Item 2.01        Completion of Acquisition or Disposition of Assets

THE MERGER AND RELATED TRANSACTIONS

Pursuant to the terms of the Merger Agreement, on the Effective Date, Merger Sub merged with and into OrangeHook with OrangeHook remaining as the surviving corporation and a wholly owned subsidiary of Nuvel. Set forth below is a description of the material terms of and transactions effected by the Merger Agreement. A copy of the Merger Agreement is included with this Current Report on Form 8-K as Exhibits 2.2 (Agreement and Plan of Merger) and 2.3 (Amendment No. 1 to Agreement and Plan of Merger) and is incorporated herein by reference. The description of the Merger Agreement terms set forth below is not complete and is qualified in its entirety by reference to the full text of the Merger Agreement filed herewith.

Consideration Payable to OrangeHook Shareholders

In accordance with the terms of the Merger Agreement, (i) outstanding shares of OrangeHook common stock, par value $.01 per share ("OrangeHook Common Stock"), and other outstanding securities convertible into OrangeHook Common Stock were exchanged for a pro rata portion of 500,000 shares (or a corresponding security convertible into shares) of a new series of preferred stock of Nuvel, par value $0.001 per share, titled "Series OH-1 Convertible Preferred Stock" and (ii) each outstanding share of OrangeHook preferred stock and other outstanding securities convertible into OrangeHook preferred stock was exchanged for one share (or a corresponding security convertible into one share) of a new series of preferred stock of Nuvel, par value $0.001 per share, titled "Series OH-2 Convertible Preferred Stock." The powers, preferences, limitations and relative rights of the Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock are summarized in the discussion under the heading " Description of Registrant's Securities ."

Reverse Stock Split and Conversion of Series OH-1 Convertible Preferred Stock of Nuvel

The terms of the Merger Agreement require Nuvel, following the completion of the Merger, to seek shareholder approval to effect a recapitalization in which it would complete a One-for-One Million Two Hundred Thousand (1-for-1,200,000) reverse split (the "Reverse Stock Split") of the common stock of Nuvel, par value $0.001 per share ("Nuvel Common Stock"). If the Reverse Stock Split is completed, shareholders who own less than 1,200,000 shares of Nuvel Common Stock or who do not own shares in multiples of 1,200,000 would have their post-Reverse Stock Split shareholdings rounded up to the nearest whole number of shares in lieu of Nuvel issuing fractional shares, meaning that a shareholder who owns 600,000 shares prior to the Reverse Stock Split would receive one (1) share instead of one-half (½) share, and a shareholder who owns 1,800,000 shares would receive two (2) shares instead of one and one-half (1½) shares. Nuvel's articles of incorporation would continue to authorize the issuance of up to 100,000,000 shares of Nuvel Common Stock.

 

 

 

 

 

Assuming the requisite shareholder approval is obtained, upon consummation of the Reverse Stock Split and without any action by the holders of Series OH-1 Convertible Preferred Stock, all outstanding shares of Series OH-1 Convertible Preferred Stock would convert into shares of fully paid and non-assessable Nuvel Common Stock at a conversion ratio equal to the quotient derived by dividing the number of outstanding shares of OrangeHook Common Stock and other outstanding securities convertible into OrangeHook Common Stock, in each case immediately prior to the Merger, by 500,000 (the "OrangeHook Preferred Conversion"). The Reverse Stock Split would not impact the number of outstanding shares of Series OH-2 Convertible Preferred Stock or the conversion ratio applicable thereto.  As a result of the Reverse Stock Split, shares of Nuvel Common Stock outstanding immediately prior thereto would represent a mere nominal interest in Nuvel. The economic benefit to holders of Nuvel Common Stock prior to the Merger is the right to participate in the contingent issuance of the Earn-Out Shares (as defined below).

Nuvel Note Conversion; Nuvel Preferred Stock Conversion

Immediately prior to completion of the Merger, Nuvel had outstanding convertible promissory notes that, collectively, had an aggregate principal amount equal to approximately $1.181 million. In addition, Nuvel had issued and outstanding 1,767,358 shares of Series D Convertible Preferred Stock. As a condition to closing the Merger, Nuvel was required to enter into Note Conversion Agreements with all holders of such notes of Nuvel (the "Nuvel Note Conversion") and to obtain irrevocable notices of conversion from the holders of all issued and outstanding shares of Nuvel's Series D Convertible Preferred Stock pursuant to which such notes and shares would be automatically converted immediately following the Reverse Stock Split into shares of post-Reverse Stock Split Nuvel Common Stock.  As of closing of the Merger, Nuvel had entered into Note Conversion Agreements with noteholders holding approximately $1.166 million in aggregate principal amount and had obtained irrevocable notices of conversion from all holders of Series D Convertible Preferred Stock. Assuming the requisite shareholder approval is obtained, upon consummation of the Reverse Stock Split such shares and notes would be automatically converted immediately into a total of 458,591 shares of post-Reverse Stock Split Nuvel Common Stock. OrangeHook elected to waive the satisfaction of the Nuvel Note Conversion with respect to the remaining $15,000 in aggregate principal amount of the notes.  Such notes would not be impacted by the Reverse Stock Split except that the conversion ratios applicable thereto would be adjusted proportionally.

Immediately prior to completion of the Merger, Nuvel had issued and outstanding 408,484 shares of Series B Convertible Preferred Stock and 1,471,121 shares of Series C Convertible Preferred Stock.  As a condition to closing the Merger, Nuvel was required to obtain irrevocable notices of conversion from the holders of all outstanding shares of Nuvel's Series B Convertible Preferred Stock and Series C Convertible Preferred Stock pursuant to which all of such shares would be automatically converted immediately prior to the effective time of the Merger into shares of Nuvel's Common Stock (together with the conversion of Nuvel's Series D Convertible Preferred Stock referred to above, the "Nuvel Preferred Stock Conversion"). As of closing of the Merger, Nuvel had obtained irrevocable notices of conversion from shareholders holding 388,484 shares of Series B Convertible Preferred Stock and 1,100,069 shares of Series C Convertible Preferred Stock. OrangeHook elected to waive the satisfaction of the Nuvel Preferred Stock Conversion with respect to the remaining 20,000 shares of Series B Convertible Preferred Stock and 371,052 shares of Series C Convertible Preferred Stock, and the unconverted shares remain outstanding following the closing of the Merger. Such shares would not be impacted by the Reverse Stock Split except that the conversion ratios applicable thereto would be adjusted in proportionally.

Zero shares of Series A Convertible Preferred Stock of Nuvel were issued and outstanding immediately prior to completion of the Merger. Copies of the certificates of designation for the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D Convertible Preferred Stock are attached to this Current Report on Form 8-K as Exhibits 4.1, 4.2, 4.3 and 4.4, respectively. See also the summary of the rights, privileges and preferences of Nuvel's preferred stock set forth under the caption " Authorization of New Classes of Preferred Stock " in Note 9 to the audited consolidated financial statements of Nuvel included in Nuvel's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on April 5, 2016.

 

 

 

 

Earn-Out Shares

Individuals and entities who held Nuvel Common Stock immediately after closing of the Merger (the "Pre-Merger Nuvel Common Stockholders") preserved the potential to participate in a future equity distribution. Under the Merger Agreement, if, during the period beginning on the effective date of the Merger and ending on December 31, 2017, Nuvel's wholly-owned subsidiary, Nuvel, Inc., enters into contracts with unaffiliated third-party customers that collectively provide for gross revenue payments of at least $1.5 million throughout their contractual terms (the "Earn-Out Contracts"), the Pre-Merger Nuvel Common Stockholders, will be eligible to receive their pro-rata portion of up to an aggregate of 357,143 shares of post-Reverse Stock Split Nuvel Common Stock (the "Earn-Out Shares"). The actual number of Earn-Out Shares (if any) to be earned by and distributed to the Pre-Merger Nuvel Common Stockholders will be based upon the gross revenue actually recognized from the Earn-Out Contracts, calculated in accordance with United States generally accepted accounting principles ("GAAP") then in effect, during the six-month periods ending on December 31 and June 30 of each year (except for the first period, which will instead use the gross revenue recognized from the Earn-Out Contracts from the effective date of the Merger through December 31, 2016) (each an "Earn-Out Period"). The percentage of the Earn-Out Shares to be distributed to the Pre-Merger Nuvel Common Stockholders, collectively, for an Earn-Out Period will be equal to the gross revenue generated from the Earn-Out Contracts during that Earn-Out Period expressed as a percentage of $1.5 million. Nuvel's obligation to issue Earn-Out Shares will cease following the six-month period ending June 30, 2019, or earlier upon the issuance of all such 357,143 shares.

Employment Agreement with Richard Resnick

The Merger Agreement required, subject to compliance with Rule 14f-1 promulgated under the Exchange Act, the individuals serving as officers of Nuvel immediately prior to the closing to resign from all of their officer positions with Nuvel. On the Effective Date and in connection with the Merger, Richard Resnick entered into a new employment agreement with Nuvel and was appointed to serve as Executive Vice President of Operations of Nuvel. In addition, Mr. Resnick continues to serve as Chief Executive Officer of Nuvel, Inc. A copy of Mr. Resnick's employment agreement is attached as Exhibit 10.35 to this Current Report on Form 8-K.

The employment agreement has a three-year term and provides for an initial annual base salary of $250,000, which increases by 5% on each anniversary of the Effective Date, as well as annual and long-term performance incentives and employee benefits. The agreement also contains severance, change-in-control and non-competition and non-solicitation provisions.

Under the terms of the employment agreement, Mr. Resnick is eligible to earn annual, performance-based cash incentives tied to achievement of certain revenue and operating income targets of Nuvel, Inc. For calendar year 2016, payouts could range from 0% to 150% of Mr. Resnick's annual base salary based on performance versus target. The performance target for calendar year 2016 is Nuvel, Inc. achieving revenue of $500,000 during the year. For calendar year 2017 and thereafter, annual, performance-based cash incentives are based on Nuvel, Inc. achieving revenue and operating income targets approved by the board of directors of Nuvel, with revenue weighted 60% and operating income weighted 40%. The table below presents information regarding the annual, performance-based cash incentives that could be earned by Mr. Resnick in calendar year 2016 if the threshold targets are met:

Mr. Resnick is also eligible to earn incentive cash bonuses for exemplary company performance if Nuvel, Inc. achieves certain revenue targets approved by the board of directors of Nuvel. Under the terms of the proposed employment agreement, Mr. Resnick is eligible to receive (i) a cash payment equal to 25% of his then-current annual base salary in the event that Nuvel, Inc. exceeds 150% of its annual revenue target for the applicable year, and (ii) a cash payment equal to 75% of his then-current annual base salary in the event that Nuvel, Inc. exceeds 400% of its annual revenue target for the applicable year.

 

 

 

 

 

 

 

As of closing of the Merger, Nuvel owed to Mr. Resnick approximately $453,500 in earned but deferred compensation for services provided to Nuvel prior to the Merger. No later than December 31, 2016, Nuvel expects to make a one-time cash payment of $50,000 to Mr. Resnick and to grant to Mr. Resnick 21,616 shares of Series OH-1 Convertible Preferred Stock of Nuvel (or, if the Reverse Stock Split has already been completed, the number of shares of Nuvel Common Stock into which the shares of Series OH-1 Convertible Preferred Stock would have been converted) in full satisfaction of all deferred compensation owed to Mr. Resnick.  In addition, as an inducement to accept employment with Nuvel in connection with the Merger, Mr. Resnick received 4,222.56 shares of restricted Series OH-1 Convertible Preferred Stock and we agreed to issue to Mr. Resnick non-qualified stock options to purchase the number of shares of Series OH-1 Convertible Preferred Stock that would be convertible into 100,000 shares of Nuvel Common Stock upon completion of the Reverse Stock Split.

Mr. Resnick's employment agreement also provides for severance and change-in-control arrangements. Under the terms of the employment agreement, (i) upon a change in control of Nuvel, Mr. Resnick would receive a one-time payment in an amount equal to his-then current annual base salary, and (ii) upon a change in control of Nuvel, Inc. at a valuation exceeding $15,000,000, Mr. Resnick would receive a one-time payment in an amount equal to 50% of his-then current annual base salary.

Mr. Resnick's employment agreement further provides that, if Mr. Resnick is terminated by Nuvel without "cause" or by Mr. Resnick for "good reason" (as such terms are defined in the employment agreement), Mr. Resnick would receive a one-time cash severance payment in an amount equal to all accrued but unpaid base salary, incentives and benefits or perquisites, one year's base salary at his then-current pay rate, and the amount of any annual, performance-based cash incentives and exemplary company performance incentives that he would have earned through the end of the quarter in which the termination occurs. In addition, if Mr. Resnick is terminated in anticipation of or within six months following a change in control of either Nuvel or Nuvel, Inc., (i) to the extent not already paid in connection with the change in control, Mr. Resnick would receive a severance payment in an amount equal to the change-in-control payments described in the preceding paragraph, and (ii) all restricted shares of Series OH-1 Convertible Preferred Stock granted to Mr. Resnick as an inducement to accept employment with Nuvel would accelerate and immediately vest.

BUSINESS

Nuvel is a Florida corporation incorporated on October 19, 2009. On December 30, 2011, Nuvel completed an acquisition of Nuvel, Inc. pursuant to a Share Exchange Agreement, among Nuvel, certain shareholders of Nuvel, Nuvel, Inc. and all shareholders of Nuvel, Inc. (the "Share Exchange Transaction"). As a result of the Share Exchange Transaction, Nuvel, Inc., which was incorporated in Delaware on January 20, 2010, became Nuvel's direct wholly-owned subsidiary effective December 30, 2011. The acquisition of Nuvel, Inc. was accounted for as a reverse merger and recapitalization effected by a share exchange transaction. Nuvel, Inc. was considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity were brought forward at their book value and no goodwill was recognized. 

On March 20, 2012, Nuvel changed its name to "Nuvel Holdings, Inc." to better reflect the business and operations of the combined company following the Share Exchange Transaction. Nuvel's stock symbol was changed from "HRMY" to "NUVL," effective April 10, 2012.

On the Effective Date, Nuvel acquired OrangeHook in an acquisition structured as a reverse triangular merger under which Merger Sub merged with and into OrangeHook, with OrangeHook remaining as the surviving corporation and a wholly owned subsidiary of Nuvel. OrangeHook shareholders received as merger consideration shares of Nuvel capital stock representing a substantial majority of the voting rights of Nuvel. As a result, OrangeHook is the acquirer in the Merger for accounting and financial reporting purposes. Although Nuvel was not a "shell company" (as defined in Rule 12b-2 under the Exchange Act), the business and operations of OrangeHook prior to the Merger currently constitute a substantial majority of the business and operations of Nuvel. Consequently, the discussion of historical and planned operations in this section focuses, in large part, on the operations of OrangeHook and its portfolio companies. Following the Merger, Nuvel continues to be a "smaller reporting company" as defined under the Exchange Act.

 

 

 

 

 

 

 

In the near future, Nuvel expects to perform a parent-subsidiary merger of OrangeHook with and into Nuvel, after which time, and subject to shareholder approval, Nuvel is expected to change its name to "OrangeHook, Inc."

Overview

OrangeHook was formed as a holding company to incubate selective and unique consumer, business, and governmental software applications which have the ability, in management's opinion, to change the world we live in to be a better and safer place. OrangeHook is focused on accelerating the delivery of the software products and services offered by its portfolio companies in the dynamic market sectors of safety, health information technology, data acceleration and banking. OrangeHook's business model creates visibility, reduces redundant sales and marketing expenses and general and administrative expenses, and brings together the talent residing in these seemingly unconnected businesses. By providing a central and combined force, OrangeHook believes that it can achieve critical mass and distributed risk scenarios with even greater upside for investors and participants.

OrangeHook currently consists of three portfolio companies: Salamander Technologies, LLC ("Salamander"), Agilivant, LLC ("Agilivant"), and LifeMed ID, Inc. ("LifeMed ID"); and Nuvel currently has one operating subsidiary, Nuvel, Inc. All portfolio companies have developed proprietary software applications and services which are unique to their particular industries and are near or at the end of their respective development stages and have recently entered or are about to enter their revenue generation phase.  In addition, OrangeHook purchased certain intellectual property and other assets of LifeNexus, Inc. ("LifeNexus") related to identification cards for healthcare patients. We currently are considering the prospect of forming a new subsidiary to further develop the products of LifeNexus.

Portfolio Companies

Management believes that the solutions being offered by our portfolio companies—Salamander, Agilivant, LifeMed ID and Nuvel, Inc.—are competitive within their respective markets and that our marketing activities will be effective in distinguishing our products from the competition. Furthermore, many of these products are complimentary to one another, and management believes that we will be able to leverage each entity's resources and expertise to create an even more robust suite of product offerings for healthcare institutions, emergency healthcare service providers, banking institutions, municipalities and its other customers, as well as higher returns for our shareholders.

Salamander

OrangeHook acquired Salamander Technologies, Inc., a Michigan corporation, on October 1, 2015 by way of a merger in which Salamander Technologies, Inc. merged with and into Salamander, with Salamander remaining as the surviving company and a wholly owned subsidiary of OrangeHook. As consideration for the merger, OrangeHook: (a) issued 144,846 shares of OrangeHook Common Stock to a majority shareholder of Salamander Technologies, Inc., and (b) paid aggregate cash consideration of $500,000 to certain minority shareholders.  Subsequent to closing, OrangeHook issued an aggregate 37,297 shares of its OrangeHook Common Stock to creditors of Salamander to satisfy certain obligations.

Salamander competes in the emergency management tracking and accountability solutions sphere against companies such as ERT Systems, Elliott Data Systems, Inc. and Advantidge, Inc. It provides installed software and software as a service ("SaaS") solutions, including integrated data-sharing technologies that allow for unique transparency and accountability across multiple levels of local, state and federal governments during emergency or catastrophic situations. Salamander's products, which are positioned to comply with the federal mandate for the National Incident Management System, provide optimization/analytics capabilities and allow for identity verification , incident command tracking , and ge ospatial location to improve situational awareness of the resources available to first responders during emergency situations .

Salamander 's SaaS solutions incorporate Salamander 's registered intellectual property and proprietary software code , intellectual property licensed-in from third parties and open source software. Salamander has a patent portfolio, consisting of three active U.S. patents with terms ranging from approximately 5 to 15 years, one U.S. patent application, three expired U.S. patents and one inactive foreign patent application, which is intended to protect the key systems and methodology associated with its SaaS solutions. Salamander also owns four U.S. trademark registrations and one U.S. trademark application for various product names and logos, several domain names, and one U.S. Copyright registration for a resource guide for first responders.

 

 

 

 

 

 

 

 

Salamander sells its SaaS solutions primarily through agreements with resellers and through its internal sales staff.  The reseller agreements generally grant non-exclusive rights to market in various geographic territories in the United States, have one-year initial terms and can be terminated upon applicable notice periods.

