424B3 1 collab-medy_424b3.htm JOINT PROXY STATEMENT/PROSPECTUS

Filed pursuant to Rule 424(b)(3)

Registration No. 333-205733

 

JOINT PROXY STATEMENT/PROSPECTUS

Dear Stockholders:

 

The board of directors of each of CollabRx, Inc. (“CollabRx”) and Medytox Solutions, Inc. (“Medytox”) has unanimously approved a merger of CollabRx Merger Sub, Inc., a wholly owned subsidiary of CollabRx (“Merger Sub”), with and into Medytox, with Medytox continuing as a wholly owned subsidiary of CollabRx. The merger will be effected by Medytox and CollabRx under an Agreement and Plan of Merger by and among Medytox, CollabRx and Merger Sub, dated as of April 15, 2015. Upon completion of the merger, Medytox will continue its corporate existence under the Nevada Revised Statutes (“NRS”) and CollabRx will be named “Rennova Health, Inc.” and continue its corporate existence under the laws of Delaware. The combined company will have its headquarters in West Palm Beach, Florida, the location of Medytox’s current headquarters.

 

In the merger, (i) each share of Medytox common stock will be converted into the right to receive such number of shares of CollabRx common stock equal to the Exchange Ratio (as defined in the Merger Agreement and described below), (ii) each share of Medytox Series B Preferred Stock will be converted into the right to receive one share of CollabRx Series B Preferred Stock, which will be designated prior to the closing of the merger, (iii) each share of Medytox Series D Preferred Stock will be converted into the right to receive one share of CollabRx Series D Preferred Stock, which will be designated prior to the closing of the merger, (iv) each share of Medytox Series E Preferred Stock will be converted into the right to receive one share of CollabRx Series E Preferred Stock, which will be designated prior to the closing of the merger, (v) each option and warrant to purchase shares of CollabRx common stock will continue in existence pursuant to its terms, (vi) each restricted stock unit for CollabRx common stock will settle prior to the closing of the merger in accordance with its terms, and (vii) Medytox’s equity incentive plan will be assumed by CollabRx and each outstanding option to purchase shares of Medytox common stock will be assumed by CollabRx and converted into an option to purchase shares of CollabRx common stock (with proportional adjustment to the number of shares underlying the option and the exercise price, each in accordance with the Exchange Ratio). The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) will hold 10% of CollabRx’s common stock following the closing of the merger, and holders of Medytox equity prior to the closing of the Merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s common stock following the closing of the merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

CollabRx shares currently trade on NASDAQ under the symbol “CLRX” and Medytox shares currently trade over the counter under the symbol “MMMS.” In connection with the closing of the merger, Medytox shares will cease trading on the over the counter Bulletin Board and be deregistered under the federal securities laws, and we intend to submit a listing application with NASDAQ for the shares of common stock of the combined company following the merger. If the application is approved, we expect the common stock of the combined company will trade on NASDAQ under the symbol “RNVA.”

 

We cannot complete the merger unless a sufficient number of CollabRx stockholders approve the issuance of CollabRx common stock and other securities in connection with the merger, Medytox stockholders approve and adopt the merger agreement and the transactions contemplated thereby, including the merger, and the other related proposals being submitted to the CollabRx stockholders and Medytox stockholders are approved. Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the CollabRx or Medytox special stockholder meeting in person, please vote your shares as promptly as possible so that your shares may be represented and voted at your meeting. Please note that a failure to vote your shares or return your proxy card may result in a failure to establish a quorum for the CollabRx special meeting or the Medytox special meeting.

 

 
 

 

After careful consideration, the board of directors of each of CollabRx and Medytox has unanimously approved the merger agreement and the merger. The CollabRx board of directors unanimously recommends that CollabRx stockholders vote “FOR” each of the proposals being submitted to a vote of the CollabRx stockholders at the CollabRx special meeting. The Medytox board of directors unanimously recommends that Medytox stockholders vote “FOR” each of the proposals being submitted to a vote of the Medytox stockholders at the Medytox special meeting.

 

The obligations of CollabRx and Medytox to complete the merger are subject to the satisfaction or waiver of the conditions in the merger agreement. Additional information about CollabRx, Medytox and the merger is contained in the accompanying joint proxy statement/prospectus. You should read the entire joint proxy statement/prospectus carefully. In particular, we urge you to read the information under “Risk Factors” beginning on page 23.

 

We thank you for your consideration and continued support.

 

Sincerely,  
   
   

Thomas R. Mika

President and Chief Executive Officer

CollabRx, Inc.

Seamus Lagan

Chief Executive Officer

Medytox Solutions, Inc.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the joint proxy statement/prospectus or determined that the joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This document is dated September 23, 2015, and is first being mailed to stockholders of CollabRx and Medytox on or about September 28, 2015.

 

 
 

 

ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

 

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”) by CollabRx, constitutes a prospectus of CollabRx under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the CollabRx shares of common stock and other securities to be issued to Medytox stockholders in connection with the merger. This joint proxy statement/prospectus also constitutes a joint proxy statement for both Medytox and CollabRx under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This joint proxy statement/prospectus also constitutes a notice of meeting with respect to the special meeting of Medytox stockholders and a notice of meeting with respect to the special meeting of CollabRx stockholders.

 

You should rely only on the information contained in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated September 23, 2015. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date. Neither the mailing of this joint proxy statement/prospectus to Medytox stockholders or CollabRx stockholders nor the issuance by CollabRx of shares of common stock and other securities pursuant to the merger will create any implication to the contrary.

 

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information contained in this joint proxy statement/prospectus regarding Medytox has been provided by Medytox and information contained in this joint proxy statement/prospectus regarding CollabRx has been provided by CollabRx.

 

 
 

 

Medytox Solutions, Inc.
400 S. Australian Avenue, Suite 800
West Palm Beach, Florida 33401

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 28, 2015

 

To the Stockholders of Medytox Solutions, Inc.:

 

You are cordially invited to attend a special meeting of stockholders of Medytox Solutions, Inc., a Nevada corporation, to be held at the offices of Akerman LLP, located at 777 South Flagler Drive, Suite 1100 West Tower, West Palm Beach, Florida 33401, on October 28, 2015, at 11:00 a.m., local time. The purpose of the meeting shall be to consider and vote upon the following matters:

 

1.To approve and adopt the Agreement and Plan of Merger, dated as of April 15, 2015, by and among CollabRx, Inc., CollabRx Merger Sub, Inc., a direct wholly owned subsidiary of CollabRx formed for the purpose of the merger, and Medytox Solutions, Inc., a copy of which is attached as Annex A to the joint proxy statement/prospectus (the "Merger Agreement"), pursuant to which Medytox will become a wholly owned subsidiary of CollabRx, and the transactions contemplated by such agreement.

 

2.To approve any motion to adjourn the special meeting, or any adjournment thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve and adopt the Merger Agreement and the transactions contemplated thereby.

 

Stockholders also will consider and act on such other business as may properly come before the special meeting or any adjournment or postponement thereof.

 

THE MEDYTOX BOARD OF DIRECTORS RECOMMENDS THAT MEDYTOX
STOCKHOLDERS VOTE “FOR” EACH OF THE PROPOSALS.

 

The Merger Agreement and the proposed merger are described in detail in the accompanying joint proxy statement/prospectus. Please read the joint proxy statement/prospectus carefully in deciding how to vote.

 

The record date for the Medytox special meeting is September 4, 2015. Only holders of record of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock at the close of business on the record date are entitled to notice of, and to vote at, the Medytox special meeting, or any adjournment or postponement thereof. A complete list of stockholders entitled to vote at the special meeting will be available for inspection by any stockholder at the special meeting and during normal business hours at Medytox’s corporate headquarters.

 

The approval and adoption by Medytox stockholders of the Merger Agreement and the transactions contemplated by such agreement is a condition to the merger and requires (i) the affirmative vote of a majority of the voting power of the Medytox stockholders, which includes holders of Medytox common stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock and (ii) the affirmative vote of a majority of the outstanding shares of Medytox Series B Preferred Stock, voting separately. Each share of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock is entitled to one vote for each outstanding Medytox share. Your vote is very important. Your failure to vote your shares will have the same effect as a vote “against” the approval and adoption of the Merger Agreement and the transactions contemplated by such agreement. Whether or not you plan to attend the special meeting, please promptly vote your Medytox shares by calling the toll-free number found on your proxy card, accessing the internet site found on your proxy card, or by marking, dating, signing and returning all proxy cards you receive. By providing your proxy, you do not restrict your right to vote in person at the Medytox special meeting. If your Medytox shares are held in the name of a bank, broker or other fiduciary, please follow the instructions on the voting instruction form furnished by the record holder.

 

Do not send any Medytox share certificates at this time. If we complete the merger, we will notify you of the procedures for exchanging your share certificates for shares of common stock or other securities of the combined entity.

 

By Order of the Board of Directors,

 

 

 

Seamus Lagan
Chief Executive Officer and Director

 

West Palm Beach, Florida
September 23, 2015

 

 
 


CollabRx, Inc.
44 Montgomery Street, Suite 800
San Francisco, California 94104

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On October 28, 2015

 

To the Stockholders of CollabRx, Inc.:

 

We are pleased to invite you to attend the special meeting of stockholders of CollabRx, Inc. (“CollabRx”), which will be held at the offices of Goodwin Procter LLP located at 135 Commonwealth Drive, Menlo Park, California 94025 on October 28, 2015, at 10:30 a.m., Pacific Time, to consider and act upon the following matters:

 

Proposal 1: To approve the issuance of shares of CollabRx common stock and other securities exercisable or convertible for shares of CollabRx common stock, which we refer to as the CollabRx Share Issuance, in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 15, 2015 (the “Merger Agreement”), by and among CollabRx, Inc., CollabRx Merger Sub, Inc. (“Merger Sub”), a direct wholly owned subsidiary of CollabRx formed for the purpose of the merger, and Medytox Solutions, Inc. (“Medytox”), a copy of which is attached as Annex A to the joint proxy statement/prospectus.
Proposal 2: To approve an amendment to the CollabRx Certificate of Incorporation, as amended, to effect a reverse split of CollabRx’s common stock at a specific ratio from 1-for-2.5 to 1-for-10, to be effected immediately prior to the effective time of the merger.
Proposal 3: To approve an amendment to the CollabRx Certificate of Incorporation, as amended, to increase the number of authorized shares of CollabRx common stock from 50,000,000 to 150,000,000 shares, effective as of the effective time of the merger.
Proposal 4: To approve an amendment to the CollabRx 2007 Incentive Award Plan to increase the number of shares authorized to be issued under the plan and to increase the maximum number of shares any one individual may receive in any calendar year, effective as of the effective time of the merger.
Proposal 5: To vote upon in an advisory (non-binding) basis the “golden parachute” compensation that may become payable to CollabRx’s named executive officers in connection with the Merger Agreement as required by Item 402(t) of Regulation S-K and Section 14A(b) of the Securities Exchange Act of 1934, as amended.
Proposal 6: To approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposals.

 

COLLABRX’S BOARD OF DIRECTORS RECOMMENDS VOTING
“FOR” EACH OF THE PROPOSALS.

 

The above matters, the Merger Agreement and the proposed merger are described in detail in the accompanying joint proxy statement/prospectus. Please read the joint proxy statement/prospectus carefully in deciding how to vote.

 

All CollabRx stockholders are cordially invited to attend the special meeting. Only those stockholders of record at the close of business on September 4, 2015 are entitled to notice of and to vote at the special meeting and any postponements or adjournments thereof. A complete list of stockholders entitled to vote at the special meeting will be available for inspection by any stockholder at the special meeting and during normal business hours at CollabRx’s corporate headquarters during the 10-day period immediately prior to the date of the special meeting.

 

Approval of each of Proposals 1, 2, 3 and 4 by the stockholders of CollabRx is a condition to the completion of the merger. The affirmative vote, in person or by proxy, of a majority of CollabRx’s common stock outstanding and entitled to vote is required for Proposals 2 and 3. The affirmative vote, in person or by proxy, of a majority of the shares of CollabRx’s common stock voting on Proposals 1, 4 and 6 is required for approval of such proposals. The affirmative vote, in person or by proxy, of a majority of the shares of CollabRx’s common stock voting on Proposal 5 is not required, but is for advisory purposes. Your vote is very important. Whether or not you plan to attend the special meeting, please promptly vote your shares in one of the following manners by (i) visiting the internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the provided self-addressed, stamped envelope. Submitting a proxy will not prevent you from voting in person, but it will help to secure a quorum and avoid added solicitation costs.

 

By Order of the Board of Directors,

 

 

 

Thomas R. Mika
President and Chief Executive Officer

San Francisco, California

 

September 23, 2015

 

 
 

 

TABLE OF CONTENTS

Page

QUESTIONS AND ANSWERS ABOUT THE MERGER AND MEETINGS 1
SUMMARY 10
Information about the Companies 10
Summary of the Merger 11
Recommendation of the Medytox Board of Directors and Medytox’s Reasons for the Merger 12
Recommendation of the CollabRx Board of Directors and CollabRx’s Reasons for the Merger 12
Opinion of Ladenburg Thalmann & Co. Inc. 13
Risk Factors 14
Closing and Timing of the Merger 14
Merger Consideration to Medytox Stockholders 14
Appraisal and Dissenters’ Rights 15
Treatment of Medytox Options and Other Medytox Equity-Based Awards 15
Management of the Combined Company Following the Merger 15
Interests of Medytox’s Directors and Officers in the Merger 16
Interests of CollabRx’s Directors and Officers in the Merger 17
No Medytox “Golden Parachute” Compensation 18
CollabRx “Golden Parachute” Compensation 18
Conditions to Completion of the Merger 18
No Solicitation; Board Recommendations 19
Change of Recommendation 19
Termination of the Merger Agreement 20
Expenses and Termination Fee 20
Anticipated Accounting Treatment 21
Voting and Support Agreements 21
Material U.S. Federal Income Tax Consequences of the Merger 21
Comparative Per Share Data 21
Comparative Per Share Market Price Data 22
RISK FACTORS 23
Risks Related to the Merger 23
Risks Related to the Combined Company if the Merger is Completed 26
Risks Related to Medytox 28
Risks Related to CollabRx 39
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS 50
UNAUDITED PRO FORMA  CONDENSED COMBINED FINANCIAL INFORMATION AND DATA 51
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA 52
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDENDS INFORMATION 53
Market Prices 53
Dividends 54
THE SPECIAL MEETING OF MEDYTOX STOCKHOLDERS 55
Overview 55
Date, Time and Place of the Medytox Special Meeting 55
Attendance 55
Proposals 55
Record Date; Outstanding Shares; Shares Entitled to Vote 55
Quorum 55
Vote Required; Recommendation of Medytox Board of Directors 56
Share Ownership and Voting by Medytox Officers and Directors 56
Voting Your Shares 56
Shares Held in Street Name 57
Costs of Solicitation 57
Other Business 58
Assistance 58

 

i
 

 

THE SPECIAL MEETING OF COLLABRX STOCKHOLDERS 59
Date, Time and Place 59
Purpose 59
Recommendation of the CollabRx Board of Directors 59
Record Date; Stockholders Entitled to Vote 60
Voting by CollabRx’s Directors and Executive Officers 60
Quorum 60
Required Vote 60
Voting of Proxies by Holders of Record 60
Shares Held in Street Name 61
Attending the Meeting; Voting in Person 61
Revocation of Proxies 62
Solicitation of Proxies 62
INFORMATION ABOUT THE COMPANIES 63
Medytox Solutions, Inc. 63
CollabRx, Inc. 64
CollabRx Merger Sub, Inc. 64
THE MERGER 65
General 65
Background of the Merger 65
Recommendation of the Medytox Board of Directors; Medytox’s Reasons for the Merger 73
Recommendation of the CollabRx Board of Directors; CollabRx’s Reasons for the Merger 74
Opinion of CollabRx’s Financial Advisor 75
CollabRx Closing Stock Price Performance 76
Board of Directors and Management After the Merger 79
Interests of Medytox’s Directors and Officers in the Merger 79
Interests of CollabRx’s Directors and Officers in the Merger 81
Regulatory Approvals Required 83
NASDAQ Listing of CollabRx Shares 83
Delisting and Deregistration of Medytox Shares 83
Resale of CollabRx Shares Received by Medytox Stockholders in the Merger 83
Anticipated Accounting Treatment 84
Material Relationships with Financial Advisors 84
Appraisal and Dissenters’ Rights 84
THE MERGER AGREEMENT 85
Structure of the Merger and Concurrent Transactions 85
Closing and Effective Time of the Transactions 85
Merger Consideration 85
Exchange of Shares 87
Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note. 87
Listing of CollabRx Stock 88
Governance Structure After the Merger 88
Representations and Warranties 89
Conduct of Business by CollabRx and Medytox 91
Stockholder Meetings and Board Recommendations 93
No Solicitation 94
Efforts to Consummate 97
Indemnification and Insurance 97
Employee Benefits 98
Certain Other Covenants 98
Conditions to Completion of the Merger 99
Termination of the Merger Agreement 101
Effect of Termination 102
Termination Fees 103
Other Expenses 104
Amendments; Waivers 104
Governing Law 104

 

ii
 

 

VOTING AGREEMENTS 105
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT, MERGER AND OWNERSHIP OF COLLABRX CAPITAL STOCK 106
INFORMATION WITH RESPECT TO MEDYTOX’S BUSINESS 110
Business Strategy 112
MEDYTOX’S MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 121
Results of Operations 121
Disputed Subsidiary 122
Liquidity and Capital Resources 123
Liquidity and Capital Resources during the year ended December 31, 2014 compared to the year ended December 31, 2013 124
Liquidity and Capital Resources during the six months ended June 30, 2015 compared to the six months ended June 30, 2014 125
Critical Accounting Policies and Estimates 126
INFORMATION WITH RESPECT TO COLLABRX’S BUSINESS 128
Customers 136
Marketing, Sales and Service 136
Intellectual Property 136
Competition 137
Governmental Regulations 138
Segment and Geographical Information 140
Employees 140
Facilities 140
Research and Development 140
Legal Proceedings 140
COLLABRX’S MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 141
Corporate Information 141
Company Background 141
Overview of our Current Business 141
The CollabRx Merger 144
Discontinued Operations 146
Critical Accounting Policies and Estimates 147
Revenue Recognition and Deferred Revenue 148

Accounts Receivable – Allowance for Sales Returns and Doubtful Accounts

148
Fair Value Measurements 149
Intangible Assets and Goodwill 149
Impairment of Long-Lived Assets 150
Income Taxes 150
Accounting for Stock-Based Compensation 150
Results of Operations 151
Quantitative and Qualitative Market Risk Disclosure 158
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 159
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS As of June 30, 2015 160
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Six Months Ended June 30, 2015 161
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS For the Twelve Months Ended December 31, 2014 162

 

iii
 

 

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 163
MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER 164
Directors and Executive Officers of the Combined Company Following the Merger 164
Directors 164
Executive Officers 166
Director Independence 166
Board Leadership Structure of the Combined Company 167
Board Committees of the Combined Company 167
Certain Relationships and Related Person Transactions 169
Director Compensation 170
Executive Compensation 173
Medytox Summary Compensation Table 173
Seamus Lagan, Chief Executive Officer 174
MEDYTOX PROPOSAL NO. 1 – APPROVAL AND ADOPTION OF MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY 175
Adoption of Merger Agreement 175
Recommendation of Medytox Board of Directors 175
MEDYTOX PROPOSAL NO. 2 - POSSIBLE ADJOURNMENT OF THE MEDYTOX SPECIAL MEETING 176
Possible Adjournment of Medytox Special Meeting 176
Recommendation of Medytox Board of Directors 176
COLLABRX PROPOSAL NO. 1 - APPROVAL OF THE ISSUANCE OF SHARES OF COLLABRX  COMMON STOCK AND OTHER SECURITIES EXERCISABLE OR CONVERTIBLE FOR COLLABRX COMMON STOCK IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT 177
Recommendation of the CollabRx Board of Directors 177
COLLABRX PROPOSAL NO. 2 - APPROVAL OF AN AMENDMENT TO THE COLLABRX CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT A REVERSE SPLIT OF COLLABRX’S COMMON STOCK, TO BE EFFECTED IMMEDIATELY PRIOR TO THE EFFECTIVE TIME OF THE MERGER 178
Purpose of the Reverse Stock Split 178
Possibility that the Reverse Stock Split Will Fail to Achieve the Desired Effects; Other Possible Consequences 179
Board Discretion to Implement Reverse Stock Split 180
Effect of the Reverse Stock Split on Registration and Voting Rights 180
Effect of the Reverse Stock Split on Stock Options, Warrants and Par Value 180
Effective Date 180
Exchange of Stock Certificates 180
No Appraisal Rights 182
Cash Payment in Lieu of Fractional Shares 182
Federal Income Tax Consequences of the Reverse Stock Split 182
Recommendation of the CollabRx Board of Directors 182
COLLABRX PROPOSAL NO. 3 - APPROVAL OF AN AMENDMENT TO THE COLLABRX CERTIFICATE OF INCORPORATION, AS AMENDED, TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COLLABRX COMMON STOCK FROM 50,000,000 TO 150,000,000, EFFECTIVE AS OF THE EFFECTIVE TIME OF THE MERGER 183
Reason for the Amendment 183
Principal Effects of Increase in Authorized Shares 183
Risks and Possible Disadvantages Associated with the Increase in Authorized Shares 183
Recommendation of the CollabRx Board of Directors 183

 

iv
 

 

COLLABRX PROPOSAL NO. 4 - APPROVAL OF THE AMENDMENT TO THE COLLABRX, INC. 2007 INCENTIVE AWARD PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED UNDER THE PLAN AND TO INCREASE THE MAXIMUM NUMBER OF SHARES ANY ONE INDIVIDUAL MAY RECEIVE IN ANY CALENDAR YEAR, EFFECTIVE AS OF THE EFFECTIVE TIME OF THE MERGER 184
Administration 184
Eligibility 184
Limitation on Awards and Shares Available 184
Awards 185
Amendment and Termination 186
New Plan Benefits 186
Recommendation of the CollabRx Board of Directors 186
COLLABRX PROPOSAL NO. 5 - ADVISORY (NON-BINDING) APPROVAL OF THE MERGER-RELATED COMPENSATION OF COLLABRX’S NAMED EXECUTIVE OFFICERS 187
Recommendation of the CollabRx Board of Directors 187
COLLABRX PROPOSAL NO. 6 - POSSIBLE ADJOURNMENT OF THE COLLABRX SPECIAL MEETING 188
Recommendation of the CollabRx Board of Directors 188
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS OF MEDYTOX 189
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS OF COLLABRX 191
DESCRIPTION OF COLLABRX SHARES 192
DESCRIPTION OF CAPITAL STOCK 192
General 192
Common Stock 192
Preferred Stock 192
Options 198
Restricted Stock Units 198
Warrants 198
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws 199
Exchange Listing 200
Transfer Agent and Registrar 200
COMPARISON OF RIGHTS OF HOLDERS OF  COLLABRX COMMON STOCK AND MEDYTOX COMMON STOCK 201
LEGAL MATTERS 210
EXPERTS 210
FUTURE STOCKHOLDER PROPOSALS 211
Medytox 211
CollabRx 211
WHERE YOU CAN FIND MORE INFORMATION 212
Index to Financial Statements F-1

 

Annex A Agreement and Plan of Merger A-1
Annex B Nevada Revised Statutes B-1
Annex C Opinion of Ladenburg Thalmann & Co, Inc. C-1
Annex D Stockholders Agreement, dated as of April 15, 2015, among CollabRx, Inc., Thomas R. Mika and certain Medytox Solutions, Inc. stockholders identified therein. D-1
Annex E Form of Voting and Support Agreement entered into by Medytox Stockholders E-1
Annex F Voting and Support Agreement entered into by CollabRx Stockholder F-1
Annex G Certificate of Amendment to Certificate of Incorporation of CollabRx G-1
Annex H Amendment to 2007 Incentive Award Plan H-1
Annex I Forms of Certificates of Designations I-1

 

v
 

 

References to “Medytox” and “CollabRx” in this joint proxy statement/prospectus refer to Medytox Solutions, Inc. and CollabRx, Inc., respectively. References to the “combined company” refer to CollabRx and its consolidated subsidiaries, including Medytox and its subsidiaries, after the merger. Except as otherwise noted, references to “we,” “us” or “our” refer to Medytox or CollabRx as the context requires. References to “Merger Sub” refer to CollabRx Merger Sub, Inc., a newly formed, direct, wholly-owned subsidiary of CollabRx.

 

References to the “merger agreement” refer to that certain Agreement and Plan of Merger, dated as of April 15, 2015, among Medytox, CollabRx, and Merger Sub. References to the “merger” refer to the merger of Merger Sub with and into Medytox, with Medytox surviving as the surviving company and as a direct, wholly-owned subsidiary of CollabRx as contemplated under the merger agreement.

 

References to “Medytox common stock” refer to common stock, par value $0.0001 per share, of Medytox, and references to “Medytox common stockholders” refer to holders of Medytox common stock.

 

References to “CollabRx common stock” or “CollabRx shares” refer to shares of common stock, par value $0.01 per share, of CollabRx, and references to “CollabRx stockholders” refer to holders of CollabRx shares.

 

Medytox owns or has rights to various trademarks, trade names or service marks, including STABLE SPOT (design), MEDYTOX SOLUTIONS INC. (design) and MEDYTOX SOLUTIONS INC.

 

CollabRx owns or has rights to various trademarks, trade names or service marks, including COLLABRX and THERAPY FINDER, GENETIC VARIANT ANNOTATION SERVICE, and GVA.

 

All other trademarks or trade names referred to in this joint proxy statement/prospectus are the property of their respective owners.

 

Unless specifically noted otherwise, the discussion in this joint proxy statement/prospectus does not reflect adjustments necessary to fully reflect the effect of the reverse stock split contemplated by “CollabRx Proposal No. 2-Approval of an Amendment to the CollabRx Certificate of Incorporation, as amended, to Effect a Reverse Split of CollabRx’s common stock, to be effected immediately prior to the effective time of the merger.” For example, all references in this joint proxy statement/prospectus to the aggregate number of CollabRx shares to be issued to Medytox stockholders in connection with the merger, and all references to the number of outstanding CollabRx shares or CollabRx shares available for issuance under CollabRx equity-based plans, are made before taking into account the effect of the proposed reverse stock split. Specifically, the 50,000,000 CollabRx shares proposed to be available for issuance under the CollabRx 2007 Incentive Award Plan subject to “CollabRx Proposal No. 4- Approval of the Amendment to the CollabRx, Inc. 2007 Incentive Award Plan to increase the number of shares authorized to be issued under the plan,” would be reduced to fully reflect the effect of the proposed reverse stock split if the reverse stock split is effected prior to the closing of the merger.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND MEETINGS

 

Set forth below are questions that you, as a Medytox stockholder or a CollabRx stockholder, may have regarding the merger and the other matters to be considered at the special meeting of stockholders of Medytox or the special meeting of stockholders of CollabRx and the answers to those questions. Medytox and CollabRx urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the other matters to be considered at such meetings. Additional important information is also contained in the Annexes to this joint proxy statement/prospectus. 

 

Q:Why am I receiving this joint proxy statement/prospectus?
A:Medytox is soliciting a proxy from holders of Medytox shares and CollabRx is soliciting a proxy from holders of CollabRx shares to approve a strategic business combination of Medytox and CollabRx and related matters. On April 15, 2015, Medytox, CollabRx, and Merger Sub entered into a merger agreement, pursuant to which Merger Sub will merge with and into Medytox, with Medytox as the surviving company and a direct, wholly-owned subsidiary of CollabRx. Upon completion of the merger, Medytox stockholders will receive CollabRx shares in exchange for their Medytox shares as described below.

 

Q:What are the proposals on which I am being asked to vote?

 

A:Medytox: At the special meeting of Medytox stockholders, Medytox stockholders will vote upon proposals to:

 

·approve and adopt the Merger Agreement and the transactions contemplated thereby; and

 

·adjourn the Medytox special meeting, or any adjournment thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the Medytox special meeting to approve and adopt the merger agreement and the transactions contemplated thereby.

 

The Medytox board of directors unanimously recommends that Medytox stockholders vote their Medytox shares “FOR” approval of each of the above proposals.

 

CollabRx: At the special meeting of CollabRx stockholders, CollabRx stockholders will vote upon proposals to approve the following:

 

·the issuance of shares of CollabRx common stock and other securities exercisable or convertible for shares of CollabRx common stock, which we refer to as the CollabRx Share Issuance, in connection with the transactions contemplated by the Merger Agreement;

 

·an amendment to CollabRx’s Certificate of Incorporation, as amended, to effect a reverse split of CollabRx’s common stock at a specific ratio from 1-for-2.5 to 1-for-10 to be effective immediately prior to the effective time of the merger;

 

·an amendment to CollabRx’s Certificate of Incorporation, as amended, to increase the number of authorized shares of CollabRx common stock from 50,000,000 to 150,000,000 shares, effective as of the effective time of the merger;

 

·an amendment to the CollabRx, Inc. 2007 Incentive Award Plan to increase the number of shares authorized to be issued under the plan and to increase the maximum number of shares any one individual may receive in any calendar year;

 

·the “golden parachute” compensation that may become payable to CollabRx's named executive officers in connection with the Merger Agreement as required by Item 402(t) of Regulation S-K and Section 14A(b) of the Securities Exchange Act of 1934 on an advisory (non-binding) basis; and

 

·the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposals.

 

The CollabRx board of directors unanimously recommends that CollabRx stockholders vote their CollabRx shares “FOR” approval of each of the above proposals.

 

1
 

 

Q:What will I receive in the merger?

 

A:At the effective time of the merger, (i) each share of Medytox common stock will be converted into the right to receive such number of shares of CollabRx common stock equal to the Exchange Ratio, (ii) each share of Medytox Series B Preferred Stock will be converted into the right to receive one share of CollabRx Series B Preferred Stock, which will be designated prior to the closing of the merger, (iii) each share of Medytox Series D Preferred Stock will be converted into the right to receive one share of CollabRx Series D Preferred Stock, which will be designated prior to the closing of the merger, (iv) each share of Medytox Series E Preferred Stock will be converted into the right to receive one share of CollabRx Series E Preferred Stock, which will be designated prior to the closing of the merger, (v) each option and warrant to purchase shares of CollabRx common stock will continue in existence pursuant to its terms, (vi) each restricted stock unit for CollabRx common stock will settle prior to the closing of the merger in accordance with its terms, and (vii) Medytox’s equity incentive plan will be assumed by CollabRx and each outstanding option to purchase shares of Medytox common stock will be assumed by CollabRx and converted into an option to purchase shares of CollabRx common stock (with proportional adjustment to the number of shares underlying the option and the exercise price, each in accordance with the Exchange Ratio). The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) will hold 10% of CollabRx’s common stock following the closing of the merger, and holders of Medytox equity prior to the closing of the Merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s common stock following the closing of the merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

No fractional shares will be issued in connection with the merger. Any Medytox stockholder who would otherwise be entitled to receive a fraction of a CollabRx share of common stock pursuant to the merger will receive, in lieu of such fractional share, one whole share of CollabRx common stock.

 

CollabRx stockholders will not receive any merger consideration and will continue to hold their CollabRx shares after giving effect to the merger.

 

Q:What is the value of the merger consideration?

 

A:The market value of the merger consideration that Medytox stockholders will receive will depend on the price per CollabRx share at the effective time of the merger. That price will not be known at the time of the Medytox special meeting or the CollabRx special meeting and may be less or more than the current market price or the market price at the time of the stockholder meetings. The closing price on the NASDAQ Capital Market of a share of CollabRx common stock on September 22, 2015, the last practicable trading day prior to the date of this joint proxy statement/prospectus, was $0.74. There will be no established market for the shares of CollabRx preferred stock.

 

Q:Why are CollabRx stockholders being asked to approve the reverse stock split?

 

A:The primary objective in proposing the reverse stock split proposed by “CollabRx Proposal No. 2-Approval of an Amendment to the CollabRx Certificate of Incorporation, as amended, to Effect a Reverse Split of CollabRx’s common stock to be effected immediately prior to the effective time of the merger” is to raise the per share trading price of the CollabRx shares. The CollabRx board of directors believes that the reverse stock split would, among other things, help CollabRx to maintain the listing of its common stock on the NASDAQ Capital Market.

 

Unless specifically noted otherwise, the discussion in this joint proxy statement/prospectus does not reflect adjustments necessary to fully reflect the effect of the reverse stock split contemplated by “CollabRx Proposal No. 2-Approval of an Amendment to the CollabRx Certificate of Incorporation, as amended, to Effect a Reverse Split of CollabRx common stock to be effected immediately prior to the effective time of the merger.” For example, all references in this joint proxy statement/prospectus to the aggregate number of CollabRx shares to be issued to Medytox stockholders in connection with the merger are made before taking into account the effect of the proposed reverse stock split.

 

2
 

 

Q:What percentage of the combined company will Medytox and CollabRx stockholders own following the merger?

 

A:Immediately following the merger, the former stockholders of Medytox are expected to own approximately 90% of the combined company and the pre-merger stockholders of CollabRx are expected to own approximately 10% of the combined company; in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

Q:When and where will the stockholders meetings be held?

 

A: Medytox: The Medytox special meeting will be held at the offices of Akerman LLP, located at 777 South Flagler Drive, Suite 1100 West Tower, West Palm Beach, Florida 33401, on October 28, 2015, at 11:00 a.m., local time.

 

CollabRx: The CollabRx special meeting will be held at the offices of Goodwin Procter LLP located at 135 Commonwealth Drive, Menlo Park, California 94025 on October 28, 2015, at 10:30 a.m., Pacific Time.

Q:Who is entitled to attend the Medytox and CollabRx meetings?

 

A:Medytox: All holders of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock as of the record date for the Medytox special meeting, or their duly appointed proxies, are invited to attend the Medytox special meeting.

 

CollabRx: All holders of CollabRx shares as of the record date for the CollabRx special meeting, or their duly appointed proxies, are invited to attend the CollabRx special meeting.

Q:Who is entitled to vote at the Medytox and CollabRx meetings?

 

A:Medytox: Medytox has fixed September 4, 2015 as the record date for the Medytox special meeting. If you were a Medytox holder of common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock or Medytox Series E Preferred Stock as of the close of business on that date, you are entitled to vote on matters that come before the Medytox special meeting. All votes made by proxy must be received (whether delivered by mail, telephone or internet) no later than 5:00 p.m., Eastern Time, on October 27, 2015 to be counted.

 

CollabRx: CollabRx has fixed September 4, 2015 as the record date for the CollabRx special meeting. If you were a CollabRx stockholder as of the close of business on such date, you may vote on matters that come before the CollabRx special meeting. All votes made by proxy must be received (whether delivered by mail, telephone or internet) no later than 5:00 p.m., Pacific Time, on October 27, 2015 to be counted.

Q:How many votes do I have?

 

A:Medytox: You are entitled to one vote for each outstanding Medytox share of common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock that you owned as of the close of business on the Medytox record date. As of the close of business on the Medytox record date, there were 31,006,026 shares of common stock, 5,000 shares of Series B Preferred Stock, 50,000 shares of Series D Preferred Stock and 45,000 shares of Series E Preferred Stock issued and outstanding.

 

CollabRx: You are entitled to one vote for each CollabRx share of common stock that you owned as of the close of business on the CollabRx record date. As of the close of business on the CollabRx record date, there were 10,487,373 outstanding CollabRx shares.

 

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Q:How do I vote?

 

A:Medytox: If you are a registered holder of Medytox shares as of the close of business on the record date for the Medytox special meeting, you may vote in person by attending the meeting or by proxy. You may vote in any of the following ways:

 

·in person at the Medytox special meeting;

 

· by internet - go to www.islandstocktransfer.com and follow the instructions for internet voting as shown on your proxy card. You do not need to return your proxy card if you vote using the internet;

 

· by telephone - call toll free at (877) 502-0550 and follow the instructions. You do not need to return your proxy card if you vote by telephone; or

 

·by mail - complete, sign, date and mail the proxy card in the envelope and return it as soon as possible.

 

All votes made by proxy must be received (whether delivered by mail, telephone or the internet) no later than 5;00 p.m., Eastern Time, on October 27, 2015 to be counted.

 

If you are a beneficial owner of Medytox shares held in “street name,” please follow the voting instructions provided by your broker, bank or other nominee that holds your shares by properly completing, signing, dating, and returning the voting instruction form provided to you by your nominee to ensure that your shares are represented at the Medytox special meeting.

 

CollabRx: If you are a registered holder of CollabRx shares as of the close of business on the record date for the CollabRx special meeting, you can vote in person by attending the meeting or by proxy. You may vote in any of the following ways:

 

·in person at the CollabRx special meeting;

 

·by internet - go to www.proxyvotenow.com/clrx and follow the instructions for internet voting shown on your proxy card. You do not need to return your proxy card if you vote using the internet;

 

·by telephone - call toll free at (866) 395-9276 and follow the instructions. You do not need to return your proxy card if you vote by telephone; or

 

·by mail - complete, sign, date and mail the proxy card in the envelope and return it as soon as possible.

 

All votes made by proxy must be received (whether delivered by mail, telephone or internet) no later than 5:00 p.m., Pacific Time, on October 27, 2015 to be counted.

 

If you are a beneficial owner of CollabRx shares held in “street name,” then you will have received this material from your broker or other nominee seeking your instructions as to how you wish your shares to be voted. In that case, follow the procedures specified on your broker’s or other nominee’s voting instruction form provided to you by your nominee to ensure that your shares are represented at the CollabRx special meeting.

 

Q:My shares are held in “street name” by my broker, or I am a non-registered shareholder. Will my broker automatically vote my shares for me?

 

A:No. If your shares are held through a broker, bank or other nominee, you are considered the “beneficial owner” of the shares held for you in what is known as “street name.” You are not the “record holder” or “registered holder” of these shares. If this is the case, this joint proxy statement/prospectus has been forwarded to you by your broker, bank or other nominee. As the beneficial owner, unless your broker, bank or other nominee has discretionary authority over your shares, you generally have the right to direct your broker, bank or other nominee as to how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which your broker, bank or other nominee does not have discretionary authority. This is often called a “broker non-vote.”

 

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Please follow the voting instructions provided by your broker, bank or other nominee so that it may vote your shares on your behalf. Please note that you may not vote shares held in street name by returning a proxy card directly to Medytox or CollabRx or by voting in person at your meeting unless you first provide a proxy from your broker, bank or other nominee.

 

If you are a Medytox stockholder and you do not instruct your broker, bank or other nominee on how to vote your Medytox shares, your broker, bank or other nominee will not vote your shares over which they do not have discretionary authority. This broker non-vote will have the same effect as a vote against the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereby, and will have no effect on the proposal to adjourn the Medytox special meeting, if necessary or appropriate, to solicit additional proxies if necessary or appropriate.

 

If you are a CollabRx stockholder and you do not instruct your broker, bank or other nominee on how to vote your CollabRx shares, your broker, bank or other nominee will not vote your shares over which they do not have discretionary authority. This broker-non vote will have the same effect as a vote against Proposals 2 and 3 to amend CollabRx’s Certificate of Incorporation, as amended, and will have no effect on the other proposals submitted to CollabRx stockholders.

 

Q:

What vote is required to approve each proposal?

 

A:Medytox: The proposal at the Medytox special meeting to approve and adopt the Merger Agreement and the transactions contemplated by it requires (i) the affirmative vote of a majority of the voting power of the Medytox stockholders, which includes holders of Medytox common stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock and (ii) the affirmative vote of a majority of the outstanding shares of Medytox Series B Preferred Stock, voting separately. Each share of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock is entitled to one vote for each outstanding Medytox share.

 

The proposal to approve any motion to adjourn the special meeting, or its adjournment, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve and adopt the merger agreement and the transactions contemplated thereby, requires the affirmative vote of at least a majority of the Medytox shares represented, in person or by proxy, at the special meeting (other than the Series B Preferred Stock), whether or not a quorum is present.

 

CollabRx: The affirmative vote of a majority of CollabRx shares outstanding as of the close of business on the record date for the CollabRx special meeting is required to approve Proposals 2 (reverse stock split) and 3 (increase in authorized common stock). The affirmative vote of a majority of CollabRx shares voting at the CollabRx special meeting is required to approve Proposals 1 (the CollabRx Share Issuance), 4 (amendments to incentive plan) and 6 (adjournment, even if less than a quorum is present). The affirmative vote, in person or by proxy, of a majority of the shares of CollabRx’s common stock voting on proposal 5 is not required, but is for advisory purposes.

 

Q:What will happen if CollabRx shareholders do not approve the ‘golden parachute’ compensation?

 

A:Approval of the ‘golden parachute’ compensation that may become payable to CollabRx’s named executive officers in connection with the merger is not a condition to completion of the merger. The vote with respect to the ‘golden parachute’ compensation is an advisory vote and will not be binding on CollabRx regardless of whether the issuance of shares of CollabRx common stock and other securities pursuant to the Merger Agreement is approved. Therefore, regardless of whether shareholders approve the ‘golden parachute’ compensation, if the issuance of shares of CollabRx common stock and other securities pursuant to the Merger Agreement is approved by the shareholders and the merger is completed, the ‘golden parachute’ compensation will still be paid to CollabRx’s named executive officers to the extent payable in accordance with the terms of compensation arrangements.

 

5
 

 

Q:What will happen if I fail to vote or I abstain from voting?

