Equity Private Placement (EPP) Glossary

Most glossary terms have been defined with regard to relevance to equity private placements. Definitions are provided solely to facilitate the use of PrivateRaise.com. (Confer with your legal counsel for additional information.)

A

Accredited Investor

Any person or institution deemed capable of understanding and affording the financial risks associated with the purchase of restricted securities. The Securities and Exchange Commission (“SEC“) recognizes the following entities/parties as being accredited:

Individuals

Any person who individually or jointly with their spouse has a net worth of at least $1 million. An person who has had income in excess of $200,000 for the immediately preceding two years and has an expectation of such income in the current year, or any person and their spouse who has had a joint income in excess of $300,000 for such periods. Any director, officer or general partner of the issuer.

Institutions

A financial institution such as bank, broker/dealer, insurance company or business development company. A trust or business partnership, with assets in excess of $5 million, that wasn’t formed for the purpose of acquiring the unregistered securities.

Any entity wholly owned by accredited investors.

American Depositary Receipt (ADR)

A receipt for shares of foreign-based companies that entitles the holder of an ADR to all dividends and capital gains related to the issuer. ADRs allow U.S. investors to buy shares of foreign-based corporations’ securities through U.S. stock markets and exchanges instead of having to buy shares through a foreign-based company’s primary stock exchange.

Affiliate

A person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, an issuer.

American Stock Exchange (“NYSE Amex”)

A national U.S. stock market exchange.

B

Blank Check Preferred Stock

Preferred stock that has been authorized, but not yet issued, by an issuer. The specific rights and preferences of the preferred stock being issued, including liquidation preferences, dividend rates and voting rights, are established by the board of directors during completion of an equity private placement. Blank check preferred stock lets an issuer’s board structure and negotiate terms directly with investors without additional stockholder authorization.

Bond (Debt: Nonconvertible)

A certificate of indebtedness. The issuer promises to pay the bondholder a specified amount of interest (“coupon”) for a specified time period and to repay the debt at the end of a specified period (the “maturity of the bond”).

A secured bond is one that is backed by collateral that may be sold if the issuer fails to pay interest and principal when they are due.

An unsecured bond (a “Debenture“) is only backed by the full faith and credit of the issuer.

C

Certificate of Incorporation (or Articles of Incorporation)

An issuer‘s basic organizational document, filed with the secretary of state in the state of incorporation. It includes the name, location and purpose of a company; the number, classification, rights and preferences of an issuer’s capital stock; and voting authority of the directors with respect to related-party transactions and redemptions.

Common Stock

Common stock represents an ownership stake in the issuer. Common stock is the most junior security that may be offered by an issuer (i.e., holders of preferred stock, subordinated debt, secured debt and trade payables all get paid before common stockholders in the event of a liquidation of the issuer). There can be different classes or series of common stock with different rights, including voting or dividend differences.

Convertible Debt (Debt: Convertible)

Debt that can be converted into equity, usually at the option of the debt holder. Convertible debt is similar to convertible preferred stock, but it ranks senior to preferred stock in the event of a liquidation of the company.

Convertible Preferred Stock (Preferred Stock: Convertible)

A form of preferred stock that grants an investor the right (but not the obligation) to convert the preferred stock into the common stock of the issuer.

Convertible Security (Other: Convertible)

Any security — other than preferred stock, debt or a warrant — that permits an investor to acquire an ownership stake in the issuer by converting the original security, typically, into common stock (e.g., trust preferred securities).

Corporate Insiders

Officers, directors or anyone individual owning 10% or more of the outstanding securities of an issuer.

Covenants

Agreements made by an issuer with specified investors in relation to equity private placements. Affirmative covenants detail positive actions that an issuer intends to perform. Negative covenants specify actions that an issuer will not take without consent of such investors. If an issuer breaches a covenant, it is considered to be in default, giving specified default rights to investors.

D

Debenture

A type of bond that is not collateralized by another asset of the issuer. An indenture agreement sets forth the terms of the bond.

