SEC Connect
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL
[____], 2017
REGISTRATION NO. 333-__________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
MEDOVEX CORPORATION
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or
organization)
46-3312262
I.R.S.
Employer Identification Number
1950
Airport Road, Suite A
Atlanta,
GA 30341
(844) 633-6839
(Address,
including zip code, and telephone number, including area code of
registrant’s principal executive offices)
1950
Airport Road, Suite A
Atlanta,
GA 30341
(844) 633-6839
(Name,
address, including zip code, and telephone number, including area
code, of agent for service)
Copies
to:
Harvey
J. Kesner, Esq.
Arthur
S. Marcus, Esq.
Sichenzia
Ross Ference Kesner LLP
61
Broadway, 32nd Floor
New
York, New York 10006
Phone:
(212) 930-9700
Fax:
(212) 930-9725
Approximate
date of commencement of proposed sale to the public: From time to
time after the effective date of this registration
statement.
If the
only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check
the following box: ☐
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plants, check the
following box: ☐
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following and list the Securities Act registration statement number
of the earlier effective registration statement for the same
offering. ☐
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. ☐
If this
Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become
effective upon filing with the Commission pursuant to Rule 462(e)
under the Securities Act, check the following
box. ☐
If this
Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.D. filed to register
additional securities or additional classes of securities pursuant
to Rule 413(b) under the Securities Act, check the following
box. ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
☐ Large
accelerated filer
☐ Accelerated
filer
☐ Non-accelerated
filer
☒ Smaller
reporting company
CALCULATION OF REGISTRATION FEE
Title of Class of Securities to be
Registered
|
|
Proposed
Maximum
Aggregate
Price
Per Share
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
Amount of
Registration
Fee
|
|
|
|
|
|
|
Common Stock,
$0.001 par value per share (2)
|
3,080,929
|
$1.46
|
(1)
|
$4,482,751.92
|
$519.55
|
Common Stock,
$0.001 par value per share, underlying Series A Preferred Stock
(3)
|
1,799,279
|
$1.46
|
(1)
|
$ 2,617,950.72
|
$303.42
|
Common Stock,
$0.001 par value per share, underlying warrants (4)
|
541,667
|
$1.52
|
|
$823,333.84
|
$95.42
|
Common Stock,
$0.001 par value per share, underlying warrants (5)
|
2,411,346
|
$1.50
|
|
$3,617,019.35
|
$419.21
|
Total number of
securities to be registered
|
7,833,221
|
|
|
$11,541,055.83
|
$1,337.61
|
(1)
Estimated solely
for purposes of calculating the registration fee pursuant to Rule
457(c) under the Securities Act of 1933, as amended, using the
average of the high and low prices as reported on the NASDAQ
Capital Market on April 10, 2017.
(2)
Represents
outstanding shares of common stock offered by the selling
stockholders.
(3)
Represents shares
of common stock issuable upon conversion of outstanding shares of
Series A Preferred Stock, offered by the selling
stockholders.
(4)
Represents
shares of common stock issuable
upon the exercise of warrants at an exercise price per share of
$1.52, offered by the selling stockholders.
(5)
Represents
shares of common stock issuable
upon the exercise of warrants at an exercise price per share of
$1.50, offered by the selling stockholders.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be
changed. The selling stockholders may not sell these securities
under this prospectus until the registration statement of which it
is a part and filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED APRIL [___],
2017
MEDOVEX CORPORATION
7,833,221
Shares of Common Stock
This
prospectus relates to the resale of up to 7,833,221 shares of
common stock of MedoveX Corporation by the selling stockholders,
including 1,799,279 shares issuable upon conversion of outstanding
shares of Series A Preferred Stock, 2,953,013 shares issuable upon
exercise of outstanding warrants, and 3,080,929 outstanding
shares.
The
selling stockholders may sell common stock from time to time in the
principal market on which the stock is traded at the prevailing
market price or in negotiated transactions.
We will
not receive any of the proceeds from the sale of common stock by
the selling stockholder. We will pay the expenses of registering
these shares.
Investing in our common stock involves a high degree of risk. You
should consider carefully the risk factors beginning on page 3 of
this prospectus before purchasing any of the shares offered by this
prospectus.
Our
common stock is listed on the NASDAQ Capital Market under the
symbol “MDVX” and our Series A Warrants trade under the
symbol “MDVXW”.
The
last reported sale price of our common stock on the NASDAQ Capital
Market on April 7, 2017 was $1.44 per share.
We may amend or supplement this prospectus from time to time by
filing amendments or supplements as required. You should read the
entire prospectus and any amendments or supplements carefully
before you make your investment decision.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is_________, 2017.
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You may
only rely on the information contained in this prospectus or that
we have referred you to. We have not authorized anyone to provide
you with different information. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any
securities other than the common stock offered by this prospectus.
This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any common stock in any
circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this prospectus nor any sale made in
connection with this prospectus shall, under any circumstances,
create any implication that there has been no change in our affairs
since the date of this prospectus or that the information contained
by reference to this prospectus is correct as of any time after its
date.
WHERE YOU CAN FIND MORE INFORMATION
We file
annual, quarterly and special reports, along with other information
with the SEC. Our SEC filings are available to the public over the
Internet at the SEC’s website at http://www.sec.gov. You may
also read and copy any document we file at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room.
This
prospectus is part of a registration statement on Form S-3 that we
filed with the SEC to register the securities offered hereby under
the Securities Act of 1933, as amended. This prospectus does not
contain all of the information included in the registration
statement, including certain exhibits and schedules. You may obtain
the registration statement and exhibits to the registration
statement from the SEC at the address listed above or from the
SEC’s internet site.
INCORPORATION OF
DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” information
into this prospectus. This means that we can disclose important
information to you by referring you to another document filed
separately with the SEC. The information that we incorporate by
reference is considered to be part of this prospectus. Because we
are incorporating by reference our future filings with the SEC,
this prospectus is continually updated and those future filings may
modify or supersede some or all of the information included or
incorporated in this prospectus. This means that you must look at
all of the SEC filings that we incorporate by reference to
determine if any of the statements in this prospectus or in any
document previously incorporated by reference have been modified or
superseded. This prospectus incorporates by reference the documents
listed below and any future filings we will make with the SEC under
Sections 13(a), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), (i) after the date of
the initial registration statement and prior to effectiveness of
the registration statement, and (ii) after the date of this
prospectus, until the selling stockholders sells all of our
securities registered under this prospectus:
●
Our
Annual Report on Form 10-K for the year ended December 31, 2016,
filed with the SEC on March 31, 2017; and
●
the
description of our common stock, Series A Warrants to purchase
Common Stock contained in our Registration Statement on Form S-1
filed with the SEC on June 17, 2016 (File No. 333-212113),
including any amendment or report filed for the purpose of updating
such description; and
●
all
reports and other documents subsequently filed by us pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the
date of this prospectus and prior to the termination of this
offering.
Notwithstanding the
foregoing, information furnished under Items 2.02 and 7.01 of any
Current Report on Form 8-K, including the related exhibits, is not
incorporated by reference in this prospectus.
The
information about us contained in this prospectus should be read
together with the information in the documents incorporated by
reference. You may request a copy of any or all of these filings,
at no cost, by writing or telephoning us at: Jeffrey Wright,
MedoveX Corporation, 1950 Airport Road, Suite A, Atlanta, Georgia
30341, telephone number 844-633-6839.
This
summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully,
including the section entitled “Risk Factors” before
deciding to invest in our common stock. The terms
“MedoveX,” the “Company,” “we,”
“our” or “us” in this prospectus refer to
MedoveX Corporation and its wholly-owned subsidiaries, unless the
context suggests otherwise.
ABOUT MEDOVEX
MedoveX
was incorporated in Nevada on July 30, 2013 as Spinez Corp. MedoveX
is the parent company of Debride Inc., (“Debride”),
which was incorporated under the laws of Florida on October 1,
2012, but did not commence operations until February 1, 2013.
Spinez Corp. changed its name to MedoveX Corp. and effected a
2-for-1 reverse split of its stock in March, 2014.
The
goal of the Company is to obtain, develop and commercialize various
intellectual property rights (patents, patent applications,
knowhow, etc.) in the medical technology area, with particular
focus on the development of medical devices. We intend to leverage
the extensive experience of our board of directors and management
team in the medical industry to seek out product candidates for
licensing, acquisition or development. Specifically, MedoveX
is in the business of designing and marketing proprietary medical
devices for commercial use in the United States and Europe. The
Company is currently seeking approval from the FDA and the European
Union for a CE Mark for the DenerveX System.
The DenerveX Device
Our
first acquisition was the DenerveX device. We believe
that the DenerveX device can be developed to encompass a number of
medical applications, including pain
relief.
The
Company acquired the DenerveX patent on January 31, 2013 from Scott
Haufe, M.D. (“Dr. Haufe”), a director of the Company,
in exchange for 750,108 shares of common stock in the Company and a
1% royalty on all sales of any product sold based on the
patent.
In
September 2013, we entered into a Co-Development Agreement with
James Andrews, M.D. (“Dr. Andrews”), a director of the
Company, whereby Dr. Andrews committed to further evaluate the
DenerveX device and to seek to make modifications and improvements
to such technology. In exchange for such services, the
Company agreed to pay Dr. Andrews a royalty equal to two (2%)
percent of the DenerveX net sales during the five (5) year term of
the Co-Development Agreement. Upon the termination of the term of
the Co-Development Agreement, which has a minimum term of five (5)
years, then the royalty payable to Dr. Andrews shall be reduced to
one (1%) percent of DenerveX net sales after such termination of
products covered by any U.S. patent on which Dr. Andrews is listed
as a co-inventor; if any such patents are obtained. Such
one (1%) percent royalty shall continue during the effectiveness of
such patent. Pursuant to the Co-Development Agreement,
Dr. Andrews agreed to assign any modifications or improvements to
the DenerveX to the Company subject to the royalty rights described
above.
Our
intention is to market the product as a disposable, single-use kit
which will include all components of the DenerveX device
product. In addition to the DenerveX device itself, we are
developing a dedicated Electro Surgical Generator, the DenerveX
Pro-40, to power the DenerveX device. The generator would be
provided to customers agreeing to purchase the DenerveX device, and
could not be used for any other purpose.
The
Company has entered into some of the final stages of the
development and verification of the DenerveX Device and the
DenerveX Pro-40 power generator as a system. Final development,
testing and verification to set standards is the main focus for
these final stages. Additionally, the company has be tested the
DenerveX System in an extensive living tissue model under very
strict Good Laboratory Practice Standards to measure, verify, and
establish its’ effectiveness for performance as a system.
Other testing will include device sterilization, shelf life
verification and shipping and performance testing to very specific
standards.
The
DenerveX System (the DenerveX Device and the DenerveX Pro-40
generator) were successfully tested as a system by SGS, a world
leader in safety performance testing, and received certification of
compliance in January 2017. SGS, a highly respected testing and
verification firm, tested the DenerveX System using an extensive
set of testing standards.
Regulatory Approval
The
Company is currently seeking approval from the FDA for
commercialization of the DenerveX System in the US, and we are also
seeking approval from the European Union for a CE Mark for
commercialization of the DenerveX System throughout the
EU.
Once
the Company obtains a CE Mark, which we anticipate will be in the
first half of 2017, we will provide a copy of the CE certificate
along with other necessary documentation to obtain regulatory
approval for commercialization of the DenerveX System throughout
certain countries including Columbia, Peru, Argentina, Mexico,
Turkey, Israel, New Zealand and Australia. The documentation
required to accompany the CE Mark to obtain regulatory approval in
the aforementioned countries include copies of the ISO 3485
certification, the SGS certificate of approval and a statement of
Good Manufacturing Practices (“GMP”).
The Company incurred net losses of approximately $16,227,000 and
$6,523,000 for the years ended December 31, 2016 and 2015,
respectively. The Company will continue to incur losses until such
time as it can bring a sufficient number of approved products to
market and sell them with margins sufficient to offset expenses.
Our
principal executive offices are located at 1950 Airport Road, Suite
A, Atlanta, Georgia 30341. We maintain an Internet website at
www.MedoveX.com.
The information contained on, connected to or that can be accessed
via our website is not part of this prospectus. We have included
our website address in this prospectus as an inactive textual
reference only and not as an active hyperlink.
Recent Developments
February 2017 Private Placement
In
February 2017, we completed a private placement pursuant to a Unit
Purchase Agreement dated February 9, 2017, in which we sold units
(each a “February Unit” and collectively, the
“February Units”). Each February Unit consisted of one
(1) share of common stock, par value $0.001 per share, and one-half
(1/2) of a warrant to purchase a share of common stock, and were
sold to select accredited investors, including the selling
stockholders, at a price of $100,000 per unit for total gross
proceeds of $3,022,000. At the closing, we issued to the investors
a total of 1,631,731 shares of common stock and warrants to
purchase up to a total of 1,858,462 shares of our common stock. The
total number of warrants includes an aggregate of 405,577 warrants
principals of Laidlaw & Company (UK) Ltd., which acted as
placement agent for the February 2017 private placement as
placement agent. The warrants have an exercise price of $1.50 per
share, subject to adjustment upon the
occurrence of certain events relating to a change in capital stock,
including, but not limited to, in the case of: stock splits,
reclassifications or combinations of common stock, and certain
other business combinations, and will be exercisable for a period
of five (5) years from the date of issuance. One investor chose to
be issued 12,740.38 shares of Series A Preferred Stock instead of
shares of common stock as permitted by the terms of the
offering.
