S-4/A 1 v449051_s4a.htm S-4/A

As filed with the Securities and Exchange Commission on October 25, 2016

Registration No. 333-213566

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



 

AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

FORM HOLDINGS CORP.

(Exact name of registrant as specified in its charter)



 

   
Delaware   4899   20-4988129
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

780 Third Avenue, 12th Floor
New York, New York 10017
(212) 309-7549

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)



 

Andrew D. Perlman
Chief Executive Officer
FORM Holdings Corp.
780 Third Avenue, 12th Floor
New York, New York 10017
(212) 309-7549

(Name, address, including zip code, and telephone number,
including area code, of agent for service)



 

Copies to:

Kenneth R. Koch, Esq.
Jeffrey P. Schultz, Esq.
Merav Gershtenman, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler Center
666 Third Avenue
New York, New York
(212) 935-3000



 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement number 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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o   Smaller reporting company x
     (Do not check if a smaller reporting company)         

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o

 

 


 
 

TABLE OF CONTENTS

       
Title of Each Class of Securities to be Registered   Amount to be Registered   Proposed Maximum Offering Price Per Share   Proposed Maximum Aggregate Offering Price   Amount of Registration Fee(3)
Common Stock, par value $0.01 per share     6,458,336 (1)      N/A     $ 9,770,000 (2)    $ 983.84 (10) 
Preferred Stock, par value $0.01 per share     494,792 (4)      N/A     $ 28,080,000 (5)    $ 2,827.66 (10) 
Warrants to purchase Common Stock     2,500,000 (6)      N/A       N/A       N/A (7) 
Common Stock issuable upon exercise of the Warrants     2,500,000 (8)      N/A     $ 7,500,000 (9)    $ 755.25 (10) 

Pursuant to Rule 416, this registration statement also covers an indeterminate number of additional securities of FORM Holdings as may be issuable as a result of stock splits, stock dividends or similar transactions.
(1) Represents (i) 2,500,000, which is the number of shares of FORM Holdings Corp. (“FORM”) common stock, par value $0.01 per share, to be issued to equity holders of XpresSpa Holdings, LLC (“XpresSpa”) in the transactions described in the proxy statement/prospectus and (ii) 3,958,336, the number of shares of common stock that the FORM preferred stock, par value $0.01 per share, is initially convertible into.
(2) Calculated based upon the book value of the securities to be received by FORM in the transactions described in the proxy statement/prospectus in accordance with Rule 457(f)(2) under the Securities Act.
(3) Determined in accordance with Section 6(b) of the Securities Act of 1933 by multiplying 0.0001007 by the proposed maximum aggregate offering price.
(4) Represents the number of shares of FORM convertible preferred stock to be issued to equity holders of XpresSpa in the transactions described in the proxy statement/prospectus.
(5) Calculated based upon the book value of the securities to be received by FORM in the transactions described in the proxy statement/prospectus in accordance with Rule 457(f)(2) under the Securities Act.
(6) Represents the number of warrants to purchase FORM common stock to be issued by FORM to equity holders of XpresSpa in the transactions described in the proxy statement/prospectus.
(7) In accordance with existing SEC interpretations, the entire registration fee for the warrants is allocated to the FORM common stock registered underlying the warrants, and no separate fee is recorded for the warrants to purchase shares of FORM common stock.
(8) Represents the number of shares of FORM common stock issuable upon exercise of the warrants, to be issued by FORM in the transactions described in the proxy statement/prospectus.
(9) The aggregate offering price of the warrants to purchase FORM common stock is calculated based on the $3.00 exercise price of the warrants.
(10) Previously paid.

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.


 
 

TABLE OF CONTENTS

The information in this proxy statement/prospectus is not complete and may be changed. Form Holdings Corp. may not sell these securities until the registration statement filed with the Securities and Exchange Commission (the “SEC”), of which this proxy statement/prospectus is a part, is declared effective. This proxy statement/prospectus is not an offer to sell these securities and it is not the solicitation of an offer to buy these securities in any jurisdiction where the offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any representation to the contrary is a criminal offense.

PRELIMINARY — SUBJECT TO COMPLETION — DATED OCTOBER 25, 2016

FORM HOLDINGS CORP.

[GRAPHIC MISSING]

PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

FORM Holdings Corp. (“FORM”), FHXMS, LLC, a wholly-owned subsidiary of FORM (“Merger Sub”), XpresSpa Holdings, LLC (“XpresSpa”), Mistral XH Representative, LLC, as Unitholders’ Representative (the “Representative”) and the XpresSpa unitholders party thereto or who become a party thereto, entered into a Merger Agreement on August 8, 2016 (the “Original Merger Agreement”), pursuant to which Merger Sub will merge with and into XpresSpa, with XpresSpa surviving the merger as a wholly-owned subsidiary of FORM (the “Merger ”). On September 8, 2016, the parties amended the Original Merger Agreement pursuant to that certain Amendment No. 1 to Merger Agreement, to clarify the stockholder approval threshold required for the approval of the Merger Agreement by FORM’s stockholders (“Amendment No. 1”). On October 25, 2016, the parties further amended the Original Merger Agreement pursuant to that certain Amendment No. 2 to Merger Agreement, to clarify certain indemnification provisions in connection with the Merger and to increase the amount to be held in escrow in connection with such right to indemnification (“Amendment No. 2” and together with Amendment No. 1 and the Original Merger Agreement, the “Merger Agreement”). The disinterested members of the board of directors (consisting of all board members except Bruce T. Bernstein) of FORM have unanimously approved the Merger Agreement and the Merger. In addition, the disinterested members of the board of directors (consisting of all board members except Bruce T. Bernstein) of XpresSpa have approved the Merger Agreement and the Merger. XpresSpa is a privately held airport retailer of spa services and products.

Pursuant to the terms of the Merger Agreement, upon completion of the Merger, (i) the then-outstanding common units of XpresSpa (other than units held by FORM and its subsidiaries, which will be cancelled without any consideration) and (ii) the then-outstanding preferred units of XpresSpa (other than preferred units held by FORM and its subsidiaries, which will be cancelled without any consideration) will be cancelled and automatically converted into the right to receive an aggregate of (i) 2,500,000 shares of FORM common stock, (ii) 494,792 shares of FORM preferred stock, initially convertible into 3,958,336 shares of FORM common stock and (iii) five-year warrants to purchase an aggregate of 2,500,000 shares of FORM common stock, at an exercise price of $3.00 per share, in each case, subject to adjustment in the event of a stock split, dividend or similar events. Immediately following the completion of the Merger (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis).

FORM’s common stock is listed on The NASDAQ Capital Market and trades under the symbol “FH.” On October 18, 2016, a recent practicable date before the printing of this proxy statement/prospectus, the closing sale price of FORM common stock was $3.24 per share. Following the completion of the Merger, FORM is expected to continue to be publicly traded on The NASDAQ Capital Market.

FORM is soliciting proxies for use at an annual meeting of its stockholders to consider and vote upon (i) a proposal to approve the Merger, including, but not limited to the issuance of shares of FORM’s common stock, FORM’s preferred stock and warrants to purchase shares of FORM’s common stock to the XpresSpa equity holders in connection with the Merger, (ii) a proposal to approve the adoption of a Section 382 rights agreement designed to preserve the substantial amount of FORM’s net operating loss carry forwards and other tax benefits, (iii) a proposal to elect six director nominees to the FORM board of directors, (iv) a proposal to approve an amendment to the FORM 2012 Employee, Director and Consultant Equity Incentive Plan, or the 2012 Plan, to increase the number of shares of common stock reserved for issuance under the 2012 Plan to up to a maximum of 7,573,568 and increase the maximum number of shares available for grant to a single participant in any fiscal year, (v) a proposal to ratify the appointment of FORM’s independent registered public accounting firm for the year ending December 31, 2016, (vi) a proposal to approve an amendment to FORM’s Amended and Restated Certificate of Incorporation to remove “only-for-cause” director removal, (vii) a proposal to approve, by an advisory vote, the compensation of FORM’s named executive officers, as disclosed in this proxy statement/prospectus and (viii) an adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposals referred to in clauses (i) through (vii). The board of directors of FORM recommends that FORM stockholders vote FOR each of the foregoing proposals. Approval of the foregoing proposal (i) is necessary to complete the Merger.

Your vote is very important. Whether or not you plan to attend the FORM annual meeting of stockholders, please submit your proxy as promptly as possible (i) through the Internet, (ii) by telephone or (iii) by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided to make sure that your shares are represented at the annual meeting.

This proxy statement/prospectus provides you with detailed information about the FORM annual meeting, the Merger and the other business to be considered by FORM stockholders at the annual meeting. In addition to being a proxy statement, this document is also a prospectus to be used by FORM when issuing FORM’s common stock and preferred stock, the warrants to purchase common stock and the shares of common stock underlying such preferred stock and warrants to be issued to the XpresSpa equity holders in connection with the Merger. FORM encourages you to read the entire document carefully.

Please pay particular attention to the section entitled “Risk Factors” beginning on page 29 for a discussion of the risks related to the Merger, FORM following the completion of the Merger, and the business and operations of each of FORM and XpresSpa.

Andrew D. Perlman
Chief Executive Officer
FORM Holdings Corp.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the Merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated October 25, 2016 and is first being mailed to the stockholders of FORM on or about October 28, 2016.


 
 

TABLE OF CONTENTS

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus references important business and financial information about FORM that is not included in or delivered with this proxy statement/prospectus. FORM and its proxy solicitor, The Proxy Advisory Group, LLC®, will provide you with copies of this information (excluding all annexes) relating to FORM, without charge, upon written or oral request. You can obtain these documents, which are referred to in this proxy statement/prospectus, by requesting them in writing or by telephone from FORM or The Proxy Advisory Group LLC®, FORM’s proxy solicitor, at the following address and telephone number, as applicable:

 
FORM Holdings Corp.
780 Third Avenue, 12th Floor
New York, New York 10017
(212) 309-7549
  The Proxy Advisory Group, LLC®
18 East 41st Street, Suite 2000
New York, New York 10017
888-337-7699
888-33-PROXY

In order for you to receive timely delivery of the documents in advance of the FORM annual meeting you must request the information no later than November 15, 2016.

Important Notice Regarding the Availability of Proxy Materials for the 2016 Annual Meeting of Stockholders of FORM to be held on November 28, 2016. This proxy statement/prospectus, a form of proxy card and FORM’s Annual Report to Stockholders for 2016 are available on the Internet at www.proxyvote.com.

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms a part of a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the “SEC”) by FORM (File No. 333-213566), constitutes a prospectus of FORM under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of FORM’s common stock and preferred stock and the warrants (and the shares of common stock issuable upon conversion or repayment of the preferred stock and the exercise of the warrants) to be issued to the XpresSpa equity holders in connection with the Merger.

This proxy statement/prospectus also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended, with respect to a FORM annual meeting, at which FORM stockholders will be asked to consider and vote upon certain proposals, including (i) a proposal to approve the Merger, including, but not limited to, the issuance of shares of FORM’s common stock, preferred stock and warrants (and the shares of common stock issuable upon conversion or repayment of the preferred stock and exercise of the warrants) to the XpresSpa equity holders in connection with the Merger, (ii) a proposal to approve the adoption of a Section 382 rights agreement designed to preserve the substantial amount of FORM’s net operating loss carry forwards and other tax benefits, (iii) a proposal to elect six director nominees to the FORM board of directors, (iv) a proposal to approve an amendment to the FORM 2012 Employee, Director and Consultant Equity Incentive Plan, or the 2012 Plan, to increase the number of shares of common stock reserved for issuance under the 2012 Plan to up to a maximum of 7,573,568 shares and increase the maximum number of shares available for grant to a single participant in any fiscal year, (v) a proposal to ratify the appointment of CohnReznick LLP as FORM’s independent registered public accounting firm for the fiscal year ending December 31, 2016, (vi) a proposal to approve an amendment to FORM’s Amended and Restated Certificate of Incorporation to remove “only-for-cause” director removal, (vii) a proposal to approve, by an advisory vote, the compensation of FORM’s named executive officers, as disclosed in this proxy statement/prospectus, and (viii) a proposal to approve the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of proposals (i) – (vii).


 
 

TABLE OF CONTENTS

[GRAPHIC MISSING]

FORM HOLDINGS CORP.
780 Third Avenue, 12th Floor
New York, New York 10017
(212) 309-7549



 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 28, 2016

To the Stockholders of FORM Holdings Corp.:

The 2016 annual meeting of stockholders of FORM Holdings Corp. (“FORM”), a Delaware corporation, will be held on November 28, 2016, at 11:00 a.m., local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., the Chrysler Center, 666 Third Avenue, 32nd floor, New York, New York 10017, for the following purposes:

1. To approve the Merger, including, but not limited to the issuance of shares of FORM’s common stock, preferred stock and warrants (and the shares of common stock issuable upon conversion or repayment of the preferred stock and exercise of the warrants) to the XpresSpa equity holders in connection with the Merger contemplated by the Agreement and Plan of Merger, dated as of August 8, 2016, by and among FORM, XpresSpa, FHXMS, LLC, a wholly-owned subsidiary of FORM, Mistral XH Representative, LLC, as Unitholders’ Representative and the XpresSpa unitholders party thereto or who become a party thereto, as amended by Amendments No. 1 and No. 2 to Agreement and Plan of Merger;
2. To approve the adoption of a Section 382 rights agreement designed to preserve the substantial amount of FORM’s net operating loss carry forwards and other tax benefits;
3. To elect six director nominees to the FORM board of directors as specified in “FORM’s Proposal No. 3: Election of Directors” to serve until the next annual meeting of the FORM stockholders or until their successors are duly elected and qualify or until their earlier death, resignation or removal;
4. To approve a proposed amendment to the FORM 2012 Employee, Director and Consultant Equity Incentive Plan, or the 2012 Plan, to increase the number of shares of common stock reserved for issuance under the Plan to up to a maximum of 7,573,568 shares and increase the maximum number of shares available for grant to a single participant in any fiscal year;
5. To ratify the appointment of CohnReznick LLP as FORM’s independent registered public accounting firm for the fiscal year ending December 31, 2016;
6. To approve an amendment to FORM’s Amended and Restated Certificate of Incorporation to remove “only-for-cause” director removal;
7. To approve, by an advisory vote, the compensation of FORM’s named executive officers, as disclosed in this proxy statement/prospectus;
8. To approve the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM’s Proposal Nos. 1, 2, 3, 4, 5, 6 or 7; and
9. To conduct any other business as may properly come before the FORM annual meeting or any adjournment or postponement thereof.


 
 

TABLE OF CONTENTS

The FORM board of directors has determined that the Merger, upon the terms and conditions set forth in the Merger Agreement, and the other transactions contemplated by the Merger Agreement are advisable and fair to, and in the best interests of, FORM and its stockholders. The board of directors makes its recommendation to the FORM stockholders after consideration of the factors described in this proxy statement/prospectus. The disinterested members of the FORM board of directors unanimously recommend that FORM stockholders vote FOR each of the foregoing proposals.

The FORM board of directors has fixed October 18, 2016 as the record date for the determination of stockholders entitled to notice of, and to vote at, the FORM annual meeting and any adjournment or postponement thereof. Only holders of record of shares of FORM’s common stock at the close of business on the record date are entitled to notice of, and to vote at, the FORM annual meeting. At the close of business on the record date, FORM had 15,799,881 shares of common stock outstanding and entitled to vote.

Your vote is important. The affirmative vote of the holders of a majority of the shares of FORM’s common stock present and entitled to vote on the matter either in person or by proxy at the FORM annual meeting is required for approval of FORM’s Proposal Nos. 1, 2, 4, 5, 7 and 8. The affirmative vote of a plurality of the voting power of the shares present or represented by proxy at the meeting and entitled to vote is required for the election of the directors set forth in FORM’s Proposal No. 3. The affirmative vote of the holders of a majority of the outstanding shares of FORM’s common stock entitled to vote on the matter either in person or by proxy at the annual meeting is required for approval of FORM’s Proposal No. 6.

All FORM stockholders of record are cordially invited to attend the FORM annual meeting in person. However, even if you plan to attend the FORM annual meeting in person, FORM urges you to submit your proxy as promptly as possible (i) through the Internet, (ii) by telephone or (iii) by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope as instructed on the enclosed proxy card to ensure that your shares of FORM common stock will be represented at the FORM annual meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, all of your shares will be voted FOR FORM’s Proposal Nos. 1, 2, 3, 4, 5, 6, 7 and 8. If you fail to submit your proxy as instructed on the enclosed proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the FORM annual meeting and will have the same effect as a vote against FORM’s Proposal No. 6 but such failure will have no effect with respect to FORM’s Proposal Nos. 1, 2, 3, 4, 5, 7 and 8. If you do attend the FORM annual meeting and wish to vote in person, you may withdraw your proxy and vote in person.

Pursuant to rules adopted by the SEC, FORM has elected to provide access to the proxy materials of FORM both by sending you this full set of proxy materials, including a proxy card, and by making a copy of the proxy materials available to you on the Internet. This proxy statement/prospectus, a form of proxy card and FORM’s Annual Report to Stockholders for the year ended December 31, 2015 are available on the Internet at www.proxyvote.com.

This proxy statement/prospectus provides you with detailed information about the Merger and the other business to be considered by FORM stockholders at the annual meeting. FORM encourages you to read the entire document carefully. Please pay particular attention to the section entitled “Risk Factors” beginning on page 29 for a discussion of the risks related to the Merger, FORM following the completion of the Merger, and the business and operations of each of FORM and XpresSpa.

By Order of the Board of Directors,
 
Andrew D. Perlman
Chief Executive Officer
October 25, 2016


 
 

TABLE OF CONTENTS

IMPORTANT

Your vote is important. Whether or not you expect to attend the FORM annual meeting, please submit your proxy (i) through the Internet, (ii) by telephone or (iii) by marking, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided, as instructed in these materials as promptly as possible in order to ensure that your shares of FORM’s common stock will be represented at the FORM annual meeting. Even if you have voted by proxy, you may still vote in person if you attend the FORM annual meeting and revoke your proxy. Please note, however, that if your shares are held in “street name” by a broker or other nominee and you wish to vote at the FORM annual meeting, you must obtain a proxy issued in your name from such record holder prior to annual meeting.


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS

 
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE FORM ANNUAL
MEETING
    1  
SUMMARY     9  
The Companies     9  
The Merger     13  
What XpresSpa Equity Holders Will Receive in the Merger     13  
Ownership of FORM After the Completion of the Merger     14  
Board of Directors and Executive Officers of FORM After the Completion of the Merger     14  
Recommendations of the FORM Board of Directors and its Reasons for the Merger     14  
Preferred Stock Valuation by Innovus Advisors     15  
Interests of FORM’s Directors and Executive Officers in the Merger     15  
Anticipated Accounting Treatment of the Merger     16  
Material U.S. Federal Income Tax Consequences of the Merger     16  
Restrictions on Sales of Shares of FORM’s Common Stock, Preferred Stock and Warrants Received by XpresSpa Equity Holders in the Merger     16  
Appraisal Rights     16  
Regulatory Approvals     16  
Conditions to the Completion of the Merger     17  
No Solicitation     18  
Termination of the Merger Agreement     18  
Termination Fees and Expenses     19  
Voting by FORM Directors and Executive Officers     20  
Rights of XpresSpa Equity Holders Will Change as a Result of the Merger     20  
Private Placements     20  
Escrow Agreement     21  
Risk Factors     21  
Matters to Be Considered at the FORM Annual Meeting     21  
SUMMARY HISTORICAL FINANCIAL DATA OF FORM     23  
SUMMARY HISTORICAL FINANCIAL DATA OF XPRESSPA     24  
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA     25  
MARKET PRICE DATA AND DIVIDEND INFORMATION     26  
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS     27  
RISK FACTORS     29  
Risks Related to the Merger     29  
Risks Related to FORM’s Business     34  
Risks Related to XpresSpa’s Business     39  
THE MERGER     44  
Structure of the Merger     44  
What XpresSpa Equity Holders Will Receive in the Merger     44  
Ownership of FORM after the Completion of the Merger     44  

i


 
 

TABLE OF CONTENTS

 
Background of the Merger     45  
Recommendations of the FORM’s Board of Directors and its Reasons for the Merger     50  
Preferred Stock Valuation by Innovus Advisors     52  
Board of Directors and Executive Officers of FORM After the Completion of the Merger     58  
Interests of FORM Directors and Executive Officers in the Merger     58  
Anticipated Accounting Treatment     59  
Tax Treatment of the Merger     59  
Regulatory Approvals Required for the Merger     60  
Restrictions on Sales of Shares of FORM’s Common Stock, Preferred Stock and Warrants Received by XpresSpa Equity Holders in the Merger     60  
Appraisal Rights     60  
The NASDAQ Capital Market Listing of FORM Common Stock     60  
Private Placements     61  
Escrow Agreement     61  
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER     62  
THE MERGER AGREEMENT     66  
Terms of the Merger     66  
Completion of the Merger     66  
Limited Liability Company Agreement; Certificate of Formation; Directors and Officers     66  
Merger Consideration     67  
Representations and Warranties     68  
Material Adverse Effect     68  
Certain Covenants of the Parties     69  
No Solicitation     70  
Board Recommendations     71  
Approval of Stockholders     71  
Indemnification of Directors and Officers     72  
Conditions to the Completion of the Merger     72  
Termination of the Merger Agreement     73  
Termination Fees and Expenses     73  
Amendments     74  
Governing Law     74  
Amendment No. 1     74  
Amendment No. 2     74  
INFORMATION ABOUT THE COMPANIES     75  
FORM Holdings Corp.     75  
XpresSpa Holdings, LLC     76  
FHXMS, LLC     76  
THE ANNUAL MEETING OF FORM’S STOCKHOLDERS     77  
Date, Time and Place     77  

ii


 
 

TABLE OF CONTENTS

 
Purpose of the FORM Annual Meeting     77  
FORM Record Date; Shares Entitled to Vote     77  
Quorum     77  
Required Vote     77  
Counting of Votes; Treatment of Abstentions and Incomplete Proxies     78  
Voting by FORM’s Directors and Executive Officers     78  
Voting of Proxies by Registered Holders     79  
Shares Held in Street Name     79  
Revocability of Proxies and Changes to a FORM Stockholder’s Vote     79  
Solicitation of Proxies     80  
Delivery of Proxy Materials to Households Where Two or More FORM Stockholders Reside     80  
Attending the FORM Annual Meeting     80  
FORM’S PROPOSALS     81  
FORM’s Proposal No. 1: Approval of the Issuance of FORM Common Stock and Preferred Stock and Warrants in Connection with the Merger     81  
FORM’s Proposal No. 2: Approval of Adoption of Section 382 Rights Agreement     82  
FORM’s Proposal No. 3: Election of Directors     86  
FORM’s Proposal No. 4: Approval of an Amendment to the FORM 2012 Employee, Director and Consultant Equity Incentive Plan     87  
FORM’s Proposal No. 5: Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm     94  
FORM’s Proposal No. 6: Approval of the Certificate Amendment Proposal     96  
FORM’s Proposal No. 7: Approval, by an Advisory Vote, of the Compensation of FORM’s Named Executive Officers, as Disclosed in this Proxy Statement/Prospectus     97  
FORM’s Proposal No. 8: Approval of the Adjournment of the FORM Annual Meeting, if Necessary, to Solicit Additional Proxies if There Are Not Sufficient Votes in Favor of FORM Proposals Nos. 1 – 7     99  
FORM’S BUSINESS     100  
FORM’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     106  
XPRESSPA’S BUSINESS     122  
XPRESSPA’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     130  
MANAGEMENT OF FORM FOLLOWING THE MERGER     135  
Executive Officers and Directors     135  
Composition of the Board and Director Independence     138  
Committees of the Board of Directors     139  
Board Leadership Structure, Executive Sessions of Non-Management Directors     140  
Risk Oversight     140  
Code of Ethics     140  
Section 16(a) Beneficial Ownership Reporting Compliance     141  
Related Person Transactions     141  

iii


 
 

TABLE OF CONTENTS

 
FORM SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
    148  
XPRESSPA SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     150  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FORM FOLLOWING THE MERGER     152  
DESCRIPTION OF CAPITAL STOCK     155  
Common Stock     155  
Preferred Stock     155  
Warrants     156  
Delaware Statutory Business Combinations Provision     156  
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS     157  
COMPARISON OF RIGHTS OF FORM’S STOCKHOLDERS AND XPRESSPA EQUITY HOLDERS     163  
LEGAL MATTERS     167  
EXPERTS     167  
FUTURE STOCKHOLDER PROPOSALS     167  
WHERE YOU CAN FIND ADDITIONAL INFORMATION     167  
INDEX TO FINANCIAL STATEMENTS     F-1  
Annexes
        

Annex A — 

 The Merger Agreement and Amendments No. 1 and No. 2 to the Merger Agreement

    A-1  

Annex B — 

 Section 382 Rights Agreement

    B-1  

Annex C — 

 FORM 2012 Employee, Director and Consultant Equity Incentive Plan, as Amended

    C-1  

Annex D — 

 Form of Certificate of Amendment to Amended and Restated Certificate of
 Incorporation to Remove “Only-for-Cause” Director Removal

    D-1  

Annex E — 

 Form of Certificate of Designation of Preferences, Rights and Limitations of Series D
 Convertible Preferred Stock

    E-1  

Annex F — 

 Form of Warrant

    F-1  

Annex G — 

 Preferred Stock Valuation Opinion by Innovus Advisors

    G-1  

iv


 
 

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER AND
THE FORM ANNUAL MEETING

The following are some questions that you, as a stockholder of FORM Holdings Corp. (“FORM”), may have regarding the Merger (as defined below) or the FORM annual meeting, together with brief answers to those questions. FORM urges you to read carefully the remainder of this proxy statement/prospectus, including the annexes and other documents referred to in this proxy statement/prospectus, because the information in this section may not provide all of the information that might be important to you with respect to the Merger or the FORM annual meeting.

