Registration
No. 333-142220
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM
SB-2
ON
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
ORGANIC
TO GO FOOD CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation
or organization)
|
|
5812
(Primary
Standard Industrial Classification
Code Number)
|
|
58-2044900
(IRS
Employee
Identification
No.)
|
3317
Third Avenue South
Seattle,
Washington 98134
(206)
838-4670
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Jason
Brown, Chief Executive Officer
3317
Third Avenue South
Seattle,
Washington 98134
(206)
838-4670
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
to:
Gerald
Chizever, Esq.
Lawrence
Venick, Esq.
Loeb
& Loeb LLP
10100
Santa Monica Blvd., Suite 2200
Los
Angeles, CA 90067
(310)
282-2000
From
time to time after the effective date of this Registration
Statement
(Approximate
date of commencement of proposed sale to the public)
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check
the
following box: x
If
this
Form is filed to register additional securities for an offering pursuant
to Rule
462(b) under the Securities Act, please check the following box and list
the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under
the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. o
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the
same
offering. o
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission,
acting
pursuant to said Section 8(a), may determine.
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING
STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT
TO COMPLETION, DATED MAY
2,
2008
PRELIMINARY
PROSPECTUS
ORGANIC
TO GO FOOD CORPORATION
13,864,343
SHARES OF COMMON STOCK
This
prospectus covers the resale by selling stockholders beginning on page 33
of up
to 13,864,343 shares of our common stock, $.001 par value, which consists
of:
|
·
|
9,757,040
shares of common stock; and
|
|
·
|
4,107,303
shares of common stock issuable upon exercise of outstanding
warrants.
|
This
is
not an underwritten offering. We will not receive any of the proceeds from
the
sale of these shares. We may, however, receive proceeds in the event that
some
or all of the warrants held by the selling stockholders are exercised for
cash.
The
securities will be offered for sale by the selling stockholders identified
in
this prospectus in accordance with the methods and terms described in the
section of this prospectus entitled “Plan of Distribution.” The
selling stockholders will be responsible for any commissions or discounts
due to brokers or dealers. We have agreed to pay for all of the expenses
of
registration of the shares covered by this prospectus. The section of this
prospectus entitled “Description of Securities” more fully describes the
characteristics of our common stock and other securities.
Our
common stock is currently listed on the OTC Bulletin Board under the symbol
“OTGO.OB.” On April 30, 2008, the last reported bid price of our common stock
was $1.30 per share.
An
investment in our common stock involves a high degree of risk. See “Risk
Factors” beginning at page 5.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus
is
, 2008.
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
|
1
|
PROSPECTUS
SUMMARY
|
2
|
SUMMARY
FINANCIAL INFORMATION
|
4
|
RISK
FACTORS
|
5
|
USE
OF PROCEEDS
|
12
|
DETERMINATION
OF OFFERING PRICE
|
12
|
DESCRIPTION
OF BUSINESS
|
13
|
LEGAL
PROCEEDINGS
|
17
|
DESCRIPTION
OF PROPERTY
|
17
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
18
|
DIRECTORS
AND EXECUTIVE OFFICERS
|
23
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
26
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
27
|
EXECUTIVE
COMPENSATION
|
28
|
SELLING
STOCKHOLDERS
|
33
|
PLAN
OF DISTRIBUTION
|
46
|
DESCRIPTION
OF SECURITIES
|
48
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
49
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
51
|
LEGAL
MATTERS
|
51
|
EXPERTS
|
51
|
WHERE
YOU CAN FIND MORE INFORMATION
|
51
|
FINANCIAL
STATEMENTS
|
F-1
|
CAUTIONARY
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. Such forward-looking statements
include statements regarding, among other things, (a) our projected sales
and
profitability, (b) our growth strategies, (c) anticipated trends in our
industry, (d) our future financing plans and (e) our anticipated needs for
working capital. Forward-looking statements, which involve assumptions and
describe our future plans, strategies and expectations, are generally
identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of
these words or other variations on these words or comparable terminology.
This
information may involve known and unknown risks, uncertainties and other
factors
that may cause our actual results, performance or achievements to be materially
different from the future results, performance, or achievements expressed
or
implied by any forward-looking statements. These statements may be found
under
“Prospectus Summary,” “Management's Discussion and Analysis of Financial
Condition and Results of Operations” and “Description of Business,” as well as
in this prospectus generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks outlined under “Risk Factors”
and matters described in this prospectus generally. This prospectus may contain
market data related to our business, which may have been included in articles
published by independent industry sources. Although we believe these sources
are
reliable, we have not independently verified this market data. This market
data
includes projections that are based on a number of assumptions. If any one
or
more of these assumptions turns out to be incorrect, actual results may differ
materially from the projections based on these assumptions. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur. In addition to
the
information expressly required to be included in this prospectus, we will
provide such further material information, if any, as may be necessary to
make
the required statements, in light of the circumstances under which they are
made, not misleading.
Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and
our
business made elsewhere in this prospectus as well as other pubic reports
which
may be filed with the Securities and Exchange Commission (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 statement contained in this prospectus to reflect new events
or
circumstances, unless and to the extent required by applicable law. Neither
the
Private Securities Litigation Reform Act of 1995 nor Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”), provides any
protection for statements made in this prospectus.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. It
does
not contain all of the information that you should consider before investing
in
our common stock. You should read the entire prospectus carefully, including
the
section entitled “Risk Factors” and our consolidated financial statements and
the related notes. In this prospectus, unless otherwise noted, we refer to
Organic To Go Food Corporation, formerly known as SP Holding Corporation,
and
our wholly owned subsidiary, Organic To Go, Inc., as “Organic,” “the Company,”
“we,” “us” and “our.”
Our
Company
We
were
incorporated in Florida on March 16, 1994 and reincorporated in Delaware on
September 26, 2000. For the years ended December 31, 2006, 2005 and
2004, we were a non-operating shell company and our business operations were
limited to sustaining a public shell vehicle.
On
February 12, 2007, we acquired Organic Holding Company, Inc., an organic
food
services company, through a reverse merger with our wholly owned subsidiary.
As
a result of the merger, Organic Holding Company, Inc. became our wholly owned
subsidiary and was renamed “Organic To Go, Inc.” On May 16, 2007, our
stockholders approved an amendment to our Amended and Restated Certificate
of
Incorporation to change our name from SP Holding Corporation to Organic To
Go
Food Corporation.
Our
principal executive offices are located at 3317 Third Avenue South, Seattle,
Washington 98134 and our telephone number is (206) 838-4670. Our website
address
is http://www.organictogo.com. The information on our website is not intended
to
be part of this prospectus.
Overview of
our Business
We
prepare and serve classic American cuisine. We use organic ingredients when
possible and always natural ingredients without pesticides and other harmful
additives. Customers can get our food at our convenient USDA certified
Retail Cafés, through our Delivery/Casual Catering Services and at specific
locations where our “grab-and-go” meals are sold via a wholesale relationship.
Our target customers are white collar office workers as well as students
and employees of colleges and universities.
We
provide a delicious and healthy alternative to typical fast food options,
lunch box deliveries and casual catering. We serve a wide range of organic,
natural and wholesome meals, which include everything from ham and cheese
sandwiches to deli-style roast beef sandwiches and veggie packed salads.
We
proactively source producers and manufacturers who use sustainable farming
and/or production practices as an integral part of our overall mission to
provide wholesome “clean” food from farm to table. We also use alternative
packaging such as biodegradable and recycled plastics, and sugar cane based
disposable tableware to minimize the environmental impact of convenience
packaging for “grab-and-go” meals.
More
than
70% of our products currently offered are organic. When our food is not organic
it is either something such as water or salt which cannot be certified or
is
made up from all natural ingredients sourced under careful preset guidelines
to
insure the highest quality products available. In February 2006, we became
the
first fast-casual restaurant and retailer to be USDA certified as “Organic” by
Quality Assurance International, the leading third-party certification agency
in
the organic foods industry.
We
currently maintain twenty-six Retail Cafés in the Seattle, Washington, Los
Angeles, California, and San Diego, California vicinities. We have an agreement
with Compass Group, Inc., pursuant to which Compass Group, Inc. maintains
twenty
three of our “grab-and-go” locations on the Microsoft Corporate Campus near
Seattle, Washington. We also provide sandwiches and other “grab-and-go” food to
independent coffee vendors at the Los Angeles International Airport. We operate
“grab-and-go” locations at universities in the Seattle, Washington and Los
Angeles, California areas, including the University of Washington Medical
Center, the University of Southern California and the University of California,
Los Angeles.
Our
revenue from sales for the year ended December 31, 2007, increased approximately
65% to $15.9 million, as compared with $9.7 million for the year ended December
31, 2006. We incurred a net loss of approximately $12.1 million for the year
ended December 31, 2007, as compared with a net loss of approximately $8.0
million for the year ended December 31, 2006.
Registration
of Shares
We
are
registering for resale 13,864,343 shares of our common stock issued or issuable
upon the exercise of warrants as a result of a series of bridge note financings
with select accredited investors conducted between July 2006 through December
2006, and a private placement with select accredited investors that closed
on
February 12, 2007. In connection the bridge note financings and private
placement, we are registering for resale:
|
·
|
4,498,040
shares of common stock and 2,156,179 shares of common stock underlying
warrants, which were issued to investors in connection with the
bridge
note financings;
|
|
·
|
5,259,000
shares of common stock and 1,100,600 shares of common stock underlying
warrants, which were issued to investors in connection with the
private
placement; and
|
|
·
|
850,524
shares of common stock underlying warrants, which were issued as
compensation for services to the placement agents in connection
with the
private placement.
|
Capital
stock currently outstanding:
|
|
As
of March 31, 2008, we had outstanding 36,329,755 shares of common
stock
and options and warrants to purchase a total of 17,301,546 shares of
common stock.
|
|
|
|
Common
stock offered by Organic To Go Food Corporation:
|
|
None
|
|
|
|
Common
stock offered by selling stockholders:
|
|
Up
to 13,864,343 shares of our common stock, which consists
of:
|
|
|
|
|
|
·
|
9,757,040
shares of common stock; and
|
|
|
·
|
4,107,303
shares of common stock issuable upon exercise of outstanding
warrants.
|
|
|
|
|
Use
of proceeds:
|
|
We
will not receive any of the proceeds from the sale of shares
of common
stock by the selling stockholders. We may, however, receive proceeds
in
the event some or all of the warrants held by the selling stockholders
are
exercised.
|
|
|
|
OTC
Bulletin Board Symbol:
|
|
OTGO.OB
|
|
|
|
Risk
Factors:
|
|
As
investment in our common stock involves significant risks. See
“Risk
Factors” beginning on page 5.
|
SUMMARY
FINANCIAL INFORMATION
You
should read the summary financial data set forth below in conjunction with
“Management’s Discussion and Analysis of Financial Condition or Plan of
Operations” and our financial statements and the related notes included
elsewhere in this prospectus. We derived the financial data as of the year
ended
December 31, 2006 and 2007, from our financial statements included in this
prospectus. The historical results are not necessarily indicative of the
results
to be expected for any future period.
Statement of Operations Data:
(in thousands except for per share
|
|
Year Ended December 31,
|
|
amounts)
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
Sales
|
|
$
|
9,663
|
|
$
|
15,902
|
|
Cost
of sales
|
|
$
|
4,876
|
|
$
|
7,361
|
|
Operating
Expenses
|
|
$
|
10,483
|
|
$
|
16,075
|
|
Net
Loss
|
|
$
|
(7,966
|
)
|
$
|
(12,145
|
)
|
Net
Loss Per Share - Basic and Diluted
|
|
$
|
(2.78
|
)
|
$
|
(0.57
|
)
|
Weighted
Average Shares Outstanding
|
|
|
2,868
|
|
|
21,136
|
|
Balance Sheet Data:
|
|
At December 31,
|
|
(in thousands)
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
865
|
|
$
|
668
|
|
Total
Current Assets
|
|
$
|
1,655
|
|
$
|
3,101
|
|
Total
Assets
|
|
$
|
5,277
|
|
$
|
12,940
|
|
Total
Current Liabilities
|
|
$
|
8,549
|
|
$
|
4,757
|
|
Total
Liabilities
|
|
$
|
9,278
|
|
$
|
6,293
|
|
Stockholders’
Equity (Deficit)
|
|
$
|
(4,001
|
)
|
$
|
6,647
|
|
RISK
FACTORS
You
should consider carefully the risks described below, together with all of
the
other information in this prospectus, in evaluating our company, our business
and this offering. If any of the following risks actually occur, our business,
financial condition, and results of operations could suffer. In this case,
the
trading price of our common stock could decline and you may lose all or part
of
your investment.
Risks
Related to Our Company
Our
limited operating history makes it difficult for investors to evaluate our
business and the risks and uncertainties frequently encountered by new
companies.
Our
current business operations were founded in November 2004, and as a result,
we
have a limited operating history. This limited operating history and the
unpredictability of our industry make it difficult for investors to evaluate
our
business and future operating results. An investor in our securities must
consider the risks, uncertainties and difficulties frequently encountered
by
companies in new and rapidly evolving markets. The risks and difficulties
we
face include challenges in accurate financial planning as a result of limited
historical data and the uncertainties resulting from having had a relatively
limited time period in which to implement and evaluate our business strategies
as compared to older companies with longer operating histories.
If
we fail to open new Retail Cafés and expand our Delivery/Casual Catering
Services and Wholesale operations we may not be able to achieve
profitability.
Our
growth strategy requires us to open new Retail Cafés and expand our
Delivery/Casual Catering Services and Wholesale operations through acquiring
other companies or in greenfield locations. The success of our planned expansion
will be dependent upon numerous factors, many of which are beyond our control,
including the following:
|
·
|
hiring,
training and retention of qualified operating
personnel;
|
|
|
|
|
·
|
identification
and successful negotiation for the purchase of suitable acquisition
targets;
|
|
·
|
identification
and availability of suitable
properties;
|
|
·
|
negotiation
of favorable lease terms;
|
|
·
|
timely
development of new Retail Café, Delivery/Casual Catering Services and
Wholesale operations;
|
|
·
|
the
successful integration of the operations of acquired
companies;
|
|
|
|
|
·
|
management
of construction and development costs of Retail Café, Delivery/Casual
Catering Services and Wholesale
operations;
|
|
·
|
competition
in our markets; and
|
|
·
|
general
economic conditions.
|
Delays
or
failures in opening new Retail Cafés or in expanding our Delivery/Casual
Catering Services and Wholesale operations could materially adversely affect
our
business, financial condition, operating results or cash flows. Further,
any new
Retail Café, Delivery/Casual Catering Services or Wholesale operation we open or
acquire may not be able to obtain similar operating results to those of our
existing operations.
In
order to support our future expansion and growth plans we may need
additional financing, which may not be available on satisfactory terms or
at
all.
We
may
need to raise additional funds to support our future expansion and growth
plans.
Our funding requirements may change as a result of many factors, including
underestimates of budget items, unanticipated cash requirements, future product
and service opportunities, and future business combinations. Consequently,
we
may need to seek additional sources of financing, which may not be available
on
favorable terms, if at all, and which may be dilutive to existing
stockholders.
We
may
seek to raise additional financing through equity offerings, debt financings
or
additional corporate collaboration and licensing arrangements. To the extent
we
raise additional capital by issuing equity securities, our stockholders may
experience dilution. To the extent that we raise additional capital by issuing
debt securities, we could incur substantial interest obligations, may be
required to pledge assets as collateral for the debt and may be constrained
by
restrictive financial and/or operational covenants. Debt financing would
also be
superior to the stockholders’ interests in bankruptcy or liquidation.
Our
reliance on our suppliers and distributors subjects us to a number of risks,
including possible delays or interruptions in supplies, diminished direct
control over quality and a potential lack of adequate raw material capacity.
We
depend
on our suppliers and distributors for the operation of our business. Any
disruption in the supply of or degradation in the quality of the raw materials
provided by our suppliers could have a material adverse effect on our business,
operating results and financial condition. In addition, such disruptions
in
supply or degradations in quality could have a long-term detrimental impact
on
our efforts to develop a strong brand identity and a loyal consumer base.
Although we maintain relationships with a number of suppliers and always
attempt
to have more than one potential supplier for any required item, there can
be no
assurance that we will be able to continue to maintain multiple supply sources.
If any supplier or distributor fails to perform as anticipated, or if there
is a
termination or any disruption in any of these relationships for any reason,
it
could have a material adverse effect on results of operations.
We
could face labor shortages that could slow our growth.
Our
success depends in part upon our ability to attract, motivate and retain
a
sufficient number of qualified employees, including managers, chefs and other
kitchen staff, necessary to keep pace with our expansion schedule. Qualified
individuals of the requisite caliber and number needed to fill these positions
are in short supply in some areas. Although we have not experienced any
significant challenges in recruiting or retaining employees, any future
inability to recruit and retain sufficient individuals may delay the planned
openings and development of new Retail Cafés, Delivery/Casual Catering Services
and Wholesale operations. Any such delays or any material increases in employee
turnover rates in existing Retail Cafés and in our Delivery/Casual Catering
Services and Wholesale operations could have a material adverse effect on
our
business, financial condition, operating results or cash flows. Additionally,
competition for qualified employees could require us to pay higher wages
to
attract sufficient employees, which could result in higher labor
costs.
Our
expansion into new markets may present increased risks due to our unfamiliarity
with the area.
From
July
through October 2007, we purchased a total of eight stores in San
Diego, California, in order to facilitate our initial entry into the San
Diego
market. We anticipate that our new Retail Cafés, Delivery/Casual Catering
Services and Wholesale operations will typically take several months to reach
budgeted operating levels due to challenges commonly associated with new
businesses, including lack of market awareness, inability to hire sufficient
staff and other factors. Although we will attempt to mitigate these factors
by
careful attention to training and staffing needs, there is a risk that we
will
not be successful in operating our new Retail Cafés, Delivery/Casual Catering
Services and Wholesale operations on a profitable basis. New markets that
we
enter may have different competitive conditions, consumer tastes and
discretionary spending patterns than our existing markets, which may cause
our
new Retail Cafés, Delivery/Casual Catering Services and Wholesale operations in
those new markets to be less successful than those in our existing
markets.
Our
expansion may strain our administrative, financial and informational
infrastructure, which could slow our development.
We
face
the risk that our existing systems and procedures, financial controls and
information systems will be inadequate to support our planned expansion.
We may
not be able to accurately predict whether we will be able to respond on a
timely
basis to all of the changing demands that our planned expansion will impose
on
management and these systems and controls. If we fail to continue to improve
our
information systems and financial controls or to manage other factors necessary
for us to achieve our expansion objectives, our business, financial condition,
operating results or cash flows could be materially adversely
affected.
All
of our operations are currently located in Washington and California. As
a
result, we are highly sensitive to negative occurrences in those two
states.
We
are
particularly susceptible to adverse trends and economic conditions in the
States
of Washington and California, including in their labor markets. In addition,
given our geographic concentration, negative publicity regarding any of our
operations in the states of Washington or California could have a material
adverse effect on our business and operations, as could other regional
occurrences such as local strikes, supply shortages, local economic conditions,
consumer preferences, earthquakes or other natural disasters.
Our
operation as a public company subjects us to evolving corporate governance
and
public disclosure regulations that result in significant expenses and liability
exposures.
As
a
public company, we incur significant legal, accounting and other expenses
that
non-public companies may not incur. We incur costs associated with our public
company reporting requirements. We also incur costs associated with corporate
governance requirements, including certain requirements under the Sarbanes-Oxley
Act of 2002, as well as new rules implemented by the SEC and the Financial
Industry Regulatory Authority. We expect these rules and regulations, to
increase significantly our legal and financial compliance costs and to make
some
activities more time-consuming and costly. Like many smaller public companies,
we face a significant impact from required compliance with Section 404 of
the
Sarbanes-Oxley Act of 2002. Section 404 requires management of public companies
to evaluate the effectiveness of internal control over financial reporting
and
the independent auditors will eventually have to attest to the effectiveness
of
such internal controls and the evaluation performed by management. The SEC
has
adopted rules implementing Section 404 for public companies as well as
disclosure requirements. The Public Company Accounting Oversight Board, or
PCAOB, has adopted documentation and attestation standards that the independent
auditors must follow in conducting its attestation under Section 404. We
have
taken action to comply with Section 404; however, there can be no assurance
that
we will be able to meet effectively all of the requirements of Section 404
as
known to us in the currently mandated timeframe. Any failure to implement
effectively new or improved internal controls, or to resolve difficulties
encountered in their implementation, could harm our operating results, cause
us
to fail to meet reporting obligations or result in management being required
to
give a qualified assessment of our internal controls over financial reporting
or
our independent auditors providing an adverse opinion regarding management’s
assessment. Any such result could cause investors to lose confidence in our
reported financial information, which could have a material adverse effect
on
our stock price.
We
also
expect these rules and regulations may make it more difficult and more expensive
for us to obtain director and officer liability insurance and we may be required
to accept reduced policy limits and coverage or incur substantially higher
costs
to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified individuals to serve on our Board
of
Directors or as executive officers. We are currently evaluating and monitoring
developments with respect to these rules, and it is difficult to predict
or
estimate the amount of additional costs we may incur or the timing of such
costs.
If
we fail to maintain the adequacy of our internal controls, our ability to
provide accurate financial statements and comply with the requirements of
the
Sarbanes-Oxley Act of 2002 could be impaired, which could cause our stock
price
to decrease substantially.
All
of
our current management, other than Andrew Jacobs and Michael Gats, was
previously the management of our operating subsidiary, Organic To Go, Inc.,
which we acquired in a reverse merger on February 12, 2007. Prior to that
time,
our subsidiary was a private company without public reporting obligations.
As a
result, prior to the merger, our management had committed limited personnel
and
resources to the development of the external reporting and compliance
obligations that would be required of a public company. We have taken and
will
continue to take measures to address and improve our financial reporting
and
compliance capabilities. If our financial and managerial controls, reporting
systems or procedures fail, we may not be able to provide accurate financial
statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002
as it
applies to us. Any failure of our internal controls or our ability to provide
accurate financial statements could cause the trading price of our common
stock
to decrease substantially.
We
depend on our key personnel, and the loss of their services may adversely
affect
our business.
We
are
highly dependent upon the efforts of our senior management team. The death
or
departure of any of our key personnel could have a material adverse effect
on
our business. In particular, the loss of Jason Brown, our Chief Executive
Officer and Chairman, could significantly impact our ability to operate and
grow
and could cause performance to differ materially from projected results.
We have
a $3 million “key man” insurance policy covering Mr. Brown.
Our
past activities prior to our merger with Organic Holding Company, Inc., may
lead
to future liability for the combined companies.
Prior
to
February 12, 2007, we were engaged in businesses and were managed by parties
unrelated to that of our new operations. Any liabilities relating to such
prior
business may have a material adverse effect on us.
Risks
Related to Our Industry
We
operate in a highly competitive industry where many of our competitors are
larger and have more resources than we do.
We
operate in a highly competitive environment. Many of our competitors are
substantially larger than us in terms of resources and market share. As a
result, many of our competitors offer products and services at a lower cost
to
consumers. Our success will depend to a significant extent on our ability
to
continue to develop and introduce differentiated products and services and
deliver them to consumers in a widespread, convenient and cost-effective
manner.
The success of our products and services is dependent on several factors
including understanding consumer needs, differentiation from competitive
offerings, market acceptance and lower costs. Although we believe that we
can
take the necessary steps to meet the competitive challenges of the marketplaces
in which we operate, we may not be successful in differentiating our products
and services from those of our competitors or meeting consumer
demand.
Our
profitability depends, in part, on our ability to anticipate and react to
changes in food and supply costs. Our centralized purchasing staff negotiates
prices for all of our ingredients and supplies. Any increase in distribution
costs could cause our food and supply costs to increase. Further, various
factors beyond our control, including adverse weather conditions and
governmental regulations, could cause our food and supply costs to increase.
We
may not be able to anticipate and react to changing food and supply costs
by
adjusting our purchasing practices in a timely fashion. A failure to do so
could
adversely affect our operating results and cash flows.
Changes
in consumer preferences or discretionary consumer spending could negatively
impact our results.
Our
Retail Cafés, Delivery/Casual Catering Services and Wholesale operations feature
various types of organic foods and beverages. Our continued success depends,
in
part, upon the popularity of these foods in the future. Shifts in consumer
preferences away from this cuisine could materially adversely affect our
future
profitability. Also, our success depends on numerous factors affecting
discretionary consumer spending, including economic conditions, disposable
consumer income and consumer confidence. Adverse changes in these factors
could
reduce customer traffic or impose practical limits on pricing, either of
which
could materially adversely affect our business, financial condition, operating
results or cash flows. We can also be materially adversely affected by negative
publicity concerning food quality, illness, injury, publication of government
or
industry findings concerning food products served by us, or other health
concerns or operating issues stemming from our operations.
Our
industry is affected by litigation and publicity concerning food quality,
health
and other issues which can cause customers to avoid our cafés and result in
liabilities.
We
could
become the subject of complaints or litigation from customers or employees
alleging illness, injury or other food quality, health or operational concerns.
Adverse publicity resulting from these allegations may materially adversely
affect us and our Retail Cafés, Delivery/Casual Catering Services and Wholesale
operations, regardless of whether the allegations are valid or whether we
are
liable.
Our
operations are subject to governmental regulation associated with the food
service industry, the operation and enforcement of which may restrict our
ability to carry on our business.
We
are in
the perishable food industry. The development, manufacture and marketing
of
products sold by us are subject to extensive regulation by various government
agencies, including the U.S. Food and Drug Administration and the U.S. Federal
Trade Commission, as well as various state and local agencies. These agencies
regulate production processes, product attributes, packaging, labeling,
advertising, storage and distribution. These agencies establish and enforce
standards for safety, purity and labeling. In addition, other governmental
agencies (including the U.S. Occupational Safety and Health Administration),
establish and enforce health and safety standards and regulations in the
workplace, including those in our retail locations. Our retail locations
will be
subject to inspection by federal, state and local authorities. Although we
intend to comply at all times with all such laws and regulations, including
obtaining and maintaining all necessary permits and licenses relating to
our
operations, there is a risk that we may not be able to comply with such laws
and
regulations on a timely basis, or at all. Our failure to comply with applicable
laws and regulations could subject us to civil remedies including fines,
injunctions, recalls or seizures as well as potential criminal sanctions.
In
addition, compliance or attempted compliance with governmental laws and
regulations may result in significant time or cost expenditures, which could
delay or preclude us from marketing our products or continuing or expanding
our
operations.
Risks
Relating to Ownership of Our Common Stock
The
market price of our common stock may be highly volatile, which may result
in a
significant decline in the value of our common stock.
The
market price of our common stock may fluctuate significantly in response
to
factors, most of which are beyond our control, such as:
|
·
|
the
announcement of new products or services by us or our
competitors;
|
|
·
|
quarterly
variations in our and our competitors’ results of
operations;
|
|
·
|
changes
in earnings estimates or recommendations by securities
analysts;
|
|
·
|
developments
in our industry; and
|
|
·
|
general
market conditions and other factors, including factors unrelated
to our
own operating performance or the condition or prospects of our
industry.
|
Further,
the stock market in general, and securities of small-cap companies in
particular, have recently experienced extreme price and volume fluctuations.
Continued market fluctuations could result in extreme volatility in the price
of
our common stock, which could cause a decline in its value. You should also
be
aware that price volatility might be worse if the trading volume of our common
stock is low.
