As filed with the Securities and Exchange Commission on December
23, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JANONE INC.
(Exact name of registrant as specified in its charter)
Nevada
|
|
5700
|
|
41-1454591
|
(State or other jurisdiction of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
325 E. Warm Springs Road, Suite 102
Las Vegas, Nevada 89119
(702) 997-5968
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive offices)
Tony Isaac
President and Chief Executive Officer
JanOne Inc.
325 E. Warm Springs Road, Suite 102
Las Vegas, Nevada 89119
(702) 997-5968
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
With Copy to:
Randolf W. Katz, Esq.
Clark Hill LLP
1055 West Seventh Street, Suite 2400
Los Angeles, California 90017
213-891-9100
Approximate date of commencement of proposed sale to the
public:
From time to time after this registration statement is
declared effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. ☐
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, other than securities offered only in
connection with dividend or interest reinvestment plans, 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, please
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 registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that shall
become effective upon filing with the Commission pursuant to Rule
462(e) under the Securities Act, check the following
box. ☐
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed to
register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the
following box. ☐
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
|
|
☐
|
|
Accelerated filer
|
|
☐
|
Non-accelerated filer
|
|
☒
|
|
Smaller reporting company
|
|
☒
|
|
|
|
|
Emerging growth company
|
|
☐
|
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 7(a)(2)(B) of Securities
Act. ☐
Calculation of Registration Fee:
|
|
|
|
|
Title of each class of securities to be registered(1)
|
Amount to be
registered(2)(3)
|
Proposed maximum
offering price per
security(2)(3)(4)(5)
|
Aggregate
maximum offering
price(2)(3)(4)(5)
|
Amount of
registration fee(6)
|
Common Stock, par value $0.001 per share
|
|
|
|
|
Preferred Stock, par value $0.001 per share
|
|
|
|
|
Debt Securities
|
|
|
|
|
Warrants
|
|
|
|
|
Rights
|
|
|
|
|
Units(7)
|
|
|
|
|
Total
|
|
|
$100,000,000
|
$ 10,910
|
(1)
|
Securities registered hereunder may be sold separately, together,
or as units with other securities registered hereunder.
|
(2)
|
The proposed maximum aggregate
offering price per class of security will be determined from time
to time by the registrant in connection with the issuance by the
registrant of the securities registered hereunder and is not
specified as to each class of securities pursuant to Form S-3
General Instruction II.D.
|
(3)
|
The registrant is registering an indeterminate aggregate principal
amount and number of securities of each identified class of
securities up to a proposed aggregate offering price of
$100,000,000, which may be offered from time to time in unspecified
numbers and at indeterminate prices, and as may be issuable upon
exercise of any securities registered hereunder, including under
any applicable anti-dilution provisions. In addition, pursuant to
Rule 416 under the Securities Act of 1933, as amended (the
“Securities Act”), the securities being registered hereunder
includes such indeterminate number of shares of common stock as may
be issuable with respect to the shares being registered hereunder
as a result of stock splits, stock dividends, or similar
transactions. In no event will the aggregate offering price of all
securities issued by the registrant from time to time pursuant to
this registration statement exceed $100,000,000, excluding accrued
interest, if any, on any debt securities issued under this
registration statement.
|
(4)
|
Pursuant to General Instruction II.D. of Form S-3, the table lists
each of the classes of securities being registered and the
aggregate proceeds to be raised, but does not specify by each class
information as to the amount to be registered, proposed maximum
offering price per unit, and proposed maximum aggregate offering
price.
|
(5)
|
Includes consideration to be received by us, if applicable, for
registered securities that are issuable upon exercise, conversion,
or exchange of other registered securities.
|
(6)
|
The proposed maximum aggregate
offering price has been estimated solely to calculate the
registration fee in accordance with Rule 457(o) under the
Securities Act. The Registrant previously
paid this amount in connection with the filing of the Registration
Statement on Form S-3 (File No. 333-248914), which has subsequently
been withdrawn, and under Rule 457(p) applies such amount to this
registration statement.
|
(7)
|
Each Unit consists of any combination of two or more of the
securities being registered hereby.
|
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 contained in this prospectus is not complete and
may be changed. We may not sell these securities until the
Registration Statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and is not a solicitation of an offer to buy these
securities in any jurisdiction where such offer or sale is not
permitted.
Preliminary Prospectus Subject to completion, Dated December 23,
2020

$100,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Rights
Units
We may offer and sell from time to time shares of our common stock,
par value $0.001 per share (our
“Common Stock”), shares of our preferred stock, par value $0.001 per share (our “Preferred
Stock”), debt securities, warrants, rights, and units that
include any of these securities. The Preferred Stock or warrants
may be convertible into or exercisable for shares of our Common
Stock or shares of our Preferred Stock or other of our securities
registered hereunder. The debt securities may be convertible into
or exchangeable for shares of our Common Stock or shares of our
Preferred Stock. Our Common Stock is listed on The Nasdaq Capital
Market and trades under the symbol “JAN.”
We may offer and sell these securities to or through one or more
underwriters, dealers, and agents, or directly to purchasers, on a
continuous or delayed basis.
The aggregate market value
of our outstanding Common Stock held by non-affiliates was
approximately $2,186,586, based on 1,829,982 shares of outstanding
Common Stock as of December 15, 2020, of which approximately
410,121 shares were held by affiliates, and based on the closing
sale price of our Common Stock of $4.62 on November 25, 2020.
Pursuant to General Instruction I.B.6 of Form S-3, in no
event will we sell securities pursuant to this prospectus with a
value of more than one-third of the aggregate market value of our
Common Stock held by non-affiliates in any 12-month period, so long
as the aggregate market value of our Common Stock held by
non-affiliates is less than $75,000,000. In the event that,
subsequent to the date of this prospectus, the aggregate market
value of our outstanding Common Stock held by non-affiliates equals
or exceeds $75,000,000, then the one-third limitation on sales
shall not apply to additional sales made pursuant to this
prospectus. During the prior 12 calendar months prior to, and
including, the date of this prospectus, we have not sold any
securities pursuant to General Instruction I.B.6 of
Form S-3.
This prospectus describes some of the general terms that may apply
to these securities and the general manner in which they may be
offered. The specific terms of any securities to be offered, and
the specific manner in which they may be offered, will be described
in a supplement to this prospectus. You should read this prospectus
and any applicable prospectus supplement carefully before you
invest.
See the “Risk Factors” section of this prospectus on page 4, our
filings with the SEC, and the applicable prospectus supplement for
certain risks that you should consider before investing in our
securities.
None of the Securities and Exchange Commission, any state
securities commission, or any other regulatory body has approved or
disapproved of these securities nor passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus
is ,
2020.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This document is called a prospectus and is part of a Registration
Statement on Form S-3 that we have filed with the Securities and
Exchange Commission (the “SEC”) using a “shelf” registration
process. Under this shelf registration process, we may, from time
to time, sell any combination of the securities described in this
prospectus in one or more offerings in amounts that we will
determine from time to time, up to a total dollar amount of
$100,000,000.
This prospectus provides you with a general description of the
securities we may offer. Each time we offer a type or series of
securities described in this prospectus we will provide a
prospectus supplement, incorporate information or document by
reference into this prospectus or a related free writing prospectus
or use other offering materials, as applicable, containing more
specific information about the terms of the securities that are
then being offered. We may also authorize one or more related free
writing prospectuses to be provided to you that may contain
material information relating to these offerings and securities.
This prospectus, together with applicable prospectus supplements,
any information or document incorporated by reference, and any
related free writing prospectus or other offering materials, as
applicable, we file with the SEC, includes all material information
relating to these offerings and securities. We may also add,
update, or change in the prospectus supplement any of the
information contained in this prospectus or in the documents that
we incorporate by reference into this prospectus, including,
without limitation, a discussion of any risk factors or other
special considerations that apply to these offerings or securities
or the specific plan of distribution. If there is any inconsistency
between the information in this prospectus and a prospectus
supplement or information or document incorporated by reference
having a later date, you should rely on the information in that
prospectus supplement or incorporated information having a later
date. We urge you to read carefully this prospectus, any applicable
prospectus supplement, and any related free writing prospectus or
other offering materials, as applicable, together with the
information incorporated herein by reference as described under the
heading “Incorporation of Certain Information by Reference,” before
buying any of the securities being offered.
You should rely only on the information we have provided in, or
incorporated by reference into, this prospectus, any applicable
prospectus supplement, and any related free writing prospectus or
other offering materials, as applicable. We have not authorized
anyone to provide you with different information. No dealer,
salesperson, or other person is authorized to give any information
or to represent anything not contained in this prospectus, any
applicable prospectus supplement, any related free writing
prospectus, or other offering materials, as applicable.
Neither the delivery of this prospectus nor any sale made under it
implies that there has not been any change in our business or
affairs or that the information in this prospectus is correct as of
any date after the date of this prospectus. You should assume that
the information in this prospectus, any applicable prospectus
supplement, any related free writing prospectus, or other offering
materials, as applicable, is accurate only as of the date on the
front of the document and that any information we have incorporated
by reference is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of
this prospectus, any applicable prospectus supplement, any related
free writing prospectus, or other offering materials, as
applicable, or any sale of a security.
The Registration Statement containing this prospectus, including
exhibits to the Registration Statement, provides additional
information about us and the securities offered under this
prospectus and any prospectus supplement. We have filed and plan to
continue to file other documents with the SEC that contain
information about us and our business. Also, we will file legal
documents that control the terms of the securities offered by this
prospectus as exhibits to the reports that we file with the SEC.
The Registration Statement and other reports can be read at the SEC
Internet site or at the SEC offices mentioned under the heading
“Available Information.”
This prospectus contains summaries of certain provisions contained
in some of the documents described herein; but, reference is made
to the actual documents for complete information. All of the
summaries are qualified in their entirety by the actual documents.
Copies of some of the documents referred to herein have been filed,
will be filed, or will be incorporated by reference as exhibits to
the Registration Statement of which this prospectus is a part, and
you may obtain copies of those documents as described below under
“Available Information.”
1
AVAILABLE
INFORMATION
We have filed with the SEC a Registration Statement on
Form S-3 under the Securities Act with respect to the
securities covered by this prospectus. This prospectus, which is a
part of that Registration Statement, does not contain all of the
information set forth in the Registration Statement or the exhibits
and schedules filed therewith. For further information with respect
to us and the securities covered by this prospectus, please see the
Registration Statement and the exhibits filed with the Registration
Statement. A copy of the Registration Statement and the exhibits
filed with the Registration Statement may be inspected without
charge at the Public Reference Room maintained by the SEC, located
at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for more information about the operation of
the Public Reference Room. The SEC also maintains an Internet
website that contains reports, proxy and information statements,
and other information regarding registrants that file
electronically with the SEC. The address of the website is
http://www.sec.gov.
We are subject to the information and periodic reporting
requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and, in accordance therewith, we file
periodic reports, proxy statements, and other information with the
SEC. Such periodic reports, proxy statements, and other information
are available for inspection and copying at the Public Reference
Room and website of the SEC referred to above. We maintain a
website at http://www.janone.com. You may access our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and amendments to those reports filed pursuant to
Sections 13(a) or 15(d) of the Exchange Act with the SEC free
of charge at our website as soon as reasonably practicable after
such material is electronically filed with, or furnished to, the
SEC. Our website and the information contained on that site, or
connected to that site, are not incorporated into and are not a
part of this prospectus.
2
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC’s rules allow us to incorporate by reference information
into this prospectus. This means that we can disclose important
information to you by referring you to another document. Any
information referred to in this way is considered part of this
prospectus from the date we file that document. Any reports filed
by us with the SEC after the date of this prospectus and before the
date that the offering of the securities by means of this
prospectus is terminated will automatically update and, where
applicable, supersede any information contained in this prospectus
or incorporated by reference in this prospectus.
We incorporate by reference into this prospectus the following
documents or information filed with the SEC (other than, in each
case, documents or information deemed to have been furnished and
not filed in accordance with SEC rules):
•
|
Our Annual Report on
Form 10-K for the year ended December 28, 2019, filed with the SEC
on
April 6,
2020;
|
•
|
Our Quarterly Reports
on Form 10-Q for the quarters ended March 28, 2020, filed with the
SEC on
May 12,
2020,
June 27, 2020, filed with the SEC on
August
10, 2020, and
September 26,
2020,
filed with the SEC on
November
10, 2020;
|
•
|
Our Current Reports on
Form 8-K, filed with the SEC on
January
10, 2020,
April
22, 2020
(as amended on April 23, 2020),
May
4, 2020,
June
18, 2020,
June
25, 2020,
June
30, 2020,
July
8, 2020,
July
21, 2020,
July
30, 2020,
August
6, 2020,
August
12, 2020,
September
3, 2020,
September
16, 2020,
September
24, 2020,
and
October
2, 2020
(excluding any information furnished pursuant to Item 2.02 or Item
7.01 of such Current Reports on Form 8-K); and
|
•
|
The description of our
Common Stock contained filed as Exhibit 4.1 to our Annual Report on
Form 10-K for the year ended December 28, 2019, filed with the SEC
on
April 6,
2020.
|
Additionally, all documents filed by us with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act, after (i) the
date of the initial Registration Statement and prior to
effectiveness of the Registration Statement and (ii) the date
of this prospectus and before the termination or completion of this
offering, shall be deemed to be incorporated by reference into this
prospectus from the respective dates of filing of such documents,
except that we do not incorporate any document or portion of a
document that is “furnished” to the SEC, but not deemed “filed.”
Any information that we subsequently file with the SEC that is
incorporated by reference as described above will automatically
update and supersede any previous information that is part of this
prospectus.
We will provide without charge to each person, including any
beneficial owner, to whom this prospectus is delivered, upon his or
her written or oral request, a copy of any or all documents
referred to above that have been or may be incorporated by
reference into this prospectus, excluding exhibits to those
documents unless they are specifically incorporated by reference
into those documents. Written or telephone requests should be
directed to JanOne Inc., 325 E. Warm Springs Road, Suite 102, Las
Vegas, Nevada 89119, Attention: Corporate Secretary; telephone:
(702) 997-5968.
3
FORWARD-LOOKING
STATEMENTS
This prospectus, including the documents we incorporate by
reference into it, contains forward-looking statements within the
meaning of Section 27A of the Securities Act, and
Section 21E of the Exchange Act, the Private Securities
Litigation Reform Act of 1995 (the “PSLRA”) or in releases made by
the SEC. Such statements include, without limitation, statements
regarding our expectations, hopes, or intentions regarding the
future. Statements that are not historical fact are forward-looking
statements. These forward looking statements can often be
identified by their use of words such as “expect,” “believe,”
“anticipate,” “outlook,” “could,” “target,” “project,” “intend,”
“plan,” “seek,” “estimate,” “should,” “will,” “may,” and “assume,”
as well as variations of such words and similar expressions
referring to the future. These cautionary statements are being made
pursuant to the Securities Act, the Exchange Act, and the PSLRA
with the intention of obtaining the benefits of the “safe harbor”
provisions of such laws.
The forward-looking
statements contained in or incorporated by reference into this
prospectus are largely based on our expectations, which reflect
estimates and assumptions made by our management. These estimates
and assumptions reflect our best judgment based on currently known
market conditions and other factors. Although we believe such
estimates and assumptions to be reasonable, they are inherently
uncertain and involve certain
risks and uncertainties, many of which are beyond our control. If
any of those risks and uncertainties materialize, actual results
could differ materially from those discussed in any such
forward-looking statement. Among the factors that could cause
actual results to differ materially from those discussed in
forward-looking statements are those discussed under the heading
“Risk Factors” below, those discussed under the heading “Risk
Factors” and in other sections of our Annual Report on Form 10-K
for the year ended December 28, 2019, as well as in our other
reports filed from time to time with the SEC that are incorporated
by reference into this prospectus. See “Available Information” and
“Incorporation of Certain Information by Reference” for information
about how to obtain copies of those documents.
All readers are cautioned
that the forward-looking statements contained in this prospectus
and in the documents incorporated by reference into this prospectus
are not guarantees of future performance, and we cannot assure any
reader that such statements will be realized or that the
forward-looking events and circumstances will occur. Actual results
may differ materially from those anticipated or implied in the
forward-looking statements. All
forward-looking statements in this prospectus and the documents
incorporated by reference into it are made only as of the date of
the document in which they are contained, based on information
available to us as of the date of that document, and we caution you
not to place undue reliance on forward-looking statements in light
of the risks and uncertainties associated with them. Except as
required by law, we undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
RISK FACTORS
Investing in our securities involves significant risks. You should
review carefully the risks and uncertainties described under the
heading “Risk Factors” contained in, or incorporated into, the
applicable prospectus supplement, any related free writing
prospectus, or other offering materials, as applicable, and under
similar headings in the other documents that are incorporated by
reference herein or therein. Each of the referenced risks and
uncertainties could adversely affect our business, operating
results, and financial condition, as well as adversely affect the
value of an investment in our securities. When we offer and sell
any securities pursuant to a prospectus supplement, we may include
additional risk factors relevant to such securities in the
prospectus supplement.
4
BUSINESS
General
As of September 10, 2019, JanOne Inc. (formerly known as Appliance
Recycling Centers of America, Inc.) and subsidiaries
(collectively, “we,” the “Company,” or “JanOne”) broadened its
business perspectives to being a pharmaceutical company focused on
finding treatments for conditions that cause severe pain and
bringing to market drugs with non-addictive pain-relieving
properties. The Company aims to reduce prescriptions for dangerous
opioid drugs by treating underlying diseases that cause severe
pain. Our first drug candidate is a treatment for Peripheral
Arterial Disease (“PAD”), a condition that can cause severe pain
and affects over 8.5 million people in the U.S.
alone. In addition, we continue to operate our legacy
businesses, ARCA Recycling, Inc. (“ARCA Recycling”), in our
Recycling segment, and GeoTraq Inc. (“GeoTraq”), in our Technology
segment. ARCA Recycling recycles major household
appliances in North America by providing turnkey appliance
recycling and replacement services for utilities and other sponsors
of energy efficiency programs. GeoTraq is engaged in the
development, design, and, ultimately, we expect, the sale of
cellular transceiver modules and associated wireless services.
On September 10, 2019, the Company
changed its name from Appliance Recycling Centers of America, Inc.
to JanOne Inc. and announced that it intended to broaden its
business perspectives to include developing new and highly
innovative solutions for ending the opioid epidemic. From digital
technologies to educational advocacy to revolutionary painkilling
drugs that address a multibillion dollar a year market, the Company
intends to champion new initiatives to combat the opioid crisis,
which claims tens of thousands of lives each year. The
new name, JanOne, was strategically chosen to express the start of
a “new day” in the fight against the opioid epidemic. January First
is the first day of a New Year—a day of optimism, resolution, and
hope. JanOne affirms the Company’s new strategic commitment to
fresh thinking and innovative means to assist in ending the worst
drug crisis in our nation’s history. The Company also
adopted a new Nasdaq ticker symbol, NASDAQ: JAN, a new CUSIP
number, 03814F403, and a new website address –
www.janone.com. The information contained
in or accessible from our website is not incorporated into this
prospectus, and you should not consider it part of this prospectus.
We have included our website address in this prospectus solely as
an inactive textual reference.
On December 28, 2019, we had 208
employees, of which 199 were full-time employees.
We were incorporated in Minnesota in 1983, although, through our
predecessors, we began operating our legacy recycling business in
1976. On March 12, 2018, we reincorporated in the State
of Nevada. Our principal office is located at 325 E. Warm Springs
Road, Suite 102, Las Vegas, Nevada 89119.
Biotechnology
Overview
We are a clinical-stage biopharmaceutical company focused on
becoming the leader in identifying, acquiring, licensing,
developing, partnering and commercializing
novel, non-opioid and non-addictive therapies
to address the large unmet medical need for the treatment of
pain. Our initial product candidate, JAN101 (formerly
known as TV1001SR) is a potential treatment for Periphery Artery
Disease (“PAD”), a vascular disease that affects more than 60
million people worldwide. We are also researching the potential
impact our compound JAN101 could have in patients with COVID-19 as
many doctors around the world and our company believes COVID-19 is
a respiratory disease that directly affects the vascular
system. We expect to commence
Phase 2b clinical trials for the treatment of PAD in early
2021. It is expected that the investigational new drug
application (“IND”) for JAN101 as a COVID-19 vascular complication
treatment will be submitted to the U.S. Food and Drug
Administration (the “FDA”) in the coming weeks.
5
JAN101
Generally
JAN101, formerly known as TV1001SR and/or TV1001, our advanced
product candidate, is a patented oral, sustained release
pharmaceutical composition of sodium nitrite and targets poor blood
flow to the extremities, such as those with vascular complications
of diabetes or PAD and treats pain. A conclusion from a round of
human studies found JAN101 sustained release sodium nitrite
prevents the prevalent reports of headaches by patients treated
with an immediate release formulation of sodium nitrite. In a
previous study of patients with PAD, 40 mg BID treatment with
immediate release sodium nitrite led to a statistically significant
reduction in reported pain while a 80 mg BID treatment had the more
pronounced effect on bioactivity and Flow Mediated Dilation, a
measure of vascular function. However, a number of
subjects on both treatment groups reported headaches and dizziness
following treatment. Although this did not result in
subjects discontinuing treatment, JAN101 was developed to overcome
this side effect. JAN101 was tested in a bridging study
of diabetic neuropathy subjects and during that bridging study, the
subjects did not report headaches or dizziness. Subjects
in this bridge study also reported less pain following treatment
and improvements in bioactivity (quantitative sensory testing, a
measure of nerve function) were similar to the PAD study, where the
80 mg dose group had the greatest improvement in Flow Mediated
Dilation. The ability to alleviate pain with BID treatment of
JAN101 offers promise for a new non-addictive, non-sedating
treatment of chronic pain.
Clinical studies in humans JAN101 Attributes
|
•
|
Well established safety
profile
|
|
•
|
Excellent
bioavailability
|
|
•
|
Lack of induced
tolerance
|
JAN1010 does not mask pain, but instead treats the cause of pain by
improving tissue and vascular dysfunction.
Benefits of Sodium Nitrite on Vascular Health
In initial research
studies, sodium nitrite effectively restored ischemic tissue blood
flow and was effective in a wide range of pathologies involving
alterations of angiogenesis - development of new blood vessels -
including diabetes, wound healing and tissue necrosis. Beneficial
effects included enhancing angiogenesis, endothelial cell
proliferation, and arteriogenesis. There is also a
strong association between reduced circulating nitrite levels and
cardiovascular diseases in humans. We describe some of
the associations and beneficial effects of sodium nitrite/nitrite
below.
Plasma nitrite levels are negatively correlated to cardiovascular
disease

6
Plasma nitrite levels were inversely related to number of
cardiovascular risk factors a subject had and decreased plasma
nitrite was associated with decreased flow mediated vasodilation
(FMD) and increased intimal medial thickness (IMT) (both indicators
of vascular pathology). -Kleinbongard, et al. (2006) Free Radic
Biol and Medicine 40:295-302
Plasma nitrite levels are reduced in diabetic and PAD
patients

Exercise is a well-known stimulator of endothelial nitric oxide
synthase activity, NO production that leads to increased
plasma nitrite. In the study by Allen et al, these authors revealed
that baseline plasma levels of nitrite were less in patients with
diabetes mellitus (DM) or DM + PAD. Importantly, increases in
plasma nitrite levels were not observed in either DM, PAD or DM +
PAD patients after supervised exercise. These data reveal that
baseline nitrite availability is compromised in DM patients and
that supervised exercise is unable to increase plasma nitrite
levels but actually results in a decrease in nitrite highlighting a
physiological efficiency of this molecule. -Allen et al Nitric
Oxide 2009 20:231-237
Skeletal Muscle Nitrite and Metabolite Levels are Reduced in
Critical Limb Ischemia Patients

7
Skeletal muscle nitrite, nitrosothiol, nitric oxide-heme and cGMP
are all significantly reduced in CLI patients. Diabetic patients
with CLI show even further nitrite reductions.
In summary, nitrite levels in various cardiovascular and vascular
diseases appear to be inversely related to the severity of the
disease in humans:
|
•
|
Lower nitrite levels
are associated with higher level of heart failure;
|
|
•
|
Lower nitrite levels
are observed in diabetic patients with PAD and are not compensated
by exercise; and
|
|
•
|
Nitrite levels are
lower in the muscles of patients with critical limb ischemia and
are further reduced in diabetic subjects with critical limb
ischemia.
|
Given the association between low levels of circulating nitrite and
human diseases, supplementation with sodium nitrite has been
studied preclinically in animals. Below are summaries
of some of the more important findings:
|
•
|
Stimulates wound
healing
|
|
•
|
Prevents tissue
necrosis
|
8
From Arya et al
Nitrite Therapy Selectively Increases Ischemic Tissue Vascular
Density in a NO-dependent Manner

Chronic sodium nitrite therapy increases ischemic tissue vascular
density in a NO-dependent manner. A and B show representative
images of CD31 (red) and DAPI nuclear (blue) staining from sodium
nitrite and sodium nitrate ischemic gastrocnemius muscle tissue at
day 7. C and D report the vascular density of ischemic
gastrocnemius muscle tissue at days 3 and 7 for 165 μg/kg sodium
nitrite and nitrate treatments, respectively. E and F demonstrate
the vascular density of ischemic gastrocnemius muscle tissue at
days 3 and 7 from 165 μg/kg sodium nitrite plus carboxy PTIO.
(Scale bar, 150 μm.) n = 10 mice per treatment group. Kumar D. et
al. PNAS; 2008; 105:7540-7545.
