Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
(Exact
name of registrant as specified in its charter)
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Delaware
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22-2343568
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
Number)
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420
Lexington Avenue
Suite 450
New
York, New York 10170
(212)
584-4180
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Catherine
M. Vaczy, Esq.
Vice
President and General Counsel
NeoStem, Inc.
420
Lexington Avenue, Suite 450, New York, New York 10170
(212)
584-4180
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Approximate
date of proposed sale to the public: As
soon as
practicable after this Registration Statement becomes 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:
o
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: x
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. o
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. o
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: o
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: o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o (Do not check if
a smaller reporting company)
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Smaller
reporting company x
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Title of Each Class of
Securities to be
Registered
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Amount to be
Registered
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Proposed Maximum
Offering Price
Per Share
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Proposed Maximum
Aggregate Offering
Price
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Amount of
Registration Fee
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Common
Stock, par value $.001 per share
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909,152
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(1)
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$
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0.91
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(2)
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$
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827,328
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(2)
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$
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32.51
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(3)
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Common
Stock, par value $.001 per share
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100,000
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(4)
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$
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5.00
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(5)
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$
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500,000
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(5)
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$
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19.65
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(3)
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|||||||||||||||||
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Common
Stock, par value $.001 per share
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3,000
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(4)
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$
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4.61
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(5)
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$
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13,830
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(5)
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$
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0.54
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(3)
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Common
Stock, par value $.001 per share
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50,000
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(4)
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$
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3.00
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(5)
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$
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150,000
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(5)
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$
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5.90
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(3)
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Common
Stock, par value $.001 per share
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70,000
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(4)
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$
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2.00
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(5)
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$
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140,000
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(5)
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$
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5.50
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(3)
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Common
Stock, par value $.001 per share
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835,709
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(4)
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$
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1.75
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(5)
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$
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1,462,491
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(5)
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$
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57.48
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(3)
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|||||||||||||||||
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Common
Stock, par value $.001 per share
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50,000
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(4)
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$
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1.30
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(5)
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$
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65,000
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(5)
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$
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2.55
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(3)
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Common
Stock, par value $.001 per share
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50,000
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(4)
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$
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1.00
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(5)
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$
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50,000
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(5)
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$
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1.97
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(3)
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Total
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2,067,861
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(1)(4)
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$
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(2)(5)
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$
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3,208,649
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(2)(5)
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$
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126.10
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|||||||||||||||||||
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Amount
of shares of Common Stock to be registered. To be offered and sold
by the
selling stockholders.
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| (2) |
Estimated
solely for the purpose of computing the amount of the registration
fee for
the shares of Common Stock to be registered in accordance with
Rule 457(c) under the Securities Act, based on the average of
the high and low prices for the Common Stock, $.001 par value per
share,
as reported by the American Stock Exchange on June 25, 2008, which
date
was within five business days of the date of this filing.
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This
amount is included in the aggregate filing fee for this registration
statement of $126.10.
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| (4) |
Amount
of shares of Common Stock issuable upon exercise of warrants to be
registered. To be offered and sold by the selling stockholders upon
the
exercise of outstanding warrants.
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| (5) |
Estimated
solely for the purpose of computing the amount of the registration
fee for
the shares of Common Stock issuable upon exercise of warrants to
be
registered in accordance with Rule 457(g) under the Securities
Act, based upon the price at which the warrants may be exercised.
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The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay its effective date until the Registrant shall file
a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
(i)
SUBJECT
TO COMPLETION, DATED JULY 1, 2008
The
information contained in this prospectus is not complete and may be changed.
The
selling stockholders 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 it is not soliciting
an
offer to buy these securities in any jurisdiction where the offer or sale is
not
permitted.
PROSPECTUS
NEOSTEM,
INC.
2,067,861
Shares
Common
Stock
Our
securityholders named in the table beginning on page 18 of this prospectus
are offering an aggregate of 2,067,861 shares of our Common Stock. 909,152
of
such shares are currently outstanding and 1,158,709 of such shares are issuable
upon the exercise of currently outstanding warrants. We will not receive any
proceeds upon the sale of shares by the selling stockholders. We will receive
the exercise price of the outstanding warrants that are exercised. See “Use of
Proceeds.”
Our
Common Stock is traded on the American Stock Exchange under the symbol “NBS.” On
June 30, 2008, the reported last sale price of our Common Stock on the American
Stock Exchange was $0.99 per share.
Investing
in our Common Stock is speculative and involves a high degree of risk. See
“Risk
Factors” beginning on page 5.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
July
, 2008
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PROSPECTUS
SUMMARY
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1
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RISK
FACTORS
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5
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RISKS
RELATING TO THE COMPANY’S FINANCIAL CONDITION
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5
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RISKS
RELATING TO THIS OFFERING
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6
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RISKS
RELATING TO THE COMPANY’S BUSINESS
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7
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RISKS
RELATING TO COMPETITION
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14
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RISKS
RELATING TO INTELLECTUAL PROPERTY
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15
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SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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16
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USE
OF PROCEEDS
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17
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SELLING
SECURITYHOLDERS
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17
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PLAN
OF DISTRIBUTION
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20
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LEGAL
MATTERS
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21
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EXPERTS
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21
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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21
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WHERE
YOU CAN FIND MORE INFORMATION
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LIMITATION
OF LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
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23
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This
prospectus is part of a registration statement that we have filed with the
Securities and Exchange Commission (the "SEC" or "Commission") utilizing a
shelf
registration process. Under the shelf registration process, selling stockholders
may, from time to time, offer and sell shares of our common stock pursuant
to
this prospectus. It is important for you to read and consider all of the
information contained in this prospectus and any applicable prospectus
supplement before making any decision whether to invest in the common stock.
You
should also read and consider the information contained in the documents that
we
have incorporated by reference as described in "Where You Can Find More
Information, and "Incorporation of Certain Information by Reference" in this
prospectus.
We
have
not authorized anyone to give any information or to make any representations
different from that which is contained or incorporated by reference in this
prospectus or any accompanying prospectus supplement in connection with the
offer made by this prospectus or any accompanying prospectus supplement and,
if
given or made, such information or representations must not be relied upon
as
having been authorized by NeoStem, Inc. or any such person. Neither the delivery
of this prospectus or any accompanying prospectus supplement nor any sale made
hereunder and thereunder shall under any circumstances create an implication
that there has been no change in the affairs of NeoStem, Inc. since the date
hereof. This prospectus or any accompanying prospectus supplement does not
constitute an offer or solicitation by anyone in any state in which such offer
or solicitation is not authorized or in which the person making such offer
or
solicitation is not qualified to do so or to anyone to whom it is unlawful
to
make such offer or solicitation.
(i)
This
summary highlights some information contained or incorporated by reference
in
this prospectus. It may not contain all of the information that is important
to
you. Important information is incorporated by reference into this prospectus.
To
understanding this offering fully, you should read carefully the entire
prospectus, including “Risk Factors” and the other information incorporated by
reference in this prospectus.
NeoStem,
Inc. (“we” or “the Company”) is engaged in a platform business of operating a
commercial autologous (donor and recipient are the same) adult stem cell bank
and is pioneering the pre-disease collection, processing and long-term storage
of stem cells from adult donors that they can access for their own future
medical treatment. We are managing a growing nationwide network of adult stem
cell collection centers, and believe that as adult stem cell therapies obtain
necessary regulatory approvals and become Standard of Care, individuals will
need the infrastructure, methods and procedures being developed by the Company
to have their stem cells safely collected and conveniently stored for future
therapeutic use. Stem cells, which are very primitive and undifferentiated
cells
that have the unique ability to transform into many different cells (such as
white blood cells, nerve cells or heart muscle cells), can be found in the
bone
marrow or peripheral blood of adults. The Company only works with adult (not
embryonic) stem cells. Using the Company’s process, stem cells are moved
(mobilized) by a mobilizing agent administered in the days preceding collection
from the bone marrow in which they reside to the peripheral blood and collected
through a safe, minimally invasive procedure called “apheresis.” We also
recently entered the research and development arena, through the acquisition
of
a worldwide exclusive license to an early-stage technology to identify and
isolate rare stem cells from adult human bone marrow, called VSEL (very small
embryonic-like) stem cells. VSELs have many physical characteristics typically
found in embryonic stem cells, including the ability to differentiate into
specialized cells found in substantially all the different types of cells and
tissue that make up the body.
On
January 19, 2006 we consummated the acquisition of the assets of NS California,
Inc., a California corporation (“NS California”) relating to NS California’s
business of collecting and storing adult stem cells. Effective with the
acquisition, the business of NS California became our principal business, rather
than our historic business of providing capital and business guidance to
companies in the healthcare and life science industries. We now provide adult
stem cell processing, collection and banking services with the goal of making
stem cell collection and storage widely available, so that the general
population will have the opportunity to store their own stem cells for future
healthcare needs. Using our proprietary process, we provide the infrastructure,
methods and systems that allow adults to have their stem cells safely collected
and conveniently banked for future therapeutic use as needed in the treatment
of
such life-threatening diseases as diabetes, heart disease and radiation sickness
that may result from a bioterrorist attack or nuclear accident. According to
the
National Institutes of Health, there are over 2,000 clinical trials currently
underway relating to the use of adult stem cells, over 500 relating to
autologous use, in the treatment of numerous serious diseases and conditions,
including those that address cardiac disease, autoimmune disorders such as
lupus, multiple sclerosis, peripheral vascular diseases, and age related
musculoskeletal disorders, as well as diabetes, cancer, neurological disease
and
wound healing.
During
2007, we were focused on establishing a nationwide network of collection centers
in certain major metropolitan areas of the United States to drive growth, with
the goal of generating significant revenue in 2008. To date, our revenues
generated from the collection, processing and storage of adult stem cells have
not been significant. Initial participants in our collection center network
have
been single physician practices who opened collection centers in California,
Pennsylvania and Nevada. Revenues generated by these early adopters have not
been significant and are not expected to become significant, and the Company
is
considering whether to continue to keep the Pennsylvania center active given
poor performance of the center and the failure of the center to comply with
certain financial obligations under its collection center agreement. However,
these centers have served as a platform for the development of the Company’s
business model and today the Company is honing its model and focusing on
multi-physician and multi-specialty practices joining its network.
1
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·
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New
York Metropolitan Area: The Company signed an agreement in October
2007 to
open an adult stem cell collection center with ProHEALTH Care Associates,
one of the largest and most prominent multi-specialty practices in
the
region, with over 100 doctors and 250,000 patients. In January 2008
ProHEALTH received a provisional license from the New York State
Department of Health and the facility launched operations in May
2008. The
Company signed an agreement in June 2008 for a New York City stem
cell
collection center facility and anticipates this facility being operational
in the fall of 2008.
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·
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California:
The Company anticipates signing an agreement for a Santa Monica based
stem
cell collection facility and anticipates this facility being
operational in the summer of 2008.
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·
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Florida:
In January 2008 the Company signed an agreement with CelVida LLC
(“CelVida”) to open a collection center in the Coral Gables, Florida area
and in May 2008 announced that a site for the center has been secured.
This center is the result of a development agreement with CelVida
to
develop and operate stem cell collection centers using NeoStem’s
proprietary processes. The founder and President of CelVida, Chester
Amedia, Jr., MD, FACP, is an interventional nephrologist with extensive
business and patient care experience in the fields of disease management
and extracorporeal therapies. The Company anticipates this center
will
leverage the “Celvida” brand and targets the Latin American
community.
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·
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Northeast
expansion: The Company also formed a strategic alliance with New
England
Cryogenic Center, Inc. (NECC), one of the largest cryogenic laboratories,
to provide extensive processing and storage capacity for consumers
in
August 2007. Due to space constraints at the Company’s California facility
and the need for the Company to transfer its processing and storage
operation to a larger facility, the Company is including opportunities
on
the east coast, including utilizing NECC as its primary processing
and
storage facility. The Company also anticipates the launch of a marketing
campaign to NECC’s current 50,000 clients who have stored stem cells for
their children from the umbilical cord at
birth.
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We
also
recently entered the research and development arena through our acquisition
from
the University of Louisville of a worldwide exclusive license to the VSEL
technology. VSELs have many physical characteristics typically found in
embryonic stem cells, including the ability to differentiate into specialized
cells found in different types of tissue that would be able to interact with
the
specific organ in order to repair degenerated, damaged or diseased tissue (the
three “Ds” of aging). NeoStem has the ability to harvest and cryopreserve these
VSELs from individual patients, setting the stage for their use in personalized
regenerative medicine. If VSELs can be expanded from individual patients and
their potential to develop into different types of tissue cells maintained,
it
would represent a significant step toward overcoming the two major limitations
in the development of stem cell therapies today, the ethical dilemma regarding
use of embryonic stem cells and the immunological problems associated with
using
cells from a third party donor. In connection with the license agreement, we
also entered into a sponsored research agreement with the University of
Louisville pursuant to which the Company is funding research relating to our
VSEL technology at the laboratory of its co-inventor, Mariusz Ratajczak, M.D.,
Ph.D., head of the Stem Cell Biology Program at the James Graham Brown Cancer
Center at the University of Louisville. The acquisition of the VSEL technology
was made through our acquisition of our new subsidiary Stem Cell Technologies,
Inc. (“SCTI”) in a stock-for-stock exchange, which as a condition to the
acquisition was funded by the seller in amounts sufficient to pay certain
near-term costs under the license agreement and the sponsored research
agreement. In addition to the research we are currently funding at the
University of Louisville, we are also in discussions relating to other research
at the University of Louisville to generate data relating to other clinical
applications of VSELs, including neural, cardiac and ophthalmic, to expand
our
research efforts and maximize the value of this technology. We are seeking
funding for these programs through the application to the U.S. Small Business
Administration for Small Business Innovation Research (SBIR) grants.
2
In
May
2008, we entered into a collection center agreement with the James Graham Brown
Cancer Center at the University of Louisville, further expanding our corporate
and academic relationship. This unique collection center will allow the
harvesting of large numbers of cells from adults donating them for basic
research as well as clients paying to have their cells stored for their own
future medical need. We believe this is a unique opportunity given the interest
of adult stem cell translational scientists and clinicians at the University
in
exploring the therapeutic potential of VSELs and other adult stem cells of
the
body. By enabling investigators to have access to large numbers of adult stem
cells from interested and informed study subjects, we believe that translational
adult stem cell research will move forward at an accelerated pace and that
clinical trial designs will be more rapidly implemented to investigate new
research findings.
Our
company currently pursues generating revenue and earnings from our platform
business as follows: (1) upfront and annual fees from the collection centers
in
our network, (2) patient collection fees, (3) processing center collection
fees
and (4) storage fees, which represent recurring revenue paid each year or month.
We are structuring a direct to consumer marketing plan to drive awareness and
target individuals who can afford our services. We have also established a
relationship with CareCredit, a GE Financial Services Company and the nation’s
leading patient financing program to assist our patients in paying for a portion
of our services over time—which we believe opens up a broader client base to us.
We are planning to educate individuals that have a family history or early
diagnosis of diseases being treated with stem cell therapy as well as those
who
have banked their infant’s stem cells that can afford this “bioinsurance.”
Additionally we are working on establishing collaborations with high profile
medical centers and academic institutions involved in cutting edge research
and
clinical trials relating to stem cells. We believe that there is a significant
need for our banking services for our first responders and homeland security
personnel. We are moving forward to educate those groups and find resources
to
protect those individuals who protect us. Our other go-to market strategies
include collaboration with cord blood companies, tissue banks, pharmaceutical
companies, concierge medical programs, executive health plans, regenerative
medicine specialists and first responder groups. In April 2007, the Company
participated in the founding of The
Stem for Life Foundation (the
“Foundation”). The Mission of the Foundation is to heighten public awareness and
knowledge of the benefits and promise of adult stem cells in treating serious
medical conditions.
The
Company is also pursuing businesses that are related to its platform business
of
collection, processing and storage of adult stem cells which include (i)
“medical tourism” due to advanced stem cell therapies developing at a faster
pace outside the United States, (ii) supplying collected stem cells for the
conduct of adult stem cell research, (iii) storing excess cells collected from
a
patient at oncology transplant centers, and (iv) supplying stem cells for
diagnostic and therapeutic use.
We
have
engaged in various capital raising activities to pursue these business
opportunities. In 2007 we raised $2,500,000 in gross proceeds through the
private sale of our common stock, warrants and convertible promissory notes
and
in August 2007, we completed a public offering of units consisting of shares
of
common stock and warrants to purchase common stock, which raised gross proceeds
of $6,350,000. In May 2008 we completed a private placement of units consisting
of shares of common stock and warrants to purchase common stock, which raised
gross proceeds of $900,000. Such capital raising activities have enabled us
to
pursue our business plan and begin to grow our adult stem cell collection and
storage business, including expanding marketing and sales activities. However,
fully developing our business, particularly defining the optimal marketing
and
distribution model, has taken longer than anticipated. In order to fully develop
our business, we expect to require additional capital.
We
are
currently actively exploring acquisition opportunities of revenue generating
businesses, both domestically and abroad, including businesses that are
synergistic with our current business or additive to our current business,
and
in February 2008 engaged a financial advisor on an exclusive basis for a six
month period to assist us in this regard.
On
August
29, 2006, our stockholders approved an amendment to our Certificate of
Incorporation to effect a reverse stock split of our Common Stock at a ratio
of
one-for-ten shares and to change our name from Phase III Medical, Inc. to
NeoStem, Inc. On June 14, 2007, our stockholders approved an amendment to our
Certificate of Incorporation to effect a reverse split of our Common Stock
at a
ratio of up to one-for-ten shares in the event it was deemed necessary by our
Board of Directors in order to be accepted onto a securities exchange. On July
9, 2007, our Board of Directors approved a one-for-ten reverse stock split
to be
effective upon the initial closing of the Company’s public offering in order to
satisfy the listing requirements of the American Stock Exchange. On August
9,
2007 the reverse split was effective and the Company’s Common Stock commenced
trading on The American Stock Exchange under the symbol “NBS.” Accordingly, all
numbers in this prospectus have been adjusted to reflect both a one-for-ten
reverse stock split which was effective as of August 31, 2006, and the
one-for-ten reverse stock split which was effective as of August 9,
2007.
