The Company was incorporated under the name Creative Learning Products, Inc. in the
State of New Jersey on August 31, 1988 and changed its name to Creative Gaming, Inc. in
May 1997. The Company changed its name to Management Services, Inc. in October 2006. In
August 2008, the Company changed its name to Centriforce Technology Corp. In May 2010, the
Company changed its name to ADB International Group, Inc. The Company changed its name to
its current name, E-Qure Corp., on August 27, 2014.
On May 12, 2014, the board of directors approved a plan to redomicile from the State of
New Jersey to the State of Delaware. In conjunction with the change in domicile the board
of directors also approve a 1:100 reverse split of our Common Stock. The redomicile and
reverse split were approved by FINRA and became effective on August 4, 2014.
In January 2014, Mr. Weissberg negotiated with Lifewave Ltd., a public
company organized under the laws of the State of Israel, for the purpose of acquiring
certain of Lifewave's IP assets pertaining to a wound healing device. The Registrant
signed a patent purchase agreement with Lifewave on January 6, 2014 (the
"Agreement"), the closing of which was subject to several material conditions,
including our ability of raising equity capital sufficient to develop and commercially
exploit the technology.
On June 4, 2014, we completed the purchase of all right, title and
interest to certain IP assets, including rights to a wound treatment device. The IP
assets, including the wound healing device, acquired by the Registrant are designed for
wound treatment incorporating Bioelectrical Signal Therapy ("BST Device").
The BST Device implements patented and proprietary electrical stimulation
technologies to treat hard-to-cure wounds and ulcers up to complete closure and/or cure.
Pursuant to the Agreement, the Registrant has agreed to pay Lifewave a
royalty of from 10% to 20% of the profits (as defined in the Agreement) generated from the
In June 2014, the Registrant entered into an agreement with the Austen
BioInnovation Institute in Akron ("ABIA" or the "Institute"), for the
purpose of bringing our BST Device to the U.S. market.
The Company's management selected ABIA's Product Innovation and
Commercialization Division, which has significant expertise in wound healing, clinical
trial development, and regulatory operations, to spearhead its pre-market clinical trial
program, which is necessary to apply for regulatory approval from the United States Food
and Drug Administration ("FDA") to distribute the BST Device in the United
States. As part of the Institute's fully integrated regulatory and device development
service Offerings, ABIA will prepare on behalf of the Company an application to obtain FDA
approval. The initial trial will include 70 patients in a double-arm, randomized,
multi-center study to assess the safety and efficacy of the BST Device in patients
with Stage II and III pressure and venous stasis ulcers; and submit data to the FDA to
On December 18, 2015, the Registrant
confirmed certain information that it had received from ABIA that, while
ABIA still anticipated that it would be able to provide the Registrant with
a final draft of the IDE application, ABIA had sustained financial
difficulties and key personnel losses that would likely adversely effect its
ability to perform under the Agreement on a timely basis, if at all. As a
result, the Registrant requested that ABIA fully refund the monies paid to
ABIA under the Agreement. In addition, the Registrant agreed to engage a
professional regulatory consultant, who was a former member of ABIA's
regulatory staff, to serve as the Registrant's FDA regulatory consultant on
an interim basis, subject to the execution of a separate services agreement.
The Registrant is also evaluating the advisability of engaging another firm
to replace ABIA, which process may be expected to delay the IDE approval
process for the BST Device.
The Company's success is dependent upon the successful FDA
clinical trial of its BST Device. The Device may need additional development and may
never achieve safety or efficacy. The Company believes that its design and procedure show
promise, but the path to commercial success, even if development milestones are met, may
take more time and might be more costly.
There are a number of potential obstacles the Company might face,
including the following:
We may not be able to raise sufficient
additional funds that we may need to complete the all requisite clinical trials.
Competitors may develop alternatives that
render BST Device redundant or unnecessary.
We may not have a sufficient and/or
sustainable intellectual property position.
Our device may be shown to have harmful side
effects/characteristics that indicate it is unlikely to be safe and effective.
Our device may not receive FDA regulatory
Even if our device receives regulatory
approval, it may not be accepted by patients, the medical community or third-party payers.
Effective October 15, 2014, through our
wholly-owned Israeli subsidiary, ESQURE,
we entered into an Asset Purchase Agreement with Michael Cohen. We purchased all of Mr. Cohan's assets (the "Seller's Assets")
related to our BST Device for 875,000 restricted shares of common stock valued at $350,000.
The Seller's Assets settled a subscription receivable under a previous subscription
agreement for the same number of shares.
Pursuant to the terms of the Asset
Purchase Agreement, we purchased all of Seller's assets (the
"Seller's Assets") related to our BST Device as follows:
(i) medical research data held by Seller's research
partners, distributors and marketing advisors in Israel and elsewhere;
(ii) manufacturing and design files related to the BST
device, including mechanical and electronics schemes drawings, printed
circuit boards graphics, BST electrodes including rechargeable electrodes;
and related files, as well as files related to all BST electrodes;
(iii) testing equipment and devices for BST manufacturing;
(iv) PowerLab devices
including equipment of Lifewave Ltd (the entity from whom Registrant
acquired the BST Device and technology);
(v) BST devices and electrodes under the control of BST
distributors, physicians, hospitals, clinics worldwide;
(vi) the Main Server of Lifewave which holds all
manufacturing, marketing and other material related to the Registrant's BST Device; and
(vii) Injection molds for the manufacture of the Registrant's
BST Device plastic parts.
On December 28, 2014, the
Registrant entered into a preliminary distribution agreement with Rubifarm
S.A., an entity organized under the laws of Argentina ("Rubifarm"), which
agreement is subject to approval by the regulatory authorities of Argentina.
At the date of regulatory approval, which is anticipated during the 4th
quarter of 2015, a definitive agreement will be executed and filed with the
SEC. The agreement contemplates that Rubifarm will be granted exclusive
distribution rights for the BST Device in Argentina for an initial term of
5 years subject to Rubifarm meeting a minimum purchase quota of $1.5 million
during the initial 5-year term in order to retain its exclusivity.
On July 30, 2015, the Company reported that it
entered into an exclusive distribution agreement (the "Distribution
Agreement") with Chemipal Ltd, a closely-held Tel-Aviv Stock Exchange listed
company organized under the laws of the State of Israel ("Chemipal").
Chemipal has been actively engaged in the distribution of medical products
in Israel since 1941. Under the Distribution Agreement, the Registrant has
granted Chemipal exclusive distribution rights to the Registrant's medical
device for the treatment of chronic wounds (the "BST Device") and the
accompanying disposable electrodes (sometimes collectively, the "Products")
in Israel for an initial 5 year term, subject to Chemipal satisfying a
minimum purchase quota of $3 million during the term. The Chemipal agreement
further provides as follows:
(i) the Registrant will supply the Distributor
with an initial inventory;
Registrant will re-supply the Distributor with Products from time-to-time,
based upon payment by the Distributor to the Registrant;
(iii) based upon demand for the Products, the parties will reevaluate and
increase the size of the inventory as sales of the Products increase; and
(iv) the Distributor will use the BST Device for treatment of patients in
hospitals, long-term care facilities, medical centers and clinics and other
We are a start-up company and we may require
additional capital to implement our business and fund our operations. See
"Management's Discussion and Analysis" on page 60.