 

A:Medytox: Failure to vote will have the effect of reducing the number of shares that can be counted towards achieving a quorum. A quorum is required to conduct any business at the special meeting. Abstentions will be treated as being present for purposes of determining the presence or absence of a quorum. If you are a Medytox stockholder and fail to vote, fail to instruct your broker, bank or other nominee to vote, or mark your proxy or voting instructions to abstain, this will have the effect of a vote against the proposal to approve and adopt the merger agreement and the transactions contemplated thereby and the adjournment proposal.

 

CollabRx: Failure to vote will have the effect of reducing the number of shares that can be counted towards achieving a quorum. A quorum is required to conduct any business at the special meeting. Abstentions will be treated as being present for purposes of determining the presence or absence of a quorum. Abstentions will have the effect of voting against Proposals 2 (reverse stock split) and 3 (increase in authorized common stock). Abstentions will have no effect on the other proposals submitted to CollabRx stockholders.

 

Q:What will happen if I return my proxy card without indicating how to vote?

 

A:If you are a holder of record of Medytox shares or a holder of record of CollabRx shares and sign and return your proxy card without indicating how to vote on any particular proposal, the Medytox shares or CollabRx shares represented by your proxy will be voted in accordance with the recommendations of the Medytox board of directors or the CollabRx board of directors, as applicable.

 

Q:What constitutes a quorum?

 

A:Medytox: A majority of the outstanding Medytox shares entitled to vote at the Medytox special meeting must be represented in person or by proxy at the Medytox special meeting in order to constitute a quorum for the transaction of business at the Medytox special meeting. Abstentions will be counted as present at the meeting for the purpose of determining whether there is a quorum.

 

CollabRx: Two or more stockholders representing a majority of the outstanding CollabRx shares must be present in person or represented by proxy at the CollabRx special meeting in order to constitute a quorum for the transaction of business at the CollabRx special meeting. Abstentions will be counted as present at the meeting for the purpose of determining whether there is a quorum.

 

Q:Can I change my vote after I have returned a proxy or voting instruction card?

 

A:Yes.

 

If you are a record holder of Medytox shares as of the close of business on the record date for the Medytox special meeting, you may revoke your proxy and change your vote at any time before it is voted at the Medytox special meeting by:

 

· voting again by internet, telephone or mail at a later time before the closing of these voting facilities at 5:00 p.m., Eastern Time, on October 27, 2015;

 

·submitting a duly executed proxy card bearing a later date;

 

·giving a written notice of revocation of the proxy’s authority to Medytox’s Corporate Secretary, 400 S. Australian Avenue, Suite 800, West Palm Beach, Florida 33401; or

 

·if you are a registered stockholder, attending the Medytox special meeting and voting in person.

 

If you are a record holder of CollabRx shares as of the close of business on the record date for the CollabRx special meeting, you may revoke your proxy at any time before it is voted at the CollabRx special meeting by taking any of the following actions:

 

· voting again by internet, telephone or mail at a later time before the closing of these voting facilities at 5:00 p.m., Pacific Time, on October 27, 2015;

 

·giving a written notice of revocation to CollabRx’s Corporate Secretary, 44 Montgomery Street, Suite 800, San Francisco, California 94104;

 

·submitting a duly executed proxy card bearing a later date; or

 

·if you are a registered stockholder, attending the CollabRx special meeting and voting in person.

 

6
 

 

Q:What are the material U.S. federal income tax consequences of the merger to U.S. holders of Medytox shares?

 

A:The merger is intended to be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. Assuming the merger qualifies as a reorganization, a holder of Medytox preferred or common stock will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of the holder’s shares of Medytox preferred or common stock for shares of CollabRx preferred or common stock pursuant to the merger. You are urged to consult your own tax advisor regarding the particular consequences to you of the merger. For a more complete discussion of the material U.S. federal income tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences of the Reverse Stock Split, Merger and Ownership of CollabRx Capital Stock” beginning on page 106.

 

Q:When do you expect the merger to be completed?

 

A:We hope to complete the merger as soon as reasonably practicable and expect to complete the merger during the fourth calendar quarter of 2015. However, the merger is subject to various conditions, and it is possible that factors outside the control of both companies could result in the merger being completed at a later time, or not at all. See “The Merger Agreement-Conditions to Completion of the Merger” beginning on page 99 and “Risk Factors” beginning on page 23.

 

Q:Are stockholders entitled to appraisal and dissenter’s rights?

 

A:Medytox: Yes. Section 78.3793 of the Nevada Revised Statutes, or NRS, along with the provisions of NRS 92A.300 to 92A.500, entitle any holder of shares of Medytox preferred or common stock as of the record date for the special meeting of Medytox stockholders, in lieu of receiving the merger consideration that such holder would otherwise be entitled to pursuant to the merger agreement, to dissent from the merger and obtain payment in cash for the “fair value” of Medytox shares held by the holder. Any stockholder contemplating the exercise of these dissenters’ rights should review carefully the provisions of NRS 78.3793 along with the provisions of NRS 92A.300 to 92A.500 (copies of which are attached as Annex B to this joint proxy statement/prospectus), particularly the special procedural steps required to perfect such rights. These rights may be lost if the procedural requirements of NRS 78.3793 along with the provisions of NRS 92A.300 to 92A.500 are not fully and precisely satisfied. See “The Merger-Appraisal and Dissenters’ Rights” beginning on page 84.

 

CollabRx: No. CollabRx stockholders are not entitled to appraisal or dissenter’s rights in connection with the merger or any of the other transactions described in this joint proxy statement/prospectus. See “The Merger-Appraisal and Dissenters’ Rights” beginning on page 84.

 

Q:What do I need to do now?

 

A:Carefully read and consider the information contained in this joint proxy statement/prospectus, including its Annexes, then please authorize a proxy to vote your Medytox shares or CollabRx shares as soon as possible so that your shares may be represented at the applicable stockholder meeting.

 

Q:Do I need to do anything with my Medytox shares or CollabRx shares now?

 

A:No.

 

Medytox: After the merger is completed, your Medytox shares will be converted automatically into the right to receive CollabRx shares pursuant to the merger agreement. You do not need to take any action at the current time.

 

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As soon as possible after the merger, the exchange agent will mail each holder of record of Medytox shares a letter of transmittal and instructions for use in surrendering the Medytox shares in exchange for CollabRx shares pursuant to the merger.

 

CollabRx: You do not need to do anything with your CollabRx shares in connection with the merger. If the reverse stock split is approved by CollabRx’s stockholders and effected by the CollabRx board of directors, stockholders with CollabRx shares held in book-entry form or through a bank, broker or other nominee will not be required to take any action and will see the impact of the reverse stock split reflected in their accounts on the effective date of the reverse stock split. In that case, beneficial holders may contact their bank, broker or nominee for more information. Stockholders with CollabRx shares held in certificate form will be permitted to exchange their stock certificates for book-entry shares representing the CollabRx shares resulting from the reverse stock split. Shortly after the effective date of the reverse stock split, if any, those stockholders will receive a letter of transmittal and instructions for exchanging their certificates from CollabRx’s exchange agent.

 

Q:Who is soliciting my proxy?

 

A:Medytox and CollabRx have jointly retained Alliance Advisors to assist in their solicitation of proxies and have agreed to pay it a fee of approximately $15,000, plus administrative disbursements. All fees and disbursements to Alliance Advisors will be paid by CollabRx.

 

Medytox: The Medytox board of directors and members of management are soliciting your proxy for use at the Medytox special meeting and any adjournment or postponement thereof. All associated costs of the proxy solicitation by Medytox will be borne by Medytox. In addition to the use of the mail, proxies may be solicited directly by directors, officers and other employees of Medytox, without additional remuneration, by personal interview, telephone, facsimile or otherwise. Medytox also will supply copies of the proxy solicitation materials to brokerage firms, banks, and other nominees for the purpose of soliciting proxies from the beneficial owners of the shares held of record by such nominees. Medytox will request that such brokerage firms, banks, and other nominees forward the proxy solicitation materials to the beneficial owners and will reimburse them for their reasonable expenses.

 

CollabRx: The CollabRx board of directors and members of management are soliciting proxies for use at the CollabRx special meeting and any adjournment or postponement thereof. In accordance with the merger agreement, CollabRx will pay its own cost of soliciting proxies from its stockholders, including the cost of mailing this joint proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by CollabRx’s officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication. CollabRx will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of CollabRx shares. CollabRx may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.

 

Q:What if I hold shares in both Medytox and CollabRx?

 

A:If you are a stockholder of both Medytox and CollabRx, you will receive two separate packages of proxy materials. A vote as a Medytox stockholder will not count as a vote as a CollabRx stockholder, and a vote as a CollabRx stockholder will not count as a vote as a Medytox stockholder. Therefore, please separately vote your Medytox shares and CollabRx shares.

 

Q:Who can help answer my questions?

 

A:Medytox and CollabRx stockholders who have questions about the merger or the other matters to be voted on at the Medytox special meeting or the CollabRx special meeting or desire additional copies of this joint proxy statement/prospectus or additional proxy cards should contact:

 

Alliance Advisors
200 Broadacres Drive
3rd Floor
Bloomfield, NJ 07003
Telephone: (877) 777-5216

E-mail: aal@allianceadvisorsllc.com

 

8
 

 

Medytox stockholders may also contact:

 

Seamus Lagan
Chief Executive Officer
Medytox Solutions, Inc.
400 S. Australian Avenue, Suite 800
West Palm Beach, Florida 33401
Telephone: (561) 855-1626

 

CollabRx stockholders may also contact:

 

Thomas R. Mika
President and Chief Executive Officer
CollabRx, Inc.
44 Montgomery Street, Suite 800
San Francisco, California 94104
Telephone: (415) 248-5350

 

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SUMMARY

 

This summary highlights selected information from this joint proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the merger and the other proposals being considered at the Medytox special meeting and the CollabRx special meeting, you should read this entire joint proxy statement/prospectus carefully, including the attached Annexes, and the other documents to which you are referred herein. See “Where You Can Find More Information” beginning on page 212.

 

Information about the Companies

 

Medytox Solutions, Inc.

 

400 S. Australian Avenue, Suite 800
West Palm Beach, Florida 33401
Telephone: (561) 855-1626

 

Medytox Solutions, Inc. (“Medytox”) is a holding company that owns and operates businesses in the medical services sector. Medytox is a new generation healthcare enterprise that delivers a single source for integrated solutions. Medytox applies its innovative approach through an outstanding suite of IT & software solutions, revenue cycle management and financial services, combined with a range of diagnostic testing and other ancillary services for the healthcare sector.

 

Its principal line of business is clinical laboratory blood and urine testing services, with a particular emphasis in the provision of urine drug toxicology testing to physicians, clinics and rehabilitation facilities in the United States. Testing services to rehabilitation facilities represented over 90% of Medytox’s revenues for the years ended December 31, 2014 and December 31, 2013.

 

Medytox, utilizing its proprietary lab ordering and reporting software, offers a complete, turn-key urine drug testing (“UDT”) program allowing physicians to proactively monitor and treat patients. The Medytox UDT program is utilized by physicians to identify and evaluate prescribed and/or non-prescribed drugs that when combined may cause adverse drug interactions dangerous to a patient’s health. With our UDT program, physicians can be more assured their patients are adhering to their therapeutic drug regimens and are in compliance with their prescribed guidelines. Our UDT program helps the health care provider achieve better outcomes for patients and in evaluating to what extent the prescribed medications and their dosages are working for the patient to achieve a better outcome towards recovery.

 

As a provider of clinical laboratory services, we continue to pursue our strategy of acquiring or entering into binding relationships with high-complexity laboratories that can facilitate our customers’ needs. We have successfully completed substantial expansion of our New Mexico and Florida based laboratories and have completed several acquisitions or strategic partnerships with laboratories located in different regions of the United States, allowing us to correspondingly increase our client base. These laboratories, and those we will continue to seek out, offer or can be developed to offer, the most advanced analytical technology for the processing of urine specimens including Immunoassay Analyzers (“IA”) for screens and Gas Chromatography Mass Spectrometry/Liquid Chromatography Mass Spectrometry (“GCMS/LCMS”) for confirmations. All Medytox laboratories are fully-staffed professional COLA-accredited high complexity laboratories with additional certifications such as the COLA Laboratory of Excellence Award (COLA’s Highest Commendation), Clinical Laboratory Improvement Amendments (“CLIA”) and the State of Florida’s AHCA Clinical Laboratory License for Non-Waived High Complexity testing, and we anticipate that any facilities acquired in the future will meet these stringent requirements. Our in-house billing company services all of our facilities, utilizing electronic processing of claims to the major insurance payers and eliminating the need to rely on and pay for the services of clearing houses, allowing us to maximize profit retention.

 

Medytox is actively expanding the services it offers its clients to include not just specialized diagnostic testing in its laboratories but medical billing services, electronic health records (“EHR”) and laboratory information systems (“LIS”) products and IT and software solutions incorporating integration of numerous electronic communication platforms in the sector in an effort to provide a single source solution to medical providers.

 

Medytox shares are not listed on an established public trading market, but are quoted by the OTC Markets Group, Inc., in the non-NASDAQ over the counter market under the symbol “MMMS.”

 

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Medytox was organized on July 20, 2005 under the laws of the State of Nevada. In the first half of 2011, management decided to reorganize as a holding company to acquire and manage a number of companies in the medical services sector. Its headquarters is located at 400 S. Australian Avenue, Suite 800, West Palm Beach, Florida 33401. Its telephone number is (561) 855-1626. It maintains a web site at http://www.medytoxsolutionsinc.com. The information contained on or connected to Medytox’s website is expressly not incorporated by reference into this joint proxy statement/prospectus. Additional information about Medytox is included elsewhere in this joint proxy statement/prospectus. See the sections titled “Information With Respect to Medytox’s Business,” “Medytox’s Management Discussion and Analysis of Financial Condition and Results of Operations” and “Medytox’s Financial Statements” beginning on pages 110, 121 and F-4, respectively.

 

CollabRx, Inc.

 

44 Montgomery Street, Suite 800
San Francisco, California 94104
Telephone: (415) 248-5350

 

CollabRx develops and markets medical information and clinical decision support products and services intended to set a standard for the clinical interpretation of genomics-based, precision medicine. Building on a comprehensive and specialized knowledge base, software systems that facilitate dynamic updating and automated reporting and a large network of independent expert clinical advisors, we have developed a suite of unique and differentiated information products and services. These products include a scalable system for providing high-value information on biomarkers and related therapies for inclusion in reports prepared by diagnostic labs reporting on the results from their multi-biomarker genomic-based tests. In addition, we have developed decision-support tools for physicians and patients to assist with treatment planning for advanced cancer, offered over the Internet in both web-based and mobile apps. We believe that both product sets are highly synergistic, and allow opportunities for enhancement, cross-fertilization and adoption that go beyond what each would offer individually. CollabRx shares are listed on the NASDAQ Capital Market under the symbol “CLRX.”

 

CollabRx, Inc., a Delaware corporation, is the formerly named Tegal Corporation, a Delaware corporation (“Tegal”), which acquired a private company of the same name on July 12, 2012. Following approval by its stockholders on September 25, 2012, Tegal amended its charter and changed its name to “CollabRx, Inc.” Tegal was formed in December 1989 to acquire the operations of the former Tegal Corporation, a division of Motorola, Inc. Tegal’s predecessor company was founded in 1972 and acquired by Motorola, Inc. in 1978. Tegal completed its initial public offering in October 1995. CollabRx’s headquarters is located at 44 Montgomery Street, Suite 800, San Francisco, California 94101. Its telephone number is (415) 248-5350. CollabRx maintains a website at http://www.collabrx.com. The information contained on or connected to CollabRx’s website is expressly not incorporated by reference into this joint proxy statement/prospectus. Additional information about CollabRx is included elsewhere in this joint proxy statement/prospectus. See the sections titled “Information with respect to CollabRx’s Business,” “CollabRx’s Management Discussion and Analysis of Financial Condition and Results of Operations” and “CollabRx’s Financial Statements” beginning on pages 128, 141 and F-71, respectively.

 

CollabRx Merger Sub, Inc.

 

c/o CollabRx, Inc.
44 Montgomery Street, Suite 800
San Francisco, California 94104
Telephone: (415) 248-5350

 

Merger Sub is a Nevada corporation and a newly incorporated, direct, wholly-owned subsidiary of CollabRx. Merger Sub was incorporated on March 13, 2015 for the sole purpose of effecting the merger. To date, Merger Sub has not conducted any activities other than those incidental to its incorporation, the execution of the merger agreement and the preparation of applicable filings under U.S. securities laws made in connection with the merger.

 

Summary of the Merger

 

If the merger is completed, Merger Sub will merge with and into Medytox and the separate corporate existence of Merger Sub will cease. Medytox will be the surviving company in the merger, and CollabRx will continue to be the sole stockholder of the surviving company. After the merger, CollabRx and its consolidated subsidiaries, including the surviving company and its subsidiaries, will operate as a combined company under the name Rennova Health, Inc. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the merger agreement in its entirety because it is the legal document that governs the merger. For a more complete discussion of the merger, see “The Merger” and “The Merger Agreement” beginning on pages 65 and 85, respectively.

 

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Recommendation of the Medytox Board of Directors and Medytox’s Reasons for the Merger

 

After careful consideration, the Medytox board of directors unanimously recommends that Medytox stockholders vote “FOR” each of the proposals being submitted to a vote of the Medytox stockholders at the Medytox special meeting.

 

In reaching its decision, the Medytox board of directors considered a number of factors as generally supporting its decision to enter into the merger agreement, including, among others, the following:

 

·the belief that the combination of Medytox’s and CollabRx’s businesses would create more value for the Medytox stockholders in the long-term than Medytox could create as an independent, stand-alone company;

 

·the opportunity for the Medytox stockholders to participate in the potential future value of the combined company, including future potential value from CollabRx’s established products and products in development;

 

·the exchange ratio in the merger which is intended to result in Medytox stockholders holding approximately 90% of the outstanding shares of the combined company on a fully diluted basis after the merger; provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages; and

 

·the governance arrangements contained in the merger agreement.

 

The Medytox board of directors also considered a variety of risks and other potentially negative factors concerning the merger, including, among others, the following:

 

·the risk that the merger might not be completed in a timely manner;

 

·risks related to certain terms of the merger agreement (including restrictions on the conduct of Medytox’s business prior to completion of the merger and the requirement that Medytox pay CollabRx a termination fee and expense reimbursement in certain circumstances);

 

·risks related to the diversion of management and resources from other strategic opportunities;

 

·challenges and difficulties relating to integrating the operations of Medytox and CollabRx; and

 

·the fact that the combined company will need additional financing if the merger is completed.

 

For a more complete description of Medytox’s reasons for the merger and the recommendation of the Medytox board of directors, see “The Merger-Recommendation of the Medytox Board of Directors; Medytox’s Reasons for the Merger,” beginning on page 73.

 

Recommendation of the CollabRx Board of Directors and CollabRx’s Reasons for the Merger

 

After careful consideration, the CollabRx board of directors unanimously recommends that CollabRx stockholders vote “FOR” each of the proposals being submitted to a vote at the CollabRx special meeting.

 

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In reaching its decision to approve the Merger Agreement and the transactions contemplated thereby, the CollabRx board of directors considered a number of factors, including the following:

 

·the belief that the combination of CollabRx’s and Medytox’s businesses would create more value for the CollabRx stockholders in the long-term than CollabRx could create as an independent, stand-alone company;

 

·the opportunity for the CollabRx stockholders to participate in the potential future value of the combined company, including future potential value from Medytox’s established products and products in development;

 

·the exchange ratio in the merger which is intended to result in CollabRx equityholders holding approximately 10% of the outstanding shares of the combined company after the merger;

 

·the opportunity for CollabRx to expand and supplement its management capabilities by utilizing the existing experienced management team of Medytox;

 

·the opportunity for CollabRx to expand its sales and marketing activities through the established marketing and sales team of Medytox;

 

·the opportunity for CollabRx to expand its informatics-based products into more comprehensive offerings in connection with the established laboratories operated by Medytox; and

 

·the expectation that the combined company would have easier access to additional financing.

 

The CollabRx board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the merger, including the following:

 

·the fact that CollabRx stockholders will own a significantly smaller percentage in the combined company;

 

·the fact that the merger will result in a creation of Series B Preferred Stock with a significant liquidation preference;

 

·the difficulty and costs inherent in the combination of two businesses and the risk that the cost savings, synergies and other benefits expected might not be fully or timely realized;

 

·the risk that the merger might not be completed in a timely manner;

 

·risks related to certain terms of the merger agreement (including restrictions on the conduct of CollabRx’s business prior to completion of the merger and the requirement that CollabRx pay Medytox a termination fee and expense reimbursement in certain circumstances);

 

·risks related to the diversion of management and resources from other strategic opportunities;

 

·challenges and difficulties relating to integrating the operations of CollabRx and Medytox; and

 

·the fact that the combined company will need additional financing if the merger is completed.

 

For a more complete description of CollabRx’s reasons for the merger and the recommendation of the CollabRx board of directors, see “The Merger - Recommendation of the CollabRx Board of Directors; CollabRx’s Reasons for the Merger,” beginning on page 74.

 

Opinion of Ladenburg Thalmann & Co. Inc.

 

On March 17, 2015, Ladenburg Thalmann & Co. Inc. (“Ladenburg”) delivered its opinion to the CollabRx, Inc. board of directors. The opinion stated that, as of March 17, 2015, based upon and subject to the various qualifications, considerations and assumptions set forth in the Ladenburg opinion, the Common Stock Exchange Ratio, calculated as provided in Section 1.8(b) of the Merger Agreement, was fair, from a financial point of view, to CollabRx stockholders.

 

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The full text of that opinion, which sets forth the assumptions made, matters considered and limitations on the respective reviews undertaken by Ladenburg in connection with its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference in this joint proxy statement/prospectus in its entirety. Ladenburg provided its opinion for the information and assistance of the CollabRx board of directors in connection with its consideration of the merger. The opinion of Ladenburg is not a recommendation as to how any stockholder should vote or act with respect to any aspect of the merger or any other matter. You should read the opinion carefully and in its entirety. For a more complete summary of Ladenburg’s opinion, see “The Merger-Opinion of CollabRx’s Financial Advisor” beginning on page 75.

 

Risk Factors

 

The merger, as well as the possibility that the merger may not be completed, poses a number of risks to Medytox and CollabRx and their respective stockholders, including, among others:

 

·the exchange ratio will not be adjusted upon any change in the price of either Medytox shares or CollabRx shares;

 

·the CollabRx Series B Preferred Stock will have a significant liquidation preference which could lead to little or no funds to distribute to other stockholders in the event of a liquidation, dissolution, or change of control;

 

·the merger is subject to certain conditions to closing that could result in the merger not being consummated or being delayed, either of which could negatively impact the share price and future business and operating results of Medytox and CollabRx;

 

·the merger agreement contains provisions that restrict Medytox’s and CollabRx’s ability to pursue alternatives to the merger and, in specified circumstances, could require Medytox or CollabRx to pay the other party a termination fee and expense reimbursement; and

 

·whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruptions in the businesses of Medytox and CollabRx, which could have an adverse effect on the businesses and operating results of Medytox and CollabRx.

 

Medytox, CollabRx and the combined company are also subject to various risks associated with their respective businesses. These risks are discussed in greater detail under “Risk Factors” beginning on page 23. Medytox and CollabRx both encourage you to read and consider all of these risks carefully.

 

Closing and Timing of the Merger

 

The completion of the merger will occur at a date and time specified jointly by CollabRx and Medytox, which will be no later than three business days after the satisfaction or, to the extent permitted by applicable law, waiver of the conditions to the closing of the merger (other than those conditions that by their terms are to be satisfied at the closing, subject to the satisfaction or waiver of those conditions).

 

CollabRx and Medytox currently expect the closing to occur during the fourth calendar quarter of 2015. However, as the merger is subject to the satisfaction or waiver of the conditions described in the merger agreement, it is possible that factors outside the control of CollabRx and Medytox could result in the merger being completed at a later time, or not at all.

 

Merger Consideration to Medytox Stockholders

 

At the effective time of the merger, (i) each share of Medytox common stock will be converted into the right to receive such number of shares of CollabRx common stock equal to the Exchange Ratio, (ii) each share of Medytox Series B Preferred Stock will be converted into the right to receive one share of CollabRx Series B Preferred Stock, which will be designated prior to the closing of the merger, (iii) each share of Medytox Series D Preferred Stock will be converted into the right to receive one share of CollabRx Series D Preferred Stock, which will be designated prior to the closing of the merger, and (iv) each share of Medytox Series E Preferred Stock will be converted into the right to receive one share of CollabRx Series E Preferred Stock, which will be designated prior to the closing of the merger. The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) will hold 10% of CollabRx’s common stock following the closing of the merger, and holders of Medytox equity prior to the closing of the merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s common stock following the closing of the merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

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CollabRx will not issue fractional CollabRx shares or certificates for fractional CollabRx shares in connection with the merger. Each Medytox stockholder who otherwise would have been entitled to receive a fraction of a CollabRx share will receive, in lieu thereof, one whole share of CollabRx common stock.

 

For a more complete discussion of the merger consideration, see “The Merger Agreement-Merger Consideration” beginning on page 85.

 

Appraisal and Dissenters’ Rights

 

Any Medytox shares outstanding immediately prior to the merger, and held by Medytox stockholders who have not approved the merger and who have properly exercised dissenters’ rights in the time and manner provided in the provisions of 78.3793 of the Nevada Revised Statutes or NRS and the provisions of NRS 92A.300 to 92A.500, and, as of the effective time, have neither effectively withdrawn nor lost their dissenters’ rights under the NRS, will not be converted into the right to receive the merger consideration, but will, by virtue of the merger, be entitled to only such consideration as shall be determined pursuant to the provisions of 78.3793 of the NRS and the provisions of NRS 92A.300 to 92A.500.

 

Appraisal or dissenters’ rights are not available to CollabRx stockholders in connection with the merger or any of the other transactions described in this joint proxy statement/prospectus.

 

For a more complete description of the dissenters’ rights available to Medytox stockholders, see “The Merger-Appraisal and Dissenters’ Rights” beginning on page 84.

 

Treatment of Medytox Options and Other Medytox Equity-Based Awards

 

In the merger, (i) each option and warrant to purchase shares of CollabRx common stock will continue in existence pursuant to its terms, (ii) each restricted stock unit for CollabRx common stock will settle prior to the closing of the merger in accordance with its terms, and (iii) Medytox’s equity incentive plan will be assumed by CollabRx and each outstanding option to purchase shares of Medytox common stock will be assumed by CollabRx and converted into an option to purchase shares of CollabRx common stock (with proportional adjustment to the number of shares underlying the option and the exercise price, each in accordance with the Exchange Ratio). The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) will hold 10% of CollabRx’s common stock following the closing of the merger, and holders of Medytox equity prior to the closing of the merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s common stock following the closing of the merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

For a more complete discussion of the treatment of Medytox stock options and other equity-based awards, see “The Merger-Medytox Stock Options, Other Medytox Equity-Based Awards and the D&D Convertible Note” beginning on page 87.

 

Management of the Combined Company Following the Merger

 

In connection with the execution of the merger agreement, CollabRx, Thomas R. Mika and certain Medytox stockholders entered into a Stockholders Agreement, dated as of April 15, 2015, whereby the parties agreed to take all necessary actions to (i) set the size of the board of directors of CollabRx at seven (7) members as of the effective time of the merger, and (ii) elect to the CollabRx board two (2) directors designated by Mr. Mika, until the earliest to occur of (A) the date when Mr. Mika’s equity holdings in CollabRx fall below the Minimum Equity Percentage (as defined in the stockholders agreement), (B) the first anniversary of the date of the stockholders agreement, and (C) the date of termination of Mr. Mika’s employment with CollabRx or a subsidiary thereof. The stockholders agreement also contains customary representations and warranties and certain procedural and information rights related to the foregoing obligation to vote. A copy of the stockholders agreement is attached as Annex D to this joint proxy statement/prospectus.

 

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Upon completion of the merger, Mr. Mika, CollabRx’s current Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer, Secretary and Treasurer, will serve as Chairman of the Board of the combined company and President of the CollabRx subsidiary of the combined company, Seamus Lagan, Medytox’s current Chief Executive Officer and Director, will serve as Chief Executive Officer, President and Director of the combined company, Sebastien Sainsbury, Medytox’s current Secretary, will serve as Secretary of the combined company and Samuel Mitchell, Medytox’s current Chief Operating Officer, will serve as Chief Operating Officer of the combined company. Medytox is currently undertaking a search for a permanent Chief Financial Officer.

 

For a more complete discussion of the management of the combined company after the merger, see “The Merger-Board of Directors and Management After the Merger” beginning on page 79.

 

Interests of Medytox’s Directors and Officers in the Merger

 

In considering the unanimous recommendation of the Medytox board of directors to Medytox stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the other matters to be acted upon by the Medytox stockholders at the Medytox special meeting, Medytox stockholders should be aware that members of the Medytox board of directors and Medytox’s executive officers have interests in the merger that may be different from, or in addition to, or conflict with, the interests of Medytox stockholders.

 

Interests of the Medytox directors and officers relate to:

 

·the board of directors of the combined company will include five current members of the Medytox board of directors, and such directors, with the exception of Seamus Lagan, are expected to receive cash and equity compensation for their board service;

 

·Mr. Seamus Lagan will be appointed Chief Executive Officer, President and director of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Christopher Diamantis will be appointed director of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Benjamin Frank will be appointed director of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Michael L. Goldberg will be appointed director of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Robert Lee will be appointed director of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Sebastien Sainsbury will be appointed Secretary of the combined company and is expected to receive cash and equity compensation for his service;

 

·Mr. Samuel Mitchell will be appointed Chief Operating Officer of the combined company and is expected to receive cash and equity compensation for his service;

 

 

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·other current officers of Medytox may become officers of the combined company and will receive compensation for their service;

 

·pursuant to the terms of the merger agreement, Medytox’s current and former directors and executive officers will be entitled to certain ongoing indemnification and coverage for six years after the effective time; and

 

·certain of Medytox’s officers and directors, in addition to other major stockholders, entered into a Voting and Support Agreement with CollabRx pursuant to which, among other things and subject to the terms and conditions therein, the officers and directors agreed to vote their Medytox shares in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement.

 

The Medytox board of directors was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, and to recommend that Medytox stockholders approve and adopt the merger agreement and the transactions contemplated thereby, including the merger, and related matters. Other than full disclosure of these potential conflicts of interest, the Medytox board of directors did not take any other steps to alleviate such potential conflicts of interest since it did not consider such potential conflicts of interest to be material in connection with its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, and related matters.

 

For a more complete discussion of the interests of the directors and executive officers of Medytox in the merger, see “The Merger-Interests of Medytox’s Directors and Officers in the Merger” beginning on page 79.

 

Interests of CollabRx’s Directors and Officers in the Merger

 

In considering the unanimous recommendations of the CollabRx board of directors to vote in favor of the issuance of CollabRx common stock and other securities in connection with the merger and the other matters to be acted upon by CollabRx stockholders at the CollabRx special meeting, CollabRx stockholders should be aware that some of CollabRx’s directors and executive officers have interests in the merger that are different from, and in addition to, the interest of CollabRx stockholders generally.

 

Interests of the CollabRx directors and executive officers relate to:

 

· Mr. Mika received a $150,000 bonus in conjunction with the signing of the Merger Agreement;

 

·the board of directors of the combined company will include two of the current members of the CollabRx board of directors, who are expected to be Dr. Paul Billings and Mr. Mika, and such directors are expected to receive cash and equity compensation for their service;

 

·other current officers of CollabRx may become officers of the combined company and receive compensation for their service;

 

· as of September 4, 2015, the record date for CollabRx’s special meeting, CollabRx’s directors and officers held an aggregate 423,264 options and 23,921 restricted stock units, all of which options that are then outstanding will become fully vested and exercisable at the effective time of the merger and remain exercisable for the remainder of their terms, and all of which restricted stock units that are then outstanding will be settled prior to the effective time of the merger;

 

·Mr. Mika entered into a Voting and Support Agreement with Medytox pursuant to which, among other things and subject to the terms and conditions therein, he agreed to vote his CollabRx shares in favor of the merger, the merger agreement and the transactions contemplated thereby; and

 

·the existing employment agreements between CollabRx and each of Mr. Mika and Clifford Baron will be terminated, and a CollabRx subsidiary will enter into Employment Agreements with each of Messrs. Mika and Baron on substantially similar terms.

 
For a more complete discussion of the interests of the directors and executive officers of CollabRx in the merger, see “The Merger-Interests of CollabRx’s Directors and Officers in the Merger” beginning on page 81.

 

 

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No Medytox “Golden Parachute” Compensation

 

There are no agreements or understandings, whether written or unwritten, between any of Medytox’s named executive officers and either Medytox or CollabRx concerning any type of compensation, whether present, deferred or contingent, that is based on or otherwise relates to the merger. The merger will not constitute a change in control under the employment agreement of any of Medytox’s named executive officers or under the Medytox Solutions, Inc. 2013 Incentive Compensation Plan. Medytox has not entered into any new agreement or arrangement to provide additional compensation in connection with the merger and no additional payments to Medytox’s named executive officers are expected to be made in connection with the merger. Therefore, the advisory stockholder vote relating to “golden parachute compensation” otherwise required by Item 402(t) of Regulation S-K is not required with respect to Medytox’s named executive officers.

 

CollabRx “Golden Parachute” Compensation

 

Some of CollabRx’s directors and executive officers have interests in the merger that are different from, and in addition to, the interests of the CollabRx stockholders generally. The CollabRx board of directors was aware of and considered these potential interests, among other matters, in approving the merger agreement and the transactions contemplated thereby and in determining to recommend that the stockholders vote for approval of the merger agreement and the transactions contemplated thereby. For more information, please see the section titled “Interests of CollabRx’s Directors and Officers in the Merger” including the table titled “Golden Parachute Compensation - CollabRx” and the accompanying footnotes.

 

Conditions to Completion of the Merger

 

The obligations of CollabRx and Medytox to consummate the transactions contemplated by the merger agreement are subject to the satisfaction or waiver by CollabRx and Medytox of certain conditions set forth in the merger agreement, including the following conditions:

 

·obtaining the approval of the required percentage of CollabRx shares to approve Proposals 1, 2, 3 and 4;

 

·obtaining Medytox stockholder approval of the merger agreement and consummation of the transactions contemplated thereby, including the merger;

 

·the effectiveness of the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, under the Securities Act, and no stop order having been issued;

 

·no laws shall have been adopted and no temporary restraining order, preliminary or permanent injunction or other order issued by a court or other governmental entity shall be in effect making the merger illegal or otherwise prohibiting consummation of the merger;

 

·the shares of CollabRx common stock to be issued in the merger and such other shares to be reserved for issuance in connection with the Merger shall have been approved for listing on NASDAQ, subject to official notice of issuance;

 

·the representations and warranties of the other party, other than the representations relating to the authority of such party with respect to the execution, delivery, performance, due and valid authorization and enforceability of the merger agreement, and to each party’s capital structure, (i) to the extent qualified by material adverse effect, being true and correct, and (ii) to the extent not qualified by material adverse effect, being true and correct except where the failure to be true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a material adverse effect on such party, in the case of (i) and (ii), as of the closing date (except for those representations and warranties that were made as of a specified date, which need be true and correct, subject to such qualifications, only as of such specified date);

 

·the representations and warranties of the other party relating to the authority of such party with respect to the execution, delivery, performance, due and valid authorization and enforceability of the merger agreement, and each party’s capital structure being true and correct in all respects (other than de minimis inaccuracies with respect to such party’s capital structure) as of the closing date;

 

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·the other party having performed, in all material respects, its covenants and agreements contained in the merger agreement required to be performed prior to the closing date; and

 

·since the date of the merger agreement, there having not been or occurred any material adverse effect to the other party.

 

In addition, the obligations of Medytox to consummate the transactions contemplated by the merger agreement are subject to the satisfaction of the following conditions as of the closing date:

 

·the reverse stock split shall have been effected;

 

·the key employees shall have executed and delivered their respective employment agreements; and

 

·there shall be no event of default under certain agreements between Medytox and CollabRx.

 

Medytox and CollabRx may waive conditions to completion of the merger only to the extent legally permissible. In the event that either Medytox or CollabRx determines to waive any condition to the merger and such waiver necessitates the recirculation of this joint proxy statement/prospectus and resolicitation of proxies under applicable law, Medytox and CollabRx will recirculate this joint proxy statement/prospectus and resolicit proxies from Medytox and CollabRx stockholders.

 

For a more complete discussion of the conditions to completion of the merger, see “The Merger Agreement-Conditions to Completion of the Merger” beginning on page 99.

 

No Solicitation; Board Recommendations

 

Subject to certain exceptions specified in the merger agreement, each of CollabRx and Medytox agreed not to (i) solicit proposals relating to, participate or engage in discussions or negotiations with respect to, or enter into any agreement with respect to an acquisition proposal with respect to itself or (ii) disclose any non-public information or data relating to, or afford access to the properties, books, or records of, itself or any of its subsidiaries to any person that has made an acquisition proposal with respect to it.

 

If, however, prior to obtaining the approval of its stockholders, CollabRx or Medytox receives an unsolicited written acquisition proposal from a third party that constitutes, or that its respective board of directors determines in good faith is reasonably expected to lead to, a superior proposal, then CollabRx or Medytox, as applicable, may, subject to certain conditions included in the merger agreement, disclose any non-public information or data relating to, or afford access to the properties, books, or records of, itself or any of its subsidiaries to and participate or engage in discussions or negotiations with that third party with respect to that proposal.

 

For a more complete description of the prohibition on solicitations of acquisition proposals from third parties, see “The Merger Agreement-No Solicitation” beginning on page 94.

 

Change of Recommendation

 

The merger agreement generally restricts the ability of the board of directors of each of CollabRx and Medytox to withdraw its recommendation that its stockholders approve the transactions contemplated by the merger agreement or to propose publicly to recommend, adopt, or approve any acquisition proposal with respect to itself.

 

However, the board of directors of each of CollabRx and Medytox may change its recommendation, prior to obtaining the approval of the respective stockholders, in response to a superior offer or an intervening event if, among other things, such board of directors concludes that a failure to change its recommendation would be a breach of its fiduciary duties to its stockholders and, if requested by the other party, its representatives have negotiated in good faith with the other party for four business days regarding any amendment to the merger agreement that would allow the transaction contemplated thereby to be effected.

 

For a more complete description of the circumstances under which the CollabRx board of directors or Medytox board of directors may withdraw its recommendation that its stockholders approve the merger, see “The Merger Agreement-No Solicitation” beginning on page 94.

 

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Termination of the Merger Agreement

 

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time by mutual written consent of CollabRx and Medytox, as well as under certain other circumstances.

 

The merger agreement may be terminated:

 

·by either CollabRx or Medytox if the other party’s board of directors or any committee thereof (i) makes an adverse recommendation change or (ii) publicly proposes to make an adverse recommendation change;

 

·by either CollabRx or Medytox if at any time prior to obtaining the approval of its stockholders, in order to enter into a definitive agreement with respect to a superior proposal, in each case if it has complied with its obligations under the provisions described under “The Merger Agreement-No Solicitation” and, in connection with the termination of the merger agreement, it pays to the other party in immediately available funds $1 million; or

 

·by either CollabRx or Medytox if at any time prior to the effective time, if any of the other party’s covenants, representations or warranties contained in the merger agreement has been breached or any of the other party’s representations and warranties has become untrue, such that any of the conditions to the closing of the merger described under “The Merger Agreement-Conditions to Completion of the Merger” will not be satisfied, and (i) such breach is incapable of being cured by December 31, 2015 and (ii) at least 30 days written notice shall have been given.

 

The merger agreement also may be terminated by either CollabRx or Medytox if, subject to certain conditions being met:

 

·the required approval of either party’s stockholders contemplated under the merger agreement at the respective stockholders’ meeting is not obtained;

 

·the transactions contemplated by the merger agreement violate any order, decree or ruling of any court or governmental body that has become final and non-appealable or if there is a law that makes the transactions contemplated in the merger agreement illegal or otherwise prohibited; or

 

·the merger has not been consummated on or before December 31, 2015, subject to an extension not later than March 31, 2016 under certain circumstances.

 

For a more complete discussion of the circumstances under which the merger agreement may be terminated, see “The Merger Agreement-Termination of the Merger Agreement” beginning on page 101.

 

Expenses and Termination Fee

 

All costs and expenses incurred in connection with the negotiation of the merger agreement, the performance of the obligations thereunder, and the consummation of the transactions contemplated thereby will be paid by the party incurring these expenses. The merger agreement provides that each of CollabRx and Medytox will be obligated to pay a $1 million termination fee to the other party following the termination of the merger agreement by the other party in certain circumstances.

 

For a more complete discussion of termination fees and expenses, see “The Merger Agreement-Termination Fees” and “The Merger Agreement – Other Expenses” beginning on pages 103 and 104, respectively.

 

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Anticipated Accounting Treatment

 

The merger will be accounted for as a “reverse acquisition” pursuant to which Medytox will be considered the acquiring entity for accounting purposes in accordance with U.S. generally accepted accounting principles. As such, Medytox will allocate the total purchase consideration to CollabRx’s tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of completion of the merger. Medytox’s historical results of operations will replace CollabRx’s historical results of operations for all periods prior to the merger. After completion of the merger, the results of operations of both companies will be included in the combined company’s financial statements. As required under applicable regulations under the Code, for certain consolidated tax return compliance and accounting purposes following the merger, CollabRx will calculate and file consolidated tax returns and certain financial statements as though Medytox was the surviving entity in the merger and as though Medytox were the parent to the new consolidated group. For all other purposes, CollabRx will be the surviving parent to the new consolidated group.

 

For a more complete discussion of the anticipated accounting treatment of the merger, see “The Merger-Anticipated Accounting Treatment” beginning on page 84.