9
Nitrite Therapy Augments Arterial Perfusion of Ischemic Tissue

Chronic sodium nitrite therapy acutely increases ischemic tissue
blood flow and stimulates arteriogenesis. A and B report 165 μg/kg
sodium nitrite-induced acute changes in blood flow of chronically
ischemic tissues at various time points with or without cPTIO,
respectively. C reports the number of arterial branches between PBS
and nitrite therapies. D and E illustrate vascular casting of the
arterial vasculature in ischemic hind limbs of day 7 nitrite or
PBS-treated mice, respectively. *, P < 0.01 vs. sodium nitrate.
n = 10 mice per treatment group. Kumar D. et.al. PNAS;2008;
105:7540-7545
10
Nitrite Therapy Restores Diabetic Ischemic Hind-Limb Blood Flow and
Promotes Wound Heal

Unilateral femoral artery ligation was performed on 18-20 week old
male Db/Db mice. Mice were randomized to PBS or sodium nitrite (165
μg/kg) therapy twice daily via I.P. injection. Laser doppler
flowmetry was performed at the indicated time points. Increased
wound dehiscence was noted in the PBS treated animals at day 7 but
not in nitrite treated animals. (Bir et al Diabetes 2014,
63(1):270-81)
Nitrite Therapy Increases Diabetic Ischemia Induced
Angiogenesis

11
Nitrite therapy prevented ischemia mediated endothelial cell
density loss in normal C57BL/6J ischemic limbs. Nitrite therapy
significantly restored endothelial cell density in ischemic limbs
of diabetic mice to normal C57BL/6J levels compared to PBS therapy
of non-ischemic and ischemic conditions. These data suggest that
nitrite therapy may be useful in attenuating microvascular
rarefaction due to loss of nitric oxide that is observed during
metabolic dysfunction (Frisbee JC AJP Integr Comp Physiol 2005
289(2):R307-16; Stepp et al Microcirculation 2007 14(4-5):
311-6)
Delayed Nitrite Therapy Restores Ischemic Hind-Limb Blood Flow

Studies were performed to determine whether nitrite mediated
therapy would be effective in tissue that had been left ischemic
for 5 days after femoral artery ligation. Femoral artery ligation
was performed in C57BL/6J mice and the animals randomized to either
PBS or sodium nitrite therapy 5 days after artery ligation.
Treatments were given b.i.d. via I.P. injection. Ischemic limb
blood flow was measured using laser doppler flowmetry. (Bir et al
Diabetes 2014, 63(1):270-81)
12
Delayed nitrite therapy increases SPY angiogram arteriogenesis

Delayed nitrite therapy increases SPY angiogram arteriogenesis.
Representative temporal SPY angiogram image stills (3–6s) are shown
at 11 days following ligation and 6 days after beginning therapy
(either
PBS or sodium nitrite). Left: PBS control angiogram.
Right: sodium nitrite
angiogram following injection of ICG. n = 5 animals per cohort. Circles
identify limb anatomical regions of vascular blush, whereas arrows
indicate perfused vessels that progressively occur over time.
Bir S C et al. Am J Physiol Heart Circ Physiol
2012;303:H178-H188
13
Nitrite Therapy Prevents Tissue Necrosis in Aged Db/Db Mice

Delayed sodium nitrite (165 ug/kg) or control PBS therapy was
stated 5 days post femoral artery ligation in 9 month old Db/Db
mice. Nitrite therapy significantly prevented tissue necrosis
(panel B) compared to control PBS therapy (panel A). Panel D
reports tissue necrosis severity as a function of degree of limb
and digit involvement. Nitrite therapy but not PBS control or
sodium nitrate significantly prevented tissue necrosis. (Bir et al
Diabetes 2014, 63(1):270-81)
Nitrite and Hind Limb Ischemia Summary
Sodium nitrite has long been known to be a potent vasodilator
(transiently increasing blood vessel diameter) that can lead to a
drop in blood pressure when given acutely. The above
studies indicate that chronic administration at low doses, promotes
angiogenesis, unlike single one-time nitrite therapy which does not
stimulate angiogenesis. In addition, these studies and a large
number of other studies not reviewed above, show:
|
•
|
Nitrite therapy is very
specific, acting only in damaged, ischemic tissue;
|
|
•
|
Delayed nitrite therapy
effectively restores ischemic tissue blood flow;
|
|
•
|
Nitrite therapy is
effective in a wide range of pathologies involving alterations of
angiogenesis including critical limb ischemia, heart failure, and
tissue necrosis;
|
|
•
|
Nitrite supplementation
has had positive effects in various diabetes models, including
diabetic nephropathy and diabetic wound healing;
|
|
•
|
Beneficial effects
center on enhancing angiogenesis, endothelial cell proliferation,
and arteriogenesis; and
|
|
•
|
Sustained release
nitrite therapy, unlike immediate release therapy, does not lead to
vasodilation or a drop in blood pressure.
|
14
Our Product Candidate JAN101
Our product candidate is designed to treat diseases associated with
poor vascular function. The following table summarizes our current
product candidate pipeline:

Therapeutic Area Peripheral Artery Disease Pain COVID-19 Drug
JAN101 Pre-IND Phase 1 Phase 2a Phase 2b Phase 3
The Company intends to file an Investigational IND with the FDA for
COVID-19 in the coming weeks and a protocol amendment to carry out
a large Phase 2 trial in Peripheral Artery Disease patients early
next year.
Pain
Pain is a protective reaction that alerts the body to the presence
of actual or potential tissue damage so that necessary corrective
responses can be mounted. The National Institutes of Health (the
“NIH”) defines chronic pain as pain that persists beyond the normal
healing time of an injury or that persists longer than three
months. It is estimated that chronic pain affects 100 million
individuals in the US and over 1.5 billion people worldwide, thus
more people suffer from chronic pain than diabetes, heart disease
and cancer combined (Cowen Therapeutic Categories Outlook March
2019). Chronic pain exacts a tremendous cost
in terms of direct treatment and rehabilitation expenditures, lost
worker productivity, prevalent addiction to opioid-based drugs, and
emotional and financial burden for patients and their families.
According to an Institute of Medicine of the National Academies
report, pain is a significant public health problem in the United
States that costs society between $560 and $635 billion
annually. Despite the magnitude of the pain problem, innovation in
the development of therapeutic solutions has been largely absent.
Since 2010, there have been 20 approvals by the FDA for the
treatment of pain, of which 12 were opioid variants, one was an
extended release generic corticosteroid, five were variants of
aspirin, and two were variants of other existing drugs. We are
developing a novel product candidate designed to overcome the
limitations of current treatment options for patients with PAD who
suffer from chronic pain. According to a research study by Stanford
University more than 24% of patients with PAD are at risk of high
opioid use. By treating pain at the source and present patients and
physicians with better and safer treatment alternatives we expect
to minimize opioids at the prescription pad. Given the
properties of JAN101, we have made the strategic decision to
initially focus on pain associated with PAD by treating the
underlying cause of PAD.
Peripheral artery disease
Peripheral artery disease is a general term for conditions in which
arterial blood flow to the limbs are partially blocked. When there
is less blood present in the extremities relative to demand, muscle
pain and fatigue result, especially in the calf, which is also
known as intermittent claudication. In many patients,
pain and fatigue are relieved through rest. Roughly half of
patients with PAD are asymptomatic. The most common cause of PAD /
intermittent claudication is atherosclerosis. Diabetes, chronic
kidney disease, hypertension, and smoking are all risk factors
which can increase the likelihood of PAD. In atherosclerosis, fat
deposits (plaques) build up along arterial walls, resulting in a
reduction in blood flow in the legs. This same process can cause
strokes if the arteries leading up to the brain are affected.
15
Because of the high rate of asymptomatic patients, prevalence
figures vary widely. Some estimate that up to 200 million worldwide
have PAD, ranging from asymptomatic disease to severe. Prevalence
increases as a function of patient age, rising sharply after the
age of 60. Thus, in countries with an aging population, it is
expected that the prevalence of PAD will only
increase. There is also a strong ethnic and racial
component to PAD prevalence, which may be due to cultural
differences in diet and exercise, along with genetic differences.
Some suggest a prevalence of 8-12 million in the US alone, with
roughly a third experiencing pain when walking, which improves upon
resting. The diagnosis of PAD usually begins with patient
complaints of pain in the extremities. If the patient is already
being treated or monitored for diabetes or other risk factors, then
the physician will check for a weak or absent pulse in the
extremity. Decreased blood pressure, poor wound healing, and
whooshing sounds in the legs (via stethoscope) are also tell-tale
signs of PAD / intermittent claudication. Angiograms,
electrocardiograms, and ultrasounds can also be used to image and
confirm the diagnosis.

The non-drug treatment of PAD / intermittent claudication may be
divided into four general categories:
|
•
|
Lifestyle
– Primarily changes in
diet and smoking cessation.
|
|
•
|
Exercise
– Patients who walk,
cycle, stretch, or swim can experience marked improvement. Formal
programs involving treadmills and track walking (usually 3-5 times
per week) are frequently provided to patients. However, if the pain
is triggered by exercise (claudication) and is significant, it can
discourage the patient from exercise.
|
|
•
|
Angioplasty
– A procedure by which
the affected artery is stretched with a balloon-like device. This
procedure has limited effectiveness and is reserved for severely
blocked arteries.
|
|
•
|
Bypass
Surgery –
Arteries which are beyond angioplasty can be bypassed entirely.
This procedure is typically reserved for cases where the blockage
is considered very long (~10 centimeters) and nearly
complete.
|
The underlying condition, however, is not addressed by surgery.
Surgical approaches will not, in the long run, improve exercise
capacity and walking distance. Only exercise itself, coupled with
lifestyle changes and drug approaches, has this benefit.
16
Prescription drugs for the treatment of the underlying PAD may be
divided into multiple categories, depending on the underlying
condition and severity:
|
•
|
Cholesterol-Lowering
Agents - Statins
and bile acid sequestrants.
|
|
•
|
Antiplatelet
Medica1ons –
Aspirin and related drugs, such as clopidogrel. Cilostazol also has
antiplatelet properties.
|
|
•
|
Antihypertensives
– Patients with
underlying high blood pressure can and will receive any number of
medications to reduce blood pressure, such as ACE inhibitors and
diuretics.
|
|
•
|
Diabetes
Therapies –
While a substantial portion of PAD patients may have pre-diabetes
or fulminant diabetes, it is unknown of aggressive treatment of
diabetes has a positive effect on PAD.
|
|
•
|
Pain
– To our knowledge, no
drugs are specifically indicated for PAD-associated pain.
Pentoxifylline, for example, is indicated “…for the treatment of
patients with intermittent claudication on the basis of chronic
occlusive arterial disease of the limbs.” (Sanofi-Aventis U.S. LLC,
2010) However, the evidence supporting the effectiveness of
pentoxifylline is mixed. Short-term courses of NSAIDs, such as
ibuprofen may be used, provided the patient is not on another
anticoagulant like aspirin. Non-drug pain relievers, such as TENS
and massage, may also be used in these patients. Opioids may also
be used which creates a risk for addiction and potential misuse at
the medicine cabinet by family members.
|

The lack of any truly effective treatment of PAD, along with
encouraging early trial results using JAN101 on both improving
vascular function and reducing pain in PAD patients, has created an
opportunity to potentially treat this large unmet medical
need. By improving vascular function, JAN101 has the
potential to reduce associated pain and improve PAD patients’
quality of life.
17
COVID-19
Coronavirus disease (COVID-19) is an infectious disease caused by a
newly discovered coronavirus.
Most people infected with the COVID-19 virus will experience mild
to moderate respiratory illness and recover without requiring
special treatment. Older people, and those with underlying
medical problems like cardiovascular disease, diabetes, chronic
respiratory disease, and cancer are more likely to develop serious
illness. The COVID-19 virus spreads primarily through
droplets of saliva or discharge from the nose when an infected
person coughs or sneezes. At the time of filing this Form 10-K,
there are no specific vaccines or treatments for COVID-19. However,
there are many ongoing clinical trials evaluating potential
treatments and vaccines.
One of the hallmarks of severe cases of COVID-19 is acute
respiratory distress syndrome (“ARDS”), a rapid, widespread
inflammation of the lungs that can lead to respiratory failure and
death. In
addition to the widely reported lung injuries associated with
COVID-19, clinicians around the world are reporting that the
disease also could be causing cardiac injuries in patients that
sometimes lead to cardiac arrest. Kidney damage also is becoming a
commonly reported issue among COVID-19 patients.
Alan Kliger, a nephrologist at the Yale School of Medicine,
found early data showed 14% to 30% of ICU COVID-19
patients in New York and Wuhan, China, lost kidney function and
later required dialysis. Similarly, a study published in the
journal Kidney
International found that nine of 26 people who died of
COVID-19 in Wuhan had acute kidney injuries, and seven had units of
the new coronavirus in their kidneys.
A study in May, 28 2020 in the New England Journal published
research detailing the post-mortem features of seven patients who
died of COVID-19 provides critical insights, including evidence of
extensive damage to the lining of the blood vessels, abnormal blood
vessel growth in the lungs and widespread blood clotting. The study
led by Steven Mentzer, HMS professor of surgery at Brigham and
Women’s Hospital, and done in collaboration with a team of
international researchers tissue analysis showed that infection
with SARS-CoV-2, the virus that causes COVID-19, caused severe
damage to the endothelial cells that line blood vessels and
triggered widespread blood clotting. The team also
identified signs of a distinctive pattern of vascular disease
progression in some cases of COVID-19 compared with patterns seen
in equally severe influenza virus infection. The findings highlight
these key takeaways:
|
•
|
While caused by a
respiratory virus, COVID-19 manifests as a vascular disease that
leads to severe injuries to blood vessels throughout the lungs. The
damage to vascular cells may help explain why serious blood
clotting has been observed in many patients.
|
|
•
|
The substantial new
blood vessel growth seen in the lungs of COVID-19 patients occurs
primarily through a mechanism known as intussusceptive
angiogenesis—the splitting of existing blood vessels to form new
ones—perhaps as a repair response to blood clotting and blood
vessel damage, according to the authors.
|
Damaged blood vessels may also underlie other problems, such as
COVID toe, multisystem inflammatory syndrome in children (MIS-C),
stroke and other seemingly unrelated problems seen with
COVID-19.
Our Team
Tony Giordano PhD, our Chief Scientific Officer, joined the company
in December 2019. Dr. Giordano joined JanOne from the Cleveland
Clinic, the No.2 rated hospital in the country, where he served as
Senior Director of Special Projects in the Business Development
group. Dr. Giordano has extensive experience in commercialization
and drug development, having served as Vice President or President
of seven different biotechnology companies he co-founded, including
companies developing platform technologies, a cancer vaccine, and
Alzheimer’s Disease and cardiovascular therapies. He has
managed numerous clinical trials and the launch of a medical food
product. Dr. Giordano has also served as an Associate
Professor and Assistant Dean of Research and Business Development
at LSU Health Sciences Center in Shreveport, where he led the
licensing efforts at the campus and at Abbott Labs, where in
addition to serving as a Senior Research Scientist, he was involved
in technology assessment activities. Dr. Giordano has a PhD
focused in Molecular Genetics from Ohio State University and
completed Fellowships at the NCI and NIA.
18
Dr. Amol Soin, our Chief Medical Officer, joined the Company in
January 2020. Dr. Soin is considered one of the nation's
top pain experts and is the Founder and Chairman of the Ohio Pain
Clinic. Dr. Soin brings significant expertise for treating
neuropathic and chronic pain and extensive research experience for
non-opioid, nonaddictive pain solutions to the JanOne management
team. In his role as Chief Medical Officer, Dr. Soin will guide
JanOne's drug development activities, manage clinical research, set
patient safety standards, and ensure regulatory compliance. In
addition, Dr. Soin will play an integral role in establishing
partnerships and drug candidate selection as the company expands
its pipeline. Dr. Soin received his undergraduate degree
from University of Akron, his MBA from University of
Tennessee, his MD from Northeastern Ohio Universities College of
Medicine, his master's in science from Brown
University and also has studied at Dartmouth College. He
is board certified in anesthesiology and pain medicine and a fellow
of interventional pain management at the World Institute of Pain,
and he served as a pain management fellow at the Cleveland Clinic,
the oldest and largest academic pain management department
in the United States. The founder and chairman of the Ohio
Pain Clinic, Dr. Soin has also held several prestigious positions
including President of the Ohio Society of Interventional Pain
Physicians, president of the American Society of Interventional
Pain Physicians Foundation, President of the Society of
Interventional Pain Management Surgery Centers and president –
elect of TriState Pain Society. He was appointed by Governor Kasich
to the Ohio Medical Board in 2012 to two 5 year terms and has
served as the Ohio Medical Board's president where he was
instrumental in passing statewide rules and guidelines to help the
opioid crisis.
In November 2019, we formed a Scientific Board of Advisors (the
“SBA”) and the following doctors and scientist currently sit on the
SBA:
Chris Kevil, Ph.D., Chair of the Scientific Advisory Board
-- Dr. Kevil, an internationally
known expert in vascular pathophysiology, PAD, and nitric oxide
biology, discovered the role of sodium nitrite in promoting
angiogenesis that led to the development of TV1001 now known as
Jan101. Dr. Kevil earned his Ph.D. degree from LSU Health
Shreveport in Molecular and Cellular Physiology followed by a
fellowship at the University of Alabama at Birmingham (UAB) with an
emphasis on redox pathophysiology. Returning to LSU Health
Shreveport in the Department of Pathology, he established cutting
edge research programs regarding redox biology regulation of
peripheral vascular diseases. This led to ground-breaking insights
on how glutathione, nitrite/nitric oxide, and hydrogen sulfide
regulate vascular health during ischemia.
Edgar Ross, MD -- Dr. Ross is the
current Director of the Pain Management Center at Brigham and
Women's Hospital and a professor of anesthesia at Harvard Medical
School. Dr. Ross is recognized as Castle Connolly's America's top
doctors for the fifth year in a row. In addition to serving as
chairman of Pfizer's partnership on pain, Dr. Ross also has served
as a member of the Blue Cross and Blue Shield Opioid Prescribing
Policy Committee.
Rakesh Patel, Ph.D. -- Dr. Patel
is currently Vice Chair for Research, Department of Pathology, and
Director of the Center for Free Radical Biology at the University
of Alabama at Birmingham (UAB). Most noted is his research to
understand the molecular basis of nitric oxide, and nitrite
interactions with organs and red blood cells. Patel is also known
for his work to understand the impacts on the biological process
associated with blood flow regulation and pulmonary
function.
Timothy Ness, MD, Ph.D. -- Dr.
Ness is Professor Emeritus and former Pain Treatment Division
Chief, Director of Pain Research and Vice Chair for Clinical
Research in the Department of Anesthesiology and Perioperative
Medicine at the University of Alabama at Birmingham (UAB) He has
served as a clinical research expert on pain for the National
Institutes of Health (NIH), Food and Drug Administration (FDA)
advisory panels, the Veterans Administration (VA), and various
international research institutes. He has served on the American
Pain Society and the American Society of Regional Anesthesia and
Pain Medicine Board of Directors. He is currently funded by the
NIH.
Alan Kaye, MD, PhD, DABA, DABPM, DABIPP -- Dr Kaye is the Professor and Chairman of
the Department of Anesthesiology at LSU Health Sciences Center in
New Orleans since January 2005. Before LSU, he was Professor and
Chairman of the Texas Tech University Health Sciences Center
Department of Anesthesiology in Lubbock, Texas. Prior, he was the
Medical Director of the Greater New Orleans Surgical Center, the
Director of Resident Recruitment, Acting Program Director and an
Attending Staff of the Department of Anesthesiology at Tulane
University Medical Center in New Orleans. He received two BS
degrees and a MD degree from the University of Arizona. He also
completed a pain management fellowship at Texas Tech Health
Sciences Center. He is Board
19
Certified as a Consultant in
Anesthesiology and has a special certificate in Pain Management for
the American Board of Anesthesiology. He is also a Diplomate of the
American Board of Pain Medicine and the American Board of
Interventional Pain Physicians. Dr. Kaye completed his PhD in
pharmacology in May 1997. His thesis title was "Pharmacology of
Angiotensin Peptides and Nonpeptide Agonists in the Pulmonary
Vascular Bed of the Cat and of the Rat." He was awarded first place
in the National Student Research Forum as a resident and has
authored or co-authored over 150 abstracts and 200 manuscripts and
book chapters in the fields of pulmonary vascular pharmacology and
anesthesiology. He has had a lifelong interest in education and
teaching medical students and residents. He serves on a number of
national committees including as a National Board of Directors of
ASIPP and ABIPP. He is editor-in-chief of the journal Pain
Physicians and is on the FDA Advisory Board on Anesthetics and
Analgesics. He was an Associate National Board Examiner in
Anesthesiology
John Cooke, MD, Ph.D. -- is the
Chair of the Department of Cardiovascular Sciences at the Houston
Methodist Research Institute, Director of the Center for
Cardiovascular Regeneration, and Medical Director of the RNA
Therapeutics Program in the Houston Methodist DeBakey Heart and
Vascular Center in Houston, Texas. He trained in cardiovascular
medicine and obtained a Ph.D. in physiology at the Mayo Clinic. He
was recruited to Harvard Medical School as an assistant professor
of medicine. In 1990, he was recruited to Stanford University to
spearhead the program in vascular biology and medicine, and was
appointed professor in the Division of Cardiovascular Medicine at
Stanford University School of Medicine, and associate director of
the Stanford Cardiovascular Institute until his recruitment to
Houston Methodist in 2013. Dr. Cooke has published over 500
research papers, position papers, reviews, book chapters and
patents in the arena of vascular medicine and biology with over
30,000 citations. He has served on national and international
committees that deal with cardiovascular diseases, including the
American Heart Association, American College of Cardiology, Society
for Vascular Medicine, and the National Heart, Lung and Blood
Institute. He has served as president of the Society for Vascular
Medicine, as a director of the American Board of Vascular Medicine,
and as an associate editor of Vascular Medicine.
Our Strategy
Our mission is to develop and commercialize
novel, non-opioid, and non-addictive therapies
to safely and effectively address the significant unmet medical
need of chronic pain or treat conditions that cause pain. The
principal elements of our strategy to achieve this mission are the
following:
|
•
|
License, acquire,
develop, and create
novel, non-opioid and non-addictive therapies
by leveraging our understanding of pain biology to address the
large and growing problem of pain. While innovation in medical
sciences has led to exciting new treatment options in many disease
areas, pain has seen limited innovation in recent years. We have a
deep understanding of the pathophysiology of pain and diseases that
cause pain. We intend to leverage this understanding to bring
innovation in the pain treatment paradigm through targeted
acquisitions of companies or assets in development. Our advisors
and doctors have years of collective experience in leadership
positions at institutions and substantial scientific experience,
and understand the complexity of designing and executing clinical
trials for and developing therapies.
|
|
•
|
Advance the
development of our lead product candidate, JAN101, designed for the
treatment of patients with PAD and pain associated with the
disease. There are limited therapeutic
options available for patients with PAD and we believe that JAN101
has the potential to transform the standard of care to a twice a
day pill to substantially improve moderate to severe PAD. The
company plans to engage a contract research organization (“CRO”) in
early 2021 and begin enrolling subjects for the first Phase 2b
trials for JAN101, and we expect to report topline results promptly
following receipt of the data from the CRO.
|
|
•
|
Leverage clinical
activity of JAN101 to expand into new indications, including
complications associated with COVID-19. We believe that JAN101 may have
utility in treating vascular complications in patients with
COVID-19 as we believe COVID-19 is an endothelial cell disease
which manifests its complications in the vascular system and major
organ causing complications in recovered patients. In November
2020, we filed an IND for our COVID-19 indication (which was
subsequently converted to a pre-IND) and begin our study if and
when we receive approval from the FDA. We plan to release more
information regarding our COVID-19 study once the FDA has cleared
the IND.
|
20
|
•
|
Advance our
product candidates through clinical development and pursue
development of additional product candidates through
acquisitions. Our objective is to build a
well-balanced, multi-asset portfolio targeting the large population
of patients with chronic and acute pain. To achieve this, in
addition to JAN101, we intend to pursue partnerships, licensing
agreements, and potential acquisitions of other pharma companies.
We continue our search for assets with indications where we believe
they could have meaningful impact and address the large unmet
medical need. In addition, we may choose to
selectively in-license or acquire complementary product
candidates by leveraging the insights, network, and experience of
our team.
|
|
•
|
Maximize the
commercial potential of all our product
candidates. We currently intend to retain all
commercial rights to JAN101 in the United States and selectively
partner outside of the United States. Because we believe that PAD
is an attractive market for many major pharmaceutical companies, we
may sub-license or partner certain indications if we believe it may
enhance stockholder value. As we continue to build and develop our
product portfolio, we may opportunistically pursue strategic
partnerships that maximize the value of our pipeline while seeking
to develop other indications.
|
|
•
|
Leverage our
management team background and expertise. We have assembled a team with
extensive experience described above.
|
Chronic Pain
The NIH defines chronic pain as pain that persists either beyond
the normal healing time of an injury or longer than three months.
We believe that chronic pain represents a significant public health
crisis. In the United States, chronic pain affects approximately
40 million adults annually, which is greater than the annual
prevalence of each of heart disease, cancer and diabetes. It is
also estimated that pain leads to between $560 and
$635 billion in healthcare and lost productivity costs each
year. Chronic pain is the leading cause of long-term disability in
the United States, and approximately 23 million adults in the
United States experience severe pain over a three-month period.
Globally the prevalence of chronic pain is even larger, with over
1 billion people worldwide affected each year. Common
types of chronic pain include those of neuropathic and inflammatory
origin and may involve the skin, muscles, joints, bones, tendons,
ligaments, and other soft tissues. Chronic pain is associated with
a variety of clinical conditions including, but not limited to,
arthritis, spinal conditions, cancer, fibromyalgia, diabetes,
surgical recovery, visceral injury and general trauma.
