Item
1. Business.
Overview
We
are a medical device company focusing on the development and commercialization of our proprietary MicroNet™ stent platform
technology for the treatment of complex vascular and coronary disease. A stent is an expandable “scaffold-like” device,
usually constructed of a metallic material, that is inserted into an artery to expand the inside passage and improve blood flow.
Our MicroNet, a micron mesh sleeve, is wrapped over a stent to provide embolic protection in stenting procedures.
Our
CGuard™ carotid embolic prevention system (“CGuard EPS”) combines MicroNet and a self-expandable nitinol stent
in a single device for use in carotid artery applications. Our CGuard EPS received CE mark approval in the European Union in March
2013, and we launched its release on a limited basis in October 2014. In January 2015, a new version of CGuard, with a rapid exchange
delivery system, received CE mark approval in Europe and in September 2015, we announced the full market launch of CGuard EPS
in Europe. Subsequently, we launched CGuard EPS in Russia and certain countries in Latin America and Asia, including India. We
expect to receive approval to launch CGuard EPS in Brazil, and we are seeking strategic partners for potential launch of CGuard
EPS in Japan and China.
In
April 2017, we had a pre-investigational device exemption (“IDE”) submission meeting with the U.S. Food and Drug Administration
(“FDA”) regarding CGuard EPS where we presented materials that we believed would support a formal IDE submission seeking
approval to conduct a human clinical trial in the United States which included our draft synopsis for the clinical trial design.
The FDA agreed to our pre-clinical test plan and clinical trial design. On July 26, 2019, we submitted an IDE application for
CGuard EPS. In connection with such application, on August 23, 2019, we received a request for additional information from the
FDA in support of our application. We continue to work closely with the FDA to address FDA’s information and testing requests
in support of our pending IDE application, as the initiation of clinical testing in the U.S. is our current highest priority.
Following resolution of all comments from the FDA, we plan to re-submit the IDE application, as IDE approval by the FDA would
be a critical step toward the commencement of a human clinical trial using CGuard EPS in the United States.
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS that
are expected to reduce cost of goods and/or provide the best-in-class performing delivery system. In furtherance of
our strategy focusing on establishing CGuard EPS as a viable alternative to vascular surgery, we are exploring adding a
procedural protection device to our portfolio incorporating the principal of reverse flow of the carotid artery as an
adjunctive alternative to femoral access. We cannot give any assurance that we will receive sufficient (or any) proceeds from
future financings or the timing of such financings, if ever for potential product enhancements and manufacturing
enhancements. In addition, such additional financings may be costly or difficult to complete. Even if we receive sufficient
proceeds from future financings, there is no assurance that we will be able to timely apply for CE mark approval following
our receipt of such proceeds. We believe these improvements may allow us to reduce cost of goods and increase penetration in
our existing geographies and better position us for entry into new markets.
We
consider the addressable market for our CGuard EPS consists of individuals with diagnosed, symptomatic high-grade carotid artery
stenosis (HGCS, ≥70% occlusion) for whom an intervention is preferable to medical (drug) therapy. This group includes not only
carotid artery stenting patients but also individuals undergoing carotid endarterectomy, as the two approaches compete for the
same patient population. Assuming full penetration of the intervention caseload by CGuard EPS, we estimate that the addressable
market for CGuard EPS was approximately $1.0 billion in 2017. (source: Health Research International 2017 Results of Update
Report on Global Carotid Stenting Procedures and Markets by Major Geography and Addressable Markets).
Our
MGuard™ Prime™ Embolic Protection System (“MGuard Prime EPS”) is marketed for use in patients with acute
coronary syndromes, notably acute myocardial infarction (heart attack) and saphenous vein graft coronary interventions (bypass
surgery). MGuard Prime EPS combines MicroNet with a bare-metal cobalt-chromium based stent. MGuard Prime EPS received CE mark
approval in the European Union in October 2010 for improving luminal diameter and providing embolic protection. However, as a
result of a shift in industry preferences away from bare-metal stents in favor of drug-eluting (drug-coated) stents, in 2014 we
decided to curtail further development of this product in order to focus on the development of a drug-eluting stent product, MGuard
DES™. Due to limited resources, though, our efforts have been limited to testing drug-eluting stents manufactured by potential
partners for compatibility with MicroNet and seeking to incorporate MicroNet onto a drug-eluting stent manufactured by a potential
partner. The FDA has clarified that the primary mode of action for drug-eluting cardiovascular stents, which are regulated as
combination products, is that of the device component and has assigned the FDA Center for Devices and Radiological Health (CDRH)
primary responsibility for premarket review and regulation, providing some clarity about what to expect regarding the regulatory
framework related to the development of MGuard DES™.
We
also intend to develop a pipeline of other products and additional applications by leveraging our MicroNet technology to new applications
to improve peripheral vascular and neurovascular procedures, such as the treatment of the superficial femoral artery disease,
vascular disease below the knee and neurovascular stenting to seal aneurysms in the brain.
Presently,
none of our products may be sold or marketed in the United States.
We
were organized in the State of Delaware on February 29, 2008.
Recent
Developments
Public
Offerings
On
April 8, 2019, we closed an underwritten public offering of 486,957 shares of our common stock at a price to the public of $5.00
per share. We received net proceeds of approximately $2.0 million from the offering, after deducting underwriter discounts and
commissions and offering expenses payable by us. As a result of such offering, the conversion price for each of our Series B Preferred
Stock and Series C Preferred was reduced to $5.00 per share. In connection with this public offering, on April 12, 2019, the underwriter
partially exercised its over-allotment option and purchased an additional 12,393 shares of our common stock at a price to the
public of $5.00 per share. We received net proceeds of approximately $47,000 from the exercise of the over-allotment option.
On
September 24, 2019, we closed an underwritten public offering of (i) 539,000 common units, with each common unit being comprised
of one share of our common stock and one Series E Warrant to purchase one share of common stock and (ii) 2,238,777 pre-funded
units, with each pre-funded unit being comprised of one pre-funded warrant to purchase one share of common stock and one Series
E Warrant. In connection with this public offering, the underwriter partially exercised its over-allotment option and purchased
an additional 194,444 Series E Warrants to purchase 194,444 shares of common stock. The offering price to the public was $1.80
per common unit and $1.79 per pre-funded unit. The net proceeds to the us from the offering of common units and pre-funded units
and the exercise of the underwriter’s option to purchase 194,444 additional Series E Warrants to purchase an aggregate of
194,444 shares of common stock was approximately $4.2 million, excluding the proceeds, if any, from the exercise of the Series
E Warrants and the pre-funded warrants sold in the offering, and after deducting underwriting discounts and commissions and payment
of other estimated expenses associated with the offering that were payable by us.
NYSE
American Notification
Stockholder’s
Equity
On
August 7, 2019, we received notification from the NYSE American that we do not meet continued listing standards of the NYSE American
as set forth in Part 10 of the NYSE American Company Guide (the “Company Guide”). Specifically, we are not in compliance
with Section 1003(a)(iii) of the Company Guide because we reported stockholders’ equity of less than $6 million as of June
30, 2019, and net losses in our five most recent fiscal years ended December 31, 2018. As a result, we became subject to the procedures
and requirements of Section 1009 of the Company Guide.
On
October 11, 2019, NYSE American accepted our plan to regain compliance with Section 1003(a)(iii) of the Company Guide by August
7, 2020. We are subject to periodic review during the period covered by the compliance plan. Failure to make progress consistent
with the plan or to regain compliance with the continued listing standards by the end of the plan period could result in our common
stock being delisted from the NYSE American.
Low
Trading Price
On
January 7, 2019, we received notification from the NYSE American that we are not in compliance with the NYSE American continued
listing standards because our shares of common stock had been selling for a low price per share for a substantial period of time.
Pursuant to Section 1003(f)(v) of the NYSE American Company Guide (the “Company Guide”), the NYSE American staff determined
that our continued listing was predicated on us effecting a reverse stock split of our common stock or otherwise demonstrating
sustained price improvement within a reasonable period of time, which the staff determined to be until July 7, 2019. In addition,
the NYSE American advised us that its policy is to immediately suspend trading in shares of, and commence delisting procedures
with respect to, a listed company if the market price of its shares falls below $0.06 per share at any time during the trading
day.
Effective
as of 5:00 p.m. Eastern Time on March 29, 2019, we amended our amended and restated certificate of incorporation in order to effectuate
a 1-for-50 reverse stock split of our outstanding shares of common stock.
On
July 8, 2019, we received notice from NYSE American that we have resolved the continued listing deficiency with respect to low
selling price pursuant to Section 1003(f)(v) of the Company Guide. We are subject to NYSE Regulation’s normal continued
listing monitoring. However, in accordance with Section 1009(h) of the Company Guide, if we are again determined to be below any
of the continued listing standards within 12 months of July 8, 2019, NYSE American will examine the relationship between the two
incidents of noncompliance and re-evaluate our method of financial recovery from the first incident. NYSE Regulation will then
take the appropriate action, which depending on the circumstances, may include truncating the compliance procedures described
in Section 1009 of the Company Guide or immediately initiating delisting proceedings. If in the future we fall below the continued
listing criterion of a minimum average share price of $0.20 over a 30-day trading period, our common stock will be subject to
immediate review by NYSE American. There can be no assurance that the market price of our common stock will remain above the levels
viewed as abnormally low for a substantial period of time.
Our
Industry
Carotid
Carotid
arteries are located on each side of the neck and provide the primary blood supply to the brain. Carotid artery disease, also
called carotid artery stenosis, is a type of atherosclerosis (hardening of the arteries) that is one of the major risk factors
for ischemic stroke. In carotid artery disease, plaque accumulates in the artery walls, narrowing the artery and disrupting the
blood supply to the brain. This disruption in blood supply, together with plaque debris breaking off the artery walls and traveling
to the brain, are the primary causes of stroke. According to the World Health Organization (https://www.who.int/cardiovascular_diseases/resources/atlas/en/)
every year, 15 million people worldwide suffer a stroke, and nearly six million die and another five million are left permanently
disabled. According to the same source, stroke is the second leading cause of disability, after dementia.
In
2017, 2.2 million people were diagnosed with carotid artery disease, of which, approximately 600,000 patients had high grade carotid
stenosis requiring intervention for carotid artery disease (2017 Health Research International Market Report). Carotid
artery stenting is a minimally invasive treatment option for carotid artery disease and an alternative to carotid endarterectomy,
where a surgeon accesses the blocked carotid artery though an incision in the neck, and then surgically removes the plaque. Endovascular
techniques using stents and carotid embolic prevention system protect against plaque and debris traveling downstream, blocking
off the vessel and disrupting blood flow. We believe that the use of a stent with an embolic protection system should increase
the number of patients being treated since it would avoid the need for complex surgery.
Coronary
Physicians
and patients may select from a variety of treatments to address coronary artery disease, including pharmaceutical therapy, balloon
angioplasty, stenting with bare metal or drug-eluting stents, and coronary artery bypass graft procedures, with the selection
often depending upon the stage of the disease.
The
global market for coronary stents is estimated at $5.5 billion and projected to grow to $8 billion by 2025. (Global Market Insights,
Inc. Nov 06, 2019). Growth will be driven by a continued increases in incidence (Coronary heart disease burden is projected to
rise from around 47 million DALYs globally in 1990 to 82 million DALYs (Disability Adjusted Life Year)in 2020 – WHO Global
Burden of Coronary Heart Disease) – especially in developing countries). However, this market is dominated by drug eluting
stents (DES) which limits the opportunity for MGuard.
Neurovascular
The
neurovascular market focuses on catheter-delivered products used to treat strokes that already happened or unruptured brain aneurysms
that could lead to strokes. In the latter case, coils are wound into blood vessel bulges to block blood flow entering the aneurysms
to prevent the aneurysms from rupturing. Endovascular treatment of arterial aneurysm has evolved substantially over the past two
decades, transitioning from an investigational therapy into routine clinical practice and ultimately emerging as the treatment
of choice for many lesions (source: Medtech Ventures 2009, Aneurysm Flow Modulating Device Market). We believe that the
market for aneurysm flow modulating devices is still in the embryonic stage with windows of opportunities for early entrance.
The
current global market for the aneurysm flow modulating devices is estimated at $550 million, and the current market value of the
flow diversion market segment is estimated to be $125 million. The neurovascular market includes over-the-wire, flow-guided microcatheters,
guiding catheters, coil and liquid embolics, neurovascular stents and flow diversion stents. According to iData Research, the
market is expected to be driven by the conversion from surgical procedures to endovascular techniques in the treatment of aneurysms
and arteriovenous malformations.
Peripheral
Peripheral
vascular diseases (“PVD”) are caused by the formation of atherosclerotic plaques in arteries, which carry blood to
organs, limbs and head. It is also known as peripheral artery occlusive disease or peripheral artery disease. It comprises diseases
pertaining to both peripheral veins and peripheral arteries, affecting the peripheral and cardiac circulation in the body. PVD
includes diseases outside of the heart and brain, but most times refers to the leg and foot.
The
global market for PVDs was valued at about $5.34 billion in 2018 and is projected to grow to $6.22 billion by 2022 (Global Peripheral
Vascular Devices and Equipment Markets, 2014-2022 Research and Markets) with growth being driven primarily by increases in the
number of patients with peripheral artery disease. Stents and balloons hold the majority of the share in the peripheral vascular
devices market. Peripheral stents are more often used in combination with balloon angioplasty to open the veins, so that blood
can flow through the blocked veins in the body.
