investment income to the
ownership of the notes.
Information Reporting and Backup Withholding
Under certain circumstances, the Code requires “information
reporting” annually to the IRS and to U.S. Holders, and “backup
withholding” with respect to certain payments made on or with
respect to the notes. Certain U.S. Holders are exempt from backup
withholding and information reporting, including tax-exempt
organizations, qualified pension and profit sharing trusts, and
individual retirement accounts that provide a properly completed
IRS Form W-9. Backup withholding will apply to a non-exempt U.S.
Holder if such U.S. Holder (1) fails to furnish its taxpayer
identification number, or TIN, which, for an individual would be
his or her social security number, (2) furnishes an incorrect TIN,
(3) is notified by the IRS that it has failed to properly report
payments of interest and dividends, or (4) under certain
circumstances, fails to certify, under penalties of perjury, that
it has furnished a correct TIN and has not been notified by the IRS
that it is subject to backup withholding for failure to report
interest and dividend payments.
Backup withholding is not an additional tax. Rather, the United
States federal income tax liability of persons subject to backup
withholding will be offset by the amount of tax withheld. If backup
withholding results in an overpayment of United States federal
income tax, a refund or credit may be obtained from the IRS,
provided that certain required information is timely
furnished.
PLAN OF DISTRIBUTION
The terms of this offering were subject to market conditions and
negotiations between us and prospective investors. We have entered
into a Securities Purchase Agreement directly with institutional
investors who have agreed to purchase the Notes and shares issuable
upon conversion of the Notes. We will only sell such securities to
investors who have entered into the Securities Purchase
Agreement.
We currently anticipate that the closing of the sale of the Notes
and shares issuable upon conversion of the Notes is expected to
take place on or about November 17, 2021, subject to satisfaction
of certain conditions. We estimate that the net proceeds from the
sale of the securities offered under this prospectus supplement
will be approximately $850,000, if we sell the Notes
offered
hereby, after deducting estimated offering expenses payable by us.
Our obligation to issue the shares issuable upon conversion of the
Notes to the investors is subject to the conditions set forth in
the Notes and related transaction agreements.
We do not intend to apply to list the Notes on any securities
exchange or to arrange for their quotation on any automated dealer
quotation system.
Our Common Stock is traded on the OTC:QB marketplace maintained by
OTC Markets Group, Inc. (the “OTC”), under the symbol “CVSI.” Our
transfer agent is Issuer Direct Corporation.
LEGAL MATTERS
The validity of the securities offered by this prospectus has been
passed upon for us by Procopio, Cory, Hargreaves & Savitch LLP,
San Diego, California.
EXPERTS
The consolidated financial statements of CV Sciences, Inc. as of
December 31, 2020 and 2019, and for each of the years then ended,
incorporated by reference in this prospectus supplement, have been
so incorporated in reliance on the report of Deloitte & Touche
LLP, an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus supplement and the accompanying prospectus are part
of the registration statement on Form S-3 we filed with the SEC
under the Securities Act and do not contain all the information set
forth in the registration statement. Whenever a reference is made
in this prospectus supplement or the accompanying prospectus to any
of our contracts, agreements or other documents, the reference may
not be complete and you should refer to the exhibits that are a
part of the registration statement or the exhibits to the reports
or other documents incorporated by reference in this prospectus
supplement and the accompanying prospectus for a copy of such
contract, agreement or other document. Because we are subject to
the information and reporting requirements of the Exchange Act, we
file annual, quarterly and current reports, proxy statements and
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 and copy any document we file
at the SEC’s Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the Public Reference
Room.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” information from
other documents that we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is considered
to be part of this prospectus supplement and the accompanying
prospectus. Information contained in this prospectus supplement and
the accompanying prospectus and information that we file with the
SEC in the future and incorporate by reference in this prospectus
supplement and the accompanying prospectus will automatically
update and supersede this information. We incorporate by reference
the documents listed below and any future filings (other than
information in current reports furnished under Item 2.02 or Item
7.01 of Form 8-K and exhibits filed on such form that are related
to such items) we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of the prospectus
supplement and prior to the termination of the offering of the
securities covered by this prospectus supplement:
•our
Annual Report on Form 10-K for the year ended December 31, 2020,
filed with the SEC on March 19, 2021;
•our
Definitive Proxy Statement on Schedule 14A, filed with the SEC on
April 8, 2021;
•our
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2021, June 30, 2021, and September 30, 2021, filed with the SEC on
May 13, 2021, August 16, 2021, and November 15, 2021,
respectively;
•our
Current Reports on Form 8-K, filed with the SEC on June 2, 2021,
June 14, 2021, June 29, 2021, July 30, 2021, September 13, 2021,
and September 30, 2021; and
•the
description of our common stock contained in our registration
statement on Form 8-A, filed with the SEC on May 27, 2012 and any
amendment or report filed with the SEC for the purpose of updating
the description.
All reports and other documents we subsequently file pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering, including all such documents we may
file with the SEC after the date of this prospectus supplement, but
excluding any information furnished to, rather than filed with, the
SEC, will also be incorporated by reference into this prospectus
supplement and deemed to be part of this prospectus supplement from
the date of the filing of such reports and documents.
You may request a free copy of any of the documents incorporated by
reference in this prospectus supplement by writing or telephoning
us at the following address:
CV Sciences, Inc.
Attention: Corporate Secretary
10070 Barnes Canyon Road
San Diego, CA 92121
(866) 290-2157
Exhibits to the filings will not be sent, however, unless those
exhibits have specifically been incorporated by reference in this
prospectus supplement or the accompanying prospectus.
PROSPECTUS
$100,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units
We may offer and sell up to $100 million in the aggregate of the
securities identified above from time to time in one or more
offerings. This prospectus provides you with a general description
of the securities.
Each time we offer and sell securities, we will provide a
supplement to this prospectus that contains specific information
about the offering and the amounts, prices and terms of the
securities. The supplement may also add, update or change
information contained in this prospectus with respect to that
offering. You should carefully read this prospectus and the
applicable prospectus supplement before you invest in any of our
securities.
We may offer and sell the securities described in this prospectus
and any prospectus supplement to or through one or more
underwriters, dealers and agents, or directly to purchasers, or
through a combination of these methods. If any underwriters,
dealers or agents are involved in the sale of any of the
securities, their names and any applicable purchase price, fee,
commission or discount arrangement between or among them will be
set forth, or will be calculable from the information set forth, in
the applicable prospectus supplement. See the sections of this
prospectus entitled “About this Prospectus” and “Plan of
Distribution” for more information. No securities may be sold
without delivery of this prospectus and the applicable prospectus
supplement describing the method and terms of the offering of such
securities.
Investing in our securities involves risks. See the “Risk Factors”
on page 5 of this prospectus and any similar section contained in
the applicable prospectus supplement concerning factors you should
consider before investing in our securities.
Our common stock is traded on the OTC:QB marketplace maintained by
OTC Markets Group, Inc. (the “OTC”), under the symbol “CVSI.” On
April 15, 2020, the last reported sale price of our common stock on
the OTC was $0.605 per share.
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 of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is April 21, 2020.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed
with the U.S. Securities and Exchange Commission (the “SEC”) using
a “shelf” registration process. By using a shelf registration
statement, we may sell securities from time to time and in one or
more offerings up to a total dollar amount of $100 million as
described in this prospectus. Each time that we offer and sell
securities, we will provide a prospectus supplement to this
prospectus that contains specific information about the securities
being offered and sold and the specific terms of that offering. We
may also authorize one or more free writing prospectuses to be
provided to you that may contain material information relating to
these offerings. The prospectus supplement or free writing
prospectus may also add, update or change information contained in
this prospectus with respect to that offering. If there is any
inconsistency between the information in this prospectus and the
applicable prospectus supplement or free writing prospectus, you
should rely on the prospectus supplement or free writing
prospectus, as applicable. Before purchasing any securities, you
should carefully read both this prospectus and the applicable
prospectus supplement (and any applicable free writing
prospectuses), together with the additional information described
under the heading “Where You Can Find More Information;
Incorporation by Reference.”
We have not authorized anyone to provide you with any information
or to make any representations other than those contained in this
prospectus, any applicable prospectus supplement or any free
writing prospectuses prepared by or on behalf of us or to which we
have referred you. We take no responsibility for, and can provide
no assurance as to the reliability of, any other information that
others may give you. We will not make an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this
prospectus and the applicable prospectus supplement to this
prospectus is accurate only as of the date on its respective cover,
that the information appearing in any applicable free writing
prospectus is accurate only as of the date of that free writing
prospectus, and that any information incorporated by reference is
accurate only as of the date of the document incorporated by
reference, unless we indicate otherwise. Our business, financial
condition, results of operations and prospects may have changed
since those dates. This prospectus incorporates by reference, and
any prospectus supplement or free writing prospectus may contain
and incorporate by reference, market data and industry statistics
and forecasts that are based on independent industry publications
and other publicly available information. Although we believe these
sources are reliable, we do not guarantee the accuracy or
completeness of this information and we have not independently
verified this information. Although we are not aware of any
misstatements regarding the market and industry data presented in
this prospectus and the documents incorporated herein by reference,
these estimates involve risks and uncertainties and are subject to
change based on various factors, including those discussed under
the heading “Risk Factors” contained in this prospectus, the
applicable prospectus supplement and any applicable free writing
prospectus, and under similar headings in other documents that are
incorporated by reference into this prospectus. Accordingly,
investors should not place undue reliance on this
information.
