As
filed with the Securities and Exchange Commission on October
9, 2018
Registration
No. 333-227430
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM S-1/A
(Amendment No. 1)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BRIDGELINE DIGITAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
|
7372
|
52-2263942
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
80 Blanchard Road
Burlington, MA 01803
(781)
376-5555
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive
Offices)
Roger Kahn
President and Chief Executive Officer
Bridgeline Digital, Inc.
80 Blanchard Road
Burlington, MA 01803
(781)
376-5555
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to
Daniel W. Rumsey, Esq.
Jessica R. Sudweeks, Esq.
Disclosure Law Group, a Professional Corporation
600 West Broadway, Suite 700
San Diego, CA 92101
Telephone: (619) 272-7050
Facsimile: (619)
330-2101
|
Leslie
Marlow, Esq.
Hank
Gracin, Esq.
Patrick
J. Egan, Esq.
Gracin
& Marlow, LLP
The
Chrysler Building
405
Lexington Avenue, 26th Floor
New
York, NY 10174
Telephone:
(212) 907-6457
Facsimile:
(212) 208-4657
|
Approximate date of
commencement of proposed sale to the public
: As soon as practicable after this registration
statement becomes effective.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the following
box.
☑
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering.
☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering.
☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act:
Large accelerated filer
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☐
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Accelerated
filer
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☐
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Non-accelerated
filer
|
|
☐
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Smaller reporting company
|
|
☑
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|
|
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Emerging growth
company
|
|
☐
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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.
☐
CALCULATION OF REGISTRATION
FEE
Title
of each class of securities to be registered
|
Proposed
maximum aggregate offering
price
(1)
|
Amount
of registration fee
|
Common
Stock, par value $0.001 per share
(2)
|
$
7,187,500
|
$
871.13
|
Representative’s
Warrants
(3)
|
—
|
—
|
Shares of Common
Stock underlying Representative’s Warrants
(2)(4)
|
$
390,625
|
$
47.34
|
Total
|
$
7,578,125
|
$
918.47
(5)
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(1)
|
Estimated solely
for the purpose of calculating the amount of the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended
(the “
Securities
Act
”). Includes shares that the underwriters have the
option to purchase to cover over-allotments, if any.
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(2)
|
Pursuant to Rule
416 under the Securities Act, the shares of common stock being
registered hereunder also include such indeterminate number of
additional shares of common stock as may be issued after the date
hereof as a result of stock splits, stock dividends or similar
transactions.
|
(3)
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No registration fee
required pursuant to Rule 457(g) under the Securities
Act.
|
(4)
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Estimated solely
for the purpose of calculating the registration fee pursuant to
Rule 457(g) under the Securities Act.
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(5)
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$826.77
previously paid.
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The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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 the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell these
securities nor does it seek an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
|
SUBJECT TO COMPLETION
|
DATED OCTOBER 9
,
2018
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6,250,000
Shares
Common
Stock
Bridgeline
Digital, Inc.
We are offering 6,250,000 shares of
our common stock pursuant to this prospectus
for an assumed public offering price of $1.00 per
share (the last reported sale price of our common stock on the
NASDAQ Capital Market on October 3,
2018).
Our common stock is
currently listed on the Nasdaq Capital Market under the symbol
“BLIN.” The last reported sale price of our common
stock on October 3, 2018 was $1.00
per share and the last
reported sale price of our common stock on October 8, 2018 was
$1.045.
The actual public
offering price will be as determined by us and the underwriters at
the time of pricing, and may be at a discount to the current market
price. Accordingly, the recent market price used throughout this
prospectus may not be indicative of the actual public offering
price.
Investing in our securities involves risks. See
“
Risk
Factors
” beginning on
page
8
of this prospectus for a discussion of the risks
that you should consider in connection with an investment in our
securities.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
|
|
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Public
offering price
|
$
|
$
|
Underwriting discounts and commissions
(1)
|
$
|
$
|
Proceeds,
before expenses, to us
|
$
|
$
|
_______________
(1)
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We
have also
agreed to issue to the representative of the underwriters a
five-year warrant to purchase up to 312,500 shares of our common
stock (based on an assumed public offering price of $1.00 per
share, which was the last reported sale price of our common stock
on the Nasdaq Capital Market on October 3, 2018), an amount equal
to 5% of the shares of common stock offered pursuant to this
prospectus, with an exercise price equal to the greater of (i) 125%
of the public offering price per share in this offering and (ii)
the closing price of our common stock on the closing date of this
offering, as reported by the Nasdaq Capital Market (the
“
Representative's
Warrants
”). In
addition, we have also agreed to reimburse the underwriters for
certain expenses. See “
Underwriting
”
beginning on page 33 for additional information regarding this
warrant and underwriting compensation
generally.
|
We have granted the underwriters an option for a
period of 45 days from the date of this prospectus to purchase up
to an additional 937,500 shares of our common stock,
an amount equal to 15% of the number of shares offered hereby, on
the same terms and conditions described herein, solely to cover
over-allotments, if any. See “
Underwriting
”
for more information.
The underwriters expect to deliver the shares of
common stock against payment on or about
, 2018, subject to customary closing
conditions.
ThinkEquity
a
division of Fordham Financial Management, Inc.
The
date of this prospectus is
,
2018
BRIDGELI
N
E DIGITAL, INC.
TAB
LE OF
CONTENTS
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Page
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1
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2
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8
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15
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16
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17
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18
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19
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21
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22
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25
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30
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31
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33
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38
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38
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38
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39
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39
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We have not, and the underwriters have not,
authorized anyone to provide you with information different than
that which is contained in or incorporated by reference in this
prospectus or in any free writing prospectus that we have
authorized for use in connection with this offering. We are
offering to sell, and seeking offers to buy, shares of common stock
only in jurisdictions where offers and sales are permitted. The
distribution of this prospectus and the offering of the securities
in certain jurisdictions may be restricted by law. This prospectus
does not constitute, and may not be used in connection with, an
offer to sell, or a solicitation of an offer to buy, any securities
offered by this prospectus by any person in any jurisdiction in
which it is unlawful for such person to make such an offer or
solicitation. You should assume that the information appearing in
this prospectus, the documents incorporated by reference in this
prospectus, and in any free writing prospectus that we have
authorized for use in connection with this offering, is accurate
only as of the date of those respective documents. Our business,
financial condition, results of operations and prospects may have
changed since those dates. You should read this prospectus, the
documents incorporated by reference in this prospectus, and any
free writing prospectus that we have authorized for use in
connection with this offering, in their entirety before making an
investment decision. You should also read and consider the
information in the documents to which we have referred you in the
sections of this prospectus entitled “
Where You Can Find More
Information
” and
“
Incorporation of Certain
Information by Reference
.”
For
investors outside of the United States: No action is being taken in
any jurisdiction outside of the United States that would permit a
public offering of the shares of our common stock or possession or
distribution of this prospectus in any such jurisdiction. Persons
outside of the United States who come into possession of this
prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the shares of common
stock and the distribution of this prospectus outside of the United
States.
We
further note that the representations, warranties and covenants
made by us in any agreement that is filed as an exhibit to any
document that is incorporated by reference in this prospectus were
made solely for the benefit of the parties to such agreement,
including, in some cases, for the purpose of allocating risk among
the parties to such agreements, and should not be deemed to be a
representation, warranty or covenant to you. Moreover, such
representations, warranties or covenants were accurate only as of
the date when made. Accordingly, such representations, warranties
and covenants should not be relied on as accurately representing
the current state of our affairs.
Unless the context requires otherwise, references
in this prospectus to “
Bridgeline
,” “
Bridgeline
Digital
,” the
“
Company
,” “
we
,” “
us
,” and “
our
” refer to Bridgeline Digital, Inc., a
Delaware corporation.
This prospectus and
the information incorporated herein by reference include
trademarks, servicemarks and tradenames owned by us or other
companies. All trademarks, servicemarks and tradenames included or
incorporated by reference in this prospectus are the property of
their respective owners.
|
This summary highlights
information contained elsewhere in this prospectus. This summary
does not contain all of the information you should consider before
investing in our securities. Before deciding to invest in our
securities, you should read this entire prospectus carefully,
including the section of this prospectus entitled “Risk
Factors” beginning on page 8
.
All brand names or trademarks
appearing in this report are the property of their respective
holders. Unless the context requires otherwise, references in this
report to “Bridgeline,” the “Company,”
“we,” “us,” and “our” refer to
Bridgeline Digital, Inc., a Delaware
corporation.
Overview
Bridgeline
Digital, The Digital Engagement Company™, helps
customers maximize the performance of their full digital experience
from websites and intranets to online stores. Bridgeline’s
Unbound platform integrates Web Content Management, eCommerce,
eMarketing, Social Media management, and Web Analytics (Insights)
with the goal of assisting marketers deliver digital experiences
that attract, engage and convert their customers across all
channels. Bridgeline’s Unbound platform combined with its
digital services assists customers in maximizing on-line revenue,
improving customer service and loyalty, enhancing employee
knowledge, and reducing operational costs. Our Unbound
franchise product is a platform that empowers large franchise and
multi-unit organizations with state-of-the-art web engagement
management while providing superior oversight of corporate
branding. Our Unbound franchise product also deeply integrates
content management, eCommerce, eMarketing and web analytics on one
unified platform.
The Unbound platform is delivered through a
cloud-based software as a service (“
SaaS
”) multi-tenant business model, whose
flexible architecture provides customers with state of the art
deployment providing maintenance, daily technical operation and
support; or via a traditional perpetual licensing business model,
in which the software resides on a dedicated server in either the
customer’s facility or hosted by Bridgeline via a cloud-based
hosted services model.
The Bridgeline
Unbound Platform is an award-winning application recognized around
the globe. Our teams of Microsoft Gold© certified developers
have won over 100 industry related awards. In 2017, our
Marketing Automation platform was named a 2017 SIIA CODiE Award
finalist in the Best Marketing Solution category. In 2016,
CIO Review
selected
Bridgeline Unbound (formerly iAPPS) as one of the 20 Most Promising
Digital Marketing Solution Providers. This followed accolades
from the SIIA (Software and Information Industry Association) which
recognized Content Manager with the 2015 SIIA CODiE Award for Best
Web Content Management Platform. Also in 2015,
EContent
magazine named
Bridgeline’s Unbound Digital Engagement Platform to its
Trendsetting Products list. The list of 75 products and platforms
was compiled by EContent’s editorial staff, and selections
were based on each offering’s uniqueness and importance to
digital publishing, media, and marketing. We were also recognized
in 2015 as a strong performer by Forrester Research, Inc in its
independence report, “The Forrester Wave ™:
Through-Channel Marketing Automation Platforms, Q3 2015.” In
recent years, our Content Manager and Commerce products were
selected as finalists for the 2014, 2013, and 2012 CODiE Awards for
Best Content Management Solution and Best Electronic Commerce
Solution, globally. In 2014 and 2013, Bridgeline Digital won
twenty-five Horizon Interactive Awards for outstanding development
of web applications and websites. Also in 2013, the Web Marketing
Association sponsored Internet Advertising Competition honored
Bridgeline Digital with three awards for customer websites and B2B
Magazine selected Bridgeline Digital as one of the Top Interactive
Technology companies in the United States
.
KMWorld Magazine Editors selected
Bridgeline Digital as one of the 100 Companies That Matter in
Knowledge Management and also selected Bridgeline’s Unbound
(formerly iAPPS) as a Trend Setting Product in 2013.
Corporate Information
We were incorporated in the state of Delaware in
2000. Our principal place of business is located at 80 Blanchard
Road, Burlington, Massachusetts 01803. Our telephone number is
(781) 376-5555. We maintain a corporate website
at
http://www.bridgeline.com
.
The information
contained on our website is not, and should not be interpreted to
be, a part of this prospectus.
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THE
OFFERING
|
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The following summary contains general information about this
offering. The summary is not intended to be complete. You should
read the full text and more specific details contained elsewhere in
this prospectus.
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Issuer
|
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Bridgeline Digital,
Inc.
|
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Common
Stock we are Offering
|
|
6,250,000 shares of common stock.
|
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Option
to Purchase Additional Shares of Common Stock
|
|
We
have granted the underwriters an option for a period of 45 days
from the date of this prospectus to purchase up to
937,500 additional shares of our common stock, an
amount equal to 15% of the number of shares offered hereby, on the
same terms and conditions as set forth herein, to cover
over-allotments, if any.
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Common
Stock to be Outstanding Immediately after this
Offering
|
|
10,491,225 shares (or 11,428,725 shares if the
underwriters exercise their option to purchase additional shares in
full).
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Assumed Public Offering
Price
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$1.00 (the last reported sale price of our common stock on the
Nasdaq Capital Market on October 3,
2018).
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Use
of Proceeds
|
|
We
estimate that we will receive net proceeds from this offering of
approximately $4.6 million, or approximately
$5.5 million if the underwriters exercise their option
to purchase additional shares in full, in each case, after
deducting underwriting discounts and our estimated offering
expenses.
We currently intend to use a portion of the net
proceeds that we receive from this offering to repay certain term
notes, and to utilize the remaining net proceeds for research and
development, working capital needs, capital expenditures and other
general corporate purposes. In addition, we may use a portion of
the net proceeds from this offering to pursue potential strategic
acquisitions, although we do not have any specific plans or
arrangements to do so at this time.
See “
Use of
Proceeds
” on page
16
of this
prospectus.
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Risk
Factors
|
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Investing in our securities involves significant
risks. Before making a decision whether to invest in our
securities, please read the information contained in or
incorporated by reference under the heading
“
Risk
Factors
” in this
prospectus, the documents we have incorporated by reference herein,
and under similar headings in other documents filed after the date
hereof and incorporated by reference into this prospectus. See
“
Incorporation of Certain
Information by Reference
”
and “
Where You Can Find More
Information
.”
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Nasdaq
Capital Market Symbol
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“BLIN.”
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The number of shares of our common stock that will
be outstanding immediately after the offering is based on 4,241,225
shares outstanding as of October 3
, 2018. Unless we specifically state otherwise,
the share information in this prospectus excludes:
●
459,846
shares of our common stock issuable upon the exercise of stock
options outstanding at a weighted-average exercise price of $6.81
per share;
●
546,151 shares of common stock issuable upon the exercise of
warrants at a weighted-average exercise price of $6.16
per share;
●
260,534
shares of common stock reserved for future issuance under our 2016
Stock Incentive Plan (the
“
2016
Plan
”)
;
●
161,455 shares of common stock issuable upon
conversion of 262,364 outstanding shares of Series A Convertible
Preferred
Stock
(“
Series A
Preferred
”);
and
●
312,500 shares of common stock issuable upon the exercise of
the Representative’s Warrants to be issued to the
representative of the underwriters upon closing of this
offering.
The
above numbers reflect the 1-for-5 stock split effectuated by
us on July 24, 2017.
Unless
otherwise indicated, all information in this prospectus
assumes:
●
no
conversion of outstanding shares of Series A
Preferred;
●
no
exercise of outstanding warrants or the outstanding stock options
issued under the 2016 Plan, as described above; and
●
no
exercise by the underwriters of their option to purchase up to an
additional 937,500 shares of common stock from us in
this offering to cover over-allotments, if any.
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SUMMARY FINANCIAL DATA
The following tables set forth a summary of our
historical financial data as of, and for the periods ended on, the
dates indicated. We have derived the statements of operations data
for the years ended September 30, 2017 and 2016 from our audited
financial statements and the related notes appearing in our Annual
Report on Form 10-K for the year ended September 30, 2017 (the
“
2017
10-K
”), which is
incorporated by reference into this prospectus. The statements of
operations data for the nine-months ended June 30, 2018 and 2017
and the balance sheet data as of June 30, 2018 have been derived
from our unaudited financial statements appearing in our Quarterly
Report on Form 10-Q for the period ended June 30, 2018 (the
“June
10-Q
”), which is
incorporated by reference into this prospectus. In the opinion of
the management, the unaudited data reflects all adjustments,
consisting of normal and recurring adjustments, necessary for a
fair presentation of results as of and for these
periods.
The following summary
financial data should be read together with our consolidated
financial statements and related notes appearing in the 2017 10-K
and in the June 10-Q, as well as in the sections entitled
“
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
” in each of the
2017 10-K and in our June 10-Q, each of which are incorporated by
reference into this prospectus. Our audited consolidated financial
statements have been prepared in U.S. dollars in accordance with
U.S. generally accepted accounting principles.
Our historical results for any prior period are
not indicative of our future results, and our results for the
nine-months ended June 30, 2018 may not be indicative of our
results for the year ending September 30, 2018.
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Statement of Operations
Data:
(dollars in
thousands)
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Revenue
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(unaudited
)
|
|
|
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Digital
engagement services
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$
5,559
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$
6,298
|
$
8,498
|
$
8,520
|
|
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Subscription
and perpetual licenses
|
4,367
|
5,018
|
6,788
|
6,084
|
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Managed
service hosting
|
839
|
743
|
1,007
|
1,291
|
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Total revenue
|
10,765
|
12,059
|
16,293
|
15,895
|
|
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Cost of revenue
|
|
|
|
|
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Digital
engagement services
|
3,666
|
3,569
|
4,911
|
5,143
|
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Subscription
and perpetual licenses
|
1,503
|
1,468
|
1,969
|
1,835
|
|
|
Managed
service hosting
|
213
|
209
|
280
|
304
|
|
|
Total
cost of revenue
|
5,382
|
5,246
|
7,160
|
7,282
|
|
|
Gross
profit
|
5,383
|
6,813
|
9,133
|
8,613
|
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Operating expenses
|
|
|
|
|
|
|
Sales
and marketing
|
3,045
|
3,661
|
4,807
|
4,934
|
|
|
General
and administrative
|
2,156
|
2,395
|
3,256
|
3,456
|
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Research
and development
|
1,221
|
1,175
|
1,587
|
1,578
|
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|
Depreciation
and amortization
|
305
|
468
|
582
|
1,309
|
|
|
Goodwill
impairment
|
4,615
|
-
|
-
|
-
|
|
|
Restructuring
expenses
|
187
|
249
|
286
|
879
|
|
|
Total operating expenses
|
11,529
|
7,948
|
10,518
|
12,156
|
|
|
|
|
|
|
|
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Loss
from operations
|
(6,146
)
|
(1,135
)
|
(1,385
)
|
(3,543
)
|
|
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Interest
and other expense, net
|
(115
)
|
(122
)
|
(201
)
|
(914
)
|
|
|
Loss
on inducement of debt (convertible notes)
|
-
|
-
|
-
|
(3,414
)
|
|
|
Loss
before income taxes
|
(6,261
)
|
(1,257
)
|
(1,586
)
|
(7,871
)
|
|
|
(Benefit)/provision
for income taxes
|
11
|
13
|
16
|
(47
)
|
|
|
Net
loss
|
$
(6,272
)
|
$
(1,270
)
|
$
(1,602
)
|
$
(7,824
)
|
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Dividends
on convertible preferred stock
|
(231
)
|
(207
)
|
(281
)
|
(131
)
|
|
|
Net
loss applicable to common shareholders
|
(6,503
)
|
(1,477
)
|
(1,883
)
|
(7,955
)
|
|
|
Net
loss per share attributable to common shareholders:
|
|
|
|
|
|
|
Basic
and diluted
|
$
(1.54
)
|
$
(0.36
)
|
$
(0.45
)
|
$
(4.20
)
|
|
|
Number
of weighted average shares outstanding:
|
|
|
|
|
|
|
Basic
and diluted
|
4,222,848
|
4,129,481
|
4,147,140
|
1,893,003
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
(unaudited, dollars in thousands)
|
|
|
|
Cash
and cash equivalents
|
$
427
|
$
1,187
|
$
5,797
|
Total
assets
|
11,422
|
12,182
|
16,792
|
Debt,
current portion, less unamortized discount and issuance
costs
|
198
|
958
|
198
|
Debt,
net of current portion
|
2,810
|
2,810
|
2,810
|
Total
liabilities
|
6,090
|
6,850
|
6,090
|
Total
stockholders’ equity
|
5,332
|
5,332
|
10,702
|
|
|
|
|
|
(1)
|
T
he pro forma figures give effect to the sale by
the Company of certain term promissory notes (the
“
Term
Notes
”) in the aggregate
principal amount of $941,176, which sales occurred
on September 7, 2018. After recording $141,176 of original
issue discount and debt issuance costs of $40,000, the Company
received net cash proceeds in the aggregate amount of $760,000 for
the Term Notes. The original issue discount and debt issuance costs
are recorded as a contra liability and will be amortized over the
life of the Term Notes. The Term Notes have an original issue
discount of fifteen percent (15%), bear interest at a rate of
twelve percent (12%) per annum, and mature on the earlier to occur
of (i) six months from September 7, 2018, or (ii) the consummation
of a debt or equity financing resulting in gross proceeds to the
Company of at least $3.0 million.
In connection with the issuance of the Term Notes,
each purchaser also entered into a Subordination Agreement with the
Company’s lenders, Heritage Bank of Commerce and Montage
Capital II, L.P. (the “
Lenders
”), pursuant to which the purchasers agreed
to subordinate (i) all of the Company’s indebtedness and
obligations to the purchasers, whether presently existing or
arising in the future, to all of the Company’s indebtedness
to the Lenders, and (ii) all of the
purchasers’ security interests, if any, to all of the
Lenders’ security interests in property of the
Company.
|
|
|
(2)
|
Pro forma as
adjusted balance sheet data reflects the items described in
footnote 1 and our sale of 6,250,000 shares of common
stock in this offering at an assumed public offering price of
$1.00 per share, which was the last reported sale
price of our common stock on the Nasdaq Capital Market on
October 3, 2018, after deducting underwriting
discounts and commissions and estimated offering expenses payable
by us as well as the repayment of the Term Notes, including
all accrued interest, which amounted to approximately $10,000 as of
October 3, 2018, out of proceeds of the offering. Pro forma
as adjusted balance sheet data is illustrative only and will change
based on the actual public offering price and other terms of this
offering determined at pricing. Each $0.25 increase (decrease) in
the public offering price per share would increase (decrease) the
amount of cash and cash equivalents, working capital, total assets,
and total stockholders’ equity by approximately
$1.5 million, assuming the number of securities
offered by us, as set forth on the cover page of this prospectus,
remains the same, and after deducting underwriting discounts and
commissions, estimated offering expenses payable by us, and the
amounts necessary to repay the Term Notes, including all
accrued interest, which amounted to approximately $10,000 as of
October 3, 2018. We may also increase or decrease the number
of securities to be issued in this offering. Each increase
(decrease) of 1.0 million shares offered by us would increase
(decrease) the as adjusted amount of cash and cash equivalents,
working capital, total assets and total stockholders’ deficit
by approximately $930,000, assuming the assumed public
offering price remains the same, and after deducting underwriting
discounts and commissions, estimated offering expenses payable by
us, and the amounts necessary to repay the Term Notes,
including all accrued interest, which amounted to approximately
$10,000 as of October 3, 2018. The pro forma information
discussed above is illustrative only and will be adjusted based on
the actual public offering price and other terms of this offering
determined between us and the underwriters at pricing.
|
|
|
|
|
|
An
investment in our securities involves a high degree of risk. You
should consider the risks, uncertainties and assumptions discussed
below as well as all of the other information contained or
incorporated by reference in this prospectus, including our
Quarterly Reports on Form 10-Q for the quarters ended December 31,
2017, March 31, 2018 and June 30, 2018, and our Annual Report on
Form 10-K for the fiscal year ended September 30, 2017.
See
“Incorporation of Certain Information by Reference” and
“Where You Can Find More Information.”
It is not possible to predict or identify all such
risks. Consequently, we could also be affected by additional
factors that are not presently known to us or that we currently
consider to be immaterial to our
operations.
The occurrence of any
of these known or unknown risks might cause you to lose all or part
of your investment in the offered securities.
Risks Related to Our Business
We have incurred significant net losses since inception and expect
continue to incur operating losses for the foreseeable future. We
may never achieve or sustain profitability, which would depress the
market price of our common stock and could cause you to lose all or
a part of your investment.
We
have incurred net losses in each fiscal year since our inception in
2000, including net losses of $7.8 million and $1.6 million during
the fiscal years ended September 30, 2017 and 2016, respectively,
and net losses of $6.3 million and $1.3 million during the nine
months ended June 30, 2018 and 2017, respectively. As of September
30, 2017, we had an accumulated deficit of approximately $54.3
million. We do not know whether or when we will become profitable.
Substantially all of our operating losses have resulted from costs
incurred in connection with our research and development programs
and from general and administrative costs associated with our
operations. Although we expect to incur decreasing levels of
operating losses over the next several years due to the
implementation of our restructuring plant, no assurances can be
given. Our prior losses, combined with expected future losses, have
had and will continue to have an adverse effect on our
stockholders’ equity (deficit) and working capital. Because
of the numerous risks and uncertainties associated with our
business, we are unable to predict the extent of any future losses
or when we will become profitable, if at all. Even if we do become
profitable, we may not be able to sustain or increase our
profitability on a quarterly or annual basis.
Our debt obligations and operating lease commitments may adversely
affect our financial condition and cash flows from
operations.
We maintain a $2.5 million line of credit
with our bank, Heritage Bank of Commerce, as well as a
non-revolving term loan for up to $1.0 million through Montage
Capital II, L.P., both of which are secured by all of our assets
and intellectual property. Additionally, on September 7, 2018, we
sold and issued Term Notes in the aggregate principal amount of
$941,176, which had accrued approximately $10,000 in interest
as of October 3, 2018, and which will mature on
the earliest to occur of
(i) six months from September 7,
2018, or (ii) the consummation of a debt or equity financing
resulting in gross proceeds to the Company of at least $3.0
million
. Further, we have contractual
commitments in operating lease arrangements, which are not
reflected on our consolidated balance sheets. Our ability to meet
our expenses and debt obligations will depend on our future
performance, which will be affected by financial, business,
economic, regulatory and other factors. We will not be able to
control many of these factors, such as economic conditions and
governmental regulations. Further, our operations may not generate
sufficient cash to enable us to service our debt or contractual
obligations resulting from our leases. If we fail to make a payment
on our debt, we could be in default on such debt. If we are at any
time unable to generate sufficient cash flows from operations to
service our indebtedness when payment is due, we may be required to
attempt to renegotiate the terms of the instruments relating to the
indebtedness, seek to refinance all or a portion of the
indebtedness or obtain additional financing. There can be no
assurance that we would be able to successfully renegotiate such
terms, that any such refinancing would be possible or that any
additional financing could be obtained on terms that are favorable
or acceptable to us.
Although
as of June 30, 2018, we were in compliance with all financial
covenants required pursuant to our borrowing facilities, we have
failed to satisfy such covenants in the past. A failure to comply
with the covenants and other provisions of our outstanding debt
could result in events of default under such instruments, which
could permit acceleration of all of our borrowings under our
revolving credit facility as well as our non-revolving term loan.
Any required repayment of our borrowing facilities as a result of a
fundamental change or other acceleration would lower our current
cash on hand such that we would not have those funds available for
use in our business. In addition, in the event we do not have
sufficient cash resources to repay our borrowings when due, we may
be required to forfeit all or some of our assets to the banks as a
result of their security interest in our assets, which would
negatively impact our business, financial condition and future
prospects, and we may not be able to continue as a going
concern.
If we are unable to manage our future growth efficiently, our
business, liquidity, revenues and profitability may
suffer.
We
anticipate that continued expansion of our core business will
require us to address potential market opportunities. For example,
we may need to expand the size of our research and development,
sales, corporate finance or operations staff. There can be no
assurance that our infrastructure will be sufficiently flexible and
adaptable to manage our projected growth or that we will have
sufficient resources, human or otherwise, to sustain such growth.
If we are unable to adequately address these additional demands on
our resources, our profitability and growth might suffer. Also, if
we continue to expand our operations, management might not be
effective in expanding our physical facilities and our systems, and
our procedures or controls might not be adequate to support such
expansion. Our inability to manage our growth could harm our
business and decrease our revenues.
We may require additional financing to execute our business plan
and further expand our operations.
We
may require additional funding to further expand our
operations. We currently have a borrowing facility with Heritage
Bank from which we can borrow, and this line is subject to
financial covenants that must be met. It is not certain that all or
part of this line will be available to us in the future. In
addition, we have received a term loan for up to $1.0 million with
Montage Capital II, L.P. We also depend on other sources of
financing and this may not be available to us in a timely basis if
at all, or on terms acceptable to us. Further, our ability to
obtain financing may be limited by rules of the Nasdaq Capital
Market. If we fail to obtain acceptable funding when needed, we may
not have sufficient resources to fund our operations, and this
would have a material adverse effect on our business.
Our revenue and quarterly results may fluctuate, which could
adversely affect our stock price.
We
have experienced, and may in the future experience, significant
fluctuations in our quarterly operating results that may be caused
by many factors. These factors include, amongst
others:
|
●
|
changes in demand
for our products;
|
|
●
|
introduction,
enhancement or announcement of products by us or our
competitors;
|
|
●
|
market acceptance
of our new products;
|
|
●
|
the growth rates of
certain market segments in which we compete;
|
|
●
|
size and timing of
significant orders;
|
|
●
|
budgeting cycles of
customers;
|
|
●
|
mix of products and
services sold;
|
|
●
|
changes in the
level of operating expenses;
|
|
●
|
completion or
announcement of acquisitions; and
|
|
●
|
general
economic conditions in regions in which we conduct
business.
|
The length of our sales cycle can fluctuate significantly which
could result in significant fluctuations in license revenues being
recognized from quarter to quarter.
The
decision by a customer to purchase our products often involves the
development of a complex implementation plan across a
customer’s business. This process often requires a
significant commitment of resources both by prospective customers
and us. Given the significant investment and commitment of
resources required in order to implement our software, it may take
several months, or even several quarters, for marketing
opportunities to materialize. If a customer’s decision to
purchase our products is delayed or if the installation of our
products takes longer than originally anticipated, the date on
which we may recognize revenue from these sales would be delayed.
Such delays and fluctuations could cause our revenue to be lower
than expected in a particular period and we may not be able to
adjust our costs quickly enough to offset such lower revenue,
potentially negatively impacting our results of
operations.
We are dependent upon a small number of major customers, and
a failure to renew our licenses with such customers could
reduce our revenue.
During
fiscal year 2017, two of our customers in aggregate accounted for
24% of total sales. Our customers have no obligation to renew
their subscription licenses, and some customers have elected
not to do so, including a number of our large customers in the
recent two fiscal years. Our license renewal rates may decline or
fluctuate as a result of a number of factors, including customer
dissatisfaction with our products and services, our failure to
update our products to maintain their attractiveness in the market,
or constraints or changes in budget priorities faced by our
customers. A decline in license renewal rates could cause our
revenue to decline which would have a material adverse effect on
our operations.
We face intense and growing competition, which could result in
price reductions, reduced operating margins and loss of market
share.
We
operate in a highly competitive marketplace and generally encounter
intense competition to create and maintain demand for our services
and to obtain service contracts. If we are unable to successfully
compete for new business and license renewals, our revenue growth
and operating margins may decline. The market for our Bridgeline
Unbound platform (Content Manager, Insights, eCommerce, Marketier,
Social) and web development services are competitive and rapidly
changing. Barriers to entry in such markets are relatively low.
With the introduction of new technologies and market entrants, we
expect competition to intensify in the future. Some of our
principal competitors offer their products at a lower price, which
have in the past and may in the future result in pricing pressures.
Such pricing pressures and increased competition generally could
result in reduced sales, reduced margins or the failure of our
product and service offerings to achieve or maintain more
widespread market acceptance.
The
web development/services market is highly fragmented with a large
number of competitors and potential competitors. Our prominent
public company competitors are Big Commerce, Salesforce (Commerce
Cloud), Episerver, Hubspot, Sitecore and Adobe (Experience
Manager). We face competition from customers and potential
customers who develop their own applications internally. We also
face competition from potential competitors that are substantially
larger than we are and who have significantly greater financial,
technical and marketing resources, and established direct and
indirect channels of distribution. As a result, they are able to
devote greater resources to the development, promotion and sale of
their products than we can.
There may be a limited market for our common stock, which may make
it more difficult for you to sell your stock and which may reduce
the market price of our common stock.
The
average amount of shares traded per day in fiscal 2018 was
approximately 405,213 shares, compared to approximately 26,000
shares per day in fiscal 2017, 38,000 shares per day for fiscal
2016 and 3,000 shares per day for fiscal 2015. The average trading
volume of our common stock can be sporadic and may impair the
ability of holders of our common stock to sell their shares at the
time they wish to sell them or at a price that they consider
reasonable. A low trading volume may also reduce the fair
market value of the shares of our common stock. Accordingly, there
can be no assurance that the price of our common stock will reflect
our actual value. There can be no assurance that the daily trading
volume of our common stock will increase or improve either now or
in the future.
The market price of our common stock is volatile, which could
adversely affect your investment in our common stock.
The
market price of our common stock is volatile and could
fluctuate significantly for many reasons, including, without
limitation, as a result of the occurrence of those risks discussed
herein, actual or anticipated fluctuations in our operating results
and general economic and industry conditions. During fiscal 2017
and fiscal 2018, the closing price of our common stock as reported
on the Nasdaq Capital Market fluctuated between $2.12 and $4.55,
and between $0.86 and $3.50, respectively. We are required to meet
certain financial criteria in order to maintain our listing on the
Nasdaq Capital Market. One such requirement is that we maintain a
minimum closing bid price of at least $1.00 per share for our
common stock. If we fail this requirement, then the Nasdaq Capital
Market will issue a notice that we are not in compliance and we
will need to take corrective actions in order to not be delisted.
Such corrective actions could include a reverse stock
split.
If our products fail to perform properly due to undetected errors
or similar problems, our business could suffer, and we could face
product liability exposure.
We
develop and sell complex web engagement software, which may
contain undetected errors or bugs. Such errors can be detected at
any point in a product’s life cycle, but are frequently found
after introduction of new software or enhancements to existing
software. We continually introduce new products and new versions of
our products. Despite internal testing and testing by current and
potential customers, our current and future products may contain
serious defects. If we detect any errors before we ship a product,
we might have to delay product shipment for an extended period of
time while we address the problem. We might not discover software
errors that affect our new or current products or enhancements
until after they are deployed, and we may need to provide
enhancements to correct such errors. Therefore, it is possible
that, despite our testing, errors may occur in our software. These
errors could result in the following:
|
●
|
harm to our
reputation;
|
|
●
|
lost
sales;
|
|
●
|
delays
in commercial release;
|
|
●
|
product liability
claims;
|
|
●
|
contractual
disputes;
|
|
●
|
negative
publicity;
|
|
●
|
delays in or loss
of market acceptance of our products;
|
|
●
|
license
terminations or renegotiations; or
|
|
●
|
unexpected expenses
and diversion of resources to remedy errors.
|
Furthermore,
our customers may use our software together with products from
other companies. As a result, when problems occur, it might be
difficult to identify the source of the problem. Even when our
software does not cause these problems, the existence of these
errors might cause us to incur significant costs, divert the
attention of our technical personnel from our product development
efforts, impact our reputation, or cause significant customer
relations problems.
Technology and customer requirements evolve rapidly in our
industry, and if we do not continue to develop new products and
enhance our existing products in response to these changes, our
business could suffer.
