UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
TO
TENDER
OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE
SECURITIES
EXCHANGE ACT OF 1934
CARDAX,
INC.
(Name
of Subject Company (Issuer) and Filing Person (Offeror))
COMMON
STOCK
$0.001
par value per share
(Title
of Class of Securities)
14141D102
(CUSIP
Number of Class of Common Stock)
David
G. Watumull
Cardax,
Inc.
2800
Woodlawn Drive, Suite 129
Honolulu,
Hawaii 96822
(808)
457-1400
(Name,
Address, and Telephone Number of Person Authorized to Receive Notices and
Communications
on Behalf of Filing Person)
Copies
to:
Richard
M. Morris, Esq.
Herrick,
Feinstein LLP
2 Park Avenue
New
York, New York 10016
(212)
592-1400
CALCULATION
OF FILING FEE:
Transaction
Valuation:
|
|
Amount
of Filing Fee:
|
$8,630,351.09
(a)
|
|
$1,074.48
(b)
|
(a)
|
Estimated
for purposes of calculating the amount of the filing fee only. The transaction is an
offer by the Cardax, Inc. (the “
Company
”) to holders of its $0.625
warrants (“
Original Warrants
”) to exchange up to 27,705,782 of such
Original Warrants, plus a fee of $0.15 per Original Warrant (“
Exchange Payment
”)
for an equal number of shares of common stock of the Company (“
Exchange Offer
”).
The transaction valuation is calculated pursuant to Rule 0-11 of the Securities Exchange
Act of 1934, as amended. The transaction valuation assumes that 27,705,782 outstanding
Original Warrants are tendered in the Exchange Offer, and was determined using $0.31
per Original Warrant, which represents the
average
of the bid and ask
price of the Company’s
common stock on May 1, 2018 on the OTCQB.
|
(b)
|
Estimated
solely for purposes of computing the amount of the registration fee pursuant to Rule
457(c) and (g) under the Securities Act of 1933, computed based upon the
average
of the bid and ask
price per share of the
Company’s common stock on May 1, 2018 on the OTCQB.
|
[X]
Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
Amount
Previously Paid: $1,074.48
Form
or Registration Number: Registration Statement on Form S-4 (File No. 333-224619)
Filing
Party: Cardax, Inc.
Date
Filed: May 2, 2018
[ ]
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.
Check
the appropriate boxes below to designate any transactions to which the statement relates:
[ ]
third-party tender offer subject to Rule 14d-1.
[X]
issuer tender offer subject to Rule 13e-4.
[ ]
going-private transaction subject to Rule 13e-3.
[ ]
amendment to Schedule 13D under Rule 13d-2.
Check
the following box if the filing is a final amendment reporting the results of the tender offer: [ ]
If
applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:
[ ]
Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
[ ]
Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)
INTRODUCTORY
STATEMENT
This
Tender Offer Statement on Schedule TO (this “
Schedule TO
”) is being filed by Cardax, Inc., a Delaware corporation
(the “
Company
”), in connection with the Company’s offer to exchange each issued and outstanding warrant
that provided the holder the right to purchase a share of common stock of the Company, par value $0.001 per share (“
Common
Stock
”) at $0.625 per share (each, an “
Original Warrant
”) and payment by the holder of $0.15 in cash
(the “
Exchange Payment
”), for one share of Common Stock, which constitutes the “
Exchange Offer
”.
The
Exchange Offer is being made upon the terms and subject to the conditions set forth in the offer of warrant holders (“
Offer
Letter
”), letter of transmittal (“
Letter of Transmittal
”), and prospectus (as it may be amended and/or
supplemented from time to time, the “
Prospectus
”), which forms part of the Registration Statement on Form S-4,
initially filed by the Company with the Securities and Exchange Commission (the “
SEC
”) on May 2, 2018, as amended
by Amendment No. 1, filed by the Company on June 14, 2018 (as it may be further amended and/or supplemented from time to time,
the “
Registration Statement
”). The Offer Letter, Letter of Transmittal, and Registration Statements (including
the Prospectus), are Exhibits (a)(1)(a), (a)(1)(b), and (a)(4)(a) hereto, respectively.
