Daniel W. Rumsey, Esq.
Jessica R. Sudweeks, Esq.
Disclosure Law Group,
|
Randy Berholtz, Esq.
Executive Vice President, Corporate
Development and General Counsel
|
Gregory Sichenzia, Esq.
Thomas Rose, Esq.
Jay Yamamoto, Esq.
|
a Professional Corporation
|
Innovus Pharmaceuticals, Inc.
|
Sichenzia Rose Ference Kesner LLP
|
600 West Broadway, Suite 700
|
9171 Towne Centre Drive, Suite 440
|
61 Broadway, 32
nd
Floor
|
San Diego, California 92101
|
San Diego, CA 92122
|
New York, NY 10006
|
Tel: (619) 272-7050
|
Tel: (858) 249-9873
|
Tel:
(212)
930-9700
|
Fax: (619) 330-2101
|
Fax: (858) 249-7879
|
Fax:
(212)
930-9725
|
|
|
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐ (Do not check if a
smaller reporting company)
|
Smaller
reporting company ☒
|
Title of Each Class of
Securities to be Registered
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount of
Registration Fee
|
Primary Offering:
|
|
|
Common
stock, par value $0.001 per share
|
$
5,000,000
(1)
|
$
579.50
|
Series A warrants to purchase shares of common
stock
(1)
(2) (4)
|
$
50,000
(3)
|
$
5.80
|
Common stock issuable upon exercise of Series A
warrants
(1)
(2)
|
$
8,500,000
|
$
985.15
|
Series B warrants to purchase shares of common
stock
(1) (2)
(5)
|
$
50,000
(3)
|
$
5.80
|
Common stock issuable upon exercise of Series B
warrants
(1)
(2)
|
$
6,250,000
|
$
724.38
|
Placement agent warrants
(6)
|
$
12,500
(3)
|
$
1.45
|
Shares of common stock issuable upon exercise of the
placement agent warrants
(6)
|
$
312,500
|
$
36.22
|
Total
|
$
20,175,000
|
$
2,338.30
(8)
|
Secondary Offering:
|
|
|
Common stock, par value $0.001 per share
(2)
|
$
5,046,665.63
(7) |
$
584.91
(8) |
|
The information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these
securities in any state or other jurisdiction where the offer or
sale is not permitted.
|
|
|
Per share and
related
warrants
|
Total
|
Public offering
price
|
$
|
$
|
Placement
agent’s fees
(1)
|
$
|
$
|
Offering proceeds,
before expenses, to us
|
$
|
$
|
|
PAGE
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27
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36
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46
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50
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56
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58
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60
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63
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64
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66
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66
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66
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67
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PROSPE
C
TUS
SUMMARY
The following summary highlights information contained elsewhere in
this prospectus and does not contain all of the information that
you should consider in making your investment decision in our
securities. Before investing in our securities, you should
carefully read this entire prospectus, including our financial
statements and the related notes included in this prospectus and
the information set forth under the headings “Risk
Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.”
Our Company
We are an emerging over-the-counter
("
OTC
") consumer goods and specialty pharmaceutical
company
engaged in the commercialization, licensing and
development of safe and effective non-prescription medicine and
consumer care products to improve men’s and women’s
health and vitality and respiratory diseases. We deliver
innovative and uniquely presented and packaged health solutions
through our (a) OTC medicines and consumer and health products,
which we market directly, (b) commercial partners to primary care
physicians, urologists, gynecologists and therapists, and (c)
directly to consumers through our on-line channels, retailers and
wholesalers.
We are dedicated to being
a leader in developing and marketing new OTC and branded
Abbreviated New Drug Application (“
ANDA
”) products. We are actively pursuing
opportunities where existing prescription drugs have recently, or
are expected to, change from prescription (or Rx) to OTC. These
“Rx-to-OTC switches” require Food and Drug
Administration (“
FDA
”) approval through a process initiated by
the New Drug Application (“
NDA
”) holder.
Our
business model leverages our ability to (a) develop and build our
current pipeline of products, and (b) to also acquire
outright or in-license commercial products that are supported by
scientific and/or clinical evidence, place them through our
existing supply chain, retail and on-line (including
Amazon®-based business platform) channels to tap new markets
and drive demand for such products and to establish physician
relationships. We currently have 17 products
marketed in the United States with six of those being
marketed and sold in multiple countries around the world through
some of our 14 commercial partners. We currently expect to launch
an additional five products in the U.S. in 2017 and we
currently have approvals to launch certain of our already marketed
products in 31 additional countries.
Our Strategy
Our
corporate strategy focuses on two primary objectives:
1.
Developing a
diversified product portfolio of exclusive, unique and patented
non-prescription OTC and branded
ANDA
drugs and consumer health products
through: (a) the introduction of line extensions and reformulations
of either our or third-party currently marketed products; and (b)
the acquisition of products or obtaining exclusive licensing rights
to market such products; and
2.
Building an
innovative, U.S. and global sales and marketing model through
direct to consumer approaches such as our proprietary Beyond
Human® Sales and Marketing platform, the addition
of new online platforms such as Amazon® and commercial
partnerships with established international complimentary partners
that: (a) generates revenue, and (b) requires a lower cost
structure compared to traditional pharmaceutical companies thereby
increasing our gross margins.
|
|
|
Our Products
We
currently generate revenue from 17 products in the U.S. and six in
international countries, as follows:
1.
Vesele
®
for promoting
sexual and health (U.S. and U.K.);
2.
Zestra
®
for female
arousal (U.S., U.K., Denmark, Canada, Morocco, the UAE and
South Korea);
3.
Zestra
Glide
®
(U.S, Canada
and the MENA countries);
4.
EjectDelay
®
indicated
for the treatment of premature ejaculation (U.S. and
Canada);
5.
Sensum+
®
to
alleviate reduced penile sensitivity (U.S., U.K. and
Morocco);
6.
Beyond
Human
®
Testosterone
Booster;
7.
Beyond
Human
®
Ketones;
8.
Beyond
Human
®
Krill
Oil;
9.
Beyond
Human
®
Omega 3
Fish Oil;
10.
Beyond
Human
®
Vision
Formula;
11.
Beyond
Human
®
Blood
Sugar;
12.
Beyond
Human
®
Colon
Cleanse;
13.
Beyond
Human
®
Green Coffee
Extract;
14.
Beyond
Human
®
Growth
Agent;
15.
RecalMax
™
for brain health;
16.
Androferti
®
(U.S. and Canada) for the support of overall male reproductive
health and sperm quality; and
17.
UriVarx
™
for overactive
bladder and urinary incontinence.
|
|
|
|
|
|
|
|
|
In
addition, we currently expect to launch in the U.S. the following
products in 2017, subject to the applicable regulatory approvals,
if required:
1.
Xyralid™ for the relief of the pain and symptoms
caused by hemorrhoids (first half of 2017);
2.
AllerVarx
™
for allergic
rhinitis symptoms (first half of 2017);
3.
AndroVit™ for prostate and sexual health (second
half of 2017);
4.
Urocis™ XR for urinary tract infections in
women (second half of 2017); and
5.
FlutiCare
™
for allergic
rhinitis subject to FDA ANDA approval (second half of
2017).
Sales and Marketing Strategy U.S. and Internationally
Our sales and marketing strategy is based on (a)
the use of direct to consumer advertisements in print and online
media through our proprietary Beyond
Human®
sales
and marketing infrastructure acquired in March 2016; (b) working
with direct commercial channel partners in the U.S. and also
directly marketing the products ourselves to physicians,
urologists, gynecologists and therapists and to other healthcare
providers; and (c) working with exclusive commercial partners
outside of the U.S. that would be responsible for sales and
marketing in those territories. We have now fully integrated most
of our existing line of products such as Vesele
®
,
Sensum+
®
,
UriVarx
™
,
Zestra
®
,
and RecalMax
™
into the Beyond
Human®
sales
and marketing platform. We plan to integrate
Xyralid™, AllerVarx
™
,
AndroVit™, Urocis™ XR; and
FlutiCare
™
,
subject to regulatory approvals, upon their commercial launches in
2017. We also market and distribute our products in the U.S.
through retailers, wholesalers and other online channels. Our
strategy outside the U.S. is to partner with companies who can
effectively market and sell our products in their countries through
their direct marketing and sales teams. The strategy of using our
partners to commercialize our products is designed to limit our
expenses and fix our cost structure, enabling us to increase our
reach while minimizing our incremental
spending.
