|
|
|
Nevada
|
|
90-0835572
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
4275 Executive Square, Suite 200,
La Jolla CA
|
|
92037
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
Large accelerated filer
¨
|
Accelerated filer
¨
|
Non-accelerated filer
¨
|
Smaller reporting company
x
|
As of November 8, 2013, the registrant had 18,143,398 shares of common stock outstanding.
|
|
|
September 30,
|
|
December 31,
|
|
||
|
|
2013
|
|
2012
|
|
||
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
25,876
|
|
$
|
18,445
|
|
Accounts receivable
|
|
|
75,165
|
|
|
-
|
|
Prepaid expenses
|
|
|
21,200
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
122,241
|
|
|
18,445
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
4,149
|
|
|
-
|
|
CIRCUMserum License (see note 8)
|
|
|
250,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
376,390
|
|
$
|
18,445
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
62,723
|
|
$
|
1,602
|
|
Accrued compensation
|
|
|
281,582
|
|
|
-
|
|
Deferred revenue
|
|
|
75,136
|
|
|
-
|
|
Promissory notes
|
|
|
20,000
|
|
|
50,000
|
|
Accrued interest (current portion)
|
|
|
2,744
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
442,185
|
|
|
51,602
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable (non-current portion)
|
|
|
34,957
|
|
|
16,596
|
|
Convertible debentures - related parties (non-current portion) (see Note 6)
|
|
|
539,276
|
|
|
162,668
|
|
|
|
|
|
|
|
|
|
Total Non-Current Liabilities
|
|
|
576,977
|
|
|
179,264
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
1,016,418
|
|
|
230,866
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock; 150,000,000 shares authorized, at $0.001 par value, 18,089,264
and 16,197,782 shares issued and outstanding, respectively |
|
|
18,089
|
|
|
16,198
|
|
Additional paid-in capital
|
|
|
4,979,226
|
|
|
2,220,202
|
|
Deficit accumulated during the development stage
|
|
|
(5,637,343)
|
|
|
(2,448,821)
|
|
|
|
|
|
|
|
|
|
Total Stockholders' Deficit
|
|
|
(640,028)
|
|
|
(212,421)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
376,390
|
|
$
|
18,445
|
|
1 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Inception)
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
Through
|
|
|||||||||
|
|
September 30,
|
|
September 30,
|
|
September 30,
|
|
|||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
2013
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
166
|
|
$
|
-
|
|
$
|
445
|
|
$
|
-
|
|
$
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
166
|
|
|
-
|
|
|
445
|
|
|
-
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
66,342
|
|
|
-
|
|
|
66,342
|
|
|
-
|
|
|
147,302
|
|
Investment banking fees
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,954,865
|
|
General and administrative
|
|
|
648,127
|
|
|
73,231
|
|
|
3,086,918
|
|
|
179,357
|
|
|
3,532,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
714,469
|
|
|
73,231
|
|
|
3,153,260
|
|
|
179,357
|
|
|
5,635,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(714,303)
|
|
|
(73,231)
|
|
|
(3,152,815)
|
|
|
(179,357)
|
|
|
(5,634,559)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(19,649)
|
|
|
(4,288)
|
|
|
(35,707)
|
|
|
(12,743)
|
|
|
(144,023)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Expense
|
|
|
(19,649)
|
|
|
(4,288)
|
|
|
(35,707)
|
|
|
(12,743)
|
|
|
(144,023)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(733,952)
|
|
$
|
(77,519)
|
|
$
|
(3,188,522)
|
|
$
|
(192,100)
|
|
$
|
(5,778,582)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC LOSS AND DILUTED LOSS PER
SHARE |
|
$
|
(0.04)
|
|
$
|
(0.00)
|
|
$
|
(0.19)
|
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING |
|
|
17,848,558
|
|
|
16,333,670
|
|
|
17,030,496
|
|
|
10,549,045
|
|
|
|
|
2 | ||
|
|
|
|
|
From
|
|
|||||
|
|
|
|
October 31, 2008
|
|
|||||
|
|
|
|
(Inception)
|
|
|||||
|
|
For the Nine Months Ended
|
|
Through
|
|
|||||
|
|
September 30,
|
|
September 30,
|
|
|||||
|
|
2013
|
|
2012
|
|
2013
|
|
|||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,188,522)
|
|
$
|
(192,100)
|
|
$
|
(5,778,582)
|
|
Adjustments to reconcile net loss to
|
|
|
|
|
|
|
|
|
|
|
net cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
|
1,962,379
|
|
|
|
|
|
1,962,379
|
|
Common stock issued for services
|
|
|
354,421
|
|
|
-
|
|
|
363,809
|
|
Value of warrants granted to investment banker
|
|
|
-
|
|
|
-
|
|
|
1,904,865
|
|
Accretion of debt discount
|
|
|
8,017
|
|
|
-
|
|
|
8,017
|
|
Non-cash interest expense (including a discount
|
|
|
|
|
|
|
|
|
|
|
on conversion of Apricus Bio convertible notes
|
|
|
|
|
|
|
|
|
|
|
of $48,920)
|
|
|
-
|
|
|
-
|
|
|
91,897
|
|
Promissory note issued for services rendered
|
|
|
-
|
|
|
-
|
|
|
50,000
|
|
Research and development expense
|
|
|
|
|
|
|
|
|
|
|
recognized upon purchase of SSAO inhibitor assets
|
|
|
-
|
|
|
-
|
|