At
the closing of the February 2017 private placement, we also
converted an aggregate of $1,150,000 of debt, which was initially
issued to certain investors (the “Noteholders”) in
connection with our September 2016 private placement, into February
Units on the same terms as the other investors, except that it was
conducted on a commission free basis. In connection with the
conversion, the Noteholders received an aggregate of 165,865 shares
of common stock, an aggregate of 9,399 shares of Series A Preferred
Stock and warrants to purchase an aggregate of up to 552,885 shares
of common stock. We also issued an aggregate of 200,000 shares of
common stock in exchange for their cancellation of 200,000 warrants
to purchase common stock, also issued during our September 2016
private placement.
In
total, we issued an aggregate of 1,997,596 shares of our common
stock, an aggregate of approximately 22,139 shares of our Series A
Preferred Stock, of which 4,147 shares have already been converted
into shares of common stock, and warrants to purchase up to an
aggregate of 2,411,346 shares of our common stock.
In connection with the February 2017 private
placement, on February 8, 2017, the Company filed a
Certificate of Designation (the “Certificate of
Designation”) with the Secretary of State of the State of
Nevada to designate the preferences, rights and limitations of the
Series A Convertible Preferred Stock. Pursuant to the Certificate
of Designation, the Company designated 45,000 shares of its
preferred stock as Series A Convertible Preferred Stock (the
“Series A Preferred Stock”). The Series A Preferred
Stock has a Stated Value of $0.001 per share. The Series A
Preferred Stock is convertible at the option of the holder into 100
shares of the Company’s Common Stock for every share of
Series A Preferred Stock. Upon any liquidation of the Company, the
holder of the Series A Preferred Stock shall be entitled to
receive, for each share thereof, out of the assets of the Company
legally available thereof, a preferential amount in cash equal to
(and not more than) the Stated Value. All preferential amounts to
be paid to the holders of the Series A Preferred Stock in
connection with any such liquidation event shall be paid prior to
any payments made to the holders of common stock.
September 2016 Private Placement
In
September 2016, we completed a private placement pursuant to a Unit
Purchase Agreement dated September 16, 2016, in which we sold ten
(10) units, each consisting of (i) a $115,000 senior secured note
(subject to an original issue discount of $15,000); and (ii) a
warrant to purchase up to 200,000 shares of our common stock, to
selected accredited investors, including the selling stockholders,
at a price of $100,000 per unit for total gross proceeds of
$1,000,000. The warrants had an exercise price of $1.625 per share.
In February 2017, these warrants were cancelled and exchanged for
200,000 shares of our common stock, which are being registered in
this registration statement on behalf of the selling
stockholders.
August 2016 Private Placement
In
August 2016, we completed a private placement pursuant to a Unit
Purchase Agreement dated as of August 5, 2016, in which we sold 4.6
units, each consisting of (i) 208,333 shares of our common stock;
and (ii) a warrant to purchase 104,167 shares of our common stock,
to selected accredited investors, including the selling
stockholders, at a price of $250,000 per unit for total gross
proceeds of $1,150,000. In connection with this private placement,
we also sold an additional 125,000 shares of our common stock and a
warrant to purchase 62,500 shares of our common stock at a price of
$150,000, resulting in total gross proceeds of $1,300,000 from the
August 2016 private placement. The warrants have an exercise price
of $1.52 per share, subject to adjustment upon the occurrence of
certain events relating to a change in capital stock, including,
but not limited to, in the case of: stock splits, reclassifications
or combinations of common stock, and certain other business
combinations, and will be exercisable for a period of five (5)
years from the date of issuance.
In
total, we issued an aggregate of 1,083,333 shares of common stock
and warrants to purchase up to an aggregate of 541,667 shares of
our common stock.
The
shares of common stock sold in our August and February private
placements, the shares underlying our Series A Preferred Stock
warrants sold in our February private placement and the shares
underlying the warrants sold each of our August, September and
February private placements are being included in this Registration
Statement on Form S-3.
About this Offering
This
prospectus includes the resale of 7,833,221 shares of common stock,
consisting of (i) 1,799,279 shares issuable upon conversion of
outstanding shares of Series A Preferred Stock sold in the 2017
February Private Placement, (ii) 3,080,929 shares of common stock
issued to accredited investors in each of our August 2016,
September 2016 and February 2017 private placements, (iii) 541,667
shares issuable upon exercise of outstanding warrants issued in the
third quarter of 2016; and (iv) 2,411,346 shares issuable upon
exercise of outstanding warrants, which includes an aggregate of
405,577 issued to designees of the placement agent, Laidlaw &
Company (UK) Ltd., for the Company’s private placement
completed in the first quarter of 2017. The warrants issued in the
third quarter of 2016 have an exercise price of $1.52 per share and
expire on August 4, 2021. The warrants issued in the first quarter
of 2017 have an exercise price of $1.50 and expire February 14,
2022.
RISK FACTORS
There are numerous and varied risks, known and unknown, that may
prevent us from achieving our goals. If any of these risks actually
occur, our business, financial condition or results of operation
may be materially adversely affected. In such case, the trading
price of our common stock could decline and investors could lose
all or part of their investment.
Risks Related to Our Business
Discussion
of our business and operations included in this prospectus should
be read together with the risk factors set forth below. They
describe various risks and uncertainties to which we are or may
become subject. These risks and uncertainties, together with other
factors described elsewhere in this report, have the potential to
affect our business, financial condition, results of operations,
cash flows, strategies or prospects in a material and adverse
manner. New risks may emerge at any time, and we cannot
predict those risks or estimate the extent to which they may affect
our financial performance. Each of the risks described below could
adversely impact the value of our securities. These
statements, like all statements in this report, speak only as of
the date of this prospectus (unless another date is indicated), and
we undertake no obligation to update or revise the statements in
light of future developments.
We
cannot assure you that we will be successful in commercializing any
of the Company’s products or if any of our products are
commercialized, that they will be profitable for the
Company.
The
Company generates limited revenue from operations upon which an
evaluation of our prospects can be made. The
Company’s prospects must be considered keeping in mind the
risks, expenses and difficulties frequently encountered in the
establishment of a new business in a constantly changing
industry. There can be no assurance that the Company
will be able to achieve profitable operations in the foreseeable
future, if at all.
The
Company has identified a number of specific risk areas that may
affect our operations and results in the future:
Risks Related to Our Financial Position and Capital
Requirements
We are a development stage company and face uncertainties
associated with being an early stage venture.
Our
operating subsidiary, Debride, was incorporated in October
2012. MedoveX was incorporated on July 30, 2013. Other
material non-cash assets include the intellectual property relating
to the DenerveX obtained from Scott M. W. Haufe, M.D. in connection
with our acquisition of Debride.
We
face all of the potential expenses, delays, uncertainties and
complications typically encountered by development stage
businesses, many of which may be beyond our
control.
These
include, but are not limited to, lack of sufficient capital,
unanticipated problems, delays or expenses relating to product
development and licensing and marketing activities, competition,
technological changes and uncertain market
acceptance. In addition, if we are unable to manage
growth effectively, our operating results could be materially and
adversely affected.
We are in the early stage of product development and there can be
no assurance that we will effectively and successfully develop
products for commercialization.
The Denervex device we are developing has had only limited research
and testing in the fields of use we are presently intending to
explore and to commercialize. We will have to continue
to go through extensive research and testing to develop the initial
product and any additional products and to determine or demonstrate
the safety and effectiveness of their proposed use. Our
products and our proposed testing of those products will require
various regulatory approvals and
clearances. Accordingly, the products we intend to
pursue are not presently marketable in the fields of use for which
we hope to develop them, and it is possible that some or all of
them may never become legally and commercially
marketable. The development and testing of medical
devices and related treatments and therapies is difficult,
time-consuming and expensive, and the successful development of any
products based on innovative technologies is subject to inherent
uncertainties and risks of failure. These risks include
the possibilities that any or all of the proposed products or
procedures may be found to be ineffective, or may otherwise fail to
receive necessary regulatory clearances; that the proposed products
or procedures may be uneconomical to produce and market or may
never achieve broad market acceptance; that third parties may hold
proprietary rights that preclude the Company from marketing its
intended products or procedures; or that third parties may develop
and market superior or equivalent products and
procedures. We are unable to predict whether our
research and development or acquisition activities will result in
any commercially viable products or
procedures. Furthermore, due to the extended testing and
regulatory review process required before marketing clearances can
be obtained, the time frames for commercialization of any products
or procedures are long and uncertain.
We expect to continue to incur losses for the immediate
future.
We have incurred losses since our inception. We expect
to continue to incur losses for the foreseeable future. The
principal causes of our losses are likely to be personnel costs,
working capital costs, research and development costs, intellectual
property protection costs, brand development costs, marketing and
promotion costs, and the lack of any significant revenue stream for
the foreseeable future. We may never achieve
profitability.
Our independent registered public accounting firm has included an
explanatory paragraph with respect to our ability to continue as a
going concern in its report on our consolidated financial
statements for the period ended December 31, 2016.
Our independent registered public accounting firm has included an
explanatory paragraph with respect to our ability to continue as a
going concern in its report on our consolidated financial
statements for the period ended December 31, 2016. The presence of
the going concern explanatory paragraph may have an adverse impact
on our relationship with third parties with whom we do business,
including our customers, vendors and employees and could make it
challenging and difficult for us to raise additional debt or equity
financing to the extent needed, all of which could have a material
adverse impact on our business, results of operations, financial
condition and prospects.
Raising additional capital and carrying out further acquisitions
may cause dilution to our existing stockholders, restrict our
operations or require us to relinquish rights to our technologies
or products.
We
will likely seek additional capital through a combination of
private and public equity offerings, debt financings, strategic
partnerships and alliances and licensing arrangements. To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, the ownership interests of existing
stockholders will be diluted, and the terms may include liquidation
or other preferences that adversely affect stockholder rights. Debt
financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take certain
actions, such as incurring debt, making capital expenditures or
declaring dividends.
If
we raise or expend additional funds through strategic partnerships,
acquisitions, alliances and/or licensing arrangements with third
parties, we may be required to relinquish valuable rights to our
technologies or products, or grant licenses on terms that are not
favorable to us. If we are unable to raise additional funds through
equity or debt financing when needed, we may be required to delay,
limit, reduce or terminate our product development or
commercialization efforts or grant rights to develop and market
products that we would otherwise prefer to develop and market
ourselves.
Our operating results may fluctuate significantly as a result of a
variety of factors, many of which are outside of our control, which
could cause fluctuations in the price of our
securities.
We
are subject to the following factors that may negatively affect our
operating results:
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the announcement or introduction of new products by our
competitors;
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our ability to upgrade and develop our systems and infrastructure
to accommodate growth;
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our ability to attract and retain key personnel in a timely and
cost effective manner;
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technical difficulties;
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the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations and
infrastructure;
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our ability to identify and enter into relationships with
appropriate and qualified third-party providers such as Devicix,
LLC for necessary testing, clinical trials and manufacturing
services;
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regulation by federal, state or local governments; and
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general economic conditions, as well as economic conditions
specific to the medical device and healthcare
industries.
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As a result of our lack of any operating history and the nature of
the markets in which we compete, it is difficult for us to forecast
our revenues or earnings accurately. As a strategic
response to changes in the competitive environment, we may from
time to time make certain decisions concerning expenditures,
pricing, service or marketing that could have a material and
adverse effect on our business, results of operations and financial
condition. Due to the foregoing factors, our quarterly
revenues and operating results are difficult to
forecast.
We may be unable to manage growth effectively.
As we seek to advance our product candidates, we will need to
expand our development, regulatory, manufacturing, marketing and
sales capabilities or contract with third parties to provide these
capabilities for us. We anticipate that a period of
significant expansion will be required to address potential growth
and to handle licensing and research activities. This
expansion will place a significant strain on our management,
operational and financial resources. To manage the
expected growth of our operations and personnel, we must establish
appropriate and scalable operational and financial systems,
procedures and controls and must establish a qualified finance,
administrative and operations staff. As a public company, we will
have to implement internal controls to comply with government
mandated regulations. Our management may be unable to
hire, train, retain, motivate and manage the necessary personnel or
to identify, manage and exploit potential strategic relationships
and market opportunities. Our failure to manage growth
effectively could have a material and adverse effect on our
business, results of operations and financial
condition.
Risks Related to Development, Clinical Testing and Regulatory
Approval of Our Products
Government regulation of our business is extensive and regulatory
approvals are uncertain, expensive and time-consuming.