The
growing prevalence of PVD is expected to cause increased demand for treatment options. PVD is age related and its prevalence increases
markedly with advancing age. In addition PVD is more prevalent in lower and medium income countries than in higher income countries
(https://www.thelancet.com/journals/langlo/article/PIIS2214-109X(19)30255-4)
Our
Products
Below
is a summary of our current products and products under development, and their intended applications.
MicroNet
MicroNet
is our proprietary circular knitted mesh which wraps around a stent to protect patients from plaque debris flowing downstream
upon deployment. MicroNet is made of a single fiber from a biocompatible polymer widely used in medical implantations. The size,
or aperture, of the current MicroNet ‘pore’ is only 150-180 microns in order to maximize protection against the potentially
dangerous plaque and thrombus.
CGuard
– Carotid Applications
Our
CGuard EPS combines our MicroNet mesh and a self-expandable nitinol stent (a stent that expands without balloon dilation pressure
or need of an inflation balloon) in a single device for use in carotid artery applications. MicroNet is placed over and attached
to an open cell nitinol metal stent platform which is designed to trap debris and emboli that can dislodge from the diseased carotid
artery and potentially travel to the brain and cause a stroke. This danger is one of the greatest limitations of carotid artery
stenting with conventional carotid stents and stenting methods. The CGuard EPS technology is a highly flexible stent system that
conforms to the carotid anatomy.
We
believe that our CGuard EPS design provides advantages over existing therapies in treating carotid artery stenosis, such as conventional
carotid stenting and surgical endarterectomy, given the superior embolic protection characteristics provided by the MicroNet.
We believe the MicroNet will provide acute embolic protection at the time of the procedure, but more importantly, we believe that
CGuard EPS will provide post-procedure protection against embolic dislodgement, which can occur up to 48 hours post-procedure.
It is in this post-procedure time frame that embolization is the source of post-procedural strokes in the brain. Schofer, et al.
(“Late cerebral embolization after emboli-protected carotid artery stenting assessed by sequential diffusion-weighted magnetic
resonance imaging,” Journal of American College of Cardiology Cardiovascular Interventions, Volume 1, 2008) have
shown that the majority of the incidents of embolic showers associated with carotid stenting occur post-procedure.
Our
CGuard EPS with over-the-wire delivery system received CE mark approval in the European Union in March 2013. In October 2014,
we initiated a limited market release of CGuard EPS with over-the-wire delivery system for use in carotid artery applications
in Germany, Poland and Italy.
In
September 2014, we reported the results of the CGuard CARENET trial at the Transcatheter Cardiovascular Therapeutics (“TCT”)
conference in Washington D.C. In the CARENET trial, the CGuard EPS system demonstrated better results over historical data using
conventional commercially available carotid stents. In the third quarter of 2015 the results of the CGuard CARENET trial were
published in the Journal of the American College of Cardiology. In November 2015, positive twelve-month follow-up data from the
CGuard CARENET trial was presented at the 42nd Annual Symposium on Vascular and Endovascular Issues, documenting the benefits
of the CGuard MicroNet technology as well as the patency benefits (maintaining the artery open) of the internal and external carotid
arteries at twelve months.
In
the first quarter of 2015, we introduced CGuard RX, the new rapid exchange delivery system for CGuard EPS. The rapid exchange
delivery system has a guidewire that passes through the delivery system, running through the guiding catheter. It has one port,
and thus, can be operated by one operator, while an over-the-wire-delivery system has two lumens and ports and requires two operators
to perform the procedure. Our rapid exchange delivery system received CE mark approval in January 2015. We launched our CGuard
EPS in Europe with the rapid exchange delivery system in multiple medical specialties that perform carotid artery stenting. These
customers include interventional cardiologists, vascular surgeons, interventional neuroradiologists and interventional radiologists.
In
September 2015, we announced full market launch of CGuard EPS in Europe. Subsequently, we launched CGuard EPS in Russia and certain
countries in Latin America and Asia, including India. We expect to receive approval to launch CGuard EPS in Brazil, and we are
seeking strategic partners for potential launch of CGuard EPS in Japan and China.
In
April 2017, we had a pre-investigational device exemption (“IDE”) submission meeting with the U.S. Food and Drug Administration
(“FDA”) regarding CGuard EPS where we presented materials that we believed would support a formal IDE submission seeking
approval to conduct a human clinical trial in the United States which included our draft synopsis for the clinical trial design.
The FDA agreed to our pre-clinical test plan and clinical trial design. On July 26, 2019, we submitted an IDE application for
CGuard EPS. In connection with such application, on August 23, 2019, we received a request for additional information from the
FDA in support of our application. We continue to work closely with the FDA to address FDA’s information and testing requests
in support of our pending IDE application, as the initiation of clinical testing in the U.S. is our current highest priority.
Following resolution of all comments from the FDA, we plan to re-submit the IDE application , as IDE approval by the FDA would
be a critical step toward the commencement of a human clinical trial using CGuard EPS in the United States..
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods and/or provide the best-in-class performing delivery system. We cannot give any assurance that we will receive sufficient
(or any) proceeds from future financings or the timing of such financings, if ever for potential product enhancements and manufacturing
enhancements. In addition, such additional financings may be costly or difficult to complete. Even if we receive sufficient proceeds
from future financings, there is no assurance that we will be able to timely apply for CE mark approval following our receipt
of such proceeds. We believe these improvements may allow us to reduce cost of goods and increase penetration in our existing
geographies and better position us for entry into new markets.
MGuard
Products– Coronary Applications
Bare-Metal
Stent MGuard Product. Our MGuard Prime EPS coronary product is comprised of MicroNet wrapped around a cobalt-chromium
based bare-metal stent. In comparison to a conventional bare-metal stent, we believe our MGuard Prime EPS coronary product with
MicroNet mesh provides protection from dangerous embolic showers in patients experiencing ST-segment elevation myocardial infarction,
the most severe form of a heart attack, referred to as STEMI. Standard stents were not engineered for heart attack patients. Rather,
they were designed for treating stable angina patients whose occlusion is different from that of an occlusion in a heart attack
patient. In acute heart attack patients, the plaque or thrombus is unstable and often breaks up as the stent is implanted causing
downstream blockages in a significant portion of heart attack patients. Our MGuard Prime EPS is integrated with a precisely engineered
micro net mesh that is designed to prevent the unstable arterial plaque and thrombus that caused the heart attack blockage from
breaking off.
NGuard
— Neurovascular Applications
We
began developing a neurovascular flow diverter, which we refer to as NGuard, which is an endovascular device that diverts blood
flow away from cerebral aneurysms and ultimately seals the aneurysms. We have tested early flow diverter prototypes in initial
pre-clinical testing in both simulated aneurysm bench models using various MicroNet configurations with varying aperture sizes,
as well as in standard in vivo pre-clinical models, in which we observed aneurysm sealing and also wide open side branch vessels
across which the device was placed. We have suspended all further development activity of NGuard until we obtain sufficient funding
for such purpose.
PVGuard
— Peripheral Vascular Applications
We
intend to develop our MicroNet mesh sleeve and a self-expandable stent for use in peripheral vascular applications, to which we
refer to as PVGuard. PVDs are usually characterized by the accumulation of plaque in arteries in the legs. This accumulation can
lead to the need for amputation or even death, when untreated. PVD is treated either by trying to clear the artery of the blockage,
or by implanting a stent in the affected area to push the blockage out of the way of normal blood flow.
As
in carotid procedures, peripheral procedures are characterized by the necessity of controlling embolic showers both during and
post-procedure. Controlling embolic showers is so important in these indications that physicians often use fully covered stents,
at the risk of blocking branching vessels, to ensure that emboli do not fall into the bloodstream and move to the brain. We believe
that our MicroNet design will provide substantial advantages over existing therapies in treating peripheral artery stenosis.
However,
as we plan to focus our resources on the further expansion of our sales and marketing activities for CGuard EPS and, provided
that we have sufficient resources, potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods and/or provide the best-in-class performing delivery system and its submission for CE mark approval, we do not intend
to pursue the development of PVGuard in the near future.
Completed
Clinical Trials for CGuard EPS
CARENET
The
CARENET trial was the first multi-center study of CGuard EPS following the receipt of CE mark of this device in March 2013. The
CARENET trial was designed to evaluate feasibility and safety of CGuard EPS in treatment of carotid lesions in consecutive patients
suitable for coronary artery stenting (“CAS”) in a multi-operator, real-life setting. The acute, 30 day, magnetic
resonance imaging (“MRI”), ultrasound and six month clinical event results were presented at the LINC conference in
Leipzig, Germany in February, 2015. In the third quarter of 2015, the results of the CGuard CARENET trial were published in the
Journal of the American College of Cardiology. In November 2015, positive twelve month follow-up data from the CGuard CARENET
trial was presented at the 42nd Annual Symposium on Vascular and Endovascular Issues, documenting the benefits of the CGuard MicroNet
technology as well as the patency benefits (maintaining the artery open) of the internal and external carotid arteries at twelve
months.
MACCE
(myocardial infarction (“MI”), stroke or death) rate was 0.0% at 30 days. At six months, there was one death, which
was not device or procedure-related but did result in a MACCE rate of 3.6% at six months. At twelve months there were two additional
deaths, which were not device or procedure-related resulting in a MACCE rate of 10.7% at one year.
|
|
|
30 days (n=30)
|
|
|
|
6 months (n=28)
|
|
|
|
12 months (n=28)
|
|
MACCE (MI, stroke, death)
|
|
|
(0) 0.0
|
%
|
|
|
(1) 3.6
|
%
|
|
|
(3) 10.7
|
%
|
MI
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
stroke
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
|
|
(0) 0.0
|
%
|
death
|
|
|
(0) 0.0
|
%
|
|
|
(1) 3.6
|
%
|
|
|
(3) 10.7
|
%
|
CAS
carries the risk of cerebral embolization during and following the procedure, leading to life-threatening complications, mainly
cerebral ischemic events. Diffusion-weighted magnetic resonance imaging (DW-MRI) is a sensitive tool used to identify cerebral
emboli during CAS by measuring “lesions” within the brain which are areas that are ischemic and do not receive oxygenated
blood due to cerebral emboli. In the CARENET trial, 37.0% of patients treated with CGuard EPS had new ischemic lesions at 48 hours
after the procedure, with an average volume of 0.039 cm3. Of these lesions, there was only one that remained at 30 days following
the procedure and all others had resolved. Complete details appear in the following table. Where there is a second number shown
below after a ± symbol, it indicates the potential error in the measurement.
|
|
48 hours
n=27
|
|
|
30 days
n=26
|
|
Subjects with new Acute Ischemic Lesions (“AIL”)
|
|
|
10
|
|
|
|
1
|
|
Incidence of new lesions
|
|
|
37.0
|
%
|
|
|
4.0
|
%
|
Total number new AIL
|
|
|
83
|
|
|
|
1
|
|
Avg. number new AIL per patient
|
|
|
3.19 ± 10.33
|
|
|
|
0.04 ± 0.20
|
|
Average lesion volume (cm3)
|
|
|
0.039 ± 0.08
|
|
|
|
0.08 ± 0.00
|
|
Maximum lesion volume (cm3)
|
|
|
0.445
|
|
|
|
0.116
|
|
Permanent AIL at 30 days
|
|
|
—
|
|
|
|
1
|
|
The
healing process of the tissue and in-stent restenosis can be measured by a non-invasive form of ultrasound called duplex ultrasound.
This type of ultrasound measures the velocity of the blood that flows within the carotid arteries, which increases exponentially
as the lumen of the internal carotid artery narrows and the percent stenosis increases. One of the measurements is called PSV
(peak systolic volume) and is known to be highly correlated to the degree of in-stent restenosis; PSV values higher than 300 cm/sec
are indicative of >70% stenosis, while PSV values lower than 104 cm/sec are indicative of <30% restenosis and healthy healing.
In the CARENET trial, duplex ultrasound measurements done at 30 days, 6 months and 12 months following the stenting procedure
all attest to healthy normal healing without restenosis concerns, as the PSV values were 60.96 cm/sec ± 22.31, 85.24 cm/sec
± 39.56, and 90.22 cm/sec ± 37.72 respectively. The internal carotid artery was patent in all patients (100%).
The
conclusions of the CARENET trial were:
|
●
|
The
CARENET trial demonstrated safety of the CGuard EPS stent, with a 30 day MACCE rate of 0%.
|
|
|
|
|
●
|
Incidence
of new ipsilateral lesions (percent of patients with new lesions on the ipsilateral side (same side where the stent was employed))
at 48 hours was reduced by almost half compared to published data, and volume was reduced almost tenfold.
|
|
|
|
|
●
|
All
but one lesion had resolved completely by 30 days.
|
|
|
|
|
●
|
Twelve
month data showed no stroke or stroke-related deaths, and no cardiac adverse events.
|
|
|
|
|
●
|
CGuard
EPS offers enhanced benefits for patients undergoing CAS with unprecedented safety.
|
Physician-Sponsored
Clinical Trials for CGuard—PARADIGM-101 Study
PARADIGM-101
(Prospective evaluation of All-comer peRcutaneous cArotiD
revascularization In symptomatic and increased-risk asymptomatic carotid artery stenosis, using CGuard™
Mesh-covered embolic prevention stent system-101) was an investigator-led, single center study with the objective
of evaluating feasibility and outcome of routine use of CGuard EPS in 101 consecutive unselected all-comer patients referred for
carotid revascularization, initiated in 2015. In May 2016, the 30-day results were presented at the EuroPCR 2016 Late-Breaking
Clinical Trial Session in Paris, and in the Journal of EuroIntervention.