Although
our common stock is currently quoted on the OTC Bulletin Board, trading may
be
extremely sporadic. A more active market for our common stock may not develop.
Accordingly, you may have to bear the economic risk of an investment in our
common stock indefinitely.
We
may not be able to list our common stock on a securities exchange, which
may
affect the liquidity of our common stock.
We
intend
to seek to have our common stock listed on the American Stock Exchange or
the
NASDAQ Stock Market as soon as practicable. However, we may not be able to
initially meet or maintain the listing standards of either of those or any
other
stock exchange. In addition, if we fail to meet the listing standards set
forth
by the SEC regulations, various requirements may be imposed on broker-dealers
who sell our securities to persons other than established customers and
accredited investors. These requirements may deter broker-dealers from
recommending or selling our common stock, which may further affect its liquidity
and make it more difficult for us to raise additional capital.
We
have a substantial number of convertible securities outstanding, which if
fully
exercised could require us to issue a significant number of shares of our
common
stock and result in substantial dilution to existing
stockholders.
As
of
March 11, 2008, we had outstanding options and warrants to purchase up to
4,914,938 and 12,386,608 shares of common stock, respectively. In the event
these securities are exercised, you could suffer substantial dilution in
terms
of your percentage ownership of your common stock.
A
large number of additional shares may be sold into the public market in the
near
future, which may cause the market price of our common stock to decline
significantly, even if our business is doing well.
Sales
of
a substantial amount of common stock in the public market, or the perception
that these sales may occur, could adversely affect the market price of our
common stock. On a fully diluted basis, we had 36,763,476 shares of common
stock outstanding as of March 11, 2008. If these shares of common stock are
registered or otherwise become eligible for public sale, the market price
of our
common stock could decline significantly.
We
have not and do not intend to pay any dividends. As a result, you may only
be
able to obtain a return on investment in our common stock if its value
increases.
Our
current management has not paid dividends in the past and does not plan to
pay
dividends in the near future. We expect to retain earnings to finance and
develop our business. In addition, the payment of future dividends will be
directly dependent upon our earnings, our financial needs and other similarly
unpredictable factors. As a result, the success of an investment in our common
stock will depend upon future appreciation in its value. The price of our
common
stock may not appreciate in value or even maintain the price at which you
purchased our shares.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of the shares by the selling
stockholders. All proceeds from the sale of the shares of common stock offered
under this prospectus will be for the account of the selling stockholders
as
described below in the sections entitled “Selling Stockholders” and “Plan of
Distribution.” With the exception of any brokerage fees and commission which are
the obligation of the selling stockholders, we are responsible for the fees,
costs and expenses of this offering which are estimated to be $111,317.21,
inclusive of our legal and accounting fees, printing costs and filing and
other
miscellaneous fees and expenses.
A
portion
of the shares of common stock covered by this prospectus are issuable upon
exercise of warrants. We may receive proceeds in the event some or all of
the
warrants held by the selling stockholders are exercised for cash. Any proceeds
received from the exercise of the warrants will be used for working capital
and
general corporate purposes. There can be no assurance that the any of the
selling stockholders will exercise their warrants or that we will receive
any
proceeds therefrom. Warrant holders often choose not to exercise their warrants
because the price of the common stock does not justify the exercise or the
warrant expires by its terms.
The
selling stockholders may sell all or a portion of their shares of our stock
in
the over-the-counter market at prices prevailing at the time of sale, or
related
to the market price at the time of sale, or at other negotiated
prices. See “PLAN OF DISTRIBUTION.”
DESCRIPTION
OF BUSINESS
We
were
incorporated in Florida on March 16, 1994 and reincorporated in Delaware on
September 26, 2000. For the years ended December 31, 2006, 2005 and
2004, we were a non-operating shell company and our business operations were
limited to sustaining a public shell vehicle.
On
February 12, 2007, we acquired Organic Holding Company, Inc., an organic
food
services company, through a reverse merger with our wholly owned subsidiary.
As
a result of the merger, Organic Holding Company, Inc. became our wholly owned
subsidiary and was renamed “Organic To Go, Inc.” On
May
16, 2007, our stockholders approved an amendment to our Amended and Restated
Certificate of Incorporation to change our name from SP Holding Corporation
to
Organic To Go Food Corporation.
Our
principal executive offices are located at 3317 Third Avenue South, Seattle,
Washington 98134 and our telephone number is (206) 838-4670.
Overview of
Our Business
We
prepare and serve classic American cuisine. We use organic ingredients when
possible and always natural ingredients without pesticides and other harmful
additives. Customers can get our food at our convenient USDA certified
Retail Cafés, through our Delivery/Casual Catering Services and at specific
locations where our “grab-and-go” meals are sold via a wholesale relationship.
Our target customers are white collar office workers as well as students
and employees of colleges and universities. We currently maintain twenty-six
Retail Cafés in the Seattle, Washington, Los Angeles, California, and San Diego,
California vicinities. We have an agreement with Compass Group, Inc., pursuant
to which Compass Group, Inc. maintains twenty three of our “grab-and-go”
locations on the Microsoft Corporate Campus near Seattle, Washington. We
also
provide sandwiches and other “grab-and-go” food to independent coffee vendors at
the Los Angeles International Airport. We operate “grab-and-go” locations at
universities in the Seattle, Washington and Los Angeles, California areas,
including the University of Washington Medical Center, the University of
Southern California and the University of California, Los Angeles.
Our
Product
We
provide a delicious and healthy alternative to typical fast food options,
lunch box deliveries and casual catering. We serve a wide range of organic,
natural and wholesome meals, which include everything from ham and cheese
sandwiches to deli-style roast beef sandwiches and veggie packed salads.
We
proactively source producers and manufacturers who use sustainable farming
and/or production practices as an integral part of our overall mission to
provide wholesome “clean” food from farm to table. We also use alternative
packaging such as biodegradable and recycled plastics, and sugar cane based
disposable tableware to minimize the environmental impact of convenience
packaging for “grab-and-go” meals.
We
offer
packaged and private label food products from key vendors prepared using
our
specifications, and deliver them directly to our Retail Café and Delivery/Casual
Catering Services customers. We prepare or assemble our products at one of
two
assembly kitchens in Seattle, Washington and Los Angeles, California. Orders
that we take via the Internet or by telephone are routed to dedicated customer
service centers in Seattle and Los Angeles and are processed in real time.
While less than 15% of the orders placed are for “same day” delivery, there is a
growing need for this service, thus we are increasing our ability to provide
“same day” delivery, particularly to businesses in proximity to our Retail
Cafés. Our Retail Cafés generally operate Monday through Friday from 7:00 a.m.
to 4:30 p.m. We provide delivery and catering services after-hours and on
weekends.
More
than
70% of our products currently offered are organic. When our food is not organic
it is either something such as water or salt which cannot be certified or
is
made up from all natural ingredients sourced under careful preset guidelines
to
insure the highest quality products available. In February 2006, we became
the
first fast-casual restaurant and retailer to be USDA certified as “Organic” by
Quality Assurance International, the leading third-party certification agency
in
the organic foods industry.
We
offer
our food products through three primary business channels or units: Retail
Cafés; Delivery/Casual Catering Services; and Wholesale, which accounted for
approximately 45%, 41% and 14%, of our total sales, respectively, in 2007.
Our
core customer base consists of “white collar” workers, college students and
employees.
Retail
Cafés
We
currently operate 26 cafés in the Seattle, Washington, Los Angeles and San
Diego, California vicinities. We operate Retail Cafés in large multi-tenant
buildings and on large college campuses. We believe these retail locations
serve
as billboards for our Delivery/Casual Catering Services and branded Wholesale
units.
Comparing
the 12 months ended December 31, 2007, with the same period in 2006, same
store
(comparable) sales decreased approximately 2% for Retail Cafés open longer than
a year. The average sales ticket for our Retail Cafés was approximately $5.83 in
2007 and approximately $5.60 in 2006. The prices of the products we sell
in our
Retail Cafés range from $0.49 to $11.99.
Delivery/Casual
Catering Services
We
also
distribute our products through delivery and catering services. Customers
of our
Delivery/Casual Catering Services unit currently include, among others,
Starbucks Corporate Headquarters, Microsoft, Westin Hotels, Washington Mutual
Bank, T-Mobile, NBC, Google, Amazon, Qualcomm and several movie studios.
Approximately 80% of our delivery orders are repeat orders from customers
who
have ordered five or more times.
Wholesale
Our
Wholesale business is growing and we believe that it presents a tremendous
opportunity to build our brand. Wholesale sales currently represent
approximately 14% of our revenue. Current Wholesale customers include the
University of California, Los Angeles, University of Southern California,
Cal
State Pomona, Cal State Long Beach, University of Washington, Children’s
Hospital of Seattle, Washington, NBC Studios and Euro Coffee at the Los Angeles
International Airport.
Industry
Overview and Market Opportunity
While
the
growth and popularity of natural and organic foods has been evident with
the
rise of grocery stores that sell organic products, such as Whole Foods Market,
Wild Oats and Trader Joe’s, the food service side of the industry has not been
as developed. We believe that we are one of the first companies to provide
services in this area of growing consumer demand.
According
to the Organic Trade Association’s (OTA) 2007 Manufacturer Survey, the market
for organic foods grew by 20.9% in 2006. The survey also found that sales
of
organic foods during 2006 totaled $16.7 billion, which constituted 2.8% of
total
U.S. food sales. This strong growth is consistent with annual growth rates
since
1997, all of which have been between 15% and 21% per year.
The
OTA
2007 Survey also estimated that the use of organic products in the United
States
food service industry is increasing annually by a rate of 21% per year.
According to the survey, as recently as 2004, $330 million in natural/organic
food sales, or only 5% of all natural/organic sales, were sold into the food
service channel. Traditionally, retail food sales constitute roughly 70%
of
total food sales and food service sales constitute roughly 30%.
Additional
industry information is available at the OTA’s website, www.OTA.com
or the
Organic Center’s website, www.Organic-Center.org.
Competition
We
are in
competition with other food service operations within the same geographical
areas in which we operate. The Retail Cafés, Delivery/Casual Catering Services
and Wholesale business channels are highly competitive. Some of our
competitors are significantly larger than us and have greater access to
resources. We compete with other organizations primarily through the quality,
variety and value perception of the food products offered. The number and
location of units, quality and speed of service, attractiveness of facilities,
effectiveness of marketing and new product development are also important
factors. The price charged for each menu item we sell or service we provide
may
vary from market to market depending on competitive pricing and the local
cost
structure.
Expansion
Plans
We
intend
to grow internally and through acquisitions by adding catering companies
and café locations that are consistent with our core business focus. In each of
the markets where we operate, we plan to take advantage of our scalability
and
acquire local catering companies with strong ties to the region’s corporate
community. We also intend to work closely with landlords and property managers
to upgrade the amenities they offer in their buildings by making our
Delivery/Casual Catering Services and food products available to their tenants.
In addition, by the end of the calendar year we expect to grow our Wholesale
business by strategically aligning with large retail stores. There can be
no
assurance, however, that we will acquire or open such additional café locations
or catering companies or enter into any such strategic alliances.
Recent
Acquisitions
Acquisition
of Brother’s Restaurant & Deli
On
October 19, 2007, we acquired Brother’s Restaurant & Deli, adding three
Retail Cafés and two catering facilities in San Diego, California. The purchase
price was comprised of $2.4 million cash, shares of common stock having a
fair
value of $250,000 based on the closing price as of the date of the agreement,
$150,000 due 90 days from the closing date and another $150,000 due 120 days
after the close, and upon the occurrence of certain events, additional shares
of
common stock having a fair value of $50,000 based on the closing price as
of the
date of the agreement. No liabilities were assumed by us. We also assumed
the
leases for the three locations. Brother’s generated approximately $3.0 million
in revenue in 2006.
Acquisition
of Jackrabbit, LLC
On
March
9, 2007, we acquired substantially all of the assets of Jackrabbit, LLC,
a
Seattle-based catering business for cash of approximately $630,000, a $150,000
promissory note and 400,000 shares of common stock. Jackrabbit has been serving
downtown Seattle businesses since 1996 with premium box lunches and casual
catering. Jackrabbit generated approximately $1.85 million in revenue in
2006.
Suppliers
We
have
not experienced any material shortages of food, equipment, fixtures or other
products which are necessary to our operations and we anticipate no such
shortages of products. Sysco Food Service and Amercian Paper and Plastics
are
our two principal suppliers of food products and paper and packaging supplies.
Sysco Food Services, which provides us goods from approximately 15 major
manufacturers, supplies approximately 27.5% of all products purchased and
American Paper and Plastic supplies approximately14.6% of all products
purchased. Generally, alternate suppliers are available for all of our raw
materials and supplies.
Dependence
on Major Customers
We
are
not dependent on any major customers. No single customer of ours accounted
for
more than 10% of our total sales during 2007.
Environment
and Energy
Various
federal, state and local agencies have adopted regulations that affect the
discharge of materials into the environment or which otherwise relate to
the
protection of the environment. We do not believe that such regulations will
have
a material effect on our operations, our capital expenditures, earnings or
our
competitive position. However, we cannot predict the effect of future
environmental legislation or regulations.
Companies
involved in the food industry use significant amounts of energy in their
operations. Our principal sources of energy for our operations are electricity
and natural gas. To date, the supply of energy available to us has been
sufficient to maintain normal operations.
Government
Regulation
We
operate in the perishable food industry. The development, manufacture and
marketing of products sold by us may be subject to extensive regulation by
various government agencies, including the U.S. Food and Drug Administration
and
the U.S. Federal Trade Commission, as well as various state and local agencies.
These and other agencies regulate production processes, product attributes,
packaging, labeling, advertising, storage and distribution and establish
and
enforce standards for safety, purity and labeling. In addition, other
governmental agencies (including the U.S. Occupational Safety and Health
Administration), establish and enforce health and safety standards and
regulations in the workplace, including those in our retail locations. Our
retail locations are subject to inspection by federal, state, and local
authorities.
Information
Technology
We
have
integrated information technology systems that facilitate efficient and scalable
operations throughout our operations.
Employees
As
of March 11, 2007, we had a workforce of approximately 316 employees,
consisting of 251 full-time and 65 part-time employees. None of our
employees are represented by a collective bargaining agreement, nor have
we
experienced any work stoppages.
Trademark
and Website
We
have
registered our stylized logo, and we have registered the Internet domain
name
“www.organictogo.com.”
LEGAL
PROCEEDINGS
We
are
currently in mediation pursuant to the Standard Form of Agreement with Wheelihan
Construction, Inc. This matter arose out of tenant improvements made by
Wheelihan Construction, Inc. and its subcontractors at one of our retail
locations in San Diego, California. In connection with the matter, four
subcontractors/suppliers have commenced actions against us, Wheelihan
Construction, Inc. and other defendants.
From
time
to time, we are subject to various legal proceedings and claims that may
arise
in the ordinary course of business. Our management currently believes that
resolution of such legal matters will not have a material adverse impact
on
us.
DESCRIPTION
OF PROPERTY
Our
principal executive offices are located at 3317 Third Avenue South, Seattle,
Washington 98134. This facility consists of approximately 13,500 square feet
of
office space pursuant to a lease that expires on December 31, 2011.
We
lease
space for our retail properties as needed for our business operations from
time
to time. We believe that we will continue to be able to find and lease the
properties we need on reasonable terms. However, there can be no assurance
that
we will be able to find suitable locations for our planned expansion or for
continued operations. We believe that the condition of all of the properties
we
lease are generally adequate for their respective purposes.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
The
following discussion and analysis of the results of operations and financial
condition of Organic To Go Food Corporation for the years ended December
31,
2007 and 2006 should be read in conjunction with our financial statements
and
the notes to those financial statements that are included elsewhere in this
prospectus. This discussion includes forward-looking statements based upon
current expectations that involve risks and uncertainties, such as plans,
objectives, expectations and intentions. Actual results and the timing of
events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. Words such as “anticipate,”
“estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “could,” and similar expressions are used to identify
forward-looking statements.
Overview
Organization
and Business - Organic
Holding Company, Inc., d/b/a Organic To Go, whose name was changed to Organic
To
Go, Inc. effective February 27, 2007, is a wholly owned subsidiary of Organic
To
Go Food Corporation and was incorporated in the state of Delaware in February
2004. We provide convenient cafés which prepare and serve “grab and go” lunch,
dinner, and breakfast foods and beverages prepared using organic ingredients,
whenever possible. We also distribute our products through delivery, catering
and select wholesale accounts. In October 2006, we expanded our catering
operations in the California area by acquiring the assets of a catering
operation headquartered in Los Angeles, California. In March 2007, we expanded
our catering operations by acquiring the assets of a catering operation located
in Seattle, Washington, and in July, September and October 2007 we further
expanded our operations by acquiring the assets of six retail and catering
stores in San Diego, California. In February 2007, we completed a reverse
merger
with SP Holding Corporation, a public shell company. At December 31, 2007,
we
operated five stores in Washington and eighteen stores in California, with
central kitchens in each market.
Management
believes we have the opportunity to capture increasing market share in all
three
of our business channels: Delivery/Catering, Retail, and Wholesale “grab &
go” convenience foods, by providing customers with delicious, healthy, wholesome
and organic food choices. Management is focused in the near and long term
on the
challenges and risks that we face in expanding our business. These include
our
ability to obtain retail, catering and wholesale locations, building a
sufficient infrastructure to support our expansion, and obtaining a customer
base and margin improvement sufficient to achieve and sustain profitability.
Basis
of Presentation and Liquidity - Since
our
inception, we have funded operations and business development and growth
through
debt and equity financings. In this regard, during 2006, we raised approximately
$8.1 million pursuant to sales of debt and equity securities in connection
with
our private placement and subordinated debt offerings. Further, during the
three
months ended March 31, 2007, proceeds of approximately $6.9 million were
received from the sale of equity securities in connection with our merger
with
SP Holding Corporation and concurrent private placement, and approximately
$5.3
million of notes payable were converted into shares of common stock.
Additionally, during the three months ended June 30, 2007, proceeds of
approximately $6.7 million were received from the sale of debt and equity
securities. In October 2007, we closed a private placement offering and issued
approximately 3.2 million shares of common stock and warrants to purchase
approximately 1.5 million shares of common stock. The aggregate gross proceeds
raised by the Company were approximately $5.7 million. In January 2008, we
closed a private placement offering and issued approximately 1.4 million
shares
of Company common stock and warrants to purchase approximately 0.6 million
shares of common stock. The aggregate gross proceeds raised by the Company
were
approximately $2.0 million. Also, in February 2008, we closed a private
placement offering and issued approximately 7.1 million shares of common
stock,
a warrant to purchase approximately 4.3 million shares of common stock and
a
conditional warrant to purchase shares of common stock, which may only be
exercised under certain circumstances. The aggregate gross proceeds raised
by
the Company were $10.0 million. Our management intends to continue to be
engaged
in additional fund-raising activities to fund future capital expenditures,
potential acquisitions of businesses, and provide additional working capital.
Critical
Accounting Policies and Estimates
Management's
discussion and analysis of financial condition and results of operations
are
based on our financial statements, which have been prepared in accordance
with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported net sales and expenses during the reporting
periods. On an ongoing basis, estimates and assumptions are evaluated. Estimates
are based on historical experience and on various other factors believed
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that
are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. A summary of significant
accounting policies is presented in Note 1 to our financial statements included
elsewhere in this prospectus. The following accounting policies are considered
the more critical to aid in understanding and evaluating our results of
operations and financial condition.
Use
of Estimates - In
preparing the financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during
the
reporting years. Actual results could differ from those estimates. The more
significant accounting estimates inherent in the preparation of our financial
statements include estimates as to the depreciable lives of property and
equipment, recoverability of long-lived assets, valuation of inventories,
valuation of equity related instruments issued, and valuation allowance for
deferred income tax assets.
Inventory
- Inventory,
which consists primarily of food, beverages and packaging products, is stated
at
the lower of cost or market. Cost is determined on a first-in, first-out
basis.
In assessing the ultimate realization of inventories, our management makes
judgments as to future demand requirements compared to current inventory
levels.
Impairment
of Long-lived Assets - Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable.
Impairment of long-lived assets would be recognized in the event that the
net
book values of such assets exceed the future undiscounted cash flows
attributable to such assets. No impairment of long-lived assets was recognized
for any of the periods presented.
Intangible
Assets - In
connection with acquisitions in 2006 and 2007 of certain assets of catering
businesses and other retail store locations we acquired certain identifiable
intangible assets including customer-based intangibles. These acquisitions
have
been accounted for in accordance with SFAS No. 141. Amounts allocated to
intangible assets were identified by management and have been valued on a
number
of factors. The estimate of useful lives of each intangible asset was based
on
an analysis by management of all pertinent factors. Management selected an
estimated useful life of two years for each identifiable intangible asset.
Revenue
Recognition - Revenues
are recognized at the point of sale at retail locations or upon delivery
of
products for delivery and wholesale transactions.
Cost
of Sales - Cost
of
sales includes the cost of food, beverages and paper products.
Income
Taxes - We
account for income taxes in accordance with SFAS No. 109, “Accounting for Income
Taxes,” which requires recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been included in financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between
the
tax bases of assets and liabilities and their financial reporting amounts
at
each period end based on enacted tax laws and statutory tax rates applicable
to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred
tax
assets to amounts expected to be realized. We continue to provide a full
valuation allowance in order to reduce our net deferred tax asset to zero,
inasmuch as our management has not determined that realization of deferred
tax
assets is more likely than not. The provision for income taxes represents
the
tax payable for the period and change during the period in net deferred tax
assets and liabilities.
Stock-based
Compensation - In
December 2004, the FASB released SFAS 123R. SFAS 123R sets forth the accounting
for share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise, or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, “Accounting for Stock Issued to
Employees,” and generally requires instead that such transactions be accounted
for using a fair-value-based method, which requires recording an expense
over
the requisite service period for the fair value of all options or warrants
granted to employees and consultants. We adopted SFAS 123R effective beginning
January 1, 2006.
Results
of Operations
Sales
- Sales
for
2007 increased approximately 65%, to $15.9 million, as
compared with $9.7 million for 2006. Retail sales were $7.1 million
during 2007, an increase of approximately 37% over $5.2 million during the
comparative prior year. Retail sales comprised 45% of total sales in 2007
compared to 54% of total sales in 2006. The increase in retail sales is
primarily a result of the addition of eleven new Retail Cafés that were opened
or acquired during 2007. In 2007, we ended the year with 23 Retail Cafés as
compared with 12 at the end of 2006.
Delivery/Catering
sales were $6.6 million during 2007, an increase of $3.3 million, or
approximately 100% over $3.3 million during 2006. Delivery/Catering sales
comprised 41% of total sales in 2007 as compared with 34% for the prior
year. The increase in delivery/catering sales during 2007 is attributable
to the
acquisition of catering businesses in Seattle and San Diego in addition to
increased business volume in all delivery/catering operations.
Wholesale
sales were $2.2 million during 2007, an increase of $1.1 million, as compared
with $1.1 million during 2006. Wholesale sales comprised 14% of total sales
in
the 2007 period as compared with 12% in 2006. The increase in wholesale
sales is due to our entrance in the San Diego market and increased business
volume in existing markets.
Cost
of Sales - Cost
of
sales includes the cost of food and paper products. Cost of sales for 2007
increased approximately 51%, to $7.4 million, as compared with $4.9 million
for 2006. Cost of sales for 2007 was approximately 46% as a percent of sales
as
compared with 50% during the comparative prior year period. During 2007, we
were able to negotiate lower costs on our food and paper products and reduce
the
amount of food waste and spoilage.
Gross
Profit - Gross
profit increased approximately 78%, to $8.5 million for 2007, as compared
with
$4.8 million for 2006. Gross profit for 2007 was approximately 54% of sales
as
compared with 50% during 2006. In addition to negotiating lower costs on
our food and paper products and reducing the amount of food waste and spoilage,
we also increased retail and wholesale prices during the year to improve
our
gross margin.
Operating
Expenses - Operating
expenses for 2007 increased approximately 53%, to $16.1 million, as
compared with $10.5 million for 2006. Operating expenses are comprised
primarily of labor, and, to a lesser extent, occupancy, utilities, and selling,
general and administrative expenses. Operating expenses increased in 2007
as
compared with 2006, primarily due to increased labor and related costs as a
result of continued growth since the prior year, including the acquisition
of
two catering businesses, increasing the number of Retail Cafés from 12 in 2006
to 23 in 2007, and preparing for future growth. During 2007, we recorded
$498,000 in non-recurring, one-time expenses, including significant upfront
expenses to research and open locations in San Diego, the first new geographic
territory since the acquisition of Briazz in 2005.
Depreciation
and Amortization - Depreciation
and amortization expense for 2007 increased to $4.0 million as
compared with $1.2 million during 2006, due primarily to amortization of
identifiable intangible assets acquired in the catering and retail business
acquisitions in the latter part of 2006 and throughout 2007. Depreciation
and
amortization for 2007 were approximately 25% of sales as compared with 12%
during 2006.
Loss
from Operations - Loss
from
operations during 2007 increased to approximately $11.5 million as
compared with $6.9 million during 2006. The increase in loss from
operations over the prior year is the result of an increase in gross profit
of
$3.7 million being offset by a $5.6 million increase in operating expenses,
and
an increase in depreciation and amortization of $2.8 million
Interest
Expense, Net - Interest
expense, net for 2007, decreased to $691,000 as compared with $1.1 million
for
the prior year. The decrease was primarily due to the increase in debt from
July
2006 through March 2007, prior to $5.3 million of debt being converted into
equity in March 2007.
Net
Loss - Net
loss
in 2007 increased to approximately $12.1 million as compared with $8.0
million in 2006.
Liquidity
and Capital Resources
As
planned, we have funded operations through financing activities consisting
primarily of private placements of debt and equity securities. Our management
intends to raise additional debt and equity financing to fund future expansion
and capital expenditures, operations and to provide additional working capital.
During 2006, we raised approximately $8.1 million pursuant to sales of debt
and
equity securities in connection with our 2006 private placement and subordinated
debt offerings. Further, during the three months ended March 31, 2007, proceeds
of approximately $6.9 million were received from the sale of equity securities
in connection with our merger with SP Holding Corporation and concurrent
private
placement, and approximately $5.3 million of notes payable were converted
into
shares of common stock. Additionally, during the three months ended June
30,
2007, proceeds of approximately $6.7 million were received from the sales
of
debt and equity securities. In October 2007, we closed a private placement
offering and issued approximately 3.2 million shares of common stock and
warrants to purchase approximately 1.5 million shares of common stock. The
aggregate gross proceeds raised by us were approximately $5.7 million. In
January and February 2008, proceeds of approximately $12.0 million were received
from the sales of equity securities. We intend to continue to be engaged
in
additional fund-raising activities to fund future capital expenditures,
potential acquisitions of businesses, and provide additional working capital.
Net
cash
used by operating activities was approximately $9.7 million in 2007 and $6.0
million in 2006. The increase in cash used by operating activities was due
primarily to the increase in net loss as adjusted for depreciation and
amortization expense.
Net
cash
used in investing activities was approximately $7.2 million and $1.2 million
for
2007 and 2006, respectively. Uses of cash flow for investing activities in
2007
primarily related to capital expenditures associated with business expansion
for
the acquisition of store and kitchen fixtures, equipment and leasehold
improvements.