Pain is a necessary protective reaction that alerts the body to the
presence of actual or potential tissue damage so that necessary
corrective responses can be mounted. Pain is signaled by
specialized cells in the peripheral nervous system called
nociceptors, or pain-sensing fibers. These pain-sensing fibers
normally transmit information about stimuli that approach or exceed
harmful intensity from different locations in the body to the
brain, which registers this information as a sensation of pain. In
the case of tissue injury due to trauma or infection, pain
accompanies the associated inflammation, persists for the duration
of the inflammatory response, and aids healing by inhibiting use of
the affected body part.
Pain also can modify the central nervous system such that the brain
becomes sensitized and registers more pain with less provocation.
This is called central sensitization. When central sensitization
occurs, the nervous system goes through a process
called wind-up and gets regulated in a persistent state
of high reactivity. This persistent,
or up-regulated, state of reactivity lowers the threshold
for what triggers the sensation of pain and can result in the
sensation of pain even after the initial injury might have
healed.
When there is dysfunction in pain signaling, injury to the nervous
system, or an unhealed injury, pain becomes no longer just a
symptom, but a disease in itself.
Current Therapeutic Approaches to Treating Chronic Pain and Their
Limitations
NSAIDs
Some of the most widely used therapies to treat chronic
inflammatory pain
are non-steroidal anti-inflammatory drugs, or
NSAIDs. NSAIDs can have significant side effects that include
gastrointestinal bleeding, gastritis, high blood pressure, fluid
retention, kidney problems, heart problems and rashes. On
April 7, 2005, the FDA announced a decision to require boxed
warnings of potential cardiovascular risk for all NSAIDs.
21
Corticosteroids
Corticosteroids, or steroids, also possess anti-inflammatory
properties and are commonly used in the practice of pain
management, either systemically or locally, depending on the
condition. Steroids work by decreasing inflammation and
reducing the activity of the immune system. While steroids are
commonly used, they may have numerous and serious side effects.
These side effects may include allergic or hypersensitivity
reactions, increased risk for infection, adrenal insufficiency,
diabetes or decreased glucose tolerance, hypertension, loss of bone
density, and loss of joint cartilage volume. In addition, steroids
should not be administered when there is an infection present
because steroids can inhibit the body’s natural infection-fighting
immune response. Also, if a joint is already damaged or is subject
to chronic deterioration, IA steroid injections are not likely to
provide any long-term restorative benefit. For the above reasons,
IA steroid injections are generally recommended to be administered
no more often than every six weeks and not more than three to four
times per year.
Opioids
Opioids are some of the most widely prescribed therapeutics for
chronic and acute pain, and sales of these drugs have quadrupled
between 1999 and 2010. According
to a National Survey on Drug Use and Health report, in 2016 more
than one third of adult Americans were prescribed opioids and
230 million opioid prescriptions were written that year in the
United States. Opioids act by binding to specific receptors located
on neurons in both the central and peripheral nervous system
throughout the body including in the brain, spinal cord and other
nervous tissue. Although they can be effective in providing pain
relief, the increased medical use of opioids has been accompanied
by an increase in the abuse and misuse of prescription opioids. In
addition, for most patients, chronic opioid use is a poor option
due to an intolerance to the many side effects, including nausea,
vomiting, drowsiness and constipation, and the propensity for
opioids to become less effective with long-term use. According to
the Centers for Disease Control and Prevention, or CDC, almost two
million individuals abused or were dependent on prescription
opioids in 2014. CDC figures show that the number of opioid-related
overdose deaths has quadrupled between 1999 and 2010, and currently
approximately 40% of opioid overdose deaths in the United States
involve a prescription opioid. This increase in prescription
opioid-related deaths in the United States prompted President Trump
to declare the opioid crisis a national Public Health Emergency in
October 2017. Opioid abuse has become an epidemic in the United
States, ranking as the nation’s second most prevalent illegal drug
problem. These major issues create the need to find new approaches
to treating chronic pain.
Our Approach to Treating
PAD and Chronic Pain
The unmet medical need for treating PAD and chronic pain reflects
the historic failure to develop novel classes of analgesics with
comparable or greater efficacy, an acceptable level of adverse
effects and a lower abuse liability than those currently available.
Some of the reasons for this include the heterogeneity of chronic
pain and its related conditions, and the complexity and diversity
of the underlying pathophysiological mechanisms for pain. However,
recent advances in the understanding of the neurobiology of pain
are beginning to offer opportunities to identify new drug targets
and develop new therapeutic strategies.
We have taken an innovative and targeted approach to identifying
treatments for chronic pain that leverages our understanding of the
pathophysiology of pain. Pain is variable—for example, it can be
inflammatory or neuropathic in nature, and it may be localized to a
specific area of the body or it may be generalized throughout. We
believe that the most effective way to treat chronic pain is
through therapies that specifically target the origin of the pain
signal. We strive to maximize each of our product candidate’s
potential based on its unique mechanism of action related to the
origin of the pain signal.
A Randomized, Double-Blind Study of the Effects of a Sustained
Release Formulation of Sodium Nitrite (SR-nitrite) on Patients with
Diabetic Neuropathy
Background: Background: Sodium
nitrite has been reported to be effective in reducing chronic
peripheral pain.
Objectives: To evaluate the
safety and efficacy of 40 and 80 mg, BID, of an oral sustained
release formulation of sodium nitrite (SR-nitrite) in patients
suffering from diabetic neuropathy, and to determine whether
SR-nitrite would reduce the frequency of headaches reported
previously by subjects receiving the same doses of an immediate
release formulation. Study Design: Phase II, single-center,
randomized, double-blind, placebo controlled clinical trial.
Setting: The Ohio Pain Clinic and Kettering Medical
Center.
22
Methods: Twenty-four patients
were randomized to 40 mg or 80 mg SR-nitrite or placebo twice daily
for 12 weeks. The primary objective was to determine whether
headaches would be reduced using SR-nitrite. The primary efficacy
endpoint was the mean difference in the change of the Neuropathic
Pain Symptom Inventory (NPSI) pain score from baseline to that
reported after 12 weeks of treatment. Secondary endpoints included
changes from baseline for the Brief Pain Inventory (BPI) Scale, the
RAND 36 questionnaire, Short Form McGill Questionnaire, daily
patient reported score for neuropathic pain, changes in HbA1c,
PulseOx and quantitative sensory testing. Results: The number of
subjects reporting adverse events and the number of adverse events
did not change with dose. There were no reports of
treatment-related headaches. Although no significant differences
were identified in patient responses to the questionnaires, a trend
was observed. In the NPSI assessment, patients in the 40 mg and 80
mg dose group reported a 12.7% and 22.0% reduction in pain,
respectively, compared to an 8.4% reduction by patients in the
placebo group. A trend was also observed with the BPI total
severity score. However, the 40 mg dosing group reported the
greatest reduction in pain using the McGill Pain index and via
patient logs of daily pain scores, where the mean of pain scores
reported by subjects in the 40 mg group dropped by day 41 and
generally stayed lower than the mean of scores reported by subjects
in either of the other two groups. Patients in the 80 mg SR-nitrite
group had an improvement in both Nerve Sensory Conductance and
Nerve Sensory Velocity. No changes were observed in HbA1c levels or
PulseOx.
Limitations: Small sample
size.
Conclusion: Sustained release
sodium nitrite prevents the prevalent reports of headaches by
patients treated with an immediate release formulation of sodium
nitrite. In a previous study of patients with peripheral arterial
disease (PAD), 40 mg BID treatment led to a statistically
significant reduction in reported pain, similar trends were
observed at the end of the trial period for most of the pain
questionnaires used in the study. The 80 mg BID treatment had the
more pronounced affect on bioactivity (quantitative sensory
testing), which was similar to the PAD study, where this dose group
had the greatest improvement in FMD {AU: spell out FMD}. The
ability to alleviate pain with BID treatment of SR-nitrite offers
promise for a new non-addictive, non-sedating treatment of chronic
pain and warrants further study.
Microcirculatory injury, which is common in diabetic patients, can
lead to a number of problems. Prominent among these is diabetic
peripheral neuropathy (DPN) (1,2). About 10% of patients will have
evidence of DPN at the time they are initially evaluated, and
almost 50% of diabetic patients will ultimately develop DPN. Of
diabetic patients with DPN, 40% to 50% suffer from chronic pain as
well as paresthesias, sensory loss, and weakness, and have at least
an 8-fold increased risk of undergoing a distal lower extremity
amputation compared to similar
non-diabetics. Endothelial cells play an important part
in the regulation of microcirculation, as they maintain vascular
tone by secreting both vasodilators and vasoconstrictors. A central
feature of diabetic microvascular disease (MVD) is endothelial
dysfunction, which, in turn, plays an important role in the
development and progression of DPN. The pathophysiological factors
leading to endothelial dysfunction in diabetes include chronic
hyperglycemia and protein glycolation, insulin resistance,
inflammation, and increased oxidative stress. Studies have now
shown a close relationship between endothelial dysfunction and
diminished nitric oxide (NO) bioavailability. Endogenously produced
NO has a half life measured in seconds, and is rapidly oxidized to
nitrite (NO2–) and nitrate (NO3––) end products, the latter of
which is biologically inert. In the presence of microcirculatory
ischemia and endothelial cell dysfunction, however, endogenous NO
production by eNOS is much more limited. In such circumstances,
circulating NO2– can be non-enzymatically reduced to increase NO
availability. In addition to serving as a circulating NO reservoir,
nitrite itself has also been shown to have direct and potent
vasodilatory effects in vitro and in vivo. The findings that NO2–
mediates vasodilatation, both directly and through NO generation,
has led to growing interest in the potential effectiveness of
nitrite as a therapeutic agent in conditions associated with DPN
and endothelial dysfunction. Such conditions include diabetic
microvascular disease, DPN, and retinopathy, in which low levels of
NO and NO2–, as well as elevated levels of nitrate (NO3), suggest
that the complete oxidation of NO occurs during diabetes with
insufficient NO2– reserves to restore NO bioavailability. Previous
human studies with an oral formulation of NaNO2 have shown that
administration twice daily improves vascular function. In the
peripheral arterial disease study, subjects who received the lower
dose of NaNO2 reported a significant reduction in pain. Although
side effects were minimal, headaches and dizziness were reported by
a large number of subjects, likely due to the rapid release of
NaNO2 leading to vasodilation. An oral sustained-release
formulation of NaNO2 (SR-nitrite) was developed in an attempt to
overcome these problems and was tested in a porcine model of
metabolic syndrome with critical limb ischemia. SR-nitrite-treated
animals showed increased myocardial NO
23
bioavailability, diminished oxidative stress, and cytoprotection in
ischemic tissue. Importantly, 24-telometry recordings of blood
pressure showed no evidence of vasodilation. In the present study,
we hypothesized that the SRnitrite would reduce or eliminate
headaches reported in patients following administration of the
immediate release formulation. Given the promising results on
reducing pain in diabetic patients with peripheral arterial disease
reported in the previous study, patients with diabetic neuropathy
were utilized in this study to determine whether any trends in
reducing pain could be observed. The study design was a randomized,
placebo controlled, double-blind phase II study was carried out to
investigate the safety and potential biological activity of
multiple doses of an oral, sustained-release formulation of sodium
nitrite (SR-nitrite; Theravasc Inc., Cleveland, OH, USA), BID in
doses of 40 mg and 80 mg over a 12-week treatment period, in human
subjects with diabetes and neuropathic pain in the lower
extremities and feet. The trial was approved by the Copernicus IRB
and listed on ClinicalTrials.gov:
www.clinicaltrials.gov/ct2/show/NCT02412852. The study was funded
by Theravasc Inc.
JAN101—Regulatory Strategy
Sodium Nitrite has been previously approved as one of the active
components of cyanide poisoning antidote. This means the approval
path for JAN101 is through a 505(b)(2) NDA, which we intend to
pursue.
JAN101—Commercial Strategy
We currently intend to use third party providers and manufacturers
in the United States to effectively support the commercialization
JAN101, if we are successful in obtaining FDA
approval. We believe that we can cost effectively
promote JAN101 to the patients suffering from PAD. We anticipate
our commercial operation to include outside sales management,
outside sales support, distribution support and an internal
marketing group. Additional requisite capabilities will include
focused management of key accounts, such as managed care
organizations, group purchasing organizations, and government
accounts. We intend to selectively partner with third
parties with vast experience in the space as we have been
partnering for every aspect of development.
Competition
The biotechnology and pharmaceutical industries are characterized
by extensive research and development efforts, rapidly advancing
technologies, intense competition, and a strong emphasis on
proprietary products. We are currently focused on the development
and commercialization of our asset pipeline of
novel, non-opioid and non-addictive therapies
for PAD. The number of patients suffering from chronic PAD is large
and growing. While we believe that our product candidate and our
Chief Scientific Officers development experience and scientific
knowledge provide us with competitive advantages, we face potential
competition from many different sources, including pharmaceutical,
biotechnology, and specialty pharmaceutical companies either
marketing or developing therapeutics to treat chronic pain.
Academic research institutions, governmental agencies, as well as
public and private institutions are also potential sources of
competitive products and technologies. Our competitors
may have significantly greater financial resources, robust drug
pipelines, established presence in the market and expertise in
research and development, manufacturing, pre-clinical and
clinical testing, obtaining regulatory approvals and reimbursement
and marketing approved products than we do. These competitors also
compete with us in recruiting and retaining qualified clinical,
regulatory, scientific, sales, marketing and management personnel,
establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies complementary
to, or necessary for, our programs. Smaller
or early-stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with
large and established companies. The key competitive
factors affecting the success of all of our product candidates, if
approved, are likely to be their efficacy, durability, safety,
price and the availability of reimbursement from government and
other third-party payors.
Significant competition exists in the PAD pain field. Although we
believe our approach to developing novel treatments for pain is
unique from most other existing or investigational therapies, such
as non-steroidal anti-inflammatory drugs (“NSAIDs”),
corticosteroids and opioids, we will need to compete with all
currently available and future therapies within the indications
where our development is focused. With respect to
JAN101, the main classes of marketed products that are available
for the treatment of PAD pain include NSAIDs and opioids.
Furthermore, numerous monoclonal antibodies targeting nerve growth
factor, or NGF inhibitors, are in clinical development, including
two product candidates in Phase 3.
There are a number of companies developing or marketing therapies
for the treatment and management of pain that may compete with our
current product candidate, including many major pharmaceutical and
biotechnology companies. Among the companies that currently market
or are developing therapies that, if approved, our product
24
candidates would potentially compete with include: Acorda
Therapeutics, Assertio Therapeutics, Biogen, Cara Therapeutics, Eli
Lilly and Company, Endo Pharmaceuticals, Flexion Therapeutics,
Grunenthal, Horizon Pharma, Janssen Research &
Development, Merck & Co., Novartis, Pacira Pharmaceuticals,
Pain Therapeutics, Pfizer, Purdue Pharma, Sanofi, Trevena and
Vertex Pharmaceuticals.
Intellectual Property
Our success depends in large part upon our ability to obtain and
maintain proprietary protection for our products and technologies,
and to operate without infringing or otherwise violating the
proprietary rights of others. We endeavor to protect our products
using a combination of intellectual property protections and
available government regulatory and marketing exclusivities
afforded to new medicines. For example, we endeavor to protect our
products by, among other methods, filing U.S., and potentially in
the future, foreign, patent applications related to our proprietary
technology, inventions and improvements that are important to the
development and implementation of our business. We also use other
forms of protection, such as confidential information, trade
secrets and know-how, and trademarks to protect our
intellectual property, particularly where we do not believe patent
protection is appropriate or obtainable.
The proprietary nature of, and protection for, our product
candidates, processes and know-how are important to our
business. Our policy is to pursue, maintain and defend intellectual
property rights, and to protect the technology, inventions, and
improvements that are commercially important to our business.
Trade Secrets and Other Proprietary Information
In addition to patents, we rely on trade secrets
and know-how to develop and maintain our competitive
position. For example, we have developed methods for the more
efficient manufacture of sustained released sodium nitrite tablets.
We seek to protect our proprietary information, in part, by
confidentiality agreements and invention assignment agreements with
our employees, consultants, scientific advisors, contractors and
commercial partners.
LSU License
Agreement
On November 19, 2019, we entered into a Patent and Know How License
Agreement (the “License Agreement”) with UAB Research Foundation
(“UABRF”), TheraVasc, Inc. (“TheraVasc”), and the Board of
Supervisors of Louisiana State University and Agricultural and
Mechanical College, acting on behalf of LSU Health Sciences Center
at Shreveport (“LSU Health Shreveport”, together with UABRF and
TheraVasc, the “Licensors”). Under the License Agreement, the
Licensors have agreed to grant to JanOne an exclusive, worldwide
license, including the right to sublicense, to the Licensors’
patent rights and know-how related to the Licensors’ sustained
release formulation of sodium nitrite. Under the License
Agreement, have agreed to pay a non-refundable upfront license fee
and certain milestone payments upon the achievement of certain
milestones of up to approximately $6.5 million and certain royalty
payments and annual license maintenance
fees. The License Agreement
requires us to use commercially reasonable efforts to develop and
commercialize JAN101.
Commercial
Operations
We currently have no marketing and sales organization. We have
retained global rights to our product candidate, and, if one of our
product candidates is approved by the FDA, expect to access the
market in the United States we expect that our sales force will be
supported by sales management, internal sales support, an outside
marketing group and distribution support. We intend to invest in
our commercial capabilities prudently by focusing our marketing
efforts on the physician subspecialties that treat patients with
PAD. These physicians include, but are not limited to, pain
management specialists, rheumatologist, surgeons and sports
medicine physicians. We will also evaluate licensing and partnering
with third parties to help us reach other sales channels and
geographic markets inside and outside of the United States.
25
Government Regulation
The FDA and comparable regulatory authorities in state and local
jurisdictions and in other countries impose substantial and
burdensome requirements upon companies involved in the clinical
development, manufacture, marketing and distribution of drugs, such
as those we are developing. These agencies, and other federal,
state and local entities regulate, among other things, the research
and development, testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record keeping, approval,
advertising and promotion, distribution, post-approval monitoring
and reporting, sampling and export and import of our product
candidates.
U.S. Government Regulation
of Drug Products
In the United States, the FDA regulates drugs under the FDCA and
its implementing regulations. The process of obtaining regulatory
approvals and the subsequent compliance with applicable federal,
state, local and foreign statutes and regulations requires the
expenditure of substantial time and financial resources. Failure to
comply with the applicable U.S. requirements at any time during the
product development process, approval process or after approval,
may subject an applicant to a variety of administrative or judicial
sanctions, such as the FDA’s refusal to approve pending
applications, withdrawal of an approval, imposition of a clinical
hold, issuance of warning letters, product recalls, product
seizures, total or partial suspension of production or
distribution, injunctions, fines, refusals of government contracts,
restitution, disgorgement or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in
the United States generally involves the following:
|
•
|
completion
of pre-clinical laboratory tests, animal studies and
formulation studies in compliance with the FDA’s good laboratory
practice, or GLP, regulations;
|
|
•
|
submission to the FDA
of an IND which must become effective before human clinical trials
may begin;
|
|
•
|
approval by an IRB at
each clinical site before each trial may be initiated;
|
|
•
|
performance of adequate
and well-controlled human clinical trials in accordance with GCP
requirements to establish the safety and efficacy of the proposed
drug product for each indication;
|
|
•
|
submission to the FDA
of an NDA;
|
|
•
|
satisfactory completion
of an FDA advisory committee review, if applicable;
|
|
•
|
satisfactory completion
of an FDA inspection of the manufacturing facility or facilities at
which the product is produced to assess compliance with cGMP
requirements and to assure that the facilities, methods and
controls are adequate to preserve the drug’s identity, strength,
quality and purity;
|
|
•
|
satisfactory completion
of FDA audits of clinical trial sites to assure compliance with
GCPs and the integrity of the clinical data;
|
|
•
|
payment of user fees
and securing FDA and approval of the NDA; and
|
|
•
|
compliance with any
post-approval requirements, including the potential requirement to
implement a REMS and the potential requirement to conduct
post-approval studies.
|
26
Pre-clinical Studies
Pre-clinical studies include laboratory evaluation of product
chemistry, toxicity and formulation, as well as animal studies to
assess potential safety and efficacy. An IND sponsor must submit
the results of the pre-clinical tests, together with
manufacturing information, analytical data and any available
clinical data or literature, among other things, to the FDA as part
of an IND. Some pre-clinical testing may continue even
after the IND is submitted. An IND automatically becomes effective
30 days after receipt by the FDA, unless before that time the FDA
raises concerns or questions related to one or more proposed
clinical trials and places the clinical trial on a clinical hold.
In such a case, the IND sponsor and the FDA must resolve any
outstanding concerns before the clinical trial can begin. As a
result, submission of an IND may not result in the FDA allowing
clinical trials to commence. Clinical holds also may be imposed by
the FDA at any time before or during clinical trials, due to safety
concerns about on-going or proposed clinical trials,
or non-compliance with specific FDA requirements, and the
trials may not begin or continue until the FDA notifies the sponsor
that the hold has been lifted.
Clinical Trials
Clinical trials involve the administration of the investigational
new drug to human subjects under the supervision of qualified
investigators in accordance with GCP requirements, which include
the requirement that all research subjects provide their informed
consent in writing for their participation in any clinical trial.
Clinical trials are conducted under protocols detailing, among
other things, the objectives of the trial, the parameters to be
used in monitoring safety, and the effectiveness criteria to be
evaluated. A protocol for each clinical trial and any subsequent
protocol amendments must be submitted to the FDA as part of the
IND. In addition, an IRB at each institution participating in the
clinical trial must review and approve the plan for any clinical
trial before it commences at that institution. Information about
certain clinical trials must be submitted within specific
timeframes to the National Institutes of Health for public
dissemination on their www.clinicaltrials.gov website. The
information contained in, or accessible through, this website does
not constitute a part of this prospectus. We have included this
website address in this prospectus solely as an inactive textual
reference.
Human clinical trials are typically conducted in three sequential
phases, which may overlap or be combined:
|
•
|
Phase 1: The drug is
initially introduced into healthy human subjects or patients with
the target disease or condition and tested for safety, dosage
tolerance, absorption, metabolism, distribution, excretion and, if
possible, to gain an early indication of its
effectiveness.
|
|
•
|
Phase 2: The drug is
administered to a limited patient population to identify possible
adverse effects and safety risks, to preliminarily evaluate the
efficacy of the product for specific targeted diseases and to
determine dosage tolerance and optimal dosage.
|
|
•
|
Phase 3: The drug is
administered to an expanded patient population, generally at
geographically dispersed clinical trial sites, in well-controlled
clinical trials to generate enough data to statistically evaluate
the efficacy and safety of the product for approval, to establish
the overall risk-benefit profile of the product, and to provide
adequate information for the labeling of the product.
|
Post-approval trials, sometimes referred to as Phase 4 trials, may
be conducted after initial marketing approval. These trials are
used to gain additional experience from the treatment of patients
in the intended therapeutic indication. In certain instances, the
FDA may mandate the performance of Phase 4 clinical trials as a
condition of approval of an NDA.
The FDA or the sponsor may suspend a clinical trial at any time on
various grounds, including a finding that the research subjects or
patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical
trial at its institution if the clinical trial is not being
conducted in accordance with the IRB’s requirements or if the drug
has been associated with unexpected serious harm to patients. In
addition, some clinical trials are overseen by an independent group
of qualified experts organized by the sponsor, known as a data
safety monitoring board or committee. Depending on its charter,
this group may determine whether a trial may move forward at
designated check points based on access to certain data from the
trial.
27
During the development of a new drug, sponsors are given
opportunities to meet with the FDA at certain points. These points
may be prior to submission of an IND, at the end of Phase 2, and
before an NDA is submitted. Meetings at other times may be
requested. These meetings can provide an opportunity for the
sponsor to share information about the data gathered to date, for
the FDA to provide advice, and for the sponsor and the FDA to reach
agreement on the next phase of development. Sponsors typically use
the meetings at the end of the Phase 2 trial to discuss Phase
2 clinical results and present plans for the pivotal Phase 3
clinical trials that they believe will support approval of the new
drug.
Concurrent with clinical trials, companies usually complete
additional animal studies and must also develop additional
information about the chemistry and physical characteristics of the
drug and finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things,
the manufacturer must develop methods for testing the identity,
strength, quality and purity of the final drug. In addition,
appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the product candidate
does not undergo unacceptable deterioration over its shelf
life.
While the IND is active and before approval, progress reports
summarizing the results of the clinical trials and non-clinical
studies performed since the last progress report must be submitted
at least annually to the FDA, and written IND safety reports must
be submitted to the FDA and investigators for serious and
unexpected suspected adverse events, findings from other studies
suggesting a significant risk to humans exposed to the same or
similar drugs, findings from animal or in vitro testing suggesting
a significant risk to humans, and any clinically important
increased incidence of a serious suspected adverse reaction
compared to that listed in the protocol or investigator
brochure.