Salamander's primary obligation (other than trade payables) consists of an ongoing royalty obligation, in an aggregate amount of up to $3.5 million, owed to former preferred shareholders of Salamander. Under the terms of the agreement providing for the royalties, Salamander is obligated to make quarterly royalty payments in an amount equal to five percent of its gross revenue (excluding any refunds, rebates, discounts, allowances and returns) from 2014 through 2017, three percent from 2018 through 2019, and two percent thereafter, until the aggregate amount of all royalty payments equals $3.5 million. In connection with the acquisition of Salamander, OrangeHook agreed to guarantee Salamander's royalty obligation.

Agilivant

On February 12, 2016, OrangeHook acquired approximately 82% of the outstanding equity interests of Agilivant pursuant to a membership interest purchase agreement.  OrangeHook agreed to issue an aggregate of 433,551 shares of OrangeHook Common Stock in exchange for the equity interests.  As of closing, Agilivant reported approximately $2.8 million of trade payables and other outstanding indebtedness, approximately $1.3 million of which consisted of principal on loans made by OrangeHook.  OrangeHook issued 70,997 shares of OrangeHook Common Stock on June 30, 2016 in exchange for the cancellation of $795,174 of such indebtedness. OrangeHook is currently seeking to acquire the remaining equity interests of Agilivant.

Agilivant offers a hybrid SaaS-based payment technology solution, encompassing both issuing and acquiring functionality, in the financial transfer and remittance services sphere . By providing this combined capability, Agilivant can offer open, closed and hybrid (semi-closed) payment solutions to its customers. Additionally, Agilivant provides full merchant acquiring capabilities as a sub-agent to two partner companies.

The Agilivant system is flexible and can provide mobile, web-based and card-based solutions. It operates as a SaaS in a private data cloud, eliminating the need for a bank to purchase expensive computer systems with complex applications and software or to hire more staff to handle mobile banking systems, operations processing, legal compliance and call centers. Agilivant's cash card management system issues and manages debit-based accounts.

Agilivant competes with a large number of companies that offer financial transfer and remittance services as well as with payment associations. Agilivant's principal direct competitors include financial transfer and remittance companies like Western Union, MoneyGram, PayPal, Xoom, as well as individual banks.

LifeMed ID

On July 20, 2016, OrangeHook acquired LifeMed ID pursuant to an amended and restated agreement and plan of merger dated as of May 31, 2016.  OrangeHook issued 1,454,261 shares of OrangeHook Common Stock to former LifeMed ID shareholders as consideration for the merger.

LifeMed ID competes in the healthcare information systems sphere . It provides a cloud-based patient identification solution with robust workflow automation, dynamic reporting, and customizable functionalities to enable streamlined electronic registration that is optimized for each healthcare facility and every patient. LifeMed ID issues a patient a token that identifies the patient throughout his or her life and enables medical professionals to obtain a complete medical history of the patient (including allergies, pre-existing conditions, and other related medical information) before making a medical diagnosis. The LifeMed ID application can also dramatically reduce insurance fraud utilizing its deterministic matching properties.

With the LifeMed ID application, all medical records can be linked via a secure, cloud-based application to ensure a complete history can be accessed instantly. The LifeMed ID application utilizes a library of application programming interfaces to seamlessly overlay, enhance and integrate with existing systems, while at the same time facilitating connectivity with outside third party systems and databases. The application does not require time-intensive installation or ramp-up and can be installed and operational in days, not weeks. The application also enables both internal and external systems to securely send patient data back and forth for real time electronic medical record updates. The end result is physicians, hospitals, and first responders all being able to see (and act on) one universal set of records via the secure cloud infrastructure.

 

 

 

 

 

 

 

LifeMed ID has a patent portfolio that is intended to protect the key systems and methodology associated with its SaaS-based solutions.  Its patent portfolio consists of seven active U.S. patents with durations generally expiring within ten years, as well as two pending U.S. patents and one pending Interlinking Electronic Identities patent. Currently, LifeMed ID has entered into strategic and reseller agreements, all of which will use the patented healthcare patient solutions developed by LifeMed ID. LifeMed ID competes with companies in the healthcare information systems industry such as Epic Systems, GE Healthcare, Ltd., Cerner Corporation, and Allscripts Healthcare Solutions.

Effective March 10, 2016, OrangeHook and LifeMed ID entered into a business partnership agreement with Lenovo PC HK Limited , an electronics manufacturing company based out of Asia, which was subsequently amended on September 1, 2016. As amended, the agreement contemplates that LifeMed ID's patient identification application and other software products offered by OrangeHook's portfolio companies will be preloaded onto the manufacturer's computers, tablets and other electronic devices for marketing and sale as a bundled system to hospitals and other healthcare facilities and providers throughout the world. The manufacturer has agreed to be LifeMed ID's exclusive electronics hardware partner throughout the world, and LifeMed ID has agreed to be its exclusive provider of patient identification software. The exclusivity provisions in the agreement do not apply to the software products offered by OrangeHook's other portfolio companies. OrangeHook has agreed to pay the manufacturer a percentage of its revenues from service and usage fees, including upgrades and upsells, generated from customers under their joint marketing efforts. The manufacturer has agreed to pay OrangeHook two lump sum licensing fees payable no later than September 26, 2016 and December 31, 2016. In addition, if OrangeHook achieves certain revenue targets from sales of the bundled products to customers located in China, the manufacturer has agreed to pay OrangeHook a one-time fee within 60 days of the later of April 30, 2017 or such time as OrangeHook achieves a certain sales revenue milestone.

Nuvel, Inc.

Nuvel, Inc. is a start-up company engaged in the business of designing, developing and selling a family of proxy and other appliances and related software and services that can secure, accelerate and optimize the delivery of business applications, web content and other information to users over private enterprise networks, or across an enterprise's gateway to the public Internet. Nuvel, Inc . is designing products that provide end users with information about the applications and web traffic running on their networks, including the ability to discover, classify, manage and control communications between users and applications across internal networks, the WAN and the Internet. Nuvel, Inc .'s products are also designed with the intent to accelerate and optimize the performance of end users' business applications and content, whether used internally or hosted by external providers.

Nuvel, Inc. competes directly with several data acceleration software companies, including Aspera, BMC, Code Sector, Inc., Cisco and Sony.  Many of these competitors focus upon the size and type of file being transferred.  Nuvel, Inc. takes a different approach—the Network Data Tunnel (NDT) solution—which streamlines the transfer process itself rather than modifying the file being sent.  The NDT solution can increase transfer speeds by up to 150 times.  The software itself is lightweight and requires minimal time and effort to incorporate into extant systems, and due to the massive increases in bandwidth utilization, can be used to facilitate mass integration into cloud-based systems.

LifeNexus

On June 2, 2016, OrangeHook acquired certain copyrights, trademarks, patents and other assets of LifeNexus. Spring Grove Finance, S.A. previously acquired the assets from the Chapter 7 bankruptcy estate of LifeNexus and agreed to sell the assets to OrangeHook in exchange for 178,571 shares of OrangeHook Common Stock.

LifeNexus' intellectual property relates to personal health cards for maintaining an individual's personal health record, enabling users to store, update, and share their medical information, including medical history, allergies, vaccinations, prescriptions, emergency contacts, insurance information, dependent information, advance directives, and more, offering healthcare providers access to critical patient information at the time and point of need. If we decide to pursue further development of the LifeNexus intellectual property, we anticipate that LifeNexus' personal health card would serve as a prepaid card for making healthcare-related payments and managing individual health-related spending, such as co-pays and other fees at the physician's office, pharmacy, and hospital.

 

 

RISK FACTORS

 

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

FINANCIAL INFORMATION

Selected Financial Data

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following management's discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto filed with this Current Report on Form 8-K. The following discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. OrangeHook does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Current Report.

Overview

 

OrangeHook was formed on October 17, 2014, as a holding company, to incubate selective and unique consumer, business, and governmental software applications. OrangeHook is focused on accelerating the delivery of the software products and services offered by its portfolio companies and acquisition targets in the dynamic market sectors of safety, health information technology, data acceleration and banking. OrangeHook's business model creates visibility, reduces redundant selling, general and administrative expenses, and brings together the talent residing in these seemingly unconnected businesses. By providing a central and combined force, OrangeHook believes that it can achieve critical mass and distributed risk scenarios with even greater upside for investors and participants.

OrangeHook currently consists of three portfolio companies that have developed proprietary software applications and services which are unique to their particular industries:  Salamander, Agilivant and LifeMed ID. All are near or at the end of their respective development stages and have recently entered or are about to enter their revenue generation phase.  In addition, OrangeHook purchased certain intellectual property and other assets of LifeNexus, Inc related to identification cards for healthcare patients and expects to form a subsidiary to further develop the products.

OrangeHook generated revenues of $321,479 and $784,187 for the three and nine months ended September 30, 2016, respectively, compared to revenues of $0 and $0 for the three and nine months ended September 30, 2015, respectively.  The increase in revenue was the result of:

·     Revenue generated by Salamander of $223,621 and $684,298 for the three and nine months ended September 30, 2016, respectively,

·     Revenue generated by Agilivant of $24,755 and $26,786 for the three months and for the period of February 12 (the date of acquisition) through September 30, 2016, respectively,

·     Revenue generated by LifeMed ID of $73,103 for the period from July 20 (date of acquisition) through September 30, 2016, respectively.

 

 

 

 

Net loss of $4,748,064 and $8,799,933 for the three and nine months ended September 30, 2016, respectively, compared to $876,351 and $1,698,882 for the three and nine months ended September 30, 2015.  The increase in net loss was primarily the result of:

·     Operating costs associated with the operations of Salamander of $455,303 and $1,286,518 for the three and nine months ended September 30, 2016, respectively,

·     Operating costs associated with the operations of Agilivant of $391,475 and $841,040 for the three months and for the period of February 12 (the date of acquisition) through September 30, 2016, respectively,

·     Operating costs associated with the operations of LifeMed ID of $993,042 for the period from July 20 (date of acquisition) through September 30, 2016,

·     Increased corporate operating expenses in OrangeHook of $1,006,788 and $2,739,216 for the three and nine months ended September 30, 2016, respectively,

·     Increased interest expense, net of interest income, of $1,444,522 and $2,224,981, for the three and nine months ended September 30, 2016, respectively.

Portfolio Companies

OrangeHook believes that the solutions being offered by its current portfolio companies, Salamander, Agilivant and LifeMed ID, as well as the additional products added to the portfolio from the recent addition of Nuvel, Inc., are competitive within their respective markets on the basis of proprietary technology and in-depth understanding of the markets they serve and that OrangeHook's marketing activities will be effective in distinguishing its products from the competition. Furthermore, many of these products are complimentary to one another, and OrangeHook believes that it will be able to leverage each organization's resources and expertise to create an even more robust suite of product offerings for the healthcare institutions, emergency healthcare providers and its other customers and higher returns for OrangeHook.

Salamander

OrangeHook acquired the Salamander business in October of 2015. Salamander competes in the emergency management tracking and accountability solutions sphere. It provides installed software and Software as a Service (" SaaS ") solutions, including integrated data-sharing technologies that allow for unique transparency and accountability across multiple levels of local, State and Federal government during emergency or catastrophic situations. Salamander's products, which are positioned to comply with the federal mandate for the National Incident Management System, provide optimization/analytics capabilities and resolve issues associated with identity verification , incident command tracking , and ge ospatial location .

Salamander 's solutions incorporate Salamander 's registered intellectual property and proprietary software code , intellectual property licensed-in from third parties and open source software. Salamander has a patent portfolio that is intended to protect the key systems and methodology associated with its solutions, and it also owns four U.S. trademark registrations and one U.S. trademark application for various product names and logos, several domain names, and one U.S. Copyright registration for a resource guide for first responders.

Salamander sells its solutions primarily through agreements with resellers and through its internal sales staff.

The reseller agreements generally grant non-exclusive rights to market in various geographic territories in the United States, have one-year initial terms and can be terminated upon applicable notice periods.

Agilivant

OrangeHook acquired a majority interest (82%) in Agilivant, LLC in February of 2016. Agilivant offers a hybrid SaaS-based payment technology solution, encompassing both issuing and acquiring functionality, in the financial transfer and remittance services sphere. By providing this combined capability, Agilivant can offer open, closed and hybrid (semi-closed) payment solutions to its customers. Additionally, Agilivant provides full merchant acquiring capabilities as a sub-agent to two partner companies.

 

 

 

 

 

 

 

The Agilivant system is flexible and can provide mobile, web-based and card-based solutions. It operates as a SaaS in a private data cloud, eliminating the need for a bank to purchase expensive computer systems with complex applications and software or to hire more staff to handle mobile banking systems, operations processing, legal compliance and call centers. Agilivant's cash card management system issues and manages debit-based accounts.

LifeMed ID

We made our initial investment in LifeMed ID in December 2014, which continued through a series of investments ending on March 31, 2016. We acquired the remaining equity interests in LifeMed ID on July 20, 2016.  LifeMed ID competes in the healthcare information systems sphere. It provides a cloud-based patient identification solution with robust workflow automation, dynamic reporting, and customizable functionalities to enable error-free, streamlined electronic registration that is optimized for each healthcare facility and patient. LifeMed ID issues a patient a token that identifies the patient throughout his or her medical life and enables medical professionals to obtain a complete medical history of the patient (including allergies, pre-existing conditions, and other related medical information) before making a medical diagnosis. The LifeMed ID application also dramatically reduces insurance fraud utilizing its deterministic matching properties by positively identifying the patient.

With the LifeMed ID application, all medical records can be linked via a secure, cloud-based application to ensure a complete history can be accessed instantly through a SaaS-based solution. The LifeMed ID application utilizes a library of application programming interfaces to seamlessly overlay, enhance and integrate with existing systems, while at the same time facilitating connectivity with outside third party systems and databases. The application does not require time-intensive installation or ramp-up and can be installed and operational in days, not weeks.  The application also enables both internal and external systems to securely send patient data back and forth for real time electronic medical record updates. The end result is physicians, hospitals, and first responders all being able to see (and act on) one universal set of records via the secure cloud infrastructure.

LifeMed ID has a patent portfolio that is intended to protect the key systems and methodology associated with its SaaS based solutions.  Its patent portfolio consists of seven active U.S. patents, as well as two pending U.S. patents and one pending Interlinking Electronic Identities patent. Currently, LifeMed ID has entered into strategic and reseller agreements, all of which will use the patented healthcare patient solutions developed by LifeMed ID.

Effective March 10, 2016, OrangeHook and LifeMed ID entered into a business partnership agreement with Lenovo PC HK Limited , an electronics manufacturing company based out of Asia, which was subsequently amended on September 1, 2016. As amended, the agreement contemplates that LifeMed ID's patient identification application and other software products offered by OrangeHook's portfolio companies will be preloaded onto the manufacturer's computers, tablets and other electronic devices for marketing and sale as a bundled system to hospitals and other healthcare facilities and providers throughout the world. The manufacturer has agreed to be LifeMed ID's exclusive electronics hardware partner throughout the world, and LifeMed ID has agreed to be its exclusive provider of patient identification software. The exclusivity provisions in the agreement do not apply to the software products offered by OrangeHook's other portfolio companies. OrangeHook has agreed to pay the manufacturer a percentage of its revenues from service and usage fees, including upgrades and upsells, generated from customers under their joint marketing efforts. The manufacturer has agreed to pay OrangeHook two lump sum licensing fees payable no later than September 26, 2016 and December 31, 2016. In addition, if OrangeHook achieves certain revenue targets from sales of the bundled products to customers located in China, the manufacturer has agreed to pay OrangeHook a one-time fee within 60 days of the later of April 30, 2017 or such time as OrangeHook achieves a certain sales revenue milestone.

Nuvel, Inc.

Nuvel, Inc. is in the business of designing, developing and marketing data acceleration solutions that are built for the purpose of accelerating and optimizing the flow of information across enterprise networks.  Nuvel, Inc.'s products are intended to be deployed by its customers throughout their network infrastructures to improve the performance of their networks and reduce network costs, while enhancing network speed and optimization.  During the past three years, due to cash restrictions, Nuvel, Inc. has curtailed expenses on research and development.   However, Nuvel, Inc. understands the vital importance of research and development for its overall success. Nuvel, Inc. is committed to continue to conduct research and development activities to strive to advance its technology, when and if liquidity permits. We believe that the OrangeHook platform will help facilitate this effort.

 

 

 

 

 

Financial Presentation

Description of Certain Line Items

Revenue

Revenue consists of license and subscription and other fees generated from the sales and licensing of our portfolio products. OrangeHook provides installed software and SaaS based solutions that are billed on a periodic basis throughout the licensing period.

Cost of Sales

Cost of sales includes the costs associated with the sale and licensing of our products including installation and support costs.

Product Development

Product development consists primarily of expenses relating to software maintenance and development of all portfolio company products.

Sales and Marketing

Sales and marketing consists primarily of trade shows, the travel expense related to the trade shows, and the salaries for the employees that are marketing the solutions.

General and Administrative

General and administrative consists primarily of the salaries for the employees of OrangeHook, Salamander, Agilivant and LifeMed ID, along with rent, legal, accounting and other professional fees, including merger-related expenses, for OrangeHook and amortization of intangible assets as a result of the acquisition of the portfolio entities.

Critical Accounting Estimates and Policies

The following discussion and analysis of financial condition and results of operations is based upon our financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses its judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing customer agreements, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see  Note 3 to OrangeHook's audited financial statements for the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014 included in this Current Report on Form 8-K for a more complete description of OrangeHook's significant accounting policies.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These condensed financial statements should be read in conjunction with the financial statements for the year ended December 31, 2015 and related notes thereto, which are included in this Current Report on Form 8-K and of which these financial statements are a part.

 

 

 

 

 

 

The audited financial statements and footnotes for the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014 have been prepared in accordance with U.S. GAAP and applicable rules and regulations of the SEC regarding financial information. Copies of the OrangeHook's audited financial statements and footnotes for the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014 are included in this Current Report on Form 8-K.

Business Combinations

For acquisitions, OrangeHook allocates the purchase price based on the fair value of assets acquired and liabilities assumed.  For material acquisitions, OrangeHook engaged an independent specialist to assist us in the valuation of the intangible assets, utilizing discounted cash value methods.  In most cases, OrangeHook has issued shares of its common stock to acquire the equity or assets of the businesses.  The evaluation of OrangeHook's common stock requires us to make assumptions about future cash flows of OrangeHook that include, among others, growth in revenues, margins realized, level of operating expenses and cost of capital. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. OrangeHook engaged an independent specialist to assist us in evaluating the fair value of OrangeHook's common stock and we ultimately concluded on the fair value of OrangeHook's common stock.

Accounts Receivable

The carrying value of OrangeHook's accounts receivable represents their estimated net realizable value. No collateral or other security is required to support accounts receivable, which are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts (90 to 120 days outstanding) are written off through a charge to the valuation allowance and a credit to accounts receivable. OrangeHook does not charge interest on past due accounts receivable balances.