The Company's principal executive office and mailing address is 20
West 64th Street, Suite 39G, New York, NY 10023. Our telephone number is (972) 54 427777.
Electrical Stimulation To Accelerate Wound Healing
The human cell is, in essence, an electrical unit. Human cells are enveloped by a
plasma membrane that operates on the electrochemical physiology principle (the principal
of the electrical properties of biological cells and tissues) of direct current exchange
of ions. Injury to the outermost layer or epithelial layer of the human skin disrupts the
body's naturally occurring electrical current therefore creating an electrical field. This
electrical field guides the epithelial cell migration during wound healing. Electrical
stimulation has shown enhanced movement of epithelial cells through the application of
electrical fields. Movement of epithelial cells does not occur in a linear fashion;
rather, the cells migrate approximately along the electrical field. Epithelial cells have
the ability to change direction in response to electrical fields. If the polarity of the
electrical field is changed, a reversal of movement of the epithelial cell can be
observed. Epithelial cells cultured in the presence of an electrical field demonstrate an
increase in the extent of cell movement. Under the impact of direct electrical current,
endothelial cell orientation may be observed as early as 4 hours after the onset of an
electrical field. Electrical stimulation is believed to restart or accelerate chronic wound
healing by imitating the natural electrical current that occurs in injured skin
and which is absent around chronic wounds.
Our BST Device
The BST Device, using electrodes affixed around the opposing
sides of the wound, emits an electrical field around the wound and therefore mimics the
electrochemical physiology principle and induces local cell regeneration. Wound treatment
with the BST Device is non-invasive, painless and efficient. The procedure calls for
electric stimulation to be performed 3 times a day for a duration of 30 minutes. The
patient is connected to the BST Device only for the duration of the treatment. Our
BST Device is positioned to treat severe stage II, as well as stage III and IV wounds including
pressure ulcers, diabetic ulcers and venous ulcers.
The BST Device is a standalone and easy-to-operate Device for
adjunctive therapy in wound healing. The Device is able to automatically adjust the
electric pulse amplitude based on a patient's impedance reading. It has a built-in,
pre-programmed timer to stop treatment after a 30 minute session. We believe that our
BST Device represents a cost-effective wound healing method that can reduce
hospitalization time and therefore reduce treatment costs.
The Global Wound Care Market
Based upon the knowledge and professional experience of members of our
management in the wound care industry, we believe that the global market for
wound care, which includes an array of surgical, chronic and acute wound care
products reached around $24 billion in 2013 and we expect it to grow by
approximately 7% annually.
The advanced wound care market, which includes drug treatment, negative
pressure devices, enzymatic debridement, electrical treatment and tissue engineered skin
substitutes, represents the segment of the overall wound care market, which we believe has
the greatest growth potential.
Chronic Wounds - Our Target Market
Our BST Device is designed for chronic wound treatments in
hospitals, nursing homes and home care.
Chronic wound care represents a critical issue for healthcare
providers. Unlike an acute wound, a chronic wound is one that shows no signs of
significant healing within a period of three months. We believe that chronic wounds constitute an
expensive and debilitating healthcare problem, with significant clinical and social
implications. Without effective treatment, a chronic wound can lead to a more severe
medical condition, such as infection, gangrene or amputation, which further impedes the
patient's quality of life and even death.
Patients can suffer from chronic wounds for months, or even years,
before healing is achieved, if at all. The treatment of a patient suffering from a chronic
wound including nursing time, wound care products, pressure-relieving devices,
special beds, surgical procedures, and hospitalization in the event of more severe
complications can possibly surpass $100,000 - with no guarantee of healing. Treatment
usually requires a joint effort conducted by an interdisciplinary team of nurses, doctors
There are four types of chronic wounds (also known as trophic or skin
ulcers): (i) Pressure ulcers; (ii) Venous insufficiency ulcers (also known as venous
stasis ulcers); (iii) Diabetic or Neuropathic ulcers; and (iv) Arterial insufficiency
Chronic wounds are classified by four stages according to their degree
of severity, with Stages III and IV being the two most severe, requiring, in most cases,
hospitalization and special treatment.
Chronic wounds primarily occur in patients over the age of 60 and those
with restricted mobility such as being confined to a wheelchair or bed. The wounds are
often large and/or deep, prone to infection, and debilitating due to the extent of tissue
damage incurred, resulting a compromised state of the patient's health. Sepsis can
result in extremely severe cases, which in turn, may lead to amputation and even death.
A range of traditional passive therapy and advanced wound therapy
products are used to prevent further wound deterioration. Passive therapy products include
synthetic dressings and gels that offer early-stage treatment, by enabling the wound to
remain clean and moist so as to prevent infection. Advanced wound therapy includes
specialty beds, mattress overlays, compression devices, negative pressure
therapy and mattress replacements used to
accelerate blood flow to the wound. All advanced wound therapy treatments are expensive
and require professional assistance.
In recent years, an array of modern, interactive wound management
products has been developed to provide a controlled local environment to stimulate the
healing process. These sophisticated products, based on growth factors, tissue
bioengineering, and hyperbaric oxygen technology, not only are very expensive, but also
require a high level of patient compliance.
There is a large number of patients suffering from chronic
wounds. We believe, based upon the knowledge and experience of our management in
the wound care industry that current treatments available may not be sufficient
to manage the various chronic wound conditions. As a result, we believe that our
BST device offers an additional, cost-effective and curative treatment method.
Our Wound Healing Strategy
The objective of our BST Device is to reduce treatment time and
therefore costs while delivering optimal therapeutic results, which eventually will lead
to lower wound treatment costs.
The cost of an unhealed wound goes far beyond the costs of the
physician, hospital and medical equipment, particularly when there are subsequent
complications that require additional medical treatment.
The healing time of chronic wounds usually ranges from a few weeks to a few
months depending on the size and type of the wound. Wound treatment typically can involve
many direct and indirect costs. Wound dressings comprise only 10-15% of the total direct
treatment cost according to the International Committee on Wound Management. In contrast,
a significant percentage of the total cost is attributable to care providers'
salaries and staff expenses. As a result, treatment methods that reduce healing time to
closure of the wound inevitably lead to lower cost of care.
The majority of severe chronic wounds are treated in hospitals.
Treatment options often have limited efficacy and typically are very expensive. In
addition, they are mostly only partially reimbursed by most insurance, primarily due to their
poor clinical viability. As a result, hospitals lose revenues due to long and
unsuccessful treatment cycles.
We believe that our BST Device is a very effective and cost-saving method
for the chronic wound treatment market. Our belief is based on the knowledge
and experience of our management in
the wound care industry that our BST Device is designed to be able to
significantly lower treatment cost compared to other wound therapies due to
the fact that our wound heal method requires shorter healing times and
therefore lower per day treatment costs.
