Filed Pursuant to Rule 424(b)(5)
Registration No. 333-237772
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 30, 2020)
700 Shares of Preferred Stock
Warrants to Purchase up to 10,000,000 Shares of Common
Stock
Placement Agent Warrants to Purchase up to 750,000 Shares of Common
Stock
(and 20,750,000 shares of Common Stock issuable upon the conversion
of such Preferred Stock and exercise of such Warrants and Placement
Agent Warrants)
We are offering an aggregate of 700 shares of our Series A
Convertible Preferred Stock, par value $0.0001 per share and stated
value of $1,000 per share (“Preferred Stock”) and warrants (each, a
“Warrant” and collectively, the “Warrants”) to purchase 10,000,000
shares of our common stock, par value $0.0001 (“Common Stock”) to
an institutional investor pursuant to this prospectus supplement,
the accompanying prospectus and a securities purchase agreement,
dated March 30, 2022, by and between us and the investor signatory
thereto (the “Securities Purchase Agreement”). The Preferred Stock
is convertible into an aggregate of 10,000,000 shares of Common
Stock at an initial conversion price of $0.07 per share. Each
Warrant will have an exercise price of $0.10 per share, will become
exercisable on or after the date of stockholder approval for an
increase in the Company’s authorized shares of Common Stock, or the
Initial Exercise Date, and will expire three years after such
Initial Exercise Date. We are also registering an aggregate of up
to 20,000,000 shares of our Common Stock issuable upon the
conversion of the Preferred Stock or exercise of the
Warrants.
We have engaged H.C. Wainwright & Co., LLC (the “Placement
Agent”) as our exclusive placement agent in connection with this
offering. The Placement Agent has agreed to use its reasonable best
efforts to sell the securities offered by this prospectus
supplement and the accompanying prospectus. We have agreed to pay
the Placement Agent the fees set forth in the table below. We will
also issue warrants to purchase up to 750,000 shares of our common
stock (the “Placement Agent Warrants”), to the Placement Agent, or
its designees, as part of the compensation payable to the Placement
Agent which are exercisable for $0.0875 per share and become
exercisable at any time after stockholder approval; and will expire
three years following the initial exercise date but in no event
later than March 31, 2027 (the shares of common stock issuable upon
exercise of the placement agent warrants are also being registered
hereby). The Placement Agent is not purchasing or selling any
shares offered by this prospectus supplement and the accompanying
base prospectus. See “Plan of Distribution” beginning on page S-18
of this prospectus supplement for more information regarding these
arrangements.
Our Common Stock is quoted on the OTC:QB under the symbol “CVSI.”
On March 23, 2022, the closing price of our Common Stock was $0.12
per share. There is no established public trading market for the
Preferred Stock and the Warrants being offered in this offering,
and we do not expect a market to develop. In addition, we do not
intend to apply for listing the Preferred Stock and the Warrants on
any national securities exchange or other trading market. Without
an active market, the liquidity of the Preferred Stock and the
Warrants will be limited.
Investing in our securities involves a high degree of risk,
including that the trading price of our Common Stock has been
subject to volatility. Please read the information contained in or
incorporated by reference under the heading “Risk Factors” in this
prospectus supplement and in the accompanying
prospectus.
__________________
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Per Preferred Share and Warrant
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Total
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Series A Preferred Stock Public Offering Price
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$ |
1,000.00 |
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$ |
700,000 |
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Placement Agent Fees
(1)
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$ |
75.00 |
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$ |
52,500 |
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Proceeds to us, before expenses
(2)
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$ |
925.00 |
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$ |
647,500 |
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(1)
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We have agreed to pay the Placement Agent an aggregate cash
placement fee equal to 7.5% of the gross proceeds, a cash
management fee of 1.0% of the gross proceeds raised in this
offering, and up to $35,000 for fees and expenses of legal counsel
and other reasonable and customary out-of-pocket expenses. See
“Plan of Distribution” beginning on page S-18 of this prospectus
supplement. |
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(2)
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The amount of the offering proceeds to us presented in this table
does not give effect to any exercise of the Warrants being issued
in this offering.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
We expect that delivery of the securities being offered pursuant to
this prospectus supplement and the accompanying prospectus will be
made on or about March 31, 2022, subject to the satisfaction of
certain customary closing conditions.
H.C. Wainwright & Co.
The date of this prospectus supplement is
March 31, 2022.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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Prospectus Supplement |
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Prospectus |
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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 March 31, 2022,
are part of a registration statement on Form S-3 (File No.
