Winter is coming. Stockholders vote yes on Prop No 3 and approve 3.6M option shares. 33% dilution with no cash to the company. 8k will file after market close today.

ReplyTo wheresthebeef123. Proposal No 2., the Ratification of Accounting Firm, is a formality; I voted FOR. From the Audit Analytics Blog comes this:

The shareholder vote on auditor ratification is generally seen as a kind of formality: non-binding and routine. A recent analysis of the 6,373 shareholder votes filed between January 2012 and September 2013 seems to bear this out. On average, almost 98% of votes were cast in favor of auditor ratification.

Proposals No. 3 and No. 4 are not routine and imo, should be voted AGAINST. You can read my rationale here. Proposal No. 3 is especially deceptive for what the Proxy doesn't say.

How to Vote your ATOS Proxy IMO.

I received my proxy today. The following is why and how my vote differed from Board recommendations.

Proposal No. 1 – Election of Directors

Mr. Quay should not be both the CEO and Chairman of the Board. Unfortunately, it does not appear that shareholders have a say in this matter. The election of Mr. Quay and Mr. Weaver looks to be pretty much a done deal. However, I withheld my vote for Mr. Quay as a protest in that he has too much control over the Company.

I voted FOR Mr. Weaver and WITHHOLD on Mr. Quay


Proposal No. 3 – To Approve the 2019 Amendments to the Atossa Genetics Inc 2010 Stock Option and Incentive Plan and to Increase The Number of Shares Authorized for Issuance Under The Plan By 3,600,000

This is one of the most egregious requests I have ever seen by a public company and my vote here is a no-brainer. A 26% dilution to existing shareholders that is almost exclusively for the benefit of the CEO and CFO as a reward for what? Management’s performance since Atossa became a public company has been atrocious. On a split adjusted basis, the stock once traded at over $1,500/share:



Note at the IPO in 2012, Mr. Quay owned over 5,000,000 shares (37% post IPO). However, through two reverse splits (and probably some sales along the way), his beneficial share interest has dropped to 82,667. Would have been great for investor confidence if he bought 200,000 shares at $1.36 instead of taking 2.3M no-risk options.

Lastly, the wording of Proposal No. 3 is very deceptive for what it doesn’t say. View prior post here.

I voted AGAINST Proposal No. 3


Proposal No. 4 - Advisory Vote on Executive Compensation

While I agree with the stated philosophy of “tying compensation to increases in stockholder value,” the number of option shares granted to Mr. Quay (2,300,000) and Mr. Guse (800,000) is over the top. Fortunately shareholders can stop this by voting Against Proposal No. 3. A similar vote is required here to express shareholder dissatisfaction with the overall compensation package.

What is the right number of options? Given an exercise price of $1.36/share, I could support 230,000 shares for Mr. Quay and 80,000 shares for My Guse. If Atossa hits on its Oral Endoxifen, the Company could easily run to a $500M market cap. With 9,124,447 common shares outstanding as of the record date, that equals a per share price of $54.80. In other words, $12.3M for Mr. Quay (as opposed to $123M) and $4.3M for Mr. Guse (as opposed to $43M). Most CEO's of Fortune 500 companies don't earn $123M in stock compensation. $166M for the CEO/CFO of a micro cap, outrageous.

I voted AGAINST Proposal No. 4

Thanks for taking the time to read my post. Now go vote your Proxy.

Are ATOS Investors Really This Ignorant?

On Friday, Atossa Genetics issued a Proxy Statement for its annual meeting, to be held on May 16, 2019. Shareholders are being asked to vote on a number of proposals. This post focuses on PROPOSAL NO. 3, TO APPROVE THE 2019 AMENDMENTS TO THE ATOSSA GENETICS INC 2010 STOCK OPTION AND INCENTIVE PLAN AND TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE PLAN BY 3,600,000.