Our
current OTC monograph, Rx-to-OTC ANDA switch drugs and consumer
care products marketing strategy is to focus on four main U.S.
markets which we believe each to be in excess of $1.0 billion: (1)
Sexual health (female and male sexual dysfunction and
health); (2) Urology (bladder and prostate health); (3) Respiratory
disease; and (4) Brain health. We will
focus our current efforts on these four markets and will seek to
develop, acquire or license products that we can sell through our
sales channels in these fields.
Acquisition and Licensing Strategy
Our
acquisition and licensing strategy is to acquire or in-license
products that fit our commercialization strategy that are branded,
with growing market shares, that can be sold direct to consumers
and through our on-line partnerships and that can then be sold
internationally through our commercial partnerships.
The
following represents products and product candidates we have
successfully acquired:
1.
Zestra
®
and Zestra Glide
®
(acquired Semprae Laboratories, Inc.
in 2013 - current Innovus subsidiary);
2.
Vesele
®
(from Trophikos, Inc. in
2014);
3.
Sensum+
®
(from Centric Research Institute in
2013);
4.
FlutiCare
™
(acquired Novalere, Inc. in 2015,
current Innovus Pharma subsidiary);
and
5.
Beyond
Human
®
Testosterone Booster; Beyond Human
®
Human
Growth Agent; Beyond Human
®
Ketones;
Beyond Human
®
Krill
Oil; Beyond Human
®
Omega 3
Fish Oil; Beyond Human
®
Vision
Formula; Beyond Human
®
Blood
Sugar; and Beyond Human
®
Colon
Cleanse (acquired Beyond Human
™
assets in
2016).
The
following represents the products we have in-licensed from third
parties:
1.
Androferti
®
(from Q Pharma in
2015);
2.
AllerVarx
™
(from NTC Pharma in
2016);
3.
AndroVit
™
(from Q Pharma in
2015);
4.
Urocis
™
XR
(from Q Pharma in
2015); and
5.
In addition, we have developed and repurposed
Xyralid
™
for
the relief of the pain and
symptoms caused by hemorrhoids
.
|
|
|
|
|
|
|
|
|
We
currently have 14 partnerships that have the rights to sell certain
of our current products in approximately 65 countries. Our
international partners include the following
companies:
1.
Orimed
Pharma, the OTC subsidiary of Jamp Pharma (Canada);
2.
DanaLife
ApS (Denmark and in alternative markets);
3.
Tramorgan
(U.K);
4.
Sothema
Laboratories (MENA);
5.
Ovation
Pharma (Morocco);
6.
Tabuk
Pharmaceuticals (MENA);
7.
BroadMed
(Lebanon);
8.
Elis
Pharmaceuticals (Turkey and Lebanon);
9.
BioTask
(Malaysia);
10.
Oz
Biogenics (Myanmar and Vietnam);
11.
Khandelwal
Laboratories (India);
12
.
PT
Resources (Select Asian Countries);
13.
Q
Pharma (US and Canada); and
14
.
J&H Co. LTD
(South Korea).
Risks Related to our Business
Our ability to implement our business strategy is subject to
numerous risks, as more fully described in the section entitled
“Risk Factors” immediately following this prospectus
summary. These risks include, among others:
●
We have a short operating history and have not produced significant
revenue from our operations;
●
We have a history of operating losses, including an accumulated
deficit of approximately $29.1 million at
December 31, 2016, which will likely continue in the
future;
●
The success of our
business currently depends on market acceptance of all 17 of our
products, but also on our top five products:
Vesele
®
,
Sensum+
®
,
Zestra
®
,
Beyond Human®
Testosterone Booster
and RecalMax
™
that
accounted for approximately 92% of our annual net
revenue during the year ended December 31, 2016. No
customer accounted for more than 10% of total net revenue for
the year ended December 31, 2016;
●
We have no commercial manufacturing capacity and rely on
third-party contract manufacturers to produce commercial quantities
of our products;
●
We face significant competition and have limited resources compared
to many of our competitors;
●
We may never receive
approval of our ANDA from the FDA for Fluticare
™
,
which we are relying upon to generate significant future
revenue;
●
If
we fail to protect our intellectual property rights, such as
patents and trademarks, our ability to pursue the development of
our technologies and products would be negatively
affected;
●
We
may not be able to raise the levels of financing required to market
and sell many of our products;
●
We
may not be able to grow effectively and retain or hire the
necessary talent to increase our sales;
●
We
may not be able to grow internationally as we would like due to
regulatory, political, or economic changes in such
countries;
●
We
are currently very reliant on the experience, knowledge, skills and
actions of our President and Chief Executive Officer, Dr. Bassam
Damaj;
●
We
may not be able to acquire or license the necessary products
required for us to grow effectively and increase our product
revenue;
●
We
may face an uncertain U.S. regulatory, political and economic
environment with the ascendancy of a new U.S.
presidential administration;
and
●
Our
liquidity.
|
|
|
|
|
|
|
|
|
The
Offering
|
|
|
|
|
|
|
Common stock we are offering
|
25,000,000
shares of common stock
|
|
|
|
|
|
|
Warrants we are offering
|
Each s
hare
of common stock sold in this offering will be accompanied by a
five-year Series A Warrant to purchase one share of our common
stock, at an exercise price of
$ per share
( % of the public offering price of
our common stock) and a one-year Series B Warrant to purchase one
share of our common stock, at an exercise price of
$ per share
( % of the public offering price of
our common stock). The Warrants will be immediately exercisable.
This prospectus also covers the shares of common stock issuable
upon exercise of the Warrants offered
hereby.
|
|
|
Common stock outstanding after this offering
|
149,810,756 shares of common stock
|
|
|
|
|
|
|
Use of proceeds
|
We
estimate that the net proceeds to us from this offering, after
deducting the estimated offering expenses payable by us,
and based on the assumed combined public offering
price of $0.20 per share of common stock and related Warrants (the
last bid price of our common stock on the OTCQB Marketplace on
March 10, 2017)
will be approximately
$4.3 million, excluding any proceeds we may receive
upon exercise of the Warrants, if any. We intend to use the net
proceeds of this offering for the commercial launch of
FlutiCare™, if approved by the FDA, working capital and
general corporate purposes, including sales and marketing
activities, product development, capital expenditures, the
potential repayment of certain debt of the Company and product
acquisitions and product licenses. See “
Use of Proceeds
” for a more
complete description of the intended use of proceeds from this
offering.
|
|
|
|
|
|
|
Determination of offering
price
|
The offering price
of our common stock and related Warrants was negotiated between us
and the investors, in consultation with the placement agent based
on the trading of our common stock prior to the offering, among
other things. Other factors considered in determining the offering
price of the common stock and related Warrants we are offering
include our history and prospects, the stage of development of our
business, our business plans for the future and the extent to which
they have been implemented, an assessment of our management,
general conditions of the securities markets at the time of the
offering and such other factors as were deemed
relevant.
|
|
|
|
|
|
|
Risk factors
|
You
should read the “
Risk
Factors
” section of this prospectus and the other
information in this prospectus for a discussion of factors to
consider carefully before deciding to invest in shares of our
common stock.
|
|
|
|
|
|
|
OTCQB Marketplace Symbol
|
“INNV.”
We do not intend to apply for listing of the Warrants
on any securities exchange or other nationally recognized trading
system and we do not expect such a market to develop.
|
|
|
The number of
shares of our common stock to be outstanding after this offering is
based on 124,810,756 shares of our common stock outstanding as of
March 10, 2017 and excludes the following, in each
case as of such date:
|
|
|
|
●
|
253,500
shares of common stock issuable upon the exercise of stock options
outstanding as of March 10, 2017, at a weighted average exercise
price of $0.21 per share;
|
|
|
●
|
13,818,336
unallocated shares of common stock reserved for future issuance
under our stock-based compensation plans, consisting of no shares
of common stock reserved for future issuance under our 2013 Equity
Incentive Plan ("
2013
Plan
"), 61,367 shares of common stock reserved for future
issuance under our 2014 Equity Incentive Plan ("
2014 Plan
"), and 13,756,969 shares of
common stock reserved for future issuance under our 2016 Equity
Incentive Plan ("
2016
Plan
") (together, the “
Incentive Plans
”), and such
additional shares that become available under our Incentive Plans
pursuant to provisions thereof that automatically increase the
share reserves under the Incentive Plans each
year;
|
|
|
●
|
14,935,303 shares
of common stock reserved for issuance of outstanding restricted
stock units as of March 10, 2017;
|
|
|
●
|
5,097,448 shares of common stock
issuable upon conversion of the 2016 convertible notes payable as
of March 10, 2017; (“
2016
Notes
”)
|
|
|
●
|
5,967,054 shares
of common stock issuable upon the exercise of warrants outstanding
as of March 10, 2017, at a weighted average exercise price of $0.34
per share; and
|
|
|
●
|
50,000,000
shares of common stock
issuable upon exercise of the Warrants to be issued in connection
with this offering, and 1,250,000 shares of our common stock
issuable upon the exercise of the warrants issuable to the
placement agents.
|
|
|
Although the
foregoing includes common stock issuable upon conversion of
outstanding 2016 Notes, as a result of the offering, the holders
(i) may elect to convert all principal and accrued interest into
shares of common stock at a conversion price equal to $
, which represents a 10% discount to the public
offering price of the shares of common stock in this offering; or
(ii) shall receive a prepayment of 100% of outstanding principal
and 100% of all accrued unpaid interest directly from the proceeds
of this offering. As a result, in the event all holders of 2016
Notes elect to convert into common stock, an additional 1,982,341
shares of common stock will be issued and
outstanding.