Our research, development, testing and clinical trials,
manufacturing and marketing of most of our intended products are
subject to an extensive regulatory approval process by the FDA and
other regulatory agencies in the U.S. and abroad. The
process of obtaining FDA and other required regulatory approvals
for medical device products, including the potential for being
required to engage in pre-clinical and clinical testing, is
lengthy, expensive and uncertain. There can be no
assurance that, even after such time and expenditures, the Company
will be able to obtain necessary regulatory approvals for clinical
testing or for the manufacturing or marketing of any
products. In addition, during the regulatory process,
other companies may develop other technologies with the same
intended use as our products. Even if regulatory
clearance is obtained, a marketed product is subject to continual
review, and later discovery of previously unknown safety issues or
failure to comply with the applicable regulatory requirements may
result in restrictions on a product’s marketing or withdrawal
of the product from the market, as well as possible civil or
criminal sanctions.
The results of our clinical trials may not support our product
claims or may result in the discovery of adverse side
effects.
Even if the clinical trials that we may need to undertake are
completed as planned, we cannot be certain that their results will
support our product claims or that the FDA or foreign regulatory
authorities will agree with our conclusions regarding the results
of the trials.
The clinical trial process may fail to demonstrate that a product
is safe and effective for the proposed indicated use, which could
cause us to abandon a product and could delay development of other
products. Any delay or termination of our clinical
trials will delay the filing of our product submissions and,
ultimately, our ability to commercialize a product and generate
revenue.
It is also possible that patients enrolled in clinical trials
will experience adverse side effects that are not currently part of
the product’s profile and not predicted or foreseen on the
basis of prior experience. Even if clinical trials are
otherwise successful, we may be unable to develop a commercially
viable product, treatment or therapy based on those
trials.
Risks Related to Our Business and Industry
If our products and procedures do not gain market acceptance among
physicians, patients and the medical community, we may be unable to
generate significant revenues, if any.
Even if we obtain regulatory approval for our products, they may
not gain market acceptance among physicians, healthcare payers,
patients and the medical community. In particular, the U.S.
government agency Center for Medicare/Medicaid Service or other
private reimbursement agencies may decline to reimburse physicians
and health care facilities whose patients are on Medicare or
Medicaid or private insurance for use of our product, significantly
reducing our potential market. Market acceptance will depend on our
ability to demonstrate the benefits of our approved products in
terms of safety, efficacy, convenience, ease of administration and
cost effectiveness. In addition, we believe market
acceptance depends on the effectiveness of our marketing strategy,
the pricing of our approved products and the reimbursement policies
of government and third party payers with respect to our
products. Physicians may not utilize our approved
products for a variety of reasons and patients may determine for
any reason that our product is not useful to them. If
any of our approved products fail to achieve market acceptance, our
ability to generate revenues will be limited.
The industry in which we plan to operate is highly competitive and
there can be no assurances that we will be able to compete
effectively.
We are engaged in a rapidly evolving
industry. Competition from other medical device
companies and from other research and academic institutions is
intense and expected to increase. Many of these
companies have substantially greater financial and other resources
and development capabilities than we do, have substantially greater
experience in undertaking pre-clinical and clinical testing of
products, and are commonly regarded in the medical device
industries as very aggressive competitors. In addition
to competing with universities and other research institutions in
the development of products, technologies and processes, we compete
with other companies in acquiring rights to products or
technologies from universities. There can be no
assurance that we can develop products that are more effective or
achieve greater market acceptance than competitive products, or
that our competitors will not succeed in developing products and
technologies that are more effective than those being developed by
us and that would therefore render our products and technologies
less competitive or even obsolete.
Third parties may claim that we infringe on their proprietary
rights and may prevent us from commercializing and selling our
products.
There has been substantial litigation in the medical device
industry with respect to the manufacture, use and sale of new
products. These lawsuits often involve claims relating
to the validity of patents supporting the new products and/or the
validity and alleged infringement of patents or proprietary rights
of third parties. We may be required to defend against
challenges to the validity of our patents and against claims
relating to the alleged infringement of patent or proprietary
rights of third parties.
Litigation initiated by a third party claiming patent invalidity or
patent infringement could:
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require us to incur substantial litigation expense, even if we are
successful in the litigation;
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require us to divert significant time and effort of our
management;
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result in the loss of our rights to develop, make or market our
products; and
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require us to pay substantial monetary damages or royalties in
order to license proprietary rights from third parties or to
satisfy judgments or to settle actual or threatened
litigation.
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Although patent and intellectual property disputes within the
medical device industry have often been settled through licensing
or similar arrangements, costs associated with these arrangements
may be substantial and could include the long-term payment of
royalties.
Furthermore, the required licenses may not be made available to us
on acceptable terms. Accordingly, an adverse
determination in a judicial or administrative proceeding or a
failure to obtain necessary licenses could prevent us from
manufacturing and selling our products or increase our costs to
market our products.
Healthcare policy changes, including the recently enacted
legislation to reform the United States healthcare system, may have
a material adverse effect on us.
In March 2010, President Obama signed into law the PPACA, which
substantially changes the way healthcare is financed by both
governmental and private insurers, encourages improvements in the
quality of healthcare items and services, and significantly impacts
the medical device industry. The PPACA includes, among other
things, the following measures:
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a 2.3% excise tax on any entity that manufactures or imports
medical devices offered for sale in the United States, with limited
exceptions;
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a new Patient-Centered Outcomes Research Institute to oversee,
identify priorities and conduct comparative clinical effectiveness
research;
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new reporting and disclosure requirements on device manufacturers
for any “transfer of value” made or distributed to
physicians and teaching hospitals, as well as reporting of certain
physician ownership interests;
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payment system reforms including a national pilot program on
payment bundling to encourage hospitals, physicians and other
providers to improve the coordination, quality and efficiency of
certain healthcare services through bundled payment models;
and
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an independent payment advisory board that will submit
recommendations to reduce Medicare spending if projected Medicare
spending exceeds a specified growth rate.
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These provisions could meaningfully change the way healthcare is
delivered and financed, and could have a material adverse impact on
numerous aspects of our business.
In the future, there may continue to be additional proposals
relating to the reform of the United States healthcare system.
Certain of these proposals could limit the prices we are able to
charge for our products or the amounts of reimbursement available
for our products, and could limit the acceptance and availability
of our products. The adoption of some or all of these proposals
could have a material adverse effect on our business, results of
operations and financial condition.
Additionally, initiatives sponsored by government agencies,
legislative bodies and the private sector to limit the growth of
healthcare costs, including price regulation and competitive
pricing, are ongoing in markets where we do business. We could
experience an adverse impact on our operating results due to
increased pricing pressure in the United States and in other
markets. Governments, hospitals and other third party payors could
reduce the amount of approved reimbursement for our products or
deny coverage altogether. Reductions in reimbursement levels or
coverage or other cost-containment measures could adversely affect
our future operating results.
We depend on key personnel.
We depend greatly on Dr. Scott M. W. Haufe, a member of the board
of directors and the co-founder of Debride, Jarrett Gorlin, our
Chief Executive Officer, and a member of the board of
directors and Patrick Kullmann, our President and Chief Operating
Officer, among others. Our success will depend, in part,
upon our ability to attract and retain additional skilled
personnel, which will require substantial additional
funds. There can be no assurance that we will be able to
find, attract and retain additional qualified employees, directors,
and advisors having the skills necessary to operate, develop and
grow our business. Our inability to hire qualified
personnel, the loss of services of Dr. Haufe, Mr. Gorlin or Mr.
Kullmann, or the loss of services of other executive officers, key
employees, or advisors that may be hired in the future, may have a
material and adverse effect on our business. We
currently do not maintain “key man” insurance policies
on the lives of these individuals or the lives of any of our other
employees.
In the future, we could experience difficulties attracting and
retaining qualified employees. Competition for qualified personnel
in the medical products field is intense. We may need to hire
additional personnel as we expand our clinical development and
commercial activities. We may not be able to attract and retain
quality personnel on acceptable terms or at all.
In addition, we may enter into arrangements with consultants and
advisors, including scientific and clinical advisors, to assist us
in formulating our research and development and commercialization
strategy.
Our consultants and advisors may be employed by employers other
than us and may have commitments under consulting or advisory
contracts with other entities that may limit their availability to
us.
If we are unable to hire qualified personnel, our business and
financial condition may suffer.
Our success and achievement of our growth plans depend on our
ability to recruit, hire, train and retain other highly qualified
technical and managerial personnel. In this regard, we have limited
resources and as such we may not able to provide an employee with
the same amount of compensation that he or she would likely receive
at a larger company and as a result we may face difficulty in
finding qualified employees. The inability to attract,
retain and motivate any additional highly skilled employees
required for the expansion of our activities, could have a
materially adverse effect on our ability to conduct our business
and as such can impair our operations.
If we obtain approval to commercialize our products outside of the
United States, a variety of risks associated with international
operations could materially adversely affect our
business.
If our products are approved for commercialization outside the
United States, we will likely seek to enter into agreements with
third parties to market our products outside the United States. We
expect that we will be subject to additional risks related to
entering into or maintaining international business relationships,
including:
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different regulatory requirements for medical devices or treatments
in foreign countries;
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lack of adequate reimbursement for the use of our
product;
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differing United States and foreign import and export
rules;
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reduced protection for intellectual property rights in foreign
countries;
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unexpected changes in tariffs, trade barriers and regulatory
requirements;
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economic weakness, including inflation, or political instability in
particular foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for
employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could result in increased
operating expenses and reduced revenues and other obligations
incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is more
common than in the United States;
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production shortages resulting from any events affecting raw
material supply or manufacturing capabilities abroad;
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potential liability resulting from development work conducted by
these distributors; and
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business interruptions resulting from geographical actions,
including war and terrorism, or natural disasters.
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Any government investigation of alleged violations of law could
require us to expend significant time and resources in response,
and could generate negative publicity. Any failure to comply with
ongoing regulatory requirements may significantly and adversely
affect our ability to commercialize and generate revenues from our
products.
If regulatory sanctions are applied or if regulatory approval is
withdrawn, the value of our company and our operating results will
be adversely affected.
We face substantial competition, which may result in others
discovering, developing or commercializing products before, or more
successfully, than we do.
Our future success depends on our ability to demonstrate and
maintain a competitive advantage with respect to the design,
development and commercialization of new and novel
products.
Our competitors may succeed in developing competing products before
we do for the same indications that we are pursuing, obtaining
regulatory approval for products or gaining acceptance for the same
markets that we are targeting. If we are not "first to market" with
one of our products, our competitive position could be compromised
because it may be more difficult for us to obtain marketing
approval for that product and successfully market that product as a
second competitor.
Many of our competitors have substantially greater commercial
infrastructures and financial, technical and personnel resources
than we have. We will not be able to compete successfully unless we
successfully:
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design and develop products that are superior to other products in
the market;
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attract qualified scientific, medical, sales and marketing and
commercial personnel;
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obtain patent and/or other proprietary protection for our processes
and products;
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obtain required regulatory approvals; and
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collaborate with others in the design, development and
commercialization of new products.
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Established competitors may invest heavily to quickly discover and
develop novel treatments that could make our products obsolete. In
addition, any new product that competes with an approved product
must demonstrate compelling advantages in efficacy, convenience,
tolerability and safety in order to overcome price competition and
to be commercially successful. If we are not able to compete
effectively against our current and future competitors, our
business will not grow and our financial condition and operations
will suffer.
If our future employees or third parties with whom we contract
commit fraud or other misconduct, including noncompliance with
regulatory standards and requirements, our business may experience
serious adverse consequences.
We are exposed to the risk of employee or third party fraud or
other misconduct. Misconduct by employees could include intentional
failures to comply with FDA regulations, to provide accurate
information to the FDA, to comply with manufacturing standards we
have established, to comply with federal and state health-care
fraud and abuse laws and regulations, to report financial
information or data accurately or to disclose unauthorized
activities to us. In particular, sales, marketing and business
arrangements in the healthcare industry are subject to extensive
laws and regulations intended to prevent fraud, kickbacks,
self-dealing and other abusive practices. These laws and
regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. Employee
misconduct could also involve the improper use of information
obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. We have
adopted a Code of Business Conduct and Ethics but it is not always
possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be
effective in controlling unknown or unmanaged risks or losses or in
protecting us from governmental investigations or other actions or
lawsuits stemming from a failure to be in compliance with such laws
or regulations. If any such actions are instituted against us, and
we are not successful in defending ourselves or asserting our
rights, those actions could have a significant impact on our
business, including the imposition of significant fines or other
sanctions.
If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit
commercialization of any products.
We face an inherent risk of product liability as a result of any
clinical testing of our products and will face an even greater risk
if we commercialize any products. We may be sued if any product we
develop allegedly causes injury or is found to be otherwise
unsuitable during product testing, manufacturing, marketing or
sale.