 

Voting and Support Agreements

 

Pursuant to the merger agreement, CollabRx entered into voting agreements in the form of a Voting and Support Agreement with certain Medytox stockholders representing stockholders holding approximately 88% of Medytox’s currently outstanding shares of common stock and all of Medytox’s outstanding shares of preferred stock, pursuant to which, among other things and subject to the terms and conditions therein, such stockholders agreed to vote their Medytox shares in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement and against any acquisition proposal (other than the merger), including any “superior proposal.” Medytox entered into a similar agreement with Mr. Mika, Chief Executive Officer of CollabRx. Copies of the voting agreements are attached as Annex E and F to this joint proxy statement/prospectus.

 

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

 

The merger is intended to be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Assuming the merger qualifies as a reorganization, holders of Medytox capital stock will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of the holder’s Medytox shares for CollabRx shares pursuant to the merger. You are urged to consult your own tax advisor regarding the particular consequences to you of the merger.

 

For a more complete discussion of the material U.S. federal income tax consequences of the merger, see “Material U.S. Federal Income Tax Consequences of the Reverse Stock Split, Merger and Ownership of CollabRx Capital Stock” beginning on page 106.

 

Tax matters are very complicated, and the tax consequences of the merger to a particular shareholder will depend in part on such shareholder’s circumstances. Accordingly, you should consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws.

 

Comparative Per Share Data

 

The following tables set forth certain historical and pro forma per share financial information for Medytox shares and CollabRx shares. The following information should be read in conjunction with the audited financial statements of Medytox and CollabRx, which are provided in this joint proxy statement/prospectus beginning on pages F-2 and F-71, respectively. The unaudited pro forma information below is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. The unaudited pro forma information also does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.

 

Per share information for the six months ended June 30, 2015:

Medytox
Historical

CollabRx
Historical

Pro Forma
Combined

Net income (loss) $ (0.16 ) $ (0.39 ) $ (0.06
Book value   0.51     0.67   $ 0.27  
Cash dividends on common stock            

 

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Per share information for the year ended December 31, 2014:

Medytox
Historical

CollabRx
Historical

Pro Forma
Combined

Net income (loss) $     0.09   $ (1.75)   $     0.06  
Book value   0.51     0.43     0.29  
Cash dividends on common stock            

 

Comparative Per Share Market Price Data

 

Medytox shares of common stock are quoted by the OTC Markets Group, Inc., in a non-NASDAQ over the counter market under the symbol “MMMS.” CollabRx shares of common stock are listed for trading on the NASDAQ Capital Market under the symbol “CLRX.” Medytox shares of preferred stock are not quoted or listed for trading on any market. The following table lists the closing prices per CollabRx share and Medytox share on the over the counter market and NASDAQ on the following dates:

 

·April 15, 2015, the last full trading day prior to the public announcement of the merger, and

 

·September 22, 2015, the last trading day for which this information could be calculated prior to the date of this joint proxy statement/prospectus.

 

 

Medytox shares of common stock

 

CollabRx shares of common stock

 
April 15, 2015 $ 4.20   $ 1.05  
September 22, 2015 $ 3.30   $ 0.74  

 

Recent Developments

 

Medytox Operating Results

 

Medytox’s operating results for 2015 have been impacted by a variety of factors which should be considered in reviewing the results. While sample volumes increased over prior periods, collection rates on gross billings have declined as a consequence of changes in payor reimbursement practices and the mix of testing being performed. Revenues were also reduced by an increased number of uninsured patients for which billings are more difficult. (Medytox has stopped providing services to customers from which uninsured patients created collection difficulties.) Finally, revenues were negatively impacted by the write off of accounts determined to be uncollectible. In addition to increases to support growing operations, operating expenses reflect substantial increases over the prior periods as Medytox continues to make investments in development of products in the IT portion of the business. (Medytox introduced its new EHR product in the market in August of 2015.) The operating expenses for 2015 also include the impact of the 2014 acquisitions made by the company; exaggerating the growth rate when compared to the same periods in the previous years. The expenses also reflect the impact of one time stock compensation awards to key employees. (A complete discussion of these factors appears in the “Medytox’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 121).

 

For the three months ended June 30, 2015, Medytox reported:

 

· net revenues of $9.4 million, compared to $16.0 million for the three months ended June 30, 2014, representing a decrease of $6.6 million, or 41.1%;
· operating expenses of $14.0 million, compared to $10.2 million for the three months ended June 30, 2104, representing an increase of $3.8 million, or 37.6%;
· a loss from operations of $4.6 million, compared to income from operations of $5.8 million for the three months ended June 30, 2014;
· a net loss attributable to common stockholders of $5.1 million, compared to net income attributable to common stockholders of $2.0 million for the three months ended June 30, 2014.

 

For the six months ended June 30, 2015, Medytox reported:

 

· net revenues of $23.0 million, compared to $30.8 million for the six months ended June 30, 2014, representing a decrease of $7.8 million, or 25.3%;
· operating expenses of $25.4 million, compared to $18.2 million for the six months ended June 30, 2014, representing an increase of $7.2 million, or 39.9%;
· a loss from operations of $2.4 million, compared to income from operations of $12.7 million for the six months ended June 30, 2014; and
· a net loss attributable to common stockholders of $4.6 million, compared to net income attributable to common stockholders of $5.4 million for the six months ended June 30, 2014.

 

Medytox Income Tax Liability and Federal Tax Lien

 

In August 2015, the Internal Revenue Service filed a tax lien against Medytox relating to the 2013 federal tax liability of $1.2 million. In September 2015, Medytox borrowed $3.0 million and used a portion of those funds to pay the 2013 federal tax liability and the tax lien was released.  Medytox has recorded a $5.6 million total tax liability for 2014 and 2015, but has made no payments to date on such liabilities.

 

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RISK FACTORS

 

In addition to the other information included in this joint proxy statement/prospectus, including the matters addressed under “Cautionary Statement Concerning Forward-Looking Statements,” Medytox and CollabRx stockholders should consider carefully the following risk factors before deciding how to vote their Medytox shares at the Medytox special meeting and/or CollabRx shares at the CollabRx special meeting. If any of the risks described below actually occur, the respective businesses, operating results, financial condition or share prices of Medytox, CollabRx or the combined company could be materially adversely affected. The risks discussed below may not prove to be exhaustive and are based on certain assumptions made by Medytox and CollabRx, which later may prove to be incorrect or incomplete.

 

Risks Related to the Merger

 

The Exchange Ratio will not be adjusted in the event of any change in the price of either Medytox shares or CollabRx shares.

 

Upon completion of the merger, each Medytox share of common stock will be converted into the right to receive a certain number of CollabRx shares of common stock based on the Exchange Ratio. This Exchange Ratio will not be adjusted for changes in the market price of either Medytox shares or CollabRx shares between the date of signing the merger agreement and completion of the merger. Changes in the price of CollabRx shares prior to the merger will affect the value of CollabRx shares that Medytox stockholders will receive on the closing date.

 

The prices of Medytox shares and CollabRx shares, and the number of outstanding shares of common stock of Medytox or CollabRx, on the date of the completion of the merger may vary from the date the merger agreement was executed, the date of this joint proxy statement/prospectus and the date of each stockholder meeting. As a result, the value represented by the Exchange Ratio will also vary. These variations could result from changes in the business, operations or prospects of Medytox or CollabRx prior to or following the completion of the merger, regulatory considerations, general market and economic conditions and other factors both within and beyond the control of Medytox or CollabRx. At the time of the Medytox special meeting, Medytox stockholders will not know with certainty the value of the CollabRx shares that they will receive upon completion of the merger.

 

Our Series B Preferred Stock has a significant liquidation preference.

 

Upon completion of the merger, the CollabRx Series B Preferred Stock will have a liquidation preference of $5,000 per share, payable upon certain liquidity events. Upon any liquidation, dissolution or winding up of CollabRx, and after paying or adequately providing for the payment of all its obligations, the remainder of the assets of CollabRx shall be distributed, either in cash or in kind, first pro rata to the holders of the Series B Preferred Stock in an amount equal to the liquidation preference; then, to any other series of preferred stock, until an amount to be determined by a resolution of the Board of Directors prior to issuances of such preferred stock, has been distributed per share, and, then, the remainder pro rata to the holders of the common stock.

 

Currently, the liquidation preference to which the holders of the CollabRx Series B Preferred Stock will be entitled totals approximately $25 million in the aggregate. It would be unlikely that holders of the Series B Preferred Stock would vote in favor of any corporate merger/transaction unless all or a significant portion of the value resulting from such a transaction (at least an amount equal to the Series B Preferred Stock liquidation preference) is ascribed to the Series B Preferred Stock. Therefore, absent a concession from the holders of the Series B Preferred Stock or a redemption of the Series B Preferred Stock, there may be significantly less funds remaining after the payment of the liquidation preference for holders of other preferred stock or the common stock, or CollabRx could be forced to accrue this liability on its financials.

 

The merger is subject to certain conditions to closing that could result in the merger not being consummated or being delayed, any of which could negatively impact the share price and future business and operating results of Medytox and CollabRx.

 

Consummation of the merger is subject to a number of customary conditions, including, but not limited to, the adoption and approval of the merger agreement by the Medytox stockholders, the approval of the CollabRx Share Issuance by the CollabRx stockholders, and the other conditions described under “The Merger Agreement-Conditions to Completion of the Merger” beginning on page 99. There is no assurance that Medytox and CollabRx will receive the necessary approvals or satisfy the other conditions necessary for the completion of the merger. If any conditions to the merger are not satisfied or, where waiver is permissible, not waived, the merger will not be consummated.

 

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Failure to complete the merger would prevent Medytox and CollabRx from realizing the anticipated benefits of the merger. Medytox and CollabRx have already and expect to continue to incur significant costs associated with transaction fees, professional services, taxes and other costs related to the merger. In the event that the merger is not completed, Medytox and CollabRx, respectively, will remain liable for these costs and expenses. Further, if the merger is not completed and the merger agreement is terminated, under certain circumstances, either Medytox or CollabRx may be required to pay the other party a termination fee of $1 million.

 

In addition, the current market price of Medytox shares and CollabRx shares may reflect a market assumption that the merger will occur, and a failure to complete the merger could result in a negative perception by the market of Medytox and CollabRx generally and a resulting decline in the market price of Medytox shares and CollabRx shares. Any delay in the consummation of the merger or any uncertainty about the consummation of the merger could also negatively impact the share price and future business and operating results of Medytox and CollabRx. Medytox and CollabRx cannot assure you that the merger will be consummated, that there will be no delay in the consummation of the merger or that the merger will be consummated on the terms contemplated by the merger agreement.

 

Medytox and CollabRx may waive one or more conditions to the merger without resoliciting stockholder approval for the merger.

 

Certain conditions to Medytox’s and CollabRx’s obligations to complete the merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of Medytox and CollabRx. In the event of a waiver of a condition, the boards of directors of Medytox and CollabRx will evaluate the materiality of any such waiver to determine whether a supplement to this joint proxy statement/prospectus, an amendment to the registration statement of which this joint proxy statement/prospectus is a part or a resolicitation of proxies is necessary. If the Medytox board of directors or the CollabRx board of directors determines any such waiver is not significant enough to require resolicitation of stockholders, it will have the discretion to complete the merger without seeking further stockholder approval.

 

The merger agreement contains provisions that restrict Medytox’s and CollabRx’s ability to pursue alternatives to the merger and, in specified circumstances, could require Medytox or CollabRx to pay the other party a termination fee.

 

Under the merger agreement, Medytox and CollabRx each agreed not to (1) take certain actions to solicit proposals relating to alternative business combination transactions or (2) subject to certain exceptions, including the receipt of a “superior proposal” (as defined in the merger agreement), enter into discussions or an agreement concerning, or provide confidential information in connection with any proposals, for alternative business combination transactions. In certain specified circumstances described under “The Merger Agreement-Termination Fees,” upon termination of the merger agreement, one party would be required to pay the other party a termination fee of $1 million. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Medytox or CollabRx from considering or proposing that acquisition, even if such third party were prepared to enter into a transaction that is more favorable to Medytox, CollabRx or their respective stockholders than the proposed merger.

 

Whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruptions in the businesses of Medytox and CollabRx, which could have an adverse effect on the businesses and operating results of Medytox and CollabRx.

 

Whether or not the merger is completed, the announcement and pendency of the merger could cause disruptions in or otherwise negatively impact the businesses and operating results of Medytox and CollabRx, including among others:

 

·Medytox and CollabRx employees may experience uncertainty about their future roles with the combined company, which might adversely affect Medytox’s and CollabRx’s ability to retain and hire key personnel and other employees;

 

·the attention of Medytox’s and CollabRx’s management may be directed toward completion of the merger and transaction-related considerations and may be diverted from the day-to-day operations and pursuit of other opportunities that could have been beneficial to the businesses of Medytox and CollabRx; and

 

·customers, distributors, independent sales agencies, vendors or suppliers may seek to modify or terminate their business relationships with Medytox or CollabRx, or delay or defer decisions concerning Medytox or CollabRx.

 

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These disruptions could be exacerbated by a delay in the completion of the merger or termination of the merger agreement and could have an adverse effect on the businesses, operating results or prospects of Medytox and CollabRx if the merger is not completed or the business, operating results or prospects of the combined company if the merger is completed.

 

Current Medytox and CollabRx stockholders will have a reduced ownership and voting interest in the combined company after the merger.

 

Upon completion of the merger, Medytox stockholders will own approximately 90% of the combined company and CollabRx stockholders will own approximately 10% of the combined company; provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages. Medytox and CollabRx stockholders currently have the right to vote for their respective directors and on other matters affecting their respective companies. When the merger occurs, each Medytox stockholder who receives CollabRx shares in the merger will become a stockholder of the combined company with a percentage ownership of the combined company that will be smaller than the stockholder’s percentage ownership of Medytox. Correspondingly, each CollabRx stockholder will remain a stockholder of the combined company with a percentage ownership of the combined company that will be significantly smaller than the stockholder’s percentage ownership of CollabRx prior to the merger. As a result of these reduced ownership percentages, current Medytox stockholders will have less voting power in the combined company than they now have with respect to Medytox, and current CollabRx stockholders will have significantly less voting power in the combined company than they now have with respect to CollabRx.

 

The CollabRx shares to be received by Medytox stockholders as a result of the merger will have different rights from outstanding Medytox shares.

 

Following completion of the merger, Medytox stockholders will no longer be stockholders of Medytox, but will be stockholders of CollabRx, which will be renamed Rennova Health, Inc. Medytox stockholders’ rights are currently governed by the Medytox articles of incorporation and bylaws, and Nevada law. After the merger, the combined company stockholders’ rights will be governed by the combined company’s certificate of incorporation and bylaws and Delaware law.

 

See “Comparison of Rights of Holders of CollabRx Common Stock and Medytox Common Stock” beginning on page 201 for a discussion of the different rights associated with Medytox shares and CollabRx shares.

 

The opinion of CollabRx’s financial advisor will not reflect changes in circumstances between the signing of the merger agreement and completion of the merger.

 

CollabRx has not obtained an updated opinion from its financial advisor as of the date of this joint proxy statement/prospectus and does not expect to receive an updated opinion prior to completion of the merger. Changes in the operations and prospects of Medytox or CollabRx, general market and economic conditions and other factors that may be beyond the control of Medytox or CollabRx, and on which CollabRx’s financial advisor’s opinion was based, may significantly alter the value of Medytox or CollabRx or the prices of Medytox shares or CollabRx shares by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because CollabRx’s financial advisor will not be updating its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed. The Medytox board of directors’ recommendation that Medytox stockholders vote “FOR” the proposals being submitted to the Medytox stockholders and the CollabRx board of directors’ recommendation that CollabRx stockholders vote “FOR” the proposals being submitted to CollabRx stockholders, however, are made as of the date of this joint proxy statement/prospectus. For a description of the opinion that CollabRx received from its financial advisor, please refer to “The Merger-Opinion of CollabRx’s Financial Advisor” beginning on page 75.

 

The directors and executive officers of Medytox and CollabRx have interests in the merger that are different from, or in addition to, those of other Medytox and CollabRx stockholders, which could have influenced their decisions to support or approve the merger.

 

In considering whether to approve the proposals at the meetings, Medytox and CollabRx stockholders should recognize that the directors and executive officers of Medytox and CollabRx have interests in the merger that are in addition to their interests as stockholders of Medytox or CollabRx. These interests may include, among others, continued service as a director or an executive officer of the combined company, accelerated vesting of certain equity-based awards or certain severance benefits and payment of certain amounts in connection with the merger, as applicable. These interests, among others, may influence the directors and executive officers of Medytox to support or approve the proposals at the Medytox special meeting or the directors and executive officers of CollabRx to support or approve the proposals at the CollabRx special meeting. See “The Merger - Interests of Medytox’s Directors and Officers in the Merger” and “The Merger - Interests of CollabRx’s Directors and Officers in the Merger” beginning on pages 79 and 81, respectively.

 

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Risks Related to the Combined Company if the Merger is Completed

 

The combined company will need additional financing after the merger is completed, which may not be available on favorable terms at the time it is needed and which could reduce the combined company’s operational and strategic flexibility.

 

The combined company will require additional working capital to fund future operations. The combined company could seek to acquire that through additional equity or debt financing arrangements, which may or may not be available on favorable terms at such time. If the combined company raises additional funds by issuing equity securities, the combined company’s stockholders will experience dilution. Debt financing, if available, may involve covenants restricting the combined company’s operations or its ability to incur additional debt. Any debt financing or additional equity that the combined company raises may contain terms that are not favorable to the combined company or its stockholders. If the combined company does not have, or is not able to obtain, sufficient funds, it may have to delay development or commercialization of its products or license to third parties the rights to commercialize products or technologies that it would otherwise seek to commercialize. The combined company also may have to reduce marketing, customer support or other resources devoted to its products or cease operations.

 

The combined company may be unable to successfully integrate Medytox’s and CollabRx’s operations or realize the anticipated cost savings and other potential benefits of the merger in a timely manner or at all. As a result, the value of the combined company’s shares may be adversely affected.

 

Medytox and CollabRx entered into the merger agreement because each company believed that the merger will be beneficial to its respective stockholders, other stakeholders and businesses. Achieving the anticipated potential benefits of the merger will depend in part upon whether the combined company is able to integrate Medytox’s and CollabRx’s operations in an efficient and effective manner. The integration process may not be completed smoothly or successfully. The necessity of coordinating geographically separated organizations, systems and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. Medytox and CollabRx operate numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, payroll, employee benefits and regulatory compliance. Medytox and CollabRx may also have inconsistencies in standards, controls, procedures or policies that could affect the combined company’s ability to maintain relationships with customers and employees after the merger or to achieve the anticipated benefits of the merger. The integration of certain operations following the merger will require the dedication of significant management resources, which may temporarily distract management’s attention from the combined company’s day-to-day business. Employee uncertainty and lack of focus during the integration process may also disrupt the combined company’s business. Any inability of management to integrate successfully the operations of the two companies or to do so within a longer time frame than expected could have a material adverse effect on the combined company’s business and operating results. The combined company may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of the merger. An inability to realize the full extent of, or any of, the anticipated benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect on the combined company’s business and operating results, which may affect the value of the combined company’s shares after completion of the merger.

 

The success of the combined company after the merger will depend in part upon the ability of Medytox and CollabRx to retain key employees of each company. Competition for qualified personnel can be very intense. In addition, key employees may depart because of issues relating to the uncertainty or difficulty of integration or a desire not to remain with the combined company. Accordingly, no assurance can be given that key employees will be retained.

 

Medytox and CollabRx have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.

 

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The future results of the combined company will suffer if the combined company does not effectively manage its expanded operations following completion of the merger.

 

Following completion of the merger, the size of the business of the combined company will increase significantly beyond the current size of either Medytox’s or CollabRx’s business. The combined company’s future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

 

Medytox and CollabRx will incur direct and indirect costs as a result of the merger.

 

Medytox and CollabRx will incur substantial expenses in connection with completing the merger, and over a period of time following completion of the merger, the combined company further expects to incur substantial expenses in connection with coordinating the businesses, operations, policies and procedures of Medytox and CollabRx. While Medytox and CollabRx have assumed that a certain level of transaction and coordination expenses will be incurred, there are a number of factors beyond the combined company’s control that could affect the total amount or the timing of these transaction and coordination expenses. For example, as discussed under “The Merger - Appraisal and Dissenters’ Rights,” NRS Section 78.3793 along with NRS Sections 92A.300 to 92A.500 entitle any holder of Medytox shares as of the record date for the special meeting of Medytox stockholders, in lieu of receiving the merger consideration that such holder would otherwise be entitled pursuant to the merger agreement, to dissent from the merger and obtain payment in cash for the “fair value” of the Medytox shares held by such holder. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. These expenses may exceed the costs historically borne by Medytox and CollabRx.

 

Medytox’s and CollabRx’s actual financial positions and results of operations may differ materially from the unaudited pro forma financial data included in this joint proxy statement/prospectus.

 

The pro forma financial information contained in this joint proxy statement/prospectus is presented for illustrative purposes only and may not be an indication of what the combined company’s financial position or results of operations would have been had the transaction been completed on the dates indicated. The pro forma financial information was derived from the audited and unaudited historical financial statements of Medytox and CollabRx and certain adjustments and assumptions were made regarding the combined company after the transaction. The assets and liabilities of Medytox and CollabRx are reported at historical values. Purchase price estimates and allocations will be completed as additional information becomes available and as additional analyses are performed. Additionally, the value of the consideration deemed (for accounting purposes only) to be given by Medytox to complete the merger will be determined based on the value of Medytox’s common stock at the time of the completion of the merger. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations.

 

The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the closing. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the share price of the combined company.

 

The expected officers and directors of the combined company will have the ability to exercise significant control over the combined company.

 

Following the effective time of the merger, the directors and executive officers of the combined company may exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of the combined company or forcing management to change its operating strategies, which may be to the benefit of management but not in the interest of the stockholders of the combined company.

 

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The market price of the combined company’s shares after the merger may be affected by factors different from those currently affecting Medytox shares or CollabRx shares.

 

Upon completion of the merger, holders of Medytox shares will become holders of CollabRx shares. The business of Medytox differs from that of CollabRx in important respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares following the merger may be affected by factors different from those currently affecting the independent results of operations of Medytox and CollabRx. For a discussion of the businesses of Medytox and CollabRx and of certain factors to consider in connection with those businesses, see “Information With Respect to Medytox’s Business” and “Information With Respect to CollabRx’s Business” beginning on pages 110 and 128, respectively.

 

If goodwill or other intangible assets that the combined company records in connection with the merger become impaired, the combined company could be required to take significant charges against earnings.

 

In connection with the accounting for the merger, the combined company expects to record a significant amount of goodwill and other intangible assets. Under U.S. generally accepted accounting principals, or GAAP, the combined company must assess, at least annually and potentially more frequently, whether the value of its goodwill and other indefinite-lived intangible assets have been impaired. Amortizing intangible assets will be assessed for impairment in the event of an impairment indicator. Any impairment of the value of goodwill or other intangible assets will result in a charge against earnings, which could materially adversely affect the combined company’s results of operations and stockholders’ equity in future periods.

 

If any of the events described in “Risks Related to Medytox” or “Risks Related to CollabRx” occur, those events could cause the potential benefits of the merger not to be realized.

 

Following completion of the merger, the combined company will be susceptible to many of the risks described under “Risks Related to Medytox” and “Risks Related to CollabRx.” To the extent any of the events in the risks described in those sections occur, those events could cause the potential benefits of the merger not to be realized and the market price of the combined company’s shares to decline.

 

Risks Related to Medytox

 

An investment in the securities of Medytox is highly speculative and subject to numerous and substantial risks. These risks include those set forth herein. You should carefully consider the risks and uncertainties described below and the other information in this proxy statement/prospectus. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected.

 

Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes or changing interpretations of, CLIA or state laboratory licensing laws to which we are subject.

 

The clinical laboratory testing industry is subject to extensive federal and state regulation, and many of these statutes and regulations have not been interpreted by the courts. The CLIA are federal regulatory standards that apply to virtually all clinical laboratories (regardless of the location, size or type of laboratory), including those operated by physicians in their offices, by requiring that they be certified by the federal government or by a federally approved accreditation agency. CLIA does not preempt state law, which in some cases may be more stringent than federal law and require additional personnel qualifications, quality control, record maintenance and proficiency testing. The sanction for failure to comply with CLIA and state requirements may be suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. Several states have similar laws and we may be subject to similar penalties.

 

We cannot assure you that applicable statutes and regulations will not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect our business. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations, which could have a material adverse effect on our business. In addition, compliance with future legislation could impose additional requirements on us, which may be costly.

 

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Healthcare plans have taken steps to control the utilization and reimbursement of healthcare services, including clinical test services.

 

We also face efforts by non-governmental third-party payers, including healthcare plans, to reduce utilization and reimbursement for clinical testing services.

 

The healthcare industry has experienced a trend of consolidation among healthcare insurance plans, resulting in fewer but larger insurance plans with significant bargaining power to negotiate fee arrangements with healthcare providers, including clinical testing providers. These healthcare plans, and independent physician associations, may demand that clinical testing providers accept discounted fee structures or assume all or a portion of the financial risk associated with providing testing services to their members through capped payment arrangements. In addition, some healthcare plans have been willing to limit the PPO or Point of Service (“POS”) laboratory network to only a single national laboratory to obtain improved fee-for-service pricing. There are also an increasing number of patients enrolling in consumer driven products and high deductible plans that involve greater patient cost-sharing.

 

The increased consolidation among healthcare plans also has increased the potential adverse impact of not being a contracted provider with any such insurer. The Patient Protection and Affordable Care Act (the “Health Care Reform Law”) includes provisions, including ones regarding the creation of healthcare exchanges, which may encourage healthcare insurance plans to increase exclusive contracting.

 

We expect continuing efforts to reduce reimbursements, to impose more stringent cost controls and to reduce utilization of clinical test services. These efforts, including future changes in third-party payer rules, practices and policies, or failing or ceasing to be a contracted provider to a healthcare plan, may have a material adverse effect on our business.

 

Unless we raise sufficient funds, we will not be able to succeed in our business model.

 

Medytox, under its current business model, commenced operations in July 2011 and has changed significantly in the past few years which may make it difficult to evaluate our business and prospects based on prior performance. Our business model requires us to secure working capital for marketing expenses. Unless we raise sufficient funds, we will not be able to succeed in our business model. If our model fails, then we will fail as a company.

 

Regulation by the Food and Drug Administration (“FDA”) of Laboratory Developed Tests (“LDTs”) and clinical laboratories may result in significant change, and our business could be adversely impacted if we fail to adapt.

 

High complexity, CLIA-certified laboratories, such as ours, frequently develop testing procedures to provide diagnostic results to customers.  These tests have been traditionally offered by nearly all complex laboratories for the last few decades and LDTs are subject to oversight of the Center for Medicare and Medicaid Services (“CMS”) through its enforcement of CLIA.  The FDA, which regulates the development and use of medical devices, has claimed that it has regulatory authority over LDTs, but has not exercised enforcement with respect to most LDTs offered by high complexity laboratories, and not sought to require these laboratories to comply with FDA regulations regarding medical devices.  During 2010, the FDA publicly announced that it has decided to exercise regulatory authority over these LDTs, and that it plans to issue guidance to the industry regarding its regulatory approach. At that time, the FDA indicated that it would use a risk-based approach to regulation and would direct more resources to tests with wider distribution and with the highest risk of injury, but that it will be sensitive to the need to not adversely impact patient care or innovation. In September 2014, the FDA announced its framework and timetable for implementing this guidance. We cannot predict the ultimate timing or form of any such guidance or regulation or their potential impact. If adopted, such a regulatory approach by the FDA may lead to an increased regulatory burden, including additional costs and delays in introducing new tests. While the ultimate impact of the FDA’s approach is unknown, it may be extensive and may result in significant change. Our failure to adapt to these changes could have a material adverse effect on our business.

 

Some of our activities may subject us to risks under federal and state laws prohibiting “kickbacks” and other laws designed to prohibit payments for referrals and eliminate healthcare fraud.

 

Federal and state anti-kickback and similar laws prohibit payment, or offers of payment, in exchange for referrals of products and services for which reimbursement may be made by Medicare or other federal and state healthcare programs. Some state laws contain similar prohibitions that apply without regard to the payor of reimbursement for the services. Under a federal statute, known as the “Stark Law” or “self-referral” prohibition, physicians, subject to certain exceptions, are prohibited from referring their Medicare or Medicaid program patients to clinical laboratories with which the physicians or their immediate family members have a financial relationship, and the laboratories are prohibited from billing for services rendered in violation of Stark Law referral prohibitions.  Violations of the federal health care programs’ anti-kickback law (the “Anti-Kickback Law”) and Stark Law may be punished by civil and criminal penalties, and/or exclusion from participation in federal health care programs, including Medicare and Medicaid.  States may impose similar penalties. The Health Care Reform Law significantly strengthened provisions of the Federal False Claims Act and Anti-Kickback Law provisions, and other health care fraud provisions, leading to the possibility of greatly increased qui tam suits by relators for perceived violations of these laws. There can be no assurance that our activities will not come under the scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws.

 

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Federal officials responsible for administering and enforcing the healthcare laws and regulations have made a priority of eliminating healthcare fraud. For example, the Health Care Reform Law includes significant new fraud and abuse measures, including required disclosures of financial arrangements with physician customers, lower thresholds for violations and increased potential penalties for violations. Federal funding available for combating health care fraud and abuse generally has increased. While we seek to conduct our business in compliance with all applicable laws and regulations, many of the laws and regulations applicable to our business, particularly those relating to billing and reimbursement of tests and those relating to relationships with physicians, hospitals and patients, contain language that has not been interpreted by courts. We must rely on our interpretation of these laws and regulations based on the advice of our counsel and regulatory or law enforcement authorities may not agree with our interpretation of these laws and regulations and may seek to enforce legal remedies or penalties against us for violations. From time to time we may need to change our operations, particularly pricing or billing practices, in response to changing interpretations of these laws and regulations or regulatory or judicial determinations with respect to these laws and regulations. These occurrences, regardless of their outcome, could damage our reputation and harm important business relationships that we have with healthcare providers, payors and others. Furthermore, if a regulatory or judicial authority finds that we have not complied with applicable laws and regulations, we would be required to refund amounts that were billed and collected in violation of such laws and regulations. In addition, we may voluntarily refund amounts that were alleged to have been billed and collected in violation of applicable laws and regulations. In either case, we could suffer civil and criminal damages, fines and penalties, exclusion from participation in governmental healthcare programs and the loss of licenses, certificates and authorizations necessary to operate our business, as well as incur liabilities from third-party claims, all of which could harm our operating results and financial condition. Moreover, regardless of the outcome, if we or physicians or other third parties with whom we do business are investigated by a regulatory or law enforcement authority we could incur substantial costs, including legal fees, and our management may be required to divert a substantial amount of time to an investigation.

 

To enhance compliance with applicable health care laws, and mitigate potential liability in the event of noncompliance, regulatory authorities, such as the Department of Health and Human Services’ Office of Inspector General (“OIG”), have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the elements of an effective compliance and ethics program described in Section 8B2.1 of the United States Sentencing Commission Guidelines Manual, and for many years the OIG has made available a model compliance program targeted to the clinical laboratory industry. In addition, certain states require that health care providers, such as clinical laboratories, that engage in substantial business under the state Medicaid program have a compliance program that generally adheres to the standards set forth in the Model Compliance Program.  Also, under the Health Care Reform Law, the U.S. Department of Health and Human Services, or HHS, will require suppliers, such as Medytox, to adopt, as a condition of Medicare participation, compliance programs that meet a core set of requirements. While we have adopted, or are in the process of adopting, healthcare compliance and ethics programs that generally incorporate the OIG’s recommendations, and training our applicable employees in such compliance, having such a program can be no assurance that we will avoid any compliance issues.

 

We conduct our clinical laboratory testing business in a heavily regulated industry and changes in regulations or violations of regulations could, directly or indirectly, harm our operating results and financial condition.

 

The clinical laboratory testing industry is highly regulated and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely in the future. Areas of the regulatory environment that may affect our ability to conduct business include, without limitation:

 

·federal and state laws applicable to billing and claims payment;

 

·federal and state laboratory anti-mark-up laws;

 

·federal and state anti-kickback laws;

 

·federal and state false claims laws;

 

·federal and state self-referral and financial inducement laws, including the federal physician anti-self-referral law, or the Stark Law;

 

·coverage and reimbursement levels by Medicare and other governmental payors and private insurers;

 

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·federal and state laws governing laboratory licensing and testing, including CLIA;

 

·federal and state laws governing the development, use and distribution of diagnostic medical tests known as LDTs;

 

·the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), along with the revisions to HIPAA as a result of the Federal Health Information Technology for Economic and Clinical Health Act (“HITECH”), and analogous state laws;

 

·federal, state and foreign regulation of privacy, security, electronic transactions and identity theft;

 

·federal, state and local laws governing the handling, transportation and disposal of medical and hazardous waste;

 

·Occupational Safety and Health Administration (“OSHA”) rules and regulations;

 

·changes to laws, regulations and rules as a result of the Health Care Reform Law; and

 

·changes to other federal, state and local laws, regulations and rules, including tax laws.

 

These laws and regulations are extremely complex and in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Any determination that we have violated these laws or regulations, or the public announcement that we are being investigated for possible violations of these laws or regulations, could harm our operating results and financial condition. In addition, a significant change in any of these laws or regulations may require us to change our business model in order to maintain compliance with these laws or regulations, which could harm our operating results and financial condition.

 

Failure to comply with complex federal and state laws and regulations related to submission of claims for clinical laboratory services can result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid Programs.

 

We are subject to extensive federal and state laws and regulations relating to the submission of claims for payment for clinical laboratory services, including those that relate to coverage of our services under Medicare, Medicaid and other governmental health care programs, the amounts that may be billed for our services and to whom claims for services may be submitted.

 

Our failure to comply with applicable laws and regulations could result in our inability to receive payment for our services or result in attempts by third-party payers, such as Medicare and Medicaid, to recover payments from us that have already been made. Submission of claims in violation of certain statutory or regulatory requirements can result in penalties, including substantial civil money penalties for each item or service billed to Medicare in violation of the legal requirement, and exclusion from participation in Medicare and Medicaid. Government authorities may also assert that violations of laws and regulations related to submission or causing the submission of claims violate the federal False Claims Act (“FCA”) or other laws related to fraud and abuse, including submission of claims for services that were not medically necessary. Violations of the FCA could result in enormous economic liability. The FCA provides that all damages are trebled, and each false claim submitted is subject to a penalty of up to $11,000. For example, we could be subject to FCA liability if it was determined that the services we provided were not medically necessary and not reimbursable, particularly if it were asserted that we contributed to the physician’s referrals of unnecessary services to us. It is also possible that the government could attempt to hold us liable under fraud and abuse laws for improper claims submitted by an entity for services that we performed if we were found to have knowingly participated in the arrangement that resulted in submission of the improper claims.

 

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Changes in regulation and policies, including increasing downward pressure on health care reimbursement, may adversely affect reimbursement for diagnostic services and could have a material adverse impact on our business.

 

Reimbursement levels for health care services are subject to continuous and often unexpected changes in policies, and we face a variety of efforts by government payers to reduce utilization and reimbursement for diagnostic testing services. Changes in governmental reimbursement may result from statutory and regulatory changes, retroactive rate adjustments, administrative rulings, competitive bidding initiatives, and other policy changes.

 

The Health Care Reform Law includes two separate reductions in the reimbursement rates for our clinical laboratory services under the clinical laboratory fee schedule.  First, it includes a “productivity adjustment”. Second, it includes an additional 1.75 percent reduction, the first of a series of such annual reductions effective from 2011 to 2015, which would reduce the annual Consumer Price Index-based update that would otherwise determine our reimbursement for clinical laboratory services.  These reimbursement cuts could adversely affect our business.

 

The U.S. Congress has considered, at least yearly in conjunction with budgetary legislation, changes to the Medicare fee schedules under which we receive reimbursement. For example, currently there is no copayment or coinsurance required for clinical laboratory services. However, Congress has periodically considered imposing a 20 percent coinsurance on laboratory services. If enacted, this would require us to attempt to collect this amount from patients, although in many cases the costs of collection would exceed the amount actually received.

 

CMS pays laboratories on the basis of a fee schedule that is reviewed and re-calculated on an annual basis.  CMS may change the fee schedule upward or downward on billing codes that we submit for reimbursement on a regular basis; our revenue and business may be adversely affected if the reimbursement rates associated with such codes are reduced. Even when reimbursement rates are not reduced, policy changes add to our costs by increasing the complexity and volume of administrative requirements. Medicaid reimbursement, which varies by state, is also subject to administrative and billing requirements and budget pressures. Recently, state budget pressures have caused states to consider several policy changes that may impact our financial condition and results of operations, such as delaying payments, reducing reimbursement, restricting coverage eligibility and service coverage, and imposing taxes on our services.

 

Failure to timely or accurately bill for our services could have a material adverse effect on our business.

 

Billing for clinical testing services is extremely complicated and is subject to extensive and non-uniform rules and administrative requirements. Depending on the billing arrangement and applicable law, we bill various payers, such as patients, insurance companies, Medicare, Medicaid, physicians, hospitals and employer groups. Changes in laws and regulations could increase the complexity and cost of our billing process. Additionally, auditing for compliance with applicable laws and regulations as well as internal compliance policies and procedures adds further cost and complexity to the billing process. Further, our billing systems require significant technology investment and, as a result of marketplace demands, we need to continually invest in our billing systems.

 

Missing or incorrect information on requisitions adds complexity to and slows the billing process, creates backlogs of unbilled requisitions, and generally increases the aging of accounts receivable and bad debt expense. Failure to timely or correctly bill may lead to our not being reimbursed for our services or an increase in the aging of our accounts receivable, which could adversely affect our results of operations and cash flows. Failure to comply with applicable laws relating to billing government healthcare programs could lead to various penalties, including: (1) exclusion from participation in CMS and other government programs; (2) asset forfeitures; (3) civil and criminal fines and penalties; and (4) the loss of various licenses, certificates and authorizations necessary to operate our business, any of which could have a material adverse effect on our results of operations or cash flows.

 

There have been times when our accounts receivable have increased at a greater rate than revenue growth and, therefore, have adversely affected our cash flows from operations. We have taken steps to implement systems and processing changes intended to improve billing procedures and related collection results. We believe that we have made progress by reorganizing our accounts receivable and billing functions and that our allowance for doubtful accounts is adequate. However, we cannot assure that our ongoing assessment of accounts receivable will not result in the need for additional provisions. Such additional provisions, if implemented, could have a material adverse effect on our operating results.

 

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Our operations may be adversely impacted by the effects of extreme weather conditions, natural disasters such as hurricanes and earthquakes, health pandemics, hostilities or acts of terrorism and other criminal activities.

 

Our operations are always subject to adverse impacts resulting from extreme weather conditions, natural disasters, health pandemics, hostilities or acts of terrorism or other criminal activities. Such events may result in a temporary decline in the number of patients who seek clinical testing services or in our employees’ ability to perform their job duties. In addition, such events may temporarily interrupt our ability to transport specimens, to receive materials from our suppliers or otherwise to provide our services. The occurrence of any such event and/or a disruption of our operations as a result may adversely affect our results of operations.

 

Increased competition, including price competition, could have a material adverse impact on our net revenues and profitability.

 

We operate in a business that is characterized by intense competition. Our major competitors include large national laboratories that possess greater name recognition, larger customer bases, and significantly greater financial resources and employ substantially more personnel than we do. Many of our competitors have long established relationships. We cannot assure you that we will be able to compete successfully with such entities in the future.

 

The clinical laboratory business is intensely competitive both in terms of price and service. Pricing of laboratory testing services is often one of the most significant factors used by health care providers and third-party payers in selecting a laboratory. As a result of the clinical laboratory industry undergoing significant consolidation, larger clinical laboratory providers are able to increase cost efficiencies afforded by large-scale automated testing. This consolidation results in greater price competition. We may be unable to increase cost efficiencies sufficiently, if at all, and as a result, our net earnings and cash flows could be negatively impacted by such price competition. We may also face increased competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry. Additionally, we may also face changes in fee schedules, competitive bidding for laboratory services or other actions or pressures reducing payment schedules as a result of increased or additional competition.

 

Additional competition, including price competition, could have a material adverse impact on our net revenues and profitability.

 

Failure to comply with environmental, health and safety laws and regulations, including the federal Occupational Safety and Health Administration Act and the Needlestick Safety and Prevention Act, could result in fines and penalties and loss of licensure, and have a material adverse effect upon Medytox’s business.

 

Medytox is subject to licensing and regulation under federal, state and local laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation and disposal of medical specimens, and infectious and hazardous waste materials, as well as regulations relating to the safety and health of laboratory employees. All of Medytox’s laboratories are subject to applicable federal and state laws and regulations relating to biohazard disposal of all laboratory specimens, and they utilize outside vendors for disposal of such specimens. In addition, the federal OSHA has established extensive requirements relating to workplace safety for health care employers, including clinical laboratories, whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These requirements, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens. In addition, the Needlestick Safety and Prevention Act requires, among other things, that Medytox include in its safety programs the evaluation and use of emergency controls such as safety needles if found to be effective at reducing the risk of needlestick injuries in the workplace.

 

Failure to comply with federal, state and local laws and regulations could subject Medytox to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions which would have a material adverse effect on its business. In addition, compliance with future legislation could impose additional requirements on us which may be costly.

 

Regulations requiring the use of “standard transactions” for health care services issued under HIPAA may negatively impact Medytox’s profitability and cash flows.