Key
findings from the PARADIGM-101 study and the follow-up data are as follows:
|
●
|
CGuard
EPS delivery success was 99.1%. The clinical evaluation also found no device foreshortening or elongation;
|
|
|
|
|
●
|
Angiographic
diameter stenosis or vessel narrowing was reduced from 83±9% to only 6.7±5% (p<0.001);
|
|
|
|
|
●
|
Periprocedural
death/major stroke/ myocardial infarction (“MI”) rates were 0%;
|
|
|
|
|
●
|
One
event was adjudicated by the Clinical Events Committee as a minor stroke (0.9%), with no change in NIH Stroke Scale or modified
Ranking scale;
|
The
results of the PARADIGM-101 study demonstrated that CGuard EPS can safely be used in a high risk, all-comer population of patients
with carotid artery stenosis and indicated that routine use of CGuard EPS may prevent cerebral events, such as strokes, by holding
plaque against the vessel wall, preventing emboli from being released into the blood stream. The PARADIGM-101 study found that
CGuard EPS is applicable in up to 90% of all-comer patients with carotid stenosis.
Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study
“Clinical
Results and Mechanical Properties of the Carotid CGUARD Double-Layered Embolic Prevention Stent Study” was an investigator-led,
prospective single-center study which evaluated CGuard EPS in 30 consecutive patients with internal carotid artery stenosis disease
with the objective of reporting early clinical outcomes with a novel MicroNet covered stent for the internal carotid artery and
the in vitro investigation of the device’s mechanical properties. In October 2016, the 30-day positive results were published
online-ahead-of-print in the Journal of Endovascular Therapy.
Key
findings from the study are as follows:
|
●
|
100%
success in implanting CGuard EPS without residual stenosis;
|
|
|
|
|
●
|
No
peri- or post-procedural complications;
|
|
|
|
|
●
|
No
deaths, major adverse events, minor or major strokes, or new neurologic symptoms during the six months following the procedure;
|
|
|
|
|
●
|
Modified
Rankin Scale improved for the symptomatic patients from 1.56 prior to the procedure to 0 afterwards;
|
|
|
|
|
●
|
All
vessels treated with CGuard EPS remained patent (open) at six months; and
|
|
|
|
|
●
|
DW-MRI
performed in 19 of 30 patients found no new ipsilateral lesions after 30 days and after six months compared with the baseline
DW-MRI studies.
|
Additionally,
based on engineering evaluations, the study concluded that CGuard EPS provides a high radial force and strong support in stenotic
lesions. The stent is easy to use and safe to implant because it does not foreshorten and its structure adapts well to changes
in diameter and direction of tortuous vascular anatomies. The MicroNet mesh of CGuard did not cause any changes to specific mechanical
parameters of the underlying stent.
CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry
“CGUARD
Mesh-Covered Stent in Real World: The IRON-Guard Registry using CGuard EPS” was a physician initiated prospective multi-center
registry that included 200 patients from 12 medical centers in Italy. The objective of the study was to report 30-day outcomes
(including MACCE) in a prospective series of patients who were treated with CGuard EPS between April 2015 and June 2016. In January
2017, 30-day results were presented at the Leipzig Interventional Course (LINC) 2017 and published in the Journal of EuroIntervention
in May 2017. The 12 month follow-up was published in the Journal of EuroIntevention in October 2018.
Key
30-day results presented were:
|
●
|
100%
success in implanting CGuard EPS;
|
|
|
|
|
●
|
No
MI, major stroke or death at 30 days;
|
|
|
|
|
●
|
There
were two transient ischemic attacks and five periprocedural minor strokes, including one thrombosis solved by surgery.
|
|
|
|
|
●
|
Total
elimination of post-procedural neurologic complications by 30 days;
|
|
|
|
|
●
|
DW-MRI
performed pre-procedure and between 24 and 72 hours post-procedure in 61 patients, indicated that 12 patients had new micro
emboli (19%).
|
|
|
|
|
●
|
At
12 months, there were no new major neurological adverse events, thrombosis or external carotid occlusion recorded;
|
|
|
|
|
●
|
One
myocardial infarction occurred at 12 months.
|
Peri-procedural
brain lesions prevention in CAS (3PCAS): Randomized trial comparing CGuard stent vs. WallStent™ Study
3PCAS
study was an independent investigator-led single center randomized clinical trial, comparing CGuard EPS vs. WallStent™,
intended to evaluate the incidence of peri-procedural diffusion-weighted-magnetic-resonance-imaging (DW-MRI) new brain lesions
after carotid artery stenting. Sixty-one consecutive patients referred for carotid revascularization (between January 2015 and
October 2016) were eligible for the study. The results of the 3PCAS study was published in the International Journal of Cardiology
in September 2018. The discussion distinguished between peri-procedural (from procedure to 48h -72h) and post-procedural periods
(72h to 30 days) where the CGuard EPS demonstrated a reduction in the post-procedural embolic effect during the carotid plaque
healing period. In contrast, there was no difference between the two stent groups during the peri-procedural stage because of,
according to the published article, the presence of bilateral/contralateral lesions (lesions resulting from the contralateral
artery from the non-treated carotid) which suggest that the peri-procedural neurological damage may have originated from extra-carotid
sources (outside of the artery which was treated and outside the stent itself).
Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: “One Size Fits All”
“Initial
Clinical Study of the New CGuard EPS MicroNet Covered Carotid Stent: ‘One Size Fits All’” was an investigator-led,
single-center study, which evaluated CGuard EPS in 30 consecutive patients with symptomatic stenosis of the internal carotid artery
with the objective of evaluating the CGuard EPS MicroNet covered stent for its ability to adjust to different vessel diameters.
The results of the study were published in the Journal of Endovascular Therapy in May 2019. The conclusion of the study as reported
was that CGuard EPS has high conformability combined with an almost equivalent outward radial force at expansion diameters ranging
from 5.5 to 9.0 mm. The first clinical results demonstrate the “One Size Fits All” stent can be implanted in internal
carotid arteries with reference diameters within this range.
Key
findings from the study were as follows:
|
●
|
100%
technical success in implanting CGuard EPS;
|
|
|
|
|
●
|
No
neurological events within 30 days;
|
|
|
|
|
●
|
The
chronic outward force normalized by stent length demonstrated a near-equivalent radial force outcome; and
|
|
|
|
|
●
|
The
stent displayed only a minor difference between the minimal radial force at 9.0 mm (0.195 N/mm) and the maximal radial force
at 5.5 mm (0.330 N/mm).
|
Preliminary
Results From a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention
System: The IRONGUARD 2 Study
“Preliminary
Results From a Prospective Real-World Multicenter Clinical Practice of Carotid Artery Stenting Using the CGuard Embolic Prevention
System: The IRONGUARD 2 Study” was a physician initiated prospective multi-center registry that enrolled 729 patients from
12 medical centers in Italy, from January 2017 to June 2019. The objective of the study is to evaluate periprocedural, 30 day,
and 12-month outcomes in a prospective series of patients submitted to protected carotid artery stenting with the CGuard Embolic
Prevention System. In November 2019, 24-hour, 30-day and 12-month results were published in the Journal of Vascular Surgery. The
study concluded that the real-world large multicenter, multispecialty analysis suggests that the use of the CGuard EPS in routine
clinical practice is associated with no major periprocedural and 30-day neurologic complications.
Key
findings from the study are as follows:
|
●
|
100%
procedural success in implanting CGuard EPS;
|
|
|
|
|
●
|
1death
from hemorrhagic stroke (patient was admitted for immediate treatment of CAS due to stroke), 2 minor strokes, 6 TIAs and one
nonfatal AMI at 24 hours;
|
|
|
|
|
●
|
1
minor stroke, 2 TIAs and one nonfatal AMI between 24 hours and 30 days; and
|
|
|
|
|
●
|
No
neurologic events and 7 deaths (2 fatal AMISs, 4 neoplasms and 1 suicide) between 30 days and 1 year.
|
Completed
Clinical Trials for MGuard Bare-Metal Coronary Products
We
have completed eight clinical trials with respect to our first generation stainless steel-based MGuard coronary device and our
cobalt-chromium based MGuard Prime EPS stent. Our first generation MGuard stent combining the MicroNet with a stainless steel
stent received CE mark approval for the treatment of coronary artery disease in the European Union in October 2007. We subsequently
replaced the stainless steel stent with a more advanced cobalt-chromium based stent for MGuard Prime EPS.
The
First in Men (FIM) study conducted in Germany from the fourth quarter of 2006 through the second quarter of 2008 focused on patients
with occlusion in their stent graft. This group is considered to be in “high risk” for complications during and shortly
after the procedure due to the substantial risk of occurrence of a thromboembolic event. The study demonstrated MGuard’s
safety in this high risk group. This study was followed by the GUARD study in Brazil in 2007 with a similar patient population
which reinforced the safety profile of MGuard in patients prone to procedural complications. The MAGICAL study was a pilot study
in STEMI patients conducted in Poland from 2008 through 2012 which demonstrated safety, measured by MACE rates at 30 days following
the procedure, as well as efficacy results, measured by the ability of MGuard to reestablish blood flow into the infarcted area
of the muscle. Furthermore, we conducted three registries (iMOS, IMR and iMOS Prime) that confirmed the feasibility of MGuard
and MGuard Prime EPS for the treatment of STEMI patients and the safety of MGuard and MGuard Prime EPS in the STEMI patient group.
Safety was repeatedly demonstrated in these trials and registries by the low mortality rate in the first month after the procedure.
In
the second calendar quarter of 2011, we began the MGuard for Acute ST Elevation Reperfusion Trial (which we refer to as our “MASTER
I trial”), a prospective, randomized study, which demonstrated that among patients with acute STEMI undergoing emergency
PCI, patients treated with MGuard had superior rates of epicardial coronary flow (blood flow within the vessels that run along
the outer surface of the heart) and complete ST-segment resolution, or restoration of blood flow to the heart muscle after a heart
attack, compared to those treated with commercially-approved bare metal or drug-eluting stents. The results of this trial are
summarized in greater detail below.
Finally,
the MASTER II trial, which we initially initiated as part of our efforts to seek approval of our MGuard Prime EPS by the U.S.
Food and Drug Administration, was discontinued at our election in its current form in light of market conditions moving toward
the use of drug-eluting stents over bare-metal stents. Analysis of the patients already enrolled in the MASTER II trial prior
to its suspension, however, reconfirmed the MASTER I safety results due to a continued low mortality rate.
MASTER
I Trial
In
the second calendar quarter of 2011, we began the MASTER I trial, a prospective, randomized study in Europe, South America and
Israel to compare the MGuard with commercially-approved bare metal and drug-eluting stents in achieving superior myocardial reperfusion
(the restoration of blood flow) in primary angioplasty for the treatment of acute STEMI, the most severe form of heart attack.
The MASTER I trial enrolled 433 subjects, 50% of whom were treated with MGuard and 50% of whom were treated with a commercially-approved
bare metal or drug-eluting stents. The detailed acute and 30 days results from the trial were presented at the TCT conference
on October 24, 2012 and published (Prospective, Randomized, Multicenter Evaluation of a Polyethylene Terephthalate Micronet Mesh–Covered
Stent (MGuard) in ST-Segment Elevation Myocardial Infarction, Stone et. al, JACC, 60; 2012). The results were as follows:
|
●
|
The
primary endpoint of post-procedure complete ST-segment resolution (restoration of blood flow to the heart muscle after a heart
attack) was statistically significantly improved in patients randomized to the MGuard compared to patients receiving a commercially-approved
bare metal or drug-eluting stent (57.8% vs. 44.7%).
|
|
|
|
|
●
|
Patients
receiving MGuard exhibited superior rates of thrombolysis in myocardial infarction (TIMI) 3 flow, which evidences normal coronary
blood flow that fills the distal coronary bed completely, as compared to patients receiving a commercially-approved bare metal
or drug-eluting stent (91.7% vs. 82.9%), with comparable rates of myocardial blush grade 2 or 3 (83.9% vs. 84.7%) and corrected
TIMI frame count (cTFC) (17.0 vs. 18.1
|
|
|
|
|
●
|
Angiographic
success rates (attainment of <50% final residual stenosis of the target lesion and final TIMI 3 flow) were higher in the
MGuard group compared to commercially-approved bare metal or drug-eluting stents (91.7% vs 82.4%).
|
|
|
|
|
●
|
Mortality
(0% vs. 1.9%) and major adverse cardiac events (1.8% vs. 2.3%) at 30 days post procedure were not statistically significantly
different between patients randomized to MGuard as opposed to patients randomized to commercially-approved bare metal or drug-eluting
stents. All other major adverse cardiac event components, as well as stent thrombosis, were comparable between the MGuard
and commercially-approved bare metal or drug-eluting stents.
|
The
six month results from the MASTER I trial were presented at the 2013 EuroPCR Meeting, the official annual meeting of the European
Association for Percutaneous Cardiovascular Interventions, on May 23, 2013 in Paris, France. The results were as follows:
|
●
|
Mortality
(0.5% vs. 2.8%) and major adverse cardiac events (5.2% vs. 3.4%) at 6 months post procedure were not statistically significantly
different between patients randomized to the MGuard as compared to patients randomized to commercially-approved bare metal
or drug-eluting stents. All other major adverse cardiac event components, as well as stent thrombosis, were comparable between
patients treated with MGuard and those treated with commercially-approved bare metal or drug-eluting stents.
|
The
twelve month results from the MASTER I trial were presented at the TCT conference on October 29, 2013 and published (Mesh-Covered
Embolic Protection Stent Implantation in ST-Segment–Elevation Myocardial Infarction Final 1-Year Clinical and Angiographic
Results From the MGUARD for Acute ST Elevation Reperfusion Trial, Dudek et. al, Coronary Interventions, 2014). The results
were as follows:
|
●
|
Mortality
(1.0% vs. 3.3%) and major adverse cardiac events (9.1% vs. 3.3%) at 12 months post procedure were not statistically significantly
different between patients randomized to the MGuard as opposed to those randomized to commercially-approved bare metal or
drug-eluting stents. All other major adverse cardiac events, as well as stent thrombosis, were comparable between the MGuard
and commercially-approved bare metal or drug-eluting stents.
|
In
summary, the MASTER I trial demonstrated that among patients with acute STEMI undergoing emergency PCI patients treated with MGuard
had superior rates of epicardial coronary flow (blood flow within the vessels that run along the outer surface of the heart) and
complete ST-segment resolution compared to those treated with commercially-approved bare metal or drug-eluting stents. In addition,
patients treated with MGuard showed a slightly lower mortality rate and a slightly higher major adverse cardiac event rate as
compared to patients treated with commercially-approved bare metal or drug-eluting stents six and twelve months post procedure.