Marketing and Sales
The Company intends to launch marketing efforts in the US upon FDA approval has been granted, of
which there can be no assurance. Until such time, most of our efforts will be
related to internally preparing for the launch of our BST Device in the US and
launching a few European territories.
Assuming FDA approval, which we believe will be achieved,
in part because of approval that has been received in Europe, the Company
plans to indirectly sell its wound treatment solution by entering into
distribution agreements with distributors specializing in medical devices
complementary to BST Device or by creating its own sales and marketing
force. The distributors or the company will then sell the treatment to
hospitals, nursing homes, geriatric institutions, and private clinics.
In addition to indirect sales through distribution
agreements, the Company considers the outright sale of its treatment to each
institution such as hospitals, nursing homes, geriatric institutions, and
private clinics, which would rent the Device to their patients on a monthly basis.
Upon completion of the wound healing treatment, the patient would return the
Device, which would then re-enter the medical device rental market.
Our principal competition in the chronic wound care market are expected
to be the wound care products manufactured by Kinetic Concepts, Inc. ("KCI") and
Smith & Nephew. KCI is considered market leader and, we believe, commands a market
share of approximately 21% in the United States. Smith & Nephew's U.S. market share is
believed to be approximately 19% based on revenues. Other significant competitors are
ConvaTec, Johnson & Johnson and 3M, al manufacturers of wound healing devices.
In addition to the above-mentioned device manufacturers, we expect to
face competition from specialty clinics that have been established by hospitals or
physicians. Additionally, there are a number of private companies that provide wound care
services. We may also face competition from general health care facilities and service
providers, biopharmaceutical companies and pharmaceutical companies.
We also face indirect competition from numerous companies that offer a
variety of wound healing methods including traditional wound care dressings, advanced
wound care dressings, such as hydrogels, hydrocolloids, and alginates, skin substitutes,
and products containing growth factors. While many of these methods compete with our
BST Device, such methods can also be utilized as complementary therapies to our
BST Device and vis versa.
We believe that the following treatments or therapies represent
alternatives or complementary treatments and/or therapies to our BST device:
Hyperbaric oxygen therapy ("HBOT"):Hyperbaric oxygen
therapy is a medical treatment that utilizes pressurized oxygen to heal wounds. The
treatment is administered by placing a patient in a comfortable pressure chamber that
circulates oxygen at two to three times the atmospheric pressure rate. The HBOT method is
not specifically designed for chronic wounds and the treatment process is both very long
and very expensive. HBOT treatments typically last 90-120 minutes and are administered 1-2
times a daily for a period of 5 to 6 days a week. The length of treatment depends on the
wound's severity, with some patients requiring 20-40 treatments. There are many
companies that offer HBOT treatment in clinics as a direct service to patients.
Vacuum-assisted closure ("V.A.C.") method: The
V.A.C. method is designed for the treatment of acute care setting, serious trauma wounds,
failed surgical closures, amputations, and serious pressure ulcers. The leading V.A.C.
product was launched in 1995 by KCI, a major global medical technology company.
We believe that the V.A.C. method is very expensive, painful and inconvenient, since the patient
needs to be connected to the device 22 hours a day.
EZCARE (Smith & Nephew) - Following the acquisition of
BlueSky Medical in May 2007, Smith & Nephew provide negative pressure wound
therapy (NPWT). NPWT is a technology used to treat chronic wounds such as
diabetic ulcers, pressure ulcers, as well as post-operative and hard-to-heal
wounds. It aids in the healing of open wounds by the application of
sub-atmospheric pressure (Similar technology to KCI).
In addition, recently developed technologies, or technologies that may
be developed in the future, are or may be the basis for products which compete with our
BST Device. There can be given no assurance that we will be able to successfully
enter into the chronic wound heal market with our BST Device or that we will be able
to compete effectively against such companies in the future.
Many of these companies have substantially greater capital and
marketing resources, and greater experience in commercializing products and services than
Patents, Trademarks, and Copyrights
We have a list of all pending and granted patents to
attached as exhibit 10.9 to our S-1 Registration Statement
as filed with the Company's S-1 on
September 6, 2014. To the extent that we determine that
additional intellectual property ("IP") protection may be necessary, we plan to
secure such protection by applying for additional patents, trademarks or copyrights
related to our business and IP, as we deem necessary.
Our operations and the marketing of our BST Device is subject to
extensive regulation by numerous federal and state governmental authorities in the United
States, foremost of which is the FDA. There can be no assurance that the FDA, other
governmental agencies or a third party will not contend that certain aspects of our
business and our BST Device is either subject to or is not in compliance with applicable laws, regulations or
rules or that the state or federal regulatory agencies or courts would interpret such
laws, regulations and rules in our favor. The sanctions for failure to comply with such
laws, regulations or rules could include denial of the right to conduct business,
significant fines and criminal and civil penalties. Additionally, any increase in the
complexity or substantive requirements of such laws, regulations or rules could have a
material adverse effect on our business.
Any change in current regulatory requirements or related interpretations by
or positions of, state officials where we operate could adversely affect our
operations within those states. State regulatory requirements could
adversely affect our ability to establish operations in such other states.
Various state and federal laws apply to the operations of medical
device providers including, but are not limited to, the following:
Licensure: Certain medical device providers are required to be
licensed by various state regulatory bodies. However, if we are found to not be in
compliance, we could be subject to fines and penalties or ordered to cease operations
which could have an adverse effect on our business.
False Claims Act: The Federal False Claims Act and some state
laws impose requirements in connection with the submission of claims for payment for
health care services and products, including prohibiting the knowing submission of false
or fraudulent claims and submission of false records or statements for reimbursement and
payment to the United States government or state government. Such requirements would apply
to the hospitals to which we provide our Device related to wound care treatment services.
Not only are government agencies active in investigating and enforcing actions with
respect to applicable health laws, but also health care providers are often subject to
actions brought by individuals on behalf of the government. As such,
"whistleblower" lawsuits, also known as "qui tam" actions, are
generally filed under seal with a court to allow the government adequate time to
investigate and determine whether it will intervene in the action. As a result, health
care providers subject to qui tam actions are often unaware of the lawsuit until the
government has made its determination whether to intervene, or not, at which time the seal
is lifted. The Federal False Claims Act provides for penalties equal to three (3) times
the actual amount of any overpayments plus $11,000 per claim. Under legislation passed in
2009, those who bill third parties are now obligated to discover and disclose any
overpayments received or be subject to False Claims Act penalties as well
Fraud and Abuse Laws: Since a significant portion of
reimbursement for healthcare products and services are currently paid through
reimbursements under Medicare, Medicaid or similar programs, the federal government and
many states have adopted statutes and regulations that address fraudulent and/or abusive
behavior in connection with such programs.
As part of this regulatory scheme, the federal government believes that
an "inducement" to refer a Medicare or Medicaid patient is likely to result in
fraud or abuse on the Medicare or Medicaid programs. Therefore, the federal government
adopted a number of laws and regulations to recoup funds and assess penalties which it
believes were paid inappropriately. In cases of criminal fraud, the individuals
responsible for the fraudulent activity can be subject to imprisonment.