What the Proxy says: Assuming adoption of this Proposal No. 3, there will be a total of approximately 3,836,430 shares available for issuance under the 2010 Plan, which equals approximately 26.28% of the fully diluted common stock outstanding on March 25, 2019 including convertible preferred stock and common stock issuable upon exercise of outstanding options and warrants as of March 25, 2019.

What the Proxy doesn’t say: 3,836,430 shares equals 42.04% of the 9,124,447 shares of common stock that are issued and outstanding as of April 11, 2019.

What the Proxy says: Stockholders are being asked to approve “Modification of the overall limitation on options granted to any one individual not to exceed 20,000,000 shares” and “Modification of the limitations on options granted to any one individual to not exceed 2,500,000 shares per year”.

What the Proxy doesn’t say: The number of shares that the 20,000,000 and 2,500,000, respectively, replaces. Given the total number of shares available under the 2010 Plan, an approval of these modifications would in essence be the same as deleting the limitations in their entirety; the new numbers are simply too big to have an effect.

What the Proxy says: On January 13, 2019, the Company granted options to purchase a total of 3,100,000 shares of common stock to the Chief Executive Officer and Chief Financial Officer with an exercise price equal to the last reported sale price of the shares of common stock on the NASDAQ Capital Market on the date of grant.

What the Proxy doesn’t say: The stock price on the date of the grant was $1.36. At Friday’s closing price of $2.98, this is effectively a $5,022,000 payout. At the stock’s 52 week high of $7.39, the payout totals $18,693,000.

What the Proxy says: Compensation awards made after November 2, 2017, generally are not eligible for the "performance-based compensation" exception and will not be deductible to the extent that they cause the compensation of the affected executive officer to exceed $1 million in any year.

What the Proxy doesn’t say: The stock options granted to the executive officers will likely cause executive compensation to exceed the $1 million dollar annual limit and will therefore be non-deductible to the company.

What the Proxy says: THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NO. 3

What the Proxy doesn’t say: CAREFUL READING RESULTS IN A VOTE “AGAINST” PROPOSAL NO. 3

The 2019 Options appear to be a money grab. Recall that the Company has had two huge reverse stock splits. The first one was several years back at something like 24 to 1. The second one was a year ago at 12 to 1. The effect of those reverse splits was major dilution on Dr. Quay's original stake in the company. I'm not sure the rationale on these options, but certainly can't be for past performance. It might be an attempt to get back to his original ownership position. Can't say he will be getting my vote on this. Knock a "0" off the end of the 2019 Options and then maybe.

Had there been some insider buying instead of option granting at the $1.36 level, I'd feel a whole lot better about future outlook.

Agreed, the stock will not move up until more positive news is released. However, the next news looks doesn't look so swell. From page 8 of the Company's 10-k:

In September 2017, we contracted Stockholm South General Hospital in Sweden to conduct a Phase 2 study of our topical Endoxifen in women with high MBD. The study is being led by principal investigator Dr. Per Hall, MD, Ph.D., Head of the Department of Medical Epidemiology and Biostatistics at Karolinska Institutet. The primary endpoint of this pilot study is to determine if topical Endoxifen results in an individual reduction of MBD as measured by mammography. Secondary endpoints include demonstrating safety and tolerability. The primary objective is to determine the effect size of breast density between placebo and topical Endoxifen to permit sample size calculations for statistical significance in a future Phase 3 trial. The study was fully enrolled in October 2018 with 90 participants who were equally randomized to three different groups (30 per group): placebo; lower dose topical Endoxifen; and higher dose topical Endoxifen. Participants receive the active drug or placebo for a maximum of six months. The study calls for each participant to have a baseline (pre-treatment) mammogram, and additional mammograms at month 3 and 6, or at the time of study exit. Once the study has been completed, all mammograms will be interpreted and MBD determined and any changes that occur per patient recorded. Some participants have chosen to exit the study before receiving a full six months of drug or placebo for a number of reasons: for example, some exit for non-compliance with the study protocol and some have exited because of skin rashes and irritation. As of the date of this annual report, approximately 72 participants have exited the study primarily because of skin rashes and irritation. Because the study is double blinded and results-to-date are not known, we do not know how or if the fact that some study participants exited the study before six months of dosing will result in sufficient data to achieve the primary objective which is to design a subsequent study. We expect that all dosing in the study will be completed in April 2019 with preliminary result to be reported in the second quarter of 2019.

