424(b)3
Registration No.
333-165973
PROSPECTUS
NEURALSTEM,
INC.
5,163,956
Shares of Common Stock
This
prospectus relates to the resale of up to 5,163,956 shares of our common stock
being offered by the selling shareholders listed on page 11. We will not
receive any proceeds from the sale of the shares of common stock by the selling
shareholders.
Our
shares of common stock are quoted on the NYSE: AMEX under the symbol
“CUR.” On April 2, 2010, the last reported sales price of our common
stock was, was $2.02.
Our
principal executive offices are located at 9700 Great Seneca Highway, Rockville,
MD, telephone number 301-366-4841.
Investing
in our common stock involves a high degree of risk. You are urged to read the
section entitled “Risk Factors” beginning on page 3; of this prospectus, which
describes specific risks and other information that should be considered before
you make an investment decision.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Date
of this Prospectus is May 11, 2010
TABLE
OF CONTENTS
PROSPECTUS
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Page
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Prospectus
Summary
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1
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The
Offering
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2
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Forward
Looking Statements
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2
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Risk
Factors
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3
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Use
of Proceeds
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10
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Determination
of Offering Price
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10
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Selling
Shareholders
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11
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Plan
of Distribution
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14
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Transfer
Agent
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15
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Legal
Matters
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15
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Experts
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15
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Where
you can Find More Information
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16
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Incorporation
of Certain Information by Reference
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16
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The
summary below highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information that
you should consider before deciding to invest in our securities. We urge you to
read this entire prospectus carefully, including the” Risk Factors” section and
the consolidated financial statements and related notes included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, filed with
the Securities and Exchange Commission (“SEC”) on March 31, 2010. As used
in this prospectus, unless context otherwise requires, the words “we,”
“us,”“our,” “the Company” and “Neuralstem” refer to Neuralstem, Inc. Also,
any reference to “common shares,” or “common stock,” refers to our $.01 par
value common stock.
Our
Business
We are
focused on the development and commercialization of treatments for central
nervous system disease based on transplanting human neural stem cells and small
molecule drugs.
We have
developed and maintain a portfolio of patents and patent applications that form
the proprietary base of our research and development efforts in the areas of
neural stem cell research, small molecule research, and related technologies. We
believe our patented technology, in combination with our know-how, and
collaborative projects with major research institutions, provide a competitive
advantage and will enable us to develop and commercialize products for use in
treatment of a number of neurodegenerative conditions and in regenerative repair
of acute disease.
Regenerative
medicine is a young and emerging field. There can be no assurances that our
intellectual property portfolio will ultimately produce viable commercialized
products and processes. Even if we are able to produce a commercially viable
product, there are strong competitors in this field and our product may not be
able to successfully compete against them.
All of
our research efforts to date are at either the level of research or pre-clinical
stage of development, or at the clinical stage of development. On December
18, 2008 we filed our first Investigational New Drug Application (“IND”) with
the U.S. Food and Drug Administration (“FDA”) to begin a clinical trial to treat
Amyotrophic Lateral Sclerosis (“ALS” or “Lou Gehrig’s disease”). On September
21, 2009, the FDA approved our IND. The first patient in our study was
dosed on January 21, 2010.
In
addition to our core stem cell based technologies, we have developed and
patented a series of small molecule compounds (low molecular weight organic
compounds which can efficiently cross the blood/brain barrier). The
Company expects to file an IND to commence a human safety trial of its lead
compound to treat major depression in late 2010 or early 2011.
Technology
Our
technology is the ability to isolate human neural stem cells from most areas of
the developing human brain and spinal cord and our technology includes the
ability to grow them into physiologically relevant human neurons of all types.
Our two issued core patents entitled: (i) Isolation, Propagation, and
Directed Differentiation of Stem Cell from Embryonic and Adult Central Nervous
System of Mammals; and (ii) In Vitro Generation of
Differentiated Neurons from Cultures of Mammalian Multi-potential CNS Stem
Cell contain claims which cover the process of deriving the cells and the
cells created from such process. These two core patents form the
foundation of our proposed stem cell products.
Research
We have
devoted substantial resources to our research programs to isolate and develop a
series of neural stem cell banks that we believe can serve as a basis for
therapeutic products. Our efforts to date have been directed at methods to
identify, isolate and culture large varieties of stem cells of the human nervous
system, and to develop therapies utilizing these stem cells. This research is
conducted both internally and through the use of third party laboratory
consulting companies under our direct supervision.
Employees
and Location
As of
March 13, 2010, we had eight full-time employees and six full time independent
contractors. Of these employees, ten work on research and development
and four in administration. We also use the services of numerous outside
consultants in business and scientific matters.
Where
to Find More Information
We make
our public filings with the SEC, including our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all
exhibits and amendments to these reports. Also our executive officers,
directors and holders of more than 10% of our common stock, file reports with
the SEC on Forms 3, 4 and 5 regarding their ownership of our securities.
These materials are available on the SEC’s web site, http://www.sec.gov.
You may also read or copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, DC 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Alternatively, you may obtain copies of these
filings, including exhibits, by writing or telephoning us at:
NEURALSTEM,
INC
9700
Great Seneca Highway,
Rockville,
Maryland 20850
Attn:
Chief Financial Officer
Tel:
(301) 366-4841
THE
OFFERING
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Common
stock being offered by Selling Shareholders
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Up
to 5,163,956 shares
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NYSE:
AMEX Symbol
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CUR
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Risk
Factors
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The
securities offered by this prospectus are speculative and involve a high
degree of risk and investors purchasing securities should not purchase the
securities unless they can afford the loss of their entire investment. See
“Risk Factors” beginning on page 3.
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Use
of Proceeds
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We
will not receive any proceeds from the sale of the common shares by the
Selling Shareholders. In the event the warrants held by the Selling
Shareholders are exercised for cash, we will receive approximately
5,163,956. The proceeds, if any, will be used for general working
capital.
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FORWARD
LOOKING STATEMENTS
This
prospectus, and the documents incorporated into it by reference, contains
forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"), which are intended to convey our expectations or predictions
regarding the occurrence of possible future events or the existence of trends
and factors that may impact our future plans and operating results. These
forward-looking statements are derived, in part, from various assumptions and
analyses we have made in the context of our current business plan and
information currently available to us and in light of our experience and
perceptions of historical trends, current conditions and expected future
developments and other factors we believe are appropriate in the circumstances.
You can generally identify forward looking statements through words and phrases
such as “believe”, “expect”,
“seek”, “estimate”, “anticipate”, “intend”, “plan”, “budget”, “project”, “may
likely result”, “may be”, “may continue” and other similar
expressions.
When
reading any forward-looking statement, you should remain mindful that actual
results or developments may vary substantially from those expressed in or
implied by such statement for a number of reasons or factors, including but not
limited to:
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the
success of our research and development activities, the development of a
viable commercial product, and the speed with which regulatory
authorizations and product launches may be
achieved;
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whether
or not a market for our product develops, and, if a market develops, the
rate at which it develops;
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our
ability to successfully sell or license our products if a market
develops;
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our
ability to attract and retain qualified personnel to implement our
business plan and corporate growth
strategies;
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our
ability to develop sales, marketing, and distribution
capabilities;
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our
ability to obtain reimbursement from third party payers for our proposed
products if they are developed;
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the
accuracy of our estimates and
projections;
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our
ability to fund our short-term and long-term financing
needs;
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changes
in our business plan and corporate strategies;
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other
risks and uncertainties discussed in greater detail in the section
captioned “Risk
Factors”
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Each
forward-looking statement should be read in context with and in understanding of
the various other disclosures concerning our company and our business made
elsewhere in this Prospectus as well as our public filings with the SEC. You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statements contained in this Prospectus or any other filing to
reflect new events or circumstances unless and to the extent required by
applicable law.