United States Review and
Approval Process
The results of product development, pre-clinical and
other non-clinical studies and clinical trials, along
with descriptions of the manufacturing process, analytical tests
conducted on the chemistry of the drug, proposed labeling and other
relevant information are submitted to the FDA as part of an NDA
requesting approval to market the product. The submission of an NDA
is subject to the payment of substantial user fees; a waiver of
such fees may be obtained under certain limited circumstances. The
FDA reviews an NDA to determine, among other things, whether a
product is safe and effective for its intended use and whether its
manufacturing is cGMP-compliant to assure and preserve the
product’s identity, strength, quality and purity. Under the
Prescription Drug User Fee Act, or PDUFA, guidelines that are
currently in effect, the FDA has a goal of ten months from the date
of “filing” of a standard NDA for a new molecular entity to review
and act on the submission. This review typically takes twelve
months from the date the NDA is submitted to FDA because the FDA
has approximately two months to make a “filing” decision after it
the application is submitted. The FDA conducts a preliminary review
of all NDAs within the first 60 days after submission, before
accepting them for filing, to determine whether they are
sufficiently complete to permit substantive review The FDA may
request additional information rather than accept an NDA for
filing. In this event, the NDA must be resubmitted with the
additional information. The resubmitted application also is subject
to review before the FDA accepts it for filing.
The FDA may refer an application for a novel drug to an advisory
committee. An advisory committee is a panel of independent experts,
including clinicians and other scientific experts, that reviews,
evaluates and provides a recommendation as to whether the
application should be approved and under what conditions. The FDA
is not bound by the recommendations of an advisory committee, but
it considers such recommendations carefully when making
decisions.
Before approving an NDA, the FDA will inspect the facility or
facilities where the product is manufactured. The FDA will not
approve an application unless it determines that the manufacturing
processes and facilities are in compliance with cGMP requirements
and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the
FDA may inspect one or more clinical trial sites to assure
compliance with GCP requirements.
After the FDA evaluates an NDA, it will issue an approval letter or
a Complete Response Letter. An approval letter authorizes
commercial marketing of the drug with prescribing information for
specific indications. A Complete
28
Response Letter indicates that the review cycle of the application
is complete and the application will not be approved in its present
form. A Complete Response Letter usually describes the specific
deficiencies in the NDA identified by the FDA and may require
additional clinical data, such as an additional pivotal Phase 3
trial or other significant and time-consuming requirements related
to clinical trials, non-clinical studies or manufacturing. If a
Complete Response Letter is issued, the sponsor must resubmit the
NDA or, addressing all of the deficiencies identified in the
letter, or withdraw the application. Even if such data and
information are submitted, the FDA may decide that the NDA does not
satisfy the criteria for approval.
If a product receives regulatory approval, the approval may be
significantly limited to specific diseases and dosages or the
indications for use may otherwise be limited, which could restrict
the commercial value of the product. In addition, the FDA may
require a sponsor to conduct Phase 4 testing, which involves
clinical trials designed to further assess a drug’s safety and
effectiveness after NDA approval, and may require testing and
surveillance programs to monitor the safety of approved products
which have been commercialized. The FDA may also place other
conditions on approval including the requirement for REMS, to
assure the safe use of the drug. If the FDA concludes a REMS is
needed, the sponsor of the NDA must submit a proposed REMS. The FDA
will not approve the NDA without an approved REMS, if required. A
REMS could include medication guides, physician communication plans
or elements to assure safe use, such as restricted distribution
methods, patient registries and other risk minimization tools. Any
of these limitations on approval or marketing could restrict the
commercial promotion, distribution, prescription or dispensing of
products. Marketing approval may be withdrawn
for non-compliance with regulatory requirements or if
problems occur following initial marketing.
The FDASIA, made permanent the Pediatric Research Equity Act, or
PREA, which requires a sponsor to conduct pediatric clinical trials
for most drugs, for a new active ingredient, new indication, new
dosage form, new dosing regimen or new route of administration.
Under PREA, original NDAs and supplements must contain a pediatric
assessment unless the sponsor has received a deferral or waiver.
The required assessment must evaluate the safety and effectiveness
of the product for the claimed indications in all relevant
pediatric subpopulations and support dosing and administration for
each pediatric subpopulation for which the product is safe and
effective. The sponsor or FDA may request a deferral of pediatric
clinical trials for some or all of the pediatric subpopulations. A
deferral may be granted for several reasons, including a finding
that the drug is ready for approval for use in adults before
pediatric clinical trials are complete or that additional safety or
effectiveness data needs to be collected before the pediatric
clinical trials begin. The FDA must send
a non-compliance letter to any sponsor that fails to
submit the required assessment, keep a deferral current or fails to
submit a request for approval of a pediatric formulation.
Special FDA Expedited
Review and Approval Programs
The FDA has various programs, including Fast Track Designation,
accelerated approval, priority review, and breakthrough therapy
designation, which are intended to expedite or simplify the process
for the development and FDA review of drugs that are intended for
the treatment of serious or life threatening diseases or conditions
and demonstrate the potential to address unmet medical needs. The
purpose of these programs is to provide important new drugs to
patients earlier than under standard FDA review procedures.
To be eligible for a Fast Track Designation, the FDA must
determine, based on the request of a sponsor, that a product is
intended to treat a serious or life-threatening disease or
condition and demonstrates the potential to address an unmet
medical need. The FDA will determine that a product will fill an
unmet medical need if it will provide a therapy where none exists
or provide a therapy that may be potentially superior to existing
therapy based on efficacy or safety factors. The FDA may review
sections of the NDA for a fast track product on a rolling basis
before the complete application is submitted, if the sponsor
provides a schedule for the submission of the sections of the NDA,
the FDA agrees to accept sections of the NDA and determines that
the schedule is acceptable, and the sponsor pays any required user
fees upon submission of the first section of the NDA.
The FDA may give a priority review designation to drugs that offer
major advances in treatment, or provide a treatment where no
adequate therapy exists. A priority review means that the goal for
the FDA to review an application is six months, rather than the
standard review of ten months under current PDUFA guidelines. Under
the new PDUFA agreement, these six and ten month review periods are
measured from the “filing” date rather than the receipt date for
NDAs for new molecular entities, which typically adds approximately
two months to the timeline for review and decision from the date of
submission. Most products that are eligible for Fast Track
Designation are also likely to be considered appropriate to receive
a priority review.
29
In addition, products studied for their safety and effectiveness in
treating serious or life-threatening illnesses and that provide
meaningful therapeutic benefit over existing treatments may be
eligible for accelerated approval and may be approved on the basis
of adequate and well-controlled clinical trials establishing that
the drug product has an effect on a surrogate endpoint that is
reasonably likely to predict clinical benefit, or on a clinical
endpoint that can be measured earlier than irreversible morbidity
or mortality, that is reasonably likely to predict an effect on
irreversible morbidity or mortality or other clinical benefit,
taking into account the severity, rarity or prevalence of the
condition and the availability or lack of alternative treatments.
As a condition of approval, the FDA may require a sponsor of a drug
receiving accelerated approval to perform post-marketing studies to
verify and describe the predicted effect on irreversible morbidity
or mortality or other clinical endpoint, and the drug may be
subject to accelerated withdrawal procedures.
Moreover, under the provisions of the FDASIA, a sponsor can request
designation of a product candidate as a “breakthrough therapy.” A
breakthrough therapy is defined as a drug that is intended, alone
or in combination with one or more other drugs, to treat a serious
or life-threatening disease or condition, and preliminary clinical
evidence indicates that the drug may demonstrate substantial
improvement over existing therapies on one or more clinically
significant endpoints, such as substantial treatment effects
observed early in clinical development. Drugs designated as
breakthrough therapies are also eligible for accelerated approval.
The FDA must take certain actions, such as holding timely meetings
and providing advice, intended to expedite the development and
review of an application for approval of a breakthrough
therapy.
Even if a product qualifies for one or more of these programs, the
FDA may later decide that the product no longer meets the
conditions for qualification or decide that the time period for FDA
review or approval will not be shortened. We may explore some of
these opportunities for our product candidates as appropriate.
Post-Approval
Requirements
Drugs manufactured or distributed pursuant to FDA approvals are
subject to pervasive and continuing regulation by the FDA,
including, among other things, requirements relating to
recordkeeping, periodic reporting, product sampling and
distribution, advertising and promotion and reporting of adverse
experiences with the product. After approval, most changes to the
approved product, such as adding new indications or other labeling
claims are subject to prior FDA review and approval. There also are
continuing, annual user program fee requirements for any marketed
products.
The FDA may impose a number of post-approval requirements as a
condition of approval of an NDA. For example, the FDA may require
post-marketing testing, including Phase 4 clinical trials, and
surveillance to further assess and monitor the product’s safety and
effectiveness after commercialization.
In addition, drug manufacturers and other entities involved in the
manufacture and distribution of approved drugs are required to
register their establishments with the FDA and state agencies, and
are subject to periodic unannounced inspections by the FDA and
these state agencies for compliance with cGMP requirements. Changes
to the manufacturing process are strictly regulated and often
require prior FDA approval before being implemented. FDA
regulations also require investigation and correction of any
deviations from cGMP requirements and impose reporting and
documentation requirements upon the sponsor and any third-party
manufacturers that the sponsor may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in
the area of production and quality control to maintain cGMP
compliance.
Once an approval of a drug or medical device is granted, the FDA
may withdraw the approval if compliance with regulatory
requirements and standards is not maintained or if problems occur
after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse events of
unanticipated severity or frequency, or with manufacturing
processes, or failure to comply with regulatory requirements, may
result in mandatory revisions to the approved labeling to add new
safety information; imposition of post-market studies or clinical
trials to assess new safety risks; or imposition of distribution or
other restrictions under a REMS program. Other potential
consequences include, among other things:
|
•
|
restrictions on the
marketing or manufacturing of the product, complete withdrawal of
the product from the market or product recalls;
|
|
•
|
fines, warning letters
or holds on post-approval clinical trials;
|
30
|
•
|
refusal of the FDA to
approve pending NDAs or supplements to approved NDAs, or suspension
or revocation of product approvals;
|
|
•
|
product seizure or
detention, or refusal to permit the import or export of products;
or
|
|
•
|
injunctions or the
imposition of civil or criminal penalties.
|
The FDA strictly regulates marketing, labeling, advertising and
promotion of products that are placed on the market. Drugs or
devices may be promoted only for the approved indications and in
accordance with the provisions of the approved label. The FDA and
other agencies actively enforce the laws and regulations
prohibiting the promotion of off-label uses, and a
company that is found to have improperly
promoted off-label uses may be subject to significant
liability.
The Hatch-Waxman
Amendments
The Drug Price Competition and Patent Term Restoration Act of 1984,
known as the Hatch-Waxman Act, added two pathways for FDA drug
approval. First, the Hatch-Waxman amendments authorized the FDA to
approve an alternative type of NDA under Section 505(b)(2) of
the FDCA. Section 505(b)(2) permits the filing of an NDA where
at least some of the information required for approval comes from
trials not conducted by or for the applicant and for which the
applicant has not obtained a right of reference from the data
owner. The applicant may rely upon the FDA’s findings of safety and
efficacy for an approved product that acts as the “listed drug.”
The FDA may also require 505(b)(2) applicants to perform additional
studies or measurements to support the change from the listed drug.
The FDA may then approve the new product candidate for all, or
some, of the label indications for which the branded reference drug
has been approved, as well as for any new indication sought by the
505(b)(2) applicant.
Second, the Hatch-Waxman amendments to the FDCA also established a
statutory procedure for submission and FDA review and approval of
abbreviated new drug applications, or ANDAs, for generic versions
of branded drugs previously approved by the FDA (such previously
approved drugs are referred to as “listed drugs”). An ANDA is a
comprehensive submission that contains, among other things, data
and information pertaining to the active pharmaceutical ingredient,
drug product formulation, specifications and stability of the
generic drug, as well as analytical methods, manufacturing process
validation data and quality control procedures. Premarket
applications for generic drugs are termed abbreviated because they
generally do not include pre-clinical and clinical data
to demonstrate safety and effectiveness. However, a generic
manufacturer is typically required to conduct bioequivalence
studies of its test product against the listed drug. The
bioequivalence studies for orally administered, systemically
available drug products assess the rate and extent to which the API
is absorbed into the bloodstream from the drug product and becomes
available at the site of action. Bioequivalence is established when
there is an absence of a significant difference in the rate and
extent for absorption of the generic product and the listed drug.
For some drugs, other means of demonstrating bioequivalence may be
required by the FDA, especially where rate and/or extent of
absorption are difficult or impossible to measure. The FDA will
approve the generic product as suitable for an ANDA application if
it finds that the generic product does not raise new questions of
safety and effectiveness as compared to the innovator product. A
product is not eligible for ANDA approval if the FDA determines
that it is not bioequivalent to the referenced innovator drug, if
it is intended for a different use, or if it is not subject to an
approved Suitability Petition.
In seeking approval for a drug through an NDA, including a
505(b)(2) NDA, applicants are required to list with the FDA certain
patents whose claims cover the applicant’s product. Upon approval
of an NDA, each of the patents listed in the application for the
drug is then published in the Orange Book. Any applicant who files
an ANDA seeking approval of a generic equivalent version of a drug
listed in the Orange Book or a 505(b)(2) NDA referencing a drug
listed in the Orange Book must certify to the FDA that (1) no
patent information on the drug product that is the subject of the
application has been submitted to the FDA; (2) such patent has
expired; (3) the date on which such patent expires; or
(4) such patent is invalid or will not be infringed upon by
the manufacture, use or sale of the drug product for which the
application is submitted. This last certification is known as a
paragraph IV certification. A notice of the paragraph IV
certification must be provided to each owner of the patent that is
the subject of the certification and to the holder of the approved
NDA to which the ANDA or 505(b)(2) application refers. The
applicant may also elect to submit a “section viii” statement
certifying that its proposed label does not contain (or carves out)
any language regarding the patented method-of-use rather
than certify to a listed method-of-use patent.
31
If the reference NDA holder and patent owners assert a patent
challenge directed to one of the Orange Book listed patents within
45 days of the receipt of the paragraph IV certification notice,
the FDA is prohibited from approving the application until the
earlier of 30 months from the receipt of the paragraph IV
certification expiration of the patent, settlement of the lawsuit
or a decision in the infringement case that is favorable to the
applicant. The ANDA or 505(b)(2) application also will not be
approved until any applicable non-patent exclusivity
listed in the Orange Book for the branded reference drug has
expired.
Marketing
Exclusivity
Market exclusivity provisions under the FDCA can delay the
submission or the approval of certain marketing applications. The
FDCA provides a five-year period of non-patent marketing
exclusivity within the United States to the first applicant to
obtain approval of an NDA for a new chemical entity. A drug is a
new chemical entity if the FDA has not previously approved any
other new drug containing the same active moiety, which is the
molecule or ion responsible for the action of the drug substance.
During the exclusivity period, the FDA may not approve or even
accept for review an abbreviated new drug application, or ANDA, or
a NDA submitted under Section 505(b)(2), or 505(b)(2) NDA,
submitted by another company for another drug based on the same
active moiety, regardless of whether the drug is intended for the
same indication as the original innovative drug or for another
indication, where the applicant does not own or have a legal right
of reference to all the data required for approval. However, an
application may be submitted after four years if it contains a
certification of patent invalidity or non-infringement to
one of the patents listed with the FDA by the innovator NDA
holder. The FDCA alternatively provides three years of
marketing exclusivity for an NDA, or supplement to an existing NDA
if new clinical investigations, other than bioavailability studies,
that were conducted or sponsored by the applicant are deemed by the
FDA to be essential to the approval of the application, for example
new indications, dosages or strengths of an existing drug. This
three-year exclusivity covers only the modification for which the
drug received approval on the basis of the new clinical
investigations and does not prohibit the FDA from approving ANDAs
or 505(b)(2) NDAs for drugs containing the active agent for the
original indication or condition of use. Five-year and three-year
exclusivity will not delay the submission or approval of a full
NDA. However, an applicant submitting a full NDA would be required
to conduct or obtain a right of reference to all of
the pre-clinical studies and adequate and well-controlled
clinical trials necessary to demonstrate safety and
effectiveness. Pediatric exclusivity is another type of
marketing exclusivity available in the United States. Pediatric
exclusivity provides for an additional six months of marketing
exclusivity attached to another period of exclusivity if a sponsor
conducts clinical trials in children in response to a written
request from the FDA. The issuance of a written request does not
require the sponsor to undertake the described clinical trials. In
addition, orphan drug exclusivity, as described above, may offer a
seven-year period of marketing exclusivity, except in certain
circumstances.
U.S. Coverage and
Reimbursement
Significant uncertainty exists as to the coverage and reimbursement
status of any therapeutic product candidate for which we may seek
regulatory approval. Sales in the United States will depend in part
on the availability of adequate financial coverage and
reimbursement from third-party payors, which include government
health programs such as Medicare, Medicaid, TRICARE and the
Veterans Administration, as well as managed care organizations and
private health insurers. Prices at which we or our customers seek
reimbursement for our therapeutic product candidates can be subject
to challenge, reduction or denial by payors.
The process for determining whether a payor will provide coverage
for a product is typically separate from the process for setting
the reimbursement rate that the payor will pay for the product. A
payor’s decision to provide coverage for a product does not imply
that an adequate reimbursement rate will be available. Third-party
payors are increasingly challenging the price and examining the
medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. In order to
obtain coverage and reimbursement for any product that might be
approved for marketing, we may need to conduct expensive
pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of any products, which would be in
addition to the costs expended to obtain regulatory approvals.
Third-party payors may not consider our product candidates to be
medically necessary or cost-effective compared to other available
therapies, or the rebate percentages required to secure favorable
coverage may not yield an adequate margin over cost or may not
enable us to maintain price levels sufficient to realize an
appropriate return on our investment in drug development.
32
Healthcare
Reform
In the United States and some foreign jurisdictions, there have
been, and continue to be, several legislative and regulatory
changes and proposed changes regarding the healthcare system that
could prevent or delay marketing approval of drug product
candidates, restrict or regulate post-approval activities, and
affect the profitable sale of drug product candidates.
Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare
systems with the stated goals of containing healthcare costs,
improving quality and/or expanding access. In the United States,
the pharmaceutical industry has been a particular focus of these
efforts and has been significantly affected by major legislative
initiatives. In March 2010, the ACA was passed, which substantially
changed the way healthcare is financed by both the government and
private insurers, and significantly impacts the U.S. pharmaceutical
industry. The ACA, among other things: (i) increased the
minimum Medicaid rebates owed by manufacturers under the Medicaid
Drug Rebate Program and extends the rebate program to individuals
enrolled in Medicaid managed care organizations;
(ii) established an annual, nondeductible fee on any entity
that manufactures or imports certain specified branded prescription
drugs and biologic agents apportioned among these entities
according to their market share in some government healthcare
programs; (iii) expanded the availability of lower pricing
under the 340B drug pricing program by adding new entities to the
program; (iv) increased the statutory minimum rebates a
manufacturer must pay under the Medicaid Drug Rebate Program;
(v) expanded the eligibility criteria for Medicaid programs;
(vi) created a new Patient-Centered Outcomes Research
Institute to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for
such research; and (vii) established a Center for Medicare
Innovation at CMS to test innovative payment and service delivery
models to lower Medicare and Medicaid spending, potentially
including prescription drugs.
Some of the provisions of the ACA have yet to be implemented, and
there have been judicial and Congressional challenges to certain
aspects of the ACA, as well as recent efforts by the Trump
administration to repeal or replace certain aspects of the ACA.
While Congress has not passed comprehensive repeal legislation,
bills affecting the implementation of certain taxes under the ACA
have been signed into law. The Tax Cuts and Jobs Act of 2017
includes a provision repealing, effective January 1, 2019,
the tax-based shared responsibility payment imposed by
the ACA on certain individuals who fail to maintain qualifying
health coverage for all or part of a year that is commonly referred
to as the “individual mandate.” Additionally, on January 22,
2018, President Trump signed a continuing resolution on
appropriations for fiscal year 2018 that delayed the implementation
of certain ACA-mandated fees, including
the so-called “Cadillac” tax on certain high cost
employer-sponsored insurance plans, the annual fee imposed on
certain health insurance providers based on market share, and the
medical device excise tax on non-exempt medical
devices.
Other legislative changes have been proposed and adopted since the
ACA was enacted, including aggregate reductions of Medicare
payments to providers of 2% per fiscal year and reduced payments to
several types of Medicare providers. Moreover, there has recently
been heightened governmental scrutiny over the manner in which
manufacturers set prices for their marketed products, which has
resulted in several Congressional inquiries and proposed and
enacted federal and state legislation designed to, among other
things, bring more transparency to product pricing, review the
relationship between pricing and manufacturer patient programs, and
reform government program reimbursement methodologies for drug
products. At the federal level, the Trump administration’s budget
proposal for fiscal year 2019 contains further drug price control
measures. While any proposed measures will require authorization
through additional legislation to become effective, Congress and
the Trump administration have each indicated that it will continue
to seek new legislative and/or administrative measures to control
drug costs At the state level, legislatures have increasingly
passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency
measures, and, in some cases, designed to encourage importation
from other countries and bulk purchasing.
33
U.S. Healthcare Fraud and
Abuse Laws and Compliance Requirements
Federal and state healthcare laws and regulations restrict business
practices in the pharmaceutical industry. The U.S. laws that may
affect our ability to operate include:
|
•
|
the federal
Anti-Kickback Statute, which prohibits, among other things, persons
from soliciting, receiving, offering or paying remuneration,
directly or indirectly, to induce, or in return for, the purchase
or recommendation of an item or service reimbursable under a
federal healthcare program, such as the Medicare and Medicaid
programs;
|
|
•
|
the federal civil and
criminal false claims laws and civil monetary penalty laws, which
prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for
payment from Medicare, Medicaid or other third-party payors that
are false or fraudulent;
|
|
•
|
HIPAA, which created
new federal criminal statutes that prohibit executing a scheme to
defraud any healthcare benefit program and making false statements
relating to healthcare matters;
|
|
•
|
HIPAA, as amended by
the federal Health Information Technology for Economic and Clinical
Health Act and its implementing regulations, also imposes certain
requirements relating to the privacy, security and transmission of
individually identifiable health information;
|
|
•
|
the federal Physician
Payments Sunshine Act, which among other things requires certain
manufacturers of drugs, devices, and biologics, that are
reimbursable by a federal healthcare program to report annually to
the U.S. Department of Health and Human Services information
related to payments and other transfers of value to physicians and
teaching hospitals, and ownership and investment interests held by
physicians and their immediate family members; and
|
|
•
|
similar federal laws
and state law equivalents of each of the above federal
laws.
|
Regulation Outside the United States
To the extent that any of our product candidates, once approved,
are sold in a foreign country, we may be subject to similar foreign
laws and regulations, which may include, for instance,
applicable post-marketing requirements, including safety
surveillance, anti-fraud and abuse laws and
implementation of corporate compliance programs and reporting of
payments or other transfers of value to healthcare
professionals.
In order to market our future products in the EEA and many other
foreign jurisdictions, we must obtain separate regulatory
approvals. More concretely, in the EEA, medicinal products can only
be commercialized after obtaining a Marketing Authorization, or MA.
There are two types of marketing authorizations:
|
•
|
the Community MA, which
is issued by the European Commission through the Centralized
Procedure, based on the opinion of the Committee for Medicinal
Products for Human Use of the EMA and which is valid throughout the
entire territory of the EEA. The Centralized Procedure is mandatory
for certain types of products, such as biotechnology medicinal
products, orphan medicinal products, advanced therapy products, and
medicinal products containing a new active substance indicated for
the treatment certain diseases, such as AIDS, cancer,
neurodegenerative disorders, diabetes, auto-immune and
viral diseases. The Centralized Procedure is optional for products
containing a new active substance not yet authorized in the EEA, or
for products that constitute a significant therapeutic, scientific
or technical innovation or which are in the interest of public
health in the EU; and
|
|
•
|
National MAs, which are
issued by the competent authorities of the Member States of the EEA
and only cover their respective territory, are available for
products not falling within the mandatory scope of the Centralized
Procedure. Where a product has already been authorized for
marketing in a Member State of the EEA, this National MA can be
recognized in another Member State through the Mutual Recognition
Procedure. If the product has not received a National MA in any
Member State at the time of application, it can be approved
simultaneously in various Member States through the Decentralized
Procedure.
|
34
Under the above described procedures, before granting the MA, the
EMA or the competent authorities of the Member States of the EEA
make an assessment of the risk-benefit balance of the
product on the basis of scientific criteria concerning its quality,
safety and efficacy.
Data and Marketing Exclusivity
In the EEA, new products authorized for marketing, or reference
products, qualify for eight years of data exclusivity and an
additional two years of market exclusivity upon marketing
authorization. The data exclusivity period prevents generic or
biosimilar applicants from relying on
the pre-clinical and clinical trial data contained in the
dossier of the reference product when applying for a generic or
biosimilar marketing authorization in the EU during a period of
eight years from the date on which the reference product was first
authorized in the EU. The market exclusivity period prevents a
successful generic or biosimilar applicant from commercializing its
product in the EU until 10 years have elapsed from the initial
authorization of the reference product in the EU.
The 10-year market exclusivity period can be extended to
a maximum of eleven years if, during the first eight years of those
10 years, the marketing authorization holder obtains an
authorization for one or more new therapeutic indications which,
during the scientific evaluation prior to their authorization, are
held to bring a significant clinical benefit in comparison with
existing therapies. In Japan, medicinal products approved for
administration to a patient via a new route of administration
qualify for six years of market exclusivity.
Clinical Trials
Clinical trials of medicinal products in the European Union must be
conducted in accordance with European Union and national
regulations and the International Conference on Harmonization, or
ICH, guidelines on GCPs. Additional GCP guidelines from the
European Commission, focusing in particular on traceability, apply
to clinical trials of advanced therapy medicinal products. If the
sponsor of the clinical trial is not established within the
European Union, it must appoint an entity within the European Union
to act as its legal representative. The sponsor must take out a
clinical trial insurance policy, and in most EU countries, the
sponsor is liable to provide “no fault” compensation to any study
subject injured in the clinical trial.
