PART II AND III

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY'S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

PRELIMINARY OFFERING CIRCULAR DATED OCTOBER 14, 2020

MONOGRAM ORTHOPAEDICS, INC.

 

3913 Todd Lane, Austin, TX 78744

(512) 399-2656
 

www.monogramorthopedics.com

UP TO 4,784,689 SHARES OF SERIES B PREFERRED STOCK, PLUS UP TO 956,937 BONUS SHARES ⁽¹⁾

UP TO 4,784,689 SHARES OF COMMON STOCK INTO WHICH THE SERIES B PREFERRED STOCK MAY CONVERT⁽²⁾

PRICE: $6.27 PER SHARE

Holders of our Series B Preferred Stock have limited voting rights compared to holders of our Common Stock. For instance, holders of our Common Stock will have the right to elect two directors as a single class, while holders of our Series B Preferred Stock will only vote for a single director together with the holders of our Common Stock. See "Securities Being Offered" at Page 38 for more information on the rights of our Series B Preferred Stock.

	Price to Public (3)		Underwriting discount and commissions (4)		Proceeds to issuer (5)
Per share	$	6.27	$	0.44	$	5.83
StartEngine Investor Fee		0.21		--		--
Per Share Plus Investor Fee		6.48		0.44	$	5.83
Total Maximum	$	30,000,000	$	2,100,000	$	27,900,000

(1) The company is offering up to 4,784,689 shares of Series B Preferred Stock, plus up to 956,937 additional shares of Series B Preferred Stock eligible to be issued as Bonus Shares to investors based upon an investor’s investment level and whether such investors “reserve” shares prior to investing in the company. See “Plan of Distribution and Selling Securityholders” for further details.

(2) The Series B Preferred Stock is convertible into Common Stock either at the discretion of the investor or automatically upon the occurrence of certain events, like effectiveness of registration of the Common Stock in an initial public offering. The total number of shares of the Common Stock into which the Series B Preferred Stock may be converted will be determined by dividing the original issue price per share by the conversion price per share. See "Securities Being Offered" at page 38 for additional details.

(3) Does not include effective discount that would result from the issuance of Bonus Shares. For details of the effective discount. See “Plan of Distribution and Selling Securityholders.”

(4) The company has engaged StartEngine Primary, LLC, member FINRA/SIPC (“StartEngine Primary”), to act as a placement agent in this offering as set forth in “Plan of Distribution and Selling Securityholder” and its affiliate StartEngine Crowdfunding, Inc. to perform administrative and technology-related functions in connection with this offering. The company will pay a cash commission of 3.5% to StartEngine Primary on sales of the Series B Preferred Stock, and the company will issue warrants to purchase shares of Series B Preferred Stock to StartEngine Primary in an amount equal to 2% of the shares issued to investors in this offering (excluding Bonus Shares). Shares issued to StartEngine Primary upon exercise of the warrants will be subject to a lock-up provision in accordance with FINRA requirements. The company will also pay a $15,000 advance fee for reasonable accountable out of pocket expenses actually anticipated to be incurred by StartEngine Primary. Any unused portion of this fee not actually incurred by StartEngine Primary will be returned to the company. FINRA fees will be paid by the company. See “Plan of Distribution and Selling Securityholders” for details of compensation payable to third parties in connection with this offering. The maximum amount the company would pay StartEngine Primary in commissions is $1,050,000, and the maximum amount of Series B Preferred shares the company would issue StartEngine upon its exercise of the warrants is 95,693. This does not include transaction fees paid directly to StartEngine Primary by investors.

(5) Investors will be required to pay directly to StartEngine Primary a processing fee equal to 3.5% of the investment amount at the time of the investors’ subscription. This fee will be refunded in the event the company does not raise any funds in this offering. See “Plan of Distribution and Selling Securityholders” for additional discussion of this processing fee.

The company expects that the amount of expenses of the offering that it will pay will be approximately $75,000, not including commissions or state filing fees.

The company has engaged Prime Trust, LLC (the "Escrow Agent") to hold funds tendered by investors. We may hold a series of closings at which we receive the funds from the Escrow Agent and issue the shares to investors.  The offering will terminate at the earlier of: (1) the date at which the maximum offering amount has been sold, (2) up to three  years from the date upon which the Securities and Exchange Commission qualifies the Offering Statement of which this Offering Circular forms a part, or (3) the date at which the offering is earlier terminated by the company in its sole discretion.

The offering is being conducted on a “best efforts” basis without a minimum offering amount, which means that there is no guarantee that any minimum amount will be sold in this offering.

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INVESTING IN THE SERIES B PREFERRED STOCK OF MONOGRAM ORTHOPAEDICS, INC. IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISKS. YOU SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE “RISK FACTORS” BEGINNING ON PAGE 6 TO READ ABOUT THE MORE SIGNIFICANT RISKS YOU SHOULD CONSIDER BEFORE BUYING THE SERIES B PREFERRED STOCK OF THE COMPANY.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION

GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

Sales of these securities will commence on approximately [_].

The company is following the "Offering Circular" format of disclosure under Regulation A.

In the event that we become a reporting company under the Securities Exchange Act of 1934, we intend to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Implications of Being an Emerging Growth Company.”

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TABLE OF CONTENTS

SUMMARY	4
RISK FACTORS	6
DILUTION	14
PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS	17
USE OF PROCEEDS TO ISSUER	20
THE COMPANY'S BUSINESS	21
THE COMPANY'S PROPERTY	27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	28
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES	33
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS	34
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS	35
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS	36
SECURITIES BEING OFFERED	38
FINANCIAL STATEMENTS	43

In this Offering Circular, the term “Monogram Orthopaedics” “Monogram”, “we”, “us”, “our” or “the company” refers to Monogram Orthopaedics, Inc.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

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SUMMARY

Overview

Monogram Orthopaedics, Inc was incorporated under the laws of the State of Delaware on April 21, 2016, as “Monogram Arthroplasty Inc.” On March 27, 2017, the company changed its name to “Monogram Orthopaedics, Inc.” Monogram Orthopaedics is developing a product solution architecture with the intention to enable mass personalization of orthopedic implants by linking 3D printing and robotics via automated digital image analysis algorithms. We have not yet made 510(k) premarket notification submissions or obtained 510(k) clearances for any of product candidates. FDA approval is required to market our products and the company has not obtained FDA approval for any of our product candidates. The company has a robot prototype that can execute optimized paths for high precision insertion of optimized implants in synthetic bone specimens. These implants and cut-paths are prepared based on proprietary Monogram implant designs. Monogram intends to produce and market robotic surgical equipment and related software, orthopaedic implants, tissue ablation tools, navigation consumables, and other miscellaneous instrumentation necessary for the execution of reconstructive joint replacement procedures.

The Offering

Securities offered:	Maximum of 4,784,689 shares of Series B Preferred Stock, plus up to 956,937 additional shares of Series B Preferred Stock eligible to be issued as Bonus Shares
Securities outstanding before the Offering (as of August 12, 2020)
Common Stock	4,836,935 shares
Series A Preferred Stock	4,897,559 shares
Series B Preferred Stock	0  shares
Securities outstanding after the Offering:
Series A Preferred Stock	4,897,559 (1) (2)
Series B Preferred Stock	5,741,626 shares (1) (2) (3)
Common Stock	4,836,935 shares (1)

(1)	Does not reflect the amount of potential shares issuable to Pro-Dex, Inc. (“Pro-Dex”) under the terms of its warrant agreement (filed herewith as Exhibit 6.11) as of the date of this offering circular. Pro-Dex, Inc. has the right to purchase up to 5% of the outstanding Common Stock and Preferred Stock of the company as of the date of the exercise, calculated on a post-exercise basis. After the offering, assuming a maximum raise, Pro-Dex will have the right to acquire up to 325,686 shares of Common Stock, 272,185 shares of Series A Preferred Stock, and 251,825 shares of Series B Preferred Stock, assuming no Bonus Shares are issued in this offering (or 302,190 shares of Series B Preferred Stock assuming a full 20% additional Bonus Shares are issued in this offering).
(2)	Does not reflect the amount of potential shares issuable to ZB Capital Partners, LLC under the terms of its warrant agreement (filed herewith as Exhibit 6.13), which, if exercised, would result in the issuance of 273,972 shares of Series A Preferred Stock, or 171,527 shares of Series B Preferred Stock in this offering.
(3)	Assumes a fully subscribed offering with each investment eligible for the maximum Bonus Shares, which would result in an additional 956,937 shares of Series B Preferred Stock.

Implications of Being an Emerging Growth Company

As an issuer with less than $1 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant if and when we become subject to the ongoing reporting requirements of the Exchange Act upon filing a Form 8-A. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

· will not be required to obtain an auditor attestation on our internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

· will not be required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives (commonly referred to as “compensation discussion and analysis”);

· will not be required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on-frequency” and “say-on-golden-parachute” votes);

· will be exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;

· may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and

· will be eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards.

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We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, and hereby elect to do so. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1 billion in annual revenues, have more than $700 million in market value of our Common Stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

Selected Risks Associated with Our Business

Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:

· We are a comparatively early-stage company that has incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.

· Monogram depends on a licensing agreement for its intellectual property, which, if terminated, would significantly impair its ability to continue its operations. Significant delays in the development of Monogram’s technology may result in a default on the terms of this agreement, which increases the risk of this licensing agreement being terminated.

· Our technology is not yet fully developed, and there is no guarantee that we will ever successfully develop the technology that is essential to our business.  Furthermore, the end products would have an extremely high technical sophistication level that makes it difficult to estimate the costs required to develop those technologies accurately.

· Our business plan is predicated on obtaining market clearance from the Food and Drug Administration (“FDA”) under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or the FDCA. If we are unable to obtain Section 510(k) clearance, it is unlikely that we will be able to continue to operate as a going concern.

· We could be adversely affected by product liability, product recall, personal injury or other health and safety issues.

· Reductions in third party reimbursement levels, from private or government agency plans, and potential changes in industry pricing benchmarks for joint replacements could materially and adversely affect our results of operations.

· We may be subject to patient data protection requirements.

· We operate in a highly competitive industry that is dominated by several very large, well-capitalized market leaders, and the size and resources of some of our competitors may allow them to compete more effectively than we can.

· We rely on third parties to provide services essential to the success of our business.  If the third parties we rely on to provide services necessary to our business become insolvent, it would be materially disruptive to our business, and we may incur high costs and time to secure alternative supply.

· We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses.

· All of our assets are pledged as collateral to a lender.

· The company is controlled by its officers and directors.

· In certain circumstances, investors will not have dissenters’ rights

· Investors in this offering must vote their shares to approve of certain future events, including our sale.

· This investment is illiquid.

· The auditor included a “going concern” note in its audit report.

· Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreement and investors’ rights agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under these agreements.

· We are offering Bonus Shares to some investors in this offering, which effectively gives them a discount on their investment.

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RISK FACTORS

The SEC requires the company to identify risks that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies in its industry, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as cyber-attacks and the ability to prevent such attacks). Additionally, early-stage companies are inherently more risky than more developed companies, and the risk of business failure and complete loss of your investment capital is present. You should consider general risks as well as specific risks when deciding whether to invest.
 

Risks Related to Our Company

We have a limited operating history upon which you can evaluate our performance and have not yet generated profits. Accordingly, our prospects must be considered in light of the risks that any new company encounters. Our company was incorporated under the laws of the State of Delaware on April 21, 2016, and we have not yet generated revenues or profits. The likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, operation in a competitive industry, and the continued development of our technology and products. We anticipate that our operating expenses will increase for the near future, and there is no assurance that we will be profitable in the near future. You should consider our business, operations, and prospects in light of the risks, expenses, and challenges faced as an emerging growth company.

The auditor included a “going concern” note in its audit report. We may not have enough funds to sustain the business until it becomes profitable. Even if we raise funds through this offering, we may not accurately anticipate how quickly we may use the funds and whether these funds are sufficient to bring the business to profitability.

Our technology is not yet fully developed, and there is no guarantee that we will successfully develop our technology. Monogram is developing sophisticated technology that will require significant technical and regulatory expertise to develop and commercialize. If we are unable to develop and commercialize our technology and products successfully, it will significantly affect our viability as a company. 

We are subject to substantial governmental regulation relating to the manufacturing, labeling, and marketing of our products, and will continue to be for the lifetime of our company. The FDA and other governmental authorities in the United States regulate the manufacturing, labeling, and marketing of our products. The process of obtaining regulatory approvals to market a medical device can be expensive and lengthy, and applications may take a long time to be approved if they are approved at all. Our compliance with the quality system, medical device reporting regulations, and other laws and regulations applicable to the manufacturing of products within our facilities and those contracted by third parties is subject to periodic inspections by the FDA and other governmental authorities. Complying with regulations, and, if necessary, remedial actions can be significantly expensive. Failure to comply with applicable regulatory requirements may subject us to a range of sanctions, including substantial fines, warning letters that require corrective action, product seizures, recalls, halting product manufacturing, revocation of approvals, exclusion from future participation in government healthcare programs, substantial fines, and criminal prosecution.

We are subject to federal and state healthcare regulations and laws relating to anti-bribery and anti-corruption, and non-compliance with such laws could lead to significant penalties. State and Federal anti-bribery laws, healthcare fraud and abuse laws dictate how we conduct the relationships that we and our distributors and others that market our products have with healthcare professionals, such as physicians and hospitals. We also must comply with a variety of other laws that protect the privacy of individually identifiable healthcare information. These laws and regulations are broad in scope and are subject to evolving interpretation, and we could be required to incur substantial costs to monitor compliance or to alter our practices if we are found not to be in compliance. In addition, violations of these laws may be punishable by criminal or civil sanctions, including substantial fines, imprisonment of current or former employees, and exclusion from participation in governmental healthcare programs.

Government regulations and other legal requirements affecting our company are subject to change. Such change could have a material adverse effect on our business. We operate in a complex, highly regulated environment. The numerous federal, state and local regulations that our business is subject to include, but are not limited to: federal and state registration and regulation of medical devices; applicable governmental payor regulations including Medicare and Medicaid; data privacy and security laws and regulations including those under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); the Affordable Care Act (“ACA”) or any successor to that act; laws and regulations relating to the protection of the environment and health and safety matters, including those governing exposure to, and the management and disposal of, hazardous substances; regulations regarding food and drug safety including those of the Food and Drug Administration (“FDA”), and consumer protection and safety regulations including those of the Consumer Product Safety Commission, as well as state regulatory authorities, governing the availability, sale, advertisement and promotion of products we sell; federal and state laws governing health care fraud and abuse; anti-kickback laws; false claims laws; and laws against the corporate practice of medicine. The FDA and state regulatory authorities have broad enforcement powers, including the ability to seize or recall products and impose significant criminal, civil and administrative sanctions for violations of these laws and regulations.

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Changes in laws, regulations, and policies and the related interpretations and enforcement practices may significantly affect our cost of doing business as we endeavor to maintain compliance with such new policies and laws. Changes in laws, regulations, and policies and the related interpretations and enforcement practices generally cannot be predicted may require extensive system and operational changes. Noncompliance with applicable laws and regulations could result in civil and criminal penalties that could adversely affect our business, including suspension of payments from government programs; loss of required government certifications; loss of authorizations to participate in or exclusion from government programs, including the Medicare and Medicaid programs; loss of licenses; and significant fines or monetary penalties. Any failure to comply with applicable regulatory requirements could result in significant legal and financial exposure, damage our reputation, and have a material adverse effect on our business operations, financial condition, and results of operations.

We have not yet obtained clearance of our products by the U. S. Food and Drug Administration, or FDA, which is critical to our business plan. In order to sell our products, we must obtain market clearance from the Food and Drug Administration (“FDA”) under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or the FDCA (see “The Company’s Business – Regulation.”). If Monogram is unable to obtain Section 510(k) clearance, we will not be able to sell our products, and it is unlikely that we will be able to continue to operate as a going concern. In addition, the FDA may request clinical data with our 510(k) submission. The FDA has indicated an increased focus on robotic technologies that perform automated operations and may request clinical data for our robot and/or implants. If the FDA requires such information, it will materially and adversely impact our development timeline and increase the cost to obtain market clearance. In addition, our development timeline is currently dependent on the amount of funds we raise in this offering. Depending on the amount of proceeds we receive in this offering , it could take a significant amount of time for us to obtain FDA clearance, and we may be required to raise additional capital from outside sources, which the company may not be able to achieve successfully. These factors combined may impact our ability to continue to operate as a going concern.

We anticipate initially sustaining operating losses. It is expected that we will initially sustain operating losses in seeking Section 510(k) clearance. Our ability to become profitable depends on obtaining 510(k) clearance, and subsequent success in licensing and selling of products. There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products, which may impact whether the company is successful. Furthermore, we may encounter substantial delays and unexpected costs related to development, technological changes, marketing, regulatory requirements, and changes to such requirements or other unforeseen difficulties. There can be no assurance that we will ever become profitable. If the company sustains losses over an extended period of time, it may be unable to continue in business.

Our products may not gain market acceptance among hospitals, surgeons, physicians, patients, healthcare payors, and the medical community. A critical element in our commercialization strategy is to persuade the medical community on the efficacy of our products and to educate then on their safe and effective use. Surgeons, physicians, and hospitals may not perceive the benefits of our products and could be unwilling to change from the devices they are currently using. A number of factors may limit the market acceptance of our products, including the following:

· rate of adoption by healthcare practitioners;

· rate of a product’s acceptance by the target population;

· timing of market entry relative to competitive products;

· availability of third-party reimbursement;

· government review and approval requirements;

· the extent of marketing efforts by us and third-party distributors or agents retained by us; and

· side effects or unfavorable publicity concerning our products or similar products.

Notably, in our simulations, our current methods of robotic execution take longer than conventional methods of insertion. If we are unable to reduce the time of our surgical procedure, it may adversely impact market reception of our products. Our inability to successfully commercialize our products will have a material adverse effect on the value of your investment.

We could be adversely affected by product liability, personal injury or other health and safety issues. We could be adversely impacted by the supply of defective products. We are also exposed to risks relating to the surgical robotic technology services and products we provide. Defective products or errors in our technology could lead to serious injury or death. Product liability or personal injury claims may be asserted against us with respect to any of the products we supply or the services we provide. Monogram is also liable for harms caused by any faults in raw materials or products supplied by third-party manufacturers and suppliers that our company utilizes. It is our responsibility to have a quality management system in place and to audit our suppliers to ensure that products supplied to our company meet proper standards. Should a product or other liability issues arise, the coverage limits under insurance programs and the indemnification amounts available to us may not be adequate to protect us against claims and judgments. We also may not be able to maintain such insurance on acceptable terms in the future. We could suffer significant reputational damage and financial liability if we experience any of the foregoing health and safety issues or incidents, which could have a material adverse effect on our business operations, financial condition and results of operations.

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If third-party payors fail to provide appropriate levels of reimbursement for the use of our products, our revenues could be adversely affected. Sales of our products depend on the availability of adequate reimbursement from third-party payors. In each market in which we do business, our inability to obtain reimbursement approval or the failure of third-party payors to reimburse health care providers at a level that justifies the use of our products instead of cheaper alternatives will hurt our business.

Moreover, we are unable to predict what changes will be made to the reimbursement methodologies used by third-party payors in the future. Changes in political, economic, and regulatory influences may significantly affect healthcare financing and reimbursement practices. For example, there have been multiple attempts through legislative action and legal challenges to repeal or amend the ACA. We cannot predict whether current or future efforts to repeal or amend these laws will be successful, nor can we predict the impact that such a repeal or amendment and any subsequent legislation would have on our business and reimbursement levels. There have also been a number of other proposals and enactments by the federal government and various states to reduce Medicaid reimbursement levels in response to budget deficits, and we expect additional proposals in the future. We cannot assure you that recent or future changes reimbursement policies and practices will not materially and adversely affect our results of operations. Efforts to control healthcare costs, including costs of reconstructive joint replacement, are continuous, and reductions in third party reimbursement levels could materially and adversely affect our results of operations.

We rely on a licensing agreement with the Icahn School of Medicine at Mount Sinai. We are party to a licensing agreement (and related option agreement) with Icahn School of Medicine at Mount Sinai (“Mount Sinai”) pursuant to which Mount Sinai has granted Monogram an exclusive license to patents related to customizable bone implants, surgical planning software, and surgical robots (see “The Company’s Business – Intellectual Property”). The patent, software, technical information, know-how, etc. licensed under this agreement is integral to our company’s core products and technology. As such, we are reliant on the licensing agreement with Mount Sinai to operate our business. Under the terms of our licensing agreement, Mount Sinai has the right to terminate our license for the patent if we materially breach any of our obligations under the licensing agreement. Further, the licensing agreement expires upon the later of (i) 12 years from the first commercial sale of such any product that we sell using the intellectual property covered in the licensed patent or (ii) expiration of the licensed patent. If our arrangement with Mount Sinai were to end, we would no longer be able to use the intellectual property covered by the patent, which could significantly affect our business.

We may default on our obligations under the licensing agreement with the Icahn School of Medicine at Mount Sinai, which could result in termination of the agreement. Pursuant to the terms of the licensing agreement with Mount Sinai (and amendment thereto filed as Exhibits 6.8 and 6.14), we must have a first commercial sale our products within seven (7) years of the Effective Date of the agreement, or by October 10, 2024. Failure to meet this deadline would constitute a breach of our agreement, and Mount Sinai would have the right to give us a notice of default, and could ultimately terminate the licensing agreement if we fail to cure this default within sixty (60) days. A termination of this licensing agreement would also terminate our related option agreement with Mount Sinai, as the option agreement is governed by the terms of the licensing agreement. Currently, we expect to achieve a commercial sale within this timeframe. If we are unsuccessful in doing so, however, we would be in default, and would be exposed to the risk of Mount Sinai terminating the agreement, along with our right to license its intellectual property. Such a result would materially impact our ability to operate as a going concern.

We operate in a highly competitive industry that is dominated by several very large, well-capitalized market leaders and is continuously evolving. New entrants to the market, existing competitor actions, or other changes in market dynamics could adversely impact us.  The level of competition in the orthopaedic market is high, with several very large, well-capitalized competitors holding a majority share of the market. Changes in market dynamics or actions of competitors or manufacturers, including industry consolidation and the emergence of new competitors and strategic alliances, could materially and adversely impact our business. Disruptive innovation by existing or new competitors could alter the competitive landscape in the future and require us to accurately identify and assess such changes and make timely and effective changes to our strategies and business model to compete effectively.

Currently, we are not aware of any well-known orthopaedic companies that broadly offer robotic technology in combination with surgical navigation for the insertion of patient-specific press-fit orthopaedic implants. Nonetheless, many of our competitors in this market have significant financial resources. They may seek to extend their robotics and orthopaedic implant technology to accommodate the robotic insertion of patient-specific press-fit implants. Further, several companies offer surgical navigation systems for use in arthroplasty procedures that provide a minimally invasive means of viewing the anatomical site. As such, other companies may create similar technology and/or products to that which we are trying to develop, which would increase competition in our industry. As competition increases, a significant increase in general pricing pressures could occur, which could require us to reevaluate our pricing structures to remain competitive. For example, if we are not able to anticipate and successfully respond to changes in market conditions, it could result in a loss of customers or renewal of contracts or arrangements on less favorable terms. 

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Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. If successfully developed, our products and technology may be highly disruptive to a very large and growing market. Our competitors are well-capitalized with significant intellectual property protection and resources and may initiate infringement lawsuits against our company. Such litigation could be expensive and could also prevent us from selling our products, which would significantly harm our ability to grow our business as planned.

Our failure to attract and retain highly qualified personnel in the future could harm our business. As the company grows, it will be required to hire and attract additional qualified professionals such as software engineers, robotics engineers, machine vision and machine learning experts, biomechanical engineers, project managers, regulatory professionals, sales and marketing professionals, accounting, legal, and finance experts. The company may not be able to locate or attract qualified individuals for such positions, which will affect the company’s ability to grow and expand its business.

We rely on third-party manufacturers and service providers. Our third-party partners provide a variety of essential business functions, including distribution, manufacturing, and many others. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. If we encounter problems with one or more of these parties, and they fail to perform to expectations, it would be materially disruptive to our business, and we may incur high costs and time to secure alternative supply, or be unable to secure an alternative supply altogether. Such an occurrence could have a material adverse impact on the company.

Our future success is dependent on the continued service of our small management team. Monogram is managed by four directors and one executive officer. Our success is dependent on their ability to manage all aspects of our business effectively. Because we are relying on our small management team, we lack certain business resources that may hurt our ability to efficiently operate or grow our business. Any loss of key members of our executive team could have a negative impact on our ability to manage and grow our business effectively. We do not maintain a key person life insurance policy on any of the members of our senior management team. As a result, we would have no way to cover the financial loss if we were to lose the services of our directors or officers. 

We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses. To fund future growth and development, the company will likely need to raise additional funds in the future by offering shares of its Common or Preferred Stock and/or other classes of equity, or debt that convert into shares of common or Preferred Stock, any of which offerings would dilute the ownership percentage of investors in this offering. See “Dilution.” In order to issue sufficient shares in this regard, we may be required to amend our certificate of incorporation to increase our authorized capital stock, which would require us to obtain the consent of a majority of our shareholders. Furthermore, if the company raises capital through debt, the holders of our debt would have priority over holders of common and Preferred Stock, and the company may be required to accept terms that restrict its ability to incur more debt. We cannot assure you that the necessary funds will be available on a timely basis, on favorable terms, or at all, or that such funds, if raised, would be sufficient. The level and timing of future expenditure will depend on a number of factors, many of which are outside our control. If we are not able to obtain additional capital on acceptable terms, or at all, we may be forced to curtail or abandon our growth plans, which could adversely impact the company, its business, development, financial condition, operating results or prospects.

Any valuation at this stage is difficult to assess. The valuation for this Offering was established by the company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially early-stage companies, is challenging to assess, and you may risk overpaying for your investment.

If we cannot raise sufficient funds, we will not succeed. We are offering shares of our Series B Preferred Stock in the amount of up to $30,000,000 in this Offering on a best-efforts basis and may not raise the entire amount. Even if the maximum amount is raised, we are likely to need additional funds in the future to grow. The technology and products we are developing are highly sophisticated, and we may also encounter technical challenges that require more capital than anticipated by the management team to overcome. If we cannot raise those funds for whatever reason, including reasons relating to the company itself or to the broader economy, the company may not survive. If we raise a substantially lesser amount than the Maximum Raise, we will have to find other sources of funding for some of the plans outlined in “Use of Proceeds To Issuer.”.

Our technologies are highly complex, and development budget estimates may not be accurately or sufficiently forecasted. While management makes every effort to predict anticipated development costs accurately, the project and technology complexity of the products makes it difficult to forecast these required development costs accurately. It is not uncommon to encounter unforeseen technical challenges that introduce unanticipated development costs. The actual development costs may not be the same as the anticipated development costs. If the actual development costs are materially above those anticipated by management, it could materially adversely impact our business.

Our products may require more technical complexity than anticipated and our engineers may not be able to overcome these technical challenges. While management makes every effort to anticipate the technical challenges of product development, we may encounter unforeseen complexity that we cannot overcome, or that may be difficult to overcome without incurring significant time or cost that was not anticipated or budgeted. For example, we have found it challenging to revise our first-generation tibial design. To facilitate more efficient removal, we may need to make design changes to features like the locking mechanism that were not anticipated and introduce additional cost, time and complexity. Additional unforeseen challenges as this could hinder our plan of operations, slowing our progress and increasing our costs, which may harm your investment in our company.

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We may not gain acceptance by Group Purchasing Organizations or other purchasing entities. Many hospital systems and Ambulatory Surgery Centers use group purchasing organizations to negotiate pricing and supply from vendors. Many of these organizations are large and risk-averse, and gaining adoption at reasonable terms can be challenging. If we are unable to secure contracts with widely used Group Purchasing Organizations, we may struggle to gain market adoption, which would materially adversely affect our business.

We may use independent distributors to represent our products. Monogram may use contracted employees and independent distributors to represent our products to surgeons, hospitals, and Ambulatory Surgery Centers. Such independent distributors and contractors are not employees of the company and may conduct business in a manner that is unethical or even illegal. Monogram could incur liability for unlawful business practices conducted by such independent distributors or contractors. If a distributor violates the terms of our agreements, it could materially adversely affect our business.

Our products require a level of accuracy that we may never be able to achieve. To obtain FDA approval on our system we will need to demonstrate that we can accurately position implants in robotically prepared bone specimens. The KUKA LBR Med robot that we are using has never before been used or validated for this application, and it may not be able to perform to the accuracies required. Preparing bone to the accuracies required is a highly challenging task with numerous sources of error that we may never be able to overcome. We have not yet achieved high accuracy cuts in a cadaveric bone specimen. If we cannot execute a robotic surgical plan with sufficient accuracy, it will materially adversely impact our business and market reputation.

Our assets may become pledged as collateral to a lender. We may enter into financing arrangements with lenders that contain covenants that limit our ability to engage in specified types of transactions. These covenants may limit our ability to, among other things:

· petition for bankruptcy;

· assignment of the notes to other creditors;

· appointment of a receiver of any property of the company; and

· consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets.

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A breach of any of these covenants could result in a default under the terms of such a financing in which the lender could elect to declare all amounts outstanding thereunder to be immediately due and payable. We may need to pledge all of our assets as collateral to secure additional financing.

Acquisition opportunities may present themselves that in hindsight did not achieve the positive results anticipated by our management. From time to time, acquisition opportunities may become available to the company. Those opportunities may involve the acquisition of specific assets, like intellectual property or inventory, or may involve the assumption of the business operations of another entity. Our goal with any future acquisition is that any acquisition should be able to contribute neutral to positive EBITDA to the company after integration. To effect these acquisitions, we will likely be required to obtain lender financing or issue additional shares of stock in exchange for the shares of the target entity. If the performance of the acquired assets or entity does not produce positive results for the company, the terms of the acquisition, whether it is interest rate on debt, or additional dilution of stockholders, may prove detrimental to the financial results of the company, or the performance of your particular shares.

The novel coronavirus (COVID-19) pandemic may have an impact on our business, financial condition and results of operations. The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. The extent to which COVID-19 ultimately impacts our business, financial condition and results of operations will depend on future developments, which are highly uncertain and unpredictable, including new information which may emerge concerning the severity and duration of the COVID-19 outbreak and the effectiveness of actions taken to contain the COVID-19 outbreak or treat its impact, among others. In addition to the COVID-19 disruptions possibility adversely impacting our business and financial results, they may also have the effect of heightening many of the other risks described here under “Risk Factors,” including risks relating to changes due to our limited operating history; our ability to generate sufficient revenue, to generate positive cash flow; our relationships with third parties, and many other factors. We will endeavor to minimize these impacts, but there can be no assurance relative to the potential impacts that may be incurred

Risks Related to the Securities in this Offering

In certain circumstances, investors will not have dissenters' rights. The investors’ rights agreement that investors will execute in connection with the offering contains a “drag-along” provision whereby investors agree to vote any shares they own in the same manner as the majority holders of our other classes of stock. Specifically, and without limitation, if the majority holders of our other classes of stock determine to sell the company, depending on the nature of the transaction, investors will be forced to sell their stock in that transaction regardless of whether they believe the transaction is the best or highest value for their shares, and regardless of whether they believe the transaction is in their best interests.

We have previously granted anti-dilution rights in the form of preemptive rights to certain holders of our Common Stock. The effect of those rights is that at any time we intend to issue additional shares of our stock that would dilute those holders, they would first have the right to acquire additional shares to maintain their pro rata ownership. While investors in this offering will be granted certain participation rights in future offerings of securities by the company, investors who are not accredited investors may not be able to participate in all of those offerings if such offering relies upon Rule 506(b) or (c) of Regulation D. As a result, upon future issuances of stock by the company, investors in this offering may experience more substantial dilution than other stockholders. See Exhibit 6.8 for further information about the preemptive rights granted to certain holders of our Common Stock.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreement, the investors’ rights agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under these agreements. Investors in this offering will be bound by the subscription agreement and investors’ rights agreement, both of which include a provision under which investors waive the right to a jury trial of any claim they may have against the company arising out of or relating to these agreements. By signing these agreements, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.

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If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Texas, which governs the subscription agreement and investors’ rights agreement, and in the Court of Chancery in the State of Delaware. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party knowingly, intelligently, and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the subscription agreement and investors’ rights agreement. You should consult legal counsel regarding the jury waiver provision before entering into the subscription agreement and investors’ rights agreement. 

If you bring a claim against the company in connection with matters arising under either the investors’ rights agreement or the subscription agreement, including claims under federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the company. If a lawsuit is brought against the company under the either of these agreements, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action. 

Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement or investors’ rights agreement with a jury trial. No condition, stipulation, or provision of the subscription agreement or investors’ rights agreement serves as a waiver by any holder of common shares or by us, or by an investor, of compliance with any provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when the shares are transferred, the transferee is required to agree to all the same conditions, obligations and restrictions applicable to the shares or to the transferor with regard to ownership of the shares, that were in effect immediately prior to the transfer of the Shares, including but not limited to the investors’ rights agreement or subscription agreement.

We are offering Bonus Shares to some investors in this offering, which effectively gives them a discount on their investment. Certain investors in this offering who invest more than $5,000 or more than $10,000, are entitled to receive Bonus Shares based on the amount of their investment, which effectively gives them a discount on their investment. In addition, investors who “reserve” shares of the company’s Series B Preferred Stock via the online platform provided by StartEngine Crowdfunding, Inc. (“StartEngine”) prior to the qualification of this Offering will be entitled to receive Bonus Shares on the amount of their investment in the company once the offering is qualified, which also effectively gives them a discount on their investment. These Bonus Shares perks are not exclusive, and investors are eligible to receive Bonus Shares in either or both scenarios. (See “Plan of Distribution and Selling Securityholders” for further details). Therefore, the value of shares of investors who either (i) invest less than $5,000 or $10,000 or (ii) do not “reserve” shares prior to investing in the company, and pay the full price for the Series B Preferred Stock in this offering, will be immediately diluted by investments made by investors entitled to receive the Bonus Shares, who will effectively pay less per share.

Our Amended and Restated Certificate of Incorporation also includes a forum selection provision, which could result in less favorable outcomes to the plaintiff(s) in any action against our company. Our Amended and Restated Certificate of Incorporation includes a forum selection provision that requires any claims against the company by stockholders not arising under the federal securities laws to be brought in the Court of Chancery State in the state of Delaware. This forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims.

This investment is illiquid. There is no currently established market for reselling these securities. If you decide that you want to resell these securities in the future, you may not be able to find a buyer. Although the company intends to apply in the future for quotation of its Common Stock on an over-the-counter market, or similar, exchange, there are several requirements that the company may or may not be able to satisfy in a timely manner. Even if we obtain that quotation, we do not know the extent to which investor interest will lead to the development and maintenance of a liquid trading market. You should assume that you may not be able to liquidate your investment for some time or be able to pledge these shares as collateral.