3
The
Company’s prior business was providing capital and business guidance to
companies in the healthcare and life science industries, in return for a
percentage of revenues, royalty fees, licensing fees and other product sales
of
the target companies. Additionally, through June 30, 2002, the Company was
a provider of extended warranties and service contracts via the Internet at
warrantysuperstore.com. The Company was engaged in the “run off” of such
extended warranties and service contracts through March 2007.
The
Company was incorporated under the laws of the State of Delaware in September
1980 under the name Fidelity Medical Services, Inc. Our corporate headquarters
is located at 420 Lexington Avenue, Suite 450, New York, NY 10170, our telephone
number is (212) 584-4180 and our website address is www.neostem.com. The
information on our website does not constitute a part of this prospectus. The
Company’s information as filed with the Securities and Exchange Commission is
available via a link on its websites as well as at www.sec.gov.
Our
securityholders named in the table beginning on page 18 of this prospectus
are
offering an aggregate of 2,067,861 shares of our Common Stock. 1,158,709 of
such
shares are issuable upon the exercise of currently outstanding warrants. We
will
not receive any proceeds upon the sale of shares of Common Stock by the selling
stockholders. We will receive the exercise price of the outstanding warrants
that are exercised for cash. See “Use of Proceeds.” The vast majority of the
shares being offered hereby were acquired by the selling stockholders as a
result of our capital raising activities in May 2008. See “Selling
Securityholders.”
4
RISK
FACTORS
An
investment in our Common Stock is speculative and involves a high degree of
risk. You should carefully consider the risks and uncertainties described below
and the other information in this prospectus and incorporated by reference
herein before deciding whether to purchase shares of our Common Stock. The
risks
described below are not the only ones facing our Company. Additional risks
not
presently known to us or that we currently believe to be immaterial may also
adversely affect our business and impair our business operations. If any of
the
following risks actually occur, our business strategy, financial condition
or
operating results could be harmed. This could cause the trading price of our
Common Stock to decline, and you may lose all or part of your investment.
RISKS
RELATING TO THE COMPANY’S FINANCIAL CONDITION
We
have a history of operating losses and we will continue to incur
losses.
Since
our
inception in 1980, we have generated only limited revenues from sales and have
incurred substantial net losses of $10,445,473, $6,051,400 and $1,745,039 for
the years ended December 31, 2007, 2006 and 2005, respectively, and $2,527,189
for the three months ended March 31, 2008. We expect to incur
additional operating losses as well as negative cash flow from our adult stem
cell collection, processing and storage business operations until we
successfully commercialize and develop this business, if ever. It is also
expected that, beyond the utilization of the SCTI funds to support the near-term
costs relating to our newly-acquired VSEL technology under the license and
sponsored research agreements with the University of Louisville Research
Foundation, the Company will incur losses and negative cash flow for the
foreseeable future as a result of our new research and development activities
until the VSEL technology can be successfully implemented, integrated into
our
business and commercialized, if ever, although the Company hopes to offset
some
of these costs through SBIR grants.
We
have a history of liquidity problems, which may affect our ability to raise
capital.
At
March
31, 2008, we had a cash balance of $969,776, working capital of $736,000 and
stockholders’
equity
of $2,114,295. Our history of illiquidity and losses may make it difficult
for
us to raise capital on favorable terms. We have from time to time raised capital
for our activities through the sale of our equity securities and promissory
notes. In 2007, we raised gross proceeds of $2,500,000 in January and February
through the private placement sale of our common stock and warrants to purchase
our common stock, and gross proceeds of $6,350,000 in August through the public
offering sale of units consisting of shares of our common stock and warrants
to
purchase common stock. Most recently, we raised gross proceeds of $900,000
in
May 2008 through the private placement sale of our common stock and warrants
to
purchase our common stock. Such capital raising activities have enabled us
to
pursue our business plan and begin to grow our adult stem cell collection and
storage business, including expanding marketing and sales activities. The funds
we obtained through the acquisition of SCTI were sufficient to fund certain
near
term obligations under our agreements relating to our VSEL technology; however,
substantial additional funds will need to be raised in order for us to continue
to fund additional research and development activities relating to the VSEL
technology, including in order to allow us to meet our development obligations
under our license agreement with the University of Louisville Research
Foundation. The Company has applied for SBIR grants and also anticipates seeking
to obtain funds through applications for other State and Federal grants, direct
investments into SCTI, sublicensing arrangements as well as other funding
sources to help offset all or a portion of these costs; however, there can
be no
assurance that such funding will be received.
5
We
will need substantial additional financing to continue
operations.
We
will
require substantial additional capital to fund our current operating plan for
our business, including the development of our VSEL technology. In addition,
our
cash requirements may vary materially from those now planned because of expenses
relating to marketing, advertising, sales, distribution, research and
development and regulatory affairs, as well as the costs of maintaining,
expanding and protecting our intellectual property portfolio, including
potential litigation costs and liabilities.
If
we are unable to obtain future capital on acceptable terms, this will negatively
affect our business operations and
current investors.
We
expect
that in the future we will seek additional capital through public or private
financings. Additional financing may not be available on acceptable terms,
or at
all. If additional capital is raised through the sale of equity, or securities
convertible into equity, further dilution to then existing stockholders will
result. If additional capital is raised through the incurrence of debt, our
business could be affected by the amount of leverage incurred. For instance,
such borrowings could subject us to covenants restricting our business
activities, paying interest would divert funds that would otherwise be available
to support commercialization and other important activities, and holders of
debt
instruments would have rights and privileges senior to those of equity
investors. If we are unable to obtain adequate financing on a timely basis,
we
may be required to delay, reduce the scope of or eliminate some of our planned
activities, any of which could have a material adverse effect on the
business.
We
will continue to experience cash outflows.
We
continue to incur expenses, including the salary of our executive officers,
rent, legal, marketing and
accounting fees, insurance and general administrative expenses. We are building
the infrastructure for our business and will experience
additional cash outflows in the foreseeable future. It is not possible at this
time to state whether we will be able to finance these cash outflows or when
we
will be able to achieve and sustain a positive cash position. Our ability to
become profitable will depend on many factors, including
our ability to successfully commercialize and develop the business. We cannot
assure that we will ever become
profitable and we expect to continue to incur losses. NS California, the company
from which we initially acquired our adult stem cell business, had nominal
operations and nominal assets at the time of our acquisition. From its inception
in 2002 through September 30, 2005, NS California had aggregate revenues of
$25,500, and aggregate losses of $2,357,940. We cannot guarantee that we will
be
more successful than NS California in achieving sufficient revenues for
profitability. Even if we do achieve profitability, we cannot guarantee that
we
can sustain or increase profitability in the future. If revenues grow slower
than we anticipate, or if operating expenses exceed our expectations or cannot
be adjusted accordingly, then our business, results of operations, financial
condition and cash flows will be materially and adversely affected. Because
our
strategy might include acquisitions of other businesses, products or
technologies, acquisition expenses and any cash used to make these acquisitions
will reduce our available cash.
RISKS
RELATING TO THIS OFFERING
Our
stock has historically had limited trading volume.
Our
common stock currently trades on the American Stock Exchange and until August
9,
2007 was traded on the OTC Bulletin Board, an electronic, screen-based trading
system operated by the National Association of Securities Dealers, Inc. Our
stock has generally been thinly traded and, although trading volume has
increased since it has commenced trading on the American Stock Exchange, we
cannot assure you that our stock will continue to have improved liquidity or
that it will increase above current levels. As a
result,
an investor may find it difficult to dispose of our common stock.
6
Our
stock price could be volatile.
The
price
of our common stock has fluctuated widely in the past and may be more volatile
in the future. Factors
such as the announcements of government regulation, new products or services
introduced by us or
by our
competition, healthcare legislation, trends in health insurance, litigation,
fluctuations in operating results,
our success in commercializing our business, market conditions for healthcare
stocks in general
as well
as economic recession or other factors could have a significant impact on the
future price of our common stock. The historically low volume of trading in
our
common stock has made it more vulnerable, and it may continue to be more
vulnerable, to rapid changes in price in response to market
conditions.
Sales
of substantial amounts of our common stock in the open market, or the
availability of such shares for sale, could
adversely affect the price of our common stock.
We
had
6,003,212 shares of common stock outstanding as of June 30, 2008. The following
securities that
may be
exercised for, or are convertible into, shares of our common stock were issued
and outstanding as of June 30, 2008:
· Options.
Stock options to purchase 1,803,300 shares of our common stock at a weighted
average exercise price of approximately $4.00 per share.
· Warrants.
Warrants to purchase 2,443,147 shares of our common stock at a weighted average
exercise price of approximately $4.89 per share.
· Class
A
Warrants. Warrants to purchase 635,000 shares of our common stock at an exercise
price of $6.00 per share. The Class A warrants were issued in our public
offering in August 2007.
· Underwriters
Warrants. Warrants issued to the underwriter in our public offering in August
2007 to purchase 95,250 shares of our common stock at an exercise price of
$6.50
per share (130% of the price of the common stock sold in the public offering).
The
vast
majority of the outstanding shares of our common stock, as well as substantially
all the shares
of our
common stock that may be issued under our outstanding options, warrants, Class
A
warrants and underwriter warrants, are or will be registered or otherwise not
restricted from trading.
Our
outstanding warrants may negatively affect our ability to raise additional
capital.
During
the terms of our outstanding warrants, Class A warrants and underwriter
warrants, their holders are given the opportunity to profit from a
rise
in the
market price of our common stock. So long as these warrants are outstanding,
the
terms on which we
could
obtain additional capital may be adversely affected. The holders of these
warrants might be expected
to exercise them at a time when we would, in all likelihood, be able to obtain
any needed capital
by a new
offering of securities on terms more favorable than those provided by these
warrants.
Failure
To Maintain Effective Internal Controls In Accordance With Section 404 Of
The Sarbanes-Oxley Act Could Have A Material Adverse Effect On Our Business
And
Stock Price.
If
we
fail to maintain adequacy of our internal controls in accordance with the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and as such
standards are modified, supplemented or amended from time to time, we may not
be
able to ensure that we can conclude on an ongoing basis that we have effective
internal controls over financial reporting in accordance with Section 404
of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal
control environment could have a material adverse effect on our stock price.
During
the course of our testing of our internal controls, we may identify, and have
to
disclose, material weaknesses or significant deficiencies in our internal
controls that will have to be remediated. Implementing any appropriate changes
to our internal controls may require specific compliance training of our
directors, officers and employees, entail substantial costs in order to modify
our existing accounting systems, and take a significant period of time to
complete. Such changes may not, however, be effective in maintaining the
adequacy of our internal controls, and any failure to maintain that adequacy,
or
consequent inability to produce accurate financial statements on a timely basis,
could increase our operating costs and could materially impair our ability
to
operate our business. In addition, investors’ perceptions that our internal
controls are inadequate or that we are unable to produce accurate financial
statements may negatively affect our stock price.
7
RISKS
RELATING TO THE COMPANY’S BUSINESS
If
the potential of stem cell therapy to treat serious disease is not realized,
the
value of our stem cell collection, processing
and storage and our development programs could be significantly
reduced.
The
potential of stem cell therapy to treat serious disease is currently being
explored. Stem cell therapy is not a commonly used procedure and it has not
been
proven in clinical trials that stem cell therapy will be an effective treatment
for diseases other than those currently addressed by hematopoietic stem
cell
transplants (hematopoietic stem cells are the stem cells from which all blood
cells are made). No stem cell products have been successfully developed and
commercialized to date, and
none
have received regulatory approval in the United States or internationally.
Stem
cell therapy may
be
susceptible to various risks, including undesirable and unintended side effects,
unintended immune system responses, inadequate therapeutic efficacy or other
characteristics that may prevent or limit its approval or commercial use. The
value of our stem cell collection, processing and storage and our development
programs could be significantly reduced if the use of stem cell therapy to
treat
a wide-range of serious diseases
is not
proven effective in the near future.
Because
the stem cell industry is subject to rapid technological and therapeutic
changes, our future success will materially
depend on the viability of the commercial use of stem cells for the treatment
of
disease.
Our
success materially depends on the development of therapeutic treatments and
cures for disease using stem cells. The broader medical and research environment
for such treatments and cures critically affects
the utility of stem cells, the services we offer to the public, and our future
success. The value of stem
cells in
the treatment of disease is subject to potentially revolutionary technological,
medical and therapeutic changes. However, future technological and medical
developments or improvements in conventional therapies could render the use
of
stem cells and our services and equipment obsolete and unmarketable.
As a result, there can be no assurance that our services will provide
competitive advantages
over
other technologies. If technological or medical developments arise that
materially alter the commercial
viability of our technology or services, we may be forced to incur significant
costs in replacing
or
modifying equipment in which we have already made a substantial investment
prior
to the end of its anticipated
useful life. Alternatively, significant advances may be made in other treatment
methods or in
disease
prevention techniques which could significantly reduce or entirely eliminate
the
need for the services
we provide. The materialization of any of these risks could have a material
adverse effect on our
business, financial condition, the results of operations or our ability to
operate at all.
We
may be forced to undertake lengthy and costly efforts to build market acceptance
of our stem cell collection, processing and storage services, the success of
which is critical to our profitability. There can be no assurance that these
services will gain market acceptance. To date, only a minimal number of
collections have been performed at the collection centers in our
network.
Our
future success in the business of collecting, processing and storing adult
stem
cells depends on the successful and continued market acceptance of this service.
Broad use and acceptance of our service requires marketing expenditures and
education and awareness of consumers and medical practitioners who, under
present law, must order stem cell collection on behalf of a potential customer.
The time and expense required to educate and build awareness of our services
and
its potential benefits could significantly
delay market acceptance and our ultimate profitability. The successful
commercialization of our
services will also require that we satisfactorily address the concerns of
medical practitioners in order to
avoid
potential resistance to recommendations for our services and ultimately reach
our potential consumers.
No assurances can be given that our business plan and marketing efforts will
be
successful, that
we will
be able to commercialize our services, or that there will be market acceptance
of our services or clinical acceptance of our services by physicians sufficient
to generate any material revenues for us. To date, only a minimal number of
collections have been performed at the collection centers in our
network.
8
Ethical
and other concerns surrounding the use of stem cell therapy may increase the
regulation of or negatively impact the public perception of our stem cell
services, thereby reducing demand for our services.
The
use
of embryonic stem cells for research and stem cell therapy has been the subject
of debate regarding related ethical, legal and social issues. Although our
business only utilizes adult stem cells and does
not
involve the more controversial use of embryonic stem cells, the use of other
types of human stem cells
for
therapy could give rise to similar ethical, legal and social issues as those
associated with embryonic
stem
cells. Additionally, it is possible that our business could be negatively
impacted by any stigma associated
with the use of embryonic stem cells if the public fails to appreciate the
distinction between the
use of
adult versus embryonic stem cells. The commercial success of our business will
depend in part on public acceptance of the use of stem cell therapy, in general,
for the prevention or treatment of human diseases.
Public attitudes may be influenced by claims that stem cell therapy is unsafe
or
unnecessary, and stem
cell
therapy may not gain the acceptance of the public or the medical community.
Public pressure or
adverse
events in the field of stem cell therapy that may occur in the future also
may
result in greater governmental regulation of our business creating increased
expenses and potential regulatory delays relating to the approval or licensing
of any or all of the processes and facilities involved in our stem cell
banking
services. In the event that the use of stem cell therapy becomes the subject
of
adverse commentary or
publicity, our business could be adversely affected and the market price for
our
common stock could be
significantly harmed.
We
operate in a highly regulated environment, and our failure to comply with
applicable regulations, registrations and approvals would materially and
adversely affect our business.
Historically,
the FDA has not regulated banks that collect and store stem cells. More recent
changes,
however,
require establishments engaged in the recovery, processing, storage, labeling,
packaging or distribution of any Human Cells, Tissues, and Cellular and
Tissue-Based Products (HCT/Ps) or the screening or testing of a cell tissue
donor to register with the FDA. The registration requirement was effective
as of January 2004 and we are currently so registered. The FDA also adopted
rules in May 2005 that regulate current Good Tissues Practices
(cGTP). We may be or become subject to such regulations, and there can be no
assurance that we will be able, or will have the resources, to comply. Future
FDA regulations
could also adversely impact or limit our ability to market or perform our
services. In order to collect
and store blood stem cells we must conduct (or arrange for the conduct of)
a
variety of laboratory tests
which are regulated under the federal Clinical Laboratory Improvement Amendments
(CLIA). Any
facility
conducting regulated tests must obtain a CLIA certificate of compliance and
submit to regular inspection.