Any such product liability claims may include allegations of
defects in manufacturing, defects in design, a failure to warn of
dangers inherent in the product, negligence, strict liability, and
a breach of warranties. Claims could also be asserted under state
consumer protection acts. If we cannot successfully defend
ourselves against product liability claims, we may incur
substantial liabilities or be required to limit commercialization
of our products. Even successful defense would require significant
financial and management resources. Regardless of the merits or
eventual outcome, liability claims may result in:
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decreased demand for our products or products that we may
develop;
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injury to our reputation;
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withdrawal of clinical trial participants;
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costs to defend the related litigation;
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a diversion of management's time and our resources;
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substantial monetary awards to trial participants or
patients;
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product recalls, withdrawals or labeling, marketing or promotional
restrictions;
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loss of revenue;
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the inability to commercialize our products; and
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a decline in our stock price.
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Our inability to obtain and retain sufficient product liability
insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the
commercialization of products we develop. We currently do not
maintain product liability insurance because it is generally
expensive, and in light of our developmental stage we do not
believe it is cost effective to obtain at this time. Since we
commenced sales, we secured product liability insurance; however,
we may not be able to obtain or maintain product liability
insurance in the future on acceptable terms or with adequate
coverage against potential liabilities, if at all. If we
are the subject of a successful product liability claim that
exceeds the limits of any insurance coverage we obtain, we would
incur substantial charges that would adversely affect our earnings
and require the commitment of capital resources that might
otherwise be available for the development and commercial launch of
our products.
We may not be able to secure adequate clinical trial liability
insurance for all of our products and a successful clinical trial
liability claim against us could have an adverse effect on our
financial condition even with such insurance coverage.
Our business will expose us to potential liability that results
from risks associated with conducting clinical trials of our
products. There is no guarantee that we will be able to procure
clinical trial liability insurance at favorable rates, if at all,
and even if procured that we will procure adequate coverage to
satisfy any liability we may incur. A successful clinical trial
liability claim, if any, brought against us could have a material
adverse effect on our business, prospects, financial condition and
results of operations even though clinical trial insurance is
successfully maintained or obtained. The current and planned
insurance coverages may only mitigate a small portion of a
substantial claim against us.
Our relationships with customers and third-party payors in the
United States and elsewhere will be subject to applicable
anti-kickback, fraud and abuse and other healthcare laws and
regulations, which could expose us to criminal sanctions, civil
penalties, contractual damages, reputational harm and diminished
profits and future earnings.
Healthcare providers, physicians and third-party payors in the
United States and elsewhere play a primary role in the
recommendation and prescription of any products for which we obtain
marketing approval. Our future arrangements with third-party payors
and customers may expose us to broadly applicable fraud and abuse
and other healthcare laws and regulations that may constrain the
business or financial arrangements and relationships through which
we market, sell and distribute our products for which we obtain
marketing approval. Restrictions under applicable federal, state
and foreign healthcare laws and regulations include the
following:
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the federal healthcare anti-kickback statute prohibits, among other
things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in
cash or in kind, to induce or reward either the referral of an
individual for, or the purchase, order or recommendation of, any
good or service for which payment may be made under federal and
state healthcare programs such as Medicare and
Medicaid;
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the federal False Claims Act imposes criminal and civil penalties,
including civil whistleblower or qui tam actions, against
individuals or entities for knowingly presenting, or causing to be
presented, to the federal government, claims for payment that are
false or fraudulent or making a false statement to avoid, decrease
or conceal an obligation to pay money to the federal
government;
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the federal Health Insurance Portability and Accountability Act of
1996, or HIPPA, as amended by the Health Information Technology for
Economic and Clinical Health Act, or HITECH, imposes criminal and
civil liability for executing a scheme to defraud any healthcare
benefit program. HIPAA and HITECH also regulate the use and
disclosure of identifiable health information by health care
providers, health plans and health care clearinghouses, and also
impose obligations, including mandatory contractual terms, with
respect to safeguarding the privacy, security and transmission of
identifiable health information as well as requiring notification
of regulatory breaches. HIPAA and HITECH violations may prompt
civil and criminal enforcement actions as well as enforcement by
state attorneys general;
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the federal false statements statute prohibits knowingly and
willfully falsifying, concealing or covering up a material fact or
making any materially false statement in connection with the
delivery of or payment for healthcare benefits, items or
services;
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the federal transparency requirements under the Health Care Reform
Law requires manufacturers of drugs, devices, biologics and medical
supplies to report to the Department of Health and Human Services
information related to physician payments and other transfers of
value and physician ownership and investment
interests;
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analogous state laws and regulations, such as state anti-kickback
and false claims laws, may apply to sales or marketing arrangements
and claims involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers;
and
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analogous anti-kickback, fraud and abuse and healthcare laws and
regulations in foreign countries.
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Efforts to ensure that our business arrangements with third parties
will comply with applicable healthcare laws and regulations will
involve substantial costs. It is possible that governmental
authorities will conclude that our business practices may not
comply with current or future statutes, regulations or case law
involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations are found to be in violation of any
of these laws or any other governmental regulations that may apply
to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, exclusion from government
funded healthcare programs, such as Medicare and Medicaid, and the
curtailment or restructuring of our operations. If any of the
physicians or other providers or entities with whom we expect to do
business are found to be not in compliance with applicable laws,
they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded healthcare
programs.
Risks Related to Commercialization of Our Products
If, in the future, we are unable to establish our own sales,
marketing and distribution capabilities or enter into licensing or
collaboration agreements for these purposes, we may not be
successful in commercializing our products.
We currently have a relatively small number of employees and do not
have a sales or marketing infrastructure, and we, do not have any
significant sales, marketing or distribution experience. We intend
to be opportunistic in seeking to either build our own commercial
infrastructure to commercialize our products if and when they are
approved, or enter into licensing or collaboration agreements to
assist in the future development and commercialization of such
products.
If we choose to develop internal sales, distribution and marketing
capabilities, we will likely have to invest significant amounts of
financial and management resources, some of which will be committed
prior to any confirmation that any product will be approved. For
products for which we decide to perform sales, marketing and
distribution functions ourselves, we could face a number of
additional risks, including:
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our inability to recruit and retain adequate numbers of effective
sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or
persuade adequate numbers of physicians to utilize our
procedures;
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the lack of complementary products to be offered by sales
personnel, which may put us at a competitive disadvantage relative
to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an
independent sales and marketing organization.
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Where and when appropriate, we may elect to utilize contract sales
forces or strategic partners to assist in the commercialization of
our products. If we enter into arrangements with third parties to
perform sales, marketing and distribution services for our
products, the resulting revenues or the profitability from these
revenues to us are likely to be lower than if we had sold, marketed
and distributed our products ourselves. In addition, we may not be
successful in entering into arrangements with third parties to
sell, market and distribute our products or may be unable to do so
on terms that are favorable to us. We likely will have limited
control over such third parties, and any of these third parties may
fail to devote the necessary resources and attention to sell,
market and distribute our products effectively.
If we do not establish sales, marketing and distribution
capabilities successfully, either on our own or in collaboration
with third parties, we will not be successful in commercializing
our products.
Risks Related to Acquisitions
We may be unable to identify, acquire, close or integrate
acquisition targets successfully.
A substantial part of our business strategy includes acquiring and
integrating complementary businesses, products, technologies or
other assets, and forming strategic alliances, joint ventures and
other business combinations, to help drive future growth. We may
also in-license new products. Acquisitions or similar arrangements
may be complex, time consuming and expensive. In some cases, we
move very rapidly to negotiate and consummate the transaction, once
we identify the acquisition target. We may not consummate some
negotiations for acquisitions or other arrangements, which could
result in significant diversion of management and other employee
time, as well as substantial out-of-pocket costs. In addition,
there are a number of risks and uncertainties relating to our
closing transactions. If such transactions are not completed for
any reason, we will be subject to several risks, including the
following: (i) the market price of our common shares may
reflect a market assumption that such transactions will occur, and
a failure to complete such transactions could result in a negative
perception by the market of us generally and a decline in the
market price of our common shares; and (ii) many costs
relating to the such transactions may be payable by us whether or
not such transactions are completed.
If an acquisition is consummated (such as our acquisition and
subsequent divestiture of Streamline, Inc.), the integration of the
acquired business, product or other assets into our Company may
also be complex and time-consuming and, if such businesses,
products and assets are not successfully integrated, we may not
achieve the anticipated benefits, cost-savings or growth
opportunities. Potential difficulties that may be encountered in
the integration process include the following:
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integrating personnel, operations and systems, while maintaining
focus on selling and promoting existing and newly-acquired
products;
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coordinating geographically dispersed organizations;
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distracting management and employees from operations;
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retaining existing customers and attracting new
customers;
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maintaining the business relationships the acquired company has
established, including with healthcare providers; and
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managing inefficiencies associated with integrating the operations
of the Company.
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We have incurred, and may incur in the future, restructuring and
integration costs and a number of non-recurring transaction costs
associated with these acquisitions, combining the operations of the
Company and the acquired company and achieving desired synergies.
These fees and costs may be substantial. Non-recurring transaction
costs include, but are not limited to, fees paid to legal,
financial and accounting advisors, filing fees and printing costs.
Additional unanticipated costs may be incurred in the integration
of the businesses of the Company and the acquired company. There
can be no assurance that the elimination of certain duplicative
costs, as well as the realization of other efficiencies related to
the integration of the acquired business, will offset the
incremental transaction-related costs over time. Therefore, any net
benefit may not be achieved in the near term, the long term or at
all.
These acquisitions and other arrangements, even if successfully
integrated, may fail to further our business strategy as
anticipated or to achieve anticipated benefits and success, expose
us to increased competition or challenges with respect to our
products or geographic markets, and expose us to additional
liabilities associated with an acquired business, product,
technology or other asset or arrangement. Any one of these
challenges or risks could impair our ability to realize any benefit
from our acquisition or arrangement after we have expended
resources on them.
Our strategic acquisitions, investments or alliances may not be
successful.
As part of our strategy to increase revenue growth, we seek to
supplement our internal growth through strategic acquisitions,
investments and alliances. Such transactions are inherently risky.
The success of any acquisition, investment or alliance may be
affected by a number of factors, including our ability to properly
assess and value the potential business opportunity or to
successfully integrate any business we may acquire into our
existing business. There can be no assurance that any past or
future transaction will be successful.
Our future growth is dependent upon the development or acquisition
of new products, and there can be no assurance that such products
will be developed.
A significant element of our strategy is to increase revenue growth
by focusing on products that deliver greater benefits to
physicians, healthcare payers, patients and the medical community.
The development or acquisition of these products may require
significant research and development, clinical trials and
regulatory approvals. The results of our product development
efforts may be affected by a number of factors, including our
ability to innovate, develop and manufacture new products, complete
clinical trials, obtain regulatory approvals and reimbursement in
the United States and abroad, or gain and maintain market
approval of our products. In addition, patents attained by others
can preclude or delay our commercialization of a product. There can
be no assurance that any products now in development or that we may
seek to develop in the future will achieve technological
feasibility, obtain regulatory approval or gain market
acceptance.
Risks Related to Our Dependence on Third Parties
We are dependent on contract research organizations and other
contractors to assist in our clinical testing and for certain
research and development activities, thus, the timing and adequacy
of our clinical trials and such research activities are, to a
certain extent, beyond our control.
The nature of clinical trials and our business strategy will likely
require us to rely on contract research organizations, independent
clinical investigators and other third party service providers to
assist us with clinical testing and certain research and
development activities. Our success is dependent upon the success
of these outside parties in performing their responsibilities.
Although we believe our contractors are economically motivated to
perform on their contractual obligations, we cannot directly
control the adequacy and timeliness of the resources and expertise
applied to these activities by our contractors. If our contractors
do not perform their activities in an adequate or timely manner,
the development and commercialization of our products could be
delayed.
If the third parties on which we may need to rely to conduct any
clinical trials and to assist us with pre-clinical development or
other key steps do not perform as contractually required or
expected, we may not be able to obtain regulatory clearance or
approval for or commercialize our product.
We do not have (and do not expect to develop) the independent
ability to independently conduct pre-clinical and clinical trials
for our products and to the extent we will need to conduct such
trials, we will likely need to rely on third-parties, such as
contract research organizations, medical institutions, clinical
investigators and contract laboratories to conduct such
trials. We also do not have (and do not expect to
develop) the independent ability to manufacture our proposed
products, and will therefore need to rely on third parties such as
contract manufacturing organizations. If these various
third parties do not successfully carry out their contractual
duties or regulatory obligations or meet expected deadlines, or if
the quality or accuracy of the data they obtain or the quality of
the products they produce for us is compromised due to the failure
to adhere to our clinical or manufacturing protocols or regulatory
requirements or for any other reasons, we may have difficulty
replacing them with other qualified third-party providers of the
necessary services or products and in the meantime, our
pre-clinical development activities or clinical trials may be
extended, delayed, suspended or terminated, and we may not be able
to obtain regulatory clearance or approval for, or successfully
commercialize, a product on a timely basis, if at
all. As such, our business, operating results and
prospects may be adversely affected and may even fail
entirely. Furthermore, our third-party clinical trial
investigators may be delayed in conducting our clinical trials for
reasons outside of their (or our) control.
We rely on third parties to manufacture our products and as a
result we may not be able to control our product
development.