Prior to commencing a clinical trial, the sponsor must obtain a
clinical trial authorization from the competent authority, and a
positive opinion from an IEC. The application for a clinical trial
authorization must include, among other things, a copy of the trial
protocol and an investigational medicinal product dossier
containing information about the manufacture and quality of the
medicinal product under investigation. Currently, clinical trial
authorization applications must be submitted to the competent
authority in each EU Member State in which the trial will be
conducted. Under the new Regulation on Clinical Trials, which is
currently expected to take effect in 2019, there will be a
centralized application procedure where one national authority
takes the lead in reviewing the application and the other national
authorities have only a limited involvement. Any substantial
changes to the trial protocol or other information submitted with
the clinical trial applications must be notified to or approved by
the relevant competent authorities and ethics committees. Medicines
used in clinical trials must be manufactured in accordance with
cGMP. Other national and European Union-wide regulatory
requirements also apply.
Recycling
We started our business in 1976 as a used appliance retailer that
reconditioned old appliances to sell in our stores. Under
contracts with national and regional retailers of new appliances,
such as Sears Roebuck and Co. and Montgomery Ward Inc., we
collected the replaced appliance from the retailer’s customer’s
residence when one of their stores delivered a new appliance in the
Minneapolis/St. Paul, Miami, or Atlanta market. Any old appliances
that we could not sell in our stores were sold to scrap metal
processors. In the late 1980s, stricter environmental regulations
began to affect the disposal of unwanted appliances and we were no
longer able to take appliances that contained hazardous components
to a scrap metal processor. At that time, we began to develop
systems and equipment to remove the harmful materials so that metal
processors would accept the appliance shells for processing. We
then offered our services for disposing of appliances in an
environmentally sound manner to appliance manufacturers and
retailers, waste hauling companies, rental property managers, local
governments, and the public.
35
In 1989, we began contracting with electric utility companies to
provide turnkey appliance recycling services to support their
energy conservation efforts. Since that time, we have provided our
services to approximately 400 utilities and other providers of
energy efficiency programs throughout North America.
We currently have contracts to
recycle, or to replace and recycle, appliances for approximately
180 utilities across North America.
We have seen continued interest from sponsors of energy efficiency
initiatives that recognize the effectiveness of recycling and
replacing energy inefficient appliances. We are aggressively
pursuing electric, water, and gas utilities, public housing
authorities, and energy efficiency management companies going
forward and expect that we will continue to submit proposals for
various new appliance recycling and replacement programs
accordingly. However, for a variety of reasons, we still have a
limited ability to project revenues from utility programs. We
cannot predict recycling volumes or if we will be successful in
obtaining new contracts in the next fiscal year.
We operate 13 recycling centers in the U.S. and Canada to process
and recycle old appliances according to all federal, state,
provincial, and local rules and regulations. ARCA uses U.S. EPA
RAD-compliant methods to remove and properly manage hazardous
components and materials, including CFC refrigerants, mercury,
polyurethane foam insulation and recyclable materials, such as
ferrous and nonferrous metals, plastics, and glass. All of our
facilities comply with licensing and permitting requirements, and
employees who process appliances receive extensive safety and
hazardous materials training.
Major household appliances in the United States include:
Refrigerators
|
|
Clothes washers
|
Freezers
|
|
Clothes dryers
|
Ranges/ovens
|
|
Room air conditioners
|
Dishwashers
|
|
Dehumidifiers
|
Microwave ovens
|
|
Humidifiers
|
Improper disposal of old appliances threatens air, ground, and
water resources because many types of major appliances contain
substances that can damage the environment. These harmful materials
include:
|
1.
|
Mercury, which easily
enters the body through absorption, inhalation, or ingestion,
potentially causing neurological damage. Mercury-containing
components may be found in freezers, washers, and
ranges.
|
|
2.
|
Chlorofluorocarbon
(“CFC”), hydrochlorofluorocarbon, and hydrofluorocarbon
refrigerants (collectively, “Refrigerants”), which cause long-term
damage to the earth’s ozone layer and may contribute to global
climate change. Refrigerators, freezers, room air
conditioners, and dehumidifiers commonly contain
Refrigerants.
|
|
3.
|
CFCs, having a very
high ozone-depletion potential that may also be used as blowing
agents in the polyurethane foam insulation of refrigerators and
freezers.
|
|
4.
|
Other materials, such
as oil, that are harmful when released into the
environment.
|
The U.S. federal government requires the recovery of Refrigerants
upon appliance disposal and also regulates the management of
hazardous materials found in appliances. Most state and local
governments have also enacted laws affecting how their residents
dispose of unwanted appliances. For example, many areas restrict
landfills and scrap metal processors from accepting appliances
unless the units have been processed to remove environmentally
harmful materials. As a result, old appliances usually cannot
be discarded directly through ordinary solid waste systems.
In addition to these solid waste management and environmental
issues, energy conservation is another compelling reason for proper
disposal of old appliances. The U.S. Department of Energy’s updated
appliance energy efficiency standards that took effect in September
2014 require new refrigerators to be 25-to-30% more efficient than
those manufactured only one year earlier. Refrigerators
manufactured today use about one-fifth as much electricity as units
made in the mid-1970s.
36
While new refrigerators can save a significant amount of energy in
the home, more than 30%
of all U.S. households have a second refrigerator in the basement
or garage. These units are typically 15-to-25
years old and consume about 750 to 1500 kilowatt-hours per year,
driving electric bills up by more than $150 annually per
household.
Utilities have become important participants in dealing with energy
inefficient appliances as a way of reducing peak demand on their
systems and avoiding the capital and environmental costs of adding
new generating capacity. To encourage the permanent removal of
energy inefficient appliances from use, many electric utility
companies sponsor programs through which their residential
customers can retire working refrigerators, freezers, and room air
conditioners. Utility companies often provide assistance and
incentives for consumers to discontinue use of a surplus appliance
or to replace their old, inefficient appliances with newer, more
efficient models. To help accomplish this, some utilities offer
appliance replacement programs for some segments of their
customers, through which older model kitchen and laundry appliances
are recycled and new highly efficient ENERGY STAR® units
are installed.
The U.S. Environmental Protection Agency (the “EPA”) has been
supportive of efforts by electric utilities and other entities that
sponsor appliance recycling programs to ensure that the collected
units are managed in an environmentally sound manner. In October
2006, the EPA launched the Responsible Appliance Disposal (“RAD”)
Program, a voluntary partnership program designed to help protect
the ozone layer and reduce emissions of greenhouse gases. Through
the program, RAD partners use best practices to recover
ozone-depleting chemicals and other harmful materials from old
refrigerators, freezers, room air conditioners, and dehumidifiers.
Because of our appliance recycling expertise, we were active
participants in helping to design the RAD program and currently
submit annual reports to the EPA to document the environmental
benefits our utility customers that are RAD partners have achieved
through their recycling programs.
In October 2009, we entered into a Joint Venture Agreement (the
“Joint Venture Agreement”) with 4301 Operations, LLC (“4301”) to
establish and operate a regional processing center (“RPC”). At the
time of the formation of this joint venture, we believed that 4301
had significant experience in the recycling of major household
appliances and, in connection therewith, 4301 contributed its
then-existing business and equipment to the joint venture. Under
the Joint Venture Agreement, the parties formed a new entity known
as ARCA Advanced Processing, LLC (“AAP”), in which each party had a
50% interest. In connection with the formation of the joint
venture, we contributed $2.0 million to the joint venture. The
joint venture commenced operations on February 8, 2010. On August
15, 2017, ARCA entered into an Equity Purchase Agreement with 4301
and sold its 50% joint venture interest in AAP to 4301 in
consideration of $800,000 in cash. The gain recorded by ARCA was
$81,000. On the same date and in a separate, related
transaction, ARCA entered into an Asset Purchase Agreement with
Recleim PA, LLC (“Recleim”), and the other parties thereto. Under
the agreement, ARCA agreed to license certain intellectual property
under patent No. 8,931,289 to Recleim for use at 4301 North
Delaware Avenue, Philadelphia, Pennsylvania or any successor
facility within 15 miles of where Recleim conducts business. On
August 15, 2017, Recleim (i) paid in full all AAP indebtedness owed
to BB&T Bank in the amount of $3,454,000, (ii) terminated and
released all security interests in AAP and ARCA’s equipment as part
of Recleim’s purchase of certain equipment and assets from AAP on
the same date, and (iii) assumed approximately $768,000 in AAP
liabilities and all of ARCA’s liabilities to Haier US Appliance
Solutions, Inc., dba GE Appliances.
Our wholly-owned subsidiaries in our Recycling segment include,
ARCA Canada Inc., a Canadian corporation formed in September 2006,
ARCA Recycling, Inc., a California corporation formed in November
1991, and Customer Connexx, LLC, a Nevada limited liability company
formed in October 2016 that provides call center services for
recycling business.
Technology
On August 18, 2017, in a move to diversify our offering beyond our
then-current appliance recycling capabilities, the Company acquired
GeoTraq by way of merger. As a result of this transaction, GeoTraq
became a wholly-owned subsidiary of the Company. In connection with
this transaction, the Company tendered to the three owners of
GeoTraq $200,000, issued to them an aggregate of 288,588 shares of
the Company’s Series A Convertible Preferred Stock then valued at
$14,963,288 inclusive of the beneficial conversion feature, and
issued three separate one-year unsecured promissory notes for an
aggregate original principal amount of $800,000. These unsecured
promissory notes have been repaid in full. In addition, there was
$10,133,366 deferred tax liability associated with the purchase of
the intangible assets of GeoTraq. The total value of the intangible
assets purchased was $26,096,654, including the deferred tax
liability.
37
GeoTraq is a Mobile Internet of Things (“IoT”) technology company
that designs innovative wireless modules that provide Location
Based Services (“LBS”) and connect external sensors to the IoT.
GeoTraq is planning to manufacture and sell wireless transceiver
modules and subscription services that will allow connectivity
using publicly available global Mobile IoT networks. GeoTraq
addresses the large LBS market segment that is currently under
served with existing solutions due to high deployment costs
(hardware, service, logistics), limited battery life and large form
factors.
We believe that there is a large under-served portion of the LBS
market that is not addressed by existing solutions. RFID and Wi-Fi
require close proximity for asset tracking, while GPS is too bulky
and power hungry for many needs. GeoTraq addresses the white space
in-between by designing wireless transceiver modules with
technology that provides LBS directly from global Mobile IoT
networks. GeoTraq’s technology allows for a substantially lower
cost solution, extended service life, a small form
factor,
and even disposable devices, which we believe can significantly
reduce return logistics costs.
GeoTraq applied for and was granted Patent No. 10,182,402, which covers various
aspects of operation of its Mobile IoT wireless modules. A
description of the patent features includes:
|
1.
|
An apparatus
comprising: an interval timer; a power control; a Short Message
Service (SMS) packetizer; a geo-locator; a radio frequency (RF)
communicator; and a controller and a memory, the memory comprising
instructions for the controller to operate the interval timer
cooperatively with the power control to cause a transition of the
geo-locator from a sleep state to a wake state after a preset
defined time interval, and to operate the geo-locator to receive
signal strength levels and corresponding cell IDs from a plurality
of cellular base stations, and to operate the SMS packetizer to
package the signal strength levels and the corresponding cell IDs
into a first outgoing SMS message, and to communicate the first
outgoing SMS message to a preset address using the RF
communicator.
|
|
2.
|
The
apparatus of claim 1, further comprising: a subscriber identity
module (SIM); and the memory further comprising instructions to
block visibility to the SIM by the geo-locator for a limited
duration after the transition of the geo-locator from the sleep
state to the wake state after the defined time interval.
|
|
3.
|
The
apparatus of claim 2, further comprising: the memory further
comprising instructions to override a preset floor on the signal
strength levels during the limited duration after the transition of
the geo-locator from the sleep state to the wake state after the
defined time interval.
|
|
4.
|
The
apparatus of claim 1, further comprising: the memory further
comprising instructions to operate the SMS packetizer to package
the signal strength levels with the corresponding cell
IDs.
|
|
5.
|
The
apparatus of claim 1, further comprising: the memory further
comprising instructions to receive a command SMS message via the RF
communicator; a parser to extract a time interval command from the
received command SMS message; and the memory further comprising
instructions to apply the time interval command to the interval
timer to set the defined time interval.
|
|
6.
|
The
apparatus of claim 1, further comprising: the memory further
comprising instructions to receive a response SMS message via the
RF communicator, the response SMS message being a response to the
first outgoing SMS message; a parser to extract geo-locations for
cell IDs from the response SMS message; and the memory further
comprising instructions to associate the geo-locations for each of
the cell IDs from the response message with corresponding cell IDs
in the memory.
|
|
7.
|
A method
comprising: applying an interval timer to a power control to
control power for a subscriber identify module (SIM), a SMS
packetizer, a geo-locator, and a radio frequency (RF) communicator
after a preset defined time interval; operating the interval timer
cooperatively with the power control to cause a transition of the
geo-locator from a sleep state to a wake state after the defined
time interval; operating the geo-locator to receive signal strength
levels and corresponding cell ids from a plurality of cellular base
stations; operating the SMS packetizer to package the signal
strength levels and the corresponding cell IDs into an outgoing SMS
message; and communicating the outgoing SMS message to a preset
address using the RF communicator.
|
|
8.
|
The method
of claim 7, further comprising: blocking visibility to the SIM by
the geo-locator for a limited duration after the
transition.
|
|
9.
|
The method
of claim 8, further comprising: overriding a preset floor on the
signal strength levels during the limited duration after the
transition.
|
38
|
10.
|
The method
of claim 7, further comprising: receiving a command SMS message via
the RF communicator; extracting a time interval command from the
command SMS message; and applying the time interval command to the
interval timer to set the defined time interval.
|
|
11.
|
The method
of claim 7, further comprising: receiving a response SMS message
via the RF communicator in response to the outgoing SMS message;
extracting geo-locations for cell IDs from the response SMS
message; and associating the geo-locations for each of the cell ids
from the response SMS message with corresponding cell IDs in a
memory.
|
With the GeoTraq acquisition, we expect to have the ability to
deploy IoT devices to locate, monitor and track the movement of
inventory and other assets and monitor connected
sensors. Our GeoTraq subsidiary has not generated any
revenue to date, including in the fiscal year ended December 28,
2019.
ApplianceSmart, Inc.
Prior to December 30, 2017, we sold new and out-of-the-box major
household appliances in the United States though a chain of
Company-owned retail stores operating under the name
ApplianceSmart®. On
December 30, 2017, we, together with our then-subsidiary,
ApplianceSmart, Inc. (“ApplianceSmart”), entered into a Stock
Purchase Agreement (the “Stock Purchase Agreement”) with
ApplianceSmart Holdings LLC (the “Purchaser”), a wholly-owned
subsidiary of Live Ventures Incorporated (Nasdaq: Live), pursuant
to which we sold to the Purchaser all of the issued and outstanding
shares of capital stock of ApplianceSmart (the “ApplianceSmart
Stock”) in exchange for $6.5 million. Effective April 1, 2018, the
Purchaser issued the Company a promissory note (the “ApplianceSmart
Note”) with a three-year term in the original principal amount of
$3.9 million for the balance of the purchase price. ApplianceSmart
is guaranteeing the repayment of the ApplianceSmart Note. On
December 26, 2018, the ApplianceSmart Note was amended and restated
to grant ARCA a security interest in the assets of the Purchaser,
ApplianceSmart, and ApplianceSmart Contracting Inc. in exchange for
modifying the repayment terms to provide for the payment in full of
all accrued interest and principal on April 1, 2021, the maturity
date of the ApplianceSmart Note. On March 15, 2019, JanOne entered
into subordination agreements with third parties, pursuant to which
it agreed to subordinate the payment of indebtedness under the
ApplianceSmart Note and its security interest in the assets of
ApplianceSmart and other related parties in exchange for receipt of
a payment of up to $1.2 million within 15 days of the subordination
agreement. On December 9,
2019, ApplianceSmart filed a voluntary petition (the “Chapter 11
Case”) in the United States Bankruptcy Court for the Southern
District of New York (the “Bankruptcy Court”), seeking relief under
Chapter 11 of Title 11 of the United States Code (the “Bankruptcy
Code”). As of December 28, 2019, indebtedness owed by
ApplianceSmart to JanOne is approximately $2.9
million. However, JanOne has recorded a full valuation
allowance for the entire amount of the indebtedness due to the
uncertainty of repayment.
Customers and Source of Supply for Recycling and Technology
Recycling:
We contract with utility companies
or their program administrators and other sponsors of energy
efficiency programs to provide a full range of appliance recycling
and replacement services to help them achieve their energy savings
goals. The contracts usually have terms of one-to-three years, with
provisions for renewal at the option of the utility. Under some
contracts, we manage all aspects, including advertising of the
appliance recycling or replacement program. Under other contracts,
we provide only specified services, such as collection and
recycling.
Our contracts with utility customers prohibit us from repairing and
selling appliances or appliance parts we receive through their
programs. We have instituted tracking and auditing procedures to
assure our customers that those appliances do not return to
use.
Our pricing for energy efficiency program contracts is generally on
a per-appliance basis and depends upon several factors,
including:
|
1.
|
Total number of
appliances expected to be processed and/or replaced.
|
|
2.
|
Length of the contract
term.
|
|
3.
|
Specific services the
utility requires us to provide.
|
|
4.
|
Market factors,
including labor rates and transportation costs.
|
39
|
5.
|
Anticipated revenue
associated with the sale of recycled appliance
byproducts.
|
|
6.
|
Competitive bidding
scenarios.
|
GeoTraq: GeoTraq currently has no customers. GeoTraq
sources its raw materials, including electronic chips,
computers, and software from various third
parties. GeoTraq is dependent on a single supplier for its
modules.
Principal Products and Services for Recycling and Technology
At December 28, 2019, we generated revenues from two sources:
recycling and byproducts. Recycling revenues were generated by
charging fees for collecting and recycling appliances for utilities
and other sponsors of energy efficiency programs and through the
sale of new ENERGY STAR®
appliances to utility companies for installation in the homes of a
specific segment of their customers. Byproduct revenues were
generated by selling scrap materials, such as metal and plastics,
from appliances we collected and recycled.
During fiscal year 2019, we operated three reportable segments:
biotechnology, recycling, and technology. During fiscal year 2018,
we operated two reportable segments: recycling and technology
(commencing on August 18, 2017). Our recycling segment
includes all fees charged for collecting, recycling, and installing
appliances for utilities and other customers and includes byproduct
revenue, which is generated primarily through the recycling of
appliances. Our technology segment is engaged in the development,
design, and ultimately, we expect, the sale of cellular transceiver
modules, also known as Mobile IoT modules.
Seasonality for Recycling and Technology
Promotional activities for programs in which the utility sponsor
conducts all advertising are generally strong during the second and
third calendar quarters, leading to higher customer demand for
services during that time period. As a result, we experience
a surge in business during the second and third calendar quarters,
which generally declines through the fourth and first calendar
quarters until advertising activities resume.
Our technology segment did not have any customers at December 28,
2019.
Competition for Recycling and Technology
Recycling:
Many factors, including obtaining adequate resources to create and
support the infrastructure required to operate large-scale
appliance recycling and replacement programs, affect competition in
the industry. We generally compete for contracts with several other
appliance recycling businesses, energy services management
companies, and new-appliance retailers. We also compete with small
hauling or recycling companies that are based in the program’s
service territory. Many of these companies, including
used-appliance dealers that call themselves “appliance recyclers,”
resell in the secondary market a percentage of the used appliances
they accept for recycling. The unsalable units may not be properly
processed to remove environmentally harmful materials because these
companies do not have the capability to offer the full range of
services we provide.
We expect our primary competition for appliance recycling and
replacement contracts with existing and new customers to come from
a variety of sources, including:
|
1.
|
Existing recycling
companies.
|
|
2.
|
Entrepreneurs entering
the appliance recycling business.
|
|
3.
|
Management
consultants.
|
|
4.
|
Major waste hauling
companies.
|
|
5.
|
Scrap metal
processors.
|
|
6.
|
National and regional
new appliance retailers.
|
40
In addition, utility companies and other customers may choose to
provide all or some of the services required to operate their
appliance recycling and replacement programs internally rather than
contracting with outside vendors. We have no assurance that we will
be able to compete profitably in any of our chosen markets.
Technology
GeoTraq plans on operating in an industry segment that is made of
numerous competing technologies designed to connect devices to the
IoT. The business’s wireless solution uses IoT based on LTE CAT-M
and the newly released NB-IoT protocols that were defined in the
GSMA’s (Groupe Speciale Mobile Association) 3GPP Release 13
standard. The Mobile IoT industry utilizes radio spectrum that is
licensed to wireless carries by various governmental regulatory
agencies around the world. Mobile IoT is extremely competitive and
constantly changing as carriers, manufacturers, and solution
providers offer innovation to the IoT marketplace. GeoTraq believes
there is a large under-served opportunity for “Simple IoT” solutions that
significantly reduce the complexity, cycle time and cost of
deploying LBS and sensor monitoring solutions. The company’s
transceiver modules and associated wireless connectivity
subscription service is specifically targeted at accomplishing
these objectives.
Government Regulation for Recycling and Technology
Recycling
Federal, state, and local governments regulate appliance
collection, recycling, and sales activities. While some
requirements apply nationwide, others vary by market. The many laws
and regulations that affect appliance recycling include landfill
disposal restrictions, hazardous waste management requirements, and
air quality standards. For example, the 1990 Amendments to the
Clean Air Act prohibit the venting of all Refrigerants while
servicing or disposing of appliances.
Each of our recycling facilities maintains the appropriate
registrations, permits, and licenses for operating at its location.
We register our recycling centers as hazardous waste generators
with the EPA and obtain all appropriate regional and local licenses
for managing hazardous wastes. Licensed hazardous waste companies
transport and recycle or dispose of the hazardous materials we
generate. Our collection vehicles and our transportation employees
are required to comply with all U.S. Department of Transportation
(“DOT”) licensing requirements.
Approximately 30 of ARCA Recycling’s clients participate in the
EPA’s voluntary RAD program by committing to employ best
environmental practices to reduce emissions of ozone-depleting
substances and greenhouse gases through the proper disposal of
refrigeration appliances at end of life. We prepare annual RAD
reports that quantify the materials collected to submit to EPA on
behalf of our clients.
Although we believe that further governmental regulation of the
appliance recycling industry could have a positive effect on us, we
cannot predict the direction of future legislation. Under some
circumstances, for example, further regulation could materially
increase our operational costs or reduce environmental requirements
for disposing of appliances at end of life. In addition, under some
circumstances we may be subject to contingent liabilities because
we handle hazardous materials. We believe we are in compliance with
all government regulations regarding the handling of hazardous
materials, and we have environmental insurance to mitigate the
impact of any potential contingent liability.
Technology
GeoTraq’s Mobile IoT modules utilize low-power wireless
transmitters that emit RF energy waves, which are subject to
regulation by the Federal Communications Commission (“FCC”) and may
be subject to regulation by other domestic and international
agencies. GeoTraq believes that FCC rules Part 15, Part 20, Part
22, Part 24, and Part 27 may apply to the company’s products.
GeoTraq believes that its products are safe and will utilize FCC
accredited testing laboratories to verify and certify that its
modules comply with all required regulatory requirements. In
addition, GeoTraq intends to seek and obtain necessary licenses and
permits from the FCC and other regulatory agencies as required by
law.
41
SELECTED
CONSOLIDATED FINANCIAL DATA
The following tables set forth selected consolidated financial data
for the periods ended or as of the dates indicated. Such historical
consolidated financial data should be read in conjunction with the
information set forth in our Annual Report on Form 10-K for the
year ended December 28, 2019, filed with the SEC on April 6, 2020
and incorporated herein by reference.
The statement of operations data presented below for each of the
years ended December 28, 2019 and December 29, 2018, and the
balance sheet data as of December 28, 2019 and December 29, 2018,
are derived from the audited “Consolidated Financial Statements”
contained in our Annual Report on Form 10-K for the year ended
December 28, 2019. Our historical results are not necessarily
indicative of the results to be expected for any future
periods.
(in thousands, except for loss per share)
|
|
For the 52-Week Period Ended
|
|
Statement of Operations Data
|
|
December 28, 2019
|
|
|
December 29, 2018
|
|
Revenues
|
|
$
|
35,097
|
|
|
$
|
36,794
|
|
Cost of revenues
|
|
|
27,311
|
|
|
|
25,741
|
|
Gross profit
|
|
|
7,786
|
|
|
|
11,053
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
20,217
|
|
|
|
17,150
|
|
Operating loss
|
|
|
(12,431
|
)
|
|
|
(6,097
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(1,480
|
)
|
|
|
(668
|
)
|
Impairment charges
|
|
|
(2,992
|
)
|
|
|
—
|
|
Gain on litigation settlement
|
|
|
694
|
|
|
|
—
|
|
Other income, net
|
|
|
1,048
|
|
|
|
430
|
|
Total other expense, net
|
|
|
(2,730
|
)
|
|
|
(238
|
)
|
Loss from operations before benefit from income taxes
|
|
|
(15,161
|
)
|
|
|
(6,335
|
)
|
Income tax benefit
|
|
|
3,197
|
|
|
|
727
|
|
Net loss
|
|
$
|
(11,964
|
)
|
|
$
|
(5,608
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(6.78
|
)
|
|
$
|
(3.75
|
)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
1,763,670
|
|
|
|
1,494,941
|
|
|
|
December 28, 2019
|
|
|
December 29, 2018
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
29,034
|
|
|
$
|
35,040
|
|
Current liabilities
|
|
|
17,573
|
|
|
|
9,684
|
|
Long term liabilities
|
|
|
1,120
|
|
|
|
3,745
|
|
Total stockholders' equity
|
|
|
10,341
|
|
|
|
21,611
|
|
42
DESCRIPTION OF
SECURITIES WE MAY OFFER
We may issue from time to time, in one or more offerings the
following securities:
•
|
shares of Common
Stock;
|
•
|
shares of Preferred
Stock, which may be convertible into shares of Common
Stock;
|
•
|
debt securities, which
may be senior or subordinated and may be convertible into or
exchangeable for shares of Common Stock or shares of Preferred
Stock;
|
•
|
warrants exercisable
for debt securities, shares of Common Stock, or shares of Preferred
Stock;
|
•
|
rights to purchase any
of such securities; and
|
•
|
units composed of our
debt securities, shares of Common Stock, shares of Preferred Stock,
and warrants, in any combination.
|
This prospectus contains a summary of the material general terms of
the various securities that we may offer. The specific terms of the
securities will be described in a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, which may be in
addition to or different from the general terms summarized in this
prospectus. Where applicable, the prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials will also describe
any material United States federal income tax considerations
relating to the securities offered and indicate whether the
securities offered are or will be listed on any securities
exchange. The summaries contained in this prospectus and in any
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials, as applicable, may not contain all of the information
that you would find useful. Accordingly, you should read the actual
documents relating to any securities sold pursuant to this
prospectus. See “Available Information” and “Incorporation of
Certain Information by Reference” for information about how to
obtain copies of those documents.