Demand Registration Rights

An investor‘s contractual right to demand that the issuer file and get effective a registration statement for the securities issued in an equity private placement so that investors may resell such securities to public.

Due Diligence

The research efforts of an investor to evaluate a potential investment opportunity.

E

EDGAR

Electronic Data Gathering, Analysis and Retrieval. The SEC system for electronically handling documents from reporting issuers (e.g., 10-Ks, 10-Qs, 8-Ks, etc.).

Exchangeable Debt

A bond that gives the holder the right to exchange it for securities of a firm other than the issuer of the original security.

Equity Line

An equity line financing structure allows an issuer to “draw down” on a predetermined amount of capital committed to by an investor during a specified time period (typically 24 to 36 months). The issuer draws down on the equity line by making periodic sales of its securities (typically common stock) to the investors.

Equity Private Placement

A private placement of equity or equity-linked securities by an issuer.

Equity and Equity-Linked Securities

Equity and equity-linked securities are securities sold by an issuer which provide either (i) a direct ownership stake via common stock or (ii) an ownership stake based on conversion or exercise of a security into the common stock of the issuer. Common examples of equity and equity-linked securities are common stock, convertible preferred stock, convertible debt, warrants, prepaid warrants, preferred stock (nonconvertible) with warrants, debt (nonconvertible) with warrants and options.

F

FASB

Acronym for Financial Accounting Standards Board.

Follow-On Offering

The sale of common stock by an issuer through a public offering after it is already a public company.

G

GAAP

Abbreviation for “generally accepted accounting principles.” The FASB is the body that determines what accounting procedures are generally accepted.

H

Hedge Fund

Hedge funds are private investment partnerships among a number of accredited investors. Hedge funds are exempt from the regulations governing mutual funds.

I

Investor Legal Counsel Profile

Investor legal counsel profiles provide comprehensive and detailed summaries on the historical investor representation activity of a specific legal counsel.

Investors

Any investment fund or investment manager (see definitions below) that makes investments in equity private placements.

Investment Fund

An investment fund is typically a private investment fund (“hedge fund“) or mutual fund that makes investments in equity private placements. Investment funds may be controlled by an investment manager. Investment fund can also refer to any public/private corporate entity, corporate insiders or individual accredited investors that invest in equity private placements.

Investment Fund Profile

Investment fund profiles provide comprehensive and detailed summaries on the historical investing activity of a specific investment fund.

Notes:

In the case of corporate insiders, investment fund profiles are aggregated at the “corporate insider” level to denote the collective participation of corporate insiders across all equity private placements.

In the case of individual accredited investors, investment fund profiles are aggregated at the “individual investor” level to denote the collective participation of individual investors across all equity private placements.

Relevant investment fund profiles are automatically updated as each new placement is entered into the Equity Private Placement (EPP) Database^TM.

Investment Manager

An investment manager is an entity which controls/manages an investment fund. An investment manager typically controls/manages several investment funds. Investment manager can also refer to any public/private corporate entity, corporate insiders or individual accredited investors that invest in equity private placements.

Investment Manager Profile

Investment manager profiles provide comprehensive and detailed summaries on the aggregate, historical investing activity of all of the investment funds controlled by a specific investment manager.

Notes:

In the case of a corporate entity that invests in equity private placements, such corporation is considered to be an investment manager (e.g., Microsoft Corp.).

In the case of corporate insiders, investment manager profiles are aggregated at the “corporate insider” level to denote the collective participation of corporate insiders across all equity private placements.

In the case of individual accredited investors, investment manager profiles are aggregated at the “individual investor” level to denote the collective participation of individual investors across all equity private placements.

Relevant investment manager profiles are automatically updated as each new placement is entered into the Equity Private Placement (EPP) Database^TM.

Investing Public

All institutional and individual investors who buy and sell common shares of publicly traded corporations through open market transactions.