THAT MAY
AFFECT OUR FUTURE RESULTS AND FINANCIAL CONDITION
We
have described below a number of uncertainties and risks which, in addition to
uncertainties and risks presented elsewhere in this Prospectus, may adversely
affect our business, operating results and financial condition. The
uncertainties and risks enumerated below as well as those presented elsewhere in
this Prospectus should be considered carefully in evaluating our company and our
business and the value of our securities.
Risks
Relating to Our Stage of Development
We
have a limited operating history and have significantly shifted our operations
and strategies since inception.
Since
inception in 1996 and through December 31, 2009, we have raised $62,551,375 of
capital and recorded accumulated losses totaling $67,566,831. On December
31, 2009, we had a working capital surplus of $892,552 and stockholders’ deficit
of $5,015,456. Our net losses for the two most recent fiscal years have
been $10,364,363 and $11,830,798 for 2009 and 2008 respectively. We had no
revenues for the twelve months ended December 31, 2009.
Our
ability to generate revenues and achieve profitability will depend upon our
ability to complete the development of our proposed stem cell products, obtain
the required regulatory approvals, manufacture, and market and sell our proposed
products. In part because of our past operating results, no assurances can be
given that we will be able to accomplish any of these goals.
Although
we have generated some revenue in prior years, we have not generated any revenue
from the commercial sale of our proposed stem cell products. Since inception, we
have engaged in several related lines of business and have discontinued
operations in certain areas. For example, in 2002, we lost a material contract
with the Department of Defense and were forced to close our principal facility
and lay off almost all of our employees in an attempt to focus our development
strategy on stem cell technologies. This limited and changing history may not be
adequate to enable you to fully assess our future prospects. No assurances can
be given as to exactly when, if at all, we will be able to fully develop,
commercialize, market, sell and/or derive material revenues from our proposed
products
We
will need to raise additional capital to continue operations.
Since
inception, we have relied almost entirely on external financing to fund
operations. Such financing has come primarily from the sale of common stock and
the exercise of investor warrants. As of December 31, 2009, we had cash
and cash equivalents on hand of $2,309,774. Presently, we have a monthly
cash burn rate of approximately $600,000. We will need to raise additional
capital to fund anticipated operating expenses and future expansion. Among other
things, external financing will be required to further develop our technologies
and products, as well as to pay general operating costs. On September 21,
2009, the FDA approved our IND application to commence Phase I trials for ALS.
The first patient was dosed on January 21, 2010.
We have
expended and expect to continue to expend substantial cash in the research,
development, clinical and pre-clinical testing of our stem cell technologies
with the goal of ultimately obtaining FDA approval to market our proposed
products. We will require additional capital to conduct research and
development, establish and conduct clinical and pre-clinical trials, enter into
commercial-scale manufacturing arrangements and to provide for marketing and
distribution of our products.
Our long
term capital requirements are expected to depend on many factors,
including:
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the
continued progress and costs of our research and development
programs;
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the
progress of pre-clinical studies and clinical
trials;
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the
time and costs involved in obtaining regulatory
clearance;
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the
costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims;
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The
cost of defending any patent
litigation;
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the
costs of developing sales, marketing and distribution channels and our
ability to sell our products if
developed;
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the
costs involved in establishing manufacturing capabilities for commercial
quantities of our proposed
products;
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competing
technological and market
developments;
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market
acceptance of our proposed
products;
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the
costs of recruiting and retaining employees and consultants;
and
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the
costs associated with educating and training physicians about our proposed
products.
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We cannot
assure you that financing will be available if needed. If additional financing
is not available, we may not be able to fund operations and planned growth,
develop or enhance our technologies, take advantage of business opportunities or
respond to competitive market pressures. If we exhaust our cash reserves
and are unable to realize adequate additional financing, we may be unable to
meet operating obligations which could result in us initiating bankruptcy
proceedings or delaying, or eliminating some or all of our research and product
development programs.
Additional
financing requirements could result in dilution to existing
stockholders.
We are
not able to finance our operations by generating revenue. Accordingly, we
will be required to secure additional financing which may be dilutive to current
shareholders. We are authorized to issue 150,000,000 shares of common
stock and 7,000,000 shares of preferred stock. Such securities may generally be
issued without the approval or consent of our stockholders. The issuance
of such securities may result in substantial dilution.
Risks
Relating to Our Business
Our
business is dependent on a single product candidate.
At
present our ability to progress as a company is significantly dependent on a
single product candidate for ALS which is entering Phase I clinical
trials. Any clinical, regulatory or other development that significantly
delays or prevents us from completing any of our trials, any material safety
issue or adverse side effect to any study participant in any of these trials, or
the failure of these trials to show the results expected would likely depress
our stock price significantly and could prevent us from raising the substantial
additional capital we will need to further develop our cellular technologies.
Moreover, any material adverse occurrence in our first clinical trials could
substantially impair our ability to initiate clinical trials to test our stem
cell therapies in other potential indications. This, in turn, could adversely
impact our ability to raise additional capital and pursue our planned research
and development efforts.
Our
business relies on stem cell technologies that we may not be able to
commercially develop.
We have
concentrated the majority of our research on stem cell technologies. Our
ability to generate revenue and operate profitably will depend on being able to
develop these technologies for human applications. These are emerging
technologies and have limited human applications. We cannot guarantee that we
will be able to develop our technologies or that such development will result in
products with any commercial utility or value. We anticipate that the commercial
sale of such products and royalty/licensing fees related to the technology, will
be our primary sources of revenues. If we are unable to develop the
technologies, we may never realize any revenue.
Our
product development programs are based on novel technologies and are inherently
risky.
We are
subject to the risks of failure inherent in the development of products based on
new technologies. The novel nature of these therapies creates significant
challenges in regard to product development and optimization, manufacturing,
government regulation, third party reimbursement, and market acceptance. For
example, the pathway to regulatory approval for cell-based therapies, including
our product candidates, may be more complex and lengthy than the pathway for
conventional drugs. These challenges may prevent us from developing and
commercializing products on a timely or profitable basis or at all.
Our
inability to complete pre-clinical and clinical testing and trials will impair
our viability.
On
September 21, 2009, we received approval from the FDA for our first IND in order
to commence clinical trials. We commenced the trials on January 21, 2010
with the dosing of our first patient. Although we have commenced the
trials, the outcome of the trials is uncertain, and if we are unable to
satisfactorily complete such trials, or if such trials yield unsatisfactory
results, we will be unable to commercialize our proposed products. No assurances
can be given that the clinical trials will be completed or result in a
successful outcome.
If
regulatory authorities do not approve our products or if we fail to maintain
regulatory compliance, we would be unable to commercialize our therapeutic
products, and our business and results of operations would be materially
harmed.
Our
proposed products may not have favorable results in clinical trials or receive
regulatory approval.
Positive
results from pre-clinical studies should not be relied upon as evidence that
clinical trials will succeed. Even if our product candidates achieve positive
results in pre-clinical studies, we will be required to demonstrate through
clinical trials that the product candidates are safe and effective for use in a
diverse population before we can seek regulatory approvals for their commercial
sale. There is typically an extremely high rate of attrition from the failure of
product candidates as they proceed through clinical trials. If any product
candidate fails to demonstrate sufficient safety and efficacy in any clinical
trial, then we would experience potentially significant delays in, or be
required to abandon, development of that product candidate. If we delay or
abandon our development efforts of any of our product candidates, then we may
not be able to generate sufficient revenues to become profitable, and our
operations could be materially harmed.
There
are no assurances that we will be able to submit or obtain FDA approval of a
biologics license application.