333-237772) that we filed on April 21, 2020 with the Securities and
Exchange Commission (the “SEC”) and that was declared effective on
April 30, 2020, utilizing a “shelf” registration process. Under the
shelf registration process, we may offer and sell from time to time
in one or more offerings up to an aggregate of $100,000,000 in our
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,
2021, the Company’s PlusCBD™ products were sold at more than 8,400
retail locations throughout the United States, and it is one of the
top-selling brands 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, 2021, 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.
Annual Meeting of Stockholders
Promptly after the closing of this offering, the Company will call
an annual meeting of its stockholders (the “Annual Meeting”), to
consider the following two proposed amendments to the Company’s
Certificate of Incorporation, as amended (the “Charter”), in
addition to other traditional Annual Meeting voting
matters:
•stockholder
approval of an amendment to the Charter to increase the authorized
number of shares of capital from 200,000,000 shares to 800,000,000,
and the authorized number of shares of Common Stock from
190,000,000 shares to 790,000,000 shares; and
•stockholder
approval of an amendment to the Charter to effect, at the
discretion of the Company's Board of Directors, a reverse stock
split of all outstanding shares of the Company's common stock, par
value $0.0001 per share, at a ratio of not less than 1-for-10 and
not greater than 1-for-400, such ratio to be determined by the
Company's Board of Directors at any time before May 30, 2025,
without further approval or authorization of our
stockholders.
The Shares of Preferred Stock purchased in this offering will be
outstanding and entitled vote at the Annual Meeting, and will be
entitled to 170,000 votes for each share of Preferred Stock
outstanding as of the record date for the Annual Meeting. The votes
of the holders of the Preferred Stock will be counted with the
shares of Common Stock as a class on the proposed Charter
amendments.
The votes will be counted as follows:
•The
approval of the amendment to the Charter to increase the authorized
number of shares of capital from 200,000,000 shares to 800,000,000,
and the authorized number of shares of Common Stock from
190,000,000 shares to 790,000,000 shares requires the affirmative
vote of at least a majority of the of the outstanding shares of the
capital stock of the Company. The holders of Common Stock have the
right to cast one (1) vote per share of Common Stock on this
proposal, and the holders of Preferred Stock have the right to cast
170,000 votes per share of Preferred Stock on this
proposal.
•The
approval of an amendment to the Charter to effect, at the
discretion of the Company's Board of Directors, a reverse stock
split of all outstanding shares of the Company's common stock, par
value $0.0001 per share, at a ratio of not less than 1-for-10 and
not greater than 1-for-400, such ratio to be determined by the
Company's Board of Directors at any time before May 30, 2025,
without further approval or authorization of our stockholders,
requires the affirmative vote of at least a majority of the of the
outstanding shares of the capital stock of the Company. The holders
of Common Stock have the right to cast one (1) vote per share of
Common Stock on this proposal, and the holders of Preferred Stock
have the right to cast 170,000 votes per share of Preferred Stock
on this proposal.
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.
THE OFFERING
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Preferred Stock offered by us |
700 shares of Preferred Stock convertible into an aggregate of
10,000,000 shares of Common Stock issuable upon conversion of the
Preferred Stock at an initial conversion price of $0.07 per
share.
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Warrants offered by us |
We are offering Warrants to purchase up to 10,000,000 shares of
Common Stock. Each Warrant will have an exercise price of $0.10 per
share, will become exercisable on or after the date of stockholder
approval for an increase in the Company’s authorized shares of
Common Stock, or the Initial Exercise Date, and will expire three
years after such Initial Exercise Date.
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Placement Agent Warrants |
Placement agent warrants to purchase up to 750,000 shares of common
stock issued to our placement agent (or its designees) as part of
the compensation payable to our placement agent in connection with
this offering. Each placement agent warrant has an exercise price
of $0.0875 per share (representing 125% of the conversion price per
share of preferred stock), and will become exercisable on or after
the date of stockholder approval for an increase in the Company’s
authorized shares of Common Stock, or the Initial Exercise Date,
and will expire three years after such Initial Exercise Date but in
no event later than March 31, 2027.
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Common stock to be outstanding after this offering (1) |
132,040,186 shares of Common Stock (assuming the issuance of all of
the shares of Common Stock upon the conversion of the Preferred
Stock, but not assuming the exercise of the Warrants)
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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 securities
for satisfaction of indebtedness of the Company (except for a note
holder's existing optional redemption of an outstanding convertible
promissory note) 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.
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Risk factors |
Investing in our securities involves a high degree of risk. See
"Risk Factors" beginning on page S-6 of this prospectus supplement
and under the similar heading in the accompanying prospectus and
the other information included or incorporated by reference herein
or therein.