 

Pursuant to HIPAA, the Secretary of Health and Human Services has issued regulations designed to improve the efficiency and effectiveness of the health care system by facilitating the electronic exchange of information in certain financial and administrative transactions while protecting the privacy and security of the information exchanged.

 

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The HIPAA transaction standards are complex, and subject to differences in interpretation by payers. For instance, some payers may interpret the standards to require Medytox to provide certain types of information, including demographic information not usually provided to Medytox by physicians. As a result of inconsistent application of transaction standards by payers or Medytox’s inability to obtain certain billing information not usually provided by physicians, Medytox could face increased costs and complexity, a temporary disruption in receipts and ongoing reductions in reimbursements and net revenues. In addition, new requirements for additional standard transactions, such as claims attachments and the ICD-10-CM Code Set, could prove technically difficult, time-consuming or expensive to implement.

 

Failure to maintain the security of customer-related information or compliance with security requirements could damage Medytox’s reputation with customers, and cause it to incur substantial additional costs and to become subject to litigation.

 

Medytox receives certain personal and financial information about its customers. In addition, Medytox depends upon the secure transmission of confidential information over public networks, including information permitting cashless payments. A compromise in our security systems that results in customer personal information being obtained by unauthorized persons or our failure to comply with security requirements for financial transactions could adversely affect Medytox’s reputation with its customers and others, as well as Medytox’s results of operations, financial condition and liquidity. It could also result in litigation against Medytox or the imposition of penalties.

 

Failure of Medytox, third party payers or physicians to comply with the ICD-10-CM Code Set by the compliance date of October 1, 2015, could negatively impact Medytox’s reimbursement, profitability and cash flow.

 

Medytox believes that it is in compliance in all material respects with the current Transactions and Code Sets Rule. Medytox implemented Version 5010 of the HIPAA Transaction Standards, and is within the testing and implementation phase of the rule to adopt the ICD-10-CM code set. The compliance date for ICD-10-CM is October 1, 2015. Medytox will continue its assessment and remediation of computer systems, applications and processes for compliance with these requirements. Clinical laboratories are typically required to submit health care claims with diagnosis codes to third party payers. The diagnosis codes must be obtained from the ordering physician. The failure of Medytox, third party payers or physicians to transition within the required timeframe could have an adverse impact on reimbursement, day’s sales outstanding and cash collections.

 

Compliance with the HIPAA security regulations and privacy regulations may increase Medytox’s costs.

 

The HIPAA privacy and security regulations, including the expanded requirements under HITECH, establish comprehensive federal standards with respect to the use and disclosure of protected health information by health plans, healthcare providers and healthcare clearinghouses, in addition to setting standards to protect the confidentiality, integrity and security of protected health information. The regulations establish a complex regulatory framework on a variety of subjects, including:

 

·the circumstances under which the use and disclosure of protected health information are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, activities to obtain payments for Medytox’s services, and its healthcare operations activities;

 

·a patient’s rights to access, amend and receive an accounting of certain disclosures of protected health information;

 

·the content of notices of privacy practices for protected health information;

 

·administrative, technical and physical safeguards required of entities that use or receive protected health information; and

 

·the protection of computing systems maintaining Electronic Personal Health Information (“ePHI”).

 

Medytox has implemented policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by law. The privacy and security regulations establish a “floor” and do not supersede state laws that are more stringent. Therefore, Medytox is required to comply with both federal privacy and security regulations and varying state privacy and security laws. In addition, for healthcare data transfers from other countries relating to citizens of those countries, Medytox must comply with the laws of those other countries. The federal privacy regulations restrict our ability to use or disclose patient identifiable laboratory data, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. HIPAA, as amended by HITECH, provides for significant fines and other penalties for wrongful use or disclosure of protected health information in violation of the privacy and security regulations, including potential civil and criminal fines and penalties. Due to the enactment of HITECH and an increase in the amount of monetary financed penalties, government enforcement has also increased. It is not possible to predict what the extent of the impact on business will be, other than heightened scrutiny and emphasis on compliance. If Medytox does not comply with existing or new laws and regulations related to protecting the privacy and security of health information it could be subject to significant monetary fines, civil penalties or criminal sanctions. In addition, other federal and state laws that protect the privacy and security of patient information may be subject to enforcement and interpretations by various governmental authorities and courts resulting in complex compliance issues. For example, Medytox could incur damages under state laws pursuant to an action brought by a private party for the wrongful use or disclosure of confidential health information or other private personal information.

 

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The clinical laboratory industry is subject to changing technology and new product introductions.

 

Advances in technology may lead to the development of more cost-effective technologies such as point-of-care testing equipment that can be operated by physicians or other healthcare providers in their offices or by patients themselves without requiring the services of freestanding clinical laboratories. Development of such technology and its use by Medytox’s customers could reduce the demand for its laboratory testing services and negatively impact its revenues.

 

Currently, most clinical laboratory testing is categorized as “high” or “moderate” complexity, and thereby is subject to extensive and costly regulation under CLIA. The cost of compliance with CLIA makes it impractical for most physicians to operate clinical laboratories in their offices, and other laws limit the ability of physicians to have ownership in a laboratory and to refer tests to such a laboratory. Manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care laboratory equipment to physicians and by selling test kits approved for home or physician office use to both physicians and patients. Diagnostic tests approved for home use are automatically deemed to be “waived” tests under CLIA and may be performed in physician office laboratories as well as by patients in their homes with minimal regulatory oversight. Other tests meeting certain FDA criteria also may be classified as “waived” for CLIA purposes. The FDA has regulatory responsibility over instruments, test kits, reagents and other devices used by clinical laboratories and has taken responsibility from the Centers for Disease Control for classifying the complexity of tests for CLIA purposes. Increased approval of “waived” test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect Medytox’s market for laboratory testing services and negatively impact its revenues.

 

Health care reform and related products (e.g. Health Insurance Exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in capitated reimbursement mechanisms and evolving delivery models, could have a material adverse impact on Medytox’s net revenues, profitability and cash flow.

 

Testing services are billed to private patients, Medicare, Medicaid, commercial clients, managed care organizations (“MCOs”) and third-party insurance companies. Tests ordered by a physician may be billed to different payers depending on the medical insurance benefits of a particular patient. Most testing services are billed to a party other than the physician or other authorized person that ordered the test. Increases in the percentage of services billed to government and managed care payers could have an adverse impact on Medytox’s net revenues.

 

The various MCOs have different contracting philosophies, which are influenced by the design of the products they offer to their members. Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of the rates reimbursed to participating laboratories. Other MCOs adopt broader networks with a largely uniform fee structure offered to all participating clinical laboratories. In addition, some MCOs have used capitation in an effort to fix the cost of laboratory testing services for their enrollees. Under a capitated reimbursement mechanism, the clinical laboratory and the managed care organization agree to a per member, per month payment to pay for all authorized laboratory tests ordered during the month by the physician for the members, regardless of the number or cost of the tests actually performed. Capitation shifts the risk of increased test utilization (and the underlying mix of testing services) to the clinical laboratory provider.

 

A portion of the third-party insurance fee-for-service revenues are collectible from patients in the form of deductibles, copayments and coinsurance. As patient cost-sharing increases, collectability may be impacted.

 

In addition, Medicare and Medicaid and private insurers have increased their efforts to control the cost, utilization and delivery of health care services, including clinical laboratory services. Measures to regulate health care delivery in general, and clinical laboratories in particular, have resulted in reduced prices, added costs and decreased test utilization for the clinical laboratory industry by increasing complexity and adding new regulatory and administrative requirements. Pursuant to legislation passed in late 2003, the percentage of Medicare beneficiaries enrolled in Medicare managed care plans has increased. The percentage of Medicaid beneficiaries enrolled in Medicaid managed care plans has also increased, and is expected to continue to increase. Implementation of the Health Care Reform Law, the health care reform legislation passed in 2010, also may affect coverage, reimbursement, and utilization of laboratory services, as well as administrative requirements.

 

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Medytox expects efforts to impose reduced reimbursement, more stringent payment policies and cost controls by government and other payers to continue. If Medytox cannot offset additional reductions in the payments it receives for its services by reducing costs, increasing test volume and/or introducing new procedures, it could have a material adverse impact on Medytox’s net revenues, profitability and cash flows.

 

As an employer, health care reform legislation also contains numerous regulations that will require Medytox to implement significant process and record keeping changes to be in compliance. These changes increase the cost of providing healthcare coverage to employees and their families. Given the limited release of regulations to guide compliance, the exact impact to employers including Medytox is uncertain.

 

A failure to obtain and retain new customers, a loss of existing customers or material contracts, a reduction in tests ordered or specimens submitted by existing customers, or the inability to retain existing and create new relationships with health systems could impact Medytox’s ability to successfully grow its business.

 

To offset efforts by payers to reduce the cost and utilization of clinical laboratory services, Medytox needs to obtain and retain new customers and business partners. In addition, a reduction in tests ordered or specimens submitted by existing customers, without offsetting growth in its customer base, could impact Medytox’s ability to successfully grow its business and could have a material adverse impact on Medytox’s net revenues and profitability. Medytox competes primarily on the basis of the quality of testing, timeliness of test reporting, reporting and information systems, reputation in the medical community, the pricing of services and ability to employ qualified personnel. Medytox’s failure to successfully compete on any of these factors could result in the loss of customers and a reduction in Medytox’s ability to expand its customer base.

 

In addition, as the broader healthcare industry trend of consolidation continues, including the acquisition of physician practices by health systems, relationships with hospital-based health systems and integrated delivery networks are becoming more important. Medytox’s inability to create relationships with those provider systems and networks could impact its ability to successfully grow its business.

 

A failure to identify and successfully close and integrate strategic acquisition targets could have a material adverse impact on Medytox’s business objectives and its net revenues and profitability.

 

Part of Medytox’s strategy involves deploying capital in investments that enhance its business, which includes pursuing strategic acquisitions to strengthen its capabilities and increase its presence in key geographic areas. In the past two years, Medytox has acquired an interest in clinical laboratories in California, New Jersey and New Mexico. However, Medytox cannot assure that it will be able to identify attractive acquisition targets that are of a large enough size to have a meaningful impact on its operating results. Furthermore, the successful closing and integration of a strategic acquisition entails numerous risks, including, among others:

 

·failure to obtain regulatory clearance;

 

·loss of key customers or employees;

 

·difficulty in consolidating redundant facilities and infrastructure and in standardizing information and other systems;

 

·unidentified regulatory problems;

 

·failure to maintain the quality of services that such companies have historically provided;

 

·coordination of geographically-separated facilities and workforces; and

 

·diversion of management’s attention from Medytox’s day-to-day business.

 

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Medytox cannot assure that current or future acquisitions, if any, or any related integration efforts will be successful, or that Medytox’s business will not be adversely affected by any future acquisitions, including with respect to net revenues and profitability. Even if Medytox is able to successfully integrate the operations of businesses that it may acquire in the future, Medytox may not be able to realize the benefits that it expects from such acquisitions.

 

Adverse results in material litigation matters could have a material adverse effect upon Medytox’s business.

 

Medytox may become subject in the ordinary course of business to material legal action related to, among other things, intellectual property disputes, professional liability and employee-related matters, as well as inquiries and requests for information from governmental agencies and bodies and Medicare or Medicaid carriers requesting comment and/or information on allegations of billing irregularities or billing and pricing arrangements that are brought to their attention through billing audits or third parties. Legal actions could result in substantial monetary damages as well as damage to Medytox’s reputation with customers, which could have a material adverse effect upon its business.

 

As a company with limited capital and human resources, we anticipate that more of management’s time and attention will be diverted from our business to ensure compliance with regulatory requirements than would be the case with a company that has well established controls and procedures. This diversion of management’s time and attention may have a material adverse effect on our business, financial condition and results of operations.

 

In the event we identify significant deficiencies or material weaknesses in our internal control over financial reporting that we cannot remediate in a timely manner, or if we are unable to receive a positive attestation from our independent registered public accounting firm with respect to our internal control over financial reporting when we are required to do so, investors and others may lose confidence in the reliability of our financial statements. If this occurs, the trading price of our common stock, if any, and ability to obtain any necessary equity or debt financing could suffer. In addition, in the event that our independent registered public accounting firm is unable to rely on our internal control over financial reporting in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, we may be unable to file our periodic reports with the SEC. This would likely have an adverse effect on the trading price of our common stock, if any, and our ability to secure any necessary additional financing, and could result in the delisting of our common stock. In such event, the liquidity of our common stock would be severely limited and the market price of our common stock would likely decline significantly.

 

An inability to attract and retain experienced and qualified personnel could adversely affect Medytox’s business.

 

The loss of key management personnel or the inability to attract and retain experienced and qualified employees at Medytox’s clinical laboratories could adversely affect the business. The success of Medytox is dependent in part on the efforts of key members of its management team.

 

In addition, the success of our clinical laboratories also depends on employing and retaining qualified and experienced laboratory professionals, including specialists, who perform clinical laboratory testing services. In the future, if competition for the services of these professionals increases, Medytox may not be able to continue to attract and retain individuals in its markets. Medytox’s revenues and earnings could be adversely affected if a significant number of professionals terminate their relationship with Medytox or become unable or unwilling to continue their employment.

 

Failure in Medytox’s information technology systems could significantly increase testing turn-around time or billing processes and otherwise disrupt Medytox’s operations or customer relationships.

 

Medytox’s laboratory operations and customer relationships depend, in part, on the continued performance of its information technology systems. Despite network security measures and other precautions Medytox has taken, its information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. In addition, Medytox is in the process of integrating the information technology systems of its recently acquired subsidiaries, and Medytox may experience system failures or interruptions as a result of this process. Sustained system failures or interruption of Medytox’s systems in one or more of its laboratory operations could disrupt Medytox’s ability to process laboratory requisitions, perform testing, provide test results in a timely manner and/or bill the appropriate party. Breaches with respect to protected health information could result in violations of HIPAA and analogous state laws, and risk the imposition of significant fines and penalties. Failure of Medytox’s information technology systems could adversely affect Medytox’s business, profitability and financial condition.

 

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A significant deterioration in the economy could negatively impact testing volumes, cash collections and the availability of credit.

 

Medytox’s operations are dependent upon ongoing demand for diagnostic testing services by patients, physicians, hospitals, MCOs, and others. A significant downturn in the economy could negatively impact the demand for diagnostic testing as well as the ability of patients and other payers to pay for services ordered. In addition, uncertainty in the credit markets could reduce the availability of credit and impact Medytox’s ability to meet its financing needs in the future.

 

Increasing health insurance premiums and co-payments or high deductible health plans may cause individuals to forgo health insurance and avoid medical attention, either of which may reduce demand for our products and services.

 

Health insurance premiums, co-payments and deductibles have generally increased in recent years. These increases may cause individuals to forgo health insurance, as well as medical attention. This behavior may reduce demand for testing by our laboratories.

 

If goodwill or other intangible assets that we have recorded in connection with our acquisitions of other businesses become impaired, we could have to take significant charges against earnings.

 

As a result of our acquisitions, we have recorded, and may continue to record, a significant amount of goodwill and other intangible assets. Under current accounting guidelines, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets will result in additional charges against earnings, which could materially reduce our reported results of operations in future periods.

 

Our business has substantial indebtedness and tax liabilities.

 

We currently have, and will likely continue to have, a substantial amount of indebtedness. Also, as of June 30, 2015, Medytox has income tax liabilities of approximately $7.5 million. Our indebtedness and tax liabilities could, among other things, make it more difficult for us to satisfy our debt obligations, require us to use a large portion of our cash flow from operations to repay and service our debt and tax liabilities or otherwise create liquidity problems, limit our flexibility to adjust to market conditions, place us at a competitive disadvantage and expose us to interest rate fluctuations. As of June 30, 2015, we had total debt outstanding of approximately $4.0 million, all of which is short term. In addition our capital lease obligations were $3.8 million at June 30, 2015.

 

We expect to obtain the money to pay our expenses and pay the principal and interest on our indebtedness and tax liabilities from cash flow from our operations and potentially from other debt or equity offerings. Accordingly, our ability to meet our obligations depends on our future performance and capital raising activities, which will be affected by financial, business, economic and other factors, many of which are beyond our control. If our cash flow and capital resources prove inadequate to allow us to pay the principal and interest on our debt, and our tax liabilities and meet our other obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations, restructure or refinance our debt, which we may be unable to do on acceptable terms, and forego attractive business opportunities. In addition, the terms of our existing or future debt agreements may restrict us from pursuing any of these alternatives.

 

Hardware and software failures, delays in the operation of computer and communications systems, the failure to implement system enhancements or cyber security breaches may harm Medytox.

 

Medytox’s success depends on the efficient and uninterrupted operation of its computer and communications systems. A failure of the network or data gathering procedures could impede the processing of data, delivery of databases and services, client orders and day-to-day management of the business and could result in the corruption or loss of data. While certain operations have appropriate disaster recovery plans in place, there currently are not redundant facilities everywhere to provide IT capacity in the event of a system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, cybersecurity breaches and similar events at our various computer facilities could result in interruptions in the flow of data to the servers and from the servers to clients. In addition, any failure by the computer environment to provide required data communications capacity could result in interruptions in service. In the event of a delay in the delivery of data, Medytox could be required to transfer data collection operations to an alternative provider of server hosting services. Such a transfer could result in delays in the ability to deliver products and services to clients. Additionally, significant delays in the planned delivery of system enhancements, and improvements and inadequate performance of the systems once they are completed could damage Medytox’s reputation and harm the business. Finally, long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, acts of terrorism (particularly involving cities in which Medytox has offices) and cybersecurity breaches could adversely affect the business. Although Medytox carries property and business interruption insurance, the coverage may not be adequate to compensate for all losses that may occur.

 

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Our corporate structure has certain anti-takeover aspects.

 

Under our Certificate of Incorporation, our Board of Directors has the authority to issue shares of preferred stock in one or more series and to fix the rights and preferences of the shares of any such series without stockholder approval. Any series of preferred stock is likely to be senior to the common stock with respect to dividends, liquidation rights and, possibly, voting rights. In addition, if senior management were to vote together, they could limit or prohibit others from attempting to take over control of Medytox and could have the effect of discouraging unsolicited acquisition proposals and other attempts to buy our company. Further, it could be more difficult for a third party to acquire control of us, even if that change of control might be beneficial to our stockholders.

 

There is a very limited trading market for our common stock.

 

There is a very limited trading market for our common stock. An active trading market may never develop or, if developed, be sustained. In the absence of an active trading market for our common stock investors may not be able to sell their shares when they would like to sell and may need to bear the economic risk of the investment for an indefinite period of time.

 

We do not intend to pay cash dividends on our common stock in the foreseeable future.

 

We have never declared cash dividends on our common stock and we currently do not anticipate paying any cash dividends in its foreseeable future. Accordingly, our stockholders will not realize a return on their investment unless the trading price of our common stock appreciates, which is uncertain and unpredictable.

 

We plan to use our stock to pay, to a large extent, for future acquisitions and this would be dilutive to investors.

 

We plan to use additional stock to pay, to a large extent, for future acquisitions, and believe that doing so will enable us to retain a greater percentage of our operating capital to pay for operations and marketing. Price and volume fluctuations in our stock might negatively impact our ability to effectively use our stock to pay for acquisitions, or could cause us to offer stock as consideration for acquisitions on terms that are not favorable to us and our stockholders. If we did resort to issuing stock in lieu of cash for acquisitions under unfavorable circumstances, it would result in increased dilution to investors.

 

Our common stock is subject to substantial dilution.

 

Medytox has outstanding options to purchase an aggregate of 23,855,000 shares of common stock, of which 23,325,000 are currently exercisable. Also, the D&D Convertible Note is convertible into Medytox common stock. Exercise of the options could result in substantial dilution of our common stock and a decline in its market price.

 

Risks Related to CollabRx

 

Our future growth is dependent on the successful development and introduction of new products and enhancements. There can be no assurance that we will be successful in developing and marketing, on a timely basis, new products or product enhancements, or that our new products will adequately address the changing needs of the health care marketplace.

 

A significant portion of our operating expense is relatively fixed and planned expenditures are based in part on expectations regarding future revenues. As a result, we are generally unable to mitigate the negative impact on margins in the short term. Accordingly, unexpected revenue shortfalls may significantly decrease our operating results from quarter to quarter. As a result, in future quarters our operating results could fall below the expectations of securities analysts or investors, in which event our stock price would likely decrease.

 

We have a history of losses, expect to incur substantial further losses and may not achieve or maintain profitability in the future, which in turn could further materially decrease the price of our common stock.

 

We had net losses of $1.3 million, $5.24 million and $3.3 million for the fiscal quarter ended June 30, 2015 and the fiscal years ended March 31, 2015 and 2014, respectively. We used cash flows from operations of $1.4 million, $3.64 million and $2.4 million in these respective periods. As of June 30, 2015, we had cash and cash equivalents of $6.1 million. We expect to continue to sustain losses for the foreseeable future. If we are not able to achieve profitability and positive cash flows, we may not be able to continue the operation of our business. It is not possible to predict when our business and results of operations will improve.

 

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Our quarterly operating results may continue to fluctuate.

 

Our revenue and operating results have fluctuated and are likely to continue to fluctuate significantly from quarter to quarter, and we cannot assure you that we will achieve profitability in the future.

 

Factors that could affect our quarterly operating results include:

 

·operating results of CollabRx;

 

·operating results of any companies that we may acquire in the future;

 

·fluctuations in demand for our products, and the timing of agreements with strategic partners in the health care marketplace;

 

·the timing of new products and product enhancements;

 

·changes in the growth rate of the health care marketplace;

 

·our ability to control costs, including operations expenses;

 

·our ability to develop, induce and gain market acceptance for new products and product enhancements;

 

·changes in the competitive environment, including the entry of new competitors and related discounting of products;

 

·adverse changes in the level of economic activity in the United States or other major economies in which we do business;

 

·renewal rates and our ability to up-sell additional products;

 

·the timing of customer acquisitions;

 

·the timing of revenue recognition for our sales; and

 

·future accounting pronouncements or changes in our accounting policies.

 

Our future success depends on our ability to retain our key personnel.

 

We are dependent on the services of Mr. Mika, our President and Chief Executive Officer, our technical experts and other members of our senior management team. The loss of one or more of these key officers or any other member of our senior management team could have a material adverse effect on us. We may not be able to retain or replace these key personnel, and we may not have adequate succession plans in place. Mr. Mika is subject to employment conditions or arrangements that contain post-employment non-competition provisions. However, these arrangements permit Mr. Mika to terminate his employment with us upon little or no notice and the enforceability of the non-competition provisions is uncertain.

 

If we are unable to hire, retain and motivate qualified personnel, our business would suffer.

 

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel or delays in hiring required personnel, particularly in software and biotechnology, may seriously harm our business, financial condition and operating results. Our ability to continue to attract and retain highly skilled personnel will be critical to our future success. Competition for highly skilled personnel is frequently intense, especially in the San Francisco Bay Area. We intend to issue stock options as a key component of our overall compensation and employee attraction and retention efforts. In addition, we are required under GAAP to recognize compensation expense in our operating results for employee stock-based compensation under our equity grant programs, which may negatively impact our operating results and may increase the pressure to limit share-based compensation. We may not be successful in attracting, assimilating or retaining qualified personnel to fulfill our current or future needs. Also, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.

 

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The personalized healthcare market is rapidly evolving and difficult to predict. If the personalized healthcare market does not evolve as we anticipate or if healthcare market participants do not perceive value in our products, our sales will not grow as quickly as anticipated and our stock price could decline.

 

We are in a new, rapidly evolving category within the healthcare industry that focuses on using information technology to inform personalized cancer treatment planning. As such, it is difficult to predict important market trends, including how large the personalized healthcare market will be or when and what products customers will adopt. If the market does not evolve in the way we anticipate, if organizations do not recognize the benefit that our products offer, or if we are unable to sell our products to customers, then our revenue may not grow as expected or may decline, and our stock price could decline.

 

New or existing technologies that are perceived to address personalized cancer treatment planning in different ways could gain wide adoption and supplant our products, thereby weakening our sales and our financial results.

 

The introduction of products and services embodying new technologies could render our existing products obsolete or less attractive to customers. Other technologies exist or could be developed in the future, and our business could be materially negatively affected if such technologies are widely adopted. We may not be able to successfully anticipate or adapt to changing technology or customer requirements on a timely basis, or at all. If we fail to keep up with technological changes or to convince our customers and potential customers of the value of our products even in light of new technologies, our business, operating results and financial condition could be materially and adversely affected.

 

We are dependent on a family of products that informs genomic-based medicine.

 

Our current product offering is limited to a family of products that informs genomic-based medicine using a unique approach of experts and expert systems. We expect to derive a substantial portion of our revenue from this approach and the family of products based on this approach for the foreseeable future. A decline in the price of these products, whether due to competition or otherwise, or our inability to increase sales of these products, would harm our business and operating results. We expect that this concentration of revenue from a single product family comprised of a limited number of products will continue for the foreseeable future. As a result, our future growth and financial performance will depend heavily on our ability to develop and sell enhanced versions of our products. If we fail to deliver product enhancements, new releases or new products that customers want, it will be more difficult for us to succeed.

 

If we are unable to introduce new products successfully and to make enhancements to existing products, our growth rates would likely decline and our business, operating results and competitive position could suffer.

 

Our continued success depends on our ability to identify and develop new products and to enhance and improve our existing products, and the acceptance of those products by our existing and target customers. Our growth would likely be adversely affected if:

 

·we fail to introduce these new products or enhancements;

 

·we fail to successfully manage the transition to new products from the products they are replacing;

 

·we do not invest our development efforts in appropriate products or enhancements for markets in which we now compete and expect to compete;

 

·we fail to predict the demand for new products following their introduction to market; or

 

·these new products or enhancements do not attain market acceptance.

 

Any or all of the above problems could materially harm our business and operating results.

 

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If we are unable to increase market awareness of our company and our products, our revenue may not continue to grow, or may decline.

 

The personalized healthcare market is nascent, and we have not yet established broad market awareness of our products and services. Market awareness of our value proposition and products will be essential to our continued growth and our success, particularly for the advanced stage treatment segment of the personalized cancer treatment market. If our marketing efforts are unsuccessful in creating market awareness of our company and our products, then our business, financial condition and operating results will be adversely affected, and we will not be able to achieve sustained growth.

 

We compete in highly competitive markets, and competitive pressures from existing and new companies may adversely impact our business and operating results.

 

The markets in which we compete are highly competitive. We expect competition to intensify in the future as existing competitors bundle new and more competitive offerings with their existing products and services, and as new market entrants introduce new products into our markets. This competition could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and our failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition. If we do not keep pace with product and technology advances and otherwise keep our product offerings competitive, there could be a material and adverse effect on our competitive position, revenue and prospects for growth.

 

We compete either directly or indirectly with other medical database solution companies. Some companies that offer competitive products or services are also potential customers. We do not believe that any of our principal competitors can offer the same scalable interactive expert solutions as CollabRx. The principal competitive factors in our markets include key strategic customer relationships, expert technical personnel and marketplace acceptance of our product, among others.

 

Many of our current and potential competitors are substantially larger and have greater financial, technical, research and development, sales and marketing, manufacturing, distribution and other resources and greater name recognition. We could also face competition from new market entrants, including our joint-development partners or other current technology partners. In addition, many of our existing and potential competitors enjoy substantial competitive advantages, such as:

 

·longer operating histories;

 

·the capacity to leverage their sales efforts and marketing expenditures across a broader portfolio of products;

 

·broader distribution and established relationships with partners;

 

·access to larger customer bases;

 

·greater customer support;

 

·greater resources to make acquisitions;

 

·larger intellectual property portfolios; and

 

·the ability to bundle competitive offerings with other products and services.

 

As a result, increased competition could result in loss of existing or new customers, price reductions, reduced operating margins and loss of market share. Our competitors also may be able to provide customers with capabilities or benefits different from or greater than those we can provide in areas such as technical qualifications or geographic presence, or to provide end-user customers a broader range of products, services and prices. In addition, some of our larger potential competitors have substantially broader product offerings and could leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing our products, including through selling at zero or negative margins, product bundling or closed technology platforms. These larger potential competitors may also have more extensive relationships within existing and potential customers that provide them with an advantage in competing for business with those customers. Our ability to compete will depend upon our ability to provide a better product than our competitors at a competitive price. We may be required to make substantial investments in research, development, marketing and sales in order to respond to competition, and there is no assurance that these investments will achieve any returns for us or that we will be able to compete successfully in the future.

 

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Our limited operating history in the healthcare market makes it difficult for you to evaluate our current business and future prospects, and may increase the risk of your investment.

 

Until recently, CollabRx designed, manufactured, marketed and serviced specialized plasma etch systems used primarily in the production of micro-electrical mechanical systems devices, such as sensors, accelerometers and power devices. CollabRx’s Deep Reactive Ion Etch systems were also employed in certain sophisticated manufacturing techniques, involving 3-D interconnect structures formed by intricate silicon etching. We exited the semiconductor industry through a series of divestitures in 2010 to 2012. In July 2012, we acquired CollabRx and entered the personalized healthcare market. CollabRx was founded in 2008 to use information technology to inform personalized medicine. Our current management has only been working together with our employee base for a short period of time. This limited operating history in the healthcare market makes financial forecasting and evaluation of our business difficult. Furthermore, because we depend in part on the market’s acceptance of our products, it is difficult to evaluate trends that may affect our business. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries. If we do not address these risks successfully, our business and operating results would be adversely affected, and our stock will be adversely affected.

 

We do not sell our products directly to users and rely instead on contractual relationships with key market participants who derive a benefit from offering our products to their users. Our business development cycles can be long and unpredictable, and our business development efforts require considerable time and expense.

 

We do not sell our products directly to users. Instead, we form strategic relationships with existing market participants who derive a benefit from offering our products to their users. Our business development efforts involve educating our potential business partners about the use and benefits of our products. Such potential business partners are typically large, well-established companies with long evaluation cycles. We spend substantial time and resources on our business development efforts without any assurance that our efforts will produce any sales. In addition, partnerships are frequently subject to budget constraints, multiple approvals and unplanned administrative, processing and other delays. These factors, among others, could result in long and unpredictable sales cycles. The length of our products’ business development cycles typically range from six to twelve months based on our limited experience, but may be longer as we expand our business development efforts to other segments of the healthcare market. As a result of these lengthy business development time-lines and the uncertain benefit that our partners may derive from offering our products, it is difficult for us to predict when our partners may purchase products from us and as a result, our operating results may vary significantly and may be adversely affected.

 

Our customers are concentrated and therefore the loss of a significant customer may harm our business.

 

We generate revenues from a small number of customers. In fiscal year 2015, six customers accounted for 78% of our revenues. In fiscal year 2014, five customer accounted for 96% of our revenues. The loss of any of these customers would significantly impact our operating results in future periods.

 

We are exposed to risks associated with contract termination or delay.

 

The software products for which we receive revenue are distributed through third-parties under license or contract, with varying terms. Generally, our agreements with third-parties are subject to termination with notice and/or discretionary termination if certain revenue targets are not achieved. In addition, our agreements generally do not contain revenue or performance guarantees, so our achieved revenues may vary from targets because of changes in strategic direction of our customers, contract termination, or from delays in projected launch dates, over which we have no influence or control. The loss or delay of revenues associated with such contracts may harm our business and cause us to suffer further operating losses.

 

If our security is breached, our business could be disrupted, our operating results could be harmed, and customers could be deterred from using our products and services.

 

Our business relies on the secure electronic transmission, storage and hosting of information, including published data and proprietary databases. We face the risk of a deliberate or unintentional incident involving unauthorized access to our computer systems that could result in misappropriation or loss of assets or information, data corruption, or other disruption of business operations. Although we have devoted significant resources to protecting and maintaining the confidentiality of our information, including implementing security and privacy programs and controls, training our workforce, and implementing new technology, we have no guarantee that these programs and controls will be adequate to prevent all possible security threats. We believe that any compromise of our electronic systems, including the unauthorized access, use, or disclosure of information or a significant disruption of our computing assets and networks, would adversely affect our reputation and our ability to fulfill contractual obligations, and would require us to devote significant financial and other resources to mitigate such problems, and could increase our future cyber security costs.

 

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Defects or errors in our software could harm our reputation, result in significant cost to us and impair our ability to market our products.

 

The software applications underlying our hosted products and services are inherently complex and may contain defects or errors, some of which may be material. Errors may result from our own technology or from the interface of our software with legacy systems and data, which we did not develop. The risk of errors is particularly significant when a new product is first introduced or when new versions or enhancements of existing products are released. The likelihood of errors is increased as a result of our commitment to frequent release of new products and enhancements of existing products.

 

Material defects in our software could result in a reduction in sales and/or delay in market acceptance of our products. In addition, such defects may lead to the loss of existing customers, difficulty in attracting new customers, diversion of development resources or harm to our reputation. Correction of defects or errors could prove to be impossible or impractical. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.

 

If we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation could be harmed and customer contracts may be terminated.

 

If we experience any failure or interruption in the delivery of our services over the Internet, customer satisfaction and our reputation could be harmed and lead to reduced revenues and increased expenses.

 

We may expand our business through new acquisitions in the future. Any such acquisitions could disrupt our business, harm our financial condition and dilute current stockholders’ ownership interests in our company.

 

We may pursue potential acquisitions of, and investments in, businesses, technologies or products complementary to our business and periodically engage in discussions regarding such possible acquisitions. Acquisitions involve numerous risks, including some or all of the following:

 

·difficulties in identifying and acquiring complementary products, technologies or businesses;

 

·substantial cash expenditures;

 

·incurrence of debt and contingent liabilities, some of which we may not identify at the time of acquisition;

 

·difficulties in assimilating the operations and personnel of the acquired companies;

 

·diversion of management’s attention away from other business concerns;

 

·risk associated with entering markets in which we have limited or no direct experience;

 

·potential loss of key employees, customers and strategic alliances from either our current business or the target company’s business; and

 

·delays in customer purchases due to uncertainty and the inability to maintain relationships with customers of the acquired businesses.

 

If we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of such acquisitions, we may incur costs in excess of what we anticipate, and management resources and attention may be diverted from other necessary or valuable activities. An acquisition may not result in short-term or long-term benefits to us. The failure to evaluate and execute acquisitions or investments successfully or otherwise adequately address these risks could materially harm our business and financial results. We may incorrectly judge the value or worth of an acquired company or business. In addition, our future success will depend in part on our ability to manage the growth anticipated with these acquisitions.

 

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Furthermore, the development or expansion of our business or any acquired business or companies may require a substantial capital investment by us. We may not have these necessary funds or they might not be available to us on acceptable terms or at all. We may also seek to raise funds for an acquisition by issuing equity securities or convertible debt, as a result of which our existing stockholders may be diluted or the market price of our stock may be adversely affected.

 

We may be subject to claims that we or our technologies infringe upon the intellectual property or other proprietary rights of a third party. Any such claims may require us to incur significant costs, to enter into royalty or licensing agreements or to develop or license substitute technology.

 

We cannot assure you that our software solutions and the technologies used in our product offerings do not infringe patents held by others or that they will not in the future. Any future claim of infringement could cause us to incur substantial costs defending against the claim, even if the claim is without merit, and could distract our management from our business. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. Any required licenses may not be available to us on acceptable terms, if at all. If we do not obtain any required licenses, we could encounter delays in product introductions if we attempt to design around the technology at issue or attempt to find another provider of suitable alternative technology to permit us to continue offering the applicable software solution. In addition, we generally provide in our customer agreements that we will indemnify our customers against third-party infringement claims relating to our technology provided to the customer, which could obligate us to fund significant amounts. Infringement claims asserted against us or against our customers or other third parties that we are required or otherwise agree to indemnify may have a material adverse effect on our business, results of operations or financial condition.

 

We may be unable to adequately enforce or defend our ownership and use of our intellectual property and other proprietary rights.

 

Our success is heavily dependent upon our intellectual property and other proprietary rights. We rely upon a combination of trademark, trade secret, copyright, patent and unfair competition laws, as well as license and access agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring certain of our employees and consultants to enter into confidentiality, non-competition and assignment of inventions agreements. The steps we take to protect these rights may not be adequate to prevent misappropriation of our technology by third parties or may not be adequate under the laws of some foreign countries, which may not protect our intellectual property rights to the same extent as do the laws of the United States.

 

Our attempts to protect our intellectual property may be challenged by others or invalidated through administrative process or litigation, and agreement terms that address non-competition are difficult to enforce in many jurisdictions and may not be enforceable in any particular case. Moreover, the degree of future protection of our intellectual property and proprietary rights is uncertain for products that are currently in the early stages of development because we cannot predict which of these products will ultimately reach the commercial market or whether the commercial versions of these products will incorporate proprietary technologies. In addition, there remains the possibility that others will “reverse engineer” our products in order to determine their method of operation and introduce competing products or that others will develop competing technology independently.

 

If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, even if we were to prevail. The failure to adequately protect our intellectual property and other proprietary rights may have a material adverse effect on our business, results of operations or financial condition.

 

If we cease to be a “smaller reporting company” in the future, we will be required to obtain an auditor’s attestation on the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002. Complying with this requirement will increase our accounting costs, and any delay or difficulty in satisfying this requirement could adversely affect our future results of operations and our stock price.

 

As a smaller reporting company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002, which requires an independent registered public accounting firm to test the internal control over financial reporting of public companies, and to report on the effectiveness of such controls. If our status as a smaller reporting company changes, we may be required to comply with this auditor attestation requirement. We expect that compliance with this requirement would increase our financial compliance costs and make our audit process more time consuming and costly. In addition, we may in the future discover areas of our internal controls that need improvement, particularly with respect to businesses that we may acquire. If so, we cannot be certain that any remedial measures we take will ensure that we have adequate internal controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if it becomes necessary for our independent registered public accounting firm to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting and it is unable to do so, investors could lose confidence in the reliability of our financial statements. Any failure to implement required new or improved controls, or difficulties or significant costs encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price.

 

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The market for cloud-based and cloud-focused solutions is at a relatively early stage of development, and if it does not develop or develops more slowly than we expect, our business could be harmed.

 

The market for cloud-based solutions is at an early stage relative to physical appliances and on-premise solutions, and these types of deployments may not achieve or sustain high levels of demand and market acceptance. Many factors may affect the market acceptance of cloud-based and cloud-focused solutions, including:

 

·perceived security capabilities and reliability;

 

·perceived concerns about the ability to scale operations for large enterprise customers;

 

·concerns with entrusting a third party to store and manage critical data; and

 

·the level of configurability or customizability of the solutions.

 

If organizations do not establish a presence in the cloud or do not perceive the benefits of our cloud-focused solutions, or if our competitors or new market entrants are able to develop cloud-focused solutions that are or are perceived to be more effective than ours, this portion of our business may not grow further or may develop more slowly than we expect, either of which would adversely affect our business and operating results.

 

Extensive governmental regulation could require significant compliance costs and have a material adverse effect on the demand for our products.

 

We do not believe that any of our current or planned products are subject to regulation by the FDA and other regulatory authorities worldwide. However, our business could be adversely affected by any increased regulation of our customers. Changes in the level of regulation, including an increase in regulatory requirements, could subject us to regulatory approvals and delays in launching our products or result in a decrease in demand for our products. Modifying our products to comply with changes in regulations or regulatory guidance could require us to incur substantial costs. Further, changing regulatory requirements may render our products obsolete or make new products or product enhancements more costly or time consuming than we currently anticipate. Failure by us or our customers to comply with applicable regulations could result in increased regulatory scrutiny and enforcement. If our products fail to comply with government regulations or guidelines, we could incur significant liability or be forced to cease offering our applicable products or services.

 

If any of our products are deemed to be Medical Devices, then complying with medical device regulations on a global scale will be time consuming and expensive, and could subject us to unanticipated and significant delays.

 

Although the FDA has not determined that any of our products are medical devices that are actively regulated under the Federal Food, Drug and Cosmetic Act and amendments thereto (collectively, the “Act”), the FDA may do so in the future. Other countries have regulations in place related to medical devices that may in the future apply to certain of our products. If any of our products are deemed to be actively regulated medical devices by the FDA or similar regulatory agencies in countries where we do business, we could be subject to extensive requirements governing pre- and post-marketing activities, including pre-market notification clearance. Complying with medical device regulations would be time consuming and expensive, and could result in unanticipated and significant delays in the release of new products or product enhancements. Further, it is possible that these regulatory agencies may become more active in regulating software and medical devices that are used in healthcare. If we are unable to obtain the required regulatory approvals for any such products, our business plans for these products could be delayed or canceled.

 

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The laws governing electronic health data transmissions continue to evolve and are often unclear and difficult to apply. If we or our customers do not maintain the security and privacy of patient records, we may become subject to sanctions by various government entities.

 

Federal, state, local and foreign laws regulate the confidentiality of patient records and the circumstances under which those records may be released. These regulations govern both the disclosure and use of confidential patient medical record information and require the users of such information to implement specified security and privacy measures. United States regulations currently in place governing electronic health data transmissions continue to evolve and are often unclear and difficult to apply. Laws in non-U.S. jurisdictions may have similar or even stricter requirements related to the treatment of patient information.

 

In the United States, the Health Insurance Portability and Accountability Act regulations require national standards for some types of electronic health information transactions and the data elements used in those transactions, security standards to ensure the integrity and confidentiality of health information and standards to protect the privacy of individually identifiable health information. Covered entities under HIPAA, which include health care organizations such as our customers, are required to comply with the privacy standards, the transaction regulations and the security regulations. Moreover, the recently enacted Health Information Technology for Economic and Clinical Health provisions of the American Recovery and Reinvestment Act of 2009, and associated regulatory requirements, extend many of the HIPAA obligations, formerly imposed only upon covered entities, to business associates as well, which has created additional liability risks related to the privacy and security of individually identifiable health information.

