UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 3, 2018
MONSTER DIGITAL, INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 001-37797 | 27-3948465 | ||
|
(State or Other Jurisdiction of Incorporation)
|
(Commission File Number)
|
(I.R.S. Employer Identification No.)
|
|
2655 First Street, Suite 250 Simi Valley, California 93065 |
93065 | |
| (Address of Principal Executive Office) | (Zip Code) |
Registrant’s telephone number, including area code: (805) 915-4775
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (Section 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (Section 240.12b-2 of this chapter). þ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 1.01 Entry into a Material Definitive Agreement
Extension of Outside Closing Date for Merger
On January 3, 2018, Monster Digital, Inc., (the “Company” or “Monster Digital”), the Company’s wholly-owned subsidiary Monster Merger Sub (“Merger Sub”) and Innovate Biopharmaceuticals, Inc. (“Innovate”) agreed to extend the outside closing date (the "Closing") of their previously announced reverse merger ("Merger"). The Company and Innovate had originally planned to close the transaction by January 3, 2018 but the final preparations for the Closing are taking more time than expected. The Company, Merger Sub and Innovate have amended the Agreement and Plan of Merger and Reorganization dated July 3, 2017 (the “Merger Agreement”) to provide that the outside termination date for the Merger will be January 26, 2018. A copy of the Amendment to the Merger Agreement is attached hereto as Exhibit 2.1.
Item 7.01 Regulation FD Disclosure
Press Release
On January 4, 2018, the Company issued a press release announcing the extension of the outside closing date for the Merger with Innovate also announcing significant corporate developments; potential delisting of common stock and settlement with Monster, Inc. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K furnished pursuant to Items 7.01 and the press release included as Exhibit 99.1 of Item 9.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. This information shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. The furnishing of the information in this Current Report on Form 8-K is not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information contained in this Current Report on Form 8-K constitutes material investor information that is not otherwise publicly available.
Item 8.01 Other Events.
Potential for common stock to be delisted. On January 4, 2018, the Company announced that it has determined that it will be unable to regain compliance for continued listing of its common stock on the NASDAQ Capital Market by the previously reported January 3, 2018 deadline set by The NASDAQ Stock Market LLC Hearings Panel (the “Panel”).While the Company has been working diligently with Innovate to complete the Merger, the Company and Innovate, as reported above, have determined that they will be unable to achieve these objectives prior to the January 3, 2018 deadline.
The Company has requested that the Panel grant a further extension of the deadline until January 26, 2018. The Company can give no assurance that the Panel will grant such an extension. If the Panel does not grant the Company’s requested extension, based on the listing requirements of NASDAQ, the Company’s common stock will be delisted from the Nasdaq Capital Market. The Company's common stock is currently traded on the NASDAQ Capital Market under the trading symbol “MSDI.” The Company has filed an application and is taking the steps necessary to have its common stock quoted for trading in the OTCQB US Market (“OTCQB”), operated by OTC Markets, Inc., under the same trading symbol of “MSDI.” The Company expects to hear back from the Panel by the end of this week, but cannot give any assurance that a decision will be reached by then. If the Panel does not grant an extension and the Company’s common stock is delisted from the NASDAQ Capital Market, trading will commence on the OTCQB the next trading day.
To the extent that the Company’s common stock is delisted and following commencement of trading of its common stock on the OTCQB, the Company’s common stock will continue to be registered under the Exchange Act and the Company will continue to file financial reports that will be available on the SEC's website, www.sec.gov .
Settlement Agreement with Monster, Inc. The Company and Monster Inc., (formally known as Monster Cable Products, Inc.) announced on January 4, 2018 that they have entered into a settlement agreement providing for the early termination of the License Agreement for the “Monster” names and trademarks. Pursuant to the new understanding, Monster Digital will cease using the Monster names and trademarks on or before February 1, 2018. Terms of the settlement were not disclosed.