With 80% of the participants exiting the study early, how can this be anything but bad news?

Another possible news item can be found on page 74:

On January 13, 2019, the Company granted a new option to the CEO to purchase 2,300,000 shares of Common Stock and a new option to the CFO to purchase 800,000 shares of Common Stock (the “2019 Options”). The 2019 Options: (i) have an exercise price equal to the fair market value of Common Stock on the date of grant which was $1.36 per share, (ii) do not contain a Net Cash Exercise provision, (iii) are granted pursuant to the terms and conditions of the Plan as amended by the Board of Directors on January 13, 2019, to include shares issuable upon exercise of the 2019 Options and other changes to the Plan so that the 2019 Options do not conflict with the Plan (the “Amended Plan”), (iv) vest and are exercisable in accordance with the vesting schedule related to the 2018 Liability Options; provided, however, that the 2019 Options are not exercisable unless and until the Company’s stockholders approve the Amended Plan to increase the authorized number of shares available for grant under the Plan as only 3,575 options were available for grant as of December 31, 2018, and (vi) are subject to and conditioned the 2019 Option Agreements with the optionees and the employment agreements with the optionees.

The annual meeting proxy (due out any day) will most likely contain a provision for a shareholder vote on the 2019 Options. From page 2 of the 10-k, "The number of shares outstanding of the registrant's common stock, par value $0.18, as of March 25, 2019 was 9,116,490." How is the market going react to a 34% dilution request with zero cash raised to further the company's clinical trials?

Snapshot of Company's Capital Structure:

This is from Atossa's corporate presentation dated September 5, 2018:

5.5M shares common stock
1.0M shares preferred stock, as converted basis
3.9M warrants, exercisable at $4.05/share
442K warrants, exercisable at $3.78/share

Total common, with warrants, equals 11.8M shares. Then, from various company filings, one needs to add 3.8M option shares, which results in 15.6M fully diluted common shares. 800k shares are from the current option plan as approved by Shareholders. 3.0M additional option shares have been approved by the Board (see 8k filings from January 2019) but are subject to a Shareholder vote. Expect to see a request for approval on 3.0M option shares in the annual meeting prospectus that should be out fairly soon. 2.3M shares are in favor of the company CEO, Mr. Quay and 700K shares are in favor of the company CFO, Mr. Guse. The price for these options is somewhere under $1.50/share (stock price at time of grant in early January 2019).

Roth Capital Presentation on 3/19/19

Click here to view.

The warrants (ATOWW) are thinly traded. I recently had an open order that took over two weeks to fill. Trading may be a bit more active going forward, but beware of a possible liquidity issue. There is also this from the original registration statement, under risk factors:

The warrants contain features that may reduce your economic benefit from owning them.

The warrants contain features that allow us to redeem the warrants and that prohibit you from engaging in certain investment strategies.
We may redeem the warrants for $0.18 per warrant once the VWAP of our common stock equals or exceeds $10.56 per share for ten
consecutive trading days, provided that we may not do so prior to the first anniversary of closing of the rights offering, and only upon
not less than 30 days’ prior written notice of redemption. If we give notice of redemption, you will be forced to sell or exercise your
warrants or accept the redemption price. The notice of redemption could come at a time when it is not advisable or possible for you to
exercise the warrants. As a result, you may be unable to benefit from owning the warrants being redeemed. In addition, for so long as
you continue to hold warrants, you will not be permitted to enter into any short sale or similar transaction with respect to our common
stock. This could prevent you from pursuing investment strategies that could provide you greater financial benefits from owning the
warrant.