|
20,000
|
|
Expenses paid on behalf of the Company by Apricus Bio
|
|
|
-
|
|
|
-
|
|
|
25,990
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(75,165)
|
|
|
-
|
|
|
(75,165)
|
|
Prepaid expenses
|
|
|
(21,200)
|
|
|
-
|
|
|
(21,200)
|
|
Accounts payable
|
|
|
61,121
|
|
|
(512)
|
|
|
62,723
|
|
Accrued compensation
|
|
|
281,582
|
|
|
-
|
|
|
281,582
|
|
Interest payable
|
|
|
22,563
|
|
|
12,743
|
|
|
39,158
|
|
Deferred revenue
|
|
|
75,136
|
|
|
-
|
|
|
75,136
|
|
Related-party payable
|
|
|
-
|
|
|
(12,500)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
|
(519,668)
|
|
|
(192,369)
|
|
|
(989,391)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase of intangible assets
|
|
|
(4,149)
|
|
|
-
|
|
|
(4,149)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
|
(4,149)
|
|
|
-
|
|
|
(4,149)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of loans from officers
|
|
|
-
|
|
|
-
|
|
|
23,603
|
|
Repayment of loans from officers
|
|
|
-
|
|
|
-
|
|
|
(23,603)
|
|
Repayment of notes payable
|
|
|
(50,000)
|
|
|
-
|
|
|
(50,000)
|
|
Proceeds from related-party settlement agreement
|
|
|
-
|
|
|
-
|
|
|
25,000
|
|
Proceeds from stock issued for cash
|
|
|
134,640
|
|
|
100,500
|
|
|
235,140
|
|
Proceeds from convertible debt
|
|
|
50,000
|
|
|
-
|
|
|
50,000
|
|
Proceeds from convertible debt - related party
|
|
|
396,608
|
|
|
100,000
|
|
|
759,276
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
531,248
|
|
|
200,500
|
|
|
1,019,416
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
7,431
|
|
|
8,131
|
|
|
25,876
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
18,445
|
|
|
25,014
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
25,876
|
|
$
|
33,145
|
|
$
|
25,876
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 9 for disclosure of non-cash financing activities
|
|
|
|
|
|
|
|
|
|
|
3 | ||
|
4 | ||
|
|
⋅
|
Level 1 measurements are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
|
|
⋅
|
Level 2 measurements are inputs other than quoted prices included in Level 1 that are observable either directly or indirectly.
|
|
⋅
|
Level 3 measurements are unobservable inputs.
|
5 | ||
|
6 | ||
|
|
|
As of September 30
|
|
||||
|
|
2013
|
|
2012
|
|
||
Gross number of shares excluded:
|
|
|
|
|
|
|
|
Stock units
|
|
|
6,300,000
|
|
|
-
|
|
Stock options
|
|
|
40,500
|
|
|
-
|
|
Total
|
|
|
6,340,500
|
|
|
-
|
|
|
|
September 30, 2013
|
|
December 31, 2012
|
|
||
|
|
|
|
|
|
|
|
Wages
|
|
|
259,839
|
|
|
-
|
|
Vacation
|
|
|
21,743
|
|
|
-
|
|
Total accrued compensation
|
|
|
281,582
|
|
|
-
|
|
7 | ||
|
8 | ||
|
|
⋅
|
all of CRI’s rights in past, present and future CIRCUMserum
TM
product formulations and presentations, and
|
|
⋅
|
an exclusive, perpetual license to commercialize CIRCUMserum
TM
products in all territories except for the United States.
|
9 | ||
|
10 | ||
|
11 | ||
|
|
|
September 30, 2013
|
|
Expected life (in years)
|
|
6
|
|
Expected volatility
|
|
235.7%-243.15%
|
|
Average risk free interest rate
|
|
1.71%-1.75%
|
|
Dividend yield
|
|
0%
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
||||
|
|
|
|
Weighted
|
|
remaining
|
|
|
|
||||
|
|
|
|
average exercise
|
|
contractual life
|
|
Aggregate
|
|
||||
|
|
Options
|
|
price
|
|
(years)
|
|
intrinsic value
|
|
||||
Outstanding at December 31 ,2012
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
Granted
|
|
|
40,500
|
|
|
0.49
|
|
|
9.8
|
|
|
16,800
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Outstanding at September 30, 2013
|
|
|
40,500
|
|
$
|
0.49
|
|
|
9.8
|
|
$
|
16,800
|
|
Vested at September 30, 2013
|
|
|
10,500
|
|
$
|
0.90
|
|
|
10
|
|
$
|
-
|
|
12 | ||
|
|
|
Stock Units
|
|
Outstanding at December 31, 2012
|
|
-
|
|
Granted
|
|
7,050,000
|
|
Expired
|
|
-
|
|
Cancelled
|
|
(750,000)
|
|
Forfeited
|
|
-
|
|
Outstanding at September 30, 2013
|
|
6,300,000
|
|
Vested at September 30, 2013
|
|
3,058,333
|
|
|
·
|
The Company issued of
631,313
shares of common stock (valued at $
250,000
) in connection with the CRI Asset Purchase Agreement, as described in Note 8.
|
|
·
|
The Company issued
83,103
shares of common stock upon conversion of a convertible note, as described in Note 6.
|
|
·
|
$
74,668
payable to a related party was converted into a convertible note, as described in Note 6.
|
|
·
|
The Company issued
135,888
shares of common stock related to the conversion of the Apricus Bio convertible promissory note that was originally issued in December 2011 and deemed contributed to capital in March 2012.
|
|
·
|
A convertible debenture in the principal amount of $
12,000
plus accrued interest of $
435
was converted into
16,580
shares of common stock, as described in Note 6.
|
|
·
|
Contingent liability in the amount of $
28,926
was reclassified to equity due to expiration of the rescission rights, none of which were exercised.