There can
be no assurance that even if the clinical trials of any potential
product candidate are successfully initiated and completed, we will be able to
submit a Biologics License Application (“BLA”) to the FDA or that any BLA we
submit will be approved in a timely manner, if at all. If we are unable to
submit a BLA with respect to any future product candidate, or if any BLA we
submit is not approved by the FDA, we will be unable to commercialize that
product. The FDA can and does reject BLAs and requires additional clinical
trials, even when product candidates performed well or achieved favorable
results in clinical trials. If we fail to commercialize our product candidate,
we may be unable to generate sufficient revenues to attain profitability and our
reputation in the industry and in the investment community would likely be
damaged, each of which would cause our stock price to decrease.
The manufacturing
of stem cell-based therapeutic products is novel and dependent upon specialized
key materials.
The
manufacturing of stem cell-based therapeutic products is a complicated and
difficult process, dependent upon substantial know-how and subject to the need
for continual process improvements. We depend almost exclusively on third
party manufacturers to supply our cells. In addition, our suppliers’
ability to scale-up manufacturing to satisfy the various requirements of our
planned clinical trials is uncertain. Manufacturing irregularities or
lapses in quality control could have a material adverse effect on our reputation
and business, which could cause a significant loss of stockholder value. Many of
the materials that we use to prepare our cell-based products are highly
specialized, complex and available from only a limited number of suppliers. At
present, some of our material requirements are single sourced, and the loss of
one or more of these sources may adversely affect our business
Our
business is subject to ethical and social concerns.
The use
of stem cells for research and therapy has been the subject of debate regarding
ethical, legal and social issues. Negative public attitudes toward stem
cell therapy could result in greater governmental regulation of stem cell
therapies, which could harm our business. For example, concerns regarding such
possible regulation could impact our ability to attract collaborators and
investors. Existing and potential U.S. government regulation of human
tissue may lead researchers to leave the field of stem cell research or the
country altogether, in order to assure that their careers will not be impeded by
restrictions on their work. Similarly, these factors may induce graduate
students to choose other fields less vulnerable to changes in regulatory
oversight, thus exacerbating the risk that we may not be able to attract and
retain the scientific personnel we need in the face of competition among
pharmaceutical, biotechnology and health care companies, universities and
research institutions for what may become a shrinking class of qualified
individuals
We
may be subject to litigation that will be costly to defend or pursue and
uncertain in its outcome.
Our
business may bring us into conflict with licensees, licensors, or others with
whom we have contractual or other business relationships or with our competitors
or others whose interests differs from ours. If we are unable to resolve these
conflicts on terms that are satisfactory to all parties, we may become involved
in litigation brought by or against it. Any litigation is likely to be expensive
and may require a significant amount of management's time and attention, at the
expense of other aspects of our business. The outcome of litigation is always
uncertain, and in some cases could include judgments against us which could have
a materially adverse effect on our business. By way of example, in May of
2008, we filed a complaint against StemCells Inc., alleging that U.S. Patent No.
7,361,505 (the “‘505 patent”), allegedly exclusively licensed to StemCells,
Inc., is invalid, not infringed and unenforceable. On the same day, StemCells,
Inc. filed a complaint alleging that we had infringed, contributed to the
infringement of, and or induced the infringement of two patents owned by or
exclusively licensed to StemCells relating to stem cell culture compositions. At
present, the litigation is in its initial stages and any likely outcome is
difficult to predict.
We
may not be able to obtain necessary licenses to third-party patents and other
rights.
A number
of companies, universities and research institutions have filed patent
applications or have received patents relating to technologies in our field. We
cannot predict which, if any, of these applications will issue as patents or how
many of these issued patents will be found valid and enforceable. There may also
be existing issued patents on which we would be infringed by the
commercialization of our product candidates. If so, we may be prevented from
commercializing these products unless the third party is willing to grant a
license to us. We may be unable to obtain licenses to the relevant patents at a
reasonable cost, if at all, and may also be unable to develop or obtain
alternative non-infringing technology. If we are unable to obtain such licenses
or develop non-infringing technology at a reasonable cost, our business could be
significantly harmed. Also, any infringement lawsuits commenced against us may
result in significant costs, divert our management’s attention and result in an
award against us for substantial damages, or potentially prevent us from
continuing certain operations.
We
may not be able to obtain third-party patient reimbursement or favorable product
pricing.
Our
ability to successfully commercialize our proposed products in the human
therapeutic field depends to a significant degree on patient reimbursement of
the costs of such products and related treatments. We cannot assure you that
reimbursement in the United States or foreign countries will be available for
any products developed, or, if available, will not decrease in the future, or
that reimbursement amounts will not reduce the demand for, or the price of, our
products. We cannot predict what additional regulation or legislation
relating to the health care industry or third-party coverage and reimbursement
may be enacted in the future or what effect such regulation or legislation may
have on our business. If additional regulations are overly onerous or expensive
or if health care related legislation makes our business more expensive or
burdensome than originally anticipated, we may be forced to significantly
downsize our business plans or completely abandon the current business
model.
Our
products may not be profitable due to manufacturing costs.
Our
products may be significantly more expensive to manufacture than other drugs or
therapies currently on the market today due to a fewer number of potential
manufacturers, greater level of needed expertise and other general market
conditions affecting manufacturers of stem cell based products.
Accordingly, we may not be able to charge a high enough price for us to make a
profit from the sale of our cell therapy products.
We
are dependent on the acceptance of our products by the health care
community.
Our
proposed products, if approved for marketing, may not achieve market acceptance
since hospitals, physicians, patients or the medical community in general may
decide not to accept and utilize these products. The products that we are
attempting to develop represent substantial departures from established
treatment methods and will compete with a number of more conventional drugs and
therapies manufactured and marketed by major pharmaceutical companies. The
degree of market acceptance will depend on a number of factors,
including:
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the
clinical efficacy and safety of our proposed
products;
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the
superiority of our products to alternatives currently on the
market;
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the
potential advantages of our products over alternative treatment methods;
and
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the
reimbursement policies of government and third-party
payors.
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If the
health care community does not accept our products for any reason, our business
would be materially harmed.
We
depend on two key employees for our continued operations and future
success.
The loss
of either of our key executive officers, Richard Garr and Karl Johe, would be
detrimental to us.
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We
currently do not maintain “key person” life insurance on the life of Mr.
Garr. As a result, the Company will not receive any compensation upon the
death or incapacity of this key
individual;
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We
currently do maintain “key person” life insurance on the life of Mr. Johe.
As a result, the Company will receive approximately $1,000,000 in the
event of his death or incapacity.
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In
addition, we anticipate growth and expansion into areas and activities requiring
additional expertise, such as clinical testing, regulatory compliance,
manufacturing and marketing. We anticipate the need for additional
management personnel and the development of additional expertise by existing
management personnel. There is intense competition for qualified personnel in
the areas of our present and planned activities, and there can be no assurance
that we will be able to continue to attract and retain the qualified personnel
necessary for the development our business.
The
employment contracts of key employees contain significant anti-termination
provisions which could make changes in management difficult or
expensive.
We have
entered into employment agreements with Messrs. Garr and Johe which expire on
November 1, 2012. In the event either individual is terminated prior to
the full term of their respective contracts, for any reason other than a
voluntary resignation, all compensation due to such employee under the terms of
the respective agreement shall become due and payable immediately. These
provisions will make the replacement of either of these employees very costly
and could cause difficulty in effecting a change in control. Termination prior
to the full term of these contracts would cost us as much as $1,000,000 per
contract and the immediate vesting of all outstanding options and/or warrants
held by Messrs. Garr and Johe.
Our
competition has significantly greater experience and financial
resources.
The
biotechnology industry is characterized by intense competition. We compete
against numerous companies, many of which have substantially greater resources.
Several such enterprises have initiated cell therapy research programs and/or
efforts to treat the same diseases which we target. Although not necessarily
direct competitors, companies such as Geron Corporation, Genzyme Corporation,
StemCells, Inc., Advanced Cell Technology, Inc., Aastrom Biosciences, Inc. and
Viacell, Inc., as well as others, may have substantially greater resources and
experience in our fields which put us at a competitive
disadvantage.