You will need to keep records of your investment for tax purposes. As with all investments in securities, if you sell our Series B Preferred Stock at a profit or loss, you will probably need to pay tax on the long- or short-term capital gains that you realize or apply the loss to other taxable income. If you do not have a regular brokerage account or your regular broker will not hold our Series B Preferred Stock for you (and many brokers refuse to hold securities issued under Regulation A) there will be nobody keeping records for you for tax purposes. You will have to keep your own records and calculate the gain or loss on any sales of the Series B Preferred Stock. 

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The value of your investment may be diluted if the company issues additional options. A pool of unallocated options is typically reserved for future employees, which affects the fully-diluted pre-money valuation for this offering. The price per share of the Series B Preferred Stock has been calculated assuming a 2% post-money unallocated option pool, which may not account for all additional options the company will issue after the offering and may not provide adequate protection against the dilution investors may face due to such additional issuances. Any option issuances by the company over the 2% pool will lower the value of your shares.

Investors in this offering will receive our Series B Preferred Stock, which has limited voting rights compared to our Common Stock. Investors in this offering that purchase our Series B Preferred Stock will have limited voting rights compared to those of the holders of our Common Stock. Our Amended and Restated Certificate of Incorporation states that the holders of our Common Stock are entitled to elect two (2) directors of the corporation to our Board of Directors alone as a class. Our Preferred Stockholders, therefore, will have no choice as to the election of two members of the Board of Directors of the company. The Preferred Stockholders also do not have the right to vote for any directors of the corporation as a standalone class, which is a right granted to our Common Stockholders. The holders of our Preferred Stock are entitled to vote together with the holders of the Common Stock for the election of one (1) independent director, and may vote together with the holders of the Common Stock on any additional directors to be elected to our Board of Directors after the initial (3) directors are elected. Therefore, investors in this offering will very likely not be able to exert the same amount of control over the management of the company as the holders of the Common Stock. See “Securities Being Offered” for more information on the voting rights of our Series B Preferred Stock.

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DILUTION

Dilution means a reduction in value, control, or earnings of the shares the investor owns.

Immediate dilution  

An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much more significant sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.

The following table compares the price that new investors are paying for their shares with the effective cash price paid by existing shareholders, giving effect to full conversion of all outstanding convertible notes and assuming that the shares are sold at $6.27 per share. The schedule presents shares and pricing as issued and reflects all transactions since inception, which gives investors a better picture of what they will pay for their investment compared to the company’s insiders than just including such transactions for the last 12 months, which is what the SEC requires.

The following table presents the approximate effective cash price paid for all share and potential shares issuable by the company as of September 30, 2020.

	Date Issued		Issued Shares			Potential Shares		Total Issued & Potential Shares		Effective Cash Price per Share at Issuance or Potential Conversion
Common Shares:
Common Shares		2020		519,831	(3)		—		519,831	$	0.0001376
Common Shares		2019		4,227,722	(4)		—		4,227,722	$	0.0001542
Common Shares		2017 and 2018		85,819			—		85,819	$	0.0025000
Preferred Shares:
Series-A Preferred Shares		2020		2,940,121					2,940,121	$	4.0000000
Series-A Preferred Shares		2019		702,021			—		702,021	$	4.0000000
Convertible Notes:
Convertible Notes		2020		1,255,417	(5)				1,255,417	$	1.1070475
Options:
2019 Stock Option and Grant Plan		2020		—			1,351,107		1,351,107	$	2.9517971
2019 Stock Option and Grant Plan		2019		—			453,200		453,200	$	0.6868564
Warrants:
Zimmerman Warrant (1)		2019		—			273,973		273,973	$	3.6500000
Pro-Dex, Inc. Warrant (2)		2018		—			597,872		597,872	$	2.0907477
Total Common Share Equivalents				9,734,493			2,474,777		12,209,270	$	1.8563524
Investors in this offering, assuming $30 Million raised (No Bonus Shares)		2020		4,784,689	(6)		--		4,784,689	$	6.27
Total After Inclusion of this Offering (No Bonus Shares)				14,519,182			2,474,777		16,993,959	$	3.0715168
Investors in this offering, assuming $30 Million raised (Bonus Shares)		2020		5,741,626	(7)		--		5,741,626	$	5.22
Total After Inclusion of this Offering (Bonus Shares)		2020		15,476,119			2,525,142		18,001,262	$	2.8980479

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(1) We have entered into a warrant to purchase capital stock with ZB Capital Partners LLC (the “ZB Capital”) (filed herewith as Exhibit 6.13), Under the terms of the warrant, the ZB Capital has the right to acquire $1,000,000 worth of shares of the company’s stock upon the occurrence of the company raising $5,000,000 in an equity financing. We believe it is reasonable to assume that ZB Capital would exercise its right to purchase 273,972 shares of Series A Preferred Stock at a price of $3.65 per share. However, if they so elected and assuming the company raised $5,000,000 in this offering, ZB Capital alternatively has the right to purchase the shares being sold in this offering at the same per share price paid by other investors in this offering, but reduced by the 9.0% total compensation to the StartEngine in this offering. For reference, were ZB Capital to exercise its warrant as part of this offering, it would be able to acquire up to 171,527 shares of our Series B Preferred Stock in exchange for cash consideration of $1,000,000. We have assumed conversion of the ZB Capital Partners warrants into Series-A Preferred Stock for all dilution calculations.

(2) This entry reflects the amount of potential shares issuable to Pro-Dex, Inc. (“Pro-Dex”) under the terms of its warrant agreement (filed herewith as Exhibit 6.11) as of the date of this offering circular. As of the date of this offering circular, Pro-Dex has warrants to acquire 597,872 shares of Monogram’s capital stock. However, the warrant agreement includes automatic, non-dilution provisions, which would increase the number of shares acquirable in the event of capital raising by the company.

(3) The shares of Common Stock issued in 2020 reflects the number of shares of Common Stock issued to Mount Sinai pursuant to the Licensing Agreement included as Exhibit 6.8 to this offering circular. This issuance was triggered by the company’s previous Series A Offering, in which it raised $14,435,668 in gross proceeds.

(4) The shares of Common Stock issued in 2019 were issued to Benjamin Sexson and Douglas Unis in consideration for past and future services to the company and under the terms of the Licensing Agreement included as Exhibit 6.8, respectively. In addition, this number includes the amount of shares of Common Stock issued to Mount Sinai pursuant to the Licensing Agreement.

(5) In 2020, all previous outstanding convertible notes of the company issued between 2017 and 2020 either converted into Series A Preferred Stock of the Company or were repaid.

(6)	Does not include up to 956,937 Bonus Shares that may be issued to investors in this offering.
(7)	Includes up to 956,937 Bonus Shares that may be issued to investors in this offering.

The following table illustrates the dilution that new investors will experience upon investment in the company relative to existing holders of our securities. Because this calculation is based on the net tangible assets of the company, we are calculating based our net tangible book value of $(274,632) as of December 31, 2019, as included in our audited financial statements. As such, this table does not include shares issued in 2019. However, the values have been adjusted to reflect the reverse split effected on May 28, 2019, as noted above.

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Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of a larger company. This increase in the number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, angel investment), employees exercising stock options, or by conversion of certain instruments (e.g., convertible bonds, preferred shares or warrants) into stock.

If the company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most early-stage companies are unlikely to offer dividends, preferring to invest any earnings into the company).

The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a “down round,” meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

· In June 2017 Jane invests $20,000 for shares that represent 2% of a company valued at $1 million.

· In December, the company is doing very well and sells $5 million in shares to venture capitalists on a valuation (before the new investment) of $10 million. Jane now owns only 1.3% of the company but her stake is worth $200,000.

· In June 2018, the company has run into serious problems, and in order to stay afloat, it raises $1 million at a valuation of only $2 million (the “down round”). Jane now owns only 0.89% of the company, and her stake is worth only $26,660.

This type of dilution might also happen upon the conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round,” the holders of the convertible notes will dilute existing equity holders, and even more, than the new investors do because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue in the future and the terms of those notes.

If you are making an investment expecting to own a certain percentage of the company or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by actions taken by the company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

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PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

Plan of Distribution

The company is offering up to 4,784,689 shares of Series B Preferred Stock (not including Bonus Shares) (the “Shares”) on a “best efforts” basis at a cash price of $6.27 per share. The minimum subscription is $250.80, or 40 shares. The aggregate purchase price including the 3.5% processing fee payable directly to StartEngine Primary per share is $5.7132, resulting in a minimum investment of $102.84.

The company has engaged StartEngine Primary as its sole and exclusive placement agent to assist in the placement of its securities. StartEngine Primary is under no obligation to purchase any securities or arrange for the sale of any specific number or dollar amount of securities.

Commissions and Discounts

The following table shows the total discounts and commissions payable to the placement agents in connection with this offering, assuming we raise the maximum amount of offering proceeds:

	Per Share
Public offering price	$	6.27
Placement Agent commissions	$	1,050,000	(1)
Proceeds, before expenses, to us	$	28,950,000

(1) StartEngine Primary, LLC will receive commissions of 3.5% of the offering proceeds.

StartEngine Warrants

The company will also be required to issue to StartEngine Primary warrants to purchase shares of our Series B Preferred Stock on the same terms as other investors in this offering equal to 2.0% of the total amount of shares sold in this offering (excluding Bonus Shares). Shares issued to StartEngine Primary upon exercise of these warrants will be subject to a lock-up provision in accordance with FINRA requirements. If we raise the maximum amount in this offering, StartEngine will receive warrants to purchase95,693 shares of Series B Preferred Stock.

Other Terms

StartEngine Primary has also agreed to perform the following services in exchange for the compensation discussed above:

· design, build, and create the company’s campaign page,

· provide the company with a dedicated account manager and marketing consulting services,

· provide a standard purchase agreement to execute between the company and investors, which may be used at the company’s option and

· coordinate money transfers to the company.

In addition to the commission described above, the company agrees to pay StartEngine Primary a fee of $15,000 for out of pocket accountable expenses paid prior to commencing.  Any portion of this amount not expended and accounted for will be returned to the company. Assuming the full amount of the offering is raised, we estimate that the total fees and expenses of the offering payable by the company to StartEngine Primary will be approximately $1,065,000.

StartEngine Primary will charge you a non-refundable processing fee equal to 3.5% of the amount you invest at the time you subscribe for our securities, equivalent to $0.2195 per share. This fee will be refunded in the event the company does not raise any funds in this offering.

StartEngine Primary intends to use an online platform provided by StartEngine Crowdfunding, Inc. (“StartEngine”), an affiliate of StartEngine Primary, at the domain name www.startengine.com (the “Online Platform”) to provide technology tools to allow for the sales of securities in this offering. In addition, StartEngine will assist with the facilitation of credit and debit card payments through the Online Platform. Fees for credit and debit card payments will be passed onto investors at cost, and the company will reimburse StartEngine for transaction fees and return fees that it incurs for returns and chargebacks, pursuant to a Credit Card Services Agreement.

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Bonus Shares for Certain Investors

Certain investors in this offering are eligible to receive bonus shares of Series B Preferred Stock, which effectively gives them a discount on their investment. Those investors will receive, as part of their investment, additional shares for their shares purchased (“Bonus Shares”). The amount of Bonus Shares investors in this offering are eligible to receive and the criteria for receiving such Bonus Shares is as follows:

(i) “Reserved” Shares. Prior to the qualification by the SEC of the company’s offering, the company will offer investors the opportunity to “reserve” shares via the StartEngine website. To reserve shares, an investor must create and login to his or her StartEngine account and navigate to the company’s campaign page. On our campaign page, the investor may select the green "Reserve My Shares" button, which will bring the investor to a new page where the investor will indicate the amount of shares (and amount of money) he or she would like to reserve in the company. The reservation is finalized by clicking the green “Reserve My Shares” button. Investors who reserve shares in this manner will receive 10% additional Bonus Shares on their actual investment once this offering is qualified by the SEC (rounded down to the nearest whole share). For example, if an investor reserves 100 shares, and subsequently confirms this reservation and purchases the 100 shares, such investor will receive an additional 10 shares of the company’s Series B Preferred Stock, for a total of 110 shares. “Reserving” shares is simply an indication of interest. There is no binding commitment for investors that reserve shares in this manner to ultimately invest and purchase the shares reserved of the company, or to purchase any shares of the company whatsoever.

(ii) Investment Amount. Investors will be eligible to receive Bonus Shares based on the amount of their investment in this offering. Investors that invest at least $5,000 in this offering will receive additional Bonus Shares equal to 5% of the number of shares purchased, rounded down to the nearest whole share. Investors that invest at least $10,000 will additional Bonus Shares equal to 10% of the number of shares purchased, rounded down to the nearest whole share. For example, if an investor invests $6,270, the investor will receive 5% more shares of Series B Preferred Stock, and will receive an additional 31 Bonus Shares of Series B Preferred Stock, for a total of 658 shares.

Investors receiving the 5% bonus will pay an effective price of approximately $5.97 per share before the StartEngine processing fee, while investors receiving the 10% bonus will pay an effective price of approximately $5.70 per share before the StartEngine processing fee. The StartEngine processing fee will be assessed on the full share price of $6.27, and not the effective, post bonus price. 

Investors may be eligible to receive both Bonus Share perks described above. As such, investors in this offering are eligible to receive up to 20% additional Bonus Shares on their investment in this Offering

Subscription Procedure

After the Commission has qualified the Offering Statement, we will accept tenders of funds to purchase the Series B Preferred Stock. The company may close on investments on a “rolling” basis (so not all investors will receive their shares on the same date). Investors may subscribe by tendering funds by wire, credit, or debit card or ACH transfer to the escrow account to be set up by the Escrow Agent. Tendered funds will remain in escrow until closing has occurred. Upon closing, funds tendered by investors will be made available to the company for its use.

The minimum investment in this offering is $250.80, or 40 shares of Series B Preferred Stock.

Investors will be required to complete a subscription agreement in order to invest. The subscription agreement includes a representation by the investor to the effect that, if the investor is not an “accredited investor” as defined under securities law, the investor is investing an amount that does not exceed the greater of 10% of his or her annual income or 10% of your net worth (excluding the investor’s principal residence).

The subscription procedure is summarized as follows:

1.	Go to the company’s page on www.startengine.com/monogram and click on the “Invest Now” button;
2.	Complete the online investment form;
3.	Deliver funds directly by wire, debit card, credit card or electronic funds transfer via ACH to the specified account;
4.	Once funds or documentation are received an automated AML check will be performed to verify the identity and status of the investor;
5.	Once AML is verified, investor will electronically receive, review, execute and deliver to us a Subscription Agreement.

The company has entered into an Escrow Services Agreement with Prime Trust LLC (the “Escrow Agent”) and StartEngine Primary. Investor funds will be held by the Escrow Agent pending closing or termination of the offering.  All subscribers will be instructed by the company or its agents to transfer funds by wire, credit or debit card, or ACH transfer directly to the escrow account established for this offering. The company may terminate the offering at any time for any reason at its sole discretion. Investors should understand that acceptance of their funds into escrow does not necessarily result in their receiving shares; escrowed funds may be returned.

Prime Trust is not participating as an underwriter or placement agent or sales agent of this offering and will not solicit any investment in the company, recommend the company’s securities or provide investment advice to any prospective investor, and no communication through any medium, including any website, should be construed as such, or distribute this Offering Circular or other offering materials to investors. The use of Prime Trust’s technology should not be interpreted and is not intended as an endorsement or recommendation by it of the company or this offering. All inquiries regarding this offering or escrow should be made directly to the company.

In the event that the company terminates the offering while investor funds are held in escrow, those funds will promptly be refunded to each investor without deduction or interest and in accordance with Rule 10b-9 under the Exchange Act.

Pursuant to our agreement with StartEngine Primary, the company agrees that 6% of the total funds received into escrow will be held back as a deposit hold in case of any ACH refunds or credit card chargebacks. The hold will remain in effect for 180 days following the close of the offering. 60 days after the close of the offering, 4% of the deposit hold will be released to the company. The remaining 2% will be held for the final 120 days of the deposit hold. After such further 120 days, the remaining 2% will be released to the company. Based on the assumed maximum amount that we might owe StartEngine Primary, we estimate the deposit hold could be for up to $1,800,000.

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No Minimum Offering Amount

There is no minimum offering amount in this offering and the company may close on any funds that it receives. Potential investors should be aware that there can be no assurance that any other funds will be invested in this offering other than their own funds.

No Selling Security holders

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the company.

Transfer Agent and Registrar 

The company has engaged StartEngine Secure LLC, a registered transfer agent with the SEC, who will serve as transfer agent to maintain shareholder information on a book-entry basis.

Provisions of Note in Our Subscription Agreement and Investors’ Rights Agreement

Our subscription agreement and investors’ rights agreement include forum selection provisions that require any claims against the company based on the subscription agreement and/or investors’ rights agreement not arising under the federal securities laws to be brought in a court of competent jurisdiction in the State of Texas. These forum selection provisions may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted these provisions to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers not to lose a significant amount of time traveling to any particular forum so they may continue to focus on operations of the company.

Jury Trial Waiver 

The subscription agreement and investors’ rights agreement provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the subscription agreement. By signing the subscription agreement and investors’ rights agreement, the investor warrants that the investor has reviewed this waiver with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement or investors’ rights agreement with a jury trial. No condition, stipulation, or provision of the subscription agreement or investors’ rights agreement serves as a waiver by us, or by any investor, of compliance with any provision of the federal securities laws and the rules and regulations promulgated under those laws

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USE OF PROCEEDS TO ISSUER

Assuming a maximum raise of $30,000,000, the net proceeds of this offering would be approximately $27,822,000 after subtracting estimated offering costs of $2,100,000 to StartEngine Primary in commissions, $15,000 in audit fees, $3,000 in Edgarization fees, $10,000 in blue sky related fees, and $50,000 in legal fees. If Monogram successfully raises the maximum amount under this raise, the company expects to have sufficient capital to fund the development and 510(k) pre-market submission of the Monogram total knee and robotic system. The company anticipates the total combined engineering development cost to develop and prepare both the total knee implant and the robotic surgical systems in parallel for 510(k) premarket submission is approximately $13 million, without consideration for the general and administrative costs, sales costs and other capital requirements to inventory, market and promote the finished products. With a raise of $30 million, the company would have limited working capital to support growth and would need additional capital to support sales. While the company believes it has a differentiated press-fit hip implant design, management believes that given the complexity of these products it will be most efficient to focus exclusively on the development and launch of the total knee before undertaking the development of additional implant clinical applications.

Assuming a raise of $15,000,000, representing 50% of the maximum offering amount, the net proceeds would be approximately $13,872,000 after subtracting estimated offering costs of $1,050,000 to StartEngine Primary in commissions, $15,000 in audit fees, $3,000 in Edgarization fees, $10,000 in blue sky related fees, and $50,000 in legal fees. In such an event, Monogram expects to have sufficient capital to fund the development and 510(k) pre-market submission of the Monogram total knee and robotic system. As described above, the company anticipates the total combined engineering development cost to develop and prepare both the total knee implant and the robotic surgical systems in parallel for 510(k) premarket submission is approximately $13 million, without consideration for the general and administrative costs, sales costs and other capital requirements to inventory, market and promote the finished products. At a $15,000,000 raise, however, the company would adjust its use of proceeds by limiting the speed of growth and by limiting the amount of additional recruiting of new employees. Monogram would intend to try to fund the development of the Monogram total knee and robotic system. If Monogram were able to develop the Monogram total knee and robotic system successfully, Monogram would have limited working capital with which to support the market launch. We would very likely need additional capital to facilitate sales.

Assuming a raise of $5,000,000 representing 16.6% of the maximum offering amount, net proceeds would be approximately $4,572,000 after subtracting estimated offering costs of $350,000 to StartEngine Primary in commissions, $15,000 in audit fees, $3,000 in Edgarization fees, $10,000 in blue sky related fees, and $50,000 in legal fees. In such an event, Monogram would have a capital shortfall of approximately $8,400,000 to fund the development and 510(k) pre-market submission of the Monogram total knee and robotic system (without consideration for the general and administrative costs, sales costs and other capital requirements to inventory, market and promote the finished products). The company would need to adjust its use of proceeds by limiting the scope of development considerably and would focus on advancing both the Monogram total knee and robotic system simultaneously, but it is unlikely that it would commercialize either product. Management believes it has assembled a high-caliber engineering team for both the total knee and robotic system developments that would be difficult to reassemble and believes that it is not in the best interest of the company to prioritize one product (either the robot or the implant) at the expense of the other product, which, given the complexity and development costs of both products would likely be required to commercialize. Furthermore, the company believes that advancing the Monogram total knee and robotic system in parallel is in the best interests of the company, given management’s view of the growing market demand for both navigated robotics and press-fit total knee implants. The company would require additional capital within a shorter time-frame, and it is unlikely that the company would obtain an FDA approval on any products if the company pursues the development of both products in parallel, which management believes to be in the best interest of the company. The company would also limit its speed of growth and limit the amount of additional recruiting of new employees.

Notably, as disclosed in the “Risk Factors” section of this Offering Circular, Monogram is commercializing highly complex technology. The actual costs to fund the development and 510(k) pre-market submissions of our products may differ materially from management's best efforts estimates of the project costs and the capital requirements. Monogram must obtain FDA approvals to legally market its products and generate revenue. Until such a time as the company is able to generate sufficient revenue the company will need to obtain additional financing to fund its operating losses.

The table below summarizes our intended uses of the proceeds received in this offering.

Percent			$5,000,000 Raise				$15,000,000 Raise				Maximum Offering $30,000,000 Raise
Allocation			Use Category	%			Use Category	%			Use Category
	48.67	%	Product Development		42.0	%	Product Development		28.42	%	Product Development
	39.07	%	Payroll		37.9	%	Payroll		29.98	%	Payroll
	6.12	%	General Administrative		5.4	%	General Administrative		7.12	%	Working Capital
	3.47	%	Marketing		8.4	%	Marketing		8.70	%	Marketing
	2.19	%	Commissions		5.7	%	Commissions		5.96	%	Commissions
	0.00	%	Working Capital		0.2	%	Working Capital		19.54	%	General Administrative
	0.50	%	Offering Expenses		0.4	%	Offering Expenses		0.27	%	Offering Expenses

(1) The company’s CEO, Benjamin Sexson, has contracted with the company for an annual salary of $250,000 per year (see Exhibits 6.2, 6.3, and 6.4). In addition, Mr. Sexson is eligible to earn an annual bonus in an amount of 50% of his aggregate base salary earned in such year, subject to the achievement of certain performance goals, milestones and objectives, as established from time to time by an appropriate committee of the company’s Board. A portion of the proceeds from this offering will go towards paying Mr. Sexson’s current salary payments, and may go towards a bonus for Mr. Sexson, if such bonus is granted as described above. Additionally, Mr. Sexson is entitled to severance payments by the company equal to six months' of his base salary at the time of his termination if he is terminated without cause. The company could use the proceeds of this offering to pay Mr. Sexson’s severance payments in the event of such a termination. Doug Unis, a director of the company, also receives a consulting fee of $35,000 for consulting services unrelated to his position as director. This agreement is included as Exhibit 6.1. A portion of the proceeds of this offering will go towards paying Mr. Unis’s consulting fee.

Because the offering is a “best efforts,” we may close the offering without sufficient funds for all the intended purposes set out above, or even to cover the costs of this offering. The above use of proceeds assumes a 510(k) submission without a request for clinical data from the FDA. Please see our “Risk Factors” for additional disclosures related to a clinical data request from the FDA.

The company reserves the right to change the above use of proceeds if management believes it is in the best interests of the company.

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THE COMPANY’S BUSINESS

Overview

Monogram Orthopaedics, Inc was incorporated under the laws of the State of Delaware on April 21, 2016, as “Monogram Arthroplasty Inc.” On March 27, 2017, the company changed its name to “Monogram Orthopaedics Inc.” Monogram Orthopaedics is working to develop a product solution architecture with the goal to enable mass personalization of orthopedic implants by linking 3D printing and robotics with advanced pre-operative imaging. The company has a robot prototype that can execute optimized paths for high precision insertion of optimized implants in synthetic bone specimens. These implants and cut-paths are prepared based on proprietary Monogram implant designs. Monogram intends to produce and market robotic surgical equipment and related software, orthopaedic implants, tissue ablation tools, navigation consumables, and other miscellaneous instrumentation necessary for the execution of reconstructive joint replacement procedures. The company has not made 510(k) premarket notification submissions or obtained 510(k) clearances for any of its product candidates. FDA approval is required to market our products and the company has not obtained FDA approval for any of its product candidates.

On February 24, 2020, the company executed an industrial net lease at 3913 Todd Lane in Austin, Texas, which serves as its new headquarters.

Our Background

Our company’s business is based on ideas formulated by Dr. Douglas Unis, an Associate Professor of Orthopaedic Surgery, and technology developed by Dr. Unis, Professor Anthony Costa, the head of the Neurosurgery Simulation Core, and Sulaiman Somani, a medical student at the Mount Sinai School of Medicine (“MSSM”).

Our founding philosophy is that advances in technology will usher in new way of thinking about reconstructive joint procedures and orthopedic implants. We believe that the future of orthopedic joint replacements lies in build-to-order, press-fit patient optimized implants that are inserted into bone cavities prepared by high precision robotic tools and that rely on natural biologic fixation rather than cement. We believe that to facilitate the cost-efficient delivery of anatomy restoring patient optimized implants it is necessary to develop efficient processes for designing and fabricating implants and surgical plans. We also believe that to prepare the surgical plans and execute the robotic procedures advanced imaging such as a CT scan or MRI are required. Patient optimized implants require high-precision bone preparation that moves beyond two dimensional planar cuts or alignment, for example. It is our assessment that for these processes to be truly scalable they require a high degree of optimization and a high functioning navigated surgical robot capable of executing complex cutpaths; i.e. a product solution architecture with image processing, scalable customized implant design, pre-operative planning, and robotic execution.

It is our view that press-fit 3D printed patient optimized implants that rely on biologic fixation will prove to be clinically superior over the long term while also alleviating the tremendous inventory burden and capital inefficiencies of generic implant distribution. We believe that implants should be designed and optimized to fit and restore a patient anatomy and that the ability of a robot to execute irregular cuts could exceed the capabilities of even the most skilled surgeons. Monogram believes that the use of patient specific implants and robotic surgery will, over time, reduce complication, failure rates and reduce costs considerably.

Principal Products and Services

Monogram’s primary business will be to design and manufacture optimized total knee replacements, and eventually, if we are successful at commercializing our total knee replacement and have sufficient capital and market interest, hip, knee, shoulder and extremities implants using primarily 3D printed manufacturing as well as the equipment required for insertion, including:

· Navigated surgical robots with optical tracking equipment and a cutting end-effector,

· Pre-operative and intra-operative software guidance application,

· Consumable Tissue ablation tools, and

· Navigation consumables (fiducial markers, tracked retractors, etc.).

The Monogram robotic system and related hardware (optical tracking equipment, end-effector, etc.) are multi-use capital equipment. To properly use the robotic system, Monogram’s pre-operative planning software, robotic controls and intra-operative software are needed. This software will be subject to an annual license, fees for which will be based on the scope of use (for example total knee arthroplasty). Each clinical application will be billed separately. During the procedure, a mix of re-usable and single use instrumentation is needed. The elements of our system are sold separately but generally must be used with the system to properly perform its intended clinical function.

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A significant percentage of orthopaedic medical devices are outsourced to original equipment manufacturers (OEMs). Monogram intends to outsource the manufacture of its products (including implants and instrumentation needed to execute reconstructive joint replacements) to established suppliers that may already be approved suppliers for the most significant market participants and may have decades of product-specific manufacturing expertise.  On or around March 31^st, 2020, Monogram entered into a supply and license agreement with a medical technology company with manufacturing capabilities that markets their own branded orthopaedic products. Monogram intents to secure the supply of certain components from this company. Monogram intends to work with FDA registered ISO 13485 approved suppliers with the proper Quality Management Systems and product specific expertise.

According to analysis conducted on orthopaedic procedures, as of 2019 the average cost of implant components for total hip procedures was approximately $5,004 and for primary total knee procedures $4,325. Monogram expects to price our products consistent with the market.  

Market

According to sources and analysis trusted by management, the orthopaedic devices market is considered to be highly concentrated, with the top seven market participants accounting for almost 65% of total sales as of 2019. The joint reconstruction devices market, which will be Monogram’s primary target market, reconstructive joint replacements, is even more concentrated with the top four market participants accounting for approximately 73% of sales for the total market. The knee market segment is even more consolidated with the four most significant players controlling 82% of the market and no other company controlling more than 2.2%. The total joint replacement devices market as of 2019 was approximately $19.6 billion globally. In the United States, the number of hip replacement procedures was estimated to be to 669,100 and the number of knee replacements was estimated to be 1,059,200 in 2019.

Most patients who undergo reconstructive joint replacement surgeries are aged between 50 and 80 years old, with the average patient age for hip and knee replacements around approximately 65 years of age. Many of these patients rely on third-party payors, principally federal Medicare, state Medicaid, and private health insurance plans, to pay for all or a portion of the costs and fees associated with joint replacement surgeries.

According to the orthopaedic industry statistical analysis and research, the reconstructive joint replacement market is expected to grow at an annual rate of between 3 and 4 percent with growth driven primarily by an aging population, the obesity epidemic and developments in advanced materials that have improved the longevity of implants and their efficacy for younger patients which grows the patient candidate pool. The fastest-growing patient demographic are patients aged 45 to 54 years of age. It should be noted that COVID-19 has had a significant and material adverse impact on the orthopedic market that will likely result in permanent demand destruction. These market growth estimates may not properly factor in the effects of the COVID-19 crisis, and management expects that the market for orthopaedic procedures could shrink and that the adverse impacts could last for an extended period.

Management believes that the market for robotics and surgically prepared press-fit implants will outpace broader market growth primarily because of the limited market penetration and observed growth of the Stryker Corporation, which utilizes navigated robotics and press-fit implants. In particular, management has paid close attention to Stryker’s performance in the CT based robotically prepared press-fit knee market. Stryker’s $241.6M year-over-year revenue growth in joint replacement sales from 2018 to 2019 was approximately 2.5 times as much as Zimmer Biomet, Depuy Synthes and Smith & Nephew year-over-year revenue growth combined. The Stryker Corporation markets the MAKO, a robotic-arm assisted technology that uses a CT-based preoperative plan to help surgeons provide patients with a personalized surgical experience. From 2018 to 2019, the Styker Corporation increased sales in its knee segment by 7.7%. Monogram believes this growth indicates low penetration of press-fit knees as a percentage of Total Knee Replacements.

According to sources and analysis trusted by management, less than 10% of knees are uncemented. The Stryker Corporation has indicated in a Company Conference Presentation on February 27, 2019 at the SVB Leerink Global Healthcare Conference, that there are 5,000 orthopaedic hospitals in the US, the majority of which they think would be a candidate for at least one robot. As of Q4 2019, the Stryker Corporation had approximately 700 robots installed in the US. According to another source trusted by the robotic assisted procedure growth rate in knees may be as high as 29.2% compounded annually over the next 7 years. Monogram management believes that robot penetration and the use of surgical robots for bone preparation of press-fit implants remains low. This is, in part, why management believes it is in the best interest of the company to simultaneously pursue the development of a novel press-fit knee that can be inserted with a robotic system.

Management believes that optimized press-fit (also “uncemented”) implants combined with navigated robotic insertion will grow, driven by an industry focus on normalizing patient outcomes and efforts to mitigate clinical risk and improve productivity (one of the potential benefits of not using bone cement). At the same conference, the Stryker Corporation described the limitations of cement; handling time, set-up time, odor related to it, and most significantly, leaving behind another foreign body that can degrade over time and cause implant loosening. Monogram’s implants will not utilize bone cement, which we believe provides an opportunity for us to disrupt this market, especially when combined with a surgical robotic system. With the technology and product infrastructure we are developing, we believe we may be in a prime position to capitalize on this growing market. Because press-fit implants rely on natural biologic fixation rather than cement, the initial stability of the implants may be important to facilitate proper osteointegration and long-term stability. Management believes that these types of implants are well suited for a surgical robotic system capable of executing high accuracy cuts.

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Competition

We face competition from large, well-known companies in the medical device industry as a whole, as well as specifically in the orthopaedic medical device industry. Currently, the top five market participants in the joint replacement devices market are Zimmer Biomet Holdings, Inc., DePuy Orthopaedics, Inc., a Johnson & Johnson company, Stryker Corporation, and Smith & Nephew, Inc. These companies dominate the market for orthopaedic products. These companies, as well as other companies like ConforMIS, Inc., offer implant solutions, including (depending on the competitor) a combination of conventional instruments and generic implants, robotics and generic implants, or patient-specific instruments (“PSI”) and cemented patient-specific implants for use in conventional total and partial orthopaedic replacement surgeries.

Relevant technical considerations for the evaluation of orthopaedic surgical robotics include:

· The use of advanced imaging for pre-operative planning; for example, the Mako Robot, which is owned by the Stryker Corporation, uses a CT scan to develop the pre-operative plan;

· The degrees of freedom of the robotic system; for example, Monogram is trying to commercialize a seven degree-of-freedom robotic arm;

· The use of a cutting end-effector; some robotic systems do not utilize cutting end effectors but robotically position jigs that constrain the manual instrumentation used to execute the cutting;

· The execution of the surgical plan; some robotic systems require the user to initiate the cutting and constrain the tool within a virtual cutting boundary while in other robotic systems, the robot is “active,” i.e., the robot executes preplanned cut paths.

· The use of navigation for real-time object tracking (usually optically); some robotic systems do not actively track objects in the surgical field.

Currently, we are not aware of any widely commercialized orthopaedic companies that broadly offer robotic technology in combination with surgical navigation for the insertion of patient-specific press-fit orthopaedic implants. To our knowledge the only use of robotic technology in combination with surgical navigation is for the insertion of generic orthopaedic implants. These competitors and other medical device companies have significant financial resources. They may seek to extend their robotics and orthopaedic implant technology to accommodate the robotic insertion of patient-specific implants. A number of these and other companies also offer surgical navigation systems for use in arthroplasty procedures that provide a minimally invasive means of viewing the anatomical site.

Our Innovative Approach

Monogram’s principal innovation over our competition will be our ability to produce robotically inserted press-fit orthopaedic implants rapidly and at scale. The product solution architecture that we are developing may enable the rapid fabrication of optimized robotically inserted orthopaedic implants.

The Monogram technology platform consists of a workflow to designate optimized press-fit implants from patient-specific CT scans, and integrate into a workflow for robotic execution. We seek to optimize the design and insertion of press-fit implants using data from raw CT images. The navigated robot is designed to execute cut paths that may be optimized for time to surgically prepare the corresponding cavities to facilitate high-precision insertion of the implants.

We believe that Monogram’s navigated robot features several enhancements that may enhance the user experience as compared to the current robots in use. The robot features seven degrees-of-freedom with control algorithms that leverage the kinematic redundancy of the arm to avoid interoperative boundaries and optimize the surgical execution. The company is exploring methods of tracking objects that may be of clinical significance that may not be visible from CT images. Monogram is also working on trying to reduce surgical time and improve the accuracy of execution to the greatest extent possible. For example, the company is researching the accuracy of various cutting instruments to determine if, for instance, a mill can prepare cuts with greater precision than a saw in a time-efficient manner. The management team believes that a highly dependable robot that reduces surgical time while executing high accuracy cuts is the highest priority for successful market adoption.