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Trading Market; No Listing of Preferred Stock or
Warrants |
Our common stock is traded on the OTC:QB marketplace maintained by
OTC Markets Group, Inc. (the “OTC”), under the symbol “CVSI.” There
is no established public trading market for the Preferred Stock and
the Warrants being offered in this offering, and we do not expect a
market to develop. In addition, we do not intend to apply for
listing the Preferred Stock and the Warrants on any national
securities exchange or other trading market. Without an active
market, the liquidity of the Preferred Stock and the Warrants will
be limited.
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(1) Based on 122,040,186 shares of common stock outstanding as of
March 29, 2022
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 our securities.
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
We do not have a sufficient number of shares of authorized but
unissued shares of Common Stock to offer such shares in this
offering.
We are making an offer to sell shares of our Preferred Stock, and
the accompanying Warrants because we do not currently have
sufficient authorized but unissued shares of Common Stock to issue
in this offering. The Preferred Stock has “supermajority” voting
rights in that the holders of Preferred Stock will be able to vote
the shares of Preferred Stock with the Common Stock, as a single
class, at the Annual Meeting. Each share of Preferred Stock will
entitle the holder to cast 170,000 votes per share of Preferred
Stock at the Annual Meeting. We needed to offer this Preferred
Stock with supermajority voting rights because, to date, we have
not been able to obtain the necessary vote of stockholders to
approve the needed amendments to our Charter, despite years of
attempted votes, lengthy annual meeting solicitation processes and
expenses associated with the use of a proxy solicitor. The issuance
of shares of Preferred Stock with supermajority voting rights could
be viewed negatively by our Common Stock holders and make it more
difficult for us to successfully amend our Charter to increase the
number of authorized shares of Common Stock.
We cannot be certain that, even with the supermajority voting
rights of the Preferred Stock, that the stockholders will approve
the Charter amendment proposals at the Annual Meeting. Under the
Securities Purchase Agreement, we must continue to call and hold
special meetings of our stockholders until the Charter amendment to
increase the authorized capital is approved. Special meetings are
expensive and time consuming, and the need to hold multiple
meetings may distract management’s attention to our business. If
the Charter amendments are not approved, this could have a material
adverse impact on the Company’s capital raising alternatives and
financial condition.
If you purchase Preferred Stock and Warrants sold in this offering,
you will not be able to exercise the Warrants to Common Stock until
after the proposal to amend the Charter to increase the authorized
shares of Common Stock is approved by the requisite vote of the
stockholders.
The primary purpose of this offering is to issue Preferred Stock
with supermajority voting rights in order to successfully obtain
stockholder approval of the proposed amendment to the Charter to
increase the authorized shares of Common Stock and to provide
discretion to the Board of Directors to implement a reverse stock
split. If the Preferred Stock remains outstanding for any prolonged
period of time, a negative impact on the trading of our Common
Stock could occur, including a reduction in the market price of our
Common Stock.
The Preferred Stock and Warrants are not listed for trading on any
exchange, so the ability to trade the shares of Preferred Stock and
Warrants is limited.
There is no established public trading market for the Preferred
Stock and Warrants being offered in this offering, and we do not
expect a market to develop. In addition, we do not intend to apply
for listing the Preferred Stock or Warrants on any national
securities exchange or other trading market. Without an active
market, the liquidity of the Preferred Stock and Warrants will be
limited.
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.
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 Preferred Stock or
the Exercise of the Warrants and may result in dilution 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 September 30, 2021, we have options to purchase 39,141,000
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 expect to receive net proceeds of approximately $605,000 upon
the completion of this offering. We will have broad discretion in
the use of the net proceeds from the sale of the securities 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.
Additionally, the Company entered into that certain Senior
Convertible Note Due 2022 with an institutional investor dated as
of November 17, 2021 (the “Note”) and a second tranche on March 25,
2022 (the “Additional Note”). The Notes include a subsequent
placement optional redemption right of the holder which provides
that if the Company consummates 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), the investor may require the Company 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. The current balance of the Notes is
approximately $1,290,000, a portion of which would be re-paid along
with the redemption premium in the event such investor exercised
this right.
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 September 30, 2021:
•on
an actual basis; and
•on
an as adjusted basis giving effect to the issuance and sale of 700
shares of Preferred Stock in this offering at the offering price of
$1,000 per share and 10,000,000 shares of Common Stock underlying
the Warrants sold in this offering, before deducting placement
agent’s compensation and other estimated offering expenses payable
by us.