One of the principal federal statutes regulating fraud and abuse is the
Anti-Kickback Statute. The Anti-Kickback statute prohibits the solicitation, payment,
receipt or offering of any direct or indirect remuneration in exchange for the referral of
Medicare and Medicaid patients or for the purchasing, arranging for or recommending the
purchasing, leasing or ordering of Medicare or Medicaid covered services, items or
equipment. To be convicted of a violation of the Anti-Kickback Statute, the party must
have had specific intent to induce the referral of Medicare or Medicaid patients or the
purchase, lease or ordering of a good, item or service reimbursable by Medicare or
Medicaid. Some of the federal courts have broadly construed the Anti-Kickback Statute and
held that the "intent" required to support a criminal conviction will exist if
only one purpose of the referral is to induce a prohibited referral.
To clarify some of the issues created by the Anti-Kickback Statute, the
Center for Medicare and Medicaid Services issued "safe harbor" regulations
identifying actions which will not be deemed to violate the Anti-Kickback Statute. Some of
these "safe harbors" are in the area of joint ventures, personal services, and
other arrangements. Conducting an activity that falls within a "safe harbor"
regulation provides comfort that such activity will not be prosecuted. Compliance with
each element of a particular "safe harbor" is required in order to assured of
the protection provided by such "safe harbor."Even though a transaction that
does not fall within a "safe harbor" may be perfectly appropriate, the
arrangement will be evaluated based on its facts and circumstances to determine if the
parties intended to induce the referral of Medicare or Medicaid patients or the purchase,
lease or ordering of a good, item or service reimbursable under Medicare or Medicaid.
An allegation of violation and/or a conviction for violation of the
Anti-Kickback Statute and parallel state laws could have a significant impact on our
ability to conduct our business. As noted earlier, significant fines, penalties, exclusion
from Medicare and Medicaid programs and imprisonment of individuals can result. Because
the burden to prove specific intent under the Anti-Kickback Statute can sometimes be
difficult, the government has been pursuing enforcement under statutes that do not require
specific intent such as the False Claims Act. In fact, in recent legislation the Congress
has required that those submitting claims for third party reimbursement are required to
discover and repay any overpayments, or they are subject to additional penalties.
The Stark Law: Federal and some state laws prohibit physician referrals to an
entity in which the physician or his or her immediate family members have a financial
interest for provision of certain designated health services that are reimbursed by
Medicare or Medicaid. We cannot assure you that the federal government, or other states in
which we operate, will not enact similar or more restrictive legislation or restrictions
or interpret existing laws and regulations in a manner that could harm our business.
Health Care Reform: There are currently a number of legislative
proposals that have been proposed as health care reform in the United States Congress. At
this time, it is not clear which, if any, of these proposals will be enacted. Therefore,
although one or more of these proposals, if enacted, could have an impact on our business,
we cannot predict at this time what that impact will be until there is legislation that
Ongoing Investigations: Federal and state investigations and
enforcement actions continue to focus on the health care industry, scrutinizing a wide
range of items such as joint venture arrangements and referral and billing practices. We
believe planned activities will be substantially in compliance with applicable legal
requirements. We cannot assure you, however, that a governmental agency or a third party
will not contend that certain aspects of our business are subject to, or are not in
compliance with, such laws, regulations or rules, or that state or federal regulatory
agencies or courts would interpret such laws, regulations and rules in our favor, or that
future interpretations of such laws will not require structural or organizational
modifications of our business or have a negative impact on our business. Applicable laws
and regulations are very broad and complex, and, in many cases, the courts interpret them
differently, making compliance difficult. Although we try to comply with such laws,
regulations and rules, a violation could result in denial of the right to conduct
business, significant fines and criminal penalties. Additionally, an increase in the
complexity or substantive requirements of such laws, regulations or rules, or reform of
the structure of health care delivery systems and payment methods, could have a material
adverse effect on our business.
We presently have one full-time employee, which is our CEO, Ohad Goren. Our CFO, Gal Paleg, dedicates 25% of his professional time to our
business and Itsik Ben Yesha, our CTO, dedicates 50% of his professional time to
our business. Our CEO, CTO and
CFO are employed under a service agreement with the company.
This Annual Report on Form 10-K contains forward-looking statements that
are based on current expectations, estimates, forecasts and projections about us, our
future performance, the market in which we operate, our beliefs and our management's
assumptions. In addition, other written or oral statements that constitute forward-looking
statements may be made by us or on our behalf. Words such as "expects",
"anticipates", "targets", "goals", "projects",
"intends", "plans", "believes", "seeks",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are difficult to
predict or assess. Therefore, actual outcomes and results may differ materially from what
is expressed or forecast in such forward-looking statements.
Risks Related to Our Business
Our Independent Registered Public Accounting Firm Has Expressed
Substantial Doubt As To Our Ability To Continue As A Going Concern.
The audited financial statements included in the Registration Statement
have been prepared assuming that we will continue as a going concern and do not include
any adjustments that might result if we cease to continue as a going concern. We believe
that in order to continue as a going concern, including the costs of being a public
company, we will need approximately $35,000 per year simply to cover the administrative, legal and
accounting fees. We have incurred significant losses since our inception. We have funded these losses primarily through the sale of
restricted shares of our Common Stock and the issuance of convertible notes, which have
subsequently been converted into restricted shares of Common Stock.
Based on our financial history, our independent registered
public accounting firm has expressed substantial doubt as to our ability to continue as a
going concern. We are a development stage company that has generated no revenue.
Notwithstanding our success in funding our business from the sale
of equity and debt securities to date, there can be no assurance
that we will have adequate capital resources or be able to continue to raise equity and/or
debt capital to fund planned operations or that any additional funds will be available to
us when needed or at all, or, if available, will be available on favorable terms or in
amounts required by us. If we are unable to obtain adequate capital resources to fund
operations, we may be required to delay, scale back or eliminate some or all of our plan
of operations, which may have a material adverse effect on our business, results of
operations and ability to operate as a going concern.
We Have Limited Operating History And Face Many Of The Risks And
Difficulties Frequently Encountered By Start-Up Companies.
In January 2014, the Company acquiring certain patents pertaining to a
wound healing device. The Company's new plan of operation has not yet generated any
revenues. We have no operation history as a medical device company upon which an evaluation
of the Company and its prospects could be based. There can be no assurance that management
of the Company will be successful in commercially exploiting our wound healing device and
implementing the corporate infrastructure to support its new operations so that the
Company will generate sufficient revenues to meet its expenses or to achieve or maintain
If we are unable to raise sufficient capital as needed, we may be
required to reduce the scope of our business development activities, which could harm our
business plans, financial condition and operating results, or cease our operations
entirely, in which case, you will lose all your investment.
If The Clinical Trial Studies Of Our Current Patented Device Does Not Produce Results
Necessary To Support Regulatory Clearance Or Approval In The United States, We Will Be
Unable To Commercialize Our Device.