Q: What is the Merger?
A: FORM, FHXMS, LLC, XpresSpa, the Representative and the XpresSpa unitholders party thereto or who become a party thereto have entered into an Agreement and Plan of Merger, dated as of August 8, 2016 (the “Original Merger Agreement”), that sets forth the terms and conditions of the proposed acquisition by FORM of XpresSpa. Under the Merger Agreement, FHXMS, LLC, a wholly-owned subsidiary of FORM (“Merger Sub”) will merge with and into XpresSpa, with XpresSpa surviving as a wholly-owned subsidiary of FORM (the “Merger”). On September 8, 2016, the parties amended the Original Merger Agreement pursuant to that certain Amendment No. 1 to Merger Agreement, to clarify the stockholder approval threshold required for the approval of the Merger Agreement by FORM’s stockholders (“Amendment No. 1”). On October 25, 2016, the parties further amended the Original Merger Agreement to clarify certain indemnification provisions in connection with the Merger and to increase the amount to be held in escrow in connection with such right to indemnification (“Amendment No. 2,” and together with Amendment No. 1 and the Original Merger Agreement, the “Merger Agreement”). A complete copy of the Merger Agreement (including the Original Merger Agreement and Amendments No. 1 and No. 2) is attached to this proxy statement/prospectus as Annex A.
Q: Why is FORM proposing to effect the Merger?
A: FORM believes that the Merger will increase FORM shareholder value. The disinterested members of FORM’s Board of Directors (consisting of all board members except Bruce T. Bernstein) of FORM have unanimously approved the Merger Agreement and the Merger. The acquisition of XpresSpa will increase FORM’s operating diversification, exposure to growth and markets with substantial barriers to entry, and will benefit XpresSpa by providing it with additional capital, exposure to visibility from the public markets, talent recruiting and the implementation of best practices.
Q: Why am I receiving these materials?
A: FORM is sending these materials to its stockholders to help them decide how to vote their shares of FORM common stock with respect to the Merger and the other matters to be considered at the annual meeting.

This document serves as both a proxy statement of FORM used to solicit proxies for its annual meeting and as a prospectus of FORM used to offer shares of FORM’s common stock, preferred stock and warrants to purchase common stock (including the shares of common stock issuable upon conversion or repayment of the preferred stock and exercise of the warrants) issuable to XpresSpa equity holders in connection with the Merger. This proxy statement/prospectus contains important information about the Merger and the FORM annual meeting and you should read it carefully.

Q: What will XpresSpa equity holders receive in the Merger?
A: Pursuant to the terms of the Merger Agreement, upon completion of the Merger, (i) the then-outstanding common units of XpresSpa (other than common units held by FORM and its subsidiaries, which will be cancelled without any consideration) and (ii) the then-outstanding preferred units of XpresSpa (other than preferred units held by FORM and its subsidiaries, which will be cancelled without any consideration) will be cancelled and automatically converted into the right to receive an aggregate of (i) 2,500,000 shares of FORM common stock, (ii) 494,792 shares of FORM preferred stock, initially convertible into 3,958,336 shares of FORM common stock and (iii) five-year warrants to purchase an aggregate of 2,500,000 shares of FORM common stock, at an exercise price of $3.00 per share, in each

1


 
 

TABLE OF CONTENTS

case, subject to adjustment in the event of a stock split, dividend or similar events. Immediately following the completion of the Merger (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis).

No fractional shares of FORM common or preferred stock will be issued to XpresSpa equity holders in connection with the Merger. Instead, XpresSpa equity holders will be entitled to receive the next highest number of whole shares of FORM common or preferred stock, as applicable, in lieu of any fractional shares of FORM common or preferred stock that they would otherwise be entitled to receive in connection with the Merger.

For a more complete discussion of what XpresSpa equity holders will receive in connection with the Merger, see the sections entitled “The Merger — What XpresSpa Equity Holders Will Receive in the Merger,” “The Merger — Ownership of FORM After the Completion of the Merger” and “The Merger Agreement — Merger Consideration” beginning on pages 44, 44, and 67, respectively.

Q: How will FORM stockholders be affected by the Merger?
A: The Merger will have no effect on the number of shares of FORM common stock held by current FORM stockholders as of immediately prior to the completion of the Merger. However, it is expected that upon completion of the Merger such shares will represent an aggregate of approximately 67% of the outstanding shares of common stock of FORM calculated on a fully diluted basis (without taking into account shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger).

For example, if you are a FORM stockholder and hold 5% of the outstanding shares of FORM common stock calculated on a fully diluted basis immediately prior to the completion of the Merger and do not also hold units of XpresSpa, then upon completion of the Merger you will hold an aggregate of approximately 3.35% of the outstanding shares of common stock of FORM calculated on a fully diluted basis as of immediately following the completion of the Merger.

Q: How will the Merger affect FORM’s business?
A: FORM will undergo changes in connection with the Merger. Currently, FORM is a holding company of small and middle market growth companies, focused on acquiring and building companies that would benefit from: additional capital, exposure to visibility from the public markets, talent recruiting, rebranding and implementation of best practies (as more fully discussed in the section entitled “FORM’s Business — Overview” beginning on page 100). Following the Merger, FORM will continue these pursuits but also operate a network of airport retail stores offering spa services and products.

For a more complete discussion of the existing businesses of FORM and XpresSpa, see the sections entitled “FORM’s Business,” “FORM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “XpresSpa’s Business,” and “XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages 100, 106, 122, and 130, respectively. In addition, you should carefully review the section entitled “Risk Factors” beginning on page 29, which presents risks and uncertainties related to the Merger and the business and operations of each of FORM and XpresSpa.

Q: Does XpresSpa have debt that will become an obligation of FORM following the Merger?
A: XpresSpa is obligated under a senior secured note payable to Rockmore Investment Master Fund Ltd. (“Rockmore”), a significant equity holder of XpresSpa, with an outstanding balance of approximately $6,500,000 (the “Senior Secured Note”). The Senior Secured Note accrues interest of 9.24% per annum, payable monthly, plus an additional 2.0% per annum, and matures on May 1, 2018, with an additional one-year extension if both FORM and Rockmore consent to such extension. After completion of the

2


 
 

TABLE OF CONTENTS

Merger, the Senior Secured Note will remain outstanding as an obligation of XpresSpa, but will be guaranteed by FORM. Rockmore is an investment entity controlled by FORM’s board member, Bruce T. Bernstein. Rockmore currently owns equity securities of XpresSpa that are expected to receive approximately 9.5% of the merger consideration and, following completion of the Merger, Rockmore will still be the holder of the Senior Secured Note, and will hold approximately 4.7% of the outstanding common stock of FORM on a fully diluted basis (in each case, based on the assumptions used in the section entitled “Security Ownership of Certain Beneficial Owners and Management of FORM Following the Merger” beginning on page 152). For a more complete discussion of the outstanding indebtedness of XpresSpa, see the section entitled “XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 130. In addition, you should carefully review the section entitled “Risk Factors” beginning on page 29, which describes the risks of the XpresSpa debt.
Q: Will the shares of FORM common stock, preferred stock and shares of common stock underlying the warrants received by XpresSpa equity holders in the Merger be subject to any transfer restrictions?
A: Shares of FORM common stock and preferred stock will be freely tradable upon the effectiveness of this registration statement on Form S-4 (the “Registration Statement”). Shares of FORM common stock and preferred stock received by XpresSpa equity holders who become affiliates of FORM for purposes of Rule 144 under the Securities Act of 1933, as amended, may be resold by them only in transactions permitted by Rule 144 or as otherwise permitted under the Securities Act.

For a more complete discussion of the restrictions on sales of shares of FORM common stock received by XpresSpa equity holders in the Merger, see the section entitled “The Merger — Restrictions on Sales of Shares of FORM Common Stock Received by XpresSpa Equity Holders in the Merger” beginning on page 60.

Q: What proposals are FORM stockholders being asked to consider?
A: As a condition to the completion of the Merger, FORM stockholders must approve the Merger, including, but not limited to the issuance of shares of FORM common stock, preferred stock and warrants (including the shares of common stock issuable upon conversion or repayment of the preferred stock and exercise of the warrants) to the XpresSpa equity holders in connection with the Merger (the “FORM Merger Proposal”), which approval requires the affirmative vote of the holders of a majority of the shares of FORM common stock present and entitled to vote on the matter either in person or by proxy at the FORM annual meeting. In addition, FORM stockholders are being asked to (i) approve the adoption of a Section 382 rights agreement (the “Rights Agreement”) as specified in “FORM’s Proposal No. 2: Approval of Adoption of Section 382 Rights Agreement” designed to preserve the substantial amount of FORM’s net operating loss carry forwards and other tax benefits (the “Rights Agreement Proposal”), (ii) elect six director nominees to the FORM board of directors as specified in “FORM’s Proposal No. 3: Election of Directors” to serve until the next annual meeting of the FORM stockholders or until their successors are duly elected and qualify or until their earlier death, resignation or removal (the “Election of Directors Proposal”), (iii) to approve an amendment to the FORM 2012 Employee, Director and Consultant Equity Incentive Plan (the “2012 Plan,” which is described in the section entitled “FORM’s Proposal No. 4: Approval of the 2012 Equity Incentive Plan Amendment” and attached (as amended) to this proxy statement/prospectus as Annex C, the “2012 Equity Incentive Plan Amendment”), to increase the number of shares of common stock reserved for issuance under the 2012 Plan to up to a maximum of 7,573,568 shares and increase the maximum number of shares available for grant to a single participant in any fiscal year, (iv) to ratify the appointment of CohnReznick LLP, as FORM’s independent registered public accounting firm for the fiscal year ending December 31, 2016 (the “Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal”), (v) to approve an amendment to FORM’s Amended and Restated Certificate of Incorporation (the “Certificate,” which is described in the section entitled “FORM’s Proposal No. 6: Approval of the Certificate Amendment Proposal” and attached to this proxy statement/prospectus as Annex D, the “Certificate Amendment Proposal”) to remove “only-for-cause” director removal, (vi) to approve, by an advisory vote, the compensation of FORM’s named executive officers, as disclosed in this proxy

3


 
 

TABLE OF CONTENTS

statement/prospectus (the “Compensation Proposal”) and (vii) to approve the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM’s Proposals Nos 1, 2, 3, 4, 5, 6 or 7.
Q: What stockholder approvals are required for the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM Proposals Nos. 1 – 7?
A: The holders of a majority of the shares of FORM common stock present and entitled to vote either in person or by proxy at the FORM annual meeting must vote in favor of any adjournment of the FORM annual meeting.
Q: What conditions must be satisfied or waived to complete the Merger?
A: In order to complete the Merger, each of the closing conditions contained in the Merger Agreement must be satisfied or waived (to the extent permitted by applicable law). Among the closing conditions is the requirement that (a) the stockholders and the board of directors of FORM have approved the Merger and the Merger Agreement; (b) the Registration Statement has become effective; (c) the shares of FORM common stock shall have been approved for listing on The NASDAQ Capital Market; (d) there exists no temporary restraining order, preliminary or permanent injunction or other order which prevents the consummation of the Merger; (e) the representations and warranties of the other party contained in the Merger Agreement are true and correct except for (i) such changes resulting from actions permitted under the Merger Agreement, (ii) to the extent any such representation or warranty is made as of a time other than the Effective Time (as defined in the Merger Agreement), in which case, such representation or warranty need only be true an correct at and as of such time, or (iii) where the failure of any such representation or warranty to be true and correct (without giving effect to any materiality or Company Material Adverse Effect (as defined herein), qualification or limitation) would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (f) the other party shall have performed or complied in all material respects with all agreements and covenants under the Merger Agreement, except when any failure would not, individually or in the aggregate, be reasonably expected to have a Company Materal Adverse Effect or Parent Material Adverse Effect, as applicable; (g) the receipt of certain consents or approvals; (h) the absence of a Company Material Adverse Effect or a Parent Material Adverse Effect (as defined herein), as the case may be; (i) FORM shall have received written resignations from all of the directors of XpresSpa and its subsidiaries; (j) FORM shall have received joinder agreements from XpresSpa equity holders representing 95% of the outstanding XpresSpa units; (k) FORM shall have received sufficient evidence regarding the ratification of each of XpresSpa’s subsidiaries of all appropriate prior actions and certain individuals shall have been appointed to certain offices and committees as specified by FORM; (l) XpresSpa shall have delivered a certificate regarding certain closing conditions to FORM and Merger Sub; (m) FORM shall have received a certificate from Rockmore regarding XpresSpa’s compliance with its obligations under its existing loan documents; (n) FORM shall have received satisfactory evidence of termination of that certain Monitoring and Management Services Agreement with Mistral Capital Management, LLC (“Mistral”) and its affiliate; (o) the Escrow Agreement (as defined in the Merger Agreement) shall have been executed and delivered; (p) the Representative shall have delivered to FORM a duly executed statement on behalf of XpresSpa that is in compliance with Treasury Regulations Section 1.1445-11T(d)(2), and from equity holders representing 95% of the outstanding XpresSpa units, a duly executed certificate of non-foreign status in compliance with Treasury Regulations Section 1.1445-2(b); (q) FORM shall have received good standing certificates of XpresSpa and each of its subsidiaries and (r) FORM shall have received evidence of certification for certain airport concession disadvantaged business enterprises (“ACDBE”).

For a more complete discussion of the conditions to the completion of the Merger under the Merger Agreement, see the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 72.

4


 
 

TABLE OF CONTENTS

Q: Who will be the directors of FORM if the Merger closes?
A: The election of the six director nominees is not contingent upon the approval of the Merger by the stockholders and the completion of the Merger. If the Merger is approved by the FORM stockholders and the Merger closes, then the directors of FORM elected at the annual meeting and the designee of the holders of the FORM preferred stock issued in the Merger (Andrew R. Heyer) are expected to be the directors of FORM.
Q: When does FORM expect to complete the Merger?
A: FORM expects to complete the Merger as soon as possible following the approval of the FORM Merger Proposal at the annual meeting, assuming the satisfaction or waiver of all other closing conditions contained in the Merger Agreement. It is possible, therefore, that factors outside of FORM’s control could require FORM to complete the Merger at a later time or not complete it at all.
Q: How does the FORM board of directors recommend that FORM stockholders vote with respect to each of the proposals and the adjournment of the FORM annual meeting?
A: The disinterested members of the FORM board of directors unanimously recommend that the FORM stockholders vote FOR the FORM Merger Proposal, FOR the Rights Agreement Proposal, FOR the Election of Directors Proposal, FOR the approval of the 2012 Equity Incentive Plan Amendment, FOR the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal, FOR the Certificate Amendment Proposal, FOR the approval of the compensation of FORM’s named executive directors and FOR the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM Proposal Nos. 1 – 7. The FORM board of directors made its recommendation after considering the factors described in this proxy statement/prospectus.
Q: What risks should I consider in deciding whether to vote in favor of the FORM Merger Proposal?
A: You should carefully review the section of this proxy statement/prospectus entitled “Risk Factors” beginning on page 29, which presents risks and uncertainties related to the Merger, FORM, and the business and operations of each of FORM and XpresSpa.
Q: What are the material federal income tax consequences of the Merger to holders of XpresSpa units?
A: The receipt of FORM shares and warrants to acquire FORM shares in exchange for XpresSpa units pursuant to the Merger Agreement will be a taxable transaction to U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62) for U.S. federal income tax purposes. A U.S. holder will generally recognize capital gain or loss on the receipt of FORM shares (including the portion of FORM shares placed in escrow) and warrants to acquire FORM shares in exchange for XpresSpa units. However, a portion of such gain or loss will be separately computed and taxed as ordinary income or loss to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by XpresSpa and its subsidiaries. The utilization of capital losses is subject to various limitations. Passive losses that were not deductible by a U.S. Holder in prior taxable periods because they exceeded a U.S. Holder’s share of XpresSpa’s income may become available to offset a portion of the gain recognized by such U.S. Holder. See the section of this proxy statement/prospectus entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62, for a more complete discussion of the expected material U.S. federal income tax consequences of the Merger. Each holder of XpresSpa units is strongly urged to consult with and rely upon its own tax advisor as to the specific federal, state, local and non-U.S. tax consequences to such U.S. Holder of the ownership and disposition of the merger consideration, or any portion thereof, taking into account such holder’s particular circumstances.

5


 
 

TABLE OF CONTENTS

Q: Do I have appraisal rights in connection with the Merger?
A: Under the Delaware General Corporation Law, (the “DGCL”), holders of FORM common stock are not entitled to appraisal rights in connection with the Merger or the proposals described in this proxy statement/prospectus. No dissenters’ or appraisal rights are available to any XpresSpa equity holders in connection with the Merger or the proposals described in this proxy statement/prospectus.
Q: When and where will the FORM annual meeting take place?
A: The FORM annual meeting will be held on November 28, 2016 at 11:00 a.m, local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., the Chrysler Center, 666 Third Avenue, 32nd floor, New York, New York 10017.
Q: Who can attend and vote at the stockholder meeting?
A: All FORM stockholders of record as of the close of business on October 18, 2016, the record date for the FORM annual meeting, are entitled to receive notice of, vote at and attend the FORM annual meeting.
Q: What do I need to do now and how do I vote?
A: FORM urges you to read this proxy statement/prospectus carefully, including its annexes, and to consider how the Merger may affect you.

If you are a FORM stockholder, you may vote by telephone or through the Internet by following the instructions included on your proxy card, you may indicate on the enclosed proxy card how you would like to vote, sign and return the proxy card in the enclosed postage-paid envelope, or you may attend the FORM annual meeting in person. Please provide your proxy instructions only once and as soon as possible so that your shares can be voted at the FORM annual meeting.

If you hold your shares in “street name,” please refer to your proxy card or the information forwarded by your broker or other nominee to see which options are available to you.

Q: What happens if I do not submit my proxy or if I elect to abstain from voting?
A: If you are a FORM stockholder of record and you fail to submit your proxy (i) through the Internet, (ii) by telephone or (iii) by marking, signing and dating the enclosed proxy card and returning it in the enclosed postage-paid envelope, your shares will not be counted as present for the purpose of determining the presence of a quorum, which is required to transact business at the FORM annual meeting, and your failure to take action will have no effect on the outcome of FORM’s Proposal Nos. 1 (FORM Merger Proposal), 2 (Rights Agreement Proposal), 3 (Election of Directors Proposal), 4 (2012 Equity Incentive Plan Amendment), 5 (Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal), 7 (Compensation Proposal) and 8 (adjournment to solicit additional proxies, if necessary). However, such failure to take action will have the same effect as voting AGAINST FORM’s Proposal No. 6 (Certificate Amendment Proposal). If you are a FORM stockholder and your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares, the bank, broker or other nominee that holds your shares may vote your unvoted shares only on the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal (Proposal 5) without receiving instructions from you. Therefore, we encourage you to provide voting instructions to your bank, broker or other nominee. This ensures your shares will be voted at the annual meeting and in the manner you desire. A “broker non-vote” will occur if your broker cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter or because your broker chooses not to vote on a matter for which it does have discretionary voting authority.

If you are a FORM stockholder and you sign, date, and mail your proxy card without indicating how you wish to vote, your proxy will be counted as present for the purpose of determining the presence of a quorum for the FORM annual meeting and all of your shares will be voted FOR FORM’s Proposal Nos. 1, 2, 3, 4, 5, 6, 7 and 8. However, if you submit a proxy card and affirmatively elect to abstain from voting, your proxy will be counted as present for the purpose of determining the presence of a quorum for the FORM annual meeting, but will not be voted at the FORM annual meeting. As a result, your

6


 
 

TABLE OF CONTENTS

abstention will have the same effect as voting AGAINST FORM’s Proposal Nos. 1, 2, 4, 6 and 7 and will have no effect on FORM’s Proposal Nos. 3 and 5.

Q: If my FORM shares are held in “street name” by a broker or other nominee, will my broker or nominee vote my shares for me?
A: If your FORM shares are held in “street name” in a stock brokerage account or by another nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to FORM or by voting in person at the FORM annual meeting unless you provide a legal proxy, which you must obtain from your broker or other nominee that holds your shares giving you the right to vote the shares in person at the FORM annual meeting. If your FORM shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares, the bank, broker or other nominee that holds your shares may vote your unvoted shares only on the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal (Proposal 5) without receiving instructions from you.
Q: May I vote in person?
A: If you are a stockholder of FORM and your shares of FORM common stock are registered directly in your name with FORM’s transfer agent, you are considered, with respect to those shares, the stockholder of record, and the proxy materials and proxy card are being sent directly to you by FORM. If you are a FORM stockholder of record, you may attend the FORM annual meeting and vote your shares in person, rather than submitting your proxy.

If your shares of FORM common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the FORM annual meeting. However, since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the FORM annual meeting unless you obtain a legal proxy from the broker or other nominee that holds your shares giving you the right to vote the shares in person at the FORM annual meeting.

Q: May I revoke or change my vote after I have provided proxy instructions?
A: Yes. You may revoke or change your vote at any time before your proxy is voted at the FORM annual meeting. You can do this in one of four ways. First, you can send a written notice to FORM stating that you would like to revoke your proxy. Second, you can submit a duly executed proxy bearing a later date or time than that of the previously submitted proxy. Third, you can submit a later dated vote by the Internet or telephone. Fourth, you can attend the FORM annual meeting and vote in person. Your attendance alone at the FORM annual meeting will not revoke your proxy. If you are a FORM stockholder and have instructed a broker or other nominee to vote your shares, you must follow directions received from your broker or other nominee in order to change those instructions.

If you are a beneficial owner of FORM common stock, you may submit new voting instructions by contacting your broker or other nominee. You also may vote in person if you obtain a legal proxy. All shares that have been properly voted and not revoked will be voted at the FORM annual meeting.

Q: What constitutes a quorum?
A: Stockholders who hold a majority of the shares of FORM common stock outstanding as of the close of business on the record date for the FORM annual meeting must be present either in person or by proxy in order to constitute a quorum to conduct business at the FORM annual meeting.

7


 
 

TABLE OF CONTENTS

Q: Who is paying for this proxy solicitation?
A: FORM will bear its own cost and expense of preparing, assembling, printing, and mailing this proxy statement/prospectus, any amendments thereto, the proxy card, and any additional information furnished to the FORM stockholders. FORM will bear any fees paid to the SEC. FORM may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of soliciting and obtaining proxies from beneficial owners, including the costs of reimbursing brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding this proxy statement/prospectus and other solicitation materials to beneficial owners. In addition, proxies may be solicited without additional compensation by directors, officers and employees of FORM by mail, telephone, fax, or other methods of communication. FORM has engaged The Proxy Advisory Group, LLC®, to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements that are not expected to exceed $25,000 in the total.
Q: Whom should I contact if I have any questions about the Merger or the FORM annual meeting?
A: If you have any questions about the Merger, the FORM annual meeting, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact FORM or The Proxy Advisory Group, LLC®, FORM’s proxy solicitor.