$4.05, expiring 4 years from date of issue or May, 2022.

nHANCED RECOVERY After Surgery.

----------------------------------------------------------------------
"Currently, they have not reported any contacts with a hospital group or a medical DSD such as McKesson. Time will tell if this medical channel is for real. "
----------------------------------------------------------------------

I recall seeing a press release at one time that described a distribution deal with a hospital but am now unable to find it. Or perhaps it was in one of the Company's presentations. Does anyone else remember?

https://shop.newagebev.com/collections/new-age-health-sciences/products/nhanced-recovery-after-surgery

For Those Who are Still Confused

NBEV is raising up to $50M via Roth Capital. You can view the prospectus here.

However, NBEV's ability to sell more shares of common stock was going to be held back by the fact that its total number of issued shares (49.4M) was almost equal to its total number of authorized shares (50.0M). There is a proposal to be voted on at the Company's annual meeting to increase the Company's number of authorized shares to 100M. But rather than wait until October 23rd, NBEV found a way to make 6.9M shares available for immediate sale.

Management exchanged 6.9M shares of common stock for 6,900 of Class C Preferred Stock. If/when the shareholders approve an increase in the number of common shares to 100M, these class C shares convert immediately back into common. You can read about that here.

So now Roth Capital has the ability to sell into the market up to 7.5M shares of NBEV common stock immediately (taking advantage of the current hype surrounding the Company and its CBD beverage). At an average sale price of $6.67/share on those 7.5M shares, $50M is raised.

One more note. For those that have been following NBEV a long time, the original prospectus for this offering dates back to July 18, 2017. You can view it here. It was for $100M total. Over the past year, several common stock sales have occurred, as required by various loan agreements. Documents related to this offering can be viewed here. By my count, NBEV has previously raised approximately $35M under the current S-3 filing. If the full $50M is raised by Roth Capital, that leaves $15M before another S-3 filing is required.

Twelve Pack Xing Tea for $9.95

Close-Out Packaging discount yields great deal, 12 cans for less than $10.00:

https://shop.newagebev.com/products/16oz-xing-tea-green-tea-with-ginseng

I combined that with the daily 12 days of Christmas special (a free Variety Pack) and free shipping, for a killer deal (18 twelve oz cans for $9.95, no shipping, no tax).

And then after placing the order, NBEV sends me this email:

Help Us Spread the Word - and We'll Pay You as a Thank You

Thanks again for your purchase. We'd greatly appreciate your help in spreading the word about our product!

We value 'word of mouth' so much that we've put together a generous affiliate (referral) program. Which means, every time you refer a customer our way, we'll pay you up to 10% percentage of the sale as a thank you.

You can sign up for our affiliate program by Clicking Here. (https://newagebev.leaddyno.com/affiliate/)

Our marketing strategy is a bit 'unique' in that we prefer to put money in our customers' pockets. It's a win-win, and I much prefer it to writing fat checks to Google and Facebook every month for their expensive advertising!

When you sign up for our referral program, you can literally start earning extra income in just a few minutes. We'll help you spread the word via social media. Your friends and colleagues will thank you - and so will I.


Maybe they are starting to get this whole social media marketing thing???

Free Case of Marley Mellow

Just got this email promotion and paid $7.95 shipping to get a free case of the Peach Raspberry Black Tea by entering BEHAPPY at checkout. Go to:

https://shop.newagebev.us/collections/mellow-mood

Text from the email:

FREE TRIAL - 1 CASE OF MARLEY MELLOW MOOD FOR THE FIRST 500 CUSTOMERS TO VISIT OUR NEW ONLINE STORE!

JUST PAY SHIPPING & HANDLING FEES!
CODE AT CHECKOUT: BEHAPPY

New Age Beverages Corporation is excited to officially announce the launch of our online store.
• Choose any case of Marely Mellow Mood
• Pay shipping and handling
• Enter code at checkout: BEHAPPY
ENJOY!