9
Some
states require additional regulation and oversight of clinical laboratories
operating within their borders and some impose obligations on out-of-state
laboratories providing services to their residents. Many of the states in which
we, our strategic partners or members of our collection network engage in
collection, processing or storage activities have licensing requirements that
must be complied with. Additionally, there may be state regulations impacting
the use of blood products that would impact our business. We currently have
a
biologics license from the State of California. We also have two provisional
licenses from the State of New York, which permit the Company’s California
facility to collect, process and store hematopoietic progenitor cells (“HPCs”)
collected from New York residents, and also permit the solicitation in New
York
relating to the collection of HPCs. A third provisional license received in
January 2008, permits the California facility to collect, process, store and
use
for medical research HPCs collected from New York residents. NECC, the cryogenic
laboratory with whom we have formed a strategic alliance to provide additional
processing and storage capacity for consumers on the East Coast, received a
license from the State of New York in May 2008 to process, store and use for
research HPCs collected from New York residents. Each such license is subject
to
certain limitations. There can be no assurance that we, our strategic partners
or members of our collection center network will be able to obtain any necessary
licenses required to conduct business in any states, or maintain licenses that
are required and obtained with respect to such states, including California
and
New York. We may also be subject to state and federal privacy laws related
to
the protection of our customers’ personal health information to which we would
have access through the provision of our services. We may be required to spend
substantial amounts of time and money to comply with any regulations and
licensing requirements, as well as any future legislative and regulatory
initiatives. Failure to comply with applicable regulatory requirements or delay
in compliance may result in, among other things, injunctions, operating
restrictions, and civil fines and criminal prosecution which would have a
material adverse effect on the marketing and sales of our services and impair
our ability to operate profitably or preclude our ability to operate at all
in
the future. The Company will need to transfer its processing and storage
operations to a larger facility due to space constraints at its California
facility. The Company is considering opportunities on the east coast, including
utilizing NECC as its primary processing and storage facility and opening a
processing and storage facility in connection with its activities at the
University of Louisville or at some other AABB licensed facility. Any delay
in
complying with licensing requirements applicable to a new processing and storage
facility could have a material adverse impact on our business.
Our
adult stem cell collection, processing and storage business was not contemplated
by many existing laws and regulations.
The
service that we provide is unique. It is not medical treatment, although it
involves medical procedures. It is not clinical research, although we have
recently entered the research and development arena relating to the VSEL
technology and additional research participation is part of our business plan.
Our research activities are subject to different regulations than our commercial
activities. Our adult stem cell collection, processing and storage business
was not contemplated by many of the regulations in the field in which we operate
and as a result, there
is
often considerable uncertainty when we are analyzing the applicability of
regulatory requirements.
We have
devoted significant resources to ensuring compliance with those laws that we
believe to be applicable
and when applicability of a law is in doubt, we have opted to comply in order
to
minimize risk. It
is
possible, however, that regulators may disagree with some of our interpretations
of the law prompting additional compliance requirements or even enforcement
actions. Such enforcement may have a material adverse effect on our operations
or may require re-structuring of our operations or impair our ability to operate
profitably.
Our
failure to comply with laws related to hazardous materials could materially
harm
us.
We
are
subject to state and federal laws regulating the proper disposal of biohazardous
material. Although
we believe we are currently in compliance with all such applicable laws, a
violation of such laws,
or the
future enactment of more stringent laws or regulations, could subject us to
liability for noncompliance
and may require us to incur costs and/or otherwise have a material adverse
effect on our
ability
to do business.
10
Side
effects or limitations of the stem cell collection process or a failure in
the
performance of our cryopreservation storage facility
or systems could harm our business and reputation.
To
the
extent a customer experiences adverse side effects from the stem cell collection
process, the quantities of stem cells collected through our process are
ultimately determined to be in inadequate therapeutic amounts, or
our
cryopreservation storage service is disrupted, discontinued or our ability
to
provide banked stem cells is impaired for any reason, our business and
operations could be adversely affected. Any equipment failure that causes a
material interruption or discontinuance in our cryopreservation storage of
stem
cell specimens could result in stored specimens being damaged and unable to
be
utilized. Adverse side effects of
the
collection process, limitations of the collection process (such as whether
the
collection process produces a sufficient quantity of stem cells for all future
therapeutic applications) or specimen damage (including contamination or loss
in
transit to us), could result
in
litigation against us and reduced future revenue, as well as harm to our
reputation. Our insurance may not
adequately compensate us for any losses that may occur due to any such adverse
side effects, limitations or failures
in our
system or interruptions in our ability to maintain proper, continued,
cryopreservation storage services.
Our systems and operations are vulnerable to damage or interruption from fire,
flood, equipment
failure,
break-ins, tornadoes and similar events for which we do not have redundant
systems or a formal disaster recovery plan and we may not carry sufficient
business interruption insurance to compensate us for losses that may occur.
Any
claim of adverse side effects or limitations or material disruption in our
ability to maintain continued uninterrupted storage systems could have a
material adverse effect on our business, operating results and financial
condition.
We
are dependent on existing relationships with third parties to conduct our
business.
Our
process of collecting stem cells currently involves the injection of a
“mobilizing agent” which causes the stem
cells to leave the bone marrow and enter into the blood stream. The injection
of
this mobilizing agent
is an
integral part of the collection process. There is currently only one supplier
of
this mobilizing agent, and we are currently dependent upon our relationship
with
such supplier to maintain an adequate supply. Although we continue to explore
alternative methods of stem cell collection, there can be no assurance that
any
such methods will prove to be successful. In the event that our supplier is
unable or unwilling to continue to supply a mobilizing agent to us on
commercially reasonable terms, and we are unable to identify
alternative methods or find substitute suppliers on commercially reasonable
terms, we may not be able
to
successfully commercialize our business. We are also currently using only one
outside “apheresis”
provider
that also is expected to be the apheresis provider to certain of our collection
centers being operated by members of our network. “Apheresis” is the process
through which stem cells are extracted from a patient’s
whole blood and it is an integral part of our collection process. Although
other
third parties could
provide
apheresis services, any disruption in the relationship with this service would
cause a delay in the delivery of our services. In order to successfully
commercialize our business, we will continue to depend upon our relationship
with such companies or we or the collection centers operated by members of
our
network will need to develop internal capabilities to provide this service
and
obtain appropriate licensure. See also “-
Our
new research and development activities present additional
risks”
for
additional risks relating to our dependence on third parties for development
of
our VSEL technology.
11
Our
success will depend in part on establishing and maintaining effective strategic
partnerships and collaborations,
which may impose restrictions on our business and subject us to additional
regulation.
A
key
aspect of our business strategy is to establish strategic relationships in
order
to gain access to critical supplies, to expand or complement our research and
development or commercialization capabilities, or to reduce the cost of research
and development or commercializing services on our own. There can be no
assurance that we will enter into such relationships, that the arrangements
will
be on favorable terms or that such relationships will be successful.
Relationships with licensed
professionals such as physicians may be subject to state and federal laws
including fraud and abuse
regulations restricting the referral of business, prohibiting certain payments
to physicians, or otherwise limiting our options for structuring a relationship.
If our services become widely reimbursable by government or private insurers,
we
could be subject to additional regulation and perhaps additional limitations
on
our ability to structure relationships with physicians. Additionally, state
regulators may impose restrictions on the types of business relationships into
which licensed physicians or other licensed professionals
may enter. Failure to comply with applicable fraud and abuse regulations or
other regulatory
requirements could result in civil fines, criminal prosecution or other
sanctions. Even if we do enter into these
arrangements, we may not be able to maintain these relationships or establish
new ones in the future
on
acceptable terms. Furthermore, these arrangements may require us to grant
certain rights to third parties, including exclusive rights or may have other
terms that are burdensome to us. If any of our partners terminate their
relationship with us or fail to perform their obligations in a timely manner,
our research and development
activities or commercialization of our services may be substantially impaired
or
delayed. If we fail to structure our
relationships with physicians in accordance with applicable fraud and abuse
laws
or other regulatory requirements it could have a material adverse effect on
our
business.
We
are dependent upon our management, scientific and medical personnel and we
may
face difficulties in attracting
qualified employees or managing the growth of our
business.
Our
future performance and success are dependent upon the efforts and abilities
of
our management, medical
and scientific personnel. Furthermore, our future growth will require hiring
a
significant number of
qualified technical, medical, scientific, commercial, business and
administrative personnel. Accordingly,
recruiting and retaining such personnel in the future will be critical to our
success. If we are not able to attract and retain, on acceptable terms, the
qualified personnel necessary for the continued development of our business,
including those required in order for us to obtain and maintain appropriate
licensure, we may not be able to sustain our operations or achieve our business
objectives. Our failure to manage growth effectively could limit our ability
to
achieve our commercialization and other goals relating to, and we may fail
in
developing, our new business.
General
economic recession could negatively impact demand for our
services.
Economic
recession, including attendant job loss, could negatively impact the demand
for
our services.
Our
new research and development activities present additional
risks.
Our
new
research and development activities relating to the VSEL technology are subject
to many of the same risks as our adult stem cell collection, processing and
storage business, and there can be no assurance that we independently or through
collaborations will successfully develop, commercialize or market our
processing, collection and storage activities utilizing this VSEL technology.
Further,
we have development obligations under our exclusive license agreement with
the
University of Louisville pursuant to which we have licensed the VSEL technology.
As we currently have minimal capacity to conduct research and development
activities, to assist in meeting such development obligations we have entered
into a sponsored research agreement with the University of Louisville pursuant
to which research services are being provided and on which we are currently
dependent on their performance in developing the VSEL technology. Additional
research projects at the University of Louisville are also being pursued. We
will, however, require additional research and development capacity and access
to funds to meet our obligations under the license agreement and fully develop
the VSEL technology and integrate it into our business, and expect losses to
increase as our research and development efforts progress. The Company had
applied for SBIR grants and also anticipates seeking to obtain such funds
through applications for other State and Federal grants, direct investments
into
SCTI, sublicensing arrangements as well as other funding sources to help offset
all or a portion of these costs; however, there can be no assurance that such
funds will be received. We must also develop increased internal research
capability and sufficient laboratory facilities or establish relationships
with
third parties to provide such research capability and facilities. There can
be
no assurance that we will be able to establish and maintain such relationships
on commercially acceptable terms, if at all. Further, we must meet payment
and
other obligations under the license and sponsored research agreements. The
license agreement requires the payment of certain license fees, royalties and
milestone payments, payments for patent filings and applications and the use
of
due diligence in developing and commercializing the VSEL technology. The
sponsored research agreement requires periodic and milestone payments. Our
failure to meet financial or other obligations under the license or sponsored
research agreements in a timely manner could result in the loss of some or
all
of our rights to proprietary technology (as an example, portions of the license
may be converted to a non-exclusive license or it can be terminated entirely),
and/or we could lose our right to have the University of Louisville conduct
research and development efforts.
12
The
commercial viability of our VSEL technology is subject to substantially the
same
risks as our adult stem cell collection, processing and storage business, but
it
will also depend upon the ability to successfully expand the number of VSELs
collected through our adult stem cell collection process into a therapeutically
viable amount as well as the utility of VSELs for therapeutic purposes. As
the
number of VSELs which can be isolated from the adult peripheral blood collected
is relatively small, the
ability to create a therapeutic quantity of VSELs from a small number of cells
will be essential to effectively using
VSELs.
There are many biotechnology laboratories attempting to develop stem cell
expansion technology, but to date, stem cell expansion techniques are very
inefficient and typically the target cells stop
dividing naturally, keeping the yield low. A
critical aspect of our adult stem cell collection and banking service relating
to the VSEL technology will therefore be the utilization of stem cell expansion
processes, and there can be no assurance that such technology will be available.
Moreover, stem cell collection and harvesting techniques are becoming the
subject of new and rapidly developing technologies and could undergo significant
change in the future. Rapid technological development could result in our VSEL
technology becoming obsolete prior to its successful integration into the
process and commercialization of our collection, processing and storage
business. Successful biotechnology development in general is highly uncertain
and is dependent on numerous factors, many of which are beyond our control.
Technology that appears promising in the early phases of development may fail
to
be successfully commercialized for numerous reasons, including, but not limited
to competing technologies for the same indication.
We
believe that the VSEL technology is properly classified under the FDA’s HCT/P
regulatory paradigm and not as a medical device or as a biologic or
drug. There can be no assurance that the FDA would agree that this
category of regulatory classification applies to the VSEL technology, and the
reclassification of this technology could have adverse consequences for us
and
make it more difficult or expensive for us to conduct this business by requiring
regulatory clearance, approval and/or compliance with additional regulatory
requirements.
Any
future acquisitions may expose us to additional risks.
We
continuously review acquisition prospects that would complement our current
business, increase the size and geographic scope of our operations or otherwise
offer revenue generating or other growth opportunities. We recently engaged
the
services of a financial advisor for a six month period on an exclusive basis
to
assist us in exploring acquisition opportunities of revenue generating
businesses, both domestically or abroad, including businesses that are
synergistic with or additive to our current business. The financing for any
of
these acquisitions could dilute the interests of our stockholders, result in
an
increase in our indebtedness or both. Acquisitions may entail numerous risks,
including:
|
|
•
|
|
difficulties
in assimilating acquired operations, technologies or products, including
the loss of key employees from acquired businesses;
|
|
|
•
|
|
diversion
of management’s attention from our core business;
|
13
|
|
•
|
|
risks
of entering markets (including those overseas) in which we have limited
or
no prior experience; and
|
|
|
•
|
|
our
management team has limited experience in purchasing and integrating
new
businesses.
|
Our
failure to successfully complete the integration of any acquired business could
have a material adverse effect on our business, financial condition and
operating results. In addition, there can be no assurance that we will be able
to identify suitable acquisition candidates or consummate acquisitions on
favorable terms.
RISKS
RELATING TO COMPETITION
The
stem cell preservation market has and continues to become increasingly
competitive.
We
may
face competition from companies with far greater financial, marketing, technical
and research resources, name recognition, distribution channels and market
presence than us, who are marketing
or developing new services that are similar to the services that are now being
or may in the
future
be developed by us. There can be no assurance that we will be able to compete
successfully.
For
example, in the established market for cord blood stem cell banking, the growth
in the number of families
banking their newborn’s cord blood stem cells has been accompanied by an
increasing landscape
of
competitors. Our business, which has been more recently developed, already
faces
competition from other
established operators of stem cell preservation businesses and providers of
stem
cell storage services. We
believe that certain of our competitors have established stem cell banking
services to process and store stem
cells collected from adipose tissue (fat tissue). This type of stem cell banking
will require partnering with
cosmetic surgeons who perform liposuction procedures. In addition, we believe
the use of adult stem cells
from adipose tissue will require extensive clinical trials to prove the safety
and efficacy of such cells and
the
enzymatic process required to extract adult stem cells from fat. From a
technology perspective this ability
to expand a small number of stem cells could present a competitive alternative
to stem cell banking. The
ability to create a therapeutic quantity of stem cells from a small number
of
cells is essential to using embryonic
stem cells and would be desirable to treat patients who can only supply a small
number of their
own stem
cells. There are many biotechnology laboratories attempting to develop stem
cell
expansion technology, but to date, stem cell expansion techniques are very
inefficient and typically the target cells stop
dividing naturally, keeping the yield low. This could also have an adverse
effect on our ability to fully utilize our VSEL technology, which will be
dependent upon access to reliable stem cell expansion technology. However,
even
though reliable stem cell expansion technology may ease some of the limitations
of the competitive alternatives to our business, it would also allow us to
utilize the VSEL technology and also complement adult
stem
cell banking by allowing individuals to extend the banking of an initial
collection of cells for many applications.
We
also
understand that other technologies are being developed which claim the ability
to harvest stem cells through a variety of other techniques, such as turning
skin cells into cells that behave like embryonic stem cells or harvesting stem
cells from the pulp of baby teeth. No assurance can be given that such
technologies, or any other technologies, will not ultimately prove to be more
successful, have a faster rate of market penetration or have broader application
than ours. There can be no assurance that technological
or medical breakthroughs by our current or future competitors will not render
the Company’s business of stem cell preservation commercially or otherwise
unappealing or obsolete. In addition, the Company believes that one’s use of
their own (autologous) stem cells presents fewer risks and increases the
therapeutic value of stem cell therapy but the Company could nonetheless face
competition from companies seeking to promote the benefits of third party
donors.
14
In
the
event that we are not able to compete successfully with our current or potential
competitors, it may
be
difficult for us to grow our revenue and maintain our existing business without
incurring significant
additional expenses to try to refine our technology, services or approach to
our
business to better compete, and even then there would be no guarantee of
success.
We
may face competition in the future from established cord blood banks and some
hospitals.
Cord
blood banks such as ViaCord (a division of ViaCell International, a wholly-owned
subsidiary of PerkinElmer, Inc.) or Cryo-Cell International may
be
drawn to the field of stem cell collection because their processing labs and
storage facilities can be used
for
processing adult stem cells from peripheral blood and their customer lists
may
provide them with
an easy
access to the market. We estimate that there are approximately 60 cord blood
banks in the United States,
approximately half of which are autologous (donor and recipient are the same)
and approximately half of
which
are allogeneic (donor and recipient are not the same). Hospitals that have
transplant centers to serve cancer patients may elect to provide some or all
of
the services that we provide. We estimate that there are approximately 200
hospitals in the United States with stem cell transplant centers. All of these
competitors
may have access to greater financial resources. In addition, other established
companies with
greater
access to financial resources may enter our markets and compete with us. There
can be no assurance that we will be able to compete successfully.
RISKS
RELATING TO INTELLECTUAL PROPERTY
There
is significant uncertainty about the validity and permissible scope of patents
in the biotechnological industry.
We may not be able to obtain patent protection.
There
can
be no assurance that the patent applications to which we hold rights will result
in the issuance
of patents, or that any patents issued or licensed to our company will not
be
challenged and held
to be
invalid or of a scope of coverage that is different from what we believe the
patent’s scope to be. Further, there can be no assurance that any future patents
related to these technologies will ultimately provide adequate patent coverage
for or protection of our present or future technologies, products or processes.
Our success will depend, in part, on whether we can obtain patents to protect
our own technologies;
obtain licenses to use the technologies of third parties if necessary, which
may
be protected
by
patents; protect our trade secrets and know-how; and operate without infringing
the intellectual property and proprietary rights of others.
We
may be unable to protect our intellectual property from infringement by third
parties.