This
Schedule TO is being filed in satisfaction of the reporting requirements of Rules 13-e4(b)(1) and (c)(2) promulgated under the
Securities Exchange Act of 1934, as amended (the “
Exchange Act
”). As further set forth below, information contained
in the Offer Letter, Letter of Transmittal, and the Prospectus, is incorporated by reference in response to Items 1 through 13
of this Schedule TO, except to the extent that information is specifically provided herein.
Item
1. Summary Term Sheet.
The
information set forth in the Summary Term Sheet is incorporated herein.
Item
2. Subject Company Information.
|
(a)
|
Name
and Address.
|
|
|
|
|
|
The
name of the issuer is Cardax, Inc. The address and telephone number of its principal executive offices is 2800 Woodlawn Drive,
Suite 129, Honolulu, Hawaii 96822; (808) 457-1400.
|
|
|
|
|
(b)
|
Securities.
|
|
|
|
|
|
The
title of the securities that are the subject of the Exchange Offer are the (i) Class A Warrants, (ii) Noteholder Warrants,
(iii) Placement Agent Warrants, and (iv) Financial Consultant Warrants, which are each warrants that provide the holders the
right to purchase a share of Common Stock at $0.625 per share, collectively referred to herein as Original Warrants. As of
the close of business on June 13, 2018, there were a total of 27,705,782 Original Warrants outstanding, which includes
(i) 23,914,752 Class A Warrants, (ii) 130,585 Noteholder Warrants, (iii) 3,010,445 Placement Agent Warrants, and (iv) 650,000
Financial Consultant Warrants.
|
|
|
|
|
(c)
|
Trading
Market and Price.
|
|
|
|
|
|
No
trading market exists for the Original Warrants.
|
|
|
|
|
|
With
respect to our Common Stock, the information set forth in the “Price Range Of Common Stock and Dividend Policy —
Market Information” section of the Prospectus is incorporated herein by reference.
|
Item
3. Identity and Background of Filing Person.
|
(a)
|
Name
and Address.
|
|
|
|
|
|
The
Company is the filing person. The address and telephone number of the Company and each of the Company’s executive officers
and directors is c/o Cardax, Inc., 2800 Woodlawn Drive, Suite 129, Honolulu, Hawaii 96822, (808) 457-1400.
|
|
|
|
|
(b)
|
Business
and Background of Entities.
|
|
|
|
|
|
Not
applicable.
|
|
|
|
|
(c)
|
Business
and Background of Natural Persons.
|
|
|
|
|
|
Information
on the persons specified in Instruction C of Schedule TO is set forth in the “Management” section of the Prospectus,
which is incorporated herein by reference.
|
|
|
|
|
|
Each
of the executive officers and directors of the Company are U.S. citizens.
|
Item
4. Terms of the Transaction.
|
(a)
|
Material
Terms.
|
|
|
|
|
|
The
information set forth in the Summary Term Sheet and in the “General Terms of the Exchange Offer” and “Certain
United Stated Federal Income Tax Considerations” sections of the Prospectus is incorporated herein by reference.
|
|
|
|
|
(b)
|
Purchases.
|
|
|
|
|
|
None
of the Company’s executive officers, directors, or control persons hold Original Warrants, and therefore, such persons
may not participate in the Exchange Offer.
|
Item
5. Past Contacts, Transactions, Negotiations and Agreements.
The
information set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”—“Liquidity
and Capital Resources”, “Description Of Securities”, “Certain Relationships and Related Party Transactions”,
and “Executive Compensation” sections of the Prospectus is incorporated herein by reference.