|
13 | ||
|
14 | ||
|
15 | ||
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
16 | ||
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30
|
|
||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
||||
Product sales
|
|
$
|
166
|
|
|
|
|
$
|
445
|
|
|
|
|
Total revenue
|
|
|
166
|
|
|
-
|
|
|
445
|
|
|
-
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
66,342
|
|
|
-
|
|
|
66,342
|
|
|
-
|
|
General and administrative
|
|
|
648,127
|
|
|
73,231
|
|
|
3,086,918
|
|
|
179,357
|
|
Total operating expenses
|
|
|
714,469
|
|
|
73,231
|
|
|
3,153,260
|
|
|
179,357
|
|
Operating loss
|
|
|
(714,303)
|
|
|
(73,231)
|
|
|
(3,152,815)
|
|
|
(179,357)
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(19,649)
|
|
|
(4,288)
|
|
|
(35,707)
|
|
|
(12,743)
|
|
Net income loss
|
|
|
(733,952)
|
|
|
(77,519)
|
|
|
(3,188,522)
|
|
|
(192,100)
|
|
Weighted average number of common
shares outstanding |
|
|
17,848,558
|
|
|
16,333,670
|
|
|
17,030,496
|
|
|
10,549,045
|
|
Basic and diluted income (loss) per
common share |
|
$
|
(0.04)
|
|
$
|
(0.00)
|
|
$
|
(0.19)
|
|
$
|
(0.02)
|
|
17 | ||
|
18 | ||
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
19 | ||
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
20 | ||
|
ITEM 6.
|
EXHIBITS
|
21 | ||
|
|
Innovus Pharmaceuticals, Inc.
|
|
(Registrant)
|
|
|
Dated: November 14, 2013
|
/s/ Bassam Damaj
|
|
Bassam Damaj, President and Chief
|
|
Executive Officer
|
|
(Principal Executive and Financial Officer)
|
22 | ||
|
Exhibit No.
|
|
Description
|
|
|
|
10.1#
|
|
Change in Control and Severance Agreement, dated August 9, 2013, between Innovus Pharmaceuticals, Inc. and Morgan Brown (incorporated by reference to Exhibit 10.6 on Form 10-Q, filed with the SEC on August 13, 2013).
|
10.2*#
|
|
Amended and Restated Innovus Pharmaceuticals, Inc. Non-Employee Director Compensation Plan, dated October 1, 2013.
|
|
|
|
10.3*
|
|
Amended and Restated 8% Convertible Debenture, dated November 11, 2013, between Innovus Pharmaceuticals, Inc. and Bassam Damaj, Ph.D.
|
|
|
|
10.4*
|
|
Amended and Restated 8% Convertible Debenture, dated November 11, 2013, between Innovus Pharmaceuticals, Inc. and Henry Esber, Ph.D.
|
|
|
|
10.5*
|
|
Form of Amended and Restated 8% Convertible Debenture, dated November 11, 2013, between Innovus Pharmaceuticals, Inc. and debenture holders.
|
|
|
|
31.1*
|
|
Certification of Principal Executive and Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1**
|
|
Certification of Principal Executive and Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.
|
|
|
|
101.INS***
|
|
XBRL Instance Document
|
|
|
|
101.SCH***
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL***
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF***
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB***
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE***
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
23 | ||
|
19 | ||
|
EXHIBIT 10.2
Innovus Pharmaceuticals, Inc.
Amended and Restated Non-Employee Director Compensation Plan
Effective as of October 1, 2013
The following Amended and Restated Non-Employee Director Compensation Plan (the “Plan”) replaces the Non-Employee Director Compensation Plan, dated July 1, 2013 and is available to non-employee members (the “Participants”) of the Board of Directors (the “Board”) of Innovus Pharmaceuticals, Inc. (the “Company”).
Equity Awards for Participants
Under the Innovus Pharmaceuticals, Inc. 2013 Equity Incentive Plan (the “EIP”) each Participant shall receive a quarterly Stock Unit Award (the “SUA”), the fair market value of which shall be equal to either (i) $3,000 for Outside Directors, as defined below, and (ii) $6,000 for the Chairman of the Board (the “Chairman”), both awards shall be determined by the per share closing price of the common stock on the date of award. Outside Directors are Participants who do not serve as Chairman of the Board (“Outside Directors”). For clarification, the term “Participants”, as used in this Plan, includes both the Outside Directors and the Chairman. Each SUA shall be granted pursuant to a Stock Unit Agreement (the “Agreement”) between the Company and the Participant in the form approved by the Board pursuant to the EIP.
The SUAs shall be granted and fully vested on the first business day following March 31, June 30, September 30, and December 31 (each a “Date of Award”). Notwithstanding the foregoing, the SUAs will not be settled in common shares of the Company stock until: (i) any and all tax withholding obligations are satisfied, as described in the Agreement, and (ii) the earlier of the Participant’s voluntary or involuntary resignation from the Board or ten (10) years from the Date of Award. Further, if a Participant voluntarily resigns from the Board prior to the completion of the three (3) month compensation period, then such Participant’s SUA for that quarter shall be forfeited in whole but any vested, unsettled SUAs shall not be impacted.
Reimbursement for Participants
Participants are also reimbursed for their out-of-pocket travel expenses for each Board or committee meeting attended.
Proration of Retainer and Equity Awards
With respect to Participants who join the Board during a quarter, the Board may prorate such Participant’s SUA as it deems appropriate.
Amendment or Termination
The Board may amend, alter, suspend, discontinue or terminate this program at any time.
EXHIBIT 10.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE ISSUER.
INNOVUS PHARMACEUTICALS, INC.