We have engaged a third party to conduct clinical trials and
we reasonably expect trial results in 2017. Clinical testing may be expected to take a
significant amount of time, is expensive and carries uncertain outcomes. The initiation
and completion of the trial study may be prevented, delayed, or halted for numerous
reasons, including, but not limited to, the following:
the FDA, institutional review boards or other regulatory authorities do not approve a
clinical study protocol, force us to modify a previously approved protocol, or place a
clinical study on hold;
patients do not enroll in, or enroll at a lower rate than we expect, or do not complete
a clinical study;
patients or investigators do not comply with study protocols;
patients do not return for post-treatment follow-up
at the expected rate;
patients experience serious or unexpected adverse side effects for a variety of reasons
that may or may not be related to our product causing a clinical trial study to be put on
sites participating in an ongoing clinical study withdraw, requiring us to engage new
difficulties or delays associated with establishing additional clinical sites;
third-party clinical investigators decline to participate in our clinical studies, do
not perform the clinical studies on the anticipated schedule, or act in ways inconsistent
with the investigator agreement, clinical study protocol, good clinical practices, and
other FDA and Institutional Review Board requirements;
third-party entities do not perform data collection and analysis in a timely or accurate
regulatory inspections of our clinical studies require us to undertake corrective action
or suspend or terminate our clinical studies;
changes in federal, state, or foreign governmental statutes, regulations or policies;
interim results are inconclusive or unfavorable as to immediate and long-term safety or
the study design is inadequate to demonstrate safety and efficacy.
Clinical trial failure can occur at any stage of the testing. Our clinical study may
produce negative or inconclusive results, and we may decide, or regulators may require us,
to conduct additional clinical and/or non-clinical testing in addition to those we have
planned. Our failure to adequately demonstrate the safety and efficacy of our device would
prevent receipt of regulatory clearance or approval and, ultimately, the commercialization
of that device or indication for use. Any of these occurrences may harm our business,
financial condition and prospects significantly.
Our Expected Revenue Will Be Generated From Our Sole Product, And Any Decline In The
Future Sales Of This Product Or Failure To Gain Market Acceptance Of This Product Will
Negatively Impact Our Business.
We expect our revenue to be derived entirely from sales of our wound healing Device for
the foreseeable future. If we are unable to achieve and maintain market acceptance of our
product and do not achieve sustained positive cash flow, we will be severely constrained
in our ability to fund our operations, fulfill our business plan and be able to possibly
develop and commercialize other potential products. In addition, if we are unable to
market our product as a result of a quality problem, failure to maintain or obtain
regulatory approvals, unexpected or serious complications or other unforeseen negative
effects related to our product or the other factors discussed in these risk factors, we
would lose our only potential source of revenue, and our business will be materially
If We Fail To Develop And Retain Our Sales Force, Our Business Could Suffer.
We plan to develop a direct sales force in the United States. As we launch our product,
assuming that we are successful in securing FDA approval, any efforts to increase our
marketing efforts and expand into new geographies will be dependent on our ability to hire
and retain, as well as grow and develop our sales personnel. We intend to make a
significant investment in recruiting and training sales representatives. There is
significant competition for sales personnel experienced in relevant medical device sales.
Once hired, the training process may be expected to be lengthy because it requires
significant education for new sales representatives to achieve the level of competency
with our product and meet the expectations of potential clients. Upon completion of the
training, and any previous experience in marketing medical devices, generally, our sales
representatives typically require lead time in the field to grow their network of accounts
and achieve the productivity levels we expect them to reach in any individual territory.
If we are unable to attract, motivate, develop and retain a sufficient number of qualified
sales personnel, and if our sales representatives do not achieve the productivity levels
we expect them to reach, our revenue will not grow at the rate we expect and our financial
performance will suffer. Also, to the extent we hire personnel from our competitors, we
may have to wait until applicable non-competition provisions have expired before deploying
such personnel in restricted territories or incur costs to relocate personnel outside of
such territories, and we may be subject to allegations that these new hires have been
improperly solicited, or that they have divulged to us proprietary or other confidential
information of their former employers.
If We Are Unable To Educate Physicians On The Safe And Effective Use Of Our Product, We
May Be Unable To Achieve Our Expected Growth.
An important part of our sales process will include the education of physicians on the
safe and effective use of our wound healing device. There is a learning process for
physicians to become proficient in the use of our product and, based upon the use of our
Device in Europe, it typically takes several procedures for a physician to become
comfortable using the device. If a physician experiences difficulties during an initial
procedure or otherwise, that physician may be less likely to continue to use our product,
or to recommend it to other physicians. It is critical to the success of our
commercialization efforts to educate physicians on the proper use of the device, and to
provide them with adequate product support during training. It is important for our expected growth
that these physicians advocate for the benefits of our product in the broader marketplace.
If physicians are not properly trained, they may misuse or ineffectively use our product.
This may also result in unsatisfactory patient outcomes, negative publicity or lawsuits
against us, any of which could have a material adverse effect on our business.
There May Not Be A Wide Enough Client Base To Sustain Our Business.
The Company's principal business is to engage in marketing and
selling its wound healing treatments with our device. The Company hopes to sell its wound
healing device treatments in numbers large enough to make its business model work for
profitability, of which there can b no assurance.
If We Are Unable To Protect Our Intellectual Property, Our Business Will Be Negatively
The market for medical devices is subject to frequent litigation regarding patent and
other intellectual property rights. It is possible that our device may not withstand
challenges made by others or that our patents protect our rights adequately.
Our success depends in large part on our ability to secure and maintain effective
patent protection for our product in the United States and internationally. We have
acquired patents that have been granted as well as patents pending and expect to continue
to file patent applications for various aspects of our device technology. However, we face
the risks that:
we may fail to secure necessary patents on our patents pending prior to or after
obtaining regulatory clearances, thereby permitting competitors to market competing
our already-granted patents may be re-examined, invalidated or not extended.
If we are unable to protect our intellectual property adequately, our business and
commercial prospects will suffer.
We May Be Accused Of Infringing Intellectual Property Rights Of Third
Other parties may claim that our Device infringes on their proprietary
rights. We may be subject to claims and legal proceedings regarding alleged infringement
by us of the intellectual property rights of third parties. Such claims, whether or not
meritorious, may result in the expenditure of significant financial and managerial
resources, legal fees, injunctions or the payment of damages. In the event that our
patents do not fully protect us, we may need to obtain licenses from third parties who
allege that we have infringed their rights, but such licenses may not be available on
terms acceptable to us or at all. In addition, we may not be able to obtain or utilize on
terms that are favorable to us, or at all, licenses or other rights with respect to
intellectual property we do not own.
We May Face Product Liability Claims That Could Result In Costly Litigation And
Marketing of our device and clinical testing of our product may expose us to product
liability and other tort claims. Although we intend to purchase and maintain product
liability insurance, the coverage limits of our policies may not be adequate and one or
more successful claims brought against us may have a material adverse effect on our
business and results of operations. Additionally, product liability claims could
negatively affect our business reputation, adversely impacting continued product sales as
well as our ability to obtain and maintain regulatory approval for our products.
Current Or Future Government Regulations May Add To Our Operating Costs.