Item
6. Purposes of the Transaction and Plans or Proposals.
|
(a)
|
Purposes.
|
|
|
|
|
|
We
are making the Exchange Offer primarily to raise capital from holders of Original Warrants. We believe that by allowing holders
of Original Warrants to exchange the Original Warrants for Exchange Shares, the Company can raise additional capital for general
corporate purposes in an efficient and cost-effective manner.
|
|
(b)
|
Use
of Securities Acquired.
|
|
|
|
|
|
The
Original Warrants tendered in this Exchange Offer will be retired.
|
|
|
|
|
(c)
|
Plans.
|
|
|
|
|
|
In
order for holders of Original Warrants to participate in the Exchange Offer, holders must pay an Exchange Payment. Assuming
that all holders of Original Warrants fully participate in the Exchange Offer, the Company will receive net cash proceeds
equal to $3,831,710 in connection with the Exchange Offer after deducting financial advisor and solicitation agent fees. This
would represent an increase of 121% of the Company’s assets as of March 31, 2018. In addition, assuming full participation
in the Exchange Offer, the Company’s outstanding shares of Common Stock would increase by 27,705,782 to 150,722,479,
as of June 13, 2018, representing a 22.5% increase in the outstanding Common Stock.
|
Item
7. Source and Amount of Funds or Other Consideration.
|
(a)
|
Source
of Funds.
|
|
|
|
|
|
Not
applicable.
|
|
|
|
|
(b)
|
Conditions.
|
|
|
|
|
|
Not
applicable.
|
|
|
|
|
(c)
|
Borrowed
Funds.
|
|
|
|
|
|
Not
applicable.
|
Item
8. Interest in Securities of the Subject Company.
|
(a)
|
Securities
Ownership.
|
|
|
|
|
|
None
of the Company’s executive officers, directors, or control persons are the beneficial owners of Original Warrants.
|
|
|
|
|
|
The
information set forth in the section entitled “Security Ownership of Certain Beneficial Owners and Management”
of the Prospectus is incorporated herein by reference.
|
|
|
|
|
(b)
|
Securities
Transactions.
|
|
|
|
|
|
There
was no transaction by the Company, any of its officers, directors, affiliates, or other person for which disclosure is required,
during the past 60 days with respect to the Original Warrants or our Common Stock.
|
Item
9. Person/Assets, Retained, Employed, Compensated or Used.
The
information set forth in the section entitled “Solicitation Agents” of the Prospectus is incorporated herein by reference.
Item
10. Financial Statements.
|
(a)
|
Financial
Information.
|
|
|
|
|
|
The
information set forth in the Financial Statements, included in the Prospectus, is incorporated herein by reference.
|
|
|
|
|
(b)
|
Pro
Forma Information.
|
Cardax,
Inc., and Subsidiary
CONSOLIDATED
PRO FORMA BALANCE SHEET
As
of March 31, 2018
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
Adjustments
|
|
|
Pro
Forma
|
|
ASSETS
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,293,303
|
|
|
|
(a)
|
|
|
|
3,830,636
|
|
|
$
|
5,123,939
|
|
Accounts receivable
|
|
|
123,286
|
|
|
|
|
|
|
|
|
|
|
|
123,286
|
|
Inventories
|
|
|
228,234
|
|
|
|
|
|
|
|
|
|
|
|
228,234
|
|
Deposits and
other assets
|
|
|
119,066
|
|
|
|
|
|
|
|
|
|
|
|
119,066
|
|
Prepaid
expenses
|
|
|
21,848
|
|
|
|
|
|
|
|
|
|
|
|
21,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
1,785,737
|
|
|
|
|
|
|
|
|
|
|
|
5,616,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, net
|
|
|
813
|
|
|
|
|
|
|
|
|
|
|
|
813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE
ASSETS, net
|
|
|
423,331
|
|
|
|
|
|
|
|
|
|
|
|
423,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-current assets
|
|
|
424,144
|
|
|
|
|
|
|
|
|
|
|
|
424,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
2,209,881
|
|
|
|
|
|
|
|
|
|
|
$
|
6,040,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued payroll
and payroll related expenses
|
|
$
|
3,523,151
|
|
|
|
|
|
|
|
|
|
|
$
|
3,523,151
|
|
Accounts payable
and accrued expenses
|
|
|
541,900
|
|
|
|
|
|
|
|
|
|
|
|
541,900
|
|
Fees payable
to directors
|
|
|
418,546
|
|
|
|
|
|
|
|
|
|
|
|
418,546
|
|
Employee
settlement
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
4,533,597
|
|
|
|
|
|
|
|
|
|
|
|
4,533,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
4,533,597
|
|
|
|
|
|
|
|
|
|
|
|
4,533,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock - $0.001 par value;