SECOND AMENDED AND RESTATED
8% CONVERTIBLE DEBENTURE
$1,000,000 | La Jolla, CA |
Dated as of: November 11, 2013 |
The undersigned, Innovus Pharmaceuticals, Inc., a Nevada corporation ("Issuer"), hereby promises to pay Bassam Damaj, Ph.D. ("Debenture Holder") or his assigns, on the Maturity Date (as hereinafter defined), up to One Million Dollars ($1,000,000) (as such amount may be adjusted by Section 1.6, the “Maximum Principal Amount”), or so much thereof as shall then equal the outstanding principal amount hereof following one or more advances as provided in Section 1.1(a) (such amount, as modified from time to time as provided herein, the "Principal Amount”), unless this Amended and Restated 8% Convertible Debenture ("Debenture") is earlier converted in accordance with Section 1.2 or Section 1.3, and interest shall accrue hereon from January 22, 2013 and be payable as provided herein, unless earlier converted in accordance with Section 1.2 or Section 1.3 hereof or earlier repaid in accordance with Section 1.4 hereof. This Second Amended and Restated 8% Convertible Debenture replaces the 8% Convertible Debenture, dated January 22, 2013, the Amended and Restated 8% Convertible Debenture, dated March 18, 2013 and the May 2013 Amendment to Amended and Restated 8% Convertible Debenture, dated May 6, 2013, between the Issuer and Debenture Holder. As of the date of this Debenture, the Principal Amount is Three Hundred Seventy Nine Thousand, Six Hundred and One Dollars and Twenty Seven Cents ($379,601.27).
1. Terms of the Debenture .
1.1 Advances; Interest; Interest Rate; Repayment .
(a) From time to time, Issuer may request advances by Debenture Holder up to the Maximum Principal Amount. Debenture Holder may make such advance(s) or decline to make such advance(s) in his sole and absolute discretion.
(b) Notwithstanding Section 1.1(a) above, if Issuer will have insufficient liquidity to meet any material payment obligations arising in the ordinary course of business (“Obligations”) as they come due, then Issuer will request an advance under this Debenture in the amount of such shortfall, and, unless the maximum Principal Amount is outstanding, Debenture Holder must make the advance so requested. The commitments in this Section 1.1(b) shall automatically terminate on the earlier to occur (the “Release Date”) of (i) the consummation of one or more transactions pursuant to which Issuer raises through the sale of additional equity capital or debt net proceeds at least equal to $4,000,000 or (ii) July 1, 2016.
(c) The Principal Amount shall bear interest at the rate of eight (8%) percent (the "Interest Rate") per annum based on a 365-day year. Interest shall be payable on the Maturity Date.
(d) The Principal Amount shall be either (a) if a PIPE Financing (as hereinafter defined) occurs before July 1, 2016, automatically converted into securities of the Issuer at the price of such PIPE Financing on the date of closing of the PIPE Financing, subject to any other rights described in Section 1.2 or (b) if the PIPE financing does not occur by July 1, 2016, then automatically converted into the common stock (“Common Stock”) of the Issuer at eighty percent (80%) of the closing price of the Issuer’s common stock on the date of signing of this Second Amended and Restate 8% Convertible Debenture, subject to any other rights described in Section 1.3 (such earlier date being the “Maturity Date”). “PIPE Financing” shall mean the private placement of equity, equity equivalent, convertible debt or debt financing in which Issuer receives gross proceeds, in one or more transactions, of at least Four Million Dollars ($4,000,000).
(e) The Principal Amount and interest thereon may be prepaid in whole or in part by Issuer.
(f) All monetary payments to be made by Issuer hereunder shall be made in lawful money of the United States by check or wire transfer of immediately available funds.
(g) If all or a portion of the principal amount of this Debenture or any interest payable thereon shall not be repaid when due, whether on the Maturity Date, by acceleration or otherwise, such overdue amounts shall bear interest at a rate per annum that is five percent (5%) above the Interest Rate ( i.e. , 13%), from the date of such non-payment until such amount is paid in full (as well after as before judgment), subject to the provisions of Section 4.1 below.
1.2 Automatic Conversion Upon PIPE Financing . Upon the PIPE Financing, the Convertible Amount, as defined below, shall be converted automatically into securities to be issued by Issuer in the PIPE Financing at the same terms as the investors in the PIPE Financing (the "PIPE Securities"). The “Convertible Amount” means the Principal Amount plus eight percent (8%) per annum simple interest, based on a 365-day year, with such interest accruing for the period commencing on January 22, 2013 and ending on the date of conversion. No fractional PIPE Securities shall be issued upon conversion. In lieu of any fractional PIPE Securities to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.3 Automatic Conversion on July 1, 2016 . If the PIPE Financing described in Section 1.2 above does not occur prior to July 1, 2016, then on that date, the Convertible Amount shall be converted automatically into Common Stock of the Issuer at the Conversion Price, as defined below. The “Conversion Price” means an amount equal to the closing price of the Issuer’s Common Stock trading on either the OTC Bulletin Board or on any other exchange on the date of signing of this Second Amended and Restated 8% Convertible Debenture, multiplied by 80%. No fractional Common Stock shall be issued upon conversion. In lieu of any fractional Common Stock to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.4 Conversion Procedures . Upon conversion of this Debenture as provided in Section 1.2 hereof, the Debenture Holder shall surrender this Debenture, appropriately endorsed, to Issuer at Issuer's principal office, accompanied by written notice to Issuer setting forth the name or names (with address(es)) in which the PIPE Securities issuable upon such conversion shall be issued and registered on the books of Issuer. This Debenture shall be marked cancelled on the books of Issuer as of the date of the PIPE Financing, whether or not surrendered.
1.5 Other Assurances . Issuer shall not, by amendment of its Articles of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Issuer, but shall at all times in good faith assist in the carrying out of all the provisions of this Debenture and in taking of all such actions as may be necessary or appropriate in order to protect the rights of the Debenture Holder herein against impairment.