Our
outsource model depends on third parties to assist in developing and testing our
proposed products.
Our
strategy for the development, clinical and preclinical testing and
commercialization of our proposed products is based on an outsource model. This
model requires us to engage third parties in order to further develop our
technology and products as well as for the day to day operations of our
business. In the event we are not able to enter into such relationships in the
future, our ability to operate and develop products may be seriously hindered or
we would be required to expend considerable resources to bring such functions
in-house. Either outcome could result in our inability to develop a commercially
feasible product or in the need for substantially more working capital to
complete the research in-house.
The
development, manufacturing and commercialization of cell-based therapeutic
products expose us to product liability claims.
By
developing and, ultimately, commercializing medical products, we are exposed to
the risk of product liability claims. Product liability claims against us could
result in substantial litigation costs and damage awards against us. We have
obtained liability insurance that covers our clinical trials. If and when
we begin commercializing products, we will need to increase our insurance
coverage. We may not be able to obtain insurance on acceptable terms, if
at all, and the policy limits on our insurance policies may be insufficient to
cover our liability.
We
intend to rely upon third-party FDA-approved manufacturers for our stem
cells.
We
currently have no internal manufacturing capability, and will rely extensively
on FDA-approved licensees, strategic partners or third party contract
manufacturers or suppliers. Should we be forced to manufacture our stem cells,
we cannot give you any assurance that we will be able to develop an internal
manufacturing capability or procure alternative third party suppliers. Moreover,
we cannot give you any assurance that any contract manufacturers or suppliers we
procure will be able to supply our product in a timely or cost effective manner
or in accordance with applicable regulatory requirements or our
specifications.
Risks
Relating to Our Common Stock
Our
common shares are sporadically or “thinly” traded.
Our
common shares have historically been sporadically or “thinly” traded, meaning
that the number of persons interested in purchasing our common shares at or near
the asking price at any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the facts that we
are a small company which is relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community.
Even if we came to the attention of such persons, they tend to be risk-adverse
and would be reluctant to follow an unproven development stage company such as
ours or purchase or recommend the purchase of our shares until such time as we
became more seasoned and viable. As a consequence, there may be periods of
several days or more when trading activity in our shares is minimal or
non-existent, as compared to a seasoned issuer which has a large and steady
volume of trading activity that will generally support continuous sales without
a material reduction in share price. We cannot give you any assurance that a
broader or more active trading market for our common shares will develop or be
sustained, or that current trading levels will be sustained. Due to these
conditions, we can give you no assurance that you will be able to sell your
shares if you need money or otherwise desire to liquidate your
investment.
As
a result of a recent accounting pronouncement, we no longer meet the continued
listing requirements of the NYSE AMEX.
Effective
January 1, 2009, we adopted new guidance issued by FASB related to determining
whether an instrument or embedded feature is indexed to an entity’s own
stock. As a result, we reclassified 8,547,762 of our issued and
outstanding common stock purchase warrants from equity to liability
status. The adjustment also had the effect of reducing stockholder’s
equity by $2.8 million. Due to such adjustment, we may no longer meet the
continued listing requirements of the NYSE AMEX with regard to stockholders
(deficit) equity. On June 4, 2009, as anticipated, we received
notification from the NYSE AMEX that we are not in compliance with continued
listing requirements contained in Section 1003(i) of the NYSE AMEX company
guide. In order to maintain our listing on the NYSE AMEX, we were required
to submit a plan detailing how we intend to regain compliance. On July 6,
2009, we submitted our plan. On August 18, 2009, the NYSE AMEX notified
that it would continue listing our common shares subject to the following
conditions:
|
|
·
|
That
we regain compliance with Section 1003(i) of the NYSE AMEX company guide
by December, 2010, and
|
|
|
·
|
That
we provide the Exchange Staff with updates in conjunction with the
initiatives of the Plan as appropriate or upon request, but no later than
at each quarter completion concurrent with our appropriate filing with the
Securities and Exchange Commission.
|
We
are currently being monitored by the NYSE AMEX with regard to listing
qualifications.
On
February 16, 2010 we received a letter from the NYSE Amex informing it that it
had now resolved the continued listing deficiencies referenced in the NYSE Amex
LLC's ("NYSE Amex") letters dated June 4, 2009 and August 18, 2009. The Exchange
said that while the Company remains noncompliant with the stockholders' equity
requirements under Section 1003 of the NYSE Amex Company Guide, the Exchange
staff has determined that the Company complies with the alternative listing
standards in Section 1003, including the requirement for $50,000,000 million in
market capitalization. The Exchange will continue to monitor the Company's
compliance with the continued listing standards in Section 1003 of the NYSE Amex
Company Guide. As provided in Section 1009(f) of the NYSE Amex Company
Guide. If the Company is able to demonstrate compliance with the continued
listing standards for a period of two consecutive quarters ending June 30, 2010,
the Exchange staff will deem the Plan Period over. However, if the Company
cannot demonstrate compliance over the next two quarters, the Plan Period will
remain open and Exchange staff will continue to monitor the Company throughout
the end of the Plan Period, December 6, 2010. At any time during the Plan
Period, the Exchange staff may initiate delisting proceedings based on its
evaluation of the Company. In the event the Company does not comply with all
continued listing standards as of December 6, 2010, the Exchange staff will
promptly initiate delisting procedures.
The
delisting of our common shares from the NYSE Amex may limit the ability of our
stockholders to sell their common stock.
We are
currently being monitored by the NYSE AMEX. If we are delisted, our stock
will most likely commence trading on the Over-the-Counter Bulletin Board or the
Pink Sheets. In such case, a stockholder likely would find it more difficult to
trade our common stock or to obtain accurate market quotations for it. If
our common stock is delisted, it will become subject to the Securities and
Exchange Commission’s “penny stock rules,” which impose sales practice
requirements on broker-dealers that sell that common stock to persons other than
established customers and “accredited investors.” Application of this rule could
make broker-dealers unable or unwilling to sell our common stock and limit the
ability of stockholders to sell their common stock in the secondary
market.
The
market price for our common shares is particularly volatile.
The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than those of a seasoned issuer. The volatility in
our share price is attributable to a number of factors. First, our common shares
are sporadically or thinly traded. As a consequence of this lack of liquidity,
the trading of relatively small quantities of shares by our shareholders may
disproportionately influence the price of those shares in either direction. The
price for our shares could, for example, decline precipitously in the event that
a large number of our common shares are sold on the market without commensurate
demand. Secondly, we are a speculative or “risky” investment due to our
limited operating history, lack of significant revenues to date and the
uncertainty of future market acceptance for our products if successfully
developed. As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the
market more quickly and at greater discounts than would be the case with the
stock of a seasoned issuer. Additionally, in the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and
resources.
The
following factors may add to the volatility in the price of our common
shares: actual or anticipated variations in our quarterly or annual
operating results; government regulations; announcements of significant
acquisitions, strategic partnerships or joint ventures; our capital commitments;
and additions or departures of our key personnel. Many of these factors are
beyond our control and may decrease the market price of our common shares,
regardless of our operating performance. We cannot make any predictions or
projections as to what the prevailing market price for our common shares will be
at any time, including as to whether our common shares will sustain their
current market prices, or as to what effect the sale of shares or the
availability of common shares for sale at any time will have on the prevailing
market price.
We
face risks related to compliance with corporate governance laws and financial
reporting standard.
The
Sarbanes-Oxley Act of 2002, as well as related new rules and regulations
implemented by the SEC and the Public Company Accounting Oversight Board,
require changes in the corporate governance practices and financial reporting
standards for public companies. These new laws, rules and regulations, including
compliance with Section 404 of the Sarbanes-Oxley Act of 2002 relating to
internal control over financial reporting (“Section 404”), will materially
increase the Company's legal and financial compliance costs and make some
activities more time-consuming, burdensome and expensive. ). On
October 2, 2009, the SEC announced it would extend the deadline for
non-accelerated filers to comply with Section 404(b) of the Sarbanes-Oxley Act.