 

Evolving HIPAA and HITECH-related laws or regulations in the U.S. and data privacy and security laws or regulations in non-U.S. jurisdictions could restrict the ability of our clients to obtain, use or disseminate patient information. This could adversely affect demand for our products if they are not re-designed in a timely manner in order to meet the requirements of any new interpretations or regulations that seek to protect the privacy and security of patient data or enable our clients to execute new or modified health care transactions. We may need to expend additional capital, software development and other resources to modify our products to address these evolving data security and privacy issues.

 

If commercial third-party payers or government payers fail to provide coverage or adequate reimbursement for certain genomic tests offered by our customers, or if there is a decrease in the amount of reimbursement for our customers’ products or future products they develop, our revenue and prospects for profitability may be harmed.

 

In both domestic and foreign markets, sales by our customers may depend, in large part, upon the availability of reimbursement from third-party payers. These third-party payers include government healthcare programs such as Medicare, managed care providers, private health insurers, and other organizations. Physicians and patients may not order genomic test services or products from our customers unless commercial third-party payers and government payers pay for all, or a substantial portion, of the list price, and certain commercial third-party payers may not agree to reimburse our customers if CMS does not issue a positive coverage decision. There is currently no national coverage decision that determines whether and how certain genomic tests are covered by Medicare. In the absence of a national coverage decision, local Medicare contractors that administer the Medicare program in various regions have some discretion in determining coverage and therefore payment for such tests. Accordingly, if our customers do not receive full or partial reimbursement for their tests, our revenue and results of operations could be adversely affected.

 

In addition, there is significant uncertainty surrounding whether the use of products that incorporate new technology, such as Next Generation Sequencing (“NGS”)-based tests, for which we provide interpretative analysis, will be eligible for coverage by commercial third-party payers and government payers or, if eligible for coverage, what the reimbursement rates will be for those products. The fact that a diagnostic product has been approved for reimbursement in the past, for any particular indication or in any particular jurisdiction, does not guarantee that such a diagnostic product will remain approved for reimbursement or that similar or additional diagnostic products will be approved in the future. Reimbursement of NGS-based cancer products by commercial third party payers and government payers may depend on a number of factors, including a payor’s determination that products enabled by our molecular information platform are:

 

·not experimental or investigational;

 

·medically necessary;

 

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·appropriate for the specific patient;

 

·cost-effective;

 

·supported by peer-reviewed publications;

 

·included in clinical practice guidelines; and

 

·supported by clinical utility studies.

 

The United States and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare. For example, in some foreign markets, the government controls the pricing of many healthcare products. We expect that there will continue to be federal and state proposals to implement governmental controls or impose healthcare requirements. In addition, the Medicare program and increasing emphasis on managed care in the United States will continue to put pressure on product pricing. Cost control initiatives could decrease the price that our customers would receive for any products in the future, which may limit our revenue and profitability.

 

Our common stock could be delisted from NASDAQ.

 

On June 2, 2015, we were notified by the NASDAQ that the bid price of the our common stock closed below the minimum $1.00 per share requirement for continued inclusion under Marketplace Rule 4310(c)(4). In accordance with Marketplace Rule 4310(c)(8)(D), we have 180 calendar days to regain compliance. If at any time before the expiration of such 180-day period, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, we will regain compliance with the Rule. If we do not regain compliance by the expiration of such 180-day period, an additional 180 days may be granted to regain compliance, so long as we meet The Nasdaq Capital Market initial listing criteria (except for the bid price requirement).

 

In the future, our common stock price or our tangible net worth may fall below the NASDAQ listing requirements, or we may not comply with other listing requirements, with the result being that our common stock might be delisted. If our common stock is delisted, we may list our common stock for trading over-the-counter. Delisting from the NASDAQ could adversely affect the liquidity and price of our common stock and it could have a long-term impact on our ability to raise future capital through the sale of our common stock.

 

The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.

 

Shares of our common stock have traded on The NASDAQ Capital Market as high as $3.33 and as low as $0.48 from April 1, 2014 through June 30, 2015. The trading price of our common stock may be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

 

·our quarterly or annual earnings or those of other companies in our industry;

 

·announcements by us or our competitors of significant contracts or acquisitions;

 

·changes in accounting standards, policies, guidance, interpretations or principles;

 

·general economic and stock market conditions, including disruptions in the world credit and equity markets;

 

·the failure of securities analysts to cover our common stock;

 

·future sales of our common stock; and

 

·the other factors described in these “Risk Factors.”

 

In recent years, the stock market in general has experienced extreme price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The price of our common stock could fluctuate based upon factors that have little to do with our performance, and these fluctuations could materially reduce our stock price.

 

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In the past, some companies, including companies in our industry, have had volatile market prices for their securities and have had securities class action suits filed against them. The filing of a lawsuit against us, regardless of the outcome, could have a material adverse effect on our business, financial condition and results of operations, as it could result in substantial legal costs and a diversion of our management’s attention and resources.

 

Our actual operating results may differ significantly from guidance provided by our management.

 

Although it has not been our practice in the recent past to do so, we may from time to time release guidance in our quarterly earnings releases, quarterly earnings conference call, or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. This guidance, which includes forward-looking statements, would be based on projections prepared by our management. If projections are provided, they would not be prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public accountants nor any other independent expert or outside party would examine the projections and, accordingly, no such person would express any opinion or any other form of assurance with respect thereto.

 

Projections would be based upon a number of assumptions and estimates that, while presented with numerical specificity, would be inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which would be beyond our control and would be based upon specific assumptions with respect to future business decisions, some of which will change. We would generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the suggested ranges. The principal reason that we would release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports that may be published by analysts.

 

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, any guidance provided is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from any guidance provided and the variations may be material. In light of the foregoing, investors are urged not to rely upon, or otherwise consider, any guidance provided in making an investment decision in respect of our common stock. Any failure to successfully implement our operating strategy could result in the actual operating results being different from our guidance, and such differences may be adverse and material.

 

Provisions of Delaware law and our organizational documents may discourage takeovers and business combinations that our stockholders may consider in their best interests, which could negatively affect our stock price.

 

Provisions of Delaware law and our certificate of incorporation and bylaws may have the effect of delaying or preventing a change in control of our company or deterring tender offers for our common stock that other stockholders may consider in their best interests. In addition, our board of directors has adopted a shareholder rights plan, or “poison pill,” which has the effect of making it more difficult for a person to acquire control of our company in a transaction not approved by our board of directors.

 

Our certificate of incorporation authorizes us to issue up to 5,000,000 shares of preferred stock in one or more different series with terms to be fixed by our board of directors. Stockholder approval is not necessary to issue preferred stock in this manner. Issuance of these shares of preferred stock could have the effect of making it more difficult and more expensive for a person or group to acquire control of us, and could effectively be used as an anti-takeover device. Currently there are no shares of our preferred stock issued or outstanding.

 

Our bylaws provide for an advance notice procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting of stockholders, including proposed nominations of persons for election to our board of directors, and require that special meetings of stockholders be called only by our chairman of the board, chief executive officer, president or the board pursuant to a resolution adopted by a majority of the board.

 

The anti-takeover provisions of Delaware law and provisions in our organizational documents may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

 

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As a public company, we incur significant administrative workload and expenses.

 

As a public company with common stock listed on The NASDAQ Capital Market, we must comply with various laws, regulations and requirements, including certain provisions of the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and The NASDAQ Stock Market. Complying with these statutes, regulations and requirements, including our public company reporting requirements, continues to occupy a significant amount of the time of our board of directors and management and involves significant accounting, legal and other expenses. We have hired, and anticipate that we will continue to hire, additional accounting personnel to handle these responsibilities, which will increase our operating costs. Furthermore, these laws, regulations and requirements could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

 

New laws and regulations as well as changes to existing laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC and by The NASDAQ Stock Market, would likely result in increased costs to us as we respond to their requirements. We are investing resources to comply with evolving laws and regulations, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

 

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

 

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your investment in our common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. Shares of our common stock may depreciate in value or may not appreciate in value.

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

 

This joint proxy statement/prospectus contains forward-looking statements. Statements contained in this joint proxy statement/prospectus that refer to Medytox’s or CollabRx’s estimated or anticipated future results, including estimated synergies, or other non-historical facts are forward-looking statements that reflect Medytox’s or CollabRx’s, as applicable, current perspective of existing trends and information as of the date of this joint proxy statement/prospectus. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “should,” “estimate,” “expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,” “might,” “will,” “possible,” “potential,” “predict,” “project,” or other similar words, phrases or expressions. Such forward-looking statements include, but are not limited to, statements about the benefits of the merger, including future financial and operating results, Medytox’s or CollabRx’s plans, objectives, expectations and intentions and the expected timing of completion of the merger. It is important to note that Medytox’s and CollabRx’s goals and expectations are not predictions of actual performance. Actual results may differ materially from Medytox’s and CollabRx’s current expectations depending upon a number of factors affecting Medytox’s business, CollabRx’s business and risks associated with the merger. These risks and uncertainties include those set forth under “Risk Factors” beginning on page 23, as well as, among others, uncertainties as to the timing of the merger; uncertainties as to whether Medytox stockholders and CollabRx stockholders will approve the proposals presented; the risk that competing offers will be made; the possibility that various closing conditions for the merger may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the merger, or the terms of such approval; the possibility that Medytox stockholders may exercise dissenters’ rights under the NRS in connection with the merger, which would require the combined company to pay such stockholders cash for the fair value of their Medytox shares; the effects of disruption from the merger making it more difficult to maintain relationships with employees, customers, vendors and other business partners; the risk that stockholder litigation in connection with the merger may result in significant costs of defense, indemnification and liability; other business effects, including the effects of industry, economic or political conditions outside of Medytox’s or CollabRx’s control; the failure to realize synergies and cost-savings from the merger or delay in realization thereof; the businesses of Medytox and CollabRx may not be integrated successfully, or such combination may take longer, be more difficult, time-consuming or costly to accomplish than expected; operating costs and business disruption following completion of the merger, including adverse effects on employee retention and on the combined company’s business relationships with third parties; whether Medytox is able to realize the benefits of the merger described in the section “The Merger-Recommendation of the Medytox Board of Directors; Medytox’s Reasons for the Merger” beginning on page 73; whether CollabRx is able to realize the benefits of the merger described in the section “The Merger-Recommendation of the CollabRx Board of Directors; CollabRx’s Reasons for the Merger” beginning on page 74; the inherent uncertainty associated with financial projections; risks relating to the value of the CollabRx shares to be issued in the merger; the anticipated size of the markets and continued demand for Medytox’s and CollabRx’s products and services; the impact of competitive products and pricing; and access to available financing on a timely basis and on reasonable terms. Medytox and CollabRx caution that the foregoing list of important factors that may affect future results is not exhaustive.

 

When relying on forward-looking statements to make decisions with respect to Medytox and CollabRx, investors and others should carefully consider the foregoing factors and other uncertainties and potential events and read Medytox’s and CollabRx’s filings with the SEC, available at www.sec.gov for a discussion of these and other risks and uncertainties. Neither Medytox nor CollabRx undertakes any obligation to update or revise any forward-looking statement, except as may be required by law. Medytox and CollabRx qualify all forward-looking statements by these cautionary statements.

 

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UNAUDITED PRO FORMA  CONDENSED COMBINED FINANCIAL INFORMATION AND DATA

 

The following table presents selected unaudited pro forma condensed combined financial information about Medytox’s consolidated balance sheet and statements of operations, after giving effect to the merger with CollabRx. The information under “Unaudited Pro Forma Combined Statement of Operations Data” in the table below gives effect to the merger as if it had been consummated on January 1, 2014, the beginning of the earliest period presented. The information under “Unaudited Pro Forma Combined Balance Sheet Data” in the table below assumes the merger had been consummated on June 30, 2015. This unaudited pro forma condensed combined financial information may require additional pro forma adjustments including, but not limited to, acquisition accounting adjustments. Information necessary to make adjustments for acquisition accounting is not readily available. Such adjustments may be material to the currently presented pro forma financial information.

 

The unaudited pro forma condensed combined financial information below; (i) includes adjustments to eliminate costs associated with this anticipated transaction and certain duplicate expenses since both are SEC registrants and (ii) reflect the tax impact of such expense reductions and the tax benefit of the CollabRx losses as if the combined company filed a single tax return for periods presented. These proforma adjustments are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company.

 

The information presented below should be read in conjunction with the historical consolidated financial statements of Medytox and CollabRx, including the related notes, filed by each of them with the SEC and included herein, and with the unaudited pro forma condensed combined financial statements of Medytox and CollabRx, including the related notes, appearing elsewhere in this joint proxy statement/prospectus. See “Where You Can Find More Information” and “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on pages 212 and 159, respectively. The unaudited pro forma condensed combined financial information is not necessarily indicative of results that actually would have occurred or that may occur in the future had the merger been completed on the dates indicated.

 

Unaudited Pro Forma Combined Statement of Operations Data:

 

   

Six months ended
June 30, 2015

   

Year ended
December 31, 2014

 
Net revenues   $ 23,302,433     $ 58,342,820  
Gross profit, net revenues less direct costs of revenue     16,558,802       42,350,352  
Operating expenses, excluding direct costs of revenue     21,176,495       30,858,615  
Operating income (loss)     (4,573,693 )     11,491,737  
Income (loss) before income taxes     (5,430,185 )     11,230,375  
Net Income (loss)     (5,269,985 )     5,787,191  
Diluted income (loss) per common share     (0.06 )     0.06  

 

Unaudited Pro Forma Combined Balance Sheet Data:

 

   

As of
June 30, 2015

 
Cash and cash equivalents   $ 6,784,923  
Total current assets     30,185,579  
Goodwill     3,881,813  
Other intangible assets, net     4,861,372  
Total assets     47,886,982  
Total current liabilities     19,108,482  
Note payable - related party     3,804,329  
Total liabilities     23,062,162  
Total shareholders’ equity     24,824,820  

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

 

The following table presents, for the periods indicated, certain historical per share data of Medytox and CollabRx, and unaudited pro forma combined per share information giving effect to the merger of Medytox and CollabRx as if the merger had been effective for the periods presented.

 

The data have been derived from and should be read in conjunction with the selected historical consolidated financial information, the unaudited pro forma condensed combined financial information and the accompanying notes, and the separate historical consolidated financial statements and the accompanying notes of Medytox and of CollabRx contained elsewhere in this proxy statement/prospectus. For additional information, please see the section titled “Where You Can Find More Information” beginning on page 212 of this joint proxy statement/prospectus.

 

The unaudited pro forma per share data are presented for informational purposes only and are not intended to represent or be indicative of the combined consolidated results of operations or financial condition that would have been reported had the merger been completed as of the date presented and should not be taken as representative of future results of operations or financial condition of Medytox and CollabRx and following the merger.

 

Per share information for the
six months ended June 30, 2015:

 

Medytox
Historical

   

CollabRx
Historical

   

Pro Forma
Combined

 
Net income (loss)   $ (0.16 )   $ (0.39 )   $ (0.06 )
Book value     0.51       0.67       0.27  
Cash dividends on common stock                  

 

Per share information for the
year ended December 31, 2014:

 

Medytox
Historical

  

CollabRx
Historical

  

Pro Forma
Combined

 
Net income (loss)  $0.09   $(1.75)  $0.06 
Book value    0.51    0.43    0.29 
Cash dividends on common stock             

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDENDS INFORMATION

 

Market Prices

 

Medytox shares are quoted by the OTC Markets Group, Inc., in the non-NASDAQ over the counter market under the symbol “MMMS.” CollabRx shares are listed for trading on the NASDAQ Capital Market under the symbol “CLRX.” The following table sets forth the closing prices per share of Medytox shares and CollabRx shares on NASDAQ and the over the counter market on the following dates:

 

·April 15, 2015, the last full trading day prior to the public announcement of the merger, and

 

·September 22, 2015, the last trading day for which this information could be calculated prior to the date of this joint proxy statement/prospectus.

 

   Medytox shares   CollabRx shares 
April 15, 2015  $4.20   $1.05 
September 22, 2015  $3.30   $0.74 

 

The following tables set forth, for the periods indicated, the high and low sales prices per Medytox share and CollabRx share, as reported on the over the counter market and NASDAQ, respectively. For current price information, you should consult publicly available sources.

 

Medytox

 

Fiscal year ended December 31, 2013

 

High

  

Low

 
First Quarter(1)  $   $ 
Second Quarter   5.18    3.26 
Third Quarter   5.24    0.361 
Fourth Quarter   7.42    0.361 

___________

(1)     There was no trading in the shares of Medytox common stock during the first quarter of 2013.

 

Fiscal year ended December 31, 2014

 

High

  

Low

 
First Quarter  $6.50   $5.00 
Second Quarter   7.40    6.00 
Third Quarter   7.50    6.00 
Fourth Quarter   7.00    5.05 

 

Fiscal year ending December 31, 2015

 

High

  

Low

 
First Quarter  $6.00   $3.00 
Second Quarter   4.80    3.12 
Third Quarter (through September 22, 2015)     3.30     2.00

 

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CollabRx

 

 

CollabRx

 

Fiscal year ended March 31, 2014

 

High

  

Low

 
First Quarter  $3.87   $3.06 
Second Quarter   4.49    3.15 
Third Quarter   4.55    3.76 
Fourth Quarter   4.02    3.06 

 

Fiscal year ended March 31, 2015

 

High

  

Low

 
First Quarter  $3.33   $1.86 
Second Quarter   2.05    1.05 
Third Quarter   1.08    0.55 
Fourth Quarter   2.23    0.61 

 

Fiscal year ending March 31, 2016

 

High

  

Low

 
First Quarter  $1.14   $0.69 
Second Quarter (through September 22, 2015)     0.80     0.48

 

Dividends

 

Neither Medytox nor CollabRx has ever declared or paid cash dividends on its shares of common stock. Medytox does accrue a monthly dividend to the holders of the Series B Preferred Stock pursuant to the terms of the Series B Preferred Stock. Dividends of $5,010,300 and $2,601,296 were accrued during the years ended December 31, 2014 and 2013, respectively. Dividend payments to the holders of Medytox Series B Preferred Stock will terminate at the effective time of the merger. The combined company currently intends to retain all future earnings for the operation and expansion of its businesses and does not anticipate declaring or paying cash dividends in the foreseeable future. Any payment of cash dividends on the combined company’s shares will be at the discretion of the combined company’s board of directors and will depend upon its results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by the combined company’s board of directors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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THE SPECIAL MEETING OF MEDYTOX STOCKHOLDERS

 

Overview

 

This joint proxy statement/prospectus is being provided to Medytox stockholders as part of a solicitation of proxies by the Medytox board of directors for use at the special meeting of Medytox stockholders and at any adjournments of such meeting. This joint proxy statement/prospectus is being furnished to Medytox stockholders on or about September 28, 2015. This joint proxy statement/prospectus provides Medytox stockholders with information they need to be able to vote or instruct their votes to be cast at the Medytox special meeting.

 

Date, Time and Place of the Medytox Special Meeting

 

Medytox will hold a special meeting of stockholders on October 28, 2015, at 11:00 a.m. Eastern Time, at the offices of Akerman LLP located at 777 South Flagler Drive, Suite 1100 West Tower, West Palm Beach, Florida 33401.

 

Attendance

 

Only holders of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock on the Medytox record date or persons holding a written proxy for any stockholders or account of Medytox as of the record date may attend the Medytox special meeting. If you are a Medytox stockholder of record (that is, you hold your shares in your own name) and you wish to attend the Medytox special meeting, please bring your proxy and evidence of your share ownership, such as your most recent account statement, to the Medytox special meeting. You should also bring valid picture identification. If your shares are held in street name in a stock brokerage account or by another nominee and wish to attend the Medytox special meeting, you need to bring a copy of a brokerage or bank statement to the Medytox special meeting reflecting your share ownership as of the Medytox record date. You should also bring valid picture identification.

 

Proposals

 

At the Medytox special meeting, Medytox stockholders will vote upon:

 

·Medytox Proposal No. 1- Approval and adoption of the Merger Agreement and the transactions contemplated thereby.

 

·Medytox Proposal No. 2- Approval of any motion to adjourn the special meeting, or any adjournment thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve and adopt the Merger Agreement and the transactions contemplated thereby.

 

Record Date; Outstanding Shares; Shares Entitled to Vote

 

Only holders of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock as of the close of business on September 4, 2015, the record date for the Medytox special meeting, will be entitled to notice of, and to vote at, the Medytox special meeting or any adjournments thereof. As of the close of business on the Medytox record date, there were 31,006,026 shares of common stock, 5,000 shares of Series B Preferred Stock, 50,000 shares of Series D Preferred Stock and 45,000 shares of Series E Preferred Stock issued and outstanding. Each share of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock is entitled to one vote for each outstanding Medytox share.

 

Quorum

 

The stockholders present, in person or by proxy, holding a majority of the outstanding Medytox shares entitled to vote as of the record date will constitute a quorum for the transaction of business at the Medytox special meeting. Abstentions will be counted as present at the meeting for the purpose of determining whether there is a quorum.

 

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Vote Required; Recommendation of Medytox Board of Directors

 

Proposal 1- Approve and Adopt the Merger Agreement and the Transactions Contemplated Thereby

 

Medytox stockholders are considering and voting on a proposal to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the merger. Medytox stockholders should carefully read this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger. In particular, Medytox stockholders are directed to the Merger Agreement, which is attached as Annex A to this joint proxy statement/prospectus.

 

The approval and adoption by Medytox stockholders of the Merger Agreement and the transactions contemplated by such agreement is a condition to the merger and requires (i) the affirmative vote of a majority of the voting power of the Medytox stockholders, which includes holders of Medytox common stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock and (ii) the affirmative vote of a majority of the outstanding shares of Medytox Series B Preferred Stock, voting separately. Each share of Medytox common stock, Medytox Series B Preferred Stock, Medytox Series D Preferred Stock and Medytox Series E Preferred Stock is entitled to one vote for each outstanding Medytox share. Abstentions to vote will have the same effect as a vote against the merger agreement proposal.

 

The Medytox board of directors recommends that Medytox stockholders vote “FOR” the approval and adoption of the merger agreement and the transactions contemplated thereby, including the merger.

 

Proposal 2- Approval of Possible Adjournment of the Medytox Special Meeting

 

Medytox stockholders may be asked to vote on a proposal to adjourn the Medytox special meeting, or any adjournments thereof, to approve any motion to adjourn the special meeting, or any adjournment thereof, to another time or place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement and the transactions contemplated thereby. Approval of the Medytox adjournment proposal requires the affirmative vote of holders of a majority of Medytox shares represented, in person or by proxy, at the special meeting (other than the Series B Preferred Stock,) whether or not a quorum is present. Abstentions will have the same effect as a vote against this proposal.

 

Share Ownership and Voting by Medytox Officers and Directors

 

It is anticipated that as of the Medytox record date, the Medytox directors and executive officers will have the right to vote approximately 18,271,551 shares of Medytox common stock, 5,000 shares of Series B Preferred Stock and no shares of either Series D Preferred Stock or Series E Preferred Stock, representing approximately 58% of Medytox common stock, Series D Preferred Stock and Series E Preferred Stock voting power entitled to vote at the meeting. Medytox directors and executive officers who are stockholders of Medytox evidenced their support “FOR” the proposal to approve and adopt the merger agreement and the transactions contemplated thereby and “FOR” the Medytox adjournment proposal by having entered into a Company Voting and Support Agreement with CollabRx to vote in favor of the merger agreement and transactions contemplated thereby.

 

Voting Your Shares

 

Medytox stockholders may vote in person at the Medytox special meeting, or by executing and returning a proxy. Medytox recommends that you submit your proxy even if you plan to attend the Medytox special meeting. If you vote by proxy, you may change your vote, among other ways, if you attend and vote at the Medytox special meeting.

 

If you own Medytox shares in your own name, you are considered, with respect to those shares, the “stockholder of record.” If your Medytox shares are held by a brokerage firm, bank or other nominee, you are considered the beneficial owner of shares held in “street name.”

 

If you are a Medytox stockholder of record you may use the enclosed proxy card to tell the persons named as proxy holders how to vote your shares. If you properly complete, sign and date your proxy card, your shares will be voted in accordance with your instructions. The named proxy holders will vote all shares at the meeting for which proxy holders have been properly submitted and not revoked. If you sign and return your proxy card but do not mark your card to tell the proxy holders how to vote, your shares will be voted “FOR” the proposals to approve and adopt the merger agreement and the transactions contemplated thereby and to adjourn the Medytox special meeting in accordance with the recommendations of the Medytox board of directors.

 

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Medytox stockholders may also vote over the internet at www.islandstocktransfer.com or by telephone toll free at (877) 502-0550 by close of business on the day immediately preceding the Medytox special meeting. Voting instructions are printed on the proxy card or voting information form you received. Either method of submitting a proxy will enable your shares to be represented and voted at the special meeting.

 

Shares Held in Street Name

 

If your Medytox shares are held in an account through a brokerage firm, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares by following the instructions that the broker, bank or other nominee provides you along with this joint proxy statement/prospectus. Your broker, bank or other nominee may have an earlier deadline by which you must provide instructions to it as to how to vote your shares, so you should read carefully the materials provided to you by your broker, bank or other nominee.

 

If you do not provide voting instructions to your brokerage firm, bank or other nominee, it will nevertheless be entitled to vote your shares on “discretionary” items but will not be permitted to do so on “non-discretionary” items. None of the proposals at the Medytox special meeting are discretionary matters. As such, without your instructions, nominees do not have discretionary authority to vote on any of the proposals to be voted on at the Medytox special meeting.

 

A “broker non-vote” occurs when a brokerage firm, bank, or other nominee does not vote shares that it holds in “street name” on behalf of a beneficial owner, because the beneficial owner has not provided voting instructions to the nominee with respect to a non-discretionary item. Because brokers, banks and other nominees do not have discretionary voting with respect to any of the proposals, if a beneficial owner of Medytox shares held in “street name” does not give voting instructions to the broker, bank or other nominee for any proposal, then those shares will not be present in person or represented by proxy at the special meeting. This broker non-vote will have the same effect as a vote against the proposal to approve and adopt the Merger Agreement and the transactions contemplated thereby, and will have no effect on the proposal to adjourn the Medytox special meeting, if necessary or appropriate, to solicit additional proxies if necessary or appropriate.

 

If you are a Medytox stockholder of record, you may revoke your proxy and change your vote at any time before it is voted at the special meeting by:

 

·voting again by telephone or on the internet, because only your latest telephone or internet vote will be counted;

 

·by properly completing, signing, dating, and returning another proxy card with a later date;

 

·if you are a registered stockholder, by voting in person at the meeting;

 

·if you are a registered stockholder, by giving written notice of such revocation to Medytox’s Corporate Secretary prior to or at the meeting; or

 

·if your shares are held in “street name” by a brokerage firm, bank or other nominee, you should follow the instructions of your brokerage firm, bank or other nominee regarding the revocation of proxies.

 

Your attendance at the Medytox special meeting itself will not revoke your proxy unless you give written notice of revocation to Medytox’s Corporate Secretary before the polls are closed.

 

Costs of Solicitation

 

Medytox will bear the cost of soliciting proxies from its stockholders as well as the costs associated with the filing, printing, publication and mailing of this joint proxy statement/prospectus to Medytox stockholders.

 

Medytox will solicit proxies on behalf of its board of directors by mail, telephone, facsimile, or other electronic means or in person. Medytox will make arrangements with brokerage firms, banks, and other nominees, and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Medytox shares held of record by those persons and will reimburse them for their reasonable expenses incurred in forwarding such proxy solicitation materials.

 

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Medytox and CollabRx have jointly retained Alliance Advisors to assist in their solicitation of proxies and have agreed to pay it a fee of approximately $15,000, plus administrative disbursements. All fees and disbursements to Alliance Advisors will be paid by CollabRx.

 

Medytox stockholders should not send in their common stock certificates with their proxy cards.

 

As described under “The Merger Agreement-Exchange of Shares” beginning on page 87, Medytox stockholders of record will be sent materials for exchanging Medytox shares shortly after the effective time.

 

Other Business

 

The Medytox board of directors is not aware of any other business to be acted upon at the Medytox special meeting. If, however, other matters are properly brought before the Medytox special meeting, the proxy holders will vote your shares in accordance with their best judgment.

 

Assistance

 

If you need assistance in completing your proxy card or have questions regarding the Medytox special meeting, please contact Alliance Advisors, by e-mail at aal@allianceadvisorsllc.com or call toll free: 877-777-5216 and follow the instructions.

 

 

 

 

 

 

 

 

 

 

 

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THE SPECIAL MEETING OF COLLABRX STOCKHOLDERS

 

This joint proxy statement/prospectus is being provided to CollabRx stockholders as part of a solicitation of proxies by the CollabRx board of directors for use at the special meeting of stockholders of CollabRx and at any adjournments of such meeting. This joint proxy statement/prospectus is being furnished to CollabRx stockholders on or about September 28, 2015. This joint proxy statement/prospectus provides CollabRx stockholders with information they need to be able to vote or instruct their votes to be cast at the special meeting.

 

Date, Time and Place

 

CollabRx will hold a special meeting of stockholders on October 28, 2015, at 10:30 a.m., Pacific Time, at the offices of Goodwin Procter LLP located at 135 Commonwealth Drive, Menlo Park, California 94025.

 

Purpose

 

At the special meeting, CollabRx stockholders will be asked to consider and vote on proposals to adopt and/or approve the following:

 

·the issuance of shares of CollabRx common stock and other securities exercisable or convertible for shares of CollabRx common stock, which we refer to as the CollabRx Share Issuance, in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 15, 2015, by and among CollabRx, Inc., CollabRx Merger Sub, Inc., a direct wholly owned subsidiary of CollabRx formed for the purpose of the merger, and Medytox Solutions, Inc., a copy of which is attached as Annex A to the joint proxy statement/prospectus;

 

·an amendment to the CollabRx Certificate of Incorporation, as amended, to effect a reverse split of CollabRx’s common stock at a specific ratio from 1-for-2.5 to 1-for-10, to be effected immediately prior to the effective time of the merger;

 

·an amendment to the CollabRx Certificate of Incorporation, as amended, to increase the number of authorized shares of CollabRx common stock from 50,000,000 to 150,000,000, effective as of the effective time of the merger;

 

·an amendment to the CollabRx, Inc. 2007 Incentive Award Plan to increase the number of shares authorized to be issued under the plan and to increase the maximum number of shares any one individual may receive in any calendar year;

 

·the “golden parachute” compensation that may become payable to CollabRx's named executive officers in connection with the Merger Agreement as required by Item 402(t) of Regulation S-K and Section 14A(b) of the Securities Exchange Act of 1934 on an advisory (non-binding) basis; and

 

·the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposals.

 

Recommendation of the CollabRx Board of Directors

 

The CollabRx board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement, including the issuance of shares of CollabRx common stock and other securities exercisable or convertible for shares of CollabRx common stock to Medytox stockholders in connection with the merger, are in the best interests of CollabRx and its stockholders. At such meeting, the board of directors further unanimously approved (i) the CollabRx Share Issuance, (ii) the amendment to the Certificate of Incorporation, as amended, to effect a reverse split of CollabRx’s common stock at a specific ratio from 1-for-2.5 to 1-for-10, (iii) the amendment to the Certificate of Incorporation, as amended, to increase the number of authorized shares of CollabRx common stock from 50,000,000 to 150,000,000; and (iv) the amendment to the CollabRx 2007 Incentive Award Plan to increase the number of shares authorized to be issued under the plan and to increase the maximum number of shares any one individual may receive in any calendar year. Accordingly, the CollabRx board of directors unanimously recommends that CollabRx stockholders vote “FOR” each of the proposals listed above and explained in detail in this joint proxy statement/prospectus.

 

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CollabRx stockholders should carefully read this joint proxy statement/prospectus and the exhibits hereto in their entirety for more detailed information concerning the merger and the transactions contemplated by the merger agreement.

 

Record Date; Stockholders Entitled to Vote

 

The record date for the special meeting is September 4, 2015. Only record holders of shares of CollabRx common stock at the close of business on that date are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement. At the close of business on the record date, the only outstanding voting securities of CollabRx were its common stock, and 10,487,373 shares of CollabRx common stock were issued and outstanding.

 

Each share of CollabRx common stock outstanding on the record date of the special meeting is entitled to one vote on each proposal and any other matter coming before the special meeting.

 

Voting by CollabRx’s Directors and Executive Officers

 

In connection with the merger agreement, Mr. Mika executed a voting and support agreement with Medytox pursuant to which, among other things and subject to its terms and conditions, Mr. Mika agreed to vote his shares of CollabRx common stock in favor of the merger agreement and the transactions contemplated therein. A copy of the voting and support agreement is attached to this joint proxy statement/prospectus as Annex F.

 

Quorum

 

No business may be transacted at the special meeting unless a quorum is present. Two or more CollabRx stockholders representing a majority of the outstanding shares must be present in person or represented by proxy to constitute a quorum. If a quorum is not present, or if less than a majority of shares are voted in favor of the proposals listed above, then the special meeting may be adjourned to allow additional time for obtaining additional proxies (so long as such adjournment is approved by a majority of the votes cast).

 

No notice of an adjourned meeting of less than 30 days need be given unless after the adjournment a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

 

All shares of CollabRx common stock represented at the special meeting, including shares that are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum. Broker non-votes will have no effect on determining the presence or absence of a quorum.

 

Required Vote

 

Proposals 2 (reverse stock split) and 3 (increase in authorized common stock) require the affirmative vote, in person or by proxy, of a majority of CollabRx’s common stock outstanding and entitled to vote. Proposals 1 (CollabRx Share Issuance), 4 (amendment to incentive plan) and 6 (Adjournment) require the affirmative vote, in person or by proxy, of a majority of the shares of CollabRx common stock voting on such proposal. The affirmative vote, in person or by proxy, of a majority of the shares of CollabRx’s common stock voting on Proposal 5 is not required, but is for advisory purposes.

 

Voting of Proxies by Holders of Record

 

If you were a record holder of CollabRx common stock at the close of business on the record date, a proxy card is enclosed for your use. CollabRx requests that you vote your shares as promptly as possible by (i) visiting the internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the provided self-addressed, stamped envelope. Information and applicable deadlines for voting through the internet or by telephone are provided on the enclosed proxy card. When the accompanying proxy is returned properly executed, the shares of CollabRx common stock represented by it will be voted at the special meeting or any adjournment or postponement in accordance with the instructions contained in the proxy card. Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.

 

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If a proxy is returned without an indication as to how the shares of CollabRx common stock represented are to be voted with regard to a particular proposal, the CollabRx common stock represented by the proxy will be voted in accordance with the recommendation of the CollabRx board of directors and, therefore, “FOR” each of the proposals.

 

At the date hereof, the CollabRx board of directors has no knowledge of any business that will be presented for consideration at the CollabRx special meeting and that would be required to be set forth in this joint proxy statement/prospectus or the related proxy card other than the matters set forth in CollabRx Notice of Special Meeting of Stockholders.

 

Your vote is important. Accordingly, if you were a record holder of CollabRx common stock on the record date, please sign and return the enclosed proxy card or vote via the internet or telephone whether or not you plan to attend the special meeting in person. Proxies submitted through the specified internet website or by phone must be received by 5:00 p.m., Pacific Time, on October 27, 2015.

 

Shares Held in Street Name

 

If you hold shares of CollabRx common stock through a stock brokerage account or a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” The “record holder” of such shares is your broker, bank or other nominee, and not you, and 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, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to CollabRx or by voting in person at the CollabRx special meeting unless you have a “legal proxy,” which you must obtain from your broker, bank or other nominee. Please also note that brokers, banks or other nominees who hold shares of CollabRx common stock on behalf of their customers may not give a proxy to CollabRx to vote those shares without specific instructions from their customers.

 

If you are a CollabRx stockholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee may not vote your shares on any of the proposals listed above. This broker-non vote will have the same effect as a vote against Proposals 2 and 3 to amend CollabRx’s Certificate of Incorporation, as amended, and will have no effect on the other proposals submitted to CollabRx stockholders.

 

Attending the Meeting; Voting in Person

 

Only CollabRx stockholders, their duly appointed proxies, and invited guests may attend the meeting. All attendees must present government-issued photo identification (such as a driver’s license or passport) for admittance. The additional items, if any, that attendees must bring depend on whether they are stockholders of record, beneficial owners, or proxy holders. A CollabRx stockholder who holds shares directly registered in such stockholder’s name with CollabRx’s transfer agent who wishes to attend the special meeting in person should bring government-issued photo identification.

 

A stockholder who holds shares in “street name” through a broker, bank, trustee or other nominee (referred to as a “beneficial owner”) who wishes to attend the special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.

 

A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of CollabRx common stock who wishes to attend the special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the CollabRx stockholder, and proof of the signing stockholder’s record ownership as of the record date.

 

No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the special meeting may prevent stockholders from being admitted to the CollabRx special meeting.

 

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Revocation of Proxies

 

A CollabRx stockholder may revoke a proxy at any time before it is voted at the special meeting by taking any of the following four actions:

 

·delivering written notice of revocation to CollabRx’s Corporate Secretary, at 44 Montgomery Street, Suite 800, San Francisco, California 94104;

 

·delivering a proxy card bearing a later date than the proxy that you wish to revoke;

 

·casting a subsequent vote via telephone or the Internet, as described above; or

 

·attending the meeting and voting in person.

 

Merely attending the meeting will not, by itself, revoke a CollabRx stockholder’s proxy; a CollabRx stockholder must cast a subsequent vote at the meeting using forms provided for that purpose. A CollabRx stockholder’s last valid vote that CollabRx receives before or at CollabRx’s special meeting is the vote that will be counted.

 

Solicitation of Proxies

 

CollabRx is soliciting proxies for the special meeting from its stockholders. In accordance with the merger agreement, CollabRx will pay its own cost of soliciting proxies from its stockholders, including the cost of mailing this joint proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by CollabRx’s officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.

 

CollabRx will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of CollabRx common stock. CollabRx may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.

 

Medytox and CollabRx have jointly retained Alliance Advisors to assist in their solicitation of proxies and have agreed to pay it a fee of approximately $15,000, plus administrative disbursements. All fees and disbursements to Alliance Advisors will be paid by CollabRx.

 

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INFORMATION ABOUT THE COMPANIES

 

Medytox Solutions, Inc.

 

Medytox Solutions, Inc.
400 S. Australian Avenue, Suite 800
West Palm Beach, Florida 33401
Telephone: (561) 855-1626

 

Medytox Solutions, Inc. is a holding company that owns and operates businesses in the medical services sector. Medytox is a new generation healthcare enterprise that delivers a single source for integrated solutions. Medytox applies its innovative approach through an outstanding suite of IT & software solutions, revenue cycle management and financial services, combined with a range of diagnostic testing and other ancillary services for the healthcare sector.

 

Its principal line of business is clinical laboratory blood and urine testing services, with a particular emphasis in the provision of urine drug toxicology testing to physicians, clinics and rehabilitation facilities in the United States. Testing services to rehabilitation facilities represented over 90% of our revenues for the years ended December 31, 2014 and December 31, 2013.

 

Medytox, utilizing its proprietary lab ordering and reporting software, offers a complete, turn-key urine drug testing (“UDT”) program allowing physicians to proactively monitor and treat patients. Medytox’s UDT program is utilized by physicians to identify and evaluate prescribed and/or non-prescribed drugs that when combined may cause adverse drug interactions dangerous to a patient’s health. With our UDT program, physicians can be more assured their patients are adhering to their therapeutic drug regimens and are in compliance with their prescribed guidelines. Our UDT program helps the health care provider achieve better outcomes for patients and in evaluating to what extent the prescribed medications and their dosages are working for the patient to achieve a better outcome towards recovery.

 

As a provider of clinical laboratory services, we continue to pursue our strategy of acquiring or entering into binding relationships with high-complexity laboratories that can facilitate our customers’ needs. We have successfully completed substantial expansion of our New Mexico and Florida based laboratories and have completed several acquisitions or strategic partnerships with laboratories located in different regions of the United States, allowing us to correspondingly increase our client base. These laboratories, and those we shall continue to seek out, offer or can be developed to offer the most advanced analytical technology for the processing of urine specimens including Immunoassay Analyzers (“IA”) for screens and Gas Chromatography Mass Spectrometry/Liquid Chromatography Mass Spectrometry (“GCMS/LCMS”) for confirmations. All Medytox laboratories are fully-staffed professional COLA-accredited high complexity laboratories with additional certifications such as the COLA Laboratory of Excellence Award (COLA’s Highest Commendation), Clinical Laboratory Improvement Amendments (“CLIA”) and the State of Florida’s AHCA Clinical Laboratory License for Non-Waived High Complexity testing and we anticipate that any facilities acquired in the future will meet these stringent requirements. Our in-house billing company services all of our facilities, utilizing electronic processing of claims to the major insurance payers and eliminating the need to rely on and pay for the services of clearing houses, allowing us to maximize profit retention.

 

Medytox is actively expanding the services it offers its clients to include not just specialized diagnostic testing in its laboratories but medical billing services, Electronic Health Records (“EHR”) and Laboratory Information Systems (“LIS”) products and IT and software solutions incorporating integration of numerous electronic communication platforms in the sector in an effort to provide a single source solution to medical providers.

 

Medytox shares are not listed on an established public trading market, but are quoted by the OTC Markets Group, Inc., in the non-NASDAQ over the counter market under the symbol “MMMS.”

 

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CollabRx, Inc.