1.6 Payments under Employment Agreement . If before the Release Date any cash salary, bonus or severance payments are actually paid to Debenture Holder under his Employment Agreement with the Issuer dated January 22, 2013, the gross amount of such payment(s) (before any tax withholding or deductions) shall be added to the Maximum Principal Amount.
2. Events of Default . If any of the following events (each, an "Event of Default") shall occur and be continuing:
(i) Issuer shall fail to pay any amount payable under this Debenture, including but limited to installments of interest and/or principal, within three (3) business days after such payment becomes due (at the Maturity Date, an Interest Payment Date or other date) in accordance with the terms hereof;
(ii) Issuer shall fail to pay when due (following the expiration of applicable notice and cure periods), whether upon acceleration, prepayment obligation or otherwise, any indebtedness for money due, individually or in the aggregate, involving an amount in excess of $50,000;
(iii) Any representation, warranty, covenant or agreement made by Issuer that this Debenture was incorrect in any material respect on or as of the date made;
(iv) Issuer shall default, in any material respect, in the observance or performance of any other agreement contained in this Debenture or any other agreement or instrument contemplated by this Debenture, and such default shall continue unremedied for a period of fifteen (15) days after written notice to Issuer of such default;
(v) (a) Issuer shall commence any case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment or a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Issuer shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against Issuer any case, proceeding or other action of a nature referred to in clause (a) above that (A) results in the entry of an order for relief of any such adjudication of appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (c) there shall be commenced against Issuer any case, proceeding other action seeking issuance of a warrant of attachment, execution, distrait or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (d) Issuer shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the acts set forth in clauses (a), (b) or (c) above; or (e) Issuer shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due then, and in any such event, (x) if such event is an Event of Default specified in subsection (v) above of this Section 2, automatically this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture shall immediately become due and payable, and (y) if such event is any other Event of Default, the Debenture Holder may, by written notice to Issuer, declare this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 2, presentation, demand, protest and all other notices of any kind are hereby expressly waived by Issuer.
3. Reservation of Stock .
3.1 Reservation of Common Stock . The Issuer covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Debenture, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall be issuable upon the conversion of the outstanding principal amount of the Debenture. The Issuer covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.
4. Miscellaneous .
4.1 Interest Rate . Any interest payable hereunder that is in excess of the maximum interest rate permitted under applicable law shall be reduced to the maximum interest rate permitted under such applicable law.
4.2 Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to Issuer :
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Chief Financial Officer
Facsimile: 858-964-2301
With a copy (which copy shall not constitute notice) to:
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Legal Department
Facsimile: (858) 964-2301
If to Debenture Holder at its address as furnished to Issuer.
4.3 Further Indebtedness . No indebtedness of the Issuer is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise. Without the Debenture Holder's consent, the Issuer will not, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits there from that is senior or paripassu in any respect to the obligations of the Issuer under this Debenture.
4.4 Entire Agreement; Exercise of Rights .
(a) This Debenture embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. No amendment of any provision of this Debenture shall be effective unless it is in writing and signed by each of the parties; and no waiver of any provision of this Debenture, nor consent to any departure by either party from it, shall be effective unless it is in writing and signed by the affected party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of a party to exercise, and no delay in exercising, any right under this Debenture, or any agreement contemplated hereby, shall operate as a waiver hereof by such party, nor shall any single or partial exercise of any right under this Debenture, or any agreement contemplated hereby, preclude any other or further exercise thereof or the exercise of any other right.
4.5 Governing Law . This Debenture shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, without regards to its conflicts of law provisions.
4.6 Transferability . This Debenture shall not be transferable in any manner without the express written consent of Issuer, which consent may not be unreasonably withheld.
********************************
IN WITNESS WHEREOF, the parties hereto have executed this Debenture on the date first above written.
INNOVUS PHARMACEUTICALS, INC. | ||
By: | /s/ Henry Esber | |
Name: Henry Esber, Ph.D. | ||
Title: Chairman of the Board |
DEBENTURE HOLDER | ||
By: | /s/ Bassam Damaj | |
Name: Bassam Damaj, Ph.D. |
EXHIBIT 10.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE ISSUER.
INNOVUS PHARMACEUTICALS, INC.
AMENDED AND RESTATED
8% CONVERTIBLE DEBENTURE
$70,000 | La Jolla, CA |
Dated as of: November 11, 2013 |
The undersigned, Innovus Pharmaceuticals, Inc., a Nevada corporation ("Issuer"), hereby promises to pay Henry Esber, Ph.D. ("Debenture Holder") or his assigns, at the address of 38 Angell Brook Drive, West Boylston, MA 01583, on the Maturity Date (as hereinafter defined), Seventy Thousand Dollars ($70,000), unless this Amended and Restated 8% Convertible Debenture ("Debenture") is earlier converted in accordance with Section 1.2 or Section 1.3, and interest shall accrue hereon from the date hereof and be payable as provided herein, unless earlier converted in accordance with Section 1.2 or Section 1.3 hereof or earlier repaid in accordance with Section 1.4 hereof. This Amended and Restated 8% Convertible Debenture replaces the 8% Convertible Debenture, dated January 15, 2013 between the Issuer and Debenture Holder.
1. Terms of the Debenture.
1.1 Interest; Interest Rate; Repayment .
(a) This Debenture shall bear interest at the rate of eight (8%) percent (the “Interest Rate”) per annum based on a 365-day year. Interest shall be payable on the Maturity Date.
(b) The principal outstanding hereunder shall be either (a) if a PIPE Financing (as hereinafter defined) occurs before July 1, 2016, automatically converted into securities of the Issuer at the price of such PIPE Financing on the date of closing of the PIPE Financing, subject to any other rights described in Section 1.2 or (b) if the PIPE financing does not occur by July 1, 2016, then automatically converted into the common stock (“Common Stock”) of the Issuer at eighty percent (80%) of the closing price of the Issuer’s common stock on the date of signing of this Amended and Restate 8% Convertible Debenture, subject to any other rights described in Section 1.3 (such earlier date being the “Maturity Date”). “PIPE Financing” shall mean the private placement of equity, equity equivalent, convertible debt or debt financing in which Issuer receives gross proceeds, in one or more transactions, of at least Four Million Dollars ($4,000,000).