Except as
otherwise indicated, all information in this prospectus assumes no
exercise of the outstanding options and warrants or the conversion
of convertible notes payable and restricted stock
units into common shares described above.
|
|
|
|
|
|
|
|
|
|
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
The summary
consolidated statements of operations data presented below for the
years ended December 31, 2015 and 2016 are derived from our
audited consolidated financial statements included elsewhere in
this prospectus. The summary consolidated balance sheet data as of
December 31, 2016 have been derived from our audited consolidated
financial statements included elsewhere in this prospectus. The
following summary consolidated financial data should be read with
“
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
” and our consolidated financial statements
and related notes included elsewhere in this prospectus. Our
historical results are not necessarily indicative of the results
that may be expected in any future period. The summary financial
data in this section are not intended to replace the consolidated
financial statements and are qualified in their entirety by the
consolidated financial statements and related notes included
elsewhere in this prospectus.
|
|
|
|
|
(1)
|
See Note 1 to our audited consolidated financial statements for an explanation of the method used to calculate basic and diluted net loss per common share and the weighted-average number of shares used in the computation of the per share amounts. |
|
|
|
|
|
|
|
As of December 31,
2016
|
|
|
|
|
Actual
|
As
Adjusted
(1)
(2)
|
|
|
Consolidated
Balance Sheet Data:
|
|
|
|
|
Cash
|
$
829.933
|
$
5,104,993
|
|
|
Total
assets
|
8,227,378
|
12,502,378
|
|
|
Notes payable and non-convertible
debenture, net of debt discount
|
681,127
|
681,127
|
|
|
Convertible debentures, net of debt
discount
|
714,192
|
714,192
|
|
|
Contingent
consideration
|
1,685,917
|
1,685,917
|
|
|
Derivative liabilities –
embedded conversion features
|
319,674
|
319,674
|
|
|
Derivative liabilities –
warrants
|
164,070
|
164,070
|
|
|
Total stockholders’
equity
|
1,093,973
|
5,368,973
|
|
|
|
|
|
|
(1)
|
The as adjusted
balance sheet data gives effect to the sale of 25,000,000 shares of
common stock by us in this offering based on the assumed combined
public offering of $0.20 per share of common stock and related
warrants (the last bid price of our common stock on the OTCQB
Marketplace on March 10, 2017) and after deducting the placement
agent fees and estimated offering expenses payable by
us.
|
|
(2)
|
Each $0.05 increase (decrease) in
the assumed offering price of $0.20 per share related warrants
would increase (decrease) each of our as adjusted cash, total
assets and total stockholders’ equity by approximately $1.2
million, assuming that the number of shares offered by us, remains
the same and after deducting the placement agent fees and estimated
offering expenses payable by us. Similarly, each increase
(decrease) of 6,250,000 shares in the number of shares offered by
us would increase (decrease) each of our as adjusted cash, total
assets and total stockholders’ equity by approximately $1.2
million, assuming the assumed offering price remains the same and
after deducting the placement agent fees and estimated offering
expenses payable by us.
|
|
|
High
|
Low
|
Year
Ending December 31, 2017
|
|
|
First quarter
ending March 31, 2017 (through March
10
, 2017)
|
$
0.39
|
$
0.14
|
|
|
|
Year
Ended December 31, 2016
|
|
|
First quarter ended
March 31, 2016
|
$
0.10
|
$
0.03
|
Second quarter
ended June 30, 2016
|
$
0.37
|
$
0.05
|
Third quarter ended
September 30, 2016
|
$
0.66
|
$
0.21
|
Fourth quarter
ended December 31, 2016
|
$
0.33
|
$
0.16
|
|
|
|
Year
Ended December 31, 2015
|
|
|
First quarter ended
March 31, 2015
|
$
0.28
|
$
0.13
|
Second quarter
ended June 30, 2015
|
$
0.19
|
$
0.11
|
Third quarter ended
September 30, 2015
|
$
0.16
|
$
0.05
|
Fourth quarter
ended December 31, 2015
|
$
0.12
|
$
0.05
|
|
Assumed public
offering price per share and related
Warrants
|
|
$
0.20
|
|
|
|
Net tangible book
deficit per share as of December 31,
2016
|
$
(0.04
)
|
|
|
|
|
Increase per share
attributable to new investors in this offering
|
0.04
|
|
|
|
|
As adjusted net
tangible book deficit per share after this
offering
|
|
(0.00)
|
|
|
|
Dilution per share
to new investors in this offering
|
|
$
0.20
|
|
For the Year Ended December 31, 2016
|
For the Year Ended December 31, 2015
|
|
|
|
Net
cash used in operating activities
|
$
(1,784,258
)
|
$
(1,031,727
)
|
Net
cash used in investing activities
|
(172,103
)
|
(12,816
)
|
Net
cash provided by financing activities
|
2,730,393
|
1,092,965
|
Net
change in cash
|
774,032
|
48,422
|
Cash
at beginning of the year
|
55,901
|
7,479
|
Cash
at the end of the year
|
$
829,933
|
$
55,901
|
●
|
Focusing on acquisition and licensing of commercial,
non-prescription pharmaceutical and consumer health products that
are well aligned with current therapeutic areas of male and female
sexual health, pain, vitality and respiratory diseases
. In
general, we seek non-prescription pharmaceutical (OTC monograph, Rx
to OTC ANDA switched drugs) and consumer health products that are
already marketed with scientific and/or clinical data and evidence
that are aligned with our therapeutic areas, which we then can grow
through promotion to physicians and expanding sales through our
existing retail and online channels and commercial partners on a
worldwide basis. We have done this through our acquisitions and
licensing of (1) Sensum+
®
from Centric
Research Institute or CRI, (2) Zestra
®
and
Zestra Glide® from Semprae, (3)
Vesele
®
from Trōphikōs, LLC, (4)
U.S. and Canada rights to
Androferti
®
from
Laboratorios Q Pharma (Spain), (5) FlutiCare
™
from Novalere,
and (6) UriVarx
™
from Seipel
Group;
|
●
|
Increasing the number of U.S. non-exclusive distribution channel
partners for direct and online sales and also open more channels
directly to physicians, urologists, gynecologists and
therapists
. One of our goals is to increase the number of
U.S. distribution channel partners that sell our products. To do
this, we have devised a three-pronged approach. First, we are
seeking to expand the number of OTC direct selling partners, such
as the larger in-store distributors for selected products,
and
to
expand sales to the more regional, statewide and local
distributors, such as regional pharmacy chains, large grocery
stores and supplement and health stores for selected products.
Second, we are working to expand our online presence through
relationships with well-known online sellers and the acquisition of
additional platforms such as established Amazon
stores
®
.
Third, we are seeking to expand sales of our OTC products directly
through sampling programs and detailing to physicians, urologists,
gynecologists, therapists and to other healthcare providers who
generally are used to recommending to their patients products that
are supported by strong
scientific and/or
clinical data and evidence;
|
●
|
Seeking commercial partnerships outside the U.S. and developing
consistent international commercial and distribution
systems
. We seek to develop a strong network of
international distribution partners outside of the U.S. To do so,
we are relying in part on past relationships that Dr. Bassam Damaj,
our President and Chief Executive Officer, has had with certain
commercial partners globally. In addition, we believe we
have the ability to develop new relationships with commercial
distributors who can demonstrate they have leading positions in
their regions and can provide us with effective marketing and sales
efforts and teams to detail our products to physicians
and therapists. Our commercial partners outside the U.S. are
responsible for storing, distributing and promoting our products to
physicians, urologists, gynecologists, therapists and to other
healthcare providers. We have already entered into 14 commercial
partnerships covering our products in 65 countries outside the
U.S.;
|
●
|
Developing a proprietary patent portfolio to protect the
therapeutic products and categories we desire to
enter.