When we refer to “CV Sciences,” “CVSI,” “we,” “our,” “us” and the
“company” in this prospectus, we mean CV Sciences, Inc. and its
consolidated subsidiaries, unless otherwise specified. When we
refer to “you,” we mean the potential holders of the applicable
series of securities.
We use our trademarks, including
CV Sciences
and
PlusCBD™,
in this prospectus. This prospectus also includes trademarks,
tradenames and service marks that are the property of other
organizations. Solely for convenience, trademarks and tradenames
referred to in this prospectus may appear without the ® and ™
symbols, but those references are not intended to indicate, in any
way, that we will not assert, to the fullest extent under
applicable law, our rights or that the applicable owner will not
assert its rights, to these trademarks and tradenames.
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY
REFERENCE
Available Information
We file reports, proxy statements and other information with the
SEC. The SEC maintains a website that contains reports, proxy and
information statements and other information about issuers, such as
us, who file electronically with the SEC. The address of that
website is
http://www.sec.gov.
Our website address is www.cvsciences.com. The information on our
website, however, is not, and should not be deemed to be, a part of
this prospectus.
This prospectus and any prospectus supplement are part of a
registration statement that we filed with the SEC and do not
contain all of the information in the registration statement. The
full registration statement may be obtained from the SEC or us, as
provided below. Forms of the indenture and other documents
establishing the terms of the offered securities are or may be
filed as exhibits to the registration statement or documents
incorporated by reference in the registration statement. Statements
in this prospectus or any prospectus supplement about these
documents are summaries and each statement is qualified in all
respects by reference to the document to which it refers. You
should refer to the actual documents for a more complete
description of the relevant matters. You may inspect a copy of the
registration statement through the SEC’s website, as provided
above.
Incorporation by Reference
The SEC’s rules allow us to “incorporate by reference” information
into this prospectus, which means that we can disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference
is deemed to be part of this prospectus, and subsequent information
that we file with the SEC will automatically update and supersede
that information. Any statement contained in this prospectus or a
previously filed document incorporated by reference will be deemed
to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or a
subsequently filed document incorporated by reference modifies or
replaces that statement.
We incorporate by reference our documents listed below and any
future filings made by us with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), between the date of this prospectus and the
termination of the offering of the securities described in this
prospectus. We are not, however, incorporating by reference any
documents or portions thereof, whether specifically listed below or
filed in the future, that are not deemed “filed” with the SEC,
including any information furnished pursuant to Item 2.02 or 7.01
of Form 8-K or related exhibits furnished pursuant to Item 9.01 of
Form 8-K.
This prospectus and any accompanying prospectus supplement
incorporate by reference the documents set forth below that have
previously been filed with the SEC:
•our
Annual Report on Form 10-K for the year ended December 31, 2019,
filed with the SEC on March 30, 2020;
•our
Definitive Proxy Statement on Schedule 14A, filed with the SEC on
March 31, 2020;
•our
Current Reports on Form 8-K, filed with the SEC on March 16, 2020,
March 25, 2020, and April 21, 2020; and
•the
description of our common stock contained in our registration
statement on Form 8-A, filed with the SEC on May 27, 2012 and any
amendment or report filed with the SEC for the purpose of updating
the description.
All reports and other documents we subsequently file pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering, including all such documents we may
file with the SEC after the date of the initial registration
statement and prior to the effectiveness of the registration
statement, but excluding any information furnished to,
rather than filed with, the SEC, will also be incorporated by
reference into this prospectus and deemed to be part of this
prospectus from the date of the filing of such reports and
documents.
You may request a free copy of any of the documents incorporated by
reference in this prospectus by writing or telephoning us at the
following address:
CV Sciences, Inc.
Attention: Corporate Secretary
10070 Barnes Canyon Road
San Diego, CA 92121
(866) 290-2157
Exhibits to the filings will not be sent, however, unless those
exhibits have specifically been incorporated by reference in this
prospectus or any accompanying prospectus supplement.
THE COMPANY
Overview
We operate two distinct business segments: a consumer product
division focused on manufacturing, marketing and selling
plant-based cannabidiol (“CBD”) products to a range of market
sectors; and a drug development division focused on developing and
commercializing CBD-based novel therapeutics utilizing CBD. As of
December 31, 2019, the Company’s PlusCBD™ Oil products were sold at
more than 5,500 retail locations throughout the United States, and
it was the top-selling brand of hemp-derived CBD in the natural
product retail market, according to SPINS, the leading provider of
syndicated data and insights for the natural, organic and specialty
products industry. Our state-of-the-art facility follows all
guidelines for Good Manufacturing Practices (GMP) and our hemp
extracts are processed, produced and tested throughout the
manufacturing process to confirm the cannabinoid content meets
strict company standards. With a commitment to science, PlusCBD™
Oil’s benefits in healthy people are supported by human clinical
research data, in addition to three published clinical case studies
available on PubMed.gov. PlusCBD™ Oil was the first hemp CBD
supplement brand to invest in the scientific evidence necessary to
receive self-affirmed Generally Recognized as Safe (GRAS)
status.
Our principal corporate offices are located at 10070 Barnes Canyon
Road, San Diego, CA 92121, and our telephone number is (866)
290-2157. We maintain a website that contains information
about us at www.cvsciences.com. The information included on
our website is not, and should not be considered, a part of this
prospectus or any accompanying prospectus supplement.
Current Operations
Consumer Products
We manufacture, market and sell consumer products containing
hemp-based CBD under our PlusCBD™ brand in a range of
market sectors including nutraceutical, beauty care and specialty
foods. As of December 31, 2019, we manufactured and distributed
more than 50 products and we expect to continue to add new products
to our PlusCBD™ portfolio to enhance our line of CBD and
hemp-based consumer products. We also expect to develop and launch
new brands to more effectively market and sell certain products.
Hemp-based CBD is one of more than 100 cannabinoids found in hemp,
and is non-psychoactive. Our U.S.-based operations oversee our raw
material supply chain, raw material processing, product development
and manufacturing, and sales and marketing. We intend to continue
to scale operations to accommodate market conditions.
Specialty Pharmaceuticals
Our specialty pharmaceutical segment is developing cannabinoids to
treat medical indications. Cannabinoids are compounds derived from
the Cannabis sativa plant, which contain two primary
cannabinoids, CBD and tetrahydrocannabinol (“THC”). Clinical and
preclinical data suggest that CBD has promising results in treating
a range of medical indications. On January 4, 2016, we acquired
drug development assets in the acquisition of CanX, Inc., a
Florida-based specialty pharmaceutical corporation, utilizing CBD
as the active pharmaceutical ingredient.
Our first patent-pending product candidate, CVSI-007, combines CBD
and nicotine in treatment of smokeless tobacco use and addiction.
There are currently no drugs approved by the U.S. Food & Drug
Administration for treatment of smokeless tobacco use and
addiction. We believe this product candidate may provide treatment
options for this significant unmet medical need. CVSI-007 is based
on proprietary formulations, processes and technology. In May 2016,
we filed a patent application (Application No. 15/426,617, the "617
Patent") for these formulations and processes with the U.S. Patent
and Trademark Office (“USPTO”). On April 7, 2020, the Company
received a Notice of Allowance from the USPTO for the 617 Patent.
Following administrative procedures, we expect the 617 Patent to be
issued by June 2020.
RISK FACTORS
Investment in any securities offered pursuant to this prospectus
and the applicable prospectus supplement involves risks. You should
carefully consider the risk factors incorporated by reference to
our most recent Annual Report on Form 10-K and any subsequent
Quarterly Reports on Form 10-Q or Current Reports on Form 8-K we
file after the date of this prospectus, and all other information
contained or incorporated by reference into this prospectus, as
updated by our subsequent filings under the Exchange Act, and the
risk factors and other information contained in the applicable
prospectus supplement before acquiring any of such securities. The
occurrence of any of these risks might cause you to lose all or
part of your investment in the offered securities.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein
contain 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 Exchange Act. All statements other
than statements of historical facts contained in this prospectus
and the documents incorporated by reference herein, including
statements regarding our future results of operations and financial
position, business strategy, prospective products, product
approvals, research and development costs, timing and likelihood of
success, plans and objectives of management for future operations
and future results of anticipated products, are forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such risks and
uncertainties include, without limitation, the evolving and highly
competitive markets in which we operate; industry trends in the
markets in which we compete, including the demand for and
marketability of our products; our ability to raise additional
capital to finance our activities; the future trading of our common
stock; our ability to operate as a public company; our ability to
protect our proprietary information; the evolution of legal and
regulatory developments in the United States and foreign countries
impacting the industries in which we operate; general economic and
business conditions; the volatility of our operating results and
financial condition; our ability to attract or retain qualified
senior management personnel; and other risks detailed from time to
time in our filings with the SEC, or otherwise. This prospectus and
the documents incorporated by reference herein also contain
estimates and other statistical data made by independent parties
and by us relating to market size and growth and other data about
our industry. This data involves a number of assumptions and
limitations, and you are cautioned not to give undue weight to such
estimates. In addition, projections, assumptions and estimates of
our future performance and the future performance of the markets in
which we operate are necessarily subject to a high degree of
uncertainty and risk.