(c) The principal amount and interest thereon shall not be prepaid in whole or in part by the Issuer.
(d) All monetary payments to be made by Issuer hereunder shall be made in lawful money of the United States by check or wire transfer of immediately available funds.
(e) If all or a portion of the principal amount of this Debenture or any interest payable thereon shall not be repaid when due, whether on the Maturity Date, by acceleration or otherwise, such overdue amounts shall bear interest at a rate per annum that is five percent (5%) above the Interest Rate ( i.e. , 13%) from the date of such non-payment until such amount is paid in full (as well after as before judgment).
1.2 Automatic Conversion Upon PIPE Financing . Upon the PIPE Financing, the Convertible Amount, as defined below, shall be converted automatically into securities to be issued by Issuer in the PIPE Financing at the same terms as the investors in the PIPE Financing (the “PIPE Securities”). The “Convertible Amount” means the principal amount of the Debenture plus eight percent (8%) per annum simple interest, based on a 365-day year, with such interest accruing for the period commencing on January 15, 2012 and ending on the date of conversion. No fractional PIPE Securities shall be issued upon conversion. In lieu of any fractional PIPE Securities to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.3 Automatic Conversion on July 1, 2016 . If the PIPE Financing described in Section 1.2 above does not occur prior to July 1, 2016, then on that date, the Convertible Amount shall be converted automatically into Common Stock of the Issuer at the Conversion Price, as defined below. The “Conversion Price” means an amount equal to the closing price of the Issuer’s Common Stock trading on either the OTC Bulletin Board or on any other exchange on the date of signing of this Amended and Restated 8% Convertible Debenture, multiplied by 80%. No fractional Common Stock shall be issued upon conversion. In lieu of any fractional Common Stock to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.4 Conversion Procedures . Upon conversion of this Debenture as provided in Section 1.2 and Section 1.3 hereof, the Debenture Holder shall surrender this Debenture, appropriately endorsed, to Issuer at Issuer’s principal office, accompanied by written notice to Issuer setting forth the name or names (with address(es)) in which the PIPE Securities or the Common Stock of the Issuer, as applicable, issuable upon such conversion shall be issued and registered on the books of Issuer. This Debenture shall be marked cancelled on the books of Issuer as of the date of the PIPE Financing or July 1, 2016, whichever comes first, whether or not surrendered.
1.5 Other Assurances . Issuer shall not, by amendment of its Articles of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Issuer, but shall at all times in good faith assist in the carrying out of all the provisions of this Debenture and in taking of all such actions as may be necessary or appropriate in order to protect the rights of the Debenture Holder herein against impairment.
2. Events of Default . If any of the following events (each, an “Event of Default”) shall occur and be continuing:
(i) Issuer shall fail to pay any amount payable under this Debenture, including but limited to installments of interest and/or principal, within three (3) business days after such payment becomes due (at the Maturity Date, an Interest Payment Date or other date) in accordance with the terms hereof;
(ii) Issuer shall fail to pay when due (following the expiration of applicable notice and cure periods), whether upon acceleration, prepayment obligation or otherwise, any indebtedness for money due, individually or in the aggregate, involving an amount in excess of $50,000;
(iii) Any representation, warranty, covenant or agreement made by Issuer that this Debenture was incorrect in any material respect on or as of the date made;
(iv) Issuer shall default, in any material respect, in the observance or performance of any other agreement contained in this Debenture or any other agreement or instrument contemplated by this Debenture, and such default shall continue unremedied for a period of fifteen (15) days after written notice to Issuer of such default;
(v) (a) Issuer shall commence any case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment or a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Issuer shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against Issuer any case, proceeding or other action of a nature referred to in clause (a) above that (A) results in the entry of an order for relief of any such adjudication of appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (c) there shall be commenced against Issuer any case, proceeding other action seeking issuance of a warrant of attachment, execution, distrait or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (d) Issuer shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the acts set forth in clauses (a), (b) or (c) above; or (e) Issuer shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due then, and in any such event, (x) if such event is an Event of Default specified in subsection (v) above of this Section 2, automatically this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture shall immediately become due and payable, and (y) if such event is any other Event of Default, the Debenture Holder may, by written notice to Issuer, declare this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 2, presentation, demand, protest and all other notices of any kind are hereby expressly waived by Issuer.
3. Reservation of Stock .
3.1 Reservation of Common Stock . The Issuer covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Debenture, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall be issuable upon the conversion of the outstanding principal amount of the Debenture. The Issuer covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.
4. Miscellaneous .
4.1 Interest Rate . Any interest payable hereunder that is in excess of the maximum interest rate permitted under applicable law shall be reduced to the maximum interest rate permitted under such applicable law.
4 .2 Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to Issuer :
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Bassam Damaj
Facsimile: (858) 964-2301
With a copy (which copy shall not constitute notice) to:
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Legal Department
Facsimile: (858) 964-2301
If to Debenture Holder :
Henry Esber, Ph.D.
38 Angell Brook Drive
West Boylston, MA 01583
Fax: 774-261-8054
4.3 Further Indebtedness . No indebtedness of the Issuer is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise. Without the Debenture Holder’s consent, the Issuer will not, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits there from that is senior or paripassu in any respect to the obligations of the Issuer under this Debenture.