We have
filed and are working to secure patent claims in the U.S. and
abroad covering product inventions and innovations that we believe
are valuable. These patents, if issued and ultimately found to be
valid, may enable us to create a barrier to entry for competitors
on a worldwide basis; and
|
●
|
Achieving cost economies of scale from lower cost manufacturing,
integrated distribution channels and multiple product
discounts.
We believe that we can achieve higher gross
margins per product by shifting manufacturing to lower cost
manufacturers. We also feel that we can acquire other OTC and
consumer healthcare products and reintroduce them into our networks
and sales and marketing platforms utilizing our integrated
distribution and direct to consumer channels, thus receiving
multiple product economies of scale from our distribution
partners.
|
Name
|
|
Age
|
|
Title
|
Bassam
Damaj, Ph.D.
|
|
48
|
|
President,
Chief Executive Officer, Chief Accounting Officer
|
Robert
E. Hoffman
|
|
51
|
|
Executive
Vice President and Chief Financial Officer
|
Randy
Berholtz, MBA, JD
|
|
55
|
|
Executive
Vice President, Corporate Development and General
Counsel
|
Henry
Esber, Ph.D.
|
|
78
|
|
Chairman
of the Board of Directors
|
Vivian
Liu
|
|
55
|
|
Director
|
Ziad
Mirza, MBA, M.D.
|
|
55
|
|
Director
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
(1)
|
Stock
Awards
|
Stock
Unit
Awards
|
All
Other
Compen-sation
|
Total
|
Bassam Damaj Ph
D.,
|
2016
|
$
532,400
(2)
|
$
-
|
$
-
|
$
240,000
(3)
|
$
-
|
$
772,400
|
President and Chief
Executive Officer, and former Chief Financial
Officer
(4)
|
2015
|
$
484,000
(2)
|
$
-
|
$
-
|
$
630,000
(3)
|
$
-
|
$
1,114,000
|
|
|
|
|
|
|
|
|
Robert E.
Hoffman,
|
|
|
|
|
|
|
|
Executive Vice
President and Chief Financial
Officer
(5)
|
2016
|
$
96,731
|
$
-
|
$
-
|
$
675,000
(3)
|
$
-
|
$
771,731
|
(1)
|
Our
board of directors has not yet determined the amounts of bonuses
payable to our named executive officers earned in 2016. We
anticipate that bonuses, if any, for 2016 will be determined by our
board of directors by mid-April 2017.
|
(2)
|
Pursuant
to the LOC Convertible Debenture, Dr. Damaj agreed not to draw a
salary pursuant to his employment agreement for so long as payment
of such salary would jeopardize the Company’s ability to
continue as a going concern and not to draw any salary accrued
through December 31, 2015. Salary through June 30, 2016 was accrued
for and remains unpaid as of December 31, 2016. Effective July 1,
2016, Dr. Damaj started receiving his salary in cash.
|
(3)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic
718, Stock Compensation, of restricted stock unit awards granted
during the respective fiscal year.
|
(4)
|
Dr. Damaj served as Chief Financial Officer from July 2015 until
September 6, 2016 when Mr. Robert E. Hoffman became Executive Vice
President and Chief Financial Officer.
|
(5)
|
Represents
Mr. Hoffman’s salary from the commencement of his employment
on September 6, 2016, through December 31, 2016.
|
|
|
Option Awards
|
|||
Name
|
Grant Date
(1)
|
Number of Securities Underlying Unexercised Options (#)
Exercisable
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option Exercise
Price ($)
|
Option Expiration
Date
|
Robert E. Hoffman
(1)
|
Sep.
30, 2013
|
10,500
|
—
|
$
0.90
|
Sep.
29, 2023
|
|
Dec. 31, 2013
|
10,500
|
—
|
$
0.38
|
Dec.
30, 2023
|
|
Mar. 31, 2014
|
10,500
|
—
|
$
0.40
|
Mar. 30, 2024
|
|
Jun. 30, 2014
|
10,500
|
—
|
$
0.25
|
Jun.
29, 2024
|
|
Sep. 30, 2014
|
10,500
|
—
|
$
0.40
|
Sep. 29, 2024
|
|
Dec. 31, 2014
|
10,500
|
—
|
$
0.18
|
Dec.
30, 2024
|
|
Mar
31, 2015
|
10,500
|
—
|
$
0.14
|
Mar.
30, 2025
|
|
Jun. 30, 2015
|
10,500
|
—
|
$
0.12
|
Jun.
29, 2025
|
|
Sep. 30, 2015
|
10,500
|
—
|
$
0.07
|
Sep. 29, 2025
|
|
Dec. 31, 2015
|
10,500
|
—
|
$
0.07
|
Dec. 30, 2025
|
|
Mar.
31, 2016
|
10,500
|
—
|
$
0.05
|
Mar.
30, 2026
|
Name
|
Grant Date
(1)
|
Equity incentive
plan awards: Number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or payout value of unearned shares, units or
other rights
|
Bassam
Damaj
(1)
|
Mar. 31,
2015
|
375,000
|
$
75,000
|
Robert E.
Hoffman
(2)
|
Sep. 6, 2016
|
2,500,000
|
$
500,000
|
(1)
|
Represents
the total grant date fair value, as determined under FASB ASC Topic
718, Stock Compensation, of RSU awards granted during the
respective fiscal year.
|
(2)
|
Includes
an award of 833,333 RSUs granted to each of the directors on
January 29, 2016 under the 2014 Plan in connection with the
acquisition of Beyond Human
®
assets. One-half of the RSUs were vested upon grant and the
remaining RSUs vested upon the closing of the Beyond
Human
®
acquisition on March 1, 2016.
|
NAME OF OWNER
(1)
|
Amount and nature of beneficial ownership of Common Stock
(2)
|
Percentage of outstanding Common
Stock Before the Offering
(3)
|
Percentage of outstanding
Common Stock
Following the Offering
(10)
|
5%
Stockholders
|
|
|
|
Novalere Holdings
LLC
151 Treemont
Street, Penthouse
Boston, MA
02111
|
25,617,592
|
20.53
%
|
17.10
%
|
|
|
|
|
Directors
and Named Executive Officers:
|
|
|
|
Bassam Damaj, Ph.D.
(4)
|
23,703,347
|
18.42
%
|
15.42
%
|
Robert E. Hoffman
(5)
|
395,603
|
*
|
*
|
Randy Berholtz,
MBA/JD
(6)
|
175,000
|
*
|
*
|
Henry Esber, Ph.D.
(7)
|
1,853,109
|
1.46
%
|
1.22
%
|
Vivian Liu
(8)
|
2,439,780
|
1.93
%
|
1.61
%
|
Ziad Mirza,
MBA/M.D.
(9)
|
2,013,044
|
1.59
%
|
1.33
%
|
Officers and
Directors as a Group (6 persons)
|
30,579,883
|
22.82
%
|
19.23
%
|
(10)
|
Percentage based
upon 149,810,756 shares of common stock issued and outstanding
immediately after the offering.
|
|
December
31,
2016
|
December
31,
2015
|
Wages
|
$
1,455,886
|
$
1,178,909
|
Vacation
|
261,325
|
170,371
|
Bonus
|
449,038
|
-
|
Payroll taxes on
the above
|
133,344
|
93,510
|
Total
|
2,299,593
|
1,442,790
|
Classified as
long-term
|
(1,531,904
)
|
(906,928
)
|
Accrued
compensation
|
$
767,689
|
$
535,862
|
Report of
Independent Registered Public Accounting Firm
|
|
F-1 |
Consolidated
Balance Sheets - December 31, 2016 and
2015
|
|
F-2
|
Consolidated Statements of Operations- Years Ended December
31, 2016 and 2015
|
|
F-3
|
Consolidated
Statements of Cash Flows- Years Ended
December
31, 2016 and 2015
|
|
F-4
|
Consolidated
Statements of Stockholders’ Equity (Deficit) -
December
31, 2016 and 2015
|
|
F-6
|
Notes
to the Consolidated Financial Statements -
December
31, 2016 and 2015
|
|
F-7
|
See
accompanying notes to these consolidated financial
statements.