We
will need to continue to enhance our products in order to
maintain our competitive position. We may not be successful in
developing and marketing enhancements to our products on a timely
basis, and any enhancements we develop may not adequately address
the changing needs of the marketplace. Overlaying the risks
associated with our existing products and enhancements are ongoing
technological developments and rapid changes in customer
requirements. Our future success will depend upon our ability to
develop and introduce in a timely manner new products that take
advantage of technological advances and respond to new customer
requirements. The development of new products is increasingly
complex and uncertain, which increases the risk of delays. We may
not be successful in developing new products and incorporating new
technology on a timely basis, and any new products may not
adequately address the changing needs of the marketplace. Failure
to develop new products and product enhancements that meet market
needs in a timely manner could have a material adverse effect on
our business, financial condition and operating
results.
If we are unable to protect our proprietary technology and other
intellectual property rights, our ability to compete in the
marketplace may be substantially reduced.
If
we are unable to protect our intellectual property, our
competitors could use our intellectual property to market products
similar to our products, which could decrease demand for such
products, thus decreasing our revenue. We rely on a combination of
copyright, trademark and trade secret laws, as well as licensing
agreements, third-party non-disclosure agreements and other
contractual measures to protect our intellectual property rights.
These protections may not be adequate to prevent our competitors
from copying or reverse-engineering our products. Our competitors
may independently develop technologies that are substantially
similar or superior to our technology. To protect our trade secrets
and other proprietary information, we require employees,
consultants, advisors and collaborators to enter into
confidentiality agreements. These agreements may not provide
meaningful protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or
other proprietary information. The protective mechanisms we include
in our products may not be sufficient to prevent unauthorized
copying. Existing copyright laws afford only limited protection for
our intellectual property rights and may not protect such rights in
the event competitors independently develop similar products. In
addition, the laws of some countries in which our products are or
may be licensed do not protect our products and intellectual
property rights to the same extent as do the laws of the United
States.
Policing
unauthorized use of our products is difficult and litigation could
become necessary in the future to enforce our intellectual property
rights. Any litigation could be time consuming and expensive to
prosecute or resolve, result in substantial diversion of management
attention and resources, and materially harm our business or
financial condition.
If a third party asserts that we infringe upon its proprietary
rights, we could be required to redesign our products, pay
significant royalties or enter into license
agreements.
Claims
of infringement are becoming increasingly common as the software
industry develops and as related legal protections,
including but not limited to patents, are applied to software
products. Although we do not believe that our products infringe on
the rights of third parties, a third party may assert that our
technology or technologies of entities we acquire violates its
intellectual property rights. As the number of software products in
our markets increases and the functionality of these products
further overlap, we believe that infringement claims will become
more common. Any claims against us, regardless of their merit,
could:
|
●
|
be expensive and
time consuming to defend;
|
|
●
|
result in negative
publicity;
|
|
●
|
force us to stop
licensing our products that incorporate the challenged intellectual
property;
|
|
●
|
require us to
redesign our products;
|
|
●
|
divert
management’s attention and our other resources;
and/or
|
|
●
|
require us to enter
into royalty or licensing agreements in order to obtain the right
to use necessary technologies, which may not be available on terms
acceptable to us, if at all.
|
We
believe that any successful challenge to our use of a trademark
or domain name could substantially diminish our ability to
conduct business in a particular market or jurisdiction and thus
decrease our revenue and result in possible losses to our
business.
We depend on a third-party cloud platform provider to host
our Unbound SaaS environment and managed services business and
if we were to experience a disruption in service, our business and
reputation could suffer.
We
host our SaaS and managed hosting customers via a third-party,
Amazon Web Services. If upon renewal date our third-party provider
does not provide commercially reasonable terms, we may be required
to transfer our services to a new provider, such as data center
facility, and we may incur significant equipment costs and possible
service interruption in connection with doing so. Interruptions in
our services might reduce our revenue, cause us to issue credits or
refunds to customers, subject us to potential liability, or harm
our renewal rates.
If our security measures or those of our third-party cloud
computing platform provider are breached and unauthorized
access is obtained to a customer’s data, our services may be
perceived as not being secure, and we may incur significant legal
and financial exposure and liabilities.
Security
breaches could expose us to a risk of loss of our customers’
information, litigation and possible liability. While we have
security measures in place, they may be breached as a result of
third-party action, including intentional misconduct by computer
hackers, employee error, malfeasance or otherwise and result in
someone obtaining unauthorized access to our IT systems, our
customers’ data or our data, including our intellectual
property and other confidential business information. Because the
techniques used to obtain unauthorized access, or to sabotage
systems, change frequently and generally are not recognized until
launched against a target, we may be unable to implement adequate
preventative measures. In addition, our customers may authorize
third-party technology providers to access their customer data, and
some of our customers may not have adequate security measures in
place to protect their data that is stored on our services. Because
we do not control our customers or third-party technology
providers, or the processing of such data by third-party technology
providers, we cannot ensure the integrity or security of such
transmissions or processing. Malicious third parties may also
conduct attacks designed to temporarily deny customers access to
our services. Any security breach could result in a loss of
confidence in the security of our services, damage our reputation,
negatively impact our future sales, disrupt our business and lead
to legal liability.
We
rely on encryption and authentication technology from third parties
to provide the security and authentication to effectively secure
transmission of confidential information, including consumer
payment card numbers. Such technology may not be sufficient to
protect the transmission of such confidential information or these
technologies may have material defects that may compromise the
confidentiality or integrity of the transmitted data. Any
imposition of liability, particularly liability that is not covered
by insurance or is in excess of insurance coverage, could harm our
reputation, business and operating results. We might be required to
expend significant capital and other resources to protect further
against security breaches or to rectify problems caused by any
security breach, which, in turn could divert funds available for
corporate growth and expansion or future acquisitions.
We are dependent upon our management team and the loss of any of
these individuals could harm our business.
We
are dependent on the efforts of our key management personnel. The
loss of any of our key management personnel, combined with an
inability to find a suitable replacement, or our inability to
recruit and train additional key management and other personnel in
a timely manner, could materially and adversely affect our
business, operations and future prospects. We maintain a key man
insurance policy covering our Chief Executive
Officer.
Because competition for highly qualified personnel is intense, we
might not be able to attract and retain the employees we need
to support our planned growth.
We
will need to increase the size and maintain the quality of our
sales force, software development staff and professional services
organization to execute our growth plans. To meet our objectives,
we must attract and retain highly qualified personnel with
specialized skill sets. Competition for qualified personnel can be
intense, and we might not be successful in attracting and retaining
them. Our ability to maintain and expand our sales, product
development and professional services teams will depend on our
ability to recruit, train and retain top quality people with
advanced skills who understand sales to, and the specific needs of,
our target customers. For these reasons, we have experienced, and
we expect to again experience in the future, challenges in hiring
and retaining highly skilled employees with appropriate
qualifications for our business. In addition to hiring services
personnel to meet our needs, we may also engage additional
third-party consultants as contractors, which could have a negative
impact on our financial results. If we are unable to hire or retain
qualified personnel, or if newly hired personnel fail to develop
the necessary skills or reach productivity slower than anticipated,
it would be more difficult for us to sell our products and
services, and we could experience a shortfall in revenue and not
achieve our planned growth.
Future acquisitions may be difficult to integrate into our existing
operations, may disrupt our business, dilute stockholder
value, divert management’s attention, or negatively affect
our operating results.
We
have acquired multiple businesses since our inception in
2000. Future acquisitions could involve substantial investment
of funds or financings by issuance of debt or equity securities and
could result in one-time charges and expenses and have the
potential to either dilute the interests of existing stockholders
or result in the issuance of or assumption of debt. Any such
acquisition may not be successful in generating revenues, income or
other returns to us, and the resources committed to such activities
will not be available to us for other purposes. Moreover, if we are
unable to access capital markets on acceptable terms or at all, we
may not be able to consummate acquisitions, or may have to do so
based upon less than optimal capital structure. Our inability to
take advantage of growth opportunities for our business or to
address risks associated with acquisitions or investments in
businesses may negatively affect our operating results.
Additionally, any impairment of goodwill or other intangible assets
acquired in an acquisition or in an investment, or charges to
earnings associated with any acquisition or investment activity,
may materially reduce our earnings which, in turn, may have an
adverse material effect on the price of our common
stock.
We are also subject to anti-takeover provisions under Delaware law,
which could delay or prevent a change of control. Together these
provisions may make the removal of management more difficult and
may discourage transactions that otherwise could involve payment of
a premium over prevailing market prices for our securities.
Provisions in our amended and restated bylaws and Delaware law may
have the effect of discouraging lawsuits against our directors and
officers.
Our
amended and restated bylaws require that derivative actions brought
in our name, actions against our directors, officers, other
employees or stockholders for breach of fiduciary duty and other
similar actions may be brought only in the Court of Chancery in the
State of Delaware. Any person or entity purchasing or otherwise
acquiring any interest in shares of our capital stock shall be
deemed to have notice of and consented to the forum provisions in
our amended and restated bylaws.
This
choice of forum provision may limit a stockholder’s ability
to bring a claim in a judicial forum that it finds favorable for
disputes with us or any of our directors, officers, other employees
or stockholders, which may discourage lawsuits with respect to such
claims. Alternatively, if a court were to find the choice of forum
provision contained in our amended and restated bylaws to be
inapplicable or unenforceable in an action, we may incur additional
costs associated with resolving such action in other jurisdictions,
which could harm our business, operating results and financial
condition.
Increasing government regulation could affect our business and may
adversely affect our financial condition.
We are subject not only to regulations applicable
to businesses generally, but also to laws and regulations directly
applicable to electronic commerce. In addition, an inability
to satisfy the standards of certain voluntary third-party
certification bodies that our customers may expect, such as an
attestation of compliance with the Payment Card Industry
(“
PCI
”) Data Security Standards, may have an
adverse impact on our business and results. Further, there are
various statutes, regulations, and rulings relevant to the direct
email marketing and text-messaging industries, including the
Telephone Consumer Protection Act (“
TCPA
”), the CAN-SPAM Act and related Federal
Communication Commission (“
FCC
”) orders. The interpretation of many of
these statutes, regulations, and rulings is evolving in the courts
and administrative agencies and an inability to comply may have an
adverse impact on our business and results. If in the future we are
unable to achieve or maintain industry-specific certifications or
other requirements or standards relevant to our customers, it may
harm our business and adversely affect our
results.
We may also expand our business
in countries that have more stringent data protection laws than
those in the United States, and such laws may be inconsistent
across jurisdictions and are subject to evolving and differing
interpretations.
In
particular, the European Union has passed the General Data
Protection Regulation (“
GDPR
”),
which came into force on May 25, 2018. The GDPR includes more
stringent operational requirements for entities that receive or
process personal data (as compared to U.S. privacy laws and
previous EU laws), along with significant penalties
for non-compliance, more robust obligations on data
processors and data controllers, greater rights for data subjects,
and heavier documentation requirements for data protection
compliance programs.
Additionally, both laws
regulating privacy and third-party products purporting to address
privacy concerns could negatively affect the functionality of, and
demand for, our products and services, thereby reducing our
revenue.
Federal,
state, and foreign governments may adopt laws and regulations
applicable to our business. Any such legislation or regulation
could dampen the growth of the Internet and decrease its
acceptance. If such a decline occurs, companies may choose in the
future not to use our products and services. Any new laws or
regulations in the following areas could affect our
business:
|
●
|
user
privacy;
|
|
●
|
the pricing and
taxation of goods and services offered over the
Internet;
|
|
●
|
the content of
websites;
|
|
●
|
trademarks and
copyrights;
|
|
●
|
consumer
protection, including the potential application of “do not
call” registry requirements on customers and consumer
backlash in general to direct marketing efforts of
customers;
|
|
●
|
the online
distribution of specific material or content over
the Internet; or
|
|
●
|
the characteristics
and quality of products and services offered over the
Internet.
|
W
e have
issued preferred stock with rights senior to our common stock, and
may issue additional preferred stock in the future, in order to
consummate a merger or other transaction necessary to continue as a
going concern.
Our
Certificate of Incorporation authorizes the issuance of up to
1.0 million shares of preferred stock, par value $0.001
per share, without shareholder approval and on terms established by
our board of directors, of which 264,000 shares have been
designated as Series A Preferred. We may issue additional
shares of preferred stock in order to consummate a financing or
other transaction, in lieu of the issuance of common
stock. The rights and preferences of any such class or series
of preferred stock would be established by our board of directors
in its sole discretion and may have dividend, voting, liquidation
and other rights and preferences that are senior to the rights of
our common stock.
We have never paid dividends on our common stock, and we do not
anticipate paying dividends on our common stock in the
future.
We
have never paid cash dividends on our common stock, and do not
believe that we will pay any cash dividends on our common
stock in the future. Because we have no plan to pay cash dividends
on our common stock, an investor would only realize income from his
investment in our shares if there is a rise in the market price of
our common stock, which is uncertain and
unpredictable.
Risks
Related to this Offering
Our management team may invest or spend the proceeds of this
offering in ways with which you may not agree or in ways which may
not yield a significant return
.
Our
management will have broad discretion over the use of proceeds from
this offering. We currently intend to use the net proceeds from the
sale of securities offered by this prospectus for general
corporate purposes, including, but not limited to, research and
development, capital expenditures, repayment of indebtedness, and
additions to working capital. We may also use the net proceeds from
the sale of the securities under this prospectus to acquire or
invest in complementary businesses, technologies, products or
assets. However, our management will have broad discretion in the
application of the net proceeds from this offering and could spend
the proceeds in ways that do not improve our results of operations
or enhance the value of our common stock. The failure by management
to apply these funds effectively could result in financial losses
that could have a material adverse effect on our business, cause
the price of our common stock to decline and delay the development
of our product candidates.
Purchasers in this offering will experience immediate and
substantial dilution in the book value of their
investment.
Because the public offering price per share is
substantially higher than the book value per share of our common
stock, you will suffer substantial dilution in the net tangible
book value of the common stock you purchase in this offering. After
giving effect to the sale by us of 6,250,000 shares of our
common stock at an assumed public offering price of $1.00 per
share, and after deducting the underwriting discount, estimated
offering expenses payable by us and
the repayment of the
Term Notes, including all accrued interest, which amounted to
approximately $10,000 as of October 3, 2018, upon consummation of
the offering
, you will suffer
immediate and substantial dilution of $0.75 per share in the net
tangible book value of the common stock you purchase in this
offering. To the extent outstanding options, warrants or other
derivative securities are ultimately exercised or converted, or if
we issue equity-based awards to our employees under our 2016 Plan,
there will be further dilution to investors who purchase shares in
this offering. In addition, if we issue additional equity
securities or derivative securities, investors purchasing shares in
this offering will experience additional dilution. For a further
description of the dilution that you will experience immediately
after this offering, see “
Dilution
” on page
32.
Sales of a substantial number of shares of our common stock, or the
perception that such sales may occur, may adversely impact the
price of our common stock
.
Sales
of a substantial number of shares of our common stock in the public
market could occur at any time. These sales, or the perception that
such sales may occur, may adversely impact the price of our common
stock, even if there is no relationship between such sales and the
performance of our business. As of October 3, 2018, we had
4,241,225 shares of common stock outstanding, as well as stock
options to purchase an aggregate of 459,846 shares of our
common stock at a weighted average exercise price of $6.81 per
share, outstanding warrants to purchase up to an aggregate of
546,151 shares of our common stock at a weighted average
exercise price of $6.16 per share and 161,455 shares of common
stock issuable upon conversion of our outstanding shares of Series
A Preferred. The exercise and/or conversion of such outstanding
derivative securities may result in further dilution of your
investment.
CAUTIONARY NOT
E
S REGARDING FORWARD-LOOKING
STATEMENTS
This
prospectus, and any documents we incorporate by reference, contain
forward-looking statements that involve substantial risks and
uncertainties. All statements contained in this prospectus and any
documents we incorporate by reference other than statements of
historical facts, including statements regarding our strategy,
future operations, future financial position, future revenue,
projected costs, prospects, plans, objectives of management and
expected market growth, are forward-looking statements. These
statements involve known and unknown risks, uncertainties and other
important factors that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements.
The
words “anticipate,” “believe,”
“estimate,” “expect,” “intend,”
“may,” “plan,” “predict,”
“project,” “target,”
“potential,” “will,” “would,”
“could,” “should,” “continue,”
and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain
these identifying words. These forward-looking statements include,
among other things, statements about:
●
our
ability to implement our business strategy;
●
anticipated
trends and challenges in our business and the markets in which we
operate;
●
our
expected future financial performance;
●
our
expectations regarding our operating expenses;
●
our
ability to anticipate market needs or develop new or enhanced
products to meet those needs;
●
our
expectations regarding market acceptance of our
products;
●
our
ability to compete in our industry and innovation by our
competitors;
●
our
ability to protect our confidential information and intellectual
property rights;
●
our
ability to successfully identify and manage any potential
acquisitions;
●
our
ability to manage expansion into international
markets;
●
our
ability to maintain or broaden our business relationships and
develop new relationships with strategic alliances, suppliers,
customers, distributors or otherwise;
●
our
ability to recruit and retain qualified sales, technical and other
key personnel;
●
our
ability to obtain additional financing;
●
our
ability to manage growth;
●
our
ability to maintain the listing of our common stock on the Nasdaq
Capital Market; and
●
other
risks and uncertainties, including
those
described in the
section entitled “
Risk
Factors
” in this
prospectus, as well as in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2017, which risk factors are
incorporated herein by reference
.
These
forward-looking statements are only predictions and we may not
actually achieve the plans, intentions or expectations disclosed in
our forward-looking statements, so you should not place undue
reliance on our forward-looking statements. Actual results or
events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make.
We have based these forward-looking statements largely on our
current expectations and projections about future events and trends
that we believe may affect our business, financial condition and
operating results. We have included important factors in the
cautionary statements included in this prospectus, as well as
certain information incorporated by reference into this prospectus,
that could cause actual future results or events to differ
materially from the forward-looking statements that we make. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures or
investments we may make. Except as required by applicable law,
including the securities laws of the United States and the rules
and regulations of the SEC, we do not plan to publicly update or
revise any forward-looking statements contained herein after we
distribute this prospectus, whether as a result of any new
information, future events or otherwise.
You should read
this prospectus and any documents we incorporate by reference with
the understanding that our actual future results may be materially
different from what we expect. We do not assume any obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise, except as required by
applicable law.
We
estimate that the net proceeds to us from the sale of shares of our
common stock by us in this offering will be approximately $4.6
million, or approximately $5.5 million if the underwriters exercise
in full their option to purchase additional shares of common stock
to cover over-allotments, if any, assuming the sale of shares of
common stock at an assumed public offering price of $1.00 per
share (the last reported sale price of our common stock on the
Nasdaq Capital Market on October 3, 2018), in each case, after
deducting the estimated underwriting discount, estimated offering
expenses payable by us, and the amounts necessary to repay the Term
Notes (as set forth below).
Each $0.25 increase (decrease) in the assumed
public offering price of $1.00 per share would increase (decrease)
the net proceeds to us from this offering by approximately $1.5
million, assuming the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discount, estimated offering
expenses payable by us, and the
amounts necessary to repay
the Term Notes, including all accrued interest, which amounted to
approximately $10,000 as of October 3, 2018
. We may also increase or decrease the number of
shares of common stock we are offering. Each increase (decrease) of
1.0 million shares in the number of shares of common stock we are
offering would increase (decrease) the net proceeds to us from this
offering by approximately $930,000, assuming that the assumed
public offering price remains the same, and after deducting the
estimated underwriting discount, estimated offering expenses
payable by us, and the
amounts necessary to repay the Term
Notes
, including all accrued interest,
which amounted to approximately $10,000 as of October 3,
2018. This information is illustrative only, and we will
adjust this information based on the actual public offering price
and other terms of this offering determined at pricing. We do not
expect that a change in the public offering price or the number of
shares by these amounts would have a material effect on our
intended uses of the net proceeds from this offering, although it
may impact the amount of time prior to which we may need to seek
additional capital.
On September 7, 2018, we entered into a Note
Purchase Agreement (the “
Purchase
Agreement
”) with certain
accredited investors (each, a “
Purchaser
”), pursuant to which we sold and issued to
the Purchasers Term Notes in the aggregate principal amount of
$941,176, which Term Notes have an original issue discount of
fifteen percent (15%), bear interest at a rate of twelve percent
(12%) per annum, and have a maturity date of the earlier to occur
of (a) six months from the date of execution of the Purchase
Agreement, or (b) the consummation of a debt or equity financing
resulting in the gross proceeds to the Company of at least $3.0
million. We received net cash proceeds in the aggregate amount of
$760,000 through the sale of the Term Notes, after subtracting the
original issue discount and debt issuance costs, which proceeds
we used as general working capital. Upon consummation
of this offering, assuming that we receive gross proceeds in an
amount exceeding $3.0 million, we intend to allocate approximately
$941,176, plus any accrued interest, to the repayment of the Term
Notes.
As of
October 3, 2018, the Term Notes had accrued approximately $10,000
in interest.
Michael Taglich, a member of the Company’s
Board of Directors, and Robert Taglich, Michael Taglich's brother
and a former member of the Company's Board of Directors, each
purchased Term Notes in the approximate amount of $121,618, and
therefore will each be entitled to receive a portion of the
proceeds from the offering used to repay the Term
Notes.
We
expect to use the remaining net proceeds from this offering for
general corporate purposes including, but not limited to, research
and development, capital expenditures, repayment of indebtedness,
and additions to working capital. We may also use a portion of the
net proceeds from this offering to pursue potential strategic
acquisitions, although we do not have any specific plans or
arrangements to do so at this time. We cannot currently
allocate specific percentages of the net proceeds that we may use
for the purposes specified above.
Pending other uses, we intend to invest our proceeds from the
offering in short-term investments or hold them as cash. We cannot
predict whether the proceeds invested, if any, will yield a
favorable return. Our management will have broad discretion in the
use of the net proceeds from the offering, and investors will be
relying on the judgment of our management regarding the application
of the net proceeds.
MARKET
PRICE
OF OUR
COMMON STOCK
Market
Information
Our
common stock is listed on the Nasdaq Capital Market under the
symbol “BLIN.”
On
October 3
,
2018, the closing price
for our common stock as reported on the Nasdaq Capital Market was
$1.00
per share. Shown below
is the range of high and low sales prices for our common stock
for the periods indicated as reported by the Nasdaq Capital Market.
Such quotations represent inter-dealer prices without retail
markup, markdown or commission and may not necessarily represent
actual transactions. In addition, the below figures have been
adjusted to reflect the 1-for-5 stock split effectuated by us on
July 24,
2017.
Year Ending September 30, 2019
|
|
|
|
|
|
First Quarter
(through October 3, 2018)
|
$
1.18
|
$
0.99
|
Year
Ending September 30, 2018
|
|
|
|
|
|
Fourth
Quarter
|
$
3.75
|
$
0.79
|
Third
Quarter
|
$
2.19
|
$
1.14
|
Second
Quarter
|
$
2.64
|
$
1.84
|
First
Quarter
|
$
3.03
|
$
2.22
|
Year
Ending September 30, 2017
|
|
|
|
|
|
Fourth
Quarter
|
$
3.12
|
$
2.12
|
Third
Quarter
|
$
4.15
|
$
2.65
|
Second
Quarter
|
$
4.55
|
$
3.11
|
First
Quarter
|
$
3.95
|
$
2.26
|
Year
Ending September 30, 2016
|
|
|
|
|
|
Fourth
Quarter
|
$
5.45
|
$
3.80
|
Third
Quarter
|
$
7.75
|
$
3.65
|
Second
Quarter
|
$
5.30
|
$
3.10
|
First
Quarter
|
$
6.65
|
$
5.30
|
As of
October
3
, 2018, our
common stock was held of record by approximately 1,700
stockholders.
Because many of our
shares are held by brokers and other institutions on behalf of
stockholders, we are unable to estimate the total number of
individual stockholders represented by these record
holders.
We have never
declared or paid cash dividends on our common stock, and do not
anticipate paying cash dividends to our holders of our common stock
in the near future. We currently intend to retain all available
funds and any future earnings for use in the operation of our
business. Therefore, we do not currently expect to pay any cash
dividends on our common stock for the foreseeable
future.
We
currently have outstanding Series A Preferred and our Board of
Directors has the right to authorize the issuance of preferred
stock in the future, without further stockholder approval, the
holders of which may have preferences over the holders of our
common stock as to payment of dividends.
Cash dividends are currently
payable to holders of our Series A Preferred at a rate of 12% per
year.
The following table
sets forth our cash and cash equivalents and capitalization as of
June 30, 2018:
|
●
|
on an actual basis
as of June 30, 2018;
|
|
●
|
on a pro forma
basis, giving effect to the sale of the Term Notes in the aggregate
principal amount of $941,176, which sales occurred on September 7,
2018, and for which we received cash proceeds in the aggregate
amount of $760,000 after subtracting the original issue discount
and debt issuance costs; and
|
|
●
|
on a pro forma as
adjusted basis to reflect the issuance and sale by us of
6,250,000 shares of our common stock in
this offering at an assumed public offering price of
$1.00 per share, which was the last reported sale
price for our common stock on the Nasdaq Capital Market on
October 3, 2018, after deducting the underwriting discounts
and commissions, estimated offering expenses payable by us, and the
amounts necessary to repay the Term Notes, including all
accrued interest, which amounted to approximately $10,000 as of
October 3, 2018.
|
The pro forma and pro forma as adjusted
information below is illustrative only
, and our
capitalization following the closing of this offering will be
adjusted based on the actual public offering price and other terms
of this offering determined at pricing as well as our actual
expenses. You should read this table together with our consolidated
financial statements and the related notes and the sections
entitled “
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
” in our
Quarterly Reports on
Form 10-Q for the quarters ended December 31, 2017, March 31, 2018
and June 30, 2018, and our Annual Report on Form 10-K for the
fiscal year ended September 30, 2017
, which are incorporated
by reference herein.
|
|
(unaudited,
dollars in thousands)
|
|
|
Pro Forma
As Adjusted
(2)
|
|
|
|
|
Cash and cash
equivalents
|
$
427
|
$
1,187
|
$
5,797
|
|
|
|
|
|
|
|
|
Debt, current
portion, less unamortized discount and issuance
costs
|
198
|
958
|
198
|
Long term debt, net
of current portion
|
2,810
|
2,810
|
2,810
|
Other long term
liabilities
|
234
|
234
|
234
|
Stockholders’
equity:
|
|
|
|
Convertible
preferred stock - $0.001 par value; 1,000,000 shares authorized;
264,000 and 262,364 at June 30, 2018 and 245,172 and 243,536 at
September 30, 2017, issued and outstanding (liquidation preference
$2,624, as of June 30, 2018)
|
-
|
-
|
-
|
Common stock -
$0.001 par value; 50,000,000 shares authorized; 4,241,225 shares
issued at June 30, 2018; 4,200,219 issued at September 30, 2017;
and 10,491,225 shares issued, pro forma as
adjusted
|
5
|
5
|
11
|
Additional paid-in
capital
|
66,430
|
66,430
|
71,985
|
Accumulated
deficit
|
(60,752
)
|
(60,752
)
|
(60,943
)
|
Accumulated other
comprehensive loss
|
(351
)
|
(351
)
|
(351
)
|
Total
stockholders’ equity
|
5,332
|
5,332
|
10,702
|
Total
capitalization
|
$
11,422
|
$
12,182
|
$
16,792
|
|
(1)
|
The pro forma figures give effect to the sale by
the Company of certain term promissory notes (the
“
Term
Notes
”) in the aggregate
principal amount of $941,176, which sales occurred
on September 7, 2018. After recording $141,176 of original
issue discount and debt issuance costs of $40,000, the Company
received net cash proceeds in the aggregate amount of $760,000 for
the Term Notes. The original issue discount and debt issuance costs
are recorded as a contra liability and will be amortized over the
life of the Term Notes. The Term Notes have an original issue
discount of fifteen percent (15%), bear interest at a rate of
twelve percent (12%) per annum, and mature on the earlier to occur
of (i) six months from September 7, 2018, or (ii) the consummation
of a debt or equity financing resulting in gross proceeds to the
Company of at least $3.0 million.
In connection with the issuance of the Term Notes,
each purchaser also entered into a Subordination Agreement with the
Company’s lenders, Heritage Bank of Commerce and Montage
Capital II, L.P. (the “
Lenders
”), pursuant to which the purchasers agreed
to subordinate (i) all of the Company’s indebtedness and
obligations to the purchasers, whether presently existing or
arising in the future, to all of the Company’s indebtedness
to the Lenders, and (ii) all of the
purchasers’ security interests, if any, to all of the
Lenders’ security interests in property of the
Company.
|
|
(2)
|
Each $0.25 increase
(decrease) in the assumed public offering price per share would
increase (decrease) the amount of cash and cash equivalents,
working capital, total assets, and total stockholders’
deficit by approximately $1.5 million, assuming the
number of securities offered by us, as set forth on the cover page
of this prospectus, remains the same, and after deducting
underwriting discounts and commissions, estimated offering expenses
payable by us, and the amounts necessary to repay the Term
Notes, including all accrued interest, which amounted to
approximately $10,000 as of October 3, 2018. We may also
increase or decrease the number of securities to be issued in this
offering. Each increase (decrease) of 1.0 million shares
offered by us would increase (decrease) the as adjusted amount of
cash and cash equivalents, working capital, total assets and total
stockholders’ deficit by approximately $930,000,
assuming the assumed public offering price remains the same, and
after deducting underwriting discounts and commissions, estimated
offering expenses payable by us, and the amounts necessary to repay
the Term Notes, including all accrued interest, which
amounted to approximately $10,000 as of October 3, 2018. The
pro forma information discussed above is illustrative only and will
be adjusted based on the actual public offering price and other
terms of this offering determined between us and the underwriters
at pricing.
|
The
number of shares of our common stock that will be outstanding
immediately after the offering is based on 4,241,225 shares
outstanding as of June 30, 2018. Unless we specifically state
otherwise, the share information in this prospectus
excludes:
●
459,846
shares of our common stock issuable upon the exercise of stock
options outstanding at a weighted-average exercise price of $6.81
per share;
●
546,151
shares of common stock issuable upon the exercise of warrants at a
weighted-average exercise price of $6.16 per
share;
●
260,534
shares of common stock reserved for future issuance under our 2016
Plan; and
●
161,455
shares of common stock issuable upon conversion of 262,364
outstanding shares of Series A Preferred; and
●
312,500 shares of common stock issuable upon
the exercise of the Representative’s Warrants to be issued to
the representative of the underwriters.
The
above numbers reflect the 1-for-5 stock split effectuated by the
Company on July 24, 2017.
If you invest in
our common stock in this offering, your interest will be diluted
immediately to the extent of the difference between the public
offering price per share and the adjusted net tangible book value
(deficit)
per share of our
common stock after this offering.
Net
tangible book value (deficit) per share of our common stock is
determined at any date by subtracting our total liabilities from
the amount of our total tangible assets (total assets less
intangible assets) and dividing the difference by the number of
shares of our common stock deemed to be outstanding at that
date.
Dilution in net tangible book value (deficit) per
share represents the difference between the amount per share paid
by investors in this offering and the net tangible book value
(deficit) per share of our common stock immediately after this
offering.
Our historical net
tangible book value (deficit) as of June 30, 2018 was approximately
$(2.7) million, or $(0.65) per share.
Our historical net tangible book value
(deficit)
per share represents our total tangible
assets less our total liabilities, divided by the number of shares
of common stock outstanding as of June 30,
2018.
Our pro forma net tangible book value (deficit) as
of June 30, 2018 was approximately $(2.7)
million, or $(0.65)
per share of common stock. Pro forma net tangible
book value (deficit) per share represents our total tangible assets
less our total liabilities, divided by the number of shares of
common stock outstanding as of June 30, 2018, after giving effect
to
giving effect to the sale by us of the Term Notes,
including all accrued interest, which amounted to approximately
$10,000 as of October 3, 2018, in the aggregate principal amount of
$941,176, which sales occurred on September 7, 2018, and for which
we received cash proceeds in the aggregate amount of $760,000 after
subtracting the original issue discount and debt issuance costs.
After further giving effect to (i) the pro forma adjustment
described above, (ii) the repayment of the Term Notes upon
consummation of the offering, and (iii) the sale of shares of our
common stock in this offering at the assumed public offering price
of $1.00 per share, which was the last reported sale price of our
common stock on the Nasdaq Capital Market on October 3, 2018, and
after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, our as adjusted net
tangible book value as of June 30, 2018 would have been
approximately $2.6 million, or $0.25 per share. This represents an
immediate increase in net tangible book value of $0.90 per share to
existing stockholders and immediate dilution in net tangible book
value of $0.75 per share to investors in this offering. The
following table illustrates this dilution on a per share
basis:
Assumed public
offering price per share
|
|
$
1.00
|
Historical net
tangible book value (deficit) per share as of June 30,
2018
|
$
(0.65
)
|
|
Pro forma increase
in net tangible book value per share attributable to the sale of
term notes described above
|
$
-
|
|
Pro forma net
tangible book value per share as of June 30,
2018
|
$
(0.65
)
|
|
Increase in pro
forma net tangible book value (value) per share attributable to
investors purchasing shares from us in this
offering
|
$
0.90
|
|
|
|
|
Pro forma
as-adjusted net tangible book value per share after this
offering
|
|
$
0.25
|
|
|
|
Dilution in pro
forma as adjusted net tangible book value per share to new
investors in this offering
|
|
$
0.75
|
If the underwriters
exercise in full their option to purchase additional shares of our
common stock at the public offering price of $1.00 per share, our
as adjusted net tangible book value would be approximately $0.31
per share, an increase of approximately $0.96 per share to existing
stockholders and an immediate dilution of approximately $0.69 per
share to new investors purchasing shares of our common stock in
this offering, after deducting the underwriting discount and
estimated offering expenses payable by
us.
The number of
shares of common stock to be outstanding after this offering is
based on 4,241,225 shares outstanding as of June 30, 2018, and
excludes:
●
459,846
shares of our common stock issuable upon the exercise of stock
options outstanding at a weighted-average exercise price of $6.81
per share;
●
546,151
shares of common stock issuable upon the exercise of warrants at a
weighted-average exercise price of $6.16 per
share;
●
260,534
shares of common stock reserved for
future issuance under our 2016 Plan;
●
161,455
shares of common stock issuable upon conversion of 262,364
outstanding shares of Series A Preferred; and
●
312,500 shares of common stock issuable upon the exercise of
the Representative’s Warrants to be issued to the
representative of the underwriters.
If
the underwriters exercise their option to purchase additional
shares in full, the percentage of shares of common stock held by
existing stockholders will decrease to approximately 37% of the
total number of shares of our common stock outstanding after this
offering, and the number of shares held by new investors will
increase to 7,187,500, or approximately 63% of the total
number of shares of common stock outstanding after the
offering.
To the extent that
outstanding options or warrants are exercised, or our lines of
credit or outstanding shares of Series A Preferred are converted
into shares of common stock, investors in this offering will
experience further dilution. In addition, we may choose to raise
additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our
current or future operating plans. To the extent that additional
capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in
further dilution to our stockholders.
DESCRIP
T
ION OF SECURITIES
The following summary of the rights of our capital stock is not
complete and is subject to and qualified in its entirety by
reference to our certificate of incorporation and bylaws, copies of
which are filed as exhibits to our Annual Report on Form 10-K for
the year ended September 30, 2017, filed with the SEC on December
21, 2017, which is incorporated by reference
herein.
General
Our authorized capital stock consists of 50.0
million shares of our common stock, $0.001 par value per share, and
1.0 million shares of preferred stock, $0.001 par value per share.
The following is a description of our common stock and certain
provisions of our amended and restated certificate of incorporation
(“
Charter
”), and our amended and restated bylaws
(“
Bylaws
”), and certain provisions of Delaware law.