Net
cash
provided by financing activities was approximately$16.7 million and $7.8
million
for 2007 and 2006, respectively. The increase of net cash provided in 2007
was
due to an increase in proceeds, net of issuance costs, from the issuance
of
common stock in private placements.
On
January 25, 2008, we entered into a Securities Purchase Agreement (with select
accredited investors related to the sale of common stock of the Company and
warrants to purchase shares of common stock. We closed the private placement
on
January 25, 2008, and issued an aggregate of 1,428,572 shares of common stock
and warrants to purchase an aggregate of 642,858 shares of common stock.
The
aggregate gross proceeds raised by us were approximately $2.0 million. Each
share was sold at $1.40 per share. The warrants expire five (5) years from
the
date of issue and may be exercised at $2.50 per share, subject to adjustment
in
certain circumstances. The private placement was conducted pursuant to Section
4(2) of the Securities Act and Rule 506 promulgated thereunder.
On
February 19, 2008, we entered into a Securities Purchase Agreement with W.Health
L.P., relating to the sale of (i) our common stock, (ii) an unconditional
warrant to purchase common stock and (iii) a conditional warrant to purchase
common stock. Pursuant to the terms of the Securities Purchase Agreement,
we
sold and issued to W.Health L.P. 7,142,857 shares of common stock at a price
of
$1.40 per share, for a total purchase price of $10.0 million.
The
unconditional warrant provides W.Health L.P. the right to purchase 4,285,715
shares of common stock at an exercise price of $2.50 per share, subject to
adjustment under certain circumstances. The unconditional warrant is exercisable
at any time through February 27, 2013 and may be exercised on a cashless
basis.
The
conditional warrant is exercisable only under certain circumstances, including
(i) our failure to become listed on The NASDAQ Stock Market or the American
Stock Exchange on or before February 27, 2011, (ii) our failure to maintain
listing on The NASDAQ Stock Market or the American Stock Market for certain
specified time periods or (iii) if we are acquired by or merge with another
unaffiliated entity for consideration to the Company of an amount equal to
or
less than $2.50 per share before February 27, 2013 (each, an “Exercise Event”).
Upon the occurrence of an Exercise Event, the W.Health L.P. will have the
right
to purchase such number of shares of common stock, calculated as of the initial
date of exercise, equal to twenty percent (20%) of the total number of shares
of
capital stock on a fully diluted basis, taking into account such issuance,
using
the treasury method, at an exercise price of $0.001 per share, subject to
adjustment under certain circumstances. The conditional warrant will expire
upon
the occurrence of certain specific events, but in any event, no later than
February 27, 2013. The conditional warrant may be exercised on a cashless
basis.
In
connection with the sale
of
common stock to W.Health, L.P., we entered into registration rights agreements,
which require
us to
file with the SEC
and
cause to be made effective,
initial
registration statements
covering
the resale of the common
stock and the common stock
issuable
upon exercise of the warrants
within specified time periods
Subsequent
to December 31, 2007, we entered into new leases for computer hardware and
software, furniture, fixtures and equipment in our cafés, which provide for
additional minimum future lease payments over their three-year terms of
approximately $1.0 million including interest.
The
table
below sets forth information regarding our current directors and executive
officers. All of our directors and executive officers, other than Andrew
Jacobs
and Gunnar Weikert, have held their positions with us since February 12,
2007,
which is the date when we acquired Organic Holding Company, Inc. Prior to
the
merger, Mark Schaftlein served as our sole officer and director since January
2004.
Name
|
|
Age
|
|
Position
|
Jason
Brown
|
|
50
|
|
Chief
Executive Officer and Chairman
|
Michael
Gats
|
|
49
|
|
Chief
Financial Officer
|
Andrew
Jacobs
|
|
50
|
|
Senior
Vice President of Operations
|
Dave
Smith
|
|
64
|
|
Director
|
Peter
Meehan
|
|
50
|
|
Director
|
Roy
Bingham
|
|
44
|
|
Director
|
Douglas
Lioon
|
|
50
|
|
Director
|
S.M.
“Hass” Hassan
|
|
58
|
|
Director
|
Gunnar
Weikert
|
|
44
|
|
Director
|
Jason
Brown
served
as Chief Executive Officer and Chairman of the Board of Directors of Organic
To
Go, Inc. since its inception in February 2004. Mr. Brown has more than 25
years
of experience in branded direct to consumer retail operations. From 2000
through
March 2003, Mr. Brown served as the Chief Executive Officer of Custom Nutrition
Services, a company which provided consumers with personalized vitamin solutions
based on tailored medical expertise which he founded. In April 2003, Custom
Nutrition Services was sold to Drugstore.com for $5.6 million in cash and
stock.
From 1995 to 2000, Mr. Brown served as the Chief Executive Officer of Concept
Development, an alternative healthcare consulting firm. From 1990 to 2000,
Mr.
Brown served as a Managing Director for Columbia Sportswear NZ/Australia,
an
international sportswear manufacturer and retailer. From 1978 to 1989, Mr.
Brown
served as the Chief Executive Officer of Cotton Comfort, a vertically integrated
cotton clothing store chain.
Michael
Gats has
served as Chief Financial Officer since January 2008. Prior to joining the
Company, Mr. Gats served as Chief Financial Officer, Vice President and
Corporate Secretary of Cutter & Buck, Inc., which was a publicly traded
company operating in the sportswear and outerwear industry. Before joining
Cutter & Buck in 1999, Mr. Gats was Chief Financial Officer at a privately
held food manufacturing and distribution company, Director of Finance at
a
Seattle-based apparel company and spent ten years in public accounting with
KPMG. He received a Bachelors degree in business with a major in accounting
from
Gonzaga University.
Andrew
Jacobs
has
served as Senior Vice President of Operations since April 27, 2007. Mr. Jacobs
has 27 years of experience in all aspects of food service operations, including
significant experience in the research and development of menus and recipes.
Prior to joining us, Mr. Jacobs worked with Costco Wholesale since 1991,
directing all U.S. food service operations and focusing on business related
to
food court and deli operation. Mr. Jacobs oversaw the growth and expansion
of
Costco’s food court and service deli departments to over $500 million in annual
sales. Prior to working for Costco, Mr. Jacobs worked as a consultant and
operator in restaurant management, restaurant real estate and food service
contract management.
Peter
Meehan
served
as a director of Organic To Go, Inc. since its inception in February 2004.
Mr.
Meehan has served as the Chief Executive Officer of Newman's Own Organics
since
it was co-founded in 1993 by Mr. Meehan, Paul Newman and Nell Newman.
Roy
Bingham
served
as a director of Organic To Go, Inc. since its inception in February 2004.
In
2006, Mr. Bingham co-founded NourishLife, LLC, an online marketer of branded
nutritional solutions. Previously, Mr. Bingham founded and served as a Managing
Director of Health Business Partners, LLC, a specialist investment banking
firm.
From 1995 to 1997, Mr. Bingham served as a consultant with McKinsey &
Company in Boston, where he provided management-consulting services to several
Fortune 500 companies. From 1988 to 1993, Mr. Bingham worked in London, England
as the corporate treasurer and eventually a Board member of Paragon, PLC.
Mr.
Bingham earned a Masters Degree in Business Administration with distinction
from
Harvard Business School in 1995.
Douglas Lioon
served
as a director of Organic To Go, Inc. since its inception in February 2004.
Mr.
Lioon joined HVL Incorporated, a healthcare and nutritional products company
whose principal brand is Douglas Laboratories, in 1978 as a Sales Representative
and served as its President from 1985 to December 2005, when HVL Incorporated
was sold to Atrium Biotechnologies Inc. for $92 million. Mr. Lioon created
and
developed the Douglas Laboratories brand, a leading dietary supplement company,
and engineered its vertical integration strategy growing Douglas Laboratories
into one of the leaders in the practitioner segment of the dietary supplement
industry.
S.M.
“Hass” Hassan
served
as a director of Organic To Go, Inc. since December 2006. Since June 2006,
Mr.
Hassan has served as a member of the Board of Directors of Whole Foods Markets,
a leading natural food supermarket chain. In 1979, Mr. Hass founded Alfalfa’s
Markets, a whole food supermarket chain, and served as its President and
Chief
Executive Officer until 1996. From 1996 to 1998, Mr. Hassan served as the
President of Wild Oats Markets, a whole food supermarket chain. In 1999,
Mr.
Hassan founded Fresh & Wild, the United Kingdom’s leading retailer of
organic foods, and served as its Executive Chairman until its sale to Whole
Foods Markets in 2004. During his career, Mr. Hassan has received many industry
recognitions, including the Chain Store Retail Executive of the Year, Boulder
Entrepreneur of the Year and EY National Entrepreneur of the Year. Since
2004,
Mr. Hassan has been working as an active board member and investor in several
companies in the natural products industry.
Gunnar
Weikert has
served as a director of the Company since February 2008. Dr Weikert is founder
and CEO of Inventages Venture Capital Inc., a leading venture capital fund
specializing in life sciences. Prior to founding Inventages, Dr. Weikert
held the position of Senior Vice President and Global Head for Life Science
Deals at Bayer AG. Dr Weikert has a MD and a PhD in metabolic science from
University of Düsseldorf. He also received an MBA education.
Arrangements
and Understandings
All
of
the Company’s officers and directors, with the exception of Michael Gats, Andrew
Jacobs and Gunnar Weikert, were appointed to their respective positions in
connection with that certain Agreement and Plan of Merger and Reorganization,
dated as of January 11, 2007, by and among the Company, Organic Acquisition
Corporation and Organic Holding Company, Inc., pursuant to which the Company
acquired its wholly owned subsidiary, Organic Holding Company, Inc.
Dr.
Weikert was appointed as a director of the Company in connection with that
certain Securities Purchase Agreement, dated as of February 19, 2008, by
and
between the Company and W.Health L.P., an affiliate of Inventages Venture
Capital Inc., pursuant to which the Company sold 7,142,857 shares of common
stock to W.Health L.P. for $10 million. Dr. Weikert is founder and CEO of
Inventages Venture Capital Inc. Pursuant to the Securities Purchase Agreement,
if Dr. Weikert resigns or dies, the remaining directors of the Company will
be
required to elect a new designee of the W.Health L.P. to serve on the Company’s
Board of Directors. The Board of Directors of the Company may not take any
action to remove Dr. Weikert or his designated successors without the written
consent of W.Health L.P., and is required to nominate Dr. Weikert or his
designated successors for election or re-election at each annual meeting
of the
Company’s stockholders. Dr. Weikert, or his designated successors, have the
right to sit on any committee established by the Board of Directors.
Board
of Directors
The
Company’s Board of Directors is currently composed of seven members.
Mr. Brown has been elected as the Chairman of the Board of Directors. In
this capacity he is responsible for presiding at the meetings of the Board
of
Directors. All directors are elected annually and serve until the next annual
meeting of stockholders or until the election and qualification of their
successors. There are no family relationships between any of our directors
or
executive officers.
Name of Beneficial Owner (1)
|
|
Amount and
Nature of
Beneficial
Ownership of
common stock
(2)
|
|
Percent of Class
of Common
Stock
|
|
Officers and
Directors:
|
|
|
|
|
|
Jason
Brown (3)
|
|
|
2,669,122
|
|
|
7.2
|
%
|
Michael
Gats (4)
|
|
|
39,375
|
|
|
*
|
|
Andrew
Jacobs (5)
|
|
|
143,245
|
|
|
*
|
|
Dave
Smith (6)
|
|
|
124,687
|
|
|
*
|
|
Peter
Meehan (7)
|
|
|
100,403
|
|
|
*
|
|
Roy
Bingham (8)
|
|
|
226,153
|
|
|
*
|
|
Douglas
Lioon (9)
|
|
|
570,990
|
|
|
1.5
|
%
|
S.M.
“Hass” Hassan (10)
|
|
|
142,967
|
|
|
*
|
|
Gunnar
Weikert (11)
|
|
|
10,416
|
|
|
*
|
|
All
directors and executive officers as a group (9 persons)
(12)
|
|
|
4,127,413
|
|
|
11.0
|
%
|
More
than 5% Beneficial Owners:
|
|
|
|
|
|
|
|
W.Health
L.P. (13)
|
|
|
11,428,572
|
|
|
28.13
|
%
|
Adam
Usdan (14)
|
|
|
3,039,473
|
|
|
8.2
|
%
|
Trellus
Management Company, LLC (14)
|
|
|
3,039,473
|
|
|
8.2
|
%
|
(1)
|
Unless
otherwise indicated, the address of the beneficial owner is c/o
Organic To
Go Food Corporation, 3317 Third Avenue South, Seattle, Washington
98134.
|
(2)
|
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities.
Shares of common stock which are purchasable under options or warrants
which are currently exercisable, or which will become purchasable
or
exercisable no later than 60 days after March 31, 2008, are deemed
outstanding for computing the percentage of the person holding
such
options or warrants, but not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote
and
subject to community property laws where applicable, the persons
named in
the table have sole voting and investment power with respect to
all shares
of common stock shown as beneficially owned by them.
|
(3)
|
Mr.
Brown’s holdings consist of 2,183,161 shares of common stock, options
to
purchase 474,093 shares of common stock and warrants to purchase
11,868
shares of common stock.
|
|
Mr.
Gats’ holdings consist of 39,375 shares of restricted
stock.
|
(5)
|
Mr.
Jacobs’ holdings consist of options to purchase 143,245 shares of common
stock.
|
(6)
|
Mr.
Smith’s holdings consist of 58,255 shares of common stock, options to
purchase 66,283 shares of common stock and warrants to purchase
149 shares
of common stock.
|
(7)
|
Mr.
Meehan’s holdings consist of 41,868 shares of common stock and options
to
purchase 58,535 shares of common stock.
|
(8)
|
Mr.
Bingham’s holdings consist of 167,380 shares of common stock, options to
purchase 58,535 shares of common stock and warrants to purchase
238 shares
of common stock.
|
(9)
|
Mr.
Lioon’s holdings consist of 500,587 shares of common stock, options to
purchase 58,535 shares of common stock and warrants to purchase
11,868
shares of common stock.
|
(10)
|
Mr.
Hassan’s holdings consist of 66,000 shares of common stock, options to
purchase 48,067 shares of common stock and warrants to purchase
28,900
shares of common stock.
|
(11)
|
Dr.
Weikert’s holdings consist of options to purchase 10,416 shares of common
stock.
|
(12)
|
Consists of
3,056,626 shares of common stock, 39,375 shares of restricted stock,
options to purchase 1,017,764 shares of common stock and warrants
to
purchase 53,023 shares of common stock.
|
(13)
|
Consists
of 7,142,857 shares of common stock and warrants to purchase 4,285,715
shares of common stock. The address of the beneficial owner is
c/o
Inventages Whealth Management Inc., Winterbotham Place, Marlborough
&
Queen Streets, P. O. Box N-3026, Nassau, The Bahamas.
|
(14)
|
Consists
of 2,239,473 shares of common stock and warrants to purchase 800,000
shares of common stock. Adam Usdan and Trellus Management Company
LLC
share voting and investment control over the shares. The address
of each
beneficial owner is 350 Madison Avenue, 9 Floor, New York, New
York 10017.
The Company is reporting this stock ownership based upon a Schedule
13G
filed with the SEC.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Mark
Schaftlein was our sole officer and director during the fiscal year ended
December 31, 2006. From time to time, we utilized the services of a consulting
firm where Mr. Schaftlein is a managing partner. The fees paid to the firm
were $50,727 and $15,000 in years 2005 and 2004, respectively. We did not
pay
fees to Mr. Schaftlein’s consulting firm for the year ended December 31, 2006.
Mr. Schaftlein resigned from all of his positions with us on February 12,
2007
upon consummation of our merger with Organic Holding Company, Inc.
Summary
Compensation
The
following table sets forth information concerning compensation paid to our
named
executive officers:
SUMMARY
COMPENSATION TABLE (1)
Name and principal
position
(a)
|
|
Year
(b)
|
|
Salary
($)
(c)
|
|
Bonus
($)
(d)
|
|
Stock Awards
($)
(e)
|
|
Option
Awards
($)
(f) (4)
|
|
All Other
Compensation
($)
(i)
|
|
Total ($)
(j)
|
|
Jason
Brown, Chief Executive Officer and Chairman (2)
|
|
|
2007
|
|
|
224,998
|
|
|
—
|
|
|
—
|
|
|
658,732
|
(5)
|
|
5,000
|
(6)
|
|
888,730
|
|
|
|
|
2006
|
|
|
156,924
|
|
|
|
|
|
|
|
|
3,600 |
(7) |
|
5,000 |
(8) |
|
165,524
|
|
Mark
Schaftlein, Former Chief Executive Officer (3)
|
|
|
2007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
2006
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Jacobs, Senior Vice
President
of Operations (9)
|
|
|
2007
|
|
|
131,538
|
|
|
—
|
|
|
—
|
|
|
514,500
|
(10)
|
|
—
|
|
|
646,038
|
|
(1)
Our
named
executive officers did not receive any Non-Equity Incentive Plan Compensation
or
Nonqualified Deferred Compensation Earnings during the years ended December
31,
2006 or 2007. Accordingly, columns (g) and (h) of the foregoing table relating
to such items were omitted from the tabular presentation.
(2)
Mr.
Brown
was appointed as our Chief Executive Officer and Chairman on February 12,
2007
in connection with our merger with Organic To Go, Inc. The compensation set
forth for the fiscal year ended December 31, 2006, reflects amounts earned
by Mr. Brown for his services as Chief Executive Officer and Chairman of
Organic
To Go, Inc.
(3)
Mr.
Schaftlein resigned as our sole officer and director on February 12, 2007.
(4)
The
amount in the “Option Awards” column is calculated using the provisions of SFAS
123R for the fiscal years ended December 31, 2006 and December 31, 2007.
For a
description of SFAS 123R and the assumptions used in determining the value
of
the options, see the notes to the financial statements included in our Annual
Report on Form 10-K filed on March 31, 2008.
(5) Effective
upon the closing of our merger with Organic To Go, Inc., we issued to Mr.
Brown
options to purchase 1,246,674 shares of common stock at an exercise price
of
$1.38 per share. The amount issued was equal to 5% of the outstanding shares
of
our common stock as of the closing of the merger determined on a fully-diluted
basis. Except in connection with a change of control, 25% of such options
vest
after 12 months of employment, with the remainder vesting monthly over the
next
three years, for a total vesting period of 48 months. All of Mr. Brown’s options
vest immediately if, within 12 months after a change in control Mr. Brown
is
terminated for any reason other than for cause or if Mr. Brown terminates
his
employment for good reason.
(6) Mr.
Brown
received $5,000 in director’s fees in 2007.
(7) The
Board
of Directors of our wholly owned subsidiary, Organic To Go, Inc., approved
the
issuance of options to purchase 60,000 shares of Organic To Go, Inc. common
stock to Mr. Brown in 2006. The options had a term of 10 years, an exercise
price of $0.12 per share and vested monthly over two years from January 1,
2006.
Pursuant to our merger with Organic To Go, Inc., Mr. Brown’s options to purchase
60,000 shares of Organic To Go, Inc. common stock were converted into options
to
purchase 41,869 shares of Organic To Go Food Corporation common stock, with
the
same term and vesting as the prior options and with an exercise price of
$0.17
per share.
(8) Mr.
Brown
received $5,000 in director’s fees in 2006.
(9) Mr.
Jacobs was appointed as Senior Vice President of Operations on April 27,
2007.
(10) On
May
15, 2007, the Company issued Mr. Jacobs options to purchase 461,601 shares
of
common stock. The options have a term of 10 years and an exercise price of
$2.23
per share. Options to purchase 25,000 and 109,150 shares of common stock
vest on
May 16, 2007 and April 27, 2008, respectively, with the remaining options
to
purchase 327,451 shares of common stock vesting monthly in equal installments
over a three year period thereafter.
Outstanding
Equity Awards
The
following table presents information regarding outstanding equity awards
held by
our named executive officers as of December 31, 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (1)
|
|
OPTION AWARDS
|
|
Name
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
(b)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
|
Option
Exercise
Price
($)
(e)
|
|
Option
Expiration
Date
(f)
|
|
Jason
Brown
|
|
|
38,380
|
(2)
|
|
3,489
|
(2)
|
|
-0-
|
|
$
|
0.17
|
|
|
2-29-16
|
|
|
|
|
-
|
|
|
1,246,674
|
(3)
|
|
-0-
|
|
$
|
1.38
|
|
|
2-11-16
|
|
Mark
Schaftlein
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Andrew
Jacobs
|
|
|
-
|
|
|
461,601
|
(4)
|
|
-0-
|
|
$
|
2.23
|
|
|
5-15-17
|
|
(1) Our
named
executive officers did not receive any stock awards during the year ended
December 31, 2007 or have any stock awards at such date. Accordingly, columns
(g), (h), (i) and (j) of the foregoing table relating to such items were
omitted
from the tabular presentation.
(2) The
options vest monthly in equal installments over a two year period beginning
on
January 1, 2006 and ending on January 1, 2008, with the first installment
vesting on February 1, 2006.
(3) Options
to purchase 311,668 shares of common stock vest on February 12, 2008, with
the
remaining options to purchase 935,006 shares of common stock vesting monthly
in
equal installments over a three year period thereafter.
(4) Options
to purchase 25,000 and 109,150 shares of common stock vest on May 16, 2007
and
April 27, 2008, respectively, with the remaining options to purchase 327,451
shares of common stock vesting monthly in equal installments over a three
year
period thereafter.
Director
Compensation
The
following table presents information regarding outstanding compensation paid
to
our directors as of December 31, 2007. Each director was paid an annual
director’s fee of $5,000.
Name
(a) (2)
|
|
Fees Earned or
Paid in Cash
($)
(b)
|
|
Option Awards
($)
(d) (3)
|
|
All
Other
Compensation
($)
(g)
|
|
Total ($)
(j)
|
|
Dave Smith
|
|
$
|
5,000
|
|
$
|
-
|
|
|
36,000
|
(4)
|
$
|
41,000
|
|
Peter
Meehan
|
|
$
|
5,000
|
|
$
|
-
|
|
|
-
|
|
$
|
5,000
|
|
Roy
Bingham
|
|
$
|
5,000
|
|
$
|
-
|
|
|
-
|
|
$
|
5,000
|
|
Douglas
Lioon
|
|
$
|
5,000
|
|
$
|
-
|
|
|
-
|
|
$
|
5,000
|
|
S.M.
“Hass” Hassan
|
|
$
|
5,000
|
|
$
|
22,000
|
(5)
|
|
-
|
|
$
|
27,000
|
|
(1) None
of
the directors received any Non-Equity Incentive Plan Compensation or
Non-Qualified Deferred Compensation Earnings during the year ended December
31,
2007. Accordingly,
columns (e) and (f) of the foregoing table relating to such items were deleted
from the tabular presentation.
(2) Mr.
Brown
also serves as a director. He does not receive any additional compensation
beyond that disclosed in the “Summary Compensation Table” set forth above for
his services as a director.
(3) The
amount in the “Option Awards” column is calculated using the provisions of SFAS
123R for the fiscal year ended December 31, 2007. For a description of SFAS
123R
and the assumptions used in determining the value of the options, see the
notes
to the financial statements included in our Annual Report on Form 10-K filed
on
March 31, 2008. As of December 31, 2007, each of the directors, other than
Mr. Smith and Mr. Hassan, held options to purchase 41,869 shares of Organic
To
Go Food Corporation common stock. As of December 31, 2007, Mr. Smith and
Mr.
Hassan held options to purchase 56,174 and 66,869 shares of Organic To Go
Food
Corporation common stock respectively.
(4) Mr.
Smith
was paid $41,000 in consulting fees.
(5) On
September 25, 2007, Mr. Hassan was granted options to purchase 25,000 shares
of
common stock, with a term of 10 years, and an exercise price of $1.82 per
share.
25% of the options vest after 12 months of employment, with the remainder
vesting monthly in equal installments over the next three years, for a total
vesting period of 48 months. The options were issued to Mr. Hassan in connection
with services rendered relating to specialty retail development.
Employment
Agreements
Jason
Brown
On
February 7, 2008, we entered into a new employment agreement with Jason Brown,
our Chairman, President and Chief Executive Officer. The summary of Mr. Brown’s
employment agreement presented below is qualified in its entirety by reference
to full text of the employment agreement, which was filed with our Current
Report on Form 8-K filed with the SEC on February 13, 2008.
Unless
the employment agreement is terminated earlier in accordance with its terms,
the
Company will employ Mr. Brown until February 7, 2011. After February 7, 2011,
the employment agreement will automatically renew for successive 1 year terms
unless either party gives the other written notice of its election not to
renew
the agreement.
Pursuant
to the employment agreement, we are obligated to pay Mr. Brown a base salary
of
$250,000 per year as base compensation, subject to annual increases at the
discretion of our Board of Directors. In addition, Mr. Brown is eligible
to
receive a cash incentive bonus of 35% of base compensation as determined
in
accordance with the following formula:
|
·
|
25%
is based on Mr. Brown achieving certain performance goals mutually
agreed
upon by him and the Board of Directors each
year;
|
|
·
|
25%
is determined at the discretion of the Board of Directors;
and
|
|
·
|
50%
is based on achievement of performance goals by the Company, which
will be
mutually agreed upon by Mr. Brown and the Board of Directors each
year.
|
We
will
also provide Mr. Brown and his family with certain health, dental and vision
benefits and Mr. Brown is entitled to receive reimbursements for all necessary
and reasonable travel, entertainment and other business expenses in connection
with his duties.
In
the
event that Mr. Brown’s employment with us is terminated due to permanent
disability, or for any other reason other than for cause, we will (i) continue
to provide and pay for health benefits to Mr. Brown and his family for a
12
month period following the date of termination, (ii) pay to Mr. Brown a lump
sum
equal to Mr. Brown’s annual base compensation and (iii) except in the case of
Mr. Brown’s permanent disability, provide Mr. Brown with certain outplacement
services and assistance for a 12 month period following the date of termination.
Mr.
Brown’s employment agreement contains restrictive covenants preventing him
from:
|
·
|
competing
with us during his employment and for a period of 3 years after
termination of his employment;
|
|
·
|
soliciting
any person employed by us, any of our sales representatives or
consultants
or any of our customers or suppliers during his employment and
for a
period of 3 years after termination of his employment; and
|
|
·
|
using
our confidential business information at any time, except in connection
with the performance of his duties for the Company.
|
Andrew
Jacobs
On
April
27, 2007, we entered into an employment agreement with Mr. Jacobs, our Senior
Vice President of Operations. The summary of Mr. Jacobs’ employment agreement
presented below is qualified in its entirety by reference to the full text
of
the employment agreement, which was filed with our Registration Statement
on
Form SB-2 filed with the SEC on July 13, 2007.
Unless
the employment agreement is terminated earlier in accordance with its terms,
we
will employ Mr. Jacobs until April 26, 2009. After April 26, 2009, the
employment agreement will automatically renew for successive 1 year terms
unless
either party gives the other written notice of its election not to renew
the
agreement.
Pursuant
to the employment agreement, we are obligated to pay Mr. Jacobs a base salary
of
$200,000 per year, subject to annual increases at the discretion of our Chief
Executive Officer. In addition, Mr. Jacobs is eligible to receive a cash
incentive bonus of up to $50,000 per year. The total amount of Mr. Jacobs’ cash
incentive bonus is determined in accordance with the following
formula:
|
·
|
25%
is based on Mr. Jacobs achieving certain performance goals mutually
agreed
upon by him and our Chief Executive Officer each
year;
|
|
·
|
25%
is determined at the discretion of our Chief Executive Officer;
and
|
|
·
|
50%
is based on achievement of performance goals by the Company, which
will be
mutually agreed upon by Mr. Jacobs and our Chief Executive Officer,
at the
beginning of each year.
|
We
will
also provide Mr. Jacobs and his family with certain health benefits and Mr.