You should read this table along with our unaudited consolidated
financial statements and related notes for the nine months ended
September 30, 2021 as well as the other financial information
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
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September 30, 2021
(Unaudited) |
|
Pro Forma Adjustments |
|
Pro Forma (unaudited) |
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Cash, cash equivalents, and restricted cash |
|
$ |
1,660,000 |
|
|
$ |
700,000 |
|
|
$ |
2,360,000 |
|
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Other assets |
|
21,950,000 |
|
|
|
|
21,950,000 |
|
|
Total Assets |
|
23,610,000 |
|
|
700,000 |
|
|
24,310,000 |
|
|
Current Liabilities |
|
12,311,000 |
|
|
|
|
12,311,000 |
|
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Long Term Liabilities (and non-current Operating Lease
liabilities) |
|
157,000 |
|
|
|
|
157,000 |
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Total Liabilities |
|
12,468,000 |
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|
|
|
12,468,000 |
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Stockholder Equity |
|
11,142,000 |
|
|
700,000 |
|
|
11,842,000 |
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Total liabilities and stockholders’
equity
|
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$ |
23,610,000 |
|
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$ |
700,000 |
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$ |
24,310,000 |
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The number of shares of Common Stock outstanding is 109,946,000 as
of September 30, 2021, and excludes:
•39,141,000
shares of common stock issuable upon the exercise of outstanding
stock options with a weighted average exercise price of $0.47 per
share;
•350,000
stock options with a weighted average exercise price of $0.23 per
share granted since September 30, 2021;
•13,856,288
stock options with weighted average exercise price of $0.47 per
share cancelled since September 30, 2021;
•5,753,515
shares of c common stock available for future grant under our
Amended and Restated 2013 Equity Incentive Plan (the “2013
Plan”);
•741,816
shares of common stock issued to Tumim Stone Capital, LLC since
September 30, 2021 under a securities purchase agreement, which was
subsequently terminated on November 15, 2021;
•7,855,998
shares of common stock issued based on conversions of convertible
note holder since September 30, 2021 since September 30,
2021;
•2,300,000
shares of common stock which may be issuable upon the exercise of
the outstanding Convertible Promissory Notes as of October 29,
2021, based on an estimated conversion price of $0.10 (first
Tranche);
•20,000,000
shares of common stock reserved for the issuance upon the exercise
of the outstanding Convertible Promissory Notes (second Tranche);
and
•3,496,404
shares issued to Procopio for services since September 30,
2021.
Unless otherwise stated, all information in this prospectus
supplement assumes no exercise of outstanding stock options and no
exercise of outstanding convertible notes.
DESCRIPTION OF SECURITIES WE ARE OFFERING
Series A Convertible Preferred Stock
The Company is offering up to 700 shares of its Series A
Convertible Preferred Stock in this offering, with a stated value
of $1,000 per share. The following are the principal terms of the
Preferred Stock:
Dividends
The holders of Preferred Stock will be entitled to dividends, on an
as-if converted basis, equal to and in the same form as dividends
actually paid on shares of Common Stock, when and if actually
paid.
Voting Rights
The Preferred Stock has no voting rights, except:
•the
right to vote, with the holders of Common Stock, as a single class,
with each share of Preferred Stock entitled to 170,000 votes per
share, on any resolution presented to stockholders for the purpose
of obtaining approval of an amendment to the Certificate to
increase the authorized number of shares of capital from
200,000,000 shares to 800,000,000, and the authorized number of
shares of Common Stock from 190,000,000 shares to 790,000,000
shares;
•the
right to vote, with the holders of Common Stock, as a single class,
with each share of Preferred Stock entitled to 170,000 votes per
share, on any resolution presented to stockholders for the purpose
of obtaining approval of an amendment to the Certificate to effect,
at the discretion of the Company's Board of Directors, a reverse
stock split of all outstanding shares of the Company's common
stock, par value $0.0001 per share, at a ratio of not less than
1-for-10 and not greater than 1-for-400, such ratio to be
determined by the Company's Board of Directors at any time before
May 30, 2025, without further approval or authorization of our
stockholders; and
•otherwise,
as long as any shares of Preferred Stock are outstanding, the
holders of the Preferred Stock will be entitled to approve, by a
majority vote of the then outstanding shares of Preferred Stock if
the Company seeks to (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or
amend the Certificate of Designation governing the Preferred Stock,
(b) amend its Certificate or other charter documents in any manner
that adversely affects any rights of the holders of the Preferred
Stock, (c) increase the number of authorized shares of Preferred
Stock, or (d) enter into any agreement with respect to any of the
foregoing.
Liquidation
Upon any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary, (a “Liquidation”), the then
holders of the Preferred Stock shall be entitled to receive out of
the assets, whether capital or surplus, of the Company the same
amount that a holder of Common Stock would receive if the Preferred
Stock were fully converted (disregarding for such purposes any
conversion limitations hereunder) to Common Stock which amounts
shall be paid pari passu with all holders of Common
Stock.