Press-fit orthopaedic implants are generally understood to perform better when high initial stability is achieved. Stability may depend on design features and a tight fit. It is not always straightforward to design implants that can be both easily inserted and removed while remaining highly stable. The Monogram press-fit implants are designed such that cortical contact, and therefore stability, are maximized while remaining insertable. The Monogram implants are designed to reconstruct the native patient anatomy as closely as possible. A challenge with press-fit orthopaedic implants is also removal. Implants that become infected may need to be removed. Monogram is working on trying to develop highly stable implants that can also be easily removed without causing significant damage to the remaining bone.

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With generic implants in hips, for example, manual bone preparation can contribute to periprosthetic fracture, dislocation, leg length inequality, subsidence and early loosening, and suboptimal function outcomes. With generic knee implants, aseptic loosening of the tibial component and malalignment can be reasons for failure. Current hip stems, for example, can have limited options to restore anatomy. For instance, most implants are available in only two widths despite wide human anatomic variations. Generic implants can be geometric as opposed to organic in shape, which limits the amount of direct bone contact required for initial stability and long-term biological fixation. There is currently no commercially viable way to produce implants matching both the internal bone cavity and the external biomechanics of the joint. The challenges of designing implants that restore anatomy, are highly stable and easily revisable are significant. There are currently limited methods for precisely sculpting an implant’s exact complement in the bone.

Our surgical approach will attempt to use additively manufactured (AM) press-fit tibial knee implants that will require robotically milled complementary cavities to be insertable. For our first-generation products, we will be combining a novel Monogram tibial design with a licensed generic femoral implant, inserts, and locking mechanism to try to reduce the initial complexity of the development. To try and reduce the regulatory risk, we will be making the first-generation implant insertable with manual instrumentation as well as robotically so that the implant and robot can be submitted to the FDA as separate submissions. Monogram is a pre-commercialization company that has not yet validated our manufacturing method or the clinical efficacy of our products. The scope of development and capabilities may be affected by our ability to commercialize certain aspects of our technology. The commercial implementations of our designs may differ considerably from the initial design concepts. For example, cutting titanium is challenging and may require design adjustments. The goal of our implants is to more accurately restore patient anatomy and mitigate some of the potential causes of failure described above. We have conducted preliminary testing that we interpret to be supportive of our hypothesis that more accurate restoration of patient anatomy and robotic insertion of patient-specific implants improves initial stability, and we believe to warrant further research. We will continue to focus our development efforts with a focus on high accuracy robotic execution, and implant design. Our testing will likely include comparisons with implants that may represent the existing standard of care as a benchmark to try and demonstrate that the initial stability of our implants shows less micromotion than their generic counterparts.

Furthermore, validation of the mechanical strength of our products is critically important to our success. In addition to stability testing, our R&D efforts will also test the mechanical strength requirements mandated by the FDA. Considerable work remains to validate our implant design. Robotic bone preparation for the insertion of implants is challenging and requires many technical steps; for example, the robot must be properly calibrated, the patient bone must be accurately correlated to the pre-operative plan, the robotic arm control must efficiently execute the plan, etc. There are numerous sources of error that make it challenging to prepare cavities with sufficient accuracy. Our robot, the KUKA LBR Med, has never been used for this application. We have found that to make cavities in simulated bone specimens for the insertion of our implants is highly challenging. We have not yet achieved high accuracy cuts in a cadaveric bone specimen. Also, our robotic execution is currently more time consuming than manual insertion methods. The added time to register the bone and to robotically execute the cuts is a disadvantage of our system. While our system has performed well in synthetic bone specimens in the past, we need to prove commercial feasibility in a range of human bones to test our ability to produce corresponding implants and cavities.

Management believes that the Monogram equipment may be cheaper and more capital efficient than traditional knee and hip replacement systems. For example, the Mako robot produced by Stryker Corporation (Ticker: SYK) is the dominant leader in navigated surgical robotics with 700 robots installed globally, based on public information from a Q4 2019 Stryker Corp Earnings Call. Further, public information from a Q3 2018 Stryker Corp Earnings Call, Stryker established that it was selling its Mako robots for $1,000,000 while reporting gross profit margins on its robot sales of 62%. Our management believes that this could imply a production cost of approximately $380,000 per robot. We estimate the cost to produce our robotic system will be below this cost. Investors should note, our assumptions about the production costs of Stryker may be inaccurate, or may not be current. Furthermore, management would expect that any competitors in the market with competitive offerings would be in a better position to discount their products than Monogram because they are larger and more established companies. We do not anticipate that reducing the capital required to distribute our products will have a material impact on demand for our products.

Sales & Orders

The specific sales process for each of our product categories is as follows:

Surgical Robot with End-Effector

Generally, the company must identify a surgeon within the organization willing to advocate for the purchase of the capital equipment to the hospital. Orders are placed by hospital finance and buying departments in advance of any surgical procedures. Cost is often a significant objection to purchase. Monogram intends to address this objection by offering high performing equipment at a price that is competitive with other market participants. Some of Monogram’s competitors offer hospitals financing options for large equipment purchases. Monogram will explore offering financing options. Investors should note that Monogram may incur losses from the initial placement of robotic systems at discounted prices.

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Monogram intends to distribute its products initially through independent distributors and contractors. We will be making efforts to secure contracts with national Group Purchasing Organizations, although we cannot guarantee favorable agreements will be secured. Monogram will also likely sell service contracts and extended warranties.

Cutting Tools and Navigation Consumables

Consumable equipment is generally billed on a per-use basis and associated with the specific surgical case for which they were used. The hospital takes stock of consumed materials which are billed by Monogram.

Technology Platform

Monogram will license its technology platform to hospitals, which will provide those hospitals with access to Monogram’s surgeon planning portal. The motion control and intra-operative control algorithms are embedded as part of the robotic surgical system.

Implants

Monogram will receive orders for implants through the Monogram technology platform. The hospital will generally aggregate the materials used in a given surgical case, which are billed by Monogram.

Design

The Monogram press-fit implant designs seeks to try to optimize for initial stability. Monogram uses raw CT images to guide this process. Monogram utilizes technology to determine the implant designs that are sent to a manufacturer to produce. Monogram may combine specific existing generic implant components with specific proprietary monogram components. For example, for knees, we may combine our tibial component with a generic locking mechanism, insert, and femoral component. For hips, we may combine a Monogram hip stem with other generic components of the total hip implant system, such as the head, liner, and acetabular cup. Monogram will be producing a proprietary tibia, but the other components of the total knee replacement (femoral implant and plastic insert) may be standard. For the first generation Monogram knee, we will not develop a custom femur or inserts. Monogram is focusing its development efforts only where management believes there is a clear potential to drive clinical benefit from technology advances.

Monogram’s other products are pre-designed, and therefore will only require manufacture and distribution to reach the end-customer.

Manufacturing

The implant designs generated with the Monogram technology will be 3D printed out of titanium. Our titanium implants will be a biocompatible medical-grade titanium alloy with a chemical composition corresponding to ISO 5832-3, ASTM F1472, and ASTM B348. Our implants will either be manufactured by an established ISO13485 contract manufacturer or the medical technology partner from which we have licensed certain implant components. The company is in discussions with development and manufacturing companies for these services.

Manufacturing of our surgical robots, navigation consumables, and cutting tools will be outsourced to well-established FDA registered ISO13485 approved manufacturers with proven quality management systems. Our robot arm is the LBR Med, which is manufacturing by the KUKA Robotics Corporation.

Quality Control and Dispatch

Our proposed distribution model contemplates using a distribution facility to ship our products to customers. Such facilities will receive final products from our suppliers that have been approved by their respective quality management systems. Our distribution facility will then conduct a final inspection of the products, and, once approved, ship them to our customers. Our distribution facility may assemble or repackage certain of these components for shipment.

Our Market

We intend to market our products to orthopaedic surgeons, hospitals (or other medical facilities), and patients. Our ideal customers are hospitals in high population metropolitan regions that tend to employ high-volume technology-focused surgeons.

Through the use of direct sales representatives, independent sales representatives, and distributors, we intend to market and sell our products in the United States and over time in other markets if we are able to scale operations in the United States successfully. We intend to try and enter contractual arrangements with national Group Purchasing Organizations that may contract with hospitals to source products.

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Research and Development

The company currently has several Research and development (“R&D”) initiatives underway. These initiatives include micromotion studies of press-fit knee implants, testing of a hybrid knee that combines generic femoral components and locking mechanisms, cadaveric testing and performance testing of a robot mounted navigation system. In addition Monogram is testing novel methods of registration and tracking. Much of our current research also relates to improving the accuracy of robotic execution with a focus on arm calibration and control as well as navigation. R&D amounted to $194,287 and $31,700 for the years ended December 31, 2019 and 2018, respectively. In 2018, the majority of our R&D expenses were related to costs incurred developing and testing our patient-specific hip implant for initial stability with the UCLA Orthopaedic Biomechanics Laboratory. In 2019, the majority of our R&D related expenses were related to research and testing of our patient optimized tibial component with the Orthopaedic Biomechanics and Advanced Surgical Technologies Laboratory at the University of Nebraska Medical Center and the development of our navigated robotic system. For the six months ended June 30, 2020, R&D amounted to $282,955. The majority of our 2020 R&D expenses have been in connection with several R&D initiatives underway, including testing configurations of our press-fit knee implants to optimize stability, testing alternative methods of robotic navigation, testing and optimizing cutting instrumentation and tooling, and performance testing of our surgical robot and related surgical workflows. We expect to continue spending at elevated levels on R&D as we continue our development. We intend to continue our research such as cadaveric studies of our knee implants for both robotic and manual placement, development of our surgical navigation systems, development of our guidance applications and continued development and testing of our implants.

The company has installed a 352 square foot cadaver lab in its Austin facility to support the research and development initiatives of the company. The cadaver lab has a dedicated surgical robot and navigation system that can be used to support testing and product development. Monogram currently has 3 surgeons under contract to support our engineers with subject matter expertise, design input, and testing services.

Employees

The company currently has 12 full-time employees that are expected to work out of our headquarters at 3913 Todd Lane, Suite 307, Austin, TX 78744. Due to the COVID-19 pandemic, 3 of our employees that were expected to relocate have been unable to relocate to Austin, TX.

Regulation

Medical products and devices are regulated by the Food and Drug Administration (the “FDA”) in the United States and can be regulated by foreign governments for devices sold internationally. The Federal Food, Drug, and Cosmetic Act and regulations issued by the FDA regulate testing, manufacturing, packaging, and marketing of medical devices. Under the current regulations and standards, we believe that our products and devices are subject to general controls, including compliance with labeling and record-keeping rules. In addition, our medical devices require pre-market clearance, which for our products and devices will require a 510(k) premarket notification submission.

Further, our manufacturing processes and facilities are also subject to regulations, including the FDA’s QSR requirements (formerly Good Manufacturing Practices). These regulations govern the way we manufacture our products and maintain documentation for our manufacturing, testing, and control activities. In addition, to the extent we manufacture and sell products abroad, those products are subject to the relevant laws and regulations of those countries.

Finally, the labeling of our products and devices, our promotional activities and marketing materials are regulated by the FDA and various state agencies. Violations of regulations promulgated by these agencies may result in administrative, civil, or criminal actions against our manufacturers or us by the FDA or governing state agencies.

As of the date of this Offering Circular, Monogram has not yet received clearance to market its products in the United States (FDA) or internationally, and as such is not currently selling and distributing any products. Monogram has engaged a regulatory consulting group, “Musculoskeletal Clinical Regulatory Advisers, LLC” to assist with its 510(k) premarket notification submission for our system of products and technology. On March 31, 2020, Monogram executed a binding term sheet that outlined a license, supply, and distribution agreement with a medical device company with orthopedic implants. Management believes it is in the best interest of the company to pursue separate regulatory submissions for the robot and implants. Our first generation total knee implants will be insertable with both manual instrumentation and robotically. We hope to submit to the FDA our 510(k) premarket notification submission for the robot within three years of the closing of the Offering, which occurred in April 2020, and expect approval by the FDA within 12 months of submission. Monogram believes it is in the best strategic interests of the company to pursue the development of the total knee implants and surgical robot simultaneously. Management believes we may require considerably more capital beyond what has already been raised to pursue a separate implant approval and robot approval. We anticipate that we may be able to submit to the FDA our 510(k) premarket notification for the implants in 2021. However, we may need to make adjustments to the design based on surgeon feedback and other considerations that could extend this timeline from previous expectations. The design is not finalized and management is currently evaluating the design and the impact of design changes on the costs and the timeline. With sufficient funding and no clinical data request, we do not anticipate that the knee implant 510(k) would FDA approval later than 2022. The implants would be designed for insertion with both manual instruments and with a surgical robot, but would not be approved for insertion with the surgical robot until such time as the FDA approved the surgical robot. For the robot submission, the company expects FDA approval of its 510(k) premarket notification by 2024. If we do not raise sufficient capital in this offering it is likely additional capital will be required to complete the submission and obtain the FDA approval (see “USE OF PROCEEDS TO ISSUER” section). Notably, these timelines for both the implants and the robot assume no requests for clinical data from the FDA. The company does not anticipate it will be able to accelerate the timeline for the robot submission at this time.

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Intellectual Property

The majority of our patents or trademarks are licensed from Mount Sinai. The following patent applications are currently under review:

ID Type	Patent Name	Application	Filing Date
Patent Application Number	APPARATUS, METHOD AND SYSTEM FOR PROVIDING CUSTOMIZABLE BONE IMPLANTS	16/153,334	5-Oct-18
Patent Application Number	CUSTOMIZED TIBIAL TRAYS, METHODS, AND SYSTEMS FOR KNEE REPLACEMENT	PCT/US2020/020279	28-Feb-20
U.S. Provisional Patent Application Number	REGISTRATION AND/OR TRACKING OF A PATIENT'S BONE EMPLOYING A PATIENT SPECIFIC BONE JIG	62/990,827	17-Mar-20
Patent Application Number	CUSTOM HIP DESIGN AND INSERTABILITY ANALYSIS	PCT/US2020/028499	16-Apr-20
U.S. Provisional Patent Application Number	CUSTOMIZED TIBIAL TRAYS, METHODS, AND SYSTEMS FOR KNEE REPLACEMENT (with screws)	63/027,098	19-May-20
Patent Application Number	A SYSTEM AND METHOD FOR INTERACTION AND DEFINITION OF TOOL PATHWAYS FOR A ROBOTIC CUTTING TOOL	PCT/US20/33810	20-May-20
Patent Application Number	ROBOT MOUNTED CAMERA REGISTRATION AND TRACKING SYSTEM FOR ORTHOPEDIC AND NEUROLOGICAL SURGERY	PCT/US2020/035408	29-May-20

Additionally, the company has developed its own intellectual property, which would not require a license from Mount Sinai. Information on patent filings by the company are included below:

ID Type	Patent Name	Application	Filing Date
Provisional Patent Application	NAVIGATION AND/OR ROBOTIC TRACKING METHODS AND SYSTEMS	63/037,699	11-Jun-20

Acquisition Opportunities

We do not have any current plans to acquire the assets or operation of other entities, but we believe that opportunities may become available. Should there be an opportunity to make an acquisition, our goal would be to ensure that the assets or operations to be acquired are a good fit, and the acquisition terms are in line with the benefits to the company. Acquisitions would likely be in the form of cash and equity. The cash portion of any acquisition would likely come from obtaining financing from lenders or future equity financing rounds, neither of which have been identified. Such financing would require that the company take on new expenses related to either the servicing of new debt or broker commission fees. Any equity used for an acquisition would come from issuing additional shares of the company’s stock in exchange for the stock of the acquired entity. The issuance of stock would likely occur in a transaction that is not registered with the Securities and Exchange Commission and could result in the dilution of the investors in the Offering. Additionally, investor consent would not be sought if the company had sufficient authorized shares available.

Litigation

From time to time, the company may be involved in a variety of legal matters that arise in the normal course of business. The company is not currently involved in any litigation, and its management is not aware of any pending or threatened legal actions relating to its intellectual property, conduct of its business activities, or otherwise.

THE COMPANY’S PROPERTY

The company leases office space at 3913 Todd Lane, Suite 307, Austin, TX 78744, which serves as its headquarters. Monogram intends to lease distribution facilities in the future.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the six months ended June 30, 2020 and 2019 and for the fiscal years ended December 31, 2019 and December 31, 2018 should be read in conjunction with our financial statements and the related notes included in this Offering Circular. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

Monogram Orthopaedics, Inc was incorporated under the laws of the State of Delaware on April 21, 2016 as “Monogram Arthroplasty Inc.” On March 27, 2017, the company changed its name to “Monogram Orthopaedics, Inc.” Monogram Orthopaedics is developing a product solution architecture intending to enable mass personalization of press-fit orthopedic implants by linking 3D printing and robotics via automated digital image analysis algorithms. We have not yet made 510(k) premarket notification submissions or obtained 510(k) clearances for any of product candidates. FDA approval is required to market our products and the company has not obtained FDA approval for any of our product candidates. The company has a robot prototype that can execute optimized paths for high precision insertion of optimized press-fit implants in synthetic bone specimens. These implants and cut-paths are prepared based on proprietary Monogram designs. Monogram intends to produce and market robotic surgical equipment and related software, orthopaedic implants, tissue ablation tools, navigation consumables, and other miscellaneous instrumentation necessary for the execution of reconstructive joint replacement procedures.

Results of Operations

Six months ended June 30, 2020 compared to six months ended June 30, 2019

The company is in an early stage of development.  The company did not generate revenues for the six months ended June 30, 2020 and 2019.

Our costs and expenses currently consist of general and administrative expenses primarily composed of salaries, travel, and office expenses of administrative employees and contractors, software license fees, and other overhead expenses. Costs and expenses totaled $4,393,372 for the six months ended June 30, 2020 compared to $558,510 for the six months ended June 30, 2019, an increase of $3,834,862, primarily due to:

· General and administrative expenses increased to $143,180for the six months ended June 30, 2020 from $129,000 for the six months ended June 30, 2019, an 11% increase, due primarily to increases in fees incurred in connection with the Series A Offering, as well as increases in salaries and payroll taxes, reductions in insurance premiums, and small medical equipment purchases that were not made in 2018;  

· Marketing and advertising expenses increased to $929,958 for the six months ended June 30, 2020 from $16,635 for the six months ended June 30, 2019 in connection with the Series A Offering. Marketing and advertising efforts by the company prior to commencing the Series A Offering were minimal;

· Wages and payroll related expenses increased to $683,663 for the six months ended June 30, 2020 from $99,537 for the six months ended June 30, 2019, an increase of $584,126 primarily due to increases in personnel in 2020.

· Stock-based compensation expenses during the six months ended June 30, 2020 were $2,084,064, of which $3,737 was incurred during the six months ended June 30, 2019, in conjunction with the issuance of Common Stock and options to purchase Common Stock to employees, advisors and consultants of the company under the company’s 2019 Stock Option and Grant Plan, which was adopted on May 7, 2019, and subsequently amended on August 15, 2020. The vesting of stock options accounts for $4,740 in stock-based compensation and the issuance of 519,831 shares of Common Stock was recorded as stock-based compensation of $2,079,324;

· Legal and professional services expenses increased to $253,906 for the six months ended June 30, 2020 from $92,707 for the six months ended June 30, 2019, an increase of 174% due to fees incurred in connection with the issuances of convertible notes, intellectual property filings, contract negotiations, and the Series B Offering;

· Research and development costs increased to $282,955 for the six months ended June 30, 2020 from $203,552 for the six months ended June 30, 2019, a 39% increase, due to research related to testing of our patient optimized press-fit implant components with the Orthopaedic Biomechanics and Advanced Surgical Technologies Laboratory at the University of Nebraska Medical Center and the development of our navigated robotic system.

The company also had a loss on a change in derivative liabilities of $717,887 for the six months ended June 30, 2020, which was not incurred during the six months ended June 30, 2019. This occurred primarily due to an increase in the total value of the company as a result of the Company issuing shares and raising capital in 2020, which led to an increase in the amount of shares a certain warrant holder of the company (Pro-Dex, Inc.) could acquire pursuant to the anti-dilutive rights of the warrants held by Pro-Dex, Inc. The effect of those rights is that at any time we issue additional shares of our stock that would dilute Pro-Dex, Inc., Pro-Dex, Inc. has the right to acquire additional shares to maintain their pro rata ownership. Since the issuance of additional shares in the Series A Offering increased the outstanding shares of capital stock of our company, Pro-Dex, Inc. had the right to acquire more shares of the Company, increasing the value of their investment and resulting in an increase in the company's derivative liabilities for the six months ended June 30, 2020.

As a result of the foregoing, the company generated a net loss of $5,143,448 for the six months ended June 30, 2020 compared to a net loss of $615,552 for the six months ended June 30, 2019, a $4,527,896 increase in net loss. Excluding the stock-based compensation expense of $2,084,064, however, the company’s net loss was $3,059,384 as of June 30, 2020.

We expect our legal and professional, research and development, payments to contractors, and marketing and advertising expenses to increase in connection with the Series B Offering, for which we made our initial filing with the SEC on August 28, 2020. We expect wages and payroll tax expenses to increase following the Series B Offering. We expect rent to decrease following a move to a less expensive facility.

Year ended December 31, 2019 Compared to Year ended December 31, 2018

The company is in an early stage of development.  The company did not generate revenues for the years ended December 31, 2019 and 2018.

Our costs and expenses currently consist of general and administrative expenses primarily composed of salaries, travel, and office expenses of administrative employees and contractors, software license fees, and other overhead expenses. Costs and expenses totaled $1,676,695 for the year ended December 31, 2019 compared to $650,127for the year ended December 31, 2018, an increase of 158%, primarily due to:

· General and administrative expenses increased to $179,671 for the year ended December 31, 2019 from $101,679 for the year ended December 31, 2018, a 77% increase, due primarily to increases in fees incurred in connection with the Offering, as well as increases in salaries and payroll taxes, reductions in insurance premiums, and small medical equipment purchases that were not made in 2018;  

· Marketing and advertising expenses increased to $205,207 for the year ended December 31, 2019 from $3,154 for the year ended December 31, 2018 in connection with the Offering that was conducted by the company in 2019. Marketing and advertising efforts by the company prior to commencing the Offering were minimal;

· Wages and payroll related expenses decreased to $344,757 for the year ended December 31, 2019 from $378,523 for the year ended December 31, 2018, a 8.9% decrease primarily due to reductions in company personnel in 2019. However, the company incurred $614,870 in stock-based compensation expenses during the year ended December 31, 2019, of which $0 was incurred during the year ended December 31, 2018, in conjunction with the issuance of Common Stock and options to purchase Common Stock;

· Legal and professional services expenses increased to $106,140 for the year ended December 31, 2019 from $104,114 for the year ended December 31, 2018, an increase of 1.9% due to fees incurred in connection with the issuances of convertible notes, intellectual property filings, contract negotiations, and this Offering;

· Research and development costs increased to $194,287 for the year ended December 31, 2019 from $31,700 for the year ended December 31, 2018, a 512.9% increase, due to research related to testing of our patient optimized press-fit implant components with the Orthopaedic Biomechanics and Advanced Surgical Technologies Laboratory at the University of Nebraska Medical Center and the development of our navigated robotic system; and

Other expenses increased to $119,570 for the year ended December 31, 2019 from $62,141 for the year ended December 31, 2018, an increase of 92.4%. This increase was primarily due to:

· Interest expenses increasing to $124,470 for 2019 from $62,184 for the year ended December 31, 2018, an increase of 100.2% primarily due to the issuance of additional convertible notes see “—Liquidity and Capital Resources” below; and

· Depreciation expense increasing to $31,763 for 2019 from $30,957 for 2018, an increase of 2.6%, due to depreciation related to equipment purchased in 2018 and 2019 that were not subject to a full year of depreciation in 2018.

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As a result of the foregoing, the company generated a net loss of $1,796,265 for the year ended December 31, 2019 compared to a net loss of $712,268 for the year ended December 31, 2018, an 152.2% increase in net loss.

Since the end of the period covered by our financial statements, our legal and professional, research and development, payments to contractors, and marketing and advertising expenses are expected to increase in connection with the Offering. Our expenses related to wages and payroll taxes have temporarily decreased due to employees voluntarily deferring wages and temporary reductions in headcount. We expect wages and payroll tax expenses to increase following the Offering. We expect rent to decrease following a move to a less expensive facility. In addition, our future financial statements will show additional expenses related to acquisition of components related to its novel knee system. On July 1st, 2020, the company entered into a non-exclusive distribution agreement with a third-party manufacturer for an FDA approved total knee system, specific components of which it intends to integrate into its novel knee system for future release. As part of this agreement, the company placed an initial purchase order for inventory totaling approximately $500,085. As of the date of this Offering Circular, the company has made this purchase. The agreement does not require the company to submit any further purchase orders.

Liquidity and Capital Resources

At June 30, 2020 the company’s cash on hand was $9,415,863. The company is not generating revenues and requires the continued infusion of new capital to continue business operations. The company has recorded losses since inception, but has raised capital through securities offerings. As of June 30, 2020, the company had working capital of $7,934,034 and a stockholders’ equity of $8,814,312. The company has historically been capitalized by contributions from related parties and its officers and directors. More recently, it has raised capital through securities offerings. The company plans to continue to try to raise additional capital through crowdfunding offerings, equity issuances, or any other method available to the company. Absent additional capital, the company may be forced to significantly reduce expenses and could become insolvent.

On September 20, 2019, the company commenced an offering under Regulation A under the Securities Act of 1933 pursuant to which it offered shares of its Series A Preferred Stock (the “Series A Offering”). As of December 31, 2019, the company had sold 702,021 shares of its Series A Preferred Stock in the Series A Offering for total gross proceeds of $2,808,084. On March 17, 2020, the company filed a 253G2 supplement in connection with the Series A Offering, indicating that the company intended to terminate the Series A Offering on April 24, 2020 (the “Termination Date”). The company terminated the Series A Offering on the Termination Date. In the six months ended June 30, 2020, the company executed five additional closings and sold an aggregate of 2,940,121 shares of Series A Preferred Stock for gross proceeds of $11,760,484. Offering costs, which were recorded as a reduction in capital in excess of par value, totaled $1,013,860, resulting in net proceeds of $10,746,624.

The company estimates that the proceeds raised from the Series A Offering can continue to fund the company’s current rate of operations through 2021 without raising additional capital. However, the company has determined that additional capital raising activity will be beneficial for enhancing the operations of the company.

On August 28, 2020, the company filed an offering statement on Form 1-A to offer up to 4,784,689 shares of its Series B Preferred Stock (the “Series B Offering”). The SEC has not yet qualified this offering statement.

Issuances of Equity and Convertible Notes

Since its inception, the company has funded operations through the issuance of equity securities and convertible notes. During the year ended December 31, 2018, the company issued convertible for total proceeds of $1,148,000. During the six months ended June 30, 2019, the company did not have any convertible promissory note issuances that resulted in proceeds to the company. In February 2019, the company issued a convertible promissory note to Benjamin Sexson, the company’s CEO, in consideration for deferred compensation in the amount of $48,000 that were converted into convertible notes. For the six months ended June 30, 2019, the company received cash proceeds of $583 from the issuance of shares of Common Stock to its Chief Executive Officer. The company received no cash proceeds from common stock issuances for the six months ended June 30, 2020. As described above, the company sold shares of Series A Preferred Stock in the Series A Offering in 2019 and 2020 – see “Liquidity and Capital Resources”. As described above, the company sold shares of Series A Preferred Stock in the Offering in 2019 and 2020 – see “Liquidity and Capital Resources”.

At June 30, 2020 the company’s cash on hand was $9,415,863. The company is not generating revenues and requires the continued infusion of new capital to continue business operations. As of June 30, 2020, the company had working capital of $7,934,034 and a stockholders’ equity of $8,814,312. The company has historically been capitalized by contributions from related parties and its officers and directors. More recently, it has raised capital through securities offerings. The company plans to continue to try to raise additional capital through crowdfunding offerings, equity issuances, or any other method available to the company. Absent additional capital, the company may be forced to significantly reduce expenses and could become insolvent.

Indebtedness

Since its inception, the company has entered into convertible notes in the combined principal amount of $2,124,000. Convertible notes comprising $1,830,000 of the $2,124,000 bear interest at 6% per year. Convertible notes comprising $294,000 of $2,124,000 bear interest at 4% per year. The combined principal amount and the accrued interest of these notes were $2,329,719 as of December 31, 2019. On April 29^th, 2020, the company repaid a note payable to Pro-Dex, Inc. in the amount of $934,866.67, reducing this total balance. On July 10^th, 2020, the company repaid a note (issued on July 12, 2018) payable to another holder in the amount of $44,000, also reducing its total indebtedness. The remaining balance of these notes was represented by notes that were subject to mandatory conversion upon closing of an equity financing in which the company issues and sells shares of its Preferred Stock for gross proceeds equal to or exceeding $5,000,000. These notes were previously filed as exhibits to the company’s Form 1-A filed on September 10, 2019. On April 23^rd, 2020, the company triggered this conversion from sales of its Series A Preferred Stock in the Offering, resulting in aggregate gross proceeds to the company of $5,057,772 as of the same date. As such, as of the date of this Offering Circular, these notes are no longer outstanding. A total of 255,417 shares of its Series A Preferred Stock have been issued to the noteholders for the conversion of their notes.

As of June 30, 2020, the company had $119,025 total debt, consisting of a Payroll Protection Program (PPP) loan of $79,025 and a $40,000 note that matured in July 2020 and was paid in full. During the six months ended June 30, 2020, the company received a $79,025 Payroll Protection Program (PPP) loan from the U.S. Small Business Administration that carries an interest rate of 1%, has a two-year term with no principal payments for 12 months, and which can be forgiven in full if the company applies for forgiveness and documents that it spent proceeds on allowed expenditures, including payroll cost. The company believes this loan will be forgiven in full.

As of December 31, 2019, the company owed Pro-Dex, Inc. notes payable of $800,000 and accrued interest payable of $117,295. In April 2020, the company paid off this note in full, consisting of $800,000 in principal and $134,867 in accrued interest. Pro-Dex, Inc. also holds anti-dilutive warrants for which the company has recorded a warrant liability of $947,131 as of June 30, 2020.

The company owed Doug Unis, a board member of the company, $71,000 in notes payable and $5,969 in accrued interest at December 31, 2019, that was discharged in full in April 2020 by the issuance of 71,307 shares of Series A preferred Stock. Doug Unis is owed $4,000 in accounts payable at June 30, 2020.

The company owes its Chief Executive Officer $4,518 in accounts payable and $151,427 in salary and bonus payable at June 30, 2020.

The company currently has no material commitments for capital expenditures.

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Trend Information

Our primary addressable market is for knee procedures, specifically primary Total Knee Arthroplasty (“TKA”) procedures (Monogram has a novel Total Hip Arthroplasty (“THA”) design but we will not be pursuing commercialization until after the knee has been successful approved). The intention of reconstructive joint replacement procedures is to replace diseased or damaged bone with fabricated implants designed to restore patient function. Management of the company has reviewed third party reports trusted by management which identify that approximately 1,059,200 TKA procedures where were conducted in the United States in 2019, compared to 1,011,300 TKA procedures in 2018. This increase in TKA procedures represents a year-over-year increase in surgical volume from 2018 to 2019 of 4.7% for TKA procedures. Generally, the fabricated implants are surgically inserted, and fixation is achieved via cement or osseointegration (“press-fit,” “cementless,” “uncemented”). Monogram is focusing its developments on cementless knee fixation.

Joint reconstruction and musculoskeletal care are widely recognized as highly effective treatments as measured by the rates of long-term survivability. As such, we expect the procedure volumes to continue to grow with strong demographic tailwinds. Industry publications identify the global market for Knee Joint Reconstruction Sales in 2019 was estimated to be $9. Those same publications projected the market for Knee Joint Reconstruction Sales to increase to $10.7bn by 2023. While insurers and other healthcare providers such as Centers for Medicare & Medicaid Services ("CMS") seem to recognize that these procedures are generally effective at returning patients to productivity, pressures persist in improving quality and reducing cost. We believe these pressures are a potential tailwind for technologies that help surgeons achieve reproducibly, total “episode of care” positive outcomes (reducing the length of stay, reducing revision surgeries, supporting better patient outcomes, etc.). Notably, growth estimates do not factor in the adverse impacts of the COVID-19 pandemic and are likely overstated.

The push for reproducible positive outcomes has been positive for the adoption of computer assisted surgical robotics. Despite this robot adoption is still early. We believe that robotic adoption and the penetration of computer assistive tools remains in the earlier stages of adoption. For instance, in public information available from its Q4 2019 earnings call, Stryker Corporation indicated that it had performed 24,000 Total Knee procedures in the quarter. At the Evercore HEALTHCONx Healthcare Conference on November 28, 2018, Styker executives indicated that there were approximately 600 robots installed globally but 5,000 hospitals in the US alone that are a target for a least one robot. According to research sources trusted by management, the robotic procedure growth rate may be as high as 29.2% compounded annually over the next 7 years.

It should be noted that the emergence of 3D printing technologies allow manufacturers to print porous structures directly into implants. As identified in the above industry studies, it is our view that the growth and demand for press-fit uncemented implants are increasing and that the penetration of press-fit implants for knee replacements remains low. Further, we believe that the combination of robotics and 3D printing appears to be highly synergistic because of the benefits of precision bone preparation for press-fit implants. Moreover, we believe that advances in 3D printing will continue to improve the mechanical properties and viability of 3D printed implants in a range of applications.

In conclusion, it is our view that computer-assisted robotic procedures will continue to increase market penetration and improve. Advances in image processing, navigation, robotics, and advanced manufacturing are favorable developments.

Relaxed Ongoing Reporting Requirements

If we become a public reporting company in the future, we will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:

· not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

· taking advantage of extensions of time to comply with certain new or revised financial accounting standards;

· being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

· being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

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If we become a public reporting company in the future, we expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an “emerging growth company” for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.

If we do not become a public reporting company under the Exchange Act for any reason, we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semiannual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semiannual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our shareholders could receive less information than they might expect to receive from more mature public companies.