A
detailed table with the results from the MASTER I trial is set forth below. The “p-Value” refers to the probability
of obtaining a given test result. Any p value less than 0.05 is considered statistically significant.
|
|
MGuard
|
|
|
Bare Metal Stents/Drug
Eluting Stents
|
|
|
p-Value
|
|
Number of Patients
|
|
|
217
|
|
|
|
216
|
|
|
|
—
|
|
TIMI 0-1
|
|
|
1.8
|
|
|
|
5.6
|
|
|
|
0.01
|
|
TIMI 3
|
|
|
91.7
|
|
|
|
82.9
|
|
|
|
0.006
|
|
Myocardial blush grade 0-1
|
|
|
16.1
|
|
|
|
14.8
|
|
|
|
0.71
|
|
Myocardial blush grade 3
|
|
|
74.2
|
|
|
|
72.1
|
|
|
|
0.62
|
|
ST segment resolution >70
|
|
|
57.8
|
|
|
|
44.7
|
|
|
|
0.008
|
|
30 day major adverse cardiac event
|
|
|
1.8
|
|
|
|
2.3
|
|
|
|
0.75
|
|
6 month major adverse cardiac event
|
|
|
5.2
|
|
|
|
3.4
|
|
|
|
0.34
|
|
12 month major adverse cardiac event
|
|
|
9.1
|
|
|
|
3.3
|
|
|
|
0.02
|
|
Future
Clinical Trials for CGuard EPS and MGuard Prime EPS
Post-marketing
clinical trials (outside the United States) could be conducted to further evaluate the safety and efficacy of CGuard EPS in specific
indications. These trials would be designed to facilitate market acceptance and expand the use of the product. We expect to be
able to rely upon CE mark approval of the product and other supporting clinical data to obtain local approvals.
We
do not anticipate conducting additional post-marketing clinical trials for our bare-metal MGuard coronary products.
Growth
Strategy
Our
primary business objective is to utilize our proprietary MicroNet technology and products to become the industry standard for
treatment of stroke, complex vascular and coronary disease and to provide a superior solution to the common acute problems caused
by current stenting procedures, such as restenosis, embolic showers and late thrombosis. We are pursuing the following business
strategies to achieve this objective.
|
●
|
Widen
the adoption of CGuard EPS. We are seeking to expand the population of CGuard EPS
patients in those countries in which CGuard EPS is commercially available. In particular,
our focus is on establishing CGuard EPS as a viable alternative (in appropriate cases)
to conventional carotid stents and vascular surgery within the applicable medical communities.
We intend to accomplish this goal by continuing to publish and present our clinical data,
support investigator-initiated clinical registries and exploring addition of a procedural
protection device to our portfolio incorporating the principal of reverse flow of the
carotid artery as an adjuctive alternative to femoral access. We have partnered and will
continue to seek out partnerships with organizations focused on the treatment of stroke.
We will also continue to engage advisory boards and to develop a network of key opinion
leaders to assist us in our efforts to widen the adoption of CGuard EPS.
|
|
●
|
Grow
our presence in existing and new markets for CGuard EPS. We have launched CGuard EPS in most European and Latin American
countries through a comprehensive distributor sales organizations network. We are continuing to focus on larger growing markets
through this network by supporting our distributors with a comprehensive marketing and clinical education programs. In November
2018, we obtained approval for reimbursement and commercial sale for CGuard EPS in Australia and immediately launched the
product. We are also pursuing additional product registrations and distribution contracts with local distributors in other
countries in Europe, Asia and Latin America.
|
|
|
|
|
●
|
Continue
to leverage our MicroNet technology to develop additional applications for interventional cardiologists and vascular surgeons.
In addition to the applications described above, we believe that we will eventually be able to utilize our proprietary
MicroNet technology to address imminent market needs for new product innovations to significantly improve patients’
care. We continue to broadly develop and protect intellectual property using our mesh technology. Examples of some areas include
peripheral vascular disease, neurovascular disease, renal artery disease and bifurcation disease.
|
|
|
|
|
●
|
Establish
relationships with collaborative and development partners to fully develop and market our existing and future products. We
are seeking strategic partners for collaborative research, development, marketing, distribution, or other agreements, which
could assist with our development and commercialization efforts for CGuard EPS and MGuard DES, and other potential products
that are based on our MicroNet technology.
|
|
|
|
|
●
|
Continue
to protect and expand our portfolio of patents. Our MicroNet technology and the use of patents to protect it are critical
to our success. We own numerous patents for our MicroNet technology. Nineteen patent applications and patents are pending
or in force (fifteen of which are issued patents) in the United States, some of which have corresponding patent applications
and/or issued patents in Canada, China, Europe, Israel, India, and South Africa. We believe these patents and patent applications
collectively cover all of our existing products and may be useful for protecting our future technological developments. We
intend to aggressively continue patenting new technology, and to actively pursue any infringement covered by any of our patents.
We believe that our patents, and patent applications once allowed, are important for maintaining the competitive differentiation
of our products and maximizing our return on research and development investments.
|
|
|
|
|
●
|
Resume
development and successfully commercialize MGuard DES. While we have limited the focus of product development to our carotid
products, if we resume development of our coronary products, we plan to evaluate opportunities to further develop MGuard DES.
|
Competition
The
markets in which we compete are highly competitive, subject to change and impacted by new product introductions and other activities
of industry participants.
Carotid
The
carotid stent markets in the United States and Europe are dominated by Abbott Laboratories, Boston Scientific Corporation, Covidien
Ltd. (currently part of Medtronic, Inc.), and Cordis Corporation (currently part of Cardinal Health, Inc.). Gore Medical and Terumo
Medical Corporation produce a polytetrafluoroethylene mesh-covered stent and a double layer metal stent, respectively. All of
these larger companies have substantially greater capital resources, larger customer bases, broader product lines, larger sales
forces, greater marketing and management resources, larger research and development staffs and larger facilities than ours and
have established reputations and relationships with our target customers, as well as worldwide distribution methods that are more
effective than ours. However, we believe that the European market is somewhat fragmented, and, in our opinion, smaller competitors
may be able to gain market share with greater flexibility.
Coronary
The
bare-metal stent and the drug-eluting stent markets in the United States and Europe are dominated by Abbott Laboratories, Boston
Scientific Corporation, and Medtronic, Inc. In Europe, the market is now almost exclusively dominated by drug eluding stents and
is rapidly becoming so in the rest of the world. (Catheter Cardiovasc Interv. 2018 Oct 1;(92(4):E262-E270. doi: 10.1002/ccd.27375.
Epub 2017 Oct 13. https://www.ncbi.nlm.nih.gov/pubmed/29027735). We believe physicians look to next-generation stent technology
to compete with existing therapies. Such next-generation technologies include bio-absorbable stents, stents that focus on treating
bifurcated lesions, and stents with superior polymer and drug coatings, and many industry participants are working to improve
stenting procedures as the portfolio of available stent technologies rapidly increases.
According
to the MEDTECH OUTLOOK, the three major players (Abbott Laboratories, Boston Scientific Corporation and Medtronic, Inc.) in the
worldwide coronary stent market have a combined total market share of approximately 92%. To date, our sales are not significant
enough to register in market share. As such, one of the challenges we face to further our product growth is the competition from
numerous pharmaceutical and biotechnology companies in the therapeutics area, as well as competition from academic institutions,
government agencies and research institutions. Most of our current and potential competitors, including but not limited to those
listed above, have, and will continue to have, substantially greater financial, technological, research and development, regulatory
and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do. Due to ongoing consolidation
in the industry, there are high barriers to entry for small manufacturers in the European and the U.S. markets and the rest of
the world.
Neurovascular
Leading
industry players in the global neurovascular devices market include Medtronic, Stryker, Terumo and Johnson & Johnson. Acquisitions
and mergers are increasingly used as a strategy for product portfolio expansion and to grow footprint. (Global Market Insights,
Inc. - Devices Market Share 2018-2024 Industry Size Report. https://www.gminsights.com/industry-analysis/neurovascular-devices-market)
Sales
and Marketing
Sales
and Marketing
Based
on the positive CGuard EPS clinical data, we initiated the commercial launch of CGuard EPS in CE marked countries in early 2015.
In September 2015, we announced full market launch of CGuard EPS in Europe.
In
2017, we decided to shift our commercial strategy to focus on sales of our products through local distribution partners and our
own internal sales initiatives to gain greater reach into all the relevant clinical specialties and to expand our geographic coverage.
Our current strategy seeks to broaden our sales efforts to transition vascular surgeons from carotid endarterectomy procedures
to carotid stenting with CGuard EPS, which we believe can greatly expand our customer base. We have focused and we plan to continue
to focus our marketing efforts primarily on key growth markets and to evaluate opportunities in new territories if and when they
become available. In addition, we are using international trade shows and industry conferences to gain market exposure and brand
recognition. We continue to work with leading physicians to enhance our marketing effort and are developing relationships with
new key opinion leaders to champion our technology and work with us in clinical studies
Currently,
we are actively selling our MGuard coronary products with a bio-stable MicroNet through local distributors in Europe, Latin America,
the Middle East and Asia.
Product
Positioning
When
treating carotid artery disease, we believe that there is an opportunity to enter the market with bare-metal stent platform and
to become a competitive player without a drug-eluting stent platform. Therefore, we believe that CGuard EPS is poised for commercial
growth in 2020 as more and more positive clinical data is presented.
Additionally,
we intend to continue to evaluate potential product enhancements and manufacturing enhancements for CGuard EPS expected to reduce
cost of goods or provide the best-in-class performing delivery system. We believe these improvements may allow us to reduce cost
of goods and increase penetration in our existing geographies and better position us for entry into new markets. Finally, we do
not expect that it would be crucial to use a drug-eluting stent platform to compete in certain new markets such as the neurovascular
market, and hence, we plan to continue to explore this area of opportunity.
The
MGuard coronary products have initially penetrated the market by entering segments with indications that present high risks of
embolic dislodgement, notably acute MI and saphenous vein graft coronary interventions. Even though MGuard technology has demonstrated
its advantages with clinical data, it is based on a bare-metal platform while the market demand has shifted away from bare-metal
stents in favor of drug-eluting stents.
Insurance
Reimbursement
In
most countries, a significant portion of a patient’s medical expenses is covered by third-party payors. Third-party payors
can include both government funded insurance programs and private insurance programs. While each payor develops and maintains
its own coverage and reimbursement policies, payors, in many instances, have similarly established policies, and in the U.S.,
for example, coverage policies and reimbursement rates of private payors are often influenced by those established by the U.S.
Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS). The CGuard products and MGuard coronary
products sold to-date in applicable foreign countries have been designed and labeled to facilitate the utilization of existing
reimbursement codes for such countries, and we intend to continue to design and label our present and future products in a manner
consistent with this goal.
While
most countries have established reimbursement codes for stenting procedures, certain countries may require additional clinical
data before recognizing coverage and/or to obtain a certain level of reimbursement for one or more of our products. In these situations,
we intend to complete the required clinical studies to obtain reimbursement approval in countries where it makes economic sense
to do so.