We may face unanticipated increases in operating
costs because of any changes in governmental regulations related to our wound
healing Device, specifically, and/or medical devices, generally. We have no
assurance that the independent clinical trials will result in favorable data that will be
accepted by the FDA. Laws and regulations may be introduced and court decisions may be
rendered that materially affect the demand for our product. Complying with new regulations
and/or court decisions could increase our operating costs. Furthermore, we may be subject
to the laws of various jurisdictions where we actually conduct business. Our failure to
qualify to do business in a jurisdiction that requires us to do so could subject us to
fines or penalties and could have a material adverse impact on our business and
We Are Required To Comply With Medical Device Reporting, Or MDR, Requirements And Must
Report Certain Malfunctions, Deaths And Serious Injuries Associated With Our Device Which
Can Result In Voluntary Corrective Actions, Mandatory Recall Or Agency Enforcement
Under applicable FDA MDR regulations, medical device manufacturers are required to
submit information to the FDA when they receive a report or become aware that a device has
or may have caused or contributed to a death or serious injury or has or may have a
malfunction that would likely cause or contribute to death or serious injury if the
malfunction were to recur. All manufacturers placing medical devices on the market in the
European Economic Area and the United States are legally bound to report any serious or
potentially serious incidents involving devices they produce or sell to the regulatory
agency, or Competent Authority, in whose jurisdiction the incident occurred.
Malfunction of our wound healing Device could result in future voluntary corrective
actions, such as recalls, including corrections, or customer notifications, or agency
action, such as inspection or enforcement actions. If malfunctions do occur, we may be
unable to correct the malfunctions adequately or prevent further malfunctions, in which
case we may need to cease manufacture and distribution of the affected products, initiate
voluntary recalls, and redesign the products. Regulatory authorities may also take actions
against us, such as ordering recalls, imposing fines, or seizing the affected products.
Any corrective action, whether voluntary or involuntary, will require the dedication of
our time and capital, distract management from operating our business, and may harm our
reputation and financial results.
We May Be Subject To Federal, State And Foreign Healthcare Laws And Regulations, And A
Finding Of Failure To Comply With Such Laws And Regulations Could Have A Material Adverse
Effect On Our Business.
Our operations are, and will continue to be, directly and indirectly affected by
various federal, state or foreign healthcare laws, including, but not limited to, those
described below. In particular, we are subject to the federal Anti-Kickback Statute, which
prohibit, among other things, any person or entity from knowingly and willfully offering,
paying, soliciting or receiving any remuneration, directly or indirectly, in cash or in
kind, in return for or to induce the referring, ordering, leasing, purchasing or arranging
for or recommending the referring, ordering, purchasing or leasing of any good, facility,
item or service, for which payment may be made, in whole or in part, under federal
healthcare programs, such as the Medicare and Medicaid programs.
We are also subject to the federal HIPAA statute, which, among other things, created
federal criminal laws that prohibit knowingly and willfully executing, or attempting to
execute, a scheme or artifice to defraud any health care benefit program or making any
materially false, fictitious or fraudulent statements relating to health care matters.
We are also subject to the federal "sunshine" law, which requires us to track
and report annually to the Centers for Medicare & Medicaid Services, or CMS,
information related to "payments or other transfers of value" made to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and
teaching hospitals and to report annually to CMS ownership and investment interests held
by physicians, as defined above, and their immediate family members in our company so long
as it is privately held.
In addition, we are subject to the federal civil and criminal false claims laws and
civil monetary penalty laws, which prohibit, among other things, persons or entities from
knowingly presenting, or causing to be presented, a false or fraudulent claim to, or the
knowing use of false records or statements to obtain payment from, or approval by, the
federal government. Suits filed under the False Claims Act, known as "qui tam"
actions, can be brought by any individual on behalf of the government and such
individuals, commonly known as "whistleblowers", may share in any amounts paid
by the entity to the government in fines or settlement. When an entity is determined to
have violated the False Claims Act, it may be required to pay up to three times the actual
damages sustained by the government, plus civil penalties for each separate false claim.
Many states have also adopted laws similar to each of the above federal laws, such as
anti-kickback and false claims laws which may be broader in scope and apply to items or
services reimbursed by any third-party payor, including commercial insurers, as well as
laws that restrict our marketing activities with physicians, and require us to report
consulting and other payments to physicians. Some states mandate implementation of
compliance programs to ensure compliance with these laws. We also are subject to foreign
fraud and abuse laws, which vary by country.
If our operations are found to be in violation of any of the laws described above or
any other governmental regulations that apply to us now or in the future, we may be
subject to penalties, including civil and criminal penalties, damages, fines,
disgorgement, exclusion from governmental health care programs, and the curtailment or
restructuring of our operations, any of which could adversely affect our ability to
operate our business and our financial results.
Our Future Success Is Dependent, In Part, On The Performance And
Continued Service Of Ohad Goren and Itsik Ben Yesha, Our Chief Executive Officer and Chief
The Company will be dependent on its key executives, Ohad Goren and
Itsik Ben Yesha, our CEO and CTO, respectively, for the foreseeable future. The loss of
the services from either one could have a material adverse effect on the operations and
prospects of the Company. They are expected to handle all aspects of our medical device
business and manage our operations. Their responsibilities include developing business
arrangements, directing the development of the Company's technology and IP, overseeing technical
aspects of our business, regulations and formulating strategies and materials to be used during our
presentations and meetings. At this time, the Company does not have an employment
agreement with either Mr. Goren or Ben Yesha, though the Company may enter into such an
agreement with Mr. Goren, its CEO and Mr. Ben Yesha, its CTO, on terms and conditions
usual and customary in our industry. The Company does not currently have "key
man" life insurance on neither Mr. Goren, Mr. Ben Yesha nor on Mr. Ron Weissberg, our
Chairman and control shareholder.
We Operate In A Highly Competitive Industry And Compete Against Several
Large Companies Which Could Adversely Affect Our Ability to Succeed.
There are numerous established companies that offer wound healing
products including products from Kinetic Concepts, Inc. and Smith & Nephew, which have
far greater financial and other resources and far longer operating histories than we do.
We are a new entry into this competitive market and may struggle to differentiate
ourselves as a viable competitor whose wound healing Device provides more value and
efficacy than the competition.
We Are An "Emerging Growth Company" Under The Recently
Enacted Jobs Act And We Cannot Be Certain If The Reduced Disclosure Requirements
Applicable To Emerging Growth Companies Will Make Our Common Stock Less Attractive To
We qualify as an "emerging growth company" under the recently
enacted JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from
certain disclosure requirements. For so long as we are an emerging growth company, among
other things, we will not be required to:
have an auditor report on our internal controls over financial
reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
submit certain executive compensation matters to shareholder advisory votes, such as
"say-on-pay" and "say-on-frequency";
obtain shareholder approval of any golden parachute payments not previously approved;
disclose certain executive compensation related items such as the correlation between
executive compensation and performance and comparisons of the Chief Executive's
compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an
"emerging growth company" can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. In other words, an "Emerging Growth Company" can delay the
adoption of certain accounting standards until those standards would otherwise apply to
private companies. We have elected to take advantage of the benefits of this extended
transition period. Our financial statements may therefore not be comparable to those of
companies that comply with such new or revised accounting standards.