If you are a FORM stockholder you should contact FORM, or The Proxy Advisory Group, LLC®, FORM’s proxy solicitor, at the address and telephone number listed below:

 
FORM Holdings Corp.
780 Third Avenue, 12th Floor
New York, New York 10017
(212) 309-7549
  The Proxy Advisory Group, LLC®
18 East 41st Street, Suite 2000
New York, New York 10017
888-337-7699
888-33-PROXY

This proxy statement/prospectus, a form of proxy card and FORM’s Annual Report to Stockholders for 2015 are available on the Internet at www.proxyvote.com.

Q: What happens if I sell my shares after the record date but before the annual meeting?
A: If you transfer your FORM common stock after the record date but before the date of the annual meeting, you will retain your right to vote at the annual meeting (provided that such shares remain outstanding on the date of the annual meeting).
Q: What do I do if I receive more than one proxy statement/prospectus or set of voting instructions?
A: If you hold shares directly as a record holder and also in “street name” or otherwise through a nominee, you may receive more than one proxy statement/prospectus and/or set of voting instructions relating to the FORM annual meeting. These should each be voted and/or returned separately in order to ensure that all of your shares are voted.

8


 
 

TABLE OF CONTENTS

SUMMARY

This proxy statement/prospectus is being sent to FORM stockholders and XpresSpa equity holders. This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you with respect to the FORM Merger Proposal and the other proposals or any other matter described in this proxy statement/prospectus. FORM urges you to carefully read this proxy statement/prospectus, as well as the documents attached to or referred to in this proxy statement/prospectus, to fully understand the Merger. In particular, you should read the Merger Agreement, which is described elsewhere in this proxy statement/prospectus and attached as Annex A. To understand the Merger fully, you should read carefully this entire document, including the business and financial information about FORM and XpresSpa, and the documents to which this proxy statement/prospectus refers, including the annexes attached hereto. See the section entitled “Where You Can Find Additional Information” beginning on page 167.

The Companies

FORM Holdings Corp.

On May 6, 2016, Vringo, Inc. changed its name to FORM Holdings Corp. and concurrently announced its repositioning as a holding company of small and middle market growth companies. FORM’s focus is on acquiring and building companies that would benefit from:

additional capital;
exposure to visibility from the public markets;
talent recruiting;
rebranding; and
implementation of best practices.

FORM’s management team is committed to executing its strategy. FORM is industry agnostic, but limits the scope of its pipeline by looking only at companies with a clear path to grow in excess of $100,000,000 in revenue.

FORM’s common stock, which was previously listed on The NASDAQ Capital Market under the trading symbol “VRNG,” has been listed under the trading symbol “FH” since May 9, 2016.

FORM has three operating segments:

Group Mobile
FLI Charge
Intellectual property

Group Mobile is a growing premier supplier of innovative and full-service mobile technology solutions, including rugged computers, tablets, mobile devices, accessories, a full suite of professional services and other related products geared toward emergency first responders, municipalities and corporations. In addition, Group Mobile specializes in high-quality customer service and support for those products.

FLI Charge owns a patented conductive wireless charging technology and focuses on the development and commercialization of its technology through the direct-to-consumer sale of conductive charging pads, phone cases, charging adaptors and other enablements, as well as partnerships and licensing agreements in various industries. FLI Charge is currently working with partners to implement FLI Charge technology in various fields such as furniture and automotive. FLI Charge’s business model is based on manufacturing and commercializing its own conductive charging pads, phone cases, charging adaptors and other enablements as well as licensing its technology in exchange for recurring licensing revenue.

The intellectual property operating segment is focused on the innovation, development and monetization of intellectual property. FORM’s portfolio consists of over 600 patents and patent applications covering a range of technologies including telecom infrastructure, mobile devices, remote monitoring and ad-insertion.

9


 
 

TABLE OF CONTENTS

Prior to December 31, 2013, FORM operated a global platform for the distribution of mobile social applications and services. On February 18, 2014, FORM sold its mobile social application business to InfoMedia Services Limited (“InfoMedia”), receiving an 8.25% ownership interest in InfoMedia as consideration and a seat on the board of directors of InfoMedia. As part of the transaction, FORM has the opportunity to license certain intellectual property assets and work with InfoMedia to identify and protect new intellectual property.

FORM is headquartered in New York, New York and was incorporated in Delaware in 2006. FORM’s principal offices are located at 780 Third Avenue, 12th Floor, New York, New York 10017 and its telephone number is (212) 309-7549. FORM’s principal website is www.formholdings.com. The information on or that can be accessed through FORM’s website is not part of this proxy statement/prospectus. FORM’s common stock is listed on The NASDAQ Capital Market and trades under the symbol “FH.” Additional information about FORM and its subsidiaries is included elsewhere in this proxy statement/prospectus. See the sections entitled “FORM’s Business,” “FORM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “FORM’s Financial Statements” beginning on pages 100, 106, and F-1, respectively.

XpresSpa Holdings, LLC

XpresSpa is a leading airport retailer of spa services and related products. It is a well recognized and popular airport spa brand with nearly three times the number of U.S. locations as its closest competitor. It provides nearly 900,000 services per year. As of October 18, 2016, XpresSpa operated 51 total locations in 44 terminals and 21 airports in three countries. XpresSpa also sells wellness and travel products through its internet site, www.xpresspa.com. Services and products include:

Massage services for the neck, back, feet and whole body;
Nail care, such as pedicures, manicures and polish changes;
Beauty care services such as waxing and facials;
Hair care, such as hair cuts and blow outs;
Wellness products such as massagers, lotions and aromatherapy aids; and
Travel products such as neck pillows, blankets, massage tools, travel kits and eye masks.

For over a decade, increased security requirements have led travelers to spend more time post-security at the airport before their flights. In addition, travelers are often dealing with stressful security lines and are subjected to increased downtime from delays due to congested airports, inclement weather conditions, and cancelled flights. XpresSpa was developed to address the stress and idle time spent at the airport, allowing travelers to spend this time productively, by relaxing and focusing on personal care and wellness. XpresSpa’s service offerings are well positioned to benefit from consumers’ sustained and growing interest in health and wellness, including spa services.

In addition, a confluence of microeconomic events has created favorable conditions for the expansion of retail concepts at airports, in particular retail concepts that attract higher spending from air travelers. The competition for airplane landings has forced airports to lower landing fees, which in turn has necessitated augmenting their retail offerings to offset budget shortfalls. Infrastructure projects at airports across the country, again intended to make an airport more desirable to airlines, require funding from bond issuances that in turn rely upon, in part, the expected minimum rent guarantees and expected income from concessionaires.

Equally as important to the industry growth is XpresSpa’s flexible retail format. XpresSpa opens multiple locations annually, which have ranged in size from 300 square feet to 3,000 square feet, with a typical size of 1,000 – 1,200 square feet. XpresSpa is able to adapt its operating model to almost any size space available in space constrained airports. This flexibility compared to other retail concepts allows XpresSpa to operate multiple stores within an airport, from which it enjoys synergies due to shared labor between stores.

XpresSpa uses GAAP and non-GAAP measurements to assess the trends, profitability and return on capital invested in its core spa business. Items it reviews on an ongoing basis include revenues, comparable store sales growth and Store EBITDA.

10


 
 

TABLE OF CONTENTS

Total revenues have increased 65% from $23,486,000 in 2010 to $38,843,000 in 2015, largely as a result of the growth in the number of spas, from 28 in 2010 to 47 in 2015 and 48 in 2016.

[GRAPHIC MISSING]

As a measure of the quality of the increase in revenues, XpresSpa regularly measures comparable store sales, which it defines as current period sales from stores opened longer than a year compared to the period of those same stores’ sales a year ago (“Comp Store Sales”). The measurement of Comp Store Sales on a daily, weekly, monthly and year-to-date basis provides a clear view of the underlying health of the sales growth of the company that may otherwise be clouded by simply growing the number of spas. A reconciliation between Comp Store Sales, which is a non-GAAP measure commonly used in the retail industry, and total revenue as reported on the financial statements is presented below:

         
(In Thousands)   2012   2013   2014   2015   June 30, 2016
(H1 2016)
Comp Store Sales   $ 21,461     $ 26,569     $ 31,441     $ 34,060     $ 18,356  
Non-comp Store Sales     7,892       7,316       5,906       4,783       2,115  
Total Revenue   $ 29,353     $ 33,895     $ 37,347     $ 38,843     $ 20,471  

11


 
 

TABLE OF CONTENTS

The chart below illustrates percentage changes in Comp Store Sales.

[GRAPHIC MISSING]

Strong performance in Comp Store Sales in 2013 and 2014 was eroded in 2015 due to a severe shortage of massage technicians. Efforts were focused on recruiting, hiring and retaining these technicians beginning in the fourth quarter of 2015. During 2016, XpresSpa began to expand, which resulted in a Comp Store Sales increase of 2.9% during the first half of 2016.

A measure of the health of the overall profitability of the spas is another non-GAAP measure which we refer to as Store EBITDA (“Store EBITDA”), which is defined as earnings before any corporate general and administrative expenses, depreciation and amortization, interest and tax. Store EBITDA is a measure that helps XpresSpa assess earnings after the direct costs of delivering the services and selling products in the spas were incurred.

During 2015 and the six months ended June 30, 2016, XpresSpa generated $7.6 million and $3.5 million of Store EBITDA, respectively. The table below presents a reconciliation between the financial statements and Store EBITDA:

   
(In Thousands)   2015   June 30,
2016
Gross Profit     11,173       5,636  
Add back: Store Depreciation and Amortization     4,000       1,580  
Less: Store Selling, General and Administrative Expenses     (7,554 )      (3,711 ) 
Store EBITDA     7,619       3,505  
Reconciliation to the Consolidated Statements of Operations:
 
Store Depreciation and amortization     4,000       1,580  
Corporate Depreciation and amortization     405       304  
Less: Amortization of deferred finance charges     (73 )       
Total Depreciation and Amortization Expense per the financial statements     4,332       1,884  
Store Selling, General and Administrative Expenses     7,554       3,711  
Corporate Selling General and Administrative Expenses     10,898       5,083  
Selling, General and Administrative Expenses per the financial statements     18,452       8,794  

12


 
 

TABLE OF CONTENTS

XpresSpa believes that its operating metrics represent an attractive return on invested capital and as a result is pursuing new locations at airports and terminals around the country. XpresSpa estimates that there are more than 25 spa locations coming out as formal requests for proposal (“RFP”) by airport retail authorities in the next two years. Historically, XpresSpa has won approximately four out of every five RFPs that it participated in.

XpresSpa is headquartered in New York, New York and was formed in 2012. XpresSpa’s predecessor, Binn & Partners, LLC, was formed in New York in 2000, and commenced operating its first spa location in February 2004. XpresSpa’s principal offices are located at 3 East 54th street, 9th Floor, New York, New York 10022 and its telephone number is (212) 750-9595. XpresSpa’s principal website is www.xpresspa.com. The information on or that can be accessed through XpresSpa’s website is not part of this proxy statement/prospectus. XpresSpa is a private company and its units are not publicly traded. Additional information about XpresSpa and its subsidiaries is included elsewhere in this proxy statement/prospectus. See the sections entitled “XpresSpa’s Business,” “XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “XpresSpa’s Financial Statements” beginning on pages 122, 130, and F-63, respectively.

FHXMS, LLC

Merger Sub is a wholly-owned subsidiary of FORM and was formed in Delaware on July 25, 2016, solely for the purpose of facilitating the Merger. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the Merger Agreement.

The Merger

FORM and XpresSpa have entered into the Merger Agreement, which provides that, subject to the terms and conditions of the Merger Agreement and in accordance with the DGCL at the Effective Time (as such term is defined in the Merger Agreement), Merger Sub will merge with and into XpresSpa, with XpresSpa surviving as a wholly-owned subsidiary of FORM. The disinterested members of the board of directors (consisting of all board members except Bruce T. Bernstein) of FORM have unanimously approved the Merger Agreement and the Merger. The disinterested members of the board of directors (consisting of all board members except Bruce T. Bernstein) of XpresSpa have approved the Merger Agreement and the Merger.

What XpresSpa Equity Holders Will Receive in the Merger

Upon completion of the Merger (i) the then-outstanding common units of XpresSpa (other than units held by FORM and its subsidiaries, which will be cancelled without any consideration) and (ii) the then-outstanding preferred units of XpresSpa (other than preferred units held by FORM and its subsidiaries, which will be cancelled without any consideration) will be cancelled and automatically converted into the right to receive an aggregate of (i) 2,500,000 shares of FORM common stock, (ii) 494,792 shares of FORM preferred stock, initially convertible into 3,958,336 shares of FORM common stock and (iii) five-year warrants to purchase an aggregate of 2,500,000 shares of FORM common stock, at an exercise price of $3.00 per share, in each case, subject to adjustment in the event of a stock split, dividend or similar events. Immediately following the completion of the Merger (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis).

No fractional shares of FORM common stock or FORM preferred stock will be issued to XpresSpa equity holders in connection with the Merger. Instead, XpresSpa equity holders will be entitled to receive the next highest number of whole shares of FORM common or preferred stock, as applicable, in lieu of any fractional shares of FORM common or preferred stock that they would otherwise be entitled to receive in connection with the Merger.

13


 
 

TABLE OF CONTENTS

For a more complete discussion of what XpresSpa equity holders will receive in connection with the Merger, see the sections entitled “The Merger — What XpresSpa Equity Holders Will Receive in the Merger” and “The Merger Agreement — Merger Consideration” beginning on pages 44 and 67, respectively.

Ownership of FORM After the Completion of the Merger

Upon completion of the Merger, (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis).

Board of Directors and Executive Officers of FORM After the Completion of the Merger

Upon completion of the Merger, FORM will have a seven member board of directors, comprised of Andrew D. Perlman, John Engelman, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe, all of whom are currently members of the FORM board of directors, and Andrew R. Heyer, who is the nominee of the holders of FORM preferred stock and currently a member of the XpresSpa board of directors and Chief Executive Officer of Mistral.

The executive management team of FORM is expected to be composed of the following individuals:

   
Name   Current Position   Position with FORM after completion
of the Merger
Andrew D. Perlman   Chief Executive Officer and Director of FORM   Chief Executive Officer and Director
Anastasia Nyrkovskaya   Chief Financial Officer and Treasurer of FORM   Chief Financial Officer and Treasurer
Clifford Weinstein   Executive Vice President of FORM and President of
FLI Charge
  Executive Vice President and President of FLI Charge
Darin White   President of Group Mobile   President of Group Mobile
Edward Jankowski   Chief Executive Officer of XpresSpa   Senior Vice President and Chief Executive Officer of XpresSpa

Recommendations of the FORM Board of Directors and its Reasons for the Merger

The disinterested members of the FORM board of directors (consisting of all board members except Bruce T. Bernstein), after considering the factors described in the section entitled “The Merger — Recommendations of the FORM Board of Directors and its Reasons for the Merger” beginning on page 50, have unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger. The disinterested members of the FORM board of directors have determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, FORM and its stockholders, and therefore recommends that the FORM stockholders vote FOR the FORM Merger Proposal, as contemplated by the Merger Agreement, FOR the Rights Agreement Proposal, FOR the Election of Directors Proposal, FOR the approval of the 2012 Equity Incentive Plan Amendment, FOR the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal, FOR the Certificate Amendment Proposal, FOR the Compensation Proposal and FOR the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM Proposal Nos. 1 – 7. The FORM board of directors made its recommendations to the FORM stockholders after considering the factors described in this proxy statement/prospectus. For a more complete discussion of the recommendations of the FORM board of directors and its reasons for the Merger, see the section entitled “The Merger — Recommendations of the FORM Board of Directors and its Reasons for the Merger” beginning on page 50.

14


 
 

TABLE OF CONTENTS

Preferred Stock Valuation by Innovus Advisors

Innovus Advisors, LLC, which is referred to as Innovus, was retained by FORM to prepare a valuation of the FORM preferred stock to be issued by FORM in the Merger solely as requested by NASDAQ. On August 4, 2016, at the request of FORM management, Innovus rendered its oral valuation opinion regarding such preferred stock to the FORM Board of Directors, which was subsequently confirmed in writing to FORM.

The full text of Innovus’ written valuation opinion to FORM, dated August 4, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Innovus in rendering its valuation opinion of the FORM preferred stock to be issued by FORM in the Merger, is attached to this proxy statement/prospectus as Annex G. Innovus’ valuation opinion of the FORM preferred stock to be issued by FORM in the Merger is qualified in its entirety by reference to the full text of the Innovus valuation opinion. You are encouraged to read Innovus’ valuation opinion, this section and the summary of Innovus’ valuation opinion below carefully and in their entirety. Innovus’ valuation opinion was for the benefit of FORM and addressed only the value of the FORM preferred stock to be issued by FORM in the Merger as of the date of the opinion and did not address any other aspects or implications of the Merger.

Innovus’ valuation opinion was not intended to, and does not, constitute a fairness opinion, advice or a recommendation as to how FORM’s stockholders should vote at any stockholders’ meeting to be held in connection with the Merger or take any other action with respect to the Merger.

Additionally, Innovus’ valuation opinion does not relate to the fairness of the consideration in the Merger and Innovus did not advise or determine the amount of consideration to be paid in the Merger.

Interests of FORM’s Directors and Executive Officers in the Merger

You should be aware that certain directors and executive officers of FORM have interests in the Merger that are different from, or in addition to, the interests of the stockholders of FORM generally.

Interests of FORM’s directors and executive officers in connection with the Merger relate to (i) the continuing service of each of Andrew D. Perlman, John Engelman, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe as directors of FORM following the completion of the Merger, (ii) the fact that Andrew D. Perlman, Anastasia Nyrkovskaya and Clifford Weinstein are currently executive officers of FORM and will remain executive officers of FORM following the completion of the Merger, (iii) the right to continued indemnification for directors and executive officers of FORM following the completion of the Merger and (iv) the equity and debt holdings of Rockmore, an investment entity controlled by FORM’s board member Bruce T. Bernstein, in XpresSpa. Rockmore currently owns equity securities of XpresSpa that are expected to receive approximately 9.5% of the merger consideration and, following completion of the Merger, Rockmore will still be the holder of the Senior Secured Note, and will hold approximately 4.7% of the outstanding common stock of FORM on a fully diluted basis (in each case, based on the assumptions used in the section entitled “Security Ownership of Certain Beneficial Owners and Management of FORM Following the Merger” beginning on page 152). Pursuant to the terms of the Senior Secured Note, XpresSpa may not merge into or consolidate with any other person or entity or permit any other person or entity to merge into or consolidate with XpresSpa without the consent of Rockmore. Rockmore has provided its consent to the Merger.

The FORM board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and in recommending that FORM stockholders approve the FORM Merger Proposal.

For a more complete discussion of the interests of the directors and executive officers of FORM in the Merger, see the section entitled “The Merger — Interests of FORM’s Directors and Executive Officers in the Merger” beginning on page 58.

15


 
 

TABLE OF CONTENTS

Anticipated Accounting Treatment of the Merger

The Merger will be accounted for using the acquisition method of accounting in accordance with ASC 805. United States generally accepted accounting principles (“GAAP”) requires that one of the two companies in the Merger be designated as the acquirer for accounting purposes based on the evidence available. FORM will be treated as the acquiring entity for accounting purposes. In identifying FORM as the acquiring entity, the companies took into account the composition of FORM’s Board of Directors, the designation of certain senior management positions, including its Chief Executive Officer and Chief Financial Officer, as well as the fact that FORM’s existing stock holders will own approximately 67% of FORM after completion of the Merger on a fully diluted basis.

Material U.S. Federal Income Tax Consequences of the Merger

The receipt of FORM shares and warrants to acquire FORM shares in exchange for XpresSpa units pursuant to the Merger Agreement will be a taxable transaction to U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 62) for U.S. federal income tax purposes. A U.S. holder will generally recognize capital gain or loss on the receipt of FORM shares (including the portion of FORM Shares placed in escrow) and warrants to acquire FORM shares in exchange for XpresSpa units. However, a portion of such gain or loss will be separately computed and taxed as ordinary income or loss to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by XpresSpa and its subsidiaries. The utilization of capital losses is subject to various limitations. Passive losses that were not deductible by a U.S. Holder in prior taxable periods because they exceeded a U.S. Holder’s share of XpresSpa’s income may become available to offset a portion of the gain recognized by such U.S. Holder. For a more complete discussion of the material U.S. federal income tax consequences of the Merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on 62. Each holder of XpresSpa units is strongly urged to consult with and rely upon its own tax advisor as to the specific federal, state, local and non-U.S. tax consequences to such holder of the ownership and disposition of the Merger Consideration, or any portion thereof, taking into account such holder’s particular circumstances.

Restrictions on Sales of Shares of FORM’s Common Stock, Preferred Stock and Warrants Received by XpresSpa Equity Holders in the Merger

Shares of FORM common stock, FORM preferred stock and warrants will be freely tradable upon the effectiveness of the Registration Statement. Shares of FORM common stock, FORM preferred stock and warrants received by XpresSpa equity holders who become affiliates of FORM for purposes of Rule 144 under the Securities Act, may be resold by them only in transactions permitted by Rule 144 or as otherwise permitted under the Securities Act.

For a more complete discussion of the restrictions on sales of shares of FORM common stock, FORM preferred stock and warrants received by the XpresSpa equity holders in the Merger, see the section entitled “The Merger — Restrictions on Sales of Shares of FORM Common Stock, Preferred Stock and Warrants Received by XpresSpa Equity Holders in the Merger” beginning on page 60.

Appraisal Rights

Under the DGCL, holders of FORM common stock are not entitled to appraisal rights in connection with the Merger or the proposals described in this proxy statement/prospectus. No dissenters’ or appraisal rights are available to any XpresSpa equity holders in connection with the Merger or the proposals described in this proxy statement/prospectus.

Regulatory Approvals

As of the date of this proxy statement/prospectus, neither FORM nor XpresSpa is required to make filings or to obtain approvals or clearances from any regulatory authorities in the United States or other countries to complete the Merger. In the United States, FORM must comply with applicable federal and state securities laws and the rules and regulations of The NASDAQ Capital Market. Under NASDAQ Marketplace Rule 5635(a), a company listed on The NASDAQ Capital Market is required to obtain stockholder approval in connection with a merger with another company if the number of shares of common stock or securities

16


 
 

TABLE OF CONTENTS

convertible into common stock to be issued is in excess of 20% of the number of shares of common stock then outstanding. Based on the current number of issued and outstanding shares of FORM common stock, if the Merger is completed, it is estimated that the FORM common stock and FORM preferred stock to be issued in the Merger will exceed 20% of FORM’s common stock issued and outstanding on the record date, and may constitute a “change of control” under NASDAQ rules. For these reasons FORM must obtain its stockholders approval of the FORM Merger Proposal.

Conditions to the Completion of the Merger

FORM and XpresSpa expect to complete the Merger as soon as possible following the approval of the FORM Merger Proposal at the annual meeting. Completion of the Merger will only be possible, however, after all closing conditions contained in the Merger Agreement are satisfied or waived, including after FORM receives stockholder approval at the annual meeting. It is possible, therefore, that factors outside of each company’s control could require them to complete the Merger at a later time or not complete it at all.

The obligations of FORM and XpresSpa to consummate the Merger are each subject to the satisfaction or waiver (to the extent permitted under applicable law) of the following conditions, among others and subject, in some cases, to the exceptions or limitations contained in confidential disclosure schedules delivered to each party by the other:

the stockholders and the board of directors of FORM have approved the Merger and the Merger Agreement;
the registration statement for which this proxy statement/prospectus forms a part has become effective;
the shares of FORM common stock shall have been approved for listing on The NASDAQ Capital Market;
there exists no temporary restraining order, preliminary or permanent injunction or other order which prevents the consummation of the Merger;
the representations and warranties of the other party contained in the Merger Agreement are true and correct except for (i) such changes resulting from actions permitted under the Merger Agreement, (ii) to the extent any such representation or warranty is made as of a time other than the Effective Time (as defined in the Merger Agreement), in which case, such representation or warranty need only be true and correct at and as of such time, or (iii) where the failure of any such representation or warranty to be true and correct (without giving effect to any materiality or Company Material Adverse Effect (as defined herein), qualification or limitation) would not reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect;
the other party shall have performed or complied in all material respects with all agreements and covenants under the Merger Agreement, except when any failure would not, individually or in the aggregate, be reasonably expected to have a Company Materal Adverse Effect or Parent Material Adverse Effect, as applicable;
the receipt of certain consents or approvals;
the absence of a Company Material Adverse Effect or a Parent Material Adverse Effect, as the case may be;
FORM shall have received written resignations from all of the directors of XpresSpa and its subsidiaries;
FORM shall have received joinder agreements from XpresSpa equity holders representing 95% of the outstanding XpresSpa units;
FORM shall have received sufficient evidence regarding the ratification of each of XpresSpa’s subsidiaries of all appropriate prior actions and certain individuals shall have been appointed to certain offices and committees as specified by FORM;

17


 
 

TABLE OF CONTENTS

XpresSpa shall have delivered a certificate regarding certain closing conditions to FORM and Merger Sub;
FORM shall have received a certificate from Rockmore regarding XpresSpa’s compliance with its obligations under its existing loan documents;
FORM shall have received satisfactory evidence of termination of that certain Monitoring and Management Services Agreement with Mistral and its affiliate;
the Escrow Agreement shall have been executed and delivered;
the Representative shall have delivered to FORM a duly executed statement on behalf of XpresSpa that is in compliance with Treasury Regulations Section 1.1445-11T(d)(2), and from equity holders representing ninety five percent (95%) of the outstanding XpresSpa units, a duly executed certificate of non-foreign status in compliance with Treasury Regulations Section 1.1445-2(b);
FORM shall have received good standing certificates of XpresSpa and each of its subsidiaries; and
FORM shall have received evidence of certification for certain ACDBEs. For a more complete discussion of the conditions to the completion of the Merger, see the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” beginning on page 72.