We do not currently own or operate any manufacturing facilities,
and we lack sufficient internal staff to produce clinical and
preclinical product supplies ourselves. As a result, we are working
with a third-party contract manufacturer to produce sufficient
quantities of our products for future clinical trials, preclinical
testing and commercialization.
Reliance on third-party manufacturers entails risks to which we
would not be subject if we manufactured products ourselves,
including reliance on the third party for regulatory compliance and
quality assurance, the possibility of breach of the manufacturing
agreement by the third party because of factors beyond our control
(including a failure to manufacture our products in accordance with
our product specifications) and the possibility of termination or
nonrenewal of the agreement by the third party, based on its own
business priorities, at a time that is costly or damaging to us. We
will be dependent on the ability of these third-party manufacturers
to produce adequate supplies of medical products to support our
clinical development programs and future commercialization of our
products. In addition, the FDA and other regulatory authorities
require that our products be manufactured according to current
good manufacturing practices and similar foreign standards.
Any failure by our third-party manufacturer to comply with cGMP or
failure to scale up manufacturing processes, including any failure
to deliver sufficient quantities of products in a timely manner,
could lead to a delay in, or failure to obtain, regulatory approval
of any of our products. In addition, such failure could be the
basis for action by the FDA to withdraw approvals for products
previously granted to us and for other regulatory action, including
recall or seizure, fines, imposition of operating restrictions,
total or partial suspension of production or
injunctions.
We have limited staffing and rely on our third party manufacturer
to purchase from third-party suppliers the materials necessary to
produce our products. There are a limited number of suppliers for
certain capital equipment and materials that we use to manufacture
our products. Such suppliers may not sell these materials to our
manufacturer at the times we need them or on commercially
reasonable terms. We do not have any control over the process or
timing of the acquisition of these materials by our third party
manufacturer. If our manufacturer or we are unable to purchase
these materials after regulatory approval has been obtained for our
products, the commercial launch of our products would be delayed or
there would be a shortage in supply, which would impair our ability
to generate revenues from the sale of our products.
In addition, our manufacturer may not be able to manufacture our
products at a cost or in quantities or in a timely manner necessary
to develop and commercialize them. If we successfully commercialize
the DenerveX or any of our products, we may be required to
establish or access large-scale commercial manufacturing
capabilities. In addition, as our development pipeline increases
and matures, we may have a greater need for clinical trial and
commercial manufacturing capacity. To meet our projected needs for
commercial manufacturing the third party with whom we currently
work will need to increase its scale of production or we will need
to secure an alternate supplier.
We may not be successful in establishing and maintaining strategic
partnerships, which could adversely affect our ability to develop
and commercialize products.
We may seek to enter into strategic partnerships in the future,
including alliances with other healthcare companies, to enhance and
accelerate the development and commercialization of our products.
We face significant competition in seeking appropriate strategic
partners and the negotiation process is time-consuming and complex.
Moreover, we may not be successful in our efforts to establish a
strategic partnership or other alternative arrangements for any
future products and programs because our research and development
pipeline may be insufficient, our products and programs may be
deemed to be at too early of a stage of development for
collaborative effort and/or third parties may not view our products
and programs as having the requisite potential to demonstrate
safety and efficacy. Even if we are successful in our efforts to
establish strategic partnerships, the terms that we agree upon may
not be favorable to us and we may not be able to maintain such
strategic partnerships if, for example, development or approval of
a product is delayed or sales of an approved product are
disappointing.
If we ultimately determine that entering into strategic
partnerships is in our best interest but either fail to enter into,
are delayed in entering into or fail to maintain such strategic
partnerships:
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the development of certain of our current or future products may be
terminated or delayed;
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our cash expenditures related to development of certain of our
current or future products would increase significantly and we may
need to seek additional financing;
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we may be required to hire additional employees or otherwise
develop expertise, such as sales and marketing expertise, for which
we have not budgeted;
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we will bear all of the risk related to the development of any such
products; and
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the competitiveness of any product that is commercialized could be
reduced.
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Risks Related to Our Intellectual Property Rights
We could be unsuccessful in obtaining adequate patent protection
for one or more of our products.
We cannot be certain that our patents will not later be found to be
invalid and/or unenforceable or that any new patents that we seek
to obtain will be issued or granted. The patent position of medical
products companies is generally uncertain because it involves
complex legal and factual considerations. The standards applied by
the United States Patent and Trademark Office and foreign patent
offices in granting patents are not always applied uniformly or
predictably. For example, there is no uniform worldwide policy
regarding patentable subject matter or the scope of claims
allowable in medical product patents. Consequently, patents may not
issue from our pending patent applications. As such, we do not know
the degree of future protection that we will have on our
proprietary products and technology.
We have obtained a patent with respect to our technology both
domestically and internationally and anticipate potentially filing
multiple patent applications, in the future. While we
believe that we will be able to secure adequate and enforceable
patent protection for our products and technologies, there is no
guarantee that patent protection can be obtained, and even if it is
obtained that such patent protection will ultimately be deemed
valid, sufficiently enforceable, sufficient to preclude competition
or not infringe upon the rights of other parties.
Our commercial success may depend in part on our ability to obtain
additional patents and protect our existing patent position as well
as our ability to maintain adequate protection of other
intellectual property for our technologies, products, and any
future products in the United States and other countries. If we do
not adequately protect our intellectual property, competitors may
be able to use our technologies and erode or negate any market
exclusivity related competitive advantage we may have, which could
harm our business and ability to achieve profitability. The laws of
some foreign countries do not protect our proprietary rights to the
same extent as the laws of the United States, and we may encounter
significant problems in protecting our proprietary rights in these
countries.
Issued patents covering one or more of our products could be found
invalid or unenforceable if challenged in court.
If we were to initiate legal proceedings against a third party to
enforce a patent covering one of our products, the defendant could
counterclaim that our patent is invalid and/or unenforceable. In
patent litigation in the United States, defendant counterclaims
alleging invalidity and/or unenforceability are commonplace.
Grounds for a validity challenge could be an alleged failure to
meet any of several statutory requirements, for example, lack of
novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone
connected with prosecution of the patent withheld relevant
information from the U.S. Patent and Trademark Office, or made a
misleading statement, during prosecution. The outcome following
legal assertions of invalidity and unenforceability during patent
litigation is unpredictable. With respect to the validity question,
for example, we cannot be certain that there is no invalidating
prior art, of which we and the patent examiner were unaware during
prosecution. If a defendant were to prevail on a legal assertion of
invalidity and/or unenforceability, we would lose at least part,
and perhaps all, of the patent protection on one or more of our
products. Such a loss of patent protection could have a material
adverse impact on our business.
Claims that our products or the sale or use of our products
infringe the patent rights of third parties could result in costly
litigation or could require substantial time and money to resolve,
even if litigation is avoided.
We cannot guarantee that our products or, the use of our products
does not infringe any third party patents. Third parties might
allege that we are infringing their patent rights or that we have
misappropriated their trade secrets. Such third parties might
resort to litigation against us. The basis of such litigation could
be existing patents or patents that issue in the future. Our
failure to successfully defend against any claims that our products
infringe the rights of third parties could also adversely affect
our business.
It is also possible that we failed to identify relevant patents or
applications. For example, applications filed before
November 29, 2000 and certain applications filed after that
date that will not be filed outside the United States remain
confidential until patents issue. Patent applications in the United
States and elsewhere are published approximately 18 months
after the earliest filing for which priority is claimed, with such
earliest filing date being commonly referred to as the priority
date. Therefore, patent applications covering our products could
have been filed by others without our knowledge.
Additionally, pending patent applications which have been published
can, subject to certain limitations, be later amended in a manner
that could cover our products or the use of our
products.
In order to avoid or settle potential claims with respect to any
patent rights of third parties, we may choose or be required to
seek a license from a third party and be required to pay license
fees or royalties or both. These licenses may not be available on
acceptable terms, or at all. Even if we or any future strategic
partners were able to obtain a license, the rights may be
nonexclusive, which could result in our competitors gaining access
to the same intellectual property. Ultimately, we could be
prevented from commercializing one or more of our products, or be
forced to cease some aspect of our business operations, if, as a
result of actual or threatened patent infringement claims, we are
unable to enter into licenses on acceptable terms. This could harm
our business significantly.
Defending against claims of patent infringement or misappropriation
of trade secrets could be costly and time consuming, regardless of
the outcome. Thus, even if we were to ultimately prevail, or to
settle at an early stage, such litigation could burden us with
substantial unanticipated costs. In addition, litigation or
threatened litigation could result in significant demands on the
time and attention of our management team, distracting them from
the pursuit of other Company business.
Unfavorable outcomes in intellectual property litigation could
limit our research and development activities and/or our ability to
commercialize certain products.
If third parties successfully assert intellectual property rights
against us, we might be barred from using certain aspects of our
product technology, or we may be barred from developing and
commercializing certain products. Prohibitions against using
certain technologies, or prohibitions against commercializing
certain products, could be imposed by a court or by a settlement
agreement between us and a plaintiff. In addition, if we are
unsuccessful in defending against allegations of patent
infringement or misappropriation of trade secrets, we may be forced
to pay substantial damage awards to the plaintiff. There is
inevitable uncertainty in any litigation, including intellectual
property litigation. There can be no assurance that we would
prevail in any intellectual property litigation, even if the case
against us is weak or flawed. If litigation leads to an outcome
unfavorable to us, we may be required to obtain a license from the
patent owner, in order to continue our research and development
programs or to market our product(s). It is possible that the
necessary license will not be available to us on commercially
acceptable terms, or at all. This could limit our research and
development activities, our ability to commercialize certain
products, or both.
Most of our competitors are larger than we are and have
substantially greater resources. They are, therefore, likely to be
able to sustain the costs of complex patent litigation longer than
we could. In addition, the uncertainties associated with litigation
could have a material adverse effect on our ability to raise the
funds necessary to continue our operations, or enter into strategic
partnerships that would help us bring our products to
market.
In addition, any future patent litigation, interference or other
administrative proceedings will result in additional expense and
distraction of our personnel. An adverse outcome in such litigation
or proceedings may expose us or any future strategic partners to
loss of our proprietary position, expose us to significant
liabilities, or require us to seek licenses that may not be
available on commercially acceptable terms, if at all.
Confidentiality agreements with employees and third parties may not
prevent unauthorized disclosure of trade secrets and other
proprietary information.
In addition to patents, we rely on trade secrets, technical
know-how, and proprietary information concerning our business
strategy in order to protect our competitive position. In the
course of our research and development activities and our business
activities, we often rely on confidentiality agreements to protect
our proprietary information. Such confidentiality agreements are
used, for example, when we talk to manufacturers or clinical
development services or potential strategic partners. In addition,
each of our employees is required to sign a confidentiality
agreement upon joining us. We take steps to protect our proprietary
information, and our confidentiality agreements are carefully
drafted to protect our proprietary interests. Nevertheless, there
can be no guarantee that an employee or an outside party will not
make an unauthorized disclosure of our proprietary confidential
information. This might happen intentionally or inadvertently. It
is possible that a competitor will make use of such information,
and that our competitive position will be compromised, in spite of
any legal action we might take against persons making such
unauthorized disclosures.
Trade secrets are difficult to protect. Although we use reasonable
efforts to protect our trade secrets, our employees, consultants,
contractors, or outside scientific collaborators might
intentionally or inadvertently disclose our trade secret
information to competitors. Enforcing a claim that a third party
illegally obtained and is using any of our trade secrets is
expensive and time consuming, and the outcome is unpredictable. In
addition, courts outside the United States sometimes are less
willing than U.S. courts to protect trade secrets. Moreover, our
competitors may independently develop equivalent knowledge, methods
and know-how.
Our research and development strategic partners may have rights to
publish data and other information to which we have rights. In
addition, we may engage individuals or entities to conduct research
relevant to our business. The ability of these individuals or
entities to publish or otherwise publicly disclose data and other
information generated during the course of their research is
subject to certain contractual limitations. These contractual
provisions may be insufficient or inadequate to protect our
confidential information. If we do not apply for patent protection
prior to such publication, or if we cannot otherwise maintain the
confidentiality of our proprietary technology and other
confidential information, then our ability to obtain patent
protection or to protect our trade secret information may be
jeopardized.
Intellectual property rights do not necessarily address all
potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual
property rights is uncertain because intellectual property rights
have limitations, and may not adequately protect our business, or
permit us to maintain our competitive advantage. The following
examples are illustrative:
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others may be able to make products that are the same as or similar
to our products but that are not covered by the claims of the
patents that we own or have exclusively licensed;
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we or any future strategic partners might not have been the first
to make the inventions covered by the issued patent or pending
patent application that we own;
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we or any future strategic partners might not have been the first
to file patent applications covering certain of our
inventions;
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others may independently develop similar or alternative
technologies or duplicate any of our technologies without
infringing our intellectual property rights;
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issued patents that we own may not provide us with any competitive
advantages, or may be held invalid or unenforceable, as a result of
legal challenges by our competitors;
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our competitors might conduct research and development activities
in countries where we do not have patent rights and then use the
information learned from such activities to develop competitive
products for sale in our major commercial markets;
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we may not develop additional proprietary technologies that are
patentable; and
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the patents of others may have an adverse effect on our
business.