Conversion
The Preferred Stock is convertible into Common Stock, which
converted shares of Common Stock are referred to as the Conversion
Shares in this prospectus supplement. The conversion rate, subject
to adjustment as set forth in the Certificate of Designation, is
determined by dividing the stated value of the Preferred Stock by
$0.07 (the “Conversion Price”). The Conversion Price can be
adjusted as set forth in the Certificate of Designation for stock
dividends and stock splits or the occurrence of a fundamental
transaction (as defined below). Upon conversion the shares of
Preferred Stock shall resume the status of authorized but unissued
shares of preferred stock of the Company.
Optional Conversion
The Preferred Stock can be converted at the option of the Holder at
any time and from time to time.
Beneficial Ownership Limitation
The Preferred Stock cannot be converted to Common Stock if the
holder and its affiliates would beneficially own more than 4.99% or
9.99% at the election of the holder of the outstanding Common
Stock. However, any holder may increase or
decrease such percentage to any other percentage not in excess of
9.99% upon notice to us, provided that any increase in this
limitation will not be effective until 61 days after such notice
from the holder to us and such increase or decrease will apply only
to the holder providing such notice.
Warrants
The Company is also offering Warrants to purchase an aggregate of
10,000,000 shares of our Common Stock.
Each Warrant issued in this offering represents the right to
purchase up to one share of Common Stock at an initial exercise
price of $0.10 per share. Each Warrant may be exercised, in cash on
or after the date of stockholder approval for an increase in the
Company’s authorized shares of common stock and from time to time
thereafter through and including the third anniversary of the
initial exercise date.
The Warrants will be exercisable in whole or in part by delivering
to the Company a completed instruction form for exercise and
complying with the requirements for exercise set forth in the
Warrant. The Warrant may be exercised in whole or in part by
delivering a warrant exercise form to us and complying with the
requirements for exercise under the terms of the Warrant. Payment
of the exercise price may be made in cash or pursuant to a cashless
exercise, in which case the holder would receive upon such exercise
the net number of shares of Common Stock determined according to
the formula set forth in the Warrant.
No Fractional Shares
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of the Warrant. As to any fraction of a
share which the holder would otherwise be entitled to purchase upon
such exercise, the number of shares of Common Stock to be issued
shall be rounded up to the nearest whole number.
Failure to Timely Deliver Shares
If we fail to deliver to the holder a certificate representing
shares issuable upon exercise of a Warrant or to credit the
holder’s balance account with Depository Trust Company for such
number of shares of Common Stock to which the holder is entitled
upon the holder’s exercise of the Warrant, in each case, by the
delivery date set forth in the Warrant, and if after such date the
holder is required by its broker to purchase (in an open market
transaction or otherwise) or the holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the holder of the warrant shares which the holder
anticipated receiving upon such exercise, or a Buy-In, then we
shall (A) pay in cash to the holder the amount, if any, by which
(x) the holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (1) the number of
warrant shares that we were required to deliver to the holder in
connection with the exercise at issue, times (2) the price at which
the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the holder, either reinstate the
portion of the applicable warrant and equivalent number of warrant
shares for which such exercise was not honored (in which case such
exercise shall be deemed rescinded) or deliver to the holder the
number of shares of Common Stock that would have been issued had we
timely complied with our exercise and delivery obligations. In
addition, if we fail to deliver to the holder any Common Stock
pursuant to a validly-exercised Warrant, we will be required to pay
liquidated damages in the amount of $10 per trading day for each
$1,000 of the shares of Common Stock exercised but not delivered
(and rising to $20 per trading day beginning the third trading day
after the warrant share delivery date) until such time the shares
of Common Stock are delivered or the holder rescinds such
exercise.
Exercise Limitation
In general, a holder will not have the right to exercise any
portion of a Warrant if the holder (together with its Attribution
Parties (as defined in the Warrant)) would beneficially own in
excess of 4.99% or 9.99%, at the election of the holder, of the
number of shares of our Common Stock outstanding immediately after
giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the warrant. However,
any holder may increase or decrease such percentage to any other
percentage not in excess of 9.99% upon notice to us, provided that
any increase in this limitation will not be effective until 61 days
after such notice from the holder to us and such increase or
decrease will apply only to the holder providing such
notice.
Adjustment for Stock Splits
The exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Warrants are subject to
adjustment upon the occurrence of specific events, including sales
of additional shares of Common Stock, stock dividends, stock
splits, and combinations of our Common Stock.