Intellectual
Property
Patents
We
have nineteen pending patent applications, three of which are pending in the United States, many of which cover aspects of our
CGuard and MGuard technology. Some of the corresponding patent applications outside the U.S. are filed in Canada, China, Europe,
Israel, India and South Africa. We hold an aggregate total of over 75 patents and pending applications including fifteen issued
U.S. patents. These patent rights are directed to cover various patent families, including the following seven (7) patent families:
Base Title of Patent Family
|
|
Country Pending
|
|
|
Country/Patent No.
|
|
|
|
Issue Date
|
|
Bifurcated Stent Assemblies
|
|
|
|
|
Israel 198,188
China ZL200780046676.2
|
|
|
|
5/1/2014
9/26/2012
|
|
Deformable Tip for Stent Delivery and Methods of Use
|
|
US
|
|
|
US 10,258,491
RU 2018128017
|
|
|
|
4/16/2019
6/25/2019
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—
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China
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—
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—
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EPO
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—
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—
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Israel
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—
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—
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India
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—
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—
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Japan
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—
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—
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Mexico
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—
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—
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—
|
|
In Vivo Filter Assembly
|
|
India
|
|
|
US 9,132,261
Israel 198,189
|
|
|
|
9/15/2015
2/1/2014
|
|
Knitted Stent Jackets
|
|
India
|
|
|
Canada 2,666,728
Canada 2,887,189
China ZL200780046697.4
China ZL201210320950.3
Israel 198,190
EP 07827229.1
(Germany, France, & UK)
US 10,137,015
|
|
|
|
6/23/2015
5/1/2018
10/10/2012
12/2/2015
2/1/2014
3/29/2017
11/27/2018
|
|
Optimized Stent Jacket
|
|
Canada
EPO
Israel
US
|
|
|
Canada 2,670,724
China ZL201210454357.8
China ZL200780043259.2
India 297,257
Israel 198,665
US 9,132,003
US 9,526,644
US 9,782,281
US 10,070,976
US 10,406,006
US 10,406,008
EP 07827415.6
(10 EP countries)
|
|
|
|
12/11/2018
12/9/2015
1/2/2013
5/30/2018
5/28/2014
9/15/2015
12/27/2016
10/10/2017
9/11/2018
9/10/2019
9/10/2019
10/11/2017
|
|
Stent Apparatuses for Treatment Via Body Lumens and Methods of Use
|
|
US
Israel
Europe (EPO)
|
|
|
South Africa 2007/10751
Canada 2,609,687
Canada 2,843,097
EP 1885281
(BE, CH, DE, FR, GB, IE, IT, and NL)
IL 187,516
US 8,961,586
US 10,058,440
US 10,070,977
|
|
|
|
10/27/2010
4/22/2015
10/27/2015
2/13/2019
3/1/2017
2/24/2015
8/28/2018
9/11/2018
|
|
Stent Thermoforming Apparatus and Methods
|
|
Australia
Canada
Europe (EPO)
India
US
|
|
|
JP 6553178
US 9,527,234
US 9,782,278
US 10,376,393
|
|
|
|
7/12/2019
12/27/2016
10/10/2017
8/13/2019
|
|
In
lay terms, these patent applications generally cover three aspects of our products: the mesh sleeve with and
without a drug, the
product and the delivery mechanism of the stent. We also believe that one or more additional pending patent applications, upon
issuance, will cover our existing products. We also believe that the patent applications we have filed, in particular those covering
the use of a knitted micron-level mesh sleeve over a stent for various indications, if issued as patents with claims substantially
in their present form, would likely create a significant barrier for another company seeking to use similar technology.
Trade
Secrets
We
also rely on trade secret protection to protect our interests in proprietary know-how and/or for processes for which patents are
difficult to obtain or enforce. As part of this, we rely on non-disclosure and confidentiality agreements with employees, consultants
and other parties to protect, in part, trade secrets and other proprietary technology.
Trademarks
We
use the InspireMD®, MGuard®, CGuard®, and MGuard Prime® trademarks
in connection with our products. We have registered these trademarks in the European Union. The trademarks are renewable indefinitely,
so long as we make the appropriate filings when required. We also have registrations for Carenet®, NGuard®,
PVGuard® and the MNP Micronet Protection Logo in the European Union and a supplemental registration for Micronet®
in the United States. We have also applied to register the names CGuard™ InspireMD™, SmartFit™, PVGuardTM,
NGuardTM, and MGuard Prime™ as trademarks in the United States. We also use and may have common law rights to
various trademarks, trade names, and service marks.
Government
Regulation
The
manufacture and sale of our products are subject to regulation by numerous governmental authorities, principally the European
Union CE mark and other corresponding foreign agencies.
Sales
of medical devices outside the United States are subject to foreign regulatory requirements that vary widely from country to country.
These laws and regulations range from simple product registration requirements in some countries to complex approval process,
clinical trials and production controls in others. As a result, the processes and time periods required to obtain foreign marketing
approval may be longer or shorter than those necessary to obtain U.S. Food and Drug Administration market authorization. These
differences may affect the timeliness of international market introduction of our products. For the European Union nations, medical
devices must obtain a CE mark before they may be placed on the market. In order to obtain and maintain the CE mark, we must comply
with the Medical Device Directive 93/42/EEC (“MDD”) by presenting comprehensive technical files for our products demonstrating
safety and efficacy of the product to be placed on the market and passing initial and annual quality management system audit as
per ISO 13485 standard by an European Notified Body. We have obtained ISO 13485 quality system certification and the products
we currently distribute into the European Union display the required CE mark. In order to maintain certification, we are required
to pass an annual surveillance audit conducted by Notified Body auditors. The European Union replaced the MDD with the new European
Medical Devices Regulation, or MDR (MDR 2017/745). The MDR will apply after a transitional period of three years ending on May
26, 2020, which is expected to change several aspects of the existing regulatory framework in Europe. Manufacturers have the duration
of the transition period to update their technical documentation and processes to meet the new requirements in order to obtain
a CE Mark. After May 26, 2020, medical devices can still be placed on the market under the provision of the MDD until May 27,
2024; provided the CE Mark was issued prior to this date and the manufacturer continues to comply with this directive. By May
27, 2024, all medical devices entering the EU will need to have a CE Mark under the MDR, even if they have been on the market
previously under the MDD. In our case, CGuard and MGuard can continue to be marketed under the MDD until November 12, 2022. Specifically,
the EU MDR will require changes in the clinical evidence required for medical devices, post-market clinical follow-up evidence,
annual reporting of safety information for Class III products, Unique Device Identification (“UDI”) for all products,
submission of core data elements to a European UDI database prior to placement of a device on the market, and multiple other labeling
changes. Approvals for certain of our currently-marketed products could be curtailed or withdrawn as a result of the implementation
and recertification process of the EU MDR and acquiring approvals for new products could be more challenging, time consuming and
costly.
As
noted below, we have or had regulatory approval and made sales of CGuard EPS, MGuard Prime EPS or both products either through
distributors pursuant to distribution agreements or directly, in the following countries: Argentina, Australia, Austria, Belarus,
Belgium, Brazil, Bulgaria, Chile, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Germany,
Hong Kong, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Netherlands, New Zealand,
Norway, Peru, Poland, Portugal, Romania, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland,
Turkey Vietnam and the United Kingdom In addition, we are awaiting regulatory approval to sell our products in Taiwan. While each
of the European Union member countries accepts the CE mark as its sole requirement for marketing approval, some of these countries
still require us to take additional steps in order to gain reimbursement rights for our products. Furthermore, while we believe
that certain of the above-listed countries that are not members of the European Union accept the CE mark as a primary requirement
for marketing approval, each such country requires additional regulatory requirements for final marketing approval of our products.
Furthermore, we are currently targeting additional countries in Europe, Asia, and Latin America, however, even if all governmental
regulatory requirements are satisfied in each such country, we anticipate that obtaining marketing approval in each country could
take as few as three months or as many as twelve months or more, due to the nature of the approval process in each individual
country, including typical wait times for application processing and review, as discussed in greater detail below.
In
October 2007, our first generation MGuard stent combining the MicroNet with a stainless steel stent received CE mark approval
for the treatment of coronary artery disease in the European Union. We subsequently replaced the first generation MGuard product
with MGuard Prime EPS, which uses a more advanced cobalt-chromium based stent. Our MGuard Prime EPS received CE mark approval
in the European Union in October 2010 and marketing approval in those countries listed in the table below.
The
CGuard EPS received CE mark approval in the European Union on March 14, 2013 and marketing approval in the countries listed in
the table below. We are currently seeking marketing approval for CGuard EPS in, South Korea and Taiwan.
Please
refer to the table below setting forth the approvals and sales made for CGuard EPS and the MGuard Prime EPS on a country-by-country
basis.
Approvals
and Sales of MGuard Prime EPS and CGuard EPS on a Country-by-Country Basis
Countries
|
|
CGuard
EPS Approval
|
|
CGuard
EPS Sales
|
|
MGuard
Prime EPS Approval
|
|
MGuard
Prime EPS Sales
|
|
Argentina
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Australia
|
|
Y
|
|
Y
|
|
N
|
|
Y
|
(1)
|
Austria
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Belarus
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Belgium
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Brazil
|
|
N
|
|
N
|
|
Y
|
|
Y
|
|
Bulgaria
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Chile
|
|
Y
|
|
Y
|
|
N
|
|
Y
|
(2)
|
Colombia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Croatia
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Cyprus
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Czech
Republic
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Denmark
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Dominican
Republic
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Ecuador
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Estonia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Finland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
France
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Germany
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Greece
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Holland
(Netherlands)
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Hong
Kong
|
|
Y
|
|
Y
|
|
N
|
|
N
|
|
Hungary
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Iceland
|
|
Y
|
|
N
|
|
Y
|
|
N
|
|
India
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Ireland
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Israel
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Italy
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Latvia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Lithuania
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Liechtenstein
|
|
Y
|
|
N
|
|
Y
|
|
N
|
|
Luxembourg
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Malaysia
|
|
N
|
(3)
|
N
|
|
N
|
(3)
|
Y
|
(3)
|
Malta
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Mexico
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
New
Zealand
|
|
Y
|
|
N
|
|
N
|
|
N
|
|
Norway
|
|
Y
|
|
N
|
|
Y
|
|
Y
|
|
Peru
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Poland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Portugal
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Romania
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Russia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Saudi
Arabia
|
|
N
|
|
N
|
|
N
|
|
Y
|
(4)
|
Serbia
|
|
Y
|
|
Y
|
|
Y
|
|
N
|
|
Slovakia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Slovenia
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
South
Africa
|
|
Y
|
|
N
|
|
Y
|
(5)
|
Y
|
|
Spain
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Sweden
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Switzerland
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Turkey
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Venezuela
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Vietnam
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
Ukraine
|
|
Y
|
|
Y
|
|
N
|
|
N
|
|
United
Kingdom
|
|
Y
|
|
Y
|
|
Y
|
|
Y
|
|
(1)
|
The
approval expired and per management decision it was decided not to renew it.
|
|
|
(2)
|
We
have made sales to distributors in this country, but based upon information from such distributors, we believe that the product
has not been sold to customers in this country.
|
|
|
(3)
|
The
approval expired and per management decision it was decided not to renew it.
|
|
|
(4)
|
The
approval expired in November 2017. We have not had sales of MGuard Prime EPS in Saudi Arabia since 2014.
|
|
|
(5)
|
The
certificate evidencing regulatory approval for MGuard Prime EPS in South Africa was held by our former distributor in South
Africa, and we cannot guarantee that it is in full force and effect. Our distribution agreement with the distributor in South
Africa expired pursuant to the terms of such distribution agreement on February 1, 2015, and we have not had sales of MGuard
Prime EPS in South Africa since 2015.
|
U.S.
Food and Drug Administration Government Regulation of Medical Devices for Human Subjects
Many
of our activities are subject to regulatory oversight by the U.S. Food and Drug Administration under provisions of the Federal
Food, Drug, and Cosmetic Act and regulations thereunder, including regulations governing the development, marketing, labeling,
promotion, manufacturing, and export of medical devices.
U.S.
Food and Drug Administration Approval/Clearance Requirements
In
the United States, Class II or III medical devices must be cleared or approved by the U.S. Food and Drug Administration prior
to commercialization. Unless an exemption applies, each medical device that we market or wish to market in the United States must
receive 510(k) clearance or premarket approval. Medical devices that receive 510(k) clearance are “cleared” by the
U.S. Food and Drug Administration to market, distribute, and sell in the United States. Medical devices that obtain a premarket
approval by the U.S. Food and Drug Administration are “approved” to market, distribute, and sell in the United States.
We anticipate filing a premarket approval application in the future and do not anticipate filing a 510(k) premarket notification.
Even though we do not anticipate filing a 510(k), we cannot be certain that the U.S. Food and Drug Administration will find it
more appropriate for us to file a 510(k) premarket notification instead of a premarket approval application. Further, we cannot
be sure that we will ever obtain premarket approval. Descriptions of the premarket approval and 510(k) clearance processes are
provided below.
Class
I devices are those for which safety and effectiveness can be assured by adherence to the U.S. Food and Drug Administration’s
general regulatory controls for medical devices, or the General Controls, which include compliance with the applicable portions
of the U.S. Food and Drug Administration’s quality system regulations, facility registration and product listing, reporting
of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some
Class I devices also require premarket clearance by the U.S. Food and Drug Administration through the 510(k) process described
below.
Class
II devices are subject to the U.S. Food and Drug Administration’s General Controls, and any other special controls as
deemed necessary by the U.S. Food and Drug Administration to ensure the safety and effectiveness of the device. Premarket review
and clearance by the U.S. Food and Drug Administration for Class II devices is accomplished through the 510(k) process. Pursuant
to the Medical Device User Fee and Modernization Act of 2002 (MDUFMA), as of October 2002, unless a specific exemption applies,
510(k) submissions are subject to user fees. Certain Class II devices are exempt from this premarket review process. The U.S.
Food and Drug Administration has recently indicated that it intends to modernize the 510(k) process and has issued new guidance
documents that may change the way that devices are cleared by the U.S. Food and Drug Administration.
Class
III includes devices with the greatest risk. Devices in this class must meet all of the requirements in Classes I and II.
In addition, Class III devices cannot generally be marketed until they receive a premarket approval. The safety and effectiveness
of Class III devices cannot be assured solely by the General Controls and the other requirements described above. These devices
require formal clinical studies to demonstrate safety and effectiveness. Under MDFUMA, premarket approval applications (and supplemental
premarket approval applications) are subject to significantly higher user fees than 510(k) applications, and they also require
considerably more time and resources.