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Changes in U.S. patent law could diminish the value of patents in
general, thereby impairing our ability to protect our
products.
As is the case with other medical products companies, our success
is heavily dependent on intellectual property, particularly
patents. Obtaining and enforcing patents in the medical products
industry involve both technological complexity and legal
complexity. Therefore, obtaining and enforcing medical industry
patents is costly, time-consuming and inherently uncertain. In
addition, Congress may pass patent reform legislation. The Supreme
Court has ruled on several patent cases in recent years, either
narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain
situations. In addition to increasing uncertainty with regard to
our ability to obtain patents in the future, this combination of
events has created uncertainty with respect to the value of
patents, once obtained. Depending on decisions by the U.S.
Congress, the federal courts, and the U.S. Patent and Trademark
Office, the laws and regulations governing patents could change in
unpredictable ways that would weaken our ability to obtain new
patents or to enforce our existing patents and patents that we
might obtain in the future.
Obtaining and maintaining our patent protection depends on
compliance with various procedural, document submission, fee
payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated
for non-compliance with these requirements.
The U.S. Patent and Trademark Office and various foreign
governmental patent agencies require compliance with a number of
procedural, documentary, fee payment and other provisions during
the patent process. There are situations in which noncompliance can
result in abandonment or lapse of a patent or patent application,
resulting in partial or complete loss of patent rights in the
relevant jurisdiction. In such an event, competitors might be able
to enter the market earlier than would otherwise have been the
case.
Internationally, we may apply for patent protection relating to
certain existing and proposed products and processes. While we will
generally apply for patents in those countries where we intend to
make, use or sell patented products, we may not accurately predict
all of the countries where patent protection will ultimately be
desirable. If we fail to timely file a patent application in any
such country, we may be precluded from doing so at a later date.
Furthermore, we cannot assure you that any of our patent
applications (domestic or international) will be approved. The
rights granted to us under our patents, including prospective
rights sought in our pending patent applications, may not be
meaningful or provide us with any commercial advantage and they
could be opposed, contested or circumvented by our competitors or
be declared invalid or unenforceable in judicial or administrative
proceedings. The failure of our patents to adequately protect our
technology might make it easier for our competitors to offer the
same or similar products or technologies. Competitors may be able
to design around our patents or develop products that provide
outcomes which are comparable to ours without infringing on our
international intellectual property rights. In the event
of unauthorized use or disclosure or other breaches of such
agreements, we may not be provided with meaningful protection for
our trade secrets or other proprietary information. Due to
differences between foreign and U.S. patent laws, our patented
intellectual property rights may not receive the same degree of
protection in foreign countries as they would in the United States.
Even if patents are granted outside the United States, effective
enforcement in those countries may not be available. In
countries where we do not have significant patent protection, we
may not be able to stop a competitor from marketing products in
such countries that are the same as or similar to our products.
Moreover, we may not have sufficient resources or desire to defend
our patents or trademarks against challenges or to enforce our
intellectual property rights, especially if those rights are
international in scope and venue.
Securities market risks
Our stock price and trading volume may be volatile, which could
result in losses for our stockholders.
The equity markets may experience periods of volatility, which
could result in highly variable and unpredictable pricing of equity
securities. The market price of our Common stock could change in
ways that may or may not be related to our business, our industry
or our operating performance and financial condition and could
negatively affect our share price or result in fluctuations in the
price or trading volume of our Common stock. We cannot
predict the potential impact of these periods of volatility on the
price of our Common stock. The Company cannot assure you that the
market price of our Common stock will not fluctuate or decline
significantly in the future.
Our inability to comply with Nasdaq’s listing requirements
could result in our common stock being delisted, which could affect
its market price and liquidity and reduce our ability to raise
capital.
We are required to meet certain qualitative and financial tests
(including having stockholders’ equity of at least $2.5
million to maintain the listing of our common stock on the NASDAQ
Capital Market as set forth in NASDAQ listing rule 5550(b)(1) the
(“Stockholders’ Equity Requirement” or
“Rule 5550(b)(1)”). If we do not maintain compliance
with the continued listing requirements for NASDAQ within specified
periods and subject to permitted extensions, our common stock may
be recommended for delisting (subject to any appeal we would file).
If our common stock were delisted, it could be more difficult to
buy or sell our common stock and to obtain accurate quotations, and
the price of our stock could suffer a material decline. Delisting
would also impair our ability to raise capital.
On August 30, 2016, we received a letter from the Listing
Qualifications Department of the NASDAQ Stock Market notifying the
us that we were not in compliance with the Stockholders’
Equity Requirement; specifically, the stockholders’ equity of
$1,311,796 as reported in our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2016 was below the minimum
stockholder’s equity of $2,500,500 required for continued
listing on the NASDAQ Capital Market in accordance with Rule
5550(b)(1). The decline in our stockholders’ equity was
largely a result of the recognition of an impairment loss recorded
in our Form 10-Q for the quarter ended June 30, 2016 related to the
intangible assets of Streamline Inc., which we acquired as our
wholly owned subsidiary in March 2015.
On October 14, 2016, we submitted a plan to NASDAQ to regain
compliance with the Stockholders’ Equity Requirement (the
“Plan”) through a combination of note conversions,
warrant exercises and infusions of equity capital.
On November 1, 2016, we received formal notice from NASDAQ
informing us that that we have been granted an extension until
February 27, 2017 to regain compliance with the Stockholders’
Equity Requirement for continued listing of our common stock on the
NASDAQ Capital Market.
On February 24, 2017, we filed a Form 8K with the Securities and
Exchange Commission summarizing the actions taken to regain and
affirmatively state its current compliance with NASDAQ's
stockholder equity requirement.
On March 1, 2017, NASDAQ issued a determination letter stating that
the company had successfully evidenced compliance with the minimum
$2,500,000 stockholders' equity requirement for continued listing
on the Capital Market.
NASDAQ will continue to monitor the Company’s ongoing
compliance with the stockholders’ equity requirement and, if
at the time of its next periodic report the Company does not
evidence compliance, we may be subject to delisting.
While we are exercising diligent efforts to maintain the listing of
our common stock on NASDAQ, there can be no assurance that the
Company will be able to maintain compliance with Rule
5550(b)(1).
If our Common stock is delisted from NASDAQ the Company would be
subject to the risks relating to penny stocks.
If our Common stock were to be delisted from trading on the NASDAQ
Capital Market and the trading price of the Common stock were below
$5.00 per share on the date the Common stock were delisted, trading
in our Common stock would also be subject to the requirements of
certain rules promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These rules
require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a "penny stock" and impose
various sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and
accredited investors, generally institutions. These additional
requirements may discourage broker-dealers from effecting
transactions in securities that are classified as penny stocks,
which could severely limit the market price and liquidity of such
securities and the ability of purchasers to sell such securities in
the secondary market. A penny stock is defined generally as any
non-exchange listed equity security that has a market price of less
than $5.00 per share, subject to certain exceptions.
If we need additional capital to fund the growth of our operations,
and cannot obtain sufficient capital, we may be forced to limit the
scope of our operations.
As we implement our growth strategies, we may experience increased
capital needs. We may not, however, have sufficient capital to fund
our future operations without additional capital investments. If
adequate additional financing is not available on reasonable terms
or at all, we may not be able to carry out our corporate strategy
and we would be forced to modify our business plans (e.g., limit
our expansion, limit our marketing efforts and/or decrease or
eliminate capital expenditures), any of which may adversely affect
our financial condition, results of operations and cash flow. Such
reduction could materially adversely affect our business and our
ability to compete.
Our capital needs will depend on numerous factors, including,
without limitation, (i) our profitability or lack thereof, (ii) our
ability to respond to a release of competitive products by our
competitors, and (iii) the amount of our capital expenditures,
including acquisitions. Moreover, the costs involved may exceed
those originally contemplated. Cost savings and other economic
benefits expected may not materialize as a result of any cost
overruns or changes in market circumstances. Failure to obtain
intended economic benefits could adversely affect our business,
financial condition and operating performances.
We do not anticipate paying any cash dividends on our common stock
in the foreseeable future and our stock may not appreciate in
value.
We have not declared or paid cash dividends on our common stock to
date. We currently intend to retain our future earnings, if any, to
fund the development and growth of our business. In addition, the
terms of any existing or future debt agreements may preclude us
from paying dividends. There is no guarantee that shares of our
Common stock will appreciate in value or that the price at which
our stockholders have purchased their shares will be able to be
maintained.
If securities or industry analysts do not publish research or
reports about our business, or publish inaccurate or unfavorable
research reports about our business, our share price and trading
volume could decline.
The trading market for our Common stock will, to some extent,
depend on the research and reports that securities or industry
analysts publish about us or our business. We do not have any
control over these analysts. If one or more of the analysts who
cover us should downgrade our shares or change their opinion of our
business prospects, our share price would likely decline. If one or
more of these analysts ceases coverage of our company or fails to
regularly publish reports on us, we could lose visibility in the
financial markets, which could cause our share price and volume to
decline.
You may experience dilution of your ownership interests because of
the future issuance of additional shares of our common or preferred
stock or other securities that are convertible into or exercisable
for our common or preferred stock.
In the future, we may issue our authorized but previously unissued
equity securities, resulting in the dilution of the ownership
interests of our present stockholders. We are authorized to
issue an aggregate of 49,500,000 shares of common stock and 500,000
shares of “blank check” preferred stock (of which
45,000 shares have been designated Series A Convertible Preferred
Stock, of which 17,993 shares are issued and outstanding). We may
issue additional shares of our common stock or other securities
that are convertible into or exercisable for our common stock in
connection with hiring or retaining employees, future acquisitions,
future sales of our securities for capital raising purposes, or for
other business purposes. The future issuance of any such
additional shares of our common stock may create downward pressure
on the trading price of the common stock. We will need to raise
additional capital in the near future to meet our working capital
needs, and there can be no assurance that we will not be required
to issue additional shares, warrants or other convertible
securities in the future in conjunction with these capital raising
efforts, including at a price (or exercise or conversion prices)
below the price an investor paid for stock.
An aggregate of 2,953,013 shares of common stock underlying certain
of our warrants and an aggregate of 1,799,279 shares of common
stock underlying our Series A Preferred Stock are being registered
in this registration statement. Upon exercise of these
warrants or conversion of these shares of Series A Preferred Stock,
you will experience dilution. As of April 10, 2017, we
have 17,441,351 shares of common stock issued and outstanding
and 17,993 shares of our Series A Preferred Stock issued and
outstanding. Assuming full exercise of these warrants
and full conversion of the shares of Series A Preferred Stock, the
number of shares of our common stock outstanding will increase by
4,752,292. Thus, assuming full exercise of the warrants and the
conversion of all issued and outstanding Series A Preferred Stock,
the number of shares of common stock outstanding post-offering will
be 22,193,643.
You could lose all of your investment.
An investment in our securities is speculative and involves a high
degree of risk. Potential investors should be aware that the value
of an investment in the Company may go down as well as up. In
addition, there can be no certainty that the market value of an
investment in the Company will fully reflect its underlying value.
You could lose your entire investment.
The ability of our Board of Directors to issue additional stock may
prevent or make more difficult certain transactions, including a
sale or merger of the Company.
Our Board of Directors is authorized to issue up to 500,000 shares
of preferred stock (of which 45,000 shares have been designated
Series A Convertible Preferred Stock, of which 17,993 shares are
issued and outstanding) with powers, rights and preferences
designated by it. See “Preferred Stock” in the
section of this prospectus titled “Description of
Securities.” Shares of voting or convertible preferred stock
could be issued, or rights to purchase such shares could be issued,
to create voting impediments or to frustrate persons seeking to
effect a takeover or otherwise gain control of the Company.
The ability of the Board of Directors to issue such
additional shares of preferred stock, with rights and preferences
it deems advisable, could discourage an attempt by a party to
acquire control of the Company by tender offer or other means.
Such issuances could therefore deprive stockholders of
benefits that could result from such an attempt, such as the
realization of a premium over the market price for their shares in
a tender offer or the temporary increase in market price that such
an attempt could cause. Moreover, the issuance of such
additional shares of preferred stock to persons friendly to the
Board of Directors could make it more difficult to remove incumbent
officers and directors from office even if such change were to be
favorable to stockholders generally.
Offers or availability for sale of a substantial number of shares
of our common stock upon exercise of warrants or other convertible
securities, for example, in connection with the 7,833,221 shares
being registered for sale herein, may cause the price of our common
stock to decline.