This summary does not purport to be complete and is qualified in
its entirety by the provisions of our Charter and our Bylaws,
copies of which have been filed with the SEC as exhibits to our
periodic filings under the Securities and Exchange Act of 1934, as
amended
(
the
“
Exchange
Act
”)
, and
are also incorporated by reference as exhibits to the registration
statement of which this prospectus is a
part.
As of
October
3
,
2018, there were issued and outstanding, or reserved for
issuance:
●
4,241,255 shares of common stock held by
approximately
1,700
stockholders of record;
●
459,846
shares of our common stock issuable upon the exercise of stock
options outstanding at a weighted-average exercise price of $6.81
per share;
●
546,151
shares of common stock issuable upon the exercise of warrants at a
weighted-average exercise price of $6.16 per
share;
●
260,534
shares of common stock reserved for
future issuance under our 2016 Plan;
●
161,455 shares of common stock issuable upon
conversion of 262,364 outstanding shares of Series A
Preferred
;
and
●
312,500 shares of common stock issuable upon the exercise of
the Representative’s Warrants to be issued to the
representative of the underwriters.
The
above numbers reflect the 1-for-5 stock split effectuated by the
Company on July 24, 2017.
Common Stock
Except
as otherwise expressly provided in our Charter, or as required by
applicable law, all shares of our common stock have the same rights
and privileges and rank equally, share ratably and are identical in
all respects as to all matters, including, without limitation,
those described below. All outstanding shares of common stock are
fully paid and nonassessable.
Voting
Rights.
The holders of
common stock are entitled to one vote per share on all matters. The
common stock does not have cumulative voting rights, which means
that holders of the shares of common stock with a majority of the
votes to be cast for the election of directors can elect all
directors then being elected.
Dividends.
Each share of common stock has an equal and
ratable right to receive dividends to be paid from our assets
legally available therefore when, as and if declared by our Board
of Directors. We have never declared or paid cash dividends on our
common stock, and we do not anticipate paying cash dividends on our
common stock in the foreseeable future.
Liquidation.
In
the event we dissolve, liquidate or wind up, the holders of common
stock are entitled to share equally and ratably in the assets
available for distribution after payments are made to our creditors
and to the holders of any outstanding preferred stock we may
designate and issue in the future with liquidation preferences
greater than those of the common stock.
Other.
The holders of shares of our common stock
have no preemptive, subscription or redemption rights and are not
liable for further call or assessment. All of the outstanding
shares of common stock are,
and the shares of
common stock offered hereby will be, fully paid and
nonassessable.
Transfer Agent and Registrar
The
transfer agent and registrar for our common stock is the American
Stock Transfer & Trust Company, LLC.
Preferred Stock
We
are authorized, subject to limitations prescribed by Delaware law
and our Charter, to issue up to 1.0 million shares of preferred
stock in one or more series, to establish from time to time the
number of shares to be included in each series and to fix the
designation, powers, preferences and rights of the shares of each
series and any of its qualifications, limitations or restrictions.
Our Board of Directors can increase or decrease the number of
shares of any series, but not below the number of shares of that
series then outstanding, without any further vote or action by our
stockholders. Our Board of Directors may authorize the issuance of
preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of
the common stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of the
Company and may adversely affect the market price of our common
stock and the voting and other rights of the holders of our common
stock.
Series A Preferred
In October 2014, our Board of Directors authorized
the creation of a series of up to 264,000 shares of Series A
Preferred. The Certificate of Designation of Preferences, Rights
and Limitations of the Series A Convertible Preferred
was filed with the Delaware Secretary
of State on October 28, 2014.
As of October 3
, 2018, there were 264,000 shares of Series A
Preferred issued and 262,364 shares of Series Preferred
outstanding.
As of October 3
, 2018, an aggregate total of 1,636 shares of
Series A Preferred have been converted into 1,007 shares of common
stock. There will be no further issuances of Series A
Preferred.
Voting
Rights
.
Shares of Series A Preferred vote
on an as-converted basis along with shares of our common
stock.
Conversion.
Shares of Series A Preferred may be
converted, at the option of the holder, at any time into such
number of shares of our common stock (“
Conversion
Shares
”) equal (i) to the
number of shares of Series A Preferred to be converted, multiplied
by the stated value of $10.00 per share (the
“
Stated
Value
”) and (ii) divided
by the conversion price in effect at the time of conversion,
currently $16.25.
Any
accrued but unpaid dividends on the shares of Series A Preferred to
be converted shall also be converted in shares of our common stock
at the Conversion Price. We also have the right to require the
holders to convert shares of Series A Preferred into Conversion
Shares if (i) the Company’s common stock has closed at or
above $32.50 per share for ten consecutive trading days and (ii)
the Conversion Shares are (A) registered for resale on an effective
registration statement or (B) may be resold pursuant to Rule
144.
Dividends.
Cumulative dividends are currently payable in cash
at a rate of 12% per year. The Series A Preferred is senior to our
common stock and any other stock with respect to dividends
rights.
Liquidation.
In the event of any liquidation,
dissolution, or winding up of the Company, the holders of shares of
Series A Preferred will be entitled to receive in preference to the
holders of common stock and any other stock, the amount equal to
the Stated Value per share of Series A Preferred plus declared and
unpaid dividends, if any. After such payment has been made, the
remaining assets of the Company will be distributed ratably to the
holders of common stock.
Anti-Takeover Effects of Certain Provisions of Delaware Law and of
the Company’s Certificate of Incorporation and
Bylaws
Delaware Law
We are subject to Section 203
(“
Section 203
”) of the Delaware General Corporation Law
(the “
DGCL
”). In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in “business
combination” transactions with any “interested
stockholder” for a period of three years following the time
that the stockholder became an interested stockholder,
unless:
●
prior
to the time the stockholder became an interested stockholder,
either the applicable business combination or the transaction which
resulted in the stockholder becoming an interested stockholder is
approved by the corporation’s board of
directors;
●
upon
consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for
purposes of determining the voting stock outstanding (but not the
voting stock owned by the interested stockholder) shares owned by
directors who are also officers of the corporation and shares owned
by employee stock plans in which the employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer;
or
●
at
or subsequent to the time that the stockholder became an interested
stockholder, the business combination is approved by the
corporation’s board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at
least 66 2⁄3% of the outstanding voting stock which is not
owned by the interested stockholder.
A
“business combination” is defined to include, in
general and subject to exceptions, a merger of the corporation with
the interested stockholder; a sale of 10% or more of the market
value of the corporation’s consolidated assets to the
interested stockholder; certain transactions that result in the
issuance of the corporation’s stock to the interested
stockholder; a transaction that has the effect of increasing the
proportionate share of the corporation’s stock owned by the
interested stockholder; and any receipt by the interested
stockholder of loans, guarantees or other financial benefits
provided by the corporation. An “interested
stockholder” is defined to include, in general and subject to
exceptions, a person that (1) owns 15% or more of the outstanding
voting stock of the corporation, or (2) is an
“affiliate” or “associate” (as defined in
Section 203) of the corporation and was the owner of 15% or more of
the corporation’s outstanding voting stock at any time within
the prior three year period.
A
Delaware corporation may opt out of Section 203 with an express
provision in its original certificate of incorporation or by an
amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by Section 203 and approved by a
majority of its outstanding voting shares. We have not opted out of
Section 203. As a result, Section 203 could delay, deter or prevent
a merger, change of control or other takeover of our company that
our stockholders might consider to be in their best interests,
including transactions that might result in a premium being paid
over the market price of our common stock, and may also limit the
price that investors are willing to pay in the future for our
common stock.
Undesignated Preferred Stock
The
ability to authorize undesignated preferred stock makes it possible
for our Board of Directors to issue one or more series of preferred
stock with voting or other rights or preferences. These and other
provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of our
company.
Requirements for Advance Notification of Stockholder Nominations
and Proposals
Our
Bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election
as directors, other than nominations made by or at the direction of
the Board of Directors or a committee of the Board of
Directors.
Stockholder Action by Written Consent; Special Meetings of
Stockholders
Our
Bylaws prohibit our stockholders from taking action by written
consent in lieu of a meeting.
Amendment of Certificate of Incorporation and Bylaws
Our
Charter may be amended by the affirmative vote of a majority of the
aggregate number of shares of each class of our capital stock
issued and outstanding after a resolution of our Board of Directors
declaring the advisability of such amendment has been adopted in
accordance with Delaware law. Our Bylaws may be amended by the
affirmative vote of a majority of the aggregate number of shares of
each class of our capital stock issued and outstanding (and
entitled to vote on the subject matter) present in person or
represented by proxy at a meeting of stockholders provided that
notice thereof is stated in the written notice of the meeting. Our
Bylaws may also be amended by a majority of the Board of Directors
in accordance with Delaware law and our
Charter.
D
IRECTORS AND EXECUTIVE
OFFICERS
The
following table sets forth certain information about our executive
officers and directors as of the date of this
prospectus.
Name
|
Age
|
Position with the Company
|
|
Since
|
Roger
Kahn
|
48
|
Director,
President and Chief Executive Officer
|
|
2017
|
|
|
|
|
|
Carole Tyner
(1)
|
55
|
Chief
Financial Officer and Treasurer
|
|
2018
|
|
|
|
|
|
Joni
Kahn*
|
62
|
Chairperson
of the Board, Chair of the Compensation Committee and Member of the
Audit and Nominating and Corporate Governance
Committees
|
|
2012
|
|
|
|
|
|
Kenneth
Galaznik*
|
66
|
Director,
Chair of the Audit Committee and Member of the Compensation
Committee
|
|
2006
|
|
|
|
|
|
Scott
Landers*
|
47
|
Director,
Chair of Nominating and Corporate Governance Committee and Member
of the Audit and Compensation Committees
|
|
2010
|
|
|
|
|
|
Michael
Taglich
|
52
|
Director
|
|
2013
|
*Independent
director as defined under the rules of the Nasdaq Stock
Market.
(1)
Ms.
Tyner was appointed as our Chief Financial Officer and Treasurer
effective September 28, 2018, following the resignation of our
former Chief Financial Officer, Michael Prinn.
Roger Kahn
was elected to the Board of Directors in
December 2017. Mr. Kahn joined the Company as the Chief Operating
Officer in August 2015 and has been our President and Chief
Executive Officer since May 2016. Prior to joining Bridgeline
Digital, Mr. Kahn co-founded FatWire, a leading content management
and digital engagement company. As the General Manager and Chief
Technology Officer of FatWire, Mr. Kahn built the company into a
global corporation with offices in thirteen countries and annual
revenues of $40 million. FatWire was acquired by Oracle in 2011 for
$160 million. Mr. Kahn received his Ph.D. in Computer Science and
Artificial Intelligence from the University of
Chicago.
Mr.
Kahn brings extensive experience to our Board as an experienced
senior executive and industry expert. As a prior chief operating
officer, Mr. Kahn brings extensive leadership experience in
international business operations and strategic planning, and his
Ph.D. provides significant value to the Company’s technology
footprint.
Carole Tyner
was appointed as the Company’s
Chief Financial Officer and Treasurer effective September 28,
2018.
Ms. Tyner has over
twenty-five years of financial management experience in public and
private companies and has served as the Company’s Vice
President of Finance since January 2014. From 2012 to 2014, Ms.
Tyner was the Vice President of Finance for Kalido Inc (N/K/A
Magnitude Software), a global developer of enterprise information
management software. Ms. Tyner graduated from the Suffolk
University Sawyer School of Management with a Bachelor of Science
degree in Accounting.
Joni Kahn
has been a member of our Board of Directors
since April 2012. In May 2015, Ms. Kahn was appointed Chairperson
of the Board of Directors. She also serves as the Chair of the
Compensation Committee and is a member of the Audit and Nominating
and Governance Committees. Ms. Kahn has over thirty years of
operating experience with high growth software and services
companies with specific expertise in the SaaS (Software as a
Service), ERP (Enterprise Resource Planning) Applications, Business
Intelligence and Analytics and CyberSecurity segments. From 2013 to
2015, Ms. Kahn was the Senior Vice President of Global Services for
Big Machines, Inc., which was acquired by Oracle in October 2013.
From 2007 to 2012, Ms. Kahn was Vice President of Services for
HP’s Enterprise Security Software group. From 2005 to 2007,
Ms. Kahn was the Executive Vice President at BearingPoint where she
managed a team of over 3,000 professionals and was responsible for
North American delivery of enterprise applications, systems
integration and managed services solutions. Ms. Kahn also oversaw
global development centers in India, China and the U.S. From 2002
to 2005, Ms. Kahn was the Senior Group Vice President for worldwide
professional services for Business Objects, a business intelligence
software maker based in San Jose, where she led the applications
and services division that supported that company’s
transformation from a products company to an enterprise solutions
company. Business Objects was acquired by SAP in 2007. From 2000 to
2007, Ms. Kahn was a Member of the Board of Directors for MapInfo,
a global location intelligence solutions company. She was a member
of MapInfo’s Audit Committee and the Compensation Committee.
MapInfo was acquired by Pitney Bowes in 2007. From 1993 to
2000, Ms. Kahn was an Executive Vice President and Partner of KPMG
Consulting, where she helped grow the firm’s consulting
business from $700 million to $2.5 billion. Ms. Kahn received her
B.B.A in Accounting from the University of Wisconsin –
Madison.
Ms.
Kahn brings extensive leadership experience to our Board and our
Audit Committee as an experienced senior executive. Ms. Kahn has
over thirty years of executive level managerial, operational, and
strategic planning experience leading world-class service and
support technology organizations. Her service on prior boards
also provides financial and governance
experience.
Kenneth
Galaznik
has been a member
of our Board of Directors since 2006. Mr. Galaznik is the Chairman
of the Company’s Audit Committee and serves as a member of
the Compensation Committee. From 2005 to 2016, Mr. Galaznik was the
Senior Vice President, Chief Financial Officer and Treasurer of
American Science and Engineering, Inc., a publicly held supplier of
X-ray inspection and screening systems with a public market cap of
over $200 million. Mr. Galaznik retired from his position at
American Science and Engineering on March 31, 2016. From August
2002 to February 2005, Mr. Galaznik was Vice President of Finance
of American Science and Engineering, Inc. From November 2001 to
August 2002, Mr. Galaznik was self-employed as a consultant. From
March 1999 to September 2001, he served as Vice President of
Finance at Spectro Analytical Instruments, Inc. and has more than
35 years of experience in accounting and finance positions. Mr.
Galaznik holds a B.B.A. degree in accounting from The University of
Houston.
Mr.
Galaznik brings extensive experience to our Board and our Audit
Committee as an experienced senior executive, a financial expert,
and as chief financial officer of a publicly-held
company.
Scott
Landers
has been a member
of our Board of Directors since 2010. Mr. Landers is the Chair of
the Nominating and Corporate Governance Committee and serves as a
member of the Audit and Compensation Committees. Mr. Landers was
named President and Chief Executive Officer of Monotype Imaging
Holdings, Inc. on January 1, 2016 after serving as the
company’s Chief Operating Officer since early 2015 and its
Chief Financial Officer, Treasurer and Assistant Secretary since
joining Monotype in July 2008. Monotype is a publicly-held company
and is a leading provider of typefaces, technology and expertise
that enable the best user experiences and sure brand integrity.
Prior to joining Monotype, from September 2007 until July 2008, Mr.
Landers was the Vice President of Global Finance at Pitney Bowes
Software, a $450 million division of Pitney Bowes, a leading global
provider of location intelligence solutions. From 1997 until
September 2007, Mr. Landers held several senior finance positions,
including Vice President of Finance and Administration, at MapInfo,
a publicly-held company which was acquired by Pitney Bowes in April
2007. Earlier in his career, Mr. Landers was a Business
Assurance Manager with Coopers & Lybrand. Mr. Landers holds a
Bachelor’s degree in accounting from Le Moyne College in
Syracuse, N.Y. and a Master’s degree in business
administration from The College of Saint Rose in Albany,
N.Y.
Mr.
Landers brings extensive experience to our Board and our Audit
Committee as an experienced senior executive, a financial expert,
and as chief executive officer and a chief financial officer of a
publicly-held company.
Michael
Taglich
has been a member
of our Board of Directors since 2013. He is the Chairman and
President of Taglich Brothers, Inc., a New York City based
securities firm which he co-founded in 1992 with his brother Robert
Taglich. Taglich Brothers, Inc. focuses on public and private
micro-cap companies in a wide variety of industries. He is
currently the Chairman of the Board of each Air Industries Group
Inc., a publicly traded aerospace and defense company (NYSE AIRI),
and BioVentrix, Inc., a privately held medical device company whose
products are directed at heart failure treatment. He also serves as
a director of a number of other private companies, and is a
director of Icagen Inc, a drug screening company. Mr. Taglich holds
a Bachelor’s degree in business from the New York University
Stern School of Business.
Michael
Taglich brings extensive professional experience which spans
various aspects of senior management, including finance, operations
and strategic planning. Mr. Taglich has more than 30 years of
financial industry experience, and served on his first public
company board over 20 years ago.
There
are no family relationships between any of the directors and the
Company’s executive officers, including between Ms. Joni Kahn
and Mr. Roger Kahn, the Company’s President and Chief
Executive Officer.
EXECUTIVE COMPENSATION
Summary Compensation Table
The
following Summary Compensation Table sets forth the total
compensation paid or accrued for the fiscal years ended September
30, 2018 and September 30, 2017 for our principal executive officer
and our other two most highly compensated executive officers who
served as executive officers during the year ended September 30,
2018. We refer to these officers as our named executive
officers.
Name and
Principal Position
|
|
|
|
|
|
All Other
Compensation
(2)
|
|
|
|
|
|
|
|
|
|
Roger Kahn
|
|
2018
|
$
300,000
|
$
67,497
|
$
-
|
$
-
|
$
367,497
|
President and
Chief
|
|
|
|
|
|
|
|
Executive
Officer
|
|
2017
|
$
300,000
|
$
20,000
|
$
-
|
$
14,037
|
$
334,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Prinn
(3)
|
|
2018
|
$
250,000
|
$
40,498
|
$
-
|
$
-
|
$
290,498
|
Former Executive
Vice President
|
|
|
|
|
|
|
|
and Chief Financial
Officer
|
|
2017
|
$
250,000
|
$
12,000
|
$
-
|
$
-
|
$
262,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carole Tyner
(3)
|
|
2018
|
$
186,750
|
$
5,933
|
$
-
|
$
-
|
$
192,683
|
Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
2017
|
$
181,500
|
$
14,250
|
$
-
|
$
-
|
$
195,750
|
|
(1)
|
Mr. Kahn elected to
receive common stock in lieu of a $20,000 cash payment for a bonus
earned for the first half of the fiscal year ended 2017. He
received 7,273 fully vested restricted shares of common stock with
a fair value price per share of $2.75.
|
|
(2)
|
A
mounts
paid to Mr. Kahn in fiscal 2017 represent reimbursement for living
expenses per Mr. Kahn’s Employment Agreement. (See section
entitled “
Employment
Agreements – Roger Kahn
”
below.)
|
|
(3)
|
Mr. Prinn resigned
as our Executive Vice President, Chief Financial Officer and
Treasurer effective September 25, 2018. Effective September 28,
2018, Carole Tyner was appointed as our Chief Financial Officer and
Treasurer.
|
Employment Agreements
Roger Kahn
We have entered into an employment agreement with
Roger Kahn, our President and Chief Executive Officer, to provide
executive management services. The employment agreement had an
initial term of thirteen months beginning August 24, 2015 and
terminating on September 30, 2016. The employment agreement was
amended on May 1, 2016 (“
First
Amendment
”) to extend
through September 30, 2017 and then extended again through
September 30, 2018. The First Amendment included a reimbursement
for living expenses directly related to accommodations and
utilities for an apartment near the Company’s corporate
headquarters in an amount not to exceed $2,900 per month. The
employment agreement renews for successive periods of one year if
the Company provides written notice of renewal not less than 60
days prior to the end of the initial term or any applicable
succeeding term. The employment agreement may be terminated by (i)
us, in the event of Mr. Kahn’s death, resignation, retirement
or disability, or for or without cause, or (ii) Mr. Kahn for good
reason. In the event that we terminate Mr. Kahn without cause or
Mr. Kahn resigns for good reason, he is entitled to receive
severance payments equal to twelve months of salary and one full
quarterly bonus. In addition, any stock option awards that are not
exercisable will be immediately vested and
exercisable.
Michael Prinn
We
entered into an employment agreement with Michael Prinn, our former
Executive Vice President and Chief Financial Officer, to provide
executive management services. Mr. Prinn’s employment
agreement was effective for the period of twelve months commencing
October 1, 2017 through September 30, 2018. The employment
agreement could be terminated by (i) us, in the event of Mr.
Prinn’s death, resignation, retirement or disability, or for
or without cause, or (ii) Mr. Prinn for good reason. Pursuant to
the terms of the agreement, in the event that we terminate Mr.
Prinn without cause or Mr. Prinn resigns for good reason, he is
entitled to receive severance payments equal to twelve months of
salary and bonus. In addition, any stock option awards that are not
exercisable will be immediately vested and
exercisable.
Effective
September 25, 2018, Mr. Prinn resigned from his position as our
Executive Vice President, Chief Financial Officer and Treasurer,
thereby terminating his employment agreement. However, Mr. Prinn
agreed to continue to provide services to the Company as an
employee until October 17, 2018.
Outstanding Equity Awards at Fiscal 2018 Year
End
The
following table sets forth information concerning outstanding stock
options for each named executive officer as of September 30,
2018.
Name
|
|
|
Number
of Securities
Underlying
Unexercised
Options
Exercisable
(1)
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
|
|
|
Roger Kahn
(1)
|
|
08/24/2015
|
51,382
|
24,390
|
$
5.75
|
08/24/2025
|
|
|
08/19/2016
|
136,777
|
49,689
|
$
4.10
|
08/19/2026
|
|
|
188,159
|
74,079
|
|
|
|
|
|
|
|
|
Michael Prinn
(1)
|
|
10/28/2011
(2)
|
2,400
|
-
|
$
16.75
|
10/28/2021
|
|
|
11/29/2011
|
2,000
|
-
|
$
16.25
|
11/29/2021
|
|
|
10/19/2012
|
3,000
|
-
|
$
41.00
|
10/19/2022
|
|
|
12/09/2013
|
3,000
|
-
|
$
28.00
|
12/09/2023
|
|
|
12/09/2015
|
10,000
|
5,000
|
$
5.90
|
12/09/2025
|
|
|
08/19/2016
|
14,667
|
7,333
|
$
4.10
|
08/19/2026
|
|
|
35,067
|
12,333
|
|
|
|
|
|
|
|
|
Carole
Tyner
|
|
01/28/2014
|
2,000
|
-
|
$
33.25
|
01/28/2024
|
|
|
02/09/2105
|
400
|
-
|
$
13.25
|
02/09/2025
|
|
|
08/19/2016
|
1,334
|
666
|
$
4.10
|
08/19/2026
|
|
|
3,734
|
666
|
|
|
_______________
|
(1)
|
Shares vest in
equal installments upon the anniversary date of the grant over
three years.
|
|
(2)
|
Stock option awards
granted as part of October 28, 2011 repricing program, offered
employees the opportunity to exchange and forfeit options
previously granted for new options grants of the same amount with
(i) a grant exercise price of $16.75, the fair market value on
October 28, 2011, and (ii) a new three-year vesting schedule
beginning October 28, 2011. Mr. Prinn exchanged 2,400
previously granted options for a new grant with an incremental
grant date fair value of $6,600.
|
COMPENSATION OF
DIRECTORS
The
non-employee members of our Board of Directors are compensated as
follows:
|
●
|
Option Grants.
Unless otherwise
determined by our Board of Directors, non-employee directors each
receive annual grants of options to purchase 2,000 shares of our
common stock at an exercise price equal to the fair market value of
the shares on the date of grant. The options vest over three years
in equal installments on the anniversary of grant. New directors
receive options to purchase 5,000 shares of our common stock at the
then current fair market value upon election to the
Board. During the fiscal year ended September 30, 2018,
outside directors each received stock options to purchase 2,000
shares of common stock.
|
|
●
|
Compensation.
Each outside
director receives an annual retainer of $12,000 and is compensated
$1,500 for each meeting such director attends in person. Members of
the Audit Committee receive additional annual compensation of
$3,000.
|
|
●
|
Committee Chair Bonus.
The Chair
of our Audit Committee receives an additional annual fee of
$10,000. The Chairs of our Compensation Committee and Nominating
and Corporate Governance Committee each receive an additional
annual fee of $5,000. These fees are payable in lump sums in
advance. Other directors who serve on our standing committees,
other than the Audit Committee, do not receive additional
compensation for their committee services.
|
Director Compensation Table
The
following table sets forth information concerning the compensation
paid to our non-employee directors during the fiscal year ended
September 30, 2018.
Name
|
Fees
Earned or
Paid
in Cash and Stock
(1)
|
|
|
|
Joni
Kahn
|
$
26,000
|
$
3,344
|
—
|
$
29,344
|
Kenneth
Galaznik
|
$
28,000
|
$
3,344
|
—
|
$
31,344
|
Scott
Landers
|
$
26,000
|
$
3,344
|
—
|
$
29,344
|
Michael
Taglich
|
$
18,000
|
$
3,344
|
—
|
$
21,344
|
(1)
|
In lieu of cash
payment for board services, our non-employee directors were issued
shares of restricted common stock, which vested on September 30,
2018.
During fiscal 2018,
a total of 41,006 shares of restricted common stock were issued
with a fair market value at the date of grant of $2.39 per share,
as follows:
|
Name
|
Common
Stock
Shares
Issued
|
|
Joni
Kahn
|
10,879
|
$
26,000
|
Kenneth
Galaznik
|
11,716
|
$
28,000
|
Scott
Landers
|
10,879
|
$
26,000
|
Michael
Taglich
|
7,532
|
$
18,000
|
Total
|
41,006
|
$
98,000
|
(2)
|
Represents
aggregate grant date fair value of the entire stock option awards
for the fiscal year ended September 30, 2018 in accordance with
Financial Accounting Standards Board Accounting Standards
Codification Topic 718 (“
ASC
718
”), excluding the estimated impact of forfeitures
of stock option grants. None of the stock option awards listed
above were exercised in the fiscal year ended September 30, 2018,
and the amounts set forth above do not represent amounts actually
received by the directors.
|
(3)
|
The following table
sets forth the following aggregate number of shares under
outstanding stock options plans held by our non-employee directors
as of September 30, 2018:
|
Name
|
Number
of Shares Underlying
Outstanding
Stock Options
|
Joni
Kahn
|
8,200
|
Kenneth
Galaznik
|
10,800
|
Scott
Landers
|
9,600
|
Michael
Taglich
(a)
|
10,400
|
(a)
In consideration for a loan to us of
$250,000, Michael Taglich received 3,000 options to purchase our
common stock on November 20, 2015 at a price of $6.05 per share.
The fair value of the options at the time of grant was $4.15 per
share. The shares vest in equal installments upon the anniversary
date of the grant over three
years.
CERTAIN RELATIONSHI
P
S AND RELATED
TRANSAC
TIONS, AND DIRECTOR
INDEPENDENCE
Item
404(d) of Regulation S-K requires the Company to disclose any
transaction or proposed transaction which occurred since the
beginning of the two most recently completed fiscal years in which
the amount involved exceeds the lesser of $120,000 or 1% of the
average of the Company’s total assets as of the end of the
last two completed fiscal years in which the Company is a
participant and in which any related person has or will have a
direct or indirect material interest. A related person is any
executive officer, director, nominee for director, or holder of 5%
or more of the Company’s common stock, or an immediate family
member of any of those persons.
In
accordance with our Audit Committee charter, our Audit Committee is
responsible for reviewing and approving the terms of any related
party transactions. Therefore, any material financial transaction
between the Company and any related person would need to be
approved by our Audit Committee prior to the Company entering into
such transaction.
In
October 2013, Michael Taglich joined the Board of Directors.
Michael Taglich is the Chairman and President of Taglich Brothers,
Inc., a New York based securities firm. Taglich Brothers, Inc. was
the placement agent for many of the Company’s private
offerings in 2012, 2013, 2014, and 2016. It was also the placement
agent for the Company’s $3.0 million subordinated debt
offering in 2013 and the Series A Preferred stock sale in 2015. As
of October 3, 2018, Michael Taglich beneficially owns approximately
21.8% of the Company’s common stock. Michael Taglich has also
guaranteed $1.5 million in connection with the Company’s out
of formula borrowings on its credit facility with Heritage
Bank.
In
consideration of previous loans by Michael Taglich and a personal
guaranty delivered by Michael Taglich to BridgeBank, N.A. for the
benefit of
the
Company
on December 19, 2014 (the “
Guaranty
”), on January 7, 2015
the Company issued Michael Taglich a warrant to purchase 12,000
shares of common stock of the Company at a price equal to $20.00
per share. On January 7, 2015,
the
Company
also entered into a side letter with Michael Taglich
pursuant to which
the
Company
agreed in the event the Guaranty remains outstanding
for a period of more than 12 months, on each anniversary of the
date of issuance of the Guaranty while the Guaranty remains
outstanding
the
Company
will issue Michael Taglich a warrant to purchase
6,000 shares of common stock, which warrant shall contain the same
terms as the warrant issued to Michael Taglich on January 7, 2015.
Since the Guaranty did remain outstanding for a period of more than
12 months, a warrant to purchase 6,000 shares of common stock was
issued to Michael Taglich in February 2016 at a price of $20.00 and
a warrant to purchase 6,000 shares of common stock was issued in
January 2017 at a price of $20.00.
Mr.
Taglich was also issued warrants in fiscal 2015 in connection with
shareholder term notes issued to him. The notes were subsequently
converted to shares of common stock in May 2016. He was issued
three warrants totaling 36,000 shares at an exercise price of
$20.00 per share and one warrant for 32,000 shares at an exercise
price of $8.75 per share in connection with these notes. The
warrants have a term of five years and are exercisable six months
after the date of issuance. A fair market value of $270 was
assigned to the warrants and recorded as a debt discount in current
liabilities with the offsetting amount recorded to additional paid
in capital in the Consolidated Balance Sheet. The fair market
value of the warrants was amortized on a straight-line basis over
their expected life. However, when the Company converted these term
notes in May 2016, the remaining unamortized value was recorded as
amortization expense. Total amortization expense of $158 was
recorded in fiscal 2016 related to the
warrants.
Robert
Taglich was appointed to the Company’s Board of Directors in
May 2016. Robert Taglich is the brother of Michael Taglich and is
the Co-founder and Senior Director of Taglich Brothers, Inc. Mr.
Taglich was a consultant to the Company prior to his appointment to
the Board of Directors. As compensation for his consulting
services, Robert Taglich was granted options to purchase 3,000
shares of the Company’s common stock at a price of $6.05 per
share. As a director, Mr. Taglich was granted options to purchase
2,200 shares of common stock, and 6,954 shares of restricted common
stock. Mr. Taglich did not seek re-election to the Board of
Directors and his tenure expired on June 29,
2017.
In
connection with the equity conversion of the $3.0 million in term
notes from shareholders that was completed in May 2016, Taglich
Brothers, Inc. was granted placement agent warrants to purchase
86,778 shares of common stock at a price of $3.65 per share.
Included in the distribution were warrants to purchase 35,120
shares of common stock to Michael Taglich and warrants to purchase
28,552 shares of common stock to Robert Taglich. The warrants
expire in five years.
In
connection with the private offering in July 2016, Taglich
Brothers, Inc was granted placement agent warrants to purchase
44,000 shares of common stock at a price of $4.60 per share.
Included in the distribution were 8,864 warrants to Michael Taglich
and 7,236 warrants to Robert Taglich. The warrants expire in five
years.
In
connection with the private offering in November 2016, the Company
issued to the purchasers warrants to purchase a total of
213,538 shares common stock. Each warrant expires five and
one-half years from the date of issuance and is exercisable for
$3.50 per share beginning six months from the date of issuance, or
May 9, 2017. The warrants expire May 9, 2022.
Warrants to
purchase 8,600 shares of common stock and 15,385 shares of common
stock were issued to Michael Taglich and Robert Taglich,
respectively, in connection with the private
offering.
On
September 7, 2018, both Michael Taglich and Robert Taglich each
purchased Term Notes in the amount of approximately
$121,618.
The Company intends
to repay these Term Notes, along with all accrued interest, which
amounted to approximately $1,284 per Term Note held by each Michael
Taglich and Robert Taglich as of October 3, 2018, out of the
proceeds of this offering.
SECURITY
OWNER
S
HIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Beneficial
ownership is determined in accordance with Rule 13d-3 under the
Exchange Act. In computing the number of shares beneficially owned
by a person or a group and the percentage ownership of that person
or group, shares of our common stock subject to options or warrants
currently exercisable or exercisable within 60 days after
October 3, 2018 are deemed outstanding,
but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Unless otherwise
indicated, the address of each individual named below is our
address, 80 Blanchard Road, Burlington, Massachusetts
01803.
The following tables set forth, as of October 3, 2018,
the beneficial ownership of our Series A Preferred and common stock
by (i) each person or group of persons known to us to beneficially
own more than 5% of the outstanding shares of the outstanding
securities, (ii) each of our directors and named executive
officers, and (iii) all of our executive officers and directors as
a group. At the close of business on October 3, 2018
there were 262,354 shares of Series A Preferred and 4,241,255
shares of our common stock issued and
outstanding.
Except as indicated
in the footnotes to the tables below, each stockholder named in the
table has sole voting and investment power with respect to the
shares shown as beneficially owned by such
stockholder.
This information is
based upon information received from or on behalf of the
individuals named herein.
Series
A Preferred
|
Number
of
Shares
Owned
(2)
|
Percent
of Shares
Outstanding
|
Robert
Taglich
790 New York
Avenue
Huntington, NY
11743
|
65,993
|
25.15
%
|
Alvin Fund,
LLC
215 West
98
th
Street, Apt. 10A
New York, NY
10025
|
22,446
|
8.56
%
|
Shadow Capital,
LLC
3601 SW
29
th
Street
Topeka, KS
66614
|
21,128
|
8.05
%
|
Sterling Family
Investment, LLC
12400 Dutch Forest
PL
Edmond, OK
73013
|
21,128
|
8.05
%
|
|
(1)
|
Each of our
officers and directors are excluded from this table, as no officer
or director currently holds shares of Series A
Preferred.
|
|
|
|
|
(2)
|
Holders of Series A
Preferred are entitled to vote on all matters presented to our
stockholders on an as-converted basis. Each share of Series A
Preferred is convertible, at the option of each respective holder,
into approximately 0.62 shares of our common
stock.
|
Common
Stock
|
|
Percent
of Shares
Outstanding
|
Michael Taglich,
Director
|
951,267
(1)
|
21.78
%
|
Roger Kahn,
President, Chief Executive Officer and
Director
|
345,283
(2)
|
7.78
%
|
Michael Prinn,
Former Executive Vice President and Chief Financial Officer
(3)
|
36,997
(4)
|
*
|
Carole
Tyner, Chief Financial Officer and Treasurer
(3)
|
3,734
(5)
|
*
|
Kenneth Galaznik,
Director
|
37,418
(6)
|
*
|
Scott Landers,
Director
|
34,359
(7)
|
*
|
Joni Kahn,
Director
|
33,223
(8)
|
*
|
All executive
officers and directors as a group (7
persons)
|
1,442,282
|
31.20
%
|
*less than
1%
|
(1)
|
Includes
119,419 shares issuable upon the exercise of warrants,
and 7,200 shares of common stock subject to currently exercisable
options (includes options that will become exercisable within 60
days of October 3, 2018). Also includes 1,739 shares
of common stock and 120 shares issuable upon the exercise of
warrants owned by Mr. Taglich’s spouse.
|
|
(2)
|
Includes 8,600
shares issuable upon the exercise of warrants and 188,159 shares of
common stock subject to currently exercisable options (includes
options that will become exercisable within 60 days of
October 3, 2018). Includes 27,236 shares of common
stock owned by Mr. Kahn’s spouse.
|
|
(3)
|
As noted above, Mr.