Dividends or Distributions
If we declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of
our Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or
other securities, property, options, evidence of indebtedness or
any other assets by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement or other similar
transaction) at any time after the issuance of the Warrants, then,
in each such case, the holders of the Warrants shall be entitled to
participate in such distribution to the same extent that the
holders would have participated therein if the holders had held the
number of shares of Common Stock acquirable upon complete exercise
of the Warrants.
Purchase Rights
If we grant, issue or sell any shares of our Common Stock or
securities exercisable for, exchangeable for or convertible into
our Common Stock, or rights to purchase stock, warrants, securities
or other property pro rata to the record holders of any class of
shares of our Common Stock, referred to as Purchase Rights, then
each holder of the Warrants will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the holder could have acquired if the holder had held
the number of shares of Common Stock acquirable upon complete
exercise of the Warrant immediately before the record date, or, if
no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined, for the grant, issue
or sale of such Purchase Rights.
Fundamental Transaction
If a Fundamental Transaction (as defined in the Warrants and
described below) occurs, then the successor entity will succeed to,
and be substituted for us, and may exercise every right and power
that we may exercise and will assume all of our obligations under
the Warrants with the same effect as if such successor entity had
been named in the warrant itself. Additionally, upon consummation
of a Fundamental Transaction pursuant to which holders of shares of
our Common Stock are entitled to receive securities or other assets
with respect to or in exchange for shares of our Common Stock, we
will make appropriate provision to ensure that the holder will
thereafter have the right to receive upon an exercise of the
Warrants at any time after the consummation of the Fundamental
Transaction but prior to the applicable expiration date of the
Warrants, in lieu of shares of our Common Stock (or other
securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, at
the option of each holder (without regard to any limitation in the
Warrant on the exercise of the Warrants), the number of shares of
Common Stock of the successor or acquiring corporation or of us, if
we are the surviving corporation, and any additional consideration
which the holder would have been entitled to receive upon the
happening of such Fundamental Transaction had the Warrant been
exercised immediately prior to such Fundamental
Transaction.
If holders of our Common Stock are given a choice as to the
securities, cash or property to be received in a Fundamental
Transaction, then the holder shall be given the same choice as to
the consideration it receives upon any exercise of the Warrants,
following such Fundamental Transaction. These provisions apply
similarly and equally to successive Fundamental Transactions and
other corporate events described in the Warrants and will be
applied without regard to any limitations on the exercise of the
warrant.
In the event of a Fundamental Transaction, at the request of the
holder, we or the successor entity shall purchase the unexercised
portion of the Warrants from the holder by paying to the holder, on
or prior to the second trading day after such request (or, if
later, on the effective date of the Fundamental Transaction), cash
in an amount equal to the Black-Scholes Value (as defined below) of
the remaining unexercised portion of the Warrants on the date of
such Fundamental Transaction.
Subsequent Equity Sales; Anti-Dilution Protection; Price Resets
upon Reverse Stock Split and Uplist
In addition, in the event of the implementation of the reverse
split and in connection with an uplist to a national exchange, the
holder of the Warrants will be able to reset its strike price based
on the average of the five (5) VWAPs immediately prior to the date
of each triggering event, the Warrants have anti-dilution
protections on subsequent equity sales entitling the holder to a
reset on the strike price, and the Company cannot effect a reverse
stock split until the stock has traded at least $3 million in total
volume following the public announcement of the execution of the
Securities Purchase Agreement.
Authorized Shares
During the period the Warrants are outstanding, we will seek the
Authorized Share Approval in order to reserve from our authorized
and unissued shares of Common Stock a sufficient number of shares
to provide for the issuance of 100% of the shares of Common Stock
underlying the warrants upon the exercise of the warrants. Except
and to the extent as necessary in connection with the Authorized
Share Approval or otherwise waived or consented to by the holder,
we will not take any action, including, without limitation,
amending our Certificate or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of holders as set
forth in the Warrant against impairment.
Transferability
Subject to applicable laws, the Warrants may be offered for sale,
sold, transferred or assigned. There is currently no trading market
for the Warrants and a trading market is not expected to
develop.
Rights as a Shareholder
Except as otherwise provided in the Warrants or by virtue of a
holder’s ownership of shares of our Common Stock, the holders of
the Warrants do not have the rights or privileges of holders of our
Common Stock, including any voting rights, unless and until they
exercise their warrants.
Amendments
Each Warrant may be amended with the written consent of the holder
of such Warrant and us.
Listing
There is no established public trading market for the Warrants, and
we do not expect a market to develop. In addition, we do not intend
to apply for listing of the Warrants on any national securities
exchange.