|
|
For the Year Ended
December 31,
|
|
|
2016
|
2015
|
NET
REVENUE:
|
|
|
Product
sales, net
|
$
4,817,603
|
$
730,717
|
License
revenue
|
1,000
|
5,000
|
Net
revenue
|
4,818,603
|
735,717
|
|
|
|
OPERATING
EXPENSE:
|
|
|
Cost
of product sales
|
1,083,094
|
340,713
|
Research
and development
|
77,804
|
-
|
Sales
and marketing
|
3,621,045
|
82,079
|
General
and administrative
|
5,870,572
|
3,828,113
|
Impairment
of goodwill
|
-
|
759,428
|
Total
operating expense
|
10,652,515
|
5,010,333
|
|
|
|
LOSS
FROM OPERATIONS
|
(5,833,912
)
|
(4,274,616
)
|
|
|
|
OTHER
INCOME AND (EXPENSE):
|
|
|
Interest
expense
|
(6,661,694
)
|
(1,153,376
)
|
Change
in fair value of derivative liabilities
|
65,060
|
393,509
|
Other
income (expense), net
|
1,649
|
(8,495
)
|
Fair
value adjustment for contingent consideration
|
(1,269,857
)
|
115,822
|
Loss
on extinguishment of debt
|
-
|
(32,500
)
|
Total
other expense, net
|
(7,864,842
)
|
(685,040
)
|
|
|
|
LOSS
BEFORE PROVISION FOR (BENEFIT FROM) INCOME
TAXES
|
(13,698,754
)
|
(4,959,656
)
|
|
|
|
Provision
for (benefit from) income taxes
|
2,400
|
(757,028
)
|
|
|
|
NET
LOSS
|
$
(13,701,154
)
|
$
(4,202,628
)
|
|
|
|
NET
LOSS PER SHARE OF COMMON STOCK – BASIC AND
DILUTED
|
$
(0.15
)
|
$
(0.08
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING
– BASIC AND DILUTED
|
94,106,382
|
52,517,530
|
|
|
For the Year Ended
December 31,
|
|
|
2016
|
2015
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
NET
LOSS
|
$
(13,701,154
)
|
$
(4,202,628
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
5,532
|
28,950
|
Allowance
for doubtful accounts
|
2,066
|
5,892
|
Common
stock, restricted stock units and stock options issued to
employees, board
of
directors and consultants for compensation and
services
|
2,684,602
|
1,508,769
|
Gain
on purchase price adjustment to goodwill
|
-
|
(759,428
)
|
Impairment
of goodwill
|
-
|
759,428
|
Loss
on extinguishment of debt
|
-
|
32,500
|
Change
in fair value of contingent consideration
|
1,449,857
|
(115,822
)
|
Non-cash
gain on settlement of contingent consideration
|
(180,000
)
|
-
|
Change
in fair value of derivative liabilities
|
(65,060
)
|
(393,509
)
|
Shares
of common stock issued for debt amendment
|
-
|
15,500
|
Fair
value of embedded conversion feature in
convertible
debentures in excess of allocated proceeds
|
2,756,899
|
71,224
|
Amortization
of debt discount
|
3,646,161
|
960,061
|
Amortization
of intangible assets
|
624,404
|
550,789
|
Changes
in operating assets and liabilities, net of acquisition
amounts:
|
|
|
Accounts
receivable
|
47,456
|
102,612
|
Prepaid
expense and other current assets
|
(279,786
)
|
27,653
|
Deposits
|
-
|
6,961
|
Inventories
|
(345,413
)
|
11,516
|
Accounts
payable and accrued expense
|
694,547
|
(206,657
)
|
Accrued
compensation
|
856,803
|
535,862
|
Accrued
interest payable
|
31,907
|
29,745
|
Deferred
revenue and customer deposits
|
(13,079
)
|
(1,145
)
|
Net
cash used in operating activities
|
(1,784,258
)
|
(1,031,727
)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Purchase
of property and equipment
|
-
|
(9,540
)
|
Purchase
of intangible assets
|
-
|
(3,276
)
|
Payments
on contingent consideration
|
(172,103
)
|
-
|
Net
cash used in investing activities
|
(172,103
)
|
(12,816
)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Repayments
of line of credit convertible debenture – related
party
|
(409,192
)
|
(14,886
)
|
Financing
costs in connection with issuance of convertible
debentures
|
(40,000
)
|
(82,500
)
|
Proceeds
from short-term loans payable
|
21,800
|
258,278
|
Payments
on short-term loans payable
|
(252,151
)
|
(27,927
)
|
Proceeds
from notes payable and convertible debentures
|
3,574,000
|
1,455,000
|
Payments
on notes payable
|
(449,204
)
|
(440,000
)
|
Proceeds
from warrant exercises
|
310,140
|
-
|
Proceeds
from non-convertible debentures – related party
|
-
|
50,000
|
Payments
on non-convertible debentures – related party
|
(25,000
)
|
(105,000
)
|
Net
cash provided by financing activities
|
2,730,393
|
1,092,965
|
|
|
|
NET
CHANGE IN CASH
|
774,032
|
48,422
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
55,901
|
7,479
|
|
|
|
CASH
AT END OF YEAR
|
$
829,933
|
$
55,901
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
Cash
paid for income taxes
|
$
-
|
$
2,400
|
Cash
paid for interest
|
$
229,046
|
$
107,764
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
|
|
|
Common stock issued
for conversion of notes payable, convertible debentures and
accrued
interest
|
$
3,264,705
|
$
167,000
|
Reclassification of
the fair value of the embedded conversion features from derivative
liability
to additional
paid-in capital upon conversion
|
$
3,111,828
|
$
-
|
Cashless
exercise of warrants
|
$
3,385
|
$
-
|
Reclassification of the fair value of
the warrants from derivative liability to additional paid-in
capital
upon cashless exercise
|
$
518,224
|
$
-
|
Common
stock issued for acquisition
|
$
-
|
$
2,071,625
|
Relative fair value
of common stock issued in connection with notes payable recorded as
debt
discount
|
$
276,167
|
$
-
|
Relative fair value
of warrants issued in connection with convertible debentures
recorded as debt
discount
|
$
445,603
|
$
89,551
|
Relative fair value
of common stock issued in connection with convertible debentures
recorded
as debt
discount
|
$
1,127,225
|
$
374,474
|
Fair value of
embedded conversion feature derivative liabilities recorded as debt
discount
|
$
687,385
|
$
830,560
|
Fair value of
warrants issued to placement agents in connection with convertible
debentures
recorded as debt
discount
|
$
357,286
|
$
68,419
|
Fair value of the
contingent consideration for acquisition
|
$
330,000
|
$
2,905,425
|
Fair value of
warrant derivative liabilities recorded as debt
discount
|
$
-
|
$
226,297
|
Proceeds from note
payable paid to seller in connection with acquisition
|
$
300,000
|
$
-
|
Financing costs
paid with proceeds from note payable
|
$
7,500
|
$
-
|
Common
stock issued to Novalere Holdings for payment of the acquisition
contingent
consideration
as a result of an amendment and supplement to the registration
rights and stock
restriction
agreement
|
$
2,971,641
|
$
-
|
Fair value of
unamortized non-forfeitable common stock issued to consultant
included in
prepaid expense and
other current assets
|
$
170,600
|
$
-
|
Fair value of
non-forfeitable common stock to be issued to consultant included in
prepaid
expense and other
current assets and accounts payable and accrued
expense
|
$
360,000
|
$
-
|
Issuance of shares
of common stock for vested restricted stock units
|
$
19,316
|
$
500
|
Return of shares of
common stock related to license agreement
|
$
-
|
$
38,000
|
Accrued interest
added to principal in connection with amendment of notes
payable
|
$
-
|
$
3,200
|
Fair value of
beneficial conversion feature on line of credit convertible
debenture – related party
|
$
3,444
|
$
8,321
|
See
accompanying notes to these consolidated financial
statements.