50,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2018
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Common Stock - $0.001 par value;
400,000,000 shares authorized, 150,565,482 and 122,674,516 shares issued and outstanding as of March 31, 2018
|
|
|
122,860
|
|
|
|
(b)
|
|
|
|
27,706
|
|
|
|
150,566
|
|
Additional paid-in-capital
|
|
|
56,520,384
|
|
|
|
(b)
|
|
|
|
4,128,161
|
|
|
|
60,648,545
|
|
Accumulated
deficit
|
|
|
(58,966,960
|
)
|
|
|
(c)
|
|
|
|
(325,231
|
)
|
|
|
(59,292,191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(2,323,716
|
)
|
|
|
|
|
|
|
|
|
|
|
1,506,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
2,209,881
|
|
|
|
|
|
|
|
|
|
|
$
|
6,040,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOOK VALUE OF STOCK
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
The
accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements
Cardax,
Inc., and Subsidiary
CONSOLIDATED
PRO FORMA STATEMENTS OF OPERATIONS
For
the three months ended March 31, 2018
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
As
Reported
|
|
|
|
|
|
Adjustments
|
|
|
Pro
Forma
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES, net
|
|
$
|
313,310
|
|
|
|
|
|
|
|
|
|
|
$
|
313,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS
SOLD
|
|
|
135,532
|
|
|
|
|
|
|
|
|
|
|
|
135,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
177,778
|
|
|
|
|
|
|
|
|
|
|
|
177,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
expenses
|
|
|
553,269
|
|
|
|
(c)
|
|
|
|
325,231
|
|
|
|
878,500
|
|
Sales and marketing
|
|
|
350,114
|
|
|
|
|
|
|
|
|
|
|
|
350,114
|
|
Research and
development
|
|
|
183,823
|
|
|
|
|
|
|
|
|
|
|
|
183,823
|
|
Stock based compensation
|
|
|
129,625
|
|
|
|
|
|
|
|
|
|
|
|
129,625
|
|
Depreciation
and amortization
|
|
|
9,605
|
|
|
|
|
|
|
|
|
|
|
|
9,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,226,436
|
|
|
|
|
|
|
|
|
|
|
|
1,551,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,048,658
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,373,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
|
556
|
|
Interest income
|
|
|
1,119
|
|
|
|
|
|
|
|
|
|
|
|
1,119
|
|
Interest
expense
|
|
|
(881
|
)
|
|
|
|
|
|
|
|
|
|
|
(881
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expenses)
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before the
provision for income taxes
|
|
|
(1,047,864
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,373,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(1,047,864
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(1,373,095
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
Diluted
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES USED IN CALCULATION OF
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
122,674,516
|
|
|
|
|
|
|
|
27,705,782
|
|
|
|
150,380,298
|
|
Diluted
|
|
|
122,674,516
|
|
|
|
|
|
|
|
27,705,782
|
|
|
|
150,380,298
|
|
The
accompanying notes are an integral part of these Pro Forma Condensed Consolidated Financial Statements
Cardax,
Inc., and Subsidiary
NOTES
TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Basis of Presentation
Cardax,
Inc. and Subsidiary are referred to herein as the “
Company
”. The accompanying unaudited pro forma condensed
consolidated balance sheet as at March 31, 2018 and unaudited pro forma condensed consolidated statements of operations for the
three-months ended March 31, 2018 of the Company (the “
Pro Forma Condensed Consolidated Financial Statements
”)
have been prepared by management on the basis of United States Generally Accepted Accounting Principles (“
U.S. GAAP
”)
and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“
SEC
”)
from information derived from the financial statements of the Company. The unaudited Pro Forma Condensed Consolidated Financial
Statements have been prepared for inclusion in the Company’s Schedule TO in connection with the Company’s offer to
exchange each issued and outstanding warrant that provided the holder the right to purchase a share of common stock of the Company,
par value $0.001 per share (“
Common Stock
”), at $0.625 per share (each, an “
Original Warrant
”),
and payment by the holder of $0.15 in cash (the “
Exchange Payment
”), for one share of Common Stock (an “
Exchange
Share
”), which constitutes the “
Exchange Offer
”.