In some cases, you can identify forward-looking statements by terms
such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,”
“could,” “intend,” “target,” “project,” “contemplates,” “believes,”
“estimates,” “predicts,” “potential” or
“continue” or the negative of these terms or other similar
expressions. The forward-looking statements in this prospectus and
the documents incorporated by reference herein are only
predictions. We have based these forward-looking statements largely
on our current expectations and projections about future events and
financial trends that we believe may affect our business, financial
condition and results of operations. These forward-looking
statements speak only as of the date of this prospectus and are
subject to a number of risks, uncertainties and assumptions, which
we discuss in greater detail in the documents incorporated by
reference herein, including under the heading “Risk Factors” and
elsewhere in this prospectus. The events and circumstances
reflected in our forward-looking statements may not be achieved or
occur and actual results could differ materially from those
projected in the forward-looking statements. Moreover, we operate
in an evolving environment. New risk factors and uncertainties may
emerge from time to time, and it is not possible for management to
predict all risk factors and uncertainties. Given these risks and
uncertainties, you should not place undue reliance on these
forward-looking statements. Except as required by applicable law,
we do not plan to publicly update or revise any forward-looking
statements contained in this prospectus or the documents
incorporated by reference herein, whether as a result of any new
information, future events, changed circumstances or
otherwise.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities
as set forth in the applicable prospectus supplement.
DIVIDEND POLICY
No cash dividends were paid on our common stock for the 2019 and
2018 fiscal years, and our board of directors has not considered
any change in this practice, and has no intentions of considering
any such change in the foreseeable future.
The payment of cash dividends in the future will be determined by
our board of directors, in light of conditions then existing,
including our earnings, financial requirements, and opportunities
for reinvesting earnings, business conditions, and other factors.
There are otherwise no restrictions on the payment of
dividends.
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is not complete and
may not contain all the information you should consider before
investing in our capital stock. This description is summarized
from, and qualified in its entirety by reference to, our
certificate of incorporation and bylaws which have been publicly
filed with the SEC. See “Where You Can Find More Information;
Incorporation by Reference.”
Our authorized capital stock consists of:
•190,000,000
shares of common stock, $0.0001 par value; and
•10,000,000
shares of preferred stock, $0.0001 par value.
On March 31, 2020, we filed a definitive proxy statement with the
SEC with respect to our annual meeting of stockholders to be held
on May 21, 2020 to solicit stockholder approval of, among other
proposals, a reverse stock split at a ratio
that will be determined by our board of directors of not less than
1-for-2 and not greater than 1-for-20. If
the reverse stock split is approved and
implemented by our board of directors, the outstanding shares of
our common stock will be reclassified and combined into a lesser
number of shares such that one share of our common stock will be
issued for a specified number of shares in accordance with the
specific ratio determined by our board of directors. In such case,
we will adjust and proportionately decrease the number of shares of
our common stock reserved for issuance upon exercise of, and adjust
and proportionately increase the exercise price of, all options and
warrants and other rights to acquire our common stock and we will
adjust and proportionately decrease the total number of shares of
our common stock that may be the subject of future grants under our
stock plans, in each case as more fully described in the proxy
statement. The reverse stock split will not change the number of
authorized shares of our common stock or preferred
stock.
Common Stock
As of March 31, 2020, there were 99,851,942 shares of our common
stock outstanding and held of record by 47 stockholders. Holders of
our common stock are entitled to receive dividends out of legally
available assets at such times and in such amounts as our board of
directors may from time to time determine. Each stockholder is
entitled to one vote for each share of common stock held on all
matters submitted to a vote of stockholders, including the election
of directors. Holders of our common stock representing a majority
of the voting power of our capital stock issued and outstanding and
entitled to vote, represented in person or by proxy, are necessary
to constitute a quorum at any meeting of our stockholders. Our
common stock does not currently have cumulative voting rights, and,
as such, cumulative voting for the election of directors is not
currently authorized. Accordingly, the holders of a majority of the
outstanding shares of common stock entitled to vote in any election
of directors can elect all of the directors standing for election,
if they so choose, other than any directors that holders of any
preferred stock we may issue may be entitled to elect. Our board of
directors is not currently classified.
Subject to preferences that may be applicable to any then
outstanding preferred stock, holders of common stock are entitled
to dividends if declared by our board of directors out of funds
legally available for payment of dividends Our common stock is not
subject to conversion or redemption or any sinking fund provisions
and holders of common stock are not entitled to preemptive rights.
Upon the liquidation, dissolution or winding up of our company, the
remaining assets legally available for distribution to
stockholders, after payment of claims or creditors and payment of
liquidation preferences, if any, on outstanding shares or any class
of securities having preference over the common stock, are
distributable ratably among the holders of common stock and any
participating class of securities having preference over the common
stock at that time. Each outstanding share of common stock is fully
paid and non-assessable. The rights, preferences and privileges of
holders of common stock are subject to and may be adversely
affected by the rights of the holders of shares of any series of
preferred stock that we may designate and issue in the
future.
Transfer Agent and Registrar
The current transfer agent and registrar for our common stock is
Issuer Direct Corporation.
Preferred Stock
We currently have no outstanding shares of preferred stock. Our
board of directors is authorized, subject to limitations imposed by
Delaware law, to issue up to a total of 10,000,000 shares of
preferred stock in one or more series, without stockholder
approval. Our board of directors is authorized to establish from
time to time the number of shares to be included in each series of
preferred stock, and to fix the rights, preferences and privileges
of the shares of each series of preferred stock and any of its
qualifications, limitations or restrictions. Our board of directors
can also increase or decrease the number of shares of any series of
preferred stock, but not below the number of shares of that series
of preferred stock then outstanding, without any further vote or
action by the stockholders.
Prior to the issuance of shares of each series, our board of
directors is required by the General Corporation Law of the State
of Delaware (the “DGCL”) and our certificate of incorporation to
adopt resolutions and file a certificate of designation with the
Secretary of State of the State of Delaware. The certificate of
designation fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and
restrictions, including dividend rights, conversion rights,
redemption privileges and liquidation preferences.
All shares of preferred stock offered by this prospectus will, when
issued, be fully paid and nonassessable and will not have any
preemptive or similar rights. Our board of directors may authorize
the issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of the
holders of our common stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, have the
effect of delaying, deferring or preventing a change in control of
our company and may adversely
affect the market price of our common stock and the voting and
other rights of the holders of common stock. We have no current
plans to issue any shares of preferred stock.
We will describe in a prospectus supplement relating to the class
or series of preferred stock being offered the following
terms:
•the
title and stated value of the preferred stock;
•the
number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred
stock;
•the
dividend rate(s), period(s) or payment date(s) or method(s) of
calculation applicable to the preferred stock;
•whether
dividends are cumulative or non-cumulative and, if cumulative, the
date from which dividends on the preferred stock will
accumulate;
•the
procedures for any auction and remarketing, if any, for the
preferred stock;
•the
provisions for a sinking fund, if any, for the preferred
stock;
•the
provision for redemption, if applicable, of the preferred
stock;
•any
listing of the preferred stock on any securities
exchange;
•the
terms and conditions, if applicable, upon which the preferred stock
will be convertible into common stock, including the conversion
price or manner of calculation and conversion period;
•voting
rights, if any, of the preferred stock;
•a
discussion of any material or special U.S. federal income tax
considerations applicable to the preferred stock;
•the
relative ranking and preferences of the preferred stock as to
dividend rights and rights upon the liquidation, dissolution or
winding up of our affairs;
•any
limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the class or series of
preferred stock as to dividend rights and rights upon liquidation,
dissolution or winding up of our affairs; and
•any
other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
Unless we specify otherwise in the applicable prospectus
supplement, the preferred stock will rank, relating to dividends
and upon our liquidation, dissolution or winding up:
•senior
to all classes or series of our common stock and to all of our
equity securities ranking junior to the preferred
stock;
•on
a parity with all of our equity securities the terms of which
specifically provide that the equity securities rank on a parity
with the preferred stock; and
•junior
to all of our equity securities the terms of which specifically
provide that the equity securities rank senior to the preferred
stock.
The term equity securities does not include convertible debt
securities.