Despite
our efforts to protect our intellectual property, third parties may infringe
or
misappropriate our intellectual property or may develop intellectual property
competitive to ours. Our competitors may independently develop similar
technology, duplicate our processes or services or design around our
intellectual property rights. As a result, we may have to litigate to enforce
and protect our intellectual property
rights to determine their scope, validity or enforceability. Intellectual
property litigation is costly,
time-consuming, diverts the attention of management and technical personnel
and
could result in substantial uncertainty regarding our future viability. The
loss
of intellectual property protection or the inability to secure or enforce
intellectual property protection would limit our ability to develop and/or
market
our services in the future. This would also likely have an adverse affect on
the
revenues generated by
any
sale or license of such intellectual property. Furthermore, any public
announcements related to such
litigation or regulatory proceedings could adversely affect the price of our
common stock.
15
Third
parties may claim that we infringe on their intellectual
property.
We
also
may be subject to costly litigation in the event our technology infringes upon
another party’s proprietary
rights. Third parties may have, or may eventually be issued, patents that would
be infringed by
our
technology. Any of these third parties could make a claim of infringement
against us with respect to our technology. We may also be subject to claims
by
third parties for breach of copyright, trademark or license usage rights. An
adverse determination in any litigation of this type could require us to design
around a third party’s patent, license alternative technology from another party
or otherwise result in limitations in our ability to use the intellectual
property subject to such claims. Litigation and patent interference
proceedings could result in substantial expense to us and significant diversion
of efforts by our technical
and management personnel. An adverse determination in any such interference
proceedings or in
patent
litigation to which we may become a party could subject us to significant
liabilities to third parties
or, as
noted above, require us to seek licenses from third parties. If required, the
necessary licenses may not be available on acceptable financial or other terms
or at all. Adverse determinations in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent us, in whole
or
in part, from
commercializing our products, which could have a material adverse effect on
our
business, financial condition and results of operations.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, any prospectus supplement we may use in connection with this
prospectus, and the documents we incorporate by reference into this prospectus
or any such prospectus supplement contain or will contain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934 and Section 27A of the Securities Act of 1933. For this purpose,
any statements contained herein that relate to future events or conditions,
including without limitation, the statements included or incorporated by
reference into this prospectus or any prospectus supplement regarding our
financial
position, potential, business strategy, efforts, plans and objectives for future
operations and potential acquisitions and funding, may
be
deemed to be forward-looking statements. All such statements, which are all
statements other than of historical fact, involve known and unknown risks,
uncertainties and other factors, which may cause our actual results, performance
or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These
statements are commonly identified by the use of such terms and phrases as
“intends,” “expects,” “anticipates,” “should,” “estimates,” “seeks,” “believes,”
“plans,” “may,” “will,” “could” and “continue” or similar expressions or other
variations or comparable terminology. Additionally, statements concerning our
ability to develop the adult stem cell business, to develop the VSEL technology,
the future of regenerative medicine and the role of adult stem cells and VSELs
in that future, the future use of adult stem cells and VSELs as a treatment
option and the potential revenue growth of such business are forward-looking
statements. Our ability to enter the adult stem cell arena, our success in
such
arena, our ability to expand our operations and future operating results are
dependent upon many factors, including but not limited to: (i) our ability
to
obtain sufficient capital or a strategic business arrangement to fund our
expansion plans; (ii) our ability to build the management and human resources
and infrastructure necessary to support the growth of our business; (iii)
competitive factors and developments beyond our control; (iv) scientific and
medical developments beyond our control; (v) our inability to obtain appropriate
governmental licenses or any other adverse effect or limitations caused by
government regulation of the business; (vi) whether any of our current or future
patent applications result in issued patents; and (vii) other risk factors
discussed in “Risk
Factors” contained or incorporated by reference herein and in any applicable
prospectus supplement. We cannot guarantee future results or achievements,
and
prospective investors are cautioned not to place undue reliance on these
forward-looking statements. In
addition, any forward-looking statements represent our expectation only as
of
the date they are made and should not be relied on as representing our
expectations as of any subsequent date. While we may elect to update
forward-looking statements at some point in the future, we specifically disclaim
any obligation to do so except as specifically required by law and the rules
of
the SEC, even if our expectations change or
as a
result of new information, future events or otherwise.
When we
indicate that an event, condition or circumstance could or would have an adverse
effect on us, we mean to include effects upon our business, financial and other
condition, results of operations, prospects and
ability to service our debt.
16
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of our Common Stock covered hereby,
by
any of the selling stockholders. Some of the shares of Common Stock to be sold
in this offering have not yet been issued and will only be issued upon the
exercise of warrants. We will receive estimated proceeds of approximately
$2,381,321 if all such warrants are exercised for cash, however, certain of
our
outstanding warrants have a cashless exercise feature. We intend to use any
proceeds received from the exercise of the warrants for general corporate
purposes, including the funding of development activities. We expect to incur
expenses of approximately $11,926 in connection with this offering.
We
have
filed with the Securities and Exchange Commission a registration statement
on
Form S-3, of which this prospectus is a part, to register for resale (i)
909,152 shares of outstanding Common Stock; and (ii) 1,158,709 shares of Common
Stock issuable upon exercise of outstanding warrants, for an aggregate of
2,067,861 shares of Common Stock, all of which have not previously been
registered. All of the shares and warrants are owned by the selling
securityholders.
Selling
securityholders who acquired Company securities in the May 2008 private
placement (defined below) acquired registration rights with respect to (i)
750,006 shares of Common Stock and (ii) 750,006 shares of Common Stock issuable
upon exercise of warrants, for an aggregate of 1,500,012 shares of Common Stock.
In May 2008, the Company raised an aggregate of $900,000 through the private
placement of 750,006 units at a price of $1.20 per unit to 16 accredited
investors (the “May 2008 private placement”). Each unit was comprised of one
share of Common Stock and one redeemable five-year warrant to purchase one
share
of Common Stock at a purchase price of $1.75 per share (the "Warrants"), at
a
per-Unit price of $1.20. The Warrants are not exercisable for a period of six
months and are redeemable by the Company in certain circumstances. In connection
with the May 2008 private placement, the Company issued as partial finders’ fees
to accredited investors, five year warrants to purchase an aggregate of 35,703
shares of Common Stock. Such warrants contain generally the same terms as those
sold to the investors, except they contain a cashless exercise feature and
piggyback registration rights. All of such shares of common stock, and shares
of
common stock issuable upon exercise of all such warrants, are being registered
for resale.
The
other
selling securityholders acquired their shares of Common Stock and/or warrants
in
connection with provision of consulting, investor relations or investment
banking services to the Company.
Stock
Ownership
The
table
below sets forth the number of shares of Common Stock that are:
| · |
owned
beneficially by each of the selling
stockholders;
|
| · |
offered
by each selling stockholder pursuant to this
prospectus;
|
| · |
to
be owned beneficially by each selling stockholder after completion
of the
offering, assuming that all of the warrants held by the selling
stockholder are exercised and all of the shares offered in this prospectus
are sold and that none of the other shares held by the selling
stockholders if any, are sold; and
|
| · |
the
percentage to be owned by each selling stockholder after completion
of the
offering, assuming that all of the warrants held by the selling
stockholder are exercised and all of the shares offered in this prospectus
are sold and that none of the other shares held by the selling
stockholder, if any, are sold.
|
17
For
purposes
of this table each selling stockholder is deemed to beneficially
own:
| · |
the
issued and outstanding shares of Common Stock owned by the selling
stockholder as of June 30, 2008;
|
| · |
the
shares of Common Stock underlying all warrants being registered hereunder
owned by the selling stockholders;
|
| · |
the
shares of Common Stock underlying any other options or warrants owned
by
the selling stockholder which are exercisable as of June 30, 2008
or which
were exercisable within 60 days after June 30,
2008.
|
Because
the selling stockholders may offer all or some portion of the above-referenced
securities under this prospectus or otherwise, no estimate can be given as
to
the amount or percentage that will be held by the selling stockholders upon
termination of any sale. In addition, the selling stockholders identified below
may have sold, transferred or otherwise disposed of all or a portion of such
securities since the date on which information in this table is provided, in
transactions exempt from the registration requirements of the Securities Act.
Information about the selling stockholders may change from time to time. Any
changed information will be set forth in prospectus supplements, if
required.
Except
as
otherwise noted, none of such persons or entities has had any material
relationship with us during the past three years.
In
connection with the registration of the shares of Common Stock offered in this
prospectus, we will supply prospectuses to the selling
stockholders.
|
Name
|
Number of
Shares
beneficially
owned before
Offering
|
Number of
Outstanding
Shares being
offered hereby
|
Number
of Shares Underlying Warrants being offered
hereby
|
Number of
Shares
beneficially
owned after the
Offering
|
Percentage of
Shares
beneficially
owned after
the Offering1
|
||||||||||||||||||
|
Consulting
for Strategic Growth 1, Ltd.2
|
66,000
|
50,000
|
0
|
16,000
|
Less
than 1%
|
||||||||||||||||||
|
JH
Darbie & Co., Inc.3
|
16,263
|
9,146
|
7,117
|
0
|
Less
than 1%
|
||||||||||||||||||
|
Dekko
Foundation4
|
85,000
|
20,000
|
|
20,000
|
|
45,000
|
|
|
Less
than 1%
|
|
|||||||||||||
|
David
Gardner
|
100,000
|
50,000
|
|
50,000
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
JFS
Investments Inc.5
|
170,000
|
50,000
|
|
120,000
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
1 The
percentage of stock outstanding for each stockholder after the offering is
calculated by dividing (i) (A) the number of shares of Common Stock
deemed to be beneficially held by such stockholder as of June 30, 2008, minus
(B) the number of shares being offered in this offering by such stockholder
(including shares underlying warrants) by (i) the sum of (A) the
number of shares of Common Stock outstanding as of June 30, 2008 plus
(B) the number of shares of Common Stock issuable upon the exercise of
options and warrants held by such stockholder which were exercisable as of
June
30, 2008 or which will be exercisable within 60 days after June 30,
2008.
2 Consulting
for Strategic Growth 1, Ltd. serves as a consultant to the Company. Beneficial
ownership includes 11,500 shares of Common Stock underlying warrants, none
of
which are being offered pursuant to this Prospectus.
3 JH
Darbie & Co., Inc. was a party to a non-exclusive investment banking
agreement with the Company and acted as a finder in connection with the May
2008
private placement. JH Darbie & Co., Inc. is a broker-dealer.
4 Beneficial
ownership includes 35,000 shares of Common Stock underlying warrants, 15,000
of
which are not being offered pursuant to this Prospectus.
5 JFS
Investments, Inc. serves as a consultant to the Company.
18
|
Name
|
Number of
Shares
beneficially
owned before
Offering
|
Number of
Outstanding
Shares being
offered hereby
|
Number
of Shares Underlying Warrants being offered
hereby
|
Number of
Shares
beneficially
owned after the
Offering
|
Percentage of
Shares
beneficially
owned after
the Offering1
|
||||||||||||||||||
|
Adam
M. LeFebvre
|
41,668
|
20,834
|
|
20,834
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Paul
LeFebvre
|
41,668
|
20,834
|
|
20,834
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Roger
LeFebvre
|
41,668
|
20,834
|
|
20,834
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Ryan
A. LeFebvre
|
41,668
|
20,834
|
20,834
|
0
|
Less
than 1%
|
||||||||||||||||||
|
Raymond
Markman6
|
247,241
|
100,001
|
128,587
|
18,653
|
Less
than 1%
|
||||||||||||||||||
|
McCorkle
Court Reporters, Inc.
|
41,668
|
20,834
|
20,834
|
0
|
Less
than 1%
|
||||||||||||||||||
|
New
England Cryogenic Center, Inc.7
|
41,668
|
20,834
|
|
20,834
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Ronald
T. Perella
|
41,668
|
20,834
|
|
20,834
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Alter
Rubin
|
60,000
|
30,000
|
|
30,000
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Schlumberger
LTD Group Master Trust8
|
472,500
|
155,000
|
|
155,000
|
|
162,500
|
|
|
2.64%
|
|
|||||||||||||
|
Robin
L. Smith9
|
528,115
|
16,667
|
|
16,667
|
|
494,781
|
|
7.79%
|
|
||||||||||||||
|
Solutions
in Marketing, Inc.10
|
3,000
|
0
|
|
3,000
|
|
0
|
|
|
Less
than 1%
|
|
|||||||||||||
|
Southpoint
Master Fund LP11
|
775,000
|
200,000
|
200,000
|
375,000
|
6.12%
|
||||||||||||||||||
|
Jeffrey
Tauber
|
50,000
|
25,000
|
25,000
|
0
|
Less
than 1%
|
||||||||||||||||||
|
Catherine
M. Vaczy12
|
229,585
|
7,500
|
7,500
|
214,585
|
3.53%
|
||||||||||||||||||
|
300,000
|
50,000
|
250,000
|
0
|
Less
than 1%
|
|||||||||||||||||||
6 Raymond
Markman provides investor relations services to the Company and acted as a
finder in connection with the May 2008 private placement. Beneficial ownership
includes 136,921 shares of Common Stock underlying warrants, 8,334 of which
are
not being offered pursuant to this Prospectus.
7 New
England Cryogenic Center, Inc. is a party to a Master Services Agreement with
the Company pursuant to which they will provide processing and cryogenic storage
services for adult stem cells collected by the Company.
8 Beneficial
ownership includes 317,500 shares of Common Stock underlying warrants, 162,500
of which are not being offered pursuant to this Prospectus.
9 Robin
L.
Smith has been the Chief Executive Officer and Chairman of the Board of the
Company since June 2, 2006. Prior thereto, Dr. Smith served as
Chairman of the Advisory Board of the Company since September 2005.
Beneficial ownership includes: 50,312 shares of Common Stock underlying
warrants, 33,645 of which are not being offered pursuant to this Prospectus;
and
314,000 shares of Common Stock issuable upon exercise of options, none of which
are being offered pursuant to this Prospectus.
10 Solutions
in Marketing, Inc. served as a consultant to the Company.
11 Southpoint
Master Fund LP is the beneficial owner of more than 10% of the Company’s common
stock. Beneficial ownership includes 325,000 shares of Common Stock underlying
warrants, 125,000 of which are not being offered pursuant to this
Prospectus.
12
Catherine M. Vaczy has been the Vice President and General Counsel of the
Company since April 2005. Beneficial ownership includes: 11,584 shares of
Common Stock underlying warrants, 4,084 of which are not being offered pursuant
to this Prospectus; and 73,000 shares of Common Stock issuable upon exercise
of
options, none of which are being offered pursuant to this
Prospectus.
13 Wall
Street Communications Group, Inc. is a consultant to the Company.
19
We
are
registering for resale by the selling stockholders a total of 2,067,861 shares
of Common Stock, of which 909,152 shares are issued and outstanding and
1,158,709 shares are issuable upon exercise of warrants.
The
Selling Stockholders and any of their respective donees, transferees, pledgees,
assignees and other successors-in-interest may, from time to time, sell any
or
all of their shares of Common Stock on the American Stock Exchange or any stock
exchange, market or trading facility on which the shares are traded in the
future, or in private transactions. These sales may be at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The Selling Stockholders will act independently
of
NeoStem, Inc. in making decisions with respect to the timing, manner and
size of each sale.
The
Selling Stockholders may use any one or more of the following methods when
selling shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales;
|
| · |
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per share;
|
| · |
a
combination of any such methods of sale; and
|
| · |
any
other method permitted pursuant to applicable law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the shares of Common Stock or shares underlying warrants
and,
if they default in the performance of their secured obligations, the pledgees
or
secured parties may offer and sell shares of Common Stock from time to time
under this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee
or
other successors in interest as selling stockholders under this prospectus.
Upon
the
Company being notified in writing by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Common
Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to
this
prospectus will be filed, if required, pursuant to Rule 424(b) under
the Securities Act, disclosing (i) the name of each such Selling
Stockholder and of the participating broker-dealer(s), (ii) the number of
shares involved, (iii) the price at which such the shares of Common Stock
were sold, (iv) the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable, (v) that such broker-
dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified in
writing by a Selling Stockholder that a donee or pledge intends to sell more
than 500 shares of Common Stock, a supplement to this prospectus will be filed
if then required in accordance with applicable securities law.
20
The
Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this prospectus.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We
will
bear all of the costs, expenses and fees in connection with the registration
of
the shares of common stock, other than any commissions, discounts or other
fees
payable to broker-dealers in connection with any sale of shares, which will
be
borne by the Selling Stockholder selling such shares of common stock along
with
the fees and expenses of their counsel. The Company has mutual indemnification
agreements with most of the Selling Stockholders against certain losses,
damages, liabilities (including liabilities under the Securities Act), costs
and
expenses.
The
validity of the shares to be offered by this prospectus will be passed upon
for
us by Catherine M. Vaczy, Esq., New York, NY. Ms. Vaczy is the Vice President
and General Counsel of the Company, and is the beneficial owner of approximately
3.77% of the Company’s common stock.
Holtz
Rubenstein Reminick LLP, an independent registered public accounting firm,
has
audited our consolidated financial statements as of December 31, 2007 and
for the three year period then ended included in (i) our Annual Report on Form
10-K for the year ended December 31, 2007, filed on March 28, 2008 and (ii)
Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December
31, 2007, filed on April 29, 2008, both of which are incorporated by reference
in this prospectus and elsewhere in the registration statement. Our consolidated
financial statements are incorporated by reference in reliance on the report
of
Holtz Rubenstein Reminick LLP, given on the authority of said firm as experts
in
auditing and accounting.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
We
have
elected to “incorporate by reference” certain information into this prospectus.