No Solicitation

Subject to certain exceptions, prior to the completion of the Merger or the earlier termination of the Merger Agreement, XpresSpa has agreed that it will not, and it will not authorize or permit its subsidiaries and/or its officers, directors, employees, investment bankers, attorneys, accountants and other advisors or representatives to directly or indirectly: (a) solicit, initiate, induce or take any action to facilitate, encourage, solicit, initiate or induce any action relating to, or the submission of any Company Acquisition Proposal (as defined in the Merger Agreement); (b) enter into, participate or engage in discussions or negotiations in any way with any person concerning any Company Acquisition Proposal; (c) furnish to any person (other than FORM and its designees) any information relating to XpresSpa or its subsidiaries or afford to any person (other than FORM or its representatives or designees) access to the business, properties, assets, books, records or other information, or to any personnel of XpresSpa or any of its subsidiaries, in any case, with the intent to induce or solicit the making or submission of a Company Acquisition Proposal or the making of any proposal that would reasonably be expected to lead to a Company Acquisition Proposal; (d) approve a Company Acquisition Proposal or take any action that would require it to abandon, terminate or fail to consummate, or that would reasonably be expected to result in the abandonment or, termination or failure to consummate the Merger; or (e) enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement or other similar instrument (whether binding or not) or contract constituting or otherwise relating to a Company Acquisition Proposal (other than an executed non-disclosure agreement having provisions no less favorable than that certain non-disclosure agreement between FORM and XpresSpa).

For a more complete discussion of the prohibition on solicitation of acquisition proposals from third parties, see the section entitled “The Merger Agreement — No Solicitation” beginning on page 70.

Termination of the Merger Agreement

Generally and except as specified below, the Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the completion of the Merger, including after the required FORM stockholder approval is obtained:

by mutual written consent of FORM, Merger Sub and XpresSpa; or

by either party, if:

the closing has not occurred on or before December 31, 2016, or in certain circumstances, March 31, 2017 (the “End Date”);
any law enacted by a governmental authority prohibits the consummation of the Merger, or any governmental authority has issued an order or taken any other action which restrains, enjoins or otherwise prohibits the Merger, which order has become final and non-appealable;

18


 
 

TABLE OF CONTENTS

FORM’s stockholders do not approve the Merger; or
the other party, or in the case of XpresSpa, FORM or Merger Sub, is in material breach of its obligations or representations or warranties under the Agreement that is incapable of being cured and the other party, or in the case of XpresSpa, FORM or Merger Sub, is not then in breach of any representation, warranty, covenant or agreement set forth in Merger Agreement that would result in the applicable closing conditions not being satisfied.

by FORM, if:

the XpresSpa board of directors has effected a Recommendation Change (as defined herein);
XpresSpa shall have entered or caused itself or its subsidiaries to enter, into any letter of intent, agreement in principle, term sheet, merger agreement, acquisition agreement or other similar agreement related to any Company Acquisition Proposal;
XpresSpa shall have materially breached any term of the non-solicitation provision of the Merger Agreement; or
XpresSpa’s board of directors or any authorized committee shall have resolved to do any of the foregoing.

by XpresSpa, if:

the board of directors of FORM or any authorized committee has failed to present or recommend the approval of the Merger Agreement and the Merger to the stockholders or include the recommendation in this proxy statement/prospectus;
XpresSpa determines to enter into a definitive agreement relating to a Company Superior Proposal (as defined herein);
at any time, upon payment to FORM of the XpresSpa Termination Fee (as defined below); or
if FORM fails to obtain shareholder approval or fails to receive approval of the listing of the shares of FORM common stock on The NASDAQ Capital Market prior to the End Date; provided, that XpresSpa shall not have the right to terminate the Merger Agreement if XpresSpa is then in breach of any representation, warranty, covenant or agreement set forth in Merger Agreement that would result in the applicable closing conditions not being satisfied.

For a more complete discussion of termination of the Merger Agreement, see the section entitled “The Merger Agreement — Termination of the Merger Agreement” beginning on page 73.

Termination Fees and Expenses

The Merger Agreement provides that, subject to certain exceptions discussed below, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring such expenses, provided however that if the Merger is consummated FORM will assume XpresSpa’s transaction costs, in an amount not to exceed $500,000.

In the event that either (a) XpresSpa terminates the Merger Agreement because (i) it determines to enter into a definitive agreement relating to a Company Superior Proposal, or (ii) XpresSpa elects to terminate for any reason or no reason at all or (b) FORM terminates the Merger Agreement because (i) XpresSpa effected a Company Board Approval Change (as defined in the Merger Agreement), (ii) XpresSpa enters into any agreement related to a Company Acquisition Proposal, (iii) XpresSpa materially breached the provision related to a Company Acquisition Proposal contained in the Merger Agreement or (iv) XpresSpa’s board of directors shall have resolved to do any of the foregoing (i)-(iii), then XpresSpa shall pay to FORM a fee (the “XpresSpa Termination Fee”) equal to $750,000, plus an amount in cash equal to FORM’s reasonable out-of-pocket fees and expenses incurred in connection with the Merger, in an amount not to exceed $500,000.

In the event that either (a) XpresSpa terminates the Merger Agreement because (i) the FORM board of directors fails to present and recommend the approval and adoption of the Merger Agreement, (ii) FORM fails

19


 
 

TABLE OF CONTENTS

to include the FORM Board Recommendation (as defined herein) in the proxy statement/proposal, or (iii) FORM’s board of directors shall have resolved to do any of the foregoing (i)-(ii) or (b) XpresSpa or FORM terminates the Merger Agreement because FORM’s stockholders approval is not obtained prior to the End Date, then FORM shall pay to XpresSpa a fee (the “FORM Termination Fee”) equal to $750,000, plus an amount in cash equal to XpresSpa’s reasonable out-of-pocket fees and expenses incurred in connection with the Merger, in an amount not to exceed $500,000.

In the event that (i) the Merger Agreement is terminated by XpresSpa because the Merger is not consummated on or before the End Date, and (ii) a Company Acquisition Proposal has either previously been publicly announced or has been proposed or communicated to XpresSpa and a definitive agreement with respect to such Company Acquisition Proposal has been signed or consummated within six months following the termination of the Merger Agreement, then XpresSpa shall pay to FORM the XpresSpa Termination Fee.

In the event that the Merger Agreement is terminated by FORM because the Merger is not consummated on or before the End Date, and within six months following such termination XpresSpa consummates a transaction for the (i) issuance, sale or other disposition of securities representing 50% or more of the voting power or economic interests of XpresSpa or any subsidiary, (ii) any direct or indirect sale, transfer, acquisition or disposition of more than 50% of the consolidated assets of XpresSpa and its subsidiaries taken as a whole, including by way of purchase of stock, limited liability interests or other equity interests of the subsidiaries or (iii) any merger, consolidation, equity exchange, business combination, recapitalization, reorganization, liquidation, joint venture, dissolution or any similar transaction involving XpresSpa or any of its subsidiaries, (in each case in clause (iii), that result in the equity holders of XpresSpa beneficially owning less than 50% of XpresSpa) then XpresSpa shall pay to FORM the XpresSpa Termination Fee.

For a more complete discussion of termination fees and expenses, see the section entitled “The Merger Agreement — Termination Fees and Expenses” beginning on page 73.

Voting by FORM Directors and Executive Officers

As of October 18, 2016, a recent practicable date before the printing of this proxy statement/prospectus, directors and executive officers of FORM beneficially owned and were entitled to vote 1,704,685 shares of FORM common stock, or approximately 10.1% of the total outstanding voting power of FORM. It is expected that FORM’s directors and executive officers will vote their shares FOR the approval of the Merger, although none of them has entered into any agreement requiring them to do so.

Rights of XpresSpa Equity Holders Will Change as a Result of the Merger

Due to differences between the governing documents of FORM and XpresSpa, XpresSpa equity holders receiving FORM common stock and preferred stock in connection with the Merger will have different rights once they become FORM stockholders. The material differences are described in detail under the section entitled “Comparison of Rights of FORM Stockholders and XpresSpa Equity Holders” beginning on page 163.

Private Placements

On August 8, 2016, in connection with the entry into the Merger Agreement, FORM and XpresSpa entered into subscription agreements (the “Private Placements”).

FORM entered into a subscription agreement to sell 750,574 shares of its common stock to Mistral, at a purchase price of $2.31 per share, for an aggregate purchase price of $1,733,826. For a more complete discussion of the Private Placements and XpresSpa’s intent to offer this purchase opportunity to each of its equity holders, see the section entitled “The Merger — Private Placements” beginning on page 61.

Additionally, FORM entered into a subscription agreement to purchase from XpresSpa an aggregate of 1,733,826 Series C Preferred Units of XpresSpa, at a per unit purchase price of $1.00 per unit, for an aggregate purchase price of $1,733,826. For a more complete discussion of the Private Placements, see the section entitled “The Merger — Private Placements” beginning on page 61.

20


 
 

TABLE OF CONTENTS

Escrow Agreement

In connection with the closing of the Merger, FORM has agreed to deposit shares of FORM preferred stock with an aggregate initial liquidation preference equal to $11,050,000 with American Stock Transfer & Trust Company, LLC, as escrow agent (the “Escrow Agent”) for a period of 18 months, or such other term related to specific escrows, to be invested, held and disbursed in accordance with the terms of the Escrow Agreement to serve as security to FORM for XpresSpa’s representations, warranties, covenants and agreements set forth in the Merger Agreement (the “Indemnity Escrow Amount”). In addition, FORM has agreed to deposit shares of FORM preferred stock with an aggregate initial liquidation preference equal to $3,500,000 with the Escrow Agent for a period of 18 months, or such other term related to specific escrows, to be invested, held and disbursed in accordance with the terms of the Escrow Agreement to serve as security to FORM in connection with certain consents (the “Consent Escrow Amount” and collectively with the Indemnity Escrow Amount, the “Escrow Amount”). For a more complete discussion of the Escrow Agreement, see the section entitled “The Merger — Escrow Agreement” beginning on page 61.

Risk Factors

The Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective stock and equity holders, including the following:

the issuance of shares of FORM common stock, preferred stock and warrants to the XpresSpa equity holders in connection with the Merger will substantially dilute the voting power of current FORM stockholders;
the announcement and pendency of the Merger could have an adverse effect on the FORM stock price and/or the business, financial condition, results of operations, or business prospects for FORM and/or XpresSpa;
failure to complete the Merger or delays in completing the Merger could negatively impact FORM’s and XpresSpa’s respective businesses, financial condition, or results of operations or the FORM stock price;
some of the directors and executive officers of FORM and XpresSpa have interests in the Merger that are different from, or in addition to, those of the other FORM stockholders and XpresSpa equity holders; and
the Merger Agreement contains provisions that could discourage or make it difficult for a third party to acquire FORM or XpresSpa prior to the completion of the Merger.

In addition, each of FORM and XpresSpa is subject to various risks associated with its business. The risks are discussed in greater detail in the section entitled “Risk Factors” beginning on page 29. FORM encourages you to read and consider all of these risks carefully.

Matters to Be Considered at the FORM Annual Meeting

FORM Annual Meeting

Date, Time and Place.  The FORM annual meeting will be held on November 28, 2016 at 11:00 a.m, local time, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., the Chrysler Center, 666 Third Avenue, 32nd floor, New York, New York 10017.

Matters to be Considered at the FORM Annual Meeting.  At the FORM annual meeting, and any adjournments or postponements thereof, FORM stockholders will be asked to:

approve the FORM Merger Proposal;
approve the Rights Agreement Proposal;
elect six director nominees to the FORM board of directors as set forth in the Election of Directors Proposal;
approve the 2012 Equity Incentive Plan Amendment;
approve the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal;

21


 
 

TABLE OF CONTENTS

approve the Certificate Amendment Proposal;
approve the Compensation Proposal;
approve the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM Proposal Nos. 1 – 7; and
conduct any other business as may properly come before the FORM annual meeting or any adjournment or postponement thereof.

Record Date.  The FORM board of directors has fixed the close of business on October 18, 2016 as the record date for determining the FORM stockholders entitled to notice of and to vote at the FORM annual meeting and any adjournment or postponement thereof.

Required Vote.  Approval of the FORM Merger Proposal, the Rights Agreement Proposal, 2012 Equity Incentive Plan Amendment, the Ratification of the Appointment of FORM’s Independent Registered Public Accounting Firm Proposal and the Compensation Proposal require the affirmative vote of the holders of a majority of the shares of FORM common stock present and entitled to vote on the matter either in person or by proxy at the FORM annual meeting. The election of the director nominees set forth in the Election of Directors Proposal requires the affirmative vote of a plurality of the voting power of the shares present or represented by proxy at the FORM annual meeting and entitled to vote on the election of directors. The Certificate Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of FORM’s common stock entitled to vote on the matter either in person or by proxy at the annual meeting. Approval of the adjournment of the FORM annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of FORM Proposals Nos. 1 – 7 requires the affirmative vote of the holders of a majority of the shares of FORM common stock present and entitled to vote on the matter either in person or by proxy at the FORM annual meeting. As of the close of business on the record date for the FORM annual meeting, there were 15,799,881 shares of FORM common stock outstanding and entitled to vote.

For additional information about the FORM annual meeting, see the section entitled “The Annual Meeting of FORM Stockholders” beginning on page 77.

22


 
 

TABLE OF CONTENTS

SUMMARY HISTORICAL FINANCIAL DATA OF FORM
(In thousands, except per share data)

The following table sets forth FORM summary historical financial data as of the dates and for each of the periods indicated. The financial data for the years ended December 31, 2015 and 2014, and as of December 31, 2015 and 2014 is derived from FORM’s audited financial statements, which are included elsewhere in this proxy statement/prospectus. The financial data for the six-month periods ended June 30, 2016 and 2015 and as of June 30, 2016 is derived from FORM’s unaudited financial statements, which are included elsewhere in this proxy statement/prospectus.

You should read the summary historical financial data below together with FORM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and with the financial statements and notes thereto for the year ended December 31, 2015 and for the six-months ended June 30, 2016, each of which are included elsewhere in this proxy statement/prospectus.

FORM Holdings Corp. Consolidated and Condensed Balance Sheet Data:

     
  At June 30, 2016   At December 31,
     2015   2014
Cash and cash equivalents   $ 27,449     $ 24,951     $ 16,023  
Total assets   $ 37,747     $ 50,532     $ 37,435  
Total liabilities   $ 8,035     $ 10,016     $ 6,255  
Total stockholders’ equity   $ 29,712     $ 40,516     $ 31,180  

FORM Holdings Corp. Consolidated and Condensed Statements of Operations Data:

       
  Six Months Ended
June 30,
  Year Ended
December 31,
     2016   2015   2015   2014
Revenue   $ 13,406     $ 150     $ 22,687     $ 1,425  
Cost of goods sold     3,306             800        
Operating legal costs     4,963       8,565       18,553       25,368  
Amortization and impairment of intangibles     13,201       1,617       3,295       5,123  
General and administrative     6,257       5,296       10,383       16,373  
Goodwill impairment                       65,757  
Total operating expenses     27,727       15,478       33,031       112,621  
Operating loss from continuing operations     (14,321 )      (15,328 )      (10,344 )      (111,196 ) 
Gain on revaluation of warrants and conversion feature     369       695       2,544       2,201  
Interest expense     (748 )      (465 )      (2,594 )       
Extinguishment of debt     (210 )      (210 )      (1,373 )       
Issuance of warrants                       (65 ) 
Non-operating income (expense), net     148       (177 )      (357 )      (162 ) 
Loss from continuing operations before income taxes     (14,762 )      (15,485 )      (12,124 )      (109,222 ) 
Income tax benefit (expense)                 866        
Loss from continuing operations     (14,762 )      (15,485 )      (11,258 )      (109,222 ) 
Loss from discontinued operations                       (455 ) 
Net loss     (14,762 )      (15,485 )      (11,258 )      (109,677 ) 
Net loss per share   $ (1.01 )    $ (1.65 )    $ (1.09 )    $ (12.24 ) 
Diluted net loss per share   $ (1.01 )    $ (1.65 )    $ (1.09 )    $ (12.36 ) 

23


 
 

TABLE OF CONTENTS

SUMMARY HISTORICAL FINANCIAL DATA OF XPRESSPA
(In thousands, except share and per share data)

The following table sets forth XpresSpa summary historical financial data as of December 31, 2015 and 2014, which financial data is derived from XpresSpa’s audited financial statements, which are included elsewhere in this proxy statement/prospectus. The financial data for the six-month periods ended June 30, 2016 and 2015 and as of June 30, 2016 is derived from XpresSpa’s unaudited financial statements, which are included elsewhere in this proxy statement/prospectus.

You should read the summary historical financial data below together with XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations and with the financial statements and notes thereto as of and for the period ended December 31, 2015 and for the six months ended June 30, 2016, each of which are included elsewhere in this proxy statement/prospectus.

XpresSpa Holdings, LLC Consolidated and Condensed Balance Sheet Data:

     
  At June 30,
2016
  At December 31,
     2015   2014
Cash and cash equivalents   $ 2,480     $ 4,177     $ 2,192  
Total assets   $ 22,566     $ 24,538     $ 22,258  
Total liabilities   $ 11,560     $ 10,871     $ 10,285  
Total stockholders’ equity   $ 11,006     $ 13,666     $ 11,974  

XpresSpa Holdings, LLC Consolidated and Condensed Statements of Operations Data:

       
  Six Months Ended
June 30,
  Year Ended
December 31,
     2016   2015   2015   2014
Revenue   $ 20,471     $ 19,049     $ 38,843     $ 37,347  
Cost of revenue     14,835       13,459       27,670       25,558  
Gross profit     5,636       5,590       11,173       11,789  
Amortization of intangibles     255       216       552       215  
General and administrative     8,540       8,887       17,900       15,454  
Operating loss     (3,159 )      (3,513 )      (7,279 )      (3,880 ) 
Loss on disposal of property and equipment     71             (122 )      (768 ) 
Loss on loan termination           (69 )             
Finance income (expense), net           (10 )      (32 )      (50 ) 
Interest expense     (473 )      (207 )      (635 )      (190 ) 
Loss before income taxes     (3,703 )      (3,799 )      (8,068 )      (4,888 ) 
Income tax benefit (expense)     (17 )      (75 )      (7 )      (18 ) 
Net loss     (3,720 )      (3,874 )      (8,075 )      (4,906 ) 
Net loss (income) attributable to noncontrolling interests     37       (54 )      17       (109 ) 
Net loss attributable to XpresSpa Holdings, LLC and subsidiaires   $ (3,683 )    $ (3,928 )    $ (8,058 )    $ (5,015 ) 

24


 
 

TABLE OF CONTENTS

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED AND CONDENSED FINANCIAL DATA

The following summary unaudited pro forma combined financial data is intended to show how the Merger might have affected historical financial statements if the Merger had been completed on June 30, 2016, for the purposes of the balance sheets and shows the statements of operations for the six-month period ended June 30, 2016 and the year-ended December 31, 2015, and was prepared based on the historical financial statements and results of operations reported by FORM and XpresSpa. The following should be read in conjunction with the section entitled “Unaudited Pro Forma Combined Financial Statements” beginning on page 157 and the audited historical financial statements of FORM and XpresSpa and the notes thereto beginning on pages F-1 and F-63, respectively, the sections entitled “FORM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 106 and “XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 130, and the other information contained in this proxy statement/prospectus.

Accounting Treatment of the Merger

The Merger will be accounted for using the acquisition method of accounting in accordance with ASC 805. GAAP requires that one of the two companies in the Merger be designated as the acquirer for accounting purposes based on the evidence available. FORM will be treated as the acquiring entity for accounting purposes. In identifying FORM as the acquiring entity, the companies took into account the composition of FORM’s Board of Directors, the designation of certain senior management positions, including its Chief Executive Officer and Chief Financial Officer, as well as the fact that FORM’s existing stockholders will own approximately 67% of FORM after completion of the Merger on a fully diluted basis.

Pro Forma Consolidated and Condensed Balance Sheet Data:

 
  At June 30, 2016
Cash and cash equivalents   $ 28,195  
Total assets   $ 90,472  
Total liabilities   $ 21,345  
Total stockholders’ equity   $ 69,127  

Pro Forma Consolidated and Condensed Statements of Operations Data:

   
  Six Months Ended
June 30,
2016
  Year Ended
December 31,
2015
Revenue   $ 33,877     $ 61,530  
Operating expenses     (52,511 )      (81,396 ) 
Operating loss     (18,634 )      (19,866 ) 
Non-operating income, net     307       782  
Interest expense     (1,221 )      (3,230 ) 
Loss before income taxes     (19,548 )      (22,314 ) 
Income tax benefit (expense)     (17 )      859  
Net loss     (19,565 )      (21,455 ) 
Net loss (income) attributable to noncontrolling interests     37       118  
Net loss attributable to the company   $ (19,528 )    $ (21,337 ) 
Net loss per share   $ (1.10 )    $ (1.58 ) 
Diluted net loss per share   $ (1.10 )    $ (1.58 ) 

25


 
 

TABLE OF CONTENTS

MARKET PRICE DATA AND DIVIDEND INFORMATION

Market Price

The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share of FORM common stock, which trades on The NASDAQ Capital Market under the symbol “FH,” with prices prior to November 27, 2015 adjusted to account for the 1-for-10 reverse stock split, which occurred on that date. There was no change in the nominal par value per share of $0.01. FORM’s fiscal year ends on December 31st.

   
  FORM Common Stock
     High   Low
Fiscal Year 2015
                 
First Quarter   $ 9.80     $ 4.60  
Second Quarter   $ 7.70     $ 5.50  
Third Quarter   $ 7.40     $ 3.90  
Fourth Quarter   $ 6.00     $ 2.00  
Fiscal Year 2016
                 
First Quarter   $ 2.80     $ 1.18  
Second Quarter   $ 2.47     $ 1.48  
Third Quarter   $ 2.90     $ 1.79  
Fourth Quarter (through October 18, 2016)   $ 4.05     $ 1.94  

The closing price as of October 18, 2016 was $3.24.

XpresSpa is a private limited liability company and its units are not publicly traded.

Record Holders

As of October 18, 2016, FORM had 33 stockholders of record.

Dividends

FORM has not declared or paid any cash dividend on its capital stock during the two most recent fiscal years. Any determination to pay dividends to holders of FORM common stock in the future will be at the discretion of the FORM board of directors and will depend upon many factors, including FORM’s financial condition, results of operations, capital requirements and any other factors that the FORM board of directors considers appropriate. In connection with the Merger the holders of FORM preferred stock issued to XpresSpa equity holders will be entitled to dividends at the rate of 9% per annum, payable in cash or an increase in the liquidation preference of the preferred stock, at FORM’s election.

On August 8, 2016, the trading day of the announcement of the Merger, the last reported sale price of FORM’s common stock was $2.10 for an aggregate market value of FORM’s common stock of $31.5 million. On October 18, 2016, a recent practicable date before the printing of this proxy statement/prospectus, the last reported sale price of FORM’s common stock was $3.24, for an aggregate market value of FORM’s common stock of approximately $51 million. Assuming the issuance on such date of an aggregate of 2,500,000 shares of FORM common stock, an aggregate of 494,792 shares of FORM preferred stock, initially convertible into 3,958,336 shares of FORM common stock, an aggregate of 2,500,000 of FORM warrants to purchase an aggregate of 2,500,000 shares of FORM common stock if the Merger was completed on such date, the market value attributable to the shares of FORM common stock to be issued to XpresSpa’s equity holders in the aggregate, or approximately 33.1% of the outstanding shares of FORM calculated on a fully diluted basis, would equal $29 million.