The terms of any particular offering, the initial offering price,
and the net proceeds to us will be contained in the prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials, as
applicable, relating to such offering.
43
DESCRIPTION OF CAPITAL
STOCK
The following summary of terms of our Common Stock and our
Preferred Stock is based upon our Articles of Incorporation (our
“Charter”) and Bylaws (our “Bylaws”), currently in effect, and
under Chapter 78 of the Nevada Revised Statutes (the “NRS”). This
summary is not complete and is subject to, and qualified in its
entirety by reference to, our Charter and our Bylaws. For a
complete description of the terms and provisions of our Common
Stock, please refer to our Charter and Bylaws, which are filed as
exhibits to Registration Statement of which this prospectus forms a
part. Throughout this section, references to “we,” “our,” and “us”
refer to JanOne Inc. and its subsidiaries. We encourage
you to carefully read these documents and the applicable provisions
of the NRS.
General
Our authorized capital stock consists of 10,000,000 shares of
Common Stock and 2,000,000 shares of Preferred Stock, of which
259,729 shares are designated as Series A-1 Convertible Preferred
Stock, par value $0.001 per share.
As of December 15, 2020, we had
1,829,982 shares of
our Common Stock issued and outstanding and 259,729 shares of our
Series A-1 Preferred Stock issued and outstanding.
The authorized and unissued shares of Common Stock and Preferred
Stock are available for issuance without further action by our
stockholders, unless such action is required by applicable law or
the rules of any stock exchange on which our securities may then be
listed. Unless approval of our stockholders is so required, our
Board of Directors (our “Board”) does not currently intend to seek
stockholder approval for the issuance and sale of our Common
Stock.
All of our issued and outstanding shares of our capital stock are
fully paid and
non-assessable.
Common Stock
Voting, Dividend, and Liquidation Rights
Each holder of our Common Stock is entitled to one vote for each
share issued and outstanding held on all matters to be voted upon
by the stockholders. Our Charter does not provide for cumulative
voting in the election of directors. Subject to the
rights of the holders of the Series A-1 Preferred Stock to their
preferential dividend in accordance with the provisions of our
Charter, the holders of shares of our Common Stock and Series A-1
Preferred Stock (on an as-if-converted to Common Stock basis in
accordance with the terms of our Charter) will be entitled to such
cash dividends as may be declared from time to time by our Board
from funds available therefor. Upon liquidation, dissolution, or
winding up of the Company, and after all liquidation preferences
payable to any series of Preferred Stock entitled thereto have been
satisfied, our remaining assets shall be distributed to all holders
of Common Stock and any similarly situated stockholders who are not
entitled to any liquidation preference or, if there be an
insufficient amount to pay all such stockholders, then ratably
among such holders.
Preemptive or Other Rights
Our shares of Common Stock do not have any preemptive, conversion,
or redemption rights.
Stockholder Action; Special Meetings
Stockholders’ actions can only be taken at an annual or special
meeting of our stockholders. Our Bylaws provide that special
meetings of the stockholders may be called at any time only by (i)
our Chief Executive Officer, (ii) two of the members of the Board,
or (iii) upon a written request of stockholders holding 10% or more
of the capital stock entitled to vote.
Board of Directors; Removal; Vacancies
Our Bylaws specify that the number of directors is to be determined
by a majority vote of the Board. Our Board is currently composed of
five directors. We do not have a classified Board. Pursuant to our
Bylaws and the NRS, a director serves until the regular
meeting next following or closely coinciding with the expiration of
his or her term of office and until his or her successor has
been elected and qualified, or until his or her earlier death,
removal, or resignation.
44
Limitation of Liability and Indemnification
Our Charter provides that none of our directors and officers shall
be personally liable to us or our stockholders for damages for
breach of fiduciary duty as a director or officer, except for
liability for (i) acts or omissions that involve intentional
misconduct, fraud, or knowing violation of law or (ii) for
authorizing any distribution in violation of Section 78.300 of the
NRS. Our Bylaws provide that any officer or director who is made a
party or witness to an action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact
that he or she is or was one of our directors or officers or
serving at our request as a director, officer, employee, or agent,
shall be indemnified and held harmless by us to the fullest extent
authorized by the NRS. The right to indemnification shall include
the right of advancement of expenses to the extent permitted under
the NRS.
Listing and Transfer Agent
Our Common Stock is listed on The Nasdaq Capital Market under the
symbol “JAN.” The transfer agent and registrar for our Common Stock
is EQ Shareowner Services.
Series A-1 Convertible Preferred Stock
In connection with the
Company’s acquisition of GeoTraq, the Company issued to the
then stockholders of GeoTraq, among other consideration, an
aggregate of 288,588 shares of the Company’s Series A Convertible
Preferred Stock (the “Series A Preferred Stock”). To
accomplish the designation and issuance of the Series A
Preferred Stock, we filed a Certificate of Designation with
the Secretary of State of the State of Minnesota. On November 9,
2017, we filed a Certificate of Correction with the Minnesota
Secretary of State. In connection with our reincorporation from the
State of Minnesota to the State of Nevada in March 2018, we filed
Articles of Incorporation with the Secretary of State of the State
of Nevada on March 12, 2018, and a Certificate of Correction with
the Secretary of State of the State of Nevada on August 7, 2018
(collectively, the “Nevada Articles of
Incorporation”). On June 21, 2019, we filed a
Certificate of Designation (the “Series A-1 Certificate of
Designation”) of Powers, Preferences, and Rights of Series A-1
Convertible Preferred Stock (the “Series A-1 Preferred Stock”) with
the Nevada Secretary of State. On October 1, 2020, we filed an
Amended and Restated Certificate of Designation (the “Amended and
Restated Series A-1 Certificate of Designation”) of Powers,
Preferences, and Rights of Series A-1 Convertible Preferred
Stock with the Nevada Secretary of State. The
following summary of the Nevada Articles of Incorporation and
Amended and Restated Series A-1 Certificate of Designation does not
purport to be complete and is qualified in its entirety by
reference to the provisions of applicable law and to the Nevada
Articles of Incorporation and the Amended and Restated Series A-1
Certificate of Designation, which were initially filed as Exhibit
3.3 to the Company’s Current Report on Form 8-K, filed with the SEC
on March 13, 2018, and as Exhibit 3.8(a) to the
Company’s Current
Report on Form 8-K, filed with the SEC on October 2, 2020,
respectively.
The Series A-1 Preferred
Stock was designated pursuant to guidance received from Nasdaq and
has virtually all of the same rights, characteristics, and
attributes as the Company’s Series A Preferred Stock, except as
required by the Listing Qualifications staff of The Nasdaq Stock
Market LLC (i.e.,
Section 3.2.5 in respect of voting rights of the Series A-1
Preferred Stock and Section 3.2.1(f) in respect of a Triggering
Event, as such term is defined therein, and the formula to be
applied in connection therewith), with respect to each of which
requirements the Company has already been in compliance. The filing
of the Series A-1 Certificate of Designation was unanimously
approved by the Board of Directors on June 18, 2019. The
affirmative approval of a majority of the holders of the Series A
Preferred Stock for the exchange of such shares into shares of
Series A-1 Preferred Stock occurred on or about June 19, 2019. The
three holders of our Series A Preferred Stock were deemed to have
exchanged their outstanding shares of Series A Preferred Stock for
an equivalent number of shares of Series A-1 Preferred Stock, or an
aggregate of 259,729 shares. The filing of the Amended
and Restated Series A-1 Certificate of Designation was unanimously
approved by the Board of Directors and by a majority of the holders
of the Series A-1 Preferred Stock on October 1,
2020.
Dividends
We cannot declare, pay, or set aside any dividends on shares of any
other class or series of our capital stock unless (in addition to
the obtaining of any consents required by our Articles of
Incorporation) the holders of the Series A-1 Preferred Stock then
outstanding shall first receive, or simultaneously receive, a
dividend in the aggregate amount of
45
$1.00, regardless of the number of then-issued and outstanding
shares of Series A-1
Preferred Stock. Any remaining dividends allocated by the Board of
Directors shall be distributed in an equal amount per share to the
holders of outstanding
Common Stock
and Series A-1
Preferred Stock (on an as-if-converted to
Common Stock
basis pursuant to the Conversion Ratio as defined
below).
Conversion
The shares of Series A-1 Preferred Stock have conversion rights
into an aggregate of 85.0% of GeoTraq, Inc., currently a
wholly-owned subsidiary of the Company.
Redemption
The shares of Series A-1
Preferred Stock have no redemption rights.
Preemptive Rights
Holders of shares of Series
A-1 Preferred Stock are not entitled to any preemptive
rights in respect to any securities of the Company, except as set
forth in the Series A-1 Certificate of Designation or any other
document agreed to by us.
Voting Rights
Each holder of a share of Series A-1 Preferred Stock has
that number of votes as is determined by multiplying (i) the number
of shares of Series A Preferred Stock held by such holder and (ii)
17. The holders of Series
A-1 Preferred Stock vote together with all other classes and
series of Common Stock and Preferred Stock of the Company as a
single class on all actions to be taken by the holders of Common
Stock of the Company, except to the extent that voting as a
separate class or series is required by law.
Protective Provisions
Without first obtaining the affirmative approval of a majority of
the holders of the shares of Series A-1 Preferred Stock, we
may not directly or indirectly (i) increase or decrease (other than
by redemption or conversion) the total number of authorized shares
of Series A-1 Preferred
Stock; (ii) effect an exchange, reclassification, or
cancellation of all or a part of the Series A-1 Preferred Stock, but
excluding a stock split or reverse stock split or combination of
the Common Stock or preferred stock; (iii) effect an exchange, or
create a right of exchange, of all or part of the shares of another
class of shares into shares of Series A-1 Preferred Stock; or
(iv) alter or change the rights, preferences, or privileges of
the shares of Series A-1
Preferred Stock so as to affect adversely the shares of such
series, including the rights set forth in the Series A-1
Certificate of Designation; provided, however, that we may, without any vote
of the holders of shares of the Series A-1 Preferred Stock, make
technical, corrective, administrative, or similar changes to the
Series A-1 Certificate of Designation that do not, individually or
in the aggregate, materially adversely affect the rights or
preferences of the holders of shares of the Series A-1 Preferred Stock.
Anti-Takeover Effects of Certain Provisions of our Charter, our
Bylaws, and the NRS
Certain provisions of the NRS and our Charter and Bylaws could make
more difficult the acquisition of us by means of a tender offer or
otherwise, and the removal of incumbent officers and directors.
These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of us.
Business Combinations
The “business combination” provisions of Sections 78.411 to 78.444,
inclusive, of the NRS prohibit a Nevada corporation with at least
200 stockholders (at least 100 of whom are stockholders of record
and residents of the State of Nevada) from engaging in various
“combination” transactions with any interested stockholder for a
period of three years after the date of the transaction in which
the person became an interested stockholder, unless the
46
transaction is approved by the entity’s board of directors prior to
the date the interested stockholder obtained such status; or after
the expiration of the three-year period, unless:
|
•
|
the transaction is approved by the
entity’s board of directors or a majority of the voting power held
by disinterested stockholders of the entity, or
|
|
•
|
if the consideration to be paid by
the interested stockholder is at least equal to the highest of:
(a) the highest price per share paid by the interested
stockholder within the three years immediately preceding the date
of the announcement of the combination or in the transaction in
which it became an interested stockholder, whichever is higher, (b)
the market value per share of common stock on the date of
announcement of the combination and the date the interested
stockholder acquired the shares, whichever is higher, or (c) for
holders of preferred stock, the highest liquidation value of the
preferred stock, if it is higher.
|
A “combination” is defined to include mergers or consolidations or
any sale, lease exchange, mortgage, pledge, transfer, or other
disposition, in one transaction or a series of transactions, with
an “interested stockholder” having: (a) an aggregate market value
equal to 5% or more of the aggregate market value of the assets of
the corporation, (b) an aggregate market value equal to 5% or more
of the aggregate market value of all outstanding shares of the
corporation, or (c) 10% or more of the earning power or net income
of the corporation.
In general, an “interested stockholder” is a person who, together
with affiliates and associates, owns (or within three years, did
own) 10% or more of an entity’s voting stock. The statute could
prohibit or delay mergers or other takeover or change in control
attempts and, accordingly, may discourage attempts to acquire us
even though such a transaction may offer our stockholders the
opportunity to sell their stock at a price above the prevailing
market price.
Acquisitions of Controlling Interest
Nevada’s “acquisition of controlling interest” statutes (NRS 78.378
through 78.3793, inclusive) contain provisions governing the
acquisition of a controlling interest in certain Nevada
corporations. These “control share” laws provide generally that any
person who acquires a “controlling interest” in certain Nevada
corporations may be denied voting rights, unless a majority of the
disinterested stockholders of the corporation elects to restore
such voting rights. These laws would apply to us as of a particular
date if we were to have 200 or more stockholders of record (at
least 100 of whom have addresses in Nevada appearing on our stock
ledger at all times during the 90 days immediately preceding that
date) and do business in the State of Nevada directly or through an
affiliated corporation, unless our Charter or Bylaws in effect on
the tenth day after the acquisition of a controlling interest
provide otherwise. These laws provide that a person acquires a
“controlling interest” whenever a person acquires shares of a
subject corporation that, but for the application of these
provisions of the NRS, would enable that person to exercise (1)
one-fifth or more, but less than one-third, (2) one-third or more,
but less than a majority, or (3) a majority or more of all of the
voting power of that corporation in the election of its directors.
Once an acquirer crosses one of these thresholds, shares that it
acquired in the transaction that took it over the threshold and
shares that it acquired within the 90 days immediately preceding
the date when it acquired or offered to acquire a controlling
interest become “control shares” to which the voting restrictions
described above apply.
47
DESCRIPTION OF
PREFERRED STOCK
Shares of our Preferred Stock may be issued in one or more series,
and our Board is authorized to determine the designation and to fix
the number of shares of each series. Our Board is further
authorized to fix and determine the dividend rate, premium or
redemption rates, conversion rights, voting rights, preferences,
privileges, restrictions, and other variations granted to or
imposed upon any wholly unissued series of our Preferred Stock.
Prior to the issuance of shares of a series of Preferred Stock, our
Board will adopt resolutions and file a certificate of designation
with the Secretary of State of the State of Nevada. The certificate
of designation will fix for each series the designation and number
of shares and the rights, preferences, privileges, and restrictions
of the shares including, but not limited to, the following:
•
|
the voting rights, if
any, of the Preferred Stock;
|
•
|
any rights and terms of
redemption;
|
•
|
the dividend rate(s),
period(s), and/or payment date(s) or method(s) of calculation
applicable to the Preferred Stock;
|
•
|
whether dividends are
cumulative or non-cumulative and, if cumulative, the date from
which dividends on the Preferred Stock will accumulate;
|
•
|
the relative ranking
and preferences of the preferred stock as to dividend rights and
rights upon the liquidation, dissolution, or winding up of our
affairs;
|
•
|
the terms and
conditions, if applicable, upon which the Preferred Stock will be
convertible into Common Stock, another series of Preferred Stock,
or any other class of securities, including the conversion price
(or manner of calculation) and conversion period;
|
•
|
the provision for
redemption, if applicable, of the Preferred Stock;
|
•
|
the provisions for a
sinking fund, if any, for the Preferred Stock;
|
•
|
the liquidation
preferences, if any, for the Preferred Stock;
|
•
|
any limitations on the
issuance of any class or series of Preferred Stock ranking senior
to or on a parity with the class or series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution, or
winding up of our affairs; and
|
•
|
any other specific
terms, preferences, rights, limitations, or restrictions of the
Preferred Stock.
|
In addition to the terms listed above, we will set forth in a
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials, as applicable, the following terms relating to the
series of Preferred Stock being offered:
•
|
the number of shares of
the preferred stock offered, the liquidation preference per share,
the conversion rights, and the offering price of the Preferred
Stock;
|
•
|
the procedures for any
auction and remarketing, if any, for the Preferred
Stock;
|
•
|
any listing of the
Preferred Stock on any securities exchange; and
|
•
|
a discussion of any
material and/or special United States federal income tax
considerations applicable to the Preferred Stock.
|
48
DESCRIPTION OF DEBT
SECURITIES
The following description, together with the additional information
we include in any applicable prospectus supplements or any related
free writing prospectus or other offering materials, as applicable,
summarizes the material terms and provisions of the debt securities
that we may offer under this prospectus. While the terms we have
summarized below will apply generally to any future debt securities
we may offer pursuant to this prospectus, we will describe the
particular terms of any debt securities that we may offer in more
detail in the applicable prospectus supplement. If we so indicate
in a prospectus supplement, the terms of any debt securities
offered under such prospectus supplement may differ from the terms
we describe below, and to the extent the terms set forth in a
prospectus supplement differ from the terms described below, the
terms set forth in the prospectus supplement or any related free
writing prospectus or other offering materials, as applicable,
shall control.
We may sell from time to time, in one or more offerings under this
prospectus, debt securities, in one or more series. These debt
securities that we may issue include senior debt securities, senior
subordinated debt securities, subordinated debt securities,
convertible debt securities, and exchangeable debt securities. We
will issue any such senior debt securities under a senior indenture
that we will enter into with a trustee to be named in the senior
indenture. We will issue any such subordinated debt securities
under a subordinated indenture, which we will enter into with a
trustee to be named in the subordinated indenture. We use the term
“indentures” to refer to either the senior indenture or the
subordinated indenture, as applicable. The indentures will be
qualified under the Trust Indenture Act of 1939, as
amended (the “Trust Indenture Act”), as in effect on the date
of the indenture. We use the term “debenture trustee” to refer to
either the trustee under the senior indenture or the trustee under
the subordinated indenture, as applicable.
The following summary description, together with the additional
information we may include in any applicable prospectus supplement,
information or document
incorporated by reference, related free writing prospectus, or
other offering materials, as applicable, does not purport to be
complete and is subject to, and qualified in its entirety by
reference to, the form of indenture filed as an exhibit to the
Registration Statement of which the prospectus is a part, as it may
be supplemented, amended, or modified from time to time, as well as
the notes and supplemental agreement relating to each series of
debt securities that will be incorporated by reference as exhibits
to the Registration Statement that includes the prospectus or as
exhibits to a Current Report on Form 8-K if we offer debt
securities.
General
The indenture does not limit the amount of debt securities that may
be issued thereunder, and each indenture provides that the specific
terms of any series of debt securities shall be set forth in, or
determined pursuant to, an authorizing resolution and/or a
supplemental indenture, if any, relating to such series.
We may issue the debt securities issued under the indentures as
“discount securities,” which means they may be sold at a discount
below their stated principal amount. These debt securities, as well
as other debt securities that are not issued at a discount, may be
issued with “original issue discount,” or “OID,” for U.S. federal
income tax purposes because of interest payment and other
characteristics or terms of the debt securities. Material U.S.
federal income tax considerations applicable to debt securities
issued with OID will be described in more detail in any applicable
prospectus supplement.
We will describe in the applicable prospectus supplement, the
related free writing prospectus, or other offering materials, as
applicable, the terms of the series of debt securities being
offered, including:
|
•
|
the title or
designation;
|
|
•
|
the aggregate principal
amount and any limit on the aggregate principal amount that may be
issued;
|
|
•
|
the maturity date or
dates on which principal will be payable;
|
|
•
|
the form of the debt
securities of the series;
|
49
|
•
|
the applicability of
any guarantees;
|
|
•
|
whether or not the debt
securities will be secured or unsecured, and the terms of any
secured debt;
|
|
•
|
whether the debt
securities rank as senior debt, senior subordinated debt,
subordinated debt, or any combination thereof, and the terms of any
subordination;
|
|
•
|
if the price (expressed
as a percentage of the aggregate principal amount thereof) at which
such debt securities will be issued is a price other than the
principal amount thereof, the portion of the principal amount
thereof payable upon declaration of acceleration of the maturity
thereof, or, if applicable, the portion of the principal amount of
such debt securities that is convertible into another security or
the method by which any such portion shall be
determined;
|
|
•
|
the interest rate or
rates, which may be fixed or variable, or the method for
determining the rate and the date interest will begin to accrue,
the dates interest will be payable, and the regular record dates
for interest payment dates or the method for determining such
dates;
|
|
•
|
our right, if any, to
defer payment of interest and the maximum length of any such
deferral period;
|
|
•
|
if applicable, the date
or dates after which, or the period or periods during which, and
the price or prices at which, we may, at our option, redeem the
series of debt securities pursuant to any optional or provisional
redemption provisions and the terms of those redemption
provisions;
|
|
•
|
the date or dates, if
any, on which, and the price or prices at which we are obligated,
pursuant to any mandatory sinking fund or analogous fund provisions
or otherwise, to redeem, or at the holder’s option to purchase, the
series of debt securities and the currency or currency unit in
which the debt securities are payable;
|
|
•
|
the denominations in
which we will issue the series of debt securities, if other than
denominations of $1,000 and any integral multiple
thereof;
|
|
•
|
the place or places
where payments will be payable;
|
|
•
|
whether the debt
securities of that series shall be issued in whole or in part in
the form of a global security or securities, the terms and
conditions, if any, upon which such global security or securities
may be exchanged in whole or in part for other individual
securities; and the depositary for such global security or
securities;
|
|
•
|
whether the indenture
will restrict our ability to pay dividends or will require us to
maintain any asset ratios or reserves;
|
|
•
|
if, other than the full
principal amount thereof, the portion of the principal amount of
debt securities of the series that shall be payable upon
declaration of acceleration of the maturity thereof;
|
|
•
|
whether we will be
restricted from incurring any additional indebtedness;
|
|
•
|
additions to or changes
in the events of default with respect to the securities and any
change in the right of the trustee or the holders to declare the
principal, premium, if any, and interest, if any, with respect to
such securities to be due and payable;
|
|
•
|
additions to or changes
in the provisions relating to satisfaction and discharge of the
indenture;
|
|
•
|
additions to or changes
in the provisions relating to the modification of the indenture
both with and without the consent of holders of debt securities
issued under the indenture;
|
50
|
•
|
whether interest will
be payable in cash or additional debt securities at our or the
holders’ option and the terms and conditions upon which the
election may be made;
|
|
•
|
the terms and
conditions, if any, upon which we will pay amounts in addition to
the stated interest, premium, if any, and principal amounts of the
debt securities of the series to any holder that is not a “United
States person” for federal tax purposes;
|
|
•
|
any restrictions on
transfer, sale, or assignment of the debt securities of the
series;
|
|
•
|
a discussion on any
material or special U.S. federal income tax considerations
applicable to a series of debt securities; and
|
|
•
|
any other specific
terms, preferences, rights, or limitations of, or restrictions on,
the debt securities, any other additions or changes in the
provisions of the indenture, and any terms that may be required by
us or advisable under applicable laws or regulations.
|
We may issue debt securities that provide for an amount less than
their stated principal amount to be due and payable upon
declaration of acceleration of their maturity pursuant to the terms
of the indenture. We will provide you with information on the
federal income tax considerations and other special consideration
applicable to any of these debt securities in the applicable
prospectus supplement, related free writing prospectus, or other
offering materials, as applicable.
Conversion or Exchange Rights
We will set forth in the applicable prospectus supplement, related
free writing prospectus, or other offering materials, as
applicable, the terms on which a series of debt securities may be
convertible into or exchangeable for shares of our Common Stock,
shares of our Preferred Stock, or other securities. We will include
provisions as to settlement upon conversion or exchange and whether
conversion or exchange is mandatory, at the option of the holder,
or at our option. We may include provisions pursuant to which the
number of shares of our Common Stock, shares of our Preferred
Stock, or our other securities that the holders of the series of
debt securities receive would be subject to adjustment.
Consolidation, Merger, or Sale; No Protection in Event of a Change
of Control or Highly Leveraged Transaction
Unless we provide otherwise in the prospectus supplement,
information or document
incorporated by reference, related free writing prospectus, or
other offering materials, as applicable, applicable to a particular
series of debt securities, the indenture will contain covenant that
restricts our ability to merge or consolidate, or sell, convey,
transfer, or otherwise dispose of our assets as an entirety or
substantially as an entirety, unless we are the surviving
corporation or the successor to or acquirer of such assets (other
than a subsidiary of ours) expressly assumes all of our obligations
under the indenture or the debt securities, as appropriate. In
addition, we cannot complete such a transaction unless immediately
after completing the transaction, no event of default under the
indenture, and no event that, after notice or lapse of time or
both, would become an event of default under the indenture, has
occurred and is continuing.