 

CollabRx, Inc.
44 Montgomery Street, Suite 800
San Francisco, California 94104
Telephone: (415) 248-5350

 

CollabRx develops and markets medical information and clinical decision support products and services intended to set a standard for the clinical interpretation of genomics-based, precision medicine. Building on a comprehensive and specialized knowledge base, software systems that facilitate dynamic updating and automated reporting, and a large network of independent expert clinical advisors, we have developed a suite of unique and differentiated information products and services. These products include a scalable system for providing high-value information on biomarkers and related therapies for inclusion in reports prepared by diagnostic labs reporting on the results from their multi-biomarker genomic-based tests. In addition, CollabRx has developed decision-support tools for physicians and patients to assist with treatment planning for advanced cancer, offered over the Internet in both web-based and mobile apps. CollabRx believes that both product sets are highly synergistic, and allow opportunities for enhancement, cross-fertilization and adoption that go beyond what each would offer individually. CollabRx shares are listed on the NASDAQ Capital Market under the symbol “CLRX.”

 

CollabRx Merger Sub, Inc.

 

CollabRx Merger Sub, Inc.
c/o CollabRx, Inc.
44 Montgomery Street, Suite 800
San Francisco, California 94104
Telephone: (415) 248-5350

 

Merger Sub is a Nevada corporation and a newly incorporated, direct, wholly-owned subsidiary of CollabRx. Merger Sub was incorporated on March 13, 2015 for the sole purpose of effecting the merger. To date, Merger Sub has not conducted any activities other than those incidental to its incorporation, the execution of the Merger Agreement and the preparation of applicable filings under U.S. securities laws made in connection with the Merger.

 

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THE MERGER

 

This section and the section titled “The Merger Agreement” describe the material aspects of the merger, including the merger agreement. While Medytox and CollabRx believe that this description covers the material terms of the merger and the merger agreement, it may not contain all of the information that is important to you. You should read carefully this entire joint proxy statement/prospectus for a more complete understanding of the merger and the merger agreement, including the attached Annexes, and the other documents to which you are referred herein. See “Where You Can Find More Information” beginning on page 212.

 

General

 

Upon the terms and subject to the conditions of the merger agreement and in accordance with the Nevada Revised Statutes, or NRS, at the effective time of the merger, Merger Sub, a direct, wholly-owned subsidiary of CollabRx and a party to the merger agreement, will merge with and into Medytox and the separate corporate existence of Merger Sub will cease. Medytox will survive the merger as a direct, wholly-owned subsidiary of CollabRx. The merger will become effective at such time as the articles of merger have been filed with the Nevada Secretary of State or at any later date or time mutually agreed to by CollabRx and Medytox and specified in the articles of merger.

 

At the effective time of the merger, (i) each share of Medytox common stock will be converted into the right to receive such number of shares of CollabRx common stock equal to the Exchange Ratio, (ii) each share of Medytox Series B Preferred Stock will be converted into the right to receive one share of CollabRx Series B Preferred Stock, which will be designated prior to the closing of the merger, (iii) each share of Medytox Series D Preferred Stock will be converted into the right to receive one share of CollabRx Series D Preferred Stock, which will be designated prior to the closing of the merger, (iv) each share of Medytox Series E Preferred Stock will be converted into the right to receive one share of CollabRx Series E Preferred Stock, which will be designated prior to the closing of the merger, (v) each option and warrant to purchase shares of CollabRx common stock will continue in existence pursuant to its terms, (vi) each restricted stock unit for CollabRx common stock will settle prior to the closing of the merger in accordance with its terms, and (vii) Medytox’s equity incentive plan will be assumed by CollabRx and each outstanding option to purchase shares of Medytox common stock will be assumed by CollabRx and converted into an option to purchase shares of CollabRx common stock (with proportional adjustment to the number of shares underlying the option and the exercise price, each in accordance with the Exchange Ratio). The Exchange Ratio will be calculated such that holders of CollabRx equity prior to the closing of the merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) will hold 10% of CollabRx’s common stock following the closing of the merger, and holders of Medytox equity prior to the closing of the merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that will be cancelled contingent upon the closing pursuant to agreements between Medytox and such optionees) will hold 90% of CollabRx’s common stock following the closing of the merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages.

 

CollabRx stockholders will not receive any merger consideration and will continue to hold their CollabRx shares after the merger.

 

CollabRx and Medytox currently expect the closing to occur during the fourth calendar quarter of 2015. However, as the merger is subject to the satisfaction or waiver of other conditions described in the merger agreement, it is possible that factors outside the control of CollabRx and Medytox could result in the merger being completed at an earlier time, a later time, or not at all.

 

Background of the Merger

 

Following the acquisition of a private company named CollabRx by Tegal Corporation in July 2012, members of CollabRx’s senior management and the board of directors met periodically to review and assess financial performance, operations and market developments in the context of CollabRx’s long-term strategic goals and plans. These periodic reviews routinely included evaluations of customers and prospective customers whose partnership with or investment in CollabRx as a development stage company might accelerate its growth and contribute to its funding. From the time of the acquisition in 2012, the need to raise additional capital to fund product and company development was fully understood and discussed at length by Mr. Mika and the board of directors of CollabRx.

 

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Throughout 2013 and 2014, Mr. Mika met, in person or by telephone, with representatives from over 20 financial institutions. In addition to non-deal roadshow presentations to dozens of institutional investors and analysts arranged through investment banking firms and investor relations firms, Mr. Mika and other CollabRx senior management initiated multiple contacts and discussions with companies engaged in the cancer diagnostic testing market, identifying over 20 potential strategic partners and over 10 venture capital firms actively investing in companies similar to CollabRx.

 

In October 2012, Mr. Mika met with the Co-Head of Healthcare Banking at Cantor Fitzgerald. On November 12, 2012, the two bankers from Cantor Fitzgerald met with Mr. Mika and the senior management of CollabRx in San Francisco to review non-public information about CollabRx’s operations, market and potentials. Cantor Fitzgerald subsequently arranged meetings with prominent health care institutional investors in the San Francisco area in March 2013. None of these meetings resulted in a firm offer of investment.

 

On April 10, 2013, four members of the board of directors of CollabRx met with principals of Cantor Fitzgerald in New York City to review Cantor Fitzgerald’s interest in, and capabilities to represent, CollabRx. As the year progressed, the need to raise additional capital became more urgent. Investor outreach continued during 2013, and Mr. Mika made periodic reports to the CollabRx board of directors on these activities, as well as on progress with the operations and financial condition of CollabRx.

 

On May 28, 2013, the CollabRx board of directors held a meeting in which Mr. Mika recommended that CollabRx focus primarily on strategic relationships with customers and that financing options through investment banks should be deferred until later in the year.

 

On September 17, 2013, coincident with the timing of a services agreement with a major customer, Company A, Mr. Mika made a verbal proposal for a significant investment by Company A in CollabRx. On September 19, 2013, Mr. Mika followed up with a letter proposing a strategic relationship with Company A.

 

On September 26, 2013, CollabRx held its annual meeting of stockholders, which was followed by a meeting of the CollabRx board of directors. In addition to reviewing operations, cash projections and business development opportunities, CollabRx’s financing strategy was reviewed at the CollabRx board of directors meeting. It was determined that Mr. Mika should continue to pursue strategic investors and initiate additional financing activities to shore up CollabRx’s balance sheet.

 

On October 8, 2013, Mr. Mika approached the Chief Executive Officer of Company B, a distributor of CollabRx’s on-line products about a strategic relationship, including investment. Mr. Mika provided the business plan under a confidentiality agreement that had been signed earlier in the year.

 

On October 16, 2013, at Mr. Mika’s request, Cantor Fitzgerald introduced Mr. Mika to Aegis Capital, with whom Cantor Fitzgerald had worked on a previous financing. On October 22, 2013, Mr. Mika met telephonically with Aegis Capital to discuss CollabRx’s financing needs.

 

On October 18, 2013, Company A requested a detailed business plan for review by Company A’s development committee. The confidential business plan was transmitted to Company A on November 6, 2013. The plan included non-public information that was provided under a confidentiality agreement that had been executed earlier in the year.

 

On October 31, 2013, Company B declined the investment because of its preparation for an initial public offering, but offered to introduce the opportunity to a limited set of its institutional investor-stockholders. Subsequently, the Chief Executive Officer of Company B informed Mr. Mika that there was no interest from any of the parties he contacted.

 

On November 21, 2013, Mr. Mika and other senior management of CollabRx met telephonically with Company A to discuss timeline and next steps.

 

To meet the short-term capital needs of CollabRx, Cantor Fitzgerald proposed a controlled equity offering with “at the market” (ATM) pricing through the filing of a registration statement on Form S-3. On November 21, 2013, the CollabRx board of directors authorized Mr. Mika to proceed with the ATM financing proposed by Cantor Fitzgerald.

 

On December 2, 2013, following diligence conducted by Cantor Fitzgerald for the underwriting of the ATM financing, the board of directors of CollabRx approved the ATM financing and stock sale agreements with Cantor Fitzgerald. At that meeting, Mr. Mika reviewed with the CollabRx board of directors the status of his alternative financing efforts.

 

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On December 13, 2013, Mr. Mika traveled to Company A’s headquarters in New Jersey to make a presentation to senior management about CollabRx capabilities and to promote the strategic investment. On January 20, 2014, a telephonic follow-up meeting was held for members of Company A’s management team who were unable to attend the previous presentation. It was expected that Company A’s development committee would meet on January 27, 2014, to review the investment proposal. On January 28, 2014, Mr. Mika was informed that the development committee had not met as expected and that the matter would be taken up the following month.

 

On December 20, 2013, CollabRx filed its Form S-3 registration statement with the Securities and Exchange Commission (“SEC”). On February 3, 2014, the SEC declared the previously filed Form S-3 effective, which made the ATM facility available for use, pending specific orders to be submitted by CollabRx to the trading desk of Cantor Fitzgerald.

 

On February 27, 2014, Mr. Mika and other senior management of CollabRx were requested to meet telephonically with Company A’s divisional management team, specifically to address two projects that would form additional justification for the strategic investment. The meeting was held and Mr. Mika was asked to wait for a decision while the proposal was reviewed internally. On March 24, 2014, Mr. Mika was informed that Company A would not be making the investment on the proposed terms. Subsequently, Mr. Mika revised the terms of the investment and asked his contact at Company A to propose the revised terms to divisional management. On April 28, 2014, the senior management team of CollabRx was invited to give a presentation in person to the divisional management team from Company A. On May 2, 2014, Mr. Mika received guidance from his main contact at Company A to further refine the terms for an equity investment in CollabRx. Later that day, Mr. Mika was informed that the divisional management had rejected the investment proposal and discussions on the subject were terminated.

 

In the months of March and April, 2014, the combination of trading volume and declining stock price of CollabRx allowed only a de minimis ($26,538) capital raise using the ATM facility.

 

On April 15, 2014, Mr. Mika contacted Aegis Capital to see if they could help with selling the stock available from the Form S-3. On April 17, 2014, Aegis Capital presented Mr. Mika with a draft engagement letter using the existing Form S-3 for a follow-on public offering. During a meeting of the board of directors on April 24, 2014, during which Mr. Mika presented a detailed review of CollabRx’s financing strategy, the option to engage Aegis Capital was unanimously approved and Mr. Mika was given the authority to proceed. On May 15, 2014, an engagement agreement was executed between CollabRx and Aegis Capital.

 

On April 23, 2014, Mr. Mika retained the services of Third Creek Advisors, a leading small-cap corporate governance advisory firm as Special Advisor to the board of directors of CollabRx.

 

On May 16, 2014, the ATM facility with Cantor Fitzgerald was terminated in favor of a follow-on public offering to be managed by Aegis Capital. On May 20, 2014, Mr. Mika updated the board of directors by email regarding the structure of the proposed offering and the potential interest from another strategic partner for an investment. Additional telephonic updates were held with the board of directors on June 4, 2014 and June 13, 2014. Formal resolutions of the board of directors and the pricing committee were reviewed and adopted at the meeting on June 13, 2014.

 

On June 20, 2014, a public offering was completed, resulting in gross proceeds of $1.8 million, limited in size by the regulations pertaining to the size of CollabRx’s public float and registration statements on Form S-3. Since the $1.8 million would only be sufficient to bridge CollabRx for less than six months, Mr. Mika consulted with Aegis about the possibility of doing either another public offering or a private placement to raise the needed capital.

 

On July 9, 2014, Mr. Mika requested a member of the CollabRx board of directors to make an introduction to Venture Fund A, a firm that had experience investing in public companies. On July 24, 2014, Mr. Mika met with a principal from Venture Fund A in the CollabRx offices. On August 5, 2014, Mr. Mika initiated a follow-up call and confirmed its interest in continued discussions regarding an investment in CollabRx. On August 7, 2014, CollabRx senior management reviewed the underlying technology of CollabRx with the principal of Venture Fund A via a web presentation. Customer references were requested and provided to Venture Fund A.

 

On August 8, 2014, Mr. Mika presented to the board of directors a proposal for additional financing efforts through Aegis Capital, along with a proposal to retain another banker to review strategic options, including the possible sale of CollabRx. The board of directors authorized Mr. Mika to negotiate an engagement agreement with Aegis Capital and to seek out and retain a financial advisor specialized in mergers and acquisitions to assist with finding a buyer for CollabRx. Mr. Mika also proposed that the available members of the board of directors meet on an informal but regular basis telephonically every two weeks, with corporate counsel present, to review progress with various financing activities.

 

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Subsequent to the meeting of the board of directors on August 8, 2014, Mr. Mika attempted to retain an investment banking firm specialized in mergers and acquisitions to take up the effort to find a buyer for CollabRx. During the months of August and September, Mr. Mika contacted and met with four such investment banking firms, all of which refused the assignment on the basis of the size of the potential transaction, the level of effort that would be required, and the available time to complete the assignment.

 

On August 19, 2014, at the request of Mr. Mika, Venture Fund A provided a debrief of its contacts to CollabRx customer references which were strongly positive. The principal of Venture Fund A indicated that time would be needed to generate consensus within the firm for a CollabRx investment.

 

On August 22, 2014, available members of the board of directors met for the regular bi-weekly teleconference, during which Mr. Mika updated the board on progress with strategic investors, venture funds and investment banking firms. Aegis Capital was invited to participate in this meeting and recommended that CollabRx prepare and file an S-1 registration statement for maximum flexibility in connection with any further efforts.

 

Also on August 22, 2014, the CollabRx management team visited the US headquarters of Company C, which had expressed an interest in exploratory discussions regarding an investment or acquisition of CollabRx. Company C had arranged for the business lead, the senior US division management and the foreign-based corporate development lead to be at the meeting. CollabRx provided material non-public information to Company C under a confidentiality agreement. Mr. Mika gained a commitment from Company C to complete diligence and decide whether or not an offer would be forthcoming within 30 days. In addition to several exchanges of information by email and telephone, further substantive discussions took place on September 4, September 10, October 7 and October 9, 2014, well outside the promised 30-day schedule.

 

On September 2, 2014, Mr. Mika contacted Venture Fund A by email to inquire about status and a call was set for September 3, 2014 during which Mr. Mika emphasized the importance of timing.

 

On September 5, 2014, with the approval of the board of directors, Mr. Mika executed an engagement agreement with Aegis Capital to seek a private placement for CollabRx, with certain carve-outs for funds and institutional investors with whom Mr. Mika had been in contact directly in prior months. CollabRx, along with its corporate counsel, began preparation of an offering memorandum.

 

On September 8, 2014, Venture Fund A requested additional information on company organization, infrastructure and status of capital raises. On September 10, 2014, Mr. Mika provided the additional requested information by email.

 

On September 12, 2014, Mr. Mika organized a telephonic financing discussion with available members of the board of directors. Progress was reviewed and questions were asked and answered.

 

On September 15, 2014, Aegis Capital reported to Mr. Mika that they had been unable to raise interest in investment from the institutional investors that they had contacted, except for one fund, Investor A. Mr. Mika was asked to review a form warrant agreement, provided by Aegis Capital on behalf of Investor A, before any further discussions would take place. Following review of the warrant agreement in consultation with Third Creek Advisors and members of the board of directors, Mr. Mika received a term sheet from Investor A on September 20, 2014.

 

On September 25, 2014, CollabRx held its Annual Stockholder Meeting, which was followed immediately by a board of directors meeting. At that meeting the proffered term sheet from Investor A was discussed in detail. Aegis Capital was present and answered questions from the board of directors. In addition, Third Creek Advisors was present and answered questions from the board of directors. The term sheet from Investor A proposed a $4.7 million investment, subject to certain “equity conditions,” which Mr. Mika asked Aegis Capital to clarify on behalf of Investor A. Despite several attempts to clarify the terms, a satisfactory explanation of the “equity conditions” was not forthcoming. Unable to reach an acceptable level of specificity on the “equity conditions” mentioned in the term sheet and the existence of significant protections to Investor A in the proposed warrant agreement, the board of directors declined the proposal from Investor A, believing it not to be in the best interests of CollabRx stockholders.

 

In a meeting held on September 25, 2014, the CollabRx board of directors re-affirmed the strategy of continuing to pursue multiple financing paths. On October 7, 2014, Mr. Mika met with Aegis Capital in New York City and asked Aegis Capital to prepare an Engagement Agreement for a public offering utilizing a registration statement on Form S-1. During that meeting, Mr. Mika discussed in general terms several other alternatives for CollabRx, including a possible sale of the assets and a reverse merger with another company. Aegis Capital offered their support for these alternatives, should CollabRx decide to pursue them.

 

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Also on October 7 2014, Mr. Mika met informally with Cantor Fitzgerald and discussed several alternatives for CollabRx.

 

On October 9, 2014, Mr. Mika spoke with the corporate development lead of Company C. On October 10, 2014, Company C requested additional information regarding revenues and customers, which was provided by Mr. Mika.

 

On October 10, 2014, Mr. Mika reviewed the status of discussions with Company C and others in the regular bi-weekly finance review with available members of the board of directors. Mr. Mika also reported that, despite additional efforts, he was unsuccessful in finding an investment banking firm to represent CollabRx in a sale transaction.

 

On October 17, 2014, Mr. Mika was contacted by Cantor Fitzgerald regarding Company D, which expressed an interest in an asset purchase. Following the exchange of confidentiality agreements, a telephonic meeting was held between Mr. Mika and the CEO and the Chief Medical Officer of Company D on October 24, 2014. Cantor Fitzgerald asked for time for additional diligence, but Mr. Mika responded that there was limited time for diligence in the absence of a letter of intent.

 

On October 23, 2014, Mr. Mika contacted Venture Fund A to notify it of the filing of its registration statement on Form S-1 and to see if the Fund would be interested in participating as a lead investor. The principal of Fund A requested a copy of the registration statement on Form S-1, which Mr. Mika provided.

 

On October 29, 2014, the SEC notified CollabRx that it would not be reviewing its Form S-1, allowing the potential public offering to go forward.

 

On October 31, 2014, Mr. Mika provided an update on all matters during the regular bi-weekly financing update with the available members of the board of directors.

 

On November 5, 2014, the CEO of Company E contacted Mr. Mika, at the suggestion of a member of the CollabRx board of directors, to discuss the business and objectives of Company E. On November 7, 2014, Company E’s CEO made an additional presentation of its business to Mr. Mika and the CollabRx senior management team. Expressing serious interest in an acquisition of CollabRx, Company E brought its senior management team to San Francisco on November 11, 2014. Non-public information was exchanged between the companies under a mutual confidentiality agreement.

 

On November 11, 2014, Mr. Mika had a telephone call with the corporate development lead of Company C, who notified Mr. Mika that Company C would not offer more than $1 million for the CollabRx assets. Mr. Mika informed Company C of its intent to raise additional capital with a public offering and encouraged Company C and improve its offer prior to the launch of the public offering. On November 13, 2014, Company C notified Mr. Mika by email that it would not be improving its offer and discussions with Company C were terminated on November 14, 2014.

 

On November 14, 2014, Aegis Capital notified Mr. Mika of its proposal to launch a $4 million public offering on November 17, 2014. During the regularly scheduled bi-weekly financing update, Mr. Mika discussed with the available members of the board of directors the status of all interested parties and the proposal from Aegis Capital to proceed with the public offering. It was agreed that Mr. Mika should proceed and that corporate counsel would prepare the appropriate resolutions for the board to proceed with the offering.

 

On November 17, 2014, Mr. Mika traveled to New York City for the roadshow, which commenced on November 19, 2014 with presentations to the Aegis Capital retail broker offices in New York City and Long Island, and another broker network, also on Long Island.

 

On November 18, 2014, the CEO of Company E contacted Mr. Mika by email reporting that the acquisition of CollabRx was beyond its current means, but encouraged further discussion in a business development context.

 

On November 20, 2014, Aegis Capital recommended that CollabRx withdraw its request to the SEC for effectiveness of the Form S-1, since Aegis had been unable to complete the offering at the minimum $4 million level that CollabRx required.

 

On November 20, 2014, Mr. Mika contacted Cantor Fitzgerald to see if Company D still had an interest in an asset purchase. Cantor Fitzgerald told Mr. Mika that it would contact Company D to determine its interest.

 

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Also on November 20, 2014, following CollabRx’s request to withdraw effectiveness of the Form S-1, Aegis Capital proposed that CollabRx consider a reverse merger with Medytox, which became known to Aegis Capital in connection with preliminary discussions between Medytox and a client of Aegis Capital. Aegis Capital proposed Medytox as a potential partner for CollabRx in lieu of completing the public offering at an amount less than $2 million, which was Aegis Capital’s estimate for the maximum that could be raised if the offering continued. Mr. Mika agreed to review information about Medytox, so Aegis Capital contacted Medytox and arranged for a call early the next morning, Friday, November 21, 2014.

 

On November 21, 2014, Mr. Mika met telephonically with Seamus Lagan, CEO of Medytox and several members of Medytox’s senior management team. Mr. Mika described the business, revenue model, markets and capabilities of CollabRx. Mr. Mika inquired when Mr. Lagan could meet to continue the discussion in person.

 

On November 22, 2014, Mr. Mika traveled to Nassau, Bahamas to meet with Mr. Lagan. Beginning in the mid-afternoon, Mr. Mika met with Mr. Lagan for approximately seven hours. The discussion was wide-ranging, including personal backgrounds, company histories, management styles and the basis for synergies between the two companies. Mr. Mika and Mr. Lagan discussed preliminary terms for a transaction, including valuation, post-merger capitalization, operation of CollabRx as a wholly owned subsidiary, board representation and overall structure. Mr. Mika and Mr. Lagan agreed to continue the discussion and immediately enter the diligence phase.

 

On November 23, 2014, while returning to San Francisco from Nassau, Aegis Capital contacted Mr. Mika to request a follow-up call, which took place at 6:00am PST on Monday, November 24, 2014. At 3:00pm PST on Monday, November 24, 2014, Mr. Mika convened an informal meeting of the Board to discuss his impressions of the meeting and the opportunity presented by Medytox.

 

On November 24, 2014, Company D made a non-binding offer for the assets and selected liabilities of CollabRx in the range of $1 - $3 million. Certain additional terms of the non-binding offer were discussed by email with Cantor Fitzgerald on November 25 and 26, 2014. The email containing the non-binding offer was forwarded to all the members of the board of directors of CollabRx.

 

Also on November 24, 2014, Venture Fund A contacted Mr. Mika asking for a status report, which Mr. Mika provided by telephone. The principal of Fund A requested an investor deck for presentation to his partners, which Mr. Mika provided by email.

 

Also on November 24, 2014, Medytox and CollabRx entered into a Confidentiality and Non-Circumvent Agreement.

 

On November 25, 2014, Aegis Capital presented Mr. Mika with a draft letter of intent covering key matters of the proposed reverse merger with Medytox, including post-merger capitalization and agreement to fund CollabRx through approval of any deal by its stockholders. The draft letter of intent was reviewed by CollabRx’s counsel and board of directors.

 

On November 25, 2014, Mr. Mika contacted Ladenburg to determine its interest and qualifications for providing a Fairness Opinion to the board of directors of CollabRx, should the board decide to proceed with the Medytox transaction.

 

On November 26, 2014, Mr. Mika and the senior management team of CollabRx made a web presentation to the partners of Venture Fund A. In a later telephone conference call on the same date, Mr. Mika responded to additional questions from Venture Fund A and was told that an offer would be forthcoming. On November 28, 2014, Fund A made a non-binding offer via email to Mr. Mika for the acquisition of CollabRx’s assets and selected liabilities for a price in the range of $2 - 3 million. The email containing the non-binding offer was forwarded by Mr. Mika to all of the members of the board of directors of CollabRx. On December 3, 2014, Mr. Mika requested by email more details about the non-binding offer, including the terms of the needed bridge financing through stockholder approval of the sale, a request to narrow the purchase price to a specific amount rather than a range, and the specific liabilities to be assumed.

 

On December 2, 2014, Mr. Lagan sent Mr. Mika an email containing a proposal on the post-merger capitalization. The proposal was further refined by Mr. Lagan on December 4, 2014, following the Medytox board of directors’ meeting held that same day. Further revisions were made to drafts in the days following.

 

On December 4, 2014, the Medytox board of directors met telephonically and reviewed the draft letter of intent covering key matters of the proposed reverse merger between Medytox and CollabRx. Following discussions, the Medytox board of directors unanimously approved the letter of intent and authorized Mr. Lagan to finalize and execute the letter of intent.

 

On the early morning of December 5, 2014, the CollabRx board of directors met to discuss the options that were before CollabRx but decided not to conclude the discussion until the next day, giving Venture Fund A an opportunity to refine or improve its offer, since it was bringing its team to CollabRx at 8:30am PST that day.

 

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On December 5, 2014, the CollabRx management team met with Fund A at the CollabRx office, during which additional information about the CollabRx business, future prospects and need for additional bridge financing to achieve stockholder approval were discussed at length. The principal of Venture Fund A called Mr. Mika at 4:00pm PST to withdraw Venture Fund A’s previous non-binding offer.

 

On December 6, 2014, the CollabRx board of directors met telephonically and CollabRx gave its approval to pursue the Medytox reverse merger. That same day, Mr. Mika sent the final agreed revised non-binding letter of intent to Mr. Lagan at Medytox, and both CollabRx and Medytox executed the non-binding letter. The letter of intent included a cash expense forecast for CollabRx through the end of April 2015 as a means to scale the amount of funding that Medytox would agree to provide to bridge CollabRx to stockholder approval for the merger.

 

The companies agreed to set up data rooms for a diligence process and CollabRx assembled a small team of its senior management to make a site visit to Medytox headquarters. On December 15, 2014, Mr. Lagan prepared and sent to Mr. Mika by email a preliminary agenda for the visit by the CollabRx team on December 17 and 18, 2014. The visit included a combination of diligence, deal discussion and business planning. During that visit, Medytox confirmed its interest in entering the cancer testing market and re-affirmed its desire for CollabRx to continue to operate as a wholly-owned subsidiary. Tentative schedules for document creation, diligence and site visits were discussed.

 

On December 22, 2014, Mr. Lagan made a Skype call and web presentation of Medytox to the CollabRx team, which consisted of approximately 13 employees.

 

On December 30, 2014, CollabRx engaged Ladenburg Thalmann (Ladenburg) to provide a Fairness Opinion on the proposed merger with Medytox.

 

On December 30, 2014, Mr. Mika communicated via email with Mr. Lagan on the subjects of cash requirements to be included in a funding agreement, a copy of the engagement letter with Ladenburg for the Fairness Opinion and the letter from the NASDAQ regarding the notice of a net equity deficiency.

 

From January 2 through January 5, 2015, the parties agreed to work together on a draft of a letter in response to the Nasdaq net equity requirement. Donohoe Associates had been retained as an expert advisor to navigate CollabRx through all issues with the Nasdaq. Permission was granted to all attorneys to speak directly to each other for the purpose of answering the Nasdaq.

 

On January 7, 2015, Medytox forwarded a draft of a funding agreement and a draft of a related disclosure for Form 8-K that had been proposed by Medytox’s attorneys. The terms of the funding agreement were subsequently negotiated by the companies and their respective counsel. The parties entered into a loan and security agreement on January 16, 2015. The agreement contemplated that Medytox would loan CollabRx up to $2,395,644. Also on January 16, 2015, the parties entered into a separate agreement in which CollabRx agreed that if it entered into a merger or other specified sale transactions with a party other than Medytox, under certain circumstances it would pay Medytox a fee of $1 million. Both companies coordinated the content and timing for the related Form 8-K filings and a joint press release published on January 22, 2015, which disclosed both the agreements and the non-binding letter of intent.

 

On January 19 and 20, 2015, Mr. Wadman, corporate controller of Medytox, visited CollabRx in San Francisco to conduct due diligence with Mr. Mika and Ms. Fonseca, CollabRx’s corporate controller.

 

On February 2, 2015, in response to significant price and volume moves in CollabRx common stock on the NASDAQ, Aegis Capital contacted Mr. Mika about using the still effective Form S-1 for a public offering.

 

On February 6, 2015, the CollabRx board of directors met and approved resolutions authorizing the public offering of stock in connection with the Form S-1. In addition, Mr. Mika updated the board on the status of the proposed merger with Medytox.

 

On February 9, 2015, Medytox agreed that it would waive the $1 million penalty stipulated in the agreement for the purpose of completing the public offering. The parties also discussed the anticipated changes in CollabRx's funding requirements in the event it closed a public offering. CollabRx's agreement not to make further requests for funding from Medytox until certain conditions were met and Medytox's agreement to waive the $1 million fee upon the closing of the public offering were memorialized on February 19, 2015 in an amendment to the loan and security agreement and the agreement.

 

On February 10, 2015, Ladenburg conducted a due diligence call with Mr. Mika for the purpose of rendering the Fairness Opinion.

 

On February 18, 2015, Mr. Mika and Mr. Lagan met in Washington, DC with Donohoe Associates to prepare for the NASDAQ hearing on February 19, 2015. Mr. Mika and Mr. Lagan and members of Donohoe Associates were present in person at the NASDAQ hearing. The Corporate Controller of CollabRx, the Chief Financial Officer of Medytox and outside counsel for both companies were present by telephone.

 

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On February 25, 2015, CollabRx announced the closing of an initial $5.52 million offering of common stock and warrants. Due to the demand for additional CollabRx common stock, Aegis Capital and CollabRx discussed the use of the CollabRx Form S-3 to raise additional capital. Later on the same day, the CollabRx board of directors authorized the company to use its Form S-3 for a second public offering of common stock. Also on February 25, 2015, Mr. Mika sent an email to Mr. Lagan regarding renegotiation of the capital structure in consideration of any additional capital raised by CollabRx.

 

On February 26, 2015, Mr. Mika provided an update by telephone to Ladenburg for the purpose of rendering the Fairness Opinion.

 

On March 2 and 3, 2015, Mr. Lagan and Ms. Hollis from Medytox visited the CollabRx offices in San Francisco. The discussion over two days included a wide range of topics, including opportunities for business integration and strategic and operational issues. Also on March 3, 2015, CollabRx repaid all amounts then outstanding to Medytox under the loan and security agreement.

 

On March 4 through March 10, 2015, Mr. Mika and Mr. Lagan had several discussions regarding the post-merger capital structure of the combined company.

 

On March 17, 2015, the CollabRx board of directors reviewed the Fairness Opinion provided by Ladenburg and by unanimous agreement authorized Mr. Mika to enter into a merger agreement with Medytox.

 

On March 17, 2015, CollabRx’s board of directors approved an amendment (the “Amendment to the Rights Agreement”) to the Shareholder Rights Agreement between CollabRx and Computershare Trust Company, N.A. (as successor rights agent to Registrar and Transfer Company) (“Rights Agent”), dated as of April 13, 2011 (the “Rights Agreement”). The Amendment to the Rights Agreement, among other things, renders the Rights Agreement inapplicable to the merger agreement and the transactions and other agreements contemplated thereunder. The Amendment to the Rights Agreement provides that the execution and delivery of the merger agreement and the agreements referenced therein and the consummation of the merger and the other transactions contemplated by the merger agreement will not result in Medytox or its affiliates being deemed an “Acquiring Person” under the Rights Agreement. In addition, the Amendment to the Rights Agreement provides that none of a “Stock Acquisition Date,” a “Distribution Date,” a “Section 11(a)(ii) Event” or a “Section 13 Event” (each as defined in the Rights Agreement) will occur by reason of the approval or execution of the merger agreement and the agreements referenced therein or the consummation of the merger and the other transactions contemplated by the merger agreement.

 

On March 19 and March 20, 2015, Mr. Mika and Mr. Lagan discussed the terms of the Engagement Agreement previously signed by CollabRx with representatives of Aegis Capital. As a result of those discussions, Aegis Capital agreed to a revised formula for the fees payable in connection with the merger transaction.

 

On March 28 through March 30, 2015, Mr. Mika and Mr. Lagan continued their discussion on the post-merger capitalization.

 

On April 10, 2015, the Medytox board of directors met telephonically and reviewed the draft merger agreement. Following discussions, the Medytox board of directors unanimously approved the merger agreement and authorized Mr. Lagan to finalize and execute the merger agreement.

 

On April 11, 2015, Mr. Mika and Mr. Lagan agreed on the minimum cash balance that CollabRx would have at the signing of a definitive merger agreement.

 

On April 15, 2015, Mr. Mika discussed with Mr. Lagan his selection and the budget for a consulting firm to assist CollabRx in an assessment of its markets and strategy.

 

Also, on April 15, 2015, CollabRx and Medytox executed the definitive merger agreement, and the Amendment to the Rights Agreement was executed.

 

On April 16, 2015, both companies issued a joint press release announcing the definitive merger agreement.

 

 

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Recommendation of the Medytox Board of Directors; Medytox’s Reasons for the Merger

 

After careful consideration, the Medytox board of directors unanimously recommends that Medytox stockholders vote “FOR” each of the proposals being submitted to a vote of the Medytox stockholders at the Medytox special meeting.

 

In reaching its decision, the Medytox board of directors considered a number of factors as generally supporting its decision to enter into the merger agreement, including, among others, the following:

 

·the belief that the combination of Medytox’s and CollabRx’s businesses would create more value for the Medytox stockholders in the long-term than Medytox could create as an independent, stand-alone company;

 

·the opportunity for the Medytox stockholders to participate in the potential future value of the combined company, including future potential value from CollabRx’s established products and products in development;

 

·the exchange ratio in the merger which is intended to result in Medytox stockholders holding approximately 90% of the outstanding shares of the combined company on a fully diluted basis after the merger; provided, however, outstanding shares of the newly designated CollabRx Series B Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the merger are excluded from such ownership percentages; and

 

·the governance arrangements contained in the merger agreement.

 

Uncertainties, Risks and Potentially Negative Factors

 

The Medytox board of directors also considered a variety of risks and other potentially negative factors concerning the merger, including, among others, the following:

 

·the risk that the merger might not be completed in a timely manner;

 

·risks related to certain terms of the merger agreement (including restrictions on the conduct of Medytox’s business prior to completion of the merger and the requirement that Medytox pay CollabRx a termination fee and expense reimbursement in certain circumstances);

 

·risks related to the diversion of management and resources from other strategic opportunities;

 

·challenges and difficulties relating to integrating the operations of Medytox and CollabRx; and

 

·the fact that the combined company will need additional financing if the merger is completed.

 

The foregoing discussion of the information and factors considered by the Medytox board of directors is forward-looking in nature. This information should be read in light of the factors described under “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 50.

 

 

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Recommendation of the CollabRx Board of Directors; CollabRx’s Reasons for the Merger

 

After careful consideration, the CollabRx board of directors unanimously recommends that CollabRx stockholders vote “FOR” each of the proposals being submitted to a vote at the CollabRx special meeting.

 

In reaching its decision to approve, and recommend to CollabRx stockholders the approval of, the merger agreement and the transactions contemplated thereby, the CollabRx board of directors considered a number of factors, including the following:

 

·the belief that the combination of CollabRx’s and Medytox’s businesses would create more value for the CollabRx stockholders in the long-term than CollabRx could create as an independent, stand-alone company;

 

·the opportunity for the CollabRx stockholders to participate in the potential future value of the combined company, including future potential value from Medytox’s established products and products in development;

 

·the exchange ratio in the merger which is intended to result in CollabRx equityholders holding approximately 10.0% of the outstanding shares of the combined company after the merger;

 

· the governance arrangements contained in the merger agreement;

 

·the opportunity for CollabRx to expand and supplement its management capabilities by utilizing the existing experienced management team of Medytox;

 

·the opportunity for CollabRx to expand its sales and marketing activities through the established marketing and sales team of Medytox;

 

·the opportunity for CollabRx to expand its informatics-based products into more comprehensive offerings in connection with the established laboratories operated by Medytox; and

 

·the expectation that the combined company would have easier access to additional financing.

 

Uncertainties, Risks and Potentially Negative Factors

 

The CollabRx board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the merger, including the following:

 

·the fact that CollabRx stockholders will own a significantly smaller percentage in the combined company;

 

·the difficulty and costs inherent in the combination of two businesses and the risk that the cost savings, synergies and other benefits expected might not be fully or timely realized;

 

·the risk that the merger might not be completed in a timely manner;

 

·risks related to certain terms of the merger agreement (including restrictions on the conduct of CollabRx’s business prior to completion of the merger and the requirement that CollabRx pay Medytox a termination fee and expense reimbursement in certain circumstances);

 

·risks related to the diversion of management and resources from other strategic opportunities; challenges and difficulties relating to integrating the operations of CollabRx and Medytox; and

 

·the fact that the combined company will need additional financing if the merger is completed.

 

The foregoing discussion of the information and factors considered by the CollabRx board of directors is forward-looking in nature. This information should be read in light of the factors described under “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 50.

 

 

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Opinion of CollabRx’s Financial Advisor

 

CollabRx retained Ladenburg to render a fairness opinion to the CollabRx board of directors in connection with the merger. On March 17, 2015, Ladenburg delivered its oral opinion, subsequently confirmed in a written opinion of the same date, to the CollabRx board of directors that, based on and subject to the limitations and assumptions stated in the opinion, as of the date of the opinion, the Common Stock Exchange Ratio (as defined in the Ladenburg opinion attached hereto) calculated as provided in Section 1.8(b) of the Merger Agreement, was fair, from a financial point of view, to CollabRx stockholders.

 

The full text of Ladenburg’s written opinion dated March 17, 2015, which contains the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of Ladenburg’s opinion in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. You are urged to read the opinion in its entirety and this summary is qualified by reference to the written opinion. Ladenburg’s opinion addresses solely the fairness, from a financial point of view, to CollabRx stockholders of the Common Stock Exchange Ratio as of the date of the opinion. Ladenburg’s opinion is for the use and benefit of CollabRx board of directors in connection with its consideration of the transaction. Ladenburg’s opinion may not be used by any other person, including the stockholders, lenders or creditors of CollabRx or for any other purpose without Ladenburg’s prior written consent, provided that Ladenburg has consented to the use of its opinion herein. Ladenburg’s opinion is not intended to and does not constitute an opinion or recommendation to any of CollabRx’s stockholders as to how such stockholders should vote or act with respect to the transaction, should a vote of such stockholders be required, or any matter relating thereto. Ladenburg’s opinion should not be construed as creating any fiduciary duty on its part to any party to the transaction documents or any other person.

 

In arriving at its opinion, Ladenburg, among other things:

 

·reviewed the transaction documents;

 

·reviewed the last two years of SEC filings of CollabRx and Medytox (including, but not limited to, 8Ks, 10Ks and 10Qs);

 

·reviewed the last two years of financial data of CollabRx and Medytox (obtained from SEC filings and S&P Capital IQ);

 

·reviewed CollabRx’s stock price and trading volume history up to the public announcement date of the transaction;

 

·discussed at length with CollabRx’s CEO and other members of CollabRx’s management the current and past state of CollabRx’s business, the steps taken to raise or secure capital, which included efforts through bankers, strategic partnerships, venture capital and PE firms, the steps taken to explore the sale of CollabRx or assets, and CollabRx’s equity listing history and status with NASDAQ;

 

·reviewed materials containing the history of meetings held with prospective investment bankers, investors, venture capital and PE firms and the feedback received;

 

·discussed at length with CollabRx’s CEO and other members of CollabRx management the terms of the transaction, employment agreements, and stockholder ownership at closing and post-closing of the transaction;

 

·reviewed and discussed at length with CollabRx’s CEO and other members of CollabRx management CollabRx’s weekly cash requirements from January 2015 through the end of April 2015, financial models and the operating assumptions underlying the models;

 

·reviewed and discussed at length with Medytox’s CFO the financial models that were provided to Ladenburg, the operating assumptions underlying the financial model and the ability to satisfy working capital requirements post transaction;

 

·reviewed and analyzed certain financial characteristics of publicly-traded companies that were deemed to have characteristics comparable to Medytox;

 

·reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed to have characteristics comparable to that of Medytox; and

 

·performed such other analyses and examinations as were deemed appropriate.

 

 

 

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The following is a summary of the material analyses performed by Ladenburg in connection with the preparation of its fairness opinion, which was reviewed with, and formally delivered to, the CollabRx board of directors at a meeting held on March 17, 2015. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Ladenburg or of its presentation to the CollabRx board of directors on March 17, 2015.

 

This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully understand the analyses presented by Ladenburg. The tables alone do not constitute a complete summary of the analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as an indication of the relative importance or weight given to these analyses by Ladenburg or the CollabRx board of directors. 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 March 17, 2015, and is not necessarily indicative of current market conditions.

 

Analyses

 

Ladenburg performed the following analyses in connection with rendering its opinion to the CollabRx board of directors:

 

·qualitative and quantitative review of CollabRx;

 

·selected public companies analysis;

 

·Medytox’s financial projections’ analysis

 

Each of these analyses is summarized below.