Because the market price of FORM common stock is subject to fluctuation, the market value of the shares of FORM common stock that XpresSpa equity holders will receive in the Merger may increase or decrease. The foregoing information reflects only historical information.

It is expected that following the completion of the Merger and successful approval from The NASDAQ Capital Market for inclusion of the additional shares of FORM common stock on The NASDAQ Capital Market, the common stock of FORM, including the shares of FORM common stock issued to XpresSpa equity holders in connection with the Merger, will continue to be listed on The NASDAQ Capital Market.

26


 
 

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and the other documents referred to in this proxy statement/prospectus contain or may contain forward-looking statements of FORM within the meaning of Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein, other than statements of historical fact, may be forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. Statements that include words such as may, will, project, might, expect, believe, anticipate, intend, could, would, estimate, continue or pursue or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement/prospectus and the other documents referred to herein and relate to a variety of matters, including but not limited to (i) the timing and anticipated completion of the Merger, (ii) the benefits expected to result from the Merger, (iii) the anticipated business of FORM (including XpresSpa) following the completion of the Merger, and (iv) other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations, and assumptions of management are not guarantees of performance and are subject to significant risks and uncertainty. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement/prospectus and those that are referred to in this proxy statement/prospectus. Important factors that could cause actual results to differ materially from those described in forward-looking statements contained herein include, but are not limited to:

the expected timetable for completing the transaction;
the potential value created by the Merger for FORM’s stockholders;
the potential of FORM’s business (including XpresSpa) after completion of the Merger;
the continued listing of FORM’s common stock on The NASDAQ Capital Market;
market acceptance of FORM products and services;
competition from other providers and products; and
FORM’s management and board of directors.

In addition to the risk factors identified elsewhere, various important risks and uncertainties affecting each of FORM and XpresSpa may cause the actual results of FORM to differ materially from the results indicated by the forward-looking statement in this proxy statement/prospectus, including without limitation:

the financial condition, financing requirements, prospects and cash flow of FORM and XpresSpa;
expectations regarding potential growth;
the inability to have FORM’s common stock listed for trading on The NASDAQ Capital Market or another national securities exchange;
the loss of strategic relationships;
competitive position;
introduction and proliferation of competitive products or services;
changes in technology;
the inability to achieve sustained profitability;
failure to implement short- or long-term growth strategies;
decrease in the market price for FORM’s common stock;
the cost of retaining and recruiting key personnel or the loss of such key personnel;
compliance with applicable laws;
ability to maintain or protect the validity of patents and other intellectual property;

27


 
 

TABLE OF CONTENTS

ability to obtain new airport spa locations or renew existing airport spa leases;
a decrease in U.S. airline travel due to business contraction or decreased leisure travel;
a decrease in U.S. airline travel due to terrorist activity;
increased competition in the airport spa category mitigating XpresSpa’s ability to grow;
redevelopment of airport terminals causing temporary or permanent location closures;
cyber fraud or cyber hacking in which XpresSpa’s customers’ credit card information is breached;
negative social media resulting in decreased customer demand for XpresSpa locations;
the deterioration of relationships with joint venture partners at XpresSpa locations, impacting the relationship of XpresSpa with airport leasing authorities;
changes in the cost of labor at XpresSpa locations, whether due to minimum wage increases or unionization; and
liquidity.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus or, in the case of documents referred to in this proxy statement/prospectus, as of the date of those documents. FORM disclaims any obligation to publicly update or release any revisions to these forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events, except as required by law.

28


 
 

TABLE OF CONTENTS

RISK FACTORS

In addition to the other information included and referred to in this proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 27, you should carefully consider the following risk factors before deciding how to vote your shares of FORM common stock at the FORM annual meeting. These factors should be considered in conjunction with the other information included by FORM in this proxy statement/prospectus. If any of the risks described below or referred to in this proxy statement/prospectus actually materialize, the business, financial condition, results of operations, or prospects of FORM or XpresSpa, or the stock price of FORM, could be materially and adversely affected.

Risks Related to the Merger

The issuance of FORM’s securities to XpresSpa equity holders in connection with the Merger will dilute the voting power of current FORM stockholders.

Pursuant to the terms of the Merger Agreement, it is anticipated that FORM will issue to XpresSpa unit holders shares of FORM common stock and FORM preferred stock, and warrants to purchase shares of FORM common stock. After such issuance (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis). In addition, the holders of FORM preferred stock will have voting rights as specified in the Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock, the form of which is attached hereto as Annex E. Accordingly, the issuance of shares of FORM common stock and FORM preferred stock to XpresSpa equity holders in connection with the Merger will reduce the relative voting power of each share of FORM common stock held by current FORM stockholders.

The announcement and pendency of the Merger could have an adverse effect on the business prospects for FORM and/or XpresSpa and on FORM’s stock price and/or business, financial condition or results of operations.

While there have been no significant adverse effects to date, the announcement and pendency of the Merger could disrupt FORM’s and/or XpresSpa’s prospective and current businesses in the following ways, among others:

third parties, including customers, suppliers and operators, may seek to terminate and/or renegotiate their relationships with FORM or XpresSpa or decide not to conduct business with either FORM or XpresSpa as a result of the Merger, whether pursuant to the terms of their existing agreements with FORM and/or XpresSpa or otherwise; and
the attention of FORM and/or XpresSpa management may be directed toward the completion of the Merger and related matters and may be diverted from the day-to-day business operations of their respective companies, including from other opportunities that might otherwise be beneficial to FORM or XpresSpa.

Should they occur, any of these matters could adversely affect the stock price of FORM or harm the financial condition, results of operations, or business prospects of FORM and/or XpresSpa.

29


 
 

TABLE OF CONTENTS

Failure to complete the Merger or delays in completing the Merger could negatively impact FORM’s business, financial condition, or results of operations or FORM’s stock price.

The completion of the Merger is subject to a number of conditions and there can be no assurance that the conditions to the completion of the Merger will be satisfied at all or satisfied in a timely manner. If the Merger is not completed or delayed, FORM will be subject to several risks, including:

the current trading price of FORM common stock may reflect a market assumption that the Merger will occur, meaning that a failure to complete the Merger or delays in completing the Merger could result in a decline in the price of FORM common stock;
certain executive officers and/or directors of FORM or XpresSpa may seek other employment opportunities, and the departure of any of FORM’s or XpresSpa’s executive officers and the possibility that FORM would be unable to recruit and hire experienced executives could negatively impact FORM’s future business;
the FORM board of directors will need to reevaluate FORM’s strategic alternatives, which alternatives may include other merger and acquisition opportunities;
under certain circumstances, if the Merger is terminated by either FORM or XpresSpa, then FORM is required to pay to XpresSpa a fee equal to $750,000, plus an amount in cash equal to XpresSpa’s reasonable out-of-pocket fees and expenses incurred in connection with the Merger, in an amount not to exceed $500,000;
FORM is expected to incur substantial transaction costs in connection with the Merger whether or not the Merger is completed; and
FORM would not realize any of the anticipated benefits of having completed the Merger.

If the Merger is not completed, these risks may materialize and materially and adversely affect FORM’s business, financial condition, results of operations, and FORM’s stock price.

Any delay in completing the Merger may substantially reduce the benefits that FORM expects to obtain from the Merger.

In addition to obtaining the approval of the stockholders of FORM for the consummation of the Merger, the Merger is subject to a number of other conditions beyond the control of FORM that may prevent, delay, or otherwise materially adversely affect its completion. FORM cannot predict whether or when the conditions required to complete the Merger will be satisfied. The requirements for satisfying the closing conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring. Any delay in completing the Merger may materially adversely affect the benefits that FORM expects to achieve if the Merger and the integration of the companies’ respective businesses are completed within the expected timeframe.

Some of the directors and executive officers of FORM have interests in the Merger that are different from, or in addition to, those of the other FORM stockholders.

When considering the recommendation by the FORM board of directors that the FORM stockholders vote “for” the FORM Merger Proposal, FORM’s stockholders should be aware that certain of the directors and executive officers of FORM have arrangements that provide them with interests in the Merger that are different from, or in addition to, those of the stockholders of FORM.

For instance, in connection with the Merger, (i) each of Andrew D. Perlman, John Engelman, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe, each a current director of the FORM board of directors, will continue to serve as a director of FORM following the completion of the Merger, (ii) Andrew D. Perlman, Anastasia Nyrkovskaya and Clifford Weinstein, currently executive officers of FORM, will remain executive officers of FORM following the completion of the Merger and (iii) the equity and debt holdings of Rockmore, an investment entity controlled by FORM’s board member Bruce T. Bernstein, in XpresSpa. Rockmore currently owns equity securities of XpresSpa that are expected to receive approximately 9.5% of the merger consideration and, following completion of the Merger, Rockmore will still be the holder of the Senior Secured Note, and will hold approximately 4.7% of the outstanding common stock of FORM on

30


 
 

TABLE OF CONTENTS

a fully diluted basis (in each case, based on the assumptions used in the section entitled “Security Ownership of Certain Beneficial Owners and Management of FORM Following the Merger” beginning on page 152). Pursuant to the terms of the Senior Secured Note, XpresSpa may not merge into or consolidate with any other person or entity or permit any other person or entity to merge into or consolidate with XpresSpa without the consent of Rockmore. Rockmore has provided its consent to the Merger.

In addition, the directors and executive officers of FORM also have certain rights to indemnification and to directors’ and officers’ liability insurance that will be provided by FORM following the completion of the Merger. See the sections entitled “The Merger — Interests of FORM Directors and Executive Officers in the Merger” beginning on page 58.

The FORM board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and in recommending that FORM stockholders approve the FORM Merger Proposal.

XpresSpa can terminate the Merger Agreement for any reason or no reason upon payment of a termination fee and FORM will have no recourse against XpresSpa.

Pursuant to the Merger Agreement, XpresSpa can terminate the Merger Agreement, at any time, for any reason or no reason, upon payment to FORM of a termination fee equal to $750,000, plus an amount in cash equal to FORM’s reasonable out-of-pocket fees and expenses incurred in connection with the Merger, in an amount not to exceed $500,000. FORM will have no recourse against XpresSpa other than receiving such termination fee and would not realize any of the anticipated benefits of having completed the Merger.

Litigation has been instituted challenging the Merger and adverse judgments in this lawsuit (and any other lawsuits that may be instituted challenging the Merger) may prevent the Merger from becoming effective within the expected timeframe or at all.

As referenced below, Bruce Bernstein, a member of the FORM board of directors, and XpresSpa have been named as defendants in a lawsuit challenging the Merger. If the plaintiffs in this case, or in any other cases challenging the Merger are successful, they may prevent the parties from completing the Merger in the expected timeframe, if at all.

Even if the plaintiffs in the pending action or any potential actions are not successful, the costs of defending against such claims could adversely affect the financial condition of FORM or XpresSpa and the consummation of the Merger could be delayed or the Merger Agreement could be terminated.

In August 2016, Amiral Holdings SAS (“Amiral”), the operator of BeRelax spas, filed a complaint for breach of contract against XpresSpa related to a potential strategic transaction between Amiral and XpresSpa. Amiral Holdings SAS v. XpresSpa Holdings LLC et al., Supreme Court of the State of New York, County of New York (Index No. 654051/2016). Among other things, Amiral seeks specific performance related to the contract; an injunction prohibiting the defendants from entering into or consummating a competing transaction; and a declaration with respect to Amiral’s right of first refusal and certain related matters. On October 4, 2016, Amiral filed an amended complaint and motion for a preliminary injunction. On October 14, 2016, XpresSpa filed its response to Amiral’s motion, and on October 20, 2016, Amiral filed a reply brief. A hearing on the preliminary injunction has been scheduled for December 5, 2016, although this date is subject to change by the court. If Amiral is successful in this lawsuit or its motion for a preliminary injunction, pending appeal, the completion of the Merger could be delayed or not occur at all. In addition, should Amiral’s motion for a preliminary injunction be granted after the closing of the Merger, the Court could force the Merger to become undone or award damages to Amiral, in which case FORM may not be indemnified by XpresSpa’s equity holders for losses incurred. There is no guarantee that XpresSpa will prevail in this (or any litigation) and the combined company’s business, financial condition or results of operations may be materially harmed as a result of such litigation, in addition to diverting management’s attention away from operations to attend to the litigation.

FORM may not realize the potential value and benefits created by the Merger.

The success of the Merger will depend, in part, on FORM’s ability to realize the expected potential value and benefits created from integrating FORM’s existing businesses with XpresSpa’s business, which includes

31


 
 

TABLE OF CONTENTS

the maximization of the economic benefits of FORM’s strategic vision after completion of the Merger and plans, cash balances (which, in the case of XpresSpa, would be used for the build-out of new airport locations), financial reporting and analysis functions and legal expertise. The integration process may be complex, costly, and time-consuming. The difficulties of integrating the operations of XpresSpa’s business could include, among others:

failure to implement FORM’s business plan for the business after the completion of the Merger;
unanticipated issues in integrating the business of both companies;
loss of key employees with knowledge of FORM’s or XpresSpa’s historical business and operations;
unanticipated changes in applicable laws and regulations; and
other unanticipated issues, expenses, or liabilities that could impact, among other things, FORM’s ability to realize any expected benefits on a timely basis, or at all.

FORM may not accomplish the integration of XpresSpa’s business smoothly, successfully, or within the anticipated costs or time frame. The diversion of the attention of management from FORM’s current operations to the integration effort and any difficulties encountered in combining businesses could prevent FORM from realizing the full expected potential value and benefits to result from the Merger and could adversely affect its business. In addition, the integration efforts could divert the focus and resources of the management of FORM and XpresSpa from other strategic opportunities and operational matters during the integration process.

FORM will be dependent on certain key personnel, and the loss of these key personnel could have a material adverse effect on FORM’s business, financial conditions and results of operations.

The success and future prospects of FORM largely depend on the skills, experience and efforts of key personnel of FORM and XpresSpa, including Andrew D. Perlman, FORM’s current Chief Executive Officer and a Director, and Edward Jankowski, XpresSpa’s Chief Executive Officer. The loss of Mr. Perlman or Mr. Jankowski or other executives of FORM and XpresSpa, or FORM’s failure to retain other key personnel, would jeopardize FORM’s ability to execute its strategic plan and materially harm its business.

Ownership of FORM’s common stock may be highly concentrated, and it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause FORM’s stock price to decline.

Upon completion of the Merger, FORM’s and XpresSpa’s executive officers and directors continuing with FORM are expected to beneficially own or control approximately 37.8% of FORM (see the sections entitled “FORM Security Ownership of Certain Beneficial Owners and Management” beginning on page 148, “XpresSpa Security Ownership of Certain Beneficial Owners and Management” beginning on page 150 and “Security Ownership of Certain Beneficial Owners and Management of FORM Following the Merger” beginning on page 152 for more information on the estimated ownership of FORM following the Merger). Accordingly, these executive officers and directors, acting individually or as a group, will have substantial influence over the outcome of a corporate action of FORM requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of FORM’s assets or any other significant corporate transaction. These stockholders may also exert influence in delaying or preventing a change in control of FORM, even if such change in control would benefit the other stockholders of FORM. In addition, the significant concentration of stock ownership may adversely affect the market value of FORM’s common stock due to investors’ perception that conflicts of interest may exist or arise.

The success of FORM will depend in part on relationships with third parties, which relationships may be affected by third-party preferences or public attitudes about the Merger. Any adverse changes in these relationships could adversely affect FORM’s business, financial condition, or results of operations.

FORM’s success after the Merger will be dependent on its ability to maintain and renew the business relationships of both FORM and XpresSpa and to establish new business relationships. There can be no assurance that the management of FORM will be able to maintain such business relationships, or enter into or maintain new business contracts and other business relationships, on acceptable terms, if at all. The failure to

32


 
 

TABLE OF CONTENTS

maintain important business relationships could have a material adverse effect on the business, financial condition, or results of operations of FORM.

The future results of FORM may be materially different from those shown in the unaudited pro forma consolidated and condensed financial statements presented in this proxy statement/prospectus, which show only a combination of the historical results of FORM and XpresSpa prepared by FORM and XpresSpa in connection with discussions concerning the Merger. FORM expects to incur significant costs associated with the completion of the Merger and integrating the operations of the two companies. The exact magnitude of these costs is not yet known.

FORM’s business and financial condition could be constrained by XpresSpa’s outstanding debt.

XpresSpa is obligated under the Senior Secured Note payable to Rockmore, which has an outstanding balance of approximately $6,500,000, with a maturity date of May 1, 2018, with an additional one-year extension if both FORM and Rockmore consent to such extension. The Senior Secured Note accrues interest of 9.24% per annum, payable monthly, plus an additional 2.0% per annum. XpresSpa has granted Rockmore a security interest in all of its tangible and intangible personal property to secure its obligations under the Senior Secured Note. After the completion of the Merger the debt will remain outstanding as an obligation of XpresSpa, but will be guaranteed by FORM.

The price of FORM common stock after the Merger is completed may be affected by factors different from those currently affecting the shares of FORM.

The business of FORM differs from the business of XpresSpa and, accordingly, the results of operations of FORM and the trading price of FORM common stock following the completion of the Merger may be significantly affected by factors different from those currently affecting the independent results of operations of FORM because after the Merger FORM will be conducting activities not undertaken by FORM prior to the completion of the Merger. For a discussion of the businesses of FORM and XpresSpa and of certain factors to consider in connection with those businesses, see the sections entitled “FORM’s Business,” “FORM’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “XpresSpa’s Business,” “XpresSpa’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the financial statements of FORM and XpresSpa, including the notes thereto, which are included elsewhere in this proxy statement/prospectus, and the other information contained in this proxy statement/prospectus.

Material weaknesses may exist when FORM reports on the effectiveness of its internal controls over financial reporting for purposes of its reporting requirements after the Merger.

Prior to the Merger, XpresSpa, as a private company, was not subject to Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”). Therefore, XpresSpa’s management and independent registered public accounting firm did not perform an evaluation of XpresSpa’s internal controls over financial reporting as of December 31, 2015 in accordance with the provisions of Sarbanes-Oxley. Following the completion of the Merger within the expected timeframe, FORM will be required to provide management’s report on internal control over financial reporting in its Annual Report on Form 10-K for the year ending December 31, 2016, as required by Section 404 of Sarbanes-Oxley. FORM has not yet assessed the effectiveness of the internal controls for XpresSpa and material weaknesses may exist.

FORM does not expect to pay cash dividends on its common stock.

FORM anticipates that it will retain its earnings, if any, for future growth and therefore does not anticipate paying cash dividends on its common stock in the future. Investors seeking cash dividends should not invest in FORM’s common stock for that purpose. However, from and after the date of the issuance of any shares of the FORM preferred stock, dividends at the rate per annum of $4.32 per share (which represents 9% per annum) will accrue on such shares (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the FORM preferred stock).

33


 
 

TABLE OF CONTENTS

Anti-takeover provisions in FORM’s charter and bylaws may prevent or frustrate attempts by stockholders to change the board of directors or current management and could make a third-party acquisition of FORM difficult.

FORM’s certificate of incorporation and bylaws contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could limit the price that investors might be willing to pay in the future for shares of FORM’s common stock.

Because the lack of a public market for XpresSpa’s units makes it difficult to evaluate the fairness of the Merger, XpresSpa’s equity holders may receive consideration in the Merger that is greater than or less than the fair market value of XpresSpa’s units.

The outstanding equity of XpresSpa is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of XpresSpa. Since the amount of FORM common stock, preferred stock and warrants to be issued to XpresSpa’s equity holders was determined based on negotiations between the parties, it is possible that the value of the FORM common stock, preferred stock and warrants to be issued in connection with the Merger will be greater than the fair market value of XpresSpa. Alternatively, it is possible that the value of the shares of FORM common stock, preferred stock and warrants to be issued in connection with the Merger will be less than the fair market value of XpresSpa.

If any of the events described in “Risks Related to FORM’s Business” or “Risks Related to XpresSpa’s Business” occur, those events could cause the potential benefits of the Merger not to be realized.

Following the completion of the Merger, current FORM executive officers and certain XpresSpa executive officers and certain XpresSpa and FORM directors will direct the business and operations of FORM. Additionally, XpresSpa’s business is expected to be an important part of the business of FORM following the Merger. As a result, the risks described below in the section entitled “Risks Related to XpresSpa’s Business” beginning on page 39 are among the significant risks to FORM if the Merger is completed. To the extent any of the events described below in either the section entitled “Risks Related to FORM’s Business” or “Risks Related to XpresSpa’s Business” occur, those events could cause the potential benefits of the Merger not to be realized and the market price of FORM’s common stock to decline.

Risks Related to FORM’s Business

FORM is currently, and after the completion of the Merger will continue to be, subject to the risks described below.

FORM may not be able to consummate the Merger with XpresSpa.

The consummation of the Merger with XpresSpa is subject to stockholders approval and other closing conditions. FORM has expended significant effort and management attention on the proposed transaction. There is no assurance that the Merger will be consummated. For example, FORM’s stockholders may not approve the Merger. If the Merger is not consummated for any reason, FORM’s business and operations, as well as the market price of its stock may be adversely affected.

The exercise of a substantial number of warrants or options by FORM’s security holders may have an adverse effect on the market price of FORM common stock.

Should FORM’s currently outstanding warrants be exercised, there will be 1,006,679 additional shares of common stock eligible for trading in the public market. In addition, FORM currently has options outstanding to purchase 1,492,434 shares of common stock, granted as of October 18, 2016, to FORM’s management, employees, directors and consultants. In March 2016, the FORM board of directors approved participation of all outstanding options in future dividends, as well as acceleration of vesting of all outstanding options, if certain market conditions are met. Therefore, the sale, or even the possibility of sale, of the shares of common stock underlying the warrants and options could have an adverse effect on the market price for FORM’s securities or on FORM’s ability to obtain future financing. As of June 30, 2016, the weighted average exercise price of all currently outstanding warrants and options was $9.18 per share and $16.51 per share, respectively.

34


 
 

TABLE OF CONTENTS

Future sales of FORM’s shares of common stock by its stockholders could cause the market price of FORM common stock to drop significantly, even if FORM’s business is performing well.

As of June 30, 2016, FORM had 15,011,498 shares of common stock issued and outstanding, excluding shares of common stock issuable upon exercise of warrants or options. As of October 18, 2016, FORM had 15,799,881 shares of common stock issued and outstanding excluding shares of common stock issuable upon exercise of warrants or options, including the 750,574 shares sold in the private placement described herein, completed on August 8, 2016, but not yet allocated to investors. As shares saleable under Rule 144 are sold the market price of FORM common stock could drop significantly, if the holders of shares that are not registered sell them, or are perceived by the market as intending to sell them. This decline in FORM’s stock price could occur even if FORM’s business is otherwise performing well.

Group Mobile’s and FLI Charge’s businesses depend upon their ability to keep pace with the latest technological changes and their failure to do so could make Group Mobile and FLI Charge less competitive in their respective industries.

The market for Group Mobile’s and FLI Charge’s products and services is characterized by rapid change and technological change, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. Products using new technologies or emerging industry standards could make Group Mobile’s and FLI Charge’s products and services less attractive. Furthermore, Group Mobile’s and FLI Charge’s competitors may have access to technology not available to Group Mobile and FLI Charge, which may enable them to produce products of greater interest to consumers or at a more competitive cost. Failure to respond in a timely and cost-effective way to these technological developments may result in serious harm to Group Mobile’s and FLI Charge’s businesses and operating results. As a result, Group Mobile’s and FLI Charge’s success will depend, in part, on their ability to develop and market product and service offerings that respond in a timely manner to the technological advances available to Group Mobile’s and FLI Charge’s customers, evolving industry standards and changing preferences.

FORM may not be able to successfully monetize the patents it acquired from Nokia, nor any of the other patent acquisitions, thus it may fail to realize all of the anticipated benefits of such acquisition.

There is no assurance that FORM will be able to successfully monetize the patent portfolio that it acquired from Nokia, nor any other patent acquisitions. The patents it acquired from Nokia could fail to produce anticipated benefits, or could have other adverse effects that it currently does not foresee. Failure to successfully monetize these patent assets may have a material adverse effect on its business, financial condition and results of operations.