Anti-Takeover Effects of Delaware Law and Our Certificate of
Incorporation and Bylaws
Some provisions of Delaware law, our certificate of incorporation
and our bylaws contain provisions that could make the following
transactions more difficult: an acquisition of us by means of a
tender offer; an acquisition of us by means of a proxy contest or
otherwise; or the removal of our incumbent officers and directors.
It is possible that these provisions could make it more difficult
to accomplish or could deter transactions that stockholders may
otherwise consider to be in their best interests or in our best
interests, including transactions which provide for payment of a
premium over the market price for our shares.
These provisions, summarized below, are intended to discourage
coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to
acquire control of us to first negotiate with our board of
directors. We believe that the benefits of the increased protection
of our potential ability to negotiate with the proponent
of
an unfriendly or unsolicited proposal to acquire or restructure us
outweigh the disadvantages of discouraging these proposals because
negotiation of these proposals could result in an improvement of
their terms.
Undesignated Preferred Stock
The ability of our board of directors, without action by the
stockholders, to issue up to 10,000,000 shares of undesignated
preferred stock with voting or other rights or preferences as
designated by our board of directors could impede the success of
any attempt to effect a change in control of our company. These and
other provisions may have the effect of deferring hostile takeovers
or delaying changes in control or management of our
company.
Delaware Anti-Takeover Statute
We are subject to the provisions of Section 203 of the Delaware
General Corporation Law. Under Section 203, we would generally be
prohibited from engaging in any business combination with any
interested stockholder for a period of three years following the
time that this stockholder became an interested stockholder
unless:
•prior
to this time, our board of directors approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
•upon
consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the company outstanding
at the time the transaction commenced, excluding shares owned by
persons who are directors and also officers, and by employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
•at
or subsequent to such time, the business combination is approved by
our board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
Under Section 203, a “business combination” includes:
•any
merger or consolidation involving the company and the interested
stockholder;
•any
sale, transfer, pledge or other disposition of 10% or more of the
assets of the company involving the interested
stockholder;
•any
transaction that results in the issuance or transfer by the company
of any stock of the corporation to the interested stockholder,
subject to limited exceptions;
•any
transaction involving the company that has the effect of increasing
the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder;
or
•the
receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided
by or through the company.
In general, Section 203 defines an interested stockholder as an
entity or person beneficially owning 15% or more of the outstanding
voting stock of the company and any entity or person affiliated
with or controlling or controlled by such entity or
person.
The provisions of Delaware law, our certificate of incorporation
and our bylaws could have the effect of discouraging others from
attempting hostile takeovers and, as a consequence, they may also
inhibit temporary fluctuations in the market price of our common
stock that often result from actual or rumored hostile takeover
attempts. These provisions may also have the effect of preventing
changes in the composition of our board of directors and
management. It is possible that these provisions could make it more
difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests.
DESCRIPTION OF DEBT SECURITIES
The following description, together with the additional information
we include in any applicable prospectus supplement or free writing
prospectus, summarizes certain general terms and provisions of the
debt securities that we may offer under this prospectus. When we
offer to sell a particular series of debt securities, we will
describe the specific terms of the series in a supplement to this
prospectus. We will also indicate in the supplement to what extent
the general terms and provisions described in this prospectus apply
to a particular series of debt securities. To the extent the
information contained in the prospectus supplement differs from
this summary description, you should rely on the information in the
prospectus supplement.
We may issue debt securities either separately, or together with,
or upon the conversion or exercise of or in exchange for, other
securities described in this prospectus. Debt securities may be our
senior, senior subordinated or subordinated obligations and, unless
otherwise specified in a supplement to this prospectus, the debt
securities will be our direct, unsecured obligations and may be
issued in one or more series.
The debt securities will be issued under an indenture between us
and a trustee named in the prospectus supplement. We have
summarized select portions of the indenture below. The summary is
not complete. The form of the indenture has been filed as an
exhibit to the registration statement and you should read the
indenture for provisions that may be important to you. In the
summary below, we have included references to the section numbers
of the indenture so that you can easily locate these provisions.
Capitalized terms used in the summary and not defined herein have
the meanings specified in the indenture.
General
The terms of each series of debt securities will be established by
or pursuant to a resolution of our board of directors and set forth
or determined in the manner provided in a resolution of our board
of directors, in an officer’s certificate or by a supplemental
indenture. (Section 2.2) The particular terms of each series of
debt securities will be described in a prospectus supplement
relating to such series (including any pricing supplement or term
sheet).
We can issue an unlimited amount of debt securities under the
indenture that may be in one or more series with the same or
various maturities, at par, at a premium, or at a discount.
(Section 2.1) We will set forth in a prospectus supplement
(including any pricing supplement or term sheet) relating to any
series of debt securities being offered, the aggregate principal
amount and the following terms of the debt securities, if
applicable:
•the
title and ranking of the debt securities (including the terms of
any subordination provisions);
•the
price or prices (expressed as a percentage of the principal amount)
at which we will sell the debt securities;
•any
limit on the aggregate principal amount of the debt
securities;
•the
date or dates on which the principal of a particular series of debt
securities is payable;
•the
rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any
commodity, commodity index, stock exchange index or financial
index) at which the debt securities will bear interest, the date or
dates from which interest will accrue, the date or dates on which
interest will commence and be payable and any regular record date
for the interest payable on any interest payment date;
•the
place or places where principal of, and interest, if any, on the
debt securities will be payable (and the method of such payment),
where the debt securities of such series may be surrendered for
registration of transfer or exchange, and where notices and demands
to us in respect of the debt securities may be
delivered;
•the
period or periods within which, the price or prices at which and
the terms and conditions upon which we may redeem the debt
securities;
•any
obligation we have to redeem or purchase the debt securities
pursuant to any sinking fund or analogous provisions or at the
option of a holder of debt securities and the period or periods
within which, the price or prices at which and the terms and
conditions upon which the debt securities of a particular series
shall be redeemed or purchased, in whole or in part, pursuant to
such obligation;
•the
dates on which and the price or prices at which we will repurchase
debt securities at the option of the holders of debt securities and
other detailed terms and provisions of these repurchase
obligations;
•the
denominations in which the debt securities will be issued, if other
than denominations of $1,000 and any integral multiple
thereof;
•whether
the debt securities will be issued in the form of certificated debt
securities or global debt securities;
•the
portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;
•the
currency of denomination of the debt securities, which may be U.S.
dollars or any foreign currency, and if such currency of
denomination is a composite currency, the agency or organization,
if any, responsible for overseeing such composite
currency;
•the
designation of the currency, currencies or currency units in which
payment of principal of, and premium and interest on, the debt
securities will be made;
•if
payments of principal of, or premium or interest on, the debt
securities will be made in one or more currencies or currency units
other than that or those in which the debt securities are
denominated, the manner in which the exchange rate with respect to
these payments will be determined;
•the
manner in which the amounts of payment of principal of, and
premium, if any, and interest on, the debt securities will be
determined, if these amounts may be determined by reference to an
index based on a currency or currencies or by reference to a
commodity, commodity index, stock exchange index or financial
index;
•any
provisions relating to any security provided for the debt
securities;
•any
addition to, deletion of or change in the Events of Default
described in this prospectus or in the indenture with respect to
the debt securities and any change in the acceleration provisions
described in this prospectus or in the indenture with respect to
the debt securities;
•any
addition to, deletion of or change in the covenants described in
this prospectus or in the indenture with respect to the debt
securities;
•any
depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt
securities;
•the
provisions, if any, relating to conversion or exchange of any debt
securities of such series, including if applicable, the conversion
or exchange price and period, provisions as to whether conversion
or exchange will be mandatory, the events requiring an adjustment
of the conversion or exchange price and provisions affecting
conversion or exchange;
•any
other terms of the debt securities, which may supplement, modify or
delete any provision of the indenture as it applies to that series,
including any terms that may be required under applicable law or
regulations or advisable in connection with the marketing of the
securities; and
•whether
any of our direct or indirect subsidiaries will guarantee the debt
securities of that series, including the terms of subordination, if
any, of such guarantees. (Section 2.2)
We may issue debt securities that provide for an amount less than
their stated principal amount to be due and payable upon
declaration of acceleration of their maturity pursuant to the terms
of the indenture. We will provide you with information on the
federal income tax considerations and other special considerations
applicable to any of these debt securities in the applicable
prospectus supplement.
If we denominate the purchase price of any of the debt securities
in a foreign currency or currencies or a foreign currency unit or
units, or if the principal of, and premium, if any, and interest
on, any series of debt securities is payable in a foreign currency
or currencies or a foreign currency unit or units, we will provide
you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect
to that issue of debt securities and such foreign currency or
currencies or foreign currency unit or units in the applicable
prospectus supplement.
Transfer and Exchange
Each debt security will be represented by either one or more global
securities registered in the name of The Depository Trust Company
(“DTC” or the “Depositary”) or a nominee of the Depositary (we will
refer to any debt security represented by a global debt security as
a “book-entry debt security”), or a certificate issued in
definitive registered form (we will refer to any debt security
represented by a certificated security as a “certificated debt
security”) as set forth in the applicable prospectus supplement.