Jacobs is entitled to receive reimbursements for all reasonable business,
travel
and entertainment expenses that he incurs or he pays for on our
behalf.
In
connection with Mr. Jacobs’ employment, he received options to purchase 461,601
shares of our common stock. The options were granted in accordance with the
terms and conditions of our 2007 Equity Participation Plan. 25,000 options
fully
vested on the date of grant. 25% of the balance of such options will vest
after
12 months of employment, with the remainder vesting in equal monthly
installments over the next three years, for a total vesting period of 48
months.
All of Mr. Jacobs’ options vest immediately if, within 12 months after a change
in control, Mr. Jacobs is terminated without cause. Additionally, in the
event
that Mr. Jacobs is terminated due to permanent disability, or for any other
reason other than for cause, Mr. Jacobs will be entitled to receive his
base salary in accordance with our standard payroll procedures for nine months
following the date of termination.
Mr.
Jacobs’ employment agreement contains restrictive covenants preventing him
from:
·
|
competing
with us during his employment and for a period 12 months after
termination
of his employment, subject to certain
exceptions;
|
·
|
soliciting
any person employed by us, any of our sales representatives or
consultants, or any of our clients, customers or suppliers during
his
employment and for a period of 9 to 12 months after termination
of his
employment; and
|
·
|
using
our confidential business information at any time, except in connection
with the performance of his duties.
|
SELLING
STOCKHOLDERS
This
prospectus covers the resale by selling stockholders of up to 13,864,343
shares
of common stock, comprised of:
|
·
|
4,498,040
shares of common stock and 2,156,179 shares of common stock underlying
warrants, which were issued to investors in connection with the
bridge
note financings;
|
|
·
|
5,259,000
shares of common stock and 1,100,600 shares of common stock underlying
warrants, which were issued to investors in connection with the
private
placement; and
|
|
·
|
850,524
shares of common stock underlying warrants, which were issued as
compensation for services to the placement agents in connection
with the
private placement.
|
The
following table sets forth as of March 31, 2008, (1) the name of each selling
stockholder, (2) the number of shares of our common stock beneficially owned
by
each selling stockholder, (3) the maximum number of shares of common stock
that
the selling stockholders can sell pursuant to this prospectus assuming exercise
of all warrants held, (4) the number of shares of our common stock that will
be
beneficially owned by each selling stockholder assuming all of the shares
they
are offering pursuant to this prospectus are sold, and (5) the percentage
ownership of our outstanding common stock that each selling stockholder will
hold after the offering.
Although
we have assumed for purposes of the table that the selling stockholders will
sell all of the shares offered by this prospectus, we are unaware of any
present
intent to sell such shares and no assurance can be given as to the actual
number
of shares that will be sold, if at all. In addition, a selling stockholder
may
have sold or otherwise disposed of shares in transactions exempt from
registration or otherwise since the date he or she provided information to
us.
Except as set forth below, no selling stockholder has held any position,
office
or material relationship with us or our predecessor or affiliates during
the
past three years.
Name of Selling Stockholder
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned Prior
to Offering
(1)
|
|
Maximum
Number of
Shares of
Common
Stock to be
Offered
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned After
Offering (1)
|
|
Percentage
Ownership
After
Offering (%)
(2)
|
|
2002
Kaplan Family Trust (3)
|
|
|
19,200
|
|
|
19,200
|
|
|
0
|
|
|
0
|
|
Michael
Abrams (4)
|
|
|
30,000
|
|
|
30,000
|
|
|
0
|
|
|
0
|
|
Jason
Adelman (5)
|
|
|
505,551
|
|
|
272,880
|
|
|
232,671
|
|
|
1.1
|
%
|
Barry
Adler (6)
|
|
|
1,600
|
|
|
1,600
|
|
|
0
|
|
|
0
|
|
Aegis
Capital Corp. (7)
|
|
|
10,330
|
|
|
10,330
|
|
|
0
|
|
|
0
|
|
Eric
Alden (8)
|
|
|
113,585
|
|
|
110,634
|
|
|
2,951
|
|
|
*
|
|
Nick
Alden (9)
|
|
|
327,932
|
|
|
313,172
|
|
|
14,760
|
|
|
*
|
|
Matthew
Balk (10)
|
|
|
180,657
|
|
|
100,000
|
|
|
80,657
|
|
|
*
|
|
Clyde
Berg (11)
|
|
|
536,550
|
|
|
457,172
|
|
|
79,378
|
|
|
*
|
|
Linda
M. Berglas (12)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Bernard
L. Madoff Investment Securities LLC (13)
|
|
|
480,000
|
|
|
480,000
|
|
|
0
|
|
|
0
|
|
Name of Selling Stockholder
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned Prior
to Offering
(1)
|
|
Maximum
Number of
Shares of
Common
Stock to be
Offered
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned After
Offering (1)
|
|
Percentage
Ownership
After
Offering (%)
(2)
|
|
Bibicoff
Family Trust dated 5/16/20 (14)
|
|
|
1,052,245
|
|
|
375,572
|
|
|
724,712
|
|
|
3.6
|
%
|
Allison
Bibicoff (15)
|
|
|
33,600
|
|
|
33,600
|
|
|
0
|
|
|
0
|
|
Hilary
Bibicoff (16)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Jonathan
Blaustein (17)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Steven
A. Botwinick (18)
|
|
|
33,600
|
|
|
33,600
|
|
|
0
|
|
|
0
|
|
Brett
Briggs (19)
|
|
|
2,000
|
|
|
2,000
|
|
|
0
|
|
|
0
|
|
Dr.
Arol Buntzman (20)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
C.E.
Unterberg, Towbin Capital Partners I, L.P. (21)
|
|
|
96,000
|
|
|
96,000
|
|
|
0
|
|
|
0
|
|
Carolwood
Organic, LLC (22)
|
|
|
469,047
|
|
|
144,000
|
|
|
325,047
|
|
|
1.6
|
%
|
Douglas
G. Carroll, III (23)
|
|
|
159,038
|
|
|
126,534
|
|
|
32,504
|
|
|
*
|
|
David
Wilstein and Sue Wilstein Trustees of the Century Trust
(24)
|
|
|
222,534
|
|
|
222,534
|
|
|
0
|
|
|
0
|
|
Michael
Stuart Chesler, SEP IRA (25)
|
|
|
25,000
|
|
|
25,000
|
|
|
0
|
|
|
0
|
|
Chestnut
Ridge Partners, LP (26)
|
|
|
40,000
|
|
|
40,000
|
|
|
0
|
|
|
0
|
|
Gerald
M. Chizever (27)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Cipher
06 LLC (28)
|
|
|
253,068
|
|
|
253,068
|
|
|
0
|
|
|
0
|
|
Cougar
Trading, LLC (29)
|
|
|
52,000
|
|
|
52,000
|
|
|
0
|
|
|
0
|
|
CSFN
I LLC (30)
|
|
|
240,000
|
|
|
240,000
|
|
|
0
|
|
|
0
|
|
Dana
Matthow (31)
|
|
|
480,000
|
|
|
480,000
|
|
|
0
|
|
|
0
|
|
Andrew
Dauro (32)
|
|
|
18,000
|
|
|
18,000
|
|
|
0
|
|
|
0
|
|
Lyle
Davis (33)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
NFS/FMTC
IRA f/b/o Joseph Dilillo (34)
|
|
|
25,000
|
|
|
25,000
|
|
|
0
|
|
|
0
|
|
Charles
& Kathleen Doller (35)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Charles
Doller (36)
|
|
|
14,150
|
|
|
14,150
|
|
|
0
|
|
|
0
|
|
Robert
Dombravski (37)
|
|
|
1,000
|
|
|
1,000
|
|
|
0
|
|
|
0
|
|
Dr.
David Dryfuss (38)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Howard
Ecker (39 )
|
|
|
9,600
|
|
|
9,600
|
|
|
0
|
|
|
0
|
|
Robert
Eide (40)
|
|
|
10,330
|
|
|
10,330
|
|
|
0
|
|
|
0
|
|
Gordon
Eisendrath (41)
|
|
|
14,400
|
|
|
14,400
|
|
|
0
|
|
|
0
|
|
Jonathan
Emery (42)
|
|
|
445,879
|
|
|
206,167
|
|
|
239,712
|
|
|
1.2
|
%
|
Gerald
Ferro (43)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Harry
Friedman (44)
|
|
|
14,400
|
|
|
14,400
|
|
|
0
|
|
|
0
|
|
Martin
P. Gallagher, D.C., M.D. (45)
|
|
|
111,450
|
|
|
48,000
|
|
|
63,450
|
|
|
*
|
|
Garmus
Living Trust (46)
|
|
|
36,000
|
|
|
36,000
|
|
|
0
|
|
|
0
|
|
Oscar
Garza (47)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Kenneth
Gaspar (48)
|
|
|
28,800
|
|
|
28,800
|
|
|
0
|
|
|
0
|
|
Mark
J. Gillis (49)
|
|
|
14,689
|
|
|
14,689
|
|
|
0
|
|
|
0
|
|
John
Green (50)
|
|
|
5,760
|
|
|
5,760
|
|
|
0
|
|
|
0
|
|
PFSI
FBO Arthur Gronback IRA (51)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Name of Selling Stockholder
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned Prior
to Offering
(1)
|
|
Maximum
Number of
Shares of
Common
Stock to be
Offered
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned After
Offering (1)
|
|
Percentage
Ownership
After
Offering (%)
(2)
|
|
S.M.
Hass Hassan (52)
|
|
|
124,556
|
|
|
94,900
|
|
|
29,656
|
|
|
*
|
|
George
Hausman and Anna M. Budd (53)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
George
T. Hawes (54)
|
|
|
60,000
|
|
|
60,000
|
|
|
0
|
|
|
0
|
|
Heller
Capital Investments, LLC (55)
|
|
|
872,671
|
|
|
872,671
|
|
|
0
|
|
|
0
|
|
Brian
M. Herman (56)
|
|
|
60,560
|
|
|
60,560
|
|
|
0
|
|
|
0
|
|
Robert
E. Hodge (57)
|
|
|
40,695
|
|
|
24,000
|
|
|
16,695
|
|
|
*
|
|
Larry
Hopfenprirger (58)
|
|
|
118,900
|
|
|
118,900
|
|
|
0
|
|
|
0
|
|
John
Horrigan (59)
|
|
|
63,267
|
|
|
63,267
|
|
|
0
|
|
|
0
|
|
Mark
R. Hubbard, Sole & Separate Property (60)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Yul
Hur (61)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Stuart
Jacobson (62)
|
|
|
96,000
|
|
|
96,000
|
|
|
0
|
|
|
0
|
|
Ralph
Charles Jenney & Joanne M. Jenney, Joint Tenants (63)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Jerden
Enterprises Inc. (64)
|
|
|
144,000
|
|
|
144,000
|
|
|
0
|
|
|
0
|
|
JTK
I, LLC (65)
|
|
|
56,504
|
|
|
24,000
|
|
|
32,504
|
|
|
*
|
|
Henry
Kerns (66)
|
|
|
19,200
|
|
|
19,200
|
|
|
0
|
|
|
0
|
|
Kimball
& Cross Investment Management Corp. (67)
|
|
|
3,671
|
|
|
3,671
|
|
|
0
|
|
|
0
|
|
Robert.
E. LaBlanc (68)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
The
Landau Family Trust, David Eric & Tracy Ann Landau Trustees
(69)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Debra
Lynn Lawrence (70)
|
|
|
96,000
|
|
|
96,000
|
|
|
0
|
|
|
0
|
|
NFS/FMTC
Roth IRA f/b/o Spencer Lehman (71)
|
|
|
50,000
|
|
|
50,000
|
|
|
0
|
|
|
0
|
|
Michael
Liss (72)
|
|
|
340,094
|
|
|
272,880
|
|
|
67,214
|
|
|
*
|
|
Jerry
and Barbara Lotterstein (73)
|
|
|
63,267
|
|
|
63,267
|
|
|
0
|
|
|
0
|
|
Lucienne
Ventures LLC (74)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Michael
R. MacDonald (75)
|
|
|
120,000
|
|
|
120,000
|
|
|
0
|
|
|
0
|
|
Tor
MacInnis & Terri MacInnis (76)
|
|
|
65,585
|
|
|
62,634
|
|
|
2,951
|
|
|
*
|
|
Marietta
Dermatology PSP FBO Myles Jerden, MD (77)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
MarketByte
LLC Defined Benefit & Trust (78)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Shaula
Massena (79)
|
|
|
93,771
|
|
|
61,267
|
|
|
32,504
|
|
|
*
|
|
Robert
Nathan (80)
|
|
|
30,900
|
|
|
30,900
|
|
|
0
|
|
|
0
|
|
Christine
M. Nitz (81)
|
|
|
8,712
|
|
|
8,712
|
|
|
0
|
|
|
0
|
|
Katherine
Nitz (82)
|
|
|
26,356
|
|
|
26,356
|
|
|
0
|
|
|
0
|
|
Laura
Nitz (83)
|
|
|
22,000
|
|
|
22,000
|
|
|
0
|
|
|
0
|
|
Sandra
Nitz (84)
|
|
|
87,267
|
|
|
87,267
|
|
|
0
|
|
|
0
|
|
P.K.
Nitz (85)
|
|
|
137,369
|
|
|
131,467
|
|
|
5,902
|
|
|
*
|
|
Name of Selling Stockholder
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned Prior
to Offering
(1)
|
|
Maximum
Number of
Shares of
Common
Stock to be
Offered
|
|
Number of
Shares of
Common
Stock
Beneficially
Owned After
Offering (1)
|
|
Percentage
Ownership
After
Offering (%)
(2)
|
|
IRA
f/b/o Kenneth Nitz (86)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Patrick
Noto (87)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Nathaniel
Orme, IRA (88)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Mark
Palazzolo (89)
|
|
|
1,200
|
|
|
1,200
|
|
|
0
|
|
|
0
|
|
Merilyn
Ann Patterson (90)
|
|
|
12,000
|
|
|
12,000
|
|
|
0
|
|
|
0
|
|
Wendy
Patterson (91)
|
|
|
12,000
|
|
|
12,000
|
|
|
0
|
|
|
0
|
|
David
Prescott (92)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Joseph
Reda (93)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Robert
T. Reed, Jr. (94)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Bradley
C. Reifler (95)
|
|
|
62,375
|
|
|
62,375
|
|
|
0
|
|
|
0
|
|
Michael
Rivkind (96)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Robert
& Gilda Marx Trust (97)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Winstead
Rouse (98)
|
|
|
191,543
|
|
|
126,534
|
|
|
65,009
|
|
|
*
|
|
Stuart
Rudick (99)
|
|
|
196,315
|
|
|
126,534
|
|
|
69,781
|
|
|
*
|
|
Kerry
Ryan (100)
|
|
|
38,400
|
|
|
38,400
|
|
|
0
|
|
|
0
|
|
S
& S Realty LLC (101)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Gene
Salkind (102)
|
|
|
126,534
|
|
|
126,534
|
|
|
0
|
|
|
0
|
|
Satellite
Credit Opportunities Fund, Ltd. (103)
|
|
|
129,094
|
|
|
129,094
|
|
|
0
|
|
|
0
|
|
Don
Schaffer (104)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
Daniel
Schneiderman (105)
|
|
|
15,000
|
|
|
15,000
|
|
|
0
|
|
|
0
|
|
Chris
Shufeldt (106)
|
|
|
4,199
|
|
|
4,199
|
|
|
0
|
|
|
0
|
|
SDS
Capital Group SPC, Ltd. (107)
|
|
|
438,794
|
|
|
96,000
|
|
|
342,794
|
|
|
1.7
|
%
|
Patrick
H. Sheedy (108)
|
|
|
4,000
|
|
|
4,000
|
|
|
0
|
|
|
0
|
|
Patrick
& Daisy Sheedy TTEE, The Sheedy Family Trust (109)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
John
Simonelli (110)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
Kelda
Sledz (111)
|
|
|
24,000
|
|
|
24,000
|
|
|
0
|
|
|
0
|
|
James
St. Clair (112)
|
|
|
1,000
|
|
|
1,000
|
|
|
0
|
|
|
0
|
|
Wells
Fargo Bank Rollover c/f Harris Toibb (113)
|
|
|
432,000
|
|
|
432,000
|
|
|
0
|
|
|
0
|
|
Toibb
Investments LLC (114)
|
|
|
1,008,000
|
|
|
1,008,000
|
|
|
0
|
|
|
0
|
|
Trinad
Capital Master Fund Ltd. (115)
|
|
|
1,331,775
|
|
|
1,311,111
|
|
|
20,664
|
|
|
*
|
|
David
W. Valentine (116)
|
|
|
366,534
|
|
|
366,534
|
|
|
0
|
|
|
0
|
|
Vicis
Capital Master Fund, LLC (117)
|
|
|
1,898,014
|
|
|
1,898,014
|
|
|
0
|
|
|
0
|
|
Boris
Volman (118)
|
|
|
95,063
|
|
|
57,223
|
|
|
37,840
|
|
|
*
|
|
Marvin
Winkler, Trustee of the Winkler Living Trust (119)
|
|
|
48,000
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
*
|
Less
than 1%
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting
or
investment power with respect to securities. Shares of common stock
which
are purchasable under options or warrants which are currently exercisable,
or which will become exercisable no later than 60 days after April
30,
2007, are deemed outstanding for the purposes of computing the
percentage
of the person holding such options or warrants, but not deemed
outstanding
for the purposes of computing the percentage of any other person.
Except
as indicated by footnote and subject to community property laws
where
applicable, the persons named in the table have sole voting and
investment
power with respect to all shares of common stock shown as beneficially
owned by them.
|
(2)
|
Based
on 20,312,664 shares of common stock outstanding as of April 30,
2007 and
assumes that (i) all of the shares offered hereby are sold; (ii)
all of
the shares owned before the offering, but not offered hereby, are
not
sold; and (iii) none of our outstanding convertible securities,
other than
the warrants relating to the common stock covered by this prospectus,
are
converted into shares of common stock.
|
(3)
|
The
selling stockholder is offering 16,000 shares of common stock and
3,200
shares of common stock underlying warrants received pursuant the
private
placement. Kalman R. Kaplan and Linda S. Kaplan, trustees of the
2002
Kaplan Family Trust, share voting and investment control over the
shares.
|
(4)
|
The
selling stockholder is offering 30,000 shares of common stock underlying
warrants received as compensation for services as a representative
of
Burnham Hill Partners, the primary placement agent in the private
placement. Burnham Hill Partners is a division of Pali Capital,
Inc., a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(5)
|
The
selling stockholder is offering 272,880 shares of common stock
underlying
warrants received as compensation for services as a representative
of
Burnham Hill Partners, the primary placement agent in the private
placement. Burnham Hill Partners is a division of Pali Capital,
Inc., a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(6)
|
The
selling stockholder is offering 1,600 shares of common stock underlying
warrants received as compensation for services as a representative
of The
Shemano Group Inc., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(7)
|
The
selling stockholder is offering 10,330 shares of common stock underlying
warrants received as compensation for services as a placement agent
in the
private placement. Aegis Capital Corp. is a member firm of the
NASD. The
selling stockholder has no arrangement under which the selling
stockholder
may purchase additional securities in connection with the offering.
At the
time of the acquisition of the securities, the selling stockholder
had no
understanding, directly or indirectly, with any person to distribute
securities being offered hereunder.
|
(8)
|
The
selling stockholder is offering: (i) 40,000 shares of common stock
and
8,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 43,650 shares of common stock and 19,074
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(9)
|
The
selling stockholder is offering 217,800 shares of common stock
and 95,372
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(10)
|
The
selling stockholder is offering 100,000 shares of common stock
underlying
warrants received as compensation for services as a representative
of
Burnham Hill Partners, the primary placement agent in the private
placement. Burnham Hill Partners is a division of Pali Capital,
Inc., a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(11)
|
The
selling stockholder is offering: (i) 120,000 shares of common stock
and
24,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 217,800 shares of common stock and
95,372
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(12)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(13)
|
The
selling stockholder is offering 400,000 shares of common stock
and 80,000
shares of common stock underlying warrants received as an investor
in the private placement. Bernhard L. Madoff has investing and voting
control over the shares. Bernhard L. Madoff Investment Securities
LLC is a
member firm of the NASD. The selling stockholder purchased the
securities
in the ordinary course of business and at the time of the purchase
of the
securities being registered for sale pursuant to the registration
statement, of which this prospectus is a part, the selling stockholder
had
no arrangements or understandings, directly or indirectly, with
any person
to distribute the securities.
|
(14)
|
The
selling stockholder is offering: (i) 52,000 shares of common stock
and
10,400 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 217,000 shares of common stock and
95,372
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings. Harvey Bibicoff, trustee of the Bibicoff Family Trust,
has
voting and investment control over the shares.
|
(15)
|
The
selling stockholder is offering 28,000 shares of common stock and
5,600
shares of common stock underlying warrants received pursuant the
private
placement.
|
(16)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(17)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(18)
|
The
selling stockholder is offering 28,000 shares of common stock and
5,600
shares of common stock underlying warrants received pursuant the
private
placement.
|
(19)
|
The
selling stockholder is offering 2,000 shares of common stock underlying
warrants received as compensation for services as a representative
of The
Shemano Group Inc., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(20)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(21)
|
The
selling stockholder is offering 80,000 shares of common stock and
16,000
shares of common stock underlying warrants received as an investor
in the private placement. UTCM, LLC is the General Partner of C.E.
Unterberg, Towbin Capital Partners I, L.P. Andre Arno, the Managing
Member
of UTCM, LLC, has voting and investment control over the shares.
C.E.
Unterberg, Towbin Capital Partners I, L.P is an affiliate of C.E.
Unterberg, Towbin, LLC, a member firm of the NASD. The selling
stockholder
purchased the securities in the ordinary course of business and
at the
time of the purchase of the securities being registered for sale
pursuant
to the registration statement, of which this prospectus is a part,
the
selling stockholder had no arrangements or undertakings, directly
or
indirectly, with any person to distribute the securities.
|
(22)
|
The
selling stockholder is offering 120,000 shares of common stock
and 24,000
shares of common stock underlying warrants received pursuant the
private
placement. Brener International Group, LLC is the Managing Member
of
Carolwood Organic, LLC. Gabriel Brener, the Manager of Brener
International Group, LLC, has voting and investment control over
the
shares.
|
(23)
|
The
selling stockholder is offering 88,000 shares of common stock
and 38,534 shares of common stock underlying warrants received
pursuant to the merger in connection with the bridge note
financing.
|
(24)
|
The
selling stockholder is offering: (i) 80,000 shares of common stock
and
16,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 88,000 shares of common stock and 38,534
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings. David Wilstein and Susan Wilstein, trustees of the
Century
Trust, have voting and investment control over the shares.
|
(25)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received as an investor
in the private placement. The selling stockholder purchased the
securities in the ordinary course of business and at the time of
the
purchase of the securities being registered for sale pursuant to
the
registration statement, of which this prospectus is a part, the
selling
stockholder had no arrangements or understandings, directly or
indirectly,
with any person to distribute the securities. The selling stockholder
is
also offering 1,000 shares of common stock underlying warrants
received as
compensation for services as a representative of The Shemano Group,
Inc.,
a placement agent in the private placement and a member firm of
the
NASD. At the time of the acquisition of the securities, the selling
stockholder had no understanding, directly or indirectly, with
any person
to distribute securities being offered hereunder. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the offering.
|
(26)
|
The
selling stockholder is offering 40,000 shares of common stock underlying
warrants received pursuant the private placement. Kenneth Pasternak,
the
General Partner of Chestnut Ridge Partners, LP, has voting and
investment
control over the shares.
|
(27)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(28)
|
The
selling stockholder is offering 176,000 shares of common stock
and 77,068 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings. Michael S. Liss and Jason T. Adelman,
the
Managing Members of Cipher 06 LLC, share voting and investment
control
over the shares. Michael S. Liss and Jason T. Adelman are Managing
Directors of Burnham Hill Partners, the primary placement agent
in the
private placement. Burnham Hill Partners is a division of Pali
Capital,
Inc., a member firm of the NASD. The selling stockholder purchased
the
securities in the ordinary course of business and at the time of
the
purchase of the securities being registered for sale pursuant to
the
registration statement, of which this prospectus is a part, the
selling
stockholder had no arrangements or understandings, directly or
indirectly,
with any person to distribute the securities.
|
(29)
|
The
selling stockholder is offering 36,000 shares of common stock and
16,000
shares of common stock underlying warrants received pursuant the
private
placement. Emanuel C. Geduld, the Managing Member of Cougar Trading,
LLC,
has voting and investment control over the shares.
|
(30)
|
The
selling stockholder is offering 200,000 shares of common stock
and 40,000
shares of common stock underlying warrants received pursuant the
private
placement. Thomas McAuley has voting and investment control over
the
shares.
|
(31)
|
The
selling stockholder is offering 400,000 shares of common stock
and 80,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(32)
|
The
selling stockholder is offering 15,000 shares of common stock and
3,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(33)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(34)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received as an investor
in the private placement. The selling stockholder purchased the
securities in the ordinary course of business and at the time of
the
purchase of the securities being registered for sale pursuant the
registration, of which this prospectus is a part, the selling stockholders
had no arrangements or understandings, directly or indirectly,
with any
person to distribute the securities. The selling stockholder is
also
offering 1,000 shares of common stock underlying warrants received as
compensation for services as a representative of The Shemano Group,
Inc., a placement agent in the private placement and a member firm
of the
NASD. At the time of the acquisition of the securities, the selling
stockholder had no understanding, directly or indirectly, with
any person
to distribute securities being offered hereunder. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the
offering.
|
(35)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received as an investor
in the private placement. Charles Doller is a registered
representative of Kimball & Cross Investment Management Corp., a
placement agent in the private placement and a member firm of the
NASD.