We will remain an "Emerging Growth Company" for up to five
years, or until the earliest of (i) the last day of the first fiscal year in which our
total annual gross revenues exceed $1 billion; (ii) the date that we become a "large
accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of
1934, which would occur if the market value of our ordinary shares that is held by
non-affiliates exceeds $700 million as of the last business day of our most recently
completed second fiscal quarter or (iii) the date on which we have issued more than $1
billion in non-convertible debt during the preceding three-year period.
Until such time, however, because the JOBS Act has only recently been
enacted, we cannot predict whether investors will find our stock less attractive because
of the more limited disclosure requirements that we may be entitled to follow and other
exemptions on which we are relying while we are an "emerging growth company". If
some investors find our Common Stock less attractive as a result, there may be a less
active trading market for our Common Stock and our stock price may be more volatile.
Our By-Laws Provide For Indemnification Of Our Directors And the
Purchase Of D&O Insurance At Our Expense And Limit Their Liability Which May Result In
A Major Cost To Us And Hurt The Interest Of Our Shareholders Because Corporate Resources
May Be Expended For The Benefit Of Our Directors.
The Company's By-Laws include provisions that eliminate the
personal liability of the directors of the Company for monetary damages to the fullest
extent possible under the laws of the State of Delaware or other applicable law. These
provisions eliminate the liability of directors to the Company and its stockholders for
monetary damages arising out of any violation of a director of his fiduciary duty of due
care. Under Delaware law, however, such provisions do not eliminate the personal liability
of a director for (i) breach of the director's duty of loyalty, (ii) acts or
omissions not in good faith or involving intentional misconduct or knowing violation of
law, (iii) payment of dividends or repurchases of stock other than from lawfully available
funds, or (iv) any transaction from which the director derived an improper benefit. These
provisions do not affect a director's liabilities under the federal securities laws
or the recovery of damages by third parties.
Reporting Requirements Under The Exchange Act And Compliance With The
Sarbanes-Oxley Act Of 2002, Including Establishing And Maintaining Acceptable Internal
Controls Over Financial Reporting, Are Costly And May Increase Substantially.
The rules and regulations of the SEC require a public company to
prepare and file periodic reports under the Exchange Act, which will require that the
Company engage legal, accounting, auditing and other professional services. The engagement
of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act") requires, among other things, that we design, implement
and maintain adequate internal controls and procedures over financial reporting. The costs
of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel
we have may make it difficult for us to design, implement and maintain adequate internal
controls over financial reporting. We expect these costs to be approximately $35,000 per
year. In the event that we fail to maintain an effective system of internal controls or
discover material weaknesses in our internal controls, we may not be able to produce
reliable financial reports or report fraud, which may harm our overall financial condition
and result in loss of investor confidence and a decline in our share price.
As a public company, we may be subject to the reporting requirements of
the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable
securities rules and regulations. Despite recent reforms made possible by the JOBS Act,
compliance with these rules and regulations will nonetheless increase our legal and
financial compliance costs, make some activities more difficult, time-consuming or costly
and increase demand on our systems and resources, particularly after we are no longer an
"Emerging Growth Company." The Exchange Act requires, among other things, that
we file annual, quarterly, and current reports with respect to our business and operating
We are working with our legal, independent accounting and financial
advisors to identify those areas in which changes should be made to our financial and
management control systems to manage our growth and our obligations as a public company.
These areas include corporate governance, corporate control, disclosure controls and
procedures and financial reporting and accounting systems. We have made, and will continue
to make, changes in these and other areas. However, we anticipate that the expenses that
will be required for being a public company could be material. We estimate that the
aggregate cost of increased legal services; accounting and audit functions; personnel,
such as a chief financial officer familiar with the obligations of public company
reporting; consultants to design and implement internal controls could be material. In
addition, if and when we retain independent directors and/or additional members of senior
management, we may incur additional expenses related to director compensation and/or
premiums for directors' and officers' liability insurance, the costs of which we
cannot estimate at this time. We may also incur additional expenses associated with
investor relations and similar functions, the cost of which we also cannot estimate at
this time. However, these additional expenses individually, or in the aggregate, may also
In addition, being a public company could make it more difficult or
more costly for us to obtain certain types of insurance, including directors' and
officers' liability insurance, and we may be forced to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage.
The impact of these events could also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors, our board committees or as executive
The increased costs associated with operating as a public company may
decrease our operating performance, and may cause us increase the prices of our product to offset the effect of
such increased costs. Additionally, if these requirements divert our management's
attention from other business concerns, they could have a material adverse effect on our
business, financial condition and results of operations.
Future Manufacturing Of Our Product May Be Interrupted Due To International
Political Situations, Natural Disasters Or Other Causes.
Once FDA approval is granted, we plan to manufacture our BST Device principally in Israel. Domestic
situations in Israel and surrounding countries could possibly result in production and
delivery problems. We are subject to the risk that future manufacturing and delivery of our
BST Device may be
interrupted as a result of natural disasters or capacity constraints with our
vendors' or suppliers' hardware. Any such interruptions may lead to a loss of
customers or distributors and, accordingly, may adversely affect our business and results
Risks Related to Our Common Stock
There Is No Assurance Of A Liquid Public Market Of Our Common Stock Or
That You May Be Able To Liquidate Your Investment In Our Common Stock.
At present, our Common Stock is subject to quotation of the
OTCQB market. There is only a limited, liquid public trading marketing for
our Common Stock and there can be no assurance that one will ever develop. Market
liquidity will depend on the perception of our business and any steps that our management
might take to bring us to the awareness of investors. There can be given no assurance that
there will be any awareness generated. Consequently, investors may not be able to
liquidate their investment or liquidate it at a price that reflects the value of the
business or the value of their initial investment in our Common Stock. As a result,
holders of our securities may not find purchasers for our securities should they to decide
to sell securities held by them. Consequently, our securities should be purchased only by
investors who have no need for liquidity in their investment and who can hold our
securities for a prolonged period of time.
The Market Price Of Our Common Stock May Be Volatile.
In the event an active trading market develops for our Common Stock,
the market price of our Common Stock may be highly volatile, as is the stock market in
general, and the market for securities subject to quotation on OTC Markets in particular.
Some of the factors that may materially affect the market price of our Common Stock are
beyond our control, such as changes in conditions or trends in the industry in which we
operate or sales of our Common Stock. These factors may materially adversely affect the
market price of our Common Stock, regardless of our business performance. Public stock markets have experienced extreme price and trading volume volatility. This
volatility has significantly affected the market prices of securities of many companies
for reasons frequently unrelated to the operating performance of the specific companies.
These market fluctuations may adversely affect the market price of our Common Stock.
A Large Number Of Additional Shares Will Be Available For Resale Into The Public Market
Pursuant To This Offering As Well As In The Near Future, Which May Cause The Market Price
Of Our Common Stock To Decline Significantly, Even If Our Business Performs As Expected.