Except as set forth under the heading “Global Debt Securities and
Book-Entry System” below, book-entry debt securities will not be
issuable in certificated form.
Certificated Debt Securities. You may transfer or exchange
certificated debt securities at any office we maintain for this
purpose in accordance with the terms of the indenture. (Section
2.4) No service charge will be made for any transfer or exchange of
certificated debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection with a transfer or exchange. (Section 2.7)
You may effect the transfer of certificated debt securities and the
right to receive the principal of, premium and interest on
certificated debt securities only by surrendering the certificate
representing those certificated debt securities and either
reissuance by us or the trustee of the certificate to the new
holder or the issuance by us or the trustee of a new certificate to
the new holder.
Global Debt Securities and Book-Entry System. Each global debt
security representing book-entry debt securities will be deposited
with, or on behalf of, the Depositary, and registered in the name
of the Depositary or a nominee of the Depositary. Please see the
section entitled “Global Securities” for more
information.
Covenants
We will set forth in the applicable prospectus supplement any
restrictive covenants applicable to any issue of debt securities.
(Article IV)
No Protection in the Event of a Change of Control
Unless we state otherwise in the applicable prospectus supplement,
the debt securities will not contain any provisions that may afford
holders of the debt securities protection in the event we have a
change in control or in the event of a highly leveraged transaction
(whether or not such transaction results in a change in control)
which could adversely affect holders of debt
securities.
Consolidation, Merger and Sale of Assets
We may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of our properties and
assets to, any person (a “successor person”) unless:
•we
are the surviving corporation or the successor person (if other
than CV Sciences) is a corporation organized and validly existing
under the laws of any U.S. domestic jurisdiction and expressly
assumes our obligations on the debt securities and under the
indenture;
•immediately
after giving effect to the transaction, no Default or Event of
Default, shall have occurred and be continuing; and
•certain
other conditions are met.
Notwithstanding the above, any of our subsidiaries may consolidate
with, merge into or transfer all or part of its properties to us.
(Section 5.1)
Events of Default
“Event of Default” means with respect to any series of debt
securities, any of the following:
•default
in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of such
default for a period of 30 days (unless the entire amount of the
payment is deposited by us with the trustee or with a paying agent
prior to the expiration of the 30-day period);
•default
in the payment of principal of any debt security of that series at
its maturity;
•default
in the performance or breach of any other covenant or warranty by
us in the indenture or any debt security (other than a covenant or
warranty that has been included in the indenture solely for the
benefit of a series of debt securities other than that series),
which default continues uncured for a period of 60 days after we
receive written notice from the trustee or CV Sciences and the
trustee receive written notice from the holders of not less than
25% in principal amount of the outstanding debt securities of that
series as provided in the indenture;
•certain
voluntary or involuntary events of bankruptcy, insolvency or
reorganization of CV Sciences; or
•any
other Event of Default provided with respect to debt securities of
that series that is described in the applicable prospectus
supplement. (Section 6.1)
No Event of Default with respect to a particular series of debt
securities (except as to certain events of bankruptcy, insolvency
or reorganization) necessarily constitutes an Event of Default with
respect to any other series of debt securities. (Section 6.1) The
occurrence of certain Events of Default or an acceleration under
the indenture may constitute an event of default under certain
indebtedness of ours or our subsidiaries outstanding from time to
time.
We will provide the trustee written notice of any Default or Event
of Default within 30 days of becoming aware of the occurrence of
such Default or Event of Default, which notice will describe in
reasonable detail the status of such Default or Event of Default
and what action we are taking or propose to take in respect
thereof. (Section 6.1)
If an Event of Default with respect to debt securities of any
series at the time outstanding occurs and is continuing, then the
trustee or the holders of not less than 25% in principal amount of
the outstanding debt securities of that series may, by a notice in
writing to us (and to the trustee if given by the holders), declare
to be due and payable immediately the principal of (or, if the debt
securities of that series are discount securities, that portion of
the principal amount as may be specified in the terms of that
series) and accrued and unpaid interest, if any, on all debt
securities of that series. In the case of an Event of Default
resulting from certain events of bankruptcy, insolvency or
reorganization, the principal (or such specified amount) of and
accrued and unpaid interest, if any, on all outstanding debt
securities will become and be immediately due and payable without
any declaration or other act on the part of the trustee or any
holder of outstanding debt securities. At any time after a
declaration of acceleration with respect to debt securities of any
series has been made, but before a judgment or decree for payment
of the money due has been obtained by the trustee, the holders of a
majority in principal amount of the outstanding debt securities of
that series may rescind and annul the acceleration if all Events of
Default, other than the non-payment of accelerated principal and
interest, if any, with respect to debt securities of that series,
have been cured or waived as provided in the indenture. (Section
6.2) We refer you to the prospectus supplement relating to any
series of debt securities that are discount securities for the
particular provisions relating to acceleration of a portion of the
principal amount of such discount securities upon the occurrence of
an Event of Default.
The indenture provides that the trustee may refuse to perform any
duty or exercise any of its rights or powers under the indenture,
unless the trustee receives indemnity satisfactory to it against
any cost, liability or expense that might be incurred by it in
performing such duty or exercising such right or power. (Section
7.1(e)) Subject to certain rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of
any series will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee
with respect to the debt securities of that series. (Section
6.12)
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to
the indenture or for the appointment of a receiver or trustee, or
for any remedy under the indenture, unless:
•that
holder has previously given to the trustee written notice of a
continuing Event of Default with respect to debt securities of that
series; and
•the
holders of not less than 25% in principal amount of the outstanding
debt securities of that series have made written request, and
offered indemnity or security satisfactory to the trustee, to the
trustee to institute the proceeding as trustee, and the trustee has
not received from the holders of not less than a majority in
principal amount of the outstanding debt securities of that series
a direction inconsistent with that request and has failed to
institute the proceeding within 60 days. (Section 6.7)
Notwithstanding any other provision in the indenture, the holder of
any debt security will have an absolute and unconditional right to
receive payment of the principal of, and premium and any interest
on, that debt security on or after the due dates expressed in that
debt security and to institute suit for the enforcement of payment.
(Section 6.8)
The indenture requires us, within 120 days after the end of our
fiscal year, to furnish to the trustee a statement as to compliance
with the indenture. (Section 4.3) If a Default or Event of Default
occurs and is continuing with respect to the securities of any
series and if it is known to a responsible officer of the trustee,
the trustee shall mail to each holder of the securities of that
series notice of a Default or Event of Default within 90 days after
it occurs or, if later, after a responsible officer of the trustee
has knowledge of such Default or Event of Default. The indenture
provides that the trustee may withhold notice to the holders of
debt securities of any series of any Default or Event of Default
(except in payment on any debt securities of that series) with
respect to debt securities of that series if the trustee determines
in good faith that withholding notice is in the interest of the
holders of those debt securities. (Section 7.5)
Modification and Waiver
We and the trustee may modify, amend or supplement the indenture or
the debt securities of any series without the consent of any holder
of any debt security:
•to
cure any ambiguity, defect or inconsistency;
•to
comply with covenants in the indenture described above under the
heading “Consolidation, Merger and Sale of Assets”;
•to
provide for uncertificated securities in addition to or in place of
certificated securities;
•to
add guarantees with respect to debt securities of any series or
secure debt securities of any series;
•to
surrender any of our rights or powers under the
indenture;
•to
add covenants or Events of Default for the benefit of the holders
of debt securities of any series;
•to
comply with the applicable procedures of the applicable
depositary;
•to
make any change that does not adversely affect the rights of any
holder of debt securities;
•to
provide for the issuance of and establish the form and terms and
conditions of debt securities of any series as permitted by the
indenture;
•to
effect the appointment of a successor trustee with respect to the
debt securities of any series and to add to or change any of the
provisions of the indenture to provide for or facilitate
administration by more than one trustee; or
•to
comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act.
(Section 9.1)
We may also modify and amend the indenture with the consent of the
holders of at least a majority in principal amount of the
outstanding debt securities of each series affected by the
modifications or amendments. We may not make any modification or
amendment without the consent of the holders of each affected debt
security then outstanding if that amendment will:
•reduce
the amount of debt securities whose holders must consent to an
amendment, supplement or waiver;
•reduce
the rate of or extend the time for payment of interest (including
default interest) on any debt security;
•reduce
the principal of or premium on or change the fixed maturity of any
debt security or reduce the amount of, or postpone the date fixed
for, the payment of any sinking fund or analogous obligation with
respect to any series of debt securities;
•reduce
the principal amount of discount securities payable upon
acceleration of maturity;
•waive
a Default or Event of Default in the payment of the principal of,
or premium or interest on, any debt security (except a rescission
of acceleration of the debt securities of any series by the holders
of at least a majority in aggregate principal amount of the then
outstanding debt securities of that series and a waiver of the
payment default that resulted from such acceleration);
•make
the principal of, or premium or interest on, any debt security
payable in currency other than that stated in the debt
security;
•make
any change to certain provisions of the indenture relating to,
among other things, the right of holders of debt securities to
receive payment of the principal of, and premium and interest on,
those debt securities and to institute suit for the enforcement of
any such payment and to waivers or amendments; or
•waive
a redemption payment with respect to any debt security. (Section
9.3)
Except for certain specified provisions, the holders of at least a
majority in principal amount of the outstanding debt securities of
any series may on behalf of the holders of all debt securities of
that series waive our compliance with provisions of the indenture.