Unless further extended, we will be required to include attestation
reports in our annual report for year ending on December 31, 2010. We
anticipate this will further increase the costs associated with our compliance
with the Sarbanes-Oxley Act of 2002.
Any
failure to comply with the requirements of the Sarbanes-Oxley Act of 2002, our
ability to remediate any material weaknesses that we may identify during our
compliance program, or difficulties encountered in their
implementation, could harm our operating results, cause us
to fail to meet our reporting obligations or result
in material misstatements in
our financial statements. Any such failure could
also adversely affect the results of the periodic management
evaluations of our internal controls and, in the case of a failure to remediate
any material weaknesses that we may identify, would adversely
affect the annual auditor attestation reports regarding the effectiveness of our
internal control over financial reporting that are required under Section 404 of
the Sarbanes-Oxley Act. Inadequate internal controls could also cause
investors to lose confidence in our reported financial information, which could
have a negative effect on the trading price of our common stock.
We
have never paid a cash dividend and do not intend to pay cash dividends on our
common stock in the foreseeable future.
We have
never paid cash dividends nor do we anticipate paying cash dividends in the
foreseeable future. Accordingly, any return on your investment will be as
a result of stock appreciation.
Issuance
of additional securities could dilute your proportionate ownership and voting
rights.
We are
entitled under our amended and restated certificate of incorporation to issue up
to 150,000,000 common and 7,000,000 “blank check” preferred shares. As
of December 31, 2009, we have issued and outstanding 35,743,831 common shares,
24,365,916 common shares reserved for issuance upon the exercise of current
outstanding options and warrants (excluding options and warrants issued under
our equity compensation plans), 319,341 common shares reserved for issuance of
additional grants under our 2005 incentive stock plan, and 760,000 shares
reserved for issuance of grants under our 2007 stock plan. Accordingly, we will
be entitled to issue up to 88,810,912 additional common shares
and 7,000,000 additional preferred shares. Our board may generally issue
those common and preferred shares, or options or warrants to purchase those
shares, without further approval by our shareholders based upon such factors as
our board of directors may deem relevant at that time. Any preferred shares we
may issue shall have such rights, preferences, privileges and restrictions as
may be designated from time-to-time by our board, including preferential
dividend rights, voting rights, conversion rights, redemption rights and
liquidation provisions. It is likely that we will be required to issue a large
amount of additional securities to raise capital to further our development and
marketing plans. It is also likely that we will be required to issue a large
amount of additional securities to directors, officers, employees and
consultants as compensatory grants in connection with their services, both in
the form of stand-alone grants or under our various stock option plans, in order
to attract and retain qualified personnel. In the event of issuance, your
proportionate ownership and voting rights may be significantly decreased and the
value of your investment impacted.
Risks
Relating to Intellectual Property and Government Regulation
We
may not be able to withstand challenges to our intellectual property
rights.
We rely
on our intellectual property, including issued and applied-for patents, as the
foundation of our business. Our intellectual property rights may come under
challenge. No assurances can be given that, even though issued, our
current and potential future patents will survive such challenges. For example,
in 2005 our neural stem cell technology was challenged in the U.S. Patent and
Trademark Office. Although we prevailed in this particular matter upon
re-examination by the patent office, these cases are complex, lengthy,
expensive, and could potentially be adjudicated adversely to our interests,
removing the protection afforded by an issued patent. The viability of our
business would suffer if such patent protection were limited or eliminated.
Moreover, the costs associated with defending or settling intellectual property
claims would likely have a material adverse effect on our business and future
prospects. At present, there is litigation with StemCells, Inc. which is in its
initial stages and any likely outcome is difficult to predict.
We
may not be able to adequately protect against the piracy of the intellectual
property in foreign jurisdictions.
We
anticipate conducting research in countries outside of the United States.
A number of our competitors are located in these countries and may be able to
access our technology or test results. The laws protecting intellectual
property in some of these countries may not adequately protect our trade secrets
and intellectual property. The misappropriation of our intellectual
property may materially impact our position in the market and any competitive
advantages, if any, that we may have.
Our
products may not receive regulatory approval.
The FDA
and comparable government agencies in foreign countries impose substantial
regulations on the manufacturing and marketing of pharmaceutical products
through lengthy and detailed laboratory, pre-clinical and clinical testing
procedures, sampling activities and other costly and time-consuming procedures.
Satisfaction of these regulations typically takes several years or more and vary
substantially based upon the type, complexity and novelty of the proposed
product. On September 21, 2009 the FDA approved our IND application to
commence a Phase I trial for ALS. We commenced the trials on January 21,
2010 with the dosing of our first patient. We cannot assure you that we
will successfully complete any clinical trials in connection with such IND.
Further, we cannot predict when we might first submit any product license
application for FDA approval or whether any such product license application
will be granted on a timely basis, if at all. Moreover, we cannot assure
you that FDA approvals for any products developed by us will be granted on a
timely basis, if at all. Any delay in obtaining, or failure to obtain, such
approvals could have a material adverse effect on the marketing of our products
and our ability to generate product revenue.
Development
of our technologies is subject to extensive government regulation.
Our
research and development efforts, as well as any future clinical trials, and the
manufacturing and marketing of any products we may develop, will be subject to,
and restricted by, extensive regulation by governmental authorities in the
United States and other countries. The process of obtaining FDA and other
necessary regulatory approvals is lengthy, expensive and uncertain. FDA and
other legal and regulatory requirements applicable to the development and
manufacture of the cells and cell lines required for our preclinical and
clinical products could substantially delay or prevent us from producing the
cells needed to initiate additional clinical trials. We may fail to obtain the
necessary approvals to commence clinical testing or to manufacture or market our
potential products in reasonable time frames, if at all. In addition, the U.S.
Congress and other legislative bodies may enact regulatory reforms or
restrictions on the development of new therapies that could adversely affect the
regulatory environment in which we operate or the development of any products we
may develop.
We base
our research and development on the use of human stem cells obtained from human
tissue. The U.S. federal and state governments and other jurisdictions impose
restrictions on the acquisition and use of human tissue, including those
incorporated in federal Good Tissue Practice, or “GTP,” regulations. These
regulatory and other constraints could prevent us from obtaining cells and other
components of our products in the quantity or of the quality needed for their
development or commercialization. These restrictions change from time to time
and may become more onerous. Additionally, we may not be able to identify or
develop reliable sources for the cells necessary for our potential products —
that is, sources that follow all state and federal laws and guidelines for cell
procurement. Certain components used to manufacture our stem and progenitor cell
product candidates will need to be manufactured in compliance with the FDA’s
Good Manufacturing Practices, or “GMP.” Accordingly, we will need to enter into
supply agreements with companies that manufacture these components to “GMP”
standards. There is no assurance that we will be able to enter into any
such agreements.
Noncompliance
with applicable requirements both before and after approval, if any, can subject
us, our third party suppliers and manufacturers and our other collaborators to
administrative and judicial sanctions, such as, among other things, warning
letters, fines and other monetary payments, recall or seizure of products,
criminal proceedings, suspension or withdrawal of regulatory approvals,
interruption or cessation of clinical trials, total or partial suspension of
production or distribution, injunctions, limitations on or the elimination of
claims we can make for our products, refusal of the government to enter into
supply contracts or fund research, or government delay in approving or refusal
to approve new drug applications.
We
cannot predict if or when we will be permitted to commercialize our products due
to regulatory constraints.
Federal,
state and local governments and agencies in the United States (including the
FDA) and governments in other countries have significant regulations in place
that govern many of our activities. We are or may become subject to
various federal, state and local laws, regulations and recommendations relating
to safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous or potentially
hazardous substances used in connection with its research and development work.