By incorporating by reference, we can disclose important information to you
by
referring you to another document we have filed separately with the Securities
and Exchange Commission. The information incorporated by reference is deemed
to
be part of this prospectus, except for information incorporated by reference
that is superseded by information contained in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the Securities and Exchange Commission:
|
|
•
|
|
The
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, filed on March 28, 2008;
|
|
•
|
|
The
Company’s Amendment No. 1 to Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2007, filed on April 29, 2008;
|
|
|
•
|
|
The
Company’s Quarterly Report on Form 10-Q for the period ended
March 31, 2008, filed on May 15, 2008;
|
|
|
•
|
|
The
filed portions of the Company’s Current Reports on Form 8-K, filed on
January 9, January 11, March 26, May 23 and June 26, 2008; and
|
21
|
|
•
|
|
The
description of our common stock as set forth in the section entitled
“Description of Securities” in the Company’s Registration Statement on
Form 8-A filed on August 8, 2007 pursuant to Section 12(b) of the
Securities Exchange Act of 1934, as amended, which incorporates by
reference the
description of the common stock contained in the section entitled
"Description of Securities" in the Prospectus filed on July 16, 2007
pursuant to Rule 424(b) with respect to the Company's Registration
Statement on Form SB-2 (Registration No. 333-142923) filed with the
Securities and Exchange Commission (the "Registration Statement"),
including
any amendment or report filed for the purpose of updating such
description.
|
We
are
also incorporating by reference all other reports that we file with the
Securities and Exchange Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act between the date of this prospectus and
the
termination of the offering.
To
receive a free copy of any of the documents incorporated by reference in this
prospectus, call or write to NeoStem, Inc., Attention: Secretary, 420 Lexington
Avenue, Suite 450, New York, NY 10170, (telephone number is
(212) 584-4180). The information relating to us contained in this
prospectus does not purport to be comprehensive and should be read together
with
the information contained in the documents incorporated or deemed to be
incorporated by reference in this prospectus.
You
should rely only on the information contained in this prospectus or any
supplement and in the documents incorporated by reference above. We have not
authorized anyone else to provide you with different information. You should
not
assume that the information in this prospectus or any supplement or in the
documents incorporated by reference is accurate on any date other than the
date
on the front of those documents. The
information we incorporate by reference is an important part of this prospectus,
and any information that we file later with the SEC will automatically update
and supersede this information.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the information requirements of the Securities Exchange Act and
we
therefore file periodic reports, proxy statements and other information with
the
Securities and Exchange Commission relating to our business, financial
statements and other matters. The reports, proxy statements and other
information we file may be inspected and copied at prescribed rates at the
Securities and Exchange Commission’s Public Reference Room located at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the Securities and Exchange Commission’s Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities
and Exchange Commission also maintains an Internet site that contains reports,
proxy and information statements and other information regarding issuers like
us
that file electronically with the Securities and Exchange Commission. The
address of the Securities and Exchange Commission’s Internet site is
www.sec.gov. You may also view our filings with the Securities and Exchange
Commission on our internet site at www.neostem.com.
This
prospectus constitutes part of a registration statement on Form S-3 filed under
the Securities Act with respect to the securities. As permitted by the
Securities and Exchange Commission’s rules, this prospectus omits some of the
information, exhibits and undertakings included in the registration statement.
You may read and copy the information omitted from this prospectus but contained
in the registration statement, as well as the periodic reports and other
information we file with the Securities and Exchange Commission, at the public
reference facilities maintained by the Securities and Exchange Commission in
Washington, D.C.
Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance we refer you to
the
copy of the contract or document filed or incorporated by reference as an
exhibit to the registration statement or as an exhibit to our Securities
Exchange Act filings, each such statement being qualified in all respects by
such reference.
22
LIMITATION
ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Section
145 of the Delaware General Corporation Law (“GCL”) authorizes a court to award
or a corporation’s Board of Directors to grant indemnification to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Our certificate of incorporation
is
consistent with the Delaware GCL. Each of our directors, officers, employees
and
agents will be indemnified to the extent permitted by the Delaware GCL. We
also
maintain insurance on behalf of our directors and officers against liabilities
asserted against such persons and incurred by such persons in such capacities,
whether or not we would have the power to indemnify such persons under the
Delaware GCL. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred
or
paid by a director, officer or controlling person of the Company 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, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
23
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
New
York, State of New York on July 1, 2008.
|
|
NEOSTEM,
INC.
|
||
|
|
By:
|
/s/
Robin L. Smith
|
|
|
|
Name:
|
Robin
L. Smith
|
|
|
|
Title:
|
Chief
Executive Officer
|
|
KNOW
ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Robin L. Smith and Catherine M. Vaczy as his or her
true and lawful attorneys-in-fact and agents, with full power of substitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement (or any other registration statement for the
same
offering that is effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933) and to file the same, with all exhibits thereto
and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his or her substitute or substitutes, may
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/
Robin L. Smith
|
|
Director,
Chief Executive
|
|
|
||||||
|
Robin
L. Smith
|
|
Officer
and Chairman of the
Board
(Principal Executive Officer)
|
|
July
1, 2008
|
||||||
|
/s/
Larry A. May
|
|
Chief
Financial Officer
|
|
|
||||||
|
Larry
A. May
|
|
(Principal
Financial Officer and
Principal
Accounting Officer)
|
|
July
1, 2008
|
||||||
|
/s/
Mark Weinreb
|
|
|
||||||||
|
Mark
Weinreb
|
|
Director
and President
|
|
July
1, 2008
|
||||||
|
/s/
Joseph Zuckerman
|
|
|
||||||||
|
Joseph
Zuckerman
|
|
Director
|
|
July
1, 2008
|
||||||
|
/s/
Richard Berman
|
|
|
||||||||
|
Richard
Berman
|
|
Director
|
|
July
1, 2008
|
||||||
|
|
|
|
||||||||
|
Steven
S. Myers
|
|
Director
|
|
|
||||||
24
INFORMATION
NOT REQUIRED IN PROSPECTUS
The
following table sets forth an itemized estimate of fees and expenses payable
by
the Registrant in connection with the offering of the securities described
in
this registration statement, none of which will be paid by the selling
securityholders:
|
$
|
126.10
|
|||
|
Legal
fees and expenses
|
$
|
5,500.00
|
||
|
Accounting
fees and expenses
|
$
|
5,000.00
|
||
|
Printing
expenses
|
$
|
300.00
|
||
|
Mailing
and Miscellaneous
|
$
|
1,000.00
|
||
|
Total
|
$
|
11,926.10
|
We
are
incorporated under the laws of the State of Delaware. Under the General
Corporation Law of Delaware, 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 he or she is or was our director, officer, employee
or
agent, or is or was serving at our request 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 in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to our best interests,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful.
In
addition, the Delaware GCL also provides that we also 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 our right to procure a judgment
in
our favor by reason of the fact that he or she is or was our director, officer,
employee or agent, or is or was serving at our request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he
or
she reasonably believed to be in or not opposed to our best interests. However,
in such an action by or on our behalf, no indemnification may be made in respect
of any claim, issue or matter as to which the person is adjudged liable to
us
unless and only to the extent that the court determines that, despite the
adjudication of liability but in view of all the circumstances, the person
is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Our
certificate of incorporation is consistent with the Delaware GCL. Each of our
directors, officers, employees and agents will be indemnified to the extent
permitted by the Delaware GCL. We also maintain insurance on behalf of our
directors and officers against liabilities asserted against such persons and
incurred by such persons in such capacities, whether or not we would have the
power to indemnify such persons under the Delaware GCL.
II-1
|
Exhibit
|
Description
|
Reference
|
|
|
3
|
(a)
|
Amended
and Restated Certificate of Incorporation dated August 29, 2006
(1)
|
3.1
|
|
(b)
|
Amendment
to Amended and Restated Certificate of Incorporation dated
August 8, 2007 (2)
|
3.1
|
|
|
(c)
|
Amended
and Restated By-laws (3)
|
3.1
|
|
|
(d)
|
First
Amendment to Amended and Restated By-laws (4)
|
3.2
|
|
|
4
|
(a)
|
Specimen
Certificate for Common Stock (2)
|
4.1
|
|
(b)
|
Form
of Subscription Agreement among NeoStem, Inc. and certain investors
listed
therein (5)
|
10.1
|
|
|
(c)
|
Form
of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem,
Inc.
(5)
|
10.2
|
|
|
(d)
|
Form
of Redeemable Finder’s Warrant to Purchase Shares of Common Stock of
NeoStem, Inc. (6)
|
4.1
|
|
|
(e)
|
Consulting
Agreement dated January 1, 2008 between NeoStem, Inc. and JFS Investments,
Inc. (6)
|
4.2
|
|
|
(f)
|
Form
of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem,
Inc.
Issued to JFS Investments Inc. (6)
|
4.3
|
|
|
(g)
|
Redeemable
Warrant to Purchase Shares of Common Stock of NeoStem, Inc. Issued
to
Solutions in Marketing, Inc. (6)
|
4.4
|
|
|
(h)
|
Warrant
to Purchase Shares of Common Stock of NeoStem, Inc. Issued to Wall
Street
Communications Group, Inc. (6)
|
4.5
|
|
|
5
|
(a)
|
Opinion
re: legality (6)
|
5.1
|
|
23
|
(a)
|
Consent
of Holtz Rubenstein Reminick LLP(6)
|
23.1
|
|
(b)
|
Consent
of Catherine M. Vaczy, Esq. (6) (included as part of Exhibit 5(a))
|
||
|
24
|
(a)
|
Power
of Attorney (6) (included as part of signature page)
|
|
Notes:
(1)
Filed
with the Securities and Exchange Commission as an exhibit, numbered as indicated
above, to the Company's Registration Statement on Form S-1, File No. 333-137045,
which exhibit is incorporated here by reference.
(2)
Filed
with the Securities and Exchange Commission as an exhibit, numbered as indicated
above, to the Company's Registration Statement on Form S-3, File No. 333-145988,
which exhibit is incorporated here by reference.
(3)
Filed
with the Securities and Exchange Commission as an exhibit, numbered as indicated
above, to the quarterly report of the Company on Form 10-Q for the quarter
ended
June 30, 2005, which exhibit is incorporated here by reference.
(4)
Filed
with the Securities and Exchange Commission as an exhibit, numbered as indicated
above, to the current report of the Company on Form 8-K, dated August 1, 2006,
which exhibit is incorporated here by reference.
(5)
Filed
with the Securities and Exchange Commission as an exhibit, numbered as indicated
above, to the current report of the Company on Form 8-K, dated May 20, 2008,
which exhibit is incorporated here by reference.
(6)
Filed
herewith.
II-2
The
undersigned registrant hereby undertakes:
(1) To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of this 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 this registration statement. Notwithstanding
the
foregoing, any increase or decrease in the volume of securities offered (if
the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement; and
(iii)
To
include any material information with respect to the plan of distribution not
previously disclosed in this registration statement or any material change to
such information in this registration statement;
Provided,
however, that paragraphs (i), (ii) and (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)
If
the registrant is relying on Rule 430B,
(A) 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
(B)
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 that
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;
or
II-3
(ii)
If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed
in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness;
provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify
any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
(5) That,
for
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.
(6) To
deliver or cause to be delivered with the prospectus, to each person to whom
the
prospectus is sent or given, the latest annual report to security holders that
is incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to
deliver, or cause to be delivered to each person to whom the prospectus is
sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(7) Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of
such issue.
II-4
|
|
|
|
DESCRIPTION
|
|
NO.
|
|
|
4(d)
|
Form
of Redeemable Finder’s Warrant to Purchase Shares of Common Stock of
NeoStem, Inc.
|
4.1
|
||||
|
4(e)
|
Consulting
Agreement dated January 1, 2008 between NeoStem, Inc. and JFS Investments,
Inc.
|
4.2
|
||||
|
4(f)
|
Form
of Redeemable Warrant to Purchase Shares of Common Stock of NeoStem,
Inc.
Issued to JFS Investments Inc.
|
4.3
|
||||
|
4(g)
|
Redeemable
Warrant to Purchase Shares of Common Stock of NeoStem, Inc. issued
to
Solutions in Marketing, Inc.
|
4.4
|
||||
|
4(h)
|
Warrant
to Purchase Shares of Common Stock of NeoStem, Inc. Issued
to Wall Street Communications Group, Inc.
|
4.5
|
||||
|
5(a)
|
|
Opinion
of Catherine M. Vaczy, Esq.
|
|
5.1
|
||
|
23(a)
|
|
Consent
of Holtz Rubenstein Reminick LLP
|
|
23.1
|
||
|
23(b)
|
Consent
of Catherine M. Vaczy, Esq. (included as part of Exhibit
5(a))
|
|||||
|
24(a)
|
Power
of Attorney (included as part of signature page)
|
|||||
Exhibit
4.1
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant
No. _____
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
NEOSTEM,
INC.
THIS
CERTIFIES that, for value received, __________is entitled to purchase from
NEOSTEM, INC., a Delaware corporation (the “Corporation”),
subject to the terms and conditions hereof, __________ (__________) shares
(the
“Warrant
Shares”)
of
common stock, $.001 par value (the “Common
Stock”).
This
warrant, together with all warrants hereafter issued in exchange or substitution
for this warrant, is referred to as the “Warrant”
and
the
holder of this Warrant is referred to as the “Holder.”
The
number of Warrant Shares is subject to adjustment as hereinafter provided.
Notwithstanding anything to the contrary contained herein, this Warrant shall
expire at 5:00 p.m. (Eastern Time) on May 19, 2013 (the “Termination
Date”).
1. Exercise
of Warrants.
The
Holder may, at any time six months after the date of issuance (i.e. on November
20, 2008) and prior to the Termination Date, exercise this Warrant in whole
or
in part at an exercise price per share equal to $1.75 per share, subject to
adjustment as provided herein (the “Exercise
Price”),
by
the surrender of this Warrant (properly endorsed) at the principal office of
the
Corporation, or at such other agency or office of the Corporation in the United
States of America as the Corporation may designate by notice in writing to
the
Holder at the address of such Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Exercise Price in lawful money of
the
United States by check or wire transfer for each share of Common Stock being
purchased. Upon any partial exercise of this Warrant, there shall be executed
and issued to the Holder a new Warrant in respect of the shares of Common Stock
as to which this Warrant shall not have been exercised. In the event of the
exercise of the rights represented by this Warrant, a certificate or
certificates for the Warrant Shares so purchased, as applicable, registered
in
the name of the Holder, shall be delivered to the Holder hereof as soon as
practicable after the rights represented by this Warrant shall have been so
exercised.
2. Cashless
Exercise.
Notwithstanding any provision herein to the contrary, if as of the date of
exercise of all or a part of this Warrant, the closing sales price of the Common
Stock is greater than the Warrant Price, as adjusted, then in lieu of exercising
this Warrant for cash, the holder may elect to receive, without the cash payment
by the holder of the Exercise Price, shares of Common Stock equal to the value
of this Warrant or any portion hereof by the surrender of this Warrant (or
such
portion of this Warrant being so exercised) together with the Net Issue Election
Notice annexed hereto duly executed and completed, at the office of the Company.
Thereupon, the Company shall issue to the holder such number of shares of Common
Stock, equal to the quotient obtained by dividing [(A-B)(X)] by (A),
where:
(A) = the
closing sales price on the trading day immediately preceding the date that
the
holder delivers the Net Issue Election Notice to the Company as provided
herein;
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(B) = the
Exercise Price of this Underwriter Warrant, as adjusted, in effect on the date
that the holder delivers the Net Issue Election Notice to the Company as
provided herein; and
(X) = the
total number of shares of Common Stock covered by this Underwriter Warrant
which
the holder has surrendered for cashless exercise.
3.
Reservation
of Warrant Shares.
The
Corporation agrees that, prior to the expiration of this Warrant, it will at
all
times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the number of Warrant
Shares as from time to time shall be issuable by the Corporation upon the
exercise of this Warrant.
4. No
Stockholder Rights.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Corporation.
5. Transferability
of Warrant.
Prior
to the Termination Date and subject to compliance with applicable Federal and
State securities and other laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed for transfer.
Any registration rights to which this Warrant may then be subject shall be
transferred together with the Warrant to the subsequent Investor.
6. Certain
Adjustments.
With
respect to any rights that Holder has to exercise this Warrant and convert
into
shares of Common Stock, Holder shall be entitled to the following
adjustments:
(a) Merger
or Consolidation.
If at any time there shall be a merger or a consolidation of the Corporation
with or into another entity when the Corporation is not the surviving
corporation, then, as part of such merger or consolidation, lawful provision
shall be made so that the holder hereof shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the aggregate Exercise Price then in effect, the number of shares
of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the holder
hereof as the holder of the stock deliverable upon exercise of this Warrant
would have been entitled in such merger or consolidation if this Warrant had
been exercised immediately before such transaction. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the holder hereof
as
the holder of this Warrant after the merger or consolidation.
(b) Reclassification,
Recapitalization, etc.
If the Corporation at any time shall, by subdivision, combination or
reclassification of securities, recapitalization, automatic conversion, or
other
similar event affecting the number or character of outstanding shares of Common
Stock, or otherwise, change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities
of
any other class or classes, this Warrant shall thereafter represent the right
to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such subdivision,
combination, reclassification or other change.
(c) Split
or Combination of Common Stock and Stock Dividend.
In case
the Corporation shall at any time subdivide, redivide, recapitalize, split
(forward or reverse) or change its outstanding shares of Common Stock into
a
greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Exercise
Price
shall be
proportionately reduced and the number of Warrant Shares proportionately
increased. Conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the Exercise
Price
shall be
proportionately increased and the number of Warrant Shares proportionately
reduced.
7. Legend
and Stop Transfer Orders.