If our stockholders sell substantial amounts of our common stock in
the public market, including upon the expiration of any statutory
holding period under Rule 144 or registration for resale, or issued
upon the conversion of preferred stock or exercise of warrants, it
could create a circumstance commonly referred to as an
“overhang” and in anticipation of which the market
price of our common stock could fall. The existence of
an overhang, whether or not sales have occurred or are occurring,
also could make more difficult our ability to raise additional
financing through the sale of equity or equity-related securities
in the future at a time and price that we deem reasonable or
appropriate. As of April 10, 2017, we have 17,441,351
shares of common stock issued and outstanding and 17,993 shares of
our Series A Preferred Stock issued and outstanding. Following the
effectiveness of the registration statement of which this
prospectus forms a part and the full exercise of the warrants to
purchase up to shares held by the selling stockholders, and the
conversion of the Series A Preferred Stock into shares of our
common stock held by our selling stockholders, an additional
4,752,292 shares will be immediately available for resale. Even
though the holders of the warrants may not exercise the warrants if
they would own more than 9.99% or 4.99%, as applicable, of the
then-outstanding common stock, this restriction does not prevent
these holders from selling some of their holdings and then
exercising the warrants for additional shares.
Investor relations activities, nominal “float” and
supply and demand factors may affect the price of our
stock.
The Company may utilize various techniques such as non-deal road
shows and investor relations campaigns in order to create investor
awareness for the Company. These campaigns may include
personal, video and telephone conferences with investors and
prospective investors in which our business practices are
described. The Company may provide compensation to
investor relations firms and pay for newsletters, websites,
mailings and email campaigns that are produced by third-parties
based upon publicly-available information concerning the Company.
The Company does not intend to review or approve the content of
such analysts’ reports or other materials based upon
analysts’ own research or methods. Investor
relations firms should generally disclose when they are compensated
for their efforts, but whether such disclosure is made or complete
is not under our control. In addition, investors in the
Company may, from time to time, also take steps to encourage
investor awareness through similar activities that may be
undertaken at the expense of the investors. Investor
awareness activities may also be suspended or discontinued which
may impact the trading market our common stock.
The SEC and FINRA enforce various statutes and regulations intended
to prevent manipulative or deceptive devices in connection with the
purchase or sale of any security and carefully scrutinize trading
patterns and company news and other communications for false or
misleading information, particularly in cases where the hallmarks
of “pump and dump” activities may exist, such as rapid
share price increases or decreases. We and our
shareholders may be subjected to enhanced regulatory scrutiny due
to the small number of holders who initially will own the
registered shares of our common stock publicly available for
resale. The Supreme Court has stated that manipulative action is a
term of art connoting intentional or willful conduct designed to
deceive or defraud investors by controlling or artificially
affecting the price of securities. Often times,
manipulation is associated by regulators with forces that upset the
supply and demand factors that would normally determine trading
prices.
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Such
statements include statements regarding our expectations, hopes,
beliefs or intentions regarding the future, including but not
limited to statements regarding our market, strategy, competition,
development plans (including acquisitions and expansion),
financing, revenues, operations, and compliance with applicable
laws. Forward-looking statements involve certain risks and
uncertainties, and actual results may differ materially from those
discussed in any such statement. Factors that could cause actual
results to differ materially from such forward-looking statements
include the risks described in greater detail in the following
paragraphs. All forward-looking statements in this document are
made as of the date hereof, based on information available to us as
of the date hereof, and we assume no obligation to update any
forward-looking statement. Market data used throughout this
prospectus is based on published third party reports or the good
faith estimates of management, which estimates are based upon their
review of internal surveys, independent industry publications and
other publicly available information.
You should review carefully the section entitled “Risk
Factors” within this prospectus for a discussion of these and
other risks that relate to our business and investing in shares of
our common stock.
All forward-looking statements speak only as of the date of this
prospectus. We disclaim any obligation to update or revise these
statements unless required by law, and you should not place undue
reliance on these forward-looking statements. Although we believe
that our plans, intentions and expectations reflected in or
suggested by the forward-looking statements we make in this
prospectus are reasonable, we can give no assurance that these
plans, intentions or expectations will be achieved. We disclose
important factors that could cause our actual results to differ
materially from our expectations under “Risk Factors”
and elsewhere in this prospectus. These cautionary statements
qualify all forward-looking statements attributable to us or
persons acting on our behalf.
This
prospectus relates to shares of our common stock that may be
offered and sold from time to time by the selling stockholders. We
will not receive any of the proceeds resulting from the sale of
common stock by the selling stockholders, although we may receive
proceeds from the exercise of warrants for cash. We intend to use
such proceeds, if any, for general corporate purposes.
SELLING STOCKHOLDERS
This
prospectus includes the offering by the selling stockholders of up
to 7,833,221 shares of common stock, consisting of (i) 1,799,279
shares issuable upon conversion of outstanding shares of Series A
Preferred Stock, (ii) 2,953,013 shares issuable upon exercise of
outstanding warrants, and (iii) 3,080,929 outstanding
shares.
The
following table sets forth, based on information provided to us by
the selling stockholders or known to us, the names of the selling
stockholders, the nature of any position, office or other material
relationship, if any, which the selling stockholder has had, within
the past three years, with us or with any of our predecessors or
affiliates, and the number of shares of our common stock
beneficially owned by the selling stockholders before this
offering. The number of shares owned are those beneficially owned,
as determined under the rules of the SEC, and the information is
not necessarily indicative of beneficial ownership for any other
purpose. Under these rules, beneficial ownership includes any
shares of common stock as to which a person has sole or shared
voting power or investment power and any shares of common stock
which the person has the right to acquire within 60 days through
the exercise of any option, warrant or right, through conversion of
any security or pursuant to the automatic termination of a power of
attorney or revocation of a trust, discretionary account or similar
arrangement. Except as set forth below, none of the selling
stockholders is a broker-dealer or an affiliate of a broker-dealer.
As of April 10, 2017, there were 17,441,351 shares of our common
stock issued and outstanding and 17,993 shares of our Series A
Preferred Stock issued and outstanding.
We have
assumed all shares of common stock reflected on the table will be
sold from time to time in the offering covered by this prospectus.
Because the selling stockholder may offer all or any portions of
the shares of common stock listed in the table below, no estimate
can be given as to the amount of those shares of common stock
covered by this prospectus that will be held by the selling
stockholder upon the termination of the offering.
Name of Selling Stockholder
|
|
|
Number
of Shares of Common Stock Beneficially Owned Before
Offering
|
|
|
Number
of Shares of Common Stock Offered
|
|
|
Number of Shares of Common Stock Owned After Offering
|
|
|
Percentage
of Common Stock Beneficially Owned After Offering
|
|
Abrams
Jtwros, Donald J Abrams & Deborah Ranee
|
|
|
30,846
|
|
|
28,846
|
(1)
|
|
2,000
|
|
|
*
|
%
|
Albini,
Paul E
|
|
|
28,846
|
|
|
28,846
|
(1)
|
|
-
|
|
|
-
|
|
Allen,
Nicholas
|
|
|
108,173
|
|
|
108,173
|
(1)
|
|
-
|
|
|
-
|
|
Beaver
R/O Ira, Sterne Agee & Leach Inc C/F Dean
|
|
|
90,144
|
|
|
90,144
|
(1)
|
|
-
|
|
|
-
|
|
Chaban,
Bohdan
|
|
|
196,279
|
|
|
170,192
|
(1)
|
|
26,087
|
|
|
*
|
%
|
Crowne,
Jesse W
|
|
|
623,907
|
|
|
72,115
|
(1)
|
|
551,786
|
|
|
*
|
%
|
DJ
Management And Investing Llc
|
|
|
205,912
|
|
|
66,346
|
(1)
|
|
139,566
|
|
|
*
|
%
|
Gitter,
S Alexei
|
|
|
28,846
|
|
|
28,846
|
(1)
|
|
-
|
|
|
-
|
|
Gorlin,
Jarrett (2)
|
|
|
676,456
|
|
|
72,115
|
(1)
|
|
604,340
|
(3)
|
|
3.4
|
%
|
Gorlin,
Steve (4)
|
|
|
1,287,135
|
|
|
216,346
|
(1)
|
|
1,070,789
|
|
|
6.1
|
%
|
Harrison
Jtwros, John R Harrison & Linda L
|
|
|
634,030
|
|
|
455,769
|
(1)
|
|
178,261
|
|
|
1.0
|
%
|
Henry,
Steven J
|
|
|
98,610
|
|
|
62,740
|
(1)
|
|
35,870
|
|
|
*
|
%
|
Jarrett
Gorlin C/F Logan Gorlin Utma/Ga (5)
|
|
|
14,423
|
|
|
14,423
|
(1)
|
|
-
|
|
|
-
|
|
Jarrett
Gorlin C/F Taylor Gorlin Utma/Ga (5)
|
|
|
14,423
|
|
|
14,423
|
(1)
|
|
-
|
|
|
-
|
|
Miller,
Jeffrey
|
|
|
49,038
|
|
|
49,038
|
(1)
|
|
-
|
|
|
*
|
%
|
Redmon,
Alan D
|
|
|
20,192
|
|
|
20,192
|
(1)
|
|
-
|
|
|
*
|
%
|
Regan
Jtwros, James Regan & Maureen
|
|
|
363,174
|
|
|
300,000
|
(1)
|
|
63,174
|
|
|
*
|
%
|
Rutherford,
Thomas J
|
|
|
657,714
|
|
|
432,692
|
(1)
|
|
225,022
|
|
|
1.3
|
%
|
YP
Holdings LLC
|
|
|
341,346
|
|
|
341,346
|
(1)
|
|
-
|
|
|
-
|
|
Seidman,
Sandy
|
|
|
1,911,058
|
|
|
1,911,058
|
(1)
|
|
-
|
|
|
-
|
|
Stetson Capital Investments Inc. Retirement Plan
|
|
|
207,604
|
|
|
185,865
|
(1)
|
|
21,739
|
|
|
*
|
%
|
John Stetson
|
|
|
192,933
|
|
|
192,933
|
(1)
|
|
-
|
|
|
-
|
|
GRQ Consultants Inc. Roth 401K FBO Barry Honig
|
|
|
213,569
|
|
|
170,090
|
(1)
|
|
43,479
|
|
|
*
|
%
|
GRQ Consultants, Inc. 401K
|
|
|
787,860
|
|
|
787,860
|
(1)
|
|
-
|
|
|
-
|
|
Barry and Renee Honig Charitable Foundation, Inc.
|
|
|
282,332
|
|
|
282,332
|
(1)
|
|
-
|
|
|
-
|
|
ATG Capital LLC
|
|
|
100,000
|
|
|
100,000
|
(1)
|
|
-
|
|
|
-
|
|
Melechdavid, Inc.
|
|
|
99,913
|
|
|
99,913
|
(1)
|
|
-
|
|
|
-
|
|
Sorrento Therapeutics, Inc.
|
|
|
937,499
|
|
|
937,499
|
(1)
|
|
-
|
|
|
-
|
|
Zhang Hwang
|
|
|
187,500-
|
|
|
187,500
|
(1)
|
|
-
|
|
|
-
|
|
Buff Trust
|
|
|
107,366
|
|
|
64,892
|
(6)
|
|
42,474
|
|
|
*
|
%
|
Garnet Trust
|
|
|
107,366
|
|
|
64,892
|
(6)
|
|
42,474
|
|
|
*
|
%
|
Laidlaw Holdings Ltd.
|
|
|
33,944
|
|
|
20,522
|
(6)
|
|
13,422
|
|
|
*
|
%
|
Kevin R. Wilson
|
|
|
8,121
|
|
|
1,472
|
(6)
|
|
6,649
|
|
|
*
|
%
|
Joseph M. Fedorko
|
|
|
170,313
|
|
|
133,799
|
(6)
|
|
36,514
|
|
|
*
|
%
|
James P. Ahern
|
|
|
84,013
|
|
|
45,000
|
(6)
|
|
39,013
|
|
|
*
|
%
|
Matthew D. Eitner
|
|
|
84,013
|
|
|
45,000
|
(6)
|
|
39,013
|
|
|
*
|
%
|
Hugh Regan
|
|
|
30,654
|
|
|
20,000
|
(6)
|
|
10,654
|
|
|
*
|
%
|
Francis R. Smith
|
|
|
14,721
|
|
|
10,000
|
(6)
|
|
4,721
|
|
|
*
|
%
|
|
|
|
Total
|
|
|
7,833,221
|
|
|
|
|
|
|
|
*
Less
than 1%.
(1)
Represents shares
of common stock, shares of common stock issuable upon exercise of
warrants and upon conversion of Series A Preferred Stock sole to
the selling stockholders in the Company’s private placement
completed in the third quarter of 2016 and the Company’s
private placement completed in the first quarter of
2017.
(2)
The
selling stockholder is chief executive officer of the
Company.
(3)
Represents: (i)
506,837 shares held by The Jarrett S. & Rebecca L. Gorlin
Family Limited Partnership, which the selling stockholder disclaims
beneficial ownership of these shares; (ii) 32,435 pursuant to
options exercisable within 60 days; and (iii) 22,040 issuable upon
exercise of warrants purchased as part of a unit in the
Company’s private placement completed in the second quarter
of 2016.
(4)
The
selling stockholder is a director of the Company.
(5)
Jarrett Gorlin,
chief executive officer of the Company, has control over the
selling stockholder.
(6)
Represent shares
issuable upon exercise of warrants issued to designees of the
placement agent for the Company’s private placement completed
in the first quarter of 2017.