Issuer

Any public corporation that has the authority to issue and distribute securities through equity private placements. Issuers are required to describe material financings (e.g., equity private placements) through timely disclosure in any of the following documents filed with the SEC:

Form 8-K

The report that a publicly held issuer must file reporting on defined “material” events (e.g., equity private placements) that might affect its financial situation or the value of its assets or shares.

Form 10-Q

A comprehensive overview of the state of an issuer’s business and financial health that must be filed with the SEC on a quarterly basis.

Form 10-K

A comprehensive overview of the state of an issuer’s business and financial health that must be filed with the SEC within 90 days of the end of a company’s fiscal year.

Issuer Legal Counsel Profile

Issuer legal counsel profiles provide comprehensive and detailed summaries on the historical issuer representation activity of a specific legal counsel.

Issuer Profile

Issuer profiles provide comprehensive and detailed summaries on the placement history of a specific isuer.

L

Legal Counsel

Legal counsel act as legal advisers during execution of an equity private placement. Legal counsel may represent an issuer or investor.

M

Market Capitalization (Equity)

The aggregate value of an issuer‘s common shares as determined by the market. Equity market capitalization is calculated by multiplying the total number of common shares outstanding by the current share price.

Maturity

The date on which the principal amount of a bond, convertible debt, preferred stock, convertible preferred stock or any other convertible security is to be paid in full.

Mezzanine Financing

Financing that ranks above equity but below debt in the capital structure of an issuer.

N

NASD

The National Association of Securities Dealers is a self-regulating organization that is responsible for regulating its members. Most broker-dealers are members. The NASD operates the NASDAQ stock markets.

NASDAQ

Abbreviation for National Association of Securities Dealers Automated Quotation System. The system is designed to facilitate over-the-counter stock trading.

NASDAQ Global Select Market (NASDAQ – GS)

A major national stock market that uses computers and telecommunications for trading securities. Created effective 7/3/06.

NASDAQ Global Market (NASDAQ – GM)

A major national stock market that uses computers and telecommunications for trading securities of companies that do not qualify for inclusion in the NASDAQ Global Select. Renamed from NASDAQ National Market System (NASDAQ – NM) effective 7/3/06.

NASDAQ Capital Market (NASDAQ – CM)

NASDAQ market for the trading of securities of generally smaller, less-well-capitalized companies that do not qualify for inclusion in the NASDAQ Global Market. Renamed from NASDAQ SmallCap Market (NASDAQ – SC) effective 9/27/05.

New Issue

A security being offered to the public for the first time by an issuer. New issues may be initial public offerings by private companies going public or additional securities of issuers that already are public.

New York Stock Exchange (NYSE)

The oldest and largest national stock exchange. Commonly referred to as the “Big Board.”

O

Options

An investor’s or issuer’s right (but not obligation) to buy (or sell) equity and equity-linked securities or require the other party to buy (or sell) equity and equity-linked securities.

Over-the-Counter (OTC)

Also known as Pink Sheets. Companies that do not meet the minimum listing criteria for the OTC BB.

Over-the-Counter Bulletin Board (OTC BB)

Companies that do not meet the minimum listing criteria for the national stock exchanges.

P

Placement Agent

A Placement agent is any fiduciary agent that assists issuers in executing equity private placements or registered direct offerings (e.g., investment banks, broker-dealers, financial advisers, etc.).

Placement Agent Profile

Placement agent profiles provide comprehensive and detailed summaries on the historical placement activity of a specific placement agent.

Placement Profile

Placement profiles provide detailed summaries of equity private placements, with varying placement status, based on publicly available information. Important pricing elements of a transaction are highlighted in the form of a term sheet. In addition, relevant investor, placement agent and legal counsel information is provided.

Placement Status

Placement status for equity private placements:

Closed

Securities have been sold by issuer and funds have been invested/paid by investors.

Equity lines are considered to be closed on mutual execution of investment documentation by issuer and investor

144A Debt: Convertible transactions are considered to be closed on the settlement date as disclosed in a press release, SEC regulatory filing or both.