Revenue Recognition

Revenue from tracking systems sales is recognized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605, Revenue Arrangements with Multiple Deliverables. When elements such as the product (e.g., hardware, software and other components) installation and training are contained in a single arrangement, or in related arrangements with the same customer, revenue is allocated to each element based upon its relative fair value. Management believes the individual elements within its contracts meet the ASC Topic 605 criteria for treatment as separate units of accounting. The price charged when the element is sold separately generally determines fair value. Revenue from product sales is recognized when the related goods are shipped whereas revenue from installation and training activities is recognized when the services are performed. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.

Revenue from service contracts and subscription agreements is recorded on a straight-line basis over the terms of the related agreements.

Revenue from software licensing arrangements is recognized when all of the following conditions exist: (1) the licensing agreement has been executed, (2) the license period has begun and the licensee can begin its use of the software, (3) the fee is fixed or determinable, (4) collection of the license fee is reasonably assured, and (5) there are no significant on-going obligations of OrangeHook relating to the licensing arrangement.

Advance payments received from customers are deferred until all revenue recognition criteria are satisfied.

 

 

 

 

 

Income Taxes

OrangeHook accounts for deferred tax assets and liabilities under the liability method.  Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years.  Deferred tax assets are recognized for deductible temporary differences and tax operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled.  OrangeHook regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income.  OrangeHook has recorded a full valuation related to deferred tax assets and liabilities.  We account for uncertainty in income taxes recognized in financial statements in accordance with ASC 740 (formerly FIN 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109,"). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Only tax positions that meet the more-likely-than-not recognition threshold may be recognized. We do not have any material uncertain tax positions.

Stock-Based Compensation

OrangeHook measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. During 2016, 2015 and 2014, OrangeHook granted common stock, shares of restricted stock, warrants and stock options to certain employees and outside directors in exchange for their services. In connection with those awards, the fair value of the award was measured on the grant date. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period.

Software Development Costs

To date, OrangeHook has not capitalized any of the costs incurred related to the development of its software products being marketed as the period of time between achieving technological feasibility and the general availability of OrangeHook's software products has been very short and any costs incurred subsequent to achieving technological feasibility have not been significant. These costs are expensed and included in product development expenses in the accompanying consolidated statements of operations.

Goodwill and Intangible Assets

In accordance with ASC Topic No. 350, Intangibles-Goodwill and Other, goodwill and intangible assets without a defined life shall not be amortized over a defined period, but instead must be tested for impairment at least annually. Additionally, goodwill is tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The goodwill impairment test is a two-step impairment test. In the first step, OrangeHook compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of that reporting unit, goodwill is not impaired and OrangeHook is not required to perform further testing. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then OrangeHook must perform the second step in order to determine the implied fair value of the reporting unit's goodwill and compare it to the carrying value of the reporting unit's goodwill. The activities in the second step include valuing the tangible and intangible assets and liabilities of the impaired reporting unit and determining the implied fair value of the impaired reporting unit's goodwill based upon the residual of the fair value of the net assets.

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2016 and 2015

Overview

 

We incurred net losses of $4,748,064, and $876,351 for the three months ended September 30, 2016 and 2015, respectively. The results of operations for the three months ended September 30, 2016 are impacted by the acquisition of Salamander which occurred on October 1, 2015, a controlling interest (82%) of Agilivant, which occurred on February 12, 2016, and the acquisition of LifeMed ID, which occurred on July 20, 2016. The results of operations for the three months ended September 30, 2015 were prior to the acquisition of any of the targeted portfolio entities and included the results of operations of OrangeHook only.

Gross profit attained for the three months ended September 30, 2016 is representative of the SaaS-based software companies which we expect to continue as revenues grow. There was no revenue, cost of goods sold or gross profit for the three months ended September 30, 2015.

Product Development

Product development for the three months ended September 30, 2016 and 2015 was $838,950 and $0, respectively.  The increase in product development was attributable to expenses of Salamander of $186,627, Agilivant of $131,686 and LifeMed of $520,637. Costs in this category consist of employee salaries and related costs and contractor expenses for software development and expenses to maintain and enhance our software solutions.

Sales and Marketing

Sales and marketing expenses for the three months ended September 30, 2016 and 2015 were $308,225 and $0, respectively. Costs incurred of $148,632 for Salamander, $0 for Agilivant and $159,593 for LifeMed consist of sales and marketing salaries, sales and reseller commissions, travel, advertising and promotion expenses.

General and Administrative

General and administrative expenses for the three months ended September 30, 2016 and 2015 were $2,403,942 and $704,509, respectively.  The increase in general and administrative expenses of $1,699,433, or 241%, is mainly due to an increase in OrangeHook's general and administrative expenses of $1,006,788 which consists of approximately $172,000 in salaries caused by an increase in corporate staff, approximately $156,000 in subcontractors involved in business development activities, approximately $191,000 in legal and auditing expense due to merger and acquisition activities and approximately $272,000 in non-cash compensation resulting from grants of non-qualified stock options and grants to employees and directors. The remainder of the increase was due to the operations of Salamander of $120,044, Agilivant of $259,789 and LifeMed of $312,812.

 

 

 

 

 

 

Operating Loss

OrangeHook's operating loss for the three months ended September 30, 2016 and 2015 was $3,325,223 and $704,509 respectively. OrangeHook's operating expenses increased year-over-year due to our acquisitions of development-stage companies and positioning the companies' administrative functions for growth and public-company regulatory compliance.

Other Income (Expense)

Gain on debt extinguishment:

During the three months ended September 30, 2016, OrangeHook recorded a gain on debt extinguishment of $172,446 which resulted from the conversion of a note payable in the amount of $300,000 plus accrued interest of $16,000 into 45,143 shares of common stock at a value of $3.18 per share.

Net loss on investment in LifeMed ID, Inc.:

During the three months ended September 30, 2016, OrangeHook recorded a loss of $46,280, representing its share (24%) of LifeMed ID's net loss for the period from July 1, 2016 through July 20, 2016. During that period, OrangeHook accounted for its investment under the equity method of accounting. Effective July 20, 2016, OrangeHook acquired remaining 76% of LifeMed which results in the presentation of fully consolidated results from that point forward.

Interest expense, net of interest income:

Interest expense, net of interest income for three months ended September 30, 2016 was $1,616,364 as compared to $171,842 for the three months ended September 30, 2015. The increase of $1,444,522 or 841%, was principally due to interest expense on increased levels of borrowings including the amortization of debt issuance costs and original issue discount and an amount equal to $1,197,929 related to imputed interest on a forward purchase contract that became effective in July 2016 related to a $1.55 million put obligation for the repurchase of common shares of OrangeHook stock at a value greater than fair value between OrangeHook and David Batchelor, a board member and the founder of LifeMed ID.

Net loss attributable to noncontrolling interest in subsidiary

During the three months ended September 30, 2016, the net loss attributable to noncontrolling interest in subsidiary was $67,357. The noncontrolling interest in the subsidiary is due to OrangeHook owning 82% in Agilivant, while the remaining 18% is held by a minority partner.

Net Loss

As a result of the above, net loss for the three months ended September 30, 2016 was $4,748,064 as compared to $876,351 for the three months ended September 30, 2015.

 

 

 

 

 

 

Nine Months Ended September 30, 2016 and 2015

Overview

 

We reported net losses of $ 8,799,933 and $1,698,882 for the nine months ended September 30, 2016 and 2015, respectively. The results of operations for the nine months ended September 30, 2016 are impacted by the acquisition of Salamander which occurred on October 1, 2015, a controlling interest (82%) of Agilivant, which occurred on February 12, 2016, and the acquisition of LifeMed ID, which occurred on July 20, 2016. The results of operations for the nine months ended September 30, 2015 were prior to the acquisition of any of the targeted portfolio entities and included the results of operations of OrangeHook only.

Gross profit attained for the nine months ended September 30, 2016 is representative of the SaaS-based software companies which we expect to continue as revenues grow. There was no revenue, cost of goods sold or gross profit for the nine months ended September 30, 2015. 

Product Development

Product development for the nine months ended September 30, 2016 and 2015 was $1,329,462 and $0, respectively.  The increase in product development was attributable to expenses of Salamander of $512,443, Agilivant of $296,382 and LifeMed of $520,637. Costs in this category consist of employee salaries and related costs and contractor expenses for software development and expenses to maintain and enhance our software solutions.

Sales and Marketing

Sales and marketing expenses for the nine months ended September 30, 2016 and 2015 were $554,908 and $0, respectively. Costs incurred of $395,315 for Salamander, $0 for Agilivant and $159,593 for LifeMed consist of sales and marketing salaries, sales and reseller commissions, travel, advertising and promotion expenses.

General and Administrative

General and administrative expenses for the nine months ended September 30, 2016 and 2015 were $5,448,048 and $1,472,604, respectively.  The increase in general and administrative expenses of $3,975,444, or 270%, is mainly due to an increase in OrangeHook's expenses of $2,739,216 which consists of approximately $653,000 in salaries caused by an increase in corporate staff, approximately $550,000 in subcontractors involved in business development activities, approximately $669,000 in legal and auditing expense due to merger and acquisition activities and approximately $359,000 in non-cash compensation resulting from grants of non-qualified stock options to employees and directors. The remainder of the increase was due to the operations of Salamander of $378,758, Agilivant of $544,658 and LifeMed of $312,812.

 

 

 

 

 

 

 

Operating Loss

OrangeHook's operating loss for the nine months ended September 30, 2016 and 2015 was $6,739,326 and $1,472,604, respectively. OrangeHook's operating expenses increased year-over-year due to our acquisitions of development-stage companies and positioning the companies' administrative functions for growth and public-company regulatory compliance.

Other Income (Expense)

Gain on debt extinguishment:

During the nine months ended September 30, 2016, OrangeHook recorded a gain on debt extinguishment of $741,852 which resulted from the issuance of 70,997 shares of common stock, valued at their estimated fair value of $3.18 per share, to extinguish certain notes payable, accrued interest and accounts payable with a total value of $795,174 and the conversion of a note payable in the amount of $300,000 plus accrued interest of $16,000 into 45,143 shares of common stock at a value of $3.18 per share.

Net loss on investment in LifeMed ID, Inc.:

During the nine months ended September 30, 2016, OrangeHook recorded a loss of $404,310, representing its share (24%) of LifeMed ID's net loss for the period from April 1, 2016 through July 20, 2016. During that period, OrangeHook accounted for its investment under the equity method of accounting. Effective July 20, 2016, OrangeHook acquired remaining 76% of LifeMed which results in the presentation of fully consolidated results from that point forward.

Interest expense, net of interest income:

Interest expense, net of interest income for nine months ended September 30, 2016 was $2,451,259 as compared to $226,278 for the nine months ended September 30, 2015. The increase was principally due to an increase in interest expense on increased levels of borrowings including the amortization of debt issuance costs and original issue discount and an amount equal to $1,197,929 related to imputed interest on a forward purchase contract that became effective in July 2016 related to a $1.55 million put obligation for the repurchase of common shares of OrangeHook stock at a value greater than fair value between OrangeHook and David Batchelor, a board member and the founder of LifeMed ID.

Net loss attributable to noncontrolling interest in subsidiary

During the nine months ended September 30, 2016, net loss attributable to noncontrolling interest in subsidiary was $53,110. The noncontrolling interest in the subsidiary is due to OrangeHook owning 82% in Agilivant, while the remaining 18% is held by a minority partner.

Net Loss

As a result of the above, net loss for the nine months ended September 30, 2016 was $8,799,933 as compared to $1,698,882 for the nine months ended September 30, 2015.

 

 

 

 

 

Year Ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014

 

		2015				2014
Revenue		$	244,902			$	-
Cost of sales			31,863				-
Gross profit			213,039				-
Operating expenses:
Product development			140,730				-
Sales and marketing			122,944				-
General and administrative			3,538,957				172,864
Total operating expenses			3,802,631				172,864
Loss from operations			(3,589,592	)			(172,864	)
Other income (expense):
Gain on debt extinguishment			403,553				-
Interest expense, net of interest income			(494,332	)			(6,036	)
Loss before income taxes			(3,680,371	)			(178,900	)
Income tax expense			-				-
Net loss		$	(3,680,371	)		$	(178,900	)

 

OrangeHook reported net losses of $3,680,371 and $178,900 for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014, respectively.

Revenues and Gross Profit

 

We had revenues of $244,902 and $0 for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014, respectively.  The increase in revenues for the year ended December 31, 2015 was attributable to the revenues generated by Salamander. Gross profit for the year ended December 31, 2015 was $213,039 or 87% of revenues.

Product Development

Product development and maintenance for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014 was $140,730 and $0, respectively, representing salaries for software development employees and contractors of Salamander.

Sales and Marketing

Sales and marketing expenses for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014 were $122,944 and $0, respectively, due to Salamander which incurred salaries, sales and reseller commissions, travel, advertising and promotion expenses.

 

 

 

 

 

 

General and Administrative

General and administrative expenses for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014 were $3,538,957 and $172,864, respectively.  The increase in general and administrative expenses of $3,366,093 is primarily due the increase in corporate office expenses incurred by OrangeHook of $3,114,231 due to increases in salaries, wages and benefits as corporate employees were added during the period, an increase in costs (legal, audit and subcontractors) associated with the acquisitions of Salamander, Agilivant and LifeMed ID as well as costs incurred in connection with increased business development activities. In addition, noncash compensation expense of approximately $606,000 was recorded in 2015 for stock compensation awards granted to employees and directors. The remainder of the increase was due to Salamander expenses of $286,676.

Operating Loss

OrangeHook's operating loss for the year ended December 31, 2015 and the period from October 17, 2014 (inception) through December 31, 2014 was $3,589,592, and $172,864, respectively.

Other income (expense), net

Gain on debt extinguishment:

During the year ended December 31, 2015, OrangeHook recorded a gain on debt extinguishment of $403,553 which resulted from the issuance of 37,297 shares of common stock, valued at their estimated fair value of $3.18 per share, to extinguish certain notes payable and accrued interest with a total value of $522,158.

Interest expense, net of interest income:

Interest expense, net of interest income for year ended December 31, 2015 was $494,332 as compared to $6,036 for the period from October 17, 2014 (inception) through December 31, 2014 . The increase of $488,296 was principally due to an increase in interest expense on increased levels of borrowings including the amortization of debt issuance costs and original issue discount.

Net Loss

As a result of the above, net loss for year ended December 31, 2015 was $3,680,371 as compared to $178,900 for the period from October 17, 2014 (inception) through December 31, 2014 .

 

 

 

 

 

 

Liquidity and Capital Resources

Liquidity Sources and Requirements

During the three and nine months ended September 30, 2016 we recorded revenues of $321,479 and $784,187, respectively and incurred net losses of $4,748,064 and $8,799,933.  Net cash used in operating activities was $4,283,029 for the nine months ended September 30, 2016. As of September 30, 2016, we had a working capital deficit of $12,701,875. During the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014, we recorded revenue of $244,902 and $0, respectively and incurred net losses of $3,680,371 and $178,900, respectively.  Net cash used in operating activities was $1,940,138 and $32,044 for the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014, respectively. As of December 31, 2015, we had a working capital deficit of $1,941,955. Since inception, we have met our liquidity requirements principally through the sale of convertible debentures and other debt and equity securities.

OrangeHook has the following debt obligations as of September 30, 2016.

Notes payable to directors-

OrangeHook has various notes payable to directors with principal amounts totaling $3,743,330 as of September 30, 2016. Of the amount outstanding, a total of $1,575,000 in principal is due within the next twelve months. Subsequent to September 30, 2016, one director converted notes that were due in various amounts from July-August 2016 with principal amounts totaling $960,000 into Series A-1 Convertible Preferred Stock.

Convertible debentures-

In 2015, OrangeHook sold an aggregate principal amount of $3,050,000 of convertible debentures which were scheduled to mature twelve months from the issuance date. During 2016, certain of these debentures became due. OrangeHook was successful in extending the maturity dates on these debentures to October 2017. The holders also agreed to add interest accrued on the debentures to the principal balance of the amended debentures. As of September 30, 2016, convertible debentures with principal amounts totaling $3,427,560 are outstanding.

Short-term debt-

OrangeHook has short-term debt instruments with various lenders totaling $2,542,614 as of September 30, 2016, all of which are due within the next twelve months. Subsequent to September 30, 2016, on October 31, 2016, OrangeHook entered into an agreement with a lender whereby OrangeHook issued 390,000 shares of common stock plus seven-year warrants for an additional 78,000 shares of common stock at an exercise price of $7.00 per share in exchange for the cancellation of this note plus accrued interest of $40,411 and a cash payment of $250,000. In addition, on November 10, 2016, another lender converted a note with a principal balance of $100,000 into 30,769 shares of the OrangeHook's common stock.

Line of credit-

On March 30, 2016, OrangeHook entered into an unsecured revolving line of credit with a bank which provides for borrowings up to a principal amount of $350,000. As of September 30, 2016, the principal balance outstanding under this credit facility is $350,000. The line is scheduled to mature on September 30, 2017.

Management anticipates that the impact of one or more of the actions listed below will generate sufficient cash flows to pay current liabilities, long-term debt and fund OrangeHook's operations through September 30, 2017:

1.     Raise additional debt or equity capital on terms favorable to OrangeHook,

2.     Generate revenues in amounts sufficient to attain profitability,

3.     Control general and administrative expenses based on available cash flow from operations and the amount of capital available.

 

 

 

 

 

 

Our ability to continue our operations and to pay our obligations when they become due is contingent upon obtaining additional financing and generating positive cash flows from our operations. Management's plans include seeking to procure additional funds through debt and equity financings and to increase operating cash flows from revenues expected to be generated by our portfolio operations. There are no assurances that we will be able to raise capital on terms acceptable to us or at all, or that cash flows generated from our operations will be sufficient to meet our current operating costs and required debt service. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned product development, which could harm our financial condition and operating results, or we may not be able to continue to fund our ongoing operations. These conditions raise substantial doubt about our ability to continue as a going concern. Refer to Notes 5 through 10 to OrangeHook's consolidated financial statements for the three and nine months ended September 30, 2016, which are included in this Current Report on Form 8-K, for additional details regarding our financing activities.

Cash Flows – Operating Activities

Net cash used in operating activities was $4,283,029 during the nine months ended September 30, 2016. Net cash used in operating activities consisted principally of a net loss of $8,799,933, adjusted for certain non-cash income and expense items and changes in operating assets and liabilities.

Net cash used in operating activities was $1,940,138 during the year ended December 31, 2015 . Net cash used in operating activities consisted principally of a net loss of $3,680,371, adjusted for certain non-cash income and expense items and changes in operating assets and liabilities.

Cash Flows – Investing Activities

 

During the nine months ended September 30, 2016, net cash used for investing activities was $3,104,844, which consisted principally of $1,358,000 in advances to LifeMed ID, $85,000 in advances to Agilivant, and $480,000 in advances to Nuvel. In addition, OrangeHook purchased shares of LifeMed ID common and preferred stock of $1,310,000 during the period prior to the completion of its acquisition on July 20, 2016.

 

During the year ended December 31, 2015, net cash used for investing activities was $5,320,241, which consisted principally of $1,925,000 for purchases of LifeMed ID preferred and common stock, $1,006,014 in advances to Agilivant, $1,045,000 in advances to LifeMed ID and $699,000 in advances to Nuvel.