4.4 Entire Agreement; Exercise of Rights .
(a) This Debenture embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. No amendment of any provision of this Debenture shall be effective unless it is in writing and signed by each of the parties; and no waiver of any provision of this Debenture, nor consent to any departure by either party from it, shall be effective unless it is in writing and signed by the affected party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of a party to exercise, and no delay in exercising, any right under this Debenture, or any agreement contemplated hereby, shall operate as a waiver hereof by such party, nor shall any single or partial exercise of any right under this Debenture, or any agreement contemplated hereby, preclude any other or further exercise thereof or the exercise of any other right.
4.5 Governing Law . This Debenture shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, without regards to its conflicts of law provisions.
4.6 Transferability . This Debenture shall not be transferable in any manner without the express written consent of Issuer, which consent may not be unreasonably withheld.
*********************
IN WITNESS WHEREOF, the parties hereto have executed this Debenture on the date first above written.
INNOVUS PHARMACEUTICALS, INC.
By: | /s/ Bassam Damaj | |
Name: Bassam Damaj, Ph.D. | ||
Title: President & Chief Executive Officer |
DEBENTURE HOLDER
By: | /s/ Henry Esber | |
Henry Esber, Ph.D. | ||
EXHIBIT 10.5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE ISSUER.
INNOVUS PHARMACEUTICALS, INC.
AMENDED AND RESTATED
8% CONVERTIBLE DEBENTURE
$____________ La Jolla, CA
Dated as of: November 11, 2013
In consideration of the receipt of $ _______________ , the undersigned, Innovus Pharmaceuticals, Inc., a Nevada corporation (“Issuer”), hereby promises to pay, dated as of July 1, 2016, by and between Issuer and ______________________________________ (“Debenture Holder”), at the address of ______________________________________, on the Maturity Date (as hereinafter defined), the principal amount of __________ ($_______) Dollars, unless this Amended and Restated 8% Convertible Debenture (“Debenture”) is earlier converted in accordance with Section 1.2 or Section 1.3, and interest shall accrue hereon from _______________ and be payable as provided herein, unless earlier converted in accordance with Section 1.2 or Section 1.3 hereof or earlier repaid in accordance with Section 1.4 hereof. This Amended and Restated 8% Convertible Debenture replaces the 8% Convertible Debenture, dated January 13, 2012 and any amendments thereto between the Issuer and Debenture Holder.
This Debenture is one of a series of secured convertible debentures of like tenor and ranking (collectively, the “Debentures”) made by the Issuer in favor of certain investors dated of even date herewith.
1. Terms of the Debenture.
1.1 Interest; Interest Rate; Repayment .
(a) This Debenture shall bear interest at the rate of eight (8%) percent (the “Interest Rate”) per annum based on a 365-day year. Interest shall be payable on the Maturity Date.
(b) The principal outstanding hereunder shall be either (a) if a PIPE Financing (as hereinafter defined) occurs before July 1, 2016, automatically converted into securities of the Issuer at the price of such PIPE Financing on the date of closing of the PIPE Financing, subject to any other rights described in Section 1.2 or (b) if the PIPE financing does not occur by July 1, 2016, then automatically converted into the common stock (“Common Stock”) of the Issuer at eighty percent (80%) of the closing price of the Issuer’s common stock on the date of signing of this Amended and Restate 8% Convertible Debenture, subject to any other rights described in Section 1.3 (such earlier date being the “Maturity Date”). “PIPE Financing” shall mean the private placement of equity, equity equivalent, convertible debt or debt financing in which Issuer receives gross proceeds, in one or more transactions, of at least Four Million Dollars ($4,000,000).
(c) The principal amount and interest thereon shall not be prepaid in whole or in part by the Issuer.
(d) All monetary payments to be made by Issuer hereunder shall be made in lawful money of the United States by check or wire transfer of immediately available funds.
(e) If all or a portion of the principal amount of this Debenture or any interest payable thereon shall not be repaid when due, whether on the Maturity Date, by acceleration or otherwise, such overdue amounts shall bear interest at a rate per annum that is five percent (5%) above the Interest Rate ( i.e. , 13%) from the date of such non-payment until such amount is paid in full (as well after as before judgment).
1.2 Automatic Conversion Upon PIPE Financing . Upon the PIPE Financing, the Convertible Amount, as defined below, shall be converted automatically into securities to be issued by Issuer in the PIPE Financing at the same terms as the investors in the PIPE Financing (the “PIPE Securities”). The “Convertible Amount” means the principal amount of the Debenture plus eight percent (8%) per annum simple interest, based on a 365-day year, with such interest accruing for the period commencing on January 13, 2012 and ending on the date of conversion. No fractional PIPE Securities shall be issued upon conversion. In lieu of any fractional PIPE Securities to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.3 Automatic Conversion on July 1, 2016 . If the PIPE Financing described in Section 1.2 above does not occur prior to July 1, 2016, then on that date, the Convertible Amount shall be converted automatically into Common Stock of the Issuer at the Conversion Price, as defined below. The “Conversion Price” means an amount equal to the closing price of the Issuer’s Common Stock trading on either the OTC Bulletin Board or on any other exchange on the date of signing of this Amended and Restated 8% Convertible Debenture, multiplied by 80%. No fractional Common Stock shall be issued upon conversion. In lieu of any fractional Common Stock to which the Debenture Holder would otherwise be entitled, Issuer shall pay cash in an amount equal to such amount of Debenture not converted.
1.4 Conversion Procedures . Upon conversion of this Debenture as provided in Section 1.2 and Section 1.3 hereof, the Debenture Holder shall surrender this Debenture, appropriately endorsed, to Issuer at Issuer’s principal office, accompanied by written notice to Issuer setting forth the name or names (with address(es)) in which the PIPE Securities or the Common Stock of the Issuer, as applicable, issuable upon such conversion shall be issued and registered on the books of Issuer. This Debenture shall be marked cancelled on the books of Issuer as of the date of the PIPE Financing or July 1, 2016, whichever comes first, whether or not surrendered.