Unless
the Warrant Shares have been registered under the Securities Act, upon exercise
of any part of the Warrant, the Corporation shall instruct its transfer agent
to
enter stop transfer orders with respect to such Warrant Shares, and all
certificates or instruments representing the Warrant Shares shall bear on the
face thereof substantially the following legend:
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THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
8.Redemption
of Warrant.
This
Warrant is subject to redemption by the Company as provided in this Section
8.
(a) This
Warrant may be redeemed, at the option of the Company, in whole and not in
part,
at a redemption price of $.0001 per Warrant (the “Redemption
Price”),
provided (i) the average closing price of the Common Stock as quoted by
Bloomberg, LP., or the Principal Trading Market (as defined below) on which
the
Common Stock is included for quotation or trading, shall equal or exceed $2.40
per share (taking into account all adjustments) for twenty (20) out of thirty
(30) consecutive trading days.
(b) If
the
conditions set forth in Section
8(a)
are met,
and the Company desires to exercise its right to redeem this Warrant, it shall
mail a notice (the “Redemption
Notice”)
to the
registered holder of this Warrant by first class mail, postage prepaid, at
least
ten (10) business days prior to the date fixed by the Company for redemption
of
the Warrants (the “Redemption
Date”).
(c
) The
Redemption Notice shall specify (i) the Redemption Price, (ii) the Redemption
Date, (iii) the place where the Warrant certificates shall be delivered and
the
redemption price paid, and (iv) that the right to exercise this Warrant shall
terminate at 5:00 p.m. (New York time) on the business day immediately
preceding the Redemption Date. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to a holder (a) to whom notice was not mailed,
or
(b) whose notice was defective. An affidavit of the Secretary or an
Assistant Secretary of the Company that the Redemption Notice has been mailed
shall, in the absence of fraud, be prima
facie
evidence
of the facts stated therein.
(d) Any
right
to exercise a Warrant shall terminate at 5:00 p.m. (New York time) on the
business day immediately preceding the Redemption Date. On and after the
Redemption Date, the holder of this Warrant shall have no further rights except
to receive, upon surrender of this Warrant, the Redemption Price.
(e) From
and
after the Redemption Date, the Company shall, at the place specified in the
Redemption Notice, upon presentation and surrender to the Company by or on
behalf of the holder thereof the warrant certificates evidencing this Warrant
being redeemed, deliver, or cause to be delivered to or upon the written order
of such holder, a sum in cash equal to the Redemption Price of this Warrant.
From and after the Redemption Date, this Warrant shall expire and become void
and all rights hereunder and under the warrant certificates, except the right
to
receive payment of the Redemption Price, shall cease.
9. Miscellaneous.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of New York. All the covenants and provisions of this Warrant by or for
the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder. Nothing in this Warrant shall be construed
to
give to any person or corporation other than the Corporation and the holder
of
this Warrant any legal or equitable right, remedy, or claim under this Warrant.
This Warrant shall be for the sole and exclusive benefit of the Corporation
and
the Holder. The section headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation hereof. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction, or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Corporation, if lost, stolen, or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation shall
execute and deliver to the Holder a new Warrant of like date, tenor, and
denomination.
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IN
WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by
its
duly authorized officers under its seal, this 20th day of May 2008.
| NEOSTEM, INC. | ||
| |
|
|
| /s/ Robin L. Smith | ||
|
Robin
L. Smith, Chairman & & Chief ExecutiveOfficer
|
||
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WARRANT
EXERCISE FORM
To
Be Executed by the Holder in Order to Exercise Warrant
To: NeoStem,
Inc. Dated:
________________ __, 20__
420
Lexington Avenue
Suite
450
New
York,
New York 10170
Attn:
Chairman and CEO
The
undersigned, pursuant to the provisions set forth in the attached Warrant
No. ______, hereby irrevocably elects to purchase ____________ shares of
the Common Stock of NeoStem, Inc. covered by such Warrant.
| ¨ |
The
undersigned herewith makes payment of the full purchase price for
such
shares at the price per share provided for in such Warrant. Such
payment
takes the form of $__________ in lawful money of the United
States.
|
The
undersigned hereby requests that certificates for the Warrant Shares purchased
hereby be issued in the name of:
|
(please
print or type name and
address)
|
|
(please
insert social security or other identifying number)
and
be
delivered as follows:
| (please print or type name and address) | |
(please
insert social security or other identifying number)
and
if
such number of shares of Common Stock shall not be all the shares evidenced
by
this Warrant Certificate, that a new Warrant for the balance of such shares
be
registered in the name of, and delivered to, Holder.
| Signature of Holder | ||
| SIGNATURE GUARANTEE: | ||
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(To
assign the foregoing warrant, execute
this
form. Do not use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
| whose address is | |
Dated:
________ __, 200_
| Holder’s Signature: | ||
| Holder’s Address: | ||
Signature
Guaranteed: __________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust Corporation. Officers
of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
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NET
ISSUE ELECTION NOTICE
To
Be Executed by the Registered Holder in Order to Make a Cashless Exercise of
Underwriter Warrants
| TO: |
NeoStem,
Inc.
|
420
Lexington Avenue
Suite
450
New
York, NY 10170
Attention:
Chairman and CEO
The
undersigned hereby elects under Section 2.3.2 of the attached Underwriter
Warrant No. ____, to surrender the right to purchase __________ shares of Common
Stock pursuant to the Underwriter Warrant and hereby requests the issuance
of
the number of shares of Common Stock determined in accordance with Section
2.3.2.
The
undersigned hereby requests that Certificates for the shares issuable upon
such
net issue election shall be issued in the name of:
PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________
________________________________________
________________________________________
[please
print or type name and address]
and
be delivered to:
________________________________________
________________________________________
________________________________________
[please
print or type name and address]
and
if there shall be remaining Underwriter Warrants after such net issue election,
that a new Underwriter Warrant Certificate for the balance of such Underwriter
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated:
______________
X_________________________
___________________________
___________________________
___________________________
Address
___________________________
Taxpayer
Identification Number
___________________________
Signature
Guaranteed
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Exhibit
4.2
CONSULTING
AGREEMENT
This
Consulting Agreement (the "Agreement") is made and entered into to be effective
as of January 1, 2008 (the "Effective Date") by and NeoStem located at 420
Lexington Avenue, New York, NY (the "Company") and JFS Investments Inc. and
Assigns (''the Consultant").
WHEREAS:
A.
The
Consultant has the business and financial expertise and experience to assist
the
Company, and
B.
The
Consultant is offering its services as a consultant to the Company;
and
C.
The
Company desires to retain the Consultant as an independent consultant and to
memorialize the Consultant's work for the Company by entering into this written
Agreement.
D.
The
parties agree that this Agreement reflects the entire understanding and
agreements
between
the parties hereto.
NOW,
THEREFORE, in
consideration of the premises and promises, warranties and representations
herein contained, it is agreed as follows:
1.
DUTIES.
The
Company hereby engages the consultant and the Consultant hereby accepts
engagement as a consultant. It is understood and agreed, and it is the express
intention of the parties to this Agreement, that the Consultant is an
independent contractor, and not an employee or agent of the Company for any
purpose whatsoever. Consultant shall perform all duties and obligations as
described on Exhibit
A
hereto
and agrees to be available at such times as may be scheduled by the Company
and
as otherwise reasonably requested by the Company. It is understood, however,
that the Consultant will maintain Consultant's own business in addition to
providing services to the Company. The Consultant agrees to promptly perform
all
services required of the Consultant hereunder in an efficient, professional,
trustworthy and businesslike manner. A description of the Consultant's services
are attached hereto as Exhibit
A
and
incorporated by reference herein. In such capacity, Consultant will utilize
only
materials, reports, financial information or other documentation that is
approved in writing in advance by the Company.
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2.
CONSULTING
SERVICES COMPENSATION; REGISTRATION RIGHTS.
(a)
Compensation. Subject
to paragraph 6, the Consultant will be retained as a consultant and independent
contractor for the Company. For services rendered hereunder, the Consultant
shall receive (i) 50,000 shares (the “Shares”) of restricted Company common
stock (the “Common Stock”); and (ii) two warrants (the “Warrants”) to purchase
an aggregate of 120,000 shares of restricted Common Stock (the "Warrant Shares")
on the terms set forth in the Warrants attached hereto as Exhibit
B
which
are incorporated herein. The first Warrant grants the Consultant the right
to
purchase up to 20,000 shares of Common Stock at a per share purchase price
equal
to $2.00; and the second Warrant grants the Consultant the right to purchase
up
to 100,000 shares of Common Stock at a per share purchase price equal to $5.00,
all as set forth in the Warrants. The Warrants shall vest as to one-twelfth
of
the Warrant Shares on the last day of each monthly anniversary during the Term
of this Agreement and in the event this Agreement is terminated before the
expiration of the Term (as set forth in Section 6 hereof) then the Warrants
shall remain vested and exercisable with respect to Warrant Shares for which
they were vested and exercisable as of the date of termination and the Warrants
shall terminate immediately with respect to any remaining Warrant Shares.
Subject to the foregoing, the Warrants shall have a term of five years from
the
Effective Date. The two Warrants shall be identical except for the number of
Warrant Shares to which they relate and their per share purchase price. The
Shares and the Warrant Shares shall have piggyback registration rights as set
forth below. All applicable federal, state and local taxes with respect to
the
Warrants, the Shares and the Warrant Shares shall be the sole responsibility
of
the Consultant. This Consulting Agreement may be terminated prior to expiration
of its Term as described in Section 6 below. Any expenses incurred by Consultant
hereunder shall be borne by Consultant unless otherwise agreed to by the parties
in advance. The issuance of the Shares, the Warrants and the Warrant Shares
shall be subject to the prior approval of the American Stock Exchange.
(b)
Registration
Rights.
If, at
any time after the date hereof the Company shall determine to prepare and file
with the Securities and Exchange Commission (the “SEC”) a registration statement
relating to an offering for its own account or the account of others under
the
Securities Act of 1933, as amended (the “Securities Act”) or any of its equity
securities (a "Registration
Statement"),
other
than a pre-effective or post-effective amendment to a current registration
statement or other than on Form S-4 or Form S-8 (each as promulgated under
the
Securities Act) or their then equivalents relating to equity securities to
be
issued solely in connection with any acquisition of any entity or business
or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall provide to Consultant with respect to
the
Shares and the Warrant Shares (hereinafter, the “Registrable
Securities”)
the
opportunity to have such Registrable Securities included in such Registration
Statement; provided,
that
the Company shall only be required to provide such opportunity until the
earliest of (i) the date all of such Registrable Securities have been sold
pursuant to a Registration Statement, (ii) the date all of such Registrable
Securities have otherwise been transferred to persons who may trade such shares
without restriction under the Securities Act, and the Company has delivered
a
new certificate or other evidence of ownership for such securities not bearing
a
restrictive legend, and (iii) the date all of such Registrable Securities may
be
sold without volume or manner of sale limitations pursuant to Rule 144(k) or
any
similar provision then in effect under the Securities Act in the opinion of
counsel to the Company (the "Effectiveness
Period").
In
connection with any registration:
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(i)
Consultant may not participate in any registration hereunder which is
underwritten unless Consultant (A) agrees to sell its securities on the basis
provided in any underwriting arrangements approved by the Company and (B) with
respect to any registration, timely completes and executes all questionnaires
and other customary documents.
(ii)
All
fees, disbursements and out-of-pocket expenses and costs incurred by the Company
in connection with the preparation and filing of the Registration Statement
shall be borne by the Company. Consultant shall bear any reasonable cost of
underwriting and/or brokerage discounts, fees, and commissions, if any,
applicable to the Registrable Securities being registered and sold by an
underwriter for the Consultant and the fees and expenses of the Consultant’s
counsel. The Company shall use its reasonable best efforts to qualify any of
the
Registrable Securities for sale in such states as the Consultant reasonably
designates provided that the Company shall not be required to qualify in any
state which will require an escrow or other restriction relating to the Company
and/or the sellers, or which will require the Companyto qualify to do business
in such state or require the Company to file therein any general consent to
service of process and the Company shall in no event be required to qualify
in
greater than five states.
(iii)
Notwithstanding any other provisions hereof, with respect to an
underwritten
public
offering by the Corporation, if the managing underwriter advises the Company
that marketing or other factors require a limitation of the number of shares
to
be underwritten, then there shall be excluded from such registration and
underwriting to the extent necessary to satisfy such limitation, Registrable
Securities held by the Consultant prior to any cutback of shares to be sold
for
the Company or any other holder of shares with registration rights. Further,
the
Consultant shall agree not to sell any Registrable Securities included in the
underwritten public offering for such period as may be reasonably required
by
the managing underwriter. In connection with filing any Registration Statement;
if the SEC limits the amount of securities to be registered, then the
Companyshall be allowed to exclude the Registrable Securities from the
Registration Statement prior to excluding any securities it desires to register
on its own account and any securities entitled to registration rights under
any
other agreement to which the Company is a party.
3.
CONFIDENTIALITY.
All
knowledge and information of a proprietary and confidential nature relating
to
the Company which the Consultant obtains during the Consulting period, from
the
Company or the Company's employees, agents or consultants shall be for all
purposes regarded and treated as strictly confidential. Such obligation of
Consultant shall be governed by the terms of the confidentiality agreement
attached hereto as Exhibit
C
and it
shall be Consultant’s obligation to ensure that Consultant and consultants,
employees or agents comply with its terms.
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3 -
4.
INDEPENDENT
CONTRACTOR STATUS.
Consultant
understands that since the Consultant is not an employee of the Company, the
Company will not withhold income taxes or pay any employment taxes on its behalf
(which shall remain the sole obligation of the Consultant), nor will it receive
any fringe benefits. The Consultant shall not have any authority to assume
or
create any obligations, express or implied, on behalf of the Company and shall
have no authority to represent the Company as agent, employee or in any other
capacity other than as herein provided.
The
Consultant does hereby indemnify and hold harmless the Company from and against
any and all claims, liabilities, demands, losses or expenses incurred by the
Company if (1) the Consultant fails to pay any applicable income and or
employment taxes (including interest or penalties of whatever nature), in any
amount relating to the Consultant's rendering of consulting services to the
Company, including any attorney's fees or costs to
the
prevailing party to enforce this indemnity or (2) Consultant takes any action
or
fails to and any action in accordance with the companies
instructions.
The
Consultant shall be responsible for obtaining workers' compensation insurance
coverage and agrees to indemnify, defend and hold the Company harmless of and
from any and all claims arising out of any injury, disability or death of the
Consultant.
5.
REPRESENATIONS
AND WARRANTS.
For
purposes of this Agreement and in connection with Consultant’s receipt of the
Warrants, the Shares and the Warrant Shares (sometimes referred to herein as
the
“Securities”), the Consultant represents and warrants as follows:
a.
The
Consultant (i) has adequate means of providing for the Consultant's current
needs and possible personal contingencies, (ii) has no need for liquidity in
the
investment in the Securities, (iii) is able to bear the substantial economic
risks of an investment in the Securities for an indefinite period, (iv) at
the
present time, can afford a complete loss of such investment, whether or not
the
Warrants are exercised and (v) is an "accredited investor" as defined in the
Securities Act of 1933, as amended.
b.
The
Consultant does not have a preexisting personal or business relationship with
the Company or any of its directors or executive officers, or by reason of
any
business or financial experience or the business or financial experience of
any
professional advisors who are unaffiliated with and who are compensated by
the
Company or any affiliate or selling agent of the Company, directly or
indirectly, could be reasonably assumed to have the capacity to protect the
Consultant's interests in connection with the investment in the
Securities.
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c.
The
Consultant is aware that:
i.
The
Warrants are transferable under this Agreement only as provided in the warrants
and applicable securities laws; and
ii.
The
Articles of Incorporation and Bylaws of the Company contain provisions that
limit or eliminate the personal liability of the officers, directors and agents
of the Company and indemnify such parties for certain damages relating to the
Company, including damages in connection with the Securities and the good-faith
management and operation of the Company.
d.
The
Consultant acknowledges that the Securities are currently not registered under
any registration statement with the Securities and Exchange Commission (SEC)
and
may only be registered in accordance with the terms of this Agreement, if at
all.
e.
The
Consultant has not been furnished any offering literature and has not been
otherwise solicited by the Company.
f.
The
Company and its officers, directors and agents have answered all inquiries
that
the Consultant has made of them concerning the Company or any other matters
relating to the formation, operation and proposed operation of the Company
and
the offering and sale of the Securities.
g.
The
Consultant, if a corporation, partnership, trust or other entity, is duly
organized and in good standing in the state or country of its incorporation
and
is authorized and otherwise duly qualified to purchase and hold the Securities.
Such entity has its principal place for business as set forth on the signature
page hereof and has not been formed for the specific purpose of acquiring the
Securities unless all of its equity owners qualify as accredited individual
investors.
h.
All
information that the Consultant has provided to the Company concerning the
Consultant, the Consultant's financial position and the Consultant's knowledge
of financial and business matters, or, in the case of a corporation,
partnership, trust or other entity, the knowledge of financial and business
matters of the person making the investment decision on behalf of such entity,
including all information contained herein, is correct and complete as of the
date set forth at the end hereof and may be relied upon, and if there should
be
any material adverse change in such information prior to this subscription
being
accepted, the Consultant will immediately provide the Company with such
information.
i.
The
Consultant certifies, under penalties of perjury (i) that the taxpayer
identification number shown on the signature page of this Consulting Agreement
is true, correct and complete, and (ii) that the Consultant is not subject
to
backup withholding as a result of a failure to report all interest or dividends,
or because the Internal Revenue Service has notified the Consultant that the
Consultant is no longer subject to backup withholding.
-
5 -
j.