Cash Flows – Financing Activities

 

Net cash provided by financing activities was $7,391,743 during the nine months ended September 30, 2016 which consisted primarily of proceeds of $2,482,257 from the sale of Series A and A-1 preferred stock, net of financing fees, proceeds of $2,005,000 from director loans, proceeds from short-term debt of $3,184,000 and proceeds of $350,000 from a line of credit.

Net cash provided by financing activities was $7,360,654 during the year ended December 31, 2015, which consisted primarily of proceeds of $3,050,000 from the sale of convertible debentures, proceeds of $3,948,170 from the sale of Series A and A-1 preferred stock, net of expenses and proceeds of $950,000 from director loans.

Off-Balance Sheet Arrangements

OrangeHook does not have any off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

 

 

 

 

 

 

PROPERTIES

Nuvel does not own any real property. OrangeHook currently occupies approximately 6,300 square feet of office space in Wayzata, Minnesota under two separate operating leases: (1) 2,100 square feet subleased through September 30, 2017 with base monthly rent payments of $5,304 and (2) 4,268 square feet leased through December 31, 2020 with base monthly rent payments of $13,565.  In addition, OrangeHook is party to a lease for an additional 850 square feet through September 2020 with base monthly payments of $2,299, which is subleased to an unaffiliated, third-party lessee at the same base rate. Salamander currently occupies 5,501 square feet of office space in Traverse City, Michigan that is leased through April 30, 2017 with base monthly rental payments of $6,705.  Agilivant currently occupies 1,650 square feet of office space in Vancouver, Washington under a lease that expired September 30, 2016 with base monthly holdover rental payments of $3,816. In addition, LifeMed ID currently occupies 9,820 square feet of office space in Roseville, California through October 31, 2026 with starting base monthly rent payments of $19,149 and is a party to another lease at a monthly rate of $5,533 per month through March 31, 2022. Beginning in April 2014, Nuvel, Inc. has occupied a satellite office in Los Gatos, California under a lease with variable monthly rental payments based on office usage. Additional ly, through strategic affiliations, OrangeHook has use of an office located in Beijing, China. We believe all of our facilities are suitable and adequate for current operating needs.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The tables below present information regarding the beneficial ownership of Nuvel's capital stock as of December 1, 2016 (upon completion of the Merger) by (i) each person who is known by Nuvel to beneficially own more than 5% of the outstanding shares of any class of Nuvel's voting securities; (ii) each director and named executive officer of Nuvel; and (iii) all current executive officers and directors as a group.  

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants currently exercisable or exercisable within 60 days. Shares of Nuvel capital stock issuable pursuant to options or warrants are deemed to be outstanding for purposes of computing the beneficial ownership percentage of the person or group holding such options or warrants but are not deemed to be outstanding for purposes of computing the beneficial ownership percentage of any other person.

The beneficial ownership of Nuvel capital stock is based on 48,647,979 shares of Nuvel Common Stock, 292,199 shares of Series OH-1 Convertible Preferred Stock, 9,943 shares of Series OH-2 Convertible Preferred Stock, 20,000 shares of Series B Convertible Preferred Stock, 371,052 shares of Series C Convertible Preferred Stock, and 1,767,358 shares of Series D Convertible Preferred Stock, issued and outstanding immediately following completion of the Merger. Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to such shares and the business address of each person is c/o OrangeHook, Inc., 319 Barry Avenue, Suite 300, Wayzata, Minnesota 55391.

 

 

 

 

 

 

 

* less than 1%

(1)

Includes (i) 925,926 shares of Nuvel Common Stock , (ii) an aggregate of 1,939,301 shares of Nuvel Common Stock issuable upon the exercise of the warrants held by such holder, (iii) 5,194,632 shares of Nuvel Common Stock upon the conversion of notes held by Alpha Capital Anstalt, and (iv) 1,699,383 shares of Nuvel Common Stock issuable upon the conversion of Nuvel's Series D preferred stock.  Konrad Ackerman is the director of Alpha Capital Anstalt ("Alpha"), and in such capacity, has voting and dispositive power over the securities held by Alpha.  The shares issuable upon the conversion of notes and the shares of Nuvel's Series D preferred stock held by Alpha contain "blocker" provisions that limits Alpha's and certain related parties' ability to convert such notes and Series D preferred stock to the extent that either conversion would cause Alpha's beneficial ownership in Nuvel to exceed 4.99% of the outstanding shares of Nuvel Common Stock. The calculation of beneficial ownership of Alpha does not take into account the effect of such "blocker" provisions.

(2)

Includes (i) 1,615,638 shares of Nuvel Common Stock held directly by Mr. Donenfeld, (ii) 4,550,340 shares of Nuvel Common Stock held by Paragon Capital, LP, (iii) and an aggregate of 1,744,000 shares of Nuvel Common Stock issuable upon the exercise of the warrants held by Paragon Capital LP.  Mr. Donenfeld is the General Partner of Paragon Capital, LP, and in such capacity, has voting and dispositive power over the securities held by Paragon Capital, LP.

(3)

Includes (i) 4,550,340 shares of Nuvel Common Stock and (ii) an aggregate of 1,744,000 shares of Nuvel Common Stock issuable upon the exercise of the warrants held by such holder.  Alan Donenfeld is the General Partner of Paragon Capital, LP, and in such capacity, has voting and dispositive power over the securities held by Paragon Capital, LP.

(4)

Includes (i) 1,161,012 shares of Nuvel Common Stock , (ii) an aggregate of 698,996 shares of Nuvel Common Stock issuable upon the exercise of the warrants held by such holder, and (iii) 1,157,397 shares of Nuvel Common Stock upon the conversion of notes held by Gregory Osborn.  Mr. Osborne disclaims beneficial ownership over any securities held by his wife, Elizabeth Luongo.

(5)	Includes (i) 166,666 shares of Nuvel Common Stock and (ii) an aggregate of 8,513,078 shares of Nuvel Common Stock issuable upon the exercise of warrants held by such holder.

 

 

 

 

 

* Less than 1%

(1)   Includes (i) 7,014.15 shares issuable upon the exercise of warrants held by Colleen B. Kessenich, TTEE for the Kessenich GST Trust, and (ii) 16,804.26 shares issuable upon the exercise of warrants held by David L. Kessenich, TTEE for the David L. Kessenich Trust dated 5/2/2005.

(2)   Includes 436.10 shares issuable upon the exercise of warrants. Murray R. Klane is the sole officer and director of Green Planet LLC and has sole voting and dispositive power over the shares.

(3)   Includes 1,234.49 shares issuable upon the exercise of warrants.

(4)   Includes 502.86 shares issuable upon the exercise of warrants and 383.17 shares issuable up on conversion of principal and interest on an outstanding convertible promissory note, and 383.17 shares issuable pursuant to warrants issuable upon payoff of the convertible promissory note.

(5)   Includes 167.73 shares issuable upon the exercise of warrants held by Elizabeth Hattara and Jeffrey Hattara as joint tenants. Also includes options to purchase up to 167.54 shares held by Mr. Hattara and 14,073.34 shares held by MetaConn Corporation. Mr. Hattara is the sole officer and director of MetaConn Corporation and has sole voting and dispositive power over the shares.

(6)   Includes options to purchase up to 10,716.54 shares.

(7)   Includes 50.32 shares issuable upon the exercise of warrants.

(8)   Includes 7,518.42 shares issuable upon the exercise of warrants, and 3,249.12 shares issuable up on conversion of principal and interest in outstanding convertible promissory notes and 3,249.12 shares issuable pursuant to warrants issuable upon payoff of one of those convertible promissory notes. Also includes 6.57 shares and 2,379.42 shares issuable upon the exercise of warrants held by Mr. Miller's live-in girlfriend, for which he disclaims beneficial ownership.

(9)   Includes options to purchase up to 7,037.61 shares, 3,403.20 shares issuable upon the exercise of warrants, and 792.20 shares issuable up on conversion of principal and interest in outstanding convertible promissory notes and 792.20 shares issuable pursuant to warrants issuable upon payoff of one of those convertible promissory notes. Also includes 8,601.50 shares held by Whitney Peyton and Nancy Peyton as joint tenants with right of survivorship. Also includes 11,275.47 shares held by TruSec ID, Inc. of which Mr. Whitney Peyton is the sole director and officer and is a 75% owner.

(10) Includes 2,329.45 shares issuable upon the exercise of warrants and 1,341.09 shares issuable up on conversion of principal and interest on an outstanding convertible promissory note and 1,341.09 shares issuable pursuant to warrants issuable upon payoff of the convertible promissory note held by Salvatore Fazzolari and Karen Fazzolari as joint tenants with right of survivorship.

 

 

 

 

 

* Less than 1%

(1)   Unless otherwise indicated, the business address of each person is c/o OrangeHook, Inc., 319 Barry Avenue, Suite 300, Wayzata, Minnesota 55391.

(2)   Effective immediately upon Closing of the Merger, each outstanding share and other outstanding securities convertible into shares of OrangeHook Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock will be exchanged for one share (or a corresponding security convertible into one share) of Nuvel Series OH-2 Convertible Preferred Stock. See the footnotes to the table under the heading " Security Ownership of OrangeHook Prior to the Merger " for descriptions of OrangeHook preferred stock holdings prior to the Merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Shares of Series D Convertible Preferred Stock are convertible on a one-to-one basis into shares of Common Stock at the election of the holder. Alpha Capital Anstalt ("Alpha") has entered into a Note Conversion Agreement with Nuvel pursuant to which Alpha has agreed to convert all of its Series D Convertible Preferred Stock and certain convertible notes into a total of 222,857 shares of post-Reverse Stock Split Nuvel Common Stock upon consummation of the Reverse Stock Split.  The shares issuable upon the conversion of Series D Convertible Preferred Stock held by Alpha (including pursuant to the Note Conversion Agreement) contain "blocker" provisions that limit Alpha's and certain related parties' ability to convert Series D Convertible Preferred Stock to the extent that either conversion would cause Alpha Capital Anstalt's beneficial ownership in Nuvel to exceed 4.99% of Nuvel's outstanding shares of common stock. The calculation of beneficial ownership of Alpha does not take into account the effect of such "blocker" provisions.  Konrad Ackerman is the director of Alpha, and in such capacity, has voting and dispositive power over the securities held by Alpha.

DIRECTORS AND EXECUTIVE OFFICERS

On December 1, 2016, in accordance with the terms of the Merger Agreement, the board of directors of Nuvel, acting by written consent in lieu of meeting, took the following actions: (i) increased the size of the board of directors to eight persons; (ii) elected to the board of directors the six individuals who were directors of OrangeHook immediately prior to the Closing and were not also directors of Nuvel; and (iii) appointed as the officers of Nuvel those individuals who were the officers of OrangeHook immediately prior to the closing of the Merger.

In connection with the Merger, Mr. Resnick resigned as President and Chief Executive Officer of Nuvel, but continues to serve as Chief Executive Officer of Nuvel, Inc.

 

 

 

 

 

 

 

 

David Carlson, Chief Financial Officer

David Carlson, age 60, has served as the Chief Financial Officer of OrangeHook since February 2015.  From 2008 until 2014, Mr. Carlson was the Vice President of Financial Operations at Multiband Corporation where he was responsible for providing financial support including financial analysis, raising debt and equity financing, investor relations and cash management. Prior to working at Multiband, Mr. Carlson worked as the Chief Financial Officer for CorVu Corporation, a publicly-traded software company, and has over thirty-five years of financial management experience, working for both private and public companies.  He received a Bachelor of Science in Accounting from Southwest Minnesota State University in 1979.

David Batchelor, Chief Relations Officer and Director

David Batchelor, age 62, has served as Chief Relations Manager and a member of OrangeHook's Board since February 2015.  In 2008, Mr. Batchelor founded and served as Chairman and Chief Executive Officer of LifeMed Card, Inc. and executed several patient identity smart card beta sites through the U.S.  He then founded LifeMed ID in 2010 and served as its Chairman and Chief Executive Officer until the two companies merged in 2010, and where he continues to serve as Chief Executive Officer. Among other attributes, skills and qualifications, the Board believes Mr. Batchelor is a key thought leader within healthcare technology, national speaker, committee participant of patient identity standards and founder/innovator of identity validation solutions that improve workflow efficiencies, data accuracy for patient care and big data analytics and is valuable industry and strategic knowledge for OrangeHook.

Jeffrey Hattara, Chief Strategy Officer and Director

Jeffrey Hattara, age 60, has served as Chief Strategy Officer for OrangeHook and a member of OrangeHook's Board since 2014. He has previously held positions on the board of directors of LifeMedID, Salamander Technologies, and Agilivant LLC. Mr. Hattara was previously the CFO and then CEO of Datacard Group, a privately held technology company that sells within both the identity card and financial card markets from May 2000 until June 2008.  From 2010 to 2013 he served as Executive Chairman of Agilivant LLC and then from 2013 to 2014 served as CEO and chairman of the board of TruSecID Corporation (the predecessor owner of Salamander Technologies). Among other attributes, skills and qualifications, the Board believes that Mr. Hattara is uniquely qualified to serve as a director because of his global technology deployment expertise and nearly 30 years of experience in the area of corporate finance. Mr. Hattara was educated in Chicago and earned his MBA at Northwestern University, J.L. Kellogg Graduate School of Management (1994).

Colleen Davenport, General Counsel and Secretary

Colleen Davenport, age 53, has served as OrangeHook's General Counsel since August 2016. Most recently, she was an independent attorney at Merrill Corporation where she was responsible for all domestic IT service and product vendor contracts, post-closing merger and acquisition work and commercial real estate from 2015 until joining OrangeHook. Ms. Davenport also served as in-house Corporate Counsel for Insignia Systems, Inc., a publicly-held in-store advertising and promotions company, from 2011 to 2014, practicing in the areas of SEC compliance and corporate governance, commercial transactions, contract drafting and negotiation and employment law. From 2008 to 2011, she owned her own law practice and consulting firm. From 1989 to 2008, she served in various capacities as in-house counsel at Analysts International Corporation (AIC), a then-publicly held IT consulting services firm, including Secretary and General Counsel for nearly eight years prior to leaving the company. While at AIC, Ms. Davenport practiced in the areas of SEC compliance and corporate governance, general corporate law and corporate financing, drafting and negotiation of IT services, software development, outsourcing, managed services and license agreements and employment and immigration law and compliance. She holds a J.D. from Mitchell Hamline School of Law and bachelor of arts degrees in Psychology and Political Science from Gustavus Adolphus College.

 

 

 

 

 

 

 

Robert F. Riess, Chief Operations Officer and Chief Marketing Officer

Robert F. Riess, age 40, has served as the Chief Operations Officer and Chief Marketing Officer of OrangeHook since October 2014. He also serves as the Vice President of Marketing of Agilivant. Previously, Mr. Riess was the Executive Vice President of Sales & Marketing at Multiband Corporation, from September 2011 until July 2014. He has worked in the telecommunications industry for over 17 years providing sales and marketing leadership, development, and deployment managing teams of up to 265 employees. Some examples include: creation and successful deployment of a branding strategy for a publically traded company, a proven successful track record in developing and managing a nationwide residential sales force, development and deployment of a twelve state security division, and development and implementation of a nationwide multi-dwelling unit marketing platform including a field sales force and a 150 seat call center to support its success.  He received his master's degree from Central Michigan University.

Richard Resnick, age 50, began serving as a consultant with Nuvel in March 2014 and became its acting Chief Executive Officer in January 2015. After the merger with OrangeHook, he will serve as the Executive Vice President of Operations and will serve on the Board.  From 2012 to 2013, Mr. Resnick served as the Senior Vice President of AT&T where he led the National Business Markets organization for AT&T; he served as the Senior Vice President of Global Service Management for AT&T from 2009 to 2012; from 2006 to 2009 he served as the Senior Vice President of Global Network Field Operations for AT&T and from 2003 to 2006 he served as the President of AT&T Mexico in Mexico City.  Among other attributes, skills and qualifications, the Board believes that Mr. Resnick is uniquely qualified to serve as a director because of his extensive amount of IT, Networking and Telecommunications industry knowledge. Mr. Resnick earned a BS in Economics from UC Irvine.

Robert Philbin, Chief Executive Officer and Chairman of the Board of Agilivant

Robert (Bob) Philbin, age 60, served as President—Payment Systems at OrangeHook from September 2015 to November 2016 and, since November 2015, has served as the principal executive officer of Agilivant where currently he holds the titles of Chief Executive Officer and Chairman of the Board. Previously, from 2007 until 2010, Mr. Philbin was President of TSYS Acquiring Solutions, a payments processor in the merchant acquiring space with approximately 900 employees.  Prior to his appointment to President, he was Executive Vice President and Chief Financial Officer of TSYS Acquiring Solutions responsible for finance and operations.  He also served on the board and advisory board of the Electronic Transactions Association.  Mr. Philbin holds a BSBA in Accounting from Creighton University.

 

 

Donald Miller, Chairman of the Board

Donald Miller, age 76, has served as Chairman of the board for OrangeHook since 2014 and is on OrangeHook's audit and compensation committees.  From 1962 to 2001, he worked for Schwan's Enterprises (n/k/a The Schwan Food Company), primarily as Chief Financial Officer.  He currently serves on the board of directors of Schwan's Enterprises, a position he has held since 2007, and is on the audit committee.  From 2005 until 2013, Mr. Miller was the Chairman of the Board for Multiband and served as Chairman of the Board for Biphase Technologies, LLC from 2007 to 2015.  Mr. Miller currently serves as a director for Agilivant, LLC. Among other attributes, skills, and qualifications the Board believes Mr. Miller is uniquely qualified to serve as a director based upon his extensive business experience, financial literacy and his experience involving acquisitions and divestitures.

Whitney Peyton, Director

Whitney Peyton, age 64, has served as a member of OrangeHook's board of directors since 2015 and currently serves as a member of OrangeHook's nominating and governance committee. He is also currently the Chairman of Assure Lease and has served in that role since 2009. He has also served as the Chairman of Default Analytics LLC since 2015.  He is an investor in commercial real estate and has interests in 16 Great Clips franchises in the Twin City area.  Previously, he spent 36 years at CBRE Commercial Real Estate Services, from 1977 to 2013, the most recent 21 years he was the Senior Managing Director and Broker of record for CBRE's operations in Minnesota, South Dakota, North Dakota and Iowa.  Mr. Peyton is a past president of the Minnesota Shopping Center Association, twice President of the Minnesota CCIM chapter, past president of the Realtor's Commercial Alliance, and past Board member of NAIOP, Minnesota Commercial Realtors Association, Minikahda CC and current President of the Yellowstone Club Property Owners Association (since 2009).  Among other attributes, skills and qualifications, the Board believes that Mr. Peyton is uniquely qualified to serve as a director based on his key investment background and vast business knowledge.