Plan of Operations and Milestones

We are not yet operational and have yet to generate any revenues. We have established the following milestones in our plan of operations for the next 12 months:

· The company has not established a minimum raise requirement. The proceeds from this offering are intended to advance the company farther towards FDA approvals of its 510(k) premarket notifications for its robotic system and knee implant (which we refer to herein collectively as “FDA Approval”). Nonetheless, if we raise the lowest amount set out in “Use of Proceeds” ($5,000,000), the company does not believe it would be able to obtain FDA Approval of each of these products, which the company believes is in the best interests of the company, given management’s view of the growing market demand for both navigated robotics and press-fit total knee implants The company anticipates the total combined engineering development cost to develop and commercialize both the total knee implant and the robotic surgical systems in parallel are approximately $13 million without consideration for the general and administrative costs, sales costs and other capital requirements to inventory, market and promote the finished products. This is an increase over previously anticipated costs disclosed by the company in its offering circular related to its Series A Offering. The increase is primarily related to the need to remediate technical features of both the robot and implants to incorporate findings from testing, expert input, and regulatory input. For example, surgeon feedback and testing of our implant indicates we may need to make significant revisions to the locking mechanism and fixation features. We may have to make significant changes to the arm control and guidance application as part of our regulatory strategy. With sufficient funding, we anticipate we may be able to submit to the FDA our 510(k) premarket notification for the knee implant in 2021. However, we may need to make adjustments to the design based on surgeon feedback and other considerations that could extend this timeline from previous expectations. The knee implant design is still not finalized, and management is currently evaluating the design feedback and the impact of design changes on the costs and timeline. We anticipate that we will file the robotic system with the FDA by 2023. Once submitted, the length of the review process by the FDA for our 510(k) premarket notifications for our robotic system and knee implant is uncertain. The time to obtain FDA Approval could be adversely impacted if the FDA requests clinical data with our submissions or if we encounter unforeseen technical challenges. Further, the FDA could decline to approve our submissions. If we raise less than $15 million in this offering, we will seek additional capital through private offerings to accredited or institutional investors to secure the additional capital that we believe is necessary to reach FDA Approval. However, there is no guarantee we will be successful in doing so.

· In 2020, Monogram’s management has successfully recruited several key engineering positions for the company; specifically, we have hired a Vice President of Engineering, a Director of Implants and Instruments, and a Director of Software.  We have grown the team to 12 full time employees.  Our Vice President of Engineering has significant experience with and will be responsible for supporting the implementation of the company’s Quality Management System.  We anticipate that over the next 12 months we will increasing our headcount to approximately 26 full-time employees to support the growth.

· On July 1^st, 2020, the company entered into a supply and distribution agreement with the same established orthopedic technology company from which on March 31^st, 2020, it previously entered into a licensing agreement.  As part of this distribution agreement, Monogram hired the Senior Director of US Sales of that company to join Monogram as the Sales Manager for the South East Region.  Monogram intends to engage surgeons and coordinate with independent distributors to establish active distribution channels.  Monogram intends to sell future products, in part, through any distribution channels we can establish for these existing products.  As part of these sales efforts, Monogram would share our product pipeline strategy, and on a selective basis under non-disclosure agreements, would bring individual surgeons and distributors to our cadaver lab to demonstrate our products in development.  Monogram management believes that a strategy of building out our distribution and sales channels now with purchased products may be helpful to build interest and accelerate the distribution of our future products if we are able to obtain FDA Approval.  

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· If our distribution and sales strategy described above is successful, we anticipate we will begin selling our knee implants and robot shortly after they receive FDA Approval.  Notably, we will require additional capital to promote our new products.  Furthermore, we will be submitting the knee implant and the robotic system as separate submissions to the FDA.  As such, the first generation knee implant will be insertable with manual instrumentation.  Our objective will be to cultivate surgeon interest in our implants with manual instruments so that when the robot is approved, the transition would be smoother.

· In summary, the company anticipates the total combined engineering development cost to develop and prepare both the total knee implant and the robotic surgical systems in parallel for 510(k) submission are approximately $13,000,000 without consideration for the general and administrative costs, sales costs and other capital requirements to inventory, market and promote the finished products. We estimate that a raise of approximately $15,000,000 will be needed. If we raise less than $15,000,000 in this offering, we will seek to raise additional capital from other sources. If we raise $15 million, we anticipate we may be able to submit to the FDA our 510(k) premarket notification for the knee implant in 2021. However, we may need to make adjustments to the design based on surgeon feedback and other considerations that could extend this timeline from previous expectations.  The knee implant design is still not finalized, and management is currently evaluating the design feedback and the impact of design changes on the costs and timeline.  We anticipate that we will file the robotic system to the FDA by 2023.We cannot anticipate if or when the FDA will approve our submissions. Certain events, such as a clinical data request by the FDA or unforeseen technical challenges, could result in an extended review process, or potentially lead to the FDA declining to approve our submissions. These timeline estimates assume no clinical data requests from the FDA or unforeseen technical challenges.  We do not expect to accelerate these timelines even with additional capital at this time.  As identified in our “Risk Factors,” our timeline to commercialization is dependent on the FDA review process. We expect to generate revenues within a year of FDA Approval.

 

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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Name	Position	Age	Date Appointed to Current Position	Approximate hours per week for part-time employees
Executive Officers
Benjamin Sexson	Chief Executive Officer, President	37	April 2018	N/A
Directors
Benjamin Sexson	Director	37	April 2018	N/A
Dr. Douglas Unis	Director	52	April 2016	4
Rick Van Kirk	Director	60	April 2016	0 (Approx. 8 hours a year)
Noel Goddard	Director	46	July 2020	0 (Approx. 8 hours a year)

(1) Mr. Van Kirk was elected by Pro-Dex, Inc. pursuant to rights granted to Pro-Dex. Inc. via a secured promissory note agreement. The agreement provides that Pro-Dex, Inc. shall have the right to appoint one director of the company so long as Pro-Dex, Inc. holds the note or any of the securities issuable upon conversion of the note. As of the date of this Offering Circular, this note has been repaid, and is no longer outstanding. No portion of the note converted into any securities of the Company.

Benjamin Sexson, CFA – CEO and Director

Benjamin Sexson is the Chief Executive Officer and a Director of Monogram Orthopedics, and has served in such capacities since he joined the company in April 2018. and has Prior to joining Monogram, Mr. Sexson served as the Director of Business Development at Pro-Dex, Inc., one of the largest OEM manufacturer of Orthopedic Robotic End-Effectors in the world from October 2015 to April 2018. In his tenure at Pro-Dex, Mr. Sexson was responsible for helping support the development, management and launch of the company’s first ever custom proprietary product solution and successfully negotiating the highest margin distribution agreements with a major strategic partner. In addition, Mr. Sexson helped secure and negotiate two additional major development agreements and has helped expand the company’s addressable markets from powered surgical tools in CMF to Thoracic, Trauma, Spine and Extremities as well as other product applications. Mr. Sexson is a named inventor on multiple patent applications at Pro-Dex. Prior to joining Pro-Dex, Mr. Sexson started Brides & Hairpins, a successful B2B retail brand that currently supplies Nordstrom, Bloomingdales, Urban Outfitters. Prior to that, Mr. Sexson worked in various finance positions and is a CFA Charterholder. Mr. Sexson graduated with honors from Caltech with a Bachelor’s Degree in Mechanical Engineering in 2006.

Dr. Douglas Unis – Founder and Director

Dr. Douglas Unis is a board certified orthopedic surgeon specializing in adult reconstructive surgery and is the founder and Chief Medical Officer of Monogram Orthopedics, Inc. Dr. Unis founded Monogram Orthopedics in 2015, and has served as a Director of the company since its inception. Dr. Unis has served as an Associate Professor at the Icahn School of Medicine since November 2015 and has been a practicing surgeon since 2004. He began serving as an Assistant Professor at Icahn School of Medicine at Mount Sinai in March 2014, until becoming an Associate Professor in November 2015. Dr. Unis has consulted with many leading orthopedic companies including Zimmer Biomet and Think Surgical. Prior to founding Monogram Orthopaedics, Dr. Unis was a consultant with Think Surgical, working with them for over 4 years to help with the development of their robotic total hip and knee arthroplasty system. Dr. Unis is widely recognized as a leader and innovator in the NYC area having performed the regions’ first muscle sparing anterior total hip replacement in 2005. Dr. Unis earned his BA from Duke University and Doctor of Medicine from Case Western Reserve University and later completing his residency at Northwestern University and a fellowship from Rush University in Adult Reconstruction. 

Rick Van Kirk – Director

Mr. Richard L. Van Kirk is a Director of Monogram, and has served in this capacity since our inception. He is the Chief Executive Officer of Pro-Dex, Inc. (“Pro-Dex”), the largest OEM manufacturer of Orthopedic Robotic End-Effectors on the market. Mr. Van Kirk also serves on Pro-Dex’s Board of Directors. Mr. Van Kirk was appointed to the Board of Directors of Pro-Dex concurrent with his appointment as it’s CEO in January 2015. He joined Pro-Dex in January 2006 and was named Pro-Dex’s Vice President of Manufacturing in December 2006. In April 2013 he was appointed as the Chief Operating Officer of Pro-Dex. Mr. Van Kirk’s career includes over 13 years of management experience in manufacturing. Mr. Van Kirk previously served as Manufacturing Manager and Manager of Product Development at Comarco Wireless Technologies, ChargeSource Division, which provides power and charging functionality for popular electronic devices and wireless accessories. Prior to Comarco, Mr. Van Kirk was General Manager at Dynacast, a leader in precision die casting. Mr. Van Kirk earned a BA in Business Administration at California State University, Fullerton and an MBA from Claremont Graduate School. 

Noel Goddard – Director

Ms. Noel Goddard is a seed investor with the Accelerate NY Seed Fund, where she has served as a principal from November 2017 and helped build a portfolio of 24 companies across deep technology and life science sectors. She is a serial entrepreneur, having founded/led two life science startup companies and most recently, a deep tech company.  Since April 2020 she has served as the CEO at Qunnect, which builds hardware for scalable quantum networking. From July 2015 to August 2017. Ms. Goddard was the CTO of Symbiotic Health which focused on oral delivery of cellular and biologic therapeutics to the lower GI tract.  In January 2013, Ms. Goddard  founded a food safety diagnostics company, Goddard Labs, in Calverton, NY, and worked with Sapling Learning, a STEM educational software startup acquired by Macmillan Learning. Ms. Goddard obtained her PhD from Rockefeller University, performed postdoctoral research at Harvard Medical School as a fellow in the Society of Fellows, and served as an Assistant Professor of Physics at Hunter College, CUNY, before joining the NY entrepreneurial community.

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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ended December 31, 2019, we compensated our three highest-paid directors and executive officers as follows:

Name and Position	Capacities in which compensation was received		Cash compensation ($)		Other compensation ($)			Total compensation ($)
Benjamin Sexson, CEO, Director		-	31,875	(1)		186,975	(3)	$	221,975
Dr. Douglas Unis, Director		Consultant	35,000	(2)		175,313	(4)	$	207,188
Rick Van Kirk, Director		-	-					-
Noel Goddard, Director		-	-			-		-

(1)	The company has an Employment Agreement with its CEO, Benjamin Sexson. The employment agreement and its amendments are filed as Exhibits 6.2, 6.3, and 6.4 to this offering circular. The agreement provides for an annual base salary of $70,000, which is subject to increase upon the occurrence of two events. The first of these events is the receipt by the company of $500,000 in financing from Mount Sinai. As of the date of this Offering Circular, this event has already occurred, and Mr. Sexson’s annual base salary increased to $120,000. The second of these events is the company’s close of a round of equity financing of at least $5,000,0000 on or prior to April 23, 2020, which would increase Mr. Sexson’s base salary to $250,000 per year, which occurred, and therefore has increased Mr. Sexson’s base salary to $250,000 per year as of the date of this Offering Circular. In addition, Mr. Sexson is eligible to earn an annual bonus in an amount of 50% of his aggregate base salary earned in such year, subject to the achievement of certain performance goals, milestones and objectives, as established from time to time by an appropriate committee of the company’s Board. Additionally, Mr. Sexson is entitled to severance payments by the company equal to six months' of his base salary at the time of his termination if he is terminated without cause. Mr. Sexson earned an annual salary of $31,875.00 from January 01, 2019 – December 31, 2019. Mr. Sexson was entitled to be compensated $120,000, however, Mr. Sexson opted to defer payment of his full salary in 2019.  As of December 31, 2019, Mr. Sexson had deferred an amount totaling $88,125. As of the date of this Offering Circular, this deferred amount is has been repaid.
(2)	Mr. Unis earned consulting fee of $35,000 in 2019 in consideration for his services as a consultant to the company, pursuant to the Consulting Agreement between Mr. Unis and the company (See Exhibit 6.1). Mr. Unis receives no compensation for his services as a director.
(3)	Consists of a stock option grant to purchase 160,000 shares of common stock at a price of $0.61 per share valued at $10,838 and a share grant of 1,957,080, valued at $176,137.
(4)	Consists of a stock option grant to purchase 180,000 shares of common stock at a price of $0.61 per share valued at $12,193 and a share grant of 1,812,447, valued at $163,120.

For the fiscal year ended December 31, 2019, we paid our directors as a group (3) for their services as directors. There are four directors as of the date of this Offering Circular.

Other than cash and stock-based compensation set out above, no other compensation was provided to the executive officers or directors in their capacities as officers and directors of the company.

On May 7, 2019, the company adopted an incentive plan, which reserved 2,000,000 shares of common stock for issuance under the plan and 600,000 shares allowed for issuance pursuant to Incentive Stock Options. As of August 12, 2020, (i) Benjamin Sexson has been granted options for 535,000 shares under the plan, of which 40,000 have vested; (ii) Doug Unis has been granted options for 555,000 under the plan, of which 45,000 have vested; (iii) Rick Van Kirk has been granted options for 4,000 shares under the plan, of which none have vested; and (iv) Noel Goddard has been granted options for 1,000 shares under the plan, of which none have vested. The Company amended its 2019 Stock Option Plan on August 15, 2020, and the Amended and Restated 2019 Stock Option Plan now reserves 2,600,000 shares of common stock for issuance under the Plan, with up to 780,000 shares allowed for issuance pursuant to Incentive Stock Options.

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets out, as of August 12, 2020 the voting securities of the company that are owned by executive officers and directors, and other persons holding more than 10% of any class of the company’s voting securities, or having the right to acquire those securities. The table assumes that all options and warrants have vested. The company’s voting securities include all shares of the company’s Common Stock.

Name and Address of Beneficial Owner	Title of class	Amount and nature of beneficial ownership		Amount and nature of beneficial ownership acquirable			Percent of class
Benjamin Sexson, 3913 Todd Lane, Austin, TX 78744 (1)	Common Stock		1,997,080		0			41.29	%
Dr. Douglas Unis, 3913 Todd Lane, Austin, TX 78744 (3)	Common Stock		1,767,723		0			36.55	%
ZB Capital Partners LLC, 1000 4th Street, Suite 795, San Rafael, CA 94901	Preferred Stock (Series A)		1,040,251		273,973	(2)		26.83	%
The Icahn School of Medicine at Mount Sinai, 1 Gustave L. Levy Pl, New York, NY 10029 (3)	Common Stock		1,124,594		0			23.25	%

(1)	Pursuant to Mr. Sexson’s employment agreement, Mr. Sexson is entitled to pre-emptive rights permitting him preserve his vested equity position in the company in the event of any additional issuances of company common stock (or securities convertible into common stock), at a per-share price equal to the then current fair market value, as reasonably determined by the Board. Mr. Sexson does not intend to exercise this pre-emptive right.
(2)	The acquirable shares for ZB Capital Partners LLC are comprised of shares issuable to ZB Capital Partners via the exercise of Warrants, and assumes they will be exercised for Series A Preferred Stock of the company. (See the Warrant Agreement filed as Exhibit 6.11 to this Offering Circular.)
(3)	Pursuant to the Icahn School of Medicine at Mount Sinai Policies on Intellectual Property, Dr. Unis is entitled to 65% of the 33.3% equity distribution to inventors. Dr. Unis has elected to defer receiving this distribution. These shares, which approximate to 243,418 shares, have not been included in this consideration of beneficial ownership.

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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

On October 10, 2017, the company entered into an Exclusive Licensing Agreement (the “Licensing Agreement”) with Icahn School of Medicine at Mount Sinai (“Mount Sinai”), an entity which is affiliated with one of our Directors, Doug Unis, who is employed as an associate professor at Mount Sinai. The Licensing Agreement grants Monogram a revenue-bearing, world-wide right and (a) exclusive license, with the right to grant sublicenses (on certain conditions) to certain intellectual property relating to customizable bone implants and surgical planning software and (b) non-exclusive license, with the right to grant sublicenses on certain conditions, to certain technical information for the exploitation of the intellectual property in its field of use and (c) royalty-free, irrevocable license for certain derivative works to be used either commercially outside the field of use or teaching, patient care or non-commercial academic research purposes. Mount Sinai was granted equity in the company pursuant to the Licensing Agreement, along with the right to maintain 12% of the fully-diluted outstanding Common Stock of the company until the company receives an aggregate of $10,000,000 in cash in exchange for its equity securities. As stated above under “Security Ownership of Management and Certain Securities Holders”, Dr. Unis, Mr. Costa, Mr. Somani and the Icahn School of Medicine at Mount Sinai have each agreed, pursuant to a separate agreement to which the company is not a party, to split that 12% as follows: 7.4% to Mount Sinai, 1.6% to Dr. Unis, 1%, to Mr. Somani, and 0.4% to Mr. Costa, with the remaining 0.6% going to the laboratory in which the intellectual property that is the subject of the Licensing Agreement was generated. As of the date of this Offering Circular, all shares issuable to Mount Sinai pursuant to the terms of the Licensing Agreement have been issued.

In addition, as part of the Licensing Agreement, we entered into a stock purchase agreement with Mount Sinai for the shares of Common Stock already issued to Mount Sinai. This agreement is filed as Exhibit 6.15.  

On March 18, 2019, the company entered into an option agreement (the “Option Agreement”) with Mount Sinai pursuant to which the company was granted an option to license additional intellectual property rights under the terms and conditions as set forth in the aforementioned Licensing Agreement. The company exercised this option on March 26^th, 2019 for an exercise fee of $1,000. (See Exhibit 6.9 for further information.) The intellectual property licensed pursuant to this Option Agreement is detailed under “Description of Business – Intellectual Property”. Since this Option Agreement is governed by the terms of the Licensing Agreement, any termination of the Licensing Agreement would automatically terminate this Option Agreement.

Payments under the Licensing Agreement include:

1. Annual license maintenance fees. Annual fees include a $10,000 fee beginning on the third anniversary of the effective date of the agreement (which will be October 3, 2020) and each year thereafter until Monogram makes a first commercial sale of one of our products. After this first commercial sale, the annual fee increases to $30,000 per year for the next twelve (12) years, or until the patents licensed pursuant to this agreement expire – whichever occurs first.

2. Milestone payments. Upon completion of certain significant events by the company (i.e. “milestone” events), we must pay Mount Sinai certain fees within 45 days of the occurrence of the event. If Monogram obtains FDA clearance and/or foreign regulatory approval of Monogram’s custom implants and/or orthopaedic robot, Mount Sinai is due a fee ranging from $50,000 - $100,000, depending on the type of approvals received. If Monogram achieves net sales of $10 million, Mount Sinai will receive $400,000; and at net sales of $50 million, Mount Sinai will receive $2,000,000. Finally, if for any reason the Company receives $150 million in any transaction for any reason, Mount Sinai will receive 1% of the funds received by the Company in that transaction.

3. Running royalties. Mount Sinai is entitled to 1.5% to 5% of the net sales of our products as a royalty, depending primarily on whether the product sales occurred in a country in which the patents licensed from Mount Sinai for such products are valid.

4. Sublicense fees. If Monogram sublicenses its rights under this agreement to another party, Mount Sinai is entitled 15% - 60% percentage of the income received by Monogram from party to which it sublicensed. The percentage Mount Sinai is entitled to receive is primarily determined by the timing of the sublicense grant by Monogram. If it is sublicensed prior to successful implementation of the product by Monogram, Mount Sinai will receive 60% - but if sublicensed after the first commercial sale by Monogram of its product, Mount Sinai is entitled to 15%.

Pursuant to the terms the Licensing Agreement (and the Amendment thereto filed as Exhibit 6.14), we must have a first commercial sale our products within seven (7) years of the Effective Date of the agreement, or by October 10, 2024. Failure to meet this deadline would constitute a breach of our agreement, and Mount Sinai would have the right to give us a notice of default, and could ultimately terminate the Licensing Agreement if we fail to cure this default within sixty (60) days. Termination will not relieve Monogram of any monetary or any other obligation or liability accrued under the agreement at the time of termination. In addition, if Monogram has sublicensed the agreement at the time of termination, the sublicense will become a direct license between Mount Sinai and the sublicensee. Monogram does not have any direct right to terminate this agreement with Mount Sinai prior to the completion of the term of the agreement.

On December 20, 2018, the company entered into a development and supply agreement with Pro-Dex, Inc., whereby Pro-Dex, Inc. and the company agreed, subject to certain conditions, to negotiate and endeavor to enter into a future agreements through which Pro-Dex, Inc. would develop and supply end-effectors, gearing, and saws, and other surgical products to Monogram. Richard L. Van Kirk is the Chief Executive Officer of Pro-Dex, Inc. and is a Director of Monogram. The conditions to enter into the future development and supply agreements are (i) the raise of at least $5,000,000 in equity capital through the issuance of Common Stock or Preferred Stock by Monogram on or before October 19, 2019, and (ii) the entry into a separate modification agreement regarding the terms of the convertible note issued by Monogram to Pro-Dex, Inc. Monogram and Pro-Dex, Inc. have entered into that modification agreement, dated December 20, 2018, as detailed further below. Richard L. Van Kirk is the Chief Executive Officer of Pro-Dex, Inc. and is a Director of Monogram.

On June 23, 2017, the company issued a convertible promissory note to Doug Unis, a Director of Monogram, in the principal amount of $50,000. The note consisted of two proposed tranches, one for $28,000 and a second tranche for $22,000, the release of which was subject to the achievement of certain milestones. The second $22,000 tranche was never contributed under this note. The note bears interest at 4% per year with balance due and payable on June 23, 2019. On January 19, 2018, the company issued a convertible promissory note to American IRA, LLC FBO Julia Jordan IRA, of which Doug Unis is an assign, in the principal amount of $28,000. The note bears interest at 4% per year with balance due and payable on January 19, 2020. Julia Jordan is Doug Unis’s wife. On May 30, 2018, the company issued a convertible promissory note to Doug Unis, a Director of Monogram, in the principal amount of $15,000. The note bears interest at 4% per year with balance due and payable on May 30, 2020. The company considers all three of these notes to be payable to Doug Unis, with $71,000 in principal balance and $5,969 at December 31, 2019. On April 23, 2020, all three of these notes converted into shares of the company’s Series A Preferred Stock as a result of the company’s receipt of gross proceeds of $5,000,000 or more from the Offering, and are no longer outstanding.

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On April 19, 2017, the company issued a convertible promissory note to Pro-Dex, Inc., in the principal amount of $800,000. Richard L. Van Kirk is the Chief Executive Officer of Pro-Dex, Inc. and is a Director of Monogram. The company and Pro-Dex, Inc. subsequently amended the terms of the note via an agreement dated December 20, 2018. Pursuant the agreement as amended, the company granted Pro-Dex, Inc. the right to appoint one (1) director to the Board of Monogram so long as the note is outstanding. That director is Rick Van Kirk, who currently serves as a director of our company. As of December 31, 2019 this note was still outstanding, and had accrued interest of $117,295. On April 29, 2020, the company repaid all outstanding principal and interest due on this note. As a result, as of the date of this Offering Circular, this note is no longer outstanding.

On December 20, 2018, the company issued warrants to Pro-Dex, Inc. to purchase up to 5% of the outstanding Common Stock and Preferred Stock of the company as of the date of the exercise, calculated on a post-exercise basis. The warrants have an exercise price of $1,250,000, and may be exercised at any time prior to (i) December 20, 2025, (ii) the closing of an initial public offering of the company’s securities, or (iii) a liquidation event by the company. Richard L. Van Kirk is the Chief Executive Officer of Pro-Dex, Inc. and is a Director of Monogram.

On February 11, 2019, the company issued a convertible promissory note to Benjamin Sexson, Director and CEO of Monogram, in the principal amount of $48,000. The note bears interest at 4% per year with balance due and payable on February 11, 2020. On April 23, 2020, this note automatically converted into shares of the company’s Series A Preferred Stock as a result of the company’s receipt of gross proceeds of $5,000,000 or more from the Offering. As a result, it is no longer outstanding as of the date of this Offering Circular.

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SECURITIES BEING OFFERED

General

The company is offering shares of Series B Preferred Stock in this offering. The Series B Preferred Stock may be converted into shares of the Common Stock of the company at the discretion of each investor, or automatically upon the occurrence of certain events, like an initial public offering. The company is therefore qualifying up to 4,784,689 shares of Series B Preferred Stock, convertible into 4,784,689 shares of Common Stock, under the Offering Statement of which this Offering Circular is a part.

The following description summarizes the most important terms of the company’s capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of Monogram’s Amended and Restated Certificate of Incorporation and bylaws, copies of which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Monogram’s capital stock, you should refer to the Amended and Restated Certificate of Incorporation and bylaws of the company and to the applicable provisions of Delaware law.

The authorized capital stock of the company consists of Common Stock, par value $0.001 per share, and Preferred Stock, par value $0.001 per share. The total number of authorized shares of Common Stock of Monogram is 22,000,000 and the total number of authorized shares of Preferred Stock is 14,000,000, of which 5,500,000 is designated as Series A Preferred Stock, and 8,000,000 is designated as Series B Preferred Stock 

As of September 30, 2020, the outstanding shares of the company included:

Class	Authorized		Issued and Outstanding
Series A Preferred Stock		5,500,000		4,897,559
Series B Preferred Stock		8,000,000		0
Common Stock		22,000,000		4,836,935

On May 7, 2019, the company adopted an incentive plan, which the company subsequently amended on August 15, 2020 (the “Amended and Restated 2019 Stock Option and Grant Plan” or “Plan”. The Plan reserves 2,500,000 shares of common stock for issuance under the Plan and 840,000 shares allowed for issuance pursuant to Incentive Stock Options.

Provisions of Note in Our Amended and Restated Certificate of Incorporation

Our Amended and Restated Certificate of Incorporation includes a forum selection provision that requires any claims against the company by stockholders not arising under the federal securities laws to be brought in the Court of Chancery State in the state of Delaware. This forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted this provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the company.

Common Stock

Voting Rights

Each holder of the company’s Common Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors. In addition, holders of our Common Stock are entitled to vote as a separate class for the election of two (2) directors of the company’s Board of Directors. Holders of our Preferred Stock may not vote on the election of these directors.

Dividend Rights

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the Board of Directors out of legally available funds as detailed in the company’s Restated Articles. The company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

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Liquidation Rights

In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the company, the holders of the Common Stock are entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all debts and other liabilities of the company. Holders of our Preferred Stock are entitled to a liquidation preference that is senior to holders of the Common Stock, and therefore would receive dividends and liquidation assets prior to the holders of the Common Stock.

Preferred Stock

The terms of the Series A Preferred Stock and Series B Preferred Stock are substantially the same. As such, the following description of the Series B Preferred Stock is applicable to the Series A Preferred Stock, unless otherwise noted below.

Series B Preferred Stock

Voting Rights

Each holder of the company’s Series B Preferred Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors, subject to the following restrictions:

· The holders of our Common Stock are entitled to elect two (2) directors to the company’s Board of Directors as a standalone class. The Series B Preferred Stockholders may not exercise any voting rights in the election of these directors.

Holders of our Series B Preferred Stock specifically have the right to vote with the holders of the Common Stock to elect:

· one (1) independent director to the company’s Board of Directors; and

· any additional directors to the company’s Board of Directors after the elections outlined above.

Each holder of Series B Preferred Stock will be entitled to one vote for each share of Common Stock into which such share of Preferred Stock could be converted. Fractional votes will not be permitted and if the conversion results in a fractional share, it will be disregarded.

Additionally, the holders of the Series B Preferred Stock are entitled to certain protective provisions that require the company to obtain the written consent or affirmative vote of a majority of the outstanding shares of Preferred Stock prior to effecting certain corporate actions, comprised of the following:

(a) alter the rights, powers or privileges of the Preferred Stock in a way that adversely affects the Preferred Stock;

(b) increase or decrease the authorized number of shares of any class or series of capital stock;

(c) authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers, or privileges set forth in the Amended and Restated Certificate of Incorporation of the company, as then in effect, that are senior to or on a parity with any series of Preferred Stock;

(d) redeem or repurchase any shares of Common Stock or Preferred Stock (other than pursuant to employee or consultant agreements giving the company the right to repurchase shares upon the termination of services pursuant to the terms of the applicable agreement);

(e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock;

(f) increase or decrease the number of directors of the company;

(g) liquidate, dissolve, or wind-up the business and affairs of the company

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Dividend Rights

Holders of Series B Preferred Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors out of legally available funds and on a pari passu basis with holders of the Common Stock. The company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Conversion Rights

Shares of Series B Preferred Stock will be convertible, at the option of the holder, at any time, into fully paid and nonassessable shares of the company’s Common Stock at the then-applicable conversion rate. Initially, the conversion rate will be one share of Common Stock per share of Series B Preferred Stock. The conversion rate is subject to adjustment in the event of stock splits, reverse stock splits or the issuance of a dividend or other distribution payable in additional shares of Common Stock.

Additionally, each share of Series B Preferred Stock will automatically convert into Common Stock:

i) immediately prior to the closing of a firm commitment underwritten public offering of the company’s Common Stock on Form S-1, registered under the Securities Act, at a per share price not less than the Original Issue Price (as defined below) adjusted for any stock dividends, combinations, splits, recapitalizations and the like, for a total offering proceeds $5,000,000 or more (before deduction of underwriters commissions and expenses); or

ii) upon the affirmative election of the holders of a majority of the outstanding shares of Preferred Stock, voting as a single class and on an as-converted basis.

In either of these events, the shares will convert in the same manner as a voluntary conversion.

Right to Receive Liquidation Distributions

In the event of a liquidation, dissolution or winding up of the company, whether voluntary or involuntary, or certain other events (each a “Deemed Liquidation Event”) such as the sale or merger of the company, all holders of Series B Preferred Stock will be entitled to a liquidation preference that is senior to holders of the Common Stock. Holders of Series B Preferred Stock will receive a liquidation preference equal to the greater of (a) an amount for each share equal to the Original Issue Price for such share, adjusted for any stock dividends, combinations, splits, recapitalizations and the like (the “liquidation preference”) plus any declared but unpaid dividends with respect to such shares or (b)  such amount per share as would have been payable had all shares of Series B Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. Initially, the liquidation preferences for the shares of Series B Preferred Stock will be $6.27 per share (the “Original Issue Price”).

If, upon such liquidation, dissolution, or winding up or Deemed Liquidation Event, the assets (or the consideration received in a transaction) that are distributable to the holders of Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such funds will be distributed ratably among the holders of the Preferred Stock in proportion to the full amounts to which they would otherwise be entitled to receive.

After the payment of the full liquidation preference of the Series B Preferred Stock, the remaining assets of the company legally available for distribution (or the consideration received in a transaction), if any, will be distributed ratably to the holders of the Common Stock in proportion to the number of shares of Common Stock held by each such holder.

(Note: The “Original Issue Price” for the Series A Preferred Stock is $4.00. All other terms are the same.)

Drag Along Right

The investors’ rights agreement that investors will execute in connection with the offering contains a “drag-along provision” related to the certain events, such as the sale, merger or dissolution of the company (a “Liquidating Event”). Investors who purchase Series B Preferred Stock agree that, if the board of directors, the majority of the holders of the company’s Common Stock, and the majority of the holders of the company’s Series B Preferred Stock vote in favor of such a Liquidating Event, then such holders of Series B Preferred Stock will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters’ rights with respect to Liquidating Event, and deliver any documentation or take other actions reasonably requested by the company or the other holders in connection with the Liquidating Event.

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Information Rights

The company also agrees in the investors’ rights agreement to grant certain information rights to investors in this offering that invest $50,000 or more in this offering (“Major Purchasers”). The information rights provided to Major Purchasers include: (1) annual unaudited financial statements for each fiscal year of the company, including an unaudited balance sheet as of the end of such fiscal year, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices; and (2) quarterly unaudited financial statements for each fiscal quarter of the company (except the last quarter of the company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal quarter, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments. If the company has audited records of any of the foregoing, it will provide those in lieu of the unaudited versions.

Additional Rights and Participation Rights

The investors’ rights agreement that investors will execute in connection with the offering grants investors and their transferees certain rights in connection with the company’s next equity offering. If in its next equity offering after the date that an investor executes the investors’ rights agreement (the “Next Financing”) the company issues securities that (a) have rights, preferences or privileges that are more favorable than the terms of the Series B Preferred Stock or (b) provide all such future investors in the Next Financing contractual terms such as registration rights, the company agrees to provide substantially equivalent rights to the investor with respect to the Series B Preferred Stock (with appropriate adjustment for economic terms or other contractual rights), including the amount of the Series B preferred stock liquidating distributions, through the investor’s proxy, if applicable, subject to the investor’s execution of any documents, including, if applicable, investor rights, co-sale, voting, and other agreements, executed by the investors purchasing securities in the Next Financing (the “Next Financing Documents”), provided that certain rights may be reserved for investors with a minimum amount of investment in the Next Financing. Upon the execution and delivery of the Next Financing Documents, the investors’ rights agreement (excluding any then-existing and outstanding obligations) will be automatically amended and restated by and into the Next Financing Documents and will be terminated and of no further force or effect. As a result, the rights of investors who participate in any Next Financing will instead be governed by the Next Financing Documents.

In the investors’ rights agreement, the company also grants investors in this offering participation rights. Investors will have the right of first refusal to purchase the investor’s Pro Rata Share of any New Securities (each as defined below) that the company may issue in the Next Financing. The investor will have no right to purchase any New Securities if the investor cannot demonstrate to the company’s reasonable satisfaction that the investor is at the time of the proposed issuance of New Securities eligible to purchase such New Securities under applicable securities laws. An investor’s “Pro Rata Share” means the ratio of (i) the number of shares of the company’s Common Stock issued or issuable upon conversion of the Series B Preferred Stock owned by the investor, to (ii) that number of shares of the company’s capital stock equal to the sum of (A) all shares of the company’s capital stock (on an as-converted basis) issued and outstanding, assuming exercise or conversion of all options, warrants and other convertible securities and promissory notes, and (B) all shares of the company’s capital stock reserved and available for future grant under any equity incentive or similar plan.

“New Securities” means any shares of the company’s capital stock to be issued in the Next Financing, including Common Stock or Preferred Stock, whether now authorized or not, and rights, options or warrants to purchase Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into Common Stock or Preferred Stock “New Securities” does not include: (i) shares of Common Stock issued or issuable upon conversion of any outstanding shares of Preferred Stock; (ii) Common Stock or Series B Preferred Stock issued upon conversion of any outstanding convertible notes; a(iii) shares of Common Stock or Preferred Stock issuable upon exercise of any options, warrants, or rights to purchase any securities of the company outstanding as of the date the Offering Statement is qualified by the Commission and any securities issuable upon the conversion thereof; (iv) shares of Common Stock or Preferred Stock issued in connection with any stock split or stock dividend or recapitalization; (v) shares of Common Stock (or options, warrants or rights therefor) granted or issued after the date the Offering Statement is qualified by the Commission to employees, officers, directors, contractors, consultants or advisers to, the company or any subsidiary of the company pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by the board of directors; (vi) shares of the company’s Series B Preferred Stock issued in this offering; (vii) any other shares of Common Stock or Preferred Stock (and/or options or warrants therefor) issued or issuable primarily for other than equity financing purposes and approved by the board of directors; (vii) shares of Common Stock issued or issuable by the company to the public pursuant to a registration statement filed under the Securities Act; and (ix) any other shares of the company’s capital stock, the issuance of which is specifically excluded by approval of the board of directors.