|
|
Common Stock
|
Additional
Paid-in
|
Accumulated
|
Stockholders'
Equity
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
(Deficit)
|
|
|
|
|
|
|
Balance
at January 1, 2015
|
27,112,263
|
$
27,113
|
$
10,778,807
|
$
(11,231,967
)
|
$
(426,047
)
|
|
|
|
|
|
|
Common
stock issued for services
|
1,780,625
|
1,780
|
208,749
|
-
|
210,529
|
Stock
compensation expense
|
-
|
-
|
1,298,240
|
-
|
1,298,240
|
Common
stock issued for product acquisition
|
12,947,657
|
12,948
|
2,058,677
|
-
|
2,071,625
|
Common
stock issued upon conversion of
convertible
debentures, note payable and
debentures
– related party
|
699,260
|
699
|
166,301
|
-
|
167,000
|
Common
stock issued for vested restricted stock
units
|
500,000
|
500
|
(500
)
|
-
|
-
|
Return
of shares of common stock from CRI
license
transaction
|
(200,000
)
|
(200
)
|
(37,800
)
|
-
|
(38,000
)
|
Return
of shares of common stock from
Semprae
merger transaction
|
(386,075
)
|
(386
)
|
(115,436
)
|
-
|
(115,822
)
|
Fair
value of beneficial conversion feature on line
of
credit convertible debenture – related
party
|
-
|
-
|
8,321
|
-
|
8,321
|
Shares
of common stock issued for extension of
February
2014 convertible debentures
|
250,000
|
250
|
32,250
|
-
|
32,500
|
Shares
of common stock issued for amendment of
January
2015 convertible debentures
|
100,000
|
100
|
15,400
|
-
|
15,500
|
Relative
fair value of shares of common stock
issued
in connection with convertible debentures
|
4,337,500
|
4,337
|
370,137
|
-
|
374,474
|
Relative
fair value of warrants issued in connection
with convertible
debentures
|
-
|
-
|
89,551
|
-
|
89,551
|
Fair value
of warrants issued to placement
agents in
connection with convertible debentures
|
-
|
-
|
68,419
|
-
|
68,419
|
Net
loss for year ended December 31, 2015
|
-
|
-
|
-
|
(4,202,628
)
|
(4,202,268
)
|
|
|
|
|
|
|
Balances
at December 31, 2015
|
47,141,230
|
47,141
|
14,941,116
|
(15,434,595
)
|
(446,338
)
|
|
|
|
|
|
|
Common
stock issued for services
|
10,732,500
|
10,733
|
1,802,216
|
-
|
1,812,949
|
Stock-based
compensation
|
-
|
-
|
954,753
|
-
|
954,753
|
Common
stock issued to Novalere Holdings, LLC
for
payment of contingent consideration
|
12,808,796
|
12,809
|
2,958,832
|
-
|
2,971,641
|
Common
stock issued upon conversion of
convertible debentures and accrued interest
|
17,100,508
|
17,100
|
3,247,605
|
-
|
3,264,705
|
Common
stock issued for vested restricted stock
units
|
19,315,994
|
19,316
|
(19,316
)
|
-
|
-
|
Fair
value of beneficial conversion feature on line
of
credit convertible debenture – related party
|
-
|
-
|
3,444
|
-
|
3,444
|
Relative
fair value of shares of common stock
issued
in connection with notes payable and
convertible
debentures
|
9,861,111
|
9,861
|
1,393,531
|
-
|
1,403,392
|
Relative
fair value of warrants issued in connection
with convertible
debentures
|
-
|
-
|
445,603
|
-
|
445,603
|
Fair value
of warrants issued to placement agents in
connection
with convertible debentures
|
-
|
-
|
357,286
|
-
|
357,286
|
Common
stock issued for legal costs from Semprae
merger
transaction
|
215,000
|
215
|
64,285
|
-
|
64,500
|
Common
stock issued in connection with license
agreement
|
100,000
|
100
|
22,900
|
-
|
23,000
|
Common
stock issued upon cashless exercise of
warrants
|
3,385,354
|
3,385
|
(3,385
)
|
-
|
-
|
Common
stock issued upon exercise of warrants
|
1,033,800
|
1,034
|
309,106
|
-
|
310,140
|
Reclassification
of embedded conversion feature
derivative
liability upon conversion of convertible
debentures
|
-
|
-
|
3,111,828
|
-
|
3,111,828
|
Reclassification
of warrant derivative liability upon
cashless
exercise of warrants
|
-
|
-
|
518,224
|
-
|
518,224
|
Net
loss for year ended December 31, 2016
|
-
|
-
|
-
|
(13,701,154
)
|
(13,701,154
)
|
|
|
|
|
|
|
Balances
at December 31, 2016
|
121,694,293
|
$
121,694
|
$
30,108,028
|
$
(29,135,749
)
|
$
1,093,973
|
Cash
consideration
|
$
300,000
|
Fair
value of future earn out payments
|
330,000
|
Total
|
$
630,000
|
|
|
Fair Value
|
|
|
Useful Life
|
|
||
Website
|
|
$
|
171,788
|
|
|
|
5
years
|
|
Trade
name
|
|
|
50,274
|
|
|
|
10
years
|
|
Non-competition
covenant
|
|
|
3,230
|
|
|
|
3
years
|
|
Customer
list
|
|
|
1,500
|
|
|
|
1
year
|
|
Total
|
|
$
|
226,792
|
|
|
|
|
|
|
Year Ended
December 31, 2016
|
Year Ended
December 31, 2015
|
||
|
As Reported
|
Pro Forma (unaudited)
|
As Reported
|
Pro Forma (unaudited)
|
Net
revenue
|
$
4,818,603
|
$
4,868,241
|
$
735,717
|
$
2,947,694
|
Net
loss
|
$
(13,701,154
)
|
$
(13,700,702
)
|
$
(4,202,628
)
|
$
(3,901,770
)
|
Net
loss per share of common stock – basic and
diluted
|
$
(0.15
)
|
$
(0.15
)
|
$
(0.08
)
|
$
(0.07
)
|
Weighted
average number of shares
outstanding
– basic and diluted
|
94,106,382
|
94,106,382
|
52,517,530
|
52,517,530
|
|
Shares
|
FMV
|
Closing
Consideration Shares
|
12,947,657
|
$
2,071,625
|
ANDA
Consideration Shares
|
12,947,655
|
1,657,300
|
Total
|
25,895,312
|
$
3,728,925
|
Cash
consideration
|
$
43,124
|
Fair
value of common stock issued at closing
|
2,071,625
|
Fair
value of ANDA consideration shares
|
1,657,300
|
Fair
value of future earn out payments
|
1,205,000
|
Total
|
$
4,977,049
|
Cash
|
$
43,124
|
Prepaid
expense
|
25,907
|
Total
tangible assets
|
69,031
|
|
|
Product
rights and related manufacturing agreement
|
4,681,000
|
Trademarks
|
150,000
|
Total
identifiable intangible assets
|
4,831,000
|
Goodwill
|
120,143
|
Total
acquired assets
|
5,020,174
|
|
|
Other
current liabilities
|
(43,125
)
|
Total
assumed liabilities
|
(43,125
)
|
|
|
Acquired
assets net of assumed liabilities
|
$
4,977,049
|
|
Year Ended
December 31, 2015
|
|
|
As Reported
|
Pro Forma (unaudited)
|
Net
revenue
|
$
735,717
|
$
735,717
|
Net
loss
|
$
(4,202,628
)
|
$
(4,578,521
)
|
Net
loss per share of common stock – basic and
diluted
|
$
(0.08
)
|
$
(0.09
)
|
Weighted
average number of shares outstanding – basic and
diluted
|
52,517,530
|
53,794,559
|
|
December 31,
|
|
|
2016
|
2015
|
Raw
materials and supplies
|
$
85,816
|
$
77,649
|
Work
in process
|
48,530
|
90,540
|
Finished
goods
|
465,510
|
86,254
|
Total
|
$
599,856
|
$
254,443
|
|
December 31,
|
|
|
2016
|
2015
|
Computer
equipment
|
$
5,254
|
$
5,254
|
Office
furniture and fixtures
|
33,376
|
33,376
|
Production
equipment
|
276,479
|
276,479
|
Software
|
338,976
|
338,976
|
Total
cost
|
654,085
|
654,085
|
Less
accumulated depreciation
|
(624,516
)
|
(618,984
)
|
Property
and equipment, net
|
$
29,569
|
$
35,101
|
|
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Useful Lives
(years)
|
|
|
|
|
|
Patent
& Trademarks
|
$
417,597
|
$
(91,201
)
|
$
326,396
|
7 – 15
|
Customer
Contracts
|
611,119
|
(188,428
)
|
422,691
|
10
|
Sensum+®
License (from CRI)
|
234,545
|
(84,009
)
|
150,536
|
10
|
Vesele®
Trademark
|
25,287
|
(7,047
)
|
18,240
|
8
|
Beyond Human
®
Website and Trade Name
|
222,062
|
(32,821
)
|
189,241
|
5 – 10
|
Novalere
Mfg. Contract
|
4,681,000
|
(887,440
)
|
3,793,560
|
10
|
Other Beyond Human
®
Intangible Assets
|
4,730
|
(2,147
)
|
2,583
|
1 – 3
|
Total
|
$
6,196,340
|
$
(1,293,093
)
|
$
4,903,247
|
|
|
Amount
|
Accumulated
Amortization
|
Net
Amount
|
Useful
Lives
(years)
|
|
|
|
|
|
Patent
& Trademarks
|
$
417,597
|
$
(57,593
)
|
$
360,004
|
7 – 15
|
Customer
Contracts
|
611,119
|
(127,316
)
|
483,803
|
10
|
Sensum+®
License (from CRI)
|
234,545
|
(60,554
)