Jonathon Dodge, Director

Jonathan Dodge, age 69, has served as a member of OrangeHook's board of directors since 2014 and currently serves on its compensation committee and as Chairman of its audit committee. He has been a tax partner with Thoresen, Diaby, Helle, Condan and Dodge since 2008.  From 1991 to 2008, Mr. Dodge was a partner and tax CPA at Dodge & Fox PA. He is a corporate tax specialist and also works in the area of IRS tax issues.  He was formerly a board member for Austin Mutual Insurance Company from 2004 to 2012, where he served as chairman of the audit and compensation committees, and Multiband, Inc. from 1997 to 2012, where he served on the audit and compensation committees.  He currently serves as Chairman of the Board for EPIEN Medical, Inc. and as a director for Citizens Observer, LLC, roles he has served since 2000 and 2005, respectively.  Among other attributes, skills and qualifications, the Board believes that Mr. Dodge brings significant experience, expertise and background with regard to accounting matters, including his ability to understand generally accepted accounting principles, internal controls over financial reporting and disclosure controls and procedures, and his experience in analyzing and evaluating financial statements.   Mr. Dodge may be deemed to be an " audit committee financial expert " as that term is defined by Item 407(d)(5)(ii) of Regulation S-K. He has both a BA and an MA in accounting from the University of Iowa.

Salvatore Fazzolari, Director

Involvement in Certain Legal Proceedings

To the knowledge of management, except as otherwise described herein, there have been no events under any bankruptcy act, no criminal proceedings and no Federal or State judicial or administrative orders, judgments or decrees or findings, no violations of any Federal or State securities law, and no violations of any Federal commodities law material to the evaluation of the ability and integrity of any existing director or proposed director or executive officer of Nuvel during the past ten (10) years.

Components of Executive Compensation

Each executive's employment agreement sets forth the material components of his or her employment and compensation arrangements, including initial base salaries and anticipated adjustments thereto, annual and long-term performance incentives and employee benefits. The employment agreements also contain severance and non-competition/solicitation provisions. These elements are structured with the goals of providing a competitive compensation program that will enable us to attract and retain highly-qualified executives. Each of these components is described below. The following descriptions are not complete and are qualified in their entirety by reference to the complete employment agreements.

 

 

 

 

 

 

 

(1)	Subject to adjustment by the board of directors based on the recommendation of the Compensation Committee following a review of individual and company performance goals and objectives and evaluation of the executive officer's performance in light of these goals.

(2)	Mr. Carlson's base salary was increased from $200,000 to $240,000 effective May 2, 2016.

(3)	On December 29, 2015, Jeffrey Hattara accepted 1,150,000 shares of OrangeHook Common Stock in lieu of cash compensation for services provided to OrangeHook during fiscal 2015.

(4)	Mr. Riess's annual base salary was increased from $150,000 to $175,000 effective January 1, 2016.

(5)	Mr. Batchelor currently serves as Chief Executive Officer of LifeMed ID; LifeMed ID expects to hire a new Chief Executive Officer, at which point Mr. Batchelor is expected to transition to Chief Relations Officer of that entity. He will remain CRO of Nuvel.

(6)

In connection with the closing of the Merger, Nuvel entered into an employment agreement with Richard Resnick. Refer to " The Merger and Related Transactions " for a description of the material terms of Mr. Resnick's employment agreement. A copy of the employment agreement is attached as an exhibit to this Current Report on Form 8-K.

(7)	Mr. Philbin has agreed to defer payment of 50% of his annual base salary until such time as our Chief Executive Officer and board of directors determine that our liquidity and capitalization position can support payment the entire amount.

Cash Incentives—Overview

We believe that the availability of cash incentive awards provides important motivation to executives to attain financial and other business goals. The majority of our cash incentive program is tied to achievement during the applicable fiscal year of certain target performance goals. Target performance goals are intended to be challenging yet achievable. Executive officers are responsible for submitting proposed performance targets to our board each year, and the Compensation Committee is responsible for annually reviewing and recommending to the board for approval our performance goals for purposes of establishing cash incentive awards for our executive officers. There are two components to our cash incentive compensation program: annual cash incentives and exemplary company performance cash incentives.

 

 

 

 

 

 

Cash Incentives—Annual

Executive officers of Nuvel are eligible to earn annual, performance-based cash incentives under the terms of their respective employment agreements. For Messrs. Mandel, Carlson, Hattara and Riess and Ms. Davenport, annual cash incentives are based on achievement of certain revenue and earnings before interest, tax, depreciation and amortization (EBITDA) targets. Messrs. Batchelor and Philbin do not participate in the annual, performance-based component of our cash incentive program.

 

In fiscal 2015, payouts could range from 0% to 150% of target for each executive officer based on performance versus target. Total annual incentive payout is expressed as a percentage of base salary. Payout below threshold performance is at 0%. Payout between 80% and 100% of target ranges linearly from 50% to 100% of base salary for each of Messrs. Mandel, Carlson and Hattara and from 50% to 75% for Mr. Riess. Payout above target increases up to a maximum of 150% of base salary for each executive officer. The table below presents information regarding the annual, performance-based cash incentives that could have been earned in fiscal 2015 by our executive officers had the threshold targets been met:

(1)  Mr. Philbin does not participate in the annual, performance-based cash component of our cash incentive program.

(2)  Under the terms of his employment agreement, Mr. Batchelor does not participate in the annual, performance-based cash component of Nuvel's cash incentive program.

(3)  Mr. Resnick was not an employee of OrangeHook during fiscal 2015.

(4)  Ms. Davenport was not an employee of OrangeHook during fiscal 2015.

In fiscal 2015, OrangeHook reported a net loss of $3,680,371, which resulted in a 0% target payout. As a result, executive officers of OrangeHook received no payout under the annual, performance-based component of our cash incentive program for fiscal 2015.

Cash Incentives—Exemplary Company Performance

Under the terms of their respective employment agreements, our executive officers are eligible to earn incentive cash bonuses for exemplary company performance if we achieve certain performance targets. In the event we perform at or above 150% of the target set forth in our budget for any fiscal year during the term of the executive officer's employment, (i) Mr. Mandel would receive a cash bonus equal to 10% of any operating income generated in excess of 150% of target, and (ii) each of Messrs. Carlson, Hattara and Riess would receive a cash bonus equal to 25% of his then-current respective base salary. Mr. Batchelor, Mr. Philbin and Ms. Davenport do not participate in the exemplary company performance component of our cash incentive program.

In lieu of the cash incentives described above, Mr. Batchelor's incentives are tied to the performance of LifeMed ID and Mr. Philbin's incentives are tied to the performance of Agilivant. Mr. Batchelor's employment agreement provides that he is eligible to receive quarterly cash incentive payments in an amount equal to (i) 5% of LifeMed ID's revenue during the applicable quarter from March 15, 2016 through December 31, 2016, (ii) 3% of LifeMed ID's revenue during the applicable quarter from January 1, 2017 through December 31, 2018, and (iii) 0.5% of LifeMed ID's revenue during the applicable quarter from January 1, 2019 through December 31, 2022. Mr. Philbin's employment agreement provides that he is eligible to receive annual cash bonuses equal to 10% of the operating income (calculated as earnings before interest and tax, less expenses) of Agilivant for the applicable year.

 

 

 

 

Long-Term Equity Incentives

We use equity awards to motivate performance and align executives' interests with those of our shareholders. During the term of their respective employment agreements, Messrs. Mandel, Carlson, Hattara and Riess and Ms. Davenport are eligible for equity awards on each anniversary of the effective date of their respective employment agreements if revenue and EBITDA targets are achieved. If and when earned, the awards for Messrs. Mandel, Carlson, Hattara and Riess would consist of fully-vested shares of Nuvel Common Stock (or Series OH-1 Convertible Preferred Stock if earned before completion of the Reverse Stock Split) with an aggregate value equal to (i) 100% (for Messrs. Mandel and Carlson) or 75% (for Messrs. Hattara and Riess) of the executive's base salary, multiplied by (ii) the average annual cash incentive earned by the executive during the trailing twenty-four month period immediately preceding the grant date (provided that a trailing twelve month period is used for calculating the average on the first anniversary grant date). The awards for Ms. Davenport would consist of restricted shares of Nuvel Common Stock (or Series OH-1 Convertible Preferred Stock if earned before completion of the Reverse Stock Split) with an aggregate value ranging from 0% to 25% of base salary for achievement of 75% to 100% of target and from 25% to 50% of base salary for achievement of 100% to 150% of target. Mr. Philbin does not participate in our long-term equity incentive compensation program.

No long-term equity incentives were awarded to our executives based on the performance of OrangeHook for fiscal year 2015 or 2014.

Inducement and Discretionary Equity Awards

We believe that inducement and discretionary equity awards offer the flexibility necessary to enable us to attract, retain and reward performance by key leaders needed to help drive our strategies and accomplish our objectives. Mr. Carlson received a fully-vested grant of 135,000 shares of OrangeHook Common Stock on February 1, 2015, as an inducement to accept employment with OrangeHook and a fully-vested grant of 5,000 shares of OrangeHook Common Stock on November 23, 2015, upon a recommendation of its Chief Executive Officer and approval by its Compensation Committee, in recognition of Mr. Carlson's performance during OrangeHook's 2015 fiscal year.

Mr. Riess received a fully-vested grant of 135,000 shares of OrangeHook Common Stock on April 23, 2015, as an inducement to accept employment with OrangeHook.

On November 24, 2015, Mr. Batchelor received as an inducement to accept employment with OrangeHook non-qualified stock options to purchase 178,571 shares of OrangeHook Common Stock at an exercise price of $0.16 per share. The options had an aggregate grant date fair value of $559,000 and were fully vested on the date of grant. On May 31, 2016, OrangeHook amended and restated its employment agreement with Mr. Batchelor, at which time the inducement stock options were cancelled and a replacement grant was made to Mr. Batchelor consisting of 228,413 non-qualified stock options to purchase shares of OrangeHook Common Stock at an exercise price of $3.18 per share. OrangeHook calculated the relative fair value of the revised stock option award using the Black Scholes pricing model.  Based on the calculation, OrangeHook determined that the relative fair value of the replacement options was lower than the value of the options that were issued in 2015.

Benefits and Perquisites

We believe that providing benefits and limited perquisites to executives creates an overall compensation package that is competitive with those offered by companies who compete with us for talent. Our executives participate in OrangeHook's health and welfare plans. For executives, we pay 100% of the premiums for medical, dental, vision, long-term disability and life insurance coverage. All executives receive paid time off, paid holidays, leave, expense reimbursement, and other benefits and perquisites that are available to all employees. In addition, Messrs. Mandel and Batchelor receive fully-paid family medical coverage, a one-time vehicle down payment allowance of up to $5,000, monthly vehicle allowances of $750 and $1,100, respectively, and reimbursement of phone expenses.

 

 

 

 

 

 

 

Non-Competition and Non-Solicitation Provisions

Each of Messrs. Mandel, Carlson, Hattara, Batchelor and Riess has agreed under the terms of his employment agreement that he will not compete with OrangeHook at any time during the term of the agreement or any extension thereof. In addition, during the term of the agreement and for a period of twelve months thereafter, the executives agreed to not solicit any executive officer or independent contractor of OrangeHook to sever their relationship with OrangeHook or accept employment or an independent contractor relationship with another company.

Under the terms of their respective employment agreements, Mr. Philbin and Ms. Davenport agreed, during the term of the agreement and for a period of twelve months thereafter, not to solicit any customer of OrangeHook or provide or sell to any customer of OrangeHook any service or product that is competitive with OrangeHook or its subsidiaries and not to induce or solicit any customer, employee or contractor of OrangeHook or its subsidiaries to alter or terminate his, her or its relationship with OrangeHook or its subsidiaries.

Severance and Change in Control Arrangements

To promote its goal of attracting and retaining highly-qualified executive officers, we have included severance and change-in-control arrangements in the employment agreements with our executive officers. The employment agreements provide that, upon termination of the executive's employment for any reason , the applicable executive would receive a one-time cash payment in an amount equal to all accrued but unpaid base salary, bonuses, medical insurance premiums, and other benefits or perquisites through the termination date. In addition, if Mr. Mandel's employment is terminated by us without "cause" or by Mr. Mandel for "good reason" (as such terms are defined in the employment agreement), Mr. Mandel would receive a one-time cash severance payment in an amount equal to all base salary, medical insurance premiums, and all other benefits and perquisites he would have received through the remainder of the term of his employment agreement. For Messrs. Carlson, Hattara and Riess, if the applicable executive's employment is terminated for any reason other than "cause" or "disability" (as such terms are defined in the employment agreement), the applicable executive would continue to receive his base salary and payment for any benefits and perquisites through the remainder of the term of his employment agreement. If Mr. Batchelor's employment is terminated by us without "cause," by Mr. Batchelor for "good reason," or if he is terminated following a "change in control" of OrangeHook or LifeMed ID (as such terms are defined in the employment agreement), Mr. Batchelor would receive a one-time cash severance payment in an amount equal to all base salary, medical insurance premiums, and all other benefits and perquisites he would have received through the remainder of the term of his employment agreement. If, after the first anniversary of the effective date of their respective employment agreements, Ms. Davenport's or Mr. Philbin's employment is terminated by us without "cause," by the executive for "good reason," or if the executive is terminated in connection with a "change in control" of OrangeHook (as such terms are defined in their employment agreements), the executive would receive a one-time cash severance payment in an amount equal to twelve months' base salary plus the amount of any annual cash incentives she or he would have earned during the quarter during which the termination occurred. If Ms. Davenport's or Mr. Philbin's employment is terminated for any of the aforementioned reasons before the first anniversary of the effective date of the executive's respective employment agreement, the base-salary component of the severance payment would be equal to the greater of the unpaid balance of the executive's base salary through the first anniversary date or six months' base salary (rather than twelve months' base salary).

If Mr. Mandel's employment is terminated by us without cause or by Mr. Mandel for good reason, all unvested stock options then held by Mr. Mandel would accelerate and vest and become immediately exercisable. The employment agreements with Messrs. Carlson, Hattara and Riess provide that, if the applicable executive officer's employment is terminated for any reason, all stock and stock options awards that have vested prior to the date of termination may be retained by the applicable executive, unless otherwise provided in the agreement underlying the award. If Ms. Davenport's or Mr. Philbin's employment is terminated in anticipation of or within six months following a change in control of OrangeHook, all shares of restricted OrangeHook Common Stock awarded to Ms. Davenport and all options to purchase shares of OrangeHook Common Stock awarded to Mr. Philbin would accelerate and vest and, in the case of options, become immediately exercisable. If Mr. Batchelor's employment is terminated by OrangeHook or LifeMed ID without cause or by Mr. Batchelor for good reason, or if Mr. Batchelor is terminated at any time following a change in control of OrangeHook or LifeMed ID, all unvested stock options, shares of restricted stock and other equity awards then held by Mr. Batchelor would accelerate and vest and become immediately exercisable.

 

 

 

 

 

 

Mr. Batchelor's employment agreement further provides that, in the event of a change in control of LifeMed ID, we would be required to pay to Mr. Batchelor a one-time cash payment in the amount of $3,000,000 and a one-time cash payment in an amount equal to the difference between (i) the product of (a) a percentage ranging from 25% to 40%, depending on the time of the change in control, multiplied by (b) the amount by which the total consideration paid by the acquirer of LifeMed ID exceeds $31,000,000, minus (ii) $3,000,000.

(1)   For Messers. Mandel, Carlson and Batchelor in fiscal year 2014, represents the period from October 17, 2014 (OrangeHook inception) through December 31, 2014.

(2)   Represents the aggregate grant date fair value for stock awards, calculated in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. Refer to the notes in OrangeHook's audited financial statements for the year ended December 31, 2015 and for the period from October 17, 2014 (inception) through December 31, 2014 for a discussion of the assumptions used in valuing the awards. All stock awards reported were granted outside of OrangeHook's 2016 Equity Incentive Plan.

(3)   Amount includes the pro-rated portion of Mr. Mandel's annual base salary of $350,000 for the period beginning with the July 1, 2015 effective date of Mr. Mandel's employment agreement and ending December 31, 2015.

(4)   Amount includes an award of 1,350,000 shares of OrangeHook Common Stock granted to Mr. Mandel on October 17, 2014 (inception).

(5)   Amount includes the pro-rated portion of Mr. Carlson's annual base salary of $200,000 for the period beginning with the February 1, 2015 effective date of Mr. Carlson's employment agreement and ending December 31, 2015.

(6)   Amount includes awards of 135,000 and 5,000 shares of OrangeHook Common Stock granted to Mr. Carlson on February 1, 2015 and November 23, 2015, respectively.

(7)   On November 24, 2015, Mr. Batchelor was granted an option to purchase 178,571 shares of OrangeHook Common Stock at an exercise price of $0.16 per share.  This option had an aggregate fair value of $559,000 and was fully vested on the date of grant. On May 31, 2016, this option was rescinded and replaced with a seven-year nonqualified stock option to purchase up to 228,413 shares of OrangeHook Common Stock at an exercise price of $3.18 per share. OrangeHook has calculated the relative fair value of the revised stock option award using the Black Scholes pricing model.  Based on the calculation, it was determined that the relative fair value of the replacement options was lower than the value of the options that were issued in 2015.

 

 

 

 

 

 

 

 

Outstanding Equity Awards at Fiscal Year-End

The following table provides information regarding all outstanding equity awards held by named executive officers of OrangeHook as of December 31, 2015:

(1)	On May 31, 2016, Mr. Batchelor's option was rescinded and replaced with a seven-year nonqualified stock option to purchase up to 228,413 shares of OrangeHook Common Stock at an exercise price of $3.18 per share.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on April 5, 2016 for information about outstanding equity awards of Nuvel as of December 31, 2015.

Director Compensation

Prior to the Merger, our board of directors consisted of two members: James Mandel and Richard Resnick. As required by the terms of the Merger Agreement, the size of our board was increased to eight members and we appointed to our board the six persons serving as directors of OrangeHook immediately prior to the Merger who were not also directors of Nuvel. Nuvel's non-employee directors include Donald Miller (Chairman), Whitney Peyton, Jonathan Dodge and Salvatore Fazzolari. No compensation was paid or awarded by OrangeHook to non-employee directors in fiscal 2015. Rather, as compensation for his service on the board of directors of OrangeHook for the period of December 15, 2014 through December 31, 2015, each non-employee director received upon appointment on December 15, 2014 an award of 25,000 fully vested shares of OrangeHook Common Stock and 75,000 shares of restricted OrangeHook Common Stock, subject to forfeiture until vested. The 75,000 shares of restricted OrangeHook Common Stock granted to each non-employee director vest in three equal installments on the first three anniversaries of the grant date, provided that such individuals continue to serve as members of Nuvel's board of directors through the date of vesting.

For fiscal year 2016, each of OrangeHook's non-employee directors receives a cash retainer in the amount of $25,000 as compensation for his or her services on the board of directors and a $5,000 cash retainer for each committee of the board of directors on which they serve as a member ($8,000 for a committee chairperson). In addition to the retainer, each director also receives a flat fee for services in the amount of $6,000 per year. Each non-employee director has agreed to defer payment of all cash compensation awarded to directors for their service during fiscal year 2016 until such time as our cash flow position can support payment of director compensation.