The information in this item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference in any of the Company’s filings under the Securities Act of 1933, as amended or the Exchange Act, except to the extent, if any, expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
See the Exhibit Index set forth below for a list of exhibits included with this Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MONSTER DIGITAL, INC. | |
| /s/ David Olert | |
| Date: January 5, 2018 | David Olert |
| Chief Financial Officer |
EXHIBIT INDEX
Exhibit 2.1
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “ Amendment ”) is made and entered into as of January 3, 2018, by and among Monster Digital, Inc., a Delaware corporation (“ Monster ”), Monster Merger Sub, Inc. , a Delaware corporation (“ Merger Sub ”), and Innovate Biopharmaceuticals, Inc. , a Delaware corporation (“ Innovate ”). Capitalized terms not otherwise defined in this Amendment shall have the meaning set forth in that Agreement and Plan of Merger and Reorganization dated July 3, 2017 by and among Monster, Merger Sub and Innovate (the “ Agreement ”).
RECITALS
A. Further to the Agreement, Monster and Innovate intend to effect a merger of Merger Sub with and into Innovate (the “ Merger ”) in accordance with the Agreement and the DGCL. Upon consummation of the Merger, Merger Sub will cease to exist, and Innovate will become a wholly-owned subsidiary of Monster.
B.. Each of the Board of Directors of Monster, Merger Sub and Innovate, and each of their respective stockholders, voted to approve the Merger.
C. The parties desire to effect this Amendment to agree that the Closing Date shall be on or before January 26, 2018, waive certain conditions to the Closing, and modify certain other provisions of the Agreement as set forth herein.
AGREEMENT
The parties to this Amendment, intending to be legally bound, agree as follows:
1. The Closing Date is hereby defined to mean a date on or before January 26, 2018.
2. Section 5.9(c) is hereby amended to read in full as follows:
“(c) Monster shall purchase a $5.0 million “tail” insurance policy (with a $5.0 million A-side) with an effective date as of the Closing Date, which shall remain effective for six (6) years following the Closing Date, containing the same terms and conditions that are not less favorable to the D&O Indemnified Parties.”
3. Sections 5.12 and 6.4 and 9.1(b) are hereby deleted.
4. Section 8.7 is hereby amended to read in full as follows:
“ Net Cash Calculation . Monster and Innovate have agreed in writing upon the Net Cash Calculation, or the Accounting Firm has delivered its determination with respect to the Net Cash Calculation, in each case pursuant to Section 1.6 and the Net Cash is greater than or equal to negative Five Hundred Thousand Dollars (-$500,000).”
5. Section 9.3(b) is hereby amended to read in full as follows:
“(i) If (A) this Agreement is terminated by Innovate pursuant to Section 9.1(e) , (B) at any time before the date of termination an Acquisition Proposal with respect to Monster has been publicly announced, disclosed or otherwise communicated to the Monster Board of Directors and (C) within twelve (12) months after the date of such termination, Monster enters into a definitive agreement with respect to a Subsequent Transaction or consummates a Subsequent Transaction, then Monster shall pay to Innovate, within two (2) Business Days after the earlier of such entry into a definitive agreement with respect to a Subsequent Transaction or the consummation of a Subsequent Transaction, a nonrefundable fee in an amount of $250,000 (the “ Innovate Termination Fee ”), in addition to any amount payable to Innovate pursuant to Section 9.3(d) .
(ii) If (A) this Agreement is terminated by Monster pursuant to Section 9.1(d) , (B) at any time before the date of termination an Acquisition Proposal with respect to Innovate has been publicly announced, disclosed or otherwise communicated to the Innovate Board of Directors, and (C) within twelve (12) months after the date of such termination, Innovate enters into a definitive agreement with respect to a Subsequent Transaction or consummates a Subsequent Transaction, then Innovate shall pay to Monster, within two (2) Business Days after the earlier of such entry into a definitive agreement with respect to a Subsequent Transaction or consummation of a Subsequent Transaction, a nonrefundable fee in an amount of $250,000 (the “ Monster Termination Fee ”), in addition to any amount payable to Monster pursuant to or Section 9.3(d) .”