In
rendering the services hereunder and in connection with the Securities, the
Consultant agrees to comply with all applicable federal and state securities
laws, the rules and regulations thereunder, the rules and regulations of any
exchange or quotation service on which the Company's securities are listed
'and
the rules and regulations of the National Association of Securities Dealers,
Inc.
6.
TERM
AND TERMINATION.
The
term
of this Agreement shall be one year commencing as of January 1, 2008 (the
“Term”). Either party may terminate this Agreement at anytime with or without
cause by giving thirty (30) days written notice to the other party. Should
the
Consultant default in the performance of this Agreement or materially breach
any
of its provisions, the Company may, in its sole discretion, terminate this
Agreement immediately upon written notice to the Consultant.
7.
NO
THIRD PARTY RIGHTS.
The
parties warrant and represent that they are authorized to enter into this
Agreement and that no third parties, other than the parties hereto, have any
interest in any of the services or the Securities contemplated hereby. The
services provided hereunder by the Consultant are personal to the Consultant
and
may not be assigned.
8.
ABSENCE
OF WARRANTIES AND REPRESENTATIONS.
Each
party hereto
acknowledges
that they have signed this Agreement without having relied upon or being induced
by any agreement, warranty or representation of fact or opinion of any person
not expressly set forth herein. All representations and warranties of either
party contained herein shall survive its signing and delivery.
9.
GOVERNING
LAW. This
Agreement shall be governed by and construed in accordance with the law of
the
State of New York.
10.
ATTORNEY'S
FEES.
In the
event
of any controversy, claim or dispute between the parties hereto, arising out
of
or in any manner relating to this Agreement, including an attempt to rescind
or
set aside, the prevailing party in any action brought to settle such
controversy, claim or dispute shall be entitled to recover reasonable attorney's
fees and costs.
11.
ARBITRATION.
Any
controversy between the parties regarding the construction or application of
this Agreement, any claim arising out of this Agreement or its breach, shall
be
submitted to arbitration in New York, New York before one arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, upon the written request of one party after service of that request
on the other party. The cost of arbitration shall be borne by the losing party.
The arbitrator is also authorized to award attorney's fees to the prevailing
party.
12.
VALIDITY.
If any
paragraph, sentence, term or provision hereof shall be held to be invalid or
unenforceable for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of any other paragraph, sentence, term
and
provision hereof. To the extent required, any paragraph, sentence, term or
provision of this Agreement may be modified by the parties hereto by written
amendment to preserve its validity.
-
6 -
13.
NON-DISCLOSURE
OF TERMS.
The
terms
of this Agreement shall be kept confidential, and no party, representative,
attorney or family member shall reveal its contents to any third party except
as
required by law or regulation (including the regulations of the American Stock
Exchange) or as necessary to comply with law or preexisting contractual
commitments.
14.
ENTIRE
AGREEMENT. This
Agreement contains the entire understanding of the parties and cannot be altered
or amended except by an amendment duly executed by all parties hereto. This
Agreement shall be binding upon
and
inure to the benefit of the successors, assigns and personal representatives
of
the parties.
IN
WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement
effective as of the date first written above.
/s/Robin
Smith
Robin
Smith
CEO
NeoStem
/s/Joseph
Salvani
Joseph
Salvani
President,
CEO
JFS
Investments Corp.
TAXPAYER
ID NO. _______________________
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7 -
EXHIBIT
A
DESCRIPTION
OF CONSULTING SERVICES
The
Consultant agrees, to the extent reasonably required in the conduct of its
business with the Company, to place at the disposal of the Company its judgment
and experience and to provide business development services to the Company
including, but not limited, to, the following:
(i)
review the Company's financial requirements;
(ii)
analyze and assess alternatives for the Company's financial
requirements;
(iii)
provide introductions to professional analysts and money managers;
(iv)
assist the Company in financing arrangements to be determined and governed
by
separate and distinct financing agreements;
(v)
provide analysis of the Company's industry and competitors in the form of
general industry reports provided directly to Company.
(vi)
Assist the Company in developing corporate partnering relationships;
and,
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8 -
Exhibit
4.3
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant
No. _____
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
NEOSTEM,
INC.
THIS
CERTIFIES that, for value received, JFS Investments Inc. is entitled to purchase
from NEOSTEM, INC., a Delaware corporation (the “Corporation”),
subject to the terms and conditions hereof, _____________________
(_____________) shares (the “Warrant
Shares”)
of
common stock, $.001 par value (the “Common
Stock”).
This
warrant, together with all warrants hereafter issued in exchange or substitution
for this warrant, is referred to as the “Warrant”
and
the
holder of this Warrant is referred to as the “Holder.”
The
number of Warrant Shares is subject to adjustment as hereinafter provided.
Notwithstanding anything to the contrary contained herein, this Warrant shall
expire at 5:00 p.m. (Eastern Time) on January 1, 2013 (the “Termination
Date”).
1. Vesting
and Exercise of Warrants.
This
Warrant shall vest and become exercisable as to one-twelfth of the Warrant
Shares on the last day of each monthly anniversary during the term of the
Consulting Agreement effective as of January 1, 2008 and entered into between
the Holder and the Corporation (the “Consulting Agreement”), and in the event
the Consulting Agreement is terminated before the expiration of the Term (as
defined in the Consulting Agreement) then this Warrant shall remain vested
and
exercisable with respect to Warrant Shares for which it was vested and
exercisable as of the date of termination and the Warrant shall terminate
immediately with respect to any remaining Warrant Shares.
The
Holder may, at any time prior to the Termination Date, exercise this Warrant
as
to any Warrant Shares for which it is then vested and exercisable in whole
or in
part at an exercise price equal to $______ per share, subject to adjustment
as
provided herein (the “Exercise
Price”),
by
the surrender of this Warrant (properly endorsed) at the principal office of
the
Corporation, or at such other agency or office of the Corporation in the United
States of America as the Corporation may designate by notice in writing to
the
Holder at the address of such Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Exercise Price in lawful money of
the
United States by check or wire transfer for each share of Common Stock being
purchased. Upon any partial exercise of this Warrant, there shall be executed
and issued to the Holder a new Warrant in respect of the shares of Common Stock
as to which this Warrant shall not have been exercised. In the event of the
exercise of the rights represented by this Warrant, a certificate or
certificates for the Warrant Shares so purchased, as applicable, registered
in
the name of the Holder, shall be delivered to the Holder hereof as soon as
practicable after the rights represented by this Warrant shall have been so
exercised.
2. Reservation
of Warrant Shares; Registration Rights.
The
Corporation agrees that, prior to the expiration of this Warrant, it will at
all
times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the number of Warrant
Shares as from time to time shall be issuable by the Corporation upon the
exercise of this Warrant. The registration rights set forth in the Consulting
Agreement shall apply to the Warrant Shares.
-
1 -
3. No
Stockholder Rights.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Corporation.
4. Transferability
of Warrant.
Prior
to the Termination Date and subject to compliance with applicable Federal and
State securities and other laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed for transfer.
Any registration rights to which this Warrant may then be subject shall be
transferred together with the Warrant to the subsequent Investor.
5. Certain
Adjustments.
With
respect to any rights that Holder has to exercise this Warrant and convert
into
shares of Common Stock, Holder shall be entitled to the following
adjustments:
(a) Merger
or Consolidation.
If at any time there shall be a merger or a consolidation of the Corporation
with or into another entity when the Corporation is not the surviving
corporation, then, as part of such merger or consolidation, lawful provision
shall be made so that the holder hereof shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the aggregate Exercise Price then in effect, the number of shares
of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the holder
hereof as the holder of the stock deliverable upon exercise of this Warrant
would have been entitled in such merger or consolidation if this Warrant had
been exercised immediately before such transaction. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the holder hereof
as
the holder of this Warrant after the merger or consolidation.
(b) Reclassification,
Recapitalization, etc.
If the Corporation at any time shall, by subdivision, combination or
reclassification of securities, recapitalization, automatic conversion, or
other
similar event affecting the number or character of outstanding shares of Common
Stock, or otherwise, change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities
of
any other class or classes, this Warrant shall thereafter represent the right
to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such subdivision,
combination, reclassification or other change.
(c) Split
or Combination of Common Stock and Stock Dividend.
In case
the Corporation shall at any time subdivide, redivide, recapitalize, split
(forward or reverse) or change its outstanding shares of Common Stock into
a
greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Exercise
Price
shall be
proportionately reduced and the number of Warrant Shares proportionately
increased. Conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the Exercise
Price
shall be
proportionately increased and the number of Warrant Shares proportionately
reduced.
6. Legend
and Stop Transfer Orders.
Unless
the Warrant Shares have been registered under the Securities Act, upon exercise
of any part of the Warrant, the Corporation shall instruct its transfer agent
to
enter stop transfer orders with respect to such Warrant Shares, and all
certificates or instruments representing the Warrant Shares shall bear on the
face thereof substantially the following legend:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
-
2 -
7.Redemption
of Warrant.
This
Warrant is subject to redemption by the Company as provided in this Section
7.
(a) This
Warrant may be redeemed, at the option of the Company, in whole and not in
part,
at a redemption price of $.0001 per Warrant (the “Redemption
Price”),
provided the average closing price of the Common Stock as quoted by Bloomberg,
LP., or the Principal Trading Market (as defined below) on which the Common
Stock is included for quotation or trading, shall equal or exceed $10.00 per
share (taking into account all adjustments) for twenty (20) out of thirty (30)
consecutive trading days
(b) If
the
conditions set forth in Section
7(a)
are met,
and the Company desires to exercise its right to redeem this Warrant, it shall
mail a notice (the “Redemption
Notice”)
to the
registered holder of this Warrant by first class mail, postage prepaid, at
least
ten (10) business days prior to the date fixed by the Company for redemption
of
the Warrants (the “Redemption
Date”).
(c
) The
Redemption Notice shall specify (i) the Redemption Price, (ii) the Redemption
Date, (iii) the place where the Warrant certificates shall be delivered and
the
redemption price paid, and (iv) that the right to exercise this Warrant shall
terminate at 5:00 p.m. (New York time) on the business day immediately
preceding the Redemption Date. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to a holder (a) to whom notice was not mailed,
or
(b) whose notice was defective. An affidavit of the Secretary or an
Assistant Secretary of the Company that the Redemption Notice has been mailed
shall, in the absence of fraud, be prima
facie
evidence
of the facts stated therein.
(d) Any
right
to exercise a Warrant shall terminate at 5:00 p.m. (New York time) on the
business day immediately preceding the Redemption Date. On and after the
Redemption Date, the holder of this Warrant shall have no further rights except
to receive, upon surrender of this Warrant, the Redemption Price.
(e) From
and
after the Redemption Date, the Company shall, at the place specified in the
Redemption Notice, upon presentation and surrender to the Company by or on
behalf of the holder thereof the warrant certificates evidencing this Warrant
being redeemed, deliver, or cause to be delivered to or upon the written order
of such holder, a sum in cash equal to the Redemption Price of this Warrant.
From and after the Redemption Date, this Warrant shall expire and become void
and all rights hereunder and under the warrant certificates, except the right
to
receive payment of the Redemption Price, shall cease.
8. Miscellaneous.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of New York. All the covenants and provisions of this Warrant by or for
the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder. Nothing in this Warrant shall be construed
to
give to any person or corporation other than the Corporation and the holder
of
this Warrant any legal or equitable right, remedy, or claim under this Warrant.
This Warrant shall be for the sole and exclusive benefit of the Corporation
and
the Holder. The section headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation hereof. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction, or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Corporation, if lost, stolen, or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation shall
execute and deliver to the Holder a new Warrant of like date, tenor, and
denomination.
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3 -
IN
WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by
its
duly authorized officers under its seal, this 15 day of February
2008.
| NEOSTEM, INC. | ||
| |
|
|
| /s/ Robin L. Smith | ||
|
Robin L. Smith, Chairman & Chief Executive Officer |
||
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4 -
WARRANT
EXERCISE FORM
To
Be Executed by the Holder in Order to Exercise Warrant
| To: |
NeoStem,
Inc.
Dated:
________________ __, 20__
|
420
Lexington Avenue
Suite
450
New
York,
New York 10170
Attn:
Chairman and CEO
The
undersigned, pursuant to the provisions set forth in the attached Warrant
No. ______, hereby irrevocably elects to purchase ____________ shares of
the Common Stock of NeoStem, Inc. covered by such Warrant.
|
¨
|
The
undersigned herewith makes payment of the full purchase price for
such
shares at the price per share provided for in such Warrant. Such
payment
takes the form of $__________ in lawful money of the United
States.
|
The
undersigned hereby requests that certificates for the Warrant Shares purchased
hereby be issued in the name of:
| (please print or type name and address) | |
(please
insert social security or other identifying number)
and
be
delivered as follows:
| (please print or type name and address) |
(please
insert social security or other identifying number)
and
if
such number of shares of Common Stock shall not be all the shares evidenced
by
this Warrant Certificate, that a new Warrant for the balance of such shares
be
registered in the name of, and delivered to, Holder.
| Signature of Holder | ||
| SIGNATURE GUARANTEE: | ||
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5 -
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form. Do not use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
| whose address is | |
Dated:
________ __, 200_
| Holder’s Signature: | |||
| Holder’s Address: | |||
Signature
Guaranteed: _________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust Corporation. Officers
of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
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6 -
Exhibit
4.4
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant
No. 219
WARRANT
A TO PURCHASE SHARES OF COMMON STOCK
OF
NEOSTEM,
INC.
THIS
CERTIFIES that, for value received, Solutions in Marketing, Inc. is entitled
to
purchase from NEOSTEM, INC., a Delaware corporation (the “Corporation”),
subject to the terms and conditions hereof, three thousand (3,000) shares (the
“Warrant
Shares”)
of
common stock, $.001 par value (the “Common
Stock”).
This
warrant, together with all warrants hereafter issued in exchange or substitution
for this warrant, is referred to as the “Warrant”
and
the
holder of this Warrant is referred to as the “Holder.”
The
number of Warrant Shares is subject to adjustment as hereinafter provided.
Notwithstanding anything to the contrary contained herein, this Warrant shall
expire at 5:00 p.m. (Eastern Time) on October 1, 2012 (the “Termination
Date”).
1. Exercise
of Warrants.
The
Holder may, at any time prior to the Termination Date, exercise this Warrant
in
whole or in part at an exercise price per share equal to $4.61 per share,
subject to adjustment as provided herein (the “Exercise
Price”),
by
the surrender of this Warrant (properly endorsed) at the principal office of
the
Corporation, or at such other agency or office of the Corporation in the United
States of America as the Corporation may designate by notice in writing to
the
Holder at the address of such Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Exercise Price in lawful money of
the
United States by check or wire transfer for each share of Common Stock being
purchased. Upon any partial exercise of this Warrant, there shall be executed
and issued to the Holder a new Warrant in respect of the shares of Common Stock
as to which this Warrant shall not have been exercised. In the event of the
exercise of the rights represented by this Warrant, a certificate or
certificates for the Warrant Shares so purchased, as applicable, registered
in
the name of the Holder, shall be delivered to the Holder hereof as soon as
practicable after the rights represented by this Warrant shall have been so
exercised.
2. Reservation
of Warrant Shares.
The
Corporation agrees that, prior to the expiration of this Warrant, it will at
all
times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the number of Warrant
Shares as from time to time shall be issuable by the Corporation upon the
exercise of this Warrant.
-
1 -
3. No
Stockholder Rights.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Corporation.
4. Transferability
of Warrant.
Prior
to the Termination Date and subject to compliance with applicable Federal and
State securities and other laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed for transfer.
Any registration rights to which this Warrant may then be subject shall be
transferred together with the Warrant to the subsequent Investor.
5. Certain
Adjustments.
With
respect to any rights that Holder has to exercise this Warrant and convert
into
shares of Common Stock, Holder shall be entitled to the following
adjustments:
(a) Merger
or Consolidation.
If at any time there shall be a merger or a consolidation of the Corporation
with or into another entity when the Corporation is not the surviving
corporation, then, as part of such merger or consolidation, lawful provision
shall be made so that the holder hereof shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the aggregate Exercise Price then in effect, the number of shares
of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the holder
hereof as the holder of the stock deliverable upon exercise of this Warrant
would have been entitled in such merger or consolidation if this Warrant had
been exercised immediately before such transaction. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the holder hereof
as
the holder of this Warrant after the merger or consolidation.
(b) Reclassification,
Recapitalization, etc.
If the Corporation at any time shall, by subdivision, combination or
reclassification of securities, recapitalization, automatic conversion, or
other
similar event affecting the number or character of outstanding shares of Common
Stock, or otherwise, change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities
of
any other class or classes, this Warrant shall thereafter represent the right
to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such subdivision,
combination, reclassification or other change.
(c) Split
or Combination of Common Stock and Stock Dividend.
In case
the Corporation shall at any time subdivide, redivide, recapitalize, split
(forward or reverse) or change its outstanding shares of Common Stock into
a
greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Exercise
Price
shall be
proportionately reduced and the number of Warrant Shares proportionately
increased. Conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the Exercise
Price
shall be
proportionately increased and the number of Warrant Shares proportionately
reduced.
6. Legend
and Stop Transfer Orders.
Unless
the Warrant Shares have been registered under the Securities Act, upon exercise
of any part of the Warrant, the Corporation shall instruct its transfer agent
to
enter stop transfer orders with respect to such Warrant Shares, and all
certificates or instruments representing the Warrant Shares shall bear on the
face thereof substantially the following legend:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
-
2 -
7.Redemption
of Warrant.
This
Warrant is subject to redemption by the Company as provided in this Section
7.