As of December 31, 2015, Messrs. Miller and Peyton held 50,000 and 150,000 options to purchase shares of OrangeHook Common Stock , respectively. Messrs. Dodge and Fazzolari did not hold any stock options as of fiscal 2015 year end. The options held by Messrs. Miller and Peyton were awarded by OrangeHook not as compensation for their services as members of the board of directors, but rather as consideration in exchange for personal guarantees of repayment of OrangeHook indebtedness. Refer to " OrangeHook Transactions with Related Persons " for a description of the transaction.

 

 

 

Executive officers who also serve as members of our board of directors do not receive any compensation for service in their capacity as directors. Information regarding executive compensation arrangements with executive officers is included in the executive compensation tables and discussion under the heading " Executive Compensation ."

Compensation Committee Interlocks and Insider Participation

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

(1)	The entire principal amount of each promissory note remains outstanding, except as otherwise noted.

(2)	Table does not present any interest payments that have been made on the notes.

 

 

 

 

 

 

(3)   OrangeHook is in the process of obtaining extensions to the maturity dates of the notes.

(4)   Current outstanding principal balance of $1,208,330.

(5)   During 2015, OrangeHook made principal payments totaling $62,000 on this note. The remaining balance of $118,000 was converted into 118 shares of Series A-1 Convertible Preferred Stock at maturity on March 1, 2016.

(6)   Issued in the name of Shorewood Village Shopping Center, an entity in which James Mandel has a financial interest.

(7)   On October 26, 2016, Donald Miller and OrangeHook agreed to convert the entire principal balances and all accrued interest into 1,022 shares of Series A-1 Convertible Preferred Stock with attached 7-year warrants to purchase 71.5 shares of OrangeHook Common Stock at $7.00 per share in full satisfaction of OrangeHook's obligations under the promissory notes.

(8)   Paid in full on May 31, 2016.

(9)   OrangeHook made a principal payment under this note in the amount of $210,000 on June 30, 2016. The remaining balance of $190,000 was paid in full on October 31, 2016.

(10) During October and November of 2016, OrangeHook made principal payments totaling $15,000. As of November 15, 2016, the outstanding principal balance was $17,000.

(11) In November of 2016, OrangeHook made principal payments totaling $10,000. As of November 15, 2016, the outstanding principal balance was $40,000.

(12) OrangeHook made a payment of $100,000 on the principal balance on June 30, 2016, and the current outstanding principal amount equals $350,000.

(13) Paid in full on October 4, 2016.

(14) The funds were advanced to OrangeHook on September 29, 2016, but the terms of the loan are currently being negotiated.

LifeMed ID made advances of $54,550, $102,894.31 and $335,648.06 to David Batchelor on November 18, 2015, February 9, 2016 and February 28, 2016, respectively. Mr. Batchelor is an executive officer and director of each of OrangeHook and LifeMed ID. Mr. Batchelor issued to LifeMed ID two promissory notes in the amounts of $54,550 and $102,894.31 for the loans, which accrue interest at a rate of 4% per annum and mature immediately upon exercise of Mr. Batchelor's put option (described below). On November 2, 2016, Mr. Batchelor forfeited 35,571 shares of OrangeHook Common Stock in exchange for the satisfaction in full of the entire principal amount ($493,092.37) and accrued interest ($4,895.99) on the loans.

On February 9, 2016, OrangeHook advanced $160,000 to David Batchelor under a promissory note with an interest rate of 4% per annum, maturing within 15 days of the closing date of OrangeHook's acquisition of LifeMed ID. Payment by Mr. Batchelor was to be made by surrendering shares of OrangeHook held by Mr. Batchelor in amount equal to the principal and interest at a rate of $14.00 per share. In March 2016, the note was cancelled. OrangeHook agreed to accept 80,000 shares of LifeMed ID common stock valued at $2.00 per share in exchange for cancellation of the note and forgave accrued interest associated with the note.

On April 7, 2016, OrangeHook provided approximately $300,000 in non-interest bearing financing to Mr. Batchelor as part of a real estate transaction involving Mr. Batchelor's personal residence. OrangeHook obtained the funds from MEZ Capital, LLC in exchange for a promissory note issued by OrangeHook to MEZ Capital, LLC in the original principal amount of $300,000. The promissory note had a fixed interest rate equal to $13,500 and contained a loan discount feature requiring OrangeHook to pay $15,000 to MEZ Capital, LLC at the time of disbursement of the funds. Mr. and Mrs. Batchelor guaranteed repayment of the promissory note and assigned their rights to the proceeds of the sale of their former residence as security for payment of the promissory note. Upon the sale of Mr. Batchelor's former residence on May 10, 2016, the promissory note was paid in full by a direct transfer of funds from the title company involved in the sale of Mr. Batchelor's former residence to MEZ Capital, LLC.

In February 2016, OrangeHook advanced $50,000 to Jeffrey Hattara in future wages payable to Mr. Hattara under the terms of his employment agreement. Beginning January 1, 2016, Mr. Hattara agreed to defer payment of 50% of his annual base salary. On October 28, 2016, OrangeHook processed a salary payment to Mr. Hattara in the amount of all advanced wages plus applicable tax withholdings, reducing his accrued but deferred compensation and eliminating the amounts advanced. As of the date of this Current Report, Mr. Hattara has earned approximately $71,538 in outstanding deferred compensation.

 

 

 

 

 

Director Guarantees of OrangeHook Indebtedness

Directors James Mandel, Donald Miller, Jeffrey Hattara and Whitney Peyton personally guaranteed repayment of certain promissory notes issued by OrangeHook in its 2015 convertible note offering. As consideration for their guarantees, OrangeHook issued Messrs. Miller and Peyton on June 1, 2015 options to purchase up to 50,000 and 150,000 shares of OrangeHook Common Stock, respectively, exercisable at a price of $0.16 per share through May 31, 2025. Messers. Mandel and Hattara did not receive any consideration for their guarantees.

Consulting Services

Beginning January 2015, OrangeHook engaged MetaConn Corp to provide consulting services relating to acquisition strategies and other business development opportunities in connection with OrangeHook's planned acquisitions of targeted portfolio companies. The parties did not enter into any written agreement for the services and the arrangement can be terminated at any time by OrangeHook. Fees for the services provided by MetaConn are on a project-by-project basis. OrangeHook has paid to MetaConn Corp a total of approximately $151,250 and $150,250 in 2015 and 2016, respectively, as compensation for its services.  Mr. Hattara, a director, officer and greater than 10% beneficial owner of OrangeHook, is also a director, officer and a substantial equity owner of MetaConn Corp.  OrangeHook expects aggregate fees paid to MetaConn Corp to be less than $200,000 in 2016.

Beginning in 2014, OrangeHook engaged Thoresen, Diaby, Helle, Condon and Dodge, Inc. to provide tax consulting and compliance services, including the preparation of income tax provision workpapers used in connection with the annual audits performed by OrangeHook's independent audit firm and the preparation of the federal and all state income tax returns. OrangeHook paid the firm a total of $30,930 and $18,865 in 2015 and 2016, respectively, as compensation for its services. Jonathon Dodge, a board member and Chairman of the Audit Committee, is a partner of Thoresen, Diaby, Helle, Condon and Dodge, Inc.

Registration Rights and Put Option Agreement and Nonqualified Stock Option Agreement

OrangeHook entered into a Registration Rights and Put Option Agreement with Mr. Batchelor on March 23, 2016. In the event Nuvel files a registration statement following the Merger, the agreement grants Mr. Batchelor piggy-back registration rights for stock, warrants, options and other securities of Nuvel held by Mr. Batchelor following the Merger. The agreement also grants Mr. Batchelor a put option which, if exercised, will require OrangeHook to purchase up to 110,714 shares of Mr. Batchelor's stock at $14 per share, up to an aggregate maximum of $1,550,000, during 2016. On each of May 18, June 14, and August 3, 2016, Mr. Batchelor delivered to OrangeHook a notice to exercise the repurchase of 39,285 shares pursuant to this put option. On October 30, 2016, Mr. Batchelor delivered notice to exercise the repurchase of the remaining 71,428 shares of the put option. OrangeHook has deferred repurchasing the shares in accordance with liquidity limitations set forth in the agreement.

OrangeHook also entered into a Nonqualified Stock Option Agreement with Mr. Batchelor on May 31, 2016. For a description of the material terms of the agreement, refer to the discussion under the heading " Executive Compensation ."

Salamander Royalty Obligation

On December 31, 2013, Salamander entered into a stock purchase agreement with TruSec ID, Inc. and former preferred shareholders of Salamander, pursuant to which TruSec ID, Inc. purchased 100% of the issued and outstanding shares of Series A through Series D Preferred Stock of Salamander. Under the terms of the agreement, Salamander agreed to make quarterly royalty payments to the preferred shareholders in an amount equal to five percent of its gross revenue (excluding any refunds, rebates, discounts, allowances and returns) from 2014 through 2017, three percent from 2018 through 2019, and two percent thereafter, until the aggregate amount of all royalty payments equals $3.5 million. In connection with its acquisition of Salamander, OrangeHook agreed to guarantee Salamander's royalty payment obligation. Jeffrey Hattara is a director and Chief Strategy Officer of OrangeHook and, at the time of OrangeHook's acquisition of Salamander, was the President and Chief Executive Officer and an approximately 25% owner of TruSec ID, Inc. As of September 30, 2016, Salamander has made an aggregate total of $ 17,470.68 in royalty payments to its former preferred shareholders.

 

 

 

 

 

 

Executive Officer Employment Agreements

Prior to the Merger, OrangeHook entered into employment agreements with each its executive officers. We anticipate the agreements will be assumed by Nuvel in connection with an expected parent-subsidiary merger of OrangeHook into Nuvel. With the exception of the employment agreements with Robert Riess and Colleen Davenport, the employment agreements were not approved, or recommended to the full board of directors for approval, by the Compensation Committee of OrangeHook's board of directors. OrangeHook was, at the time of entering into the agreements, a privately-held company with no formal policies or procedures in place regarding Compensation Committee approval of executive officer compensation. Going forward, Nuvel expects to implement policies and procedures regarding Compensation Committee approval of executive compensation. The material terms of the employment agreements are described under the heading " Executive Compensation ." In addition, Nuvel entered into a new employment agreement with Richard Resnick in connection with the Merger. The material terms of Mr. Resnick's employment agreement are described under the heading " The Merger and Related Transactions. "

Facilities

OrangeHook currently occupies approximately 6,300 square feet of office space in Wayzata, Minnesota, part of which is subleased from a company owned by a family member of Mr. Mandel. Monthly payments for OrangeHook's office space are approximately $18,869 in the aggregate.

Salamander currently occupies approximately 5,501 square feet of office space in Traverse City, Michigan, that is leased from a company owned by a former member of Salamander management and beneficial owners of OrangeHook common stock.  Monthly rental payments are $6,705.

Board Independence and Committees

Director Independence

Nuvel uses the definitions provided by the rules of the New York Stock Exchange ("NYSE") to evaluate independence of board and committee members in light of information requested from and provided by each director concerning his background, employment, and affiliations, including any family relationships and related-party transactions . In accordance with such rules, Mr. Dodge is an "independent" director despite the fact that he was a partner and equity owner in Thoresen, Diaby, Helle, Condan and Dodge , Inc. which has provided non-audit services to OrangeHook . The payments for such services received by Thoresen, Diaby, Helle, Condan and Dodge, Inc. in each of the last three years did not exceed 5% of the firm's consolidated gross revenues, or $200,000. In addition to Mr. Dodge, Messrs. Miller, Peyton, and Fazzolari are "independent" directors under the rules of the NYSE. Messrs. Mandel, Resnick, Batchelor, and Hattara are not independent directors due to their positions as executive officers of Nuvel . There are no family relationships between Nuvel's directors or executive officers.

Board Committees

During its fiscal year ended December 31, 2015, the board of directors of Nuvel did not meet on any occasion, but rather transacted business by unanimous written consent. During   fiscal year 2015, OrangeHook's board of directors met four times, and its audit committee met one time, the compensation committee met two times, and the nominating and governance committee met one time. Each of OrangeHook's directors attended at least 75% of the aggregate number of meetings held by the board of directors and committees on which he served.

Audit Committee.

Compensation Committee.

Nominating and Governance Committee.

Our Nominating and Governance Committee is comprised entirely of independent directors as defined under the rules of the NYSE and is responsible for performing such tasks as   (i)  reviewing and recommending to the full board corporate governance policies and procedures; (ii)  reviewing Nuvel's   code of ethics (once adopted) and compliance therewith; (iii)  identifying director candidates, including recommendation to the full board of the slate of nominees; (iv)  recommending to the board the composition of the committees; (v)  educating Nuvel's   directors; (vi)  evaluating the board; and (vii)  determining compensation policies, practices and levels of compensation for the board.

Code of Ethics

Nuvel does not currently have a code of ethics. However, in the near future our board of directors plans to adopt OrangeHook 's code of ethics as was in effect immediately prior to the Merger. The code of ethics applies to all directors, officers and employees, including the principal executive officer, principal financial officer and principal accounting officer. The code is intended to address, among other things, honesty and ethical conduct, conflicts of interest , compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, reporting of violations of the code, and accountability for adherence with the code. Once adopted, a copy of the code will be made available to shareholders on our website.

 

 

 

 

 

LEGAL PROCEEDINGS

Nuvel is not a party to any material litigation or claims. However, no assurance can be given that material claims or disputes will not arise or occur in the future; in such event, we would be required to incur legal costs and fees to assert critical claims or defend claims made against us or our portfolio companies.

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Nuvel Common Stock trades under the symbol "NUVL" on the OTC Pink Marketplace. On November 30, 2016, the day preceding the effective date of the Merger, the high and low bid quotations per share of Nuvel Common Stock as reported on the OTC Pink Marketplace were $0.25 and $0.25, respectively. On June 30, 2016, the day preceding the day the Merger Agreement was signed, the high and low bid quotations per share of Nuvel Common Stock were $0.15 and  $0.15, respectively.

 

Historical market price data for OrangeHook has not been provided because, prior to the Merger, OrangeHook was a privately held company and there was no established public trading market for OrangeHook's capital stock. OrangeHook arbitrarily determined the value of its securities, and the value ascribed to its securities for purposes of the Merger should not be considered as any objective indication of actual value as it bears no relationship to OrangeHook's assets, earnings or book value or any other objective financial statement criteria of value.

As of the date of this Current Report on Form 8-K, (i) there were 29,478,373 shares subject to outstanding options or warrants to purchase, or securities convertible into, Nuvel Common Stock, (ii) there were 48,647,979 shares of Nuvel Common Stock that could be sold under Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"), or that Nuvel has agreed to register under the Securities Act for sale by security holders, and (iii) zero shares of Nuvel Common Stock are being, or have been publicly proposed to be, publicly offered by Nuvel, the offering of which could have a material effect on the market price of Nuvel Common Stock.

 

 

 

 

Holders

The number of record holders of Nuvel Common Stock as of the closing of the Merger was approximately 67 based on information received from our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in "street" or "nominee" name with a brokerage firm or other fiduciary.

Dividends

Holders of Nuvel Common Stock are entitled to receive dividends if and when declared by Nuvel 's board of directors out of funds legally available for the payment of dividends. Nuvel has never paid a cash dividend on its common stock and   presently intends to retain any earnings to fund the development of its business. Nuvel does not anticipate paying any dividends on its common stock for the foreseeable future. Due to Nuvel 's current cash flow position, Nuvel is unable to declare or pay any dividends on its common stock. Any future determination as to declaration and payment of dividends will be made at the discretion of Nuvel 's board of directors and will depend on earnings, financing requirements and other factors .

Each outstanding share of OrangeHook Common Stock was converted into shares of Series OH-1 Convertible Preferred Stock of Nuvel upon completion of the Merger. Assuming the requisite shareholder approval is obtained, the shares of Series OH-1 Convertible Preferred Stock will be converted into shares of Nuvel Common Stock upon completion of the Reverse Stock Split. The rights of such securities are further described in " Description of Registrant's Securities. "

Each outstanding share of OrangeHook Series A Convertible Preferred Stock and Series A-1 Convertible Preferred Stock was converted into shares of Series OH-2 Convertible Preferred Stock upon completion of the Merger. Dividends accrue on Series OH-2 Convertible Preferred Stock at a rate of twelve percent per annum. If and when declared, dividends are payable at the election of the holder in the form of cash or shares of Nuvel Common Stock at a conversion rate of $7.00 per share. In the event of conversion of the Series OH-2 Convertible Preferred Stock into Nuvel Common Stock, any accrued but unpaid dividends would automatically be converted into shares of Nuvel Common Stock at a conversion rate of $7.00 per share. Dividends that accrued on OrangeHook Series A Convertible Preferred Stock or Series A-1 Convertible Preferred Stock before the Merger carried over and became payable on Nuvel Series OH-2 Convertible Preferred Stock. The rights and preferences of such securities are further described in " Description of Registrant's Securities. "

(1)	Represents equity compensation plans (including compensation arrangements) for employees or non-employees (such as directors, consultants, advisors, vendors, customers, suppliers or lenders).

(2)

On November 24, 2015, Mr. Batchelor received as an inducement to accept employment with OrangeHook non-qualified stock options to purchase 178,571 shares of OrangeHook Common Stock at an exercise price of $0.16 per share. The options had an aggregate grant date fair value of $559,000 and were fully vested on the date of grant. On May 31, 2016, Mr. Batchelor's non-qualified stock options were rescinded and replaced with a seven-year non-qualified stock option to purchase up to 228,413 shares of OrangeHook Common Stock at an exercise price of $3.18 per share. The material terms of Mr. Batchelor's employment agreement are described under the heading " Executive Compensation. "

 

 

 

 

 

 

 

 

As of December 31, 2015, Nuvel did not have any securities authorized for issuance under equity compensation plans.

OrangeHook 2016 Equity Incentive Plan

On August 9, 2016, OrangeHook's Compensation Committee recommended and its board of directors adopted the OrangeHook 2016 Equity Incentive Plan (the "2016 Plan"). Following the Closing of the Merger, we expect to perform a parent-subsidiary merger of OrangeHook into Nuvel, at which time Nuvel would assume the 2016 Plan. The principal provisions of the 2016 Plan are summarized below.

Purpose and Eligible Participants .  The purpose of the 2016 Plan is to promote the success of OrangeHook and its affiliates by facilitating the employment and retention of competent personnel and by furnishing incentives to those employees, directors, and consultants upon whose efforts the success of OrangeHook and its affiliates will depend to a large degree.

Administration .  The 2016 Plan is administered by the board of directors of OrangeHook; provided, however, that the board of directors may delegate some or all of the administration of the Plan to a committee or committees. The board of directors and any committee appointed by the board of directors to administer the 2016 Plan are collectively referred to herein as the "Administrator."

Types of Awards .  The 2016 Plan permits the Administrator to grant incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, performance awards and stock appreciation rights.