In addition, the acquisition of a patent portfolio is subject to a number of risks, including, but not limited to the following:

There is a significant time lag between acquiring a patent portfolio and recognizing revenue from those patent assets, if at all. During that time lag, material costs are likely to be incurred that would have a negative effect on its results of operations, cash flows and financial position.
The integration of a patent portfolio is a time consuming and expensive process that may disrupt FORM’s operations. If its integration efforts are not successful, its results of operations could be harmed. In addition, FORM may not achieve anticipated synergies or other benefits from such acquisition.

Therefore, there is no assurance that FORM will be able to monetize an acquired patent portfolio and recoup its investment.

The mobile and/or rugged computing industry is characterized by rapid technological change, and the success of Group Mobile depends upon the frequent enhancement of existing products and services and timely introduction of new products and services that meet Group Mobile’s customers’ needs.

Customer requirements for mobile computing products and services are rapidly evolving and technological changes in the industry occur rapidly. To keep up with new customer requirements and distinguish Group Mobile from its competitors in the business of reselling rugged devices, Group Mobile must

35


 
 

TABLE OF CONTENTS

frequently introduce new products and services and enhancements of existing products and services. Enhancing existing products and services and developing new products and services is a complex and uncertain process. Furthermore, Group Mobile may not be able to launch new or improved products or services before its competition launches comparable products or services. Any of these factors could cause its business or results of operations to suffer.

If FLI Charge successfully commercially launches a product, and its product does not achieve widespread market acceptance, it will not be able to generate the revenue necessary to support its business.

Achieving acceptance of a wire-free recharging system as a preferred method to recharge fixed and mobile electronic devices will be crucial to FLI Charge’s continued success. Consumers and commercial customers will not begin to use or increase the use of its product unless they agree that the convenience of its solution would be worth the additional expense of purchasing the FLI Charge system. FLI Charge has no history of marketing any product and it and its commercialization partners may fail to generate significant interest in the initial commercial products or any other product it or its partners may develop. These and other factors, including the following factors, may affect the rate and level of the market acceptance:

its products’ price relative to other products or competing methods of recharging;
the effectiveness of its sales and marketing efforts;
the support and rate of acceptance of its technology and solutions including with its joint development partners;
perception by both individual and enterprise users of its system’s convenience, safety and efficiency;
press and blog coverage, social media coverage, and other publicity and public relations; and
regulatory developments related to marketing its products or their inclusion in others’ products.

If FLI Charge is unable to achieve or maintain market acceptance, its business would be significantly harmed.

The consumer electronics and mobile computing industries are subject to intense competition and rapid technological change, which may result in products or new solutions that are superior to FLI Charge’s technology under development or other future products it may bring to market from time to time. If FLI Charge is unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, its products may become less useful or obsolete and its operating results will suffer.

The consumer electronics and mobile computing industries in general and the power, recharging and alternative recharging segments of that industry in particular are subject to intense and increasing competition and rapidly evolving technologies. Because FLI Charge’s products are expected to have long development cycles, it must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, it will need to demonstrate the advantages of its products and technologies over well-established alternative solutions, products and technologies, as well as newer methods of power delivery and convince consumers and enterprises of the advantages of its products and technologies.

Group Mobile depends on a small number of OEMs to supply the products and services that it sells and the loss of, or a material change in, a business relationship with a major OEM supplier, could adversely affect its operations, cash flow, and financial position.

Group Mobile’s future success is highly dependent on its relationships with a small number of OEM suppliers. Group Mobile’s primary suppliers include Synnex Corporation, Ingram Micro Inc., Xplore Technologies Corporation and Flextronics International Ltd., which combined represent approximately 80% of Group Mobile’s inventory purchases. OEM supplier agreements typically are short-term and may be terminated without cause upon short notice. The loss or deterioration of Group Mobile’s relationship with any of its major OEM suppliers, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to its reseller and retail customers and end-users, or its failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that it provides

36


 
 

TABLE OF CONTENTS

OEM suppliers could adversely affect Group Mobile’s operations, cash flows, and financial position. In addition, OEM suppliers may face liquidity or solvency issues that in turn could negatively affect its operations, cash flows, and financial position.

Group Mobile and FLI Charge could become subject to product liability claims, product recalls, and warranty claims that could be expensive, divert management’s attention and harm its business.

The nature of Group Mobile’s and FLI Charge’s businesses exposes them to potential liability risks that are inherent in the marketing and sale of products used by consumers. Group Mobile or FLI Charge may be held liable if their technology under development now or in the future causes injury or death or is found otherwise unsuitable during usage. Group Mobile’s and FLI Charge’s technology incorporates sophisticated components and computer software. Complex software can contain errors, particularly when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after installation.

In addition, if a product sold by Group Mobile or FLI Charge is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, it or its strategic partners may be required to notify regulatory authorities and/or to recall the product. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of its products, which could in turn result in required recalls, restrictions on the sale of the products or other penalties. The adverse publicity resulting from any of these actions could adversely affect the perception of its customers and potential customers. These investigations or recalls, especially if accompanied by unfavorable publicity, could result in substantial costs, loss of revenue and damage to its reputation, each of which would harm its business.

FLI Charge intends to pursue licensing of its wire-free charging technology as a means of commercialization but it may not be able to secure advantageous license agreements.

FLI Charge is pursuing the licensing of its wire-free technology as a means of commercialization. There can be no assurance that it will be able to achieve partnerships and reach licensing arrangements. Furthermore, the timing and volume of revenue earned from license agreements will be outside of its control.

Technology and intellectual property company stock prices are especially volatile, and this volatility may depress the price of FORM’s common stock.

The stock market has experienced significant price and volume fluctuations, and the market prices of technology companies have been highly volatile. FORM believes that various factors may cause the market price of its common stock to fluctuate, perhaps substantially, including, among others, the following:

developments or disputes concerning its patents;
announcements of developments in its patent enforcement actions;
additions to or departures of its key personnel;
announcements of technological innovations by it or its competitors;
announcements by it or its competitors of significant contracts, acquisitions, strategic partnerships, capital commitments, new technologies, or patents;
new regulatory pronouncements and changes in regulatory guidelines;
changes in financial estimates or recommendations by securities analysts; and
general and industry-specific economic conditions.

The market prices of the securities of technology companies have been highly volatile and are likely to remain highly volatile in the future. The stock market as a whole also has experienced extreme price and volume fluctuations that have affected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance. Furthermore, FORM believes that fluctuations in its stock price can also be impacted by court rulings and/or other developments in its patent licensing and

37


 
 

TABLE OF CONTENTS

enforcement actions and its stock price may reflect certain future growth and profitability expectations. If FORM fails to meet these expectations then its stock price may significantly decline, which could have an adverse impact on investor confidence.

Anti-takeover provisions of Delaware law, provisions in FORM’s charter and bylaws and its stockholder rights plan could delay, discourage or make more difficult a third-party acquisition of control of FORM.

FORM is a Delaware corporation and, as such, certain provisions of Delaware law could delay, discourage or make more difficult a third-party acquisition of control of FORM, even if the change in control would be beneficial to stockholders or the stockholders regard it as such. FORM is subject to the provisions of Section 203 of the DGCL, which prohibits certain “business combination” transactions (as defined in Section 203) with an “interested stockholder” (defined in Section 203 as a 15% or greater stockholder) for a period of three years after a stockholder becomes an “interested stockholder,” unless the attaining of “interested stockholder” status or the transaction is pre-approved by FORM’s Board of Directors, the transaction results in the attainment of at least an 85% ownership level by an acquirer or the transaction is later approved by FORM’s Board of Directors and by its stockholders by at least a 66 2/3 percent vote of its stockholders other than the “interested stockholder,” each as specifically provided in Section 203. FORM has also adopted a shareholder rights plan in the form of the Rights Agreement, designed to help protect and preserve its substantial tax attributes primarily associated with its NOLs and research tax credits under Sections 382 and 383 of the Internal Revenue Code and related U.S. Treasury regulations. Although this is not the purpose of the Rights Agreement, it could have the effect of making it uneconomical for a third party to acquire FORM on a hostile basis.

These provisions of the DGCL, FORM’s certificate of incorporation and bylaws, and the Rights Agreement may delay, discourage or make more difficult certain types of transactions in which FORM’s stockholders might otherwise receive a premium for their shares over the current market price, and might limit the ability of its stockholders to approve transactions that they think may be in their best interest.

Future acquisitions or business opportunities could involve unknown risks that could harm FORM’s business and adversely affect its financial condition and results of operations.

FORM strives to be a diversified holding company that owns interests in a number of different businesses. FORM has in the past, and may in the future, acquire businesses or make investments, directly or indirectly through its subsidiaries, that involve unknown risks, some of which will be particular to the industry in which the investment or acquisition targets operate, including risks in industries with which FORM is not familiar or experienced. Although FORM intends to conduct appropriate business, financial and legal due diligence in connection with the evaluation of future investment or acquisition opportunities, there can be no assurance FORM’s due diligence investigations will identify every matter that could have a material adverse effect on FORM. FORM may be unable to adequately address the financial, legal and operational risks raised by such investments or acquisitions, especially if it is unfamiliar with the relevant industry. The realization of any unknown risks could expose FORM to unanticipated costs and liabilities and prevent or limit it from realizing the projected benefits of the investments or acquisitions, which could adversely affect its financial condition and liquidity.

Future acquisitions and investments are possible, changing the components of FORM’s assets and liabilities, and, if unsuccessful, could reduce the value of its common stock.

Any future acquisitions may result in significant changes in the composition of FORM’s assets and liabilities. Consequently, FORM’s financial condition, results of operations and the trading price of its common stock may be affected by factors different from those currently affecting its financial condition, results of operations and trading price.

FORM may be unsuccessful in identifying suitable acquisition candidates, which may negatively impact its growth strategy.

There can be no assurance given that FORM will be able to implement its strategy and identify suitable acquisition candidates or consummate future acquisitions on acceptable terms. FORM’s failure to successfully

38


 
 

TABLE OF CONTENTS

identify suitable acquisition candidates or consummate future acquisitions on acceptable terms could have an adverse effect on its prospects, business activities, cash flow, financial condition, results of operations and stock price.

FORM’s ability to use its net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2015, FORM had federal net operating loss carryforwards (“NOL”s) of $123.6 million which expire 20 years from the respective tax years to which they relate. FORM’s ability to utilize its NOLs may be limited under Section 382 of the Internal Revenue Code. The limitations apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). Additionally, U.S. tax laws limit the time during which these carryforwards may be utilized against future taxes. As a result, FORM may not be able to take full advantage of these carryforwards for federal and state tax purposes. Future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation.

Risks Related to XpresSpa’s Business

XpresSpa is reliant on international and domestic airplane travel, and the time that airline passengers spend in U.S. airports post-security. A decrease in airline travel, a decrease in the desire of customers to buy spa services and products, or decreased time spent in airports would negatively impact XpresSpa’s revenues.

XpresSpa depends upon a large number of airplane travelers with the psychographic propensity for health and wellness, and in particular spa treatments and products, spending significant time post-Transportation Security Administration (“TSA”) security clearance check points.

If the number of airline travelers in the United States decreases, if the time that these travelers spend post-TSA security decreases, and/or if travelers ability or willingness to pay for XpresSpa’s products and services diminishes, this could have an adverse effect on XpresSpa’s growth, business activities, cashflow, financial condition and results of operations. Some reasons for these events could include:

terrorist activities impacting either domestic or international travel through airports where XpresSpa operates, causing fear of flying, flight cancellations, or an economic downturn;
a decrease in business spending that impacts business travel, such as a recession;
a decrease in consumer spending that impacts U.S. leisure travel, such as a recession or a stock market downturn or a change in consumer lending regulations impacting available credit for leisure travel;
an increase in airfare prices that impacts the willingness of U.S. air travelers to fly, such as an increase in oil prices or heightened taxation from federal or other aviation authorities;
an increase in airplane accident rates, causing U.S. travelers to decrease the amount that they fly;
scientific studies that malign the use of spa services or the products used in spa services, such as the impact of certain chemicals and procedures on health and wellness; or
streamlined TSA security screening checkpoints, which could decrease the wait time at checkpoints and therefore the time air travelers budget for spending time at the airport.

XpresSpa’s operating results may fluctuate significantly due to certain factors, some of which are beyond its control.

XpresSpa’s operating results may fluctuate from period to period significantly because of several factors, including:

the timing and size of new unit openings, particularly the launch of new terminals;
passenger traffic and seasonality of air travel;
changes in the price and availability of supplies;

39


 
 

TABLE OF CONTENTS

macroeconomic conditions, both nationally and locally;
changes in consumer preferences and competitive conditions;
expansion to new markets and new locations; and
increases in infrastructure costs including those costs associated with the build-out of new concession locations and renovating existing concession locations.

XpresSpa’s operating results may fluctuate significantly as a result of the factors discussed above. Accordingly, results for any period are not necessarily indicative of results to be expected for any other period or for any year.

XpresSpa’s expansion into new airports may present increased risks due to its unfamiliarity with those areas.

XpresSpa’s growth strategy depends upon expanding into markets where it has little or no meaningful operating experience. Those locations may have demographic characteristics, consumer tastes and discretionary spending patterns that are different from those in the markets where its existing operations are located. As a result, new airport terminal operations may be less successful than its concession locations in its current airport terminals. XpresSpa may find it more difficult in new markets to hire, motivate and keep qualified employees who can project its vision, passion and culture. XpresSpa may also be unfamiliar with local laws, regulations and administrative procedures, including the procurement of spa services retail licenses, in new markets which could delay the build-out of new concession locations and prevent it from achieving its target revenues on a timely basis. Operations in new markets may also have lower average revenues or enplanements than in the markets where XpresSpa currently operates. Operations in new markets may also take longer to ramp up and reach expected sales and profit levels, and may never do so, thereby negatively affecting XpresSpa’s results of operations.

XpresSpa currently relies on a skilled, licensed labor force to provide spa services, and the supply of this labor force is finite. If XpresSpa cannot hire adequate staff for its locations, it will not be able to operate.

XpresSpa has approximately 686 employees in its locations across the United States. Excluding some dedicated retail staff, the majority of these employees are licensed by counties and states to perform spa services, and hold such licenses as masseuses, nail technicians, aestheticians, barbers and master barbers. The demand for these licensed technicians has been increasing in the United States as more consumers gravitate to health and wellness treatments such as spa services. XpresSpa competes not only with other airport-based spa companies but with spa companies outside of the airport for this skilled labor force. In addition, all staff hired by XpresSpa must pass the background checks and security clearances necessary to work in airport locations. If XpresSpa is unable to attract and retain qualified staff to work in its airport locations, its ability to operate will be impacted negatively.

XpresSpa’s labor force could unionize, putting upward pressure on labor costs.

Currently, one XpresSpa location has a labor force which is unionized. Major players in labor organization, and in particular “Unite Here!” which represents 33,000 employees in the airport concessions and airline catering industries, could target XpresSpa locations for its unionization efforts. In the event of the successful unionization of all of XpresSpa’s labor force, XpresSpa would likely incur additional costs in the form of higher wages, more benefits such as vacation and sick leave, and potentially also higher health care insurance costs.

XpresSpa competes for new locations in airports, and may not be able to secure new locations.

XpresSpa participates in the highly competitive and lucrative airport concessions industry, and as a result competes for retail leases with a variety of larger, better capitalized concessions companies as well as smaller, mid-tier and single unit operators. Frequently, an airport includes a spa concept within its retail product set and, in those instances, XpresSpa competes primarily with BeRelax, Terminal Getaway, Massage Bar and 10 Minute Manicure.

40


 
 

TABLE OF CONTENTS

XpresSpa’s leases may be terminated, either for convenience by the landlord or as a result of an XpresSpa default.

XpresSpa has store locations and kiosks in a number of airports in which the landlord, with prior written notice to XpresSpa, can terminate XpresSpa’s lease, including for convenience or as necessary for airport purposes or operations. If a landlord elects to terminate a lease at an airport, XpresSpa may have to shut down one or more store locations at that airport.

Additionally, XpresSpa leases have numerous provisions governing the operation of XpresSpa’s stores. Violation of one or more of these provisions, even unintentionally, may result in the landlord finding that XpresSpa is in default of the lease. Violation of lease provisions may result in fines and, in some cases, termination of a lease.

XpresSpa’s ability to operate depends on the traffic patterns of the terminals in which it operates, and the cessation or disruption of air traveler traffic in these terminals would negatively impact XpresSpa’s addressable market.

XpresSpa depends on a high volume of air travelers in its terminals. It is possible that a terminal in which XpresSpa operates could become subject to a lower volume of air travelers, which would significantly impact traffic near and around XpresSpa locations and therefore its total addressable market. Lower volume in a terminal could be caused by:

terminal construction that results in the temporary or permanent closure of a unit, or adversely impacts the volume or pattern of traffic flows within an airport;
an airline utilizing an airport in which XpresSpa operates could abandon that airport or an individual terminal in favor of other airports or terminals, or because it is contracting operations; or
adverse weather conditions could cause damage to the terminal or airport in which XpresSpa operates, resulting in the temporary or permanent closure of a unit.

Failure to comply with minimum airport concession disadvantaged business enterprise participation goals and requirements could lead to lost business opportunities or the loss of existing business.

A number of XpresSpa’s leases contain minimum ACDBE participation requirements, and bidding on or submitting proposals for new concession contracts often requires that XpresSpa meets or uses good faith efforts to meet certain minimum ACDBE participation requirements. If XpresSpa fails to comply with the minimum ACDBE participation requirements, XpresSpa may be held responsible for a breach of contract, which could result in the termination of a lease and impairment of XpresSpa’s ability to bid on or obtain future concession contracts. To the extent that XpresSpa leases are terminated and XpresSpa is required to shut down one or more store locations, there could be a material adverse impact to its business and results of operations.

Continued minimum wage increases would negatively impact XpresSpa’s cost of labor.

XpresSpa compensates its licensed technicians via a formula that includes commissions. As a result, an increase in the minimum wage would increase XpresSpa’s cost of labor.

If XpresSpa is unable to protect its customers’ credit card data and other personal information, XpresSpa could be exposed to data loss, litigation and liability, and its reputation could be significantly harmed.

Privacy protection is increasingly demanding, and the use of electronic payment methods and collection of other personal information, including order history, travel history and other preferences, exposes XpresSpa to increased risk of privacy and/or security breaches as well as other risks. The majority of XpresSpa’s sales are by credit or debit cards. Additionally, XpresSpa collects and stores personal information from individuals, including its customers and employees.

XpresSpa may experience security breaches in which credit and debit card information or other personal information is stolen in the future. Although XpresSpa uses secure private networks to transmit confidential information, third parties may have the technology or know-how to breach the security of the customer

41


 
 

TABLE OF CONTENTS

information transmitted in connection with credit and debit card sales, and its security measures and those of technology vendors may not effectively prohibit others from obtaining improper access to this information. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect for long periods of time, which may cause a breach to go undetected for an extensive period of time. Advances in computer and software capabilities, new tools, and other developments may increase the risk of such a breach. Further, the systems currently used for transmission and approval of electronic payment transactions, and the technology utilized in electronic payments themselves, all of which can put electronic payment at risk, are determined and controlled by the payment card industry, not by XpresSpa. In addition, contractors, or third parties with whom XpresSpa does business or to whom XpresSpa outsources business operations may attempt to circumvent its security measures in order to misappropriate such information, and may purposefully or inadvertently cause a breach involving such information. If a person is able to circumvent XpresSpa’s security measures or those of third parties, he or she could destroy or steal valuable information or disrupt XpresSpa’s operations. XpresSpa may become subject to claims for purportedly fraudulent transactions arising out of the actual or alleged theft of credit or debit card information, and XpresSpa may also be subject to lawsuits or other proceedings relating to these types of incidents. Any such claim or proceeding could cause XpresSpa to incur significant unplanned expenses, which could have an adverse effect on its business or results of operations. Further, adverse publicity resulting from these allegations could significantly harm its reputation and may have a material adverse effect on it. Although XpresSpa carries cyber liability insurance to protect against these risks, there can be no assurance that such insurance will provide adequate levels of coverage against all potential claims.

Negative social media regarding XpresSpa could result in decreased revenues and impact XpresSpa’s ability to recruit workers.

XpresSpa’s affinity among consumers is highly dependent on their positive feelings about the brand, its customer service and the range and quality of services and products that it offers. A negative customer experience that is posted to social media outlets and is distributed virally could tarnish XpresSpa’s brand and its customers may opt to no longer engage with the brand.

XpresSpa employs people in multiple different states, and the employment laws of those states are subject to change. In addition, its services are regulated through county and/or state operating licenses. Noncompliance with applicable laws could result in employee lawsuits or legal action taken by government authorities.

XpresSpa must comply with a variety of employment and business practices laws across the United States. XpresSpa monitors the laws governing its activities, but in the event it does not become aware of a new regulation or fails to comply with a regulation, it could be subject to disciplinary action by governing bodies and potentially employee lawsuits.

XpresSpa is not currently cash flow positive, and will depend on funding from FORM to open new locations. In the event that capital is unavailable from FORM, XpresSpa will not be able to open new locations.

Throughout its operating history, XpresSpa has not generated sufficient cash from operations to fund its new store development. As a result, it will be dependent upon FORM to fund its new location growth until such time as it can produce enough cash to profitably fund its own location growth.

XpresSpa sources, develops and sells products that may result in product liability defense costs and product liability payments.

The ingredients in XpresSpa’s products contain ingredients that are deemed to be safe by the United States Federal Drug Administration and the Federal Food, Drug and Cosmetics Act. However, there is no guarantee that these ingredients will not cause adverse health effects to some consumers given the wide range of ingredients and allergies amongst the general population. XpresSpa may face substantial product liability exposure for products it sells to the general public or that it uses in its services. Product liability claims, regardless of their merits, could be costly and divert management’s attention, and adversely affect XpresSpa’s reputation and the demand for its products and services. XpresSpa to date has not been named as a defendant in product liability actions.

42


 
 

TABLE OF CONTENTS

XpresSpa is already involved in litigation that could divert management’s attention and harm its business or prevent the completion of the Merger.

In August 2016, Amiral Holdings SAS (“Amiral”), the operator of BeRelax spas, filed a complaint for breach of contract against XpresSpa related to a potential strategic transaction between Amiral and XpresSpa. Amiral Holdings SAS v. XpresSpa Holdings LLC et al., Supreme Court of the State of New York, County of New York (Index No. 654051/2016). Among other things, Amiral seeks specific performance related to the contract; an injunction prohibiting the defendants from entering into or consummating a competing transaction; and a declaration with respect to Amiral’s right of first refusal and certain related matters. On October 4, 2016, Amiral filed an amended complaint and motion for a preliminary injunction. On October 14, 2016, XpresSpa filed its response to Amiral’s motion, and on October 20, 2016, Amiral filed a reply brief. A hearing on the preliminary injunction has been scheduled for December 5, 2016, although this date is subject to change by the court. If Amiral is successful in this lawsuit or its motion for a preliminary injunction, the completion of the Merger could be delayed or not occur at all.

43


 
 

TABLE OF CONTENTS

THE MERGER

Structure of the Merger

In accordance with the Merger Agreement and the Delaware Limited Liability Company Act (the “DLLCA”), at the effective time, Merger Sub, a wholly-owned subsidiary of FORM formed solely for the purpose of carrying out the Merger, will merge with and into XpresSpa with XpresSpa continuing as the surviving entity and a wholly-owned subsidiary of FORM. In connection with the Merger, each XpresSpa common unit and preferred unit outstanding as of immediately prior to the effective time (other than those held by FORM and its subsidiaries, which will be cancelled) will be converted into the right to receive shares of FORM common stock, preferred stock and warrants, all in accordance with the terms and conditions of the Merger Agreement. The Merger will become effective when a certificate of merger is filed with the Secretary of State of the State of Delaware or at such other time as agreed to by the parties and specified in the certificate of merger. If the FORM stockholders approve the FORM Merger Proposal, then FORM expects the Merger to be completed as soon as practicable following the FORM annual meeting and satisfaction or waiver of the closing conditions.

What XpresSpa Equity Holders Will Receive in the Merger

Upon completion of the Merger (i) the then-outstanding common units of XpresSpa (other than units held by FORM and its subsidiaries, which will be cancelled without any consideration) and (ii) the then-outstanding preferred units of XpresSpa (other than preferred units held by FORM and its subsidiaries, which will be cancelled without any consideration) will be cancelled and automatically converted into the right to receive an aggregate of (i) 2,500,000 shares of FORM common stock, (ii) 494,792 shares of FORM preferred stock, initially convertible into 3,958,336 shares of FORM common stock and (iii) five-year warrants to purchase an aggregate of 2,500,000 shares of FORM common stock, at an exercise price of $3.00 per share, in each case, subject to adjustment in the event of a stock split, dividend or similar events. Immediately following the completion of the Merger (without taking into account any shares of FORM common stock held by XpresSpa equity holders prior to the completion of the Merger but assuming that all shares held in escrow are released to the former equity holders of XpresSpa), the former equity holders of XpresSpa are expected to own approximately 18% of the outstanding common stock of FORM (or 33% of the outstanding common stock of FORM calculated on a fully diluted basis) and the current stockholders of FORM are expected to own approximately 82% of the outstanding common stock of FORM (or 67% of the outstanding common stock of FORM calculated on a fully diluted basis).