The preclinical testing and clinical trials of our proposed products are subject
to extensive government regulation that may prevent us from creating
commercially viable products. In addition, our sale of any commercially viable
product will be subject to government regulation from several standpoints,
including manufacturing, advertising, marketing, promoting, selling, labeling
and distributing. If, and to the extent that, we are unable to comply with these
regulations, our ability to earn revenues will be materially and negatively
impacted.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling shareholders. There will be no proceeds to us
from the sale of shares of common stock in this offering. In
the event the warrants held by the selling shareholders are exercised for cash,
we will receive approximately $8,955,393. We will use the proceeds received from
the exercise of warrants, if any, for working capital.
This
offering is being made solely to allow the selling shareholders to offer and
sell the securities to the public. The selling shareholders may offer for resale
some or all of their securities at the time and price that they choose pursuant
to the Plan of Distribution. On any given day, the price per
Common Share is likely to be based on the market price for our Common Shares, as
quoted on the American Stock Exchange.
SELLING
SHAREHOLDERS
This
prospectus relates to the offering and sale, from time to time, of up to
5,163,956 shares consisting of: (i) 786,551 shares of our common stock, and (ii)
4,517,405 common shares issuable upon the exercise of warrants held by the
selling shareholders (“Selling Shareholders”). The Selling Shareholders may
exercise their warrants at any time in their sole discretion. All of the Selling
Shareholders named below acquired their warrants directly from us in private
transactions.
December
2009 Offering
On
December 29, 2009, we completed a private placement of 646,551 common shares
resulting in gross proceeds of $1,500,000. The shares were sold to 1 accredited
investor at a price per share of $2.32. We are registering the 646,551 common
shares issued in the offering.
Replacement
Warrants
During
the first quarter of 2010, the Company entered into a series of transactions
resulting in the exercise of our C, D and certain placement agent warrants.
Pursuant to the transactions, we were approached by representatives of the
warrant holders who agreed to exercise their respective warrants on the
condition that we issue such warrant holders replacement warrants with
substantially similar terms as their prior warrants (“Replacement Warrants”).
Accordingly, we are registering 3,881,405 common shares underlying the
Replacement Warrants.
Series
D Warrants
On
January 29, 2010, as an inducement to exercise 800,000 Series D Warrants, we
issued Vicis Capital Master Fund a replacement warrant. The replacement warrant
entitles the holder to purchase 400,000 common shares at price of $1.85 per
share. The replacement warrant is substantially the same as the prior Series D
warrant and has a term of 1 year from the issuance date.
Series
C Warrants
In March
of 2010, in connection with the exercise of 2,699,400 Series C Warrants, we
issued the prior warrant holders an aggregate of 2,699,400 replacement warrants.
The replacement warrant is substantially the same as the prior Series C warrants
except that: (i) the exercise price is $2.13; (ii) the replacement warrants
expire 5 years from the date they were issued; and (iii) the replacement
warrants do not provide for any anti-dilution rights.
Placement
Agent Warrant
In March
of 2010, in connection with the exercise of 782,005 placement agent warrants, we
issued T.R. Winston & Company, LLC, a replacement warrant to purchase
782,005. The replacement warrant is substantially the same as the prior
replacement warrants issued to our Series C Warrant holders except that: (i) the
exercise price is $2.13; (ii) the replacement warrant expires 5 years from the
date of issuance: and (iii) the replacement warrant does not provide for any
anti-dilution rights.
Consultant
Common Shares and Warrants
In
addition to the shares underlying the Replacement Warrants, we are registering
636,000 shares issued or issuable to consultants and service providers in
exchange for services and reimbursement of expenses. The shares being registered
are: (i) 140,000 common shares, (ii) and 496,000 common shares underlying
warrants.
Set forth
below is information, to the extent known to us, setting forth the name of each
Selling Shareholder and the amount and percentage of common stock owned by each
(including shares that can be acquired on the exercise of outstanding warrants)
prior to the offering, the shares to be sold in the offering, and the amount and
percentage of Common Stock to be owned by each (including shares that can be
acquired on the exercise of outstanding warrants) after the offering assuming
all shares are sold. The footnotes provide information about persons who have
voting and dispositive power for the Selling Shareholders and about transactions
between the Selling Shareholders and the Company.
The
Selling Shareholders may sell all or some of the shares of common stock they are
offering, and may sell shares of our common stock otherwise than pursuant to
this prospectus. The table below assumes that each selling stockholder exercises
all of its warrants and sells all of the shares issued upon exercise thereof,
and that each selling stockholder sells all of the shares offered by it in
offerings pursuant to this prospectus, and does not acquire any additional
shares. We are unable to determine the exact number of shares that will actually
be sold or when or if these sales will occur.
The
Selling Shareholders may sell all, some or none of their shares in this
offering. See “Plan of Distribution.” The total number of common shares sold
under this prospectus may be adjusted to reflect adjustments due to stock
dividends, stock distributions, splits, combinations, recapitalizations or the
triggering anti-dilution protective provisions with regard to the common stock
and warrants.
Unless
otherwise stated below in the footnotes, to our knowledge, no Selling
Stockholder nor any affiliate of such stockholder: (i) has held any position or
office with, been employed by or otherwise has had any material relationship
with us or our affiliates during the three years prior to the date of this
prospectus; or (ii) is a broker-dealer, or an affiliate of a
broker-dealer.
The
Selling Shareholders may sell all or some of the shares of common stock they are
offering, and may sell shares of our common stock otherwise than pursuant to
this prospectus. The table below assumes that each Selling Shareholder exercises
all of its warrants and sells all of the shares issued upon exercise thereof,
and that each selling stockholder sells all of the shares offered by it in
offerings pursuant to this prospectus, and does not acquire any additional
shares. We are unable to determine the exact number of shares that will actually
be sold or when or if these sales will occur.
We may
amend or supplement this prospectus from time to time in the future to update or
change this list and shares which may be resold.
| |
|
Common
Shares Beneficially
Owned
Before Sale (1)
|
|
|
|
|
|
Common
Shares Owned
After
Sale (2)
|
|
| |
|
Securities
Owned
|
|
|
|
%
of class
|
|
|
Shares
being
registered
|
|
|
Amount
|
|
|
%
of Class
|
|
|
December
2009 Offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samyang
Optics Co., Ltd. -- (3)
|
|
|
646,551 |
|
|
|
|
1.51 |
% |
|
|
646,551 |
|
|
|
- |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
D Replacement Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vicis
Capital Master Fund -- (4)(i)
|
|
|
2,000,000 |
|
4(ii)(iii)
|
|
|
4.67 |
% |
|
|
400,000 |
|
|
|
1,600,000 |
|
|
|
3.74
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
C Replacement Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JMG
Capital Partners, L.P. -- 5(i)
|
|
|
729,319 |
|
5(ii)
|
|
|
1.70 |
% |
|
|
165,000 |
|
|
|
564,319 |
|
|
|
1.32 |
% |
|
JMG
Triton Offshore Fund, Ltd. -- 6(i)
|
|
|
781,734 |
|
6(ii)
|
|
|
1.83 |
% |
|
|
165,000 |
|
|
|
616,734 |
|
|
|
1.44 |
% |
|
MM
& B Holdings, a California general partnership -- 7(i)
|
|
|
1,467,000 |
|
7(ii)
|
|
|
3.43 |
% |
|
|
440,000 |
|
|
|
1,027,000 |
|
|
|
2.40 |
% |
|
Apex
Investment Fund, Ltd. -- 8(i)
|
|
|
790,000 |
|
8(ii)
|
|
|
1.84 |
% |
|
|
220,000 |
|
|
|
570,000 |
|
|
|
1.33 |
% |
|
IRA
FBO J. Steven Emerson Rollover Account II Pershing LLC as Custodian --
9(i)
|
|
|
716,000 |
|
9(ii)
|
|
|
1.67 |
% |
|
|
198,000 |
|
|
|
518,000 |
|
|
|
1.21 |
% |
|
W.