Reserved Shares.  The stock to be awarded or optioned under the 2016 Plan consists of authorized but unissued shares of OrangeHook Common Stock . The maximum aggregate number of shares of OrangeHook Common Stock currently reserved and available for awards under the 2016 Plan is one million (1,000,000) shares, provided, however, that all shares of stock reserved and available under the 2016 Plan constitutes the maximum aggregate number of shares of stock that may be issued through incentive stock options. The following shares of OrangeHook Common Stock will not reduce the pool of authorized shares and will continue to be reserved and available for future awards granted pursuant to the 2016 Plan: (i) all or any portion of any outstanding restricted stock award or restricted stock unit that expires or is forfeited for any reason, or that is terminated prior to the vesting or lapsing of the risks of forfeiture on such award, and (ii) shares of OrangeHook Common Stock covered by an award to the extent the award is settled in cash; provided, however, that the full number of shares of OrangeHook Common Stock subject to a stock appreciation right will reduce the number of shares available for future awards under the 2016 Plan, whether such stock appreciation right is settled in cash or shares of OrangeHook Common Stock.  Any shares of OrangeHook Common Stock withheld to satisfy tax withholding obligations on an award, shares of OrangeHook Common Stock withheld to pay the exercise price of an option, and shares of OrangeHook Common Stock subject to a broker-assisted cashless exercise of an option will reduce the number of shares available for future awards under the 2016 Plan.

Annual Award Limits .  Unless and until the Administrator determines that an award to a "covered employee" (as defined in Section 162(m) of the Internal Revenue Code) is not be performance-based compensation, the following limits (each, an " Annual Award Limit ," and collectively, " Annual Award Limits ") apply to grants of such awards under the 2016 Plan:

·

Options and Stock Appreciation Rights . The maximum number of shares of OrangeHook Common Stock subject to Options granted and shares of OrangeHook Common Stock subject to Stock Appreciation Rights granted in any one calendar year to any one Participant is, in the aggregate, five hundred thousand (500,000) shares, subject to adjustment for certain corporate events .

·	Restricted Stock Awards and Restricted Stock Units . The maximum grant with respect restricted stock awards and restricted stock units in any one calendar year to any one participant is, in the aggregate, five hundred thousand (500,000) shares, subject to adjustment for certain corporate events .

 

 

 

 

 

Amendments .  The board of directors may from time to time, insofar as permitted by law, suspend or discontinue the 2016 Plan or revise or amend it in any respect. However, except to the extent required by applicable law or regulation or as except as provided under the 2016 Plan itself, the board of directors may not, without shareholder approval, revise or amend the 2016 Plan to (i) materially increase the number of shares subject to the 2016 Plan, (ii) change the designation of participants, including the class of employees, eligible to receive awards, (iii) decrease the price at which options or stock appreciation rights may be granted, (iv) cancel, regrant, repurchase for cash, or replace options or stock appreciation rights that have an exercise price in excess of the fair market value of the OrangeHook Common Stock with other awards, or amend the terms of outstanding options or stock appreciation rights to reduce their exercise price, (v) materially increase the benefits accruing to participants under the 2016 Plan, or (vi) make any modification that will cause incentive stock options to fail to meet the requirements of Section 422 of the Internal Revenue Code.

Term .  The Administrator may grant awards under the 2016 Plan from time to time until the Administrator discontinues or terminates the 2016 Plan; provided, however, that in no event may incentive stock options be granted pursuant to the 2016 Plan after the earlier of (i) the date the Administrator discontinues or terminates the 2016 Plan, or (ii) the close of business on the day immediately preceding the tenth anniversary of the effective date of the 2016 Plan.

Change of Control . Unless otherwise provided in the terms of an award, upon a change of control of OrangeHook, as defined in the 2016 Plan, the Administrator may provide for one or more of the following: (i) the acceleration of the exercisability, vesting, or lapse of the risks of forfeiture of any or all awards (or portions thereof), (ii) the complete termination of the 2016 Plan and the cancellation of any or all awards (or portions thereof) which have not been exercised, have not vested, or remain subject to risks of forfeiture, as applicable in each case as of the effective date of the change of control, (iii) that the entity succeeding OrangeHook by reason of such change of control, or the parent of such entity, shall assume or continue any or all awards (or portions thereof) outstanding immediately prior to the change of control or substitute for any or all such awards (or portions thereof) a substantially equivalent award with respect to the securities of such successor entity, as determined in accordance with applicable laws and regulations, or (iv) that participants holding outstanding awards will become entitled to receive, with respect to each share of OrangeHook Common Stock subject to such award (whether vested or unvested, as determined by the Administrator pursuant to the 2016 Plan) as of the effective date of any such change of control, cash in amount equal to (1) for participants holding options, the excess of the fair market value of such OrangeHook Common Stock on the date immediately preceding the effective date of such change of control over the exercise price per share of options, or (2) for participants holding awards other than options, the fair market value of such OrangeHook Common Stock on the date immediately preceding the effective date of such change of control. The Administrator need not take the same action with respect to all awards (or portions thereof) or with respect to all participants.

Forms of Agreement.  The board of directors has approved forms of agreement to govern incentive stock options, nonqualified stock options, restricted stock awards and restricted stock unit awards awarded under the 2016 Plan. The forms of agreement governing incentive stock options and the nonqualified stock options provide that the option will be forfeited upon a termination for Cause or upon the expiration of a three-month period following a termination for any reason other than Cause, disability or death. The forms of agreement define "Cause" as (i) the conviction of the participant for the commission of any felony, (ii) the commission by the participant of any crime involving moral turpitude ( e.g. , larceny, embezzlement) which results in harm to the business, reputation, prospects or financial condition of OrangeHook or any affiliate, or (iii) a disciplinary discharge pursuant to the terms of OrangeHook's management handbooks or policies as in effect at the time. In addition, the forms of agreement provide that the participant may, at the Administrator's discretion, exercise the option by delivering cash or previously acquired shares, requesting that shares underlying the option be withheld to satisfy the exercise price and any applicable withholding obligations, broker assisted cashless exercise, such other form of payment as may be authorized by the Administrator, or any combination thereof. The form of agreement governing restricted stock awards and restricted stock unit awards provides that upon a separation from service, the participant will forfeit any shares or units for which the risks of forfeiture have not yet lapsed or which have not yet vested.

The foregoing summary of the material terms of the 2016 Plan and the forms of agreements do not purport to be complete and are qualified in their entirety by reference to the text of the 2016 Plan, the form of incentive stock option agreement, the form of nonqualified stock option agreement, the form of restricted stock agreement, and the form of restricted stock unit agreement, which are incorporated herein by reference and are included as exhibits to this Current Report on Form 8-K. Following the Closing of the Merger.

 

 

 

RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information regarding all securities sold by OrangeHook within the past three years which were not registered under the Securities Act.

Sales of OrangeHook Common Stock

In October 2014 OrangeHook issued 1,350,000 shares of OrangeHook Common Stock to its founder and Chief Executive Officer as consideration for ideas and plans contributed to OrangeHook valued at $13,500.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In April 2015 OrangeHook issued 135,000 shares of OrangeHook Common Stock to its Chief Financial Officer as a signing bonus valued at $21,600.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In April 2015 OrangeHook issued each of its non-employee board members 100,000 shares of restricted OrangeHook Common Stock with an aggregate value of $16,000.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In May, September and December of 2015, OrangeHook issued 28,583 shares of OrangeHook Common Stock with an aggregate value of $199,696 to existing shareholders pursuant to their election to receive common shares in lieu of cash dividend payments for the periods ending March 31, June 30 and September 30, 2015.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In April 2015 OrangeHook issued its Chief Operating Officer/Chief Marketing Officer a total of 135,000 shares of OrangeHook Common Stock pursuant to the terms of his employment agreement valued at $21,600.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In June of 2015 OrangeHook issued 40,000 shares of OrangeHook Common Stock to one of its directors pursuant to a warrant exercise for an aggregate cash consideration of $400.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In October 2015 OrangeHook issued 182,143 shares of OrangeHook Common Stock to one director and three accredited investor entities in connection with the acquisition of Salamander Technologies, Inc. with an aggregate value of $579,214.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

 

 

 

 

 

 

 

In October 2015 OrangeHook issued 120,000 shares of OrangeHook Common Stock to one officer and six accredited investor shareholders pursuant to warrant exercises for an aggregate cash consideration of $1,200.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In November 2015 OrangeHook issued 5,000 shares of OrangeHook Common Stock to its Chief Financial Officer as bonus compensation valued at $800. The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In December 2015 OrangeHook issued 75,000 shares of OrangeHook Common Stock to two key employees pursuant to the terms of their employment agreements with an aggregate value of $12,000.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In December 2015 OrangeHook issued 1,150,000 shares of OrangeHook Common Stock to its Chief Strategy Officer and Director in connection with his Employment Agreement valued at $184,000.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In February 2016 OrangeHook issued 433,551 shares of OrangeHook Common Stock to 11 accredited and 6 non-accredited investors pursuant to the acquisition of Agilivant   valued at $1,378,692.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In March and April 2016 OrangeHook issued 45,000 shares of OrangeHook Common Stock to six accredited shareholders pursuant to warrant exercises for aggregate cash consideration of $450.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In May of 2016 OrangeHook issued 10,000 shares of OrangeHook Common Stock to an existing shareholder pursuant to a warrant exercise for cash consideration of $100.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In June 2016 OrangeHook issued 178,571 shares of OrangeHook Common Stock with an aggregate value of $567,856 to two accredited investors affiliated with Spring Grove Finance, S.A. in connection with the acquisition of certain assets of LifeNexus.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In June 2016 OrangeHook issued 70,997 shares of OrangeHook Common Stock valued at $225,767 to two directors, one affiliate of a 5% beneficial owner, two accredited investors and one non-accredited investor pursuant to a Payoff Letter and Release Agreement with Agilivant.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In July 2016 OrangeHook issued 1,454,261 shares of OrangeHook Common Stock valued at $4,624,550 to former shareholders of LifeMed ID, consisting of 29 accredited investors and 19 non-accredited investors, in connection with the acquisition of LifeMed ID.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

 

 

 

 

 

 

 

In August 2016 and September 2016 OrangeHook issued one accredited investor entity 4,465   shares of OrangeHook Common Stock pursuant to a Consulting Fee Conversion Agreement as payment for services rendered valued at $14,199.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In September 2016 and October 2016 OrangeHook issued 2,047 shares of OrangeHook Common Stock valued at $6,509 to an accredited investor in exchange for consulting services.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipient took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In September 2016 OrangeHook issued 45,143 shares of OrangeHook Common Stock and 286,667 warrants to purchase shares of OrangeHook Common Stock at an exercise price of $7.00 per share to an accredited investor in exchange for the cancellation of a $300,000 simple agreement for future equity.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In October 2016 OrangeHook issued 390,000 shares of OrangeHook Common Stock and 78,000 warrants to purchase shares of OrangeHook Common Stock at an exercise price of $7.00 per share valued at $1,250,000 to an accredited investor shareholder in connection with the cancellation of a promissory note and additional cash investment pursuant to a conversion and purchase agreement.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In October 2016 OrangeHook issued 50,000 shares of OrangeHook Common Stock to a director pursuant to an option exercise for cash consideration of $8,000.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In October 2016 OrangeHook agreed to issue an aggregate total of 150,000 shares of OrangeHook Common Stock at a value of $3.18 per share pursuant to the terms of the employment agreements with two of its executive officers.  In November 2016, the employment agreements were amended and OrangeHook issued the executive officers, in lieu of the 150,000 shares of OrangeHook Common Stock originally agreed to, an aggregate total of 50,001 shares of OrangeHook Common Stock at a value of $3.18 per share and nonqualified stock options to purchase up to an aggregate total of 199,998 shares of OrangeHook Common Stock at $3.18 per share.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

Sales of Convertible Notes & Warrants Offering

During April 2015 through October 2015, OrangeHook issued an aggregate of $3,050,000 in unsecured promissory notes, together with attached 3-year warrants to purchase an aggregate of 305,000 shares of OrangeHook Common Stock at an exercise price of $0.01 per share in a private placement offering.  The offer and sale of the securities was made to a limited number of institutional and other accredited investors in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and/or Regulation D promulgated under the Securities Act and/or Regulation S promulgated under the Securities Act. There was no general solicitation or advertising with respect to the private placement and each of the purchasers provided written representations of an intent to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities. Appropriate legends were affixed by OrangeHook to each of the share certificates representing shares issued in the private placement.

 

 

 

 

 

 

 

In July and August 2016, OrangeHook issued an aggregate of $600,000 in unsecured promissory notes, together with attached 5-year warrants to purchase 264,291 shares of OrangeHook Common Stock at an exercise price of $7.00 per share in a private placement offering.  The offer and sale of the securities was made to a limited number of institutional and other accredited investors in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and/or Regulation D promulgated under the Securities Act and/or Regulation S promulgated under the Securities Act. There was no general solicitation or advertising with respect to the private placement and each of the purchasers provided written representations of an intent to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities. Appropriate legends were affixed by OrangeHook to each of the share certificates representing shares issued in the private placement.

In August 2016 OrangeHook amended and restated the aforementioned unsecured promissory notes that were issued between May and October 2015 to extend their maturity date and convert accrued interest in the amount of $226,053.77 into principal. At the same time, OrangeHook issued additional 5-year warrants to purchase an aggregate of 214,296 shares of OrangeHook Common Stock at an exercise price of $10.00 per share as part of the extension. The terms of the extension agreements also provided for the issuance of additional 2-year warrants to purchase up to an aggregate of 514,795 shares of OrangeHook Common Stock at an exercise price of $7.00 per share, which are issuable upon payment of the notes. As of the date of this Current Report, a total of $48,493.15 has been paid on these amended and restated unsecured promissory notes and a total of $3,427,560.58 remains outstanding. The number of 2-year warrants issuable upon payoff of the notes has been reduced to 489,651. The offer and sale of the securities was made to a limited number of institutional and other accredited investors in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and/or Regulation D promulgated under the Securities Act and/or Regulation S promulgated under the Securities Act. There was no general solicitation or advertising with respect to the private placement and each of the purchasers provided written representations of an intent to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities. Appropriate legends were affixed by OrangeHook to each of the share certificates representing shares issued in the private placement.

All of the amended and restated promissory notes described in this section were issued on the form of amended and restated promissory note included as Exhibit 10.12 to this Current Report on Form 8-K. All of the warrants described in this section were issued on the form of warrant agreement included as Exhibit 10.14 to this Current Report on Form 8-K.

Sales of Series A Convertible Preferred Stock & Warrants Offering

During December 2014 through January 2016, OrangeHook issued and sold an aggregate of 6,000 Series A Units, with each Unit consisting of one share of Series A Convertible Preferred Stock and an attached 7-year warrant to purchase 71.5 shares of OrangeHook Common Stock at a price of $7.00 per share.   In addition, in December 2015 OrangeHook issued 7-year performance warrants to purchase an aggregate of 28,572 shares of OrangeHook Common Stock at a price of $7.00 per share to two accredited investor shareholders in connection with their subscriptions for Series A Units.  The aggregate offering price of the Units was $6,000,000 ($1,000 per Unit).  Northland Securities, Inc.  ("Northland") was the principal underwriter in the offering.  The aggregate underwriting commission paid to Northland was a 5-year warrant to purchase up to 39,107 shares of OrangeHook Common Stock at a price of $7.00 per share. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act. The offer and sale of the securities was made to a limited number of institutional and other accredited investors in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and/or Regulation D promulgated under the Securities Act and/or Regulation S promulgated under the Securities Act. There was no general solicitation or advertising with respect to the private placement and each of the purchasers provided written representations of an intent to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities. Appropriate legends were affixed by OrangeHook to each of the share certificates representing shares issued in the private placement.

All of the warrants described in this section were issued on the form of warrant agreement included as Exhibit 10.14 to this Current Report on Form 8-K.

 

 

 

 

 

 

 

Sales of Series A-1 Convertible Preferred Stock & Warrants Offering

During December 2015 through October 2016, OrangeHook issued and sold an aggregate of 2,921 Series A-1 Units, with each Unit consisting of one share of Series A-1 Convertible Preferred Stock and an attached 7-year warrant to purchase 71.5 shares of OrangeHook Common Stock at a price of $7.00 per share in a continuing private placement offering. The aggregate offering price of the Units in this offering is $5,000,000 ($1,000 per Unit). There is no underwriter in the offering. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act. The offer and sale of the securities was made to a limited number of institutional and other accredited investors in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and/or Regulation D promulgated under the Securities Act and/or Regulation S promulgated under the Securities Act. There was no general solicitation or advertising with respect to the private placement and each of the purchasers provided written representations of an intent to acquire the securities for investment only and not with a view to or for sale in connection with any distribution of the securities. Appropriate legends were affixed by OrangeHook to each of the share certificates representing shares issued in the private placement.

All of the warrants described in this section were issued on the form of warrant agreement included as Exhibit 10.14 to this Current Report on Form 8-K.

Additional Sales of Series A-1 Convertible Preferred Stock & Warrants

In October 2016 OrangeHook issued 1,022 shares of Series A-1 Convertible Preferred Stock together with 7-year warrants to purchase an aggregate of 73,073 shares of OrangeHook Common Stock at a price of $7.00 per share to a director of OrangeHook pursuant to a note conversion agreement valued at $1,022,000.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

All of the warrants described in this section were issued on the form of warrant agreement included as Exhibit 10.14 to this Current Report on Form 8-K.

Additional Sales and Grants of Warrants

In November 2015 OrangeHook issued 5-year warrants to purchase an aggregate of 12,500 shares of OrangeHook Common Stock at $7.00 per share to an executive officer and director of OrangeHook, in addition to a cash payment valued at $5,000 in consideration for providing a personal guarantee on certain obligations of OrangeHook.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In January 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 50,000 shares of OrangeHook Common Stock at $7.00 per share to a director of OrangeHook pursuant to the terms of a $100,000 promissory note.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In January 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 250,000 shares of OrangeHook Common Stock at $7.00 per share to a director of OrangeHook pursuant to the terms of a $500,000 promissory note.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In February 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 150,000 shares of OrangeHook Common Stock at $7.00 per share to a director of OrangeHook pursuant to the terms of a $300,000 promissory note.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In March 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 15,000 shares of OrangeHook Common Stock at $0.01 per share to an accredited investor shareholder of OrangeHook pursuant to the terms of a $300,000 promissory note.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

 

 

 

 

 

 

 

Between January 2016 and September 2016 OrangeHook issued   7-year warrants to purchase an aggregate of up to 90,000 shares of OrangeHook Common Stock at $7.00 per share to an accredited investor shareholder of OrangeHook pursuant to the terms of a 10% unsecured convertible promissory note valued at $100,000.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In July 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 185,000 shares of OrangeHook Common Stock at $7.00 per share as compensation to the chairman of OrangeHook's board of directors valued at $108,410.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In September 2016 OrangeHook issued 5-year warrants to purchase an aggregate of up to 40,000 shares of OrangeHook Common Stock at $7.00 per share to a consultant of OrangeHook pursuant to a consulting agreement valued at $22,400.  The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In September 2016 OrangeHook issued 3-year warrants to purchase an aggregate of up to 5,000 shares of OrangeHook Common Stock at $7.00 per share to an employee of OrangeHook in exchange for services valued at $2,800. The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, since the issuance did not involve a public offering, the recipients took the securities for investment and not resale and OrangeHook took appropriate measures to restrict transfer.