The selling stockholder purchased the securities in the ordinary
course of
business and at the time of the purchase of the securities being
registered for sale pursuant the registration, of which this prospectus
is
a part, the selling stockholders had no arrangements or understandings,
directly or indirectly, with any person to distribute the
securities.
|
(36)
|
The
selling stockholder is offering 14,150 shares of common stock underlying
warrants received as compensation for services as a representative
of
Kimball & Cross Investment Management Corp., a placement agent in the
private placement and a member firm of the NASD. At the time of the
acquisition of the securities, the selling stockholder had no
understanding, directly or indirectly, with any person to distribute
securities being offered hereunder. The selling stockholder has
no
arrangement under which the selling stockholder may purchase additional
securities in connection with the offering.
|
(37)
|
The
selling stockholder is offering 1,000 shares of common stock underlying
warrants received as compensation for services as a representative
of
Kimball & Cross Investment Management Corp., a placement agent in the
private placement and a member firm of the NASD. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the offering. At the time
of the
acquisition of the securities, the selling stockholder had no
understanding, directly or indirectly, with any person to distribute
securities being offered hereunder.
|
(38)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(39)
|
The
selling stockholder is offering 8,000 shares of common stock and
1,600
shares of common stock underlying warrants received pursuant the
private
placement.
|
(40)
|
The
selling stockholder is offering 10,330 shares of common stock underlying
warrants received as compensation for services as a representative
of
Aeigs Capital Corp., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(41)
|
The
selling stockholder is offering 12,000 shares of common stock and
2,400
shares of common stock underlying warrants received pursuant the
private
placement.
|
(42)
|
The
selling stockholder is offering: (i) 40,000 shares of common stock
and
8,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 110,000 shares of common stock and 48,167
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(43)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(44)
|
The
selling stockholder is offering 12,000 shares of common stock and
2,400
shares of common stock underlying warrants received pursuant the
private
placement.
|
(45)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(46)
|
The
selling stockholder is offering 30,000 shares of common stock and
6,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(47)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(48)
|
The
selling stockholder is offering 24,000 shares of common stock and
4,800
shares of common stock underlying warrants received pursuant the
private
placement.
|
(49)
|
The
selling stockholder is offering 14,689 shares of common stock underlying
warrants received as compensation for services as a representative
of
Kimball & Cross Investment Management Corp., a placement agent in the
private placement and a member firm of the NASD. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the offering. At the time
of the
acquisition of the securities, the selling stockholder had no
understanding, directly or indirectly, with any person to distribute
securities being offered hereunder.
|
(50)
|
The
selling stockholder is offering 5,760 shares of common stock underlying
warrants received as compensation for services as a representative
of
ViewTrade Securities, Inc., a placement agent in the private placement
and
a member firm of the NASD. The selling stockholder has no arrangement
under which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(51)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(52)
|
The
selling stockholder is offering 66,000 shares of common stock
and 28,900 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings. Mr. Hassan is a member of our Board
of
Directors. The selling stockholder purchased the securities in
the
ordinary course of business and at the time of the purchase of
the
securities being registered for sale pursuant the registration,
of which
this prospectus is a part, the selling stockholders had no arrangements
or
understandings, directly or indirectly, with any person to distribute
the
securities.
|
(53)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(54)
|
The
selling stockholder is offering 50,000 shares of common stock and
10,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(55)
|
The
selling stockholder is offering: (i) 200,000 shares of common stock
and
40,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 440,000 shares of common stock
and 192,671 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings. Ronald I. Heller, the Chief Investment
Officer of Heller Capital Investments, LLC, has voting and investment
control over the shares.
|
(56)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received as an investor
in the private placement. The selling stockholder purchased the
securities in the ordinary course of business and at the time of
the
purchase of the securities being registered for sale pursuant to
the
registration statement, of which this prospectus is a part, the
selling
stockholder had no arrangements or understandings, directly or
indirectly,
with any person to distribute the securities. The selling stockholder
is
also offering 12,560 shares of common stock underlying warrants
received
as compensation for services as a representative of ViewTrade Securities,
Inc., a placement agent in the private placement and a member firm
of the
NASD. At the time of the acquisition of the securities, the selling
stockholder had no understanding, directly or indirectly, with
any person
to distribute securities being offered hereunder. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the offering.
|
(57)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(58)
|
The
selling stockholder is offering: (i) 20,000 shares of common stock
and
4,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 66,000 shares of common stock and 28,900
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(59)
|
The
selling stockholder is offering 44,000 shares of common stock
and 19,267 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(60)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(61)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(62)
|
The
selling stockholder is offering 80,000 shares of common stock and
16,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(63)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(64)
|
The
selling stockholder is offering 120,000 shares of common stock
and 24,000
shares of common stock underlying warrants received pursuant the
private
placement. Myles S. Jerden, the President of Jerden Enterprises
Inc., has
voting and investment control over the shares.
|
(65)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement. Gordon Gregory is the managing member of JTK 1 LLC and
has
voting and investment control over the shares.
|
(66)
|
The
selling stockholder is offering 16,000 shares of common stock and
3,200
shares of common stock underlying warrants received pursuant the
private
placement.
|
(67)
|
The
selling stockholder is offering 3,671 shares of common stock underlying
warrants received as compensation for services as a placement agent
in the
private placement. Kimball & Cross Investment Management Corp. is a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(68)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(69)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement. David Eric Landau and Tracy Ann Landau, trustees of
the Landau
Family Trust, share voting and investment control over the shares.
|
(70)
|
The
selling stockholder is offering 80,000 shares of common stock and
16,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(71)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received as an investor
in the private placement. The selling stockholder purchased the
securities in the ordinary course of business and at the time of
the
purchase of the securities being registered for sale pursuant the
registration, of which this prospectus is a part, the selling stockholders
had no arrangements or understandings, directly or indirectly,
with any
person to distribute the securities. The selling stockholder is
also
offering 2,000 shares of common stock underlying warrants received
as
compensation for services as a representative of The Shemano Group,
Inc.,
a placement agent in the private placement and a member firm of
the NASD.
At the time of the acquisition of the securities, the selling stockholder
had no understanding, directly or indirectly, with any person to
distribute securities being offered hereunder. The selling stockholder
has
no arrangement under which the selling stockholder may purchase
additional
securities in connection with the offering.
|
(72)
|
The
selling stockholder is offering 272,880 shares of common stock
underlying
warrants received as compensation for services as a representative
of
Burnham Hill Partners, the primary placement agent in the private
placement. Burnham Hill Partners is a division of Pali Capital,
Inc., a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(73)
|
The
selling stockholder is offering 44,000 shares of common stock
and 19,267 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(74)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement. Andrew Merkatz, the Managing Member of Lucienne Ventures
LLC,
has voting and investment control over the shares.
|
(75)
|
The
selling stockholder is offering 100,000 shares of common stock
and 20,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(76)
|
The
selling stockholder is offering 43,560 shares of common stock
and 19,074 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(77)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(78)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement. Lawrence D. Isen, trustee of the MarketByte LLC Defined
Benefit
& Trust, has voting and investment control over the shares.
|
(79)
|
The
selling stockholder is offering 42,000 shares of common stock
and 19,267 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(80)
|
The
selling stockholder is offering 30,900 shares of common stock underlying
warrants received as compensation for services as a representative
of
Aeigs Capital Corp., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(81)
|
The
selling stockholder is offering 8,712 shares of common stock received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(82)
|
The
selling stockholder is offering 26,356 shares of common stock received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(83)
|
The
selling stockholder is offering 22,000 shares of common stock received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(84)
|
The
selling stockholder is offering: (i) 20,000 shares of common stock
and
4,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 44,000 shares of common stock and 19,267
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(85)
|
The
selling stockholder is offering 74,052 shares of common stock
and 57,415 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(86)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(87)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(88)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(89)
|
The
selling stockholder is offering 1,200 shares of common stock underlying
warrants received as compensation for services as a representative
of
Aeigs Capital Corp., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(90)
|
The
selling stockholder is offering 10,000 shares of common stock and
2,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(91)
|
The
selling stockholder is offering 10,000 shares of common stock and
2,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(92)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(93)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received as an investor
in the private placement. Joseph Reda is a registered representative
of C.E. Unterberg, Towbin, LLC, a member firm of the NASD. The
selling
stockholder purchased the securities in the ordinary course of
business
and at the time of the purchase of the securities being registered
for
sale pursuant to the registration statement, of which this prospectus
is a
part, the selling stockholder had no arrangements or undertakings,
directly or indirectly, with any person to distribute the securities.
|
(94)
|
The
selling stockholder is offering 40,000 shares of common stock and 8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(95)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received as an investor
in the private placement. Bradley C. Reifler is the Chief Executive
Officer of Pali Capital, Inc., a member firm of the NASD. The selling
stockholder purchased the securities in the ordinary course of
business
and at the time of the purchase of the securities being registered
for
sale pursuant to the registration statement, of which this prospectus
is a
part, the selling stockholder had no arrangements or undertakings,
directly or indirectly, with any person to distribute the securities.
The
selling stockholder is also offering 38,375 shares of common stock
underlying warrants received as compensation for services as a
representative of Burnham Hill Partners, the primary placement
agent in
the private placement. Burnham Hill Partners is a division of Pali
Capital, Inc. At the time of the acquisition of the securities, the
selling stockholder had no understanding, directly or indirectly,
with any
person to distribute securities being offered hereunder. The selling
stockholder has no arrangement under which the selling stockholder
may
purchase additional securities in connection with the offering.
|
(96)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(97)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement. Robert Marx and Gilda Marx, as trustees of the Robert
&
Gilda Marx Trust, share voting and investment control over the
shares.
|
(98)
|
The
selling stockholder is offering 88,000 shares of common stock
and 38,534 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(99)
|
The
selling stockholder is offering 88,000 shares of common stock
and 38,534 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(100)
|
The
selling stockholder is offering 32,000 shares of common stock and
6,400
shares of common stock underlying warrants received pursuant the
private
placement.
|
(101)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement. Scott M. Landau, a Member of S & S Realty LLC, has voting
and investment control over the shares.
|
(102)
|
The
selling stockholder is offering 88,000 shares of common stock
and 38,534 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(103)
|
The
selling stockholder is offering 129,094 shares of common stock
underlying
warrants received pursuant to the merger as a result of the selling
stockholder's investment in the bridge note financings. Satellite
Asset
Management, L.P. is the discretionary investment manager of Satellite
Credit Opportunities Fund, Ltd. The controlling entity of Satellite
Asset
Management, L.P. is Satellite Fund Management, LLC. Lief Rosenblutt,
Mark
Sonnino and Gabe Bechamkin, the managing members of Satellite Fund
Management, LLC, share voting and investment control over the
shares.
|
(104)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(105)
|
The
selling stockholder is offering 15,000 shares of common stock underlying
warrants received as compensation for services as a representative
of
Burnham Hill Partners, the primary placement agent in the private
placement. Burnham Hill Partners is a division of Pali Capital,
Inc., a
member firm of the NASD. The selling stockholder has no arrangement
under
which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(106)
|
The
selling stockholder is offering 4,199 shares of common stock underlying
warrants received as compensation for services as a representative
of
Kimball & Cross Investment Management Corp., a placement agent in the
private placement and a member firm of the NASD. The selling stockholder
has no arrangement under which the selling stockholder may purchase
additional securities in connection with the offering. At the time
of the
acquisition of the securities, the selling stockholder had no
understanding, directly or indirectly, with any person to distribute
securities being offered hereunder.
|
(107)
|
The
selling stockholder is offering 80,000 shares of common stock and
16,000
shares of common stock underlying warrants received pursuant the
private
placement. Steve Derby is the Managing Member of SDS Management
LLC, the
investment advisor to SDS Capital Group SPC, Ltd. Steve Derby holds
voting
and investment control over the shares.
|
(108)
|
The
selling stockholder is offering 4,000 shares of common stock underlying
warrants received as compensation for services as a representative
of The
Shemano Group, Inc., a placement agent in the private placement
and a
member firm of the NASD. At the time of the acquisition of the
securities,
the selling stockholder had no understanding, directly or indirectly,
with
any person to distribute securities being offered hereunder. The
selling
stockholder has no arrangement under which the selling stockholder
may
purchase additional securities in connection with the
offering.
|
(109)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received as an investor
in the private placement. Patrick H. Sheedy and Daisy D. Sheedy,
trustees of The Sheedy Family Trust, share voting and investment
control
over the shares. Patrick H. Sheedy is a registered representative
of The
Shemano Group, Inc., a placement agent in the private placement
and a
member firm of the NASD. The selling stockholder purchased the
securities
in the ordinary course of business and at the time of the purchase
of the
securities being registered for sale pursuant to the registration
statement, of which this prospectus is a part, the selling stockholder
had
no arrangements or undertakings, directly or indirectly, with any
person
to distribute the securities.
|
(110)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(111)
|
The
selling stockholder is offering 20,000 shares of common stock and
4,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(112)
|
The
selling stockholder is offering 1,000 shares of common stock underlying
warrants received as compensation for services as a representative
of
ViewTrade Securities, Inc., a placement agent in the private placement
and
a member firm of the NASD. The selling stockholder has no arrangement
under which the selling stockholder may purchase additional securities
in
connection with the offering. At the time of the acquisition of
the
securities, the selling stockholder had no understanding, directly
or
indirectly, with any person to distribute securities being offered
hereunder.
|
(113)
|
The
selling stockholder is offering 360,000 shares of common stock
and 72,000
shares of common stock underlying warrants received pursuant the
private
placement.
|
(114)
|
The
selling stockholder is offering 840,000 shares of common stock
and 16,800
shares of common stock underlying warrants received pursuant the
private
placement. Harris Toibb has voting and investment control over
the shares.
|
(115)
|
The
selling stockholder is offering: (i) 200,000 shares of common stock
and
40,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 744,920 shares of common stock
and 326,191 shares of common stock underlying warrants received
pursuant to the merger as a result of the selling stockholder’s investment
in the bridge note financings.
|
(116)
|
The
selling stockholder is offering: (i) 200,000 shares of common stock
and
40,000 shares of common stock underlying warrants received pursuant
the
private placement; and (ii) 88,000 shares of common stock and 38,534
shares of common stock underlying warrants received pursuant to
the merger
as a result of the selling stockholder’s investment in the bridge note
financings.
|
(117)
|
The
selling stockholder is offering 1,320,000 shares of common stock
and
578,014 shares of common stock underlying warrants received pursuant
to
the merger as a result of the selling stockholder’s investment in the
bridge note financings.
|
(118)
|
The
selling stockholder is offering 57,223 shares of common stock underlying
warrants received pursuant to the merger in connection with the
bridge
note financing.
|
(119)
|
The
selling stockholder is offering 40,000 shares of common stock and
8,000
shares of common stock underlying warrants received pursuant to
the
private placement.
|
PLAN
OF DISTRIBUTION
The
selling stockholders of our 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 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. The selling stockholders may use any one or more
of
the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the date of this
prospectus;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of
sale;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. Each
selling stockholder does not expect these commissions and discounts relating
to
its sales of shares to exceed what is customary in the types of transactions
involved.
In
connection with the sale of our common stock or interests therein, the selling
stockholders 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
stockholders may also sell shares of our 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
stockholders 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 stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each selling stockholder has informed us
that it does not have any agreement or understanding, directly or indirectly,
with any person to distribute the common stock.
We
are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares.
Because
the selling stockholders 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. 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. Each selling
stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the selling
stockholders.
The
resale shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”), any person engaged in the distribution of the
resale shares may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the
commencement of the distribution. In addition, the selling stockholders 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 our 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.
Our
Amended and Restated Certificate of Incorporation authorizes us to issue up
to
500,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares
of
preferred stock, $0.001 par value.
The
following description of our securities is only a summary and is subject to
and
qualified by our Amended and Restated Certificate of Incorporation, our Amended
and Restated Bylaws, the Certificate of Designation for our Series A Convertible
Preferred Stock and by the provisions of applicable corporate laws of the State
of Delaware.
Common
Stock
As
of
March 31, 2008, we had 36,329,755 shares of common stock outstanding.
Holders of our common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to any
preferential rights of holders of our preferred stock, holders of common stock
are entitled to receive a pro rata share of distributions declared by our Board
of Directors. Our common stock does not provide for preemptive or other
subscription rights, and there are no conversion rights or redemption or sinking
fund provisions with respect to our common stock. All outstanding shares of
our
common stock are fully paid and non-assessable. To the extent that we issue
additional shares of our common stock in the future, the relative interests
of
the then existing stockholders may be diluted.
Preferred
Stock
As
of
March 31, 2008, we had no shares of preferred stock outstanding. We may issue
preferred stock in one or more class or series pursuant to resolution of the
Board of Directors. The Board of Directors may determine and alter the rights,
preferences, privileges, and restrictions granted to or imposed upon any wholly
unissued series of preferred stock, and fix the number of shares and the
designation of any series of preferred stock. The Board of Directors may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any wholly unissued class or series
subsequent to the issue of shares of that class or series. We have no present
plans to issue any shares of preferred stock.
Warrants
As
of
March 31, 2008, we had warrants to purchase an aggregate of 12,386,608
shares of our common stock outstanding. The exercise prices for the warrants
range from $1.38 per share to $2.50 per share, with a weighted average exercise
price of approximately per share of $2.30.
Options
As
of
March 31, 2008, we had options to purchase an aggregate of 4,914,938 shares
of our common stock outstanding, with exercise prices ranging from $0.17 per
share to $2.23 per share, with a weighted average exercise price per share
of
approximately $1.16.
Anti-Takeover
Provisions
Our
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws
contain provisions that may make it more difficult for a third party to acquire
or may discourage acquisition bids for us. Our Board of Directors may, without
action of our stockholders, issue authorized but unissued common stock and
preferred stock. The existence of undesignated preferred stock and authorized,
but unissued common stock, enables us to discourage or to make it more difficult
to obtain control of our company through a merger, tender offer, proxy contest
or otherwise.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is traded on the OTC Bulletin Board under the symbol
“OTGO.OB.”
The
following table sets forth, for the periods indicated, the reported high and
low
closing bid quotations for our common stock as reported on the OTC Bulletin
Board. The bid prices reflect inter-dealer quotations, do not include retail
markups, markdowns or commissions and do not necessarily reflect actual
transactions.
Quarter
Ended
|
|
High
Bid
($)
|
|
Low
Bid ($)
|
|
March
31, 2006
|
|
|
6.00
|
|
|
3.50
|
|
June
30, 2006
|
|
|
5.03
|
|
|
3.00
|
|
September
30, 2006
|
|
|
3.25
|
|
|
3.25
|
|
December
31, 2006
|
|
|
3.25
|
|
|
3.25
|
|
March
31, 2007
|
|
|
11.00
|
|
|
2.75
|
|
June
30, 2007
|
|
|
6.00
|
|
|
1.80
|
|
September
30, 2007
|
|
|
2.25
|
|
|
1.65
|
|
December
31, 2007
|
|
|
2.10
|
|
|
1.19
|
|
March
31, 2008
|
|
|
1.55
|
|
|
1.11
|
|
Holders
As
of
April 15, 2008, there were approximately 243 holders of record of our common
stock.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is American Stock Trust &
Transfer Company.
Dividend
Policy
We
did
not pay any dividends in the periods indicated in the above table. We do not
intend to pay cash dividends in the foreseeable future. We intend to retain
earnings, if any, for future operation and expansion. Any decision to declare
and pay dividends in the future will be made at the discretion of our Board
of
Directors and will depend on, among other things, our results of operations,
cash requirements, financial condition, contractual restrictions and other
factors that our Board of Directors may deem relevant.
Equity
Compensation Plan
The
following tables provide information as of December 31, 2007 about our common
stock that may be issued upon the exercise of options, warrants and rights
under
all of our existing equity compensation plans.
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Plan category
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available
for future issuance under
equity
compensation plans
(excluding securities
reflected in column (a))
|
|
Equity
compensation plans approved by security holders (1)
|
|
|
1,
266,601
|
|
$
|
2.09
|
|
|
2,333,399
|
|
Equity
compensation plans not approved by security holders (2)
|
|
|
1,784,337
|
|
$
|
1.08
|
|
|
N/A
|
|
Total
|
|
|
3,050,938
|
|
$
|
1.50
|
|
|
2,333,399
|
|
(1) On
May 16, 2007, our stockholders approved the adoption of the 2007 Equity
Participation Plan of Organic To Go Food Corporation. Under the plan, we are
authorized to grant options and restricted stock to our employees, directors
and
consultants. The maximum number of shares of common stock that may be granted
as
restricted stock or issued upon the exercise of options pursuant to the plan
is
3,600,000 shares. As of December 31, 2007, no shares of restricted stock were
issued under the plan. As of that same date, options to purchase
1,266,601 shares
of
common stock have been issued under the plan. None of the options issued under
the plan have been exercised.
(2)
In
connection with our merger with Organic Holding Company, Inc. on February 12,
2007, we issued options to purchase shares of our common stock in exchange
for
outstanding options to purchase shares of Organic Holding Company, Inc. common
stock that were issued to directors, officers, employees and consultants of
Organic Holding Company, Inc. prior to the merger. The following table
summarizes the number and average weighted exercise price of Organic Holding
Company, Inc. options that were outstanding on a pre-merger basis and the
equivalent information with respect to options to purchase our common stock
that
were exchanged for such Organic Holding Company, Inc. options on a post-merger
basis.
|
|
Post Merger
|
|
Number of Shares of
Organic
Holding Company, Inc.
Common
Stock Underlying
Options
|
|
Weighted Average
Exercise Price
of Options
|
|
Number of Shares
of our Common Stock
Underlying Options
|
|
Weighted Average
Exercise Price
of Options (1)
|
|
939,432
|
|
$
|
0.38
|
|
|
655,545
|
|
$
|
0.54
|
|
(1)
The
options issued in connection with the merger generally expire 10 years from
the
date of grant and have vesting schedules ranging from immediately exercisable,
to fully exercisable by July 2011.
Effective
upon the closing of the merger, Jason Brown received options to purchase
1,246,674 shares of our common stock, which represented an amount equal to
approximately 5% of the outstanding shares of our common stock as of the closing
date of the merger determined on a fully-diluted basis. The options granted
to
Mr. Brown at closing have an exercise price of $1.38 per share and expire on
February 11, 2016. Except in connection with a “Change in Control” (as defined
in Mr. Brown’s employment agreement), 25% of such options vest after 12 months
of employment, with the remainder vesting over the next 36 months, for a total
vesting period of 48 months. All of the options vest immediately if, within
12 months after a “Change in Control,” Mr. Brown is terminated for any reason
other than “Cause” or if Mr. Brown terminates his employment for “Good Reason”
(each as defined in Mr. Brown’s employment agreement).
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL
DISCLOSURE
On
February 27, 2007, our Board of Directors approved the dismissal of De Leon
& Company, P.A. (“De Leon & Company”) as our independent registered
public accounting firm.
The
report of De Leon & Company on our financial statements for the fiscal year
ended December 31, 2006, did not contain an adverse opinion or disclaimer of
opinion, except that the report stated that it was prepared assuming that we
would continue as a going concern, as to which our recurring operating losses
raised substantial doubt. The reports were not modified as to uncertainty,
audit
scope, or accounting principles.
During
our fiscal years ended December 31, 2006 and December 31, 2007, we had no
disagreements with De Leon & Company on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of De Leon &
Company, would have caused De Leon & Company to make reference to the
subject matter of the disagreements in connection with its report on the
financial statements for the fiscal year ended December 31, 2006.
Effective
February 27, 2007, we engaged Rose, Snyder & Jacobs as our new independent
accountants. Rose, Snyder & Jacobs served as the independent public
accounting firm for our wholly owned subsidiary, Organic To Go, Inc., for the
fiscal years ended December 31, 2006 and December 31, 2005. During our two
most
recent fiscal years preceding our engagement of Rose, Snyder & Jacobs,
Organic To Go Food Corporation did not consult with Rose, Snyder & Jacobs
regarding either: (1) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements; or (2) any matter that was either
the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304
of
Regulation S-K) or a reportable event (as described in paragraph (a)(1)(v)
of
Item 304 of Regulation S-K).
We
provided De Leon & Company with a copy of our Current Report on Form 8-K
filed with the SEC on February 29, 2007, announcing the change in certifying
accountants, and requested that De Leon & Company furnish us with a letter
addressed to the SEC stating whether it agreed with the statements made by
us
regarding De Leon & Company in the Form 8-K. A copy of De Leon &
Company’s letter to the SEC, dated March 7, 2007, was filed as Exhibit 16.1 to
our Current Report on Form 8-K filed with the SEC on March 9, 2007.
The
validity of the securities offered hereby has been passed upon for us by Loeb
& Loeb LLP.
EXPERTS
Our financial
statements for the periods ended December 31, 2006 and 2007 have been included
in this prospectus in reliance upon the report of Rose, Snyder & Jacobs,
independent auditors, appearing in this registration statement, and their
authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are a
public company and file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any document we file
at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C.
20549. You can request copies of these documents by writing to the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
more information about the operation of the public reference room. Our filings
are also available, at no charge, to the public at http://www.sec.gov
.
ORGANIC
TO GO FOOD CORPORATION
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Report
of Independent Registered Accounting Firm
|
|
F-2
|
|
|
|
Balance
Sheets
|
|
F-3
|
|
|
|
Statements
of Operations
|
|
F-4
|
|
|
|
Statement
of Stockholders’ Deficit
|
|
F-5
|
|
|
|
Statements
of Cash Flows
|
|
F-6
|
|
|
|
Notes
to Financial Statements
|
|
F-7
|
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders
Organic
To Go Food Corporation
We
have
audited the accompanying consolidated balance sheets of Organic To Go Food
Corporation as of December 31, 2006 and 2007, and the related consolidated
statements of operations, stockholders’ equity, and cash flows for the years
ended December 31, 2006 and 2007. These financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether
the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures
that
are appropriate in the circumstances, but not for the purpose of expressing
an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Organic To Go Food Corporation
as
of December 31, 2006 and 2007, and the results of their operations and their
cash flows for the years ended December 31, 2006 and 2007, in conformity with
accounting principles generally accepted in the United States of
America.
/s/
Rose,
Snyder & Jacobs
A
Corporation of Certified Public Accountants
Encino,
California
March
17,
2008
Organic
To Go Food Corporation and its wholly-owned subsidiary, Organic To
Go,
Inc.
|
Consolidated
Balance Sheets
|
(in
thousands, except share
amounts)
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2006
|
|
2007
|
|
Current
assets
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
865
|
|
$
|
668
|
|
Accounts
receivable, net of allowance of $54 and $47
|
|
|
365
|
|
|
1,099
|
|
Inventory
|
|
|
236
|
|
|
845
|
|
Prepaid
expenses and other current assets
|
|
|
189
|
|
|
489
|
|
Total
current assets
|
|
|
1,655
|
|
|
3,101
|
|
Property
and equipment, net
|
|
|
2,148
|
|
|
5,465
|
|
Identifiable
intangible assets, net
|
|
|
851
|
|
|
3,853
|
|
Deposits
and other assets
|
|
|
623
|
|
|
521
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
5,277
|
|
$
|
12,940
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,337
|
|
$
|
2,040
|
|
Accrued
liabilities
|
|
|
881
|
|
|
780
|
|
Current
portion of notes payable, net of discount
|
|
|
6,281
|
|
|
1,474
|
|
Current
portion of capital lease obligations
|
|
|
50
|
|
|
463
|
|
Total
current liabilities
|
|
|
8,549
|
|
|
4,757
|
|
Deferred
rent
|
|
|
-
|
|
|
52
|
|
Notes
payable, net of current portion
|
|
|
592
|
|
|
1,044
|
|
Capital
lease obligations, net of current portion
|
|
|
137
|
|
|
440
|
|
Total
liabilities
|
|
|
9,278
|
|
|
6,293
|
|
Stockholders'
equity (deficit)
|
|
|
|
|
|
|
|
Preferred
Stock; $0.001 par value; 9,670,000 and 10,000,000 shares authorized,
9,670,000 and no shares issued and outstanding
|
|
|
8 |
|
|
- |
|
Common
stock and additional paid-in capital; $0.001 par value; 15,100,000
and
500,000,000 shares authorized; 3,454,910 and 27,758,326 shares issued
and
outstanding
|
|
|
10,414
|
|
|
33,215
|
|
Accumulated
deficit
|
|
|
(14,423
|
)
|
|
(26,568
|
)
|
Total
stockholders' equity (deficit)
|
|
|
(4,001
|
)
|
|
6,647
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity (deficit)
|
|
$
|
5,277
|
|
$
|
12,940
|
|
Organic
To Go Food Corporation and its wholly-owned subsidiary, Organic To Go,
Inc.