The company will send investors, or investors’ proxies, if applicable, a notice describing the type of New Securities and the price and the general terms upon which the it proposes to issue the New Securities. An investor will have fourteen (14) days from the date of notice, to agree to purchase a quantity of New Securities, up to their Pro Rata Share. If an investor fails to exercise in full the right of first refusal within the 14-day period, then the company will have one hundred twenty (120) days after that to sell the New Securities with respect to which the investor’s right of first refusal was not exercised. If the company has not issued and sold the minimum amount of New Securities to be sold in the Next Financing within the 120-day period, then the company will not issue or sell any New Securities without again first offering those New Securities to investors in accordance with the terms of the investors’ rights agreement.

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Benjamin Sexson, our CEO, is entitled to pre-emptive rights permitting him preserve his vested equity position in the company in the event of any additional issuances of company common stock (or securities convertible into common stock), at a per-share price equal to the then current fair market value, as reasonably determined by the Board. Mr. Sexson does not intend to exercise this pre-emptive right.

(Note: Investors in the Company’s Series A Offering entered into an investors’ rights agreement with identical terms to the investors’ rights agreement in this offering. A copy of this agreement is filed as Exhibit 3.1 to this Offering Statement, of which this Offering Circular forms a part.)

42

MONOGRAM ORTHOPAEDICS, INC.

TABLE OF CONTENTS

	Page
Independent Auditor’s Report	F-1
Financial Statements as of December 31, 2019 and 2018 and for the years then ended:
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Changes in Stockholders’ Equity	F-4
Statements of Cash Flows	F-5
Notes to Financial Statements	F-6–F-26
Financial Statements as of June 30, 2020 and 2019 and for the six months then ended (Unaudited):
Balance Sheets (Unaudited)	F-27
Statements of Operations (Unaudited)	F-28
Statements of Changes in Stockholders’ Equity (Unaudited)	F-29
Statements of Cash Flows (Unaudited)	F-30
Notes to Financial Statements (Unaudited)	F-31–F-48

43

	INDEPENDENT AUDITOR’S REPORT
	To the Board of Directors and Stockholders
	of Monogram Orthopaedics, Inc.
	We have audited the accompanying financial statements of Monogram Orthopaedics, Inc., which comprise the balance sheets as of December 31, 2019 and 2018, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes to the financial statements.
	Management’s Responsibility for the Financial Statements
Members of: WSCPA AICPA PCPS	Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
	Auditor’s Responsibility
802 N. Washington PO Box 2163 Spokane, Washington 99210-2163	Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
P 509-624-9223 TF 1-877-264-0485 mail@fruci.com www.fruci.com	An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
	We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
	Going Concern
	The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has sustained recurring losses from operations and has significant accumulated and working capital deficits. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
	Opinion
	In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Monogram Orthopaedics, Inc. as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
	Spokane, Washington
	May 1, 2020

F-1

MONOGRAM ORTHOPAEDICS INC.

Balance Sheets

	December 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	2,319,393		$	922,108
Prepaid expenses		65,000			-
Total current assets		2,384,393			922,108
Equipment, net of accumulated depreciation		235,748			262,146
Total assets	$	2,620,141		$	1,184,254
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable
Trade	$	241,850		$	257,480
Related party		8,518			31,128
Accrued interest payable		78,072			78,568
Accrued interest payable – related parties		124,964			7,227
Accrued officer salary payable		88,125			48,877
Warrant liability		229,244			-
Current portion of long-term debt		1,205,000			1,025,000
Current portion of long-term debt – related parties		871,000			904,000
Total current liabilities		2,846,773			2,352,280
Long-term debt		-			180,000
Long-term debt – related parties		48,000			43,000
Total liabilities		2,894,773			2,575,280
Commitments and Contingencies		-			-
Stockholders’ deficit:
Preferred stock, $.001 par value; 7,850,000,shares authorized, 702,021 and 0 shares issued and outstanding in 2019 and 2018, respectively		702			-
Common stock, $.001 par value; 13,225,000 shares authorized, 4,317,104 and 89,382 shares issued and outstanding in 2019 and 2018, respectively		4,317			89
Capital in excess of par value		2,909,875			2,146
Accumulated deficit		(3,189,526	)		(1,393,261	)
Total stockholders’ deficit		(274,632	)		(1,391,026	)
Total liabilities and stockholders’ deficit	$	2,620,141		$	1,184,254

Accompanying notes are an integral part of these financial statements

F-2

MONOGRAM ORTHOPAEDICS INC.

Statements of Operations

	Years Ended December 31,
	2019			2018
Revenues	$	-		$	-
Cost and expenses:
Wages and payroll related expenses		344,757			378,523
General and administrative		179,671			101,679
Marketing and advertising		205,207			3,154
Legal and professional services		106,140			104,114
Depreciation		31,763			30,957
Stock-based compensation		614,870			-
Research and development		194,287			31,700
Total costs and expenses		1,676,695			650,127
Loss from operations		(1,676,695	)		(650,127	)
Other income (expense)
Interest expense		(124,470	)		(62,184	)
Interest income		4,900			43
Total other income (expense)		(119,570	)		(62,141	)
Net income (loss) before taxes		(1,796,265	)		(712,268	)
Income tax		-			-
Net income (loss)	$	(1,796,265	)	$	(712,268	)
Basic and diluted earnings (loss) per share	$	(0.62	)	$	(6.89	)
Weighted average number of basic and diluted shares outstanding		2,896,015			103,333

Accompanying notes are an integral part of these financial statements

F-3

MONOGRAM ORTHOPAEDICS INC.

Statements of Stockholders’ Equity (Deficit)

For the Years Ended December 31, 2019 and 2018

	Preferred Stock				Common Stock						Capital in Excess of			Accumulated			Total Stockholders' Equity
	Shares		Amount		Shares			Amount			Par Value			Deficit			(Deficit)
Balance, December  31, 2017		-	$	-		127,382		$	127		$	3,058		$	(680,993	)	$	(677,808	)
Net loss, December 31, 2018		-		-		-			-			-			(712,268	)		(712,268	)
Stock repurchase		-		-		(38,000	)		(38	)		(912	)		-			(950	)
Balance, December 31, 2018		-		-		89,382			89			2,146			(1,393,261	)		(1,391,026	)
Net loss, December 31, 2019		-		-		-			-			-			(1,796,265	)		(1,796,265	)
Stock option expense												5,303						5,303
Common stock issuances		-		-		4,227,722			4,228			376,584			-			380,812
Sale of preferred shares		702,021		702		-			-			2,525,842			-			2,526,544
Balance, December 31, 2019		702,021	$	702		4,317,104		$	4,317		$	2,909,875		$	(3,189,526	)	$	(274,632	)

Accompanying notes are an integral part of these financial statements

F-4

MONOGRAM ORTHOPAEDICS INC.

Statements of Cash Flows

	Year			Year
	Ended			Ended
	December 31,			December 31,
	2019			2018
Operating activities
Net loss	$	(1,796,265	)	$	(712,268	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		614,870			—
Depreciation		31,763			30,957
Changes in non-cash working capital balances:
Prepaid expenses		(65,000	)		-
Accounts payable		(15,630	)		233,207
Accrued officer salary payable		87,248			48,877
Accrued payable – related parties		(22,610	)		30,178
Accrued interest payable		117,241			62,184
Cash used in operating activities		(1,048,383	)		(306,865	)
Investing activities
Purchase of equipment		(5,365	)		(154,915	)
Cash used in investing activities		(5,365	)		(154,915	)
Financing activities
Proceeds from notes payable		-			1,105,000
Proceeds from sale of preferred stock		2,526,544			-
Proceeds from note payable – related parties		-			43,000
Proceeds from sale of common stock		489			-
Payment of related party loans		(76,000	)		-
Cash provided by financing activities		2,451,033			1,148,000
Increase in cash and cash equivalents during the period		1,397,285			686,220
Cash and cash equivalents, beginning of the period		922,108			235,888
Cash and cash equivalents, end of the period	$	2,319,393		$	922,108
Cash paid for:
Interest	$	7,229		$	-
Income taxes	$	-		$	-
Non-cash financing activities
Note issued for officer's salary	$	48,000		$	-
Repurchase of common stock by related party	$	-		$	950

Accompanying notes are an integral part of these financial statements 

F-5

MONOGRAM ORTHOPAEDICS INC.

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1. Description of Business and Summary of Accounting Principles

Description of the Organization

Monogram Orthopaedics Inc. (“Monogram,” “we,” “our,” or the “Company”), incorporated in the state of Delaware on April 21, 2016, is developing a product solution architecture for enabling mass personalization of orthopedic implants by linking 3D printing and robotics via automated digital image analysis algorithms. 

The company has a working navigated robot prototype that can optically track a simulated surgical target and execute optimized auto-generated cut paths for high precision insertion of patient specific implants in synthetic bone specimens. These implants and cut-paths are generated with proprietary Monogram software algorithms.

The financial statements are presented in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America.  The Company’s fiscal year end is December 31. The Company operated from its headquarters in Brooklyn, New York until January 2020 when it moved to Austin, Texas.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. A valuation allowance has been established to eliminate the Company’s deferred tax assets as it is more likely than not that none of the deferred tax assets will be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the tax authorities. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in income tax expense. The Company has determined that it had no significant uncertain tax positions requiring recognition or disclosure.

F-6

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.    

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The Company adopted the new standard as of January 1, 2018, utilizing a full retrospective transition method. Adoption of the new standard resulted in no changes for revenue recognition related as the Company has not yet generated revenue.

Earnings (Loss) Per Share

Earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares outstanding. To the extent that stock options, warrants and convertible preferred stock are anti-dilutive, they are excluded from the calculation of diluted earnings (loss) per share. See Note 9 for details of potentially dilutive securities.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company did not have any cash equivalents during fiscal 2019 and 2018. The Company uses two financial institutions for its cash balances, and occasionally maintains cash balances that exceed federally insured limits.

Equipment

Equipment expenditures are recorded at cost. Costs which extend the useful lives or increase the productivity of the assets are capitalized, while normal repairs and maintenance that do not extend the useful life or increase the productivity of the asset are expensed as incurred. Equipment, including the Company’s robot, are depreciated on the straight-line method over the estimated useful lives of the assets. Equipment will be depreciated over a five-year useful life. Any construction in progress is stated at cost and depreciation will commence once the project is constructed and placed in service.

F-7

Asset Impairment

Long-lived assets, such as property, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. The Company recorded no asset impairment in 2019 or 2018.

General and Administrative Expenses

General and administrative expenses include salaries, travel and office expenses of administrative employees and contractors; software license fees; and other overhead expenses.

Stock-Based Compensation

The Company applies the fair value method of ASC 718, Share Based Payment, formerly Statement of Financial Accounting Standards No. l23R "Accounting for Stock Based Compensation," in accounting for its stock-based compensation. This accounting standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period, if any. As the Company does not have sufficient, reliable, and readily determinable values relating to its common stock, the Company has used (i) the stock value pursuant to an independent valuation dated February 27, 2019 to record stock-based compensation at a price of $0.09 per share and (ii) its most recent sale of stock of $4.00 per share in December 2019 for valuing stock-based compensation at December 31, 2019.

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and amounted to $194,287 and $31,700 for the years ended December 31, 2019 and 2018, respectively. The company currently has several R&D initiatives underway including mechanical testing of a patient specific hip, micromotion studies of a patient specific press-fit knee implant, and performance testing of a robot mounted navigation system.

F-8

Advertising Costs

Advertising and marketing costs are expensed as incurred and amounted to $205,207and $3,154 for the years ended December 31, 2019 and 2018, respectively.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the warrant liability, valuations of stock-based compensation and the income tax valuation allowance. On a continual basis, management reviews its estimates, utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses.  The new guidance provides better representation about expected credit losses on financial instruments. This Update requires the use of a methodology that reflects expected losses and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates.  This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted.  The company is studying the impact of adopting the ASU in 2023, and what effect it could have. The Company believes the accounting change would not have a material effect on the financial statements.

In March 2017 the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This amendment simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This update is effective for fiscal years beginning after December 15, 2021. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company’s financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvement to Nonemployee Share-based Payment Accounting, which simplifies the accounting for share-based payments. The company elected early adoption of this ASU, using the modified retrospective approach, so that all stock compensation to employees and nonemployees is treated under the same guidance as in ASC 718. No outstanding stock option grants were required to be revalued upon the adoption of this ASU.

F-9

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

2. Going Concern Matters and Realization of Assets

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. However, the Company has sustained recurring losses from its continuing operations and as of December 31, 2019, had negative working capital of $462,380 and a stockholders’ deficit of $274,632. In addition, the Company is unable to meet its obligations as they become due and sustain its operations. The Company believes that its existing cash resources are not sufficient to fund its continuing operating losses, capital expenditures, lease and debt payments and working capital requirements.

The Company may not be able to raise sufficient additional debt, equity or other cash on acceptable terms, if at all. Failure to generate sufficient revenues, achieve certain other business plan objectives or raise additional funds could have a material adverse effect on the Company’s results of operations, cash flows and financial position, including its ability to continue as a going concern, and may require it to significantly reduce, reorganize, discontinue or shut down its operations.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company which, in turn, is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in its existence. Management’s plans include:

1. Continue to raise cash for research, product development and working capital purposes by selling equity under an offering statement that has been qualified by the Securities and Exchange Commission under Tier II of Regulation A. The Company is offering up to 5,000,000 shares of Series A preferred stock, at a price of $4.00 per share, which may convert into shares of common stock on a one-for-one basis. With sufficient cash available to the Company, it can make the additional development expenditures necessary to produce a commercially viable product and generate revenues, and consequently cut monthly operating losses.

2. Continue to develop its technology and intellectual property and look for industry partners to use or sell its product.

F-10

Management has determined, based on its recent history and its liquidity issues that it is not probable that management’s plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. Accordingly, the management of the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements.

There can be no assurance that the Company will be able to achieve or maintain cash-flow-positive operating results. If the Company is unable to generate adequate funds from operations or raise sufficient additional funds, the Company may not be able to repay its existing debt, continue to develop its product, respond to competitive pressures or fund its operations. As a result, the Company may be required to significantly reduce, reorganize, discontinue or shut down its operations. The financial statements do not include any adjustments that might result from this uncertainty.

3. Equipment

Equipment, net consists of the following as of December 31, 2019 and 2018

	2019			2018
Computer equipment	$	32,430		$	27,065
Medical equipment		6,142			6,142
Robot		123,250			123,250
Work-in-process equipment		150,000			150,000
		311,822			306,457
Accumulated depreciation		(76,074	)		(44,311	)
Equipment, net	$	235,748		$	262,146

For the years ended December 31, 2019 and 2018, depreciation expense amounted to $31,763 and $30,957, respectively.

4. Debt

The following table summarizes components debt as of December 31, 2019 and 2018: 

	2019		2018
Convertible term notes	$	1,125,000	$	1,125,000
Secured convertible term notes		80,000		80,000
Convertible term notes – related parties		919,000		947,000
Total Debt	$	2,124,000	$	2,152,000

F-11

All of the notes are convertible and they mature at various times from April 30, 2020 through February 11, 2021, as noted in the table below:

Description	Principal		Maturity Date	Interest Rate	Valuation Cap
Related party note	$	450,000	4/30/2020	6%	$	6,000,000
Related party note		350,000	4/30/2020	6%	$	6,000,000
Related party note		28,000	5/31/2020	4%	$	6,000,000
Unsecured term note		50,000	5/31/2020	4%	$	6,000,000
Unsecured term note		50,000	5/31/2020	4%	$	6,000,000
Related party note		28,000	5/31/2020	4%	$	6,000,000
Related party note		15,000	5/31/2020	4%	$	6,000,000
Secured term note		40,000	7/30/2020	4%	$	6,000,000
Secured term note		40,000	7/12/2020	6%	$	6,000,000
Unsecured term note		25,000	9/18/2020	6%	$	10,000,000
Unsecured term note		50,000	11/9/2020	6%	$	8,000,000
Unsecured term note		700,000	4/30/2020	4%	$	6,000,000
Unsecured term note		225,000	4/30/2020	6%	$	8,000,000
Unsecured term note		25,000	12/24/2020	6%	$	10,000,000
Related party note		48,000	2/11/2021	4%	$	6,000,000
Total	$	2,124,000

Interest expense amounted to $124,470 and $62,184 for the years ended December 31, 2019 and 2018, respectively. Accrued interest payable amounted to $78,072 and $78,568 at December 31, 2019 and 2018, respectively. Accrued interest payable to related parties amounted to $124,964 and $7,227 at December 31, 2019 and 2018, respectively.

Ten of the above notes contained original maturity dates in 2019. Those notes were renegotiated to extend the maturity dates to April 30, 2020 and May 31, 2020. In conjunction with the extension of the maturity dates, the Company paid aggregate fees to the note holders of $26,250, which are recorded as a component of general and administrative expenses.

The notes payable are convertible into equity upon the closing of a Financing (as hereinafter defined). The term "Equity Securities" means the class of the Company's preferred stock issued in the Financing. The Equity Securities issued upon conversion of the notes shall be of the same class of Equity Securities purchased by investors in the Financing but shall be designated as a separate series of Equity Securities that shall have the same rights and preferences of the Equity Securities purchased by new purchasers in the Financing, except that the "Original Issue Price" of the series Equity Securities issued to holders of notes, as set forth in the Company's then-current Certificate of Incorporation for the purposes of calculating liquidation preferences, conversion ratios, anti-dilution adjustments, dividends and the like, will be the Conversion Price (as hereinafter defined). Additionally, the note holders shall receive pro rata participation rights with respect to all future equity issuances, subject to customary exceptions, such that each note holder shall have the right to participate in future equity issuances in an amount that permits it to maintain its fully-diluted ownership in the Company after each equity issuance. At that time, all of the principal amount outstanding under the notes and any accrued and unpaid interest thereon shall be converted automatically at the Conversion Price without further action of the note holders into shares of equity securities issued at such Financing. The term "Conversion Price" means an amount equal to the lesser of (i) eighty percent (80%) of the per share price paid in the Financing or (ii) the price equal to the quotient of the amount in the “Valuation Cap” column in the table above, divided by the aggregate number of fully diluted outstanding shares of the Company's common stock, as defined, immediately prior to the initial closing of the Financing. The term "Financing" means any equity financing for the account of the Company involving the issuance and sale of shares of Equity Securities which occurs on or before the notes mature and at which time the aggregate gross proceeds received by the Company (excluding any amounts from the conversion of any of the notes and any other convertible notes previously issued by the Company) equals or exceeds $5,000,000.

F-12

Until the payment or conversion of the entire principal amount of the notes and the payment or conversion of the entire accrued interest thereon, the Company shall not take any of the following actions without the prior written consent of the note holders (which may be granted or withheld in the note holders' discretion):

consummate any sale of the Company or consent to the consummation of any sale of the Company;

increase or decrease the total number of authorized shares of common stock of the Company, except in connection with any capital raising securities issuance (including, without limitation, any Financing);

pay compensation to any employee of the Company in excess of $180,000 per year;

declare or pay any dividends or make any other distributions to the holders of common stock of the Company;

change the authorized number of directors of the Company to more than five or less than three;

incur any future indebtedness in excess of $20,000 in the aggregate other than deferred expenses that the Company and payee thereof agree can be converted into convertible debt, however any additional indebtedness of any kind shall be expressly made subordinate to this Note; or

change the principal business of the Company or enter into a new line of business.

The secured convertible term notes grant a security interest in and to all of the Company’s right, title and interest the Company’s assets, tangible and intangible, wherever located, whether now existing or acquired in the future, including, but not limited to (i) all fixtures and personal property of every kind; and (ii) all proceeds and products derived from the Company’s assets; and all books and records.

5. Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures of financial instruments on a recurring basis.

F-13

Fair Value Hierarchy

The Fair Value Measurements Topic of FASB’s ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

Determination of Fair Value

Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the Company bases its fair value on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon management’s own estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future value.

Valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value where it is practicable to do so for financial instruments not recorded at fair value are as follows:

Cash and cash equivalents, accounts receivable, and accounts payable

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. In general, carrying amounts approximate fair value because of the short maturity of these instruments.

F-14

Long-lived Assets

Long-lived assets are measured at fair value on a non-recurring basis and are classified in Level 3 of the fair value hierarchy. The fair value is estimated utilizing unobservable inputs, including appraisals on real estate as well as evaluations of the marketability and potential relocation of other assets in similar condition and similar market areas.

Debt

At December 31, 2019 and 2018, the Company’s convertible debt was carried at its face value plus accrued interest. Based on the financial condition of the Company, it is impracticable for the Company to estimate the fair value of its short and long-term debt.

Stock-Based Compensation

The Company records stock-based compensation based upon (i) the stock value pursuant to an independent valuation prepared in compliance with Internal Revenue Code Section 409A and Accounting Standards Codification 718 dated February 27, 2019 that assigned a fair market value to the Company's common stock at a price of $0.09 per share or (ii) its most recent sale of stock of $4.00 per share in December 2019.

Warrant Liability Measured and Recognized at Fair Value on a Recurring Basis

The following table presents the amounts of warrant liability measured at fair value on a recurring basis as of December 31, 2019 and 2018

The fair value of the warrant liability is generally measured using pricing models with no observable inputs.  These measurements are classified as Level 3 within the fair value of hierarchy.

	Total		(Level 1)		(Level 2)		(Level 3)
December 31, 2019
Warrant liability	$	229,244		-		-	$	229,244
December 31, 2018
Warrant liability	$	-		-		-		-

The Company has no instruments with significant off-balance sheet risk.

F-15

6. Income Taxes

At December 31, 2019, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $2,800,000 expiring in the years of 2020 through 2035. Utilization of the net operating losses may be subject to annual limitations provided by Section 382 of the Internal Revenue Code and similar State provisions.

The Tax Cuts and Jobs Act ("Tax Act") was enacted on December 22, 2017. Among numerous provisions, the Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. As a result of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%.

Due to the net losses incurred, the Company recorded no income tax expense for the years ended December 31, 2019 and 2018.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 were as follows:

	2019		2018
Deferred tax assets, net:
Net operating loss carryforwards	$	590,000	$	300,000
Valuation allowance		590,000		300,000
Net deferred assets	$	—	$	—

The valuation allowance increased to approximately $590,000 at December 31, 2019, from $300,000 at December 31, 2018.

The following is a reconciliation of the tax provisions for the years ended December 31, 2019 and 2018 with the statutory Federal income tax rates:

	Percentage of Pre-Tax Income
	2019			2018
Statutory Federal income tax rate		21.0	%		21.0	%
Loss generating no tax benefit		(21.0	)		(21.0	)
Effective tax rate		—			—

The Company did not have any material unrecognized tax benefits as of December 31, 2019 and 2018. The Company does not expect the unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company recorded no interest and penalties relating to unrecognized tax benefits as of and during the years ended December 31, 2019 and 2018. The Company is subject to U.S. federal income tax, as well as taxes by various state jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending December 31, 2017 through 2019.

F-16

7. Commitments and Contingencies

Litigation

The Company accrues for loss contingencies associated with outstanding litigation, claims and assessments for which management has determined it is probable that a loss contingency exists and the amount of loss can be reasonably estimated. Costs for professional services associated with litigation claims are expensed as incurred. As of December 31, 2019, the Company has not accrued or incurred any amounts for litigation matters.

Leases

The Company leased its headquarters on a month-to-month basis under a lease agreement that expired on August 31, 2019. For the years ended December 31, 2019 and 2018, rent expense amounted to $28,465 and $35,674, respectively.

Effective January 1, 2019, the Company adopted ASU No. 2016-02 (“ASU 2016-02”), Leases using the modified retrospective transition approach utilizing the effective date as the date of initial application. The adoption of the ASU had no impact on the Company’s financial statements due to the short-term nature of the lease agreement.

Non-Dilutive Warrant

On December 20, 2018, the Company issued a non-dilutive warrant that expires on December 20, 2025. The warrant is convertible into 5% of the outstanding equity of the Company at a purchase price of $1,250,000, and is valued at $229,244 and $0 at December 31, 2019 and 2018 respectively. As the company issues shares of common or preferred stock, this warrant liability is subject to increasing in value.

8. Stockholders’ Deficit

The Company is authorized to issue 13,225,000 shares of its common stock, par value $0.001 per share (the "Common Stock”), and 7,850,000 shares of preferred stock, par value $0.001 per share. The Company has designated 5,000,000 shares of preferred stock as Series A Preferred Stock.

The board of directors authorized a reverse split of the Common Stock on a 1-for-25 basis, whereby the Company issued to each of its stockholders one share of Common Stock for every 25 shares of Common Stock held by such stockholder. The reverse split was effective on May 29, 2019. The financial statements as of and for the year ended December 31, 2018 have been presented to give effect to the reverse split.

F-17

In May 2018, the company purchased all of the 38,000 shares issued to one of the founding shareholders for a payment of $970, which were immediately retired and recorded as unissued stock. As a result of this transaction, the common stock account decreased by $38 and capital in excess of par value decreased by $912.

In the year ended December 31, 2019, the Company recorded $614,870 in stock-based compensation expense in conjunction with the issuance of Common Stock and options to purchase Common Stock. The Company also received cash proceeds of $489 from the issuance of shares of Common Stock to its Chief Executive Officer. A total of 4,227,722 common shares were issued in 2019.

The Company filed a preliminary offering circular dated September 10, 2019 to raise up to $20,000,000 through the use of an offering statement that has been qualified by the Securities and Exchange Commission under Tier II of Regulation A. The Company is offering up to 5,000,000 shares of Series A Preferred Stock, at a price of $4.00 per share, which may convert into shares of Common Stock on a one-for-one basis. On December 27, 2019, the Company executed a rolling close of its offering and issued 702,021 shares of Series A Preferred Stock. Gross proceeds amounted to $2,808,084 and offering costs, which were recorded as a reduction in capital in excess of par value, totaled $282,242, resulting in net proceeds of $2,526,544

The Series A Preferred Stock is convertible into Common Stock either at the discretion of the investor or automatically upon the occurrence of certain events, like effectiveness of registration of the Common Stock in an initial public offering. The rights and preferences associated with the Common Stock and Series A Preferred Stock are as follows:

Common Stock

Voting Rights

Each holder of the company’s Common Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors. In addition, holders of our Common Stock are entitled to vote as a separate class for the election of two (2) directors of the company’s Board of Directors. Holders of our Preferred Stock may not vote on the election of these directors.

Dividend Rights

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the Board of Directors out of legally available funds as detailed in the company’s Restated Articles. The company has never declared or paid cash dividends on any of its capital stock.

F-18

Liquidation Rights

In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the company, the holders of the Common Stock are entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all debts and other liabilities of the company. Holders of the Series A Preferred Stock are entitled to a liquidation preference that is senior to holders of the Common Stock, and therefore would receive dividends and liquidation assets prior to the holders of the Common Stock.

Series A Preferred Stock

Voting Rights

Each holder of the company’s Series A Preferred Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors, subject to the following restrictions:

The holders of our Common Stock are entitled to elect two (2) directors to the company’s Board of Directors as a standalone class. The Preferred Stockholders may not exercise any voting rights in the election of these directors.

Holders of our Preferred Stock specifically have the right to vote with the holders of the Common Stock to elect:

one (1) independent director to the company’s Board of Directors; and

any additional directors to the company’s Board of Directors after the elections outlined above.

Each holder of Series A Preferred Stock will be entitled to one vote for each share of Common Stock into which such share of Preferred Stock could be converted. Fractional votes will not be permitted and if the conversion results in a fractional share, it will be disregarded.

Additionally, the holders of the Series A Preferred Stock are entitled to certain protective provisions that require the company to obtain the written consent or affirmative vote of a majority of the outstanding shares of Preferred Stock prior to effecting certain corporate actions, comprised of the following:

a) alter the rights, powers or privileges of the Preferred Stock in a way that adversely affects the Preferred Stock;

F-19

b) increase or decrease the authorized number of shares of any class or series of capital stock;

c) authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers, or privileges set forth in the Certificate of Incorporation of the company, as then in effect, that are senior to or on a parity with any series of Preferred Stock;

d) redeem or repurchase any shares of Common Stock or Preferred Stock (other than pursuant to employee or consultant agreements giving the company the right to repurchase shares upon the termination of services pursuant to the terms of the applicable agreement);

e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock;

f)	increase or decrease the number of directors of the company;
g)	liquidate, dissolve, or wind-up the business and affairs of the company

Dividend Rights

Holders of Series A Preferred Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors out of legally available funds and on a pari passu basis with holders of the Common Stock. The company has never declared or paid cash dividends on any of its capital stock.

Conversion Rights

Shares of Series A Preferred Stock will be convertible, at the option of the holder, at any time, into fully paid and nonassessable shares of the company’s Common Stock at the then-applicable conversion rate. Initially, the conversion rate will be one share of Common Stock per share of Series A Preferred Stock. The conversion rate is subject to adjustment in the event of stock splits, reverse stock splits or the issuance of a dividend or other distribution payable in additional shares of Common Stock.

Additionally, each share of Series A Preferred Stock will automatically convert into Common Stock:

i	a)	immediately prior to the closing of a firm commitment underwritten public offering of the company’s Common Stock on Form S-1, registered under the Securities Act, at a per share price not less than the Original Issue Price (as defined below) adjusted for any stock dividends, combinations, splits, recapitalizations and the like, for a total offering proceeds $5,000,000 or more (before deduction of underwriters commissions and expenses); or
	b)	upon the affirmative election of the holders of a majority of the outstanding shares of Preferred Stock, voting as a single class and on an as-converted basis.

F-20

In either of these events, the shares will convert in the same manner as a voluntary conversion.

Right to Receive Liquidation Distributions

In the event of a liquidation, dissolution or winding up of the company, whether voluntary or involuntary, or certain other events (each a “Deemed Liquidation Event”) such as the sale or merger of the company, all holders of Series A Preferred Stock will be entitled to a liquidation preference that is senior to holders of the Common Stock. Holders of Series A Preferred Stock will receive a liquidation preference equal to the greater of (a) an amount for each share equal to the Original Issue Price for such share, adjusted for any stock dividends, combinations, splits, recapitalizations and the like (the “liquidation preference”) plus any declared but unpaid dividends with respect to such shares or (b)  such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. Initially, the liquidation preferences for the shares of Series A Preferred Stock will be $4.00 per share (the “Original Issue Price”).

If, upon such liquidation, dissolution, or winding up or Deemed Liquidation Event, the assets (or the consideration received in a transaction) that are distributable to the holders of Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such funds will be distributed ratably among the holders of the Preferred Stock in proportion to the full amounts to which they would otherwise be entitled to receive.

After the payment of the full liquidation preference of the Series A Preferred Stock, the remaining assets of the company legally available for distribution (or the consideration received in a transaction), if any, will be distributed ratably to the holders of the Common Stock in proportion to the number of shares of Common Stock held by each such holder.

Drag Along Right

The investors’ rights agreement contains a “drag-along provision” related to the certain events, such as the sale, merger or dissolution of the company (a “Liquidating Event”). Investors who purchase Series A Preferred Stock agree that, if the board of directors, the majority of the holders of the company’s Common Stock, and the majority of the holders of the company’s Series A Preferred Stock vote in favor of such a Liquidating Event, then such holders of Series A Preferred Stock will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters’ rights with respect to Liquidating Event, and deliver any documentation or take other actions reasonably requested by the company or the other holders in connection with the Liquidating Event.

F-21

Information Rights

The Company also agreed in the investors’ rights agreement to grant certain information rights to Series A Preferred Stockholders that invested $50,000 or more (“Major Purchasers”). The information rights provided to Major Purchasers include: (1) annual unaudited financial statements for each fiscal year of the company, including an unaudited balance sheet as of the end of such fiscal year, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices; and (2) quarterly unaudited financial statements for each fiscal quarter of the company (except the last quarter of the company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal quarter, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments. If the company has audited records of any of the foregoing, it will provide those in lieu of the unaudited versions.

Additional Rights and Participation Rights

The investors’ rights agreement grants Series A Preferred Stockholders and their transferees certain rights in connection with the Company’s next equity offering. If in its next equity offering after the date that an investor executes the investors’ rights agreement (the “Next Financing”) the company issues securities that (a) have rights, preferences or privileges that are more favorable than the terms of the Series A Preferred Stock or (b) provide all such future investors in the Next Financing contractual terms such as registration rights, the company agrees to provide substantially equivalent rights to the investor with respect to the Series A Preferred Stock (with appropriate adjustment for economic terms or other contractual rights), including the amount of the Series A preferred stock liquidating distributions, through the investor’s proxy, if applicable, subject to the investor’s execution of any documents, including, if applicable, investor rights, co-sale, voting, and other agreements, executed by the investors purchasing securities in the Next Financing (the “Next Financing Documents”), provided that certain rights may be reserved for investors with a minimum amount of investment in the Next Financing. Upon the execution and delivery of the Next Financing Documents, the investors’ rights agreement (excluding any then-existing and outstanding obligations) will be automatically amended and restated by and into the Next Financing Documents and will be terminated and of no further force or effect. As a result, the rights of investors who participate in any Next Financing will instead be governed by the Next Financing Documents.

F-22

In the investors’ rights agreement, the Company also grants investors participation rights. Investors will have the right of first refusal to purchase the investor’s Pro Rata Share of any New Securities (each as defined below) that the company may issue in the Next Financing. The investor will have no right to purchase any New Securities if the investor cannot demonstrate to the Company’s reasonable satisfaction that the investor is at the time of the proposed issuance of New Securities eligible to purchase such New Securities under applicable securities laws. An investor’s “Pro Rata Share” means the ratio of (i) the number of shares of the company’s Common Stock issued or issuable upon conversion of the Series A Preferred Stock owned by the investor, to (ii) that number of shares of the company’s capital stock equal to the sum of (A) all shares of the company’s capital stock (on an as-converted basis) issued and outstanding, assuming exercise or conversion of all options, warrants and other convertible securities and promissory notes, and (B) all shares of the Company’s capital stock reserved and available for future grant under any equity incentive or similar plan.

“New Securities” means any shares of the Company’s capital stock to be issued in the Next Financing, including Common Stock or Preferred Stock, whether now authorized or not, and rights, options or warrants to purchase Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into Common Stock or Preferred Stock.

Warrants

On December 20, 2018 the Company issued a 7-year non-dilutive cashless warrant to purchase (i) shares of common stock equal to five percent (5%), calculated on a post-exercise basis, of the fully diluted capitalization of the Company, as of the date or dates of exercise, plus (ii) shares of preferred stock of each class or series of preferred stock of the Company equal to five percent (5%), calculated on a post-exercise basis, of the total issued and outstanding number of preferred shares of the Company, as of the date or dates of exercise. At December 31, 2019, based upon the Black-Scholes valuation model, with assumptions including: (1) a term of 5.975 years; (2) a volatility rate of 19.8% (3) a discount rate of 1.69% and (4) zero dividends, the warrant had a nominal value. At December 31, 2018, based upon the Black-Scholes valuation model, with assumptions including: (1) a term of 7 years; (2) a volatility rate of 100% (3) a discount rate of 1.00% and (4) zero dividends, the warrant had a nominal value.