Definitive Agreement

Terms of private placement have been mutually agreed upon by issuer and investor and investment documents have been executed (awaiting closing).

Announced

Issuer has publicly and specifically disclosed the existence of ongoing private placement negotiations or efforts.

Intended

Issuer has publicly disclosed its intent to pursue an equity private placement.

Postponed

Issuer has publicly disclosed that it has decided to postpone an intended/in-progress equity private placement.

Cancelled

Issuer has publicly disclosed that it has canceled an intended/in-progress equity private placement.

Preferred Stock (Preferred Stock: Nonconvertible)

Preferred stock is a type of capital stock that pays dividends at a set rate. Generally, dividend payments to preferred holders must be made before common stock dividends can be paid. Preferred stocks usually do not have voting rights.

Primary Offering

The sale of securities by an issuer, as distinct from a secondary offering in which the seller of securities is an entity other than the issuer (e.g., investors who had made investments before an issuer becoming a public company). In a primary offering, the issuer receives the proceeds from the offering of securities.

Principal

The amount of money that is financed, borrowed or invested.

Private Placement

A private placement is a private sale of restricted securities by an issuer to a relatively small number of institutions and/or individuals. This private sale of securities is executed under certain exemptions from the registration requirements of the Securities Act of 1933 (e.g., Regulation D, Regulation S, Rule 144A). These securities, however, are ineligible for resale into the public market until such time that either (i) a resale registration statement has been filed with the SEC and declared effective or (ii) resale is permitted under Rule 144 without the need for an effective registration statement.

Prospectus

Under the Securities Act of 1933, an issuer of securities must describe the securities issued by it to raise capital in a document called the prospectus. The document must explain the terms, the planned use of the money, historical financial statements and other information that could help an investor decide whether the investment is appropriate. A prospectus must be given to all buyers and potential buyers of the new issue.

Public Float

The number of common shares of an issuer, or the market value of the number of shares, that are available for trading by the public. Shares held by corporate insiders or affiliated companies are not included in the public float.

Q

Qualified Institutional Buyer

An entity, acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers that are not affiliated with the entity.

R

Registered Direct Placement

A placement of registered securities by an issuer to a limited number of accredited investors. The most common registered direct placements involve a placement of equity and equity-linked securities.

Registration Statement

Document filed with the SEC by an issuer to comply with the registration requirements under the Securities Act of 1933 with regard to (i) offerings of securities to the public and (ii) resale of such securities to the public by purchasers of restricted securities (e.g., equity private placements). The most common registration statements filed by issuers regarding equity private placements are Forms S-1, S-3, SB-1 and SB-2. Issuers must meet varying eligibility requirements to use a specific registration statement. Registration statements must be declared effective by the SEC before resale of the securities purchased in an equity private placement. Alternatively, investors may make resales of such securities to the public in accordance with Rule 144.

Regulation D

Regulation D is a series of six rules, rules 501-506, which describe three transactional exemptions from the registration requirements under the Securities Act of 1933 for sales of equity and equity-linked securities to U.S.-based investors.

Regulation S

An exemption from the registration requirements under the Securities Act of 1933 for offshore sales of equity and equity-linked securities by U.S.-based issuers. These equity and equity-linked securities are treated as restricted securities under Rule 144 with respect to resale of such securities to the public.

Registered Securities

Securities acquired directly or indirectly from an issuer, or from an affiliate of the issuer, in a transaction or series of transactions under a valid and effective registration statement. Such securities are freely tradeable and do not have any resale limitations.

Restricted Securities

Securities acquired directly or indirectly from an issuer, or from an affiliate of the issuer, in a transaction or series of transactions which do not involve a public offering and are subject to resale limitations (e.g., equity private placements).