The
unaudited pro forma condensed consolidated balance sheet as of March 31, 2018 has been prepared as if 100% of the Original Warrants
outstanding as of March 31, 2018 were exchanged on December 31, 2017. The unaudited pro forma condensed consolidated statement
of operations for the three-months ended March 31, 2018 has been prepared as if all of the Original Warrants outstanding as of
March 31, 2018 had been exchanged on January 1, 2018.
The
unaudited Pro Forma Condensed Consolidated Financial Statements have been derived from the unaudited condensed consolidated financial
statements of the Company for the quarterly period ended March 31, 2018.
The
unaudited pro forma adjustments are based on currently available information and certain assumptions that management believes
are reasonable. The unaudited Pro Forma Condensed Consolidated Financial Statements should be read in conjunction with the historical
financial statements and accompanying footnotes. The unaudited Pro Forma Condensed Consolidated Financial Statements are for informational
purposes only and do not purport to reflect the financial position or results of operations that would have occurred if the Exchange
Offer had been consummated on the dates indicated above, nor do they purport to represent or be indicative of the financial position
or results of operations of the Company for any future dates or periods.
2.
Significant Accounting Policies
The
accounting policies used in the preparation of these unaudited Pro Forma Condensed Consolidated Financial Statements are those
set forth in the Company’s audited financial statements for the year ended December 31, 2017 as described in the Company’s
Annual Report on Form 10-K filed with the SEC on March 27, 2018 and the Company’s unaudited condensed consolidated financial
statements for the quarterly period ended March 31, 2018 as described in the Company’s Quarterly Report on Form 10-Q filed
with the SEC on May 9, 2018.
Cardax,
Inc., and Subsidiary
NOTES
TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
3.
Description of the Transaction
The
Company is offering to exchange each issued and outstanding Original Warrant together with the Exchange Payment for an Exchange
Share. The Company will accept for exchange any and all Original Warrants validly tendered at any time prior to 5:00 p.m., New
York City time, during the period (the “
Exchange Period
”) beginning on the effective date of the registration
statement filed in connection with the Exchange Offer, and continuing until the date (the “
Expiration Date
”)
that is 25 business days after the effective date, unless extended by the Company. The Company will issue the Exchange Shares
on a continuous basis pursuant to Rule 415 of the Securities Act of 1933 as amended (“
Securities Act
”) during
the Exchange Period. The Company will accept for exchange any Original Warrant held by any person other than the original holder
if such Original Warrant is transferred in accordance with the terms of the Original Warrant and applicable federal and state
securities laws. Holders may elect to participate in the Exchange Offer with respect to some, all or none of their Original Warrants.
If a holder chooses not to participate in the Exchange Offer, the holder’s Original Warrants will remain in full force and
effect, as originally issued with an exercise price of $0.625 per share and will retain in all respects their original terms and
provisions.
The
purpose of the Exchange Offer is primarily to raise capital from holders of Original Warrants. The Company believes that by allowing
holders of Original Warrants to exchange the Original Warrants for Exchange Shares, the Company can raise additional capital for
general corporate purposes in an efficient and cost-effective manner.