(Section 9.2) The holders of a majority in principal amount of the
outstanding debt securities of any series may on behalf of the
holders of all the debt securities of such series waive any past
default under the indenture with respect to that series and its
consequences, except a default in the payment of the principal of,
or any interest on, any debt security of that series; provided,
however, that the holders of a majority in principal amount of the
outstanding debt securities of any series may rescind an
acceleration and its consequences, including any related payment
default that resulted from the acceleration. (Section
6.13)
Defeasance of Debt Securities and Certain Covenants in Certain
Circumstances
Legal Defeasance.
The indenture provides that, unless otherwise provided by the terms
of the applicable series of debt securities, we may be discharged
from any and all obligations in respect of the debt securities of
any series (subject to certain exceptions). We will be so
discharged upon the deposit with the trustee, in trust, of money
and/or U.S. government obligations or, in the case of debt
securities denominated in a single currency other than U.S.
dollars, government obligations of the government that issued or
caused to be issued such currency, that, through the payment of
interest and principal in accordance with their terms, will provide
money or U.S. government obligations in an amount sufficient in the
opinion of a nationally recognized firm of independent public
accountants or investment bank to pay and discharge each
installment of principal of, premium and interest on, and any
mandatory sinking fund payments in respect of, the debt securities
of that series on the stated maturity of those payments in
accordance with the terms of the indenture and those debt
securities.
This discharge may occur only if, among other things, we have
delivered to the trustee an opinion of counsel stating that we have
received from, or there has been published by, the U.S. Internal
Revenue Service a ruling or, since the date of execution of the
indenture, there has been a change in the applicable U.S. federal
income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the holders of the debt
securities of that series will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of the deposit,
defeasance and discharge and will be subject to U.S. federal income
tax on the same amounts and in the same manner and at the same
times as would have been the case if the deposit, defeasance and
discharge had not occurred. (Section 8.3)
Defeasance of Certain Covenants.
The indenture provides that, unless otherwise provided by the terms
of the applicable series of debt securities, upon compliance with
certain conditions:
•we
may omit to comply with the covenant described under the heading
“Consolidation, Merger and Sale of Assets” and certain other
covenants set forth in the indenture, as well as any additional
covenants that may be set forth in the applicable prospectus
supplement; and
•any
omission to comply with those covenants will not constitute a
Default or an Event of Default with respect to the debt securities
of that series (“covenant defeasance”).
The conditions include:
•depositing
with the trustee money and/or U.S. government obligations or, in
the case of debt securities denominated in a single currency other
than U.S. dollars, government obligations of the government that
issued or caused to be issued such currency, that, through the
payment of interest and principal in accordance with their terms,
will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants or
investment bank to pay and discharge each installment of principal
of, premium and interest on, and any mandatory sinking fund
payments in respect of, the debt securities of that series on the
stated maturity of those payments in accordance with the terms of
the indenture and those debt securities; and
•delivering
to the trustee an opinion of counsel to the effect that the holders
of the debt securities of that series will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of
the deposit and related covenant defeasance and will be subject to
U.S. federal income tax on the same amounts and in the same manner
and at the same times as would have been the case if the deposit
and related covenant defeasance had not occurred. (Section
8.4)
No Personal Liability of Directors, Officers, Employees or
Securityholders
None of our past, present or future directors, officers, employees
or securityholders, as such, will have any liability for any of our
obligations under the debt securities or the indenture or for any
claim based on, or in respect or by reason of, such obligations or
their creation. By accepting a debt security, each holder waives
and releases all such liability. This waiver and release is part of
the consideration for the issue of the debt securities. However,
this waiver and release may not be effective to waive liabilities
under U.S. federal securities laws, and it is the view of the SEC
that such a waiver is against public policy.
Governing Law
The indenture and the debt securities, including any claim or
controversy arising out of or relating to the indenture or the debt
securities, will be governed by the laws of the State of New
York.
The indenture will provide that we, the trustee and the holders of
the debt securities (by their acceptance of the debt securities)
irrevocably waive, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to the indenture, the debt securities or
the transactions contemplated thereby.
The indenture will provide that any legal suit, action or
proceeding arising out of or based upon the indenture or the
transactions contemplated thereby may be instituted in the federal
courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in
the City of New York, and we, the trustee and the holder of the
debt securities (by their acceptance of the debt securities)
irrevocably submit to the non-exclusive jurisdiction of such courts
in any such suit, action or proceeding. The indenture will further
provide that service of any process, summons, notice or document by
mail (to the extent allowed under any applicable statute or rule of
court) to such party’s address set forth in the indenture will be
effective service of process for any suit, action or other
proceeding brought in any such court. The indenture will further
provide that we, the trustee and the holders of the debt securities
(by their acceptance of the debt securities) irrevocably and
unconditionally waive any objection to the laying of venue of any
suit, action or other proceeding in the courts specified above and
irrevocably and unconditionally waive and agree not to plead or
claim any such suit, action or other proceeding has been brought in
an inconvenient forum. (Section 10.10)
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of shares of our common
stock or preferred stock or of debt securities. We may issue
warrants independently or together with other securities, and the
warrants may be attached to or separate from any offered
securities. Each series of warrants will be issued under a separate
warrant agreement to be entered into between us and the investors
or a warrant agent. The following summary of material provisions of
the warrants and warrant agreements is subject to, and qualified in
its entirety by reference to, all the provisions of the warrant
agreement and warrant certificate applicable to a particular series
of warrants. The terms of any warrants offered under a prospectus
supplement may differ from the terms described below. We urge you
to read the applicable prospectus supplement and any related free
writing prospectus, as well as the complete warrant agreements and
warrant certificates that contain the terms of the
warrants.
The particular terms of any issue of warrants will be described in
the prospectus supplement relating to the issue. Those terms may
include:
•the
number of shares of common stock or preferred stock purchasable
upon the exercise of warrants to purchase such shares and the price
at which such number of shares may be purchased upon such
exercise;
•the
designation, stated value and terms (including, without limitation,
liquidation, dividend, conversion and voting rights) of the series
of preferred stock purchasable upon exercise of warrants to
purchase preferred stock;
•the
principal amount of debt securities that may be purchased upon
exercise of a debt warrant and the exercise price for the warrants,
which may be payable in cash, securities or other
property;
•the
date, if any, on and after which the warrants and the related debt
securities, preferred stock or common stock will be separately
transferable;
•the
terms of any rights to redeem or call the warrants;
•the
date on which the right to exercise the warrants will commence and
the date on which the right will expire;
•U.S.
federal income tax consequences applicable to the warrants;
and
•any
additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange, exercise and settlement of
the warrants.
Holders of equity warrants will not be entitled to:
•vote,
consent or receive dividends;
•receive
notice as stockholders with respect to any meeting of stockholders
for the election of our directors or any other matter;
or
•exercise
any rights as stockholders of CV Sciences.
Each warrant will entitle its holder to purchase the principal
amount of debt securities or the number of shares of preferred
stock or common stock at the exercise price set forth in, or
calculable as set forth in, the applicable prospectus supplement.
Unless we otherwise specify in the applicable prospectus
supplement, holders of the warrants may exercise the warrants at
any time up to the specified time on the expiration date that we
set forth in the applicable prospectus supplement. After the close
of business on the expiration date, unexercised warrants will
become void.
A holder of warrant certificates may exchange them for new warrant
certificates of different denominations, present them for
registration of transfer and exercise them at the corporate trust
office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Until any warrants to purchase
debt securities are exercised, the holder of the warrants will not
have any rights of holders of the debt securities that can be
purchased upon exercise, including any rights to receive payments
of principal, premium or interest on the underlying debt securities
or to enforce covenants in the applicable indenture. Until any
warrants to purchase common stock or preferred stock are exercised,
the holders of the warrants will not have any rights of holders of
the underlying common stock or preferred stock, including any
rights to receive dividends or payments upon any liquidation,
dissolution or winding up on the common stock or preferred stock,
if any.
DESCRIPTION OF UNITS
We may issue units consisting of any combination of the other types
of securities offered under this prospectus in one or more series.
We may evidence each series of units by unit certificates that we
will issue under a separate agreement. We may enter into unit
agreements with a unit agent. Each unit agent will be a bank or
trust company that we select. We will indicate the name and address
of the unit agent in the applicable prospectus supplement relating
to a particular series of units.