Rule 144

SEC Rule 144 allows for the resale of restricted securities to the public in limited quantities. Rule 144 generally applies to corporate insiders and buyers of private placement securities that were sold under exemptions from the SEC‘s registration statement requirements defined in the Securities Act of 1933. Under Rule 144, restricted securities may be sold to the public by corporate insiders and buyers of private placements, before a two-year holding period, without full registration of such securities under specific conditions and limitations. After a two-year holding period, resale of such securities by nonaffiliates of the issuer to the public are unrestricted.

Rule 144A

Rule 144A applies to securities that are offered or sold by a seller (e.g., qualified institutional buyer, or QIB) only to another QIB or to a purchaser that the seller and any entity acting on behalf of the seller reasonably believes is a QIB.

S

Secondary Offering

In contrast to a primary offering where the seller of securities is the issuer, in a secondary offering the seller is any entity other than the issuer. In a secondary offering, the issuer that originally issued the securities does not receive any proceeds.

Securities Act of 1933

An act of Congress that governs the issuance of new issues of securities. It requires the registration of securities, disclosure of pertinent information relating to new issues so that investors may make informed decisions. The oversight of this function is the responsibility of the Securities and Exchange Commission.

Securities and Exchange Commission (“SEC”)

The Securities and Exchange Commission is the federal agency created to administer various acts that constitute the federal securities laws.

T

Term Sheet

A summary of the key financial terms and conditions to be included in an agreement about a proposed equity private placement. Such details would typically include the amount of investment/financing, interest or dividend payments, value per share, agents, fees, conditions, closing dates and so on.

Treasury Stock

Common shares that have been repurchased by the issuer. These common shares are included in the count of the number of shares issued but they are not counted as shares outstanding. They may eventually be retired or they may be reissued by the company.

W

Warrants

A security issued by an issuer entitling the holder to buy a certain number of shares of a specified security (typically common stock) at a specified price during a specified time period. A warrant may be issued separately or together with other equity private placement securities (e.g., convertible preferred stock).

Warrants (Prepaid)

A warrant issued by an issuer entitling the holder to exercise into a specified number of different securities, for no additional financial consideration, during a specified time period.

Placement Profile Overview

Placement Type

Equity private placements may be generally categorized as one of the following placement types: unregistered, registered direct or Rule 144A:

Unregistered (PIPE transaction):

Placements involving equity, equity-linked securities or both that are executed by issuers in reliance upon certain transaction exemptions as provided for under the Securities Act of 1933, as amended — Section 4(2), Regulation D, Regulation S and other miscellaneous exemptions.

Registered Direct (PIPE transaction):

Placements that involve the issuance of preregistered equity and equity-linked securities (e.g., shelf sale) by an issuer to a limited number of accredited investors.

Rule 144A:

Placements that involve equity, equity-linked securities or both that are offered or sold by an issuer only to qualified institutional buyers or to purchasers that the seller and any entity acting on behalf of the seller reasonably believes is a QIB.

Notes:
PIPE = Private Investment in Public Equity

Rule 144A transactions typically involve intermediaries (e.g., investment banks, placement agents or both) and the issuance of convertible securities.

Placement Status

Equity Private Placements may have one of six possible statuses:

Closed:

Securities have been issued by issuer and funds have been invested/paid by investor (press release or SEC regulatory filing that confirms the cosing has been disclosed).

Closed Status Notes:

Multiple-tranche placements: a placement is not considered to have a closed status until at least $1 million is funded/invested by the investor(s).

Equity lines are considered to be closed on mutual execution of a definitive agreement by issuer and investor.

Rule 144A transactions are considered to be closed on the settlement date as disclosed in a press release, SEC regulatory filing or both.

Definitive Agreement:

Terms of private placement have been mutually agreed upon by issuer and investor and investment documents have been executed (awaiting closing).

Announced:

Issuer has publicly and specifically disclosed the existence of ongoing private placement negotiations or efforts.

Intended:

Issuer has publicly disclosed its intent to pursue an equity private placement.

Postponed:

Issuer has publicly disclosed that is has decided to postpone an intended or in-progress equity private placement.

Canceled:

Issuer has publicly disclosed that it has canceled an intended or in-progress equity private placement.