(i)
Warrants
A
total of 27,705,782 Original Warrants were issued by the Company on February 7, 2014 upon the consummation of a reverse merger
(the “
Merger
”) in connection with a private placement of shares of Common Stock and Original Warrants. The
Original Warrants expire February 7, 2019 (five years from the date of issuance). As of the date of this report, none of the Original
Warrants have been exercised at the original price of $0.625 per share. The unaudited pro forma consolidated balance sheet gives
effect to the exchange of 27,705,782 Original Warrants outstanding as of March 31, 2018 together with the payment of $0.15 per
share, for gross proceeds of $4,155,867 and 27,705,782 shares of Common Stock being issued as a result of such exchange.
(ii)
Financial Advisor and Solicitation Agent
The
Company has engaged M.M. Dillon & Co. Group LLC (“
M.M. Dillon & Co.
”) to serve as financial advisor
and CIM Securities, LLC (“
CIM Securities
”), to serve as solicitation agent for this Exchange Offer. As compensation
for their services, the Company has agreed to pay M.M. Dillon & Co. a cash fee of 3.5% of the gross proceeds from the Exchange
Offer and a 5-year Common Stock purchase warrant with a fair market value equal to 3.5% of the gross proceeds from the Exchange
Offer and CIM Securities a cash fee of 4.3% of the gross proceeds from the Exchange Offer and a 5-year Common Stock purchase warrant
with a fair market value equal to 3.5% of the gross proceeds from the Exchange Offer. The fair market value of the Common Stock
purchase warrants shall be based on a Black-Scholes valuation as of the day immediately prior to the filing date of the initial
registration statement in connection with the Exchange Offer. M.M. Dillion & Co. and CIM Securities will also be reimbursed
for reasonable out-of-pocket expenses incurred in connection with the Exchange Offer (including reasonable fees and disbursements
of counsel).
The
agreement between the Company and M.M. Dillon & Co. and CIM Securities provides that the Company will indemnify M.M. Dillon
& Co. and CIM Securities against certain liabilities, including liabilities under the Securities Act.
Cardax,
Inc., and Subsidiary
NOTES
TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
4.
Pro Forma Assumptions and Adjustments
The
unaudited pro forma condensed consolidated balance sheet as of March 31, 2018 has been prepared as if 100% of the Original Warrants
outstanding as of March 31, 2018 were exchanged on December 31, 2017. The unaudited pro forma condensed consolidated statement
of operations for the three-months ended March 31, 2018 has been prepared as if all of the Original Warrants outstanding as of
March 31, 2018 had been exchanged on January 1, 2018. The following adjustments are directly attributable to the transaction:
a)
|
To
record the net cash proceeds from the issuance of Exchange Offer less registration fees of $1,074.
|
b)
|
To
record the issuance of the maximum number of shares available for issuance in the Exchange Offer.
|
c)
|
To
record the impact on earnings of the Exchange Offer.
|
5.
Pro Forma Common Stock
The
pro forma Common Stock has been determined as follows:
|
|
As
of March 31, 2018
|
|
|
|
Common
|
|
|
|
|
|
|
Stock
|
|
|
Amount
|
|
Common
Stock
|
|
|
122,859,700
|
|
|
$
|
56,643,244
|
|
Shares
issued upon exercise of Exchange Offer
|
|
|
27,705,782
|
|
|
|
4,155,867
|
|
Pro
forma Common Stock
|
|
|
150,565,482
|
|
|
$
|
60,799,111
|
|
6.
Pro Forma Net Loss Per Share
The
pro forma net loss per share has been determined as follows:
|
|
Three-months
|
|
|
|
ended
|
|
|
|
March
31, 2018
|
|
Weighted
average number of common shares
|
|
|
122,674,516
|
|
Weighted
average number of shares issued on in the Exchange Offer
|
|
|
27,705,782
|
|
Pro forma
weighted average number of shares outstanding - basic and diluted
|
|
|
150,380,298
|
|
Pro
forma adjusted net loss
|
|
$
|
(1,373,095
|
)
|
Pro
forma adjusted net loss per share - basic and diluted
|
|
$
|
(0.01
|
)
|
Item
11. Additional Information.
|
(a)
|
Agreements,
Regulatory Requirements and Legal Proceedings.