Consolidated
Statements of Operations
(in
thousands, except per share amounts)
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
Sales
|
|
$
|
9,663
|
|
$
|
15,902
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
4,876
|
|
|
7,361
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
4,787
|
|
|
8,541
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
10,483
|
|
|
16,075
|
|
Depreciation
and amortization
|
|
|
1,206
|
|
|
4,008
|
|
Loss
from operations
|
|
|
(6,902
|
)
|
|
(11,542
|
)
|
|
|
|
|
|
|
|
|
Interest
income (expense), net
|
|
|
(1,064
|
)
|
|
(603
|
)
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(7,966
|
)
|
|
(12,145
|
)
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(7,966
|
)
|
$
|
(12,145
|
)
|
|
|
|
|
|
|
|
|
Net
loss per share - basic and diluted
|
|
$
|
(2.78
|
)
|
$
|
(0.57
|
)
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
2,868
|
|
|
21,136
|
|
Organic
To Go Food Corporation and its wholly-owned subsidiary, Organic To Go,
Inc.
Consolidated
Statement of Stockholders' Equity (Deficit)
(in
thousands, except share amounts)
|
|
Series A, B & C
Preferred Stock
|
|
Common Stock and
Additional Paid-in
Capital
|
|
Accumulated
|
|
Total
Stockholders'
Equity
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Deficit
|
|
(Deficit)
|
|
Balance
at December 31, 2005
|
|
|
2,988,683
|
|
$
|
4
|
|
|
2,942,402
|
|
$
|
4,367
|
|
$
|
(6,457
|
)
|
$
|
(2,086
|
)
|
Issuance
of Series C Preferred Stock and warrants for cash and conversion
of notes
payable
|
|
|
2,664,153
|
|
|
4
|
|
|
|
|
|
4,477
|
|
|
|
|
|
4,481
|
|
Issuance
of warrants with borrowings
|
|
|
|
|
|
|
|
|
|
|
|
1,476
|
|
|
|
|
|
1,476
|
|
Stock
issue costs
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
(32
|
)
|
Redemption
of common stock for cash
|
|
|
|
|
|
|
|
|
(132,961
|
)
|
|
(2
|
)
|
|
|
|
|
(2
|
)
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
89,463
|
|
|
128
|
|
|
|
|
|
128
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,966
|
)
|
|
(7,966
|
)
|
Balance
at December 31, 2006
|
|
|
5,652,836
|
|
$
|
8
|
|
|
2,898,904
|
|
$
|
10,414
|
|
$
|
(14,423
|
)
|
$
|
(4,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of preferred stock into common stock
|
|
|
(5,652,836
|
)
|
|
(8
|
)
|
|
5,734,769
|
|
|
8
|
|
|
|
|
|
-
|
|
Conversion
of bridge notes into common stock
|
|
|
|
|
|
|
|
|
4,629,340
|
|
|
4,225
|
|
|
|
|
|
4,225
|
|
SP
Holding Corporation shares outstanding at merger
|
|
|
|
|
|
|
|
|
1,126,659
|
|
|
(15
|
)
|
|
|
|
|
(15
|
)
|
Issuance
of common shares and warrants for cash
|
|
|
|
|
|
|
|
|
12,137,418
|
|
|
19,059
|
|
|
|
|
|
19,059
|
|
Stock
issue costs
|
|
|
|
|
|
|
|
|
|
|
|
(1,875
|
)
|
|
|
|
|
(1,875
|
)
|
Issuance
of common shares in connection with acquisition of assets
|
|
|
|
|
|
|
|
|
685,224
|
|
|
1,084
|
|
|
|
|
|
1,084
|
|
Issuance
of common shares upon exercise of warrants
|
|
|
|
|
|
|
|
|
546,012
|
|
|
-
|
|
|
|
|
|
-
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
315
|
|
|
|
|
|
315
|
|
Net
loss for the year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,145
|
)
|
|
(12,145
|
)
|
Balance
at December 31, 2007
|
|
|
-
|
|
$
|
-
|
|
|
27,758,326
|
|
$
|
33,215
|
|
$
|
(26,568
|
)
|
$
|
6,647
|
|
Organic
To Go Food Corporation and its wholly-owned subsidiary, Organic To Go,
Inc.
Consolidated
Statements of Cash Flows
(in
thousands)
|
|
Year
ended December 31,
|
|
|
|
2006
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(7,966
|
)
|
$
|
(12,145
|
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization expense
|
|
|
1,206
|
|
|
4,008
|
|
Non-cash
interest expense
|
|
|
776
|
|
|
223
|
|
Stock-based
compensation expense
|
|
|
10
|
|
|
315
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(281
|
)
|
|
(734
|
)
|
Inventory
|
|
|
42
|
|
|
(521
|
)
|
Prepaid
expenses and other current assets
|
|
|
(123
|
)
|
|
(288
|
)
|
Accounts
payable
|
|
|
(245
|
)
|
|
576
|
|
Accrued
liabilities and deferred rent
|
|
|
431
|
|
|
(872
|
)
|
Other
|
|
|
133
|
|
|
(279
|
)
|
Net
cash used by operating activities
|
|
|
(6,017
|
)
|
|
(9,717
|
)
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchases
of property, equipment and other assets
|
|
|
(172
|
)
|
|
(2,934
|
)
|
Purchase
of intangible assets
|
|
|
(1,010
|
)
|
|
(4,276
|
)
|
Net
cash used by investing activities
|
|
|
(1,182
|
)
|
|
(7,210
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Principal
payments of notes payable
|
|
|
(264
|
)
|
|
(1,055
|
)
|
Payments
of capital lease obligations
|
|
|
(47
|
)
|
|
(266
|
)
|
Proceeds
from issuance of notes payable
|
|
|
5,918
|
|
|
868
|
|
Proceeds
from sale of preferred stock, net of issue costs
|
|
|
2,209
|
|
|
-
|
|
Redemption
of common stock
|
|
|
(2
|
)
|
|
-
|
|
Proceeds
from sale of common stock, net of issue costs
|
|
|
-
|
|
|
17,183
|
|
Net
cash provided by financing activities
|
|
|
7,814
|
|
|
16,730
|
|
Net
increase in cash and cash equivalents
|
|
|
615
|
|
|
(197
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
250
|
|
|
865
|
|
Cash
and cash equivalents, end of period
|
|
$
|
865
|
|
$
|
668
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
237
|
|
$
|
505
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
$
|
-
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Notes
payable converted into preferred stock
|
|
$
|
1,843
|
|
$
|
-
|
|
Preferred
stock converted into common stock
|
|
$
|
-
|
|
$
|
5,700
|
|
Notes
payable converted into common stock
|
|
$
|
-
|
|
$
|
4,225
|
|
Assets
purchased through issuance of common stock
|
|
$
|
-
|
|
$
|
1,084
|
|
Capital
lease obligations incurred
|
|
$
|
-
|
|
$
|
1,017
|
|
Notes
payable for assets purchased
|
|
$
|
-
|
|
$
|
225
|
|
Fixed
assets acquired under financing agreements
|
|
$
|
326
|
|
$
|
-
|
|
Organic
To Go Food Corporation and its wholly owned subsidiary, Organic To Go,
Inc.
Notes
to Consolidated Financial Statements
December
31, 2007
Organization
and business
-
Organic To Go Food Corporation, formerly SP Holding Corporation (“SP”) prior to
May 2007, and its wholly owned subsidiary Organic To Go, Inc. (“Organic” and
together with Organic To Go Food Corporation, collectively, the “Company”),
which was acquired in a reverse merger on February 12, 2007, provides convenient
Retail Cafes and delivery and catering facilities, which prepare and serve
“grab
and go” lunch, dinner, and breakfast foods and beverages prepared using organic
ingredients, whenever possible. The Company also distributes its products
through select wholesale accounts. In October 2006, Organic expanded its
catering operations in the California area by acquiring the assets of a catering
operation headquartered in Los Angeles, California, and in March 2007, it
expanded its catering operations by acquiring the assets of a catering operation
located in Seattle, Washington. In July, September and October 2007, the Company
further expanded its operations by acquiring the assets of one or two operating
locations, for a total of six locations in San Diego in three separate
transactions. At December 31, 2007, the Company operates five stores in
Washington and 18 stores in California.
Reverse
merger with public shell company in February 2007
-
Pursuant to the terms of an Agreement and Plan of Merger and Reorganization
by
and among Organic and SP, on February 12, 2007, all of the outstanding shares
of
Organic common and preferred stock were exchanged for shares of SP common stock
as determined by multiplying each such outstanding share of Organic stock by
the
exchange ratio of 0.69781 (the “Exchange Ratio”). In connection with the merger,
Organic convertible promissory bridge notes approximating $5.3 million
automatically converted into SP common stock. As a result, among other things,
Organic became a wholly owned subsidiary of SP. Outstanding Organic options,
warrants and purchase rights were converted into options, warrants and purchase
rights to purchase shares of SP common stock in accordance with the Exchange
Ratio. The closing of the merger was conditioned upon SP closing a private
placement offering of a minimum of eighty units (the “Units”) at a purchase
price of $50,000 per Unit for $4 million. Each Unit consists of (i) 40,000
shares of SP common stock and (ii) a warrant to purchase 8,000 shares of SP
common stock at an exercise price of $2.50 per share, exercisable for a period
of five years from the date of issuance. Consummation of the merger occurred
concurrently with completion of a private placement of 138 Units, for an
aggregate purchase price of approximately $6.9 million. Prior to the merger,
SP
was a non-operating “public shell” company. The merged company operates under
the name of Organic To Go Food Corporatoin.
From
an
accounting perspective, the merger transaction is considered a recapitalization
of Organic accompanied by the issuance of stock by Organic for the assets and
liabilities of SP, as a result of SP not having operations immediately prior
to
the merger, and following the merger, SP becoming an operating company.
Immediately following the merger and private placement, former SP stockholders
owned approximately 5% of the common stock of the merged company, former Organic
stockholders and convertible bridge note holders owned approximately 70% of
the
merged company, and the purchasers of Units owned approximately 25% of the
merged company. In addition, the board of directors and executive officers
of
the merged company was comprised of Organic directors and executive officers.
In
these circumstances, the merger transaction is accounted for as a capital
transaction rather than as a business combination, in that the transaction
is
equivalent to the issuance of stock by Organic for the assets and liabilities
of
SP, accompanied by a recapitalization. The accounting is identical to that
resulting from a reverse acquisition, except that no goodwill or other
intangible is recorded. All share and per share information presented and
disclosed in these financial statements have been Exchange Ratio adjusted.
Basis
of presentation and liquidity
- The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the
Company as a going concern. The Company has reported recurring losses and cash
used by operating activities, and at December 31, 2007 has a net working capital
deficiency and stockholders’ deficit that could raise doubt about its ability to
continue as a going concern. Since inception, the Company has funded its
operations and business development and growth through debt and equity
financings. In this regard, during 2006, the Company raised approximately $8.1
million pursuant to sales of debt and equity securities in connection with
its
private placement and subordinated debt offerings. Further, during the three
months ended March 31, 2007, proceeds of approximately $6.9 million were
received from the sale of equity securities in connection with the merger and
private placement, and approximately $5.3 million of notes payable were
converted into common shares. Additionally, during the three months ended June
30, 2007, proceeds of approximately $6.7 million were received from the sale
of
debt and equity securities. In October 2007, the Company closed its private
placement offering and issued approximately 3.2 million shares of Company common
stock and warrants to purchase approximately 1.5 million shares of Company
common stock. The aggregate gross proceeds raised by the Company were
approximately $5.7 million. Subsequent to December 31, 2007, the Company closed
a private placement offering in January 2008 and issued approximately 1.4
million shares of Company common stock and warrants to purchase approximately
0.6 million shares of Company common stock. The aggregate gross proceeds raised
by the Company were approximately $2.0 million. In February 2008, the Company
closed a private placement offering and issued approximately 7.1 million shares
of Company common stock and a warrant to purchase approximately 4.3 million
shares of Company common stock and a conditional warrant to purchase shares
of
Company common stock, which may only be exercised under certain circumstances.
The aggregate gross proceeds raised by the Company were approximately $10.0
million. Company management intends to continue to be engaged in additional
fund-raising activities to fund future capital expenditures, potential
acquisitions of businesses, and provide additional working capital. The
accompanying financial statements do not include any adjustments to reflect
the
possible future effects on the recoverability and classification of assets
or
the amounts and classifications of liabilities that could result should the
Company not continue as a going concern.
Use
of
estimates in the preparation of financial statements
-
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The more significant accounting estimates
inherent in the preparation of the Company's financial statements include
estimates as to the depreciable lives of property and equipment, recoverability
of receivables, valuation and recoverability of inventories, recoverability
of
long-lived assets, valuation of intangible assets and allocation of purchase
price, valuation of equity related instruments issued, and valuation allowance
for deferred income tax assets.
Cash
and cash equivalents
- The
Company considers all highly liquid investments purchased with maturities of
three months or less to be cash equivalents. The Company places its cash
balances with high credit quality financial institutions. At times, such
balances may be in excess of the FDIC insurance limit. At December 31, 2007,
approximately $675,000 was in excess of the FDIC limit.
Contingencies
-
Certain conditions may exist as of the date financial statements are issued,
which may result in a loss to the Company, but which will only be resolved
when
one or more future events occur or fail to occur. Company management and its
legal counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims
that
may result in such proceedings, the Company's legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein. If the assessment of a contingency indicates that it is probable that
a
liability has been incurred and the amount of the liability can be estimated,
then the estimated liability would be accrued in the Company's financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, together
with
an estimate of the range of possible loss if determinable would be disclosed.
Concentrations -
All
of
the Company’s operations are currently located in Washington and California. As
a result, the Company is sensitive to negative occurrences in markets where
the
Company is located, and particularly susceptible to adverse trends and economic
conditions including labor markets. In addition, given geographic concentration,
negative publicity regarding any of our operations in Washington or California
could have a material adverse effect on the Company’s business and operations,
as could other regional occurrences such as local strikes, earthquakes or other
natural disasters.
Fair
value of financial instruments
- The
Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities, the carrying amounts approximate fair value
due
to their short maturities. Amounts recorded for notes payable also approximate
fair value because current interest rates offered to the Company for debt of
similar maturities are substantially the same.
Accounts
receivable
- The
Company extends credit to some of its customers. Accounts receivable are
customer obligations due under normal trade terms. The Company performs
continuing credit evaluations of its customers’ financial condition. Management
reviews accounts receivable on a regular basis on contracted terms and how
recent payments have been received in order to determine estimates of amounts
that could potentially be uncollectible. The Company includes an estimate of
the
amount that is more likely than not to be uncollectible in its allowance for
doubtful accounts. Accounts uncollected are ultimately written off after all
reasonable collection efforts have occurred.
Inventory -
Inventory,
which consists primarily of food, beverages and packaging products, is stated
at
the lower of cost or market. Cost is determined by the first-in, first-out
method. In assessing the ultimate realization of inventories, Company management
makes judgments as to future demand requirements compared to current inventory
levels.
Property
and Equipment
-
Property and equipment is stated at cost. Additions and improvements that
significantly add to the productive capacity or extend the life of an asset
are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation
is
computed using the straight-line method over five to seven years for furniture,
fixtures, equipment and vehicles, and over three years for computer software
and
hardware. Leasehold improvements are amortized over the shorter of the lease
term or 10 years.
Identifiable
intangible assets
- In
connection with the acquisition in October 2006 of certain assets of a catering
business, the Company acquired certain identifiable intangible assets including
customer-based intangibles and a covenant not to compete received from the
sellers. This acquisition has been accounted for in accordance with Statement
of
Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No.
141”). Amounts allocated to intangible assets were identified by management and
have been valued on a number of factors based upon preliminary estimates. The
estimate of useful lives of each intangible asset was based on an analysis
by
management of all pertinent factors, and selected an estimated useful life
of up
to two years for each identifiable intangible asset. Customer based intangible
assets are amortized utilizing an accelerated method and non-compete intangible
assets are amortized on a straight-line basis. At December 31, 2007,
identifiable intangible assets were comprised of customer based intangible
assets of approximately $6.3 million, less accumulated amortization of $2.9
million, and non-compete intangible assets of approximately $589,000, less
accumulated amortization of approximately $157,000. Amortization expense for
these intangible assets will approximate $3.8 million in 2008 and $117,000
in
2009.
Statement
of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets,” (“SFAS No. 142”) requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net discounted cash
flows expected to be generated by the asset or other valuation methods. If
such
assets are considered to be impaired, impairment to be recognized is measured
by
the amount by which the carrying amount of the assets exceeds the asset’s fair
value.
Impairment
of long-lived assets
-
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Impairment of long-lived assets would be recognized in the event
that the net book values of such assets exceed the future undiscounted cash
flows attributable to such assets.
Deferred
debt issue costs
- The
Company capitalizes costs incurred in connection with borrowings. These costs
are amortized as an adjustment to interest expense over the life of the
borrowing. Deferred debt issue costs are included in other assets and were
approximately $386,000 and $0 at December 31, 2006 and 2007,
respectively.
Debt
discount
- The
Company records the fair value of warrants issued with debt securities as a
debt
discount, which is amortized as an adjustment to interest expense over the
life
of the borrowing.
Revenue
recognition
-
Revenues are recognized at the point of sale at retail locations or upon
delivery of the product for delivery and wholesale transactions.
Cost
of sales
- Cost
of sales includes the cost of food and paper products.
Pre-operating
costs
- Costs
incurred in connection with start-up and promotion of new store openings are
expensed as incurred.
Advertising
and promotion
-
Advertising and promotion costs are expensed as incurred. Approximately $671,000
and $1.2 million was expensed in 2006 and 2007, respectively.
Income
taxes
- The
Company accounts for income taxes in accordance with SFAS No. 109, “Accounting
for Income Taxes,” which requires recognition of deferred tax assets and
liabilities for expected future tax consequences of events that have been
included in financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory
tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to amounts expected to be realized. The Company continues
to
provide a full valuation allowance to reduce its net deferred tax asset to
zero,
inasmuch as Company management has not determined that realization of deferred
tax assets is more likely than not.
Stock-based
compensation
- Prior
to January 1, 2006, the Company accounted for employee stock option grants
in
accordance with APB No. 25, and adopted the disclosure-only provisions of SFAS
No. 123, “Accounting for Stock-Based Compensation,” amended by SFAS No. 148,
“Accounting for Stock-Based Compensation - Transition and Disclosure.” In
December 2004, the FASB released a revision to SFAS No. 123, “Accounting for
Stock-Based Compensation” (“FAS 123R”). FAS 123R sets forth the accounting for
share-based payment transactions in which an enterprise receives employee
services in exchange for (a) equity instruments of the enterprise or (b)
liabilities that are based on the fair value of the enterprise's equity
instruments or that may be settled by the issuance of such equity instruments.
The statement eliminates the ability to account for share-based compensation
transactions using APB Opinion No. 25, “Accounting for Stock Issued to
Employees,” and generally requires instead that such transactions be accounted
for using a fair-value-based method, which requires recording an expense over
the requisite service period for the fair value of all options or warrants
granted to employees and consultants. The Company adopted FAS 123R effective
beginning January 1, 2006 using the modified prospective method.
The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS No. 123 and Emerging Task Force Issue No. 96-18,
“Accounting for Equity Instruments that are Issued to Other Than Employees for
Acquiring or in Conjunction with Selling Goods or Services.” Compensation
expense related to equity instruments issued to non-employees is recognized
as
the equity instruments vest.
Basic
and diluted net loss per share
- Basic
net loss per common share is computed by dividing net loss by the
weighted-average number of common shares outstanding during the period. Diluted
net loss per common share is determined using the weighted-average number of
common shares outstanding during the period, adjusted for the dilutive effect
of
common stock equivalents, consisting of shares that might be issued upon
exercise of common stock options, warrants or convertible promissory notes,
or
conversion of preferred stock shares. In periods where losses are reported,
the
weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive. In connection
with
the merger with SP in February 2007, all shares of Organic preferred stock
automatically converted into an equal number of Organic common shares and all
Organic common shares automatically converted into SP common shares at the
Exchange Ratio adjusted number of shares equal to .69781 SP common shares for
every one Organic common share. All share and per share amounts have been
Exchange Ratio adjusted. For purposes of determining the weighted average number
of common shares outstanding historical Organic shares outstanding have been
multiplied by the Exchange Ratio, which results in a fewer number of shares
outstanding than historical amounts. Computations of net loss per share for
2007
exclude approximately 7,458,035 shares issuable upon exercise of outstanding
and
issuable warrants, 3,050,938 shares of common stock issuable upon exercise
of
outstanding stock options, and 294,022 shares of common stock issuable upon
conversion of convertible notes payable. Computations of net loss per share
for
2006, exclude approximately 3,912,000 shares of common stock issuable upon
conversion of convertible notes payable, 5,653,000 shares issuable upon
conversion of preferred stock and 2,332,000 shares issuable upon exercise of
outstanding and issuable warrants. These common stock equivalents could have
the
effect of decreasing diluted net income per share in future periods.
Reclassifications
-
Certain reclassifications have been made to prior years’ financial statements to
conform with current year presentations. Such reclassifications had no effect
on
stockholders’ equity, net loss or net increase in cash and cash
equivalents.
Recent
accounting pronouncements
- In
July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes”
(“FIN No. 48”),
which prescribes a recognition threshold and measurement process for recording
in the financial statements uncertain tax positions taken or expected to be
taken in a tax return. Additionally, FIN No. 48 provides guidance on
the recognition, classification, accounting in interim periods and disclosure
requirements for uncertain tax positions. The accounting provisions of
FIN No. 48 were effective for the Company beginning January 1,
2007, the adoption of which did not have a significant effect on its results
of
operations or financial position.
In
October 2006, the FASB issued FASB Staff Position No. 123(R)-5, “Amendment of
FASB Staff Position FAS 123(R)-1” (“FSP 123(R)-5”) FSP 123(R)-5 amends FSP
123(R)-1 for equity instruments that were originally issued as employee
compensation and then modified, with such modification made to the terms of
the
instrument solely to reflect an equity restructuring that occurs when the
holders are no longer employees. In such circumstances, no change in the
recognition or the measurement date of those instruments will result if both
of
the following conditions are met: (a) there is no increase in fair value of
the
award (or the ratio of intrinsic value to the exercise price of the award is
preserved, that is, the holder is made whole), or the antidilution provision
is
not added to the terms of the award in contemplation of an equity restructuring;
and (b) all holders of the same class of equity instruments (for example, stock
options) are treated in the same manner. The adoption of FSP 123(R)-5 did not
have a significant impact on the Company’s results of operations or financial
position.
In
December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2 “Accounting
for Registration Payment Arrangements” (“FSP EITF 00-19-2”), which addresses an
issuer’s accounting and disclosures relating to registration payment
arrangements. In connection with issuance of Units in the private placement
in
February 2007, the Company has registered the shares underlying the Units.
In
accordance with FSP EITF 00-19-2, the registration payment arrangements are
accounted for as an instrument separate and apart from the related securities
and will be accounted for in accordance with Statement of Financial Accounting
Standards No. 5 “Accounting for Contingencies,” accruing a liability if payment
is probable and the amount can be reasonably estimated.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - including an amendment of FASB
Statement No. 115,” which is effective for fiscal years beginning after November
15, 2007. This statement permits entities to choose to measure many financial
instruments and certain other items at fair value. This statement also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. Unrealized gains and losses on items
for which the fair value option is elected would be reported in
earnings.
In
December 2007, the FASB issued SFAS No. 141(revised 2007), Business
Combinations (“SFAS
No. 141R”), which revises current purchase accounting guidance in SFAS
No. 141, Business
Combinations.
SFAS
No. 141R requires most assets acquired and liabilities assumed in a
business combination to be measured at their fair values as of the date of
acquisition. SFAS No. 141R also modifies the initial measurement and
subsequent remeasurement of contingent consideration and acquired contingencies,
and requires that acquisition related costs be recognized as expense as incurred
rather than capitalized as part of the cost of the acquisition. SFAS
No. 141R is effective for fiscal years beginning after December 15,
2008 (the Company’s fiscal 2009) and is to be applied prospectively to business
combinations occurring after adoption. The impact of SFAS No. 141R on the
Company’s consolidated financial statements will depend on the nature and extent
of the Company’s future acquisition activities.
In
December 2007, the FASB issued SFAS No. 160. “Noncontrolling Interests in
Consolidated Financial Statements-and Amendment of ARB No. 51.” SFAS 160
establishes accounting and reporting standards pertaining to ownership interests
in subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent’s ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. This statement also
establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 is effective for fiscal years beginning on or after December
15, 2008. Management has reviewed this new standard and believes that it
has no impact on the financial statements of the Company at this time, however,
it may apply in the future.
Note
2. Inventories
Inventories at December 31, consist of the following (in thousands):
|
|
2006
|
|
2007
|
|
Food
and beverages
|
|
$
|
191
|
|
$
|
820
|
|
Paper
products
|
|
|
45
|
|
|
25
|
|
|
|
$
|
236
|
|
$
|
845
|
|
Note
3. Property and Equipment
Property
and equipment at December 31, consist of the following (in
thousands):
|
|
2006
|
|
2007
|
|
Leasehold
improvements
|
|
$
|
1,512
|
|
$
|
2,389
|
|
Furniture,
fixtures and equipment
|
|
|
1,452
|
|
|
3,878
|
|
Vehicles
|
|
|
391
|
|
|
1,156
|
|
Leased
equipment
|
|
|
259
|
|
|
686
|
|
|
|
|
3,614
|
|
|
8,109
|
|
Less
accumulated depreciation and amortization
|
|
|
1,466
|
|
|
2,644
|
|
|
|
$
|
2,148
|
|
$
|
5,465
|
|
Amortization
of leased equipment is included in depreciation and amortization
expense.
Note
4. Notes Payable
Notes
payable consist of the following (in thousands):
|
|
December
31,
|
|
December
31,
|
|
|
|
2006
|
|
2007
|
|
Notes
payable, 6% to 25% interest collateralized by vehicles and
equipment
|
|
$
|
323
|
|
$
|
141
|
|
Convertible
note payable, 8.25% interest, collateralized by substantially all
assets
|
|
|
759
|
|
|
759
|
|
Notes
payable, 7.75% interest, collateralized by certain assets, due April
2010
|
|
|
418
|
|
|
418
|
|
Convertible
notes payable, 8% interest, due June 2008
|
|
|
525
|
|
|
-
|
|
Note
payable, 9.25% interest, due March 2009
|
|
|
-
|
|
|
97
|
|
Note
payable, 8.0% interest, due October 2009
|
|
|
-
|
|
|
54
|
|
Notes
payable, 18% interest, due May 2008
|
|
|
|
|
|
500
|
|
Convertible
notes payable, 8% interest, due June 2007
|
|
|
5,275
|
|
|
-
|
|
Note
payable, 9% interest, due December 2006
|
|
|
275
|
|
|
-
|
|
Notes
payable, 10.5% interest, due December 2009
|
|
|
-
|
|
|
549
|
|
Total
notes payable
|
|
|
7,575
|
|
|
2,518
|
|
Less:
unamortized original discount
|
|
|
(702
|
)
|
|
-
|
|
Less:
current portion of notes payable
|
|
|
(6,281
|
)
|
|
(1,474
|
)
|
Notes
payable, net of current portion
|
|
$
|
592
|
|
$
|
1,044
|
|
The
Company has a borrowing agreement with a vendor pursuant to which the Company
has had outstanding borrowings of approximately $759,000 since March 31, 2006.