In October 2016 OrangeHook issued 7-year warrants to purchase an aggregate of up to 78,000 shares of OrangeHook Common Stock at $7.00 per share to shareholder of OrangeHook pursuant to a conversion and purchase agreement.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In November 2016 OrangeHook issued 3-year warrants to purchase an aggregate of up to 10,000 shares of OrangeHook Common Stock at $7.00 per share to an accredited investor shareholder of OrangeHook pursuant to a note conversion agreement valued at $5,600. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

All of the warrants described in this section were issued on the form of warrant agreement included as Exhibit 10.14 to this Current Report on Form 8-K.

Sales of Other Promissory Notes

In December 2014 OrangeHook issued an aggregate of $1,480,000 in principal amount of promissory notes to two directors of OrangeHook.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In June 2015, October 2015 and May 2016 OrangeHook issued an aggregate of $1,350,000 in principal amount of promissory notes to two directors of OrangeHook. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In January 2016, February 2016 and May 2016 OrangeHook issued an aggregate of $570,000 in principal amount of promissory notes to two affiliates of its directors. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In January 2016 and February 2016 OrangeHook issued an aggregate of $1,000,000 in principal amount of promissory notes to an existing accredited investor and to a director of OrangeHook.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

 

 

 

 

 

 

 

In March 2016 and May 2016 OrangeHook issued an aggregate of $1,300,000 in principal amount of promissory notes to an existing accredited investor shareholder of OrangeHook. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In March 2016 OrangeHook issued an aggregate of $375,000 in principal amount of promissory notes to existing accredited investor shareholders of OrangeHook. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

Between July 2016 and October 2016 OrangeHook issued an aggregate of $92,000 in principal amount of promissory notes to two directors of OrangeHook, an aggregate of $29,000 in principal amount of promissory notes to an executive officer of OrangeHook, an aggregate of $755,000 in principal amount of promissory notes to six existing accredited investor shareholders of OrangeHook, an $18,000 promissory note to an affiliate of a director, and an aggregate of $852,000 in principal amount of promissory notes to three new accredited investors.  The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

In November 2016 OrangeHook issued an aggregate of $300,000 in principal amount of promissory notes to one director and one executive officer of OrangeHook. The securities were issued pursuant to Rule 506(b) of Regulation D promulgated under the Securities Act.

All of the promissory notes discussed in this section were issued on the form of promissory note included as Exhibit 10.13 to this Current Report on Form 8-K. The following table sets forth the material details in which the promissory notes differ from the form of promissory note filed herewith:

 

 

 

 

 

 

 

 

 

 

(1)   Received a fixed fee of $2,500 payable at maturity in lieu of interest.

(2)   Received a warrant to purchase 15,000 shares of OrangeHook Common Stock at an exercise price of $0.01 per share in lieu of interest.

(3)   Received 45,143 shares of OrangeHook Common Stock and a 7-year warrant to purchase up to 286,667 shares of Common Stock at an exercise price of $7.00 per share in lieu of payment of principal and interest.

(4)   Principal and interest converted into shares of OrangeHook Series A-1 Convertible Preferred Stock at a rate of $1,000 per share.

(5)   Received a fixed fee equal to $500 per day for a minimum of 31 days in lieu of interest.

Sales of Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock

As disclosed under Item 2.01 above, in connection with the Merger, Nuvel issued shares of Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock to the former holders of OrangeHook capital stock, and other securities having the right to purchase shares of Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock, all of which were unregistered. These securities were issued in reliance on the exemption from registration provided by Regulation D promulgated under the Securities Act and/or Section 4(a)(2) of the Securities Act, since the issuance did not involve a public offering, the recipients took the securities for investment and not resale, Nuvel has taken appropriate measures to restrict transfer, Nuvel has reason to believe that the recipient, either alone or through a purchaser representative, had knowledge and experience in financial and business matters such that each was capable of evaluating the risks of the investment, and the recipients had access to information regarding Nuvel, OrangeHook and the Merger transaction.

DESCRIPTION OF REGISTRANT'S SECURITIES

As of December 1, 2016, Nuvel's authorized capital stock consisted of 100,000,000 shares of Nuvel Common Stock, par value $.001 per share, of which 48,647,979 shares were issued and outstanding, and 15,000,000 shares of preferred stock, par value $.001 per share, of which (i) 7,150,000 shares were designated as "Series A Convertible Preferred Stock," par value $0.001, none of which were issued and outstanding, (ii) 2,000,000 shares were designated as "Series B Convertible Preferred Stock,", par value $0.001, 20,000 of which were issued and outstanding; (iii) 2,000,000 shares were designated as "Series C Convertible Preferred Stock," par value $0.001, 371,052 of which were issued and outstanding; and (iv) 2,000,000 shares were designated as "Series D Convertible Preferred Stock", par value $0.001, 1,767,358 of which were issued and outstanding.  See the summary of the rights, privileges and preferences of Nuvel's preferred stock set forth under the caption "Authorization of New Classes of Preferred Stock" in Note 9 to the audited consolidated financial statements of Nuvel included in Nuvel's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on April 5, 2016.

 

 

 

 

 

 

In addition, in connection with the Merger, Nuvel designated two new series of preferred stock, the "Series OH-1 Convertible Preferred Stock" and the "Series OH-2 Convertible Preferred Stock," shares of which were issued to OrangeHook shareholders as consideration in the Merger.  Immediately upon closing of the Merger, there were 292,199 shares of Series OH-1 Convertible Preferred Stock (excluding shares of Series OH-1 Convertible Preferred Stock granted to Mr. Resnick under the terms of his employment agreement) and 9,943 shares of Series OH-2 Convertible Preferred Stock issued and outstanding. The following summaries describe the preferences, rights, privileges and powers of the Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock.

Series OH-1 Convertible Preferred Stock

One million (1,000,000) shares of Nuvel's authorized but undesignated stock are designated as Series OH-1 Convertible Preferred Stock. Shares of Series OH-1 Convertible Preferred Stock are not certificated, but instead are held in book-entry form.

Holders of Series OH-1 Convertible Preferred Stock are entitled to eight thousand (8,000) votes per each whole share of Series OH-1 Convertible Preferred Stock with respect to shareholder votes involving the election of directors and to ten thousand (10,000) votes per each whole share of Series OH-1 Convertible Preferred Stock on all other matters submitted to a vote or for the consent of Nuvel's shareholders. Holders of Series OH-1 Convertible Preferred Stock generally vote together with the holders of Nuvel Common Stock as a single class on all actions.

 

Holders of Series OH-1 Convertible Preferred Stock are entitled to receive ratably such dividends as may be declared by Nuvel's board of directors.  No dividends accrue on the Series OH-1 Convertible Preferred Stock.

In the event of any voluntary or involuntary dissolution, winding up, liquidation or reorganization of Nuvel, and following any distribution of assets or surplus funds of Nuvel to the holders of any class of shares of preferred stock senior in ranking to the Series OH-1 Convertible Preferred Stock with respect to payments upon liquidation, the holders of the Series OH-1 Convertible Preferred Stock then outstanding are entitled to participate in the distribution of any remaining assets or surplus funds with the holders of Nuvel Common Stock and any other class or series of capital stock of Nuvel, pro rata based on the voting rights to which they are entitled vis a vis the other participating classes.

Following the Reverse Stock Split of Nuvel (as discussed under the heading " Reverse Stock Split and Conversion of Series OH-1 Convertible Preferred Stock of Nuvel "), and without any action by the holders of Series OH-1 Convertible Preferred Stock, all outstanding shares of Series OH-1 Convertible Preferred Stock will convert into the number of shares of fully paid and non-assessable Nuvel Common Stock equal to the quotient of (i) the number of shares of OrangeHook Common Stock issued and outstanding at the Effective Time of the Merger, on a fully diluted basis, divided by (ii) 500,000.

The preferences, rights, privileges or powers of the Series OH-1 Convertible Preferred Stock are set forth in a certificate of designation included with this Current Report on Form 8-K as Exhibit 4.5. Nuvel may not alter or repeal the preferences, rights, privileges or powers of the Series OH-1 Convertible Preferred Stock in a manner that would adversely affect the rights of the holders thereof without the approval of shareholders owning at least a majority of the issued and outstanding shares of Series OH-1 Convertible Preferred Stock. The foregoing summary of the Series OH-1 Convertible Preferred Stock is not complete and is qualified in its entirety by reference to the certificate of designation for the Series OH-1 Convertible Preferred Stock.

Series OH-2 Convertible Preferred Stock

Eleven thousand (11,000) shares of Nuvel's authorized but undesignated stock are designated as Series OH-2 Convertible Preferred Stock. Shares of Series OH-2 Convertible Preferred Stock are certificated.

Holders of shares of Series OH-2 Convertible Preferred Stock generally have no voting rights. However, holders of Series OH-2 Convertible Preferred Stock are entitled to vote, together with the holders of Nuvel Common Stock as a single class, a total of 55,555 votes per each whole share of Series OH-2 Convertible Preferred Stock with respect to any election of directors held prior to the Reverse Stock Split and a total of 143 votes per share of Series OH-2 Convertible Preferred Stock with respect to any election of directors held after the Reverse Stock Split.

 

 

 

 

 

Each share of Series OH-2 Convertible Preferred Stock is convertible into 143 fully paid and nonassessable shares of Nuvel Common Stock at the election of the holder at any time. In addition, Nuvel may elect to convert the shares of Series OH-2 Convertible Preferred Stock into Nuvel Common Stock; provided that, at the time of the election, Nuvel Common Stock is registered under Section 12 or subject to Section 15(d) of the Exchange Act, and the shares of Nuvel Common Stock have traded above $14 per share for 10 consecutive trading days (as measured by the closing trading price or, if there is no reported closing trading price, the mean of the closing bid and asked prices for a share of stock on the primary market for Nuvel Common Stock). Any conversion completed at the election of Nuvel will be deemed to occur without any further action by the holders of Series OH-2 Convertible Preferred Stock. Upon any conversion, all accrued and unpaid dividends will automatically be converted into shares of Nuvel Common Stock at an assumed value of $7.00 per share of Nuvel Common Stock.

 

In the event of any voluntary or involuntary dissolution, winding up, liquidation or reorganization of Nuvel, holders of shares of Series OH-2 Convertible Preferred Stock are entitled to receive, prior and in preference to any distributions of any assets of Nuvel to the holders of the Series OH-1 Convertible Preferred Stock, Nuvel Common Stock and any other class of shares of preferred stock of Nuvel ranking junior to such Series OH-2 Convertible Preferred Stock, $1,000 per share of Series OH-2 Convertible Preferred Stock plus a further amount per share payable in cash for any accrued but unpaid dividends. Shares of Series B Preferred Stock and Series C Preferred Stock of Nuvel that remained outstanding following the Merger rank senior to the Series OH-2 Convertible Preferred Stock with respect to payments upon liquidation. If the assets and funds of Nuvel available for the distribution to its shareholders upon liquidation is insufficient to pay the full amount entitled to the holders of the Series OH-2 Convertible Preferred Stock and the holders of shares of any other series of preferred stock then outstanding and ranking on par with the Series OH-2 Convertible Preferred Stock, the holders of the Series OH-2 Convertible Preferred Stock would share ratably with the other series of preferred stock ranking on par with the Series OH-2 Convertible Preferred Stock in any distribution of such assets and surplus funds in proportion to the respective amounts that would be payable upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Nuvel has an ongoing right to purchase all or any portion of the outstanding shares of the Series OH-2 Convertible Preferred Stock at a per-share redemption price equal to the sum of (i) any dividends unpaid and accumulated or accrued on thereon, plus (ii) $1,000.  If Nuvel exercises its purchase option as to only a portion of the then-outstanding shares, the purchase will be made ratably from all holders of Series OH-2 Convertible Preferred Stock in proportion to their percentage ownership of the aggregate amount of the then-outstanding shares of Series OH-2 Convertible Preferred Stock.

The preferences, rights, privileges or powers of the Series OH-2 Convertible Preferred Stock are set forth in a certificate of designation attached to this Current Report on Form 8-K as Exhibit 4.6. Nuvel may not alter or repeal the preferences, rights, privileges or powers of the Series OH-2 Convertible Preferred Stock in a manner that would adversely affect the rights of the holders thereof without the approval of shareholders owning at least a majority of the issued and outstanding shares of Series OH-2 Convertible Preferred Stock. The foregoing summary of the Series OH-2 Convertible Preferred Stock is not complete and is qualified in its entirety by reference to the certificate of designation for the Series OH-2 Convertible Preferred Stock.

 

Restrictions on Transfer

Shares of Series OH-1 Convertible Preferred Stock and Series OH-2 Convertible Preferred Stock issued in the Merger are not transferable except (i) pursuant to an effective registration statement under the Securities Act or (ii) upon receipt by Nuvel of a written opinion of counsel for the holder reasonably satisfactory to Nuvel to the effect that the proposed transfer is exempt from the registration requirements of the Securities Act and relevant state securities laws.  A restrictive legend is placed on all certificates (if any) representing shares of Nuvel Series OH-2 Convertible Preferred Stock issued in the Merger, which reads substantially as follows:

NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS (SUCH FEDERAL AND STATE LAWS, THE "SECURITIES LAWS") OR (B) IF THE CORPORATION HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF THE SECURITIES LAWS.

Shares of Nuvel Series OH-1 Convertible Preferred Stock are not certificated but are subject the same transfer restrictions and have been marked as such in book-entry form.

 

 

 

 

 

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Nuvel is incorporated under the laws of the State of Florida. Under Section 607.0831 of the Florida Business Corporation Act (the "FBCA"), a director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to act, regarding corporate management or policy, by a director, unless (a) t he director breached or failed to perform his or her duties as a director; and (b) t he director's breach of, or failure to perform, those duties constitutes:

1.          A violation of the criminal law, unless the director had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful. A judgment or other final adjudication against a director in any criminal proceeding for a violation of the criminal law estops that director from contesting the fact that his or her breach, or failure to perform, constitutes a violation of the criminal law; but does not estop the director from establishing that he or she had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that his or her conduct was unlawful;

2.          A transaction from which the director derived an improper personal benefit, either directly or indirectly;

3.          A circumstance under which the liability provisions of Section 607.0834 of the FBCA are applicable;

4.          In a proceeding by or in the right of the corporation to procure a judgment in its favor or by or in the right of a shareholder, conscious disregard for the best interest of the corporation, or willful misconduct; or

5.          In a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

Under Section 607.0850 of the FBCA, a corporation may indemnify any person who was or is a party to any proceeding (other than a derivative action), due to serving as a director, officer, employee, or agent of the corporation or serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against liability incurred in connection with such proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

In addition, under Section 607.0850 of the FBCA, a corporation may indemnify any person, who was or is a party to any derivative action due to serving as director, officer, employee, or agent of the corporation or serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding. Such indemnification is authorized if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation; however, no indemnification can be made in respect of any matter as to which such person is adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, has determined that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses.

The FBCA provides that its indemnification and advancement provisions are not exclusive of any other or further indemnification or advancement of expenses arrangements under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. However, no indemnification or advancement will be made to or on behalf of any director, officer, employee or agent if a final adjudication establishes that his or her actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (i) a violation of the criminal law, unless the director, officer, employee or agent had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (ii) a transaction from which the director, officer, employee or agent derived an improper personal benefit; (iii) in the case of a director, a circumstance under which the liability provisions of Section 607.0834 regarding unlawful distributions are applicable; or (iv) willful misconduct or a conscious disregard for the best interests of the corporation in a derivative action or in a proceeding by or in the right of a shareholder.

 

 

 

 

 

 

The Articles of Incorporation of Nuvel provide that Nuvel will indemnify its officers, directors, employees and agents against liabilities, damages, settlements and expenses (including attorneys' fees) incurred in connection with Nuvel's affairs, and will advance such expenses to any such officers, directors, employees and agents, to the fullest extent permitted by law. The Articles of Incorporation further provide that the right to indemnification and the payment of expenses is not exclusive of any other right which any person may have or hereafter acquire under any statute, provision of Nuvel's Articles of Incorporation, Bylaws, agreement, vote of shareholders or disinterested directors or otherwise. Any repeal or modification of any provision of Nuvel's Articles of Incorporation regarding indemnification will not adversely affect any right to protection of a director, officer, employee or agent of Nuvel existing at the time of such repeal or modification.

In addition, Nuvel's Bylaws provide that each person who at any time is, or was, a director, officer, employee or agent of Nuvel, and is threatened to be or is made a party of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is, or was, a director, officer, employee or agent of Nuvel, or served at the request of Nuvel as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise, will be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with any such action, suit or proceeding to the full extent allowed under the Florida Statutes and such expenses shall be advanced as incurred upon receipt of an undertaking to repay such amount if such person is found not to be entitled to such indemnification pursuant to such Section. The Bylaws further provide that the foregoing right of indemnification is not exclusive of any other rights or indemnification to which any such director, officer, employee or agent may be entitled under any other bylaw, agreement, vote of shareholders or disinterested directors or otherwise.

Nuvel has the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of Nuvel or is or was serving at the request of Nuvel as a director, officer, employee or agent to another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his status as such, whether or not Nuvel would have the power to indemnify him against liability under the provisions its Articles of Incorporation. Indemnification under Nuvel's Articles of Incorporation and Bylaws is a personal right and Nuvel has no liability under the provisions of its Articles of Incorporation to any insurer or any person, corporation, partnership, association, trust or other entity (other than the heirs, executors or administrators of such person) by reason of subrogation, assignment or succession by any other means to the claim of any person to indemnification under the Nuvel's Articles of Incorporation or Bylaws.

Following the Merger and in connection with the increase to the size of our board of directors and appointment of our current executive officers, we entered into indemnification agreements with each of our current executive officers and directors. The agreements generally provide that we will indemnify the executive officer or director to the fullest extent permitted by applicable law. Under the terms of the agreements, we have agreed to indemnify the executive officer or director against all costs, judgments, penalties, fines, liabilities, amounts paid in settlement by or on behalf of the executive officer or director in any proceeding, and any expenses actually and reasonably incurred by the executive officer or director in connection with the proceeding if he or she is made or threatened to be made a party to any legal proceeding by reason of any action taken or not taken in his or her capacity as an executive officer or director, provided the executive officer or director has complied with certain standards of conduct described in the agreements. The agreements further provide that we will make advances to the executive officer or director to cover any expenses incurred by him or her in connection with the proceeding. The agreements contain a look-back provision indemnifying the executive officers and directors for any actions related to the approval of the Merger or entering into the Merger Agreement .

The foregoing description is not complete and is qualified in its entirety by reference to the form of indemnification agreement attached to this Current Report on Form 8-K as Exhibit 10.70.

 

 

 

 

 

 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The disclosures set forth in Item 9.01 under the heading " Financial Statements and Exhibits " are incorporated herein by reference.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

The disclosures set forth in Item 4.01 below are incorporated herein by reference.