Unless we provide otherwise in the prospectus
supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials, as applicable to a particular
series of debt securities, the debt securities will not contain any
provisions that may afford holders of the debt securities
protection in the event we have a change of control or in the event
of a highly leveraged transaction (whether or not such transaction
results in a change of control), which could adversely affect
holders of debt securities.
51
Events of Default Under the Indentures
Unless we provide otherwise in the prospectus
supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials, as applicable to a particular
series of debt securities, the following are events of default
under the indentures with respect to any series of debt securities
that we may issue:
|
•
|
if we fail to pay
interest when due and our failure continues for a period of 90
days; provided,
however,
that a valid extension of an interest payment period by us in
accordance with the terms of any indenture supplement thereto shall
not constitute a default in the payment of interest for this
purpose;
|
|
•
|
if we fail to pay the
principal of, or premium, if any, on any series of debt securities
as and when the same shall become due and payable whether at
maturity, upon redemption, by declaration or otherwise, or in any
payment required by any sinking or analogous fund established with
respect to such series; provided,
however,
that a valid extension of the maturity of such debt securities in
accordance with the terms of any indenture supplement thereto shall
not constitute a default in the payment of principal or premium, if
any;
|
|
•
|
if we fail to observe
or perform any other covenant or agreement contained in the debt
securities or the indenture, other than a covenant specifically
relating to another series of debt securities, and our failure
continues for 90 days after we receive written notice of such
failure, requiring the same to be remedied and stating that such is
a notice of default thereunder, from the trustee or holders of at
least 25% in aggregate principal amount of the outstanding debt
securities of the applicable series; and
|
|
•
|
if specified events of
bankruptcy, insolvency, or reorganization occur as to
us.
|
No event of default with respect to a particular series of debt
securities (except as to certain events of bankruptcy, insolvency,
or reorganization) necessarily constitutes an event of default with
respect to any other series of debt securities. The occurrence of
an event of default may constitute an event of default under any
bank credit agreements we may have in existence from time to time.
In addition, the occurrence of certain events of default or
acceleration under the indenture may constitute an event of default
under certain of our other indebtedness outstanding from time to
time.
If an event of default with respect to debt securities of any
series at the time outstanding occurs and is continuing, then the
trustee or the holders of at least 25% in principal amount of the
outstanding debt securities of that series may, by a notice in
writing to us (and to the debenture trustee if given by the
holders), declare to be due and payable immediately the principal
(or, if the debt securities of that series are discount securities,
that portion of the principal amount as may be specified in the
terms of that series) of and premium and accrued and unpaid
interest, if any, on all debt securities of that series. Before a
judgment or decree for payment of the money due has been obtained
with respect to debt securities of any series, the holders of a
majority in principal amount of the outstanding debt securities of
that series (or, at a meeting of holders of such series at which a
quorum is present, the holders of a majority in principal amount of
the debt securities of such series represented at such meeting) may
rescind and annul the acceleration if all events of default, other
than the non-payment of accelerated principal, premium, if any, and
interest, if any, with respect to debt securities of that series,
have been cured or waived as provided in the applicable indenture
(including payments or deposits in respect of principal, premium or
interest that had become due other than as a result of such
acceleration). We refer you to the prospectus
supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials, as applicable, relating to any
series of debt securities that are discount securities for the
particular provisions relating to acceleration of a portion of the
principal amount of such discount securities upon the occurrence of
an event of default.
52
Subject to the terms of the indentures, if an event of default
under an indenture shall occur and be continuing, the debenture
trustee will be under no obligation to exercise any of its rights
or powers under such indenture at the request or direction of any
of the holders of the applicable series of debt securities, unless
such holders have offered the debenture trustee reasonable
indemnity. The holders of a majority in principal amount of the
outstanding debt securities of any series will have the right to
direct the time, method, and place of conducting any proceeding for
any remedy available to the debenture trustee, or exercising any
trust or power conferred on the debenture trustee, with respect to
the debt securities of that series, provided, that:
|
•
|
the direction so given
by the holder is not in conflict with any law or the applicable
indenture; and
|
|
•
|
subject to its duties
under the Trust Indenture Act, the debenture trustee need not take
any action that might involve it in personal liability or might be
unduly prejudicial to the holders not involved in the
proceeding.
|
A holder of the debt securities of any series will only have the
right to institute a proceeding under the indentures or to appoint
a receiver or trustee, or to seek other remedies if:
|
•
|
the holder previously
has given written notice to the debenture trustee of a continuing
event of default with respect to that series;
|
|
•
|
the holders of at least
25% in aggregate principal amount of the outstanding debt
securities of that series have made written request, and such
holders have offered reasonable indemnity to the debenture trustee
to institute the proceeding as trustee; and
|
|
•
|
the debenture trustee
does not institute the proceeding, and does not receive from the
holders of a majority in aggregate principal amount of the
outstanding debt securities of that series (or at a meeting of
holders of such series at which a quorum is present, the holders of
a majority in principal amount of the debt securities of such
series represented at such meeting) other conflicting directions
within 60 days after the notice, request, and offer.
|
These limitations do not apply to a suit instituted by a holder of
debt securities if we default in the payment of the principal,
premium, if any, or interest on, the debt securities.
We will periodically file statements with the applicable debenture
trustee regarding our compliance with specified covenants in the
applicable indenture.
Modification of Indentures; Waiver
We and the debenture trustee may change the applicable indenture
without the consent of any holders with respect to specific
matters, including:
|
•
|
to evidence the
succession of another corporation to us and the assumption by any
such successor of our covenants in such indenture and in the debt
securities issued thereunder;
|
|
•
|
to add to our covenants
or to surrender any right or power conferred on us pursuant to the
indenture;
|
|
•
|
to establish the form
and terms of debt securities issued thereunder;
|
|
•
|
to evidence and provide
for a successor trustee under such indenture with respect to one or
more series of debt securities issued thereunder or to provide for
or facilitate the administration of the trusts under such indenture
by more than one trustee;
|
|
•
|
to cure any ambiguity,
to correct or supplement any provision in the indenture that may be
defective or inconsistent with any other provision of the indenture
or to make any other provisions with respect to matters or
questions arising under such indenture; provided that no such
action adversely affects the interests of the holders of any series
of debt securities issued thereunder in any material
respect;
|
53
|
•
|
to add to, delete from,
or revise the conditions, limitations, and restrictions on the
authorized amount, terms, or purposes of issue, authentication, and
delivery of securities under the indenture;
|
|
•
|
to add any additional
events of default with respect to all or any series of debt
securities;
|
|
•
|
to supplement any of
the provisions of the indenture as may be necessary to permit or
facilitate the defeasance and discharge of any series of debt
securities, provided that such action does not adversely affect the
interests of any holder of an outstanding debt security of such
series or any other security in any material respect;
|
|
•
|
to make provisions with
respect to the conversion or exchange rights of holders of debt
securities of any series;
|
|
•
|
to pledge to the
trustee as security for the debt securities of any series any
property or assets;
|
|
•
|
to add guarantees in
respect of the debt securities of one or more series;
|
|
•
|
to change or eliminate
any of the provisions of the indenture, provided that any such
change or elimination becomes effective only when there is no
security of any series outstanding created prior to the execution
of such supplemental indenture that is entitled to the benefit of
such provision;
|
|
•
|
to provide for
certificated securities in addition to or in place of global
securities;
|
|
•
|
to qualify such
indenture under the Trust Indenture Act;
|
|
•
|
with respect to the
debt securities of any series, to conform the text of the indenture
or the debt securities of such series to any provision of the
description thereof in our offering memorandum or prospectus
relating to the initial offering of such debt securities, to the
extent that such provision, in our good faith judgment, was
intended to be a verbatim recitation of a provision of the
indenture or such securities; or
|
|
•
|
to make any other
change that does not adversely affect the rights of holders of any
series of debt securities issued thereunder in any material
respect.
|
In addition, under the indentures, the rights of holders of a
series of debt securities may be changed by us and the debenture
trustee with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding debt
securities of each series (or, at a meeting of holders of such
series at which a quorum is present, the holders of a majority in
principal amount of the debt securities of such series represented
at such meeting) that is affected. However, the debenture trustee
and we may make the following changes only with the consent of each
holder of any outstanding debt security affected:
|
•
|
extending the fixed
maturity of the series of debt securities;
|
|
•
|
reducing the principal
amount, reducing the rate of, or extending the time of payment of
interest, or any premium payable upon the redemption of any debt
securities;
|
|
•
|
reducing the principal
amount of discount securities payable upon acceleration of
maturity;
|
|
•
|
making the principal of
or premium or interest on any debt security payable in currency
other than that stated in the debt security;
|
|
•
|
impair the right to
institute suit for the enforcement of any payment on any debt
security when due;
|
|
•
|
if applicable,
adversely affect the right of a holder to confer or exchange a debt
security; or
|
|
•
|
reducing the percentage
of debt securities, the holders of which are required to consent to
any amendment or waiver.
|
54
Except for certain specified provisions, the holders of at least a
majority in principal amount of the outstanding debt securities of
any series (or, at a meeting of holders of such series at which a
quorum is present, the holders of a majority in principal amount of
the debt securities of such series represented at such meeting) may
on behalf of the holders of all debt securities of that series
waive our compliance with provisions of the indenture. The holders
of a majority in principal amount of the outstanding debt
securities of any series may, on behalf of the holders of all the
debt securities of such series, waive any past default under the
indenture with respect to that series and its consequences, except
a default in the payment of the principal of, premium, or any
interest on any debt security of that series or in respect of a
covenant or provision, which cannot be modified or amended without
the consent of the holder of each outstanding debt security of the
series affected; provided, however, that the holders of a majority
in principal amount of the outstanding debt securities of any
series may rescind an acceleration and its consequences, including
any related payment default that resulted from the
acceleration.
Discharge, Defeasance, and Covenant Defeasance
We can discharge or decrease our obligations under the indenture as
stated below.
We may discharge obligations to holders of any series of debt
securities that have not already been delivered to the trustee for
cancellation and that have either become due and payable or are by
their terms to become due and payable, or are scheduled for
redemption, within one year. We may effect a discharge by
irrevocably depositing with the trustee cash or government
obligations, as trust funds, in an amount certified to be enough to
pay, when due, whether at maturity, upon redemption or otherwise,
the principal of, and any premium and interest on, the debt
securities and any mandatory sinking fund payments.
Unless otherwise provided in the applicable prospectus supplement,
information or document incorporated
by reference, related free writing prospectus, or other offering
materials, we may also discharge any and all of our
obligations to holders of any series of debt securities at any
time, which we refer to as defeasance. We may also be released from
the obligations imposed by any covenants of any outstanding series
of debt securities and provisions of the indenture, and we may omit
to comply with those covenants without creating an event of default
under the trust declaration, which we refer to as covenant
defeasance. We may effect defeasance and covenant defeasance only
if, among other things:
|
•
|
we irrevocably deposit
with the trustee cash or government obligations denominated in the
currency of the debt securities, as trust funds, in an amount
certified to be enough to pay at maturity, or upon redemption, the
principal (including any mandatory sinking fund payments) of, and
any premium and interest on, all outstanding debt securities of the
series; and
|
|
•
|
we deliver to the
trustee an opinion of counsel from a nationally recognized law firm
to the effect that the holders of the series of debt securities
will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the defeasance or covenant defeasance and
that defeasance or covenant defeasance will not otherwise alter the
holders’ U.S. federal income tax treatment of principal, and any
premium and interest payments on, the series of debt
securities.
|
In the case of a defeasance by us, the opinion we deliver must be
based on a ruling of the Internal Revenue Service issued, or a
change in U.S. federal income tax law occurring, after the date of
the indenture, since such a result would not occur under the U.S.
federal income tax laws in effect on that date.
Although we may discharge or decrease our obligations under the
indenture as described in the two preceding paragraphs, we may not
avoid, among other things, our duty to register the transfer or
exchange of any series of debt securities, to replace any
temporary, mutilated, destroyed, lost, or stolen series of debt
securities or to maintain an office or agency in respect of any
series of debt securities.
55
Registered Global Securities and Book Entry System
The debt securities of a series may be issued in whole or in part
in book-entry form and will be represented by one or more fully
registered global securities. We will deposit any registered global
securities with a depositary or with a nominee for a depositary
identified in the applicable prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials and registered in the name of such depositary or
nominee. In such case, we will issue one or more registered global
securities denominated in an amount equal to the aggregate
principal amount of all of the debt securities of the series to be
issued and represented by such registered global security or
securities. This means that we will not issue certificates to each
holder.
Unless and until it is exchanged in whole or in part for debt
securities in definitive registered form, a registered global
security may not be transferred except as a whole:
|
•
|
by the depositary for
the registered global security to its nominee;
|
|
•
|
by a nominee of the
depositary to the depositary or another nominee of the depositary;
or
|
|
•
|
by the depositary or
its nominee to a successor of the depositary or a nominee of the
successor.
|
The prospectus supplement, information
or document incorporated by reference, related free writing
prospectus, or other offering materials, as applicable,
relating to a series of debt securities will describe the specific
terms of the depositary arrangement involving any portion of the
series represented by a registered global security. We anticipate
that the following provisions will apply to all depositary
arrangements for debt securities:
|
•
|
ownership of beneficial
interests in a registered global security will be limited to
persons that have accounts with the depositary for such registered
global security, these persons being referred to as “participants,”
or persons that may hold interests through participants;
|
|
•
|
upon the issuance of a
registered global security, the depositary for the registered
global security will credit, on its book-entry registration and
transfer system, the participants’ accounts with the respective
principal amounts of the debt securities represented by the
registered global security beneficially owned by the
participants;
|
|
•
|
any dealers,
underwriters, or agents participating in the distribution of the
debt securities will designate the accounts to be credited;
and
|
|
•
|
ownership of beneficial
interest in the registered global security will be shown on, and
the transfer of the ownership interest will be effected only
through, records maintained by the depositary for the registered
global security for interests of participants, and on the records
of participants for interests of persons holding through
participants.
|
The laws of some states may require that specified purchasers of
securities take physical delivery of the securities in definitive
form. These laws may limit the ability of those persons to own,
transfer, or pledge beneficial interests in registered global
securities.
So long as the depositary for a registered global security, or its
nominee, is the registered owner of the registered global security,
the depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the debt securities
represented by the registered global security for all purposes
under the indenture. Except as stated below, owners of beneficial
interests in a registered global security:
|
•
|
will not be entitled to
have the debt securities represented by a registered global
security registered in their names;
|
|
•
|
will not receive or be
entitled to receive physical delivery of the debt securities in the
definitive form; and
|
|
•
|
will not be considered
the owners or holders of the debt securities under the relevant
indenture.
|
56
Accordingly, each person owning a beneficial interest in a
registered global security must rely on the procedures of the
depositary for the registered global security and, if the person is
not a participant, on the procedures of a participant through which
the person owns its interest, to exercise any rights of a holder
under the indenture.
We understand that, under existing industry practices, if we
request any action of holders or if an owner of a beneficial
interest in a registered global security desires to give or take
any action that a holder is entitled to give or take under the
indenture, the depositary for the registered global security would
authorize the participants holding the relevant beneficial
interests to give or take the action, and the participants would
authorize beneficial owners owning through the participants to give
or take the action or would otherwise act upon the instructions of
beneficial owners holding through them.
We will make payments of principal and premium, if any, and
interest, if any, on debt securities represented by a registered
global security registered in the name of a depositary or its
nominee to the depositary or its nominee, as the case may be, as
the registered owners of the registered global security. Neither we
nor the trustee, or any other agent of ours or the trustee will be
responsible or liable for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the
registered global security or for maintaining, supervising, or
reviewing any records relating to the beneficial ownership
interests.
We expect that the depositary for any debt securities represented
by a registered global security, upon receipt of any payments of
principal and premium, if any, and interest, if any, in respect of
the registered global security, will immediately credit
participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the registered global
security as shown on the records of the depositary. We also expect
that standing customer instructions and customary practices will
govern payments by participants to owners of beneficial interests
in the registered global security held through the participants, as
is now the case with the securities held for the accounts of
customers in bearer form or registered in “street name.” We also
expect that any of these payments will be the responsibility of the
participants.
If the depositary for any debt securities represented by a
registered global security is at any time unwilling or unable to
continue as depositary or stops being a clearing agency registered
under the Exchange Act, we will appoint an eligible successor
depositary. If we fail to appoint an eligible successor depositary
within 90 days, we will issue the debt securities in definitive
form in exchange for the registered global security. In addition,
we may at any time and in our sole discretion decide not to have
any of the debt securities of a series represented by one or more
registered global securities. In that event, we will issue debt
securities of the series in a definitive form in exchange for all
of the registered global securities representing the debt
securities. The trustee will register any debt securities issued in
definitive form in exchange for a registered global security in the
name or names as the depositary, based upon instructions from its
participants, shall instruct the trustee.
Information Concerning the Debenture Trustee
The debenture trustee, other than during the occurrence and
continuance of an event of default under the applicable indenture,
undertakes to perform only those duties as are specifically set
forth in the applicable indenture. Upon an event of default under
an indenture, the debenture trustee under such indenture must use
the same degree of care as a prudent person would exercise or use
in the conduct of his or her own affairs. Subject to this
provision, the debenture trustee is under no obligation to exercise
any of the powers given it by the indentures at the request of any
holder of debt securities unless it is offered reasonable security
and indemnity against the costs, expenses, and liabilities that it
might incur.
Payment and Paying Agents
Unless we other indicate in the applicable prospectus
supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials, we will make payment of the
interest on any debt securities on any interest payment date to the
person in whose name the debt securities, or one or more
predecessor securities, are registered at the close of business on
the regular record date for the interest.
We will pay principal of and any premium and interest on the debt
securities of a particular series at the office of the paying
agents designated by us, except that unless we otherwise indicate
in the applicable prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials, we will make interest payments by check which we
will mail to the holder. Unless we otherwise indicate in a
prospectus
57
supplement, information
or document incorporated by reference, related free writing
prospectus, or other offering materials, as
applicable,
we will designate the corporate trust office of the debenture
trustee as our sole paying agent for payments with respect to debt
securities of each series. We will name in the applicable
prospectus supplement,
information or document
incorporated by reference, related
free writing prospectus,
or other offering
materials,
any other paying agents that we initially designate for the debt
securities of a particular series. We will maintain a paying agent
in each place of payment for the debt securities of a particular
series.
All money we pay to a paying agent or the debenture trustee for the
payment of the principal of or any premium or interest on any debt
securities which remains unclaimed at the end of two years after
such principal, premium, or interest has become due and payable
will be repaid to us, and the holder of the security thereafter may
look only to us for payment thereof.
Governing Law
The indentures and the debt securities will be governed by and
construed in accordance with the laws of the State of New York,
except to the extent that the Trust Indenture Act is
applicable.
Subordination of Subordinated Debt Securities
Our obligations pursuant to any subordinated debt securities will
be unsecured and will be subordinate and junior in priority of
payment to certain of our other indebtedness to the extent
described in a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as
applicable.
Outstanding Debt Securities
As of December 15, 2020, we had the following debt securities
outstanding:
|
•
|
Secured Revolving Line of Credit
Promissory Note, dated August 28, 2019, issued to Isaac Capital
Group LLC in the original principal amount of
$2,500,000. The promissory note matures on December 31,
2020 and bears interest at 8.75% per annum.
|
58
DESCRIPTION
OF WARRANTS
General
We may issue warrants to purchase debt securities, shares of our
Common Stock, shares of our Preferred Stock, or any combination of
these securities. We may issue the warrants independently or
together with any underlying securities, and the warrants may be
attached or separate from the underlying securities. We may also
issue a series of warrants under a separate warrant agreement to be
entered into between a warrant agent and us. The warrant agent will
act solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of agency
for or with holders or beneficial owners of warrants.
The following description is a summary of selected provisions
relating to the warrants that we may issue. The summary is not
complete. When warrants are offered in the future, a prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials, as
applicable, will explain the particular terms of those securities
and the extent to which these general provisions may apply. The
specific terms of the warrants as described in the applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials will supplement and, if applicable, may modify or replace
the general terms described in this section.
This summary and any description of warrants in the applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials is subject to and is qualified in its entirety by
reference to all the provisions of any specific warrant document or
agreement, which we will file with the SEC for incorporation by
reference into this prospectus. See “Available Information” and
“Incorporation of Certain Information by Reference” for information
on how to obtain a copy of a warrant document when it is filed.
When we refer to a series of warrants, we mean all warrants issued
as part of the same series under the applicable warrant
agreement.
Terms
The applicable prospectus supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials may describe the terms of any warrants
that we may offer, including but not limited to the following:
•
|
the title of the
warrants;
|
•
|
the total number of
warrants;
|
•
|
the price or prices at
which the warrants will be issued;
|
•
|
the currency or
currencies that investors may use to pay for the
warrants;
|
•
|
the date on which the
right to exercise the warrants will commence and the date on which
the right will expire;
|
•
|
whether the warrants
will be issued in registered form or bearer form;
|
•
|
information with
respect to book-entry procedures, if any;
|
•
|
if applicable, the
minimum or maximum amount of warrants that may be exercised at any
one time;
|
•
|
if applicable, the
designation and terms of the underlying securities with which the
warrants are issued and the number of warrants issued with each
underlying security;
|
59
•
|
if applicable, the date
on and after which the warrants and the related underlying
securities will be separately transferable;
|
•
|
if applicable, a
discussion of material United States federal income tax
considerations;
|
•
|
if applicable, the
terms of redemption of the warrants;
|
•
|
the identity of the
warrant agent, if any;
|
•
|
the procedures and
conditions relating to the exercise of the warrants; and
|
•
|
any other terms of the
warrants, including terms, procedures, and limitations relating to
the exchange and exercise of the warrants.
|
Warrant Agreements
We may issue the warrants in one or more series under one or more
warrant agreements, each to be entered into between a bank, trust
company, or other financial institution as warrant agent, and us.
We may add, replace, or terminate warrant agents from time to time.
We may also choose to act as our own warrant agent or may choose
one of our subsidiaries to do so.
The warrant agent under a warrant agreement will act solely as our
agent in connection with the warrants issued under that agreement.
The warrant agent will not assume any obligation or relationship of
agency or trust for or with any holders of those warrants. Any
holder of warrants may, without the consent of any other person,
enforce by appropriate legal action, on its own behalf, its right
to exercise those warrants in accordance with their terms. Until
the warrant is properly exercised, no holder of any warrant will be
entitled to any rights of a holder of the warrant property
purchasable upon exercise of the warrant.
Form, Exchange, and Transfer
We may issue the warrants in registered form or bearer form.
Warrants issued in registered form, i.e., book-entry form, will be
represented by a global security registered in the name of a
depository, which will be the holder of all the warrants
represented by the global security. Those investors who own
beneficial interests in a global warrant will do so through
participants in the depository’s system, and the rights of these
indirect owners will be governed solely by the applicable
procedures of the depository and its participants. In addition, we
may issue warrants in non-global form, i.e., bearer form. If any warrants are
issued in non-global form, warrant certificates may be exchanged
for new warrant certificates of different denominations, and
holders may exchange, transfer, or exercise their warrants at the
warrant agent’s office or any other office indicated in the
applicable prospectus supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials.
Prior to the exercise of their warrants, holders of warrants
exercisable for debt securities will not have any of the rights of
holders of the debt securities purchasable upon such exercise and
will not be entitled to payments of principal (or premium, if any)
or interest, if any, on the debt securities purchasable upon such
exercise. Prior to the exercise of their warrants, holders of
warrants exercisable for shares of Common Stock or shares of
Preferred Stock will not have any rights of holders of the shares
of Common Stock or the shares of Preferred Stock purchasable upon
such exercise and will not be entitled to dividend payments, if
any, or voting rights of the shares of Common Stock or the shares
of Preferred Stock purchasable upon such exercise.
60
Exercise of Warrants
A warrant will entitle the holder to purchase for cash an amount of
securities at an exercise price that will be stated in, or that
will be determinable as described in, the applicable prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials.
Warrants may be exercised at any time from the initial exercise
date and time through and including the close of business on the
expiration date set forth in the applicable prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials. After the close of
business on the expiration date, unexercised warrants will become
void. Warrants may be redeemed as set forth in the applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials.
Warrants may be exercised as set forth in the applicable prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials. Upon
receipt of payment and the warrant certificate properly completed
and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable, we
will forward, as soon as practicable, the securities purchasable
upon such exercise. If less than all of the warrants represented by
such warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
61
DESCRIPTION
OF RIGHTS
We may issue rights to purchase our debt securities, shares of our
Common Stock, or shares of our Preferred Stock. These rights may be
issued independently or together with any other security offered
hereby and may or may not be transferable by the stockholder
receiving the rights in such offering. In connection with any
offering of such rights, we may enter into a standby arrangement
with one or more underwriters or other purchasers pursuant to which
the underwriters or other purchasers may be required to purchase
any securities remaining unsubscribed for after such offering.
Each series of rights will be issued under a separate rights
agreement that we will enter with a bank or trust company, as
rights agent, all of which will be set forth in the relevant
offering material. The rights agent will act solely as our agent in
connection with the certificates relating to the rights and will
not assume any obligation or relationship of agency or trust with
any holders of rights certificates or beneficial owners of
rights.
The following description is a summary of selected provisions
relating to rights that we may offer. The summary is not complete.
When rights are offered in the future, a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable,
will explain the particular terms of those securities and the
extent to which these general provisions may apply. The specific
terms of the rights as described in a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable,
will supplement and, if applicable, may modify or replace the
general terms described in this section.