(a) This
Warrant may be redeemed, at the option of the Company, in whole and not in
part,
at a redemption price of $.0001 per Warrant (the “Redemption
Price”),
provided the average closing price of the Common Stock as quoted by Bloomberg,
LP., or the Principal Trading Market (as defined below) on which the Common
Stock is included for quotation or trading, shall equal or exceed $10.00 per
share (taking into account all adjustments) for twenty (20) out of thirty (30)
consecutive trading days
(b) If
the
conditions set forth in Section
7(a)
are met,
and the Company desires to exercise its right to redeem this Warrant, it shall
mail a notice (the “Redemption
Notice”)
to the
registered holder of this Warrant by first class mail, postage prepaid, at
least
ten (10) business days prior to the date fixed by the Company for redemption
of
the Warrants (the “Redemption
Date”).
(c
) The
Redemption Notice shall specify (i) the Redemption Price, (ii) the Redemption
Date, (iii) the place where the Warrant certificates shall be delivered and
the
redemption price paid, and (iv) that the right to exercise this Warrant shall
terminate at 5:00 p.m. (New York time) on the business day immediately
preceding the Redemption Date. No failure to mail such notice nor any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to a holder (a) to whom notice was not mailed,
or
(b) whose notice was defective. An affidavit of the Secretary or an
Assistant Secretary of the Company that the Redemption Notice has been mailed
shall, in the absence of fraud, be prima
facie
evidence
of the facts stated therein.
(d) Any
right
to exercise a Warrant shall terminate at 5:00 p.m. (New York time) on the
business day immediately preceding the Redemption Date. On and after the
Redemption Date, the holder of this Warrant shall have no further rights except
to receive, upon surrender of this Warrant, the Redemption Price.
(e) From
and
after the Redemption Date, the Company shall, at the place specified in the
Redemption Notice, upon presentation and surrender to the Company by or on
behalf of the holder thereof the warrant certificates evidencing this Warrant
being redeemed, deliver, or cause to be delivered to or upon the written order
of such holder, a sum in cash equal to the Redemption Price of this Warrant.
From and after the Redemption Date, this Warrant shall expire and become void
and all rights hereunder and under the warrant certificates, except the right
to
receive payment of the Redemption Price, shall cease.
8. Miscellaneous.
This
Warrant shall be governed by and construed in accordance with the laws of the
State of New York. All the covenants and provisions of this Warrant by or for
the benefit of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder. Nothing in this Warrant shall be construed
to
give to any person or corporation other than the Corporation and the holder
of
this Warrant any legal or equitable right, remedy, or claim under this Warrant.
This Warrant shall be for the sole and exclusive benefit of the Corporation
and
the Holder. The section headings herein are for convenience only and are not
part of this Warrant and shall not affect the interpretation hereof. Upon
receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction, or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Corporation, if lost, stolen, or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, the Corporation shall
execute and deliver to the Holder a new Warrant of like date, tenor, and
denomination.
-
3 -
IN
WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by
its
duly authorized officers under its seal, this 1st
day of
October 2007.
| NEOSTEM, INC. | ||
| |
|
|
| /s/ Robin L. Smith | ||
|
Robin L. Smith, Chairman & Chief Executive Officer |
||
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4 -
WARRANT
EXERCISE FORM
To
Be Executed by the Holder in Order to Exercise Warrant
| To: |
NeoStem,
Inc.
Dated:
________________ __, 20__
|
420
Lexington Avenue
Suite
450
New
York,
New York 10170
Attn:
Chairman and CEO
The
undersigned, pursuant to the provisions set forth in the attached Warrant
No. ______, hereby irrevocably elects to purchase ____________ shares of
the Common Stock of NeoStem, Inc. covered by such Warrant.
|
¨
|
The
undersigned herewith makes payment of the full purchase price for
such
shares at the price per share provided for in such Warrant. Such
payment
takes the form of $__________ in lawful money of the United
States.
|
The
undersigned hereby requests that certificates for the Warrant Shares purchased
hereby be issued in the name of:
| (please print or type name and address) | |
(please
insert social security or other identifying number)
and
be
delivered as follows:
(please
print or type name and address)
(please
insert social security or other identifying number)
and
if
such number of shares of Common Stock shall not be all the shares evidenced
by
this Warrant Certificate, that a new Warrant for the balance of such shares
be
registered in the name of, and delivered to, Holder.
| |
|
Signature
of
Holder |
| SIGNATURE GUARANTEE: | ||
-
5 -
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form. Do not use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
| whose address is | |
Dated:
________ __, 200_
| Holder’s Signature: | |||
| Holder’s Address: | |||
Signature
Guaranteed: __________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust Corporation. Officers
of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
-
6 -
Exhibit
4.5
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
Warrant
No. 241
WARRANT
A TO PURCHASE SHARES OF COMMON STOCK
OF
NEOSTEM,
INC.
THIS
CERTIFIES that, for value received, Wall Street Communications Group, Inc.
is
entitled to purchase from NEOSTEM, INC., a Delaware corporation (the
“Corporation”),
subject to the terms and conditions hereof, two hundred and fifty thousand
(250,000) shares (the “Warrant
Shares”)
of
common stock, $.001 par value (the “Common
Stock”).
This
warrant, together with all warrants hereafter issued in exchange or substitution
for this warrant, is referred to as the “Warrant”
and
the
holder of this Warrant is referred to as the “Holder.”
The
number of Warrant Shares is subject to adjustment as hereinafter provided.
Notwithstanding anything to the contrary contained herein, this Warrant shall
expire at 5:00 p.m. (Eastern Time) on June 19, 2013 (the “Termination
Date”).
1. Exercise
of Warrant and Vesting.
(a) This
Warrant shall vest and become exercisable as
to
41,667 Warrant Shares on each of the date of execution of that certain
consulting agreement (the “Consulting Agreement”) dated as of June 11, 2008
between Wall Street Communications Group, Inc. and the Corporation and each
of
the first, second, third, fourth and fifth month anniversaries of the execution
of the Consulting Agreement (each a “Vesting Date”) (except it shall vest as to
41,666 Warrant Shares on the fourth and fifth anniversaries); provided, however,
that in the event the Consulting Agreement is terminated in accordance with
Section IV of the Consulting Agreement prior to any Vesting Date, the Warrant
shall remain exercisable in accordance with its terms as to the Warrant Shares
as to which it vested prior to termination and the Warrant shall terminate
and
be of no further force or effect with respect to the remainder of the Warrant
Shares. The
Holder may, at any time prior to the Termination Date with respect to any
Warrant Shares for which it has vested, exercise this Warrant in whole or in
part at an exercise price per share as follows: (i) as to 50,000 Warrant
Shares an exercise price of $1.00 per share, (ii) as to an additional 50,000
Warrant Shares an exercise price of $1.30 per share, (iii) as to an additional
50,000 Warrant Shares an exercise price of $1.75 per share; (iv) as to an
additional 50,000 Warrant Shares an exercise price of $2.00 per share, and
(v)
as to an additional 50,000 Warrant Shares an exercise price of $3.00 per share,
in each case subject
to adjustment as provided herein (the “Exercise
Price”),
by
the surrender of this Warrant (properly endorsed) at the principal office of
the
Corporation, or at such other agency or office of the Corporation in the United
States of America as the Corporation may designate by notice in writing to
the
Holder at the address of such Holder appearing on the books of the Corporation,
and by payment to the Corporation of the Exercise Price in lawful money of
the United States by check or wire transfer for each share of Common Stock
being
purchased.
-
1 -
This
Warrant shall be deemed to have been exercised immediately prior to the close
of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Warrant Shares issuable upon exercise shall
be
treated for all purposes as the Holder of such shares of record as of the close
of business on such date. As promptly as practicable after such date, the
Corporation shall issue and deliver to the person or persons entitled to receive
the same a certificate or certificates for the number of full Warrant Shares
issuable upon such exercise. If the Warrant shall be exercised for less than
the
total number of shares of Warrant Shares then issuable upon exercise, promptly
after surrender of the Warrant upon such exercise, the Corporation will execute
and deliver a new Warrant, dated the date hereof, evidencing the right of the
Holder to the balance of the Warrant Shares purchasable hereunder upon the
same
terms and conditions set forth herein.
2. Reservation
of Warrant Shares.
The
Corporation agrees that, prior to the expiration of this Warrant, it will at
all
times have authorized and in reserve, and will keep available, solely for
issuance or delivery upon the exercise of this Warrant, the number of Warrant
Shares as from time to time shall be issuable by the Corporation upon the
exercise of this Warrant.
3. No
Stockholder Rights.
This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Corporation.
4. Transferability
of Warrant.
Prior
to the Termination Date and subject to compliance with applicable Federal and
State securities and other laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by
the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed for transfer.
Any registration rights to which this Warrant may then be subject shall be
transferred together with the Warrant to the subsequent Investor.
5. Certain
Adjustments.
With
respect to any rights that Holder has to exercise this Warrant and convert
into
shares of Common Stock, Holder shall be entitled to the following
adjustments:
(a) Merger
or Consolidation.
If at any time there shall be a merger or a consolidation of the Corporation
with or into another entity when the Corporation is not the surviving
corporation, then, as part of such merger or consolidation, lawful provision
shall be made so that the holder hereof shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified herein and upon
payment of the aggregate Exercise Price then in effect, the number of shares
of
stock or other securities or property (including cash) of the successor
corporation resulting from such merger or consolidation, to which the holder
hereof as the holder of the stock deliverable upon exercise of this Warrant
would have been entitled in such merger or consolidation if this Warrant had
been exercised immediately before such transaction. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the holder hereof
as
the holder of this Warrant after the merger or consolidation.
(b) Reclassification,
Recapitalization, etc.
If the Corporation at any time shall, by subdivision, combination or
reclassification of securities, recapitalization, automatic conversion, or
other
similar event affecting the number or character of outstanding shares of Common
Stock, or otherwise, change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities
of
any other class or classes, this Warrant shall thereafter represent the right
to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such subdivision,
combination, reclassification or other change.
-
2 -
(c) Split
or Combination of Common Stock and Stock Dividend.
In case
the Corporation shall at any time subdivide, redivide, recapitalize, split
(forward or reverse) or change its outstanding shares of Common Stock into
a
greater number of shares or declare a dividend upon its Common Stock payable
solely in shares of Common Stock, the Exercise
Price
shall be
proportionately reduced and the number of Warrant Shares proportionately
increased. Conversely, in case the outstanding shares of Common Stock of the
Corporation shall be combined into a smaller number of shares, the Exercise
Price
shall be
proportionately increased and the number of Warrant Shares proportionately
reduced.
6. Legend
and Stop Transfer Orders.
Unless
the Warrant Shares have been registered under the Securities Act, upon exercise
of any part of the Warrant, the Corporation shall instruct its transfer agent
to
enter stop transfer orders with respect to such Warrant Shares, and all
certificates or instruments representing the Warrant Shares shall bear on the
face thereof substantially the following legend:
THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
7. Registration
Rights.
The
Company grants registration rights to the Holder as follows:
(a) The
Company will prepare and file (which may include the preparation and filing
of
one or more pre-effective amendments to any registration statements that relates
to the Company’s securities, which may be currently on file or may be
subsequently filed with the Securities and Exchange Commission (the
“Commission”)), at its own expense, a registration statement under the
Securities Act (the “Registration
Statement”)
with the Commission no later than July 3, 2008 for the non-underwritten public
offering and resale of the Warrant Shares (subject to adjustment as set forth
in
the Warrants) (the “Registrable
Securities”)
through the facilities of all appropriate securities exchanges, if any, on
which
the Company’s Common Stock is being sold or on the over-the-counter market if
the Company’s Common Stock is quoted thereon. Such registration statement may
include securities required to be included by the Company pursuant to
registration rights granted by the Company prior to the date of the Consulting
Agreement. Notwithstanding
anything herein to the contrary, if the Commission refuses to declare a
Registration Statement filed pursuant to this provision effective as a valid
secondary offering under Rule 415 due to the number of securities included
in
such Registration Statement relative to the outstanding number of shares of
Common Stock, then the Company shall be permitted to reduce the number of
Registrable Securities included in such Registration Statement to an amount
such
that the number of securities included in such Registration Statement does
not
exceed an amount that the Commission allows for the offering thereunder to
qualify as a valid secondary offering under Rule 415. The Company shall
have no liability as to any Registrable Securities which are not permitted
by
the Commission to be included in a Registration Statement due solely to SEC
Guidance from the time that it is determined that securities are not permitted
to be registered due to SEC Guidance or as to any delay occasioned by such
SEC Guidance. To the extent any Registrable Securities are not permitted to
by
registered due to SEC Guidance, the Company will include such Registrable
Securities in the Company’s next registration statement or in a previously filed
registration statement pursuant to a post-effective amendment (other than a
Form
S-8 or S-4), if permissible, whichever is the first to occur.
“SEC
Guidance”
means
(i) any written or oral guidance, comments, requirements or requests of the
Commission staff and (ii) the Securities Act and rules and regulations
thereunder.
-
3 -
(b) The
Company will use its reasonable best efforts to cause such Registration
Statement to become effective.
-
4 -
IN
WITNESS WHEREOF, the Corporation has caused this Warrant to be executed by
its
duly authorized officers under its seal, this 20th
day of
June 2008.
| NEOSTEM, INC. | ||
| |
|
|
| /s/ Robin L. Smith | ||
|
Robin L. Smith |
||
| Chairman & Chief Executive Officer | ||
-
5 -
WARRANT
EXERCISE FORM
To
Be Executed by the Holder in Order to Exercise Warrant
| To: |
NeoStem,
Inc.
Dated:
________________ __, 20__
|
420
Lexington Avenue
Suite
450
New
York,
New York 10170
Attn:
Chairman and CEO
The
undersigned, pursuant to the provisions set forth in the attached Warrant
No. ______, hereby irrevocably elects to purchase ____________ shares of
the Common Stock of NeoStem, Inc. covered by such Warrant.
|
¨
|
The
undersigned herewith makes payment of the full purchase price for
such
shares at the price per share provided for in such Warrant. Such
payment
takes the form of $__________ in lawful money of the United
States.
|
The
undersigned hereby requests that certificates for the Warrant Shares purchased
hereby be issued in the name of:
| (please print or type name and address) | |
(please
insert social security or other identifying number)
and
be
delivered as follows:
| (please print or type name and address) | |
(please
insert social security or other identifying number)
and
if
such number of shares of Common Stock shall not be all the shares evidenced
by
this Warrant Certificate, that a new Warrant for the balance of such shares
be
registered in the name of, and delivered to, Holder.
| Signature of Holder | ||
| SIGNATURE GUARANTEE: | ||
-
6 -
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute
this
form. Do not use this form to exercise the warrant.)
FOR
VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
| whose address is | |
Dated:
________ __, 200_
| Holder’s Signature: | |||
| Holder’s Address: | |||
Signature
Guaranteed: ___________________________
NOTE:
The
signature to this Assignment Form must correspond with the name as it appears
on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust Corporation. Officers
of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing
Warrant.
-
7 -
Exhibit
5.1
July
1,
2008
NeoStem,
Inc.
420
Lexington Avenue
Suite
450
New
York,
New York 10170
Dear
Ladies and Gentlemen:
I
am Vice
President and General Counsel of NeoStem, Inc., a Delaware corporation
(the
“Company”), and have
acted as counsel to the Company in connection with its registration statement
on
Form S-3 (the "Registration Statement") filed under the Securities Act of
1933,
as amended (the "Act"), relating to the registration for resale of (i) 909,152
shares of outstanding common stock (the "Shares"); and (ii) 1,158,709 shares
of
Common Stock (the "Warrant Shares") issuable upon exercise of outstanding
warrants (the "Warrants"), for an aggregate of 2,067,861 shares of common
stock.
As
such
counsel, I have reviewed the corporate proceedings taken by the Company with
respect to the authorization of the issuance of the Shares and Warrant Shares.
I
have also examined and relied upon originals or copies of such corporate
records, documents, agreements or other instruments of the Company as I have
deemed necessary to review. As to certain factual matters (including factual
conclusions and characterizations and descriptions of purpose, intention
or
other state of mind), I have relied upon certifications of officers of the
Company, and have assumed, without independent inquiry, the accuracy of those
certifications.
I
have
assumed the genuineness of all signatures, the conformity to the originals
of
all documents reviewed by me as copies, the authenticity and completeness
of all
original documents reviewed by me in original or copy form and the legal
competence of each individual executing a document. I have also assumed that
the
registration requirements of the Act and all applicable requirements of state
laws regulating the sale of securities will have been duly
satisfied.
Subject
to the foregoing, I am of the opinion that (i) the Shares have been, and,
(ii)
the Warrant Shares, when sold, paid for, issued and delivered in accordance
with
the terms of the Warrants, will be, when the Registration Statement has become
effective under the Act, duly authorized, validly issued, fully paid and
non-assessable.
This
opinion is limited to the provisions of the Delaware General Corporation
Law. My
opinion is based on these laws as in effect on the date hereof.
I
hereby
consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to me under the heading "Legal Matters" in
the
Prospectus. In giving such consent, I do not thereby admit that I am in the
category of persons whose consent is required under Section 7 of the
Act.
Very
truly yours,
/s/
Catherine M. Vaczy, Esq.
Catherine
M. Vaczy, Esq.
Exhibit
23.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby
consent to the incorporation by reference in this Registration Statement of
NeoStem, Inc. on Form S-3 of our report dated March 28, 2008, with respect
to the consolidated financial statements of NeoStem, Inc. and Subsidiaries
appearing in the Annual Report on Form 10-K/A of NeoStem, Inc. for the year
ended December 31, 2007.
We
also
consent to the reference to us under the heading “Experts” in the
Prospectus.
/s/
Holtz
Rubenstein Reminick LLP
Holtz
Rubenstein Reminick LLP
Melville,
New York
July
1,
2008