Closing/Announced Dates

Date on which an Equity Private Placement is either: (i) closed, (ii) a definitive agreement is entered into or (iii) announced.

Notes:

Accuracy of closing/announced date is subject to extent and clarity of disclosures (via press releases and SEC filings) made by an issuer, investors or both related to a placement.

If a specific closing/announced date is not disclosed, the date of the announcement/disclosure (via press release or SEC filing) is used as a proxy date until PrivateRaise.com is able to confirm a specific closing date (subject to supplemental public disclosures made by an issuer, investors or both).

Security Type

Common Stock:

Common stock represents an ownership stake in the issuer. Common stock is the most junior security that may be offered by an issuer (i.e., holders of preferred stock, subordinated debt, secured debt and trade payables all get paid before common stockholders in the event of a liquidation of the issuer). There can be different classes or series of common stock with different rights, including voting or dividend differences.

Preferred Stock: Convertible:

A form of preferred stock that grants the investor the right (but not the obligation) to convert the preferred stock into the common stock of the issuer.

Preferred Stock: Nonconvertible:

A preferred stock is a type of capital stock that pays dividends at a set rate. Generally, dividend payments to preferred holders must be made before common stock dividends can be paid. Preferred stocks usually do not have voting rights. (only Preferred Stock: Nonconvertible placements with Warrant Coverage of at least 10% are monitored as Equity Private Placements)

Debt: Convertible:

Debt that can be converted into equity, usually at the option of the debt holder. Convertible debt is similar to convertible preferred stock, but it ranks senior to preferred stock in the event of a liquidation of the issuer.

Debt: Nonconvertible:

A certificate of indebtedness. The issuer promises to pay the bondholder a specified amount of interest (“coupon”) for a specified time period and to repay the debt at the end of a specified period (the “maturity of the bond”). (only Debt: Nonconvertible placements with Warrant Coverage of at least 10% are monitored as Equity Private Placements)

Other: Convertible:

Any security — other than preferred stock, debt or a warrant — that permits the investor to acquire an ownership stake in the issuer by converting the original security, typically, into common stock (e.g., trust preferred securities).

Prepaid Warrant:

A warrant issued by an issuer entitling the holder to exercise into a specified number of different securities, for no additional financial consideration, during a specified time period.

Warrant:

A security issued by an issuer entitling the holder to buy a certain number of shares of a specified security (typically common stock) at a specified price during a specified time period.

A warrant may be issued separately or together with other equity private placement securities (e.g., preferred stock).

Equity Line:

An equity line financing structure allows the issuer to “draw down” on a predetermined amount of capital committed to by an investor during a specified time period (typically 24 to 36 months). The issuer “draws down” on the equity line by making periodic sales of its securities (typically common stock) to the investors.

Unknown:

A security or securities issued by an issuer that could not be identified or verified by PrivateRaise.com.

Note:
If and when PrivateRaise.com is able to identify/verify the security type, the relevant placement profile is updated.

Securities

Type and name of securities issued in an equity private placement.

Issuance Amount

Gross proceeds received by the issuer in an equity private placement.

Term

Term represents the “life” of an equity private placement security.

Dividend/Coupon

Dividend/coupon is an annual rate of interest that is to be paid by an issuer to investors in association with the issuance of certain security types (e.g., preferred stock: convertible)

Purchase/Conversion Price

Fixed Price:

Purchase price of the common stock or the conversion price of a convertible security is set either (i) at closing or (ii) on a specified date after closing and does not adjust downward (or upward) throughout the life of the investment (except for certain anti-dilution adjustments or at the discretion of the issuer).

Reset Price:

Purchase price of the common stock or the conversion price of a convertible security set either (i) at closing or (ii) on a specified date after closing and is subject to adjustment downward (or upward) based on various criteria including, fundamental performance, a specified event or the stock price of the issuer at a given point in time after closing.