Fractional Shares

No fractional shares of FORM common stock or FORM preferred stock will be issued to XpresSpa equity holders in connection with the Merger. Instead, XpresSpa equity holders will be entitled to receive the next highest number of whole shares of FORM common or preferred stock, as applicable, in lieu of any fractional shares of FORM common or preferred stock that they would otherwise be entitled to receive in connection with the Merger. For an additional discussion of what XpresSpa equity holders will receive in connection with the Merger, see the section entitled “The Merger Agreement — Merger Consideration” beginning on page 67.

Ownership of FORM after the Completion of the Merger

Upon completion of the Merger, the XpresSpa equity holders are expected to receive shares of FORM common stock, preferred stock and warrants representing an aggregate of approximately 33% of the outstanding shares of common stock of FORM calculated on a fully diluted basis. FORM stockholders will continue to own their existing shares of FORM common stock, which will not be affected by the Merger, and, unless they hold XpresSpa units, will not receive any additional shares of FORM common stock in connection with the Merger. As a result, immediately upon completion of the Merger, such shares will represent an aggregate of approximately 67% of the outstanding shares of common stock of FORM calculated on a fully diluted basis. For example, if you are a FORM stockholder and hold 5% of the outstanding shares of FORM common stock calculated on a fully diluted basis immediately prior to the completion of the Merger and do not also hold XpresSpa units, then upon completion of the Merger you will hold an aggregate of approximately 3.35% of the outstanding shares of common stock of FORM calculated on a fully diluted basis

44


 
 

TABLE OF CONTENTS

as of immediately following the completion of the Merger. If you are an XpresSpa equity holder and hold 5% of the outstanding equity of XpresSpa calculated on a fully diluted basis immediately prior to the completion of the Merger and do not also hold shares of FORM common stock, then upon completion of the Merger you will hold an aggregate of approximately 1.65% of the outstanding shares of common stock of FORM, calculated on a fully diluted basis as of immediately following the completion of the Merger.

Background of the Merger

The terms of the Merger are the result of negotiations that took place between executives and board members of FORM and executives and board members of XpresSpa.

On December 17, 2015, Andrew Perlman met with Bruce T. Bernstein and Richard K. Abbe to first discuss the potential for a financing transaction involving FORM and XpresSpa.
On December 28, 2015, Andrew Perlman and Bruce T. Bernstein had a phone conversation to discuss the potential for a financing transaction involving FORM and XpresSpa.
On January 14, 2016, Bruce T. Bernstein sent FORM’s proposed non-disclosure agreement to a representative of Mistral for a potential financing transaction involving FORM and XpresSpa.
On January 15, 2016, Andrew Perlman and Cliff Weinstein met with Andrew R. Heyer (Chairman of XpresSpa and CEO of Mistral), for the first time, to discuss the potential for a financing transaction involving FORM and XpresSpa.
On January 20, 2016, a representative of Mistral sent Andrew Perlman a countersigned copy of FORM’s non-disclosure agreement, signed by Rhonda Schladerbach, Chief Operating Officer of XpresSpa, as well as an XpresSpa management presentation.
On January 26, 2016, Andrew Perlman and Bruce T. Bernstein met to discuss the potential for a financing transaction involving FORM and XpresSpa.
On February 8, 2016, Andrew Perlman, Bruce T. Bernstein, and Clifford Weinstein met with Andrew R. Heyer at FORM’s offices to discuss the potential for a financing transaction involving FORM and XpresSpa.
On February 12, 2016, Andrew Perlman and William Phoenix (an XpresSpa director and managing director at Mistral) met at Mistral’s offices to discuss the potential for a financing transaction involving FORM and XpresSpa.
On February 23, 2016, Andrew Perlman and Bruce T. Bernstein met with Tom Fricke (an executive consultant to XpresSpa), Robert Mahan (an executive consultant to XpresSpa), Rhonda Schladerbach (Chief Operating Officer of XpresSpa), William Phoenix, and a Mistral representative at the offices of XpresSpa to discuss the potential for a financing transaction involving FORM and XpresSpa.
On February 23, 2016, a Mistral respresentative sent Andrew Perlman, Bruce Bernstein and William Phoenix a set of XpresSpa financial diligence materials.
On February 28, 2016, XpresSpa sent FORM a term sheet for a financing transaction involving FORM and XpresSpa, whereby FORM would purchase $5,000,000 of Series C XpresSpa units. FORM proposed that the Series C units would have a liquidiation preference equal to the price per unit, and would be senior to all XpresSpa common securities, but junior to all existing Series A and Series B preferred units, would accrue cash dividends quarterly, and would be convertible, at FORM’s option, into XpresSpa common units.
On March 14, 2016, Andrew Perlman met with Andrew R. Heyer and William Phoenix at the offices of Mistral to discuss the potential for a financing transaction involving FORM and XpresSpa.
On March 18, 2016, FORM sent Mistral a term sheet for a financing transaction involving FORM and XpresSpa whereby FORM would purchase 5,000,000 of Series C XpresSpa units issued for $1 per unit. FORM proposed that the Series C units would have a liquidation preference prior to the distribution to XpresSpa’s Series B preferred units, Series A preferred units and common units and would also be entitled to additional equity sale participation above the liquidation preference and

45


 
 

TABLE OF CONTENTS

accrued interest. FORM also proposed that it would have 30% voting rights in XpresSpa, a right to buy out Mistral’s holdings at a valuation of $60,000,000 or six times trailing 12 month EBITDA and a right of last refusal on any alternative offer.
On March 18, 2016, Andrew Perlman and Richard Abbe held a phone conversation with Andrew R. Heyer and William Phoenix to discuss FORM’s term sheet for a financing transaction involving FORM and XpresSpa.
On March 23, 2016, a representative of XpresSpa emailed FORM a counter-proposal to FORM’s term sheet for a financing transaction involving FORM and XpresSpa whereby FORM would purchase 5,000,000 Series C XpresSpa units issued for $1 per unit. The Series C units would have a liquidation preference prior to the distribution to XpresSpa’s Series B preferred units, Series A preferred units and common units and would also be entitled to additional equity sale participation above the liquidation preference and accrued interest. XpresSpa also proposed that FORM would have 30% voting rights in XpresSpa, a right to buy out Mistral’s holdings at a valuation of $80,000,000 or eight times trailing 12 month EBITDA and a right of last refusal on any alternative offer. In addition, XpresSpa proposed that its Series A unit holders exchange their Series A units for $10.5 million worth of newly issued FORM preferred stock, with an 8.0% cash dividend payable quarterly, and 1,300,000 warrants to purchase shares of FORM common stock with an exercise price of $4.00.
On March 24, 2016, Andrew Perlman and Andrew R. Heyer held a phone conversation to discuss XpresSpa’s counter-proposal to FORM’s term sheet for a financing transaction involving FORM and XpresSpa.
On March 25, 2016, FORM sent XpresSpa a revised term sheet for a financing transaction involving FORM and XpresSpa whereby FORM would purchase 5,000,000 Series C XpresSpa units issued for $1 per unit. FORM proposed that the Series C units would have a liquidation preference prior to the distribution to XpresSpa’s Series B preferred units, Series A preferred units and common units, would be convertible into XpresSpa common units at a $30,000,000 pre money valuation and would also be entitled to additional equity sale participation above the liquidation preference and accrued interest. FORM also proposed that it would have 30% voting rights in XpresSpa and that XpresSpa’s Series A unitholders would exchange their Series A units for $10,500,00 in newly-created preferred stock in FORM, which, at the election of the unitholders, would be convertible into 2,600,000 FORM common shares, along with 1,300,000 five and a half year FORM warrants with a strike price of $4.00, not exercisable for six months. FORM also proposed that it would have a right to buy out Mistral’s holdings at a valuation of $60,000,000 or eight times trailing 12 month EBITDA, and a right of last refusal on any alternative offer.
On April 3, 2016, XpresSpa sent FORM its comments to FORM’s revised term sheet for a financing transaction involving FORM and XpresSpa.
On April 7, 2016, Andrew Perlman sent an email to Andrew R. Heyer, William Phoenix, and certain Mistral representatives to indicate that FORM did not believe that, based on XpresSpa’s comments to FORM’s revised term sheet, there was any purpose in continuing discussion regarding the potential for a financing transaction involving FORM and XpresSpa.
On April 12, 2016, after reviewing the financial due diligence of XpresSpa, Andrew Perlman informed FORM’s Board of Directors that FORM was in the process of negotiating a financing transaction involving FORM and XpresSpa, and presented to the Board of Directors information regarding XpresSpa’s business and financial performance.
On April 18, 2016, Andrew R. Heyer contacted Andrew Perlman and Bruce T. Bernstein with a proposal for a transaction whereby FORM would acquire all of the outstanding equity of XpresSpa and payoff, refinance or assume XpresSpa’s then-curent debt obligations and FORM would issue to XpresSpa equity holders 10,000,000 shares of FORM common stock, 2,500,000 warrants to purchase shares of FORM common stock with an exercise price of $3.00 per share and 2,500,000 warrants to purchase shares of FORM common stock with an exercise price of $4.00 per share.

46


 
 

TABLE OF CONTENTS

On April 18, 2016, Andrew Perlman and Andrew R. Heyer held a phone conversation regarding the newly proposed transaction. Thereafter, discussions shifted from a potential financing transaction to the possibility of FORM acquiring all of the outstanding equity of XpresSpa.
On April 20, 2016, FORM provided an updated proposal for an acquisition of all the outstanding equity of XpresSpa. Under FORM’s proposal, FORM would assume XpresSpa’s debt and would pay the XpresSpa unit holders $5,000,000 in cash, 5,100,000 shares of FORM’s common stock, 1,280,000 warrants to purchase shares of FORM’s common stock, with an exercise price of $4.50 per share and 1,280,000 warrants to purchase shares of FORM’s common stock, with an exercise price of $6.00 per share.
On April 21, 2016, Andrew R. Heyer emailed Andrew Perlman regarding FORM’s updated proposal for an acquisition of all the outstanding equity of XpresSpa. Mr. Heyer informed Mr. Perlman that the XpresSpa unit holders would require additional consideration from FORM.
On April 22, 2016, Andrew Perlman and Andrew R. Heyer exchanged emails regarding FORM’s updated proposal for an acquisition of all the outstanding equity of XpresSpa.
On April 25, 2016, Andrew Perlman, Bruce T. Bernstein, Richard K. Abbe, Andrew R. Heyer, and William Phoenix met at FORM’s offices to discuss FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa.
On April 27, 2016, Andrew Perlman emailed Bruce T. Bernstein, Richard K. Abbe, Andrew R. Heyer, and William Phoenix regarding an updated proposal by FORM for an acquisition of all of the outstanding equity of XpresSpa. Under FORM’s proposal, FORM would assume XpresSpa’s debt, and pay the XpresSpa unit holders $12,000,000 in shares of FORM preferred stock convertible to shares of FORM common stock, 5,000,000 shares of FORM common stock, 1,250,000 warrants to purchase shares of FORM’s common stock, with an exercise price of $3.00 per share, and 1,250,000 warrants to purchase shares of FORM’s common stock, with an exercise price of $4.00 per share.
On April 29, 2016, FORM sent XpresSpa an updated term sheet, memorializing the terms of FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa that was proposed by Mr. Perlman in his April 27, 2016 email to Bruce T. Bernstein, Richard K. Abbe, Andrew R. Heyer, and William Phoenix.
On May 3, 2016, XpresSpa sent FORM its comments to FORM’s updated term sheet for FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa. XpresSpa proposed that FORM would assume $6,000,000 in XpresSpa’s debt, and issue to XpresSpa equity holders 5,000,000 shares of FORM’s common stock, shares of FORM’s preferred stock with an aggregate stated value of $15,000,000, and warrants to purchase 2,500,000 shares of FORM’s common stock, with an exercise price of $3.50 per share.
On May 4, 2016, FORM sent XpresSpa an updated term sheet regarding FORM’s proposal for an acquisition of all of the outstanding equity of XpresSpa, whereby FORM would assume $6,000,000 in XpresSpa’s debt and issue to XpresSpa equity holders 5,000,000 shares of FORM’s common stock, shares of FORM’s preferred stock with an aggregate stated value of $15,000,000, warrants to purchase 1,250,000 shares of FORM’s common stock, with an exercise price of $3.00 per share, and warrants to purchase 1,250,000 shares of FORM’s common stock, with an exercise price of $4.00 per share. FORM would also loan XpresSpa up to $3,000,000 prior to the closing of the transaction.
On May 4, 2016, Andrew Perlman, Bruce T. Bernstein, Richard K. Abbe, Andrew R. Heyer, and William Phoenix met at FORM’s offices to discuss FORM’s updated term sheet regarding FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa.
On May 5, 2016, Andrew Perlman and Anastasia Nyrkovskaya updated FORM’s Board of Directors on the terms of FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa, and provided FORM’s Board of Directors with information regarding XpresSpa’s business and financial performance.

47


 
 

TABLE OF CONTENTS

On May 6, 2016, XpresSpa sent FORM its updated comments to FORM’s updated term sheet for FORM’s updated proposal for an acquisition of all of the outstanding equity of XpresSpa. XpresSpa proposed that FORM would either assume $6,000,000 in XpresSpa’s debt or pay $6,000,000 in cash and issue to XpresSpa equity holders 5,000,000 shares of FORM’s common stock, shares of FORM’s preferred stock with an aggregate stated value of $15,000,000, warrants to purchase 1,500,000 shares of FORM’s common stock, with an exercise price of $3.00 per share, and warrants to purchase 1,500,000 shares of FORM’s common stock, with an exercise price of $4.00 per share. FORM would also loan XpresSpa up to $3,000,000 prior to the closing of the transaction.
On May 6, 2016, FORM engaged RedRidge Due Diligence Services (an entity affiliated with Andrew Perlman) (“RedRidge”) to perform a quality of earnings review on behalf of FORM related to FORM’s proposed acquisition of all equity of XpresSpa.
On May 9, 2016, Andrew Perlman, Anastasia Nyrkovskaya, Bruce T. Bernstein, Andrew R. Heyer, William Phoenix, a representative of Mintz, Levin Cohn, Ferris, Glovsky and Popeo, P.C. (“Mintz, Levin”), FORM’s legal counsel, and a representative of DLA Piper LLP (“DLA”), XpresSpa’s legal counsel, met at FORM’s offices to discuss documents related to FORM’s proposal for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On May 13, 2016, XpresSpa emailed FORM a revised term sheet, memorializing the terms of FORM’s updated proposal for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa. Andrew Perlman signed the revised term sheet and emailed it back to XpresSpa.
On May 16, 2016, Andrew Perlman, Anastasia Nyrkovskaya, William Phoenix, a representative of Mistral and Robert Mahan met at FORM’s offices to review financial diligence on XpresSpa.
On May 31, 2016, Andrew Perlman emailed Bruce T. Bernstein, Andrew R. Heyer, William Phoenix, a representative of Mistral, and Robert Mahan regarding the state of FORM’s financial due diligence of XpresSpa in connection with FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On June 17, 2016, Andrew Perlman and Andrew R. Heyer met at FORM’s offices. Mr. Perlman informed Mr. Heyer that FORM wished to amend the terms of FORM’s proposed acquisition of all of the outstanding equity of XpresSpa. Mr. Perlman proposed terms which would become the terms of the final term sheet signed by XpresSpa and FORM except that the exercise price of warrants proposed by Mr. Perlman at this meeting was $4.00.
On June 22, 2016, Andrew Perlman and Andrew R. Heyer held a phone conversation, in which Mr. Heyer responded to FORM’s amended terms for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa. Mr. Heyer proposed that XpresSpa equity holders would receive an additional 1,000,000 shares of FORM common stock and 1,000,000 warrants to purchase shares of FORM common stock. Mr. Heyer also requested that the face value of the FORM preferred stock to be issued to XpresSpa unit holders be $25,000,000. Mr. Perlman rejected Mr. Heyer’s proposal but agreed to change the exercise price of the warrants to purchase shares of FORM common stock from $4.00 to $3.00.
On June 23, 2016, Andrew Perlman and Andrew R. Heyer held a phone conversation, in which Mr. Perlman and Mr. Heyer agreed in principle on amended terms for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa. Under this proposal, FORM would assume $6,500,000 of XpresSpa’s debt, and issue to XpresSpa equity holders 2,500,000 shares of FORM’s common stock, shares of FORM’s preferred stock with an aggregate stated value of $23,750,000, and warrants to purchase 2,500,000 shares of FORM’s common stock with an exercise price of $3.00 per share.
On June 28, 2016, Andrew Perlman, Anastasia Nyskovskaya, Bruce Bernstein, Andrew R. Heyer, William Phoenix, a representative of Mistral, a representative of Mintz Levin, and a representative of DLA held a meeting at FORM’s offices to discuss documents related to FORM’s proposal for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.

48


 
 

TABLE OF CONTENTS

On July 7 and 8, 2016, RedRidge visited XpresSpa’s headquarters to conduct discussions with Anastasia Nyskovskaya and XpresSpa management, and to gather information related to its quality of earnings review on behalf of FORM related to FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On July 14, 2016, RedRidge delivered to FORM its quality of earnings review on behalf of FORM related to FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On July 15, 2016, Andrew Perlman, Anastasia Nyrkovskaya, Jason Charkow (FORM’s Senior Vice President of Legal and Business Affairs), William Phoenix, a representative of Mistral, a representative of Mintz Levin, and a representative of DLA met at FORM’s ofices to discuss documents and other open items related to FORM’s proposal for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On July 15, 2016, FORM’s Board of Directors, with the exception of Bruce T. Bernstein who did not participate in the meeting, held a meeting via telephone. As part of the meeting, Andrew Perlman and Anastasia Nyrkovskaya updated FORM’s Board of Directors on FORM’s efforts to acquire all of the outstanding equity of XpresSpa. Mr. Perlman presented FORM’s Board of Directors with the term sheet to be signed by FORM and XpresSpa on July 20, 2016, and discussed the terms thereof with FORM’s Board of Directors. Mr. Perlman presented FORM’s Board of Directors with information regarding XpresSpa’s corporate and financial performance and future plans. Cory Ryan, of RedRidge, presented FORM’s Board of Directors with the quality of earnings review conducted by RedRidge on behalf of FORM related to FORM’s proposed acquisition of all of the outstanding equity of XpresSpa. FORM’s Board of Directors directed Mr. Perlman and FORM management to continue with FORM’s diligence of XpresSpa, to prepare for FORM’s potential acquisition of all of the outstanding equity of XpresSpa, to inform it of any material changes, and, if necessary, to schedule a further meeting of FORM’s Board of Directors in order to hold a vote on FORM’s potential acquisition of all of the outstanding equity of XpresSpa.
On July 20, 2016, FORM and XpresSpa signed a term sheet memorializing the amended terms agreed in principle to on June 23, 2016 for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On July 21, 2016, Andrew Perlman, Anastasia Nyrkovskaya, Jason Charkow, William Phoenix, a representative of Mintz Levin, and a representative of DLA held a meeting at FORM’s offices to discuss documents and other open items related to FORM’s proposal for FORM’s proposed acquisition of all of the outstanding equity of XpresSpa.
On July 22, 2016, FORM engaged Innovus Advisors (“Innovus”) to perform a valuation of the FORM preferred stock to be issued by FORM.
On August 4, 2016, FORM’s Board of Directors, with the exception of Bruce T. Bernstein who did not participate in the meeting, held a meeting via telephone. As part of the meeting, Andrew Perlman and Anastasia Nyrkovskaya updated FORM’s Board of Directors on FORM’s efforts to acquire all of the outstanding equity of XpresSpa. Mr. Perlman informed FORM’s Board of Directors that the terms of the proposed transaction had improved as a result of previous feedback from FORM’s Board of Directors, and that, due to a recently-filed lawsuit that could affect the potential timing of FORM’s efforts to acquire all of the outstanding equity of XpresSpa, FORM would potentially need to update the escrows for the proposed transaction. Vijay Chevli, of Innovus, presented FORM’s Board of Directors with a valuation of the FORM preferred stock to be issued by FORM. FORM’s Board of Directors advised Mr. Perlman and FORM management to continue to negotiate the proposed transaction.
On August 5, 2016, XpresSpa’s Board of Directors, with the exception of Bruce T. Bernstein who did not participate in the meeting, held a meeting via telephone in which representatives of DLA were present. At the meeting the attending board members received and discussed an update on the pending litigations against XpresSpa by Amiral Holdings SAS, the operator of Be Relax spas, in New York and the Netherlands, and the potential transaction with FORM. At the conclusion of the

49


 
 

TABLE OF CONTENTS

meeting it was decided that a vote to approve the potential transaction with FORM be tabled and the meeting adjourned until August 7, 2016.
On August 7, 2016 FORM’s Board of Directors, with the exception of Bruce T. Bernstein who did not participate in the meeting, held a meeting via telephone. After Andrew Perlman and Anastasia Nyrkovskaya updated FORM’s Board of Directors on FORM’s efforts to acquire all of the outstanding equity of XpresSpa, all of FORM’s disinterested members of the Board of Directors (consisting of all board members except Bruce T. Bernstein) voted to approve the proposed transaction.
On August 7, 2016, XpresSpa’s Board of Directors, with the exception of Bruce T. Bernstein who did not participate in the meeting, held a meeting via telephone in which representatives of DLA were present. At the meeting the attending board members received and discussed a further update on the potential transaction with FORM. After discussion concluded, the proposed transaction with FORM was unanimously approved by the attending board members.
On August 8, 2016, all parties signed the definitive Original Merger Agreement and the related ancillary documents, which the parties announced via a press release, followed by a joint conference call to answer initial questions from investors and analysts on August 8, 2016.
On August 31, 2016, representatives from Mintz and DLA had a telephone conversation to discuss the need for an amendment to the Original Merger Agreement to clarify the stockholder approval threshold required for the approval of the Original Merger Agreement by FORM’s stockholders.
On September 8, 2016, all parties signed Amendment No. 1 to the Original Merger Agreement to clarify the stockholder approval threshold required for the approval of the Merger Agreement by FORM’s stockholders.
On October 25, 2016, Andrew Perlman, Anastasia Nyrkovskaya, Jason Charkow, William Phoenix, Andrew R. Heyer and representatives from Mintz and DLA had a telephone conversation to discuss the need for a second amendment to the Original Merger Agreement to clarify certain indemnification provisions in connection with the Merger and to increase the amount to be held in escrow by $2 million in connection with such right to indemnification. The parties signed Amendment No. 2 on October 25, 2016.

Recommendations of FORM’s Board of Directors and its Reasons for the Merger

The FORM board of directors, after considering the factors described below, (i) has determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, FORM and its stockholders, (ii) has approved the Merger Agreement and (iii) recommends that the FORM stockholders vote FOR the FORM Merger Proposal. The board of directors made its recommendation to the FORM stockholders after considering the factors described in this proxy statement/prospectus. The FORM board of directors consulted with FORM’s senior management in evaluating the Merger. In addition, the FORM board of directors considered a number of factors that they believed supported their respective decisions to take the foregoing actions, including, but not limited to, the following:

the expectation that FORM’s business after completion of the Merger will be able to leverage the respective strengths of both FORM and XpresSpa;
the belief that the integration of FORM’s and XpresSpa’s businesses would create more value for the FORM stockholders in the long-term;
the consideration of FORM short- and long-term performance as a diversified holding company without XpresSpa;
the belief that the Merger is more favorable to the FORM stockholders than the alternatives to the Merger;
the likelihood that the Merger will be completed on a timely basis;
the fact that the number of shares of FORM common stock, preferred stock and warrants will not

50


 
 

TABLE OF CONTENTS

fluctuate based upon changes in the price of FORM common stock or the value of XpresSpa equity prior to the completion of the Merger, which protects the FORM stockholders from any materially negative trends in the price of FORM common stock; and
the preferred stock valuation prepared by Innovus.