Stock Options

The Company adopted a stock option plan and granted stock options to nine qualified individuals. Based upon a February 27, 2019 valuation performed by an independent and qualified financial consultant, all stock option grants were valued at $0.09 cents per share, which represents the estimated market value of a share of common stock at a date that was close to the date of the grants. Each grant vest in approximately four years, and expires in ten years from the date of the grant. The weighted average remaining life of the grants is 9.5 years at December 31, 2019.

F-23

Stock-based compensation expense from the option grants amounted to $5,303 for the year ended December 31, 2019. The remaining unrecognized option expense that will be recognized as the option grants vest is $32,625.

The following table summarizes the option grant activity for the years ended December 31, 2019 and 2018.

	Option Number of Shares		Option Exercise Price Per Share		$	Average Exercise Price
Options outstanding December 31, 2018		-		-	$	-
Issued during year ended December 31, 2019		573,200		$ 0.09 - $4.00	$	1.29
Exercised/canceled during year ended December 31, 2019		-		-	$	-
Options outstanding December 31, 2019		573,200		$ 0.09 - $4.00	$	1.29
Options exercisable, December 31, 2019		76,918		$ 0.09 - $4.00	$	0.84

9. Loss Per Common Share

Loss per common share data was computed as follows:

	2019			2018
Net loss	$	(1,796,265	)	$	(712,268	)
Weighted average common shares outstanding		2,896,015			103,333
Effect of dilutive securities		—			—
Weighted average dilutive common shares outstanding		2,896,015			103,333
Earnings (loss) per common share – basic	$	(0.62	)	$	(6.89	)
Earnings (loss) per common share – diluted	$	(0.62	)	$	(6.89	)

F-24

For the year ended December 31, 2019, the Company excluded 702,021 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 704,268 shares of Common Stock issuable upon the exercise of outstanding options and warrants to purchase Common Stock from the calculation of net loss per share because the effect would be anti-dilutive. For the year ended December 31, 2018, the Company excluded 4,469 shares of common stock issuable upon the exercise of outstanding warrants to purchase common stock from the calculation of net loss per share because the effect would be anti-dilutive. All of the Company’s debt is convertible into shares of common stock, however, the debt cannot be converted until certain contingencies are met. Consequently, any potentially issuable shares of common stock resulting from a debt conversion have not been considered.

10. Related Party Transactions

The Company has transactions with officers and directors or entities related to the officers and directors that are classified as related party transactions. Such transactions and balances as of and for the years ended December 31, 2019 and 2018 are as follows:

	2019		2018
Accounts payable	$	8,518	$	31,128
Accrued interest payable	$	124,964	$	7,227
Officer salary payable	$	88,125	$	48,877
Current portion of long-term debt	$	1,205,000	$	1,025,000
Long-term debt	$	48,000	$	43,000

The Company owes a board member $71,000 in notes payable at December 31, 2019 and 2018. The same board member is also owed $5,969 and $3,129 in accrued interest payable, and $4,000 and $26,488 in accounts payable at December 31, 2019 and 2018, respectively. This board member also received a stock option grant to purchase 180,000 shares of common stock at a price of $0.61 per share. The grant vests over a four-year period ending on May 27, 2023 and expires on May 27, 2029. The grant was valued at $12,193; $1,821 in expense was recorded in the year ended December 31, 2019 and $10,372 is the remaining unrecognized option expense at December 31, 2019.

The Company owes its Chief Executive Officer $4,518 and $4,611 in accounts payable and $88,125 and $48,877 in salary payable at December 31, 2019 and 2018, respectively. On May 27, 2019, the Chief Executive Officer received a stock option grant to purchase 160,000 shares of common stock at a price of $0.61 per share. The grant vests over a four-year period ending on May 27, 2023 and expires on May 27, 2029. The grant was valued at $10,838; $1,618 in expense was recorded in the year ended December 31, 2019 and $9,220 is the remaining unrecognized option expense at December 31, 2019.

F-25

The Company owed its former Chief Executive Officer $76,000 in notes payable at December 31, 2018 and $4,098 in accrued interest payable. The $76,000 in debt and a total of $7,229 in accrued interest payable was paid in full on December 31, 2019.

As of December 31, 2019 and 2018, the Company owes a related-party lender notes payable of $800,000 and $800,000 and accrued interest payable of $117,295 and $69,295, respectively. This lender also holds the anti-dilutive warrant for which the Company has recorded a warrant liability of $229,244. See Notes 5 and 8.

Stock-based compensation to officers in the year ended December 31, 2019 amounted to $339,257. 1,957,080 shares of Common Stock issued to the Company's Chief Executive Officer were recorded as $176,137 in stock-based compensation and 1,812,447 shares of Common Stock issued to the Company's Chief Medical Officer were recorded as $163,120 in stock-based compensation. The Common Stock issuances were valued at a price of $0.09 per share based upon an independent valuation prepared in compliance with Internal Revenue Code Section 409A and Accounting Standards Codification 718.

11. Subsequent Events

On January 20, 2020, the Company hired a Vice President of Engineering. In addition to his base salary, he received a stock option (“Option”) to purchase 100,000 shares of Common Stock at an exercise price of $4.00 per share. 25% of the Option shall vest and become exercisable on his first anniversary if he continues to have a service relationship with the Company at such time. Thereafter, the remaining 75% of the Option shall vest and become exercisable in twelve equal 6-month installments over the six-year period following the first anniversary date, provided he continues to have a service relationship with the Company on each vesting date.

On February 24, 2020, the Company executed an industrial net lease at 3913 Todd Lane Austin, Texas, and moved its corporate headquarters to this location. The premises is approximately 4,100 square feet and the lease term is from March 1, 2020 to March 31, 2024. In the first year of the lease, the monthly base rent is $5,408, and it increases to $5,909 in the fourth year.

On April 24, 2020, the Company completed a raise of approximately $13,600,000 by selling its Series A Preferred Stock at $4.00 a share under an offering statement that was qualified by the Securities and Exchange Commission under Tier II of Regulation A. This amount represents approximately $10,800,000 additional gross proceeds since its first rolling close in December 2019.

The Company evaluated subsequent events through May 1, 2020, the date these original financial statements were available to be issued. There were no other material subsequent events that required recognition or additional disclosure in these financial statements.

F-26

MONOGRAM ORTHOPAEDICS INC.

Balance Sheets

	June 30, 2020			December 31, 2019
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	9,415,863		$	2,319,393
Prepaid expenses		184,442			65,000
Total current assets		9,600,305			2,384,393
Equipment, net of accumulated depreciation		870,272			235,748
Operating lease right-of-use-asset		310,434
Deposits		15,342
Total assets	$	10,796,353		$	2,620,141
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
Trade	$	440,800		$	241,850
Related party		8,510			8,518
Accrued interest payable		4,714			78,072
Accrued interest payable – related parties		-			124,964
Accrued officer salary payable		151,427			88,125
Warrant liability		947,131			229,244
Operating lease liability		73,689			-
Current portion of long-term debt		40,000			1,205,000
Current portion of long-term debt – related parties		-			871,000
Total current liabilities		1,666,271			2,846,773
Long-term notes payable		79,025			-
Operating lease liability, net of current portion		236,745			-
Long-term debt – related parties		-			48,000
Total liabilities		1,982,041			2,894,773
Commitments and Contingencies		-			-
Stockholders’ equity (deficit):
Preferred stock, $.001 par value; 7,850,000,shares authorized, 4,897,739 and 702,201 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		4,897			702
Common stock, $.001 par value; 13,225,000 shares authorized, 4,836,935 and 4,317,104 shares issued and outstanding at June 30, 2020 and Dec. 31, 2019, respectively		4,837			4,317
Capital in excess of par value		17,137,552			2,909,875
Accumulated deficit		(8,332,974	)		(3,189,526	)
Total stockholders’ equity (deficit)		8,814,312			(274,632	)
Total liabilities and stockholders’ equity (deficit)	$	10,796,353		$	2,620,141

Accompanying notes are an integral part of these financial statements

F-27

MONOGRAM ORTHOPAEDICS INC.

Statements of Operations

(Unaudited)

	Six Months Ended June 30,
	2020			2019
Revenues	$	-		$	-
Cost and expenses:
Wages and payroll related expenses		683,663			99,537
General and administrative		143,180			129,100
Marketing and advertising		929,958			16,635
Legal and professional services		253,906			92,707
Depreciation		15,646			13,242
Stock-based compensation		2,084,064			3,737
Research and development		282,955			203,552
Total costs and expenses		4,393,372			558,510
Loss from operations		(4,393,372	)		(558,510	)
Other income (expense)
Interest expense		(54,250	)		(61,340	)
Loss on change in derivative liabilities		(717,887)			-
Other income		5,000			-
Interest income		17,061			4,298
Total other income (expense)		(750,076	)		(57,042	)
Net loss before taxes		(5,143,448	)		(615,552	)
Income tax		-			-
Net loss	$	(5,143,448	)	$	(615,552	)
Basic and diluted loss per share	$	(1.16	)	$	(0.41	)
Weighted average number of basic and diluted shares outstanding		4,425,640			1,491,833

Accompanying notes are an integral part of these unaudited financial statements

F-28

MONOGRAM ORTHOPAEDICS INC.

Statements of Stockholders’ Equity (Deficit)

For the Six Months Ended June 30, 2020 and the Years Ended December 31, 2019 and 2018

(Unaudited)

	Common Stock				Preferred Stock
	Shares		Amount		Shares			Amount			Capital in Excess of Par Value			Accumulated Deficit			Total Stockholders' Equity (Deficit)
Balance, December  31, 2017		-	$	-		127,382		$	127		$	3,058		$	(680,993	)	$	(677,808	)
Net loss, December 31, 2018		-		-		-			-			-			(712,268	)		(712,268	)
Stock repurchase		-		-		(38,000	)		(38	)		(912	)		-			(950	)
Balance, December 31, 2018		-		-		89,382			89			2,146			(1,393,261	)		(1,391,026	)
Net loss, December 31, 2019		-		-		-			-			-			(1,796,265	)		(1,796,265	)
Stock option expense		-		-		-			-			5,303			-			5,303
Common stock issuances		-		-		4,227,722			4,228			376,584			-			380,812
Sale of preferred shares		702,201		702		-			-			2,525,842			-			2,526,544
Balance, December 31, 2019		702,201		702		4,317,104			4,317			2,909,875			(3,189,526	)		(274,632	)
Net loss, June 30, 2020		-		-		-			-						(5,143,448	)		(5,143,448	)
Debt conversion		1,255,417		1,255		-			-			1,400,449			-			1,401,704
Stock-based compensation		-		-		519,831			520			2,083,544			-			2,084,064
Sale of preferred shares		2,940,121		2,940		-			-			10,743,684			-			10,746,624
Balance, June 30, 2020		4,897,739	$	4,897		4,836,935		$	4,837		$	17,137,552		$	(8,332,974	)	$	8,814,312

Accompanying notes are an integral part of these unaudited financial statements

F-29

MONOGRAM ORTHOPAEDICS INC.

Statements of Cash Flows

(Unaudited)

	Six Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2020			2019
Operating activities
Net loss	$	(5,143,448	)	$	(615,552	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		2,084,064			3,737
Depreciation		15,646			13,242
Change in fair value of derivative liabilities		717,887			-
Changes in non-cash working capital balances:
Prepaid expenses		(119,442	)		(94	)
Deposits		(15,342	)		-
Accounts payable		198,948			(175,640	)
Accrued officer salary payable		63,302			-
Accrued payable – related parties		(8	)		(7,517	)
Accrued interest payable		(80,617	)		61,340
Cash used in operating activities		(2,279,010	)		(720,484	)
Investing activities
Purchase of equipment		(650,170	)		(2,261	)
Cash used in investing activities		(650,170	)		(2,261	)
Financing activities
Proceeds from notes payable		79,025			-
Proceeds from sale of preferred stock		10,746,624			-
Proceeds from sale of common stock		-			583
Payment of related party loans		(800,000	)		-
Cash provided by financing activities		10,025,649			583
Increase (decrease) in cash and cash equivalents during the period		7,096,470			(722,162	)
Cash and cash equivalents, beginning of the period		2,319,393			922,108
Cash and cash equivalents, end of the period	$	9,415,863		$	199,946
Cash paid for:
Interest	$	134,867		$	-
Income taxes	$	-		$	-
Non-cash financing activities
Note issued for officer's salary	$	-		$	48,000
Conversion of notes payable into preferred stock	$	1,401,704		$	-

Accompanying notes are an integral part of these unaudited financial statements

F-30

MONOGRAM ORTHOPAEDICS INC.

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2019

(Unaudited)

1. Description of Business and Summary of Accounting Principles

Description of the Organization

Monogram Orthopaedics Inc. (“Monogram,” “we,” “our,” or the “Company”), incorporated in the state of Delaware on April 21, 2016, is developing a product solution architecture for enabling mass personalization of orthopedic implants by linking 3D printing and robotics via automated digital image analysis algorithms.

The company has a working navigated robot prototype that can optically track a simulated surgical target and execute optimized auto-generated cut paths for high precision insertion of patient specific implants in synthetic bone specimens. These implants and cut-paths are generated with proprietary Monogram software algorithms.

The financial statements are presented in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America.  The Company’s fiscal year end is December 31. The Company operated from its headquarters in Brooklyn, New York until January 2020 when it moved to Austin, Texas.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. A valuation allowance has been established to eliminate the Company’s deferred tax assets as it is more likely than not that none of the deferred tax assets will be realized.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the tax authorities. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in income tax expense. The Company has determined that it had no significant uncertain tax positions requiring recognition or disclosure.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

F-31

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The Company adopted the new standard as of January 1, 2018, utilizing a full retrospective transition method. Adoption of the new standard resulted in no changes for revenue recognition related as the Company has not yet generated revenue.

Earnings (Loss) Per Share

Earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares outstanding. To the extent that stock options, warrants and convertible preferred stock are anti-dilutive, they are excluded from the calculation of diluted earnings (loss) per share. See Note 9 for details of potentially dilutive securities.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company did not have any cash equivalents during fiscal 2020 and 2019. The Company uses two financial institutions for its cash balances, and occasionally maintains cash balances that exceed federally insured limits.

Equipment

Equipment expenditures are recorded at cost. Costs which extend the useful lives or increase the productivity of the assets are capitalized, while normal repairs and maintenance that do not extend the useful life or increase the productivity of the asset are expensed as incurred. Equipment, including the Company’s robot, are depreciated on the straight-line method over the estimated useful lives of the assets. Equipment will be depreciated over a five-year useful life. Any construction in progress is stated at cost and depreciation will commence once the project is constructed and placed in service.

Asset Impairment

Long-lived assets, such as property, plant, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. The Company recorded no asset impairment in 2020 or 2019.

General and Administrative Expenses

General and administrative expenses include travel and office expenses of administrative employees and contractors; software license fees; and other overhead expenses.

F-32

Stock-Based Compensation

The Company applies the fair value method of ASC 718, Share Based Payment, formerly Statement of Financial Accounting Standards No. l23R "Accounting for Stock Based Compensation," in accounting for its stock-based compensation. This accounting standard states that compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period, if any. As the Company does not have sufficient, reliable, and readily determinable values relating to its common stock, the Company has used (i) the stock value pursuant to an independent valuation dated February 27, 2019 to record stock-based compensation at a price of $0.09 per share and (ii) its most recent price from the sale of stock of $4.00 per share, from December 2019 to April 2020, for valuing stock-based compensation.

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and amounted to $282,955 and $203,552 for the six-month periods ended June 30, 2020 and 2019, respectively. The company currently has several R&D initiatives underway including mechanical testing of a patient specific hip, micromotion studies of a patient specific press-fit knee implant, and performance testing of a robot mounted navigation system.

Advertising Costs

Advertising and marketing costs are expensed as incurred and amounted to $939,958 and $16,635 for the six-month periods ended June 30, 2020 and 2019, respectively. Included in advertising costs are the online advertisements purchased to promote the Company’s sale of preferred stock through the use of an offering statement that was qualified by the Securities and Exchange Commission under Tier II of Regulation A.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to the warrant liability, valuations of stock-based compensation and the income tax valuation allowance. On a continual basis, management reviews its estimates, utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses.  The new guidance provides better representation about expected credit losses on financial instruments. This update requires the use of a methodology that reflects expected losses and requires consideration of a broader range of reasonable and supportive information to inform credit loss estimates.  This ASU is effective for reporting periods beginning after December 15, 2022, with early adoption permitted.  The company is studying the impact of adopting the ASU in 2023, and what effect it could have. The Company believes the accounting change would not have a material effect on the financial statements.

F-33

In March 2017 the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This amendment simplifies the measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This update is effective for fiscal years beginning after December 15, 2021. The adoption of ASU No. 2017-04 is not expected to have a material impact on the Company’s financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvement to Nonemployee Share-based Payment Accounting, which simplifies the accounting for share-based payments. The company elected early adoption of this ASU, using the modified retrospective approach, so that all stock compensation to employees and nonemployees is treated under the same guidance as in ASC 718. No outstanding stock option grants were required to be revalued upon the adoption of this ASU.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

2. Going Concern Matters and Realization of Assets

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. However, the Company has sustained recurring losses from its continuing operations as of June 30, 2020, has an accumulated deficit of $8,270,495. The Company believes that its existing cash resources are not sufficient to fund its continuing operating losses, capital expenditures, research and development efforts, lease and debt payments and working capital requirements.

The Company may not be able to raise sufficient additional debt, equity or other cash on acceptable terms, if at all. Failure to generate sufficient revenues, achieve certain other business plan objectives or raise additional funds could have a material adverse effect on the Company’s results of operations, cash flows and financial position, including its ability to continue as a going concern, and may require it to significantly reduce, reorganize, discontinue or shut down its operations.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company which, in turn, is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in its existence. Management’s plans include:

1. Continue to raise cash for research, product development and working capital purposes by selling equity under an offering statement that has been filed with the Securities and Exchange Commission under Tier II of Regulation A. The Company is seeking to raise up to $30,000,000 by offering for sale shares of Series B preferred stock, at a price of $6.27 per share, which may convert into shares of common stock on a one-for-one basis. With sufficient cash available to the Company, it can make the additional development expenditures necessary to produce a commercially viable product and generate revenues, and consequently cut monthly operating losses.

2. Continue to develop its technology and intellectual property and look for industry partners to use or sell its product.

F-34

Management has determined, based on its recent history and its liquidity issues that it is not probable that management’s plan will sufficiently alleviate or mitigate, to a sufficient level, the relevant conditions or events noted above. Accordingly, the management of the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of these financial statements.

There can be no assurance that the Company will be able to achieve or maintain cash-flow-positive operating results. If the Company is unable to generate adequate funds from operations or raise sufficient additional funds, the Company may not be able to repay its existing debt, continue to develop its product, respond to competitive pressures or fund its operations. As a result, the Company may be required to significantly reduce, reorganize, discontinue or shut down its operations. The financial statements do not include any adjustments that might result from this uncertainty.

3. Equipment

Equipment, net consists of the following as of June 30, 2020 and December 31, 2019.

				December 31,
	June 30, 2020			2019
Computer equipment	$	109,351		$	32,430
Medical equipment		253,558			6,142
Robot		449,083			123,250
Work-in-process equipment		150,000			150,000
		961,992			311,822
Accumulated depreciation		(91,720	)		(76,074	)
Equipment, net	$	870,272		$	235,748

For the six months ended June 30, 2020 and 2019, depreciation expense amounted to $15,646 and $13,242, respectively. Not all equipment has been placed into service as of June 30, 2020.

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4. Debt

The following table summarizes components debt as of June 30, 2020 and December 31, 2019:

			December 31,
	June 30, 2020		2019
Convertible term notes	$	40,000	$	1,125,000
Secured convertible term notes		-		80,000
U.S. SBA loan		79,025		-
Convertible term notes – related parties		-		919,000
Total Debt	$	119,025	$	2,124,000

The notes payable outstanding at December 31, 2020 were convertible into equity upon the closing of a financing greater than $5,000,000, which occurred effective April 23, 2020. See Note 8.

The notes payable at June 30, 2020 consist of a $40,000 note that matured in July 2020 and was paid in full, and a $79,025 Payroll Protection Program loan from the U.S. Small Business Administration that carriers an interest rate of 1%, has a two-year term with no principal payments for 12 months, and which can be forgiven in full if the Company applies for forgiveness and documents that it spent proceeds on allowed expenditures, including payroll cost. The Company believes this loan will be forgiven in full.

Interest expense amounted to $54,250 and $61,340 for the six-month periods ended June 30, 2020 and 2019, respectively. Accrued interest payable amounted to $4,714 and $78,072 as of June 30, 2020 and December 31, 2019, respectively. Accrued interest payable to related parties amounted to $0 and $124,964 at June 30, 2020 and December 31, 2019, respectively.

5. Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures of financial instruments on a recurring basis.

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Fair Value Hierarchy

The Fair Value Measurements Topic of FASB’s ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

Determination of Fair Value

Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the Company bases its fair value on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon management’s own estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future value.

Valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value where it is practicable to do so for financial instruments not recorded at fair value are as follows:

Cash and cash equivalents, accounts receivable, and accounts payable

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. In general, carrying amounts approximate fair value because of the short maturity of these instruments.

Debt

At June 30, 2020 and December 31, 2019, the Company’s convertible debt was carried at its face value plus accrued interest. Based on the financial condition of the Company, it is impracticable for the Company to estimate the fair value of its short and long-term debt.

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Stock-Based Compensation

The Company records stock-based compensation based upon (i) the stock value pursuant to an independent valuation prepared in compliance with Internal Revenue Code Section 409A and Accounting Standards Codification 718 dated February 27, 2019 that assigned a fair market value to the Company's common stock at a price of $0.09 per share or (ii) its most recent sale of stock of $4.00 per share during the period December 2019 through April 2020.

Warrant Liability Measured and Recognized at Fair Value on a Recurring Basis

The following table presents the amounts of warrant liability measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.

The fair value of the warrant liability is generally measured using pricing models with no observable inputs.  These measurements are classified as Level 3 within the fair value of hierarchy.

	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2020
Warrant liability	$	947,131		-		-	$	947,131
December 31, 2019
Warrant liability	$	229,244		-		-		229,244

The Company has no instruments with significant off-balance sheet risk.

6. Income Taxes

At June 30, 2020 and December 31, 2019, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $2,800,000 expiring in the years of 2020 through 2035. Utilization of the net operating losses may be subject to annual limitations provided by Section 382 of the Internal Revenue Code and similar State provisions.

The Tax Cuts and Jobs Act ("Tax Act") was enacted on December 22, 2017. Among numerous provisions, the Tax Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. As a result of the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%.

Due to the net losses incurred, the Company recorded no income tax expense for the six-month periods ended June 30, 2020 and 2019.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company records a valuation allowance equal to 100% of its deferred tax assets.

7. Commitments and Contingencies

Litigation

The Company accrues for loss contingencies associated with outstanding litigation, claims and assessments for which management has determined it is probable that a loss contingency exists and the amount of loss can be reasonably estimated. Costs for professional services associated with litigation claims are expensed as incurred. As of June 30, 2020, the Company has not accrued or incurred any amounts for litigation matters.

Leases

The Company leased its headquarters on a month-to-month basis under a lease agreement that expired on August 31, 2019. A new office lease was signed in March 2020 for a term ending on March 31, 2024. For the six-month periods ended June 30, 2020 and 2019, rent expense amounted to $30,684 and $12,878, respectively.

Effective January 1, 2019, the Company adopted ASU No. 2016-02 (“ASU 2016-02”), Leases using the modified retrospective transition approach utilizing the effective date as the date of initial application. The adoption of the ASU had no impact on the Company’s financial statements due to the short-term nature of the lease agreement. The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, the Company’s office lease does not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.

The table below presents the lease related asset and liability recorded on the Company’s balance sheet as of June 30, 2020.

Operating lease right of use asset	$	310,434
Total operating lease assets	$	310,434
Current operating lease liability	$	73,689
Long-term operating lease liability		236,745
Total operating lease liability	$	310,745

The lease expense for the six months ended June 30, 2020 was $21,671, which consisted of amortization expense of $17,654 and interest expense of $4,027. The cash paid under the operating lease during the six months ended June 30, 2020 was $21,671. At June 30, 2020, the remaining lease term was 3.75 years and the discount rate was 5%.

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Non-Dilutive Warrant

On December 20, 2018, the Company issued a non-dilutive warrant that expires on December 20, 2025. The warrant is convertible into 5% of the outstanding equity of the Company at a purchase price of $1,250,000, and is valued at $947,131 and $229,244 at June 30, 2020 and December 31, 2019, respectively. As the company issues shares of common or preferred stock, this warrant liability is subject to increasing in value.

8. Stockholders’ Deficit

The Company is authorized to issue 13,225,000 shares of its common stock, par value $0.001 per share (the "Common Stock”), and 7,850,000 shares of preferred stock, par value $0.001 per share. The Company designated 5,000,000 shares of preferred stock as Series A Preferred Stock.

As of June 30, 2020 and December 31, 2019, 4,836,935 and 4,317,104 shares of Common Stock were outstanding, respectively. As of June 30, 2020 and December 31, 2019, 4,897,739 and 702,201 shares of Series A Preferred Stock were outstanding, respectively.

The board of directors authorized a reverse split of the Common Stock on a 1-for-25 basis, whereby the Company issued to each of its stockholders one share of Common Stock for every 25 shares of Common Stock held by such stockholder. The reverse split was effective on May 29, 2019. The financial statements as of and for the six months ended June 30, 2019 have been adjusted to give effect to the reverse split.

In the year ended December 31, 2019, the Company recorded $614,870 in stock-based compensation expense in conjunction with the issuance of Common Stock and options to purchase Common Stock. The Company also received cash proceeds of $489 from the issuance of shares of Common Stock to its Chief Executive Officer. A total of 4,227,722 shares of Common Stock were issued in 2019.

In the six months ended June 30, 2020, the Company recorded stock-based compensation expense of $2,084,064. The vesting of stock options accounts for $4,740 in stock-based compensation and the issuance of 519,831 shares of Common Stock was recorded as stock-based compensation of $2,079,324.

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In the six months ended June 30, 2020, based upon automatic conversion requirements in convertible promissory notes, the Company issued 1,255,417 shares of Common Stock as payment in full of $1,284,000 in principal and $117,704 accrued interest, for a total of $1,401,704. Of these amounts, payments to related parties totaled $10,041 in accrued interest and $119,000 in principal.

The Company filed a preliminary offering circular dated September 10, 2019 to raise up to $20,000,000 through the use of an offering statement that was qualified by the Securities and Exchange Commission under Tier II of Regulation A. The Company offered up to 5,000,000 shares of Series A Preferred Stock, at a price of $4.00 per share, which may convert into shares of Common Stock on a one-for-one basis. On December 27, 2019, the Company executed a rolling close of its offering and issued 702,021 shares of Series A Preferred Stock. Gross proceeds amounted to $2,808,084 and offering costs, which were recorded as a reduction in capital in excess of par value, totaled $282,242, resulting in net proceeds of $2,526,544.

In the six months ended June 30, 2020, the Company executed five additional closings and sold an aggregate of 2,940,121 shares of Series A Preferred Stock for gross proceeds of $11,760,484. Offering costs, which were recorded as a reduction in capital in excess of par value, totaled $1,013,860, resulting in net proceeds of $10,746,624.

The Series A Preferred Stock is convertible into Common Stock either at the discretion of the investor or automatically upon the occurrence of certain events, such as the effectiveness of registration of the Common Stock in an initial public offering. The rights and preferences associated with the Common Stock and Series A Preferred Stock are as follows:

Common Stock

Voting Rights

Each holder of the company’s Common Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors. In addition, holders of our Common Stock are entitled to vote as a separate class for the election of two (2) directors of the company’s Board of Directors. Holders of our Preferred Stock may not vote on the election of these directors.

Dividend Rights

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the Board of Directors out of legally available funds as detailed in the company’s Restated Articles. The company has never declared or paid cash dividends on any of its capital stock.

Liquidation Rights

In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the company, the holders of the Common Stock are entitled to share ratably in the net assets legally available for distribution to shareholders after the payment of all debts and other liabilities of the company. Holders of the Series A Preferred Stock are entitled to a liquidation preference that is senior to holders of the Common Stock, and therefore would receive dividends and liquidation assets prior to the holders of the Common Stock.

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Series A Preferred Stock

Voting Rights

Each holder of the company’s Series A Preferred Stock is entitled to one vote for each share on all matters submitted to a vote of the shareholders, including the election of directors, subject to the following restrictions:

• The holders of our Common Stock are entitled to elect two (2) directors to the company’s Board of Directors as a standalone class. The Preferred Stockholders may not exercise any voting rights in the election of these directors.

Holders of our Preferred Stock specifically have the right to vote with the holders of the Common Stock to elect:

• one (1) independent director to the company’s Board of Directors; and

• any additional directors to the company’s Board of Directors after the elections outlined above.

Each holder of Series A Preferred Stock will be entitled to one vote for each share of Common Stock into which such share of Preferred Stock could be converted. Fractional votes will not be permitted and if the conversion results in a fractional share, it will be disregarded.

Additionally, the holders of the Series A Preferred Stock are entitled to certain protective provisions that require the company to obtain the written consent or affirmative vote of a majority of the outstanding shares of Preferred Stock prior to effecting certain corporate actions, comprised of the following:

a) alter the rights, powers or privileges of the Preferred Stock in a way that adversely affects the Preferred Stock;

b) increase or decrease the authorized number of shares of any class or series of capital stock;

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c) authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers, or privileges set forth in the Certificate of Incorporation of the company, as then in effect, that are senior to or on a parity with any series of Preferred Stock;

d) redeem or repurchase any shares of Common Stock or Preferred Stock (other than pursuant to employee or consultant agreements giving the company the right to repurchase shares upon the termination of services pursuant to the terms of the applicable agreement);

e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock;

f)	increase or decrease the number of directors of the company;
g)	liquidate, dissolve, or wind-up the business and affairs of the company

Dividend Rights

Holders of Series A Preferred Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors out of legally available funds and on a pari passu basis with holders of the Common Stock. The company has never declared or paid cash dividends on any of its capital stock.

Conversion Rights

Shares of Series A Preferred Stock will be convertible, at the option of the holder, at any time, into fully paid and nonassessable shares of the company’s Common Stock at the then-applicable conversion rate. Initially, the conversion rate will be one share of Common Stock per share of Series A Preferred Stock. The conversion rate is subject to adjustment in the event of stock splits, reverse stock splits or the issuance of a dividend or other distribution payable in additional shares of Common Stock.

Additionally, each share of Series A Preferred Stock will automatically convert into Common Stock:

i

a)     immediately prior to the closing of a firm commitment underwritten public offering of the company’s Common Stock on Form S-1, registered under the Securities Act, at a per share price not less than the Original Issue Price (as defined below) adjusted for any stock dividends, combinations, splits, recapitalizations and the like, for a total offering proceeds $5,000,000 or more (before deduction of underwriters commissions and expenses); or

i

b)     upon the affirmative election of the holders of a majority of the outstanding shares of Preferred Stock, voting as a single class and on an as-converted basis.

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In either of these events, the shares will convert in the same manner as a voluntary conversion.

Right to Receive Liquidation Distributions

In the event of a liquidation, dissolution or winding up of the company, whether voluntary or involuntary, or certain other events (each a “Deemed Liquidation Event”) such as the sale or merger of the company, all holders of Series A Preferred Stock will be entitled to a liquidation preference that is senior to holders of the Common Stock. Holders of Series A Preferred Stock will receive a liquidation preference equal to the greater of (a) an amount for each share equal to the Original Issue Price for such share, adjusted for any stock dividends, combinations, splits, recapitalizations and the like (the “liquidation preference”) plus any declared but unpaid dividends with respect to such shares or (b)  such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event. Initially, the liquidation preferences for the shares of Series A Preferred Stock will be $4.00 per share (the “Original Issue Price”).

If, upon such liquidation, dissolution, or winding up or Deemed Liquidation Event, the assets (or the consideration received in a transaction) that are distributable to the holders of Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such funds will be distributed ratably among the holders of the Preferred Stock in proportion to the full amounts to which they would otherwise be entitled to receive.

After the payment of the full liquidation preference of the Series A Preferred Stock, the remaining assets of the company legally available for distribution (or the consideration received in a transaction), if any, will be distributed ratably to the holders of the Common Stock in proportion to the number of shares of Common Stock held by each such holder.

Drag Along Right

The investors’ rights agreement contains a “drag-along provision” related to the certain events, such as the sale, merger or dissolution of the company (a “Liquidating Event”). Investors who purchase Series A Preferred Stock agree that, if the board of directors, the majority of the holders of the company’s Common Stock, and the majority of the holders of the company’s Series A Preferred Stock vote in favor of such a Liquidating Event, then such holders of Series A Preferred Stock will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters’ rights with respect to Liquidating Event, and deliver any documentation or take other actions reasonably requested by the company or the other holders in connection with the Liquidating Event.

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Information Rights

The Company also agreed in the investors’ rights agreement to grant certain information rights to Series A Preferred Stockholders that invested $50,000 or more (“Major Purchasers”). The information rights provided to Major Purchasers include: (1) annual unaudited financial statements for each fiscal year of the company, including an unaudited balance sheet as of the end of such fiscal year, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices; and (2) quarterly unaudited financial statements for each fiscal quarter of the company (except the last quarter of the company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal quarter, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments. If the company has audited records of any of the foregoing, it will provide those in lieu of the unaudited versions.

Additional Rights and Participation Rights

The investors’ rights agreement grants Series A Preferred Stockholders and their transferees certain rights in connection with the Company’s next equity offering. If in its next equity offering after the date that an investor executes the investors’ rights agreement (the “Next Financing”) the company issues securities that (a) have rights, preferences or privileges that are more favorable than the terms of the Series A Preferred Stock or (b) provide all such future investors in the Next Financing contractual terms such as registration rights, the company agrees to provide substantially equivalent rights to the investor with respect to the Series A Preferred Stock (with appropriate adjustment for economic terms or other contractual rights), including the amount of the Series A preferred stock liquidating distributions, through the investor’s proxy, if applicable, subject to the investor’s execution of any documents, including, if applicable, investor rights, co-sale, voting, and other agreements, executed by the investors purchasing securities in the Next Financing (the “Next Financing Documents”), provided that certain rights may be reserved for investors with a minimum amount of investment in the Next Financing. Upon the execution and delivery of the Next Financing Documents, the investors’ rights agreement (excluding any then-existing and outstanding obligations) will be automatically amended and restated by and into the Next Financing Documents and will be terminated and of no further force or effect. As a result, the rights of investors who participate in any Next Financing will instead be governed by the Next Financing Documents.