Robert Ramsdell & Marjorie F. Ramsdell TTEE Ramsdell Family Trust DTD
7/7/94 -- 10(i)
|
|
|
128,000 |
|
10(ii)
|
|
|
0.30 |
% |
|
|
44,000 |
|
|
|
84,000 |
|
|
|
* |
|
|
TRW
Capital Growth Fund, LP -- 11(i)
|
|
|
237,300 |
|
11(ii)
|
|
|
0.55 |
% |
|
|
66,000 |
|
|
|
171,300 |
|
|
|
* |
|
|
The
Jay Goldman Master Limited Partnership -- 12(i)
|
|
|
176,000 |
|
12(ii)
|
|
|
0.41 |
% |
|
|
88,000 |
|
|
|
88,000 |
|
|
|
* |
|
|
Woodmont
Investments -- 13(i)
|
|
|
176,000 |
|
13(ii)
|
|
|
0.41 |
% |
|
|
88,000 |
|
|
|
88,000 |
|
|
|
* |
|
|
Newberg
Family Trust UTD 12/18/90 -- 14(i)
|
|
|
352,000 |
|
14(ii)
|
|
|
0.82 |
% |
|
|
176,000 |
|
|
|
176,000 |
|
|
|
* |
|
|
Bristol
Investment Fund, Ltd. -- 15(i)
|
|
|
880,000 |
|
15(ii)
|
|
|
2.06 |
% |
|
|
440,000 |
|
|
|
440,000 |
|
|
|
1.03 |
% |
|
The
Muhl Family Trust, Philip E. Muhl & Kristin A. Muhl TTEES
DTD 10-11-95 -- 16(i)
|
|
|
148,000 |
|
16(ii)
|
|
|
0.35 |
% |
|
|
44,000 |
|
|
|
104,000 |
|
|
|
* |
|
|
Charles
B. Runnels Family Trust DTD 10-14-93, Charles B Runnels & Amy Jo
Runnels TTEES -- 17(i)
|
|
|
37,000 |
|
17(ii)
|
|
|
0.09 |
% |
|
|
11,000 |
|
|
|
26,000 |
|
|
|
* |
|
|
John
W. Galuchie Jr. & Marianne C. Galuchie TTEES Galuchie Living Trust DTD
9-11-00 -- 18(i)
|
|
|
89,556 |
|
18(ii)
|
|
|
0.21 |
% |
|
|
4,400 |
|
|
|
85,156 |
|
|
|
* |
|
|
Steven
B. Dunn -- 19(i)
|
|
|
960,000 |
|
19(ii)
|
|
|
2.24 |
% |
|
|
110,000 |
|
|
|
850,000 |
|
|
|
1.99 |
% |
|
Andrew
Lessman -- 20(i)
|
|
|
880,000 |
|
20(ii)
|
|
|
2.06 |
% |
|
|
440,000 |
|
|
|
440,000 |
|
|
|
1.03 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placemetn
Agent Replacement Warrant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T.R.
Winston & Company, LLC -- 21(i)
|
|
|
1,488,757 |
|
21(ii)
|
|
|
3.48 |
% |
|
|
782,005 |
|
|
|
706,752 |
|
|
|
1.65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consultant
Common Shares and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
Development Consulting Group, Inc. -- 22(i)
|
|
|
600,000 |
|
22(ii)
|
|
|
1.40 |
% |
|
|
540,000 |
|
|
|
60,000 |
|
|
|
* |
|
|
Steven
Chizzik
|
|
|
96,000 |
|
|
|
|
|
|
|
|
96,000 |
|
|
|
- |
|
|
|
- |
|
|
Total
|
|
|
13,379,217 |
|
|
|
|
31.24 |
% |
|
|
5,163,956 |
|
|
|
8,215,261 |
|
|
|
0.19 |
|
* Less
Than 1%
|
(1)
|
Pursuant
to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership
includes any common shares as to which a shareholder has sole or shared
voting power or investment power, and also any common shares which the
shareholder has the right to acquire within 60 days, including upon
exercise of common shares purchase options or warrants. There were
42,820,875 common shares outstanding as of April 21,
2008.
|
|
|
|
|
(2)
|
Assumes the sale of all common
shares registered pursuant to this registration
statement.
|
|
|
|
|
(3)
|
Sangyoon
Lee, President, has voting and dispositive power with respect to the
securities to be offered for resale
|
|
|
|
|
(4)
|
(i)
Shad Stastney has voting and dispositive power with respect to the
securities to be offered for resale, (ii) includes: (a) 800,000 Series E
Warrants, (b) 800,000 Series F Warrants, and (c) 400,000 Replacement
Warrants the shares underlying such are being registered for resale
herein, and (iii) the warrants contain certain limitations on exercise
requiring 60 days prior written notice if such exercise would result in
selling shareholder owning in excess of 4.99% of our issued and
outstanding shares.
|
|
|
|
|
(5)
|
(i) JMG
Capital Partners, L.P. ("JMG Partners") is a California limited
partnership. Its general partner is JMG Capital Management, LLC (the
"Manager"), a Delaware limited liability company and an investment adviser
that has voting and dispositive power over JMG Partners' investments,
including the Registrable Securities. The equity interests of the Manager
are owned by JMG Capital Management, Inc., ("JMG Capital") a California
corporation. Jonathan M. Glaser is the Executive Officer and Director of
JMG Capital and has sole investment discretion over JMG Partners'
portfolio holdings.. (ii) Includes: (a)
165,000 Replacement Warrants, (b) 347,902 common shares, and (c) 216,417
Series A Warrants.
|
|
|
|
|
(6)
|
(i) JMG
Triton Offshore Fund, Ltd. (the "Fund") is an international business
company organized under the laws of the British Virgin Islands. The Fund's
investment manager is Pacific Assets Management LLC, a Delaware
limited liability company (the "Manager") that has voting and dispositive
power over the Fund's investments, including the securities being
registered herein. The equity interests of the Manager are
owned by Pacific Capital Management, Inc., a California corporation
("Pacific"). The equity interests of Pacific are owned by
Messrs. Roger Richter, Jonathan M. Glaser and Daniel A. David.
Messrs. Glaser and Richter have sole investment discretion over the Fund's
portfolio holdings. (ii) Includes: (a) 165,000
Replacement Warrants, (b) 365,317 common shares, and (c) 251,417 Series A
Warrants.
|
|
|
|
|
(7)
|
Bryan
Ezralow as Trustee of the General Partner, the Bryan Ezralow 1994 Trust,
has voting and dispositive power with respect to the securities to be
offered for resale. Includes: (a) 440,000 Replacement
Warrants, and (b) 1,027,000 common shares.
|
|
|
|
|
(8)
|
(i) Susan
Fairhurst as Director of Apex Investment Fund, Ltd. has dispositive power
with respect to the securities to be offered for
resale. (ii) Includes: (a) 220,000
Replacement Warrants, and (b) 570,000 common shares.
|
|
|
|
|
(9)
|
(i) Steven
Emerson has voting and dispositive power with respect to the securities to
be offered for resale. (ii) Includes: (a) 198,000
Replacement Warrants, and (b) 518,000 common shares.
|
|
|
|
|
(10)
|
(i) W.
Robert Ramsdell as Trustee has voting and dispositive power with respect
to the securities to be offered for resale. (ii) Includes:
(a) 24,000 Replacement Warrants, and (b) 84,000 common
shares.
|
|
|
|
|
(11)
|
(i) G.
Tyler Runnels as Managing Principal of the general partner has voting and
dispositive power with respect to the securities to be offered for resale.