The FORM board of directors also considered a number of potentially negative factors in its deliberations concerning the Merger, including:

the general challenges associated with successfully integrating two companies;
the costs associated with the completion of the Merger and the realization of the benfits expected to be obtained in connection with the Merger, including management’s time, energy and potential opportunity cost;
the general challenges and impact on the FORM stock price from acquiring an operating business materially different from its existing operations;
the failure to integrate successfully the businesses of FORM and XpresSpa in the expected timeframe could adversely affect FORM’s future results following the completion of the Merger;
the possible volatility, at least in the short term, of the trading price of FORM common stock resulting from the public announcement of the Merger;
the announcement and pendency of the Merger could have an adverse effect on FORM’s stock price and/or the business, financial condition, results of operations, or business prospects for FORM and/or XpresSpa;
the interests of FORM directors and executive officers in the Merger, including the matters described under the section entitled “The Merger — Interests of FORM Directors and Executive Officers in the Merger” beginning on page 58;
the risk that conditions to the completion of the Merger will not be satisfied and that the Merger may not be completed in a timely manner or at all;
the ability of XpresSpa’s current equity holders and board members to significantly influence FORM’s business following the completion of the Merger;
the ability of XpresSpa to terminate the Merger Agreement for any reason;
the requirement that FORM receive approval from The NASDAQ Capital Market for the listing of FORM’s common stock to be issued in connection with the Merger; and
the other risks described above under the section entitled “Risk Factors” beginning on page 29.

This discussion of the information and factors considered by the FORM board of directors is not intended to be exhaustive but is intended to summarize all material factors considered by the FORM board of directors in connection with its approval and recommendation of the Merger and the other related transactions described in this proxy statement/prospectus. In view of the wide variety of factors considered, FORM’s board of directors has not found it practicable to quantify or otherwise assign relative weights to the specific factors considered. However, the FORM board of directors concluded that the potential benefits of the Merger outweighed the potential negative factors and that, overall, the Merger had greater potential benefits for the FORM stockholders than other strategic alternatives. Therefore, after taking into account all of the factors set forth above, the FORM board of directors determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable and fair to, and in the best interests of, FORM and its stockholders and that FORM should enter into the Merger Agreement and take all actions necessary to complete the Merger.

51


 
 

TABLE OF CONTENTS

Preferred Stock Valuation by Innovus Advisors

FORM retained Innovus to prepare a valuation of the FORM preferred stock to be issued by FORM in the Merger solely as requested by NASDAQ. FORM selected Innovus based on Innovus’ qualifications, expertise and reputation and its knowledge of the industry, business and affairs of FORM. On August 4, 2016, at the request of FORM management, Innovus rendered its oral valuation opinion regarding such preferred stock to the FORM Board of Directors, which was subsequently confirmed in writing to FORM.

The full text of Innovus’ written valuation opinion to FORM, dated August 4, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Innovus in rendering its valuation opinion of the FORM preferred stock to be issued by FORM in the Merger, is attached to this proxy statement/prospectus as Annex G. Innovus’ valuation opinion of the FORM preferred stock to be issued by FORM in the Merger is qualified in its entirety by reference to the full text of the Innovus valuation opinion. You are encouraged to read Innovus’ valuation opinion, this section and the summary of Innovus’ valuation opinion below carefully and in their entirety. Innovus’ valuation opinion was for the benefit of FORM and addressed only the value of the FORM preferred stock to be issued by FORM in the Merger as of the date of the opinion and did not address any other aspects or implications of the Merger.

Innovus’ valuation opinion was not intended to, and does not, constitute a fairness opinion, advice or a recommendation as to how FORM’s stockholders should vote at any stockholders’ meeting to be held in connection with the Merger or take any other action with respect to the Merger.

Additionally, Innovus’ valuation opinion does not relate to the fairness of the consideration in the Merger and Innovus did not advise or determine the amount of consideration to be paid in the Merger.

In connection with rendering its valuation opinion, Innovus, among other things:

1. discussed the operations, financial condition, future prospects and projected operations and performance of XpresSpa with the senior management of FORM;
2. reviewed: (i) audited consolidated financial statements for XpresSpa, prepared by BDO USA LLP, for the fiscal years ended December 31, 2013 and 2014; (ii) draft, unissued audited consolidated financial statements for XpresSpa, prepared by BDO USA LLP for the fiscal years ended December 31, 2014 and 2015;
3. reviewed unaudited consolidated financial statements for XpresSpa, prepared by XpresSpa management, for the five month periods ending May 31, 2014 and May 31, 2015;
4. reviewed forecasts and projections prepared by FORM management with respect to XpresSpa for the fiscal years ending December 31, 2016, 2017, 2018, 2019, 2020 and 2021;
5. reviewed the non-binding Confidential Term Sheet dated July 20, 2016 between FORM and XpresSpa;
6. reviewed certain other publicly available financial data for certain companies that Innovus deemed comparable to FORM; and
7. conducted such other studies, analyses and inquiries as Innovus deemed appropriate.

In arriving at its valuation opinion, Innovus assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Innovus by FORM and XpresSpa and formed a substantial basis for its valuation opinion. With respect to the financial projections, including information relating to certain strategic, financial and operational benefits anticipated from the Merger, Innovus assumed, with the consent of FORM, that such financial projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the respective managements of FORM and XpresSpa of the future financial performance of FORM and XpresSpa, respectively. In addition, Innovus assumed that the Merger would be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions and without any financing contingency. Innovus’ valuation opinion does not address the

52


 
 

TABLE OF CONTENTS

relative merits of the Merger as compared to any other alternative business transactions, or whether or not such alternative business transactions could be achieved or are available. Innovus assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the Merger, no delays, limitations, conditions or restrictions would be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the Merger. Innovus is not a legal, tax or regulatory advisor. Innovus is a valuation advisor only and relied upon, without independent verification, the assessment of XpresSpa and FORM and their legal, tax and regulatory advisors with respect to legal, tax and regulatory matters. Innovus expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of FORM’s and XpresSpa’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of XpresSpa membership interests (including membership interests owned or held in treasury by XpresSpa or any of its direct or indirect wholly owned subsidiaries or owned by XpresSpa or Merger Sub or as to which dissenters’ rights have been perfected) in the Merger. Innovus did not make any independent valuation or appraisal of the assets or liabilities of FORM or XpresSpa, nor was it furnished with any such valuations or appraisals. Innovus’ valuation opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Innovus as of, the date of its opinion. Events occurring after such date may affect Innovus’ valuation opinion and the assumptions used in preparing it, and Innovus did not assume any obligation to update, revise or reaffirm its valuation opinion.

The following is a summary of the material financial analyses performed by Innovus in connection with the preparation of its valuation of the FORM preferred stock to be issued by FORM in the Merger as requested by NASDAQ. The following summary is not a complete description of Innovus’ valuation opinion or the financial analyses performed and factors considered by Innovus in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Innovus, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Innovus’ valuation opinion. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 1, 2016, which was two trading days prior to the date on which the FORM Board of Directors approved the Merger, and is not necessarily indicative of current market conditions.

To estimate the value of the FORM preferred stock to be issued by FORM in the Merger as requested by NASDAQ, Innovus estimated the combined equity value of FORM (of approximately $33.8 million) and XpresSpa (of approximately $36.9 million) as of August 1, 2016 (the “Valuation Date”) pro forma for the merger to be in the amount of approximately $70.7 million. Using this combined value, Innovus estimated the value of the FORM preferred stock using the Dynamic Options Approach and the Current Value Approach.

Subject to the full text of Innovus’ written valuation opinion (per Annex G), Innovus estimated the fair value of the FORM preferred stock to be issued by FORM in the Merger, on a controlling interest basis, in the amount of: (i) $28,750,000 or $7.1875 per share under the Dynamic Options Approach; and (ii) $29,250,000 or $7.3125 per share under the Current Value Approach.

Analysis Related to FORM

Innovus used the publicly-traded closing price of FORM common stock on the Valuation Date of $2.25 per share and the total shares of FORM common stock issued and outstanding of 15.011 million to estimate the aggregate equity value of FORM in the amount of approximately $33.8 million on a marketable, minority basis.

Analysis Related to XpresSpa

To estimate the indicated equity value of XpresSpa, Innovus utilized the following generally accepted valuation methods: comparable company analysis, comparable transactions analysis and discounted cash flow analysis to obtain an estimate of XpresSpa’s enterprise value, which was adjusted for XpresSpa’s estimated

53


 
 

TABLE OF CONTENTS

cash and debt balances as provided to Innovus by FORM management as of August 1, 2016, as well as, at the direction of FORM management, the estimated value of XpresSpa’s net operating loss carryforwards as shown in the following table:

   
Valuation Date        August 1, 2016
Methodology   Enterprise Value
Indicated Range
  Selected
Enterprise Value
($ in 000s)        (Midpoint)
Comparable Company Analysis     $33,930 – $45,380     $ 39,660  
Comparable Transactions Analysis     35,870  –  43,840       39,860  
Discounted Cash Flow Analysis-Exit     36,740  –  42,500       39,620  
Discounted Cash Flow Analysis-Gordon     38,500  –  43,820       41,160  
Indicated Enterprise Value of XpresSpa, Control Basis         $ 40,080  
Less: Debt (as of 8/1/2016)              (6,670 ) 
Add: Cash (as of 8/1/2016)           2,500  
Indicated Equity Value of XpresSpa, Control Basis, Before Adjustment(s)         $ 35,910  
Estimated NOL subsequent to the date of acquisition           970  
Indicated Equity Value of XpresSpa, Control Basis         $ 36,880  

Comparable Company Analysis

Innovus performed a comparable company analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Innovus reviewed and compared certain publicly available and internal financial information of XpresSpa with corresponding financial data for other companies that shared certain similar characteristics to XpresSpa to derive an implied valuation range for XpresSpa. The companies used in this comparison included the following companies: Autogrill S.p.A., Dufry AG, SSP Group plc, Potbelly Corporation, Shake Shack Inc., Zoe's Kitchen, Inc., Regis Corp., Sally Beauty Holdings Inc. and ULTA Salon, Cosmetics & Fragrance, Inc.

The above companies were chosen based on Innovus’ knowledge of the industry and because they have businesses that may be considered similar to XpresSpa’s. Although none of such companies are identical or directly comparable to XpresSpa, these companies are publicly traded companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and size and scale of business, that for purposes of its analysis Innovus considered similar to XpresSpa.

For purposes of this analysis, Innovus analyzed the following statistics of each of these companies based on publicly available financial information published by S&P Capital IQ:

the ratio of enterprise value, or EV (which is defined as fully diluted market capitalization using the treasury stock method, based on the closing stock price of the comparable companies on August 1, 2016, plus total debt and non-controlling interest less cash and cash equivalents), to estimated revenues, for the most recent latest twelve-month period as of the Valuation Date; and
the ratio of EV to estimated non-GAAP earnings before interest, taxes, depreciation and amortization, or EBITDA, for the most recent latest twelve-month period as of our Valuation Date; and
the ratio of EV to estimated non-GAAP earnings before interest, taxes, or EBIT, for the most recent latest twelve-month period as of our Valuation Date.

54


 
 

TABLE OF CONTENTS

The table below shows the results of Innovus’ analyses:

     
  EV to
Revenues
Ratio
  EV to
EBITDA
Ratio
  EV to
EBIT
Ratio
Autogrill S.p.A.     0.6 x       7.2 x       15.1 x  
Dufry AG     1.4 x       13.8 x       48.3 x  
SSP Group plc     0.9 x       9.9 x       17.4 x  
Potbelly Corporation     0.8 x       6.9 x       16.0 x  
Shake Shack Inc.     4.3 x       19.6 x       30.2 x  
Zoe's Kitchen, Inc.     3.0 x       29.0 x       76.4 x  
Regis Corp.     0.3 x       6.7 x       30.9 x  
Sally Beauty Holdings Inc.     1.5 x       9.8 x       11.9 x  
ULTA Salon, Cosmetics & Fragrance, Inc.     3.9 x       21.2 x       28.4 x  
Average     1.9 x       NA*       NA*  
Median     1.4 x       NA*       NA*  

* Innovus excluded the EV to EBITDA and EV to EBIT ratios since XpresSpa has negative EBITDA and EBIT for the latest 12 month period ending May 31, 2016.

Based on the analysis of the relevant metrics for each of the comparable companies, Innovus selected a representative EV to revenues ratio range of 0.75x to 1.00x and applied this range of multiples to the relevant XpresSpa financial metric and increased the indicated enterprise value for a control premium. Innovus did not select representative EBITDA and EBIT ratio range of the comparable companies since XpresSpa’s relevant metrics were negative. Innovus selected these representative ranges using its experience and professional judgment and taking into account the estimated performance of the comparable companies for the most recent latest twelve-month period as of the Valuation Date and historical trading prices of such comparable companies. For purposes of estimated latest twelve months revenues, EBITDA and EBIT for XpresSpa, Innovus used the unaudited XpresSpa income statement for the twelve month period ending May 31, 2016. Using this approach, Innovus estimated the implied enterprise value on a control basis for XpresSpa as follows:

 
Estimated Latest 12 Months Ending May 31, 2016 Metric   Control Implied
Enterprise Value Range
($ in 000s)     
EV to Revenues     $33,930 – $45,380  

No company included in the comparable company analysis is identical to XpresSpa. In evaluating comparable companies, Innovus made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of XpresSpa. These include, among other things, the impact of competition on the business of XpresSpa and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of XpresSpa and the industry, and in the financial markets in general. Mathematical analysis (such as determining the mean or median) is not in itself a meaningful method of using comparable company data.

Comparable Transactions Analysis

Innovus performed a comparable transactions analysis, which is designed to imply a value of a company based on publicly available financial terms that share some characteristics with the Merger. Innovus reviewed the publicly available financial information for transactions in the travel retail industry since January 1, 2010 with publicly available data for EV and revenues. In addition, Innovus included in its analysis three transactions: (i) Cinnabon International, Inc. (closed on October 16, 1998); (ii) the acquisition of Steiner Leisure Limited (closed on December 9, 2015) and (iii) the acquisition of TCBY Enterprises, LLC (closed on February 29, 2000). Innovus reviewed the publicly available ratio of EV to estimated last twelve month

55


 
 

TABLE OF CONTENTS

revenues, or LTM EV/Revenues, of these comparable transactions. The transactions reviewed, the month and year that each transaction was announced and the corresponding LTM EV/Revenues ratios for such transactions were as follows:

     
Date Closed   Target   Acquiror   LTM
EV/Revenues
October 1998     Cinnabon International, Inc.       Popeyes Louisiana Kitchen, Inc.       0.8x  
January 2000     Starboard Cruise Services, Inc.       LVMH Moët Hennessy Louis Vuitton       1.2x  
February 2000     TCBY Enterprises, LLC       Capricorn Holdings       1.1x  
July 2007     Japan Airport Terminal Co., Ltd.       Sydney Airport Limited       1.8x  
May 2008     WDFG UK Limited       World Duty Free Group       1.3x  
October 2008     Hudson Group (HG) Retail, LLC       Dufry AG       1.2x  
March 2010     Dufry South America Ltd.       Dufry AG       1.6x  
April 2013     Hellenic Duty Free Shops S.A.       Dufry AG       2.5x  
September 2014     The Nuance Group AG       Dufry AG       0.7x  
December 2015     Steiner Leisure Limited       Nemo Parent, Inc.       1.0x  
June 2016     Autogrill Restauration Services SAS       Elior Group       0.6x  
Average     1.3x  
Median     1.2x  

Innovus then applied an LTM EV/Revenues range, based on its professional judgment and taking into consideration, among other things, the observed multiples for the selected transactions, of 0.9x – 1.1x to XpresSpa’s historical LTM Revenues of approximately $39.9 million as of May 31, 2016. Based on this analysis, Innovus derived a range of implied enterprise values for XpresSpa of $35.87 million to $43.84 million (rounded to the nearest $10,000).

No company or transaction used in the comparable transactions is identical to XpresSpa or the Merger. In evaluating the comparable transactions, Innovus made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters, which are beyond the control of XpresSpa. These include, among other things relating to industry performance and business, market and financial conditions in general, the impact of competition on the business of XpresSpa and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of XpresSpa and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the EV and equity value of the transactions to which they are being compared.

Discounted Cash Flow Analysis

Innovus performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. In its application of the discounted cash flow analysis, Innovus used two methods of estimating terminal value, the multiple approach (or sometimes referred to as the exit approach) and the Gordon Growth approach.

Innovus calculated a range of implied enterprise values for XpresSpa based on estimates of future cash flows for the fiscal years ending December 31, 2016 through December 31, 2021. First the estimated unlevered free cash flows of XpresSpa for these periods were derived from the estimated EBITDA numbers as provided in XpresSpa forecasts prepared by FORM. Under the multiple approach, Innovus then calculated a terminal value for XpresSpa by applying a range of EBITDA multiples of 2.75x to 3.25x to the fiscal 2021 forecasted EBITDA, using assumptions that were approved for Innovus’ use by FORM. Under the Gordon Growth approach, Innovus then calculated a terminal value for XpresSpa by applying a range of terminal growth rates into perpetuity of 2.5% to 3.5% to the fiscal 2021 forecasted unlevered free cash flows, using assumptions that were approved for Innovus’ use by FORM. The unlevered free cash flows for the fiscal years ending December 31, 2016 through December 31, 2021 and the terminal values were then discounted to August 1, 2016 by using a mid-year discounting convention and applying a range of discount rates of 18.4% to 19.4% to calculate an implied EV for XpresSpa. Such range of discount rates, reflecting estimates of

56


 
 

TABLE OF CONTENTS

XpresSpa’s weighted average cost of capital, was derived by Innovus using its experience and professional judgment, with the application of an upward/downward sensitivity of 0.5%/(0.5)% to its weighted average cost of capital analysis and using the Modified Capital Asset Pricing Model, taking into account an estimated beta of 0.98 based on the indicated median beta of the comparable companies, an estimated risk-free rate of 1.8% based on the interest rate of 20-year U.S. Treasury Bond as of August 1, 2016, an equity risk premium of 6.9% and company specific risk premium of 7.5%, both as estimated by Innovus using its professional judgment and experience, an assumed tax rate of 40.0%, and an estimated pre-tax cost of debt of 7.0% based on a market participant capital structure. Based on this analysis, Innovus estimated the following range of implied enterprise values for XpresSpa:

 
Methodology   Enterprise Value
Indicated Range
($ in 000s)
    
Discounted Cash Flow Analysis-Exit     $36,740 – $42,500  
Discounted Cash Flow Analysis-Gordon     38,500 – 43,820  

Other Considerations

Innovus performed a variety of financial and comparative analyses for purposes of rendering its valuation opinion of the FORM preferred stock to be issued by FORM in the Merger as requested by NASDAQ.

The preparation of a valuation opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its valuation opinion, Innovus considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Innovus believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and valuation opinion. In addition, Innovus may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Innovus’ view of the actual value of the FORM preferred stock to be issued by FORM in the Merger as requested by NASDAQ.

In performing its analyses, Innovus made numerous assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters, which are beyond the control of FORM and XpresSpa. These include, among other things, the impact of competition on the businesses of FORM, XpresSpa and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of FORM, XpresSpa and the industry, and in the financial markets in general. Any estimates contained in Innovus’ analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates. These analyses do not purport to be appraisals or to reflect the prices at which shares of FORM common stock might actually trade.

The consideration to be received by the holders of XpresSpa membership interests was determined through arm’s-length negotiations between FORM and XpresSpa and was approved by the FORM Board of Directors. Innovus did not recommend any specific merger consideration to XpresSpa, nor opine that any specific merger consideration constituted the only appropriate merger consideration for the Merger. In addition, Innovus’ valuation opinion does not address the prices at which the FORM stock will trade following consummation of the Merger or at any time and Innovus expresses no opinion or recommendation as to how FORM stockholders should vote at any stockholders’ meeting to be held in connection with the Merger.

Innovus’ valuation opinion of the FORM preferred stock to be issued by FORM in the Merger was one of many factors taken into consideration by the FORM Board of Directors in deciding to approve, adopt and authorize the Merger Agreement. Consequently, the analyses as described above should not be viewed as determinative of the recommendation of the FORM Board of Directors with respect to the consideration or of whether the FORM Board of Directors would have been willing to agree to a different merger consideration.

Innovus has acted as valuation consultant to FORM to provide a valuation opinion of the FORM preferred stock to be issued by FORM in the Merger as requested by NASDAQ and, under the terms of its

57


 
 

TABLE OF CONTENTS

engagement letter, has received $60,000 for serving in this capacity. FORM has also agreed to reimburse Innovus for its expenses incurred in performing its services, including fees of outside counsel and other professional advisors. In addition, FORM has agreed to indemnify Innovus and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Innovus or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Innovus’ engagement. In the two years prior to the date of its opinion, Innovus has provided valuation services for FORM and has received fees of less than $100,000 in the aggregate in connection with such services. Innovus may also seek to provide valuation and financial advisory services to FORM in the future and expects to receive fees for the rendering of these services.

Innovus is a boutique valuation and financial advisory firm providing services to publicly-traded and privately-held companies domiciled globally. Innovus, its affiliates, directors and officers may at any time invest on a principal basis in companies that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account, in debt or equity securities or loans of FORM, or any other company, or any currency or commodity, that may be involved in the Merger, or any related derivative instrument.

Board of Directors and Executive Officers of FORM After the Completion of the Merger

Board of Directors

Upon completion of the Merger, FORM is expected to have a seven member board of directors, comprised of Andrew D. Perlman, John Engelman, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe, all of whom are currently members of the FORM board of directors, and Andrew R. Heyer, who is currently a member of XpresSpa’s board of directors.

Executive Officers

The executive management team of FORM is expected to be composed of the following individuals:

 
Name   Position with FORM
Andrew D. Perlman   Chief Executive Officer
Anastasia Nyrkovskaya   Chief Financial Officer and Treasurer
Clifford Weinstein   Executive Vice President
Darin White   President, Group Mobile
Edward Jankowski   Senior Vice President and Chief Executive Officer of XpresSpa

Interests of FORM Directors and Executive Officers in the Merger

In considering the recommendation of the FORM board of directors to vote FOR the FORM Merger Proposal, FORM stockholders should be aware that the directors and executive officers of FORM have interests in the Merger that may be in addition to, or different from, your interests as FORM stockholders, which could create conflicts of interest in their determinations to recommend the Merger. You should consider these interests in voting on the Merger. These interests in connection with the Merger relate to or arise from, among other things:

the fact that Andrew D. Perlman, John Engelman, Donald E. Stout, Salvatore Giardina, Bruce T. Bernstein and Richard K. Abbe are currently directors of FORM and will remain directors of FORM following the completion of the Merger;
the fact that Andrew D. Perlman, Anastasia Nyrkovskaya and Clifford Weinstein are currently executive officers of FORM and will remain executive officers of FORM following the completion of the Merger;
the equity and debt holdings of Rockmore, an investment entity controlled by FORM’s board member Bruce T. Bernstein, in XpresSpa; Rockmore currently owns equity securities of XpresSpa that are expected to receive approximately 9.5% of the merger consideration and, following completion of the Merger, Rockmore will still be the holder of the Senior Secured Note, and will hold approximately 4.7% of the outstanding common stock of FORM on a fully diluted basis (in

58


 
 

TABLE OF CONTENTS

each case, based on the assumptions used in the section entitled “Security Ownership of Certain Beneficial Owners and Management of FORM Following the Merger beginning on page 152). Pursuant to the terms of the Senior Secured Note, XpresSpa may not merge into or consolidate with any other person or entity or permit any other person or entity to merge into or consolidate with XpresSpa without the consent of Rockmore. Rockmore has provided its consent to the Merger; and
the right to continued indemnification for directors and executive officers of FORM following the completion of the Merger.

The FORM board of directors was aware of these potential conflicts of interest during its deliberations on the merits of the Merger and when making its decision regarding the Merger Agreement and the transactions contemplated thereby, including the Merger.

Indemnification and Insurance

The Merger Agreement provides that all rights to indemnification with respect to acts or omissions occurring at or prior to the completion of the Merger existing in favor of each present and former director, officer or employee of XpresSpa or any of its subsidiaries as provided in their respective certificates of incorporation or bylaws or indemnification agreements will remain in effect.

The Merger Agreement provides that, for a period of six years from the effective time, XpresSpa will provide directors’ and officers’ liability insurance that provides coverage for events occurring prior to the effective time that is no less favorable than its existing policy, or, if insurance coverage that is no less favorable is unavailable, the best available coverage, subject to the limitation that XpresSpa will not be required to spend in any one year more than 300% of the last annual premium paid prior to the date of the Merger Agreeme