Prinn resigned as our Executive Vice President, Chief Financial
Officer and Treasurer effective September 25, 2018. Effective
September 28, 2018, Carole Tyner was appointed as our Chief
Financial Officer and Treasurer.
|
|
(4)
|
I
ncludes
35,067 shares of common stock subject to currently exercisable
options (includes options that will become exercisable within 60
days of October 3, 2018).
|
|
(5)
|
Includes
3,734 shares of common stock subject to currently
exercisable options (includes options that will become exercisable
within 60 days of October 3, 2018).
|
|
(6)
|
Includes 7,600
shares of common stock subject to currently exercisable options
(includes options that will become exercisable within 60 days of
October 3, 2018).
|
|
(7)
|
Includes 6,400
shares of common stock subject to currently exercisable options
(includes options that will become exercisable within 60 days of
October 3, 2018). Includes 400 shares of
common stock owned by Mr. Landers’ children.
|
|
(8)
|
Includes 5,000
shares of common stock subject to currently exercisable options
(includes options that will become exercisable within 60 days of
October 3, 2018).
|
ThinkEquity, a
division of Fordham Financial Management, Inc., is acting as the
representative of the underwriters of this offering (the
“
Representative
”). We have entered
into an underwriting agreement
dated ,
2018 with the Representative. Subject to the terms and conditions
of the underwriting agreement, we have agreed to sell to each
underwriter named below and each underwriter named below has
severally and not jointly agreed to purchase from us, at the public
offering price per share less the underwriting discounts set forth
on the cover page of this prospectus, the number of shares of
common stock listed next to its name in the following
table:
Underwriters
|
|
Number
of Shares
|
|
ThinkEquity, a
division of Fordham Financial Management, Inc.
|
|
|
|
|
Total
|
|
|
|
|
All of the shares
to be purchased by the underwriters will be purchased from
us.
The underwriting
agreement provides that the obligations of the underwriters to pay
for and accept delivery of the shares of common stock offered by
this prospectus are subject to various conditions and
representations and warranties, including the approval of certain
legal matters by their counsel and other conditions specified in
the underwriting agreement. The shares of common stock are offered
by the underwriters, subject to prior sale, when, as and if issued
to and accepted by them. The underwriters reserve the right to
withdraw, cancel or modify the offer to the public and to reject
orders in whole or in part. The underwriters are obligated to take
and pay for all of the shares of common stock offered by this
prospectus if any such shares of common stock are taken, other than
those shares of common stock covered by the over-allotment option
described below.
Over-Allotment
Option
We have granted to
the Representative of the underwriters an option, exercisable no
later than 45 calendar days after the date of this prospectus, to
purchase up to 937,500 additional shares of common
stock (an amount equal to 15% of the shares of common stock sold in
this offering) from us to cover over-allotments, if any, at a price
per share of common stock equal to the public offering price, less
the underwriting discounts and commissions. The underwriters may
exercise this option only to cover over-allotments made in
connection with this offering. If the underwriters exercise this
option in whole or in part, then the underwriters will be severally
committed, subject to the conditions described in the underwriting
agreement, to purchase these additional shares of common stock. If
any additional shares of common stock are purchased, the
underwriters will offer the additional shares of common stock on
the same terms as those on which the shares of common stock are
being offered hereby.
Discounts
and Commissions
The Representative has advised us that the underwriters propose to
offer the shares of common stock to the public at the public
offering price per share set forth on the cover page of this
prospectus. The underwriters may offer shares to securities dealers
at that price less a concession of not more than
$ per share, of
which up to
$ per
share may be re-allowed to other dealers.
The following table
summarizes the public offering price, underwriting discounts and
commissions and proceeds before expenses to us assuming both no
exercise and full exercise by the underwriters of their
over-allotment option:
|
|
Total
Without Over-allotment Option
|
Total
With Over-allotment Option
|
Public offering
price
|
$
|
$
|
$
|
Underwriting
discounts and commissions (7%)
|
$
|
$
|
$
|
Non-accountable
expense allowance (1%)
(1)
|
$
|
$
|
$
|
Proceeds, before
expenses, to us
|
$
|
$
|
$
|
____________________
(1)
We have agreed to
pay a non-accountable expense allowance to the Representative equal
to 1% of the gross proceeds received in this offering
We have paid an expense deposit of $20,000 to the Representative,
which will be applied against the out-of-pocket accountable
expenses that will be paid by us to the underwriters in connection
with this offering, and will be reimbursed to us to the extent not
incurred.
In addition, we
have also agreed to reimburse the Representative for all reasonable
out-of-pocket accountable fees and costs incurred in connection
with this offering; provided that in no event shall we be obligated
to reimburse the Representative more than $90,000 in the aggregate
for such fees, expenses and costs, which may include: (a) fees and
expenses of counsel to the underwriters; (b) all filing fees and
communication expenses relating to the registration of the shares
of common stock to be sold in this offering with the SEC; (c) all
filing fees and expenses associated with the review of this
offering by FINRA and the Nasdaq Stock Market; and (d) any other
reasonable out-of-pocket accountable expenses incurred by the
Representative in connection with the performance of its services
in this offering.
We estimate the
expenses of this offering payable by us, not including underwriting
discounts and commissions, will be approximately
$251,916.
Discretionary
Accounts
The underwriters do
not intend to confirm sales of the securities offered hereby to any
accounts over which they have discretionary authority.
Representative's
Warrants
Upon closing of
this offering, we have agreed to issue to the Representative, as
compensation, warrants to purchase a number of shares of common
stock equal to 5% of the aggregate number of shares of common stock
sold in this offering, excluding the over-allotment
(the “
Representative’s
Warrants
”). The Representative’s Warrants will
be exercisable at a per share exercise price equal to the greater
of (i) 125% of the public offering price per share in this offering
and (ii) the closing price of our common stock on the closing date
of this offering, as reported by the Nasdaq Capital Market. The
Representative’s Warrants are exercisable at any time and
from time to time, in whole or in part, commencing on the date that
is 180 days following the effective date of the registration
statement of which this prospectus is a part and expiring on the
date that is five years following the effective date of the
registration statement.
The
Representative’s Warrants have been deemed compensation by
FINRA and are therefore subject to a 180-day lock-up pursuant to
Rule 5110(g)(1) of FINRA. The Representative (or permitted
assignees under Rule 5110(g)(1)) will not sell, transfer, assign,
pledge, or hypothecate these warrants or the securities underlying
these warrants, nor will they engage in any hedging, short sale,
derivative, put, or call transaction that would result in the
effective economic disposition of the warrants or the underlying
securities for a period of 180 days from the effective date of this
registration statement. In addition, the warrants provide for
registration rights upon request, in certain cases. The demand
registration right provided will not be greater than five years
from the effective date of this registration statement in
compliance with FINRA Rule 5110(f)(2)(G)(iv). The piggyback
registration right provided will not be greater than seven years
from the effective date of this registration statement in
compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees
and expenses attendant to registering the securities issuable on
exercise of the warrants other than underwriting commissions
incurred and payable by the holders. The exercise price and number
of shares issuable upon exercise of the warrants may be adjusted in
certain circumstances including in the event of a stock dividend or
our recapitalization, reorganization, merger or consolidation.
However, the warrant exercise price or underlying shares will not
be adjusted for issuances of shares of common stock at a price
below the warrant exercise price.
Right
of First Refusal
Until six (6)
months after the closing date of this offering, the Representative
will have, subject to certain exceptions, an irrevocable right of
first refusal to act as sole investment banker, sole book-runner
and/or sole placement agent, at the Representative’s
discretion, for each and every future public equity offering for
us, or any successor to or any subsidiary of us, on terms customary
for the Representative. The Representative will have the sole right
to determine whether or not any other broker-dealer shall have the
right to participate in any such offering and the economic terms of
any such participation. The Representative will not have more than
one opportunity to waive or terminate the right of first refusal in
consideration of any payment or fee.
Other
The underwriters
and their affiliates may in the future provide various investment
banking and other financial services for us, for which they may
receive, in the future, customary fees.
Lock-Up
Agreements
Pursuant to
“lock-up” agreements, we and our executive officers,
directors and greater than 5% stockholders, have agreed, subject to
limited exceptions, without the prior written consent of the
Representative not to directly or indirectly, offer to sell, sell,
pledge or otherwise transfer or dispose of any of shares of (or
enter into any transaction or device that is designed to, or could
be expected to, result in the transfer or disposition by any person
at any time in the future of) our common stock, enter into any swap
or other derivatives transaction that transfers to another, in
whole or in part, any of the economic benefits or risks of
ownership of shares of our common stock, make any demand for or
exercise any right or cause to be filed a registration statement,
including any amendments thereto, with respect to the registration
of any shares of common stock or securities convertible into or
exercisable or exchangeable for common stock or any of our other
securities or publicly disclose the intention to do any of the
foregoing, subject to customary exceptions, for a period of 90 days
from the date of this prospectus.
Listing
Our common stock is
listed on the Nasdaq Capital Market under the symbol
“BLIN.”
Stabilization
In connection with
this offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate-covering
transactions, penalty bids and purchases to cover positions created
by short sales.
Stabilizing
transactions permit bids to purchase shares so long as the
stabilizing bids do not exceed a specified maximum, and are engaged
in for the purpose of preventing or retarding a decline in the
market price of the shares while the offering is in
progress.
Over-allotment
transactions involve sales by the underwriters of shares in excess
of the number of shares the underwriters are obligated to purchase.
This creates a syndicate short position which may be either a
covered short position or a naked short position. In a covered
short position, the number of shares over-allotted by the
underwriters is not greater than the number of shares that they may
purchase in the over-allotment option. In a naked short position,
the number of shares involved is greater than the number of shares
in the over-allotment option. The underwriters may close out any
short position by exercising their over-allotment option and/or
purchasing shares in the open market.
Syndicate covering
transactions involve purchases of shares in the open market after
the distribution has been completed in order to cover syndicate
short positions. In determining the source of shares to close out
the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market as compared with the price at which they may purchase shares
through exercise of the over-allotment option. If the underwriters
sell more shares than could be covered by exercise of the
over-allotment option and, therefore, have a naked short position,
the position can be closed out only by buying shares in the open
market. A naked short position is more likely to be created if the
underwriters are concerned that after pricing there could be
downward pressure on the price of the shares in the open market
that could adversely affect investors who purchase in the
offering.
Penalty bids permit
the representative to reclaim a selling concession from a syndicate
member when the shares originally sold by that syndicate member are
purchased in stabilizing or syndicate covering transactions to
cover syndicate short positions.
These stabilizing
transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of our
shares of common stock or preventing or retarding a decline in the
market price of our shares of common stock. As a result, the price
of our common stock in the open market may be higher than it would
otherwise be in the absence of these transactions. Neither we nor
the underwriters make any representation or prediction as to the
effect that the transactions described above may have on the price
of our common stock. These transactions may be effected in the
over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.
Passive
Market Making
In connection with
this offering, underwriters and selling group members may engage in
passive market making transactions in our common stock on the
Nasdaq Capital Market in accordance with Rule 103 of Regulation M
under the Exchange Act, during a period before the commencement of
offers or sales of the shares and extending through the completion
of the distribution. A passive market maker must display its bid at
a price not in excess of the highest independent bid of that
security. However, if all independent bids are lowered below the
passive market maker’s bid, then that bid must then be
lowered when specified purchase limits are exceeded.
Indemnification
We have agreed to
indemnify the underwriters against liabilities relating to this
offering arising under the Securities Act and the Exchange Act,
liabilities arising from breaches of some or all of the
representations and warranties contained in the underwriting
agreement, and to contribute to payments that the underwriters may
be required to make for these liabilities.
Electronic
Distribution
This
prospectus in electronic format may be made available on websites
or through other online services maintained by one or more of the
underwriters, or by their affiliates. Other than this
prospectus in electronic format, the information on any
underwriter’s website and any information contained in any
other website maintained by an underwriter is not part of this
prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any
underwriter in its capacity as underwriter, and should not be
relied upon by investors.
Selling
Restrictions Outside the United States
No action has been
taken in any jurisdiction (except in the United States) that would
permit a public offering of our common stock, or the possession,
circulation or distribution of this prospectus or any other
material relating to us or our common stock in any jurisdiction
where action for that purpose is required. Accordingly, our common
stock may not be offered or sold, directly or indirectly, and none
of this prospectus or any other offering material or advertisements
in connection with our common stock may be distributed or
published, in or from any country or jurisdiction, except in
compliance with any applicable rules and regulations of any such
country or jurisdiction.
European Economic Area
In relation to each
Member State of the European Economic Area which has implemented
the Prospectus Directive, each a “Relevant Member
State,” with effect from and including the date on which the
Prospectus Directive is implemented in that Relevant Member State,
or the “Relevant Implementation Date,” our securities
will not be offered to the public in that Relevant Member State
prior to the publication of a prospectus in relation to our
securities that has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with the
Prospectus Directive, except that, with effect from and including
the Relevant
Implementation
Date, an offer of our securities may be made to the public in that
Relevant Member State at any time:
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to any legal entity
that is a qualified investor as defined in the Prospectus
Directive;
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to fewer than 100
or, if the Relevant Member State has implemented the relevant
provision of the 2010 PD Amending Directive, 150 natural or legal
persons (other than qualified investors as defined in the
Prospectus Directive), as permitted under the Prospectus Directive,
subject to obtaining the prior consent of the manager for any such
offer; or
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in any other
circumstances which do not require the publication by the issuer of
a prospectus pursuant to Article 3(2) of the Prospectus Directive,
provided that no such offer of the securities shall require the
issuer or any underwriter to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
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For the purposes of
this provision, the expression an “offer of securities to the
public” in relation to any securities in any Relevant Member
State means the communication in any form and by any means of
sufficient information on the terms of the offer and securities to
be offered so as to enable an investor to decide to purchase or
subscribe securities, as the same may be varied in that Relevant
Member State by any measure implementing the Prospectus Directive
in that Relevant Member State and the expression “Prospectus
Directive” means Directive 2003/71/EC (and amendments
thereto, including the 2010 PD Amending Directive, to the extent
implemented in the Relevant Member State), and includes any
relevant implementing measure in each Relevant Member State and the
expression “2010 PD Amending Directive” means Directive
2010/73/EU.
United Kingdom
In the United
Kingdom, this document is being distributed only to, and is
directed only at, and any offer subsequently made may only be
directed at persons who are “qualified investors” (as
defined in the Prospectus Directive) (i) who have professional
experience in matters relating to investments falling within
Article 19 (5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended (the Order), and/or
(ii) who are high net worth companies (or persons to whom it may
otherwise be lawfully communicated) falling within Article 49(2)(a)
to (d) of the Order (all such persons together, the relevant
persons). This document must not be acted on or relied on in the
United Kingdom by persons who are not relevant persons. In the
United Kingdom, any investment or investment activity to which this
document relates is only available to, and will be engaged in with,
relevant persons.
Canada
The offering of our
common stock in Canada is being made on a private placement basis
in reliance on exemptions from the prospectus requirements under
the securities laws of each applicable Canadian province and
territory where our common stock may be offered and sold, and
therein may only be made with investors that are purchasing, or
deemed to be purchasing, as principal and that qualify as both an
“accredited investor” as such term is defined in
National Instrument 45-106
Prospectus Exemptions
or subsection
73.3(1) of the
Securities
Act
(Ontario) and as a “permitted client” as
such term is defined in National Instrument 31-103
Registration Requirements, Exemptions and
Ongoing Registrant Obligations.
Any offer and sale of our
common stock in any province or territory of Canada may only be
made through a dealer that is properly registered under the
securities legislation of the applicable province or territory
wherein our common stock is offered and/or sold or, alternatively,
where such registration is not required.
Any resale of our
common stock by an investor resident in Canada must be made in
accordance with applicable Canadian securities laws, which require
resales to be made in accordance with an exemption from, or in a
transaction not subject to, prospectus requirements under
applicable Canadian securities laws. These resale restrictions may
under certain circumstances apply to resales of the common stock
outside of Canada.
Securities
legislation in certain provinces or territories of Canada may
provide a purchaser with remedies for rescission or damages if this
prospectus (including any amendment thereto) contains a
misrepresentation, provided that the remedies for rescission or
damages are exercised by the purchaser within the time limit
prescribed by the securities legislation of the purchaser’s
province or territory. The purchaser should refer to any applicable
provisions of the securities legislation of the purchaser’s
province or territory for particulars of these rights or consult
with a legal advisor.
Pursuant to section
3A.3 (or, in the case of securities issued or guaranteed by the
government of a non-Canadian jurisdiction, section 3A.4) of
National Instrument 33-105
Underwriting Conflicts
(“
NI 33-105
”),
the underwriters are not required to comply with the disclosure
requirements of NI 33-105 regarding underwriter conflicts of
interest in connection with this offering.
Upon receipt of
this prospectus, each Québec investor hereby confirms that it
has expressly requested that all documents evidencing or relating
in any way to the sale of the securities described herein
(including for greater certainty any purchase confirmation or any
notice) be drawn up in the English language only.
Par la réception de ce document, chaque
investisseur québecois confirme par les présentes
qu’il a expressément exigé que tous les documents
faisant foi ou se rapportant de quelque manière que ce soit
à la vente des valeurs mobilières décrites aux
présentes (incluant, pour plus de certitude, toute
confirmation d’achat ou tout avis) soient rédigés
en anglais seulement
.
The validity of the
securities offered by this prospectus will be passed upon for us by
Disclosure Law Group, a Professional Corporation, San Diego,
California.
Gracin & Marlow, LLP,
New York, New York, is acting as counsel for the underwriters in
connection with this offering.
Our consolidated
financial statements appearing in our Annual Report on Form 10-K
for the year ended September 30, 2017,
which is incorporated by reference into this
prospectus,
have been audited by
Marcum LLP, an independent registered public accounting firm, as
set forth in their reports thereon. Such consolidated financial
statements are incorporated herein by reference in reliance upon
such reports given on the authority of such firm as experts in
accounting and auditing.
WHERE
YOU CAN FIND MO
R
E
INFORMATION
We
are a public company and file annual, quarterly and special
reports, proxy statements and other information with the SEC. You
may read and copy any document we file at the SEC’s public
reference room at 100 F Street, NE, Washington, D.C. 20549. You can
request copies of these documents by writing to the SEC and paying
a fee for the copying cost. Please call the SEC at 1-800-SEC-0330
for more information about the operation of the public reference
room. Our SEC filings are also available, at no charge, to the
public at the SEC’s website at
http://www.sec.gov.
We
have filed with the SEC a Registration Statement on Form S-1 under
the Securities Act with respect to this offering of our securities.
This prospectus is part of that registration statement. This
prospectus does not contain all of the information set forth in the
registration statement or the exhibits to the registration
statement. For further information with respect to us and the
securities we are offering pursuant to this prospectus, you should
refer to the registration statement and its exhibits. Statements
contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily
complete, and you should refer to the copy of that contract or
other documents filed as an exhibit to the registration statement.
You may read or obtain a copy of the registration statement at the
SEC’s public reference facilities and Internet site referred
to above.
INCORPORA
T
ION OF CERTAIN INFORMATION BY
REFERENCE
The SEC allows us
to incorporate by reference the information we file with it, which
means that we can disclose important information to you by
referring you to another document that we have filed separately
with the SEC. You should read the information incorporated by
reference because it is an important part of this prospectus.
Information in this prospectus supersedes information incorporated
by reference that we filed with the SEC prior to the date of this
prospectus, while information that we file later with the SEC will
automatically update and supersede the information in this
prospectus. We incorporate by reference into this prospectus and
the registration statement of which this prospectus is a part the
information or documents listed below that we have filed with the
SEC:
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our Annual Report
on Form 10-K for the year ended September 30, 2017, filed
with the SEC on December 21, 2017;
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Amendment No. 1 to
Annual Report on Form 10-K for the fiscal year ended September 30,
2017, filed on January 26, 2018;
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the information
specifically incorporated by reference into our Annual Report on
Form 10-K for the year ended December 31, 2017 from
our definitive proxy statement relating to our 2018 Annual Meeting
of Stockholders, filed with the SEC on February 6,
2018;
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our Quarterly
Report on Form 10-Q for the three months ended
December 31, 2017, filed with the SEC on February 14,
2018;
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our Quarterly
Report on Form 10-Q for the three months ended
March 31, 2018, filed with the SEC on May 15,
2018;
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our Quarterly
Report on Form 10-Q for the three months ended June 30,
2018, filed with the SEC on August 14, 2018;
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our Current Reports
on Form 8-K, filed with the SEC on October 13, 2017,
November 28, 2017, December 21, 2017, January 17, 2018, March 28,
2018, September 11, 2018, September 25, 2018, and September
28, 2018; and
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the description of
our common stock set forth in our registration statement on
Form 8-A, filed with the SEC on June 28, 2007, including
any further amendments thereto or reports filed for the purposes of
updating this description.
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We also incorporate
by reference any future filings (other than current reports
furnished under Item 2.02 or Item 7.01 of
Form 8-K and exhibits filed on such form that are related
to such items unless such Form 8-K expressly provides to
the contrary) made with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, including those made after
(i) the date of
this Amendment No.
1 to
the registration statement of which this
prospectus is a part and prior to effectiveness of such
registration statement, and (ii) the date of this prospectus and
before the completion of this offering of securities included in
this prospectus, or until we file a post-effective amendment that
indicates the termination of the offering of the common stock made
by this prospectus and will become a part of this prospectus from
the date that such documents are filed with the SEC. Information in
such future filings updates and supplements the information
provided in this prospectus. Any statements in any such future
filings will automatically be deemed to modify and supersede any
information in any document we previously filed with the SEC that
is incorporated or deemed to be incorporated herein by reference to
the extent that statements in the later filed document modify or
replace such earlier statements.
We will furnish
without charge to each person, including any beneficial owner, to
whom a prospectus is delivered, upon written or oral request, a
copy of any or all of the documents incorporated by reference into
this prospectus but not delivered with the prospectus, including
exhibits that are specifically incorporated by reference into such
documents. You should direct any requests for documents
to:
Bridgeline Digital, Inc.
Attn: Corporate Secretary
80 Blanchard Road
Burlington, MA 01803
(781) 376-5555
You should rely
only on information contained in, or incorporated by reference
into, this prospectus or in any free writing prospectus that we
have authorized for use in connection with this offering.
We have not, and the underwriters have
not, authorized anyone to provide you with information different
than that which is contained in or incorporated by reference in
this prospectus or in any free writing prospectus that we have
authorized for use in connection with this offering. We are
offering to sell, and seeking offers to buy, shares of common stock
only in jurisdictions where offers and sales are
permitted.
DISCLOSURE OF COMMISSION POSI
T
ION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITY
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers, and controlling
persons, we have been advised that in the opinion of the SEC this
indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.
6,250,000
Shares
Common
Stock
P R O S P E C T U S
ThinkEquity
a
division of Fordham Financial Management, Inc.
Through and
including
,
2018 (25 days after commencement of this offering), all dealers
that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers’ obligation to
deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table
indicates the expenses to be incurred in connection with the
offering described in this registration statement, other than
underwriting discounts and commissions, all of which will be paid
by us. All amounts are estimated except the Securities and Exchange
Commission registration fee and the Financial Industry Regulatory
Authority, Inc. (“
FINRA
”) filing fee.
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SEC Registration
Fee
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$
920
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FINRA Filing
Fee
|
1,636
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Legal Fees and
Expenses
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140,000
*
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Underwriter’s
non-accountable expense allowance
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62,500
*
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Accounting Fees and
Expenses
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20,860
*
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Transfer Agent and
Registrar fees and expenses
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1,000
*
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Printing
Expenses
|
20,000
*
|
Miscellaneous
Expenses
|
5,000
*
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Total
expenses
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$
251,916
*
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* Amounts
shown are estimates.
Item 14. Indemnification of Officers and
Directors
Our amended and restated certificate of incorporation
(“
Charter
”) and amended and restated bylaws
(“
Bylaws
”) contain provisions relating to the
limitation of liability and indemnification of directors and
officers. Our Charter provides that a director will not be
personally liable to us or our stockholders for monetary damages
for breach of fiduciary duty as a director, except for
liability:
●
for
any breach of the director’s duty of loyalty to us or our
stockholders;
●
for
acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
●
under Section 174 of the Delaware General
Corporation Law (the “
DGCL
”); or
●
for
any transaction from which the director derived any improper
personal benefit.
Our
Charter also provides that we will indemnify our directors and
officers to the fullest extent not prohibited by the DGCL, as it
presently exists or may hereafter be amended.
Our Bylaws provide that we will indemnify our
directors and officers to the fullest extent not prohibited by the
DGCL;
provided, however,
that we may limit the extent of such
indemnification by individual contracts with our directors and
executive officers; and provided, further, that we are not required
to indemnify any director or executive officer in connection with
any proceeding (or part thereof) initiated by such person or any
proceeding by such person against us or our directors, officers,
employees or other agents unless:
●
such
indemnification is expressly required to be made by
law;
●
the
proceeding was authorized by the Board of Directors;
or
●
such
indemnification is provided by us, in our sole discretion, pursuant
to the powers vested in us under the DGCL.
Our
Bylaws provide that we shall advance, prior to the final
disposition of any proceeding, promptly following request therefor,
all expenses by any director or executive officer in connection
with any such proceeding upon receipt of any undertaking by or on
behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be
indemnified under Article V of our Bylaws or otherwise.
Notwithstanding the foregoing, unless otherwise determined, no
advance shall be made by us if a determination is reasonably and
promptly made by the Board of Directors by a majority vote of a
quorum of directors who were not parties to the proceeding, or if
such a quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in
a written opinion, that the facts known to the decision-making
party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner
that such person did not believe to be in or not opposed to our
best interests.
Our
Bylaws also authorize us to purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to Article
V of our Bylaws.
Section
145(a) of the DGCL authorizes a corporation to indemnify any person
who was or is a party, or is threatened to be made a party, to a
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation), by reason of
the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action,
suit or proceeding, if the person acted in good faith and in a
manner the person reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
the person’s conduct was unlawful.
Section
145(b) of the DGCL provides in relevant part that a corporation may
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit
by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection
with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
The
DGCL also provides that indemnification under Section 145(d) can
only be made upon a determination that indemnification of the
present or former director, officer or employee or agent is proper
in the circumstances because such person has met the applicable
standard of conduct set forth in Section 145(a) and
(b).
Section
145(g) of the DGCL also empowers a corporation to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such person’s status as
such, whether or not the corporation would have the power to
indemnify such person against such liability under Section 145 of
the DGCL.
Section
102(b)(7) of the DGCL permits a corporation to provide for
eliminating or limiting the personal liability of one of its
directors for any monetary damages related to a breach of fiduciary
duty as a director, as long as the corporation does not eliminate
or limit the liability of a director for acts or omissions which
(1) which breached the director’s duty of loyalty to the
corporation or its stockholders, (2) which were not in good faith
or which involve intentional misconduct or knowing violation of
law, (3) under Section 174 of the DGCL; or (4) from which the
director derived an improper personal benefit.
We
have obtained directors’ and officers’ insurance to
cover our directors and officers for certain
liabilities.
We
plan to enter into an underwriting agreement, which provides that
the underwriters are obligated, under some circumstances, to
indemnify our directors, officers and controlling persons against
specified liabilities, including liabilities under the Securities
Act.
Item 15. Recent Sales of Unregistered Securities
The number of those securities sold and issued by
the Company prior to July 24, 2017 (the “
Effective
Date
”), as set forth
below, have been adjusted to reflect the 1-for-5 stock split
effectuated by the Company on the Effective Date. Accordingly,
those numbers included herein shall differ from the corresponding
numbers disclosed in our periodic reports filed with the SEC prior
to the Effective Date.
In
October 2015, we sold 136,000 shares of our common stock at a
purchase price of $5.00 per share, for aggregate consideration of
$680,000, to accredited investors through a private placement
transaction.
In December 2015, we issued a warrant to purchase
6,000 shares of common stock at a price of $20.00 per share to a
director in connection with a bank guaranty,
which warrant was exercisable six-months after the
date of issuance and expires December 31, 2021.
In
February 2016, we issued an aggregate of 21,539 shares of
restricted common stock at $4.55 per share to four members of our
Board of Directors in lieu of cash payments as consideration for
their services as Board members.
In April 2016, our stockholders approved a
proposal for
issuance of up to 800,000 shares of our common
stock upon conversion of certain outstanding convertible promissory
notes. From June 2016 through August 2016, all of the notes were
converted into shares of common stock.
In May 2016, we
issued 361,336 shares of common stock, resulting in net proceeds to
the Company of $1.2 million for the first closing in connection
with the conversion of term notes issued to certain accredited
investors, as approved by the stockholders on April 29, 2016.
We also issued to such investors
warrants to purchase an aggregate of 53,334 shares of our common
stock at a price of $3.75 per share,
which warrants were exercisable six-months after
the date of issuance and expire five years from the date of
issuance.
In June and July 2016, we issued an additional
172,000 shares of common stock, resulting in net proceeds to the
Company of $400,000 for the second and third closings in connection
with the conversion of these term notes.
In May 2016,
certain officers and directors converted all outstanding principal
and accrued but unpaid interest due under outstanding term notes
held by such officers and directors into an aggregate of 867,765
shares of our common stock at a conversion price of $3.75 per
share. In connection with the conversion, a total of 86,778
warrants to purchase common stock were issued at a price of $3.75
per share, which warrants were exercisable six months after the
date of issuance and expire five years from the date of
issuance.
In
July 2016, we sold 440,000 shares of common stock at $3.75 per
share to certain accredited investors in a private placement
transaction, resulting in net proceeds of $1.5 million to the
Company. We also issued to such investors warrants to purchase an
aggregate of 44,000 shares of our common stock at a price of $4.60
per share, which warrants were exercisable six-months after the
date of issuance and expire five and one-half years from the date
of issuance.
During
fiscal 2016, we issued 5,172 shares of common stock in connection
with a prior acquisition as payment of contingent
consideration.
In
October 2016, we issued to one of our vendors 2,000 shares of
common stock at $3.95 per share for an aggregate fair market value
of $7,850 in exchange for services provided.
In November 2016, we sold 427,073 shares of our
common stock at a purchase price of $2.40 per share, for aggregate
consideration of approximately $1.1 million, to accredited
investors through a private placement transaction.
We also issued to purchasers warrants
to purchase an aggregate of 213,538 shares of our common stock at a
price of $3.50 per share, which warrants were exercisable
six-months after the date of issuance and expire five and one-half
years from the date of issuance. In addition, we entered into a
registration right agreement with such purchasers to file a
registration statement to register the shares of common stock
issued as well as those shares of common stock underlying to the
warrants that were issued to the purchasers. Our President and CEO
and two of our directors purchased an aggregate of 78,740 shares of
common stock in this private offering; however, these officers and
directors waived their rights to participate in the registration
statement.
In
December 2016, we issued warrants to purchase 6,000 shares of
common stock at a price of $20.00 per share to a director in
connection with a bank guaranty, which warrants were exercisable
six-months after the date of issuance and expire on December 31,
2021.
In
February 2017, we issued an aggregate of 36,826 shares of
restricted common stock at $3.15 to five members of our Board of
Directors in lieu of cash payments as consideration for their
annual services as Board members.
In
June 2017, our CEO and President elected to receive shares of
common stock in lieu of a $20,000 cash payment for a bonus earned
for his services to the Company in the first half of the fiscal
year. He received 7,273 fully vested restricted shares of
common stock with a fair value price of $2.75 per
share.
During
fiscal 2017, we issued 1,129 shares of common stock in connection
with a prior acquisition as payment of contingent
consideration.
In
October 2017, we issued to one of our lenders an eight-year warrant
to purchase 66,315 shares of our common stock at a price of $2.65
per share.
In December 2017, we issued a warrant to purchase
6,000 shares of common stock at a price of $20.00 per share to a
director in connection with a bank guaranty, which warrants were
exercisable six-months after the date of issuance and
expire December 31,
2021.
In
February 2018, we issued an aggregate of 41,006 shares of
restricted common stock at $2.39 per share to four members of our
Board of Directors in lieu of cash payments as consideration for
their annual services as Board members.
On September 7, 2018, we sold and issued Term
Notes to certain accredited investors in the aggregate principal
amount of $941,176,
for which we received cash proceeds in
the aggregate amount of $760,000 after subtracting the original
issue discount and debt issuance costs. The Term Notes have an
original issue discount of fifteen percent (15%), bear interest at
a rate of twelve percent (12%) per annum, and mature on the earlier
to occur of (i) six months from September 7, 2018, or (ii) the
consummation of a debt or equity financing resulting in gross
proceeds to the Company of at least $3.0 million.
We believe that
each of the offers, sales and issuances of securities described in
Item 15 were exempt from registration under the Securities Act
pursuant to Regulation D under the Securities Act or pursuant to
Section 4(a)(2) of the Securities Act regarding transactions
not involving a public offering. The recipients of securities in
each of these transactions represented their intention to acquire
the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate
legends were affixed to the stock certificates and instruments
issued in such transactions. All recipients had adequate access,
through their relationships with us, to information about
us.