The
U.S. Food and Drug Administration decides whether a device line must undergo either the 510(k) clearance or premarket approval
based on statutory criteria that utilize a risk-based classification system. Premarket approval is the U.S. Food and Drug Administration
process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices and, in many
cases, Class II medical devices. Class III devices are those that support or sustain human life, are of substantial importance
in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. The U.S. Food
and Drug Administration uses these criteria to decide whether a premarket approval or a 510(k) is appropriate, including the level
of risk that the agency perceives is associated with the device and a determination by the agency of whether the product is a
type of device that is similar to devices that are already legally marketed. Devices deemed to pose relatively less risk are placed
in either Class I or II. In many cases, the U.S. Food and Drug Administration requires the manufacturer to submit a 510(k) requesting
clearance (also referred to as a premarket notification), unless an exemption applies. The 510(k) must demonstrate that the manufacturer’s
proposed device is “substantially equivalent” in intended use and in safety and effectiveness to a legally marketed
predicate device. A “predicate device” is a pre-existing medical device to which equivalence can be drawn, that is
either in Class I, Class II, or is a Class III device that was in commercial distribution before May 28, 1976, for which the U.S.
Food and Drug Administration has not yet called for submission of a premarket approval application.
We
expect that unless an exemption applies, each medical device that we market or wish to market in the United States must receive
510(k) clearance or premarket approval. Medical devices that receive 510(k) clearance are “cleared” by the U.S. Food
and Drug Administration to market, distribute, and sell in the United States. Medical devices that obtain a premarket approval
by the U.S. Food and Drug Administration are “approved” to market, distribute, and sell in the United States. We anticipate
that each device that we wish to commercialize will be considered a Class III device by the U.S. Food and Drug Administration
and therefore we anticipate filing a premarket approval application in the future and do not anticipate filing a 510(k) premarket
notification. Even though we do not anticipate filing a 510(k), we cannot be certain that the U.S. Food and Drug Administration
will find it more appropriate for us to file a 510(k) premarket notification instead of a premarket approval application or that
applications of our technology may not be considered Class II devices. Further, we cannot be sure that we will ever obtain a premarket
approval. Descriptions of the premarket approval and 510(k) clearance processes are provided below.
Premarket
Approval Pathway
We
expect that current and future applications of our technology will result in medical devices that are considered Class III devices
subject to premarket approval. A premarket approval application must be submitted if a device cannot be cleared through the 510(k)
process. A premarket approval application must be supported by extensive data including, but not limited to, analytical, preclinical,
clinical trials, manufacturing, statutory preapproval inspections, and labeling to demonstrate to the U.S. Food and Drug Administration’s
satisfaction the safety and effectiveness of the device for its intended use. Before a premarket approval application is submitted,
a manufacturer must apply for an IDE. If the device presents a “significant risk,” as defined by the U.S. Food and
Drug Administration, to human health, the U.S. Food and Drug Administration requires the device sponsor to file an IDE application
with the U.S. Food and Drug Administration and obtain IDE approval prior to initiation of enrollment of human subjects for clinical
trials. The IDE provides the manufacturer with a legal pathway to perform clinical trials on human subjects where without the
IDE, only approved medical devices may be used on human subjects.
The
IDE application must be supported by appropriate data, such as analytical, animal and laboratory testing results, manufacturing
information, and an Investigational Review Board (IRB) approved protocol showing that it is safe to test the device in humans
and that the testing protocol is scientifically sound. If the clinical trial design is deemed to have “non-significant risk,”
the clinical trial may be eligible for “abbreviated” IDE requirements.
A
clinical trial may be suspended by either the U.S. Food and Drug Administration or the IRB at any time for various reasons, including
a belief that the risks to the study participants outweigh the benefits of participation in the study. Even if a study is completed,
clinical testing results may not demonstrate the safety and efficacy of the device, or they may be equivocal or otherwise insufficient
to obtain approval of the product being tested. After the clinical trials have been completed, if at all, and the clinical trial
data and results are collected and organized, a manufacturer may complete a premarket approval application.
After
a premarket approval application is sufficiently complete, the U.S. Food and Drug Administration will accept the application and
begin an in-depth review of the submitted information. By statute, the U.S. Food and Drug Administration has 180 days to review
the “accepted application,” although, generally, review of the application can take between one and three years, but
it may take significantly longer. During this review period, the U.S. Food and Drug Administration may request additional information
or clarification of information already provided. Also, during the review period, an advisory panel of experts from outside the
U.S. Food and Drug Administration may be convened to review and evaluate the application and provide recommendations to the U.S.
Food and Drug Administration as to the approvability of the device. The preapproval inspections conducted by the U.S. Food and
Drug Administration include an evaluation of the manufacturing facility to ensure compliance with the Quality Systems Regulations,
as well as inspections of the clinical trial sites by the Bioresearch Monitoring group to evaluate compliance with good clinical
practice and human subject protections. New premarket approval applications or premarket approval supplements are required for
modifications that affect the safety or effectiveness of the device, including, for example, certain types of modifications to
the device’s indication for use, manufacturing process, labeling and design. Significant changes to an approved premarket
approval require a 180-day supplement, whereas less substantive changes may utilize a 30-day notice, or a 135-day supplement.
Premarket approval supplements often require submission of the same type of information as a premarket approval application, except
that the supplement is limited to information needed to support any changes from the device covered by the original premarket
approval application, and it may not require as extensive clinical data or the convening of an advisory panel.510(k) Clearance
Pathway
We
do not currently market, distribute, or sell any products that have market clearance by the U.S. Food and Drug Administration
under its 510(k) process. If, in the future, we develop products where 510(k) clearance is required, we would be required to submit
a 510(k) demonstrating that such proposed devices are substantially equivalent to a respective previously cleared 510(k) device
or a device that was in commercial distribution before May 28, 1976, for which the U.S. Food and Drug Administration has not yet
called for the submission of 510(k). U.S. Food and Drug Administration’s 510(k) clearance pathway usually takes from three
to twelve months but could take longer. In some cases, the U.S. Food and Drug Administration may require additional information,
including clinical data, to make a determination regarding substantial equivalence.
If
a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, a
premarket approval. The U.S. Food and Drug Administration requires each device manufacturer to determine whether the proposed
change requires submission of a new 510(k) or a premarket approval, but the U.S. Food and Drug Administration can review any such
decision and can disagree with a manufacturer’s determination. If the U.S. Food and Drug Administration disagrees with a
manufacturer’s determination, the U.S. Food and Drug Administration can require the manufacturer to cease marketing and/or
recall the modified device until 510(k) clearance or premarket approval of the modified device is obtained.
Pervasive
and Continuing U.S. Food and Drug Administration Regulation
A
host of regulatory requirements apply to our approved devices, including the quality system regulation (which requires manufacturers
to follow elaborate design, testing, control, documentation and other quality assurance procedures), the Medical Device Reporting
regulations (which require that manufacturers report to the U.S. Food and Drug Administration specified types of adverse events
involving their products), labeling regulations, and the U.S. Food and Drug Administration’s general prohibition against
promoting products for unapproved or “off-label” uses. Class II devices also can have special controls such as performance
standards, post-market surveillance, patient registries, and U.S. Food and Drug Administration guidelines that do not apply to
Class I devices.
A
noncomprehensive list of the regulatory requirements that apply to our approved products classified as medical devices include:
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product
listing and establishment registration, which helps facilitate U.S. Food and Drug Administration inspections and other regulatory
action;
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Quality
Systems Regulations, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing,
control, documentation and other quality assurance procedures during all aspects of the development and manufacturing process;
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labeling
regulations and U.S. Food and Drug Administration prohibitions against the promotion of products for uncleared, unapproved
or off-label use or indication;
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clearance
of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended
use of one of our cleared devices;
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approval
of product modifications that affect the safety or effectiveness of one of our cleared devices;
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medical
device reporting regulations, which require that manufacturers comply with U.S. Food and Drug Administration requirements
to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that
would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to
recur;
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post-approval
restrictions or conditions, including post-approval study commitments;
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post-market
surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device;
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the
U.S. Food and Drug Administration’s recall authority, whereby it can ask, or under certain conditions order, device
manufacturers to recall from the market a product that is in violation of governing laws and regulations;
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regulations
pertaining to voluntary recalls; and,
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notices
of corrections or removals.
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We
do not currently have a registered establishment with the U.S. Food and Drug Administration. If we are approved or cleared to
manufacture, prepare, or process a device in the United States, we and any third-party manufacturers that we may use must will
be required to register our establishments with the U.S. Food and Drug Administration. As such, we and our manufacturing facilities
will be subject to U.S. Food and Drug Administration inspections for compliance with the U.S. Food and Drug Administration’s
Quality System Regulation. Additionally, some of our subcontractors may also be subject to U.S. Food and Drug Administration announced
and unannounced inspections for compliance with the U.S. Food and Drug Administration’s Quality System Regulation. These
regulations will require that we manufacture our products and maintain our documents in a prescribed manner with respect to design,
manufacturing, testing and quality control activities. As a medical device manufacturer, we will further be required to comply
with U.S. Food and Drug Administration requirements regarding the reporting of adverse events associated with the use of our medical
devices, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were
to recur. U.S. Food and Drug Administration regulations also govern product labeling and prohibit a manufacturer from marketing
a medical device for unapproved applications.
Our
CGuard EPS is classified as a Class III medical device by the U.S. Food and Drug Administration. Class III medical devices are
generally the highest risk devices and are therefore subject to the highest level of regulatory control by the U.S. Food and Drug
Administration, since the U.S. Food and Drug Administration process of premarket approval involves scientific and regulatory review
to evaluate the safety and effectiveness of Class III medical devices for the purpose(s) intended. The U.S. Food and Drug Administration
will either approve or deny a premarket approval application and we cannot market a device unless or until the U.S. Food and Drug
Administration approves a premarket approval application.
We
expect the approval process in the U.S. to take a significant amount of time, require the expenditure of significant resources,
involve rigorous clinical investigations and testing, and potentially require changes to products. The approval process may result
in limitations on the indicated uses of the medical devices for which we are able to obtain approval (since the U.S. Food and
Drug Administration can take action against a company that promotes off-label uses) and will also require increased post-market
surveillance.
U.S.
Healthcare Laws and Regulations
In
addition to the U.S. Food and Drug Administration regulations, there are a variety of other healthcare laws and regulations to
which we may be subject if any of our products are marketed, sold, distributed, and/or utilized in the United States. Of specific
note are federal and state fraud and abuse laws, which prohibit the payment or receipt of kickbacks, bribes or other remuneration,
including the offer or solicitation of such payment, intended to induce or reward the purchase, recommendation or generation of
business involving healthcare products any item or service payable by a health-care program. Other provisions of federal and state
laws prohibit presenting, or causing to be presented, to third party payors (including, government program, such as Medicare and
Medicaid) for reimbursement, claims that are false or fraudulent, or which are for items or services that were not provided as
claimed. In addition, other healthcare laws and regulations may apply, such as transparency and reporting requirements, and privacy
and security requirements. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation
in federal and state healthcare programs, any of which could have a material adverse effect on our business. These laws are potentially
applicable to manufacturers of products regulated by the U.S. Food and Drug Administration as medical devices, such as us, and
hospitals, physicians and other institutional or individual providers that may refer or purchase such products. The healthcare
laws that may be applicable to our business or operations include, but are not limited to:
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The
federal Anti-Kickback Statute, which prohibits the offer, payment, solicitation or receipt of any form of remuneration in
return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing
of, items or services payable by Medicare, Medicaid or any other federal healthcare program;
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Federal
false claims laws and civil monetary penalty laws, including the False Claims Act, that prohibit, among other things, individuals
or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government
healthcare programs that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation
to pay money to the federal government;
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The
federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which includes provisions that
prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or
obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or
under the custody or control of, any healthcare benefit program, and for knowingly and willfully falsifying, concealing or
covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare
benefits, items or services;
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HIPAA,
as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and its implementing regulations,
also imposes obligations and requirements on healthcare providers, health plans, and healthcare clearinghouses as well as
their respective business associates that perform certain services for them that involve the use or disclosure of individually
identifiable health information, with respect to safeguarding the privacy and security of certain individually identifiable
health information;
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The
federal transparency requirements under the Affordable Care Act, including the provision commonly referred to as the Physician
Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable
under Medicare, Medicaid or Children’s Health Insurance Program to report annually to Centers for Medicare and Medicaid
Services, or CMS, information related to payments and other transfers of value to physicians and teaching hospitals, and ownership
and investment interests held by physicians and their immediate family members; and
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Analogous
state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may be broader in scope and
apply to referrals and items or services reimbursed by both governmental and non-governmental third-party payors, including
private insurers, many of which differ from each other in significant ways and often are not preempted by federal law, thus
complicating compliance efforts.
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Customers
Our
customer base is varied. We began shipping our product to customers in Europe in January 2008 and have since expanded our global
distribution network to Southeast Asia, India, Latin America and Israel. We currently have distribution agreements for our CE
mark-approved MGuard Prime EPS and/or CGuard EPS with medical product distributors based in Europe, the Middle East, Asia Pacific
and Latin America. We are currently in discussions with additional distribution companies in Europe, Asia, and Latin America.
Most
of our current agreements with our distributors stipulate that, and we expect our future agreements with our distributors to stipulate
that, while we shall assist in training by providing training materials, marketing guidance, marketing materials, and technical
guidance, each distributor will be responsible for carrying out local registration, sales and marketing activities. In addition,
in most cases, all sales costs, including sales representatives, incentive programs, and marketing trials, will be borne by the
distributor. Under current agreements, distributors purchase stents from us at a fixed price. Our current agreements with distributors
are generally for a term of two to three years.
Manufacturing
and Suppliers
The
polymer fiber for MicroNet is supplied by Biogeneral, Inc., a San Diego, California-based specialty polymer manufacturer for medical
and engineering applications.