Variable Price:

Purchase price of the common stock or the conversion price of a convertible security fluctuates in relation to the stock price of the issuer after closing (usually subject to a maximum purchase/conversion price). The effective purchase price of the common stock or the conversion price of a convertible security will ultimately depend on the direction and magnitude of the issuer’s stock price movement.

Anti-Dilution Protection

Provides investors with dilution protection in the event an issuer issues equity or equity-linked securities (subsequent to the closing of an equity private placement) at a purchase/ conversion/exercise price below a specified price.

Note:

PrivateRaise.com does not classify equity private placements that are subject to customary anti-dilution provisions in the event of a stock split, stock dividend, merger, recapitalization or distribution of assets as having anti-dilution protection.

Weighted-Average

Purchase/conversion/exercise price is adjusted based on a weighted average calculation of the dilution impact of such subsequent issuance or offering by the issuer.

Full-Ratchet

Current purchase/conversion/exercise price is lowered to equal the purchase/conversion/exercise price of the subsequent issuance or offering by the issuer.

Most-Favored Nation

Investor has the option to substitute the purchase/conversion/exercise terms of a subsequent issuance or offering by the issuer for the current purchase/conversion/exercise terms.

Reset & Variable Price Minimums

Hard Floor Price:

Minimum purchase/conversion price which remains in-force throughout the life of the investment and is not subject to certain conditions or adjustments (upward or downward) and does not provide investors with a remedy to be “made whole” in the event the market price of the issuer’s common stock falls below the hard floor price.

Note:
Hard floor price does not apply to fixed-priced placements.

Soft Floor Price:

Minimum purchase/conversion price which may be subject to certain conditions, time limitations or adjustments and/or provides alternative means for the investors to be “made whole” in the event the market price of the issuer’s common stock falls below the soft floor price (e.g., redemption-at-premium or cash-in-lieu-of-conversion rights).

Note:
Soft floor price does not apply to fixed-priced placements.

Investor Warrants & Options

Investor Warrants:

Warrants that are issued in addition to the primary securities purchased by investors in an equity private placement.

Investor Call Option:

Investors’ right (not obligation) to purchase additional securities from the issuer during a specified time period. The type and purchase/conversion price may or may not be identical to the securities originally purchased by investors.

Investor Greenshoe:

Investors’ right (not obligation) to purchase additional securities from the issuer during a specified time period. The type and purchase/conversion Price is identical to the securities originally purchased by investors.

Issuer Options

Issuer Put Option:

An issuers’ right (but not obligation) to sell additional securities to the investor during a specified time period. The type and purchase/conversion price may or may not be identical to the securities originally purchased by investors.

Investor Restrictions

Conversion/Exercise Restrictions:

Applicable to convertible securities and warrants. Restrictions on the ability of investors to convert their preferred stock or debt or to exercise their warrants into the underlying common stock. Restrictions can include limitations based on a maximum principal amount for any given conversion/exercise, a percentage of trading volume of the common stock or passage of time.

Selling Restrictions:

Restrictions on the ability of investors to resell purchased common stock or the common stock received from conversion of preferred stock or debt. Restrictions can include limitations based on a maximum number of common shares that can be sold over a specified time period, a percentage of trading volume of the common stock or passage of time.

Hedging Restrictions:

Restrictions on the ability of investors to engage in short sales or related hedging activities in relation to the securities originally purchased by the investors. Restrictions can include limitations based on the type of hedging activities, maximum principal amount or number of common shares that may be hedged or specified time periods where hedging activities are prohibited or limited.

Investor Contractual Rights

Investor Purchase Rights:

Investors’ right to participate in any future issuances of securities by the Issuer — Right of Participation, Right of First Refusal, etc. —after the closing of an equity private placement.

Investor purchase rights may apply to future issuances of various types of securities or may be limited to securities that are similar to the securities originally purchased by investors.

Investor purchase rights are typically applicable for defined time periods.

Investor Redemption:

Investors’ right, under certain specified conditions, to force an issuer to redeem all or a portion of the securities originally purchased by investors.