1.5 Other Assurances . Issuer shall not, by amendment of its Articles of Incorporation or By-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Issuer, but shall at all times in good faith assist in the carrying out of all the provisions of this Debenture and in taking of all such actions as may be necessary or appropriate in order to protect the rights of the Debenture Holder herein against impairment.
2. Events of Default . If any of the following events (each, an “Event of Default”) shall occur and be continuing:
(i) Issuer shall fail to pay any amount payable under this Debenture, including but limited to installments of interest and/or principal, within three (3) business days after such payment becomes due (at the Maturity Date, an Interest Payment Date or other date) in accordance with the terms hereof;
(ii) Issuer shall fail to pay when due (following the expiration of applicable notice and cure periods), whether upon acceleration, prepayment obligation or otherwise, any indebtedness for money due, individually or in the aggregate, involving an amount in excess of $50,000;
(iii) Any representation, warranty, covenant or agreement made by Issuer that this Debenture was incorrect in any material respect on or as of the date made;
(iv) Issuer shall default, in any material respect, in the observance or performance of any other agreement contained in this Debenture or any other agreement or instrument contemplated by this Debenture, and such default shall continue unremedied for a period of fifteen (15) days after written notice to Issuer of such default;
(v) (a) Issuer shall commence any case, proceeding or other action (x) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (y) seeking appointment or a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Issuer shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against Issuer any case, proceeding or other action of a nature referred to in clause (a) above that (A) results in the entry of an order for relief of any such adjudication of appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; or (c) there shall be commenced against Issuer any case, proceeding other action seeking issuance of a warrant of attachment, execution, distrait or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; or (d) Issuer shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the acts set forth in clauses (a), (b) or (c) above; or (e) Issuer shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due then, and in any such event, (x) if such event is an Event of Default specified in subsection (v) above of this Section 2, automatically this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture shall immediately become due and payable, and (y) if such event is any other Event of Default, the Debenture Holder may, by written notice to Issuer, declare this Debenture (with all accrued and unpaid interest thereon) and all other amounts owing under this Debenture to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 2, presentation, demand, protest and all other notices of any kind are hereby expressly waived by Issuer.
3. Reservation of Stock .
3.1 Reservation of Common Stock . The Issuer covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of the Debenture, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than such number of shares of the Common Stock as shall be issuable upon the conversion of the outstanding principal amount of the Debenture. The Issuer covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid and nonassessable.
4. Miscellaneous .
4.1 Interest Rate . Any interest payable hereunder that is in excess of the maximum interest rate permitted under applicable law shall be reduced to the maximum interest rate permitted under such applicable law.
4 .2 Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given when delivered by hand or by facsimile transmission, when telexed, or upon receipt when mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to Issuer :
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Bassam Damaj
Facsimile: (858) 964-2301
With a copy (which copy shall not constitute notice) to:
Innovus Pharmaceuticals, Inc.
4275 Executive Square, Suite 200
La Jolla, CA 92037
Attn: Legal Department
Facsimile: (858) 964-2301
If to Debenture Holder : at its address as furnished on the face of this Debenture.
4.3 Further Indebtedness . No indebtedness of the Issuer is senior to this Debenture in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise. Without the Debenture Holder’s consent, the Issuer will not, directly or indirectly, enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits there from that is senior or paripassu in any respect to the obligations of the Issuer under this Debenture.
4.4 Entire Agreement; Exercise of Rights .
(a) This Debenture embodies the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. No amendment of any provision of this Debenture shall be effective unless it is in writing and signed by each of the parties; and no waiver of any provision of this Debenture, nor consent to any departure by either party from it, shall be effective unless it is in writing and signed by the affected party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
(b) No failure on the part of a party to exercise, and no delay in exercising, any right under this Debenture, or any agreement contemplated hereby, shall operate as a waiver hereof by such party, nor shall any single or partial exercise of any right under this Debenture, or any agreement contemplated hereby, preclude any other or further exercise thereof or the exercise of any other right.
4.5 Governing Law . This Debenture shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be performed entirely within such state, without regards to its conflicts of law provisions.
4.6 Transferability . This Debenture shall not be transferable in any manner without the express written consent of Issuer, which consent may not be unreasonably withheld.
*********************
IN WITNESS WHEREOF, the parties hereto have executed this Debenture on the date first above written.
INNOVUS PHARMACEUTICALS, INC. | ||
By: | ||
Name: Bassam Damaj, Ph.D. | ||
Title: President & Chief Executive Officer |
DEBENTURE HOLDER | ||
By: | ||
Name: |
Schedule of Debenture Holders
This schedule is being provided pursuant to Item 601 of Regulation S-K.
Name of Holder | Original Principal Amount | |||
(in U.S. dollars) | ||||
Wallace T. Boyack | $74,667 | |||
Vivian Lui | $50,000 | |||
Unrelated Party | $20,000 | |||
Henry Esber, Ph.D. | $13,000 | |||
Ziad Mirza, M.D. | $5,000 | |||
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Bassam Damaj, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Innovus Pharmaceuticals, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: November 14, 2013 |
/s/ Bassam Damaj |
|
Bassam Damaj, President and Chief Executive Officer (Principal Executive and Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Innovus Pharmaceuticals, Inc. (the “Corporation”) for the quarter ended September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Bassam Damaj, principal executive officer and principal financial officer of the Corporation, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of September 30, 2013. |
Dated: November 14, 2013 | /s/ Bassam Damaj | |
Bassam Damaj, President and Chief Executive Officer (Principal Executive and Financial Officer) |
“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”