Item 16. Exhibits
|
|
Incorporated
by Reference
|
Filed
|
|
Exhibit
|
|
|
|
Herewith
|
|
Form of
Underwriting Agreement
|
|
|
|
X
|
|
Asset Purchase
Agreement, dated as of May 11, 2010, by and between Bridgeline
Digital, Inc. and TMX Interactive, Inc.
|
10-Q
|
May 17,
2010
|
2.1
|
|
|
Asset Purchase
Agreement, dated as of July 9, 2010, by and between Bridgeline
Digital, Inc. and e.magination network, LLC
|
8-K
|
July 15,
2010
|
2.1
|
|
|
Agreement and Plan
of Merger, dated as of October 3, 2011, by and among Bridgeline
Digital, Inc., Magnetic Corporation and Jennifer
Bakunas
|
8-K
|
October 6,
2011
|
2.1
|
|
|
Agreement and Plan
of Merger, dated as of May 31, 2012, by and among Bridgeline
Digital, Inc., MarketNet, Inc. and Jill
Bach
|
8-K
|
June 5,
2012
|
2.1
|
|
|
Amended and
Restated Certificate of Incorporation, as
amended
|
10-Q
|
May 15,
2013
|
3.1
|
|
|
Certificate of
Amendment to Amended and Restated Certificate of Incorporation,
dated May 4, 2015
|
8-K
|
May 5,
2015
|
3.1
|
|
|
Certificate of
Designations of the Series A Convertible Preferred
Stock
|
8-K
|
November 4,
2014
|
3.1
|
|
|
Amended and
Restated By Laws
|
10-Q
|
February 17,
2015
|
3.2
|
|
|
Specimen Common
Stock Certificate (File No. 333-139298)
|
SB-2/A
|
June 20,
2007
|
4.1
|
|
|
Form of
Representative’s Warrant
|
|
|
|
X
|
|
Opinion of
Disclosure Law Group, a Professional Corporation.
|
|
|
|
X
|
|
Employment
Agreement with Roger “Ari” Kahn, dated August 24,
2015
|
10-K
|
December 24,
2015
|
10.1
|
|
|
First Amendment to
Employment Agreement, Roger “Ari” Kahn, dated May 10,
2016
|
8-K
|
May 13,
2016
|
10.1
|
|
|
Amended and
Restated Stock Incentive Plan, as amended
|
DEF 14
A
|
July 14,
2014
|
C
|
|
|
Securities Purchase
Agreement between Bridgeline Digital, Inc. and the investors named
therein, dated October 29, 2010
|
8-K
|
November 4,
2010
|
10.1
|
|
|
Securities Purchase
Agreement between Bridgeline Digital, Inc. and the investors named
therein, dated May 31, 2012
|
8-K
|
June 5,
2012
|
10.1
|
|
|
Form of Common
Stock Purchase Warrant issued to Placement Agent, dated November 6,
2013
|
8-K
|
November 12,
2013
|
10.3
|
|
|
Placement Agent
Agreement between Bridgeline Digital, Inc. and Taglich Brothers,
Inc., dated October 30, 2013
|
8-K
|
November 12,
2013
|
10.5
|
|
|
Form of Restricted
Stock Agreement by and between Bridgeline Digital, Inc. and certain
Board of Directors, dated February 24, 2014
|
10-Q
|
May 15,
2014
|
10.2
|
|
|
Securities Purchase
Agreement between Bridgeline Digital, Inc. and the Investors named
therein dated March 28, 2014
|
10-Q
|
May 15,
2014
|
10.3
|
|
|
Form of Common
Stock Purchase Warrant issued to Placement Agent, dated March 28,
2014
|
10-Q
|
May 15,
2014
|
10.4
|
|
|
Securities Purchase
Agreement between Bridgeline Digital, Inc and the investors
therein, dated October 28, 2014
|
8-K
|
November 4,
2014
|
10.1
|
|
|
Form of Common
Stock Purchase Warrant Issued to Placement Agent
|
8-K
|
November 4,
2014
|
10.2
|
|
|
Form of Common
Stock Purchase Warrant Issued by Company to Michael Taglich dated
January 7, 2015
|
8-K
|
January 9,
2015
|
10.3
|
|
|
Side Letter between
the Company and Michael Taglich, dated January 7,
2015
|
8-K
|
January 9,
2015
|
10.3
|
|
|
Form of Common
Stock Purchase Warrant Issued by Company to Michael Taglich dated
February 17, 2015
|
10-Q
|
February 17,
2015
|
10.2
|
|
|
Form of Restricted
Stock Agreement
|
10-Q
|
May 15,
2015
|
10.6
|
|
|
Form of Common
Stock Purchase Warrant Issued by Company to Michael Taglich dated
May 12, 2015
|
10-Q
|
May 15,
2015
|
10.9
|
|
|
Form of Common
Stock Purchase Warrant Issued by Company to Michael Taglich dated
July 21, 2015
|
8-K
|
July 24,
2015
|
10.2
|
|
|
Securities Purchase
Agreement between Bridgeline Digital, Inc and the investors
therein, dated October 13, 2015
|
10-Q
|
February 12,
2016
|
10.3
|
|
|
Bridgeline Digital
Inc. 2016 Stock Incentive Plan
|
DEF 14
A
|
March 22,
2016
|
Appendix
B
|
|
|
Form of Common
Stock Purchase Warrant issued to placement agent
|
8-K
|
May 17,
2016
|
10.3
|
|
|
Loan and Security
Agreement between Bridgeline Digital Inc. and Heritage Bank of
Commerce, dated June 9, 2016
|
8-K
|
June 15,
2016
|
10.1
|
|
|
Unconditional
Guarantee entered into by Michael N. Taglich in favor of Heritage
Bank of Commerce, dated June 9, 2016
|
8-K
|
June 15,
2016
|
10.2
|
|
|
Placement Agreement
between Bridgeline Digital, Inc and Taglich Brothers, Inc dated
March 31, 2016
|
8-K
|
June 15,
2016
|
10.3
|
|
|
First Amendment to
the Loan and Security Agreement between Bridgeline Digital
Inc. and Heritage Bank of Commerce, dated August 15,
2016
|
10-Q
|
August 15,
2016
|
10.12
|
|
|
Form of Securities
Purchase Agreement dated November 3, 2016
|
8-K
|
November 4,
2016
|
10.1
|
|
|
Form of Purchaser
Warrant
|
8-K
|
November 4,
2016
|
10.2
|
|
|
Form of
Registration Rights Agreement dated November 3,
2016
|
8-K
|
November 4,
2016
|
10.3
|
|
|
Form of Insider
Securities Purchase Agreement dated November 3,
2016
|
8-K
|
November 4,
2016
|
10.4
|
|
|
Second Amendment to
the Loan and Security Agreement between Bridgeline Digital
Inc. and Heritage Bank of Commerce, dated December 14,
2016
|
10-K
|
December 14,
2016
|
10.66
|
|
|
Employment
Agreement with Michael D. Prinn dated November 11,
2016
|
10-Q
|
February 14,
2017
|
10.7
|
|
|
Third Amendment to
the Loan and Security Agreement between Bridgeline Digital,
Inc and Heritage Bank of Commerce
|
10-Q
|
August 14,
2017
|
10.1
|
|
|
First Amendment to
Affirmation of Guaranty between Michael N. Taglich and
Heritage Bank of Commerce
|
10-Q
|
August 14,
2017
|
10.2
|
|
|
Seventh Amendment
to the Loan and Security Amendment between Bridgeline Digital, Inc.
and Heritage Bank of Commerce, dated May 10, 2018
|
10-Q
|
May 15,
2018
|
10.1
|
|
|
First Amendment to
the Loan and Security Amendment between Bridgeline Digital, Inc.
and Montage Capital II LP, dated May 10, 2018
|
10-Q
|
May 15,
2018
|
10.2
|
|
|
Eighth Amendment to
the Loan and Security Amendment between Bridgeline Digital, Inc.
and Heritage Bank of Commerce, dated August 10,
2018
|
10-Q
|
August
14, 2018
|
10.1
|
|
|
Form of Note
Purchase Agreement
|
8-K
|
September 11,
2018
|
10.1
|
|
|
Form of Promissory
Note
|
8-K
|
September 11,
2018
|
10.2
|
|
|
Form of
Subordination Agreement
|
8-K
|
September 11,
2018
|
10.3
|
|
|
Ninth
Amendment to the Loan and Security Agreement between Bridgeline
Digital, Inc. and Heritage Bank of Commerce, dated September 21,
2018
|
8-K
|
September 25,
2018
|
10.1
|
|
|
Subsidiaries of the
Registrant
|
10-K
|
December 21,
2017
|
21.1
|
|
|
Consent of Marcum
LLP, Independent Registered Public Accounting
Firm
|
|
|
|
X
|
|
Consent of
Disclosure Law Group, a Professional Corporation (included in
Exhibit 5.1)
|
|
|
|
X
|
|
Power of Attorney
(included on signature page to the initial
Registration Statement)
|
|
|
|
|
Item 17.
Undertakings
The undersigned
registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in
such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act
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 Securities 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 Securities Act and will be governed by the final adjudication
of such issue.
The
undersigned registrant hereby undertakes:
(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;
|
|
(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) if, in
the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee”
table in the effective registration statement;
|
|
(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, 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 of the registrant under the
Securities Act 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.
|
The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act,
each filing of the registrant’s annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement 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.
The
undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report, to
securityholders that is incorporated by reference in the prospectus
and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide
such interim financial information.
The registrant
hereby further undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2) For
the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of these securities at
that time shall be deemed to be the
initial
bona
fide
offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused
this
Amendment
No. 1 to the
registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized,
in the City of Burlington, Massachusetts on
October
9
, 2018.
|
BRIDGELINE
DIGITAL, INC.
|
|
|
|
|
By:
|
/s/ Roger
Kahn
|
|
|
Roger
Kahn
|
|
|
President
and Chief Executive Officer (Principal Executive
Officer)
|
Pursuant
to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Roger
Kahn
|
|
President,
Chief Executive Officer
|
|
October
9
,
2018
|
Roger
Kahn
|
|
(Principal
Executive Officer) and Director
|
|
|
|
|
|
|
|
/s/ Carole
Tyner
|
|
Chief Financial
Officer
|
|
October
9
,
2018
|
Carole
Tyner
|
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October
9
,
2018
|
Kenneth
Galaznik
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
October
9
,
2018
|
Joni
Kahn
|
|
|
|
|
*
|
|
Director
|
|
October
9
,
2018
|
Scott
Landers
|
|
|
|
|
*
|
|
Director
|
|
October
9
,
2018
|
Michael
Taglich
|
|
|
|
|
*
By: /
s/ Roger
Kahn
|
|
|
|
|
Attorney-in-fact
|
|
|
|
|
Exhibit 1.1
UNDERWRITING AGREEMENT
between
BRIDGELINE DIGITAL, INC.
and
THINKEQUITY,
A DIVISION OF FORDHAM FINANCIAL MANAGEMENT, INC.,
as Representative of the Several Underwriters
BRIDGELINE DIGITAL, INC.
UNDERWRITING AGREEMENT
New York, New York
[●], 2018
ThinkEquity,
A
Division of Fordham Financial Management, Inc.
As Representative of the several Underwriters named on Schedule 1
attached hereto
17 State Street, 22
nd
Floor
New York, New York 10004
Ladies and Gentlemen:
The
undersigned, Bridgeline Digital, Inc., a corporation formed under
the laws of the State of Delaware (collectively with its
subsidiaries and affiliates, including, without limitation, all
entities disclosed or described in the Registration Statement (as
hereinafter defined) as being subsidiaries or affiliates of
Bridgeline Digital, Inc., the “
Company
”), hereby confirms its
agreement (this “
Agreement
”) with ThinkEquity, a
division of Fordham Financial Management, Inc. (hereinafter
referred to as “you” (including its correlatives) or
the “
Representative
”), and with the
other underwriters named on
Schedule 1
hereto for which the
Representative is acting as representative (the Representative and
such other underwriters being collectively called the
“
Underwriters
”
or, individually, an “
Underwriter
”) as
follows:
1.
Purchase and Sale of
Shares
.
1.1
Firm
Shares
.
1.1.1
Nature
and Purchase of Firm Shares
.
(i) On
the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to the several Underwriters, an
aggregate of
[●]
shares
(the “
Firm
Shares
”) of the Company’s common stock, par
value $0.001 per share (the “
Common Stock
”).
(ii) The
Underwriters, severally and not jointly, agree to purchase from the
Company the number of Firm Shares set forth opposite their
respective names on
Schedule 1
attached hereto and
made a part hereof at a purchase price of $
[●]
per Firm Share (93%
1
of the per Firm Share offering price).
The Firm Shares are to be offered initially to the public at the
offering price set forth on the cover page of the Prospectus (as
defined in
Section
2.1.1
hereof).
1.1.2
Shares
Payment and Delivery
.
(i)
Delivery
and payment for the Firm Shares shall be made at 10:00 a.m.,
Eastern time, on the second (2nd) Business Day following the
effective date (the “
Effective
Date
”) of the
Registration Statement (as defined in
Section 2.1.1
below) under the Securities Act of
1933, as amended (the “
Securities
Act
”) (or the third (3rd)
Business Day following the Effective Date if the pricing for the
Offering (as defined in
Section 2.1.1
below) occurs after 4:01 p.m., Eastern
time on the Effective Date)
, or at such earlier time as
shall be agreed upon by the Representative and the Company, at the
offices of Gracin & Marlow, LLP, The Chrysler Building, 405
Lexington Avenue, 26
th
Floor, New York,
New York 10174 (“
Representative Counsel
”), or at
such other place (or remotely by facsimile or other electronic
transmission) as shall be agreed upon by the Representative and the
Company. The hour and date of delivery and payment for the Firm
Shares is called the “
Closing
Date
.”
(ii) Payment
for the Firm Shares shall be made on the Closing Date by wire
transfer in Federal (same day) funds, payable to the order of the
Company upon delivery of the certificates (in form and substance
satisfactory to the Underwriters) representing the Firm Shares (or
through the facilities of the Depository Trust Company
(“
DTC
”)) for the
account of the Representative. The Firm Shares shall be registered
in such name or names and in such authorized denominations as the
Representative may request in writing at least two (2) full
Business Days prior to the Closing Date. The Company shall not be
obligated to sell or deliver the Firm Shares except upon tender of
payment by the Representative for all of the Firm Shares. The term
“Business Day” means any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions
are authorized or obligated by law to close in New York, New
York.
1.2
Over-allotment
Option
.
1.2.1
Option
Shares
. For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares, the
Company hereby grants to the Representative an option to purchase
up to
[●]
additional
shares of Common Stock, representing fifteen percent (15%) of the
Firm Shares sold in the offering, from the Company (the
“
Over-allotment
Option
”). The purchase price to be paid per Option
Share shall be equal to the price per Firm Share set forth in
Section 1.1.1
hereof. The Firm Shares and the Option Shares are hereinafter
referred to together as the “
Public Securities
.” The offering
and sale of the Public Securities is hereinafter referred to as the
“
Offering
.”
1.2.2
Exercise
of Over-allotment Option
. The Over-allotment Option granted
pursuant to
Section
1.2.1
hereof may be exercised by the Representative as to
all (at any time) or any part (from time to time) of the Option
Shares within 45 days after the date of the Prospectus (as defined
below). The Underwriters shall not be under any obligation to
purchase any Option Shares prior to the exercise of the
Over-allotment Option. The Over-allotment Option granted hereby may
be exercised by the giving of oral notice to the Company from the
Representative, which must be confirmed in writing by overnight
mail or facsimile or other electronic transmission setting forth
the number of Option Shares to be purchased and the date and time
for delivery of and payment for the Option Shares (the
“
Option Closing
Date
”), which shall not be later than two (2) full
Business Days after the date of the notice or such other time as
shall be agreed upon by the Company and the Representative, at the
offices of Representative Counsel or at such other place (including
remotely by facsimile or other electronic transmission) as shall be
agreed upon by the Company and the Representative. If such delivery
and payment for the Option Shares does not occur on the Closing
Date, the Option Closing Date will be as set forth in the notice.
Upon exercise of the Over-allotment Option with respect to all or
any portion of the Option Shares, subject to the terms and
conditions set forth herein, (i) the Company shall become obligated
to sell to the Underwriters the number of Option Shares specified
in such notice and (ii) each of the Underwriters, acting severally
and not jointly, shall purchase that portion of the total number of
Option Shares then being purchased as set forth in
Schedule 1
opposite the name of
such Underwriter bears to the total number of Firm Shares, subject,
in each case, to such adjustments as the Representative, in its
sole discretion, shall determine.
1.2.3
Payment
and Delivery
. Payment for the Option Shares shall be made on
the Option Closing Date by wire transfer in Federal (same day)
funds, payable to the order of the Company upon delivery to you of
certificates (in form and substance satisfactory to the
Underwriters) representing the Option Shares (or through the
facilities of DTC) for the account of the Underwriters. The Option
Shares shall be registered in such name or names and in such
authorized denominations as the Representative may request in
writing at least two (2) full Business Days prior to the Option
Closing Date. The Company shall not be obligated to sell or deliver
the Option Shares except upon tender of payment by the
Representative for applicable Option Shares. The Option Closing
Date may be simultaneous with, but not earlier than, the Closing
Date; and in the event that such time and date are simultaneous
with the Closing Date, the term “
Closing Date
” shall refer to the
time and date of delivery of the Firm Shares and Option
Shares.
1.3
Representative’s
Warrants
.
1.3.1.
Purchase Warrants
.
The Company hereby agrees to issue and sell to the Representative
(and/or its designees) on the Closing Date an option (the
“
Representative’s
Warrant
”) for the purchase of an aggregate of
[●] shares of Common Stock, representing 5.0% (2.5% of the
Firm Shares sold to the investors set forth on Schedule A annexed
hereto) of the Firm Shares (excluding the Option Shares), for an
aggregate purchase price of $100.00. The Representative’s
Warrant agreement, in the form attached hereto as
Exhibit A
(the
“
Representative’s
Warrant Agreement
”), shall be exercisable, in whole or
in part, commencing on a date which is one hundred and eighty (180)
days after the Effective Date and expiring on the five-year
anniversary of the Effective Date at an initial exercise price per
share of Common Stock of $[●], which is equal to 125.0% of
the public offering price of each Firm Share. The
Representative’s Warrant Agreement and the shares of Common
Stock issuable upon exercise thereof are hereinafter referred to
together as the “
Representative’s
Securities
.” The Representative understands and agrees
that there are significant restrictions pursuant to FINRA Rule 5110
against transferring the Representative’s Warrant and the
underlying shares of Common Stock during the one hundred eighty
(180) days immediately following the Effective Date and by its
acceptance thereof shall agree that the Representative’s
Warrant and the underlying shares of Common Stock shall not be sold
during the Offering, or sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale,
derivative, put, or call transaction that would result in the
effective economic disposition of the Representative’s
Warrant or the underlying shares of Common Stock by any person for
a period of one hundred eighty (180) days immediately following the
Effective Date, except as provided for in FINRA Rule
5110(g)(2).
1.3.2.
Delivery
. Delivery
of the Representative’s Warrant Agreement shall be made on
the Closing Date and shall be issued in the name or names and in
such authorized denominations as the Representative may
request.
2.
Representations and Warranties of the
Company
. The Company represents and warrants to the
Underwriters as of the Applicable Time (as defined below), as of
the Closing Date and as of the Option Closing Date, if any, as
follows:
2.1
Filing
of Registration Statement
.
2.1.1
Pursuant
to the Securities Act
.
The
Company has filed with the U.S. Securities and Exchange Commission
(the “
Commission
”) a registration statement, and an
amendment or amendments thereto, on Form S-1 (File No. 333-227430),
including any related prospectus or prospectuses, for the
registration of the Public Securities and the
Representative’s Securities under the Securities Act, which
registration statement and amendment or amendments have been
prepared by the Company in all material respects in conformity with
the requirements of the Securities Act and the rules and
regulations of the Commission under the Securities Act (the
“
Securities Act
Regulations
”) and will
contain all material statements that are required to be stated
therein in accordance with the Securities Act and the Securities
Act Regulations. Except as the context may otherwise require, such
registration statement, as amended, on file with the Commission at
the time the registration statement became effective (including the
Preliminary Prospectus included in the registration statement,
financial statements, schedules, exhibits and all other documents
filed as a part thereof or incorporated therein and all information
deemed to be a part thereof as of the Effective Date pursuant to
paragraph (b) of Rule 430A of the Securities Act Regulations (the
“
Rule
430A Information
”)), is
referred to herein as the “
Registration
Statement
.” If the
Company files any registration statement pursuant to Rule 462(b) of
the Securities Act Regulations, then after such filing, the term
“
Registration
Statement
” shall include
such registration statement filed pursuant to Rule 462(b). The
Registration Statement has been declared effective by the
Commission on the date hereof.
Each
prospectus used prior to the effectiveness of the Registration
Statement, and each prospectus that omitted the Rule 430A
Information that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a
“
Preliminary
Prospectus
.” The
Preliminary Prospectus, subject to completion, dated [●],
2018, that was included in the Registration Statement immediately
prior to the Applicable Time is hereinafter called the
“
Pricing
Prospectus
.” The final
prospectus in the form first furnished to the Underwriters for use
in the Offering is hereinafter called the
“
Prospectus
.”
Any reference to the “
most recent Preliminary
Prospectus
” shall be
deemed to refer to the latest Preliminary Prospectus included in
the Registration Statement.
“
Applicable
Time
” means [ ]:00
[a.m.][p.m.], Eastern time, on the date of this
Agreement.
“
Issuer Free Writing
Prospectus
” means any
“issuer free writing prospectus,” as defined in Rule
433 of the Securities Act Regulations (“
Rule 433
”), including without limitation any
“free writing prospectus” (as defined in Rule 405 of
the Securities Act Regulations) relating to the Public Securities
that is (i) required to be filed with the Commission by the
Company, (ii) a “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i),
whether or not required to be filed with the Commission, or (iii)
exempt from filing with the Commission pursuant to Rule
433(d)(5)(i) because it contains a description of the Public
Securities or of the Offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule
433(g).
“
Issuer General Use Free Writing
Prospectus
” means any
Issuer Free Writing Prospectus that is intended for general
distribution to prospective investors (other than a
“
bona
fide
electronic road
show,” as defined in Rule 433), as evidenced by its being
specified in
Schedule 2-B
hereto.
“
Issuer Limited Use Free Writing
Prospectus
” means any
Issuer Free Writing Prospectus that is not an Issuer General Use
Free Writing Prospectus.
“
Pricing Disclosure
Package
” means any Issuer
General Use Free Writing Prospectus issued at or prior to the
Applicable Time, the Pricing Prospectus and the information
included on
Schedule 2-A
hereto, all considered together.
2.1.2
Pursuant
to the Exchange Act
. The Company has filed with the
Commission a Form 8-A (Accession No. 001-33567) providing for the
registration pursuant to Section 12(b) under the Securities
Exchange Act of 1934, as amended (the “
Exchange Act
”), of the shares of
Common Stock. The registration of the shares of Common Stock and
related Form 8-A have become effective under the Exchange Act on or
prior to the date hereof. The Company has taken no action designed
to, or likely to have the effect of, terminating the registration
of the shares of Common Stock under the Exchange Act, nor has the
Company received any notification that the Commission is
contemplating terminating such registration.
2.2
Stock
Exchange Listing
. The shares of Common Stock have been
approved for listing on The NASDAQ Capital Market (the
“
Exchange
”), and
the Company has taken no action designed to, or likely to have the
effect of, delisting the shares of Common Stock from the Exchange,
nor has the Company received any notification that the Exchange is
contemplating terminating such listing except as described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus. The Company has submitted the Listing of Additional
Shares Notification Form with the Exchange with respect to the
Offering of the Public Securities.
2.3
No
Stop Orders, etc
. Neither the Commission nor, to the
Company’s knowledge, any state regulatory authority has
issued any order preventing or suspending the use of the
Registration Statement, any Preliminary Prospectus or the
Prospectus or has instituted or, to the Company’s knowledge,
threatened to institute, any proceedings with respect to such an
order. The Company has complied with each request (if any) from the
Commission for additional information.
2.4
Disclosures
in Registration Statement
.
2.4.1
Compliance
with Securities Act and 10b-5 Representation
.
(i) Each
of the Registration Statement and any post-effective amendment
thereto, at the time it became effective, complied in all material
respects with the requirements of the Securities Act and the
Securities Act Regulations. Each Preliminary Prospectus, including
the prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto,
and the Prospectus, at the time each was filed with the Commission,
complied in all material respects with the requirements of the
Securities Act and the Securities Act Regulations. Each Preliminary
Prospectus delivered to the Underwriters for use in connection with
this Offering and the Prospectus was or will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(ii) Neither
the Registration Statement nor any amendment thereto, at its
effective time, as of the Applicable Time, at the Closing Date or
at any Option Closing Date (if any), contained, contains or will
contain an untrue statement of a material fact or omitted, omits or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein not
misleading.
(iii) The
Pricing Disclosure Package, as of the Applicable Time, at the
Closing Date or at any Option Closing Date (if any), did not, does
not and will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; and any Issuer Limited Use Free
Writing Prospectus hereto does not conflict with the information
contained in the Registration Statement, any Preliminary Prospectus
or the Prospectus, and each such Issuer Limited Use Free Writing
Prospectus, as supplemented by and taken together with the
Prospectus as of the Applicable Time, did not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided
,
however
, that this representation and
warranty shall not apply to statements made or statements omitted
in reliance upon and in conformity with written information
furnished to the Company with respect to the Underwriters by the
Representative expressly for use in the Registration Statement, the
Pricing Disclosure Package or the Prospectus or any amendment
thereof or supplement thereto. The parties acknowledge and agree
that such information provided by or on behalf of any Underwriter
consists solely of the following statements concerning the
Underwriters contained in the “Underwriting” section of
the Prospectus (the “
Underwriters Information
”): (i)
the second sentence of the subsection entitled “Discounts and
Commissions” related to concessions; (ii) the first three
paragraphs under the subsection entitled “Price
Stabilization, Short Positions and Penalty Bids”; and (iii)
the subsection entitled “Electronic
Distribution.”
(iv)
Neither
the Prospectus nor any amendment or supplement thereto (including
any prospectus wrapper), as of its issue date, at the time of any
filing with the Commission pursuant to Rule 424(b), at the Closing
Date or at any Option Closing Date, included, includes or will
include an untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading;
provided
,
however
, that this representation and warranty shall not
apply to the Underwriters’ Information.
(v)
The
documents incorporated by reference in the Registration Statement,
the Pricing Prospectus, the Pricing Disclosure Package and the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects
to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder and none of such documents contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and any further documents so filed and
incorporated by reference in the Registration Statement, the
Pricing Prospectus, the Pricing Disclosure Package and the
Prospectus, when such documents become effective or are filed with
the Commission, as the case may be, will conform in all material
respects to the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder, and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not
misleading.
2.4.2
Disclosure
of Agreements
. The agreements and documents described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus conform in all material respects to the descriptions
thereof contained or incorporated by reference therein and there
are no agreements or other documents required by the Securities Act
and the Securities Act Regulations to be described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus or to be filed with the Commission as
exhibits to the Registration Statement or to be
incorporated by reference in the Registration Statement, the
Pricing Disclosure Package or the Prospectus, that have not been so
described or filed or incorporated by reference. Each agreement or
other instrument (however characterized or described) to which the
Company is a party or by which it is or may be bound or affected
and (i) that is referred to or incorporated by reference in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus, or (ii) is material to the Company’s business,
has been duly authorized and validly executed by the Company, is in
full force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the
other parties thereto, in accordance with its terms, except (x) as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights
generally, (y) as enforceability of any indemnification or
contribution provision may be limited under the federal and state
securities laws, and (z) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject
to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. None of such
agreements or instruments has been assigned by the Company, and
neither the Company nor, to the best of the Company’s
knowledge, any other party is in default thereunder and, to the
best of the Company’s knowledge, no event has occurred that,
with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. To the Company’s knowledge,
performance by the Company of the material provisions of such
agreements or instruments will not result in a violation of any
existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign,
having jurisdiction over the Company or any of its assets or
businesses (each, a “
Governmental
Entity
”), including,
without limitation, those relating to environmental laws and
regulations.
2.4.3
Prior
Securities Transactions
. No securities of the Company have
been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by or under
common control with the Company, except as disclosed in the
Registration Statement, the Pricing Disclosure Package and the
Preliminary Prospectus.
2.4.4
Regulations
.
The disclosures in the Registration Statement, the Pricing
Disclosure Package and the Prospectus concerning the effects of
federal, state, local and all foreign regulation on the Offering
and the Company’s business as currently contemplated are
correct in all material respects and no other such regulations are
required to be disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus that are not so
disclosed.
2.4.5
No
Other Distribution of Offering Materials
. The Company has
not, directly or indirectly, distributed and will not distribute
any offering material in connection with the Offering other than
any Preliminary Prospectus, the Pricing Disclosure Package, the
Prospectus and other materials, if any, permitted under the
Securities Act and consistent with
Section 3.2
below.
2.5
Changes
After Dates in Registration Statement
.
2.5.1
No
Material Adverse Change
. Since the respective dates as of
which information is given in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, except as otherwise
specifically stated therein: (i) there has been no material adverse
change in the financial position or results of operations of the
Company, nor any change or development that, singularly or in the
aggregate, would involve a material adverse change or a prospective
material adverse change, in or affecting the condition (financial
or otherwise), results of operations, business, assets or prospects
of the Company (a “
Material
Adverse Change
”); (ii) there have been no material
transactions entered into by the Company, other than as
contemplated pursuant to this Agreement; and (iii) no officer or
director of the Company has resigned from any position with the
Company.
2.5.2
Recent
Securities Transactions, etc
. Subsequent to the respective
dates as of which information is given in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, and
except as may otherwise be indicated or contemplated herein or
disclosed in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, the Company has not: (i) issued any
securities or incurred any liability or obligation, direct or
contingent, for borrowed money; or (ii) declared or paid any
dividend or made any other distribution on or in respect to its
capital stock.
2.6
Disclosures
in Commission Filings
. Since January 1, 2013, (i) none of
the Company’s filings with the Commission contained any
untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and (ii) the Company has made all filings with the
Commission required under the Exchange Act and the rules and
regulations of the Commission promulgated thereunder (the
“
Exchange Act
Regulations
”).
2.7
Independent
Accountants
. To the knowledge of the Company, Marcum LLP
(the “
Auditors
”), whose respective
reports are filed with the Commission and included or incorporated
by reference in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, is each an independent registered
public accounting firm as required by the Securities Act and the
Securities Act Regulations and the Public Company Accounting
Oversight Board. The Auditors have not, during the periods covered
by the financial statements included or incorporated by reference
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus, provided to the Company any non-audit services, as
such term is used in Section 10A(g) of the Exchange
Act.
2.8
Financial
Statements, etc
. The financial statements, including the
notes thereto and supporting schedules included or incorporated by
reference in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, fairly present the financial position
and the results of operations of the Company at the dates and for
the periods to which they apply; and such financial statements have
been prepared in conformity with U.S. generally accepted accounting
principles (“
GAAP
”), consistently applied
throughout the periods involved (provided that unaudited interim
financial statements are subject to year-end audit adjustments that
are not expected to be material in the aggregate and do not contain
all footnotes required by GAAP); and the supporting schedules
included or incorporated by reference in the Registration Statement
present fairly the information required to be stated therein. No
other historical or pro forma financial statements or supporting
schedules are required to be included in the Registration
Statement, the Pricing Disclosure Package or the Prospectus by the
Securities Act or the Securities Act Regulations. The pro forma
financial statements and the related notes, if any, included or
incorporated by reference in the Registration Statement, the
Pricing Disclosure Package and the Prospectus have been properly
compiled and prepared in accordance with the applicable
requirements of the Securities Act, the Securities Act Regulations,
the Exchange Act or the Exchange Act Regulations and present fairly
the information shown therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and
circumstances referred to therein. All disclosures contained in the
Registration Statement, the Pricing Disclosure Package or the
Prospectus, or incorporated or deemed incorporated by reference
therein, regarding “non-GAAP financial measures” (as
such term is defined by the rules and regulations of the
Commission), if any, comply with Regulation G of the Exchange Act
and Item 10 of Regulation S-K of the Securities Act, to the extent
applicable. Each of the Registration Statement, the Pricing
Disclosure Package and the Prospectus discloses all material
off-balance sheet transactions, arrangements, obligations
(including contingent obligations), and other relationships of the
Company with unconsolidated entities or other persons that may have
a material current or future effect on the Company’s
financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or
significant components of revenues or expenses. Except as disclosed
in the Registration Statement, the Pricing Disclosure Package and
the Prospectus, (a) neither the Company nor any of its direct and
indirect subsidiaries, including each entity disclosed or
described in the Registration
Statement, the Pricing Disclosure Package and the Prospectus as
being a subsidiary of the Company (each, a
“
Subsidiary
” and, collectively, the
“
Subsidiaries
”), has incurred any material liabilities or
obligations, direct or contingent, or entered into any material
transactions other than in the ordinary course of business, (b) the
Company has not declared or paid any dividends or made any
distribution of any kind with respect to its capital stock, (c)
there has not been any change in the capital stock of the Company
or any of its Subsidiaries, or, other than in the course of
business or any grants under any stock compensation plan, and (d)
there has not been any Material Adverse Change in the
Company’s long-term or short-term debt.
2.9
Authorized
Capital; Options, etc
. The Company had, at the date or dates
indicated in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, the duly authorized, issued and
outstanding capitalization as set forth therein. Based on the
assumptions stated in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company will have on the
Closing Date the adjusted stock capitalization set forth therein.
The reverse stock split effected on July 24, 2017 was duly
authorized by all requisite action of the Company’s Board of
Directors and shareholders under the Delaware General Corporation
Law. Except as set forth in, or contemplated by, the Registration
Statement, the Pricing Disclosure Package and the Prospectus, on
the Effective Date, as of the Applicable Time and on the Closing
Date and any Option Closing Date, there will be no stock options,
warrants, or other rights to purchase or otherwise acquire any
authorized, but unissued shares of Common Stock of the Company or
any security convertible or exercisable into shares of Common Stock
of the Company, or any contracts or commitments to issue or sell
shares of Common Stock or any such options, warrants, rights or
convertible securities.
2.10
Valid
Issuance of Securities, etc.
2.10.1
Outstanding
Securities
. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this
Agreement have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights
of rescission or similar rights with respect thereto or put rights,
and are not subject to personal liability by reason of being such
holders; and none of such securities were issued in violation of
the preemptive rights, rights of first refusal or rights of
participation of any holders of any security of the Company or
similar contractual rights granted by the Company. The authorized
shares of Common Stock conform in all material respects to all
statements relating thereto contained in the Registration
Statement, the Pricing Disclosure Package and the Prospectus. The
offers and sales of the outstanding shares of Common Stock were at
all relevant times either registered under the Securities Act and
the applicable state securities or “blue sky” laws or,
based in part on the representations and warranties of the
purchasers of such Shares, exempt from such registration
requirements.
2.10.2
Securities
Sold Pursuant to this Agreement
. The Public Securities have
been duly authorized for issuance and sale and, when issued and
paid for, will be validly issued, fully paid and non-assessable;
the holders thereof are not and will not be subject to personal
liability by reason of being such holders; the Public Securities
are not and will not be subject to the preemptive rights of any
holders of any security of the Company or similar contractual
rights granted by the Company; and all corporate action required to
be taken for the authorization, issuance and sale of the Public
Securities has been duly and validly taken. The Public Securities
and the Representative’s Warrants conform in all material
respects to all statements with respect thereto contained in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus. All corporate action required to be taken for the
authorization, issuance and sale of the Representative’s
Warrant have been duly and validly taken; the shares of Common
Stock issuable upon exercise of the Representative’s Warrant
have been duly authorized and reserved for issuance by all
necessary corporate action on the part of the Company and when paid
for and issued in accordance with the agreements evidencing the
Representative’s Warrant Agreement, such shares of Common
Stock will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal
liability by reason of being such holders; and such shares of
Common Stock are not and will not be subject to the preemptive
rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
2.11
Registration
Rights of Third Parties
. No holders of any securities of the
Company or any rights exercisable for or convertible or
exchangeable into securities of the Company have the right to
require the Company to register any such securities of the Company
under the Securities Act or to include any such securities in a
registration statement to be filed by the Company.
2.12
Validity
and Binding Effect of Agreements
. This Agreement and the
Representative’s Warrant Agreement have been duly and validly
authorized by the Company, and, when executed and delivered, will
constitute, the valid and binding agreement of the Company,
enforceable against the Company in accordance with its
terms, except: (i) as
such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting
creditors’ rights generally; (ii) as enforceability of any
indemnification or contribution provision may be limited under the
federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
2.13
No
Conflicts, etc
. The execution, delivery and performance by
the Company of this Agreement and the Representative’s
Warrant Agreement and all ancillary documents, the consummation by
the Company of the transactions herein and therein contemplated and
the compliance by the Company with the terms hereof and thereof do
not and will not, with or without the giving of notice or the lapse
of time or both: (i) result in a material breach of, or conflict
with any of the terms and provisions of, or constitute a material
default under, or result in the creation, modification, termination
or imposition of any lien, charge, mortgage, pledge, security
interest, claim, equity, trust or other encumbrance, preferential
arrangement, defect or restriction of any kind whatsoever or
encumbrance upon any property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, note, lease,
loan agreement or any other agreement or instrument, franchise,
license or permit to which the Company is a party or as to which
any property of the Company is a party; (ii) result in any
violation of the provisions of the Company’s Amended and
Restated Certificate of Incorporation (as the same may be amended
or restated from time to time, the “
Charter
”) or the amended and
restated bylaws of the Company (as the same may be amended or
restated from time to time); or (iii) violate any existing
applicable law, rule, regulation, judgment, order or decree of any
Governmental Entity as of the date hereof.