The note payable requires monthly payments of interest at the prime rate plus
1%
(9.25% at December 31, 2006, and 8.25% at December 31, 2007), with the principal
due in September 2007. The note is convertible at the note holder’s option into
shares of the Company’s common stock at an Exchange Ratio adjusted conversion
price of approximately $1.68 per share. If the note was not converted in full
on
or before the maturity date, the then outstanding principal balance and accrued
interest automatically converts into a term note, which shall provide for
thirty-six equal monthly payments and a final maturity date in September 2010.
Since the note was not converted or repaid on or prior to the maturity date
the
original note has been replaced with a 36 month term loan with interest at
prime
plus 1%. The note is collateralized by a pledge of Company assets.
During
2006, the Company received approximately $4.3 million through the issuance
of
approximately $3.8 million of convertible promissory notes bearing interest
at
8% due June 2007 (the “Bridge Notes”) and $525,000 of convertible promissory
notes bearing interest at 8% due June 2008 (the “2 year Bridge Notes”) and
warrants to purchase shares of Company common stock (together with the notes,
the “Bridge Securities”). The estimated fair value of the warrants of
approximately $768,000 was recorded as an original issue discount to be
amortized to interest expense on a straight-line basis over the 7-month term
of
the notes. Additionally, in 2006, the Company received approximately $1.6
million through the issuance of convertible promissory notes bearing interest
at
24%, approximately $1.5 million of which were converted at the holders’ option
into bridge notes and the remaining notes were repaid. Warrants were issued
in
connection with the short-term loans, the fair value of which was expensed
over
the debt term prior to conversion. Bridge Notes of approximately $5.8 million
were convertible at the note holders’ option, or in certain circumstances
automatically, into shares of the Company’s common stock at an Exchange Ratio
adjusted conversion price of approximately $1.68 per share. In February 2007,
in
connection with the closing of the merger with SP, the Bridge Notes of
approximately $5.3 million were automatically converted into common stock.
A
portion of the bridge known as “Satellite Note” of $525,000 was not converted.
The Satellite Note principal was paid in December 2007 with the proceeds from
the issuance of two promissory notes payable in the amounts of $258,500 and
$291,500, each bearing interest at 10.5% per annum, both due on December 12,
2009. The holder of each note can elect to require payment in full on December
12, 2008.
During
2006, the Company borrowed $275,000 from one of the Company’s equity and bridge
note investors pursuant to a promissory note payable of $275,000, bearing
interest at 9% per annum, which was outstanding and due at December 31, 2006,
and which was repaid in full during the three months ended March 31, 2007.
During
2007, the Company borrowed $500,000 from three of the Company’s equity and
bridge note investors pursuant to a promissory note payable of $500,000, bearing
interest at 18% per annum, all of which are due on May 15, 2008.
Also
during 2007, as part of asset purchase agreements, the Company issued to the
sellers promissory notes of $150,000 and $75,000, bearing interest at 9.25%
and
8% per annum, payable monthly and due on March 11, 2009 and October 10, 2010
respectively.
Future
minimum principal payments on notes payable at December 31, 2007 are as follows
(in thousands):
2008
|
|
$
|
1,474
|
|
2009
|
|
|
856
|
|
2010
|
|
|
188
|
|
|
|
$
|
2,518
|
|
Note
5. Reverse Merger with Public Shell Company, Private Placement and Stockholders’
Equity
Reverse
merger
- On
February 12, 2007, pursuant to an Agreement and Plan of Merger and
Reorganization by and among Organic and SP, Organic became a wholly owned
operating subsidiary of SP. Those persons holding shares of Organic capital
stock, warrants and options to purchase shares of Organic capital stock, and
certain promissory notes convertible into shares of Organic capital stock,
received shares of SP common stock and warrants and options to purchase shares
of SP common stock.
Under
the
terms of the merger, each share of Organic common stock and Organic preferred
stock (which included certain issued and outstanding convertible promissory
notes on an “as converted” basis) outstanding immediately prior to the closing
of the merger was converted into the right to receive 0.69781 shares of SP
common stock. Under the terms of the merger, each then convertible promissory
note whose holder had not previously elected to convert to Organic common stock,
became convertible for shares of SP common stock, provided that (i) the face
value of each such convertible note remained unchanged, (ii) each such
convertible note became convertible for such number of shares of SP common
stock
as was determined by multiplying the number of Organic shares underlying said
convertible note by the Exchange Ratio, with the resulting product rounded
down
to the nearest whole number of shares, and (ii) the per share conversion price
for each convertible note determined by dividing the conversion price per share
for said convertible note by the Exchange Ratio, with the resulting quotient
rounded down to the nearest whole cent.
Under
the
terms of the merger, each then outstanding option and warrant to purchase shares
of Organic common stock, whether or not exercisable, was converted into an
option or warrant to purchase shares of SP common stock upon the same terms
and
conditions as the corresponding Organic options and warrants, provided that
(i)
each such Organic option and warrant related to such number of shares of SP
common stock as was determined by multiplying the number of shares of Organic
common stock underlying such Organic option or warrant by the Exchange Ratio,
with the resulting product rounded down to the nearest whole number of shares,
and (ii) the per share exercise price for the newly issued SP options or
warrants was determined by dividing the exercise price per share of such Organic
options or warrants by the Exchange Ratio, with the resulting quotient rounded
down to the nearest whole cent.
Private
placement
-
Consummation of the merger occurred concurrently with the completion of a
private placement of 138 Units for an aggregate of approximately $6.9 million,
issued by SP. Each Unit is comprised of (i) 40,000 shares of SP common stock,
and (ii) a detachable five-year warrant to purchase 8,000 shares of SP common
stock, at an exercise price of $2.50 per share (the “SP Warrants”). The purchase
price per Unit was $50,000. Pursuant thereto the Company issued to the investors
an aggregate of 5,522,992 shares of SP common stock and SP Warrants to purchase
1,104,598 shares of Company common stock. Organic engaged Burnham Hill Partners,
a division of Pali Capital, Inc., as the placement agent (the “Placement Agent”)
in connection with the Private Placement. Pursuant to the terms of the
engagement with the Placement Agent, the Placement Agent, or its registered
assignees or designees, received a cash commission of 10% of the gross proceeds
from the Units sold in the Private Placement. In addition, the Company issued
to
the Placement Agent or its registered assignees or designees, SP Warrants (the
“Placement Agent Warrants”) to purchase up to 888,899 shares of SP common stock.
The Placement Agent Warrants are exercisable at any time at a price equal to
110% of the price paid by the investors in the private placement, on a
net-issuance or cashless basis. The Placement Agent Warrants had registration
rights similar to the registration rights afforded to the holders of SP
Warrants. The Placement Agent Warrants are fully vested and have a term of
five
years.
The
issuance of SP common stock to the Organic stockholders and the investors is
intended to be exempt from registration under the Securities Act of 1933, as
amended (the “Securities Act”), pursuant to Section 4(2) thereof. As such, the
SP common stock received by the Organic stockholders pursuant to the merger
and
issued to the investors pursuant to the Private Placement may not be offered
or
sold in the United States unless they are registered under the Securities Act,
or an exemption from the registration requirements of the Securities Act is
available. In April 2007, the Company filed a registration statement covering
these securities with the SEC. The registration statement was declared effective
in May 2007.
During
the three months ended June 30, 2007, the Company closed a private placement
with select accredited investors related to the sale and issuance of an
aggregate of 3,350,000 shares of common stock of the Company and warrants to
purchase an aggregate of 1,340,000 shares of common stock. The aggregate gross
proceeds raised by the Company were approximately $6.7 million. Each share
was
sold to the investors at $2.00 per share. The warrants will expire five years
from the date of issue and may be exercised at $2.50 per share, subject to
adjustment in certain circumstances. In connection with the private placement,
the Company paid its placement agents an aggregate cash commission equal to
$84,000. In addition, the Company reimbursed the placement agents $40,000 for
costs and expenses incurred in connection with the private placement, and issued
to the placement agents five-year warrants to purchase an aggregate of 21,000
shares of common stock, at an exercise price of $2.50 per share, subject to
adjustment in certain circumstances. The private placement was conducted
pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated
thereunder.
In
October 2007, the Company entered into a securities purchase agreement with
select accredited investors related to the sale of Company common stock and
warrants to purchase shares of Company common stock. The purchase price of
the
common stock was $1.75 per share. The Company closed its private placement,
pursuant to which it issued an aggregate of 3,264,426 shares of Company common
stock and warrants to purchase an aggregate of 1,468,990 shares of Company
common stock at an exercise price of $2.50 per share with a five year term.
The
aggregate gross proceeds raised by the Company were approximately $5.7 million.
In connection with the private placement, the Company paid to certain finders
an
aggregate cash commission equal to $140,000 and warrants to purchase an
aggregate of 35,000 shares of Company common stock at an exercise price of
$2.50
per share with a five year term.
In
connection with the placements, the Company entered into registration rights
agreements requiring the Company to file with the SEC an initial registration
statement covering the resale of the common stock and the common stock issuable
upon exercise of the warrants within 30 days following the closing of each
such
private placement. In addition, the Company was required to cause each
registration statement to be declared effective by the SEC 90 to 180 days
following the close of the respective private placement, depending on certain
conditions. The Company’s registration statements were declared effective by the
SEC within the prescribed time limits.
Authorized
shares
- SP is
currently authorized under its Amended and Restated Certificate of Incorporation
to issue 500,000,000 shares of its common stock and 10,000,000 shares of its
preferred stock. Prior to the closing of the merger and private placement,
there
were 439,403 shares of SP common stock issued and outstanding and 60 shares
of
SP preferred stock issued and outstanding. At the closing of the merger and
private placement and after giving effect thereto, there were 19,595,671 shares
of SP common stock issued and outstanding and no shares of preferred stock
issued and outstanding (the 60 shares of SP preferred stock issued and
outstanding prior to the merger having automatically converted into 687,271
shares of SP common stock upon closing of the merger).
Warrants
- During
the three months ended March 31, 2007, in conjunction with various financing
related agreements, including issuances of debt and equity securities, the
Company issued warrants for a term of approximately 5 years to purchase shares
of the Company’s common stock at exercise prices ranging from $1.17 to $1.38 per
share for approximately 4,165,000 shares and at $2.50 per share for
approximately 1,105,000 shares. During the three months ended June 30, 2007,
the
Company issued warrants at exercise prices ranging from $1.17 to $2.50 per
share
for approximately 1,371,000 shares and 822,270 shares were redeemed. During
the
three months ended December 31, 2007, the Company issued warrants at an exercise
price of $2.50 per share for approximately 1,639,000 shares. As of December
31,
2007, there were a total of 7,458,035 warrants outstanding.
Stock
options -
Commencing in 2006, the Company from time to time granted to certain of its
directors, officers and employees options to purchase shares of the Company’s
common stock. Options have a term of 10 years from the date of grant, with
exercise prices established at no less than the estimated fair market value
of
the Company’s common stock on the date of grant. The Company determines the fair
market value of options granted using the Black-Scholes option-pricing model.
The determination of the fair market value of stock-based awards on the date
of
grant using an option pricing model is affected by the stock price as well
as
assumptions regarding a number of subjective variables. These variables include,
among others, the expected life of the award, expected stock price volatility
over the term of the award and actual and projected exercise behaviors. Although
the fair value of stock-based awards is determined in accordance with SFAS
123R
and SAB 107, the Black-Scholes option pricing model requires the input of highly
subjective assumptions, and other reasonable assumptions could provide differing
results. The weighted average fair value of stock options granted during the
year ended December 31, 2006 and 2007 was approximately $0.21 and $0.72 per
share, respectively determined using the Black-Scholes option pricing model
with
the following assumptions: dividend yield of 0%; expected volatility of 50%
(based on the volatilities of common stock of comparable public companies);
risk-free interest rates of approximately 5.1% and 4.4 %, and estimated lives
of
5 years.
Compensation
expense recognized for stock options approximated $60,000 and $315,000 for
the
years ended December 31, 2006 and 2007, respectively. As of December 31, 2007,
there was approximately $1.5 million of unrecognized compensation cost related
to unvested stock options granted, which is expected to be recognized as expense
over a period of approximately 3 years. The intrinsic value of stock options
outstanding and exercisable is based on the close/last price for the Company’s
common stock as reported by the OTCBB of $1.43 per share at December 31, 2006
and $1.50 at December 31, 2007, and is calculated by aggregating the difference
between the closing price and the exercise price of vested and unvested stock
options which have an exercise price less than the closing price. The following
summarizes activity for stock options (intrinsic value in thousands):
|
|
Outstanding
|
|
Weighted
average
exercise price
|
|
Weighted
average
remaining life in
years
|
|
Aggretate
intrinsic value
|
|
Balance
at January 1, 2005
|
|
-
|
|
|
|
|
|
|
|
Granted
|
|
|
655,545
|
|
$
|
0.54
|
|
|
10.0
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
655,545
|
|
|
0.54
|
|
|
9.4
|
|
$
|
585
|
|
Granted
|
|
|
2,827,965
|
|
|
1.55
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
(432,572
|
)
|
|
1.98
|
|
|
|
|
|
|
|
Balance
at December 31, 2007
|
|
|
3,050,938
|
|
$
|
1.50
|
|
|
8.2
|
|
$
|
762
|
|
Exercisable
at December 31, 2007
|
|
|
467,026
|
|
$
|
0.70
|
|
|
8.7
|
|
$
|
435
|
|
Additional information regarding
stock options outstanding as of December 31, 2007, is as follows:
|
|
Options outstanding
|
|
Options exercisable
|
|
Range of exercise
prices
|
|
number
|
|
Weighted
average
exercise
price
|
|
Weighted
average
remaining
life in years
|
|
number
|
|
Weighted
average
exercise
price
|
|
$0.17
|
|
|
349,254
|
|
$
|
0.17
|
|
|
8.2
|
|
|
282,773
|
|
$
|
0.17
|
|
$0.34
|
|
|
118,628
|
|
|
0.34
|
|
|
8.5
|
|
|
44,485
|
|
|
0.34
|
|
$1.38
|
|
|
1,246,674
|
|
|
1.38
|
|
|
9.1
|
|
|
-
|
|
|
|
|
$1.43
- $1.48
|
|
|
369,781
|
|
|
1.47
|
|
|
9.7
|
|
|
110,080
|
|
|
1.43
|
|
$1.60
- 1.92
|
|
|
355,000
|
|
|
1.80
|
|
|
9.7
|
|
|
-
|
|
|
|
|
$2.23
|
|
|
461,601
|
|
|
2.23
|
|
|
9.6
|
|
|
-
|
|
|
|
|
$3.60
|
|
|
150,000
|
|
|
3.60
|
|
|
9.5
|
|
|
29,688
|
|
|
3.60
|
|
|
|
|
3,050,938
|
|
$
|
1.50
|
|
|
|
|
|
467,026
|
|
$
|
0.70
|
|
In
October 2006, pursuant to terms of an asset purchase agreement, the Company
acquired for $1.0 million cash, among other things, all inventory, furniture,
fixtures, equipment, customer lists, leasehold improvements, and owned vehicles
used in connection with a catering business in California. Other than the notes
payable on the vehicles, no liabilities were assumed by the Company. The Company
also entered in to a one year lease agreement for the building owned by the
seller. The total purchase price of approximately $1.0 million, including
related acquisition costs, was allocated to assets acquired based on relative
estimated fair values, which resulted in the majority being allocated to
customer based identifiable intangible assets, and which is summarized as
follows (in thousands):
Inventory
|
|
$
|
12
|
|
Furniture,
fixtures and equipment
|
|
|
29
|
|
Customer
based intangible assets
|
|
|
860
|
|
Covenant
not compete intangible asset
|
|
|
150
|
|
Note
payable assumed
|
|
|
(9
|
)
|
Total
|
|
$
|
1,042
|
|
In
March
2007, pursuant to terms of an asset purchase agreement, the Company acquired
for
cash of approximately $612,000, a $150,000 promissory note and 400,000 shares
of
its common stock, among other things, all inventory, furniture, fixtures,
equipment, leasehold improvements, customer lists and other intangible assets
used in connection with a Seattle-based catering business. Other than a
facilities lease and equipment lease, no liabilities were assumed by the
Company. The total purchase price approximates $1.2 million, and because
information known to exist as it pertains to estimates of fair values of
intangible assets, has been preliminarily allocated to assets acquired based
on
relative estimated fair values, which resulted in the majority being allocated
to customer based intangibles, and which is summarized as follows (in
thousands):
Inventory
|
|
$
|
32
|
|
Furniture,
fixtures, equipment and vehicles
|
|
|
160
|
|
Customer
based intangible assets
|
|
|
1,084
|
|
Liabilities
assumed
|
|
|
(42
|
)
|
Total
|
|
$
|
1,234
|
|
On
October 18, 2007, pursuant to terms an asset purchase agreement, the Company
acquired for $2.4 million cash, shares of Company common stock having a fair
value of $250,000 based on the closing price as of the date of the agreement,
$35,000 per month for 12 months from the closing date, $150,000 due 90 days
from
the closing date and another $150,000 due 120 days after the close, and upon
the
occurrence of certain events, additional shares of the Company having a fair
value of $50,000 based on the closing price as of the date of the agreement,
all
inventory, furniture, fixtures, equipment, customer lists, leasehold
improvements, and owned vehicles used in connection with a catering and retail
business operating three stores in San Diego, California. Other than the
Company’s assumption of the leases for the three locations, no other liabilities
were assumed. The total purchase price of approximately $3.0 million will be
allocated to assets acquired based on estimated fair values, which will result
in the majority being allocated to customer based identifiable intangible
assets.
Inventory
and other assets
|
|
$
|
90
|
|
Furniture,
fixtures, equipment and vehicles
|
|
|
210
|
|
Customer
based intangible assets
|
|
|
3,100
|
|
Total
|
|
$
|
3,400
|
|
|
|
2006
|
|
2007
|
|
Sales
|
|
$
|
16,414
|
|
$
|
20,189
|
|
Net
loss
|
|
$
|
(9,774
|
)
|
$
|
(11,040
|
)
|
Net
loss per share
|
|
$
|
(2.94
|
)
|
$
|
(0.39
|
)
|
In
July
2007, pursuant to terms of an asset purchase agreement, the Company acquired
for
approximately $375,000 cash, shares of Company common stock having a fair value
of approximately $163,000 based on the closing price as of the date of the
agreement, and $50,000 due 60 days from the date of the agreement, among other
things, all inventory, furniture, fixtures, equipment, customer lists, leasehold
improvements, and owned vehicles used in connection with a retail business
operating two stores in San Diego, California. No liabilities were assumed
by
the Company. The Company also entered in to a five-year lease agreement for
one
of the store locations from a landlord affiliated with the seller, and assumed
the lease for the other store location. The total purchase price of
approximately $600,000 has been preliminarily allocated to assets acquired
based
on estimated fair values, which resulted in the majority being allocated to
customer based identifiable intangible assets, and which is summarized as
follows (in thousands):
Inventory
and other assets
|
|
$
|
12
|
|
Furniture,
fixtures, equipment and vehicles
|
|
|
30
|
|
Customer
based intangible assets
|
|
|
558
|
|
Total
|
|
$
|
600
|
|
In
September 2007, pursuant to terms of an asset purchase agreement, the Company
acquired for approximately $266,000 cash, shares of Company common stock having
a fair value of approximately $100,000 based on the closing price as of the
date
of the agreement, $25,000 due in equal monthly payments within 90 days from
the
date of the agreement, and related acquisition costs of approximately $22,000,
among other things, all inventory, furniture, fixtures, equipment, customer
lists, leasehold improvements, and owned vehicles used in connection with a
retail business operating one store in San Diego, California. No liabilities
were assumed by the Company. The Company assumed the lease for the store
location. The total purchase price of approximately $415,000 has been
preliminarily allocated to assets acquired based on estimated fair values,
which
resulted in the majority being allocated to customer based identifiable
intangible assets, and which is summarized as follows (in thousands):
Inventory
(and other assets)
|
|
$
|
11
|
|
Furniture,
fixtures, equipment and vehicles
|
|
|
25
|
|
Customer
based intangible assets
|
|
|
379
|
|
Total
|
|
$
|
415
|
|
In
September 2007, pursuant to terms of an asset purchase agreement, the Company
acquired for approximately $381,000 cash and shares of Company common stock
having a fair value of approximately $48,000 based on the closing price as
of
the date of the agreement, all inventory, furniture, fixtures, equipment,
customer lists, leasehold improvements, and owned vehicles used in connection
with a retail business operating two stores in San Diego, California. No
liabilities were assumed by the Company. The Company also entered in to a
five-year lease agreement for one of the store locations from a landlord
affiliated with the seller, and assumed the lease for the other store location.
The total purchase price of approximately $430,000 has been preliminarily
allocated to assets acquired based on estimated fair values, which resulted
in
the majority being allocated to customer based identifiable intangible assets,
and which is summarized as follows (in thousands):
Inventory
and other assets
|
|
$
|
6
|
|
Furniture,
fixtures, equipment and vehicles
|
|
|
30
|
|
Customer
based intangible assets
|
|
|
394
|
|
Total
|
|
$
|
430
|
|
Note
7. Commitments and contingencies
The
Company leases its cafes, central kitchens and office facilities under
non-cancelable operating leases, some with renewal options. Rents are fixed
base
amounts, some with escalating rents and some with contingent rentals based
on
sales. Lease provisions also require additional payments for maintenance and
other expenses. Rent is expensed on a straight-line basis over the term of
the
lease. The difference between amounts paid and expensed is recorded as a
deferred credit. The Company also leases certain point-of-sale computer hardware
and software pursuant to capital leases. Subsequent to December 31, 2007, the
Company has entered into new leases for computer hardware and software,
furniture, fixtures and equipment in our cafés, which provide for additional
minimum future lease payments over their three year terms of approximately
$1.0
million including interest. Capital lease obligations are for terms ranging
from
two to five years with interest at 9% to 22%. At December 31, 2007, minimum
future annual lease obligations are as follows (in thousands):
|
|
Operating
|
|
Capital
|
|
2008
|
|
$
|
1,529
|
|
$
|
552
|
|
2009
|
|
|
1,168
|
|
|
261
|
|
2010
|
|
|
1,067
|
|
|
145
|
|
2011
|
|
|
981
|
|
|
88
|
|
2012
and thereafter
|
|
|
1,740
|
|
|
32
|
|
|
|
|
6,485
|
|
|
1,078
|
|
Less
amounts representing interest
|
|
|
|
|
|
(175
|
)
|
|
|
$
|
6,485
|
|
$
|
903
|
|
On
January 8, 2008, Esther Sanchez, a former employee of Organic To Go, Inc.,
our
wholly owned subsidiary, brought suit against us seeking damages in the Superior
Court of the State of California for the County of Los Angeles claiming wrongful
termination, sexual harassment and related causes of action in connection with
the termination of Ms. Sanchez’s employment with us. Our employment practices
liability insurer has agreed to provide a defense on our behalf, subject to
a
reservation of rights letter and the terms and conditions of its insurance
policy.
We
are
currently in mediation pursuant to the Standard Form of Agreement with Wheelihan
Construction, Inc. This matter arose out of tenant improvements made by
Wheelihan Construction, Inc. and its subcontractors at one of our retail
locations in San Diego, California. In connection with the matter, four
subcontractors/suppliers have commenced actions against us, Wheelihan
Construction, Inc. and other defendants.
From
time
to time, the Company is subject to various legal proceedings and claims that
may
arise in the ordinary course of business. Further, in the past, certain vendors
have taken legal action against the Company as a result of untimely payment
of
invoices. In some cases, the courts have stipulated judgment requiring the
Company to pay interest and comply with payment schedules. Company management
currently believes that resolution of such legal matters will not have a
material adverse impact on the Company’s financial statements. We are not a
party to any other material legal proceedings nor are we aware of any
circumstance that may reasonably lead a third party to initiate material legal
proceedings against us. In 2006, a former employee of the Company brought suit
against us. The matter was settled for an amount immaterial to the Company’s
financial results in June 2007.
Effective
January 1, 2007, the Company entered into an employment agreement with a
three-year term with its founder and Chief Executive Officer, pursuant to which
the executive officer shall receive a base salary at an annual rate of $225,000,
subject to annual increases as determined by the Company’s Board of Directors.
The Company’s Chief Executive Officer is also eligible for cash bonuses and
other typical employment benefits. In addition, effective upon the closing
of
the merger, the executive officer received 1,246,674 options to purchase shares
of the Company’s common stock at an exercise price of $1.38 per share, with a
term of 10 years from the date of grant. Options granted vest 25% after 12
months of employment, with the remainder vesting over the next 36 months,
subject to accelerated vesting in the event of a “Change in Control,” as defined
in the employment agreement, or in certain other circumstances. Under certain
departure circumstances, the executive officer could be eligible to receive
payments equal to one year’s salary and benefits.
Effective
February 7, 2008, the Company entered into an amended and restated employment
agreement with a three-year term with its founder and Chief Executive Officer,
pursuant to which the executive officer shall receive a base salary at an annual
rate of $250,000, subject to annual increases as determined by the Company’s
Board of Directors. The Company’s Chief Executive Officer is also eligible for
cash bonuses and other typical employment benefits.
Effective
January 14, 2008, the Company entered into an employment agreement with a
three-year term with its Chief Financial Officer, pursuant to which the
executive officer shall receive a base salary at an annual rate of $235,000,
subject to annual increases as determined by the Company’s Chief Executive
Officer. The Company’s Chief Financial Officer is also eligible for cash bonuses
and other typical employment benefits. In addition, the executive officer
received 300,000 options to purchase shares of the Company’s common stock at an
exercise price of $1.48 per share, with a term of 10 years from the date of
grant. Options granted vest 25% after 12 months of employment, with the
remainder vesting over the next 36 months, subject to accelerated vesting in
the
event of a “Change in Control,” as defined in the employment agreement, or in
certain other circumstances. Under certain departure circumstances, the
executive officer could be eligible to receive payments equal to six month’s
salary.
Note
8. Income taxes
Deferred
income taxes represent the net tax effects of temporary differences between
the
carrying amounts of assets and liabilities for financial reporting purposes
and
amounts used for income tax purposes. Significant components of the Company’s
deferred tax assets and liabilities and related valuation allowances as of
December 31 are as follows (in thousands):
Deferred
tax assets
|
|
2006
|
|
2007
|
|
Net
operating loss carryforwards
|
|
$
|
4,689
|
|
$
|
7,919
|
|
Property
and equipment
|
|
|
351
|
|
|
122
|
|
Intangible
assets
|
|
|
58
|
|
|
1,111
|
|
Other
|
|
|
112
|
|
|
262
|
|
Total
deferred tax assets
|
|
|
5,210
|
|
|
9,414
|
|
Valuation
allowance
|
|
|
(5,210
|
)
|
|
(9,414
|
)
|
Deferred
tax assets, net of valuation allowance.
|
|
$
|
-
|
|
$
|
-
|
|
The
Company has recorded no provision for income taxes due to net losses incurred.
A
valuation allowance has been recorded against deferred tax assets as it has
not
been determined that it is more likely than not that these deferred tax assets
will be realized. As of December 31, 2007, the Company has net operating loss
carryforwards of approximately $21.0 million and $12.0 million for federal
and
state income tax purposes, respectively, which expire beginning in 2024
(federal) and 2014 (state). Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards. Further, as a
result of ownership changes, the Company may be subject to annual limitations
on
the amount of net operating loss utilizable in any tax year.