Definitions
“Black
Scholes Value”
means the value of the Warrants based on the Black-Scholes Option
Pricing Model obtained from the “OV” function on Bloomberg, L.P.
(“Bloomberg”)
determined as of the day of consummation of the applicable
Fundamental Transaction for pricing purposes and reflecting (A) a
risk-free interest rate corresponding to the U.S. Treasury rate for
a period equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the
Termination Date, (B) an expected volatility equal to the greater
of 100% and the 100 day volatility obtained from the HVT function
on Bloomberg (determined utilizing a 365 day annualization factor)
as of the trading day immediately following the public announcement
of the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the
sum of the price per share being offered in cash, if any, plus the
value of any non-cash consideration, if any, being offered in such
Fundamental Transaction and (ii) the greater of (x) the last VWAP
immediately prior to the public announcement of such Fundamental
Transaction and (y) the last VWAP immediately prior to the
consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the
Termination Date, and (E) a zero cost of borrow.
“Fundamental Transaction” means (i) we, directly or indirectly, in
one or more related transactions effect any merger or consolidation
with or into another Person, (ii) we (and all of our subsidiaries,
taken as a whole), directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of
all or substantially all of our assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by us or another
Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders
of 50% or more of the outstanding Common Stock, (iv) we, directly
or indirectly, in one or more related transactions effect any
reclassification, reorganization or recapitalization of our Common
Stock or any compulsory share exchange pursuant to which our Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) we, directly or indirectly, in
one or more related transactions consummate a stock or share
purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off,
merger or scheme of arrangement) with another Person or group of
Persons whereby such other Person or group acquires more than 50%
of the outstanding shares of our Common Stock (not including any
shares of Common
Stock held by the other Person or other Persons making or party to,
or associated or affiliated with the other Persons making or party
to, such stock or share purchase agreement or other business
combination).
Placement Agent Warrants
We have also agreed to issue to the placement agent the placement
agent warrants to purchase up to 750,000 shares of common stock,
which represent 7.5% of the number of shares of common stock
issuable upon conversion of the Preferred Stock sold in this
offering. The placement agent warrants will have the same terms as
the common warrants described above, except that the placement
agent warrants will have an exercise price of $0.0875 per share
(representing 125% of the conversion price per share of preferred
stock) and a termination date no later than March 31,
2027.
PLAN OF DISTRIBUTION
Pursuant to the engagement agreement, dated February 15, 2022, we
have engaged H.C. Wainwright & Co., LLC, or the placement
agent, to act as our exclusive placement agent to solicit offers to
purchase the shares of our Preferred Stock and Warrants offered by
this prospectus supplement and the accompanying prospectus. The
placement agent is not purchasing or selling any such securities,
nor is it required to arrange for the purchase and sale of any
specific number or dollar amount of such securities, other than to
use its “reasonable best efforts” to arrange for the sale of such
securities by us. Therefore, we may not sell all of the Shares of
our Preferred Stock and Warrants being offered. The terms of this
offering were subject to market conditions and negotiations between
us, the placement agent and prospective investors. The placement
agent will have no authority to bind us by virtue of the engagement
letter. We have entered into a securities purchase agreement
directly with an institutional investor who has agreed to purchase
the shares of Preferred Stock and Warrants in this offering. We
will only sell to investors who have entered into securities
purchase agreements. The placement agent may retain sub-agents and
selected dealers in connection with this offering.
Delivery of the shares of Preferred Stock and Warrants offered
hereby is expected to occur on or about March 31, 2022, subject to
satisfaction of certain customary closing conditions.
Fees and Expenses
We have agreed to pay the placement agent an aggregate cash fee
equal to 7.5% of the gross proceeds received in the offering and a
management fee equal to 1.0% of the gross proceeds received in the
offering. In addition, we have agreed to pay the placement agent
$35,000 for accountable expenses.
We estimate the total expenses of this offering paid or payable by
us, exclusive of the placement agent's cash fee of 7.5% of the
gross proceeds and management fee of 1.0% of the gross proceeds,
will be approximately $35,000. After deducting the fees due to the
placement agent and our estimated expenses in connection with this
offering, we expect the net proceeds from this offering will be
approximately $605,500.