Sales of a substantial number of shares of our Common Stock in the public market
pursuant to our Offerings, or the perception that additional shares of Common Stock become
available pursuant to Rule 144 promulgated by the SEC under the Act, could adversely
affect the market price of our Common Stock. As of March 31, 2017, we have
shares of Common Stock outstanding of which 15,921,328 shares of Common Stock are restricted as a result of applicable securities
laws. As restrictions on resale expire, the market price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as intending
to sell them. For a more detailed description, see "Shares Eligible for Future
If holders of restricted securities sell a large number of shares pursuant to Rule 144
under the Act, they could adversely affect the market price for our Common Stock.
You Will Experience Dilution Of Your Ownership Interest Because Of The
Future Issuance Of Additional Shares Of Our Common Stock Or Our Preferred Stock.
In the future, we may issue our authorized but previously unissued
equity securities, resulting in the dilution of the ownership interests of our present
stockholders. We are authorized to issue an aggregate of 500,000,000 shares of Common
Stock, par value $0.00001 per share, of which 22,012,562 are currently outstanding.
We may also issue additional shares of our Common Stock or other
securities that are convertible into or exercisable for Common Stock in connection with
hiring or retaining employees or consultants, future acquisitions, future sales of our
securities for capital raising purposes, or for other business purposes. The future
issuance of any such additional shares of our Common Stock or other securities may have a
negative impact on the market price of our Common Stock. There can be no assurance that we
will not be required to issue additional shares, warrants or other convertible securities
in the future in conjunction with hiring or retaining employees or consultants, future
acquisitions, future sales of our securities for capital raising purposes or for other
business purposes, including at a price (or exercise prices) below the price at which
shares of our Common Stock will be quoted on the OTCQB Markets.
We May Never Pay Any Dividends To Our Shareholders.
We currently intend to retain any future earnings for use in the operation and
expansion of our business. Accordingly, we do not expect to pay any dividends in the
foreseeable future, but will review this policy as circumstances dictate. The declaration
and payment of all future dividends, if any, will be at the sole discretion of our board
of directors, which retains the right to change our dividend policy at any time.
Consequently, stockholders must rely on sales of their Common Stock after price
appreciation, which may never occur, as the only way to realize any future gains on their
Insider Will Continue To Have Substantial Control Over Us After This Offering and Will
Be Able To Influence Corporate Matters.
Our directors and executive officers and stockholders
holding more than 5% of our Common Stock and their affiliates will beneficially own, in
the aggregate, approximately 30% of our outstanding Common Stock. As a result, if these
stockholders were to choose to act together, they would be able to exercise significant
influence over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions, such as a merger or other
sale of our company or its assets. This concentration of ownership could limit your
ability to influence corporate matters and may have the effect of delaying or preventing a
third party from acquiring control over us. For information regarding the ownership of our
outstanding stock by our executive officers and directors and their affiliates, see
"Security Ownership of Certain Beneficial Owners and Management."
We cannot assure you that the interests of our management team will
coincide with the interests of the investors. So long as our management team collectively
controls a significant portion of our Common Stock, these individuals, or entities
controlled by them, will continue to collectively be able to strongly influence or
effectively control our decisions.
Anti-Takeover Provisions Of The Delaware General Corporation Law May Discourage Or
Prevent A Change Of Control, Even If An Acquisition Would Be Beneficial To Our
Shareholders, Which Could Reduce Our Stock Price.
We are subject to the provisions of Section 203 of the Delaware General Corporation
Law, which may prohibit certain business combinations with stockholders owning 15% or more
of our outstanding voting stock. These and other provisions in our amended and restated
certificate of incorporation, amended and restated bylaws and Delaware law could make it
more difficult for stockholders or potential acquirers to obtain control of our board of
directors or initiate actions that are opposed by our then-current board of directors,
including a merger, tender offer or proxy contest involving our company. Any delay or
prevention of a change of control transaction or changes in our board of directors could
cause the market price of our Common Stock to decline.
State Blue Sky Registration, Potential Limitations On Resale Of Our Common Stock.
The holders of our shares of Common Stock and those persons, who desire to purchase our
Common Stock in any trading market that might develop, should be aware that there may be
state blue-sky law restrictions upon the ability of investors to resell our securities.
Accordingly, investors should consider the secondary market our securities to be a limited
It is the present intention of management after the active commencement of operations
in to seek coverage and publication of information regarding the Company in an accepted
publication manual, which permits a manual exemption. The manual exemption permits a
security to be distributed in a particular state without being registered if the
Registrant issuing the security has a listing for that security in a securities manual
recognized by the state. However, it is not enough for the security to be listed in a
recognized manual. The listing entry must contain (1) the names of issuer's officers, and
directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either
the fiscal year preceding the balance sheet or for the most recent fiscal year of
operations. Furthermore, the manual exemption is a non-issuer exemption restricted to
secondary trading transactions, making it unavailable for issuers selling newly issued
Most of the accepted manuals are those published in Standard and Poor's, Moody's
Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many
states expressly recognize these manuals. A smaller number of states declare that they
"recognize securities manuals" but do not specify the recognized manuals. The
following states do not have any provisions and therefore do not expressly recognize the
manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota,
Tennessee, Vermont and Wisconsin.
Our Common Stock Is Considered A Penny Stock, Which May Be Subject To
Restrictions On Marketability, So You May Not Be Able To Sell Your Shares.
We may be subject now and in the future to the Penny
Stock rules if our shares of Common Stock sell below $5.00 per share. Penny stocks
generally are equity securities with a price of less than $5.00. The penny stock rules
require broker-dealers to deliver a standardized risk disclosure document prepared by the
SEC which provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer must also provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and its
salesperson, and monthly account statements showing the market value of each penny stock
held in the customer's account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information must be given to the customer orally or in
writing prior to completing the transaction and must be given to the customer in writing
before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction,
the broker dealer must make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written agreement
to the transaction. The penny stock rules are burdensome and may reduce purchases of any
Offerings and reduce the trading activity for shares of our Common Stock. As long as our
shares of Common Stock are subject to the penny stock rules, the holders of such shares of
Common Stock may find it more difficult to sell their securities.
The Control Deficiencies In Our Internal Control Over Financial Reporting May Until
Remedied Cause Errors in Our Financial Statements Or Cause Our Filings With The SEC To Not
We have identified control deficiencies in our internal control over financial
reporting as of the evaluation done by management as of December 31, 2016, including those
related to (i) absent or inadequate segregation of duties within a significant account or
process, (ii) inadequate documentation of the components of internal control, and (iii)
inadequate design of information technology general and application controls that prevent
the information system from providing complete and accurate information consistent with
financial reporting objectives and current needs. If our internal control over financial
reporting or disclosure controls and procedures are not effective, there may be errors in
our financial statements that could require a restatement or our filings may not be timely
made with the SEC. Based on the work undertaken and performed by us, however, we believe
the financial statements contained in our reports filed with the SEC are fairly stated in
all material respects in accordance with GAAP for each of the periods presented. We intend
to implement additional corporate governance and control measures to strengthen our
control environment as we are able, but we may not achieve our desired objectives. We may
identify material weaknesses and control deficiencies in our internal control over
financial reporting in the future that may require remediation and could lead investors
losing confidence in our reported financial information, which could lead to a decline in
our stock price.