The
difference between the expected benefit computed using the statutory tax rate
and the recorded benefit of zero is primarily due to the change in the valuation
allowance. The change in the valuation allowance was approximately $2.9 million
and $4.2 million in 2006 and 2007, respectively.
Note
9. Subsequent events
On
January 25, 2008, the Company entered into a Securities Purchase Agreement
with
select accredited investors related to the sale of common stock and warrants
to
purchase shares of common stock. The Company closed the private placement on
January 25, 2008, and issued an aggregate of 1,428,572 shares of common stock
and warrants to purchase an aggregate of 642,858 shares of common stock. The
aggregate gross proceeds raised by the Company were approximately $2.0 million.
Each share was sold to the investors at $1.40 per share. The warrants expire
five years from the date of issue and may be exercised at $2.50 per share,
subject to adjustment in certain circumstances. The private placement was
conducted pursuant to Section 4(2) of the Securities Act and Rule 506
promulgated thereunder.
On
February 19, 2008, we entered into a Securities Purchase Agreement with W.Health
L.P., relating to the sale of (i) our common stock, (ii) an unconditional
warrant to purchase common stock and (iii) a conditional warrant to purchase
common stock. Pursuant to the terms of the Securities Purchase Agreement, we
sold and issued to W.Health L.P. 7,142,857 shares of common stock at a price
of
$1.40 per share, for a total purchase price of $10.0 million.
The
unconditional warrant provides W.Health L.P. the right to purchase 4,285,715
shares of common stock at an exercise price of $2.50 per share, subject to
adjustment under certain circumstances. The unconditional warrant is exercisable
at any time through February 27, 2013 and may be exercised on a cashless basis.
The
conditional warrant is exercisable only under certain circumstances, including
(i) our failure to become listed on The NASDAQ Stock Market or the American
Stock Exchange on or before February 27, 2011, (ii) our failure to maintain
listing on The NASDAQ Stock Market or the American Stock Market for certain
specified time periods or (iii) if we are acquired by or merge with another
unaffiliated entity for consideration to the Company of an amount equal to
or
less than $2.50 per share before February 27, 2013 (each, an “Exercise Event”).
Upon the occurrence of an Exercise Event, the W.Health L.P. will have the right
to purchase such number of shares of common stock, calculated as of the initial
date of exercise, equal to twenty percent (20%) of the total number of shares
of
capital stock on a fully diluted basis, taking into account such issuance,
using
the treasury method, at an exercise price of $0.001 per share, subject to
adjustment under certain circumstances. The conditional warrant will expire
upon
the occurrence of certain specific events, but in any event, no later than
February 27, 2013. The conditional warrant may be exercised on a cashless basis.
In
connection with the sale of common stock to W.Health, L.P., we entered into
registration rights agreements, which require us to file with the SEC and cause
to be made effective, initial registration statements covering the resale of
the
common stock and the common stock issuable upon exercise of the warrants within
specified time periods.
13,864,343 Shares
Common
Stock
Organic
To Go Food Corporation
PROSPECTUS
, 2008
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth an estimate of the costs and expenses payable by
us
in connection with the offering described in this registration statement. We
do
not anticipate that the selling stockholders will incur any expenses with
respect to this offering. All of the amounts shown are estimates except the
SEC
Registration Fee:
|
|
Amount
|
|
Registration
Fee
|
|
$
|
1,317.21
|
|
Accounting
Fees and Expenses
|
|
|
25,000.00
|
|
Printing
Fees
|
|
|
5,000.00
|
|
Legal
Fees and Expenses
|
|
|
75,000.00
|
|
Miscellaneous
Fees and Expenses
|
|
|
5,000.00
|
|
Total
|
|
$
|
111,317.21
|
|
Our
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws provide that, subject to certain qualifications and limitations, we
may
indemnify and provide insurance for an officer or director, because of his
or
her position as such, to the fullest extent authorized by Delaware General
Corporation Law, as the same exists or may hereafter be amended. We are subject
to Section 145 of the Delaware General Corporation Law, set forth
below.
“Section
145. Indemnification of officers, directors, employees and agents;
insurance.
“(a)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if
the
person acted in good faith and in a manner the person reasonably believed to
be
in or not opposed to the best interests of the corporation, and, with respect
to
any criminal action or proceeding, had no reasonable cause to believe the
person’s conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere
or
its equivalent, shall not, of itself, create a presumption that the person
did
not act in good faith and in a manner which the person reasonably believed
to be
in or not opposed to the best interests of the corporation, and, with respect
to
any criminal action or proceeding, had reasonable cause to believe that the
person’s conduct was unlawful.
“(b)
A
corporation shall have power to indemnify any person who was or is a party
or is
threatened to be made a party to any threatened, pending or completed action
or
suit by or in the right of the corporation to procure a judgment in its favor
by
reason of the fact that the person is or was a director, officer, employee
or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys’
fees) actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall
be
made in respect of any claim, issue or matter as to which such person shall
have
been adjudged to be liable to the corporation unless and only to the extent
that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
“(c)
To
the extent that a present or former director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a) and (b) of this section, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys’ fees) actually and reasonably incurred by such
person in connection therewith.
“(d)
Any
indemnification under subsections (a) and (b) of this section (unless ordered
by
a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or former
director, officer, employee or agent is proper in the circumstances because
the
person has met the applicable standard of conduct set forth in subsections
(a)
and (b) of this section. Such determination shall be made, with respect to
a
person who is a director or officer at the time of such determination, (1)
by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than
a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the
stockholders.
“(e)
Expenses (including attorneys’ fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit
or
proceeding may be paid by the corporation in advance of the final disposition
of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the corporation
as authorized in this section. Such expenses (including attorneys’ fees)
incurred by former directors and officers or other employees and agents may
be
so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
“(f)
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
the other subsections of this section shall not be deemed exclusive of any
other
rights to which those seeking indemnification or advancement of expenses may
be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person’s official capacity and
as to action in another capacity while holding such office.
“(g)
A
corporation shall have power to purchase and maintain insurance on behalf of
any
person who is or was director, officer, employee or agent of the corporation,
or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
or
other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person’s status as
such, whether or not the corporation would have the power to indemnify such
person against such liability under this section.
“(h)
For
purposes of this section, references to (the corporation) shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
“(i)
For
purposes of this section, references to (other enterprises) shall include
employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to “serving at the request of the corporation” shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person
who
acted in good faith and in a manner such person reasonably believed to be in
the
interest of the participants and beneficiaries of an employee benefit plan
shall
be deemed to have acted in a manner “not opposed to the best interests of the
corporation” as referred to in this section.
“(j)
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee
or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
“(k)
The
Court of Chancery is hereby vested with exclusive jurisdiction to hear and
determine all actions for advancement of expenses or indemnification brought
under this section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation’s obligation to advance expenses (including attorneys’
fees).”
Item
15. Recent Sales of Unregistered Securities.
The
following represents our sales of unregistered securities in the last three
years:
2008
(First Quarter)
In
February 2008, we closed a private placement with an investor related to the
sale and issuance of 7,142,857 shares of common stock, a warrant to purchase
of
4,285,715 shares of common stock and a conditional warrant to purchase shares
of
common stock, which is exercisable only under certain circumstances. The private
placement was conducted pursuant to Section 4(2) of the Securities Act and
Regulation S.
In
January 2008, we closed a private placement with select accredited investors
related to the sale and issuance of an aggregate of 1,428,572 shares of common
stock and warrants to purchase an aggregate of 642,858 shares of common stock.
The private placement was conducted pursuant to Section 4(2) of the Securities
Act and Rule 506 promulgated thereunder.
2007
In
October 2007, we closed a private placement with select accredited investors
related to the sale and issuance of an aggregate of 3,264,426 shares of common
stock and warrants to purchase an aggregate of 1,468,990 shares of common stock.
The private placement was conducted pursuant to Section 4(2) of the Securities
Act and Rule 506 promulgated thereunder.
On
October 18, 2007, we issued 126,865 shares of common stock to the owners of
Brothers Restaurant & Deli as partial consideration for the acquisition of
certain assets. The securities were not registered under the Securities Act,
in
reliance upon exemptions set forth in Section 4(2) of the Securities
Act.
On
June 28, 2007, we closed a private placement with select accredited investors
related to the sale and issuance of an aggregate of 3,350,000 shares of common
stock and warrants to purchase an aggregate of 1,340,000 shares of common stock.
In connection with the private placement, we issued to the placement agent
a
five-year warrant to purchase an aggregate of 21,000 shares of common stock.
The
private placement was conducted pursuant to Section 4(2) of the Securities
Act
and Rule 506 promulgated thereunder.
In
May
2007, we issued warrants to purchase a total of 10,000 shares of common stock
in
connection with a $500,000 debt financing. The warrants were issued pursuant
to
Section 4(2) of the Securities Act.
On
March 9, 2007, in connection with our acquisition of substantially all of the
assets of Jackrabbit, LLC, we issued 400,000 shares of common stock to
Jackrabbit, LLC. We issued the foregoing securities in reliance on Section
4(2) of the Securities Act.
On
February 12, 2007, in connection with our merger with Organic Holding Company,
Inc. and concurrent private placement of units, we issued the following
securities:
|
·
|
8,633,765
shares of our common stock in exchange for all 12,372,712 outstanding
shares of Organic Holding Company, Inc. common and preferred
stock;
|
|
·
|
options
to purchase an aggregate of 718,337 shares of our common stock in
exchange
for all of the outstanding options to purchase an aggregate of 1,029,432
shares of Organic Holding Company, Inc. common
stock;
|
|
·
|
options
to purchase an aggregate of 1,246,674 shares of our common stock
to our
Chief Executive Officer and Chairman, Jason Brown, pursuant to his
employment agreement;
|
|
·
|
warrants
to purchase an aggregate of 2,350,968 shares of our common stock
in
exchange for all of the outstanding warrants to purchase an aggregate
of
3,369,137 shares of Organic Holding Company, Inc. capital
stock;
|
|
·
|
115.731
units, comprised of an aggregate of 4,629,240 shares of our common
stock
and warrants to purchase 925,848 shares of our common stock in exchange
for certain Organic Holding Company, Inc. bridge
notes;
|
|
·
|
687,271
shares of our common stock upon conversion of 60 shares of our Series
A
Convertible Preferred Stock;
|
|
·
|
138
units, comprised of an aggregate of 5,523,000 shares of our common
stock
and warrants to purchase an aggregate of 1,104,600 shares of our
common
stock, at $50,000 per unit for a total offering price of $6,903,740,
to
investors in the private placement;
and
|
|
·
|
warrants
to purchase 888,899 shares of our common stock to the placement agents
in
the private placement as consideration for services
rendered.
|
These issuances were exempt from registration under Section 4(2) of
the Securities Act based on the representations of the security holders, which
included, in pertinent part, that such persons were either (a) “accredited
investors” within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, or (b) not a “U.S. person” as that term is defined in Rule
902(k) of Regulation S under the Securities Act, that such persons were
acquiring our securities for investment purposes for their own respective
accounts and not as nominees or agents, and not with a view to the resale or
distribution thereof, and that said persons understood that our securities
may
not be sold or otherwise disposed of without registration under the Securities
Act or an applicable exemption therefrom.
2006
In
December 2006, we raised $525,000 through the issuance of a convertible
promissory note. The note bears interest at 8% per annum and matures on June
29,
2008. Commencing on September 1, 2007 to immediately prior to the maturity
date,
the outstanding principal amount of the note, together with all accrued and
unpaid interest due under the note, is convertible at a per share conversion
price equal to $1.68 per share. We issued the foregoing securities in reliance
on Section 4(2) of the Securities Act.
In
December 2006, we issued .8444 shares of Series A Preferred Stock to a
consultant in consideration for the settlement of $7,600 of debt. We issued
the
foregoing securities in reliance on Section 4(2) of the Securities Act.
In
February 2006, we issued an aggregate of 55.4 shares of Series A Convertible
Preferred Stock to accredited investors in consideration for the cancellation
of
outstanding bridge notes and the settlement of certain other accrued liabilities
in the aggregate principal amount plus accrued interest of $498,480. We issued
the foregoing securities in reliance on Section 4(2) of the Securities
Act.
2005
In
March
2005, we issued 9,070 shares of our common stock in exchange for warrants issued
during our June and August 2001 private placement financings. We issued the
foregoing securities in reliance on Section 4(2) of the Securities
Act.
In
February 2005, we issued 7,113 shares of common stock to a legal firm in
consideration for the cancellation of $21,338.97 of accounts payable. We
recorded an expense of $21,340 related to the issuance of the common stock.
We
issued the foregoing securities in reliance on Section 4(2) of the Securities
Act.
(a)
Exhibits
Exhibit Number
|
|
Description
|
|
|
|
2.1
|
|
Agreement
and Plan of Merger and Reorganization, dated as of January 11, 2007
(1)
|
|
|
|
2.2
|
|
First
Amendment to Agreement and Plan of Merger and Reorganization and
Company
Disclosure Schedule, dated as of February 12, 2007 (2)
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation (3)
|
|
|
|
3.2
|
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation
(4)
|
|
|
|
3.3
|
|
Amended
and Restated Bylaws (5)
|
|
|
|
4.1
|
|
Specimen
Common Stock Certificate (2)
|
|
|
|
4.2
|
|
Form
of Warrant (2)
|
|
|
|
4.3
|
|
Form
of Warrant issued in connection with June 28, 2007 Private Placement
(6)
|
4.4
|
|
Form
of Warrant issued in connection with October 2007 Private Placement
(7)
|
|
|
|
4.5
|
|
Form
of Warrant issued in connection with January 2008 Private Placement
(14)
|
|
|
|
4.6
|
|
Form
of Unconditional Warrant issued in connection with February 2008
Private
Placement (16)
|
|
|
|
4.7
|
|
Form
of Conditional Warrant issued in connection with February 2008 Private
Placement (16)
|
|
|
|
5.1
|
|
Opinion
of Loeb & Loeb LLP**
|
|
|
|
10.1
|
|
Asset
Purchase Agreement by and between Organic Holding Company, Inc. and
Briazz
Inc. (2)
|
|
|
|
10.2
|
|
Asset
Purchase Agreement by and among Vinaigrettes LLC, Dan Karzen and
Organic
Holding Company, Inc. (2)
|
|
|
|
10.3
|
|
Placement
Agent Agreement, dated December 18, 2006, by and between Organic
Holding
Company, Inc. and Burnham Hill Partners, a division of Pali Capital,
Inc.
(2)
|
|
|
|
10.4
|
|
Form
of Subscription Agreement by and between SP Holding Corporation and
the
Investors (2)
|
|
|
|
10.5
|
|
2007
Equity Participation Plan of Organic To Go Food Corporation
(4)
|
|
|
|
10.6
|
|
Escrow
Agreement, dated June 20, 2007 (6)
|
|
|
|
10.7
|
|
Securities
Purchase Agreement, dated June 26, 2007 (6)
|
|
|
|
10.8
|
|
Registration
Rights Agreement, dated June 26, 2007 (6)
|
|
|
|
10.9
|
|
Joinder
to each of the Securities Purchase Agreement and the Registration
Rights
Agreement, dated June 28, 2007 (10)
|
|
|
|
10.10
|
|
Employment
Agreement between Organic To Go, Inc. and Andrew Jacobs
(11)
|
|
|
|
10.11
|
|
Escrow
Agreement, dated October 10, 2007 (7)
|
|
|
|
10.12
|
|
Securities
Purchase Agreement, dated October 12, 2007 (7)
|
|
|
|
10.13
|
|
Registration
Rights Agreement, dated October 12, 2007 (7)
|
|
|
|
10.14
|
|
Joinder
to each of the Securities Purchase Agreement and the Registration
Rights
Agreement, dated October 12, 2007 (9)
|
|
|
|
10.15
|
|
Agreement
of Purchase and Sale of Assets (8)
|
|
|
|
10.16
|
|
First
Amendment to Agreement of Purchase and Sale of Assets
(8)
|
10.17
|
|
Employment
Agreement by and between Michael Gats and Organic To Go Food Corporation
(13)
|
|
|
|
10.18
|
|
Securities
Purchase Agreement, dated January 25, 2008 (14)
|
|
|
|
10.19
|
|
Employment
Agreement by and between Jason Brown and Organic To Go Food Corporation
(15)
|
|
|
|
10.20
|
|
Securities
Purchase Agreement, dated February 19, 2008 (16)
|
|
|
|
10.21
|
|
Registration
Rights Agreement, dated February 27, 2008 (16)
|
|
|
|
10.22
|
|
Deferred
Registration Rights Agreement, dated February 27, 2008
(16)
|
|
|
|
16.1
|
|
Letter
from De Leon & Company, P.A. to the SEC, dated March 7, 2007
(12)
|
|
|
|
21.1
|
|
List
of Subsidiaries (2)
|
|
|
|
23.1
|
|
Consent
of Rose, Snyder & Jacobs*
|
|
|
|
23.2
|
|
Consent
of Loeb & Loeb LLP (included in Exhibit 5.1)**
|
|
|
|
24.1
|
|
Power
of Attorney**
|
*
|
|
Filed
herewith
|
**
|
|
Previously
filed
|
|
|
|
(1)
|
|
Filed
on January 17, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(2)
|
|
Filed
on February 13, 2007 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(3)
|
|
Filed
on December 13, 2003 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(4)
|
|
Filed
on May 21, 2007 as an exhibit to our Current Report on Form 8-K and
incorporated herein by reference.
|
|
|
|
(5)
|
|
Filed
on May
14, 2001
as
an exhibit to our report
on Form 10-QSB
and
incorporated herein by reference.
|
|
|
|
(6)
|
|
Filed
on June 27, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(7)
|
|
Filed
on October 18, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(8)
|
|
Filed
on October 24, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
(9)
|
|
Filed
on November 5, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(10)
|
|
Filed
on June 29, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
(11)
|
|
Filed
on July 13, 2007 as an exhibit to our Registration Statement on Form
SB-2
and incorporated herein by reference.
|
|
|
|
(12)
|
|
Filed
on March 9, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(13)
|
|
Filed
on December 19, 2007 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(14)
|
|
Filed
on January 28, 2008 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(15)
|
|
Filed
on February 13, 2008 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(16)
|
|
Filed
on February 25, 2008 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
Financial
Statement Schedules have been omitted because the information required to be
set
forth therein is either not applicable or is included in the Consolidated
Financial Statements or the notes thereto.
Item
17. Undertakings.
(a)
|
The
undersigned registrant hereby
undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration
statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to
Rule
424(b) if, in the aggregate, the changes in volume and price represent
no
more than 20% change in the maximum aggregate offering price set
forth in
the "Calculation of Registration Fee" table in the effective registration
statement; and
|
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities
Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein,
and the
offering of such securities at that time shall be deemed to be the
initial
bona fide offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold at the termination
of the
offering.
|
|
(4)
|
That,
for the purpose of determining liability under the Securities Act
to any
purchaser each prospectus filed pursuant to Rule 424(b) as part of
a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed
in
reliance on Rule 430A, shall be deemed to be part of and included
in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement
or made
in a document incorporated or deemed incorporated by reference into
the
registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale
prior to
such first use, supersede or modify any statement that was made in
the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such
date of
first use.
|
|
Insofar
as indemnification for liabilities arising under the Securities Act
may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant
has
been advised that in the opinion of the SEC such indemnification
is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of
expenses incurred or paid by a director, officer or controlling person
of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in
connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled
by
controlling precedent, submit to a court of appropriate jurisdiction
the
question whether such indemnification by it is against public policy
as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
|
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, as amended,
the
registrant certifies that it has reasonable grounds to believe that it meets
all
of the requirements of filing on Form S-1 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Seattle,
State of Washington, on May
1,
2008.
ORGANIC
TO GO FOOD CORPORATION
(Registrant)
|
|
|
By:
|
/s/ Jason
Brown
|
|
Jason Brown
Chief Executive Officer
and Chairman
|
In
accordance with the requirements of the Securities Act of 1933, as amended,
this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Jason Brown
|
|
Chief Executive Officer
and Chairman
|
|
May
1,
2008
|
Jason
Brown
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/
Michael Gats
|
|
Chief
Financial Officer
|
|
May
1,
2008
|
Michael
Gats
|
|
(Principal
Accounting Officer and Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/
Dave Smith*
|
|
Director
|
|
May
1,
2008
|
Dave
Smith
|
|
|
|
|
|
|
|
|
|
/s/
Peter Meehan*
|
|
Director
|
|
May
1,
2008
|
Peter
Meehan
|
|
|
|
|
|
|
|
|
|
/s/
Roy Bingham*
|
|
Director
|
|
May
1,
2008
|
Roy
Bingham
|
|
|
|
|
|
|
|
|
|
/s/
Douglas Lioon*
|
|
Director
|
|
May
1,
2008
|
Douglas
Lioon
|
|
|
|
|
|
|
|
|
|
/s/
S.M. “Hass” Hassan*
|
|
Director
|
|
May
1,
2008
|
S.M.
“Hass” Hassan
|
|
|
|
|
|
|
|
|
|
/s/
Gunnar Weikert
|
|
Director
|
|
May
1,
2008
|
Gunnar
Weikert
|
|
|
|
|
|
|
|
|
|
*
By: /s/ Jason Brown
|
|
|
|
May
1,
2008
|
Attorney-in-fact
|
|
|
|
|
Exhibit
Index
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
|
Agreement
and Plan of Merger and Reorganization, dated as of January 11, 2007
(1)
|
|
|
|
2.2
|
|
First
Amendment to Agreement and Plan of Merger and Reorganization and
Company
Disclosure Schedule, dated as of February 12, 2007 (2)
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation (3)
|
|
|
|
3.2
|
|
Certificate
of Amendment to Amended and Restated Certificate of Incorporation
(4)
|
|
|
|
3.3
|
|
Amended
and Restated Bylaws (5)
|
|
|
|
4.1
|
|
Specimen
Common Stock Certificate (2)
|
|
|
|
4.2
|
|
Form
of Warrant (2)
|
|
|
|
4.3
|
|
Form
of Warrant issued in connection with June 28, 2007 Private Placement
(6)
|
|
|
|
4.4
|
|
Form
of Warrant issued in connection with October 2007 Private Placement
(7)
|
|
|
|
4.5
|
|
Form
of Warrant issued in connection with January 2008 Private Placement
(14)
|
|
|
|
4.6
|
|
Form
of Unconditional Warrant issued in connection with February 2008
Private
Placement (16)
|
|
|
|
4.7
|
|
Form
of Conditional Warrant issued in connection with February 2008 Private
Placement (16)
|
|
|
|
5.1
|
|
Opinion
of Loeb & Loeb LLP**
|
|
|
|
10.1
|
|
Asset
Purchase Agreement by and between Organic Holding Company, Inc. and
Briazz
Inc. (2)
|
|
|
|
10.2
|
|
Asset
Purchase Agreement by and among Vinaigrettes LLC, Dan Karzen and
Organic
Holding Company, Inc. (2)
|
|
|
|
10.3
|
|
Placement
Agent Agreement, dated December 18, 2006, by and between Organic
Holding
Company, Inc. and Burnham Hill Partners, a division of Pali Capital,
Inc.
(2)
|
|
|
|
10.4
|
|
Form
of Subscription Agreement by and between SP Holding Corporation and
the
Investors (2)
|
|
|
|
10.5
|
|
2007
Equity Participation Plan of Organic To Go Food Corporation
(4)
|
|
|
|
10.6
|
|
Escrow
Agreement, dated June 20, 2007 (6)
|
10.7
|
|
Securities
Purchase Agreement, dated June 26, 2007 (6)
|
|
|
|
10.8
|
|
Registration
Rights Agreement, dated June 26, 2007 (6)
|
|
|
|
10.9
|
|
Joinder
to each of the Securities Purchase Agreement and the Registration
Rights
Agreement, dated June 28, 2007 (10)
|
|
|
|
10.10
|
|
Employment
Agreement between Organic To Go, Inc. and Andrew Jacobs
(11)
|
|
|
|
10.11
|
|
Escrow
Agreement, dated October 10, 2007 (7)
|
|
|
|
10.12
|
|
Securities
Purchase Agreement, dated October 12, 2007 (7)
|
|
|
|
10.13
|
|
Registration
Rights Agreement, dated October 12, 2007 (7)
|
|
|
|
10.14
|
|
Joinder
to each of the Securities Purchase Agreement and the Registration
Rights
Agreement, dated October 12, 2007 (9)
|
|
|
|
10.15
|
|
Agreement
of Purchase and Sale of Assets (8)
|
|
|
|
10.16
|
|
First
Amendment to Agreement of Purchase and Sale of Assets
(8)
|
|
|
|
10.17
|
|
Employment
Agreement by and between Michael Gats and Organic To Go Food Corporation
(13)
|
|
|
|
10.18
|
|
Securities
Purchase Agreement, dated January 25, 2008 (14)
|
|
|
|
10.19
|
|
Employment
Agreement by and between Jason Brown and Organic To Go Food Corporation
(15)
|
|
|
|
10.20
|
|
Securities
Purchase Agreement, dated February 19, 2008 (16)
|
|
|
|
10.21
|
|
Registration
Rights Agreement, dated February 27, 2008 (16)
|
|
|
|
10.22
|
|
Deferred
Registration Rights Agreement, dated February 27, 2008
(16)
|
|
|
|
16.1
|
|
Letter
from De Leon & Company, P.A. to the SEC, dated March 7, 2007
(12)
|
|
|
|
21.1
|
|
List
of Subsidiaries (2)
|
|
|
|
23.1
|
|
Consent
of Rose, Snyder & Jacobs*
|
|
|
|
23.2
|
|
Consent
of Loeb & Loeb LLP **
|
|
|
|
24.1
|
|
Power
of Attorney **
|
**
|
|
Previously
filed
|
|
|
|
(1)
|
|
Filed
on January 17, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(2)
|
|
Filed
on February 13, 2007 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(3)
|
|
Filed
on December 13, 2003 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(4)
|
|
Filed
on May 21, 2007 as an exhibit to our Current Report on Form 8-K and
incorporated herein by reference.
|
|
|
|
(5)
|
|
Filed
on May
14, 2001
as
an exhibit to our report
on Form 10-QSB
and
incorporated herein by reference.
|
|
|
|
(6)
|
|
Filed
on June 27, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(7)
|
|
Filed
on October 18, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(8)
|
|
Filed
on October 24, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(9)
|
|
Filed
on November 5, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(10)
|
|
Filed
on June 29, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
(11)
|
|
Filed
on July 13, 2007 as an exhibit to our Registration Statement on Form
SB-2
and incorporated herein by reference.
|
|
|
|
(12)
|
|
Filed
on March 9, 2007 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(13)
|
|
Filed
on December 19, 2007 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(14)
|
|
Filed
on January 28, 2008 as an exhibit to our Current Report on Form 8-K
and
incorporated herein by reference.
|
|
|
|
(15)
|
|
Filed
on February 13, 2008 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(16)
|
|
Filed
on February 25, 2008 as an exhibit to our Current Report on Form
8-K and
incorporated herein by reference.
|
|
|
|
(17)
|
|
Set
forth on the signature page to our Registration Statement on Form
SB-2
filed on November 19, 2007 and incorporated herein by
reference.
|