The following description, together with the additional information
included in any applicable prospectus supplement, summarizes the
general features of the units that we may offer under this
prospectus. You should read any prospectus supplement and any free
writing prospectus that we may authorize to be provided to you
related to the series of units being offered, as well as the
complete unit agreements that contain the terms of the units.
Specific unit agreements will contain additional important terms
and provisions and we will file as an exhibit to the registration
statement of which this prospectus is a part, or will incorporate
by reference from another report that we file with the SEC, the
form of each unit agreement relating to units offered under this
prospectus.
If we offer any units, certain terms of that series of units will
be described in the applicable prospectus supplement, including,
without limitation, the following, as applicable:
•the
title of the series of units;
•identification
and description of the separate constituent securities comprising
the units;
•the
price or prices at which the units will be issued;
•the
date, if any, on and after which the constituent securities
comprising the units will be separately transferable;
•a
discussion of certain U.S. federal income tax considerations
applicable to the units; and
•any
other terms of the units and their constituent
securities.
GLOBAL SECURITIES
Book-Entry, Delivery and Form
Unless we indicate differently in any applicable prospectus
supplement or free writing prospectus, the securities initially
will be issued in book-entry form and represented by one or more
global notes or global securities (collectively, “global
securities”). The global securities will be deposited with, or on
behalf of, DTC and registered in the name of Cede & Co., the
nominee of DTC. Unless and until it is exchanged for individual
certificates evidencing securities under the limited circumstances
described below, a global security may not be transferred except as
a whole by the depositary to its nominee or by the nominee to the
depositary, or by the depositary or its nominee to a successor
depositary or to a nominee of the successor
depositary.
DTC has advised us that it is:
•a
limited-purpose trust company organized under the New York Banking
Law;
•a
“banking organization” within the meaning of the New York Banking
Law;
•a
member of the Federal Reserve System;
•a
“clearing corporation” within the meaning of the New York Uniform
Commercial Code; and
•a
“clearing agency” registered pursuant to the provisions of Section
17A of the Exchange Act.
DTC holds securities that its participants deposit with DTC. DTC
also facilitates the settlement among its participants of
securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry
changes in participants’ accounts, thereby eliminating the need for
physical movement of securities certificates. “Direct participants”
in DTC include securities brokers and dealers, including
underwriters, banks, trust companies, clearing
corporations and other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation
(“DTCC”). DTCC is the holding company for DTC, National Securities
Clearing Corporation and Fixed Income Clearing Corporation, all of
which are registered clearing agencies. DTCC is owned by the users
of its regulated subsidiaries. Access to the DTC system is also
available to others, which we sometimes refer to as indirect
participants, that clear through or maintain a custodial
relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on
file with the SEC.
Purchases of securities under the DTC system must be made by or
through direct participants, which will receive a credit for the
securities on DTC’s records. The ownership interest of the actual
purchaser of a security, which we sometimes refer to as a
beneficial owner, is in turn recorded on the direct and indirect
participants’ records. Beneficial owners of securities will not
receive written confirmation from DTC of their purchases. However,
beneficial owners are expected to receive written confirmations
providing details of their transactions, as well as periodic
statements of their holdings, from the direct or indirect
participants through which they purchased securities. Transfers of
ownership interests in global securities are to be accomplished by
entries made on the books of participants acting on behalf of
beneficial owners. Beneficial owners will not receive certificates
representing their ownership interests in the global securities,
except under the limited circumstances described
below.
To facilitate subsequent transfers, all global securities deposited
by direct participants with DTC will be registered in the name of
DTC’s partnership nominee, Cede & Co., or such other name as
may be requested by an authorized representative of DTC. The
deposit of securities with DTC and their registration in the name
of Cede & Co. or such other nominee will not change the
beneficial ownership of the securities. DTC has no knowledge of the
actual beneficial owners of the securities. DTC’s records reflect
only the identity of the direct participants to whose accounts the
securities are credited, which may or may not be the beneficial
owners. The participants are responsible for keeping account of
their holdings on behalf of their customers.
So long as the securities are in book-entry form, you will receive
payments and may transfer securities only through the facilities of
the depositary and its direct and indirect participants. We will
maintain an office or agency in the location specified in the
prospectus supplement for the applicable securities, where notices
and demands in respect of the securities and the indenture may be
delivered to us and where certificated securities may be
surrendered for payment, registration of transfer or
exchange.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and
by direct participants and indirect participants to beneficial
owners will be governed by arrangements among them, subject to any
legal requirements in effect from time to time.
Redemption notices will be sent to DTC. If less than all of the
securities of a particular series are being redeemed, DTC’s
practice is to determine by lot the amount of the interest of each
direct participant in the securities of such series to be
redeemed.
Neither DTC nor Cede & Co. (or such other DTC nominee) will
consent or vote with respect to the securities. Under its usual
procedures, DTC will mail an omnibus proxy to us as soon as
possible after the record date. The omnibus proxy assigns the
consenting or voting rights of Cede & Co. to those direct
participants to whose accounts the securities of such series are
credited on the record date, identified in a listing attached to
the omnibus proxy.
So long as securities are in book-entry form, we will make payments
on those securities to the depositary or its nominee, as the
registered owner of such securities, by wire transfer of
immediately available funds. If securities are issued in definitive
certificated form under the limited circumstances described below
and unless if otherwise provided in the description of the
applicable securities herein or in the applicable prospectus
supplement, we will have the option of making payments by check
mailed to the addresses of the persons entitled to payment or by
wire transfer to bank accounts in the United States
designated
in writing to the applicable trustee or other designated party at
least 15 days before the applicable payment date by the persons
entitled to payment, unless a shorter period is satisfactory to the
applicable trustee or other designated party.
Redemption proceeds, distributions and dividend payments on the
securities will be made to Cede & Co., or such other nominee as
may be requested by an authorized representative of DTC. DTC’s
practice is to credit direct participants’ accounts upon DTC’s
receipt of funds and corresponding detail information from us on
the payment date in accordance with their respective holdings shown
on DTC records. Payments by participants to beneficial owners will
be governed by standing instructions and customary practices, as is
the case with securities held for the account of customers in
bearer form or registered in “street name.” Those payments will be
the responsibility of participants and not of DTC or us, subject to
any statutory or regulatory requirements in effect from time to
time. Payment of redemption proceeds, distributions and dividend
payments to Cede & Co., or such other nominee as may be
requested by an authorized representative of DTC, is our
responsibility; disbursement of payments to direct participants is
the responsibility of DTC; and disbursement of payments to the
beneficial owners is the responsibility of direct and indirect
participants.
Except under the limited circumstances described below, purchasers
of securities will not be entitled to have securities registered in
their names and will not receive physical delivery of securities.
Accordingly, each beneficial owner must rely on the procedures of
DTC and its participants to exercise any rights under the
securities and the indenture.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of securities in definitive form.
Those laws may impair the ability to transfer or pledge beneficial
interests in securities.
DTC may discontinue providing its services as securities depositary
with respect to the securities at any time by giving reasonable
notice to us. Under such circumstances, in the event that a
successor depositary is not obtained, securities certificates are
required to be printed and delivered.
As noted above, beneficial owners of a particular series of
securities generally will not receive certificates representing
their ownership interests in those securities. However,
if:
•DTC
notifies us that it is unwilling or unable to continue as a
depositary for the global security or securities representing such
series of securities or if DTC ceases to be a clearing agency
registered under the Exchange Act at a time when it is required to
be registered and a successor depositary is not appointed within 90
days of the notification to us or of our becoming aware of DTC’s
ceasing to be so registered, as the case may be;
•we
determine, in our sole discretion, not to have such securities
represented by one or more global securities; or
•an
Event of Default has occurred and is continuing with respect to
such series of securities,
we will prepare and deliver certificates for such securities in
exchange for beneficial interests in the global securities. Any
beneficial interest in a global security that is exchangeable under
the circumstances described in the preceding sentence will be
exchangeable for securities in definitive certificated form
registered in the names that the depositary directs. It is expected
that these directions will be based upon directions received by the
depositary from its participants with respect to ownership of
beneficial interests in the global securities.
Euroclear and Clearstream
If so provided in the applicable prospectus supplement, you may
hold interests in a global security through Clearstream Banking
S.A., which we refer to as “Clearstream,” or Euroclear Bank
S.A./N.V., as operator of the Euroclear System, which we refer to
as “Euroclear,” either directly if you are a participant in
Clearstream or Euroclear or indirectly through organizations which
are participants in Clearstream or Euroclear. Clearstream and
Euroclear will hold interests on behalf of their respective
participants through customers’ securities accounts in the names of
Clearstream and Euroclear, respectively, on the books of their
respective U.S. depositaries, which in turn will hold such
interests in customers’ securities accounts in such depositaries’
names on DTC’s books.
Clearstream and Euroclear are securities clearance systems in
Europe. Clearstream and Euroclear hold securities for their
respective participating organizations and facilitate the clearance
and settlement of securities transactions between those
participants through electronic book-entry changes in their
accounts, thereby eliminating the need for physical movement of
certificates.