6. The term “Monster Financing” is amended to read in full as follows:
“ “ Monster Financing ” shall mean the sale and issuance of convertible debt or equity securities of Monster that may be completed by Monster after the date of this Agreement and prior to the Effective Time with the principal purchase of raising capital.”
[ Remainder of page intentionally left blank ]
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of the date first above written.
| MONSTER DIGITAL, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| INNOVATE BIOPHARMACEUTICALS, INC. | ||
| By | ||
| Name: | ||
| Title: | ||
| MONSTER MERGER SUB, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 99.1
Monster Digital and Innovate Biopharmaceuticals Extend Outside Closing Date for Merger
Monster Digital announces significant corporate developments/potential delisting of common stock/settlement with Monster, Inc.
SIMI VALLEY, CA -- (Globe Newswire) -- 1/04/18 -- Monster Digital, Inc. ("Monster Digital" or the "Company") announced today several material events:
Extension of Outside Closing Date for Merger. Monster Digital and Innovate Biopharmaceuticals, Inc. ("Innovate") today announced that they have agreed to extend the outside closing date (the "Closing") of their previously announced reverse merger ("Merger"). The Company and Innovate had originally planned to close the transaction by January 3, 2018 but the final preparations for the Closing are taking more time than expected. The Company and Innovate have amended the merger agreement to provide the outside termination date for the Merger will be January 26, 2018.
As previously disclosed, following the Closing, Innovate will become a wholly owned subsidiary of Monster Digital, and Monster Digital, as the parent of the surviving company, will be renamed "Innovate Biopharmaceuticals, Inc." Innovate stockholders will own the substantial majority of shares of the combined company after the transaction. The common stock shares of the combined company will trade under the symbol INNT.
As previously disclosed, immediately prior to the effective time of the Merger, there will be a spin-off transaction (the "Spin-Off"). Previously, all of the business, assets and certain of the liabilities of Monster that are not assumed by Innovate in connection with the Merger were transferred into a wholly-owned subsidiary of the Company, MD Holding Co., Inc. ("Holdco"). Further to the Spin-Off, holders of record of the Company's common stock immediately prior to the effective time of the Merger will receive a pro rata distribution of one share of Holdco's private company common stock for each share of Monster common stock held.
“We are actively engaged with Innovate and remain committed to the reverse merger. We continue to work diligently and cooperatively with Innovate to close the transaction as soon as possible. ” said David Clarke, CEO of Monster Digital. Commenting on the Merger, Innovate's CEO Christopher P. Prior, Ph.D., stated: "We are working closely with Monster Digital towards the Closing."
Monster Digital announces significant corporate developments
Potential for Common stock to be delisted. Monster Digital today announced that it has determined that it will be unable to regain compliance for continued listing of its common stock on the NASDAQ Capital Market by the previously reported January 3, 2018 deadline set by The NASDAQ Stock Market LLC Hearings Panel (the “Panel”).While the Company has been working diligently with Innovate to complete the Merger, the Company and Innovate, as reported above, have determined that they will be unable to achieve these objectives prior to the January 3, 2018 deadline.
The Company has requested that the Panel grant a further extension of the deadline until January 26, 2018. The Company can give no assurance that the Panel will grant such an extension. If the Panel does not grant the Company’s requested extension, based on the listing requirements of NASDAQ, the Company’s common stock will be delisted from the Nasdaq Capital Market. The Company's common stock is currently traded on the NASDAQ Capital Market under the trading symbol “MSDI.” The Company has filed an application and is taking the steps necessary to have its common stock quoted for trading in the OTCQB US Market (“OTCQB”), operated by OTC Markets, Inc., under the same trading symbol of “MSDI.” The Company expects to hear back from the Panel by the end of this week, but cannot give any assurance that a decision will be reached by then. If the Panel does not grant an extension and the Company’s common stock is delisted from the NASDAQ Capital Market, trading will commence on the OTCQB the next trading day.