|
173,991
|
10
|
Vesele®
Trademark
|
25,287
|
(3,886
)
|
21,401
|
8
|
Novalere
Mfg. Contract
|
4,681,000
|
(419,340
)
|
4,261,660
|
10
|
Total
|
$
5,969,548
|
$
(668,689
)
|
$
5,300,859
|
|
2017
|
$
630,000
|
2018
|
630,000
|
2019
|
629,000
|
2020
|
629,000
|
2021
|
600,000
|
Thereafter
|
1,785,000
|
Total
|
$
4,903,000
|
|
December 31,
|
|
|
2016
|
2015
|
Prepaid
insurance
|
$
69,976
|
$
27,816
|
Prepaid
inventory
|
20,750
|
-
|
Merchant
net settlement reserve receivable (see Note 1)
|
221,243
|
-
|
Prepaid
consulting and other expense
|
21,094
|
25,462
|
Prepaid
consulting and other service stock-based compensation
expense (see Note 8)
|
530,601
|
-
|
Total
|
$
863,664
|
$
53,278
|
|
December 31,
|
|
|
2016
|
2015
|
Accounts
payable
|
$
647,083
|
$
63,826
|
Accrued
credit card balances
|
31,654
|
91,037
|
Accrued
royalties
|
73,675
|
-
|
Sales
returns and allowances
|
60,853
|
-
|
Accrual
for stock to be issued to consultants (see Note 8)
|
360,000
|
-
|
Accrued
other
|
36,785
|
640
|
Total
|
$
1,210,050
|
$
155,503
|
Beginning
balance December 31, 2014
|
$
429,225
|
Acquisition
of Novalere (see Note 3)
|
120,143
|
Release
of valuation allowance in connection with acquisition of Novalere
(see Note 10)
|
759,428
|
Impairment
of valuation allowance in connection with acquisition of Novalere
(see Note 10)
|
(759,428
)
|
Ending
balance December 31, 2015
|
549,368
|
Asset acquisition of Beyond Human
®
(see Note 3)
|
403,208
|
Ending
balance December 31, 2016
|
$
952,576
|
2017
|
$
843,013
|
2018
|
54,985
|
Total
|
$
897,998
|
|
2016
|
2015
|
|
|
|
Convertible
debentures
|
$
-
|
$
1,457,500
|
Less:
Debt discount
|
-
|
(1,050,041
)
|
Carrying
value
|
-
|
407,459
|
Less:
Current portion
|
-
|
(407,459
)
|
Convertible
debentures – long-term
|
$
-
|
$
-
|
|
|
December 31,
2015
|
|
Expected
terms (in years)
|
|
5.00
|
|
Expected
volatility
|
|
101%
– 119%
|
|
Risk-free
interest rate
|
|
1.37%
– 1.58%
|
|
Dividend
yield
|
|
-
|
|
|
2016
|
|
|
Convertible
debentures
|
$
1,559,922
|
Less:
Debt discount
|
(845,730
)
|
Carrying
value
|
714,192
|
Less:
Current portion
|
(714,192
)
|
Convertible
debentures – long-term
|
$
-
|
|
December 31,
2016
|
Expected
terms (in years)
|
5.00
|
Expected
volatility
|
229
%
|
Risk-free
interest rate
|
1.01-1.15
% 1.15%
|
Dividend
yield
|
-
|
|
2016
|
2015
|
Line
of credit convertible debenture – related party
|
$
-
|
$
409,192
|
2014
non-convertible debenture – related party
|
-
|
25,000
|
Total
|
-
|
434,192
|
Less
: Debt discount
|
-
|
(17,720
)
|
Carrying
value
|
-
|
416,472
|
Less:
Current portion
|
-
|
(391,472
)
|
Total
long-term debentures – related party
|
$
-
|
$
25,000
|
|
2016
|
2015
|
Wages
|
$
1,455,886
|
$
1,178,909
|
Vacation
|
261,325
|
170,371
|
Bonuses
|
449,038
|
-
|
Payroll
taxes on the above
|
133,344
|
93,510
|
Total
|
2,299,593
|
1,442,790
|
Classified
as long-term
|
(1,531,904
)
|
(906,928
)
|
Accrued
compensation
|
$
767,689
|
$
535,862
|
|
2016
|
2015
|
Expected
life (in years)
|
10.0
|
6.0
|
Expected
volatility
|
227.2
%
|
228.8
%
|
Average
risk-free interest rate
|
1.76
%
|
2.16
%
|
Dividend
yield
|
-
|
-
|
Grant
date fair value
|
$
0.18
|
$
0.10
|
|
Options
|
Weighted average
exercise price
|
Weighted remaining
contractual life (years)
|
Aggregate
intrinsic value
|
Outstanding
at December 31, 2014
|
113,000
|
$
0.37
|
9.5
|
-
|
Granted
|
83,000
|
$
0.10
|
10.0
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Cancelled
|
-
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Outstanding
at December 31, 2015
|
196,000
|
$
0.31
|
9.0
|
-
|
Granted
|
91,500
|
$
0.17
|
10.0
|
-
|
Exercised
|
-
|
-
|
-
|
-
|
Cancelled
|
(50,000
)
|
$
0.31
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
-
|
Outstanding
at December 31, 2016
|
237,500
|
$
0.22
|
8.6
|
$
14,293
|
|
|
|
|
|
Vested
at December 31, 2015
|
196,000
|
$
0.31
|
9.0
|
$
-
|
Vested
at December 31, 2016
|
237,500
|
$
0.22
|
8.6
|
$
14,293
|
|
Restricted
Stock Units
|
Outstanding
at December 31, 2014
|
8,270,239
|
Granted
|
10,354,497
|
Exchanged
|
(500,000
)
|
Cancelled
|
(570,000
)
|
Outstanding
at December 31, 2015
|
17,554,736
|
Granted
|
14,636,106
|
Exchanged
|
(19,315,994
)
|
Cancelled
|
-
|
Outstanding
at December 31, 2016
|
12,874,848
|
|
|
Vested
at December 31, 2015
|
14,398,487
|
Vested
at December 31, 2016
|
8,493,600
|
|
2016
|
|
2015
|
|
Expected
life (in years)
|
3.1
– 4.0
|
|
4.1
– 5.0
|
|
Expected
volatility
|
188%
– 230%
|
|
226%
|
|
Average
risk-free interest rate
|
0.86%
– 1.47%
|
|
1.15%
– 1.54%
|
|
Dividend
yield
|
-
|
|
-
|
|
|
|
2016
|
|
|
2015
|
|
Stock
price
|
$
|
0.05
– 0.50
|
|
$
|
0.07
– 0.16
|
|
Strike
price
|
$
|
0.15
– 0.25
|
|
$
|
0.15
|
|
Expected
life (in years)
|
|
0.3
– 1.1
|
|
|
0.7
– 1.1
|
|
Expected
volatility
|
|
121%
– 274%
|
|
|
101%
– 119%
|
|
Average
risk-free interest rate
|
|
0.28%
– 0.69%
|
|
|
0.28%
– 0.60%
|
|
|
Fair value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Embedded
conversion feature derivative liabilities
|
$
319,674
|
$
-
|
$
-
|
$
319,674
|
$
319,674
|
Warrant
derivative liabilities
|
164,070
|
-
|
-
|
164,070
|
164,070
|
Total
|
$
483,744
|
$
-
|
$
-
|
$
483,744
|
$
483,744
|
|
Fair value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Embedded
conversion feature derivative liabilities
|
$
301,779
|
$
-
|
$
-
|
$
301,779
|
$
301,779
|
Warrant
derivative liabilities
|
432,793
|
-
|
-
|
432,793
|
432,793
|
Total
|
$
734,572
|
$
-
|
$
-
|
$
734,572
|
$
734,572
|
|
2016
|
2015
|
Current:
|
|
|
Federal
|
$
(800
)
|
$
(759,428
)
|
State
|
3,200
|
2,400
|
Total
current
|
2,400
|
(757,028
)
|
|
|
|
Deferred:
|
|
|
Federal
|
2,552,758
|
(525,815
)
|
State
|
650,597
|
(96,157
)
|
Change
in valuation allowance
|
(3,203,355
)
|
621,972
|
Total
deferred
|
-
|
-
|
Income
tax provision (benefit)
|
$
2,400
|
$
(757,028
)
|
|
2016
|
2015
|
|
|
|
Net
operating loss carry-forwards
|
$
8,108,000
|
$
3,792,000
|
State
taxes
|
1,000
|
1,000
|
Equity
based instruments
|
374,000
|
1,585,000
|
Deferred
compensation
|
916,000
|
575,000
|
Intangibles
|
-
|
158,000
|
Derivative
liabilities
|
127,000
|
120,000
|
Other
|
125,000
|
106,000
|
Total
deferred tax assets
|
9,651,000
|
6,337,000
|
|
|
|
Intangibles
|
(1,572,000
)
|
(1,687,000
)
|
Warrants
|
(170,000
)
|
(23,000
)
|
Debt
discount
|
(252,000
)
|
(172,000
)
|
Other
|
(4,000
)
|
(5,000
)
|
Total
deferred tax liabilities
|
(1,998,000
)
|
(1,887,000
)
|
|
|
|
Less:
valuation allowance
|
(7,653,000
)
|
(4,450,000
)
|
|
|
|
Net
deferred tax assets
|
$
-
|
$
-
|
|
2016
|
2015
|
Expected
federal tax
|
34.00
%
|
34.00
%
|
State
tax (net of federal benefit)
|
(0.02
)%
|
(0.04
)%
|
Contingent
consideration
|
(3.15
)%
|
0.94
%
|
Fair
value of embedded conversion feature in excess of allocated debt
proceeds
|
(5.01
)%
|
-
%
|
Restricted
stock
|
(7.34
)%
|
-
%
|
Release
of valuation allowance
|
-
%
|
18.10
%
|
Other
|
0.86
%
|
0.57
%
|
Valuation
allowance
|
(19.36
)%
|
(35.49
)%
|
|
|
|
Total
|
(0.02
)%
|
18.08
%
|
2017
|
$
91,849
|
2018
|
95,880
|
2019
|
8,018
|
Total
|
$
195,747
|
|
|
|
The information in this preliminary prospectus is not complete and
may be changed. Neither we nor the selling stockholder may sell any
of these securities until the registration statement filed with
Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale
is not permitted.