|
|
|
|
|
|
The
information set forth in the “Certain Relationships and Related Party Transactions” of the Prospectus is incorporated
herein by reference.
|
|
|
|
|
(b)
|
Other
Material Information.
|
|
|
|
|
|
Not
applicable.
|
Item
12. Exhibits.
Exhibit
Number
|
|
Description
|
(a)
|
(1)
|
(a)
|
Letter
to Warrant Holders
|
|
|
(b)
|
Letter
of Transmittal
|
|
|
(c)
|
Summary
Term Sheet
|
|
(4)
|
(a)
|
Registration
Statement on Form S-4, filed with the SEC on May 2, 2018
|
|
|
(b)
|
Amendment
No. 1 to Registration Statement on Form S-4, filed with the SEC on June 14, 2018
|
|
(5)
|
(a)
|
Current
Report on Form 8-K, filed with the SEC on May 2, 2018
|
|
|
(b)
|
Press
Release
|
(b)
|
|
|
Not
applicable
|
(c)
|
|
|
Not
applicable
|
(d)
|
|
(1)
|
Form
of Class A Warrant
|
|
|
(2)
|
Form
of Noteholder Warrant
|
|
|
(3)
|
Form
of Placement Agent Warrant
|
|
|
(4)
|
Form
of Financial Consultant Warrant
|
(e)
|
|
|
Not
applicable
|
(f)
|
|
|
Not
applicable
|
(g)
|
|
|
Not
applicable
|
(h)
|
|
|
Not
applicable
|
Item
13. Information Required by Schedule 13E-3.
Not
applicable.
SIGNATURE
After
due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true,
complete and correct.
|
CARDAX,
INC.
|
|
|
|
|
By:
|
/s/
David G. Watumull
|
|
Name:
|
David
G. Watumull
|
|
Title:
|
President
& Chief Executive Officer
|
Date:
June 14, 2018
INDEX
TO EXHIBITS
Exhibit
Number
|
|
Description
|
|
|
|
(a)(1)(a)
|
|
Letter
to Warrant Holders (incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form
S-4, filed with the SEC on May 2, 2018).
|
|
|
|
(a)(1)(b)
|
|
Letter
of Transmittal (incorporated herein by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-4,
filed with the SEC on May 2, 2018).
|
|
|
|
(a)(1)(c)
|
|
Summary
Term Sheet.*
|
|
|
|
(a)(4)(a)
|
|
Registration
Statement on Form S-4 (as filed with the SEC on May 2, 2018 and incorporated herein by reference).
|
|
|
|
(a)(4)(b)
|
|
Amendment
No. 1 to Registration Statement on Form S-4 (as filed with the SEC on June 14, 2018 and incorporated herein by reference).
|
|
|
|
(a)(5)(a)
|
|
Current
Report on Form 8-K (as filed with the SEC on May 2, 2018 and incorporated herein by reference).
|
|
|
|
(a)(5)(b)
|
|
Press
Release (incorporated herein by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the
SEC on May 2, 2018).
|
|
|
|
(d)(1)
|
|
Form
of Class A Warrant (incorporated herein by reference to Exhibit 4.2 to the Company’s
Current Report on Form 8-K, filed with the SEC on February 10, 2014).
|
|
|
|
(d)(2)
|
|
Form
of Noteholder Warrant (incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K,
filed with the SEC on February 10, 2014).
|
|
|
|
(d)(3)
|
|
Form
of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.4 to the Company’s Current Report on Form
8-K, filed with the SEC on February 10, 2014).
|
|
|
|
(d)(4)
|
|
Form
of Financial Consultant Warrant (incorporated herein by reference to Exhibit 4.5 to the Company’s Current Report on
Form 8-K, filed with the SEC on February 10, 2014).
|
*
Filed herein.
Cardax (CE) (USOTC:CDXI)
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Cardax (CE) (USOTC:CDXI)
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