To the extent that the Company’s common stock is delisted and following commencement of trading of its common stock on the OTCQB, the Company’s common stock will continue to be registered under the Exchange Act and the Company will continue to file financial reports that will be available on the SEC's website, www.sec.gov .
Settlement Agreement with Monster, Inc. Monster Digital and Monster Inc., (formally known as Monster Cable Products, Inc.) announced that they have entered into a settlement agreement providing for the early termination of the License Agreement for the “Monster” names and trademarks. Pursuant to the new understanding, Monster Digital will cease using the Monster names and trademarks on or before February 1, 2018. Terms of the settlement were not disclosed.
About Monster Digital, Inc.
Monster Digital develops, markets and distributes Monster-branded products for use in high-performance consumer electronics, mobile products and computing applications. The Company designs and engineers premium action sports cameras and accessories, in addition to advanced data storage and memory products for professionals and consumers.
Monster Digital is a registered trademark of Monster Products, Inc. in the U.S. and other countries.
For more information about the company, please visit http://www.monsterdigital.com
About Innovate Biopharmaceuticals, Inc.:
Innovate is a clinical stage biotechnology company focused on developing novel autoimmune/inflammation therapeutic drugs.
Innovate's lead drug candidate, larazotide acetate (INN-202), has successfully met its primary endpoint in an efficacy clinical trial for celiac disease. Larazotide successfully completed the End of Phase 2 Meeting with the FDA to prepare for expected Phase 3 clinical trials for larazotide in celiac disease in 2018. In clinical studies in more than 800 patients, larazotide demonstrated a favorable safety profile comparable to placebo, due to what Innovate believes is its lack of systemic absorption from the small bowel. Larazotide has received Fast Track designation from the FDA.
Larazotide, an oral peptide formulated into a capsule, has a mechanism of action that decreases intestinal permeability and regulates tight junctions by reducing antigen trafficking across epithelial cells in the intestines. Innovate believes that larazotide is the only drug in the clinic with this mechanism of action of reducing intestinal permeability. Increased intestinal permeability, sometimes referred to as "leaky gut," has been widely recognized in the literature as a gateway to multiple autoimmune diseases, including celiac disease, irritable bowel syndrome (IBS), inflammatory bowel diseases (IBD, Crohn's and ulcerative colitis), type 1 diabetes mellitus (T1DM), nonalcoholic steatohepatitis (NASH), chronic kidney disease (CKD) and several others.
For more information, please visit http://www.innovatebiopharma.com
Forward-Looking Statements:
Some of the statements in this press release are "forward-looking" and are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties including: the risk that the Merger may not be completed in the anticipate timeframeor at all, which may adversely affect the price of the common stock of the Company; the failure to satisfy any of the conditions to the consummation of the Merger; the risk that Monster Digital’s common stock will be delisted from Nasdaq; and the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement . These statements involve risks and uncertainties that may cause results to differ materially from the statements set forth in this press release, including, among other things, our ability to obtain and maintain regulatory approval for our products; plus other factors described under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 or described in our other public filings. Our results may also be affected by factors of which we are not currently aware. The forward-looking statements in this press release speak only as of the date of this press release. Monster Digital expressly disclaims any obligation or undertaking to release publicly any updates or revisions to such statements to reflect any change in its expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based.
Contacts:
Monster Digital, Inc.
David Olert
CFO
dolert@monsterdigital.com
Investors:
PCG Advisory
Vivian Cervantes
646-863-6274
vivian@pcgadvisory.com
Innovate Biopharmaceuticals, Inc.
Kendyle Woodard
919-275-1933
investor.relations@innovatebiopharma.com