Payments, deliveries, transfers, exchanges, notices and other
matters relating to beneficial interests in global securities owned
through Euroclear or Clearstream must comply with the rules and
procedures of those systems. Transactions between participants in
Euroclear or Clearstream, on one hand, and other participants in
DTC, on the other hand, are also subject to DTC’s rules and
procedures.
Investors will be able to make and receive through Euroclear and
Clearstream payments, deliveries, transfers and other transactions
involving any beneficial interests in global securities held
through those systems only on days when those systems are open for
business. Those systems may not be open for business on days when
banks, brokers and other institutions are open for business in the
United States.
Cross-market transfers between participants in DTC, on the one
hand, and participants in Euroclear or Clearstream, on the other
hand, will be effected through DTC in accordance with the DTC’s
rules on behalf of Euroclear or Clearstream, as the case may be, by
their respective U.S. depositaries; however, such cross-market
transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the
established deadlines (European time) of such system. Euroclear or
Clearstream, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its U.S.
depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the global securities
through DTC, and making or receiving payment in accordance with
normal procedures for same-day fund settlement. Participants in
Euroclear or Clearstream may not deliver instructions directly to
their respective U.S. depositaries.
Due to time zone differences, the securities accounts of a
participant in Euroclear or Clearstream purchasing an interest in a
global security from a direct participant in DTC will be credited,
and any such crediting will be reported to the relevant participant
in Euroclear or Clearstream, during the securities settlement
processing day (which must be a business day for Euroclear or
Clearstream) immediately following the settlement date of DTC. Cash
received in Euroclear or Clearstream as a result of sales of
interests in a global security by or through a participant in
Euroclear or Clearstream to a direct participant in DTC will be
received with value on the settlement date of DTC but will be
available in the relevant Euroclear or Clearstream cash account
only as of the business day for Euroclear or Clearstream following
DTC’s settlement date.
Other
The information in this section of this prospectus concerning DTC,
Clearstream, Euroclear and their respective book-entry systems has
been obtained from sources that we believe to be reliable, but we
do not take responsibility for this information. This information
has been provided solely as a matter of convenience. The rules and
procedures of DTC, Clearstream and Euroclear are solely within the
control of those organizations and could change at any time.
Neither we nor the trustee nor any agent of ours or of the trustee
has any control over those entities and none of us takes any
responsibility for their activities. You are urged to contact DTC,
Clearstream and Euroclear or their respective participants directly
to discuss those matters. In addition, although we expect that DTC,
Clearstream and Euroclear will perform the foregoing procedures,
none of them is under any obligation to perform or continue to
perform such procedures and such procedures may be discontinued at
any time. Neither we nor any agent of ours will have any
responsibility for the performance or nonperformance by DTC,
Clearstream and Euroclear or their respective participants of these
or any other rules or procedures governing their respective
operations.
PLAN OF DISTRIBUTION
We may sell the securities from time to time pursuant to
underwritten public offerings, negotiated transactions, block
trades or a combination of these methods or through underwriters or
dealers, through agents and/or directly to one or more purchasers.
The securities may be distributed from time to time in one or more
transactions:
•at
a fixed price or prices, which may be changed;
•at
market prices prevailing at the time of sale;
•at
prices related to such prevailing market prices; or
•at
negotiated prices.
Each time that we sell securities covered by this prospectus, we
will provide a prospectus supplement or supplements that will
describe the method of distribution and set forth the terms and
conditions of the offering of such securities, including the
offering price of the securities and the proceeds to us, if
applicable.
Offers to purchase the securities being offered by this prospectus
may be solicited directly. Agents may also be designated to solicit
offers to purchase the securities from time to time. Any agent
involved in the offer or sale of our securities will be identified
in a prospectus supplement.
If a dealer is utilized in the sale of the securities being offered
by this prospectus, the securities will be sold to the dealer, as
principal. The dealer may then resell the securities to the public
at varying prices to be determined by the dealer at the time of
resale.
If an underwriter is utilized in the sale of the securities being
offered by this prospectus, an underwriting agreement will be
executed with the underwriter at the time of sale and the name of
any underwriter will be provided in the prospectus supplement that
the underwriter will use to make resales of the securities to the
public. In connection with the sale of the securities, we or the
purchasers of securities for whom the underwriter may act as agent,
may compensate the underwriter in the form of underwriting
discounts or commissions. The underwriter may sell the securities
to or through dealers, and those dealers may receive compensation
in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for which they
may act as agent. Unless otherwise indicated in a prospectus
supplement, an agent will be acting on a best efforts basis and a
dealer will purchase securities as a principal, and may then resell
the securities at varying prices to be determined by the
dealer.
Any compensation paid to underwriters, dealers or agents in
connection with the offering of the securities, and any discounts,
concessions or commissions allowed by underwriters to participating
dealers will be provided in the applicable prospectus supplement.
Underwriters, dealers and agents participating in the distribution
of the securities may be deemed to be underwriters within the
meaning of the Securities Act, and any discounts and commissions
received by them and any profit realized by them on resale of the
securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements to indemnify
underwriters, dealers and agents against civil liabilities,
including liabilities under the Securities Act, or to contribute to
payments they may be required to make in respect thereof and to
reimburse those persons for certain expenses.
Our common stock is currently listed on the OTC and any other
securities may or may not be listed on a national securities
exchange. To facilitate the offering of securities, certain persons
participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the
securities. This may include over-allotments or short sales of the
securities, which involve the sale by persons participating in the
offering of more securities than were sold to them. In these
circumstances, these persons would cover such over-allotments or
short positions by making purchases in the open market or by
exercising their over-allotment option, if any. In addition, these
persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by
imposing penalty bids, whereby selling concessions allowed to
dealers participating in the offering may be reclaimed if
securities sold by them are repurchased in connection
with
stabilization transactions. The effect of these transactions may be
to stabilize or maintain the market price of the securities at a
level above that which might otherwise prevail in the open market.
These transactions may be discontinued at any time.
We may engage in at the market offerings into an existing trading
market in accordance with Rule 415(a)(4) under the Securities Act.
In addition, we may enter into derivative transactions with third
parties, or sell securities not covered by this prospectus to third
parties in privately negotiated transactions. If the applicable
prospectus supplement so indicates, in connection with those
derivatives, the third parties may sell securities covered by this
prospectus and the applicable prospectus supplement, including in
short sale transactions. If so, the third party may use securities
pledged by us or borrowed from us or others to settle those sales
or to close out any related open borrowings of stock, and may use
securities received from us in settlement of those derivatives to
close out any related open borrowings of stock. The third party in
such sale transactions will be an underwriter and, if not
identified in this prospectus, will be named in the applicable
prospectus supplement (or a post-effective amendment). In addition,
we may otherwise loan or pledge securities to a financial
institution or other third party that in turn may sell the
securities short using this prospectus and an applicable prospectus
supplement. Such financial institution or other third party may
transfer its economic short position to investors in our securities
or in connection with a concurrent offering of other
securities.
The specific terms of any lock-up provisions in respect of any
given offering will be described in the applicable prospectus
supplement.
The underwriters, dealers and agents may engage in transactions
with us, or perform services for us, in the ordinary course of
business for which they receive compensation.
LEGAL MATTERS
Latham & Watkins LLP, San Diego, California, will pass upon
certain legal matters relating to the issuance and sale of the
securities offered hereby on behalf of CV Sciences, Inc. Additional
legal matters may be passed upon for us, or any underwriters,
dealers or agents, by counsel that we will name in the applicable
prospectus supplement.
EXPERTS
The financial statements incorporated in this Prospectus by
reference from CV Sciences, Inc.’s Annual Report on Form 10-K for
the year ended December 31, 2019, and the effectiveness of CV
Sciences, Inc.’s internal control over financial reporting as of
December 31, 2019 have been audited by Deloitte & Touche LLP,
an independent registered public accounting firm, as stated in
their reports, which are incorporated by reference herein (which
reports (1) expresses an unqualified opinion on the financial
statements and includes an explanatory paragraph regarding the
adoption of a new accounting standard and (2) expresses an adverse
opinion on the effectiveness of the Company’s internal control over
financial reporting because of a material weakness). Such financial
statements have been so incorporated in reliance upon the reports
of such firm given upon the authority as experts in accounting and
auditing.
The financial statements of CV Sciences, Inc. for the year ended
December 31, 2018, incorporated by reference in this Prospectus
have been audited by Tanner LLC, an independent registered public
accounting firm, as stated in their report incorporated by
reference herein, given on the authority of said firm as experts in
auditing and accounting.
$1,060,000
SENIOR CONVERTIBLE NOTES DUE 2022
Shares of Common Stock Issuable Upon Conversion of the
Senior Convertible Notes due 2022
CV SCIENCES, INC.
Prospectus Supplement
November 14, 2021
CV Sciences (QB) (USOTC:CVSI)
Historical Stock Chart
From Apr 2022 to May 2022
CV Sciences (QB) (USOTC:CVSI)
Historical Stock Chart
From May 2021 to May 2022