PLAN OF DISTRIBUTION
The
selling stockholders of the securities and any of their pledgees,
assignees and successors-in-interest may, from time to time, sell
any or all of their securities covered hereby on the NASDAQ Capital
Market or any other stock exchange, market or trading facility on
which the securities are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling
stockholders may use any one or more of the following methods when
selling securities:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
block
trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the
transaction;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
settlement of
short sales entered into after the effective date of the
registration statement of which this prospectus is a
part;
●
in
transactions through broker-dealers that agree with the selling
stockholder to sell a specified number of such securities at a
stipulated price per security;
●
through the
writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
●
a
combination of any such methods of sale; or
●
any
other method permitted pursuant to applicable law.
The
selling stockholders may also sell securities under Rule 144 under
the Securities Act of 1933, as amended (the “Securities
Act”), if available, rather than under this
prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The selling stockholders may also sell
securities short and deliver these securities to close out its
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The selling stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
selling stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The
selling stockholders have informed the Company that they do not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the securities. In no
event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent
(8%).
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the selling stockholder against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Because
the selling stockholders may be deemed to be
“underwriters” within the meaning of the Securities
Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition,
any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under
Rule 144 rather than under this prospectus. The selling
stockholders have advised us that there is no underwriter or
coordinating broker acting in connection with the proposed sale of
the resale securities by the selling stockholders.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of securities of the common stock by the
selling stockholder or any other person. We will make copies of
this prospectus available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the
Securities Act.
We agreed to keep this prospectus effective for a period of two
years.
The
validity of the shares of common stock offered hereby will be
passed upon for us by Sichenzia Ross Ference Kesner LLP, New York,
New York.
The
consolidated financial statements of MedoveX Corporation as of and
for the years ended December 31, 2016 and December 31, 2015
appearing in MedoveX Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2016, have been audited by Frazier
& Deeter, LLC, as set forth in its report thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Neither
our Articles of Incorporation nor Bylaws prevent us from
indemnifying our officers, directors and agents to the extent
permitted under the Nevada Revised Statute ("NRS"). NRS Section
78.7502 provides that a corporation shall indemnify any director,
officer, employee or agent of a corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him
in connection with any the defense to the extent that a director,
officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any action, suit or
proceeding referred to Section 78.7502(1) or 78.7502(2), or in
defense of any claim, issue or matter therein.
NRS
78.7502(1) provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not
liable pursuant to NRS 78.138; or (b) acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
NRS
Section 78.7502(2) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if
he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification
may not be made for any claim, issue or matter as to which such a
person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals there from, to be liable to the
corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
NRS
Section 78.747 provides that except as otherwise provided by
specific statute, no director or officer of a corporation is
individually liable for a debt or liability of the corporation,
unless the director or officer acts as the alter ego of the
corporation. The court as a matter of law must determine the
question of whether a director or officer acts as the alter ego of
a corporation.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that,
in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed hereby
in the Securities Act and we will be governed by the final
adjudication of such issue.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and
Distribution.
We will
pay all expenses in connection with the registration and sale of
the common stock by the selling stockholders. The estimated
expenses of issuance and distribution are set forth
below.
SEC filing
fee
|
$1,337.61
|
Legal
expenses
|
$-*
|
Accounting
expenses
|
$10,000*
|
Miscellaneous
|
$-*
|
Total
|
$11,337.61*
|
*
Estimate
Item 15. Indemnification of Directors and Officers.
Neither
our Articles of Incorporation nor Bylaws prevent us from
indemnifying our officers, directors and agents to the extent
permitted under the Nevada Revised Statute ("NRS"). NRS Section
78.7502 provides that a corporation shall indemnify any director,
officer, employee or agent of a corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him
in connection with any the defense to the extent that a director,
officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any action, suit or
proceeding referred to Section 78.7502(1) or 78.7502(2), or in
defense of any claim, issue or matter therein.
NRS
78.7502(1) provides that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (a) is not
liable pursuant to NRS 78.138; or (b) acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
NRS
Section 78.7502(2) provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if
he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification
may not be made for any claim, issue or matter as to which such a
person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals there from, to be liable to the
corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances
of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
NRS
Section 78.747 provides that except as otherwise provided by
specific statute, no director or officer of a corporation is
individually liable for a debt or liability of the corporation,
unless the director or officer acts as the alter ego of the
corporation. The court as a matter of law must determine the
question of whether a director or officer acts as the alter ego of
a corporation.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we have been informed that,
in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed hereby
in the Securities Act and we will be governed by the final
adjudication of such issue.
Item 16. Exhibits.
Exhibit Number
|
|
Description
|
2.1
|
|
Agreement and Plan of Merger, dated September 16, among MedoveX
Corp. f/k/a SpineZ Corp. and Debride Inc. (1)
|
2.2
|
|
Agreement and Plan of Merger, dated March 9, 2015 among MedoveX
Corp. and Streamline, Inc. (2)
|
2.3
|
|
Asset Purchase Agreement dated December 7, 2016 among MedoveX
Corp., Streamline, Inc., Skytron, LLC and certain other parties
thereto (3)
|
3.1
|
|
Articles of Incorporation of Spinez Corp. (1)
|
3.2
|
|
Certificate of Amendment to the Articles of Incorporation of Spinez
Corp. (changing the name of the company to MedoveX Corp. and
Effecting the Reverse Split of the Outstanding Shares of MedoveX
Corp.’s Common Stock).
|
3.3
|
|
Bylaws of MedoveX Corp. (1)
|
3.4
|
|
Certificate of Designation for Series A Preferred Stock
(4)
|
4.1
|
|
Modification
Agreement by and between the Company and Steve Gorlin dated January
25, 2016. (5)
|
4.2
|
|
Amendment
to the Modification Agreement by and between the Company and Steve
Gorlin dated February 16, 2016. (6)
|
4.3
|
|
Second
Amendment to the Modification Agreement by and between the Company
and Steve Gorlin dated March 25, 2016. (7)
|
4.4
|
|
Third
Amendment to the Modification Agreement by and between the Company
and Steve Gorlin dated November 1, 2016. (7)
|
4.5
|
|
Fourth
Amendment to the Modification Agreement by and between the Company
and Steve Gorlin dated November 30, 2016. (8)
|
5.1
|
|
Opinion
of Sichenzia Ross Ference Kesner LLP
|
10.1
|
|
2013 Stock Incentive Plan. (1)
|
10.2
|
|
Employment Agreement between MedoveX Corp. and Jarrett Gorlin dated
October 14, 2013. (1)
|
10.3
|
|
Employment Agreement between MedoveX Corp. and Patrick Kullmann
dated October 14, 2013. (1)
|
10.4
|
|
Employment Agreement between MedoveX Corp. and Charlie Farrahar
dated October 14, 2013. (1)
|
10.5
|
|
Employment Agreement between MedoveX Corp. and Dennis Moon dated
November 11, 2013. (1)
|
10.6
|
|
Contribution and Royalty Agreement between MedoveX and Scott W.
Haufe dated January 31, 2013. (1)
|
10.7
|
|
Co-Development Agreement between MedoveX Corp. and Dr. James
Andrews dated September 30, 2013. (1)
|
10.8
|
|
Consulting Agreement between MedoveX Corp. and Robb Knie dated
December 2, 2013. (1)
|
10.9
|
|
Engineering Services Agreement between MedoveX Corp. and Devicix,
LLC dated November 25, 2013. (1)
|
10.10
|
|
Form of Indemnification Agreement. (1)
|
10.11
|
|
Promissory
note issued on November 9, 2015 in favor of Steve
Gorlin
|
10.12
|
|
Warrant
issued on November 9, 2015 to Steve Gorlin
|
10.13
|
|
Form of
Common Stock Purchase Warrant (9)
|
10.14
|
|
Form of Unit Purchase Agreement between MedoveX Corp. and Investors
(10)
|
10.15
|
|
Form of Registration Rights Agreement between MedoveX Corp. and
Investors (10)
|
10.16
|
|
Private Placement Memorandum Supplement dated April 18, 2016
(10)
|
10.17
|
|
Form of Warrant (11)
|
10.18
|
|
Form of Unit Purchase Agreement (11)
|
10.19
|
|
Form of Registration Rights Agreement (11)
|
10.20
|
|
Form of Note (12)
|
10.21
|
|
Form of Warrant (12)
|
10.22
|
|
Form of Security Agreement (12)
|
10.23
|
|
Form of Warrant (4)
|
10.24
|
|
Form of Unit Purchase Agreement (4)
|
10.25
|
|
Form of Registration Rights Agreement (4)
|
14
|
|
Business and Code of Ethics of MedoveX Corp. (1)
|
21.1
|
|
Subsidiaries of MedoveX Corp.*
|
23.1
|
|
Consent of Frazier & Deeter, LLC
|
23.2
|
|
Consent of Sichenzia Ross Ference Kesner LLP (contained in Exhibit
5.1)
|
(1)
|
Incorporated by reference herein from the Registration Statement on
Form S-1/A filed on December 9, 2014.
|
(2)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on March 11, 2015.
|
(3)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on December 12, 2016
|
(4)
|
Incorporated by reference herein from the Current Report on From
8-K filed on February 14, 2017
|
(5)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on January 25, 2016.
|
(6)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on February 17, 2016.
|
(7)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on November 4, 2016
|
(8)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on December 6, 2016
|
(9)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on April 25, 2016.
|
(10)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on May 5, 2016.
|
(11)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on August 8, 2016
|
(12)
|
Incorporated by reference herein from the Current Report on Form
8-K filed on September 19, 2016
|
(*)
|
Incorporated by reference herein from the Annual Report on Form
10-K for the period ended December 31, 2016 filed on March 31,
2017.
|
Item 17. Undertakings.
1. The
undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment
to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in
the effective registration statement.
(iii)
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however,
that paragraphs (1)(i) and (1)(ii) of this section do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in the registration
statement.
2. The
undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, as
amended, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. The
undersigned registrant hereby undertakes to remove from
registration by means of a post-effective amendment any of the
securities being registered that remain unsold at the termination
of the offering.
4. The
undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of
the registrant’s annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan’s annual report pursuant
to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
5. The
undersigned registrant hereby undertakes that, for the purposes of
determining liability to any purchaser:
(i) If
the registrant is relying on Rule 430B:
(A) For
purposes of determining liability under the Securities Act of 1933,
each prospectus filed by the registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the
registration statement; and
(B)
Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance
on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by section 10(a) of the Securities Act of 1933
shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which
that prospectus relates, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference in the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date; or
(ii) If
the registrant is subject to Rule 430C, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule
430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of
first use.
6.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the undersigned registrant
according the foregoing provisions, or otherwise, the undersigned
registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933,
as amended, and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing Form S-3 and has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta,
Georgia, on April 17, 2017.
|
MEDOVEX CORPORATION
|
|
|
|
|
By:
|
/s/ Jarrett
Gorlin
|
|
|
Jarrett
Gorlin
|
|
Its:
|
Chief
Executive Officer, President and Director
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
By:
|
/s/ Jeffrey
Wright
|
|
|
Jeffrey
Wright
|
|
Its:
|
Chief
Financial Officer
|
|
|
(Principal
Financial and Accounting Officer)
|
Each
person whose signature appears below constitutes and appoints
Jarrett Gorlin and Jeffrey Wright, and each of them severally, as
his true and lawful attorney in fact and agent, with full powers of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments
(including post effective amendments) to the Registration
Statement, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and all post effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, each
acting alone, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, each acting alone, or his or
her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the
requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Jarrett
Gorlin
|
|
April
17, 2017
|
Jarrett
Gorlin
|
|
|
Chief
Executive Officer, President and Director
(Principal
Executive Officer)
|
|
|
|
|
|
/s/ Jeffery
Wright
|
|
April
17, 2017
|
Jeffery Wright
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
/s/ Larry
Papasan
|
|
April
17, 2017
|
Larry
Papasan
Chairman of the
Board of Directors
|
|
|
|
|
|
/s/ Clyde
A. Hennies
|
|
April
17, 2017
|
Clyde A. Hennies
Director
|
|
|
|
|
|
/s/ Scott
M.W. Haufe
|
|
April
17, 2017
|
Scott M.W. Haufe
Director
|
|
|
|
|
|
/s/ James
R. Andrews
|
|
April
17, 2017
|
James R. Andrews
Director
|
|
|
|
|
|
/s/ Ron
Lawson
|
|
April
17, 2017
|
Ron Lawson
Director
|
|
|
|
|
|
/s/ Randal
R. Betz
|
|
April
17, 2017
|
Randal R. Betz
Director
|
|
|
|
|
|
/s/ Steve
Gorlin
|
|
April
17, 2017
|
Steve Gorlin
Director
|
|
|
|
|
|
/s/ John
Thomas
|
|
April
17, 2017
|
John Thomas
Director
|
|
|
|
|
|
/s/ Jon
Mogford
|
|
April
17, 2017
|
Jon Mogford
Director
|
|
|