The following table shows the per share and total cash fees we will
pay to the placement agent in connection with the sale of the
Shares of our Preferred Stock and Warrants pursuant to this
prospectus supplement and the accompanying prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Preferred Share and Warrant
|
|
Total
|
|
Series A Preferred Stock Public Offering Price
|
$ |
1,000.00 |
|
|
$ |
700,000 |
|
|
Placement Agent Fees
(1)
|
$ |
75.00 |
|
|
$ |
52,500 |
|
|
Proceeds to us, before expenses
(2)
|
$ |
925.00 |
|
|
$ |
647,500 |
|
Placement Agent Warrants
In addition, we have agreed to issue to the placement agent (or
their designee), at the closing of this offering, warrants to
purchase 750,000 shares of our common stock, equal to 7.5% of the
shares common stock underlying the Preferred Stock sold in this
offering, at an exercise price of $0.0875 per share (representing
125% of the conversion price of the Preferred Stock). The Placement
Agent Warrants and the shares of our common stock issuable upon
exercise thereof are being registered hereby.
The Placement Agent Warrants will be exercisable upon the
Stockholder Approval Date, or the initial exercise date, an will
expire on the third anniversary of the initial exercise date but in
no event later than March 31, 2027.
Indemnification
We have agreed to indemnify the placement agent against certain
liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties
contained in our engagement letter with the placement agent. We
have also agreed to contribute to payments the placement agent may
be required to make in respect of such liabilities.
Right of First Refusal
In addition, we have granted a right of first refusal to the
placement agent pursuant to which it has the right to act as the
sole book-runner, sole manager, sole placement agent, or sole agent
as applicable, if we or our subsidiaries sell or acquire a
business, finance any indebtedness using an agent, or raise capital
through a public or private offering of equity or debt securities
at any time prior to the 18-month anniversary of the consummation
of this offering.
Fee Tail
We have also agreed to pay the placement agent, subject to certain
exceptions, a tail fee equal to the cash and warrant compensation
in the offering, if any investor, who was contacted or introduced
to us by the placement agent during the term of its engagement,
provides us with capital in any public or private offering or other
financing or capital raising transaction during the 12-month period
following expiration or termination of our engagement with the
placement agent.
Other Relationships
From time to time, the placement agent may provide in the future
various advisory, investment and commercial banking and other
services to us in the ordinary course of business, for which they
have received and may continue to receive customary fees and
commissions. However, except as disclosed in this prospectus
supplement, we have no present arrangements with the placement
agent for any further services.
Regulation M Compliance
The placement agent may be deemed to be an underwriter within the
meaning of Section 2(a)(11) of the Securities Act, and any
commissions received by it and any profit realized on the sale of
our Shares of Preferred Stock offered hereby by it while acting as
principal might be deemed to be underwriting discounts or
commissions under the Securities Act. The placement agent will be
required to comply with the requirements of the Securities Act and
the Exchange Act, including, without limitation, Rule 10b-5 and
Regulation M under the Exchange Act. These rules and regulations
may limit the timing of purchases and sales of our securities by
the placement agent. Under these rules and regulations, the
placement agent may not (i) engage in any stabilization activity in
connection with our securities; and (ii) bid for or purchase any of
our securities or attempt to induce any person to purchase any of
our securities, other than as permitted under the Exchange Act,
until they have completed their participation in the
distribution.
Trading Market
Our Common Stock is quoted on the OTC:QB under the symbol “CVSI.”
Our Preferred Stock and Warrants are not listed for trading on any
market.
Transfer Agent and Registrar
The current transfer agent and registrar for our common stock is
Issuer Direct Corporation.
LEGAL MATTERS
Procopio, Cory, Hargreaves & Savitch LLP, San Diego,
California, has acted as our Company’s legal counsel and will pass
upon the validity of the securities, other than the Warrants,
offered by this prospectus supplement. Procopio holds 3,496,404
shares of restricted common stock of the Company which were issued
as consideration for legal services. Carter Ledyard & Milburn
LLP, New York, New York, has acted as special New York counsel to
our Company by providing an opinion on the validity of Warrants
offered by this prospectus supplement. Ellenoff Grossman &
Schole LLP, New York, New York is acting as counsel to the
placement agent in this offering.
EXPERTS
The financial statements of CV Sciences, Inc. as of December 31,
2020 and 2019, and for each of the two years in the period ended
December 31, 2020, incorporated by reference in this prospectus
supplement, have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their
report. Such financial statements are incorporated by reference in
reliance upon the report of such firm given their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
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,
September 30, 2021, December 1, 2021 (amendment), December 12,
2021, March 28, 2022 and March 31, 2022; 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.
700
Shares of Preferred Stock
Warrants to Purchase up to 10,000,000 Shares of Common
Stock
Placement Agent Warrants to Purchase up to 750,000 Shares of Common
Stock
(and 20,750,000 shares of Common Stock issuable upon the conversion
of such Preferred Stock and exercise of such Warrants and Placement
Agent Warrants)
CV SCIENCES, INC.
Prospectus Supplement
H.C.
Wainwright & Co.
March 31, 2022
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