2.14
No
Defaults; Violations
. No material default exists in the due
performance and observance of any term, covenant or condition of
any material license, contract, indenture, mortgage, deed of trust,
note, loan or credit agreement, or any other agreement or
instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not
in violation of any term or provision of its Charter or bylaws, or
in violation of any franchise, license, permit, applicable law,
rule, regulation, judgment or decree of any Governmental Entity. As
of the date hereof, the Company is in compliance with all covenants
under its loan agreements, including all EBITDA
metrics.
2.15
Corporate
Power; Licenses; Consents
.
2.15.1
Conduct
of Business
. The Company has all requisite corporate power
and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies that it needs as of
the date hereof to conduct its business purpose as described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus.
2.15.2
Transactions
Contemplated Herein
. The Company has all corporate power and
authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing
with, any court, government agency or other body is required for
the valid issuance, sale and delivery of the Public Securities and
the consummation of the transactions and agreements contemplated by
this Agreement, the Representative’s Warrant Agreement and as
contemplated by the Registration Statement, the Pricing Disclosure
Package and the Prospectus, except with respect to applicable
federal and state securities laws and the rules and regulations of
the Exchange and the Financial Industry Regulatory Authority, Inc.
(“
FINRA
”).
2.16
D&O
Questionnaires
. To the Company’s knowledge, all
information contained in the questionnaires (the
“
Questionnaires
”)
completed by each of the Company’s directors and officers
immediately prior to the Offering (the “
Insiders
”), as supplemented by all
information concerning the Company’s directors, officers and
principal shareholders as described in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, as well as in
the Lock-Up Agreement (as defined in
Section 2.27
below) provided to the Underwriters, is true and
correct in all material respects and the Company has not become
aware of any information which would cause the information
disclosed in the Questionnaires to become materially inaccurate and
incorrect.
2.17
Litigation;
Governmental Proceedings
. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or
governmental proceeding pending or, to the Company’s
knowledge, threatened against, or involving the Company or, to the
Company’s knowledge, any executive officer or director which
has not been disclosed in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, or in connection with the
Company’s listing application for the listing of the Public
Securities on the Exchange, and which is required to be
disclosed.
2.18
Good
Standing
. The Company has been duly incorporated and is
validly existing as a corporation and is in good standing under the
laws of the State of Delaware as of the date hereof, and is duly
qualified to do business and is in good standing in each other
jurisdiction in which its ownership or lease of property or the
conduct of business requires such qualification, except where the
failure to be so qualified or in good standing, singularly or in
the aggregate, would not have or reasonably be expected to result
in a Material Adverse Change.
2.19
Insurance
.
The Company carries or is entitled to the benefits of insurance,
with reputable insurers, in such amounts and covering such risks
which the Company believes are adequate, including, but not limited
to, directors and officers insurance coverage at least equal to
$3,000,000, not including excess Side A coverage of $2,000,000, and
all such insurance is in full force and effect. The Company has no
reason to believe that it will not be able (i) to renew its
existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may
be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Material Adverse
Change.
2.20
Transactions
Affecting Disclosure to FINRA
.
2.20.1
Finder’s
Fees
. Except as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, there are no claims,
payments, arrangements, agreements or understandings relating to
the payment of a finder’s, consulting or origination fee by
the Company or any Insider with respect to the sale of the Public
Securities hereunder or any other arrangements, agreements or
understandings of the Company or, to the Company’s knowledge,
any of its shareholders that may affect the Underwriters’
compensation, as determined by FINRA.
2.20.2
Payments
Within Six Months
. Except for payments made to Think Equity
and except as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, the Company has not made any
direct or indirect payments (in cash, securities or otherwise) to:
(i) any person, as a finder’s fee, consulting fee or
otherwise, in consideration of such person raising capital for the
Company or introducing to the Company persons who raised or
provided capital to the Company; (ii) any FINRA member; or (iii)
any person or entity that has any direct or indirect affiliation or
association with any FINRA member, within the six months prior to
the date of this Agreement, other than the payment to the
Underwriters as provided hereunder in connection with the
Offering.
2.20.3
Use
of Proceeds
. None of the net proceeds of the Offering will
be paid by the Company to any participating FINRA member or its
affiliates, except as specifically authorized herein.
2.20.4
FINRA
Affiliation
. Other than Michael Taglich, a member of the
Company’s Board of Directors, who is associated with Taglich
Brothers, Inc., there is no (i) officer or director of the Company,
(ii) beneficial owner of 5% or more of any class of the Company's
securities or (iii) beneficial owner of the Company’s
unregistered equity securities which were acquired during the
180-day period immediately preceding the filing of the Registration
Statement that is an affiliate or associated person of a FINRA
member participating in the Offering (as determined in accordance
with the rules and regulations of FINRA). Except as disclosed in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus, the Company (i) does not have any material lending or
other relationship with any bank or lending affiliate of any
Underwriter and (ii) does not intend to use any of the proceeds
from the sale of the Public Securities to repay any outstanding
debt owed to any affiliate of any Underwriter.
2.20.5
Information
.
All information provided by the Company in its FINRA questionnaire
to Representative Counsel specifically for use by Representative
Counsel in connection with its Public Offering System filings (and
related disclosure) with FINRA is true, correct and complete in all
material respects.
2.21
Foreign
Corrupt Practices Act
. None of the Company and its
Subsidiaries or, to the Company’s knowledge, any director,
officer, agent, employee or affiliate of the Company and its
Subsidiaries or any other person acting on behalf of the Company
and its Subsidiaries, has, directly or indirectly, given or agreed
to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any
customer, supplier, employee or agent of a customer or supplier, or
official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was,
is, or may be in a position to help or hinder the business of the
Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, might have had a
Material Adverse Change; (iii) if not continued in the future,
might adversely affect the assets, business, operations or
prospects of the Company. The Company has taken reasonable steps to
ensure that its accounting controls and procedures are sufficient
to cause the Company to comply in all material respects with the
Foreign Corrupt Practices Act of 1977, as amended, and the rules
and regulations thereunder (collectively, the “
FCPA
”) or employee; (iv) violated
or is in violation of any provision of the FCPA or any applicable
non-U.S. anti-bribery statute or regulation; (v) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment; or (vi) received notice of any investigation, proceeding
or inquiry by any Governmental Entity regarding any of the matters
in clauses (i)-(v) above; and the Company and, to the knowledge of
the Company, the Company’s affiliates have conducted their
respective businesses in compliance with the FCPA and have
instituted and maintain policies and procedures designed to ensure,
and which are reasonably expected to continue to ensure, continued
compliance therewith.
2.22
Compliance
with OFAC
. None of the Company and its Subsidiaries or, to
the Company’s knowledge, any director, officer, agent,
employee or affiliate of the Company and its Subsidiaries or any
other person acting on behalf of the Company and its Subsidiaries,
is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Department of the
Treasury (“
OFAC
”), and the Company will not,
directly or indirectly, use the proceeds of the Offering hereunder,
or lend, contribute or otherwise make available such proceeds to
any subsidiary, joint venture partner or other person or entity,
for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC.
2.23
Forward-Looking
Statements
. No forward-looking statement (within the meaning
of Section 27A of the Securities Act and Section 21E of the
Exchange Act) contained in either the Registration Statement,
Disclosure Package or Prospectus has been made or reaffirmed
without a reasonable basis or has been disclosed other than in good
faith.
2.24
Money
Laundering Laws
. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial recordkeeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the money laundering statutes of all jurisdictions, the
rules and regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
Governmental Entity (collectively, the “
Money Laundering Laws
”); and no
action, suit or proceeding by or before any Governmental Entity
involving the Company with respect to the Money Laundering Laws is
pending or, to the best knowledge of the Company,
threatened.
2.25
Regulatory
.
(a) The operations conducted by or on behalf of the Company and its
Subsidiaries that are described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus or the results of
which are referred to in the Registration Statement, the Pricing
Disclosure Package and the Prospectus were and, if still ongoing,
are being conducted in material compliance with all laws and
regulations applicable thereto in the jurisdictions in which they
are being conducted and with all laws and regulations applicable
thereto. The descriptions in the Registration Statement, the
Pricing Disclosure Package and the
Prospectus of the results of such studies are
accurate and complete in all material respects and fairly present
the business and operations of the Company.
(b)
Regulatory Filings and
Permits
. The Company and its Subsidiaries have such permits,
licenses, clearances, registrations, exemptions, patents,
franchises, certificates of need and other approvals, consents and
other authorizations (“
Permits
”) issued by the
appropriate domestic or foreign regional, federal, state, or local
regulatory agencies or bodies necessary to conduct the business of
the Company, except for any of the foregoing that would not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect; the Company is in compliance in all
material respects with the requirements of the Permits, and all of
such Permits are valid and in full force and effect; the Company
has not received any notice of proceedings relating to the
revocation, termination, modification or impairment of rights of
any of the Permits that, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would
reasonably be expected to result in a Material Adverse
Effect.
2.26
Officers’
Certificate
. Any certificate signed by any duly authorized
officer of the Company and delivered to you or to Representative
Counsel shall be deemed a representation and warranty by the
Company to the Underwriters as to the matters covered
thereby.
2.27
Lock-Up
Agreements.
To the best of the Company’s knowledge,
based on filings under Section 13(d) and Section 13(g) of the
Exchange Act,
Schedule
3
hereto contains a complete and accurate list of the
Company’s officers, directors and each owner of 5% or more of
the Company’s outstanding shares of Common Stock (or
securities convertible into or exercisable for shares of Common
Stock) (collectively, the “
Lock-Up Parties
”). The Company has
caused each of the Lock-Up Parties to deliver to the Representative
an executed Lock-Up Agreement, in the form attached hereto as
Exhibit B
(the
“
Lock-Up Agreement
”), prior to the
execution of this Agreement.
2.28
Subsidiaries
.
All direct and indirect Subsidiaries of the Company are duly
organized and in good standing under the laws of the place of
organization or incorporation, and each Subsidiary is in good
standing in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification,
except where the failure to qualify would not have a Material
Adverse Change. The Company’s ownership and control of each
Subsidiary is as described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus.
2.29
Related
Party Transactions
.
2.29.1
Business
Relationships
. There are no business relationships or
related party transactions involving the Company or any other
person required to be described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus that have not been
described as required.
2.29.2
No
Relationships with Customers and Suppliers
. No relationship,
direct or indirect, exists between or among the Company on the one
hand, and the directors, officers, 5% or greater stockholders,
customers or suppliers of the Company or any of the Company’s
affiliates on the other hand, which is required to be described in
the Pricing Disclosure Package and the Prospectus or a document
incorporated by reference therein and which is not so
described.
2.29.3
No
Unconsolidated Entities
. There are no transactions,
arrangements or other relationships between and/or among the
Company, any of its affiliates (as such term is defined in Rule 405
of the Securities Act) and any unconsolidated entity, including,
but not limited to, any structure finance, special purpose or
limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability
of or requirements for its capital resources required to be
described in the Pricing Disclosure
Package and the Prospectus or a document incorporated by reference
therein which have not been described as
required.
2.29.4
No
Loans or Advances to Affiliates
. There are no outstanding
loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees or indebtedness by
the Company to or for the benefit of any of the officers or
directors of the Company, any other affiliates of the Company or
any of their respective family members, except as disclosed in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus.
2.30
Board
of Directors
. The Board of Directors of the Company is
comprised of the persons disclosed in the Registration Statement,
the Pricing Disclosure Package and the Prospectus. The
qualifications of the persons serving as board members and the
overall composition of the board comply with the Exchange Act, the
Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the
rules promulgated thereunder (the “
Sarbanes-Oxley Act
”) applicable to
the Company and the listing rules of the Exchange. At least one
member of the Audit Committee of the Board of Directors of the
Company qualifies as an “audit committee financial
expert,” as such term is defined under Regulation S-K and the
listing rules of the Exchange. In addition, at least a majority of
the persons serving on the Board of Directors qualify as
“independent,” as defined under the listing rules of
the Exchange.
2.31
Sarbanes-Oxley
Compliance
.
2.31.1
Disclosure
Controls
. The Company has developed and currently maintains
disclosure controls and procedures that will comply with Rule
13a-15 or 15d-15 under the Exchange Act Regulations, and such
controls and procedures are effective to ensure that all material
information concerning the Company will be made known on a timely
basis to the individuals responsible for the preparation of the
Company’s Exchange Act filings and other public disclosure
documents.
2.31.2
Compliance
.
The Company is, or at the Applicable Time and on the Closing Date
will be, in material compliance with the provisions of the
Sarbanes-Oxley Act applicable to it, and has implemented or will
implement such programs and taken reasonable steps to ensure the
Company’s future compliance (not later than the relevant
statutory and regulatory deadlines therefor) with all of the
material provisions of the Sarbanes-Oxley Act.
2.32
Accounting
Controls
. The Company and its Subsidiaries maintain systems
of “internal control over financial reporting” (as
defined under Rules 13a-15 and 15d-15 under the Exchange Act
Regulations) that comply with the requirements of the Exchange Act
and have been designed by, or under the supervision of, their
respective principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP, including, but not limited to, internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as disclosed in the Registration
Statement, the Pricing Disclosure Package and the Prospectus, the
Company is not aware of any material weaknesses in its internal
controls. The Company’s auditors and the Audit Committee of
the Board of Directors of the Company have been advised of: (i) all
significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are
known to the Company’s management and that have adversely
affected or are
reasonably likely to
adversely affect the Company’ ability to record, process,
summarize and report financial information; and (ii) any fraud
known to the Company’s management, whether or not material,
that involves management or other employees who have a significant
role in the Company’s internal controls over financial
reporting. Since the date of the latest audited financial
statements included in the Pricing Disclosure Package, there has
been no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.
2.33
No
Investment Company Status
. The Company is not and, after
giving effect to the Offering and the application of the proceeds
thereof as described in the Registration Statement, the Pricing
Disclosure Package and the Prospectus, will not be, required to
register as an “investment company,” as defined in the
Investment Company Act of 1940, as amended.
2.34
No Labor Disputes
.
No labor dispute with the employees of the Company or any of its
Subsidiaries exists or, to the knowledge of the Company, is
imminent.
2.35
Intellectual
Property Rights
. The Company and each of its Subsidiaries
owns or possesses or has valid rights to use all patents, patent
applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and similar rights (“
Intellectual Property Rights
”)
necessary for the conduct of the business of the Company and its
Subsidiaries as currently carried on and as described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus. To the knowledge of the Company, no action or use by
the Company or any of its Subsidiaries necessary for the conduct of
its business as currently carried on and as described in the
Registration Statement and the Prospectus will involve or give rise
to any infringement of, or license or similar fees (other than
license or similar fees described or contemplated in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus) for, any Intellectual Property Rights of others.
Neither the Company nor any of its Subsidiaries has received any
notice alleging any such infringement of, license or similar fees
for, or conflict with, any asserted Intellectual Property Rights of
others. Except as would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Change, (i)
to the knowledge of the Company, there is no infringement,
misappropriation or violation by third parties of any of the
Intellectual Property Rights owned by the Company; (ii) there is no
pending or, to the knowledge of the Company, threatened action,
suit, proceeding or claim by others challenging the rights of the
Company in or to any such Intellectual Property Rights, and the
Company is unaware of any facts which would form a reasonable basis
for any such claim, that would, individually or in the aggregate,
together with any other claims in this
Section 2.35
, reasonably be
expected to result in a Material Adverse Change; (iii) the
Intellectual Property Rights owned by the Company and, to the
knowledge of the Company, the Intellectual Property Rights licensed
to the Company have not been adjudged by a court of competent
jurisdiction invalid or unenforceable, in whole or in part, and
there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable
basis for any such claim that would, individually or in the
aggregate, together with any other claims in this
Section 2.35
, reasonably be
expected to result in a Material Adverse Change; (iv) there is no
pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by others that the Company infringes,
misappropriates or otherwise violates any Intellectual Property
Rights or other proprietary rights of others, the Company has not
received any written notice of such claim and the Company is
unaware of any other facts which would form a reasonable basis for
any such claim that would, individually or in the aggregate,
together with any other claims in this
Section 2.35
, reasonably be
expected to result in a Material Adverse Change; and (v) to the
Company’s knowledge, no employee of the Company is in or has
ever been in violation in any material respect of any term of any
employment contract, patent disclosure agreement, invention
assignment agreement, non-competition agreement, non-solicitation
agreement, nondisclosure agreement or any restrictive covenant to
or with a former employer where the basis of such violation relates
to such employee’s employment with the Company, or actions
undertaken by the employee while employed with the Company and
could reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Change. To the Company’s
knowledge, all material technical information developed by and
belonging to the Company which has not been disclosed in a filed
patent application has been kept confidential. The Company is not a
party to or bound by any
options,
licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set
forth in the Registration Statement, the Pricing Disclosure Package
and the Prospectus and are not described therein. The Registration
Statement, the Pricing Disclosure Package and the Prospectus
contain in all material respects the same description of the
matters set forth in the preceding sentence. None of the technology
employed by the Company has been obtained or is being used by the
Company in violation of any contractual obligation binding on the
Company or, to the Company’s knowledge, any of its officers,
directors or employees, or otherwise in violation of the rights of
any persons.
All
licenses for the use of the Intellectual Property described in the
Registration Statement, the Pricing Disclosure Package and the
Prospectus are in full force and effect in all material respects
and are enforceable by the Company and, to the Company’s
knowledge, the other parties thereto, in accordance with their
terms, except (x) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting
creditors’ rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the
federal and state securities laws, and (z) that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought. None of such agreements or instruments has been assigned
by the Company, and the Company has not, and to the Company’s
knowledge, no other party is in default thereunder and no event has
occurred that, with the lapse of time or the giving of notice, or
both, would constitute a default thereunder.
2.36
Taxes
.
Each of the Company and its Subsidiaries has filed all returns (as
hereinafter defined) required to be filed with taxing authorities
prior to the date hereof or has duly obtained extensions of time
for the filing thereof. Each of the Company and its Subsidiaries
has paid all taxes (as hereinafter defined) shown as due on such
returns that were filed and has paid all taxes imposed on or
assessed against the Company or such respective Subsidiary. The
provisions for taxes payable, if any, shown on the financial
statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid taxes, whether or not
disputed, and for all periods to and including the dates of such
consolidated financial statements. Except as disclosed in writing
to the Underwriters, (i) no issues have been raised (and are
currently pending) by any taxing authority in connection with any
of the returns or taxes asserted as due from the Company or its
Subsidiaries, and (ii) no waivers of statutes of limitation with
respect to the returns or collection of taxes have been given by or
requested from the Company or its Subsidiaries. The term
“
taxes
” means
all federal, state, local, foreign and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or
other taxes, fees, assessments or charges of any kind whatever,
together with any interest and any penalties, additions to tax or
additional amounts with respect thereto. The term
“
returns
” means
all returns, declarations, reports, statements and other documents
required to be filed in respect to taxes.
2.37
ERISA
Compliance
. The Company and any “employee benefit
plan” (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, “
ERISA
”)) established or maintained
by the Company or its “ERISA Affiliates” (as defined
below) are in compliance in all material respects with ERISA.
“
ERISA
Affiliate
” means, with respect to the Company, any
member of any group of organizations described in Sections
414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations
thereunder (the “
Code
”) of which the Company is a
member. No “reportable event” (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any
“employee benefit plan” established or maintained by
the Company or any of its ERISA Affiliates. No “employee
benefit plan” established or maintained by the Company or any
of its ERISA Affiliates, if such “employee benefit
plan” were terminated, would have any “amount of
unfunded benefit liabilities” (as defined under ERISA).
Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any material liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any
“employee benefit plan” or (ii) Sections 412, 4971,
4975 or 4980B of the Code. Each “employee benefit plan”
established or maintained by the Company or any of its ERISA
Affiliates that is intended to be qualified under Section 401(a) of
the Code is so qualified and, to the knowledge of the Company,
nothing has occurred, whether by action or failure to act, which
would cause the loss of such qualification.
2.38
Compliance
with Laws
. The Company: (i) is and at all times has been in
compliance with all statutes, rules, or regulations applicable to
the ownership, testing, development, manufacture, packaging,
processing, use, distribution, marketing, labeling, promotion,
sale, offer for sale, storage, import, export storage or disposal
of any of its products and services (“
Applicable Laws
”), except as could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Change; (ii) has not received any notice of
adverse finding, warning letter, untitled letter or other
correspondence or written notice from any
governmental authority alleging or asserting
noncompliance with any Applicable Laws or any licenses,
certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable
Laws (“
Authorizations
”);
(iii) possesses all material Authorizations and such Authorizations
are valid and in full force and effect and are not in material
violation of any term of any such Authorizations; (iv) has not
received written notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action
from any governmental authority or third party alleging that any
product operation or activity is in violation of any Applicable
Laws or Authorizations and has no knowledge that any such
governmental authority or third party is considering any such
claim, litigation, arbitration, action, suit, investigation or
proceeding; (v) has not received written notice that any
governmental authority has taken, is taking or intends to take
action to limit, suspend, modify or revoke any Authorizations and
has no knowledge that any such governmental authority is
considering such action; (vi) has filed, obtained, maintained or
submitted all material reports, documents, forms, notices,
applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and
that all such reports, documents, forms, notices, applications,
records, claims, submissions and supplements or amendments were
complete and correct in all material respects on the date filed (or
were corrected or supplemented by a subsequent submission); and
(vii) has not, either voluntarily or involuntarily, initiated,
conducted, or issued or caused to be initiated, conducted or
issued, any recall, market withdrawal or replacement, safety alert,
post-sale warning, or other notice or action relating to any
alleged product defect or violation and, to the Company’s
knowledge, no third party has initiated, conducted or intends to
initiate any such notice or action.
2.39
Environmental
Laws
. The Company and its Subsidiaries are in compliance
with all foreign, federal, state and local rules, laws and
regulations relating to the use, treatment, storage and disposal of
hazardous or toxic substances or waste and protection of health and
safety or the environment which are applicable to their businesses
(“
Environmental
Laws
”), except where the failure to comply would not,
singularly or in the aggregate, result in a Material Adverse
Change. There has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other
release of any kind of toxic or other wastes or other hazardous
substances by, due to, or caused by the Company or any of its
Subsidiaries (or, to the Company’s knowledge, any other
entity for whose acts or omissions the Company or any of its
Subsidiaries is or may otherwise be liable) upon any of the
property now or previously owned or leased by the Company or any of
its Subsidiaries, or upon any other property, in violation of any
law, statute, ordinance, rule, regulation, order, judgment, decree
or permit or which would, under any law, statute, ordinance, rule
(including rule of common law), regulation, order, judgment, decree
or permit, give rise to any liability; and there has been no
disposal, discharge, emission or other release of any kind onto
such property or into the environment surrounding such property of
any toxic or other wastes or other hazardous substances with
respect to which the Company has knowledge. In the ordinary course
of business, the Company and its Subsidiaries conduct periodic
reviews of the effect of Environmental Laws on their business and
assets, in the course of which they identify and evaluate
associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or
governmental permits issued thereunder, any related constraints on
operating activities and any potential liabilities to third
parties). On the basis of such reviews, the Company and its
Subsidiaries have reasonably concluded that such associated costs
and liabilities would not have, singularly or in the aggregate, a
Material Adverse Change.
2.40
Real
Property
. Except as set forth in the Registration Statement,
the Pricing Disclosure Package and the Prospectus, the Company and
each of its Subsidiaries have good and marketable title in fee
simple to, or have valid rights to lease or otherwise use, all
items of real or personal property which are material to the
business of the Company and its Subsidiaries taken as a whole, in
each case free and clear of all liens, encumbrances, security
interests, claims and defects that do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be
made of such property by the Company or any of its
Subsidiaries; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one
enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Registration Statement, the
Pricing Disclosure Package and the Prospectus, are in full force
and effect, and neither the Company nor any Subsidiary has received
any notice of any material claim of any sort that has been asserted
by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting
or questioning the rights of the Company or such Subsidiary to the
continued possession of the leased or subleased premises under any
such lease or sublease.
2.41
Contracts
Affecting Capital
. There are no transactions, arrangements
or other relationships between and/or among the Company, any of its
affiliates (as such term is defined in Rule 405 of the Securities
Act Regulations) and any unconsolidated entity, including, but not
limited to, any structured finance, special purpose or limited
purpose entity that could reasonably be expected to materially
affect the Company’s or any of its Subsidiaries’
liquidity or the availability of or requirements for their capital
resources required to be described or incorporated by reference in
the Registration Statement, the Pricing Disclosure Package and the
Prospectus which have not been described or incorporated by
reference as required.
2.42
Ineligible
Issuer
. At the time of filing the Registration Statement and
any post-effective amendment thereto, at the time of effectiveness
of the Registration Statement and any amendment thereto, at the
earliest time thereafter that the Company or another offering
participant made a bona fide offer (within the meaning of Rule
164(h)(2) of the Securities Act Regulations) of the Public
Securities and at the date hereof, the Company was not and is not
an “ineligible issuer,” as defined in Rule 405, without
taking account of any determination by the Commission pursuant to
Rule 405 that it is not necessary that the Company be considered an
ineligible issuer.
2.43
Smaller
Reporting Company
. As of the
time of the initial filing of the Registration Statement and as of
the date hereof, the Company was a “smaller reporting
company,” as defined in Rule 12b-2 of the Exchange Act
Regulations.
2.44
Industry
Data
. The statistical and market-related data included in
each of the Registration Statement, the Pricing Disclosure Package
and the Prospectus are based on or derived from sources that the
Company reasonably and in good faith believes are reliable and
accurate or represent the Company’s good faith estimates that
are made on the basis of data derived from such
sources.
2.45
Margin
Securities
. The Company owns no “margin
securities” as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the
“
Federal Reserve
Board
”), and none of the proceeds of Offering will be
used, directly or indirectly, for the purpose of purchasing or
carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might
cause any of the shares of Common Stock to be considered a
“purpose credit” within the meanings of Regulation T, U
or X of the Federal Reserve Board.
2.46
Exchange
Act Reports
. Other than a Form 8-K filed on December 22,
2017 and a Form 8-K filed on [ ], the Company has filed in a timely
manner all reports required to be filed pursuant to Sections 13(a),
13(e), 14 and 15(d) of the Exchange Act during the preceding 12
months (except to the extent that Section 15(d) requires reports to
be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act,
which shall be governed by the next clause of this sentence); and
the Company has filed in a timely manner all reports required to be
filed pursuant to Sections 13(d) and 13(g) of the Exchange Act,
except where the failure to timely file could not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Change.
2.47
Minute
Books
. The minute books of the Company have been made
available to the Underwriters and counsel for the Underwriters, and
such books (i) contain a complete summary of all
meetings and actions of the board of directors
(including each board committee) and stockholders of the Company
(or analogous governing bodies and interest holders, as
applicable), and each of its Subsidiaries since the time of its
respective incorporation or organization through the date of the
latest meeting and action, and (ii) accurately in all material
respects reflect all transactions referred to in such minutes.
There are no material transactions, agreements, dispositions or
other actions of the Company that are not properly approved and/or
accurately and fairly recorded in the minute books of the Company,
as applicable.
2.48
Integration
.
Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause the Offering to be
integrated with prior offerings by the Company for purposes of the
Securities Act that would require the registration of any such
securities under the Securities Act.
2.49
No
Stabilization
. Neither the Company nor, to its knowledge,
any of its employees, directors or stockholders (without the
consent of the Representative) has taken or shall take, directly or
indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under
Regulation M of the Exchange Act, or otherwise, stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of the Public
Securities.
2.50
Confidentiality
and Non-Competition
. To the Company’s knowledge, no
director, officer, key employee or consultant of the Company is
subject to any confidentiality, non-disclosure, non-competition
agreement or non-solicitation agreement with any employer or prior
employer that could reasonably be expected to materially affect his
ability to be and act in his respective capacity of the Company or
be expected to result in a Material Adverse Change.
3.
Covenants of the Company
. The
Company covenants and agrees as follows:
3.1
Amendments
to Registration Statement
. The Company shall deliver to the
Representative, prior to filing, any amendment or supplement to the
Registration Statement, Preliminary Prospectus, Disclosure Package
or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which the Representative
shall reasonably object in writing.
3.2
Federal
Securities Laws
.
3.2.1
Compliance
.
The Company, subject to
Section
3.2.2
, shall comply with the
requirements of Rule 424(b) and Rule 430A of the Securities Act
Regulations, and will notify the Representative promptly, and
confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement or any amendment or
supplement to any Preliminary Prospectus, the Pricing Disclosure
Package or the Prospectus shall have been filed and when any
post-effective amendment to the Registration Statement shall become
effective; (ii) of the receipt of any comments from the Commission;
(iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to any
Preliminary Prospectus, the Pricing Disclosure Package or the
Prospectus or for additional information; (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment or of
any order preventing or suspending the use of any Preliminary
Prospectus, the Pricing Disclosure Package or the Prospectus, or of
the suspension of the qualification of the Public Securities
or the Representative’s Warrants
for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such
purposes or of any examination pursuant to Section 8(d) or 8(e) of
the Securities Act concerning the Registration Statement; and (v)
if the Company becomes the subject of a proceeding under Section 8A
of the Securities Act in connection with the Offering of the Public
Securities
or the Representative’s Warrants.
The Company shall effect all filings
required under Rule 424(b) of the Securities Act Regulations, in
the manner and within the time period required by Rule 424(b)
(without reliance on Rule 424(b)(8)), and shall take such steps as
it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received
for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company shall use its best
efforts to prevent the issuance of any stop order, prevention or
suspension and, if any such order is issued, to obtain the lifting
thereof at the earliest possible moment.
3.2.2
Continued
Compliance
. The Company shall comply with the Securities
Act, the Securities Act Regulations, the Exchange Act and the
Exchange Act Regulations so as to permit the completion of the
distribution of the Public Securities as contemplated in this
Agreement and in the Registration Statement, the Pricing Disclosure
Package and the Prospectus. If at any time when a prospectus
relating to the Public Securities is (or, but for the exception
afforded by Rule 172 of the Securities Act Regulations
(“
Rule 172
”),
would be) required by the Securities Act to be delivered in
connection with sales of the Public Securities, any event shall
occur or condition shall exist as a result of which it is
necessary, in the opinion of counsel
for the Underwriters or for the Company, to (i) amend the
Registration Statement in order that the Registration Statement
will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) amend or
supplement the Pricing Disclosure Package or the Prospectus in
order that the Pricing Disclosure Package or the Prospectus, as the
case may be, will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser
or (iii) amend the Registration Statement or amend or supplement
the Pricing Disclosure Package or the Prospectus, as the case may
be, in order to comply with the requirements of the Securities Act
or the Securities Act Regulations, the Company will promptly (A)
give the Representative notice of such event; (B) prepare any
amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement, the
Pricing Disclosure Package or the Prospectus comply with such
requirements and, a reasonable amount of time prior to any proposed
filing or use, furnish the Representative with copies of any such
amendment or supplement and (C) file with the Commission any such
amendment or supplement;
provided
,
however
, that the Company shall not file or use any such
amendment or supplement to which the Representative or counsel for
the Underwriters shall reasonably object. The Company will furnish
to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request. The Company
has given the Representative notice of any filings made pursuant to
the Exchange Act or the Exchange Act Regulations within 48 hours
prior to the Applicable Time. The Company shall give the
Representative notice of its intention to make any such filing from
the Applicable Time until the later of the Closing Date and the
exercise in full or expiration of the Over-allotment Option
specified in
Section 1.2
hereof and will furnish the
Representative with copies of the related document(s) a reasonable
amount of time prior to such proposed filing, as the case may be,
and will not file or use any such document to which the
Representative or counsel for the Underwriters shall reasonably
object.
3.2.3
Exchange
Act Registration
. For a period of three (3) years after the
date of this Agreement, the Company shall use its best efforts to
maintain the registration of the shares of Common Stock under the
Exchange Act. The Company shall not deregister the shares of Common
Stock under the Exchange Act without the prior written consent of
the Representative.
3.2.4
Free
Writing Prospectuses
. The Company agrees that, unless it
obtains the prior written consent of the Representative, it shall
not make any offer relating to the Public Securities that would
constitute an Issuer Free Writing Prospectus or that would
otherwise constitute a “free writing prospectus,” or a
portion thereof, required to be filed by the Company with the
Commission or retained by the Company under Rule 433;
provided
,
however
, that the Representative shall
be deemed to have consented to each Issuer General Use Free Writing
Prospectus hereto and any “road show that is a written
communication” within the meaning of Rule 433(d)(8)(i) that
has been reviewed by the Representative. The Company represents
that it has treated or agrees that it will treat each such free
writing prospectus consented to, or deemed consented to, by the
Underwriters as an “issuer free writing prospectus,” as
defined in Rule 433, and that it has complied and will comply with
the applicable requirements of Rule 433 with respect thereto,
including timely filing with the Commission where required,
legending and record keeping. If at any time following issuance of
an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing
Prospectus conflicted or would conflict with the information
contained in the Registration Statement or included or would
include an untrue statement of a material fact or omitted or would
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at
that subsequent time, not misleading, the Company will promptly
notify the Underwriters and will promptly amend or supplement, at
its own expense, such Issuer Free Writing Prospectus to eliminate
or correct such conflict, untrue statement or
omission.
3.3
Delivery
to the Underwriters of Registration Statements
. The Company
has delivered or made available or shall deliver or make available
to the Representative and the Representative Counsel, without
charge, signed copies of the Registration Statement as originally
filed and each
amendment thereto
(including exhibits filed therewith or incorporated by reference
therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Underwriters,
without charge, a conformed copy of the Registration Statement as
originally filed and each amendment thereto (without exhibits) for
each of the Underwriters. The copies of the Registration Statement
and each amendment thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
3.4
Delivery
to the Underwriters of Prospectuses
. The Company has
delivered or made available or will deliver or make available to
each Underwriter, without charge, as many copies of each
Preliminary Prospectus as such Underwriter reasonably requested,
and the Company hereby consents to the use of such copies for
purposes permitted by the Securities Act. The Company will furnish
to each Underwriter, without charge, during the period when a
prospectus relating to the Public Securities is (or, but for the
exception afforded by Rule 172, would be) required to be delivered
under the Securities Act, such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation
S-T
.
3.5
Events
Requiring Notice to the Representative
. The Company shall
use its best efforts to cause the Registration Statement to remain
effective with a current prospectus for at least nine (9) months
after the Applicable Time, and shall notify the Representative
immediately and confirm the notice in writing: (i) of the issuance
by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose; (ii) of the
issuance by any state securities commission of any proceedings for
the suspension of the qualification of the Public Securities for
offering or sale in any jurisdiction or of the initiation, or the
threatening, of any proceeding for that purpose; (iii) of the
mailing and delivery to the Commission for filing of any amendment
or supplement to the Registration Statement or Prospectus; (iv) of
the receipt of any comments or request for any additional
information from the Commission; and (v) of the happening of any
event during the period described in this
Section 3.5
that, in the
judgment of the Company, makes any statement of a material fact
made in the Registration Statement, the Pricing Disclosure Package
or the Prospectus untrue or that requires the making of any changes
in (a) the Registration Statement in order to make the statements
therein not misleading, or (b) in the Pricing Disclosure Package or
the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If
the Commission or any state securities commission shall enter a
stop order or suspend such qualification at any time, the Company
shall make every reasonable effort to obtain promptly the lifting
of such order.