In the investors’ rights agreement, the Company also grants investors participation rights. Investors will have the right of first refusal to purchase the investor’s Pro Rata Share of any New Securities (each as defined below) that the company may issue in the Next Financing. The investor will have no right to purchase any New Securities if the investor cannot demonstrate to the Company’s reasonable satisfaction that the investor is at the time of the proposed issuance of New Securities eligible to purchase such New Securities under applicable securities laws. An investor’s “Pro Rata Share” means the ratio of (i) the number of shares of the company’s Common Stock issued or issuable upon conversion of the Series A Preferred Stock owned by the investor, to (ii) that number of shares of the company’s capital stock equal to the sum of (A) all shares of the company’s capital stock (on an as-converted basis) issued and outstanding, assuming exercise or conversion of all options, warrants and other convertible securities and promissory notes, and (B) all shares of the Company’s capital stock reserved and available for future grant under any equity incentive or similar plan.

“New Securities” means any shares of the Company’s capital stock to be issued in the Next Financing, including Common Stock or Preferred Stock, whether now authorized or not, and rights, options or warrants to purchase Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into Common Stock or Preferred Stock.

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Warrants

On December 20, 2018 the Company issued a 7-year non-dilutive cashless warrant to purchase (i) shares of common stock equal to five percent (5%), calculated on a post-exercise basis, of the fully diluted capitalization of the Company, as of the date or dates of exercise, plus (ii) shares of preferred stock of each class or series of preferred stock of the Company equal to five percent (5%), calculated on a post-exercise basis, of the total issued and outstanding number of preferred shares of the Company, as of the date or dates of exercise. At June 30, 2020, based upon the Black-Scholes valuation model, with assumptions including: (1) a term of 5.475 years; (2) a volatility rate of 19.8% (3) a discount rate of 1.75% and (4) zero dividends, the warrant had a value of $947,131. At December 31, 2019, based upon the Black-Scholes valuation model, with assumptions including: (1) a term of 5.975 years; (2) a volatility rate of 19.8% (3) a discount rate of 1.69% and (4) zero dividends, the warrant had a value of $229,244. At December 31, 2018, based upon the Black-Scholes valuation model, with assumptions including: (1) a term of 7 years; (2) a volatility rate of 100% (3) a discount rate of 1.00% and (4) zero dividends, the warrant had a nominal value.

Stock Options

The Company adopted a stock option plan and granted stock options to 13 qualified individuals. Based upon a February 27, 2019 valuation performed by an independent and qualified financial consultant, all stock option grants issued in 2019 were valued at $0.09 cents per share, which represents the estimated market value of a share of common stock at a date that was close to the date of the grants. Stock option grants in 2020 were valued at $4.00 per share. Each grant vest in approximately four to six years, and expires in ten years from the date of the grant. The weighted average remaining life of the grants is 8.9 years at June 30, 2020.

Stock-based compensation expense from the option grants amounted to $4,740 for the six months ended June 30, 2020. The remaining unrecognized option expense that will be recognized as the option grants vest is $45,165.

The following table summarizes the option grant activity for the six months ended June 30, 2020 and the years ended December 31, 2019 and 2018.

	Option Number of Shares		Option Exercise Price Per Share		$	Average Exercise Price
Options outstanding December 31, 2018		-		-	$	-
Issued during year ended December 31, 2019		573,200		$ 0.09 - $4.00	$	1.29
Exercised/canceled during year ended December 31, 2019		-		-	$	-
Options outstanding December 31, 2019		573,200		$ 0.09 - $4.00	$	1.29
Issued during six months ended June 30, 2020		23,000	$	4.00	$	4.00
Exercised/canceled during six months ended June 30, 2020		-		-	$	-
Options outstanding June 30, 2020		596,200		$ 0.09 - $4.00	$	1.39
Options exercisable, June 30, 2020		148,568		$ 0.09 - $4.00	$	1.06

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9. Loss Per Common Share

Loss per common share data was computed as follows:

	Six months Ended June 30,
	2020			2019
Net loss	$	(5,143,448	)	$	(615,552	)
Weighted average common shares outstanding		4,425,640			1,491,833
Effect of dilutive securities		—			—
Weighted average dilutive common shares outstanding		4,425,015			1,491,833
Earnings (loss) per common share – basic	$	(1.16	)	$	(0.41	)
Earnings (loss) per common share – diluted	$	(1.16	)	$	(0.41	)

For the six months ended June 30, 2020, the Company excluded 4,897,739 shares of Common Stock issuable upon conversion of Series A Preferred Stock and 596,200 and 786,315 shares of Common Stock issuable upon the exercise of outstanding options and warrants, respectively, to purchase Common Stock from the calculation of net loss per share because the effect would be anti-dilutive. For the six month ended June 30, 2019, the Company excluded 445,800 and 4,469 shares of common stock issuable upon the exercise of outstanding options and warrants, respectively, to purchase common stock from the calculation of net loss per share because the effect would be anti-dilutive.

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10. Related Party Transactions

The Company has transactions with officers and directors or entities related to the officers and directors that are classified as related party transactions. Amounts owed to related parties at June 30, 2020 and December 31, 2019 are as follows:

	June 30, 2020		Dec. 31, 2019
Accounts payable	$	8,510	$	8,518
Accrued interest payable	$	-	$	124,964
Officer salary payable	$	151,427	$	88,125
Current portion of long-term debt	$	-	$	1,205,000
Long-term debt	$	-	$	48,000

The Company owed a board member $71,000 in notes payable and $5,969 in accrued interest at December 31, 2019, that was discharged in full in April 2020 by the issuance of 71,307 shares of Series A preferred Stock. The same board member is owed $4,000 in accounts payable at June 30, 2020 and December 31, 2019. This board member also received a stock option grant to purchase 180,000 shares of common stock at a price of $0.61 per share. The grant vests over a four-year period ending on May 27, 2023 and expires on May 27, 2029. The grant was valued at $12,193; $1,821 in expense was recorded in the year ended December 31, 2019 and $1,524 in expense was recorded in the six months ended June 30, 2020. $8,848 is the remaining unrecognized option expense at June 30, 2020.

The Company owes its Chief Executive Officer $4,518 and $4,518 in accounts payable and $151,427 and $88,125 in salary and bonus payable at June 30, 2020 and December 31, 2019, respectively. On May 27, 2019, the Chief Executive Officer received a stock option grant to purchase 160,000 shares of common stock at a price of $0.61 per share. The grant vests over a four-year period ending on May 27, 2023 and expires on May 27, 2029. The grant was valued at $10,838; $1,618 in expense was recorded in the year ended December 31, 2019 and $1,355 in expense was recorded in the six months ended June 30, 2020. $7,865 is the remaining unrecognized option expense at June 30, 2020.

As of December 31, 2019, the Company owed a related-party lender notes payable of $800,000 and accrued interest payable of $117,295. In April 2020, the $800,000 in principal and accrued interest of $134,867 was paid in full. This related party also holds the anti-dilutive warrant for which the Company has recorded a warrant liability of $947,131 as of June 30, 2020. See Notes 5 and 8.

Stock-based compensation to officers in the year ended December 31, 2019 amounted to $339,257. 1,957,080 shares of Common Stock issued to the Company's Chief Executive Officer were recorded as $176,137 in stock-based compensation and 1,812,447 shares of Common Stock issued to the Company's Chief Medical Officer were recorded as $163,120 in stock-based compensation. The Common Stock issuances were valued at a price of $0.09 per share based upon an independent valuation prepared in compliance with Internal Revenue Code Section 409A and Accounting Standards Codification 718.

11. Subsequent Events

On July 1st, 2020, the Company entered into a distribution agreement for an FDA approved total knee system, specific components of which it intends to integrate into its novel knee system for future release. As part of this agreement, the Company placed an initial purchase order for inventory totaling approximately $500,085.  The company is actively soliciting interest from established orthopaedic distributors to market this FDA approved total knee system.  On August 31, 2020, the Company entered into its first sales agency agreement.  The Company intends to grow its distributor network for this product.

The Company filed a preliminary offering circular dated August 28, 2020 to raise up to $30,000,000 through the use of an offering statement that it anticipates will be qualified by the Securities and Exchange Commission under Tier II of Regulation A. The Company is offering up to 4,784,689 shares of Series B preferred stock, at a price of $6.27 per share, which may convert into shares of common stock on a one-for-one basis.

The Company evaluated subsequent events through September 3, 2020, the date these original financial statements were available to be issued. There were no other material subsequent events that required recognition or additional disclosure in these financial statements.

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PART III

INDEX TO EXHIBITS

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

1.1	Posting Agreement with StartEngine Primary, LLC
2.1*	Third Amended and Restated Certificate of Incorporation, as amended
2.3*	Bylaws (included as exhibit 2.2 to the company's Form 1-A filed September 10, 2019, available here: https://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex2-2.htm)
3.1*	Series A Investors’ Rights Agreement (included as exhibit 3.1 to the company’s Form 1-A filed September 10, 2019, available here: https://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex3-1.htm)
3.2*	Series B Investors’ Rights Agreement
3.3	Form of Warrant to be issued to StartEngine Primary, LLC
4.1*	Form of Subscription Agreement
6.1*	Consulting Agreement dated March 27, 2017 between Monogram Orthopaedics, Inc. and Doug Unis (included as Exhibit 6.1 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex6-1.htm)
6.2*	Amended Employment Agreement dated April 29, 2018 between Monogram Orthopaedics, Inc. and Benjamin Sexson (included as Exhibit 6.2 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex6-2.htm)
6.3*	April 30, 2019 Amendment to Employment Agreement dated April 29, 2018 between Monogram Orthopaedics, Inc. and Benjamin Sexson(included as Exhibit 6.14 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex6-14.htm)
6.4*	May 31, 2020 Amendment to Employment Agreement dated April 29, 2018 between Monogram Orthopaedics, Inc. and Benjamin Sexson (included as Exhibit 6.4 to the company’s annual report on Form 1-K filed June 11, 2020, available here: https://www.sec.gov/Archives/edgar/data/1769759/000110465920072469/tm2021302d1_ex6-4.htm
6.6*	Restricted Stock Award dated March 27, 2017 between Monogram Orthopaedics, Inc. and Douglas Unis(included as Exhibit 6.15 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-15.htm)
6.7*	Restricted Stock Award dated April 30, 2019 between Monogram Orthopaedics, Inc. and Benjamin Sexson(included as Exhibit 6.16 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-16.htm)
6.8*	Licensing Agreement dated October 3, 2017 between Monogram Orthopaedics, Inc. as Licensee and Icahn School of Medicine at Mount Sinai as Licensor(included as Exhibit 6.17 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-17.htm)
6.9*	Option Agreement dated March 18, 2019 between Monogram Orthopaedics, Inc. and Icahn School of Medicine at Mount Sinai (included as Exhibit 6.18 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-18.htm).
6.10*	Development and Supply Agreement dated December 20, 2018 between Monogram Orthopaedics Inc. and Pro-Dex, Inc. (included as Exhibit 6.19 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-19.htm)

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6.11*	Warrant Agreement dated December 20, 2018 between Monogram Orthopaedics Inc. and Pro-Dex, Inc. (included as Exhibit 6.20 to the company’s Form 1-A filed September 10, 2019, available here: (http://www.sec.gov/Archives/edgar/data/1769759/000114420419029248/tv522644_ex6-20.htm)
6.12*	Amended and Restated 2019 Stock Option and Grant Plan
6.13*	Warrant to Purchase Capital Stock dated February 7, 2019 between Monogram Orthopaedics, Inc. and ZB Capital Partners, LLC as Holder (included as Exhibit 6.23 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex6-23.htm)
6.14 *	Amendment to Licensing Agreement dated July 5, 2019 between Monogram Orthopaedics, Inc. as Licensee and Icahn School of Medicine at Mount Sinai (included as Exhibit 6.24 to the company’s Form 1-A filed September 10, 2019, available here: http://www.sec.gov/Archives/edgar/data/1769759/000114420419034309/tv523790_ex6-24.htm)
6.15	Stock Purchase Agreement between Monogram Orthopaedics, Inc. and Icahn School of Medicine at Mount Sinai
8.1*	Form of Escrow Agreement
11	Auditor’s Consent
12	Opinion of CrowdCheck Law LLP

*Previously Filed

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SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Austin, State of Texas, on, October 14, 2020.

MONOGRAM ORTHOPAEDICS, INC.
By	/s/ Benjamin Sexson
Benjamin Sexson, Chief Executive Officer
Monogram Orthopaedics, Inc.
The following persons in the capacities and on the dates indicated have signed this Offering Statement.
/s/ Benjamin Sexson
Benjamin Sexson, Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, Director
Date: October 14, 2020
/s/ Doug Unis
Doug Unis, Director
Date: October 14, 2020

/s/ Noel Goddard

Noel Goddard, Director

Date: October 14, 2020

/s/ Rick Van Kirk

Rick Van Kirk, Director

Date: October 14, 2020

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EX1A-1 UNDR AGMT

Exhibit 1.1

POSTING AGREEMENT

10/13/2020

StartEngine Primary LLC

3900 W Alameda Ave., Suite 1200

Burbank, CA 91505

Dear Ladies and Gentlemen:

Monogram Orthopaedics, Inc., a Delaware Corporation located at 3913 Todd Lane, Suite 307, Austin, Texas 78744 (the “Company”), proposes, subject to the terms and conditions contained in this Posting Agreement (this “Agreement”), to issue and sell shares of its Series B Preferred Stock par value $0.001 per share (the “Shares”) to investors (collectively, the “Investors”) in a public offering (the “Offering”) on the online website provided by StartEngine Crowdfunding, Inc. (the “Platform”) pursuant to Regulation A through StartEngine Primary LLC (“StartEngine”), acting on a best efforts basis only, in connection with such sales. The Shares are more fully described in the Offering Statement (as hereinafter defined).

The Company hereby confirms its agreement with StartEngine concerning the purchase and sale of the Shares, as follows:

1. ENGAGEMENT. Company hereby engages StartEngine to provide the services set out herein upon the subject to the terms and conditions set out in this Agreement, Terms of Use (“Platform Terms”), and Privacy Policy; each of which is hereby incorporated into this Agreement. Company has read and agreed to the Terms of Use and Company understands that this Posting Agreement governs Company’s use of the Site and the Services. Terms not defined herein are as defined in Platform Terms.

2. SERVICES AND FEES.

● OFFERING SERVICE: Company agrees that StartEngine shall provide the services below for a fee of $15,000 for out of pocket accountable expenses paid prior to StartEngine commencing.

Any portion of this amount not expended and accounted for shall be returned to the Company at the end of the engagement.

● OTHER FEES:

Company will pay, or reimburse if paid by StartEngine, out of pocket expenses for (i) the preparation and delivery of certificates representing the Shares (if any), (ii) FINRA filing fees, (iii) notice filing requirements under the securities or Blue Sky laws, (iv) all transfer taxes, if any, with respect to the sale and delivery of the Shares by the Company to the Investors.

● OTHER SERVICES:

● Campaign Page Design: design, build, and create Company’s campaign page.

● Support: provide Company with dedicated account manager and marketing consulting services.

● Standard Subscription Agreement: provision of a standard purchase agreement to execute between Company and Investors, which may be used at Company’s option.

● Multiple Withdrawals (Disbursements): money transfers to Company

● DISTRIBUTION: As compensation for the services provided hereunder by StartEngine Primary, Company shall pay to StartEngine at each closing of the Offering a fee consisting of the following:

● 7% cash commission based on the dollar amount received from investors.

● Non-cash commission paid in the form of a warrant to purchase the same securities in this offering and at the same terms in an amount equivalent to 2% of the total securities issued to investors in this offering (excluding bonus shares).

○ Lock-up Covenant. Notwithstanding the foregoing provision, StartEngine hereby agrees that the securities issued pursuant to the non-cash commission shall not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of qualification or commencement of sales of the public offering pursuant to which the securities were issued, except as provided in FINRA Rule 5110(e)(2).

x Check this box for selecting the split fee option (see below)

● If the “split fee” option is selected then the following provision shall apply: In each case StartEngine Capital may charge investors a fee of 3.5%, in which case the commission set forth above shall be reduced commensurately. In the event an investor invests in excess of $20,000, such investor fee shall be limited to $700 and Company shall pay the 3.5% additional commission with respect to any amount in excess of $20,000, in accordance with the commission schedule set forth above.

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The fee shall be paid in cash upon disbursement of funds from escrow at the time of each closing. Payment will be made to StartEngine directly from the escrow account maintained for the Offering. The Company acknowledges that StartEngine is responsible for providing instructions to the escrow agent for distribution of funds held pending completion or termination of the Offering.

The fee does not include the escrow fees, transaction fees, AML review and cash management fee to be negotiated directly with third party or EDGARization services or any services other than set out above.

● PROMOTE SERVICE: StartEngine Primary will design with the Company’s approval the digital ads and manage the digital advertising platform accounts for Company for no additional fee.

● The Issuer is expressly forbidden from bidding on any StartEngine branded keywords, misspellings, and similar terms in advertising campaigns on the Google, Bing, and Facebook platforms. Some of these keywords include but are not limited to:

○ StartEngine

○ Start Engine

○ StartEngine Crowdfunding

○ StartEngine Stock

○ Invest in StartEngine

○ StartEngine Shares

The Offering is subject to termination if the Company violates these targeting and bidding requirements.

3. DEPOSIT HOLD. Company agrees that 6% of the total funds committed will be held back as a deposit hold in case of any ACH refunds or credit card chargebacks. The hold will remain in effect for 180 days following the close of the Offering. 75% of this hold back will be released back to the company after 60 days and the remaining 25% shall be held for the remaining 120 days.

4. CREDIT CARD FEES. Company agrees that fees payable to Vantiv, LLC with respect to the use of credit cards to purchase the Securities are for the account of the Company and to reimburse StartEngine Crowdfunding Inc. for any such fees incurred, upon each closing held with respect to the Offering detailed in the Credit Card Services Agreement.

5. DELIVERY AND PAYMENT.

(a)On or after the date of this Agreement, the Company and selected escrow agent (the “Escrow Agent”) will enter into an Escrow Agreement (the “Escrow Agreement”), pursuant to which escrow accounts will be established, at the Company’s expense (the “Escrow Accounts”).

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(b) Prior to the initial Closing Date (as hereinafter defined) of the Offering or, as applicable, any subsequent Closing Date, (i) each Investor will execute and deliver a Subscription Agreement (each, an “Investor Subscription Agreement”) to the Company through the facilities of the Platform; (ii) each Investor will transfer to the Escrow Account funds in an amount equal to the price per Share as shown on the cover page of the Final Offering Circular (as hereinafter defined) multiplied by the number of Shares subscribed by such Investor and as adjusted by any discounts or bonuses applicable to certain Investors; (iii) subscription funds received from any Investor will be promptly transmitted to the Escrow Accounts in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (iv) the Escrow Agent will notify the Company and StartEngine in writing as to the balance of the collected funds in the Escrow Accounts.

(c)                If the Escrow Agent shall have received written notice from StartEngine on or before 9 a.m. Pacific time on such o date(s) as may be agreed upon by the Company and StartEngine (each such date, a “Closing Date”), the Escrow Agent will release the balance of the Escrow Accounts for collection by the Company and StartEngine as provided in the Escrow Agreement and the Company shall deliver the Shares purchased on such Closing Date to the Investors, which delivery may be made via book entry with the Company’s securities registrar and transfer agent, Worldwide Stock Transfer (the “Transfer Agent”). The initial closing (the “Closing”) and any subsequent closing (each, a “Subsequent Closing”) shall be effected through the Platform. All actions taken at the Closing shall be deemed to have occurred simultaneously on the date of the Closing and all actions taken at any Subsequent Closing shall be deemed to have occurred simultaneously on the date of any such Subsequent Closing.

(d)If the Company and StartEngine determine that the offering will not proceed, then the Escrow Agent will promptly return the funds to the investors without interest.

6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants and covenants to StartEngine that¹:

(a)The Company will file with the Securities and Exchange Commission (the “Commission”) an offering statement on Form 1-A (collectively, with the various parts of such offering statement, each as amended as of the Qualification Date for such part, including any Offering Circular and all exhibits to such offering statement, the “Offering Statement”) relating to the Shares pursuant to Regulation A as promulgated under the Securities Act of 1933, as amended (the “Act”), and the other applicable rules, orders and regulations (collectively referred to as the “Rules and Regulations”) of the Commission promulgated under the Act. As used in this Agreement:

(1)“Final Offering Circular” means the offering circular relating to the public offering of the Shares as filed with the Commission pursuant to Rule 253(g)(2) of Regulation A of the Rules and Regulations, as amended and supplemented by any further filings under Rule 253(g)(2);

¹ To be updated upon due diligence review; additional provisions may be added.

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(2)                       “Preliminary Offering Circular” means the offering circular relating to the Shares included in the Offering Statement pursuant to Regulation A of the Rules and Regulations in the form on file with the Commission on the Qualification Date;

(3) “Qualification Date” means the date as of which the Offering Statement was or will be qualified with the Commission pursuant to Regulation A, the Act and the Rules and Regulations; and

(4)                      “Testing-the-Waters Communication” means any website post, broadcast or cable radio or internet communication, email, social media post, video or written communication with potential investors undertaken in reliance on Rule 255 of the Rules and Regulations.

(b)The Offering Statement will be filed with the Commission in accordance with the Act and Regulation A of the Rules and Regulations; no stop order of the Commission preventing or suspending the qualification or use of the Offering Statement, or any amendment thereto, has been issued, and no proceedings for such purpose have been instituted or, to the Company’s knowledge, are contemplated by the Commission.

(c)The Offering Statement, at the time it becomes qualified, and as of each Closing Date, will conform in all material respects to the requirements of Regulation A, the Act and the Rules and Regulations.

(d)The Offering Statement, at the time it became qualified, as of the date hereof, and as of each Closing Date, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

(e)The Preliminary Offering Circular will not, as of its date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular as provided by StartEngine in Section 10(ii).

(f)The Final Offering Circular will not, as of its date and on each Closing Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Final Offering Circular as provided by StartEngine in Section 10(ii).

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(g) Each Testing-the-Waters Communication, if any, when considered together with the Final Offering Circular or Preliminary Offering Circular, as applicable, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however, that the Company makes no representation or warranty with respect to the statements contained in the Preliminary Offering Circular as provided by StartEngine in Section 10(ii).

(h)               As of each Closing Date, the Company will be duly organized and validly existing as a Corporation in good standing under the laws of the State of Delaware. The Company has full power and authority to conduct all the activities conducted by it, to own and lease all the assets owned and leased by it and to conduct its business as presently conducted and as described in the Offering Statement and the Final Offering Circular. The Company is duly licensed or qualified to do business and in good standing as a foreign organization in all jurisdictions in which the nature of the activities conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on or affecting the business, prospects, properties, management, financial position, stockholders’ equity, or results of operations of the Company (a “Material Adverse Effect”). Complete and correct copies of the [certificate of incorporation and of the bylaws] of the Company and all amendments thereto have been made available to StartEngine, and no changes therein will be made subsequent to the date hereof and prior to any Closing Date except as disclosed in the Offering Statement.

(i)The Company has no subsidiaries, nor does it own a controlling interest in any entity other than those entities set forth on Schedule 2 to this Agreement (each a “Subsidiary” and collectively the “Subsidiaries”). Each Subsidiary has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation. Each Subsidiary is duly qualified and in good standing as a foreign company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which would not be reasonably expected to have a Material Adverse Effect. All of the shares of issued capital stock of each corporate subsidiary, and all of the share capital, membership interests and/or equity interests of each subsidiary that is not a corporation, have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, encumbrance, claim, security interest, restriction on transfer, shareholders’ agreement, proxy, voting trust or other defect of title whatsoever.

(j)The Company is organized in, and its principal place of business is in, the United States.

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(k) The Company is not subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act and has not been subject to an order by the Commission denying, suspending, or revoking the registration of any class of securities pursuant to Section 12(j) of the Exchange Act that was entered within five years preceding the date the Offering Statement was originally filed with the Commission. The Company is not, nor upon completion of the transactions contemplated herein will it be, an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not a development stage company or a “business development company” as defined in Section 2(a)(48) of the Investment Company Act. The Company is not a blank check company and is not an issuer of fractional undivided interests in oil or gas rights or similar interests in other mineral rights. The Company is not an issuer of asset-backed securities as defined in Item 1101(c) of Regulation AB.

(l)Neither the Company, nor any predecessor of the Company; nor any other issuer affiliated with the Company; nor any director or executive officer of the Company or other officer of the Company participating in the offering, nor any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, nor any promoter connected with the Company, is subject to the disqualification provisions of Rule 262 of the Rules and Regulations.

(m)The Company is not a “foreign private issuer,” as such term is defined in Rule 405 under the Act.

(n)The Company has full legal right, power and authority to enter into this Agreement, the Escrow Agreement and perform the transactions contemplated hereby and thereby. This Agreement and the Escrow Agreement each have been or will be authorized and validly executed and delivered by the Company and are or will be each a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability.

(o)The issuance and sale of the Shares have been duly authorized by the Company, and, when issued and paid for in accordance with the Investor Subscription Agreement, will be duly and validly issued, fully paid and nonassessable and will not be subject to preemptive or similar rights. The holders of the Shares will not be subject to personal liability by reason of being such holders. The Shares, when issued, will conform to the description thereof set forth in the Final Offering Circular in all material respects.

(p)The Company has not authorized anyone other than the management of the Company and StartEngine to engage in Testing-the-Waters Communications. The Company reconfirms that StartEngine have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Testing-the-Waters Communications other than those listed on Schedule 1 hereto.

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(q) The financial statements and the related notes included in the Offering Statement and the Final Offering Circular present fairly, in all material respects, the financial condition of the Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows at the dates and for the periods covered thereby in conformity with United States generally accepted accounting principles (“GAAP”), except as may be stated in the related notes thereto. No other financial statements or schedules of the Company, any Subsidiary or any other entity are required by the Act or the Rules and Regulations to be included in the Offering Statement or the Final Offering Circular. There are no off-balance sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

(r)[__________________] (the “Accountants”), will report on the financial statements and schedules described in Section 6(r), are registered independent public accountants with respect to the Company as required by the Act and the Rules and Regulations. The financial statements of the Company and the related notes and schedules included in the Offering Statement and the Final Offering Circular comply as to form in all material respects with the requirements of the Act and the Rules and Regulations and present fairly the information shown therein.

(s)Since the date of the most recent financial statements of the Company included or incorporated by reference in the Offering Statement and the most recent Preliminary Offering Circular and prior to the Closing and any Subsequent Closing, other than as described in the Final Offering Circular (A) there has not been and will not have been any change in the capital stock of the Company or long-term debt of the Company or any Subsidiary or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock or equity interests, or any Material Adverse Effect, or any development that would reasonably be expected to result in a Material Adverse Effect; and (B) neither the Company nor any Subsidiary has sustained or will sustain any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Offering Statement and the Final Offering Circular.

(t)Since the date as of which information is given in the most recent Preliminary Offering Circular, neither the Company nor any Subsidiary has entered or will before the Closing or any Subsequent Closing enter into any transaction or agreement, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole or incurred or will incur any liability or obligation, direct or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has any plans to do any of the foregoing.

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(u)The Company and each Subsidiary has good and valid title in fee simple to all items of real property and good and valid title to all personal property described in the Offering Statement or the Final Offering Circular as being owned by them, in each case free and clear of all liens, encumbrances and claims except those that (1) do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries or (2) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Any real property described in the Offering Statement or the Final Offering Circular as being leased by the Company or any Subsidiary that is material to the business of the Company and its Subsidiaries taken as a whole is held by them under valid, existing and enforceable leases, except those that (A) do not materially interfere with the use made or proposed to be made of such property by the Company and its Subsidiaries or (B) would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect.

(v)There are no legal, governmental or regulatory actions, suits or proceedings pending, either domestic or foreign, to which the Company is a party or to which any property of the Company is the subject, nor are there, to the Company’s knowledge, any threatened legal, governmental or regulatory investigations, either domestic or foreign, involving the Company or any property of the Company that, individually or in the aggregate, if determined adversely to the Company, would reasonably be expected to have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under this Agreement; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental or regulatory authority or threatened by others.

(w)The Company and each Subsidiary has, and at each Closing Date will have, (1) all governmental licenses, permits, consents, orders, approvals and other authorizations necessary to carry on its business as presently conducted except where the failure to have such governmental licenses, permits, consents, orders, approvals and other authorizations would not be reasonably expected to have a Material Adverse Effect, and (2) performed all its obligations required to be performed, and is not, and at each Closing Date will not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement, lease, contract or other agreement or instrument (collectively, a “contract or other agreement”) to which it is a party or by which its property is bound or affected and, to the Company’s knowledge, no other party under any material contract or other agreement to which it is a party is in default in any respect thereunder. The Company and its Subsidiaries are not in violation of any provision of their organizational or governing documents.

(x)The Company has obtained all authorization, approval, consent, license, order, registration, exemption, qualification or decree of any court or governmental authority or agency or any sub-division thereof that is required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Shares under this Agreement or the consummation of the transactions contemplated by this Agreement as may be required under federal, state, local and foreign laws, the Act or the rules and regulations of the Commission thereunder, state securities or Blue Sky laws, and the rules and regulations of FINRA.

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(y)There is no actual or, to the knowledge of the Company, threatened, enforcement action or investigation by any governmental authority that has jurisdiction over the Company, and the Company has received no notice of any pending or threatened claim or investigation against the Company that would provide a legal basis for any enforcement action, and the Company has no reason to believe that any governmental authority is considering such action.

(z)Neither the execution of this Agreement, nor the issuance, offering or sale of the Shares, nor the consummation of any of the transactions contemplated herein, nor the compliance by the Company with the terms and provisions hereof or thereof will conflict with, or will result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default under, or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any Subsidiary pursuant to the terms of any contract or other agreement to which the Company or any Subsidiary may be bound or to which any of the property or assets of the Company or any Subsidiary is subject, except such conflicts, breaches or defaults as may have been waived or would not, in the aggregate, be reasonably expected to have a Material Adverse Effect; nor will such action result in any violation, except such violations that would not be reasonably expected to have a Material Adverse Effect, of (1) the provisions of the organizational or governing documents of the Company or any Subsidiary, or (2) any statute or any order, rule or regulation applicable to the Company or any Subsidiary or of any court or of any federal, state or other regulatory authority or other government body having jurisdiction over the Company or any Subsidiary.

(aa)There is no document or contract of a character required to be described in the Offering Statement or the Final Offering Circular or to be filed as an exhibit to the Offering Statement which is not described or filed as required. All such contracts to which the Company or any Subsidiary is a party have been authorized, executed and delivered by the Company or any Subsidiary, and constitute valid and binding agreements of the Company or any Subsidiary, and are enforceable against the Company in accordance with the terms thereof, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally and equitable principles of general applicability. None of these contracts have been suspended or terminated for convenience or default by the Company or any of the other parties thereto, and the Company has not received notice of any such pending or threatened suspension or termination.

(bb)The Company and its directors, officers or controlling persons have not taken, directly or indirectly, any action intended, or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Company’s Common Stock.

(cc)Other than as previously disclosed to StartEngine in writing, the Company, or any person acting on behalf of the Company, has not and, except in consultation with StartEngine, will not publish, advertise or otherwise make any announcements concerning the distribution of the Shares, and has not and will not conduct road shows, seminars or similar activities relating to the distribution of the Shares nor has it taken or will it take any other action for the purpose of, or that could reasonably be expected to have the effect of, preparing the market, or creating demand, for the Shares.

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(dd)No holder of securities of the Company has rights to the registration of any securities of the Company as a result of the filing of the Offering Statement or the transactions contemplated by this Agreement, except for such rights as have been waived or as are described in the Offering Statement.

(ee)No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is threatened, and the Company is not aware of any existing or threatened labor disturbance by the employees of any of its or any Subsidiary’s principal suppliers, manufacturers, customers or contractors.

(ff)The Company and each of its Subsidiaries: (i) are and have been in material compliance with all laws, to the extent applicable, and the regulations promulgated pursuant to such laws, and comparable state laws, and all other local, state, federal, national, supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company and its subsidiaries except for such non-compliance as would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; (ii) have not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Regulatory Agency or third party alleging that any product operation or activity is in material violation of any laws and has no knowledge that any such Regulatory Agency or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; and (iii) are not a party to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, or similar agreements, or has any reporting obligations pursuant to any such agreement, plan or correction or other remedial measure entered into with any Governmental Authority.

(gg)The business and operations of the Company, and each of its Subsidiaries, have been and are being conducted in compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department, commission, board, bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or any foreign jurisdiction (“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards, judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including, without limitation, liability for costs of investigating or remediating sites containing hazardous substances and/or damages to natural resources).

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(hh)There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials (as defined below) by or caused by the Company or any of its Subsidiaries (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of its Subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Effect. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into from or through any building or structure.

(ii)The Company and its Subsidiaries own, possess, license or have other adequate rights to use, on reasonable terms, all material patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property necessary for the conduct of the Company’s and each of its Subsidiary’s business as now conducted (collectively, the “Intellectual Property”), except to the extent such failure to own, possess or have other rights to use such Intellectual Property would not result in a Material Adverse Effect. Except as set forth in the Final Offering Circular: (a) no party has been granted an exclusive license to use any portion of such Intellectual Property owned by the Company or its Subsidiaries; (b) to the knowledge of the Company, there is no infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company or its Subsidiaries; (c) the Company is not aware of any defects in the preparation and filing of any of patent applications within the Intellectual Property; (d) to the knowledge of the Company, the patents within the Intellectual Property are being maintained and the required maintenance fees (if any) are being paid; (e) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (f) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope or enforceability of any such Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; and (g) there is no pending, or to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company’s or any of its Subsidiaries’ business as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company and its Subsidiaries are unaware of any other fact which would form a reasonable basis for any such claim. To the knowledge of the Company, no opposition filings or invalidation filings have been submitted which have not been finally resolved in connection with any of the Company’s patents and patent applications in any jurisdiction where the Company has applied for, or received, a patent.

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(jj)Except as would not have, individually or in the aggregate, a Material Adverse Effect, the Company and each Subsidiary (1) has timely filed all federal, state, provincial, local and foreign tax returns that are required to be filed by such entity through the date hereof, which returns are true and correct, or has received timely extensions for the filing thereof, and (2) has paid all taxes, assessments, penalties, interest, fees and other charges due or claimed to be due from the Company, other than (A) any such amounts being contested in good faith and by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP or (B) any such amounts currently payable without penalty or interest. There are no tax audits or investigations pending, which if adversely determined could have a Material Adverse Effect; nor to the knowledge of the Company is there any proposed additional tax assessments against the Company or any Subsidiary which could have, individually or in the aggregate, a Material Adverse Effect. No transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding tax or duty is payable by or on behalf of StartEngine to any foreign government outside the United States or any political subdivision thereof or any authority or agency thereof or therein having the power to tax in connection with (i) the issuance, sale and delivery of the Shares by the Company; (ii) the purchase from the Company, and the initial sale and delivery of the Shares to purchasers thereof; or (iii) the execution and delivery of this Agreement or any other document to be furnished hereunder.

(kk)On each Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be issued and sold on such Closing Date will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.