Mr. Runnells is an associated person of TR Winston, LLC that is a broker
dealer. (ii) Includes: (a) 66,000 Replacement Warrants, and (b) 171,300
common
shares.
|
|
(12)
|
(i) Jay
G. Goldman as Managing Partner has voting and
dispositive power with respect to the securities to be offered for resale.
(ii) Includes: (a) 88,000 Replacement Warrants, and (b) 88,000 common
shares.
|
|
|
|
|
(13)
|
(i) Jay
G. Goldman as Sole Member has voting and dispositive power with respect to
the securities to be offered for resale. (ii) Includes: (a) 88,000
Replacement Warrants, and (b) 88,000 common shares.
|
|
|
|
|
(14)
|
(i) Bruce
Newberg as Trustee has voting and dispositive power with respect to the
securities to be offered for resale. (ii) Includes: (a) 176,000
Replacement Warrants, and (b) 176,000 common shares.
|
|
|
|
|
(15)
|
(i) Bristol
Capital Advisors, LLC (“BCA”) is the investment advisor to Bristol
Investment Fund, Ltd. (“Bristol”). Paul Kessler is the manager
of BCA and as such has voting and investment control over the securities
held by Bristol. Mr. Kessler disclaims beneficial ownership of
these securities. (ii) Includes: (a) 440,000
Replacement Warrants, and (b) 440,000 common shares.
|
|
|
|
|
(16)
|
(i) Philip
Muhl as Trustee has voting and dispositive power with respect to the
securities to be offered for resale. (ii) Includes: (a) 44,000
Replacement Warrants, and (b) 104,000 common shares.
|
|
|
|
|
(17)
|
(i) Charles
B. Runnels as Trustee has voting and dispositive power with respect to the
securities to be offered for resale. (ii) Includes: (a) 11,000
Replacement Warrants, and (b) 26,000 common shares.
|
|
|
|
|
(18)
|
(i) John
W. Galuchie, Jr. as Trustee has voting and dispositive power with respect
to the securities to be offered for resale. (ii) Includes: (a) 4,400
Replacement Warrants, and (b) 85,156 common shares.
|
|
|
|
|
(19)
|
Includes:
(a) 110,000 Replacement Warrants, and (b) 850,000 common
shares.
|
|
|
|
|
(20)
|
Includes:
(a) 440,000 Replacement Warrants, and (b) 440,000 common
shares.
|
|
|
|
|
(21)
|
(i)
G. Tyler Runnels, CEO, has voting and dispositive power with respect to
the securities to be offered for resale. Mr. Runnells is an
associated person of TR Winston, LLC that is a broker
dealer. Includes: (a) 782,005 Replacement Warrants, and (b)
706,752 placement agent warrants.
|
|
|
|
|
(22)
|
(i)
David E. Castaneda has voting and dispositive power with respect to the
securities to be offered for resale. Includes: (a) 140,000
common share being registered, (b) 60,000 common shares not being
registered, and (c) 400,000 common shares underlying warrants issued as
compensation for
services.
|
Each
selling shareholder (the “Selling Shareholder”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of common stock on the NYSE: AMEX or any stock
exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. A
Selling Shareholders 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;
|
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
|
·
|
broker-dealers
may agree with the Selling Shareholder to sell a specified number of such
shares at a stipulated price per
share;
|
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
|
·
|
a
combination of any such methods of sale;
or
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Shareholder may also sell shares under Rule 144 under the Securities Act
of 1933, as amended (the “Securities Act”), if available, rather than under this
prospectus.
Broker-dealers
engaged by the Selling Shareholder may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Shareholder (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
FINRA Rules.
In
connection with the sale of the common stock or interests therein, the Selling
Shareholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Shareholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Shareholders 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. Each Selling Shareholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common
Stock.
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Shareholder against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
Because
Selling Shareholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Shareholders.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).
The
transfer agent for our common shares is American Stock Transfer, 59 Maiden Lane,
Plaza Level, New York, NY 10038. We act as our own transfer agent with regard to
our outstanding common share purchase options and warrants.
LEGAL
MATTERS
The
Silvestre Law Group, P.C. will issue a legal opinion as to the validity of the
issuance of the shares of common stock offered under this
prospectus.
EXPERTS
The
financial statements as of December 31, 2009 and 2008, included in this
prospectus and in the registration statement of which it forms a part, have been
so included in reliance on the report of Stegman & Company, our independent
registered public accounting firm, appearing elsewhere in this prospectus and
the registration statement of which it forms a part, given on the authority of
said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement to register the securities offered
by this prospectus under the Securities Act. This prospectus is part of that
registration statement, but omits certain information contained in the
registration statement, as permitted by SEC rules. For further information with
respect to our Company and this offering, reference is made to the registration
statement and the exhibits and any schedules filed with the registration
statement. Statements contained in this prospectus as to the contents of any
document referred to are not necessarily complete and in each instance, if the
document is filed as an exhibit, reference is made to the copy of the document
filed as an exhibit to the registration statement, each statement being
qualified in all respects by that reference. You may obtain copies of the
registration statement, including exhibits, as noted in the paragraph below or
by writing or telephoning us at:
NEURALSTEM,
INC
9700
Great Seneca Highway,
Rockville,
Maryland 20850
Attn:
Chief Financial Officer
Tel :
(301) 366-4841
We file
annual, quarterly and other reports, proxy statements and other information with
the SEC. Our SEC filings are available to the public over the Internet at the
SEC’s website at
http://www.sec.gov. You may also read and copy any document we file at
the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Room. You can also inspect reports, proxy statements and other
information about us at the offices of the National Association of Securities
Dealers, Reports Section, 1735 K Street, N.W., Washington, D.C.
20006.
We
incorporate information into this prospectus by reference, which means that we
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this prospectus, except for any such information superseded by
information contained in later-filed documents or directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC (excluding those portions of any Form 8-K
that are not deemed “filed” pursuant to the General Instructions of Form 8-K).
These documents contain important information about us and our financial
condition.
We
incorporate by reference into this prospectus supplement the information
contained in the documents listed below, which is considered to be a part of
this prospectus supplement:
|
·
|
Our
Annual Report on Form 10-K filed with the Commission on March 31, 2010,
for the year ended December 31, 2009;
|
|
|
|
|
·
|
The
description of our common stock contained in our Registration Statement on
Form SB-2 (Registration No. 333-142451), as amended (the "Registration
Statement"), filed under the Securities Act of 1933, as amended, with the
Commission on April 30, 2007 and declared effective May 4, 2007.
|
All
reports and other documents we subsequently file pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering, including all such documents we may file with the SEC after the date
of the initial registration statement and prior to the effectiveness of the
registration statement, but excluding any information furnished to, rather than
filed with, the SEC, will also be incorporated by reference into this prospectus
and deemed to be part of this prospectus from the date of the filing of such
reports and documents.
We will
provide without charge to each person, including any beneficial owner, to whom
this prospectus is delivered, upon written or oral request, a copy of any or all
documents that are incorporated by reference into this prospectus, but not
delivered with the prospectus, other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into the documents that this
prospectus incorporates. You should direct written requests to: NEURALSTEM, INC,
9700 Great Seneca Highway, Rockville, Maryland 20850 Attn: Chief Financial
Officer Tel: (301) 366-4841
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES.
The
Corporation Laws of the State of Delaware and the Company's Bylaws provide for
indemnification of the Company's Directors for expenses actually and necessarily
incurred by them in connection with the defense of any action, suit or
proceeding in which they, or any of them, are made parties, or a party, by
reason of having been Director(s) or Officer(s) of the corporation, or of such
other corporation, except, in relation to matter as to which any such Director
or Officer or former Director or Officer or person shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty. Furthermore, the personal liability of the Directors is
limited as provided in the Company's Articles of Incorporation.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
NEURALSTEM,
INC.
5,163,956
Shares of Common Stock
Resale
Prospectus