Registration Rights:

Issuer may grant varying types/combinations of registration rights to investors who purchase securities through an equity private placement:

Mandatory Registration
Issuer’s contractual commitment to the investors to:

1. file an appropriate resale registration statement with the SEC no later than a negotiated filing deadline and/or
2. cause such registration statement to be declared effective by the SEC no later than a negotiated effectiveness deadline and/or
3. have a registration statement declared effective by the SEC before the issuance of securities or funding of the investment (e.g., registered direct, equity line deals or both)

Demand Registration
An investor’s contractual right to demand, from time-to-time, that the issuer file (and cause to become effective in a timely manner) a registration statement for the securities issued in an equity private placement so that investors may resell such securities to public.

Piggy-Back Registration
An investor’s contractual right to have the securities purchased in an equity private placement included in any future registration statement that the issuer files on its own behalf or on behalf of any of its stockholders.

Issuer Contractual Rights

Forced Conversion/Exercise:

Applicable to convertible securities and warrants. The issuer has the right, under certain specified conditions, to force investors to convert their preferred stock or debt or exercise their warrants into the underlying common stock before maturity of the security.

Issuer Redemption:

An issuer’s right, under certain specified conditions, to redeem all or a portion of the securities originally purchased by investors.

Equity Market Capitalization

Equity market capitalization (EMC) on the date immediately preceding the closing/announced date of an equity private placement.

Stock Price

Closing sale price of issuer’s common stock on the date immediately preceding the closing/announced date of an equity private placement (if a specific date is disclosed).

Average Daily Trading Volume

Average daily trading volume of issuer’s common stock during the 30 days immediately preceding the closing/announced date of an equity private placement (subject to available data).

Issuance Amount (% of Market Cap)

Issuance amount as a percentage of the equity market capitalization of an issuer on the date immediately preceding the closing/announced date of a private placement.

Purchase/Conversion Price (% of Stock Price)

Calculated only for Closed and Definitive Agreement and some Announced placements (subject to available data).

Unless otherwise specifically indicated, the purchase/conversion price as a percentage of stock price is calculated/reported based on the date before the following:

1. Best available of:
   1. date of definitive agreement/pricing,
   2. date of offering announcement and
   3. date of closing (2003-present fixed/reset profiles and certain pre-2003)
2. Closing/announced date (most pre-2003 fixed/reset profiles)
3. No specific date (negotiated discount is displayed in case of variable price)

Calculated discount/premium may differ materially in some cases from negotiated pricing due to either (i) fluctuations in issuer’s stock price during the time period between determination of pricing and when the transaction is closed/announced or (ii) the negotiated pricing involves a multiple-day “pricing period” (any such information on “pricing periods”, if known, is displayed in the purchase/conversion price data fields).

Warrant Coverage

Warrant coverage is calculated as the number of warrant shares divided by:

1. total number of common shares issued (e.g., common stock) or;
2. total number of common shares that a security may be converted into (e.g., convertible security) or;
3. total number of common shares, assuming a hypothetical conversion price equal to the current market price, that a security may be hypothetically converted into (e.g., nonconvertible security).

Warrant Exercise Price (% of Stock Price)

Calculated only for Closed and Definitive Agreement and some Announced placements (subject to available data).

Unless otherwise specifically indicated, the exercise price as a percentage of stock price is calculated/reported based on the date before the following:

1. Best available of:
   1. date of definitive agreement/pricing,
   2. date of offering announcement and
   3. date of closing (2003-present fixed/reset profiles and certain pre-2003)
2. Closing/announced date (most pre-2003 fixed/reset profiles)
3. No specific date (negotiated discount is displayed in case of variable price)

Calculated discount/premium may differ materially in some cases from negotiated pricing due to either (i) fluctuations in issuer’s stock price during the time period between determination of pricing and when the transaction is closed/announced or (ii) the negotiated pricing involves a multiple-day “pricing period” (any such information on “pricing periods”, if known, is displayed in the exercise price data fields).