|
||
|
|
|
Common stock offered by Selling Stockholder
|
25,617,592
shares as of the date of this prospectus.
|
|
|
Common stock outstanding
|
124,810,756
shares of common stock.
|
|
|
Use of proceeds
|
We will
not receive any proceeds from the sale of the common stock by the
Selling Stockholder.
|
|
|
Risk factors
|
You
should read the “
Risk
Factors
” section of this prospectus and the other
information in this prospectus for a discussion of factors to
consider carefully before deciding to invest in shares of our
common stock.
|
|
|
OTCQB symbol
|
“INNV”
|
(1)
|
Information
concerning other Selling Stockholders will be set forth in one or
more prospectus supplements from time to time, if
required.
|
(2)
|
See
table titled “
Security
Ownership of Certain Beneficial Owners and Management
”
on page of this prospectus for information regarding securities
held by Novalere Holdings, LLC (“
Novalere
”) prior to this
offering.
|
(3)
|
Robert
Kargman, David Cohen, and Valerie Friedman jointly shave voting and
dispositive power over the shares of common stock beneficially
owned by Novalere. The address of Novalere is 151 Tremont Street,
Penthouse, Boston, MA 02111.
|
(4)
|
Percentage based
upon 124,810,756 shares of common stock issued and outstanding
immediately after the offering.
|
●
|
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the
block;
|
●
|
as
principal to facilitate the transaction;
|
●
|
purchases by a
broker-dealer as principle and resale by the broker-dealer for its
account;
|
●
|
an
exchange distribution in accordance with the rules of the
applicable exchange;
|
●
|
privately
negotiated transaction;
|
●
|
broker-dealers may
agree with the Selling Stockholder to sell a specified number of
such shares at a stipulated price per share;
|
●
|
specified number of
such shares at a stipulated price per share;
|
●
|
a
combination of any such methods of sale; and
|
●
|
any
other method permitted pursuant to applicable law.
|
SEC registration
fee
|
$
2,923.30
|
Accounting fees and
expenses
|
$
15,000.00
|
Legal fees and
expenses
|
$
150,000.00
|
FINRA filing
fee
|
$
3,526.25
|
Blue Sky filing
fees
|
$
7,500.00
|
Miscellaneous fees
and expenses
|
$
10,000.00
|
Total
|
$
188,949.46
|
●
|
any
breach of the director’s duty of loyalty to us or our
stockholders
|
●
|
acts or
omissions not in good faith or, which involve intentional
misconduct or a knowing violation of law
|
●
|
or
under applicable Sections of the Nevada Revised
Statutes
|
●
|
the
payment of dividends in violation of Section 78.300 of the Nevada
Revised Statutes, or
|
●
|
for any
transaction from which the director derived an improper personal
benefit.
|
|
1.
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
(i)
|
To
include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b)
(§230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
and
|
|
(iii)
|
To
include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
|
|
2.
|
That,
for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
|
|
3.
|
To
remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
|
|
4.
|
That,
for the purpose of determining liability under the Securities Act
of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other
than prospectuses filed in reliance on Rule 430A, shall be deemed
to be part of and included in the registration statement as of the
date it is first used after effectiveness.
Provided, however
, that no statement
made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of
first use.
|
|
5.
|
That,
for the purpose of determining liability of the registrant under
the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
|
|
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
|
|
(i)
|
Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
|
|
(iii)
|
The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
|
|
(iv)
|
Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
|
|
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
|
|
|
INNOVUS
PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
By:
/s/ Bassam
Damaj
|
|
|
|
Bassam
Damaj
President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ *
|
|
President
and Chief Executive Officer
|
|
March 13
,
2017
|
Bassam
Damaj
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
/s/
*
|
|
Executive
Vice President
and Chief Financial
Officer
|
|
March 13
,
2017
|
Robert E.
Hoffman
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/
*
|
|
Chairman
of the Board of Directors
|
|
March 13
,
2017
|
Henry
Esber
|
|
|
|
|
|
|
|
|
|
/s/
*
|
|
Director
|
|
March 13
,
2017
|
Vivian Liu
|
|
|
|
|
|
|
|
|
|
/s/ *
|
|
Director
|
|
March 13
,
2017
|
Ziad Mirza
|
|
|
|
|
|
|
|
|
|
*
By:
/s/ Bassam
Damaj
|
Attorney-in-fact
|
INNOVUS PHARMACEUTICALS, INC.
|
Address
for Notice:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
E-Mail:
Fax:
|
|
|
Warrant Shares:
[_______
|
I
nitial Exercise
Date: [_______, 2017
|
|
|
Issue Date:
[_______, 2017
|
|
|
(A)
|
= as applicable:
(i) the VWAP on the Trading Day immediately preceding the date of
the applicable Notice of Exercise if such Notice of Exercise is (1)
both executed and delivered pursuant to Section 2(a) hereof on a
day that is not a Trading Day or (2) both executed and delivered
pursuant to Section 2(a) hereof on a Trading Day prior to the
opening of “regular trading hours” (as defined in Rule
600(b)(64) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, (ii) at the option of the
Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
pursuant to Section 2(a) hereof or (iii) the VWAP on the date of
the applicable Notice of Exercise if the date of such Notice of
Exercise is a Trading Day and such Notice of Exercise is both
executed and delivered pursuant to Section 1(a) hereof after the
close of “regular trading hours” on such Trading
Day;
|
|
|
|
|
(B)
|
=
the Exercise Price of this Warrant, as adjusted hereunder;
and
|
|
(X)
|
=
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
|
|
INNOVUS PHARMACEUTICALS, INC.
|
|
By:__________________________________________
Name:
Title:
|
Name:
|
|
|
(Please Print)
|
Address:
|
|
Phone
Number:
Email
Address:
|
(Please
Print)
|
Dated: _______________ __, ______
|
|
Holder’s Signature:
|
|
Holder’s Address:
|
|
Warrant Shares:
[_______
|
Initial Exercise
Date: [_______, 2017
Issue Date:
[_______, 2017
|
INNOVUS PHARMACEUTICALS, INC.
|
By:__________________________________________
Name:
Title:
|
Name:
|
|
|
(Please Print)
|
Address:
|
|
Phone Number:
Email Address:
|
(Please
Print)
______________________________________
______________________________________
|
Dated: _______________ __, ______
|
|
Holder’s
Signature:
|
|
Holder’s
Address:
|
|