This summary and any description of rights in the applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials is subject to and is qualified in its entirety by
reference to the rights agreement and the rights certificates. We
will file each of these documents, as applicable, with the SEC and
incorporate them by reference as an exhibit to the Registration
Statement of which this prospectus is a part on or before the time
we issue a series of rights. See “Available Information” and
“Incorporation of Certain Documents by Reference” above for
information on how to obtain a copy of a document when it is
filed.
The applicable prospectus supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials may describe:
•
|
in the case of a
distribution of rights to our stockholders, the date of determining
the stockholders entitled to the rights distribution;
|
•
|
in the case of a
distribution of rights to our stockholders, the number of rights
issued or to be issued to each stockholder;
|
•
|
the exercise price
payable for the underlying debt securities, shares of our Common
Stock or shares of our Preferred Stock upon the exercise of the
rights;
|
•
|
the number and terms of
the underlying debt securities, shares of our Common Stock or
shares of our Preferred Stock that may be purchased per each
right;
|
•
|
the extent to which the
rights are transferable;
|
•
|
the date on which the
holder’s ability to exercise the rights shall commence, and the
date on which the rights shall expire;
|
•
|
the extent to which the
rights may include an over-subscription privilege with respect to
unsubscribed securities;
|
•
|
if applicable, the
material terms of any standby underwriting or purchase arrangement
entered into by us in connection with the offering of such rights;
and
|
•
|
any other terms of the
rights, including, but not limited to, the terms, procedures,
conditions, and limitations relating to the exchange and exercise
of the rights.
|
The provisions described in this section, as well as those
described under “—Description of Debt Securities” and “—Description
of Capital Stock” above, will apply, as applicable, to any rights
we offer.
62
DESCRIPTION
OF UNITS
General
We may issue units composed of (i) our debt securities, (ii) shares
of our Common Stock, (iii) shares of our Preferred Stock, (iv)
warrants to purchase our debt securities, shares of our Common
Stock, or shares of our Preferred Stock or any combination of these
securities, and (v) rights to purchase our debt securities, shares
of our Common Stock, or shares of our Preferred Stock in any
combination. We will issue each unit so that the holder of the unit
is also the holder of each security included in the unit. As a
result, the holder of a unit will have the rights and obligations
of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in
the unit may not be held or transferred separately, at any time or
at any time before a specified date.
The following description is a summary of selected provisions
relating to units that we may offer. The summary is not complete.
When units are offered in the future, a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable,
will explain the particular terms of those securities and the
extent to which these general provisions may apply. The specific
terms of the units as described in a prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable,
will supplement and, if applicable, may modify or replace the
general terms described in this section.
This summary and any description of units in the applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials is subject to and is qualified in its entirety by
reference to the unit agreement, collateral arrangements and
depositary arrangements, if applicable. We will file these
documents with the SEC for incorporation by reference into this
prospectus, as applicable. See “Available Information” and
“Incorporation of Certain Information by Reference” for information
on how to obtain a copy of a document when it is filed.
The applicable prospectus supplement, information or document
incorporated by reference, related free writing prospectus, or
other offering materials may describe:
•
|
the designation and
terms of the units and of the securities comprising the units,
including whether and under what circumstances those securities may
be held or transferred separately;
|
•
|
any provisions for the
issuance, payment, settlement, transfer, or exchange of the units
or of the securities composing the units;
|
•
|
whether the units will
be issued in fully registered or global form; and
|
•
|
any other terms of the
units.
|
The applicable provisions described in this section, as well as
those described under “Description of Debt Securities,”
“Description of Capital Stock” and “Description of Warrants,” will
apply to each unit and to each security included in each unit,
respectively.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable, we
intend to use the net proceeds from the sale of securities for
general corporate purposes.
63
PLAN OF DISTRIBUTION
We may sell the securities through underwriters or dealers, through
agents, directly to one or more purchasers, through a rights
offering, or otherwise. We will describe the terms of the offering
of the securities in a prospectus supplement, information or
document incorporated by reference, related free writing
prospectus, or other offering materials, as applicable,
including:
•
|
the name or names of
any underwriters, if any;
|
•
|
the purchase price of
the securities and the proceeds we will receive from the
sale;
|
•
|
any underwriting
discounts and other items constituting underwriters’
compensation;
|
•
|
any initial public
offering price;
|
•
|
any discounts or
concessions allowed or reallowed or paid to dealers; and
|
•
|
any securities exchange
or market on which the securities may be listed.
|
Only underwriters we name in the prospectus supplement, information
or document incorporated by reference, related free writing
prospectus, or other offering materials, as applicable, are
underwriters of the securities offered thereby.
The distribution of securities may be effected, from time to time,
in one or more transactions, including:
•
|
block transactions
(which may involve crosses) and transactions on The Nasdaq Capital
Market or any other organized market on which the securities may be
traded;
|
•
|
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
own account pursuant to a prospectus supplement, information or
document incorporated by reference, related free writing
prospectus, or other offering materials, as applicable;
|
•
|
ordinary brokerage
transactions and transactions in which a broker-dealer solicits
purchasers;
|
•
|
sales “at the market”
to or through a market maker or into an existing trading market, on
an exchange or otherwise; and
|
•
|
sales in other ways not
involving market makers or established trading markets, including
direct sales to purchasers.
|
The securities may be sold at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at
prices relating to the prevailing market prices, or at negotiated
prices. The consideration may be cash or another form negotiated by
the parties. Agents, underwriters, or broker-dealers may be paid
compensation for offering and selling the securities. That
compensation may be in the form of discounts, concessions, or
commissions to be received from us or from the purchasers of the
securities. Dealers and agents participating in the distribution of
the securities may be deemed to be underwriters and compensation
received by them on resale of the securities may be deemed to be
underwriting discounts and commissions under the Securities Act. If
such dealers or agents were deemed to be underwriters, they may be
subject to statutory liabilities under the Securities Act.
We may also make direct sales through subscription rights
distributed to our existing stockholders on a pro rata basis, which
may or may not be transferable. In any distribution of subscription
rights to our stockholders, if all of the underlying securities are
not subscribed for, we may then sell the unsubscribed securities
directly to third parties or may engage the services of one or more
underwriters, dealers, or agents, including standby underwriters,
to sell the unsubscribed securities to third parties.
64
Some or all of the securities that we offer though this prospectus
may be new issues of securities with no established trading market.
Any underwriters to whom we sell our securities for public offering
and sale may make a market in those securities, but they will not
be obligated to do so and they may discontinue any market making at
any time without notice. Accordingly, we cannot assure you of the
liquidity of, or continued trading markets for, any securities that
we offer.
Agents may, from time to time, solicit offers to purchase the
securities. If required, we will name in the applicable prospectus
supplement, information or document incorporated by reference,
related free writing prospectus or other offering materials, as
applicable, any agent involved in the offer or sale of the
securities and set forth any compensation payable to the agent.
Unless otherwise indicated, any agent will be acting on a best
efforts basis for the period of its appointment. Any agent selling
the securities covered by this prospectus may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the
securities.
If underwriters are used in an offering, securities will be
acquired by the underwriters for their own account and may be
resold, from time to time, in one or more transactions, including
negotiated transactions, at a fixed public offering price, or at
varying prices determined at the time of sale, or under delayed
delivery contracts or other contractual commitments. Securities may
be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. If an underwriter or
underwriters are used in the sale of securities, an underwriting
agreement will be executed with the underwriter or underwriters at
the time an agreement for the sale is reached. The applicable
prospectus supplement, information or document incorporated by
reference, related free writing prospectus, or other offering
materials will set forth the managing underwriter or underwriters,
as well as any other underwriter or underwriters, with respect to a
particular underwritten offering of securities, and will set forth
the terms of the transactions, including compensation of the
underwriters and dealers and the public offering price, if
applicable. The prospectus, and the applicable prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials will
be used by the underwriters to resell the securities.
If a dealer is used in the sale of the securities, we or an
underwriter will sell the securities to the dealer, as principal.
The dealer may then resell the securities to the public at varying
prices to be determined by the dealer at the time of resale. To the
extent required, we will set forth in the prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable, the
name of the dealer and the terms of the transactions.
We may directly solicit offers to purchase the securities and may
make sales of securities directly to institutional investors or
others. These persons may be deemed to be underwriters within the
meaning of the Securities Act with respect to any resale of the
securities. To the extent required, the prospectus supplement,
information or document incorporated by reference, related free
writing prospectus, or other offering materials, as applicable,
will describe the terms of any such sales, including the terms of
any bidding or auction process, if used.
Agents, underwriters, and dealers may be entitled under agreements
that may be entered into with us to indemnification against
specified liabilities, including liabilities incurred under the
Securities Act, or to contribution to payments they may be required
to make in respect of such liabilities. If required, the prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials, as
applicable, will describe the terms and conditions of such
indemnification or contribution. Some of the agents, underwriters
or dealers, or their affiliates may be customers of, engage in
transactions with or perform services for us, our subsidiaries or
affiliates in the ordinary course of business.
Under the securities laws of some states, the securities offered by
this prospectus may be sold in those states only through registered
or licensed brokers or dealers.
65
Any person participating in the distribution of Common Stock
registered under the Registration Statement that includes this
prospectus will be subject to applicable provisions of the Exchange
Act, and the applicable SEC rules and regulations, including, among
others, Regulation M, which may limit the timing of purchases and
sales of any of our Common Stock by any such person. Furthermore,
Regulation M may restrict the ability of any person engaged in the
distribution of our Common Stock to engage in market-making
activities with respect to our Common Stock. These restrictions may
affect the marketability of our Common Stock and the ability of any
person or entity to engage in market-making activities with respect
to our Common Stock.
Certain persons participating in an offering may engage in
over-allotment, stabilizing transactions, short-covering
transactions, and penalty bids in accordance with Regulation M
under the Exchange Act that stabilize, maintain, or otherwise
affect the price of the offered securities. If any such activities
will occur, they will be described in the applicable prospectus
supplement, information or document incorporated by reference,
related free writing prospectus, or other offering materials.
To the extent required, this prospectus may be amended or
supplemented from time to time to describe a specific plan of
distribution.
All securities we offer other than shares of Common Stock will be
new issues of securities with no established trading market. Any
underwriters may make a market in these securities but will not be
obligated to do so and may discontinue any market making at any
time without notice. We cannot guarantee the liquidity of the
trading markets for any securities.
LEGAL
MATTERS
Unless otherwise indicated in the applicable prospectus supplement,
Clark Hill PLC, Los Angeles, California, will provide opinions
regarding the validity of any securities offered by this
prospectus. Clark Hill PLC may also provide opinions regarding
certain other matters. The legality of the securities for any
underwriters, dealers, or agents will be passed upon by counsel as
may be specified in the applicable prospectus supplement.
EXPERTS
The consolidated financial statements incorporated in this
Prospectus by reference to the Registrant’s Annual Report on Form
10-K for the year ended December 28, 2019, have been audited by
WSRP, LLC, an independent registered public accounting firm, as
stated in their reports incorporated by reference herein, and have
been so incorporated in reliance upon such reports and upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Company at December
29, 2018 incorporated in this Prospectus by reference to the
Registrant’s Annual Report on Form 10-K, as amended, for the year
ended December 29, 2018, have been audited by SingerLewak LLP, an
independent registered public accounting firm, as stated in their
report incorporated by reference herein, and have been so
incorporated in reliance upon such report and upon the authority of
such firm as experts in accounting and auditing.
66
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses to be paid by the
Registrant in connection with this offering.
Fee
|
|
|
Total
|
|
SEC registration fee
|
|
$
|
12,980
|
|
FINRA filing fee
|
|
|
*
|
|
Nasdaq listing fee
|
|
|
*
|
|
Printing
|
|
|
*
|
|
Legal fees and expenses
|
|
|
*
|
|
Accounting fees and expenses
|
|
|
*
|
|
Transfer agent and registrar fees
|
|
|
*
|
|
Miscellaneous
|
|
|
*
|
|
Total
|
|
$
|
*
|
|
* Fees and expenses (other than the SEC registration fee to be paid
upon filing of this registration statement) will depend on the
securities offered, the number of issuances and the nature of the
offerings, and cannot be estimated at this time.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada Revised Statutes (“NRS”) 78.138(7) provides that, subject to
limited statutory exceptions and unless the Articles of
Incorporation or an amendment thereto (in each case filed on or
after October 1, 2003) provide for greater individual liability, a
director or officer is not individually liable to a corporation or
its stockholders or creditors for any damages as a result of any
act or failure to act in his or her capacity as a director or
officer unless determined that the presumption that directors and
officers are presumed to act in good faith, on an informed basis
and with a view to the interest of the corporation has been
rebutted and it is proven that: (i) the act or failure to act
constituted a breach of his or her fiduciary duties as a director
or officer and (ii) the breach of those duties involved intentional
misconduct, fraud, or a knowing violation of law.
NRS 78.7502(1) provides 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, 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 the action, suit, or
proceeding if the person (i) is not liable pursuant to NRS 78.138
or (ii) acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was
unlawful. NRS 78.7502(2) provides 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
amounts paid in settlement and attorneys’ fees actually and
reasonably incurred by the person in connection with the defense or
settlement of the action or suit if the person (a) is not
liable pursuant to NRS 78.138 or (b) acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed
to the best interests of the corporation. Any discretionary
indemnification pursuant to NRS 78.7502, unless ordered by a court
or advanced pursuant to NRS 78.751(2), may be made by the
corporation only as authorized in each specific case upon a
determination that the indemnification of a director, officer,
employee, or agent of a corporation is proper under the
circumstances. Such determination must be made by (x) the
stockholders, (y) the board of directors, by majority vote of a
quorum consisting of directors who were not parties to the action,
suit, or proceeding, or (z) independent legal counsel, in a written
opinion, if (1) a majority vote of a quorum consisting of directors
who were not parties to the action, suit, or proceeding so orders
or (2) a quorum consisting of directors who were not parties to the
action, suit, or proceeding cannot be obtained.
II-1
The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, does not, of itself, create a presumption that the
person is liable pursuant to NRS 78.138 or did not act in good
faith and in a manner that he or she reasonably believed to be in
or not opposed to the best interests of the corporation or that,
with respect to any criminal action or proceeding, he or she had
reasonable cause to believe that the conduct was unlawful.
NRS 78.7502(2)(b) provides that indemnification may not be made for
any claim, issue, or matter as to which such a person has been
adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to
the extent that the court in which the action or suit was brought
or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
NRS 78.751(1), requiring mandatory indemnification of officers,
directors, employees, and agents, provides that a corporation shall
indemnify any person in such a role to the extent that the person
is successful on the merits or otherwise in defense of: (a) any
threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative,
including, without limitation, 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 or (b) any claim, issue,
or matter therein, against expenses actually and reasonably
incurred by the person in connection with defending the action,
including, without limitation, attorney’s fees.
NRS 78.751(2) provides that, unless otherwise restricted by the
corporation’s articles of incorporation or bylaws, or an agreement
made by the corporation, the corporation may pay expenses of
officers and directors incurred in defending a civil or criminal
action, suit, or proceeding as they are incurred and in advance of
the final disposition of the action, suit, or proceeding, upon
receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that the director or officer was
not entitled to be indemnified by the corporation. The articles of
incorporation, the bylaws, or an agreement made by the corporation
may require the corporation to pay such expenses upon receipt of
such an undertaking.
Under the NRS, the indemnification pursuant to NRS 78.7502 and
advancement of expenses authorized in or ordered by a court
pursuant to NRS 78.751:
|
•
|
Does not exclude any
other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in the
person’s official capacity or an action in another capacity while
holding office, except that indemnification, unless ordered by a
court pursuant to NRS 78.7502 or for the advancement of expenses
made pursuant to NRS 78.751(2), may not be made to or on behalf of
any director or officer finally adjudged by a court of competent
jurisdiction, after exhaustion of any appeals taken therefrom, to
be liable for intentional misconduct, fraud or a knowing violation
of the law, and such misconduct, fraud or violation was material to
the cause of action; and
|
|
•
|
Continues for a person
who has ceased to be a director, officer, employee, or agent and
inures to the benefit of the heirs, executors, and administrators
of such a person.
|
Unless the articles of incorporation, the bylaws, or an agreement
made by a corporation provide otherwise, if a person is entitled to
indemnification or the advancement of expenses from the corporation
and any other person, the corporation is the primary obligor with
respect to such indemnification or advancement. A right to
indemnification or to advancement of expenses arising under a
provision of the articles of incorporation or any bylaw is not
eliminated or impaired by an amendment to such provision after the
occurrence of the act or omission that is the subject of the civil,
criminal, administrative or investigative action, suit, or
proceeding for which indemnification or advancement of expenses is
sought, unless the provision in effect at the time of such act or
omission explicitly authorizes such elimination or impairment after
such act or omission has occurred.
II-2
The Company’s Articles of Incorporation provide that, to the
fullest extent permitted under the NRS (including, without
limitation, to the fullest extent permitted under NRS 78.7502 and
78.751(3)) and other applicable law, the Company shall indemnify
its directors and officers in their respective capacities as such.
The Company’s Articles of Incorporation further provide that the
liability of its directors and officers shall be eliminated or
limited to the fullest extent permitted by the NRS.
The Registrant intends to maintain insurance on behalf of the
Registrant and any person who is or was a director or officer
against any loss arising from any claim asserted against him or her
and incurred by him or her in that capacity, subject to certain
exclusions and limits of the amount of coverage.
II-3
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
Exhibit No.
|
|
Description
|
1.1*
|
|
Form of Underwriting Agreement with respect to Debt Securities
|
1.2*
|
|
Form of Underwriting Agreement with respect to Common Stock
|
1.3*
|
|
Form of Underwriting Agreement with respect to Preferred Stock
|
1.4*
|
|
Form of Underwriting Agreement with respect to Warrants
|
1.5*
|
|
Form of Underwriting Agreement with respect to Units
|
3.1
|
|
Articles of Incorporation of
Appliance Recycling Centers of America, Inc.
(incorporated by reference to Exhibit 3.3 of the Company’s Current
Report on Form 8-K filed with the SEC on March 13, 2018)
|
3.2
|
|
Articles of
Conversion
(incorporated by reference to Exhibit 3.1 of the Company’s Current
Report on Form 8-K filed with the SEC on March 13, 2018)
|
3.3
|
|
Articles of
Conversion
(incorporated by reference to Exhibit 3.2 of the Company’s Current
Report on Form 8-K filed with the SEC on March 13, 2018)
|
3.4
|
|
Certificate of Correction
to Articles of Incorporation
(incorporated by reference to Exhibit 3.1 of the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2018)
|
3.5
|
|
Certificate of
Change
(incorporated by reference to Exhibit 3.1 of the Company’s Current
Report on Form 8-K filed with the SEC on April 22, 2019)
|
3.6
|
|
Certificate of Correction
to Articles of Incorporation of Appliance Recycling Centers of
America, Inc.
(incorporated by reference to Exhibit 3.7 of the Company’s Current
Report on Form 8-K filed with the SEC on June 24, 2019)
|
3.7
|
|
Certificate of Designation of
Powers, Preferences, and Rights of Series A-1 Convertible Preferred
Stock of JanOne Inc. (formerly known as Appliance Recycling Centers
of America, Inc.)
(incorporated by reference to Exhibit 3.8 of the Company’s Current
Report on Form 8-K filed with the SEC on June 24, 2019)
|
3.8
|
|
Articles of Incorporation
of JanOne Inc. (the Name Change Subsidiary), filed with the
Secretary of State of the State of Nevada on September 6,
2019
(incorporated by reference to Exhibit 3.10 of the Company’s Current
Report on Form 8-K filed with the SEC on June 24, 2019)
|
3.9
|
|
Articles of Merger for JanOne
Inc. into Appliance Recycling Centers of America, Inc., filed with
the Secretary of the State of Nevada on September 9, 2019, and
effective on September 10, 2019
(incorporated by reference to Exhibit 3.10 of the Company’s Current
Report on Form 8-K filed with the SEC on June 24, 2019)
|
3.10
|
|
Amended and Restated
Certificate of Designation for the Preferences, Rights, and
Limitations of the Series A-1 Convertible Preferred Stock of JanOne
Inc., dated October 1, 2020
(incorporated by reference to Exhibit 3.8(a) of the Company’s
Current Report on Form 8-K filed with the SEC on October 2,
2020)
|
3.11
|
|
Bylaws of Appliance Recycling
Centers of America, Inc.
(incorporated by reference to Exhibit 3.4 of the Company’s Current
Report on Form 8-K filed with the SEC on March 13, 2018)
|
3.12
|
|
First Amendment to Bylaws of
Appliance Recycling Centers of America, Inc.
(incorporated by reference to Exhibit 3.1 of the Company’s Current
Report on Form 8-K filed with the SEC on December 31,
2018)
|
4.1
|
|
Form of Indenture with respect to Debt
Securities
|
4.2
|
|
Form of Specimen Common
Stock Certificate
(incorporated by reference to Exhibit 4.2 of JanOne Inc.’s Annual
Report on Form 10-K for the fiscal year ended December 28, 2019,
filed with the SEC on April 6, 2020)
|
4.3*
|
|
Form of Specimen Preferred Stock Certificate
|
4.4*
|
|
Form of Certificate of Designation of Preferred Stock
|
4.5*
|
|
Form of Warrant Agreement (including Warrant Certificate) with
respect to Warrants to purchase Debt Securities
|
4.6*
|
|
Form of Warrant Agreement (including Warrant Certificate) with
respect to Warrants to purchase Common Stock
|
4.7*
|
|
Form of Warrant Agreement (including Warrant Certificate) with
respect to Warrants to purchase Preferred Stock
|
4.8*
|
|
Form of Warrant Agreement (including Warrant Certificate) with
respect to Warrants to purchase Units
|
II-4
*
|
To be filed as an amendment or as an exhibit to a document filed
under the Exchange Act and incorporated by reference into this
registration statement.
|
**
|
To be filed in accordance with the requirements of
Section 305(b)(2) of the Trust Indenture Act of 1939.
|
ITEM 17. UNDERTAKINGS
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:s
|
|
(i)
|
to include any
prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
|
|
(ii)
|
to reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 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;
|
provided,
however, that paragraphs (1)(i),
(1)(ii) and (1)(iii) above do not apply if the
information required to be included in a post-effective amendment
by those paragraphs is contained in reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
|
(2)
|
That, for the purpose
of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide
offering
thereof.
|
|
(3)
|
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
|
|
(4)
|
That, for the purpose
of determining liability under the Securities Act of 1933 to any
purchaser:
|
|
(i)
|
Each prospectus filed
by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be
part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration
statement; and
|
II-5
|
(ii)
|
Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7)
as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i),
(vii) or (x) for the purpose of providing the information
required by Section 10(a) of the Securities Act of 1933 shall
be deemed to be part of and included in the registration statement
as of the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to
be a new effective date of the registration statement relating to
the securities in the registration statement to which the
prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide
offering
thereof. Provided,
however, that no
statement made in a registration statement or prospectus that is
part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in
any such document immediately prior to such effective
date.
|
|
(5)
|
That, for the purpose
of determining liability of the Registrant under the Securities Act
of 1933 to any purchaser in the initial distribution of the
securities, the undersigned Registrant undertakes that in a primary
offering of securities of the undersigned Registrant pursuant to
this registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
|
|
(i)
|
Any preliminary
prospectus or prospectus of the undersigned Registrant relating to
the offering required to be filed pursuant to Rule 424;
|
|
(ii)
|
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned
Registrant;
|
|
(iii)
|
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its
securities provided by or on behalf of the undersigned Registrant;
and
|
|
(iv)
|
Any other communication
that is an offer in the offering made by the undersigned Registrant
to the purchaser.
|
|
(6)
|
That, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant’s annual report pursuant to
Section 13(a) or 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.
|
|
(7)
|
That, for
purposes of determining any liability under the Securities Act,
(i) the information omitted from the form of prospectus filed
as part of the registration statement in reliance upon Rule 430A
and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(l) or (4) or 497(h) under the
Securities Act shall be deemed to be a part of the registration
statement as of the time it was declared effective; and
(ii) 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
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
|
|
(8)
|
To file an application
for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture
Act in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture
Act.
|
II-6
|
(9)
|
That, insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
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 of 1933 and will be governed by the final
adjudication of such issue.
|
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-3 and has
duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on this 23rd day of
December, 2020.
|
JANONE INC.
|
|
|
|
|
|
|
By:
|
/s/ Tony Isaac
|
|
|
|
Tony Isaac
|
|
|
|
President and Chief Executive Officer
|
|
Each person whose signature appears below hereby constitutes and
appoints Tony Isaac and Virland A. Johnson, and each of them, as
his true and lawful attorney-in-fact and agent with full power of
substitution, for him in any and all capacities, to sign any and
all amendments to this registration statement (including
post-effective amendments or any abbreviated registration statement
and any amendments thereto filed pursuant to Rule 462(b) increasing
the number of securities for which registration is sought), and to
file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite
and necessary to be done in connection therewith, as fully for all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent,
or his substitute, may lawfully do or cause to be done by virtue
hereof.
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/ Tony Isaac
|
|
|
Tony Isaac
|
President and Chief Executive Officer and Director
|
December 23, 2020
|
|
(Principal Executive Officer)
|
|
/s/ Virland A. Johnson
|
|
|
Virland A. Johnson
|
Chief Financial Officer and Executive Vice President
|
December 23, 2020
|
|
(Principal Accounting and Financial Officer)
|
|
|
|
|
/s/ Richard D. Butler, Jr.
|
|
|
Richard D. Butler, Jr.
|
Director
|
December 23, 2020
|
|
|
|
/s/ John Bitar
|
|
|
John Bitar
|
Director
|
December 23, 2020
|
|
|
|
/s/ Nael Hajjar
|
|
|
Nael Hajjar
|
Director
|
December 23, 2020
|
II-7