3.6
Review
of Financial Statements.
For a period of five (5) years
after the date of this Agreement, the Company, at its expense,
shall cause its regularly engaged independent registered public
accounting firm to review (but not audit) the Company’s
financial statements for each of the three fiscal quarters
immediately preceding the announcement of any quarterly financial
information.
3.7
Listing
.
The Company shall use its best efforts to maintain the listing of
the shares of Common Stock (including the Public Securities and the
shares of Common Stock underlying the Representative’s
Warrants) on the Exchange for at least three years from the date of
this Agreement.
3.8
Intentionally
Omitted
.
3.9
Reports
to the Representative
.
3.9.1
Periodic
Reports, etc
. For a period of three (3) years after the date
of this Agreement, the Company shall furnish or make available to
the Representative copies of such financial statements and other
periodic and special reports as the Company from time to time
furnishes generally to holders of any class
of its securities and also promptly furnish to the
Representative: (i) a copy of each periodic report the Company
shall be required to file with the Commission under the Exchange
Act and the Exchange Act Regulations; (ii) a copy of every press
release and every news item and article with respect to the Company
or its affairs which was released by the Company; (iii) a copy of
each Form 8-K prepared and filed by the Company; (iv) five copies
of each registration statement filed by the Company under the
Securities Act; (v) a copy of each report or other communication
furnished to stockholders and (vi) such additional documents and
information with respect to the Company and the affairs of any
future subsidiaries of the Company as the Representative may from
time to time reasonably request;
provided
,
however
, the Representative shall sign, if requested by
the Company, a Regulation FD compliant confidentiality agreement
which is reasonably acceptable to the Representative and
Representative Counsel in connection with the
Representative’s receipt of such information. Documents filed
with the Commission pursuant to its EDGAR system shall be deemed to
have been delivered to the Representative pursuant to this
Section
3.9.1
.
3.10
Transfer
Agent; Transfer Sheets
. For a period of three (3) years
after the date of this Agreement, the Company shall retain a
transfer agent and registrar acceptable to the Representative (the
“
Transfer
Agent
”) and shall furnish to the Representative at the
Company’s sole cost and expense such transfer sheets of the
Company’s securities as the Representative may reasonably
request, including the daily and monthly consolidated transfer
sheets of the Transfer Agent and DTC.
American
Stock Transfer
& Trust Company,
LLC
is acceptable to the Representative to act as Transfer
Agent for the shares of Common Stock.
3.11
Trading
Reports
. During such time as the Public Securities are
listed on the Exchange, the Company shall provide to the
Representative, at the Company’s expense, such reports
published by the Exchange relating to price trading of the Public
Securities, as the Representative shall reasonably
request.
3.12
Payment
of Expenses
. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not
paid at the Closing Date, all expenses incident to the performance
of the obligations of the Company under this Agreement, including,
but not limited to: (i) all filing fees and communication expenses
relating to the registration of Public Securities to be issued and
sold in the Offering with the Commission; (ii) all filing fees
associated with the review of the Offering by FINRA; (iii) all fees
and expenses relating to the listing of such Common Stock on the
Exchange, including any fees charged by The Depository Trust
Company (DTC) for new securities; (iv) all fees, expenses and
disbursements relating to the registration, qualification or
exemption of the Public Securities under the securities laws of
such foreign jurisdictions as the Representative may reasonably
designate; (v) the costs of all mailing and printing of the
underwriting documents (including, without limitation, this
Agreement, any blue sky surveys and, if appropriate, any agreement
among underwriters, selected dealers’ agreement,
underwriters’ questionnaire and power of attorney),
Registration Statements, Prospectuses and all amendments,
supplements and exhibits thereto and as many preliminary and final
Prospectuses as the Representative may reasonably deem necessary;
(vi) the costs of preparing, printing and delivering certificates
representing the Public Securities; (vii) fees and expenses of the
Transfer Agent for the shares of Common Stock; (viii) stock
transfer and/or stamp taxes, if any, payable upon the transfer of
securities from the Company to the Underwriters; (ix) to the extent
approved by the Company in writing, the costs associated with
post-Closing advertising of the Offering in the national editions
of The Wall Street Journal and The New York Times; (x) the fees and
expenses of the Company’s accountants; (xi) the fees and
expenses of the Company’s legal counsel and other agents and
representatives; and (xii) the reasonable and documented fees and
expenses of Underwriter’s legal counsel. Notwithstanding the
foregoing, the amount of expenses to be reimbursed by the Company
to the Underwriters shall not exceed $90,000 in the aggregate. The
Representative may deduct from the net proceeds of the Offering
payable to the Company on the Closing Date, or the Option Closing
Date, if any, the expenses set forth herein to be paid by the
Company to the Underwriters, provided, however, that in the event
that the Offering is terminated, the Company agrees to reimburse
the Underwriters pursuant to
Section 8.3
hereof.
3.13
Non-accountable
Expenses
. The Company further agrees that, in addition to
the expenses payable pursuant to
Section 3.12
, on the Closing
Date it shall pay to the Representative, by deduction from the net
proceeds of the Offering contemplated herein, a non-accountable
expense allowance equal to one percent (1.0%) of the gross proceeds
received by the Company from the sale of the Public Securities),
less the Advance (as such term is defined in
Section 8.3
hereof), provided,
however, that in the event that the Offering is terminated, the
Company agrees to reimburse the Underwriters pursuant to
Section 8.3
hereof.
3.14
Application
of Net Proceeds
. The Company shall apply the net proceeds
from the Offering received by it in a manner consistent with the
application thereof described under the caption “Use of
Proceeds” in the Registration Statement, the Pricing
Disclosure Package and the Prospectus.
3.15
Delivery
of Earnings Statements to Security Holders
. The Company
shall make generally available to its security holders as soon as
practicable, but not later than the first day of the fifteenth
(15th) full calendar month following the date of this Agreement, an
earnings statement (which need not be certified by independent
registered public accounting firm unless required by the Securities
Act or the Securities Act Regulations, but which shall satisfy the
provisions of Rule 158(a) under Section 11(a) of the Securities
Act) covering a period of at least twelve (12) consecutive months
beginning after the date of this Agreement.
3.16
Stabilization
.
Neither the Company nor, to its knowledge, any of its employees,
directors or shareholders (without the consent of the
Representative) has taken or shall take, directly or indirectly,
any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under Regulation M of
the Exchange Act, or otherwise, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or
resale of the Public Securities.
3.17
Internal
Controls
. The Company shall maintain a system of internal
accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with
management’s general or specific authorization; (ii)
transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with GAAP and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
3.18
Accountants
.
As of the date of this Agreement, the Company shall continue to
retain a nationally recognized independent registered public
accounting firm for a period of at least three (3) years after the
date of this Agreement. The Representative acknowledges that Marcum
LLP is acceptable to the Representative.
3.19
FINRA
.
The Company shall advise the Representative (who shall make an
appropriate filing with FINRA) if it is or becomes aware that (i)
any officer or director of the Company, (ii) any beneficial owner
of 5% or more of any class of the Company's securities or (iii) any
beneficial owner of the Company's unregistered equity securities
which were acquired during the 180 days immediately preceding the
filing of the Registration Statement is or becomes an affiliate or
associated person of a
FINRA member
participating in the Offering (as determined in accordance with the
rules and regulations of FINRA).
3.20
No
Fiduciary Duties
. The Company acknowledges and agrees that
the Underwriters’ responsibility to the Company is solely
contractual in nature and that none of the Underwriters or their
affiliates or any selling agent shall be deemed to be acting in a
fiduciary capacity, or otherwise owes any fiduciary duty to the
Company or any of its affiliates in connection with the Offering
and the other transactions contemplated by this
Agreement.
3.21
[Intentionally
Left Blank]
3.22
Company
Lock-Up Agreements
. The Company, on behalf of itself and any
successor entity, agrees that, without the prior written consent of
the Representative, it will not for a period of ninety (90) days
after the date of this Agreement (the “
Lock-Up Period
”), (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer
or dispose of, directly or indirectly, any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company; or (ii)
file or cause to be filed any registration statement with the
Commission relating to the offering of any shares of capital stock
of the Company or any securities convertible into or exercisable or
exchangeable for shares of capital stock of the Company; or (iii)
complete any offering of debt securities of the Company, other than
entering into a line of credit with a traditional bank; or (iv)
enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership
of capital stock of the Company, whether any such transaction
described in clause (i), (ii), (iii) or (iv) above is to be settled
by delivery of shares of capital stock of the Company or such other
securities, in cash or otherwise.
The
restrictions contained in this
Section 3.22
shall not apply to
(i) the shares of Common Stock to be sold hereunder, (ii) the
issuance by the Company of shares of Common Stock upon the exercise
of a stock option or warrant or the conversion of a security
outstanding on the date hereof, which is disclosed in the
Registration Statement, Disclosure Package and Prospectus, or (iii)
the issuance by the Company of stock options, shares of capital
stock of the Company or other awards under any equity compensation
plan of the Company, provided that in each of (ii) and (iii) above,
the underlying shares shall be restricted from sale during the
entire Lock-Up Period.
3.23
Release
of D&O Lock-up Period
. If the Representative, in its
sole discretion, agrees to release or waive the restrictions set
forth in the Lock-Up Agreements described in
Section 2.27
hereof for an
officer or director of the Company and provide the Company with
notice of the impending release or waiver at least three (3)
Business Days before the effective date of the release or waiver,
the Company agrees to announce the impending release or waiver by a
press release substantially in the form of
Exhibit C
hereto through a
major news service at least two (2) Business Days before the
effective date of the release or waiver.
3.24
Blue
Sky Qualifications
. The Company shall use its best efforts,
in cooperation with the Underwriters, if necessary, to qualify the
Public Securities for offering and sale under the applicable
securities laws of such states and other jurisdictions (domestic or
foreign) as the Representative may designate and to maintain such
qualifications in effect so long as required to complete the
distribution of the Public Securities; provided, however, that the
Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so
subject.
3.25
Reporting
Requirements
. The Company, during the period when a
prospectus relating to the Public Securities is (or, but for the
exception afforded by Rule 172, would be) required to be delivered
under the Securities Act, will file all documents required to be
filed with the Commission pursuant to the Exchange Act within the
time periods required by the Exchange Act and Exchange Act
Regulations. Additionally, the Company shall report the use of
proceeds from the issuance of the Public Securities as may be
required under Rule 463 under the Securities Act
Regulations.
3.26
Press
Releases
. Prior to the Closing Date and any Option Closing
Date, the Company shall not issue any press release or other
communication directly or indirectly or hold any press conference
with respect to the Company, its condition, financial or otherwise,
or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of
business and consistent with the past practices of the Company and
of which the Representative is
notified), without the prior written consent of
the Representative, which consent shall not be unreasonably
withheld, unless in the judgment of the Company and its counsel,
and after notification to the Representative, such press release or
communication is required by law.
3.27
Sarbanes-Oxley
.
Except as disclosed in the Registration Statement, the Disclosure
Package and the Prospectus, the Company shall at all times comply
with all applicable provisions of the Sarbanes-Oxley Act in effect
from time to time.
4.
Conditions of
Underwriters’ Obligations
. The obligations of the
Underwriters to purchase and pay for the Public Securities, as
provided herein, shall be subject to (i) the continuing accuracy of
the representations and warranties of the Company as of the date
hereof and as of each of the Closing Date and the Option Closing
Date, if any; (ii) the accuracy of the statements of officers of
the Company made pursuant to the provisions hereof; (iii) the
performance by the Company of its obligations hereunder; and (iv)
the following conditions:
4.1
Regulatory
Matters
.
4.1.1
Effectiveness
of Registration Statement; Rule 430A Information
. The
Registration Statement has become effective not later than 5:00
p.m., Eastern time, on the Effective Date or such later date and
time as shall be consented to in writing by the Representative,
and, at each of the Closing Date and any Option Closing Date, no
stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto has been issued
under the Securities Act, no order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus has been issued and
no proceedings for any of those purposes have been instituted or
are pending or, to the Company’s knowledge, contemplated by
the Commission. The Company has complied with each request (if any)
from the Commission for additional information. The Prospectus
containing the Rule 430A Information shall have been filed with the
Commission in the manner and within the time frame required by Rule
424(b) (without reliance on Rule 424(b)(8)) or a post-effective
amendment providing such information shall have been filed with,
and declared effective by, the Commission in accordance with the
requirements of Rule 430A.
4.1.2
FINRA
Clearance
. On or before the date of this Agreement, the
Representative shall have received clearance from FINRA as to the
amount of compensation allowable or payable to the Underwriters as
described in the Registration Statement.
4.1.3
Exchange
Stock
Market Clearance
. On the Closing Date, the Company’s
shares of Common Stock, including the Firm Shares, the shares of
Common Stock underlying the Option Shares and the shares of Common
Stock underlying the Representative’s Warrants) shall have
been approved for listing on the Exchange, subject only to official
notice of issuance. On the first Option Closing Date (if any), the
Company’s shares of Common Stock (including the shares of
Common Stock underlying the Option Shares) shall have been approved
for listing on the Exchange, subject only to official notice of
issuance.
4.2
Company
Counsel Matters
.
4.2.1
Closing
Date Opinion of Counsel
. On the Closing Date, the
Representative shall have received the favorable opinion of
Disclosure Law Group, counsel to the Company, and a written
statement providing certain “10b-5” negative
assurances, dated the Closing Date and addressed to the
Representative, and in form and substance reasonably satisfactory
to the Representative.
4.2.2
Option
Closing Date Opinions of Counsel
. On the Option Closing
Date, if any, the Representative shall have received the favorable
opinion and “10b-5” negative assurances of counsel
listed in Section 4.2.1, dated the Option Closing Date, addressed
to the Representative and in form and substance reasonably
satisfactory to the Representative, confirming as of the Option
Closing Date, the statements made by such counsel in its opinion
delivered on the Closing Date.
4.2.3
Reliance
.
In rendering such opinion, counsel may rely: (i) as to matters
involving the application of laws other than the laws of the United
States and jurisdictions in which they are admitted, to the extent
such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and
substance reasonably satisfactory to the Representative) of other
counsel reasonably acceptable to the Representative, familiar with
the applicable laws; and (ii) as to matters of fact, to the extent
they deem proper, on certificates or other written statements of
officers of the Company and officers of departments of various
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company;
provided
that copies of any such
statements or certificates shall be delivered to Representative
Counsel if requested. The opinion of Disclosure Law Group, and any
opinion relied upon by Disclosure Law Group, shall include a
statement to the effect that it may be relied upon by
Representative Counsel in its opinion delivered to the
Underwriters.
4.3
Comfort
Letters
.
4.3.1
Cold
Comfort Letter
. At the time this Agreement is executed the
Underwriters shall have received cold comfort letters from the
Auditor containing statements and information of the type
customarily included in accountants’ comfort letters with
respect to the financial statements and certain financial
information contained or incorporated or deemed incorporated by
reference in the Registration Statement, the Pricing Disclosure
Package and the Prospectus, addressed to the Representative and in
form and substance satisfactory in all respects to you and to the
Auditor,
dated as of
the date of this Agreement.
4.3.2
Bring-down
Comfort Letter
. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received from
the Auditor letters, dated as of the Closing Date or the Option
Closing Date, as applicable, to the effect that the Auditor each
reaffirm the statements made in their letters furnished pursuant to
Section 4.3.1, except that the specified date referred to shall be
a date not more than three (3) business days prior to the Closing
Date or the Option Closing Date, as applicable.
4.4
Officers’
Certificates
.
4.4.1
Officers’
Certificate
. The Company shall have furnished to the
Representative a certificate, dated the Closing Date and any Option
Closing Date (if such date is other than the Closing Date), of its
Chief Executive Officer and its Chief Financial Officer stating
that (i) such officers have carefully examined the Registration
Statement, the Pricing Disclosure Package, any Issuer Free Writing
Prospectus and the Prospectus and, in their opinion, the
Registration Statement and each amendment thereto, as of the
Applicable Time and as of the Closing Date (or any Option Closing
Date if such date is other than the Closing Date) did not include
any untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Pricing Disclosure
Package, as of the Applicable Time and as of the Closing Date (or
any Option Closing Date if such date is other than the Closing
Date), any Issuer Free Writing Prospectus as of its date and as of
the Closing Date (or any Option Closing Date if such date is other
than the Closing Date), and the Prospectus
and each amendment or supplement thereto, as of
the respective date thereof and as of the Closing Date, did not
include any untrue statement of a material fact and did not omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made,
not misleading, (ii) since the initial effective date of the
Registration Statement, no event has occurred which should have
been set forth in a supplement or amendment to the Registration
Statement, the Pricing Disclosure Package or the Prospectus, (iii)
to the best of their knowledge after reasonable investigation, as
of the Closing Date (or any Option Closing Date if such date is
other than the Closing Date), the representations and warranties of
the Company in this Agreement are true and correct and the Company
has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied hereunder at or prior to the
Closing Date (or any Option Closing Date if such date is other than
the Closing Date), and (iv) there has not been, subsequent to the
date of the most recent audited financial statements included or
incorporated by reference in the Pricing Disclosure Package, any
material adverse change in the financial position or results of
operations of the Company, or any change or development that,
singularly or in the aggregate, would involve a material adverse
change or a prospective material adverse change, in or affecting
the condition (financial or otherwise), results of operations,
business, assets or prospects of the Company, except as set forth
in the Prospectus.
4.4.2
Secretary’s
Certificate
. At each of the Closing Date and the Option
Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company,
dated the Closing Date or the Option Date, as the case may be,
respectively, certifying: (i) that each of the Charter
and Bylaws
is true and complete, has not been
modified and is in full force and effect; (ii) that the resolutions
of the Company’s Board of Directors relating to the Offering
are in full force and effect and have not been modified; (iii) as
to the accuracy and completeness of all correspondence between the
Company or its counsel and the Commission; and (iv) as to the
incumbency of the officers of the Company. The documents referred
to in such certificate shall be attached to such
certificate.
4.4.3
Chief
Financial Officer’s Certificate
. At each of the
Closing Date and the Option Closing Date, if any, the
Representative shall have received a certificate of the Chief
Financial Officer of the Company, dated the Closing Date or the
Option Date, as the case may be, respectively, with respect to the
accuracy of certain information contained in the
Registration Statement, the Pricing Disclosure
Package and the Prospectus,
in a form reasonably acceptable
to the Representative
.
4.5
No
Material Changes
. Prior to and on each of the Closing Date
and each Option Closing Date, if any: (i) there shall have been no
material adverse change or development involving a prospective
material adverse change in the condition or prospects or the
business activities, financial or otherwise, of the Company from
the latest dates as of which such condition is set forth in the
Registration Statement and no change in the capital stock or debt
of the Company, the Pricing Disclosure Package and the Prospectus;
(ii) no action, suit or proceeding, at law or in equity, shall have
been pending or threatened against the Company or any Insider
before or by any court or federal or state commission, board or
other administrative agency wherein an unfavorable decision, ruling
or finding may materially adversely affect the business,
operations, prospects or financial condition or income of the
Company, except as set forth in the Registration Statement, the
Pricing Disclosure Package and the Prospectus; (iii) no stop order
shall have been issued under the Securities Act and no proceedings
therefor shall have been initiated or threatened by the Commission;
(iv) no action shall have been taken and no law, statute, rule,
regulation or order shall have been enacted, adopted or issued by
any Governmental Entity which would prevent the issuance or sale of
the Public Securities or materially and adversely affect or
potentially materially and adversely affect the business or
operations of the Company; (v) no injunction, restraining order or
order of any other nature by any federal or state court of
competent jurisdiction shall have been issued which would prevent
the issuance or sale of the Public Securities or materially and
adversely affect or potentially materially and adversely affect the
business or operations of the Company and (vi) the Registration
Statement, the Pricing Disclosure Package and the Prospectus and
any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance
with the Securities Act and the Securities Act Regulations and
shall conform in all material respects to the requirements of the
Securities Act and the Securities Act Regulations, and neither the
Registration Statement, the Pricing Disclosure Package, the
Prospectus nor any amendment or supplement thereto shall contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
4.6
Corporate
Proceedings
. All corporate proceedings and other legal
matters incident to the authorization, form and validity of each of
this Agreement, the Public Securities, the Representative’s
Warrant Agreement, the Registration Statement, the Pricing
Disclosure Package and the Prospectus and all other legal matters
relating to this Agreement and the transactions contemplated hereby
and thereby shall be reasonably satisfactory in all material
respects to counsel for the Underwriters, and the Company shall
have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such
matters.
4.7
Delivery
of Agreements
.
4.7.1
Lock-Up
Agreements
. On or before the date of this Agreement, the
Company shall have delivered to the Representative executed copies
of the Lock-Up Agreements from each of the persons listed in
Schedule 3
hereto.
4.7.2
Closing Date Deliveries
. On the
Closing Date, the Company shall have delivered to the
Representative executed copies of the Representative’s
Warrant Agreement
4.8
Additional
Documents
. At the Closing Date and at each Option Closing
Date (if any) Representative Counsel shall have been furnished with
such documents and opinions as they may require for the purpose of
enabling Representative Counsel to deliver an opinion to the
Underwriters, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Public
Securities as herein contemplated shall be satisfactory in form and
substance to the Representative and Representative
Counsel.
5.1
Indemnification
of the Underwriters.
5.1.1
General
.
Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its affiliates and
each of its and their respective directors, officers, members,
employees, representatives, partners, shareholders, affiliates,
counsel and agents and each person, if any, who controls any such
Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively the
“
Underwriter Indemnified
Parties
,” and each an “
Underwriter Indemnified Party
”),
against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever, whether arising out of any action between any of
the Underwriter Indemnified Parties and the Company or between any
of the Underwriter Indemnified Parties and any third party, or
otherwise) to which they or any of them may become subject under
the Securities Act, the Exchange Act or any other statute or at
common law or otherwise or under the laws of foreign countries (a
“
Claim
”),
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in (i) the Registration
Statement, the Pricing Disclosure Package, the Preliminary
Prospectus, the Prospectus or any Issuer Free Writing Prospectus
(as from time to time each may be amended and supplemented); (ii)
any materials or information provided to investors by, or with the
approval of, the Company in connection with the marketing of the
Offering, including any “road
show” or investor presentations made to
investors by the Company (whether in person or electronically);
(iii) any application or other document or written communication
(in this
Section
5
, collectively called
“
application
”) executed by the Company or based upon
written information furnished by the Company in any jurisdiction in
order to qualify the Public Securities under the securities laws
thereof or filed with the Commission, any state securities
commission or agency, the Exchange or any other national securities
exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, the
Underwriters’ Information, or (iv) otherwise arising in
connection with or allegedly in connection with the Offering. The
Company also agrees that it will reimburse each Underwriter
Indemnified Party for all fees and expenses (including but not
limited to any and all legal or other expenses reasonably incurred
in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, whether arising
out of any action between any of the Underwriter Indemnified
Parties and the Company or between any of the Underwriter
Indemnified Parties and any third party, or otherwise)
(collectively, the “
Expenses
”), and further agrees wherever and whenever
possible to advance payment of Expenses as they are incurred by an
Underwriter Indemnified Party in investigating, preparing, pursuing
or defending any Claim.
5.1.2
Procedure
.
If any action is brought against an Underwriter Indemnified Party
in respect of which indemnity may be sought against the Company
pursuant to
Section
5.1.1
, such Underwriter Indemnified Party shall promptly
notify the Company in writing of the institution of such action and
the Company shall assume the defense of such action, including the
employment and fees of counsel (subject to the approval of such
Underwriter Indemnified Party) and payment of actual expenses if an
Underwriter Indemnified Party requests that the Company do so. Such
Underwriter Indemnified Party shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Company, and shall be
advanced by the Company. The Company shall not be liable for any
settlement of any action effected without its consent (which shall
not be unreasonably withheld). In addition, the Company shall not,
without the prior written consent of the Underwriters, settle,
compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action in respect of
which advancement, reimbursement, indemnification or contribution
may be sought hereunder (whether or not such Underwriter
Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination (i) includes an unconditional
release of each Underwriter Indemnified Party, acceptable to such
Underwriter Indemnified Party, from all liabilities, expenses and
claims arising out of such action for which indemnification or
contribution may be sought and (ii) does not include a statement as
to or an admission of fault, culpability or a failure to act, by or
on behalf of any Underwriter Indemnified Party.
5.2
Indemnification
of the Company
. Each Underwriter, severally and not jointly,
agrees to indemnify and hold harmless the Company, its directors,
its officers who signed the Registration Statement and persons who
control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act against any and
all loss, liability, claim, damage and expense described in the
foregoing indemnity from the Company to the several Underwriters,
as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Pricing
Disclosure Package or Prospectus or any amendment or supplement
thereto or in any application, in reliance upon, and in strict
conformity with, the Underwriters’ Information. In case any
action shall be brought against the Company or any other person so
indemnified based on any Preliminary Prospectus, the Registration
Statement, the Pricing Disclosure Package or Prospectus or any
amendment or supplement thereto or any application, and in respect
of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company,
and the Company and each other person so indemnified shall have the
rights and duties given to the several Underwriters by the
provisions of
Section
5.1.2
. The Company agrees promptly to notify the
Representative of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or any
person, if any, who controls the Company
within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, in connection with the
issuance and sale of the Public Securities or in connection with
the Registration Statement, the Pricing Disclosure Package, the
Prospectus or any Issuer Free Writing
Prospectus.
5.3
Contribution
.
5.3.1
Contribution
Rights
. If the indemnification provided for in this
Section 5
shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under
Section 5.1 or 5.2
in respect
of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall,
in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of
such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company, on the one hand, and
the Underwriters, on the other, from the Offering of the Public
Securities, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company, on
the one hand, and the Underwriters, on the other, with respect to
the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on
the other, with respect to such Offering shall be deemed to be in
the same proportion as the total net proceeds from the Offering of
the Public Securities purchased under this Agreement (before
deducting expenses) received by the Company, as set forth in the
table on the cover page of the Prospectus, on the one hand, and the
total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Common Stock
purchased under this Agreement, as set forth in the table on the
cover page of the Prospectus, on the other hand. The relative fault
shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by the
Company or the Underwriters, the intent of the parties and their
relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this
Section 5.3.1
were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this
Section 5.3.1
shall
be deemed to include, for purposes of this
Section 5.3.1
, any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this
Section 5.3.1
in no event shall
an Underwriter be required to contribute any amount in excess of
the amount by which the total underwriting discounts and
commissions received by such Underwriter with respect to the
Offering of the Public Securities exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.3.2
Contribution
Procedure
. Within fifteen (15) days after receipt by any
party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if
a claim for contribution in respect thereof is to be made against
another party (“contributing party”), notify the
contributing party of the commencement thereof, but the failure to
so notify the contributing party will not relieve it from any
liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding
is brought against any party, and such party notifies a
contributing party or its representative of the commencement
thereof within the aforesaid 15 days, the contributing party will
be entitled to participate therein with the notifying party and any
other contributing party similarly notified. Any such contributing
party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or
proceeding affected by such party seeking
contribution on account of any settlement of any claim, action or
proceeding affected by such party seeking contribution without the
written consent of such contributing party. The contribution
provisions contained in this
Section 5.3.2
are intended to supersede, to the
extent permitted by law, any right to contribution under the
Securities Act, the Exchange Act or otherwise available. Each
Underwriter’s obligations to contribute pursuant to
this
Section 5.3
are several and not
joint.
6.
Default by an
Underwriter
.
6.1
Default
Not Exceeding 10% of Firm Shares or Option Shares
. If any
Underwriter or Underwriters shall default in its or their
obligations to purchase the Firm Shares or the Option Shares, if
the Over-allotment Option is exercised hereunder, and if the number
of the Firm Shares or Option Shares with respect to which such
default relates does not exceed in the aggregate 10% of the number
of Firm Shares or Option Shares that all Underwriters have agreed
to purchase hereunder, then such Firm Shares or Option Shares to
which the default relates shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments
hereunder.
6.2
Default
Exceeding 10% of Firm Shares or Option Shares
. In the event
that the default addressed in
Section 6.1
relates to more
than 10% of the Firm Shares or Option Shares, you may in your
discretion arrange for yourself or for another party or parties to
purchase such Firm Shares or Option Shares to which such default
relates on the terms contained herein. If, within one (1) Business
Day after such default relating to more than 10% of the Firm Shares
or Option Shares, you do not arrange for the purchase of such Firm
Shares or Option Shares, then the Company shall be entitled to a
further period of one (1) Business Day within which to procure
another party or parties satisfactory to you to purchase said Firm
Shares or Option Shares on such terms. In the event that neither
you nor the Company arrange for the purchase of the Firm Shares or
Option Shares to which a default relates as provided in this
Section 6, this Agreement will automatically be terminated by you
or the Company without liability on the part of the Company (except
as provided in
Section
3.9
and
Section
5
hereof) or the several Underwriters (except as provided in
Section 5
hereof);
provided
,
however
, that if such default occurs
with respect to the Option Shares, this Agreement will not
terminate as to the Firm Shares; and
provided
,
further
, that nothing herein shall
relieve a defaulting Underwriter of its liability, if any, to the
other Underwriters and to the Company for damages occasioned by its
default hereunder.
6.3
Postponement
of Closing Date
. In the event that the Firm Shares or Option
Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another
party or parties as aforesaid, you or the Company shall have the
right to postpone the Closing Date or Option Closing Date for a
reasonable period, but not in any event exceeding five (5) Business
Days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement, the Pricing Disclosure
Package or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment
to the Registration Statement, the Pricing Disclosure Package or
the Prospectus that in the opinion of counsel for the Underwriter
may thereby be made necessary. The term “
Underwriter
” as used in this
Agreement shall include any party substituted under this
Section 6
with like
effect as if it had originally been a party to this Agreement with
respect to such shares of Common Stock.
7.
Additional
Covenants
.
7.1
Board
Composition and Board Designations
. The Company shall ensure
that: (i) the qualifications of the persons serving as members of
the Board of Directors and the overall composition of the Board
comply with the Sarbanes-Oxley Act, with the Exchange Act and with
the listing rules of the Exchange or any other national securities
exchange, as the case may be, in the event the Company seeks to
have any of its securities listed on another exchange or quoted on
an automated quotation system, and (ii) if applicable, at least one
member of the Audit Committee of the Board of Directors qualifies
as an
“audit committee financial
expert,” as such term is defined under Regulation S-K and the
listing rules of the Exchange.
7.2
Prohibition
on Press Releases and Public Announcements
. The Company
shall not issue press releases or engage in any other publicity,
without the Representative’s prior written consent, for a
period ending at 5:00 p.m., Eastern time, on the first
(1
st
)
Business Day following the forty-fifth (45
th
) day after the
Closing Date, other than normal and customary releases issued in
the ordinary course of the Company’s business.
7.3
Right
of First Refusal
. Provided that the Firm Shares are sold in
accordance with the terms of this Agreement, the Representative
shall have an irrevocable right of first refusal (the
“
Right of First
Refusal
”), for a period of six (6) months after the
date the Offering is completed, to act as sole and exclusive
investment banker, sole and exclusive book-runner, sole and
exclusive financial advisor, sole and exclusive underwriter and/or
sole and exclusive placement agent, at the Representative’s
sole and exclusive discretion, for each and every future public
equity offering, including all equity linked financings (each, a
“
Subject
Transaction
”), during such six (6) month period, of
the Company, or any successor to or subsidiary of the Company, on
terms and conditions customary to the Representative for such
Subject Transactions. For the avoidance of any doubt, the Company
shall not retain, engage or solicit any additional investment
banker, book-runner, financial advisor, underwriter and/or
placement agent in a Subject Transaction without the express
written consent of the Representative. The Representative shall
have the sole right to determine whether or not any other broker
dealer shall have the right to participate in any Subject
Transaction in which it exercises its right of first refusal and
the economic terms of any such participation.
The
Company shall notify the Representative of its intention to pursue
a Subject Transaction, including the material terms thereof, by
providing written notice thereof by registered mail or overnight
courier service addressed to the Representative. If the
Representative fails to exercise its Right of First Refusal with
respect to any Subject Transaction within ten (10) Business Days
after the mailing of such written notice, then the Representative
shall have no further claim or right with respect to the Subject
Transaction. The Representative may elect, in its sole and absolute
discretion, not to exercise its Right of First Refusal with respect
to any Subject Transaction; provided that any such election by the
Representative shall not adversely affect the
Representative’s Right of First Refusal with respect to any
other Subject Transaction during the six (6) month period agreed to
above.
8.
Effective Date of this Agreement and
Termination Thereof
.
8.1
Effective
Date of this Agreement
. This Agreement shall become
effective when both the Company and the Representative have
executed the same and delivered counterparts of such signatures to
the other party.
8.2
Termination
.
The Representative shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has materially disrupted,
or in your opinion will in the immediate future materially disrupt,
general securities markets in the United States; or (ii) if trading
on the New York Stock Exchange or the Nasdaq Stock Market LLC shall
have been suspended or materially limited, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required by FINRA or by order
of the Commission or any other government authority having
jurisdiction; or (iii) if the United States shall have become
involved in a new war or an increase in major hostilities; or (iv)
if a banking moratorium has been declared by a New York State or
federal authority; or (v) if a moratorium on foreign exchange
trading has been declared which materially adversely impacts the
United States securities markets; or (vi) if the Company shall have
sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act
which, whether or not such loss shall have been insured, will, in
your opinion, make it inadvisable to proceed with the delivery of
the Firm Shares or Option Shares; or (vii) if the Company is in
material breach of any of its representations, warranties or
covenants hereunder; or (viii) if the Representative shall have
become aware after the date hereof of such a material adverse
change in the conditions or prospects of the Company, or such
adverse material change in general market conditions as in the
Representative’s judgment would make it impracticable to
proceed with the offering, sale and/or delivery of the Public
Securities or to enforce contracts made by the Underwriters for the
sale of the Public Securities.
8.3
Expenses
.
Notwithstanding anything to the contrary in this Agreement, except
in the case of a default by the Underwriters, pursuant to
Section 6.2
above,
in the event that this Agreement shall not be carried out for any
reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms herein, the Company shall
be obligated to pay to the Underwriters their actual and
accountable out-of-pocket expenses related to the transactions
contemplated herein then due and payable (including the fees and
disbursements of Representative Counsel) up to $90,000 in the
aggregate (inclusive of the $20,000 advance for out-of-pocket
accountable expenses previously paid by the Company to the
Representative (the “
Advance
”)), and upon demand the
Company shall pay the full amount thereof to the Representative on
behalf of the Underwriters; provided, however, that such expense
cap in no way limits or impairs the indemnification and
contribution provisions of this Agreement. Notwithstanding the
foregoing, any advance received by the Representative will be
reimbursed to the Company to the extent not actually incurred in
compliance with FINRA Rule 5110(f)(2)(C).
8.4
Survival
of Indemnification
. Notwithstanding any contrary provision
contained in this Agreement, any election hereunder or any
termination of this Agreement, and whether or not this Agreement is
otherwise carried out, the provisions of
Section 5
shall remain in full
force and effect and shall not be in any way affected by, such
election or termination or failure to carry out the terms of this
Agreement or any part hereof.
8.5
Representations,
Warranties, Agreements to Survive
. All representations,
warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto,
shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of any Underwriter or
its Affiliates or selling agents, any person controlling any
Underwriter, its officers or directors or any person controlling
the Company or (ii) delivery of and payment for the Public
Securities.