(ll)The Company and its Subsidiaries are insured with insurers with appropriately rated claims paying abilities against such losses and risks and in such amounts as are prudent and customary for the businesses in which they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company, each Subsidiary or their respective businesses, assets, employees, officers and directors are in full force and effect; and there are no claims by the Company or its Subsidiary under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any Subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that is not materially greater than the current cost.

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(mm)Neither the Company nor its Subsidiaries, nor any director, officer, agent or employee of either the Company or any Subsidiary has directly or indirectly, (1) made any unlawful contribution to any federal, state, local and foreign candidate for public office, or failed to disclose fully any contribution in violation of law, (2) made any payment to any federal, state, local and foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof, (3) violated or is in violation of any provisions of the U.S. Foreign Corrupt Practices Act of 1977, or (4) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

(nn)The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no material action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(oo)Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions (the “Sanctions Regulations”) administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC or listed on the OFAC Specially Designated Nationals and Blocked Persons List. Neither the Company nor, to the knowledge of the Company, any director, officer, agent or employee of the Company, is named on any denied party or entity list administered by the Bureau of Industry and Security of the U.S. Department of Commerce pursuant to the Export Administration Regulations (“EAR”); and the Company will not, directly or indirectly, use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any Sanctions Regulations or to support activities in or with countries sanctioned by said authorities, or for engaging in transactions that violate the EAR.

(pp)The Company has not distributed and, prior to the later to occur of the last Closing Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than each Preliminary Offering Circular and the Final Offering Circular, or such other materials as to which StartEngine shall have consented in writing.

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(rr)              Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, that is maintained, administered or contributed to by the Company or any of its affiliates for employees or former employees, directors or independent contractors of the Company or its Subsidiaries, or under which the Company or any of its Subsidiaries has had or has any present or future obligation or liability, has been maintained in material compliance with its terms and the requirements of any applicable federal, state, local and foreign laws, statutes, orders, rules and regulations, including but not limited to ERISA and the Code; no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material liability to the Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Company to any material tax, fine, lien, penalty, or liability imposed by ERISA, the Code or other applicable law; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions.

(ss)              No relationship, direct or indirect, exists between or among the Company or any Subsidiary, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any Subsidiary, on the other, which would be required to be disclosed in the Offering Statement, the Preliminary Offering Circular and the Final Offering Circular and is not so disclosed.

(tt)              The Company has not sold or issued any securities that would be integrated with the offering of the Shares contemplated by this Agreement pursuant to the Act, the Rules and Regulations or the interpretations thereof by the Commission or that would fail to come within the safe harbor for integration under Regulation A.

(uu)            Except as set forth in this Agreement, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or StartEngine for a brokerage commission, finder’s fee or other like payment in connection with the offering of the Shares.

(vv)            To the knowledge of the Company, there are no affiliations with FINRA among the Company’s directors, officers or any five percent or greater stockholder of the Company or any beneficial owner of the Company’s unregistered equity securities that were acquired during the 180-day period immediately preceding the initial filing date of the Offering Statement.

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(ww)           There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of their respective family members. The Company has not directly or indirectly, including through its Subsidiaries, extended or maintained credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any director or executive officer of the Company or any of their respective related interests, other than any extensions of credit that ceased to be outstanding prior to the initial filing of the Offering Statement. No transaction has occurred between or among the Company and any of its officers or directors, stockholders, customers, suppliers or any affiliate or affiliates of the foregoing that is required to be described or filed as an exhibit to in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular and is not so described.

7. AGREEMENTS OF THE COMPANY.

(a)The Company will file the Final Offering Circular, subject to the prior approval of StartEngine, pursuant to Rule 253 and Regulation A, within the prescribed time period.

(b)Upon effectiveness of this agreement, the Company will not, during such period as the Final Offering Circular would be required by law to be delivered in connection with sales of the Shares in connection with the offering contemplated by this Agreement (whether physically or through compliance with Rules 251 and 254 under the Act or any similar rule(s)), file any amendment or supplement to the Offering Statement or the Final Offering Circular unless a copy thereof shall first have been submitted to StartEngine within a reasonable period of time prior to the filing thereof and StartEngine shall not have reasonably objected thereto in good faith.

(c)The Company will notify StartEngine promptly, and will, if requested, confirm such notification in writing: (1) when any amendment or supplement to the Offering Statement is filed; (2) of any request by the Commission for any amendments to the Offering Statement or any amendment or supplements to the Final Offering Circular or for additional information; (3) of the issuance by the Commission of any stop order preventing or suspending the qualification of the Offering Statement or the Final Offering Circular, or the initiation of any proceedings for that purpose or the threat thereof; and (4) of becoming aware of the occurrence of any event that in the judgment of the Company makes any statement made in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular untrue in any material respect or that requires the making of any changes in the Offering Statement, the Preliminary Offering Circular or the Final Offering Circular in order to make the statements therein, in light of the circumstances in which they are made, not misleading. If the Company has omitted any information from the Offering Statement, it will use its best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to Regulation A, the Act and the Rules and Regulations and to notify StartEngine promptly of all such filings.

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(d)If, at any time when the Final Offering Circular relating to the Shares is required to be delivered under the Act, the Company becomes aware of the occurrence of any event as a result of which the Final Offering Circular, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to StartEngine, include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or the Offering Statement, as then amended or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to StartEngine, include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading, or if for any other reason it is necessary, in the reasonable judgment of counsel to the Company or counsel to StartEngine, at any time to amend or supplement the Final Offering Circular or the Offering Statement to comply with the Act or the Rules and Regulations, the Company will promptly notify StartEngine and will promptly prepare and file with the Commission, at the Company’s expense, an amendment to the Offering Statement and/or an amendment or supplement to the Final Offering Circular that corrects such statement and/or omission or effects such compliance. The Company consents to the use of the Final Offering Circular or any amendment or supplement thereto by StartEngine, and StartEngine agrees to provide to each Investor, prior to the Closing and, as applicable, any Subsequent Closing, a copy of the Final Offering Circular and any amendments or supplements thereto.

(e)If at any time following the distribution of any Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company has or will promptly notify StartEngine in writing and has or will promptly amend or supplement and recirculate, at its own expense, such Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

(j)                The Company will apply the net proceeds from the offering and sale of the Shares in the manner set forth in the Final Offering Circular under the caption “Use of Proceeds.”

8. [LEFT BLANK]

9. CONDITIONS OF THE OBLIGATIONS OF STARTENGINE. The obligations of StartEngine hereunder are subject to the following conditions:

(i) No stop order suspending the qualification of the Offering Statement shall have been issued, and no proceedings for that purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the Commission), (b) no order suspending the effectiveness of the Offering Statement shall be in effect and no proceeding for such purpose shall be pending before, or threatened or contemplated by, any securities or other governmental authority (including, without limitation, the Commission), (c) any request for additional information on the part of the staff of any securities or other governmental authority (including, without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities and (d) after the date hereof no amendment or supplement to the Offering Statement or the Final Offering Circular shall have been filed unless a copy thereof was first submitted to StartEngine and StartEngine did not object thereto in good faith, and StartEngine shall have received certificates of the Company, dated as of the Closing Date (and at the option of StartEngine, any Subsequent Closing Date) and signed by the Chief Executive Officer of the Company, and the Chief Financial Officer of the Company, to the effect of clauses (a), (b) and (c).

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(ii)Since the respective dates as of which information is given in the Offering Statement and the Final Offering Circular, (a) there shall not have been a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Offering Statement and the Final Offering Circular and (b) the Company shall not have sustained any material loss or interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree, which is not set forth in the Offering Statement and the Final Offering Circular, if in the reasonable judgment of StartEngine any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Shares to Investors as contemplated hereby.

(iii)Since the respective dates as of which information is given in the Offering Statement and the Final Offering Circular, there shall have been no litigation or other proceeding instituted against the Company or any of its officers or directors in their capacities as such, before or by any federal, state or local or foreign court, commission, regulatory body, administrative agency or other governmental body, domestic or foreign, which litigation or proceeding, in the reasonable judgment of StartEngine, would reasonably be expected to have a Material Adverse Effect.

(iv)Each of the representations and warranties of the Company contained herein shall be true and correct as of each Closing Date in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality, as if made on such date, and all covenants and agreements herein contained to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to such Closing Date shall have been duly performed, fulfilled or complied with in all material respects.

(v)At the Closing, and at any Subsequent Closing at the option of StartEngine, there shall be furnished to StartEngine a certificate, dated the date of its delivery, signed by each of the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to StartEngine to the effect that each signer has carefully examined the Offering Statement, the Final Offering Circular, and that to each of such person’s knowledge:

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(a)As of the date of each such certificate, (x) the Offering Statement does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and (y) the Final Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (2) no event has occurred as a result of which it is necessary to amend or supplement the Final Offering Circular in order to make the statements therein not untrue or misleading in any material respect.

(b)Each of the representations and warranties of the Company contained in this Agreement were, when originally made, and are, at the time such certificate is delivered, true and correct in all respects for those representations and warranties qualified by materiality and in all material respects for those representations and warranties that are not qualified by materiality.

(c)Each of the covenants required herein to be performed by the Company on or prior to the date of such certificate has been duly, timely and fully performed and each condition herein required to be complied with by the Company on or prior to the delivery of such certificate has been duly, timely and fully complied with.

(d)No stop order suspending the qualification of the Offering Statement or of any part thereof has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission.

(e)Subsequent to the date of the most recent financial statements in the Offering Statement and in the Final Offering Circular, there has been no Material Adverse Effect.

(vi)       FINRA shall not have raised any objection with respect to the fairness or reasonableness of the plan of distribution, or other arrangements of the transactions, contemplated hereby.

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10. INDEMNIFICATION.

(i)The Company shall indemnify and hold harmless StartEngine, each selling group participant, and each of their directors, officers, employees and agents and each person, if any, who controls StartEngine or such selling group participant within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each an “Indemnified Party”), from and against any and all losses, claims, liabilities, expenses and damages, joint or several (including any and all investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted (whether or not such Indemnified Party is a party thereto)), to which it, or any of them, may become subject under the Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (a) any untrue statement or alleged untrue statement made by the Company in Section 6 of this Agreement, (b) any untrue statement or alleged untrue statement of any material fact contained in (1) any Preliminary Offering Circular, the Offering Statement or the Final Offering Circular or any amendment or supplement thereto, (3) any Testing-the-Waters Communication or (4) any application or other document, or any amendment or supplement thereto, executed by the Company based upon written information furnished by or on behalf of the Company filed with the Commission or any securities association or securities exchange (each, an “Application”), or (c) the omission or alleged omission to state in any Preliminary Offering Circular, the Offering Statement, the Final Offering Circular, or any Testing-the-Waters Communication, or any amendment or supplement thereto, or in any Application a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable to the extent that such loss, claim, liability, expense or damage arises from the sale of the Shares in the offering to any person and is based solely on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with written information furnished to the Company by any Indemnified Party through StartEngine expressly for inclusion in the Offering Statement, any Preliminary Offering Circular, the Final Offering Circular, or Testing-the-Waters Communication, or in any amendment or supplement thereto or in any Application, it being understood and agreed that the only such information furnished by any Indemnified Party consists of the information described as such in subsection (ii) below. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(ii)StartEngine will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) that arise out of or are based solely upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, or any Testing-the-Waters Communication, or arise out of or are based solely upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Statement, any Preliminary Offering Circular or the Final Offering Circular, or any amendment or supplement thereto, or any Written Testing-the-Waters Communication, in reliance upon and in conformity with written information furnished to the Company by StartEngine expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred.

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(iii) Promptly after receipt by an Indemnified Party under subsection (i) or (ii) above of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any Indemnified Party otherwise than under such subsection. In case any such action shall be brought against any Indemnified Party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such Indemnified Party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (a) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and (b) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party.

(iv)If the indemnification provided for in this Section 10 is unavailable or insufficient to hold harmless an Indemnified Party under subsection (i) or (ii) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and StartEngine on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the Indemnified Party failed to give the notice required under subsection (iii) above, then each indemnifying party shall contribute to such amount paid or payable by such Indemnified Party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and StartEngine on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and StartEngine on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bears to the Fee received by StartEngine. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or StartEngine on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and StartEngine agree that it would not be just and equitable if contribution pursuant to this subsection (iv) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (iv). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (iv) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (iv), each StartEngine will not be required to contribute any amount in excess of the Fee received by such StartEngine. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

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11. TERMINATIONS.

(i)Either party may terminate this Agreement at any time by written notice to the other party. The Services and Fees are non-refundable. Any unpaid fees due to StartEngine are due immediately upon termination.

(ii)The obligations of StartEngine under this Agreement may be terminated at any time prior to the initial Closing Date, by notice to the Company from such StartEngine, without liability on the part of StartEngine to the Company if, prior to delivery and payment for the Shares, in the sole judgment of StartEngine: (a) there has occurred any material adverse change in the securities markets or any event, act or occurrence that has materially disrupted, or in the opinion of StartEngine, will in the future materially disrupt, the securities markets or there shall be such a material adverse change in general financial, political or economic conditions or the effect of international conditions on the financial markets in the United States is such as to make it, in the judgment of StartEngine, inadvisable or impracticable to market the Shares or enforce contracts for the sale of the Shares; (b) there has occurred any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, including without limitation as a result of terrorist activities, such as to make it, in the judgment of StartEngine, inadvisable or impracticable to market the Shares or enforce contracts for the sale of the Shares; (c) trading on the New York Stock Exchange, Inc., NYSE American or NASDAQ Stock Market has been suspended or materially limited, or minimum or maximum ranges for prices for securities shall have been fixed, or maximum ranges for prices for securities have been required, by any of said exchanges or by such system or by order of the Commission, FINRA, or any other governmental or regulatory authority; (d) a banking moratorium has been declared by any state or Federal authority; or (e) in the judgment of StartEngine, there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Final Offering Circular, any Material Adverse Effect of the Company and its Subsidiaries considered as a whole, whether or not arising in the ordinary course of business;

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(iii)If this Agreement is terminated pursuant to this Section 11, such termination shall be without liability of any party to any other party except as provided in Section 10(ii) hereof.

12. NOTICES. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise specified, shall be mailed or delivered (i) if to the Company, at 3913 Todd Lane, Suite 307,Austin, TX, Attention: Benjamin Sexson or (ii) if to StartEngine to 3900 W Alameda Ave., Suite 1200 Burbank, CA 91505, Attention: CEO, with copies to [counsel]. Any such notice shall be effective only upon receipt. Any notice under Section 12 may be made by facsimile or telephone, but if so made shall be subsequently confirmed in writing.

13. SURVIVAL. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Company and StartEngine set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, StartEngine or any controlling person referred to in Section 10 hereof and (ii) delivery of and payment for the Shares. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 7 and 10 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement.

14. SUCCESSORS. This Agreement shall inure to the benefit of and shall be binding upon StartEngine, the Company and their respective successors, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnification and contribution contained in Sections 10(i) and (iv) of this Agreement shall also be for the benefit of the directors, officers, employees and agents of StartEngine and any person or persons who control such StartEngine within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnification and contribution contained in Sections 10(ii) and (iv) of this Agreement shall also be for the benefit of the directors of the Company, the officers of the Company who have signed the Offering Statement and any person or persons who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Shares shall be deemed a successor because of such purchase.

15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California applicable to agreements made and to be performed in such state. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the California Courts, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the California Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

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16. ACKNOWLEDGEMENT. The Company acknowledges and agrees that StartEngine is acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Shares contemplated hereby. Additionally, StartEngine is not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether StartEngine has advised or is advising the Company on other matters). The Company has conferred with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and StartEngine shall have no responsibility or liability to the Company or any other person with respect thereto. The StartEngine advises that it and its affiliates are engaged in a broad range of securities and financial services and that it or its affiliates may have business relationships or enter into contractual relationships with purchasers or potential purchasers of the Company’s securities. Any review by StartEngine of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of StartEngine and shall not be on behalf of, or for the benefit of, the Company.

17. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

18. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the parties hereto as to the matters covered hereby and supersedes all prior understandings, written or oral, relating to such subject matter.

[signature page follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date set forth below.

MONOGRAM ORTHOPAEDICS, INC.
By:	/s/ Benjamin Sexson
Name:	Benjamin Sexson
Title:	Chief Executive Officer
Accepted as of the date hereof:
STARTENGINE PRIMARY, LLC
By:	/s/ Howard Marks
Name:	Howard Marks
Title:	Chief Executive Officer

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SCHEDULE 1

Testing the Waters

[TBD]

SCHEDULE 2

SUBSIDIARIES

[TBD]

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EX1A-3 HLDRS RTS

Exhibit 3.3

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

MONOGRAM ORTHOPAEDICS, INC.

Initial Warrant Shares: Initial Exercise Date:                   , 20    

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, StartEngine Primary, LLC or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the earlier of the 5 year anniversary of the Initial Exercise Date and [DATE FIVE YEARS AFTER DATE OF QUALIFIED OFFERING] (the “Termination Date”) but not thereafter, to subscribe for and purchase from Monogram Orthopaedics, Inc., a Delaware corporation (the “Company”), up to _________ shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s common stock (“Common Stock”); provided. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.        Definitions. In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Commission” means the United States Securities and Exchange Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Going Public Date” Such first date whereby the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act or the Common Stock is qualified under Regulation A.

“Liens” means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Liquidity Event” shall mean any one of the following events has occurred: (a) an initial underwritten public offering of Common Stock by a nationally recognized underwriter pursuant to a registration Statement filed in accordance with the Securities Act and pursuant to which at least, $30,000,000 in gross proceeds is raised for the benefit of the Company and pursuant to which the Holder has the right to include the Warrant Shares for inclusion in such offering or (b) a Fundamental Transaction with a valuation to the Company of at least $50,000,000 pursuant to which the Holder has the right to put this Warrant back to the Company for cash equal to the Black Scholes Value pursuant to Section 3(e).

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

“Transfer Agent” means __________________, the current transfer agent of the Company, with a mailing address of__________________ and a facsimile number of__________________, and any successor transfer agent of the Company.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

Section 2.Exercise.

a)                  Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise form annexed hereto. Within three Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within three (3) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

b)                  Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $____ ², subject to adjustment hereunder (the “Exercise Price”).

c)                  Cashless Exercise. If at the time of exercise hereof there is no effective registration statement registering for sale or resale the Warrant Shares, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

² 100% of the issue price paid by investors.

(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).

d)                  Mechanics of Exercise.

i.                 Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate or appropriate notation in the records kept by the Company’s transfer agent, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is three Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

ii.                 Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii.                  Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv.                  Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. Following the Going Public Date, in addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

v.                  No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

vi.                 Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

vii.                 Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

e)                  Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

Section 3.        Certain Adjustments.

a)                  Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) or Section 2(f) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) or Section 2(f) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

b)                  Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

c)                  Notice to Holder.

i.                        Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

ii.                         Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

Section 4.Transfer of Warrant.

a)                  Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)                  New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

c)                   Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)                  Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provides to the Company an opinion of counsel, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that the transfer of this Warrant does not require registration under the Securities Act.

e)                   Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

f)                   Lock-up. Notwithstanding the foregoing provisions of this Section 4, the Warrant and Warrant Shares may shall not be sold during the offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of qualification or commencement of sales of the public offering pursuant to which the Warrants were issued, except as provided in FINRA Rule 5110(g)(2).

Section 5.        Miscellaneous.

a)                   No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

b)                  Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)                   Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

d)                   Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

e)                 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of California without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of this Warrant shall be commenced in the state and federal courts sitting in the City of New York, of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant. If any party shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

f)                   Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

g)                  Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

h)                  Notices. Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above Attention: Benjamin Sexson, email address (Sexson@monogramorthopaedics.com) or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

i)                    Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

j)                    Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

k)                  Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

l)                    Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

m)                Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

n)                  Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

o)                  Piggyback Registration Rights. If, at any time after the date hereof and prior to [FIVE YEARS AFTER QUALIFICATION OF REG A OFFERING], the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act), or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, the Company shall send to the Holder a written notice of such determination and if, within 15 calendar days after the date of such notice, the Holder (or any permitted successor or assign) shall so request in writing, the Company shall include in such registration statement all or any part of the Warrant Shares that such Holder requests to be registered. Further, in the event that the offering is a firm-commitment underwritten offering, the Company may exclude the Warrant Shares if so requested in writing by the lead underwriter of such offering. In the case of inclusion in a firm-commitment underwritten offering, the Holders must sell their Warrant Shares on the same terms set by the underwriters for shares of Common Stock to be sold for the account of the Company.

********************

(Signature Page Follows)

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

Monogram Orthopaedics, Inc.
By:
	Name: Benjamin Sexson
	Title: Chief Executive Officer

NOTICE OF EXERCISE

TO:                                     

(1)         The undersigned hereby elects to purchase___________Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)         Payment shall take the form of (check applicable box):

¨ in lawful money of the United States; or

¨ [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)          Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 ___________________________________

The Warrant Shares shall be delivered to the following DWAC Account Number:

 ___________________________________

 ___________________________________

 ___________________________________

[SIGNATURE OF HOLDER]

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name of Authorized Signatory:

Title of Authorized Signatory:

Date:

ASSIGNMENT FORM

(To assign the foregoing warrant, execute
this form and supply required information. Do
not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [      ] all of or [              ] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

___________________________________________whose address is

________________________________________________________________________.

________________________________________________________________________

Dated:                   ,     

Holder’s Signature:

Holder’s Address:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX1A-6 MAT CTRCT

Exhibit 6.15

STOCK ISSUANCE AGREEMENT

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND STATE SECURITIES OR BLUE SKY LAWS. ACCORDINGLY, THE SECURITIES CANNOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT. IN ADDITION, THE SECURITIES CANNOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (“SEC”), ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY.

THIS STOCK ISSUANCE AGREEMENT (the “Agreement”) is made effective as of September 10, 2020, by and among Monogram Orthopaedics Inc., a Delaware corporation (the “Company”), and the Icahn School of Medicine at Mount Sinai, a New York not-for-profit education corporation

(the “Recipient”).

RECITALS

WHEREAS, the Company and the Recipient entered into that certain Exclusive License Agreement effective as of October 3, 2017 (“Initial License Agreement”), as amended by Amendment No. 1 to the Initial License Agreement, effective as of March 26, 2019 (“Amendment No. 1”), and as further amended by Amendment No. 2 to the Initial License Agreement, effective as of July 5, 2019 (“Amendment No. 2”, together with the Initial License Agreement and Amendment No. 1, collectively, the “License Agreement”);

WHEREAS, Section 6.1 of the Initial License Agreement required that the Company issue shares of the Company’s Equity Securities (as defined in the Initial License Agreement) representing twelve percent (12%) of the Pro Forma Fully-Diluted Equity (as defined in the Initial License Agreement) to the Recipient within sixty (60) days of the effective date of the Initial License Agreement;

WHEREAS, the Company did not issue shares of Equity Securities to the Recipient within sixty (60) days of the Effective Date of the Initial License Agreement and the Company and the Recipient entered into Amendment No. 2 to (i) extend the deadline to issue the Equity Securities to the Recipient to July 1, 2019 and (ii) require that the Company and the Recipient enter into a purchase agreement within ninety (90) days after the issuance of the Equity Securities to the Recipient;

WHEREAS, the Company issued 604,763 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock) on June 28th, 2019 and 519,831 shares of the Company’s common stock, par value $0.001 per share on July 9th, 2020 of the Company’s common stock, par value $0.001 per share to the Recipient for a total of 1,124,594 shares, as documented on the Company’s stock ledger and as evidenced by share certificate no. 1 and no. 2 delivered to the Recipient;

WHEREAS, the Company and the Recipient did not enter into a purchase agreement for the shares of Common Stock issued to the Recipient in accordance with Section 6.3 of the License Agreement; and

WHEREAS, the Company and the Recipient now desire to enter into definitive written purchase agreement to satisfy the requirements of Section 6.3 of the License Agreement and to memorialize and confirm the issuance of the shares of Common Stock to the Recipient in accordance with the terms and conditions of the License Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants hereinafter set forth, and other good and valuable consideration had and received, the parties hereto, upon the terms and subject to the conditions contained herein, hereby agree as follows:

1. Issuance of Common Stock.

(a)Original Issuance of the Shares. The Company issued 604,763 shares of the Company’s common stock, par value $0.001 per share on June 28th, 2019 and 519,831 shares of the Company’s common stock, par value $0.001 per share on July 9th, 2020 (the “Original Issue Dates”) of the Company’s common stock, par value $0.001 per share to the Recipient for a total of 1,124,594 shares (the “Shares”) as consideration for the Recipient entering into the License Agreement. As of the Original Issue Dates, the Shares represented 12% of the Pro Forma Fully-Diluted Equity.

(b)         Anti-Dilution Protection Shares. In accordance with Section 6.1 of the License Agreement, the Company previously issued a total of 1,124,594 shares of Common Stock (the “Anti-Dilution Shares”) to the Recipient in two issuances, 604,763 shares on June 28th, 2019 and and 519,831 shares on July 9th, 2020 in connection with the offering of shares of the Company’s capital stock under Regulation A promulgated under the Securities Act of 1933, as amended (the “Securities Act”). As of June 11^th, 2020 (the “Anti-Dilution Date”), the Anti-Dilution Shares and the Shares collectively represented 12% of the Pro Forma Fully-Diluted Equity. As of the date of this Agreement, the Company has received $16,720,568 dollars in cash in exchange for its Equity Securities and as of the date of this Agreement has received cash in excess of the Threshold (as defined in the License Agreement).

(c)         Certificates. The Company has delivered to the Recipient two certificates representing the Shares.

2. Representations and Warranties of the Company.

The Company represents and warrants to Recipient that the following representations and warranties are true and complete in all material respects as of the date of this Agreement, except as otherwise indicated herein. For purposes of this Agreement, an individual shall be deemed to have “knowledge” of a particular fact or other matter if such individual is actually aware of such fact. The Company will be deemed to have “knowledge” of a particular fact or other matter if one of the Company’s current officers has, or at any time had, actual knowledge of such fact or other matter.

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(a)Organization and Standing. The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its properties and assets, to carry on its business as now conducted and as presently proposed to be conducted, to execute and deliver this Agreement, and any other agreements or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.

(b) Capitalization.

(i) The authorized and outstanding capital stock of the Company as of September 10^th, 2020 consists of:

(A) 22,000,000 shares of Common Stock are authorized, 4,836,935 shares of which are issued and outstanding as of the date of this Agreement. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws; and

(B) 13,500,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”) are authorized, including 5,500,000 shares of Series A Preferred Stock are authorized, 4,897,559 of which are issued and outstanding as of the date of this Agreement and 8,000,000 shares of Series B Preferred Stock are authorized, none of which are issued and outstanding as of the date of this Agreement.

(ii)         The Company has reserved 2,000,000 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its stock option plan duly adopted by the Board of Directors and approved by the Company stockholders (the “Stock Plan”). Of such reserved shares of Common Stock, no shares have been issued pursuant to restricted stock purchase agreements, options to purchase 1,350,857 shares have been granted and are currently outstanding, and 649,143 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. Further, the Company has issued to ZB Capital Partners LLC and Pro-Dex, Inc. warrants to acquire shares of the Company’s capital stock (the “Warrants”). As of the date of this Agreement, the shares issuable following the exercise of the Warrants are 272,973, and 597,872, respectively. Except for the awards granted pursuant to the Stock Plan and as set forth in this Section 2(b)(ii), there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of Common Stock or Preferred Stock, or any securities convertible into or exchangeable for shares of Common Stock or Preferred Stock.

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(c)         Authority for Agreement. The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby (including the issuance and delivery of the Common Stock) are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company’s board of directors and stockholders. All action on the part of the officers of the Company necessary for the execution and delivery of this Agreement and the performance of all obligations of the Company under this Agreement (including the issuance and delivery of the Common Stock) has been taken. Upon full execution hereof, this Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.

(d)Valid Issuance of Shares of Common Stock. The shares of Common Stock, when issued and delivered in accordance with the terms and for the consideration set forth in this Agreement, were validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, applicable state and federal securities laws and liens or encumbrances created by or imposed by the Recipient. Assuming the accuracy of the representations of the Recipient in Section 3 of this Agreement, the shares of Common Stock were issued in compliance with all applicable federal and state securities laws.

(e)         No filings. Assuming the accuracy of the Recipients’ representations and warranties set forth in Section 3 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing, qualification or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Agreement except (i) for such filings as may be required under Section 4(a)(2) of the Securities Act or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii)    where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.

(f)          Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body, or to the Company’s knowledge, currently threatened in writing (i) against the Company, (ii) against any consultant, officer, manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the Company, (iii) that questions the validity of this Agreement or to consummate the transactions contemplated hereby or (iv) that could otherwise materially impact the Company. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or key employees is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers, directors or key employees, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers.

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(g)         No Infringement of Intellectual Property. No product or service marketed or sold (or proposed to be marketed or sold) by the Company violates or will violate any license or infringes or will infringe any intellectual property rights of any other party.

(h)         Compliance with Other Instruments. The Company is not in violation or default (i) of any provisions of its organizational documents, (ii) of any instrument, judgment, order, writ or decree, (iii)under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound, or (v) of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a material adverse effect on the Company. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (x) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (y) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.

(i)          Tax Returns and Payments. There are no federal, state, county, local or foreign taxes due and payable by the Company which have not been timely paid. There are no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.

(j)          Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a material adverse effect on the Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

3.           Representations and Warranties of Recipient. By executing this Agreement, Recipient represents and warrants, which representations and warranties are true and complete in all material respects as of the date of this Agreement:

(a)         Requisite Power and Authority. Recipient has all necessary power and authority under all applicable provisions of law to execute and deliver this Agreement and other agreements required hereunder and to carry out their provisions. All action on Recipient’s part required for the lawful execution and delivery of this Agreement (including internal authorizations) have been taken. Upon its execution and delivery, this Agreement will be a valid and binding obligation of Recipient, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (ii) as limited by general principles of equity that restrict the availability of equitable remedies.

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(b)Recipient Representations. Recipient understands that the issuance of the shares of Common Stock has not been registered under the Securities Act. Recipient also understands that the shares of Common Stock are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Recipient’s representations contained in this Agreement. Recipient understands that the shares of Common Stock are “restricted securities” as that term is defined by Rule 144 under the Securities Act, and that Recipient may only resell such shares of Common Stock in a transaction registered under the Securities Act or subject to an available exemption therefrom, and in accordance with any applicable state securities laws. Recipient acknowledges that any physical certificate representing the shares of Common Stock may bear a legend to this effect.

(c)         Receive Entirely for Own Account. This Agreement is made with the Recipient in reliance upon the Recipient’s representation to the Company, which by the Recipient’s execution of this Agreement, the Recipient hereby confirms, that the shares of Common Stock acquired by the Recipient will be acquired for investment for the Recipient’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Recipient has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Recipient further represents that the Recipient does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the shares of Common Stock issued pursuant to this Agreement. The Recipient has not been formed for the specific purpose of acquiring the shares of Common Stock.

(d)         Illiquidity and Continued Economic Risk. Recipient acknowledges and agrees that there is no ready public market for the Common Stock and that there is no guarantee that a market for their resale will ever exist. Recipient must bear the economic risk of this investment indefinitely and the Company has no obligation to list the Common Stock on any market or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended) with respect to facilitating trading or resale of the Common Stock. Recipient acknowledges that Recipient is able to bear the economic risk of losing the entire value of the shares of Common Stock owned by Recipient.

(e)         Sophisticated Investor Status. Recipient represents that Recipient is a sophisticated investor. Recipient represents that to the extent it has any questions with respect to its status as a sophisticated investor, it has sought professional advice. Recipient represents that is has the requisite knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Company.

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4.           Governing Law; Jurisdiction. This Purchase Agreement shall be governed and construed in accordance with the internal laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

5.Notices. Notice, requests, demands and other communications relating to this Purchase Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery to the address of the respective parties included in the signature line to this Agreement, or to such other address as may be specified by written notice from time to time by the party entitled to receive such notice. Any notices, requests, demands or other communications by telecopy or cable shall be confirmed by letter given in accordance with (a) or (b) above.

6.           Miscellaneous.

(a)         All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities may require.

(b)         The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective its successors and assigns of the parties.

(c)         None of the provisions of this Agreement may be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Recipient.

(d)         In the event any part of this Agreement is found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if the void or unenforceable part were never the subject of agreement.

(e)         The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

(f)This Agreement and the License Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

(g)         The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.

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(h)         The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

(i)This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(j)          If any recapitalization or other transaction affecting the stock of the Company is effected, then any new, substituted or additional securities or other property which is distributed with respect to the Common Stock shall be immediately subject to this Agreement, to the same extent that the Common Stock, immediately prior thereto, shall have been covered by this Agreement.

(k)         No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have executed this Stock Issuance Agreement as of the date first written above.

MONOGRAM ORTHOPAEDICS INC.
By:	/s/ Benjamin Sexson
Name:	Benjamin Sexson
Title:	CEO
Address:	3913 Todd Lane, Suite 307
	Austin, TX 78744
ICAHN SCHOOL OF MEDICINE AT MOUNT SINAI
By:	/s/ Erik Lium
Name:	Erik Lium
Title:	Executive Vice President
Address:	One Gustave L. Levy Place,
	New York, NY 10029

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EX1A-11 CONSENT

Exhibit 11

 

802 N Washington St

Spokane, WA 99201

CONSENT OF INDEPENDENT AUDITOR’S

We consent to the inclusion in this Offering Statement on Form 1-A of our audit report dated May 1, 2020, with respect to the balance sheets of Monogram Orthopaedics, Inc. as of December 31, 2019 and December 31, 2018, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. Our report dated May 1, 2020 relating to those financial statements includes an emphasis of matter paragraph regarding an uncertainty about Monogram Orthopaedics, Inc.’s ability to continue as a going concern.

 

Fruci & Associates II, PLLC

October 14, 2020

EX1A-12 OPN CNSL

Exhibit 12

 

September 30, 2020

Board of Directors

Monogram Orthopaedics, Inc.

3913 Todd Lane

Austin, TX 78744

To the Board of Directors:

We are acting as counsel to Monogram Orthopaedics, Inc. (the “Company”) with respect to the preparation and filing of an offering statement on Form 1-A. The offering statement, and pre-qualification amendments, cover the contemplated sale of up to 4,784,689 shares of the Company’s Series B Preferred Stock, convertible into the Common Stock of the Company, plus up to 956,937 “bonus shares” of such convertible Series B Preferred Stock.

In connection with the opinion contained herein, we have examined the offering statement, as well as pre-qualification amendments, the certificate of incorporation (as amended) and bylaws, the resolutions of the Company’s board of directors and stockholders, as well as all other documents necessary to render an opinion. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies.

Based upon the foregoing, we are of the opinion that the shares of Series B Preferred Stock, and Common Stock into which the Series B Preferred Stock may convert, being sold pursuant to the offering statement are duly authorized and will be, when issued in the manner described in the offering statement, legally and validly issued, fully paid and non-assessable.

No opinion is being rendered hereby with respect to the truth and accuracy, or completeness of the offering statement or any portion thereof.

We further consent to the use of this opinion as an exhibit to the offering statement.

Yours truly,

/s/ CrowdCheck Law, LLP

By Andrew Stephenson, Partner

CrowdCheck Law, LLP