Natec
Medical Ltd. supplies us with catheters that help create the base for our CGuard EPS stents. Our agreement with Natec Medical
Ltd., as amended, may be terminated by us upon eight months’ notice. On August 1, 2017, we amended the agreement with Natec
Medical Ltd., so that we are responsible for purchasing and handling inventory of CGuard EPS delivery system, and Natec Medical
Ltd.is responsible for the manufacturing process.
Natec
Medical Ltd. supplies us with catheters that help create the base for our MGuard Prime EPS. Our agreement with Natec Medical Ltd.,
which may be terminated by either party upon six months’ notice, calls for non-binding minimum orders.
The
cobalt-chromium stent for our MGuard Prime EPS was designed by Svelte Medical Systems Inc. We have an agreement with Svelte Medical
Systems Inc., as amended, that grants us a non-exclusive, worldwide license for production and use of the MGuard Prime cobalt-chromium
stent for the life of the stent’s patent, subject to the earlier termination of the agreement upon the bankruptcy of either
party or the uncured default by either party under any material provision of the agreement. Our royalty payments to Svelte Medical
Systems Inc. are determined by the sales volume of MGuard Prime EPS. Currently, the royalty rate is 2.9% of all net sales.
We
manufacture our CGuard EPS and MGuard Prime EPS at our own facility. The bare-metal cobalt-chromium stents for our MGuard Prime
EPS and the self-expanding bare-metal stents for our CGuard EPS are being manufactured and supplied by MeKo Laserstrahl-Materialbearbeitung.
Our agreement with MeKo Laserstrahl-Materialbearbeitung for the production of electro polished L605 bare-metal stents for MGuard
Prime EPS and CGuard EPS is priced on a per-stent basis, subject to the quantity of stents ordered. The complete assembly process
for MGuard Prime EPS and CGuard EPS, including knitting and securing the sleeve to the stent and the crimping of the sleeve stent
on to a delivery catheter, is done at our Israel manufacturing site. Once MGuard Prime EPS and CGuard EPS have been assembled,
they are sent for sterilization in a third-party facility in Israel, and then back to our facility for final packaging and distribution.
During
the quarter ended March 31, 2019, our former third-party sterilizer’s equipment failures resulted in significant interruption
in sterilized product supply for the majority of the quarter. As a result of this interruption in the delivery of sterilized products
and our limited inventory levels on hand prior to this interruption, we were unable to fulfill a significant portion of the orders
received during the three months ended March 31, 2019.
Each
MGuard stent is manufactured from two main components, the stent and the mesh polymer. The stent is made out of cobalt chromium.
This material is readily available, and we acquire it in the open market. The mesh is made from polyethylene terephthalate (polyester).
This material is readily available in the market as well, because it is used for many medical applications. In the event that
our supplier can no longer supply this material in fiber form, we would need to qualify another supplier, which could take several
months. In addition, in order to retain the approval of the CE mark, we are required to perform periodic audits of the quality
control systems of our key suppliers in order to insure that their products meet our predetermined specifications.
A
CGuard EPS consists of a CGuard stent and the delivery system. Each CGuard stent is manufactured from two main components, a self-expending
nickel-titanium stent and the mesh polymer. This material is readily available and we acquire it in the open market. The mesh
is made from polyethylene terephthalate (polyester). We have pending patent rights that cover the proposed CGuard stent with mesh.
This material is readily available in the market as well, because it is used for many medical applications. In the event that
our supplier can no longer supply this material in fiber form, we would need to qualify another supplier, which could take several
months. The delivery system for CGuard is made out of polymer tubes we acquire from an original equipment manufacturer. In the
event that our supplier can no longer supply this material, we would need to qualify another supplier, which could take several
months. In addition, in order to retain the approval of the CE mark, we are required to perform periodic audits of the quality
control systems of our key suppliers in order to insure that their products meet our predetermined specifications.
Employees
As
of March 9, 2020, we had 48 full-time employees. Except for three of our employees in Europe, our employees are not party
to any collective bargaining agreements. We do not expect the collective bargaining agreements to which our employees are party
to have a material effect on our business or results of operations. We consider our relations with our employees to be good. We
believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.
Item
1A. Risk Factors.
There
are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. You should carefully consider
the risks described below and the other information included in this Annual Report on Form 10-K, including the consolidated financial
statements and related notes. If any of the following risks, or any other risks not described below, actually occur, it is likely
that our business, financial condition, and/or operating results could be materially adversely affected. The risks and uncertainties
described below include forward-looking statements and our actual results may differ from those discussed in these forward-looking
statements.
Risks
Related to Our Business
We
have a history of net losses and may experience future losses.
We
have yet to establish any history of profitable operations. We reported a net loss of $10 million for the fiscal year ended December
31, 2019, and had a net loss of approximately $7.2 million during the fiscal year ended December 31, 2018. As of December 31,
2019, we had an accumulated deficit of $158 million. We expect to incur additional operating losses for the foreseeable future.
There can be no assurance that we will be able to achieve sufficient revenues throughout the year or be profitable in the future.
The
report of our independent registered public accounting firm contains an explanatory paragraph as to our ability to continue as
a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.
Because
we have had recurring losses and negative cash flows from operating activities, substantial doubt exists regarding our ability
to remain as a going concern at the same level at which we are currently performing. Accordingly, the report of Kesselman &
Kesselman, our independent registered public accounting firm, with respect to our financial statements for the year ended December
31, 2019, includes an explanatory paragraph as to our potential inability to continue as a going concern. The doubts regarding
our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms
or at all.
We
will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly
or difficult to obtain and could dilute our stockholders’ ownership interests.
Without
materially curtailing our operations, we estimate that we have sufficient capital to fund operations until the end of May 2020.
As such, in order for us to pursue our business objectives, we will need to raise additional capital, which additional capital
may not be available on reasonable terms or at all. For instance, we will need to raise additional funds to accomplish the following:
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furthering
our efforts to ultimately seek the U.S. Food and Drug Administration approval for commercial sales of CGuard EPS in the United
States;
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development
of our current and future products, including CGuard EPS enhancements;
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pursuing
growth opportunities, including more rapid expansion and funding regional distribution systems;
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making
capital improvements to improve our infrastructure;
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hiring
and retaining qualified management and key employees;
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responding
to competitive pressures;
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complying
with regulatory requirements such as licensing and registration; and
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maintaining
compliance with applicable laws.
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Any
additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership
percentages and could also result in a decrease in the market value of our equity securities.
The
terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences,
superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on
the holders of any of our securities then outstanding.
Furthermore,
any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. The respective
certificate of designation for our Series B Preferred Stock and Series C Preferred Stock contains a full ratchet anti-dilution
price protection to be triggered upon issuance of equity or equity-linked securities at an effective common stock purchase price
of less than the conversion price in effect. See “Risk Factors—Risks Related to Our Common Stock, Preferred Stock
and Warrants—The respective certificate of designation for the Series B Preferred Stock and the Series C Preferred Stock
contains anti-dilution provisions that may result in the reduction of the conversion price in the future. This feature may result
in an indeterminate number of shares of common stock being issued upon conversion of the Series B Preferred Stock or the Series
C Preferred Stock. Sales of these shares will dilute the interests of other security holders and may depress the price of our
common stock.” Such obligations may make any additional financing difficult to obtain or unavailable to us while any
shares of our Series B Preferred Stock or Series C Preferred Stock are outstanding. If we are unable to obtain additional financing
on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps
on unfavorable terms, which would have a material adverse effect on our business, financial condition and results of operations,
and ultimately could be forced to discontinue our operations and liquidate, in which event it is unlikely that stockholders would
receive any distribution on their shares. Further, we may not be able to continue operating if we do not generate sufficient revenues
from operations needed to stay in business.
In
addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees,
accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to
recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may
adversely impact our financial condition. If we do not have a sufficient number of available shares for any Series B Preferred
Stock or Series C Preferred Stock conversions or upon conversion of Series B Preferred Stock or Series C Preferred Stock, we will
be required to increase our authorized shares, which may not be possible and will be time consuming and expensive.
Our
products may in the future be subject to product notifications, recalls, or voluntary market withdrawals that could harm our reputation,
business and financial results.
The
manufacturing and marketing of medical devices involves an inherent risk that our products may prove to be defective and cause
a health risk even after regulatory clearances have been obtained. Medical devices may also be modified after regulatory clearance
is obtained to such an extent that additional regulatory clearance is necessary before the device can be further marketed. In
these events, we may voluntarily implement a recall or market withdrawal or may be required to do so by a regulatory authority.
In
the European Economic Area, we must comply with the EU Medical Device Vigilance System. Under this system, manufacturers are required
to take Field Safety Corrective Actions (“FSCAs”) to reduce a risk of death or serious deterioration in the state
of health associated with the use of a medical device that is already placed on the market. A FSCA may include the recall, modification,
exchange, destruction or retrofitting of the device. FSCAs must be communicated by the manufacturer or its legal representative
to its customers and/or to the end users of the device through Field Safety Notices.
Any
adverse event involving our products could result in other future voluntary corrective actions, such as recalls or customer notifications,
or agency action, such as inspection or enforcement action. Adverse events have been reported to us in the past, and we cannot
guarantee that they will not occur in the future. Any corrective action, whether voluntary or involuntary, as well as defending
ourselves in a lawsuit, would require the dedication of our time and capital, distract management from operating our business
and could harm our reputation and financial results.
We
expect to derive our revenue from sales of our CGuard EPS and MGuard Prime EPS stent products and other products we may develop,
such as CGuard EPS with enhancements. If we fail to generate revenue from these sources, our results of operations and the value
of our business would be materially and adversely affected.
We
expect our revenue to be generated from sales of our CGuard EPS and MGuard Prime EPS stent products and other products we may
develop. Future sales of CGuard EPS will be subject to the receipt of regulatory approvals and commercial and market uncertainties
that may be outside our control. In addition, sales of MGuard Prime EPS have been hampered by weakened demand for bare metal stents,
which may never improve, and we may not be successful in developing a drug-eluting stent product. In addition, there may be insufficient
demand for other products we are seeking to develop, such as CGuard EPS with enhancements. If we fail to generate expected revenues
from these products, our results of operations and the value of our business and securities would be materially and adversely
affected.
If
we are unable to obtain and maintain intellectual property protection covering our products, others may be able to make, use or
sell our products, which would adversely affect our revenue.
Our
ability to protect our products from unauthorized or infringing use by third parties depends substantially on our ability to obtain
and maintain valid and enforceable patents. Similarly, the ability to protect our trademark rights might be important to prevent
third party counterfeiters from selling poor quality goods using our designated trademarks/trade names. Due to evolving legal
standards relating to the patentability, validity and enforceability of patents covering medical devices and pharmaceutical inventions
and the scope of claims made under these patents, our ability to enforce patents is uncertain and involves complex legal and factual
questions. Accordingly, rights under any of our pending patent applications and patents may not provide us with commercially meaningful
protection for our products or may not afford a commercial advantage against our competitors or their competitive products or
processes. In addition, patents may not be issued from any pending or future patent applications owned by or licensed to us, and
moreover, patents that may be issued to us now or in the future may not be valid or enforceable. Further, even if valid and enforceable,
our patents may not be sufficiently broad to prevent others from marketing products like ours, despite our patent rights.
The
validity of our patent claims depends, in part, on whether prior art references exist that describe or render obvious our inventions
as of the filing date of our patent applications. We may not have identified all prior art, such as U.S. and foreign patents or
published applications or published scientific literature, that could adversely affect the patentability of our pending patent
applications. For example, some material references may be in a foreign language and may not be uncovered during examination of
our patent applications. Additionally, patent applications in the United States are maintained in confidence for up to 18 months
after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office for
the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside the U.S. are not typically
published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent
literature often lags behind actual discoveries. Therefore, we cannot be certain that we were the first to invent, or the first
to file patent applications relating to, our stent technologies. In the event that a third party has also filed a U.S. patent
application covering our stents or a similar invention, we may have to participate in an adversarial proceeding, known as an interference,
declared by the U.S. Patent and Trademark Office to determine priority of invention in the United States. It is possible that
we may be unsuccessful in the interference, resulting in a loss of some portion or all of our position in the United States.
In
addition, statutory differences in patentable subject matter depending on the jurisdiction may limit the protection we obtain
on certain of the technologies we develop. The laws of some foreign jurisdictions do not offer the same protection to, or may
make it more difficult to effect the enforcement of, proprietary rights as in the United States, risk that may be exacerbated
if we move our manufacturing to certain countries in Asia. If we encounter such difficulties or are otherwise precluded from effectively
protecting our intellectual property rights in any foreign jurisdictions, our business prospects could be substantially harmed.
We
may initiate litigation to enforce our patent rights on any patents issued on pending patent applications, which may prompt adversaries
in such litigation to challenge the validity, scope, ownership, or enforceability of our patents. Third parties can sometimes
bring challenges against a patent holder to resolve these issues, as well. If a court decides that any such patents are not valid,
not enforceable, not wholly owned by us, or are of a limited scope, we may not have the right to stop others from using our inventions.
Also, even if our patent rights are determined by a court to be valid and enforceable, they may not be sufficiently broad to prevent
others from marketing products similar to ours or designing around our patents, despite our patent rights, nor do they provide
us with freedom to operate unimpeded by the patent and other intellectual property rights of others that may cover our products.
We may be forced into litigation to uphold the validity of the claims in our patent portfolio, as well as our ownership rights
to such intellectual property, and litigation is often an uncertain and costly process.
We
also rely on trade secret protection to protect our interests in proprietary know-how and for processes for which patents are
difficult to obtain or enforce. We may not be able to protect our trade secrets adequately. In addition, we rely on non-disclosure
and confidentiality agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary
technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently
develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge.