Link to Presentation without Registration:

https://seekingalpha.com/filing/3691401#EX99-1_HTM

Strategic Plan for 2019 shows $400MM in revenue, $250MM from "internal factors" (new products, category growth, distribution expansion) and $150MM (plus) to come from "External Growth," taken to mean future acquisition(s).

I've been an investor in this Company for 5 years. The CEO is fantastic, his team is outstanding and I think there is much upside. They now have 3 drugs in their pipeline and if any one of them hits, stockholders will be rewarded. And they have enough cash to get them through their next clinical trial.

https://www.instagram.com/p/BWbaZVLBz3r/?taken-by=cgregsonfit

And from Amazon Fresh, our favorite Bucha:

https://www.amazon.com/Buchulife-Kombucha-Tea-Blood-Orange/dp/B00FTBQ4VY/ref=sr_1_3_a_f_it?ie=UTF8&qid=1498156816&sr=8-3&ppw=fresh&keywords=bucha

Don't forget about our favorite Bucha.

Straight from Amazon Fresh:

https://www.amazon.com/Buchulife-Kombucha-Tea-Blood-Orange/dp/B00FTBQ4VY/ref=sr_1_3_a_f_it?ie=UTF8&qid=1498156816&sr=8-3&ppw=fresh&keywords=bucha

The General is a bit more ambitious.

$100 share (his number) x 50M shares (your number) = $5B. At a 7x sales multiplier (my number), $700M in sales is needed (must be nice to be in business where such little attention is paid to profitability).

Question that nobody is yet asking, can NBEV remain independent long enough to achieve such a lofty goal? In any event, it's going to be a fun ride, especially once the bidding war starts. Coke, Pepsi, Bud, a good fit for any one of them.

Going to see many more sales like these over the next few weeks. Here's why:

Several years ago, I invested in an LLC called B&R Liquid Adventure ("B&R"). It was bringing to market a new kombucha tea, Bucha. Long story short, B&R F'ed up and in April 2015, it sold Bucha to the highest bidder, American Brewing Company ("ABC"). Consideration included $400k in cash and 1.5M shares of restricted ABC stock (valued at $500k).

For those following NBEV, you know that the General came to ABC with his grand plan to build the largest functional beverage company in the world. ABC sold off its craft beer operations leaving it with Bucha. Then about a year ago came the General's first merger, with New Age Beverages, and thereafter ABC became NBEV.

Now back to the story of B&R. The sale of Bucha to ABC did not provide enough cash to satisfy B&R's outstanding obligations. In total, B&R had raised $4.4M in private equity from approx 30 investors. On 12/31/15, B&R's assets and remaining obligations were placed in a Liquidating Trust, allowing the B&R investors to write off their individual investments and for the Trustees to negotiate settlements with B&R's creditors.

Then six weeks ago, mana drops from heaven. I get a letter stating that the Liquidating Trust still holds 1.3 million shares of NBEV. The original stock has risen from 33 cents/share to almost $4.00. Suddenly, the written off investment has value and to top it off, the stock sale restrictions are due to expire on May 15, 2017. In another long story short, agreements are reached and those 1.3 million shares are transferred to the 30 or so original B&R investors, free to be traded on the open market.

The result for most B&R investors is found money, from zero to getting most of our original investments back (5,000 to 15,000 shares are received). But there are several really big investors with 100,000+ shares received. As those investors look to move on from NBEV, I believe there are many more 10,000 share sales to be seen over the coming weeks.

Lastly, all original B&R investors were invited to join a conference call with the General prior to distribution of the shares from the Trust. The General was careful not to release any insider info (ie, the PMC Holdings acquisition was well underway but no mention was made of it). But I was suitably impressed with General Bucha, his vision for NBEV and my own research that I've decided to put most of my mana into a drawer, not to be opened again until year end 2019. My over/under is 4x from today's closing price of $5.73. Any takers?