9.1
Notices
.
All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed
(registered or certified mail, return receipt requested),
personally delivered or sent by e-mail or facsimile transmission
and confirmed and shall be deemed given when so delivered, e-mailed
or faxed and confirmed or if mailed, two (2) days after such
mailing.
If to
the Representative:
ThinkEquity, a
division of Fordham Financial Management, Inc.
17 State Street, 22
nd
Floor
New
York, New York 10004
Attention: Mr. Eric
Lord, Head of Investment Banking
Fax
No.: (212) 349-2550
e-mail:
el@think-equity.com
with a
copy (which shall not constitute notice) to:
Gracin
& Marlow, LLP
The
Chrysler Building
405
Lexington Avenue, 26
th
Floor
New
York, New York 10174
Attention: Leslie
Marlow, Esq. or Patrick J. Egan, Esq.
Fax No:
(212) 208-4657
E-mail:
lmarlow@gracinmarlow.com or
pegan@gracinmarlow.com
If to
the Company:
Bridgeline Digital,
Inc.
80
Blanchard Road
Burlington,
Massachusetts 01803
Attention: Ari
Kahn, Chief Executive Officer
Fax No:
(781) 376-5033
E-mail:
akahn@bridgeline.com
with a
copy (which shall not constitute notice) to:
Disclosure Law
Group
One
America Plaza
600
West Broadway Suite 700
San
Diego, California 92101
Attention: Daniel
Rumsey, Esq.
Fax No.
(619) 330-2101
E-mail:
drumsey@disclosurelawgroup.com
9.2
Research
Analyst Independence
. The Company acknowledges that each
Underwriter’s research analysts and research departments, if
any, are required to be independent from its investment banking
division and are subject to certain regulations and internal
policies, and that such Underwriter’s research analysts may
hold views and make statements or investment recommendations and/or
publish research reports with respect to the Company and/or the
Offering that differ from the views of their investment banking
division. The Company acknowledges that each Underwriter is a full
service securities firm and as such from time to time, subject to
applicable securities laws, rules and regulations, may effect
transactions for its own account or the account of its customers
and hold long or short positions in debt or equity securities of
the Company;
provided
,
however
, that nothing in
this Section 9.2 shall relieve the Underwriter of any
responsibility or liability it may otherwise bear in connection
with activities in violation of applicable securities laws, rules
or regulations.
9.3
Headings
.
The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of
this Agreement.
9.4
Amendment
.
This Agreement may only be amended by a written instrument executed
by each of the parties hereto.
9.5
Entire
Agreement
. This Agreement (together with the other
agreements and documents being delivered pursuant to or in
connection with this Agreement) constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and
thereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter
hereof. Notwithstanding anything to the contrary set forth herein,
it is understood and agreed by the parties hereto that all other
terms and conditions of that certain engagement letter between the
Company and ThinkEquity, a division of Fordham Financial
Management, Inc., dated August 27, 2018, shall remain in full force
and effect.
9.6
Binding
Effect
. This Agreement shall inure solely to the benefit of
and shall be binding upon the Representative, the Underwriters, the
Company and the controlling persons, directors and officers
referred to in
Section
5
hereof, and their respective successors, legal
representatives, heirs and assigns, and no other person shall have
or be construed to have any legal or equitable right, remedy or
claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. The term “successors and
assigns” shall not include a purchaser, in its capacity as
such, of securities from any of the Underwriters.
9.7
Governing
Law; Consent to Jurisdiction; Trial by Jury
. This Agreement
shall be governed by and construed and enforced in accordance with
the laws of the State of New York, without giving effect to
conflict of laws principles thereof. The Company hereby agrees that
any action, proceeding or claim against it arising out of, or
relating in any way to this Agreement shall be brought and enforced
in the New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall
be exclusive. The Company hereby waives any objection to such
exclusive jurisdiction and that such courts represent an
inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by
registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in
Section 9.1
hereof. Such
mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action
shall be entitled to recover from the other party(ies) all of its
reasonable attorneys’ fees and expenses relating to such
action or proceeding and/or incurred in connection with the
preparation therefor. The Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its stockholders and
affiliates) and each of the Underwriters hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all
right to trial by jury in any legal proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby.
9.8
Execution
in Counterparts
. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same
agreement, and shall become effective when one or more counterparts
has been signed by each of the parties hereto and delivered to each
of the other parties hereto. Delivery of a signed counterpart of
this Agreement by facsimile or email/pdf transmission shall
constitute valid and sufficient delivery thereof.
9.9
Waiver,
etc
. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed
or construed to be a waiver of any such provision, nor to in any
way effect the validity of this Agreement or any provision hereof
or the right of any of the parties hereto to thereafter enforce
each and every provision of this Agreement. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions
of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which
enforcement of such waiver is sought; and no waiver of any such
breach, non-compliance or non-fulfillment shall be construed or
deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
[
Signature Page
Follows
]
If the
foregoing correctly sets forth the understanding between the
Underwriters and the Company, please so indicate in the space
provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.
Very
truly yours,
BRIDGELINE
DIGITAL, INC.
By:
__________________________
Confirmed
as of the date first written above
mentioned,
on behalf of itself and as
Representative
of the several Underwriters
named
on
Schedule 1
hereto:
THINKEQUITY,
A Division of Fordham Financial Management, Inc.
Name:
Eric Lord
Title:
Head of Investment Banking
SCHEDULE 1
|
|
|
Underwriter
|
Total Number of Firm Shares to be Purchased
|
Number of Option Shares to be Purchased if the Over-Allotment
Option is Fully Exercised by the Representative
|
ThinkEquity, a d
ivision of Fordham Financial Management,
Inc.
|
|
|
|
|
|
TOTAL
|
|
|
SCHEDULE 2-A
Pricing
Information
Number
of Firm Shares:
[●]
Number
of Option Shares:
[●]
Public
Offering Price per Share: $
[●]
Underwriting
Discount per Share: $
[●]
Underwriting non-accountable expense allowance per Share:
$[●]
Proceeds
to Company per Share (before expenses): $
[●]
The
Company shall be credited by an amount equal to 50% of the
underwriting discount and non-accountable expense allowance at
Closing for sale of Shares to investors listed on
Schedule A
annexed hereto;
which shall reduce the aggregate Underwriting Discount and
Underwriting non-accountable expense
allowance
.
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
Free
writing prospectus filed with the SEC on [ ], 2018
SCHEDULE 3
List of Lock-Up Parties
SCHEDULE A
Company Investors:
EXHIBIT A
Form of
Representative’s Warrant Agreement
Reference
is made to Exhibit 4.2 to the Registration Statement on Form S-1,
as amended (File Number 333-227430), of the Company, which is
incorporated by reference.
EXHIBIT B
Form of Lock-Up Agreement
__________,
2018
ThinkEquity,
A
Division of Fordham Financial Management, Inc.
17
State Street, 22nd Floor
New
York, NY 10004
As
Representative of the several Underwriters named on Schedule 1 to
the Underwriting Agreement referenced below
Ladies
and Gentlemen:
The
undersigned understands that you (the “
Representative
”)
and potentially certain other firms, if any (the
“
Underwriters
”),
propose to enter into an Underwriting Agreement (the
“
Underwriting
Agreement
”) providing for the purchase by the
Underwriters of securities (which will include shares of Common
Stock, par value $0.001 per share (the “
Common Stock
”)
and may also include warrants to purchase shares of Common Stock
(the “
Common
Stock
”), of Bridgeline Digital, Inc., a Delaware
corporation (the “
Company
”), and
that the Underwriters propose to reoffer the Common Stock to the
public (the “
Offering
”).
In
consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the
undersigned hereby irrevocably agrees that, without the prior
written consent of the Representative, on behalf of the
Underwriters, the undersigned will not, directly or indirectly, (1)
offer for sale, sell, pledge, or otherwise transfer or dispose of
(or enter into any transaction or device that is designed to, or
could be expected to, result in the transfer or disposition by any
person at any time in the future of) any shares of Common Stock
(including, without limitation, shares of Common Stock that may be
deemed to be beneficially owned by the undersigned in accordance
with the rules and regulations of the Securities and Exchange
Commission and shares of Common Stock that may be issued upon
exercise of any options or warrants) or securities convertible into
or exercisable or exchangeable for Common Stock, (2) enter into any
swap or other derivatives transaction that transfers to another, in
whole or in part, any of the economic benefits or risks of
ownership of shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery
of Common Stock or other securities, in cash or
otherwise,
(3) except as
provided for below, make any demand for or exercise any right or
cause to be filed a registration statement, including any
amendments thereto, with respect to the registration of any shares
of Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock or any other securities of the
Company, or (4) publicly disclose the intention to do any of the
foregoing for a period commencing on the date hereof and ending on
the 90
th
day after the date of the Prospectus relating to the Offering (such
90-day period, the “
Lock-Up
Period
”).
The
foregoing paragraph shall not apply to (a) transactions relating to
shares of Common Stock or other securities acquired in the open
market after the completion of the Offering,
provided
that no filing under Section
16(a) of the Securities Exchange Act of 1934, as amended (the
“
Exchange
Act
”
), shall
be required or shall be voluntarily made in connection with such
transfers;
(b) bona fide gifts of
shares of any class of the Company’s capital stock or any
security convertible into Common Stock, in each case that are made
exclusively between and among the undersigned or members of the
undersigned’s family, or affiliates of the undersigned,
including its partners (if a partnership) or members (if a limited
liability company); (c) any transfer of shares of Common Stock or
any security convertible into Common Stock by will or intestate
succession upon the death of the undersigned; (d) transfer of
shares of Common Stock or any security convertible into Common
Stock to an immediate family member (for purposes of this Lock-Up
Letter Agreement, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than
first cousin) or any trust, limited partnership, limited liability
company or other entity for the direct or indirect benefit of the
undersigned or any immediate family member of the
undersigned;
provided
that, in the case of clauses (b)-(d) above, it
shall be a condition to any such transfer that (i) the
transferee/donee agrees to be bound by the terms of this Lock-Up
Letter Agreement (including, without limitation, the restrictions
set forth in the preceding sentence) to the same extent as if the
transferee/donee were a party hereto, (ii) each party (donor,
donee, transferor or transferee) shall not be required by law
(including without limitation the disclosure requirements of the
Securities Act of 1933, as amended (the “
Securities
Act
”), and the Exchange
Act) to make, and shall agree to not voluntarily make, any filing
or public announcement of the transfer or disposition prior to the
expiration of the 180-day period referred to above, and (iii) the
undersigned notifies the Representative at least two business days
prior to the proposed transfer or disposition; (e) the transfer of
shares to the Company to satisfy withholding obligations for any
equity award granted pursuant to the terms of the Company’s
stock option/incentive plans, such as upon exercise, vesting, lapse
of substantial risk of forfeiture, or other similar taxable event,
in each case on a “cashless” or “net
exercise” basis (which, for the avoidance of doubt shall not
include “cashless” exercise programs involving a broker
or other third party),
provided
that as a condition of any transfer pursuant to
this clause (e), that if the undersigned is required to file a
report under Section 16(a) of the Exchange Act, reporting a
reduction in beneficial ownership of shares of Common Stock or any
securities convertible into or exercisable or exchangeable for
Common Stock during the Lock-Up Period, the undersigned shall
include a statement in such report, and if applicable an
appropriate disposition transaction code, to the effect that such
transfer is being made as a share delivery or forfeiture in
connection with a net value exercise, or as a forfeiture or sale of
shares solely to cover required tax withholding, as the case may
be; (f)
transfers of shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock
pursuant to a bona fide third party tender offer made to all
holders of the Common Stock, merger, consolidation or other similar
transaction involving a change of control (as defined below) of the
Company, including voting in favor of any such transaction or
taking any other action in connection with such transaction,
provided
that in the event
that such merger, tender offer or other transaction is not
completed, the Common Stock and any security convertible into or
exercisable or exchangeable for Common Stock shall remain subject
to the restrictions set forth herein
;
(g)
the exercise of warrants or the exercise of stock
options granted pursuant to the Company’s stock
option/incentive plans or otherwise outstanding on the date hereof;
provided
, that the
restrictions shall apply to shares of Common Stock issued upon such
exercise or conversion; (h) the establishment of any contract,
instruction or plan that satisfies all of the requirements of Rule
10b5-1 (a “
Rule 10b5-1
Plan
”) under the Exchange Act;
provided
,
however
, that no sales of Common Stock
or securities convertible into, or exchangeable or exercisable for,
Common Stock, shall be made pursuant to a Rule 10b5-1 Plan prior to
the expiration of the Lock-Up Period;
provided
further
, that the Company is not
required to report the establishment of such Rule 10b5-1 Plan in
any public report or filing with the Commission under the Exchange
Act during the lock-up period and does not otherwise voluntarily
effect any such public filing or report regarding such Rule 10b5-1
Plan; and (i) any demands or requests for, exercise any right with
respect to, or take any action in preparation of, the registration
by the Company under the Securities Act of the undersigned’s
shares of Common Stock, provided that no transfer of the
undersigned’s shares of Common Stock registered pursuant to
the exercise of any such right and no registration statement shall
be filed under the Securities Act with respect to any of the
undersigned’s shares of Common Stock during the Lock-Up
Period. For purposes of clause (f) above, “change of
control” shall mean the consummation of any bona fide third
party tender offer, merger, purchase, consolidation or other
similar transaction the result of which is that any
“person” (as defined in Section 13(d)(3) of the
Exchange Act), or group of persons, becomes the beneficial owner
(as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a
majority of total voting power of the voting stock of the
Company.
The
undersigned also agrees and consents to the entry of stop transfer
instructions with the Company’s transfer agent and registrar
against the transfer of the undersigned’s securities subject
to this Lock-Up Letter Agreement except in compliance with this
Lock-Up Letter Agreement.
If the
undersigned is an officer or director of the Company, (i) the
undersigned agrees that the foregoing restrictions shall be equally
applicable to any shares of Common Stock that the undersigned may
purchase in the Offering; (ii) the Representative agrees that, at
least three (3) business days before the effective date of any
release or waiver of the foregoing restrictions in connection with
a transfer of securities subject to this Lock-Up Letter Agreement,
the Representative will notify the Company of the impending release
or waiver; and (iii) the Company has agreed in the Underwriting
Agreement to announce the impending release or waiver by press
release through a major news service at least two (2) business days
before the effective date of the release or waiver. Any release or
waiver granted by the Representative hereunder to any such officer
or director shall only be effective two (2) business days after the
publication date of such press release. The provisions of this
paragraph will not apply if (a) the release or waiver is effected
solely to permit a transfer of securities subject to this Lock-Up
Letter Agreement not for consideration and (b) the transferee has
agreed in writing to be bound by the same terms described in this
securities subject to this Lock-Up Letter Agreement to the extent
and for the duration that such terms remain in effect at the time
of such transfer.
It is
understood that, if the Company notifies the Underwriters that it
does not intend to proceed with the Offering, if the Underwriting
Agreement does not become effective, or if the Underwriting
Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for
and delivery of the securities, the undersigned will be released
from its obligations under this Lock-Up Letter
Agreement.
The
undersigned understands that the Company and the Underwriters will
proceed with the Offering in reliance on this Lock-Up Letter
Agreement.
Whether
or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are
subject to negotiation between the Company and the
Underwriters.
This
Lock-Up Letter Agreement shall automatically terminate upon the
earliest to occur, if any, of (1) the termination of the
Underwriting Agreement before the sale of any securities to the
Underwriters or (2) November 27, 2018, in the event that the
Underwriting Agreement has not been executed by that
date.
The
undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Lock-Up Letter
Agreement and that, upon request, the undersigned will execute any
additional documents necessary in connection with the enforcement
hereof. Any obligations of the undersigned shall be binding upon
the heirs, personal representative, successors and assigns of the
undersigned.
Very
truly yours,
By:
______________________________
Name:
Title:
EXHIBIT C
Form of Press Release
[Date]
Bridgeline
Digital, Inc., a Delaware corporation (the
“
Company
”), announced today that
ThinkEquity,
a division of Fordham Financial Management, Inc.
, acting as representative for the underwriters in
the Company’s recent public offering of the Company’s
common stock, is [waiving] [releasing] a lock-up restriction with
respect to _________ shares of the Company’s common stock
held by [certain officers, directors or other security holders] [an
officer, director or security holder] of the Company. The [waiver]
[release] will take effect on _________, 20___, and the shares may
be sold on or after such date.
This
press release is not an offer or sale of the securities in the
United States or in any other jurisdiction where such offer or sale
is prohibited, and such securities may not be offered or sold in
the United States absent registration or an exemption from
registration under the Securities Act of 1933, as
amended.
Exhibit 4.2
Form of Representative’s Warrant
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE
HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED
HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL,
TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A
PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT (DEFINED BELOW) TO ANYONE OTHER THAN (I)
THINKEQUITY (DEFINED BELOW) OR AN UNDERWRITER OR A SELECTED DEALER
IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR
PARTNER OF THINKEQUITY OR OF ANY SUCH UNDERWRITER OR SELECTED
DEALER.
THIS WARRANT IS NOT EXERCISABLE PRIOR TO
[
DATE THAT IS ONE HUNDRED EIGHTY DAYS FOLLOWING
THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT]
.
VOID AFTER 5:00 P.M., NEW YORK
TIME,
[___________________] [
DATE THAT IS FIVE YEARS FOLLOWING THE EFFECTIVE
DATE OF THE REGISTRATION STATEMENT
].
WARRANT TO PURCHASE COMMON STOCK
BRIDGELINE DIGITAL, INC.
Warrant
Shares: _______
1
Initial
Exercise Date:_________, 2019
THIS
WARRANT TO PURCHASE COMMON STOCK (the “
Warrant
”) certifies that,
for value received, _____________ or his, her or its assigns (the
“
Holder
”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after, ______,
2019 (one hundred and eighty (180) days following the Effective
Date (as defined below), the “
Initial Exercise Date
”)
and, in accordance with FINRA Rule 5110(f)(2)(G)(i), prior to or at
5:00 p.m. (New York time) on the date that is five (5) years
following the Effective Date (the “
Termination Date
”) but
not thereafter, to subscribe for and purchase from BRIDGELINE
DIGITAL, INC., a Delaware corporation (the “
Company
”), up to ______
shares of common stock, par value $0.001 per share
(“
Common
Stock
”), of the Company (the “
Warrant Shares
”), as
subject to adjustment hereunder. The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).
Section 1
.
Definitions
. In addition to the
terms defined elsewhere in this Agreement, the following terms have
the meanings indicated in this Section 1:
“
Affiliate
” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“
Business Day
” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“
Commission
” means the
United States Securities and Exchange Commission.
“
Effective Date
” the date
on which the Commission declared the Registration Statement
effective.
“Exchange Act
”
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“
Offering
” has the meaning
set forth in the Underwriting Agreement.
“
Person
” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“
Registration Statement
”
means the registration statement
, and
any amendment or amendments thereto, on Form S-1 (File No.
333-227430), filed by the Company with the Commission in connection
with the Offering.
“
Rule 144
” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“
ThinkEquity
” means
ThinkEquity, a division of Fordham Financial Management Inc., as
representative of the underwriters set forth in the Underwriting
Agreement.
“
Trading Day
” means a day
on which the New York Stock Exchange is open for
trading.
“
Trading Market
” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American LLC, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, or the New York Stock Exchange (or
any successors to any of the foregoing).
“
Underwriting Agreement
”
means that certain Underwriting Agreement, dated [______], 2018, by
and between the Company and ThinkEquity.
“
VWAP
” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of a share of Common Stock for such date (or
the nearest preceding date) on the OTCQB or OTCQX as applicable,
(c) if Common Stock is not then listed or quoted for trading on the
OTCQB or OTCQX and if prices for Common Stock are then reported on
the OTC Pink Open Market published by OTC Markets Group, Inc. (or a
similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of Common
Stock so reported, or (d) in all other cases, the fair market
value of the Common Stock as determined by an independent appraiser
selected in good faith by the Holder and reasonably acceptable to
the Company, the fees and expenses of which shall be paid by the
Company.
Section 2
.
Exercise
.
a)
Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by
delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy (or e-mail attachment)
of the Notice of Exercise Form annexed hereto. Within two (2)
Trading Days following the date of exercise as aforesaid, the
Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise form be required. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within five
(5) Trading Days of the date the final Notice of Exercise is
delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
Form within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face
hereof.
b)
Exercise Price
. The
exercise price per share of the Common Stock under this Warrant
shall be
$________
2
, subject to adjustment hereunder (the
“
Exercise
Price
”).
c)
Cashless Exercise
.
If at any time on or after the Initial Exercise Date, there is no
effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant
Shares to the Holder, then this Warrant may also be exercised, in
whole or in part, at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive
the number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:
(A) =
the VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(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.
If Warrant Shares are issued in such a
“cashless exercise,” the parties acknowledge and agree
that in accordance with Section 3(a)(9) of the Securities Act, the
Warrant Shares shall take on the registered characteristics of the
Warrants being exercised, and the holding period of the Warrants
being exercised may be tacked on to the holding period of the
Warrant Shares. The Company agrees not to take any
position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d)
Mechanics of
Exercise
.
(i)
Delivery of Warrant Shares
Upon Exercise
. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by its transfer agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“
DWAC
”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder, or (B)
the Warrant Shares are eligible for resale by the Holder without
volume or manner-of-sale limitations pursuant to Rule 144 and, in
either case, the Warrant Shares have been sold by the Holder prior
to the Warrant Share Delivery Date (as defined below), and
otherwise by physical delivery of a certificate, registered in the
Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the
Holder in the Notice of Exercise by the date that is two
(2) Trading Days after the delivery to the Company of the
Notice of Exercise (such date, the “
Warrant Share Delivery
Date
”). If the Warrant Shares can be delivered via
DWAC, the transfer agent shall have received from the Company, at
the expense of the Company, any legal opinions or other
documentation required by it to deliver such Warrant Shares without
legend (subject to receipt by the Company of reasonable back up
documentation from the Holder, including with respect to affiliate
status) and, if applicable and requested by the Company prior to
the Warrant Share Delivery Date, the transfer agent shall have
received from the Holder a confirmation of sale of the Warrant
Shares (provided the requirement of the Holder to provide a
confirmation as to the sale of Warrant Shares shall not be
applicable to the issuance of unlegended Warrant Shares upon a
cashless exercise of this Warrant if the Warrant Shares are then
eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares
shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to
Section 2(d)(vi) prior to the issuance of such shares, having
been paid. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Notice of Exercise by the
second Trading Day following the Warrant Share Delivery Date, the
Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such
exercise (based on the VWAP of the Common Stock on the date of the
applicable Notice of Exercise), $10 per Trading Day (increasing to
$20 per Trading Day on the fifth Trading Day after such liquidated
damages begin to accrue) for each Trading Day after the second
Trading Day following such Warrant Share Delivery Date until such
Warrant Shares are delivered or Holder rescinds such
exercise.
(ii)
Delivery
of New Warrants Upon Exercise
. If this Warrant shall have
been exercised in part, the Company shall, at the request of a
Holder and upon surrender of this Warrant certificate, at the time
of delivery of the Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this
Warrant.
(iii)
Rescission
Rights
. If the Company fails to cause its transfer agent to
deliver to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise;
provided
,
however
, that the Holder shall
be required to return any Warrant Shares or Common Stock subject to
any such rescinded exercise notice concurrently with the return to
Holder of the aggregate Exercise Price paid to the Company for such
Warrant Shares and the restoration of Holder’s right to
acquire such Warrant Shares pursuant to this Warrant (including,
issuance of a replacement warrant certificate evidencing such
restored right).
(iv)
Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise
. In addition to any other rights available to the
Holder, if the Company fails to cause its transfer agent to
transmit to the Holder the Warrant Shares pursuant to an exercise
on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a
“
Buy-In
”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
(v)
No
Fractional Shares or Scrip
. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which the Holder would
otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole
share.
(vi)
Charges,
Taxes and Expenses
. Issuance of Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided
,
however
, that in
the event that Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company shall pay all transfer
agent fees required for same-day processing of any Notice of
Exercise and all fees to the Depository Trust Company (or another
established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant
Shares.
(vii)
Closing
of Books
. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
(viii)
Signature
.
This Section 2 and the exercise form attached hereto set forth the
totality of the procedures required of the Holder in order to
exercise this Purchase Warrant. Without limiting the
preceding sentences, no ink-original exercise form shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any exercise form be required in
order to exercise this Purchase Warrant. No additional legal
opinion, other information or instructions shall be required of the
Holder to exercise this Purchase Warrant. The Company shall
honor exercises of this Purchase Warrant and shall deliver Shares
underlying this Purchase Warrant in accordance with the terms,
conditions and time periods set forth herein.
e)
Holder’s Exercise
Limitations
. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates and (ii) exercise or conversion of the unexercised
or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any
of its Affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership
shall be calculated in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance
with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance
therewith. To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant
is exercisable shall be in the sole discretion of the Holder, and
the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by the Holder together with
any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the
Company’s transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request
of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common
Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the
date as of which such number of outstanding shares of Common Stock
was reported. The “
Beneficial Ownership
Limitation
” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Holder, upon notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 2(e), provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61
st
day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section 3
.
Certain
Adjustments
.
a)
Stock Dividends and
Splits
. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification. For
the purposes of clarification, the Exercise Price of this Warrant
will not be adjusted in the event that the Company or any
Subsidiary thereof, as applicable, sells or grants any option to
purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any
option to purchase or other disposition) any Common Stock or Common
Stock Equivalents, at an effective price per share less than the
Exercise Price then in effect.
b)
[RESERVED]
c)
Subsequent Rights
Offerings
. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“
Purchase
Rights
”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
d)
Pro Rata
Distributions
. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend
(other than cash dividends) or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without
limitation, any distribution of shares or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “
Distribution
”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (
provided
,
however
, to the extent that the
Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). To the extent that this Warrant
has not been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant.
e)
Fundamental
Transaction
. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination) (each a “
Fundamental
Transaction
”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “
Alternate Consideration
”)
receivable by holders of Common Stock as a result of such
Fundamental Transaction for each share of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 2(e) on
the exercise of this Warrant). For purposes of any such exercise,
the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate
Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company
is not the survivor (the “
Successor Entity
”) to
assume in writing all of the obligations of the Company under this
Warrant in accordance with the provisions of this Section 3(e)
pursuant to written agreements prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Warrant a security of the Successor
Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant which is exercisable for a
corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common
Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and with an exercise price
which applies the exercise price hereunder to such shares of
capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and
the value of such shares of capital stock, such number of shares of
capital stock and such exercise price being for the purpose of
protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.
f)
Calculations
. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
g)
Notice to
Holder
.
(i)
Adjustment
to Exercise Price
. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and any resulting adjustment to the
number of Warrant Shares and setting forth a brief statement of the
facts requiring such adjustment.
(ii)
Notice
to Allow Exercise by Holder
. If (A) the Company shall
declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the
Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the
Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in
each case, the Company shall cause to be mailed a notice to the
Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least fifteen (15) calendar days prior
to the applicable record or effective date hereinafter specified,
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to provide such notice or any
defect therein shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that
any notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date
of the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 4
.
Transfer of
Warrant
.
a)
Transferability
.
Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor any
Warrant Shares issued upon exercise of this Warrant shall be sold,
transferred, assigned, pledged, or hypothecated, or be the subject
of any hedging, short sale, derivative, put, or call transaction
that would result in the effective economic disposition of the
securities by any person for a period of one hundred and eighty
(180) days immediately following the Effective Date pursuant to
which this Warrant is being issued, except the transfer of any
security:
(i)
by operation of law
or by reason of reorganization of the Company;
(ii)
to any FINRA member
firm participating in the offering and the officers or partners
thereof, if all securities so transferred remain subject to the
lock-up restriction in this Section 4(a) for the remainder of the
time period;
(iii)
if the aggregate
amount of securities of the Company held by the Holder or related
person do not exceed 1% of the securities being
offered;
(iv)
that is
beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or
otherwise directs investments by the fund, and participating
members in the aggregate do not own more than 10% of the equity in
the fund; or
(v)
the exercise or
conversion of any security, if all securities received remain
subject to the lock-up restriction in this Section 4(a) for the
remainder of the time period.
Subject
to the foregoing restriction, any applicable securities laws and
the conditions set forth in Section 4(d), this Warrant and all
rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of
this Warrant at the principal office of the Company or its
designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by
the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. The Warrant, if properly assigned in accordance
herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
b)
New Warrants
. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the initial issuance date of
this Warrant and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant
thereto.
c)
Warrant Register
.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “
Warrant Register
”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d)
Representation by the
Holder
. The Holder, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such
exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof
in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted
under the Securities Act.
Section 5
.
Registration
Rights
.
a)
Demand
Registration–Grant of Right
. The Company, upon written
demand (a “
Demand
Notice
”) of the Holder(s) of at least 51% of the
Warrants and/or the underlying Shares (“
Majority Holders
”),
agrees to register, on one occasion, all or any portion of the
Warrants and the underlying Shares (the “
Registrable Securities
”).
On such occasion, the Company will file a registration statement
with the Commission covering the Registrable Securities within
sixty (60) days after receipt of a Demand Notice and use its
commercially reasonable efforts to have the registration statement
declared effective promptly thereafter, subject to compliance with
review by the Commission;
provided
,
however
, that the Company shall
not be required to comply with a Demand Notice if the Company has
filed a registration statement with respect to which the Holder is
entitled to piggyback registration rights pursuant to
Section 5(c)
hereof and either:
(i) the Holder has elected to participate in the offering covered
by such registration statement or (ii) if such registration
statement relates to an underwritten primary offering of securities
of the Company, until the offering covered by such registration
statement has been withdrawn or until thirty (30) days after such
offering is consummated. The demand for registration may be made at
any time beginning one hundred and eighty (180) days after the
Effective Date and expiring on the fifth anniversary of the
Effective Date. The Company covenants and agrees to give written
notice of its receipt of any Demand Notice by any Holder(s) to all
other registered Holders of the Warrants and/or the Registrable
Securities within ten (10) days after the date of the receipt of
any such Demand Notice.
b)
Demand
Registration–Terms
. The Company shall bear all fees
and expenses attendant to the registration of the Registrable
Securities pursuant to
Section 5(a)
, but the Holders
shall pay any and all underwriting commissions and the expenses of
any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. The Company
agrees to use its commercially reasonable efforts to cause the
filing required herein to become effective promptly and to qualify
or register the Registrable Securities in such States as are
reasonably requested by the Holder(s);
provided
,
however
, that in no event shall
the Company be required to register the Registrable Securities in a
State in which such registration would cause: (i) the Company to be
obligated to register or license to do business in such State or
submit to general service of process in such State, or (ii) the
principal shareholders of the Company to be obligated to escrow
their shares of capital stock of the Company. The Company shall
cause any registration statement filed pursuant to the demand right
granted under
Section
5(a)
to remain effective for a period of at least twelve
(12) consecutive months after the date that the Holders of the
Registrable Securities covered by such registration statement are
first given the opportunity to sell all of such securities. The
Holders shall only use the prospectuses provided by the Company to
sell the shares covered by such registration statement, and will
immediately cease to use any prospectus furnished by the Company if
the Company advises the Holder that such prospectus may no longer
be used due to a material misstatement or omission. Notwithstanding
the provisions of this
Section 5(b)
, the Holder shall
be entitled to a demand registration under this
Section 5(b)
on only one (1)
occasion and such demand registration right shall terminate on the
fifth anniversary of the Effective Date in accordance with FINRA
Rule 5110(f)(2)(G)(iv).
c)
“
Piggy-Back”
Registration–Grant of Right
. In addition to the demand
right of registration described in
Section 5(a)
hereof, the Holder
shall have the right, for a period of six (6) years commencing one
year after the Effective Date, to include the Registrable
Securities as part of any other registration of securities filed by
the Company (other than in connection with a transaction
contemplated by Rule 145 promulgated under the Securities Act or
pursuant to Form S-4, Form S-8 or any equivalent forms);
provided
,
however
, that if,
solely in connection with any primary underwritten public offering
for the account of the Company, the managing underwriter(s) thereof
shall, in its reasonable discretion, impose a limitation on the
number of shares of common stock which may be included in the
registration statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is
necessary to facilitate public distribution, then the Company shall
be obligated to include in such registration statement only such
limited portion of the Registrable Securities with respect to which
the Holder requested inclusion hereunder as the underwriter shall
reasonably permit. Any exclusion of Registrable Securities shall be
made pro rata among the Holders seeking to include Registrable
Securities in proportion to the number of Registrable Securities
sought to be included by such Holders;
provided
,
however
, that the Company shall
not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not
entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the
Registrable Securities.
d)
“
Piggy-Back”
Registration–Terms
. The Company shall bear all fees
and expenses attendant to registering the Registrable Securities
pursuant to
Section
5(c)
hereof, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the
sale of the Registrable Securities. In the event of such a proposed
registration, the Company shall furnish the then Holders of
outstanding Registrable Securities with not less than thirty (30)
days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company
until such time as all of the Registrable Securities have been sold
by the Holder. The holders of the Registrable Securities shall
exercise the “piggy-back” rights provided for herein by
giving written notice, within ten (10) days of the receipt of the
Company’s notice of its intention to file a registration
statement. Except as otherwise provided in this Warrant, there
shall be no limit on the number of times the Holder may request
registration under this
Section 5(d)
; provided,
however, that such registration rights shall terminate on the
seventh anniversary of the Effective Date in accordance with FINRA
Rule 5110(f)(2)(G)(v).
Section 6.
Miscellaneous
.
a)
No Rights as Stockholder
Until Exercise
. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i).
b)
Loss, Theft, Destruction
or Mutilation of Warrant
. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc
. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day
d)
Authorized
Shares
.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock
certificates to execute and issue the necessary Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may
be listed. The Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Jurisdiction
. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Underwriting Agreement.
f)
Restrictions
. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g)
Nonwaiver and
Expenses
. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of
this Warrant or the Underwriting Agreement, if the Company
willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the
Company shall pay to the Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to,
reasonable attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
h)
Notices
. Any
notice, request or other document required or permitted to be given
or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Underwriting
Agreement.
i)
Limitation of
Liability
. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
j)
Remedies
. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k)
Successors and
Assigns
. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
l)
Amendment
. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company and the
Holder.
m)
Severability
.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n)
Headings
. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN WITNESS WHEREOF
, the Company has
caused this Warrant to be executed by its officer thereunto duly
authorized as of the date first above indicated.
|
BRIDGELINE DIGITAL, INC.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
Title:
|
NOTICE OF EXERCISE
TO:
|
BRIDGELINE
DIGITAL, INC.
|
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(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
☐
in lawful money of the United States;
or
☐
if permitted the cancellation of such number of
Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to
the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please register and issue said Warrant Shares in the name of the
undersigned or in such other name as is specified
below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:
_______________________________
_______________________________
(4)
Accredited
Investor
. If the Warrant is being exercised via cash
exercise, the undersigned is an “accredited investor”
as defined in Regulation D promulgated under the Securities Act of
1933, as amended.
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing Entity
:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
_______________________________________________________________
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form and supply required information.
Do not
use this form to exercise the warrant.)
FOR
VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned
to
_______________________________________________
whose address is
_______________________________________________________________.
_______________________________________________________________
Dated:
______________, _______
Holder’s
Signature: ___________________________
Holder’s
Address: ____________________________
_____________________________
NOTE:
The signature to this Assignment Form must correspond with the name
as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever. Officers of corporations and
those acting in a fiduciary or other representative
capacity
should file proper evidence of authority to assign the foregoing
Warrant.