 

Qualitative & Quantitative Review of CollabRx

 

Ladenburg discussed at length with members of CollabRx’s management team information, including but not limited to, CollabRx’s historical and future operations, product development, working capital needs, partnerships, efforts to raise capital, efforts to sell CollabRx assets, CollabRx’s NASDAQ listing, and other factors deemed important to the performance and viability of CollabRx operations. The analysis also involved financial review of CollabRx and the ability to generate cash flows to sustain ongoing operations and meet working capital needs.

 

Ladenburg reviewed CollabRx’s projected weekly cash requirements and compared these to the projected cash available for the period between January 2015 and April 2015.

 

Ladenburg reviewed CollabRx’s stock performance and trading history for the period commencing January 22, 2014 and running to January 22, 2015. Ladenburg deemed January 22, 2015 to be the date a proposed transaction with Medytox was made available to the public.

 

CollabRx Closing Stock Price Performance

 

Period Low High Mean
30 Day $0.55 $1.09 $0.71
60 Day $0.55 $1.09 $0.70
90 Day $0.55 $1.09 $0.70
180 Day $0.55 $1.58 $0.99
1 Year $0.55 $3.94 $1.98

 

The qualitative and quantitative review of CollabRx was used by Ladenburg as a consideration to evaluate the viability of CollabRx’s operations and historical equity value.

 

Selected Public Companies Analysis

 

Ladenburg reviewed selected historical financial data of Medytox and estimated stand-alone financial data of Medytox based on projections provided by Medytox’s management. Ladenburg compared such data to corresponding financial data, where applicable, for U.S. based companies primarily listed on a U.S. exchange and that provide clinical laboratory testing services, including urine and blood testing services, that Ladenburg deemed comparable to Medytox. Ladenburg selected the comparable companies based on information obtained by searching industrial classifications and its professional judgment.

 

 

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Based on these criteria, Ladenburg identified and analyzed the following selected public companies:

 

·Quest Diagnostics Inc.;

 

·Laboratory Corp. of America Holdings; and

 

·Bio-Reference Laboratories Inc.

 

For the selected public companies analysis, Ladenburg compared three valuation multiples for Medytox to valuation multiples for the selected public companies. Medytox’s valuation multiples were derived using Medytox’s EV, Medytox’s revenue for the LTM period, Medytox’s EBITDA for the LTM period, and Medytox’s P/E for the LTM period. Ladenburg then compared the Medytox multiples to valuation multiples for the selected public companies derived from their closing price per share on March 9, 2015, EV, revenue for the LTM period, EBITDA for the LTM period, and P/E for the LTM period. The tabular summary below presents the results of this comparison:

 

         

Selected Public Companies

 

Measurement

   

Medytox

    

Minimum

    

Mean

    

Median

    

Maximum

 
EV/LTM Revenue   1.8x    1.2x    1.7x    1.9x    2.1x 
EV/LTM EBITDA   4.2x    9.1x    10.1x    10.5x    10.6x 
P/E LTM   11.3x    18.3x    19.2x    19.1x    20.3x 

 

The selected public companies analysis showed that, based on the assumptions used in the analysis, the valuation multiple of Medytox was within the range of minimum and maximum valuation multiples of the selected public companies when comparing the ratio of EV to LTM revenue.

 

The selected public companies analysis showed that, based on the assumptions used in the analysis, the valuation multiples of Medytox were below the range of minimum and maximum valuation multiples of the selected public companies when comparing the ratio of (i) EV to LTM EBITDA; and (ii) P/E LTM.

 

Medytox Financial Projections Analysis

 

Ladenburg discussed and reviewed Medytox’s financial projections as provided by Medytox’s management team. Ladenburg discussed at length several variables, including but not limited to:

 

·market sizing and MMMS’ market share;

 

·growth drivers, including maximizing capacity of current laboratories, lab consolidation, and organic growth;

 

·Medytox laboratories’ current and future capacity;

 

·payer landscape associated with toxicology testing;

 

·pricing per toxicology sample;

 

·direct lab costs;

 

·net collectible revenues;

 

·commission expenses;

 

·information technology expenses;

 

·general and administrative expenses; and

 

·projected EBITDA margins.

 

 

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Implied Equity Analysis

 

Using an EBITDA and P/E analysis, Ladenburg calculated an estimated range of theoretical equity values for Medytox, on a stand-alone basis, using projected EBITDA, projected Net Income and projected EPS from FY2015 to FY2019. Using the projections, Ladenburg calculated the range of theoretical equity values for FY2015 based on an EBITDA exit multiple of 10.5x and P/E multiple of 20.0x. This analysis resulted in a theoretical equity value range of $313.5 million and $360.0 million for FY 2015.

 

Miscellaneous

 

The summary set forth above does not contain a complete description of the analyses performed by Ladenburg, but does summarize the material analyses performed by Ladenburg in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Ladenburg believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Ladenburg opinion. Ladenburg did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support its opinion that the Common Stock Exchange Ratio is fair, from a financial point of view, to CollabRx’s stockholders. Instead, Ladenburg concluded that the analyses, taken as a whole, supported its determination. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Ladenburg’s view of the actual value of Medytox.

 

No company used in the above analyses as a comparison is directly comparable to Medytox. Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in the companies to which Medytox were compared and other factors that could affect the public trading value or transaction value of the companies involved.

 

Ladenburg performed its analyses for purposes of providing its opinion to the CollabRx board of directors. In performing its analyses, Ladenburg made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Ladenburg are based upon forecasts of future results furnished to Ladenburg by Medytox’s management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Ladenburg does not assume responsibility if future results are materially different from forecasted results.

 

Ladenburg’s analysis and opinion are necessarily based upon market, economic and other conditions, as they exist on, and could be evaluated as of, March 17, 2015. Accordingly, although subsequent developments may affect Ladenburg’s opinion, Ladenburg does not assume any obligation to update, review or reaffirm our opinion to the CollabRx board of directors or any other person.

 

In arriving at Ladenburg’s opinion, Ladenburg has relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial and other information that was supplied or otherwise made available to Ladenburg and it has further relied upon the assurances of CollabRx’s management that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information and the financial projections reviewed, Ladenburg assumed that such information was reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which Ladenburg could make its analysis and form an opinion. Ladenburg has not evaluated the solvency or fair value of CollabRx under any applicable foreign, state or federal laws relating to bankruptcy, insolvency or similar matters. Ladenburg has not physically inspected CollabRx’s or Medytox’s properties and facilities and has not made or obtained any evaluations or appraisals of CollabRx’s or Medytox’s assets and liabilities (including any contingent, derivative or off-balance sheet assets and liabilities). Ladenburg has not attempted to confirm whether CollabRx or Medytox has good title to its assets.

 

Ladenburg assumed that the transaction will be consummated in a manner that complies in all respects with applicable foreign, federal, state and local laws, rules and regulations. Ladenburg has assumed that the final executed forms of the transaction documents will not differ in any material respect from the proposed final form documents Ladenburg reviewed and that the transaction will be consummated on the terms set forth in the transaction documents, without further amendments thereto, and without waiver by CollabRx of conditions to any of its obligations thereunder or in the alternative that any such amendments or waivers thereto will not be detrimental to CollabRx or its stockholders in any material respect. Ladenburg also assumed that the representations and warranties of the parties thereto contained in the transaction documents are true and correct and that each such party will perform all of the covenants and agreements to be performed by it under the transaction documents. Ladenburg has not been asked to, nor does Ladenburg, offer any opinion as to the non-financial contractual terms of the transaction documents or the prospect that the conditions set forth in the transaction documents will be satisfied.

 

 

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Board of Directors and Management After the Merger

 

Upon completion of the merger, the board of directors of the combined company will consist of seven (7) directors, including five (5) current members of the Medytox board of directors and two (2) current members of the CollabRx board of directors. Following the merger, the directors of the combined company will be as set forth in the table below, which also indicates whether the director currently serves on the Medytox or CollabRx board of directors:

 

Name and Position   Term   Prior Board Service
Thomas R. Mika, Chairman   Term ending at 2016 Annual Meeting   CollabRx
Seamus Lagan, director   Term ending at 2016 Annual Meeting   Medytox
Dr. Paul Billings, director   Term ending at 2016 Annual Meeting   CollabRx
Christopher Diamantis, director   Term ending at 2016 Annual Meeting   Medytox
Benjamin Frank, director   Term ending at 2016 Annual Meeting   Medytox
Michael L. Goldberg, director   Term ending at 2016 Annual Meeting   Medytox
Robert Lee, director   Term ending at 2016 Annual Meeting   Medytox

 

Upon completion of the merger,

 

·Mr. Mika, CollabRx’s current Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer, Secretary and Treasurer, will serve as Chairman of the Board of the combined company and President of the CollabRx subsidiary of the combined company;

 

·Seamus Lagan, Medytox’s current Chief Executive Officer and Director, will serve as Chief Executive Officer, President and Director of the combined company;

 

· Jason P. Adams, Medytox’s current Chief Financial Officer, will serve as Chief Financial Officer of the combined company;

 

·Sebastien Sainsbury, Medytox’s current Secretary, will serve as Secretary of the combined company; and

 

·Samuel Mitchell, Medytox’s current Chief Operating Officer, will serve as Chief Operating Officer of the combined company.

 

Other officers of the combined company will be chosen from the existing management teams of Medytox and CollabRx.

 

Interests of Medytox’s Directors and Officers in the Merger

 

In considering the recommendation of the Medytox board of directors to Medytox stockholders to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the other matters to be acted upon by Medytox stockholders at the Medytox special meeting, Medytox stockholders should be aware that certain directors and executive officers of Medytox will have interests in the merger that may be different from, or in addition to, the interests of Medytox stockholders generally or which may conflict with the interests of Medytox stockholders. The Medytox board of directors was aware of these interests and considered them, among other matters, when it evaluated, supervised the negotiation of and approved the merger agreement and the transactions contemplated thereby, and in making its recommendations to Medytox’s stockholders. These interests are described in more detail and quantified below.

 

Ownership Interests

 

As of the record date, directors and executive officers of Medytox, together with their respective affiliates, were entitled to vote 2,380,000 Medytox shares of common stock, or approximately 7.7% of the Medytox voting power on that date. Assuming the merger had been completed as of such date, all directors and executive officers of Medytox, together with their respective affiliates, would own, in the aggregate, approximately 6.9% of the outstanding shares of common stock of the combined company.

 

For a more complete discussion of the ownership interests of the directors and executive officers of Medytox, see “Share Ownership of Certain Beneficial Owners, Management and Directors of Medytox” beginning on page 189.

 

 

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Option Grants

 

It is expected that the combined company will issue options to purchase up to 14,800,000 shares of common stock of the combined company to certain directors and executive officers of Medytox after the effective time. The issuance of these options will dilute the equity interests of the stockholders of the combined company.

 

Positions with the Combined Company

 

As described under “Board of Directors and Management After the Merger,” as of the effective time of the merger:

 

·The board of directors of the combined company will include all of the current members of the Medytox board of directors and such directors, with the exception of Mr. Lagan, will receive cash and equity compensation for such service.

 

· Mr. Lagan will be appointed Director, President and Chief Executive Officer of the combined company and Mr. Sainsbury will serve as Secretary of the combined company and Mr. Mitchell will serve as Chief Operating Officer of the combined company. Other officers of the combined company will be chosen from the existing management teams of Medytox and CollabRx and such officers are expected to receive compensation for such service.

 

Indemnification and Insurance

 

Pursuant to the terms of the merger agreement, Medytox’s current and former directors and executive officers will be entitled to certain ongoing indemnification and coverage for six years after the effective time. See “The Merger Agreement-Indemnification and Insurance” beginning on page 97.

 

Combined Company Arrangements

 

It is possible that, prior to the effective time, some or all of Medytox’s executive officers may discuss or enter into agreements, arrangements or understandings with Medytox and CollabRx or any of their respective affiliates regarding their continuing employment with the combined company or one or more of its affiliates. As of the date of this joint proxy statement/prospectus, such discussions have not occurred and such agreements have not been entered into. No framework regarding compensation at the combined company has been agreed upon beyond what is provided for in the merger agreement (see “The Merger Agreement-Employee Benefits” beginning on page 98 for a summary of CollabRx’s obligations to Medytox employees during the specified periods following the effective time).

 

Voting Agreements

 

In connection with the merger agreement, each of Medytox’s officers and directors who held Medytox stock at the time and certain shareholders entered into a voting agreement with CollabRx pursuant to which, among other things and subject to the terms and conditions therein, such persons agreed to vote their shares of Medytox stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement, as described in more detail under “Voting Agreements.”

 

No Medytox “Golden Parachute” Compensation

 

There are not any agreements or understandings, whether written or unwritten, between any of Medytox’s named executive officers and either Medytox or CollabRx concerning any type of compensation, whether present, deferred or contingent, that is based on or otherwise relates to the merger. The merger will not constitute a change in control under the employment agreement of any of Medytox’s named executive officers or under the Medytox Solutions, Inc. 2013 Incentive Compensation Plan. Medytox has not entered into any new agreement or arrangement to provide additional compensation in connection with the merger and no additional payments to Medytox’s named executive officers are expected to be made in connection with the merger. Therefore, the advisory stockholder vote relating to “golden parachute compensation” otherwise required by Item 402(t) of Regulation S-K is not required with respect to Medytox’s named executive officers.

 

 

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Interests of CollabRx’s Directors and Officers in the Merger

 

In considering the unanimous recommendation of the CollabRx board of directors to vote in favor of the merger agreement and the transactions contemplated thereby, including the merger, and the other matters to be acted upon by CollabRx stockholders at the CollabRx special meeting, you should be aware that some of CollabRx’s directors and executive officers have interests in the merger that are different from, and in addition to, the interests of the CollabRx stockholders generally. The CollabRx board of directors was aware of and considered these potential interests, among other matters, in approving the merger agreement and the transactions contemplated thereby and in determining to recommend that the stockholders vote for approval of the merger agreement and the transactions contemplated thereby. The following discussion sets forth certain of these interests in the merger of each person who has served as a director or executive officer of CollabRx since the beginning of its last fiscal year.

 

Acceleration of Options and Settlement of Restricted Stock Units

 

As of September 22, 2015, the latest practicable date before the printing of this joint proxy statement/prospectus, directors and executive officers of CollabRx held options to purchase an aggregate of 423,264 vested and unvested shares of CollabRx common stock. In connection with the consummation of the merger, options to purchase an aggregate of 217,015 shares of CollabRx common stock will vest in accordance with their terms.

 

As of September 22, 2015, the latest practicable date before the printing of this joint proxy statement/prospectus, directors and executive officers of CollabRx held an aggregate of 23,921 restricted stock units. In connection with the consummation of the merger, all CollabRx restricted stock units will settle in accordance with their terms.

 

Employment Agreements with Executive Officers

 

In connection with the consummation of the merger, the existing employment agreements between CollabRx and each of Thomas Mika and Clifford Baron will be terminated, and a CollabRx subsidiary will enter into Employment Agreements with each of Messrs. Mika and Baron on substantially similar terms.

 

Ownership Interests

 

As of the record date, directors and executive officers of CollabRx, together with their respective affiliates, beneficially owned and were entitled to vote approximately 5.03% of the CollabRx shares outstanding on that date. Assuming the merger had been completed as of such date, all directors and executive officers of CollabRx, together with their respective affiliates, would beneficially own, in the aggregate, approximately 7.32% of the outstanding shares of common stock of the CollabRx shares outstanding.

 

For a more complete discussion of the ownership interests of the directors and executive officers of CollabRx, see “Share Ownership of Certain Beneficial Owners, Management and Directors of CollabRx.”

 

Option Grants

 

It is expected that the combined company will issue options to purchase up to 1,900,000 shares of common stock of the combined company to certain directors and executive officers of CollabRx at the effective time. The issuance of these options will dilute the equity interests of the stockholders of the combined company.

 

Positions with the Combined Company

 

As described under “-Board of Directors and Management After the Merger,” as of the effective time of the merger the board of directors of the combined company will include two of the current members of the CollabRx board of directors and any non-employee director will receive cash and equity compensation for such service. Other officers of the combined company will be chosen from the existing management teams of Medytox and CollabRx and such officers are expected to receive compensation for such service. It is possible that, prior to the effective time, some or all of CollabRx’s executive officers may discuss or enter into agreements, arrangements or understandings with CollabRx regarding their continuing employment with the combined company or one or more of its affiliates. As of the date of this joint proxy statement/prospectus, such discussions have not occurred and such agreements have not been entered into. No framework regarding compensation at the combined company has been agreed upon beyond what is provided for in the merger agreement (see “The Merger Agreement-Employee Benefits” beginning on page 98 for a summary of CollabRx’s obligations to Medytox employees during the specified periods following the effective time).

 

Voting Agreements

 

In connection with the merger agreement, Thomas Mika entered into a voting agreement with Medytox pursuant to which, among other things and subject to the terms and conditions therein, Mr. Mika agreed to vote his shares of CollabRx common stock in favor of the merger, the merger agreement and the transactions contemplated by the merger agreement, as described in more detail under “Voting Agreements.”

 

 

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Quantification of Payments to CollabRx’s Named Executive Officers

 

The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K under the Exchange Act, which requires disclosure of information about certain compensation that may be provided to CollabRx’s named executive officers that is based on or otherwise relates to the merger. The amounts included in the table are estimates based on assumptions that may or may not prove accurate on the date the merger is consummated, and the other assumptions described in the footnotes to the table below. The amounts included in the table below reflect the aggregate amounts that may be payable to each of CollabRx’s named executive officers under employment agreements, equity incentive award agreements and the merger agreement. CollabRx has no obligation to pay any tax reimbursement in connection with the merger.

 

Golden Parachute Compensation - CollabRx

 

Name   Options Awards (3)
Cash($) Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)(1)
Unexercisable
Option
Exercise
Price ($)
Option
Expiration
Date (2)
Thomas Mika 939,000(1)              3,267  $       23.00 11/15/2016
               20,730  $       21.00 12/18/2017
               43,692  $       11.70 11/5/2018
           
Clifford Baron 100,000(2)            10,000              30,000  $         3.22 3/5/2024
                 5,625                9,375  $         1.99 7/3/2024
                       –                 10,000  $         0.75 12/8/2024
           
Smruti Vidwans 92,500(2)                    –                10,000  $         0.75 12/8/2024
                 4,500                7,500  $         1.99 7/3/2024
               15,000              15,000  $         3.94 7/12/2022
           
George Lundberg 75,000(2)                    –                   5,000  $         0.75 12/8/2024
                 1,687                2,813  $         1.99 7/3/2024
                 7,500                7,500  $         3.94 7/12/2022

(1)Mr. Mika was paid a cash bonus of $150,000 upon execution of the Merger Agreement. In addition, Mr. Mika’s employment agreement states he will receive a payment equal to two times his then-prevailing base salary, plus an amount equal to two times the average annual incentive bonus paid to Mr. Mika for the three most recently completed fiscal years in which a cash bonus program covering Mr. Mika was in effect or a cash bonus was actually paid, plus 24 months of COBRA payments on a change of control, termination without cause or resigns for good reason. This severance would be payable in two equal lump sum payments, the first within 60 days following the date of separation and the second on the first anniversary of the date of separation.

(2) The CollabRx Board has approved a severance program for executive officers which generally provides for severance in an amount equal to six month’s base salary in the event an executive officer’s employment is terminated by CollabRx without cause or resigns for good reason, however, in the event that an executive officer is terminated by CollabRx without cause or resigns for good reason within 12 months following a change of control, CollabRx will continue to pay such executive officer’s base salary for a period of 12 months. For purposes of the executive severance program, the terms “cause,” “good reason” and “change of control” generally have the same meanings given to such terms in the employment agreements.

(3)As of June 30, 2015.

 

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Narrative Disclosure to Golden Parachute Compensation Table

 

The tabular disclosure set forth above assumes that each of the listed CollabRx named executive officers (i) is terminated without cause or resigns for good reason in connection with the proposed merger under circumstances that entitle such individual to severance payments under CollabRx’s severance policy, and (ii) becomes entitled to accelerated vesting and/or payment in respect of all unvested equity and equity-based awards held by such named executive officer on such date (excluding, for the avoidance of doubt, any additional awards that may be granted and any new compensatory arrangements that may be entered into prior to the closing date), in accordance with their terms and the merger agreement, regardless of whether the named executive officer’s employment is terminated.

 

Regulatory Approvals Required

 

Medytox and CollabRx have determined that no regulatory approvals are required in connection with the merger. However, Medytox and CollabRx cannot assure you that other government agencies or private parties will not initiate actions to challenge the merger before or after it is completed. Any such challenge to the merger could result in a court order enjoining the merger or in restrictions or conditions that would have a material adverse effect on the combined company following the merger if the merger is completed.

 

NASDAQ Listing of CollabRx Shares

 

CollabRx shares are currently listed on the NASDAQ Capital Market under the symbol “CLRX.” Pursuant to the terms of the merger agreement, CollabRx will file a listing of additional shares notification form with NASDAQ to list the CollabRx shares issuable in connection with the merger and will file a company event notification form with NASDAQ to change CollabRx’s company name to “Rennova Health, Inc.” and its trading symbol to “RNVA” effective as of the completion of the merger. Because the merger constitutes a change of control of CollabRx, CollabRx will file a new listing application with NASDAQ.

 

Delisting and Deregistration of Medytox Shares

 

Following the effective time of the merger, Medytox shares, which currently are quoted by the OTC Markets Group, Inc. in a non-NASDAQ over the counter market under the symbol “MMMS,” will cease trading on the over the counter market. In addition, following the effective time of the merger, Medytox common stock will be deregistered under the Exchange Act.

 

Resale of CollabRx Shares Received by Medytox Stockholders in the Merger

 

The CollabRx shares to be issued in connection with the merger will be freely transferable under the Securities Act, except for shares issued to any Medytox stockholders who may be deemed to be an “affiliate” of the combined company at the time of the closing of the merger. Persons who may be deemed to be affiliates include Medytox directors or executive officers who become directors or executive officers of the combined company after the merger as well as the principal stockholders of the combined company. This joint proxy statement/prospectus does not cover resales of CollabRx shares received by any person upon the completion of the merger, and no person is authorized to make any use of this joint proxy statement/prospectus in connection with any resale.

 

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Anticipated Accounting Treatment

 

The merger will be accounted for as a “reverse acquisition” pursuant to which Medytox will be considered the acquiring entity for accounting purposes in accordance with U.S. generally accepted accounting principles. As such, Medytox will allocate the total purchase consideration to CollabRx’s tangible and identifiable intangible assets and liabilities based on their relative fair values at the date of completion of the merger. Medytox’s historical results of operations will replace CollabRx’s historical results of operations for all periods prior to the merger. After completion of the merger, the results of operations of both companies will be included in the combined company’s financial statements. As required under applicable regulations under the Code, for certain consolidated tax return compliance and accounting purposes following the merger, CollabRx will calculate and file consolidated tax returns and certain financial statements as though Medytox was the surviving entity in the merger and as though Medytox were the parent to the new consolidated group. For all other purposes, CollabRx will be the surviving parent to the new consolidated group.

 

Material Relationships with Financial Advisors

 

CollabRx has previously engaged Cantor Fitzgerald as an advisor, and in the last two years has paid Cantor Fitzgerald approximately $51,000.

 

CollabRx has engaged Aegis Capital as an advisor. In connection with its June 2014 offering, CollabRx paid Aegis Capital approximately $196,000 and issued it 27,405 warrants to purchase common stock. In connection with its February 2015 offering, CollabRx paid Aegis Capital approximately $484,000 and issued it 4,371,200 warrants to purchase common stock. In connection with its March 2015 offering, CollabRx paid Aegis Capital approximately $322,000 and issued it 70,866 warrants to purchase common stock. In connection with this merger, CollabRx expects to pay Aegis $525,000 and common stock valued at $1 million.

 

CollabRx has not previously engaged Ladenburg and does not have a material relationship with Ladenburg. In connection with this Merger, CollabRx paid Ladenburg $225,000.

 

Appraisal and Dissenters’ Rights

 

CollabRx: Appraisal rights are statutory rights under Delaware law that enable stockholders who object to certain extraordinary transactions to demand that the corporation pay such stockholders the fair value of their shares instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Appraisal rights are not available to CollabRx stockholders in connection with the merger or any of the other transactions described in this joint proxy statement/prospectus.

 

Medytox: Medytox stockholders are entitled to appraisal rights and payment for the fair value of their shares in connection with the merger if they properly exercise their dissenters’ rights under the provisions of Sections 92A.300 — 92A.500 of the Nevada Revised Statutes, attached to this document as Annex B. If you want to exercise these rights, you must deliver to Medytox written notice of your intent to demand payment for your shares before the vote is taken on the merger and you must not vote any of your shares in favor of the merger. You must also comply with the other requirements set forth in Annex B. Strict adherence to all of the requirements set forth in Annex B must be followed by dissenting stockholders and the failure to do so will result in forfeiture of their rights to payment, and cause such stockholders to be bound by the terms of the merger, including receipt of the merger consideration. Please read the attached Annex B carefully if you are considering dissenting.

 

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THE MERGER AGREEMENT

 

The following is a summary of the material terms of the Agreement and Plan of Merger, dated as of April 15, 2015, among Medytox Solutions, Inc., CollabRx, Inc. and CollabRx Merger Sub, Inc., which is referred to as the merger agreement. This summary does not purport to describe all the terms of the merger agreement and is qualified in its entirety by reference to the complete merger agreement which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not this summary or any other information contained in this joint proxy statement/prospectus. All stockholders of Medytox and CollabRx are urged to read the merger agreement carefully and in its entirety.

 

Structure of the Merger and Concurrent Transactions

 

Subject to the terms and conditions of the merger agreement and in accordance with Nevada law, CollabRx Merger Sub, Inc., a wholly owned subsidiary of CollabRx that was formed for the purpose of the merger, will be merged with and into Medytox with Medytox surviving the merger and becoming a wholly owned subsidiary of CollabRx. Accordingly, after the effective time of the merger, shares of Medytox common stock will no longer be publicly traded.

 

In addition, concurrently with the effective time of the merger CollabRx will contribute all of its assets (other than its newly acquired ownership interest in Medytox) to a newly organized, wholly owned subsidiary of CollabRx (and sister company of Medytox after the effective time of the merger) referred to under the merger agreement as New Sub. Concurrently with the foregoing contribution of assets to New Sub, New Sub will assume all of the obligations and liabilities of CollabRx as of the effective time of the merger. The foregoing contribution of CollabRx’s assets to New Sub is referred to as the New Sub asset contribution.

 

As a result of the preceding transactions, at the effective time of the merger CollabRx will be the parent company of two operating businesses, Medytox by virtue of the merger and New Sub (comprised of CollabRx’s assets prior to the merger) by virtue of the foregoing contribution of assets and assumption of liabilities.

 

Finally, prior to or concurrently with the effective time of the merger CollabRx will change its name to Rennova Health, Inc. (referred to in this joint proxy statement/prospectus as Rennova Health) and New Sub will be re-named and continue operating as CollabRx. For purposes of simplicity, this summary of the merger agreement continues to refer to CollabRx and New Sub by their names under the merger agreement and does not give effect to the foregoing name change.

 

Closing and Effective Time of the Transactions

 

The closing will occur as soon as practicable, but in no event later than three business days after the day on which each of the conditions to closing set forth in the merger agreement has been satisfied or waived, unless Medytox and CollabRx agree to a different date. The merger will become effective upon the filing of articles of merger with the Secretary of State of the State of Nevada or such later time as may be agreed upon by Medytox and CollabRx and as specified in the articles of merger. The New Sub asset contribution will be automatically effective upon the effective time of the merger. See “Conditions to Completion of the Merger” beginning on page 99 for a more complete description of the conditions that must be satisfied or waived.

 

Merger Consideration

 

Merger Sub

 

At the effective time, each share of common stock of Merger Sub issued and outstanding immediately prior to such effective time will be converted into one share of common stock of the surviving corporation.

 

Medytox

 

Reverse Stock Split. As a condition to the obligation of Medytox to close the merger, prior to the effective time CollabRx will effect a reverse stock split of its outstanding shares of common stock such that every 2.5 to 10 outstanding shares of CollabRx common stock will be converted into 1 outstanding share of CollabRx common stock. The foregoing reverse stock split will have a corresponding effect on the number of shares of CollabRx common stock which are issuable upon exercise of outstanding CollabRx stock options.

 

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Medytox Common Stockholders. As a result of the merger, at the effective time, holders of Medytox common stock will be entitled to receive such number of shares of CollabRx common stock as determined by the exchange ratio. Under the merger agreement, the exchange ratio will be determined immediately prior to the closing based on the following formula: the product of nine times the number of shares of CollabRx common stock outstanding immediately prior to the merger on a fully diluted basis (after giving effect to the CollabRx reverse stock split), divided by the number of shares of Medytox common stock outstanding immediately prior to the merger on a fully diluted basis, which would include all shares of Medytox common stock subject to Medytox stock options which are outstanding as of the closing date (as discussed further below under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”). Applying the foregoing exchange ratio at the closing of the merger will result in the holders of Medytox common stock on a fully diluted basis immediately prior to the closing collectively owning 90% of the outstanding shares of CollabRx common stock immediately following the closing on a fully diluted basis and the holders of CollabRx common stock on a fully diluted basis immediately prior to the closing collectively owning 10% of the outstanding shares of CollabRx common stock immediately following the closing on a fully diluted basis.

 

However, by agreement of the parties the foregoing division of ownership immediately following the closing excludes certain outstanding derivative securities which will be issued by CollabRx in connection with the closing as follows: shares of CollabRx common stock issuable under (1) the D&D Convertible Note (as discussed further below under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”); (2) the newly issued shares of CollabRx Series B, D and E preferred stock (as discussed further below under “Merger Consideration”); (3) new CollabRx stock options the grant of which may be approved by the CollabRx board prior to the Closing and which would be issued at the closing (as discussed further below under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”); and (4) new CollabRx stock options the grant of which may be approved by the CollabRx board at the closing and which would be issued immediately following the closing (as discussed further below under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”). As a consequence of their exclusion from the formula for determining the exchange ratio described in the preceding paragraph, upon conversion into or exercise for shares of CollabRx common stock, such derivative securities will have a dilutive effect on the 90%/10% division of ownership in effect immediately following the effective time. The derivative securities described in this paragraph are referred to in this joint proxy statement/prospectus as the excluded CollabRx securities.

 

Fractional Shares of Common Stock. CollabRx will not issue any fractional shares of CollabRx common stock pursuant to the merger. Instead, Medytox stockholders who would have otherwise have been entitled to receive a fraction of a share of CollabRx common stock shall receive, in lieu of such fractional share, one whole share of CollabRx common stock.

 

Medytox Holders of Preferred Stock. At the effective time of the merger, holders of Medytox preferred stock will be entitled to receive shares of CollabRx preferred stock as follows:

 

·each share of Medytox Series B Non-Convertible Preferred Stock outstanding immediately prior to the effective time of the merger shall be converted into the right to receive one share of CollabRx Series B Convertible Preferred Stock (for a description of the terms of the CollabRx Series B Convertible Preferred Stock, see below under “Description of Capital Stock”);

 

·each share of Medytox Series D Convertible Preferred Stock outstanding immediately prior to the effective time of the merger shall be converted into the right to receive one share of CollabRx Series D Convertible Preferred Stock (for a description of the terms of the CollabRx Series D Convertible Preferred Stock, see below under “Description of Capital Stock”); and

 

·each share of Medytox Series E Convertible Preferred Stock outstanding immediately prior to the effective time of the merger shall be converted into the right to receive one share of CollabRx Series E Convertible Preferred Stock (for a description of the terms of the CollabRx Series E Convertible Preferred Stock, see below under “Description of Capital Stock”).

 

As discussed above, none of the shares of common stock issuable upon any conversion of CollabRx series B, D or E preferred stock are included in the 90%/10% division of ownership which will be in effect upon the closing of the merger. The CollabRx common stock received based on the exchange ratio and the CollabRx preferred stock received in exchange for the Medytox preferred stock, together with any additional whole shares of CollabRx common stock received in lieu of any fractional shares, are referred to as the merger consideration and the issuance by CollabRx of the merger consideration at the effective time of the merger to the applicable holders of Medytox common stock and preferred stock is referred to as the CollabRx share issuance.

 

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CollabRx

 

CollabRx Common Stockholders. CollabRx stockholders will continue to own their existing shares of CollabRx common stock after the merger (representing 10% of the outstanding shares of CollabRx common stock immediately after the effective time of the merger on a fully diluted basis, excluding the excluded CollabRx securities). CollabRx stockholders should not send in their stock certificates in connection with the merger.

 

Exchange of Shares

 

Before the effective time, CollabRx will appoint an exchange agent reasonably acceptable to Medytox to handle the exchange of Medytox common stock and Medytox preferred stock pursuant to the merger for CollabRx common stock and CollabRx preferred stock and the issuance of any whole shares of CollabRx common stock in lieu of fractional shares. Promptly after the effective time, CollabRx will send or cause the exchange agent to send to each holder of Medytox common stock and Medytox preferred stock a letter of transmittal for use in the exchange and instructions explaining how to surrender stock certificates or transfer uncertificated shares of Medytox common stock and Medytox preferred stock to the exchange agent. Holders of Medytox common stock and Medytox preferred stock that surrender their stock certificates or transfer their uncertificated shares to the exchange agent, together with a properly completed letter of transmittal, will receive the appropriate merger consideration. Medytox stockholders should not return stock certificates with the enclosed proxy card. In order to facilitate the foregoing exchange, on or as soon as reasonably practicable following the effective time CollabRx shall deposit with the exchange agent, in trust for the benefit of holders of Medytox common stock and/or Medytox preferred stock, book-entry shares (or certificates if requested) representing the CollabRx common stock and CollabRx preferred stock comprising the merger consideration.

 

After the effective time, holders of unexchanged shares of Medytox common stock and/or preferred stock will not be entitled to receive any dividends or other distributions payable by CollabRx after the closing until their shares of Medytox common stock and/or preferred stock are surrendered. However, once those shares are surrendered, CollabRx will pay the holder, without interest, any dividends with a record date after the effective time that were previously paid to holders of CollabRx common stock and/or preferred stock and will pay the holder (on the appropriate payment date) dividends on CollabRx common stock and/or preferred with a record date after the effective time but prior to surrender and a payment date subsequent to such surrender.

 

Any portion of the exchange fund that remains unclaimed by the Medytox stockholders for one year after the effective time will be delivered to CollabRx. Any holder of Medytox common stock or Medytox preferred stock that has not complied with the terms of exchange procedures in the merger agreement will thereafter look only to CollabRx for payment of the merger consideration, without any interest thereon.

 

Each of the exchange agent, CollabRx and Medytox shall be entitled to deduct and withhold from the merger consideration otherwise payable to any Medytox stockholder pursuant to the merger agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under any applicable provision of federal, state, local or foreign tax law.

 

Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note.

 

Medytox Option Holders. At the effective time of the merger, each outstanding option issued by Medytox to purchase shares of Medytox common stock will be converted into an option to purchase shares of CollabRx common stock on the same terms and conditions as were applicable before the merger (including expiration date, vesting conditions, and exercise provisions, but taking into account any changes to such options under the terms of the Medytox plan or award document, including any acceleration of such options, by reason of the merger) except that each option will allow the holder thereof to purchase a number of shares of CollabRx common stock equal to (1) the number of shares of Medytox common stock subject to the Medytox option before the completion of the merger multiplied by (2) the exchange ratio, rounded, if necessary, to the nearest whole share of CollabRx common stock. In addition, at the effective time of the merger, each Medytox option that has been so converted into an option to purchase shares of CollabRx common stock will have an exercise price per share equal to (1) the exercise price per share of Medytox common stock purchasable pursuant to the Medytox option before the completion of the merger divided by (2) the exchange ratio, rounded, if necessary, up to the nearest whole cent. These Medytox stock options, as converted at the effective time into options to purchase shares of CollabRx common stock (and referred to as converted CollabRx stock options), will continued to be subject to the terms of the Medytox 2013 Incentive Compensation Plan (which will be assumed by CollabRx at the effective time of the merger and is referred to as the Medytox stock plan) and are included in the 90% ownership of CollabRx common stock the former stockholders of Medytox will have upon the closing of the merger.

 

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CollabRx Holders of Restricted Stock Units. Prior to the effective time of the merger, CollabRx shall take such actions as may be necessary to cause each and every restricted stock unit of CollabRx to settle in accordance with its terms. These CollabRx restricted stock units, as so settled, are included in the 10% ownership of CollabRx common stock the existing stockholders of CollabRx will have upon the closing of the merger.

 

CollabRx Option Holders. Holders of CollabRx stock options and/or warrants will continue to hold such options and/or warrants after the merger. The terms and conditions of such options and warrants will remain unchanged, including with respect to vesting schedule. These CollabRx stock options and/or warrants, on an as-exercised basis, are included in the 10% ownership of CollabRx common stock the existing stockholders of CollabRx will have upon the closing of the merger.

 

New CollabRx Stock Options. The merger agreement contemplates that at or following the effective time of the merger CollabRx may issue additional options (referred to as the post-closing stock options) to purchase shares of CollabRx common stock, none of which (as discussed above) will be included in the 90%/10% division of ownership of CollabRx common stock which will be in effect upon the closing of the merger, as follows:

 

·prior to or at the effective time of the merger, it is expected that the CollabRx board will issue stock options to certain employees and directors of and/or consultants to CollabRx under CollabRx’s 2007 Stock Plan (as such plan is discussed further below under “CollabRx Proposal No. 4”), but the number of shares of CollabRx common stock issuable upon exercise of any such options will not exceed the product of 3% times the number of shares of CollabRx common stock outstanding immediately following the effective time of the merger on a fully diluted basis (but excluding the excluded CollabRx securities); and

 

· following the effective time of the merger, it is expected that the CollabRx board will issue further options to purchase up to 14,800,000 shares of CollabRx common stock under the CollabRx 2007 Stock Plan.

 

D&D Convertible Note. Medytox has issued a 10% Convertible Non-Negotiable Senior Promissory Note, dated as of December 31, 2014, in the principal amount of $3,000,000 to D&D Funding II, LLC. At the election of D&D Funding the note is convertible into Medytox common stock and warrants to acquire Medytox common stock based on the market price of Medytox common stock at the time of conversion (but giving effect to a 25% discount on such market price). The terms of the D&D Convertible Note are discussed further below under “Medytox Related Person Transactions”. Following the effective time of the merger the D&D Convertible Note will continue as an obligation of Medytox, but it will be and become convertible into shares of CollabRx common stock and warrants to acquire CollabRx common stock (in lieu of shares of Medytox common stock and warrants to acquire Medytox common stock) based on the same conversion price.

 

Listing of CollabRx Stock

 

CollabRx has agreed to cause the shares of CollabRx common stock to be issued in connection with the merger and such other shares to be reserved for issuance in connection with the merger to be approved for listing on the NASDAQ. The approval for listing of these shares on the NASDAQ is a condition to the obligations of Medytox and CollabRx to complete the merger, subject only to official notice of issuance. Because the merger constitutes a change of control of CollabRx, CollabRx will file a new listing application with NASDAQ.

 

Governance Structure After the Merger

 

Prior to the effective time of the merger the size of the CollabRx board will be increased by resolution of the CollabRx Board to seven members.

 

The merger agreement contemplates that immediately following the effective time of the merger those seven members of the CollabRx Board will be as follows: Thomas R. Mika, Seamus Lagan, Dr. Paul Billings, Christopher Diamantis, Benjamin Frank, Michael L. Goldberg and Robert Lee (such CollabRx board members are further discussed below under “Management of the Combined Company Following the Merger”). Of the foregoing individuals, Mr. Mika and Dr. Billings were members of the CollabRx board prior to the effective time of the merger.

 

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CollabRx and (assuming the merger is closed) certain former stockholders of Medytox who will be stockholders of CollabRx immediately following the effective time of the merger have entered into a stockholders agreement with Mr. Mika regarding board composition as follows:

 

·at each annual or special meeting of the stockholders of CollabRx at which directors are to be elected to the CollabRx board, CollabRx will nominate and use commercially reasonable efforts to cause the stockholders of CollabRx to elect to the CollabRx Board a slate of directors which includes two members designated by Mr. Mika, one of whom shall be a senior executive of CollabRx and the other of whom shall be independent; and

 

·at any such meeting of the stockholders the stockholders party to the stockholders agreement (other than Mr. Mika) will vote their shares of CollabRx common stock (in person or by proxy) in favor of the two individuals so designated by Mr. Mika to be members of the CollabRx board.

 

The foregoing obligations of the combined company and such stockholders relating to Mr. Mika and his designee will continue until the first anniversary of the closing date of the merger (but could be terminated earlier in certain circumstances specified under the stockholders agreement).

 

The merger agreement also sets forth the officers of CollabRx immediately following the effective time of the merger and allowed for a change of such officers. See Board of Directors and Management After the Merger on page 79 for a list of the officers of the combined company after the merger.

 

Amendments to the CollabRx Certificate of Incorporation

 

In connection with the merger, CollabRx’s certificate of incorporation will be amended as of the effective time in the form attached to this joint proxy/prospectus as Annex G in order to (1) change the name of CollabRx to “Rennova Health, Inc.”, (2) effect the reverse stock split of the outstanding shares of CollabRx’s common stock (as discussed further above under “Merger Consideration”) and (3) increase the authorized shares of CollabRx common stock in an amount sufficient to permit CollabRx to perform its obligations under the merger agreement relating to the merger consideration, the converted CollabRx stock options which are being assumed by CollabRx at the effective time of the merger, the post-closing stock options and the shares of CollabRx common stock issuable upon any conversion of the D&D Convertible Note, as discussed above under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”.

 

Also in connection with the merger, out of the shares of Preferred Stock authorized under CollabRx’s certificate of incorporation the CollabRx board will be designating the terms of and filing Certificates of Designation for the new Series B Convertible Preferred Stock, Series D Convertible Preferred Stock and Series E Convertible Preferred Stock (as discussed further above under “Merger Consideration”).

 

Representations and Warranties

 

The merger agreement contains a number of substantially reciprocal representations and warranties made by and to CollabRx and Merger Sub, on the one hand, and Medytox, on the other hand. The assertions embodied in those representations and warranties were made for purposes of the merger agreement and are subject to qualifications and limitations as agreed by CollabRx and Medytox in connection with negotiating the terms of the merger agreement. In addition, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders or may have been used for the purpose of allocation of risk between the respective parties rather than establishing matters of facts. For the foregoing reasons, you should not rely on the representations and warranties as statements of factual information. Representations made by and to CollabRx and Merger Sub, on the one hand, and Medytox, on the other hand, in the merger agreement relate to, among other things:

 

·organization, standing and power, organizational documents, subsidiaries;

 

·capital structure;

 

·corporate authority to enter into the merger agreement and complete the merger;

 

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·governmental filings, no violations of law;

 

·company reports, financial statements;

 

·absence of certain changes;

 

·no undisclosed material liabilities;

 

·litigation;

 

·compliance with laws;

 

·properties;

 

·contracts;

 

·employee benefit plans;

 

·labor matters and other employment matters;

 

·tax;

 

·intellectual property;

 

·environmental matters;

 

·insurance;

 

·regulatory matters, permits;

 

·interested party transactions;

 

·information;

 

·company ownership of parent securities;

 

·brokers and finders;

 

·related entity representations;

 

·tax-free reorganization/contributions; and

 

·no additional representations.

 

Significant portions of the representations and warranties of CollabRx and Medytox are qualified as to “materiality” or “material adverse effect”. For purposes of the merger agreement, a material adverse effect means, when used in connection with CollabRx or Medytox, any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to the business, results of operations, condition (financial or otherwise), or assets of the applicable entity, taken as a whole; provided, however, that a material adverse effect does not include events occurrences, facts, conditions or changes arising out of or relating to or resulting from:

 

(i) changes generally affecting the economy, financial or securities markets;
   
(ii) the announcement of the transaction contemplated by or compliance with the terms of the merger agreement;
   
(iii) any outbreak or escalation of war or any act of terrorism;

 

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(iv) general conditions in the industry in which CollabRx or Medytox, as applicable, operate;
   
(v) any change in laws or the interpretation of such laws or GAAP or the interpretation of GAAP;
   
(vi) disclosures under the disclosure schedules of CollabRx or Medytox, as applicable;
   
(vii) in the case of CollabRx only, the circumstances set forth in the Form 8-K filed by CollabRx with the SEC on November 24, 2014 and Form 8-K filed by CollabRx with the SEC on December 31, 2014; or
   
(viii) in the case of CollabRx only, CollabRx’s shortage in cash.

 

The representations and warranties in the merger agreement do not survive the completion of the merger or the termination of the merger agreement.

 

Conduct of Business by CollabRx and Medytox

 

Each of CollabRx and Medytox has undertaken a separate covenant that places restrictions on its and its subsidiaries conduct of business until the effective time or, if earlier, the date the merger agreement is terminated. In general, each of CollabRx and Medytox is required to and shall cause its subsidiaries to (i) conduct its business in all material respects in the usual, regular and ordinary course in substantially the same manner as prior to the merger agreement; and (ii) to the extent consistent with the foregoing obligation, use reasonable best efforts to maintain and preserve intact its business organization, employees, advantageous business relationships (including with its customers and suppliers), Medytox permits or CollabRx permits, as applicable, and retain the services of its key officers and key employees (in the case of CollabRx, including Thomas R. Mika).

 

In addition, as soon as practicable following the date of the merger agreement, CollabRx and Medytox agreed to cooperate in good faith to prepare and mutually agree on a monthly cash budget for CollabRx relating to each monthly period prior to the closing date and agreed that CollabRx would conduct its business at all times prior to the closing date in accordance with such monthly cash budget, provided, the parties agreed that such monthly cash budget would contemplate variances from the same mutually agreed by the parties in good faith which would not require Medytox’s prior consent and that, in all events, if the monthly cash budget is not mutually agreed by the parties, cash expenditures by CollabRx prior to the closing date would be limited to an aggregate maximum amount of $600,000 per month excluding (i) reasonable expenses related to the transactions contemplated by the merger agreement (including any disputes or litigation related to such transactions), (ii) compliance with laws and/or compliance with investigations or review by any governmental entity, (iii) repayment of principal and accrued interest under currently outstanding promissory notes in favor of certain third parties, copies of which have been made available to Medytox, and (iv) expenses related to the engagement of one of the strategic consulting firms previously disclosed to Medytox, at a rate not to exceed $500,000 per year. During January 2015, CollabRx and Medytox agreed on a monthly cash budget for CollabRx.

 

The companies have also agreed to certain specific restrictions which (subject to exceptions described in the merger agreement) are substantially, but not entirely, reciprocal, because, in a number of instances, an action is applicable to only one of the companies by nature. Certain of the activities that each company has agreed not to do, and to cause its subsidiaries not to do, without the prior written consent of the other (which shall not be unreasonably withheld, conditioned or delayed), are as follows:

 

·declare, set aside or pay any dividends; split, combine or reclassify any of its capital stock or issue any securities in respect of shares of its capital stock, except upon the exercise of stock options or settlement of stock units or conversion of convertible securities in accordance with their terms; or purchase or redeem any shares of its capital stock, or any rights, warrants or options to acquire any such shares or other securities;

 

·issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of its common stock upon the exercise of stock options or vesting of restricted shares or conversion of convertible securities, in each case that are outstanding as of the date of the merger agreement, or the issuance of the stock options and/or the D&D Convertible Note discussed above under “Medytox Stock Options, Other Equity-Based Awards and the D&D Convertible Note”);

 

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·amend its articles of incorporation, bylaws or other comparable organizational documents or the organizational documents of any of its subsidiaries;

 

·acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or any equity securities of, or by any other manner, any business or any person, or otherwise acquire or agree to acquire any assets in each case, except for acquisitions of inventory or other assets (other than property, plant and equipment) in the ordinary course of business consistent with past practice;

 

·sell, assign, transfer, lease, license, mortgage or otherwise encumber or subject to any lien (other than permitted liens), or otherwise dispose of any of its properties or assets or create any security interest in such assets or properties, in each case, other than in the ordinary course of business consistent with past practice;

 

·incur, redeem, prepay, repurchase, defease, cancel, or modify the terms of, any indebtedness or assume, guarantee or endorse, or otherwise become responsible for the indebtedness of any person (other than any of its wholly owned subsidiaries);

 

·make any loans or advances to any person other than its wholly owned subsidiaries or as a result of ordinary advances and reimbursements to employees;

 

·change in any material respect its accounting methods (or underlying assumptions), principles or practices affecting its assets, liabilities or business, including any reserving, renewal or residual method, practice or policy, in each case, in effect on the date of this merger agreement, except as required by changes in GAAP or regulatory accounting principles;

 

·make investments in persons (other than in any of its wholly owned subsidiaries or any related entity) in excess of $50,000 in the aggregate, whether by purchase of stock or securities, contributions to capital, property transfers, or entering into binding agreements with respect to any such investment or acquisition;

 

·make, change or revoke any material tax election, change an annual tax accounting period, adopt or change any material tax accounting method, file any amended tax return, enter into any closing agreement with respect to taxes, settle any material claim or assessment from a taxing authority or surrender any right to claim a refund of a material amount of taxes;

 

·subject to certain exceptions, terminate or waive any material provision of any material contract other than normal renewals of such contracts without materially adverse changes, additions or deletions of terms, or enter into or renew any agreement or contract or other binding obligation of the company or its subsidiaries containing (i) any restriction on the ability of the company and its subsidiaries, or, after the effective time of the merger, CollabRx and its Subsidiaries (including Medytox), to conduct their businesses as presently conducted or currently contemplated to be conducted after the effective time of the merger or (ii) any restriction on the company or its subsidiaries, or, after the effective time of the merger, CollabRx and its subsidiaries (including Medytox), in engaging in any type of activity or business;

 

·(i) incur any capital expenditures or (ii) enter into any contract obligating the Company (or any of its Subsidiaries) to make capital expenditures, except for, in each case, capital expenditures not in excess of $50,000 in the aggregate;

 

·except as required by agreements or instruments in effect on the date of the merger agreement, alter in any material respect, fail to satisfy or enter into any commitment to alter in any material respect, any material interest in any corporation, association, joint venture, partnership or business entity in which the company directly or indirectly holds any equity or ownership interest on the date of the merger agreement;

 

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·except as required by the terms of benefit plans or employment agreements as in effect on the date of the merger agreement or as required by applicable law or as provided by the merger agreement, or as in the ordinary course of business consistent with past practice, (i) grant or pay to any current or former director, officer, employee or consultant of the company or any of its subsidiaries any increase in compensation, except for annual or promotional salary or wage increases in the ordinary course of business consistent with past practice not to exceed, in the aggregate for all such increases, 10% of the aggregate wage and salary expense for the prior year to the company and its subsidiaries on a consolidated basis; (ii) grant, pay, promise to pay, or enter into any benefit plan or employment agreement to pay, to any current or former director, officer, employee, consultant or service provider of the company or any of its subsidiaries any severance, retention, change in control or termination pay or any increase in actual or potential severance, retention, change in control or termination pay; (iii) increase the compensation or benefits provided or payable under any benefit plan or employment agreement; (iv) modify the terms of any equity-based award granted under any stock plan; (v) make any discretionary contributions or payments with respect to any benefit plan or employment agreement to any trust or other funding vehicle; (vi) accelerate the payment or vesting of any payment or benefit provided or to be provided to any director, officer, employee or consultant of the company or any of its subsidiaries or otherwise pay any amounts not due such individual; (vii) enter into any new or amend or modify any existing employment agreement (or agreement that would be an employment agreement if in effect on the date of the merger agreement), other than employment agreements for new hires with an annual compensation not exceeding $50,000 in the aggregate; (viii) establish any new or amend or modify any existing benefit plans (or plans that would be a benefit plan if in effect on the date of the merger agreement); or (ix) establish, adopt or enter into any collective bargaining agreement;

 

·subject to certain exceptions, pay, discharge, settle, waive, release or assign or compromise any legal action, litigation, arbitration, suit, investigation or proceeding, other than any such payment, discharge, settlement or compromise (i) that involves solely money damages in an amount not in excess of $50,000 in the aggregate, and that does not create binding precedent for other pending or potential legal action, litigation, arbitration or proceeding, or (ii) pursuant to the terms of any contract in effect on the date of the merger agreement;

 

·take any action, or knowingly fail to take any action within its control, which action or failure to act would reasonably be expected to prevent the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code or as a contribution governed by Section 351 of the Internal Revenue Code;

 

·adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the company or any of its subsidiaries (other than the merger);

 

·fail to maintain in full force and effect the material insurance policies covering the company and its subsidiaries and their respective properties, assets and business in a form and amount consistent with past practices;

 

·enter into any hedging contracts not in the ordinary course of business consistent with past practice;

 

·fail to comply in all material respects with the Securities Act, the Exchange Act or the Sarbanes-Oxley Act in respect of all SEC Documents filed with or furnished to, as applicable, the SEC;

 

·purchase or otherwise acquire, directly or indirectly (including by way of providing financing), any equity interests in Medytox, CollabRx or any of Medytox’s or CollabRx’s subsidiaries; or

 

·commit or agree to take any of the foregoing actions.

 

Stockholder Meetings and Board Recommendations

 

Medytox has agreed, subject to applicable law and the terms of the merger agreement (including the exceptions described below under “No Solicitation”), that it will:

 

·use reasonable best efforts to cause the Medytox stockholder meeting to be duly called and held as soon as reasonably practicable after the Form S-4 is declared effective to secure the Medytox stockholder approval (as defined below);

 

·cause the joint proxy statement/prospectus to contain the recommendation of the Medytox board that the Medytox stockholders (consisting of a majority of each of the holders of Medytox’s common stock, Series D Convertible Preferred Stock and series E Convertible Preferred Stock, voting as separate classes, and all of the holders of Medytox’s Series B Non-convertible Preferred Stock, voting as a separate class) approve the merger agreement and the transactions contemplated under the merger agreement and the merger (the “Medytox stockholder approval”); and

 

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·use reasonable best efforts to solicit and obtain the Medytox stockholder approval, and not fail to make the foregoing recommendation or withdraw, amend, modify or materially qualify, in a manner adverse to CollabRx, such recommendation or make any public statement inconsistent with such recommendation (any such action is a “change in Medytox recommendation”).

 

CollabRx has agreed, subject to applicable law and the terms of the merger agreement (including the exceptions describe below under “No Solicitation”), that it will:

 

·use reasonable best efforts to cause the CollabRx stockholder meeting to be duly called and held as soon as reasonably practicable after the Form S-4 is declared effective to secure the CollabRx stockholder approval (as defined below);

 

·cause the joint proxy statement/prospectus to contain the recommendation of the CollabRx board that the CollabRx stockholders (consisting of a majority of the holders of CollabRx’s common stock) approve the following items to the extent necessary under applicable laws and regulations:

 

·the merger agreement and the transactions contemplated under the merger agreement (including the CollabRx share issuance and the New Sub asset contribution) and the merger;

 

·the filing by CollabRx of Certificates of Designation relating to the portion of the merger consideration consisting of CollabRx Series B Convertible Preferred Stock, CollabRx Series D Convertible Preferred Stock and CollabRx Series E Convertible Preferred Stock;

 

·an amendment to CollabRx’s certificate of incorporation to: (1) change the name of CollabRx to “Rennova Health, Inc.”; (2) effect the Reverse Stock Split; and (3) increase the authorized shares of CollabRx common stock in an amount sufficient to permit CollabRx to perform its obligations under the merger agreement relating to the merger consideration, the converted CollabRx stock options, the post-closing stock options and the D&D Convertible Note;

 

·the Medytox stock plan; and

 

·the election of the directors of CollabRx immediately following the effective time consistent with the summary above under “Governance Structure After the Merger” (the foregoing comprising the “CollabRx stockholder approval”); and

 

·use reasonable best efforts to solicit and obtain the CollabRx stockholder approval, and not fail to make the foregoing recommendation or withdraw, amend, modify or materially qualify, in a manner adverse to Medytox, such recommendation or make any public statement inconsistent with such recommendation (any such action is a “change in CollabRx recommendation”).

 

No Solicitation

 

Each of CollabRx and Medytox has agreed that it shall not, and shall cause its subsidiaries not to, and shall not authorize or permit its and its subsidiaries’ representatives to, directly or indirectly, solicit, initiate or knowingly take an action to facilitate or encourage the submission or the making of any proposal that could reasonably be expected to lead to any proposal or offer with respect to a purchase, merger, reorganization, share exchange, consolidation, business combination, tender offer, liquidation, dissolution, extraordinary dividend or similar transaction involving 25% or more of the fair market value of the party’s consolidated assets or to which 25% or more of the party’s net revenues or net income on a consolidated basis are attributable, 25% or more of the consolidated assets of the party, taken as a whole or 25% or more of the voting equity interests of a party. Any such proposal or offer, other than with respect to a transaction permitted by the covenants described above under “Conduct of the Business of CollabRx and Medytox”, is referred to in this joint proxy statement/prospectus as an “acquisition proposal”.

 

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Each of CollabRx and Medytox has further agreed that it will not, and that it will cause its subsidiaries not to, and will not authorize or permit its and its subsidiaries’ representatives to, in each case except as permitted below:

 

·conduct or engage in any discussions or negotiations with, disclose any non-public information relating to such party or any of its subsidiaries to, afford access to the business, properties, assets, books or records of such party or any of its subsidiaries to, or knowingly assist, participate in, facilitate or encourage any effort by, any third party that is seeking to make, or has made, any acquisition proposal;

 

·amend or grant any waiver (other than any wavier, as required by law, of any “don’t ask don’t waive” provisions of any standstill agreements now in effect) or release under any standstill or similar agreement with respect to any class of equity securities of such party or any of its subsidiaries;

 

·enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract relating to any acquisition proposal (each, an “adverse acquisition agreement”); or

 

·recommend an acquisition proposal or fail to recommend against acceptance of any tender offer or exchange offer for the shares of such party’s common stock constituting an acquisition proposal within ten business days after the commencement of such offer.

 

Notwithstanding the restrictions described above, neither CollabRx nor Medytox is prohibited from:

 

·complying with Rule 14d-9 or Rule 14e-2 under the Securities Exchange Act of 1934;

 

·prior to the receipt of the CollabRx stockholder approval or the Medytox stockholder approval, as applicable, (1) participating in negotiations or discussions with any third party that has made (and not withdrawn) a bona fide, unsolicited acquisition proposal in writing that the board of such party believes in good faith, after consultation with outside legal counsel, constitutes or would reasonably be expected to result in a superior proposal (as defined below); and (2) thereafter furnishing to such third party non-public information relating to such party or any of its subsidiaries pursuant to an executed confidentiality agreement that constitutes an acceptable confidentiality agreement (as such agreement is defined under the merger agreement), but in either case only if:

 

·such party shall have delivered to the other party a prior written notice advising such other party that it intends to take any of such actions; and

 

·any non-public information relating to such party or any of its subsidiaries made available to such third party shall have been previously made available to the other party or is made available to the other party prior to, or concurrent with, the time such information is made available to such third party;

 

·following receipt of and on account of a superior proposal, make a change in CollabRx recommendation or change in Medytox recommendation, as applicable (in either case, an “adverse recommendation change”), or enter into (or permit any subsidiary to enter into) an adverse acquisition agreement, but only if:

 

·such party promptly notifies the other party, in writing, at least four business days (the “notice period”) before making an adverse recommendation change or entering into (or causing a subsidiary to enter into) an adverse acquisition agreement of its intention to take such action with respect to a superior proposal, which notice shall state expressly that the party has received an acquisition proposal that the party’s board intends to declare a superior proposal and that the party’s board intends to make an adverse recommendation change and/or the party intends to enter into an adverse acquisition agreement;

 

·such party attaches to such notice the most current material terms of the proposed agreement (which shall be updated on a prompt basis) and the identity of the third party making such superior proposal;

 

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·such party shall, and shall cause its subsidiaries to, and shall use its reasonable best efforts to cause its and its subsidiaries’ representatives to, during the notice period, negotiate with the other party in good faith to make such adjustments in the terms and conditions of the merger agreement so that such acquisition proposal ceases to constitute a superior proposal, if the other party, in its discretion, definitively proposes to make such adjustments (it being agreed that in the event that, after commencement of the notice period, there is any material revision to the terms of a superior proposal, including, any revision in price, the notice period shall be extended, if applicable, to ensure that at least two business days remain in the notice period subsequent to the time such party notifies the other party of any such material revision (it being understood that there may be multiple extensions)); and the board of such party determines in good faith, after consulting with outside legal counsel, that such acquisition proposal continues to constitute a superior proposal after taking into account any adjustments made by the other party during the notice period in the terms and conditions of the merger agreement;

 

but in all events only if such party’s board determines in good faith, after consultation with outside legal counsel, that the failure to accept any such superior proposal or enter into any such adverse acquisition agreement would reasonably be expected to cause such party’s board to be in breach of its fiduciary duties under applicable law; and

 

·taking any action related to any acquisition proposal that any court of competent jurisdiction orders such party to take (which order remains unstayed).

 

A party is required to notify the other party promptly (but in no event later than twenty-four hours) after it obtains knowledge of the receipt by it (or any of its representatives) of any bona fide acquisition proposal, any inquiry that would reasonably be expected to lead to an acquisition proposal, any request for non-public information relating to such party or any of its subsidiaries or any request for access to the business, properties, assets, books or records of such party or any of its subsidiaries by any third party in connection with an acquisition proposal. In any such notice, such party is required to identify the third party making, and details of the material terms and conditions of, any such acquisition proposal, indication or request and to keep the other party informed, on a reasonably current basis, of the status and material terms of any such acquisition proposal, indication or request, including any material amendments or proposed amendments as to price and other material terms thereof. Such party is required to provide the other party with at least forty-eight hours prior notice of any meeting of such party’s board (or such lesser notice as is provided to the members of such party’s board) at which such party’s board is reasonably expected to consider any acquisition proposal and such party shall have promptly provided the other party with a list of any non-public information concerning such party’s business, present or future performance, financial condition or results of operations, made available to any third party, and, to the extent such information has not been previously made available to the other party, copies of such information;.

 

The term “superior proposal” means a bona fide written acquisition proposal involving the direct or indirect acquisition pursuant to a tender offer, exchange offer, merger, consolidation or other business combination, of all or substantially all of the applicable party’s consolidated assets or a majority of such party’s common stock, that such party’s board determines in good faith (after consultation with outside legal counsel) is more favorable from a financial point of view to the holders of such party’s common stock than the transactions contemplated by the merger agreement, taking into account (a) all financial considerations, (b) the identity of the third party making such acquisition proposal, (c) the anticipated timing, conditions (including any financing condition or the reliability of any debt or equity funding commitments) and prospects for completion of such acquisition proposal, (d) the other terms and conditions of such acquisition proposal and the implications thereof on such party, including relevant legal, regulatory and other aspects of such acquisition proposal deemed relevant by such party’s board and (e) any revisions to the terms of the merger agreement and the merger proposed by the other party during the notice period described above.

 

Each of CollabRx and Medytox has agreed to terminate any discussions or negotiations with any person that began before the date of the merger agreement.

 

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Efforts to Consummate

 

Subject to the terms and conditions of the merger agreement, each of CollabRx and Medytox has agreed they will, and will cause their subsidiaries to, use their reasonable best efforts (a) to take, or cause to be taken, all actions necessary, proper or advisable to comply as promptly as reasonably practicable with all legal requirements that may be imposed on such party or its subsidiaries with respect to the merger, the CollabRx share issuance and the other transactions contemplated by the merger agreement (including the furnishing of information for, and the preparation and filing of, all necessary and proper statements, forms, registrations, filings, notices, representation letters, and declarations related to the merger); (b) to cause the conditions to the other party’s obligation to close the merger to be satisfied and to consummate the transactions contemplated by the merger agreement in a reasonably expeditious manner (including the furnishing of customary representation letters to enable tax opinions to be rendered); and (c) to obtain (and to cooperate with the other party to obtain) any material consent, authorization, order or approval of, or any exemption or waiver by, any governmental entity and any other third party that is required to be obtained by CollabRx or Medytox or any of their respective subsidiaries in connection with the merger and the other transactions contemplated by the merger agreement.

 

Upon reasonable notice and subject to applicable law, each CollabRx and Medytox will, and will cause each of its subsidiaries to, afford to the other party and its representatives reasonable access, at such other party’s expense, during normal business hours, to all of its properties, books, contracts, commitments, financial and operating data, records, and officers and employees and the parties will, will cause their respective subsidiaries to, and will use their reasonable best efforts to cause their representatives to, make available to the other party all other information concerning their businesses, properties and personnel as the other party may reasonably request. Each of CollabRx and Medytox will, and will cause each of its subsidiaries to, provide to the other party, to the extent not publicly available, a copy of each report, schedule, registration statement and other document filed by it prior to the effective time of the merger pursuant to the requirements of the federal and state securities laws.

 

Indemnification and Insurance

 

The merger agreement provides that the parties shall cooperate and use their best efforts to defend against and respond to any threatened or actual action, whether civil, criminal or administrative, in which any individual who is now, or has been at any time prior to the date of the merger agreement, or who becomes prior to the effective time of the merger, a director or officer of CollabRx, Medytox or any of their subsidiaries or who is or was serving at the request of Medytox or any of its subsidiaries as a director or officer of another person (the “indemnified parties”), is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director or officer of Medytox or any of its subsidiaries, (ii) all acts or omissions by him taken at the request of Medytox or any of its subsidiaries at any time prior to the effective time of the merger, or (iii) the merger agreement or any of the transactions contemplated by the merger agreement, whether asserted or arising before or after the effective time of the merger. Further, from and after the effective time of the merger, CollabRx and Medytox have agreed to indemnify and hold harmless, as and to the fullest extent permitted under applicable law and CollabRx’s and Medytox’s organizational documents, each such indemnified party against any losses, claims, damages, liabilities, costs, expenses (including reimbursement for reasonable fees and expenses incurred in advance of the final disposition of any such action upon receipt of any undertaking required by applicable law), judgments, fines and amounts paid in settlement in connection with any such threatened or actual action.

 

The merger agreement requires that no provision of the constituent documents of CollabRx or Medytox or any of their subsidiaries relating to indemnification, advancement or exculpation be amended, modified or repealed in any manner that would adversely affect the rights or protections of any indemnified party for a period of six years after the effective time of the merger.

 

The merger agreement further provides that Medytox may elect to purchase, prior to the effective time of the merger, a six year prepaid “tail policy” from a broker specifically designated by CollabRx, on terms and conditions (in both amount and scope) providing substantially equivalent benefits as the current policies of directors’, officers’ and employees’ liability insurance maintained by Medytox and CollabRx with respect to acts or omissions occurring prior to the effective time of the merger that were committed by such directors, officers and employees in their capacity as such. CollabRx has agreed to cause any such tail policy to be maintained throughout its term.

 

The rights of any indemnified party under such provisions of the merger agreement are in addition to any other rights to indemnification or contribution such indemnified party may have under law or contract or otherwise. If CollabRx or Medytox or any of its successors or assigns shall (i) consolidate with or merge into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfer all or substantially all of its properties and assets to any person, then, and in each such case, proper provisions shall be made so that the successors and assigns of CollabRx or Medytox (or the acquirer of such assets), as the case may be, shall assume all of the foregoing obligations of CollabRx and Medytox.

 

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Employee Benefits

 

Except as provided under the new employment agreements of Thomas R. Mika and Clifford Baron, and subject to each party's compliance with certain convenants, at the effective time of the merger CollabRx shall provide or cause Medytox to provide each Medytox employee and each CollabRx employee with compensation and benefits that are the same or substantially comparable in the aggregate to those provided to such employees as of immediately prior to the effective time of the merger.

 

The merger agreement provides that the parties will cause each benefit plan in which Medytox employees are eligible to participate after the effective time of the merger to take into account, to the extent consistent and compatible with the terms of the applicable benefit plan, for purposes of eligibility, vesting and benefit accrual under such benefit plans, the service of the Medytox employees with Medytox and its subsidiaries to the same extent as such service was credited for such purpose by Medytox or its subsidiaries; provided, however, that such credited service shall not result in a duplication of benefits. However, none of the terms of the merger agreement is intended to limit the ability of CollabRx or its affiliates to amend or terminate any of the Medytox benefit plans or CollabRx benefit plans in accordance with their terms after the effective time of the merger.

 

The merger agreement further provides that if Medytox employees become eligible to participate in CollabRx benefit plans that are health plans, to the extent allowable by the applicable insurance carrier, if any, or applicable plan, the parties shall use commercially reasonable efforts to cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable life, disability, medical, health or dental plans, (ii) honor under such plans any deductible, co-payment and out-of-pocket expenses incurred by such employees and their beneficiaries during the portion of the calendar year prior to such participation and (iii) waive any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to such employee on or after the effective time of the merger for the year in which the effective time of the merger or participation in such plans, as applicable, occurs.

 

The merger agreement further provides that CollabRx will terminate its 401(k) Savings & Retirement Plan (the “CollabRx 401(k) plan”) immediately prior to the closing date by resolutions adopted by CollabRx’s board reasonably acceptable to Medytox, and simultaneously amend the CollabRx 401(k) plan to the extent necessary to comply with all applicable laws to the extent not previously amended. CollabRx will notify all participants in the CollabRx 401(k) plan of the plan’s termination, and the consequences thereof, prior to the effective time of the merger.

 

Certain Other Covenants

 

The merger agreement contains additional covenants, most of which are mutual, including, among other things, agreements by each party to:

 

·prepare the Form S-4 and joint proxy statement/prospectus;

 

·agree to notify the other party of certain events;

 

·complete certain corporate governance matters as described above, under “Governance Structure After the Merger”;

 

·grant approvals and take such other actions as are necessary to eliminate or minimize the effects of state takeover statutes;

 

·take any action that is required to cause the merger to qualify, and not take any actions or cause any actions to be taken which could reasonably be likely to prevent the merger from qualifying, as a tax-free reorganization/contribution, and to report the transaction as a tax-free reorganization/contribution, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended;

 

·use reasonable best efforts to obtain the tax opinion referred to in the merger agreement including customary tax representation letters;

 


·give the other party the opportunity to participate in the defense or settlement of any stockholder litigation against such party and its directors or executive officers relating to the merger and the other transactions contemplated by the merger agreement, and, except to the extent permitted pursuant to certain other provisions of the merger agreement, not settle or offer to settle any litigation commenced prior to or after the date of the merger agreement against such party or its directors, executive officers or similar persons by any stockholder of such party relating to the merger or the other transactions contemplated by the merger agreement without the prior written consent of the other party (such consent not to be unreasonably withheld, delayed or conditioned);

 

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·promptly notify the other party in writing of any fact or circumstance that would cause any of such party ‘s representations, warranties or covenants in the merger agreement or the corresponding disclosure schedules to be untrue or incomplete in any material respect, or would cause such party to be unable to make certain certifications at closing, and such party will promptly deliver to the other party an updated version of any applicable disclosure schedule or add a new section to any applicable disclosure schedule to which such fact or circumstance relates, provided the delivery of any updated disclosure schedule by a party shall not prejudice any rights of the other party prior to the effective time of the merger;

 

·take all actions reasonably necessary to cause any acquisitions or dispositions of equity securities in connection with the transactions contemplated by the merger agreement by each individual who is subject to Section 16 of the Securities Exchange Act of 1934, as amended, with respect to Medytox, or who will become subject to such requirements with respect to CollabRx, to be exempt under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended;

 

·consult with the other party regarding any public announcements; and

 

·following the effective time of the merger take such further actions as are reasonably necessary to carry out the purposes of the merger agreement.

 

Conditions to Completion of the Merger

 

Each party’s obligation to effect the merger is subject to the satisfaction or waiver of mutual conditions, including the following:

 

·Medytox stockholder approval and the CollabRx stockholder approval shall have been obtained in accordance with state law;

 

·no laws shall have been adopted or promulgated by a governmental entity of competent jurisdiction and no temporary restraining order, preliminary or permanent injunction or other order issued by a court or other governmental entity of competent jurisdiction in the United States shall be in effect, having the effect of making the merger illegal or otherwise prohibiting consummation of the merger;

 

·each of the approvals set forth in Section 3.4(a) and Section 4.4(a) of the merger agreement required to be obtained for the consummation of the merger and the other transactions contemplated by the merger agreement, other than any approvals the failure to obtain of which would not, individually or in the aggregate, have a material adverse effect on the applicable party, shall have been obtained.

 

·the shares of CollabRx common stock to be issued in the merger and such other shares to be reserved for issuance in connection with the merger shall have been approved for listing on NASDAQ, subject to official notice of issuance; and

 

·The Form S-4 shall have been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Form S-4 shall be in effect and no proceedings for that purpose shall be pending before the SEC.

 

Each of CollabRx’s and Merger Sub’s, on the one hand, and Medytox’s on the other hand, obligation to effect the merger is subject to the satisfaction or waiver of the following additional conditions:

 

·(i) certain representations and warranties of the other party regarding capitalization shall be true and correct other than in de minimis respects as of the date of the merger agreement; (ii) each representation and warranty of the other party qualified by a material adverse effect shall be true and correct in all respects as of the date of the merger agreement and as of the closing date, as if made as of such date (except for those representations and warranties which address matters only as of an earlier date which shall have been true and correct as of such earlier date); and (iii) each of the other representations and warranties of the other party contained in the merger agreement shall be true and correct as of the date of the merger agreement and as of the closing date, as if made as of such date (except for those representations and warranties which address matters only as of an earlier date which shall have been true and correct as of such earlier date), except in the case of foregoing clause (iii), where the failure of such representations and warranties to be true and correct, individually or in the aggregate, has not had, or would not reasonably be expected to have, a material adverse effect on the other party. Each party shall have received a certificate of the chief executive officer or the chief financial officer of the other party to such effect;

 

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·the other party shall have performed or complied with, in all material respects, all material agreements and covenants required to be performed or complied with by it under the merger agreement at or prior to the closing date and each party shall have received a certificate of the chief executive officer or the chief financial officer of the other party to such effect;

 

·since the date of the merger agreement, there shall not have occurred any event or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the other party and each party shall have received a certificate of the chief executive officer or the chief financial officer of the other party; and

 

·such party shall have received an opinion from counsel, on the basis of representations and warranties set forth or referred to in such opinion, dated as of the closing date, to the effect that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. In rendering such opinion, such counsel shall be entitled to receive and rely upon representations, warranties and covenants of officers of any party.

 

CollabRx’s and Merger Sub’s obligation to complete the merger is subject to the satisfaction or waiver of the following additional condition:

 

·Medytox shall have executed and delivered the amended and restated D&D Convertible Note to the holder of such note and the same shall be in full force and effect.

 

In addition, Medytox’s obligation to complete the merger is subject to the satisfaction or waiver of the following additional conditions:

 

·CollabRx shall have delivered to Medytox resignation letters of certain officers of CollabRx and Merger Sub and shall have otherwise caused the directors and officers of each of CollabRx, New Sub and Medytox to be immediately following the effective time of the merger consistent with the summary of such post-closing governance under “Governance Structure After the Merger”;

 

·the New Sub asset contribution shall have been consummated as of the effective time of the merger in accordance with the terms of the merger agreement;

 

·there shall not have occurred and be continuing as of the effective time of the merger any event of default under the bridge note;

 

·CollabRx shall have executed and delivered the amended and restated D&D Convertible Note to the holder under such note and the same shall be in full force and effect as of the effective time of the merger;

 

·Thomas R. Mika shall have executed and delivered to CollabRx or the applicable subsidiary of CollabRx his new employment agreement and the same shall be in full force and effect as of the effective time of the merger; and Clifford Baron shall have executed and delivered to CollabRx or the applicable subsidiary of CollabRx his new employment agreement and the same shall be in full force and effect as of the effective time of the merger;

 

·CollabRx shall have filed or caused to have been filed with the Secretary of State of the State of Delaware Certificates of Designation relating to the new CollabRx Series B Convertible Preferred Stock, Series D Convertible Preferred Stock and Series E Convertible Preferred Stock in the forms attached to the merger agreement, and the same shall be in full force and effect as of the effective time of the merger; and

 

·the Reverse Stock Split (as discussed further above under “Merger Consideration”) shall have been effected.

 

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Termination of the Merger Agreement

 

The merger agreement may be terminated at any time before the effective time of the merger by mutual written consent of CollabRx and Medytox.

 

The merger agreement may also be terminated prior to the effective time of the merger by either CollabRx or Medytox if:

 

·the merger has not been consummated on or before December 31, 2015 (the “outside date”); provided, however, that if by the outside date, any of the conditions relating to no laws or injunctions being in effect which would cause the consummation of the merger to be illegal and the receipt of any required approvals shall not have been satisfied but all other conditions to the parties’ obligation to consummate the merger shall have been satisfied or shall be capable of being satisfied at the closing, then the outside date may be extended from time to time by any party, in its discretion, by written notice to the other parties to a date not later than March 31, 2016; provided, that the right to so extend or terminate the merger agreement shall not be available to any party that has breached its obligations in any material respect under the merger agreement in any manner that shall have proximately caused or resulted in the failure of the merger to have been consummated by the outside date;

 

·any governmental entity shall have issued a final and non-appealable order permanently enjoining, restraining, or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement, provided, however, that the right to so terminate the merger agreement shall not be available to any party whose breach of any representation, warranty, covenant, or agreement set forth in the merger agreement has been the cause of, or resulted in, the issuance, promulgation, enforcement or entry of any such order; or

 

·Medytox stockholder approval or the CollabRx stockholder approval has not been obtained after a vote thereon at the Medytox stockholder meeting (or any adjournment or postponement thereof) or the CollabRx stockholder meeting (or any adjournment or postponement thereof), respectively; provided, however, Medytox may not terminate the merger agreement without CollabRx’s approval if Medytox stockholder approval was not obtained solely because (1) the consent of the holders of a majority of the outstanding Series D shares was not obtained and one or more holders of the outstanding Series D shares did not execute a support agreement with respect to such shares and/or (2) the consent of the holders of a majority of the outstanding Series E shares was not obtained and one or more holders of the outstanding Series E shares did not execute a support agreement with respect to such shares (as discussed further above under “Stockholder Meetings and Board Recommendations”).

 

The merger agreement may also be terminated prior to the effective time of the merger by CollabRx if:

 

·prior to the receipt of the CollabRx stockholder approval, the CollabRx board authorizes CollabRx, in full compliance with the terms of the merger agreement, to enter into an adverse acquisition agreement (other than an acceptable confidentiality agreement) in respect of a superior proposal; provided, that CollabRx shall have timely paid any amounts due to Medytox in connection with any such termination; and provided, further that in the event of such termination, CollabRx substantially concurrently enters into such adverse acquisition agreement;

 

·(i) a Medytox adverse recommendation change shall have occurred, (ii) Medytox shall have entered into, or publicly announced its intention to enter into, an adverse acquisition agreement (other than an acceptable confidentiality agreement), (iii) the Medytox board fails to reaffirm (publicly, if so requested by CollabRx) the Medytox board recommendation within ten business days after the date any Medytox acquisition proposal (or material modification thereto) is first publicly disclosed by Medytox or the person making such Medytox acquisition proposal, (iv) a tender offer or exchange offer relating to Medytox common stock shall have been commenced by a person unaffiliated with CollabRx and Medytox shall not have sent to its stockholders pursuant to Rule 14e-2 under the Securities Act, within ten business days after such tender offer or exchange offer is first published, sent or given, a statement reaffirming the Medytox board recommendation and recommending that stockholders reject such tender or exchange offer, or (v) Medytox or the Medytox board (or any committee thereof) shall publicly announce its intentions to do any of the foregoing actions; or

 

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·there shall have been a breach of any representation, warranty, covenant or agreement on the part of Medytox set forth in the merger agreement such that the conditions to the closing of the merger relating to the accuracy of Medytox’s representations and warranties under the merger agreement as of the date of the merger agreement or any other date or the performance by Medytox of its agreements under the merger agreement on or prior to the closing date, as applicable, would not be satisfied and, in either such case, such breach is incapable of being cured by the outside date; provided, that CollabRx shall have given Medytox at least thirty days written notice prior to such termination stating CollabRx’s intention to terminate the merger agreement due to any such breach; provided, further, CollabRx shall not have the right to terminate due to any such breach if it is then in material breach of any of its representations, warranties, covenants or agreements set forth in the merger agreement.

 

The merger agreement may also be terminated prior to the effective time of the merger by Medytox if:

 

·prior to the receipt of Medytox stockholder approval, the Medytox board authorizes Medytox, in full compliance with the terms of the merger agreement, to enter into an adverse acquisition agreement (other than an acceptable confidentiality agreement) in respect of a superior proposal; provided, that Medytox shall have timely paid any amounts due to CollabRx in connection with any such termination; and provided, further that in the event of such termination, Medytox substantially concurrently enters into such adverse acquisition agreement;

 

·(i) a CollabRx adverse recommendation change shall have occurred, (ii) CollabRx shall have entered into, or publicly announced its intention to enter into, an adverse acquisition agreement (other than an acceptable confidentiality agreement), (iii) the CollabRx board fails to reaffirm (publicly, if so requested by Medytox) the CollabRx board recommendation within ten business days after the date any CollabRx acquisition proposal (or material modification thereto) is first publicly disclosed by CollabRx or the person making such CollabRx acquisition proposal, (iv) a tender offer or exchange offer relating to CollabRx common stock shall have been commenced by a person unaffiliated with Medytox and CollabRx shall not have sent to its stockholders pursuant to Rule 14e-2 under the Securities Act, within ten business days after such tender offer or exchange offer is first published, sent or given, a statement reaffirming the CollabRx board recommendation and recommending that stockholders reject such tender or exchange offer, or (v) CollabRx or the CollabRx board (or any committee thereof) shall publicly announce its intentions to do any of the foregoing actions; or

 

·there shall have been a breach of any representation, warranty, covenant or agreement on the part of CollabRx set forth in the merger agreement such that the conditions to the closing of the merger relating to the accuracy of CollabRx’s representations and warranties under the merger agreement as of the date of the merger agreement or any other date or the performance by CollabRx of its agreements under the merger agreement on or prior to the closing date, as applicable, would not be satisfied and, in either such case, such breach is incapable of being cured by the outside date; provided, that Medytox shall have given CollabRx at least thirty days written notice prior to such termination stating Medytox’s intention to terminate the merger agreement due to any such breach; provided, further, Medytox shall not have the right to terminate due to any such breach if it is then in material breach of any of its representations, warranties, covenants or agreements set forth in the merger agreement.

 

Effect of Termination

 

If the merger agreement is terminated pursuant to any of the foregoing provisions, it will become void and of no further force and effect, with no liability on the part of any party to the merger agreement (or any stockholder, director, officer, employee, agent or representative of such party) to any other party to the merger agreement, except (i) with respect to Section 6.2(b) (as well as the Confidentiality Agreement), Section 8.5 (termination provisions), Section 8.6 (termination fees), and Article IX (miscellaneous), which shall remain in full force and effect and (ii) with respect to any liabilities or damages incurred or suffered by a party, to the extent such liabilities or damages were the result of fraud or the willful breach by another party of any of its representations, warranties, covenants or other agreements set forth in the merger agreement.