Any disclosure of confidential data into the public domain or to third parties could allow competitors to learn our trade secrets
and use the information in competition against us.
If
our manufacturing facilities are unable to provide an adequate supply of products, our growth could be limited and our business
could be harmed.
We
currently manufacture our CGuard EPS and MGuard Prime EPS products at our facility in Tel Aviv, Israel. If there were a disruption
to our existing manufacturing facility, we would have no other means of manufacturing our CGuard EPS or MGuard Prime EPS stents
until we were able to restore the manufacturing capability at our facility or develop alternative manufacturing facilities. If
we were unable to produce sufficient quantities of our CGuard EPS or MGuard Prime EPS stents to meet market demand or for use
in our current and planned clinical trials, or if our manufacturing process yields substandard stents, our development and commercialization
efforts would be delayed.
Additionally,
any damage to or destruction of our Tel Aviv facility or its equipment, prolonged power outage or contamination at our facility
would significantly impair our ability to produce either CGuard EPS or MGuard Prime EPS stents.
Finally,
the production of our stents must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting
contaminants. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause
a substantial percentage of defective products in a lot. If we are unable to maintain stringent quality controls, or if contamination
problems arise, our clinical development and commercialization efforts could be delayed, which would harm our business and results
of operations.
Before
we may conduct clinical trials for CGuard EPS in the United States, we must obtain the U.S. Food and Drug Administration’s
approval of our IDE application and meet a number of other regulatory requirements, and, if we obtain IDE approval and meet all
other applicable requirements, all clinical trials must be conducted in compliance with the U.S. Food and Drug Administration’s
IDE regulations. Failure to complete the applicable prerequisites before beginning clinical trials and/or to maintain compliance
with IDE regulations thereafter could have a material adverse effect on our business.
Clinical
trials involve use of a medical device candidate (or drug, biological, or other product candidate, as applicable) on human subjects
under the supervision of qualified investigators in accordance with current Good Clinical Practices, including the requirement
that all research subjects provide informed consent for their participation in the clinical study. The U.S. Food and Drug Administration
classifies medical device candidates into “significant risk” and “non-significant risk” devices. Significant
risk devices present a potential for serious risk to the health, safety, or welfare of a subject. Examples may include implants,
devices that support or sustain human life, and devices that are substantially important in diagnosing, curing, mitigating, or
treating disease or in preventing impairment to human health. If a medical device candidate presents a significant risk, an IDE
application must be submitted and approved prior to commencing any human clinical trials in the United States in connection with
such device. The U.S. Food and Drug Administration may approve, conditionally approve, or deny an IDE or it may require further
information and, thus, delay approval.
IDE
applications may be denied for a number of reasons. For example, commonly cited deficiencies in U.S. Food and Drug Administration
disapproval letters include, but are not limited to, the following:
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Inadequate
report of prior investigations due to:
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Limited
rationale and/or description of lab or animal studies;
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No
scientific justification for the number of animals selected in report of animal studies;
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Failure
to identify relevant information in literature research summary; or
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o
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Omission
of adverse information in reports of prior publications;
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Inadequate
investigational plan due to:
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o
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failure
to clearly develop or define study objectives;
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o
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inadequate
description of the protocol;
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o
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failure
to identify all risks;
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o
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failure
to develop proper monitoring procedures; or
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o
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inadequate
informed consent documents;
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●
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Inadequate
characterization or description of the device and its operation due to inadequate or omitted:
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o
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Design/engineering
drawing of device;
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o
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Rationale
for device design;
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o
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Device
and performance specifications;
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o
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Description
of materials (including biocompatibility information); or
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o
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Description
of function.
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CGuard
EPS is a significant risk device under the U.S. Food and Drug Administration’s definition. Accordingly, to conduct clinical
trials with human subjects in the U.S., we must obtain IDE approval from the U.S. Food and Drug Administration. On July 26, 2019,
we submitted an original IDE application for CGuard EPS. In connection with such application, on August 23, 2019, we received
a request for additional information from the U.S. Food and Drug Administration in support of our application. We intend to continue
to work closely with the U.S. Food and Drug Administration to resolve these additional requests. Following resolution of all comments
from the U.S. Food and Drug Administration, we plan to re-submit the IDE application. There is no guarantee that we will obtain
IDE approval from the U.S. Food and Drug Administration for CGuard EPS or any other current or future product candidate we may
develop.
In
addition to IDE approval, we must apply for and obtain IRB approval of the proposed CGuard EPS clinical study in connection with
each clinical site before commencing any study activities. A written protocol with predefined end points, an appropriate sample
size, and pre-determined patient inclusion and exclusion criteria, is also required before we may initiate or conduct the CGuard
EPS trial. If we obtain IDE approval, IRB approval, and meet all of the other applicable requirements that must be met before
beginning clinical trials in the United States, we will, then, be able to lawfully initiate the clinical investigation of the
safety and effectiveness of CGuard EPS in the United States.
Importantly,
the CGuard EPS clinical trial, if applicable, and any others that we may conduct in the future, must be conducted in accordance
with the U.S. Food and Drug Administration’s IDE regulations, which, among other things, establish requirements for investigational
device labeling, prohibit pre-approval promotion of a device candidate, and specify recordkeeping, reporting, and monitoring responsibilities
of study sponsors and study investigators.
We
may not be able to obtain U.S. Food and Drug Administration and/or IRB approval to undertake clinical trials in the United States
for CGuard EPS or any new devices we intend to market in the United States in the future. If we do obtain such approvals, we may
not be able to conduct studies which comply with the IDE and other regulations governing clinical investigations or the data from
any such trials may not support clearance or approval of the investigational device. Failure to obtain such approvals or to comply
with such regulations could have a material adverse effect on our business, financial condition and results of operations.
Relatedly,
certainty that clinical trials will meet desired endpoints, produce meaningful or useful data, and be free of unexpected adverse
effects, or that the U.S. Food and Drug Administration will accept the validity of foreign clinical study data, as applicable,
cannot be guaranteed, and such uncertainty could preclude or delay regulatory approvals and commercialization, resulting in significant
financial costs and reduced revenue. Moreover, the timing of the commencement, continuation, and completion of any future clinical
trial may be subject to significant delays attributable to various causes, including, but not limited to, scheduling conflicts
with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility
criteria, failure of patients to complete the clinical trial, delay in or failure to meet regulatory and/or IRB requirements to
conduct a clinical trial at a one or more prospective sites, and shortages of supply in the investigational device.
Though
necessary to pursue U.S. Food and Drug Administration premarket approval, pre-clinical and clinical trials are inherently lengthy
and expensive and subject to any number of regulatory and/or clinical difficulties that can cause further delays, additional costs,
and/or rejection by the U.S. Food and Drug Administration, and any such delay, added cost, or failure in connection with any future
clinical trials could prevent us from commercializing our MicroNet products in the United States, which would materially and adversely
affect our results of operations and the value of our business.
As
part of the regulatory process, we must conduct clinical trials for each product candidate to demonstrate safety and efficacy
to the satisfaction of the regulatory authorities, including, if we seek in the future to sell our products in the United States,
the U.S. Food and Drug Administration. Clinical trials are subject to rigorous regulatory requirements and are expensive and time-consuming
to design and implement. They require the enrollment of a large number of patients, and suitable patients may be difficult to
identify and recruit, which may cause a delay in the development and commercialization of our product candidates. In some trials,
a greater number of patients and a longer follow-up period may be required. Patient enrollment in clinical trials and the ability
to successfully complete patient follow-up depends on many factors, including the size of the patient population, the nature of
the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial and patient compliance.
For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo
extensive post-treatment procedures or follow-up to assess the safety and efficacy of our products, or they may be persuaded to
participate in contemporaneous clinical trials of competitive products. In addition, patients participating in our clinical trials
may die before completion of the trial or suffer adverse medical events unrelated to or related to our products. Delays in patient
enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays or
result in the failure of the clinical trial.
In
addition, the length of time required to complete clinical trials for pharmaceutical and medical device products varies substantially
according to the degree of regulation and the type, complexity, novelty and intended use of a product, and can continue for several
years and cost millions of dollars. The commencement and completion of clinical trials for our existing products and those under
development may be delayed by many factors, including governmental or regulatory delays and changes in regulatory requirements,
policy and guidelines or our inability or the inability of any potential licensee to manufacture or obtain from third parties
materials sufficient for use in preclinical studies and clinical trials. In addition, market demand may change for products being
tested due to the length of time needed to complete requisite clinical trials.
Physicians
may not widely adopt our products unless they determine, based on experience, long-term clinical data and published peer reviewed
journal articles, among other standard-of-care considerations, that the use of our stents provides a safe and effective alternative
to other existing treatments for coronary artery disease and carotid artery disease.
We
believe that physicians will not widely adopt our products unless they determine, based on experience, long-term clinical data,
published peer reviewed journal articles and payor coverage policies, among other factors, that the use of our products provide
a safe and effective alternative to other existing treatments for the conditions we are seeking to address.
If
we fail to demonstrate safety and efficacy that is at least comparable to existing and future therapies available on the market,
our ability to successfully market our products will be significantly limited. Even if the data collected from clinical studies
or clinical experience indicate positive results, each physician’s actual experience with our products will vary. Clinical
trials conducted with our products may involve procedures performed by physicians who are technically proficient and are high-volume
stent users of such products. Consequently, both short-term and long-term results reported in these clinical trials may be significantly
more favorable than typical results of practicing physicians, which could negatively affect rates of adoptions of our products.
We also believe that published peer-reviewed journal articles and recommendations and support by influential physicians regarding
our products will be important for market acceptance and adoption, and we cannot assure you that we will receive these recommendations
and support, or that supportive articles will be published.
Physicians
currently consider drug-eluting stents to be the industry standard for treatment of coronary artery disease. MGuard Prime EPS,
our current coronary product, is not drug-eluting, and this may adversely affect our business.
Our
ability to attract customers depends to a large extent on our ability to provide goods that meet the customers’ and the
market’s demands and expectations. If we do not have a product that is expected by the market, we may lose customers. The
market demand has shifted away from bare metal stents in favor of drug-eluting stents for coronary artery disease. Our MGuard
Prime EPS is a bare-metal stent product and has experienced no growth in sales over the past five years. Such sales may never
grow and we do not currently have the resources to develop a drug-eluting stent product. Our failure to provide industry standard
devices could adversely affect our business, financial condition and results of operations.
We
have only limited experience in regulatory affairs, which may affect our ability or the time required to navigate complex regulatory
requirements and obtain necessary regulatory approvals, if such approvals are received at all. Regulatory delays or denials may
increase our costs, cause us to lose revenue and materially and adversely affect our results of operations and the value of our
business.
Because
long-term success measures have not been completely validated for our products, especially CGuard EPS, regulatory agencies may
take a significant amount of time in evaluating product approval applications. Treatments may exhibit a favorable measure using
one metric and an unfavorable measure using another metric. Any change in accepted metrics may result in reconfiguration of, and
delays in, our clinical trials. Additionally, we have only limited experience in filing and prosecuting the applications necessary
to gain regulatory approvals, and our clinical, regulatory and quality assurance personnel are currently composed of only five
employees. As a result, we may experience delays in connection with obtaining regulatory approvals for our products.
In
addition, the products we and any potential licensees license, develop, manufacture and market are subject to complex regulatory
requirements, particularly in the United States, Europe and Asia, which can be costly and time-consuming. There can be no assurance
that such approvals will be granted on a timely basis, if at all. Furthermore, there can be no assurance of continued compliance
with all regulatory requirements necessary for the manufacture, marketing and sale of the products we will offer in each market
where such products are expected to be sold, or that products we have commercialized will continue to comply with applicable regulatory
requirements. If a government regulatory agency were to conclude that we were not in compliance with applicable laws or regulations,
the agency could institute proceedings to detain or seize our products, issue a recall, impose operating restrictions, enjoin
future violations and assess civil and criminal penalties against us, our officers or employees and could recommend criminal prosecution.
Furthermore, regulators may proceed to ban, or request the recall, repair, replacement or refund of the cost of, any device manufactured
or sold by us. Furthermore, there can be no assurance that all necessary regulatory approvals will be obtained for the manufacture,
marketing and sale in any market of any new product developed or that any potential licensee will develop using our licensed technology.
Even
if our products are approved by regulatory authorities, if we or our suppliers fail to comply with ongoing regulatory requirements,
or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from
the market.
Any
regulatory approvals that we receive for our products will require surveillance to monitor the safety and efficacy of the product
and may require us to conduct post-approval clinical studies. In addition, if a regulatory authority approves our products, the
manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import,
export and recordkeeping for our products will be subject to extensive and ongoing regulatory requirements.
Moreover,
if we obtain regulatory approval for any of our products, we will only be permitted to market our products for the indication
approved by the regulatory authority, and such approval may involve limitations on the indicated uses or promotional claims we
may make for our products. In addition, later discovery of previously unknown problems with our products, including adverse events
of unanticipated severity or frequency, or with our suppliers or manufacturing processes, or failure to comply with regulatory
requirements, may result in, among other things:
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●
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restrictions
on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory
product recalls;
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●
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fines,
warning letters, or untitled letters;
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●
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holds
on clinical trials;
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●
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refusal
by the regulatory authority to approve pending applications or supplements to approved applications filed by us or suspension
or revocation of license approvals;
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●
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product
seizure or detention, or refusal to permit the import or export of our product candidates; and
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●
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injunctions,
the imposition of civil penalties or criminal prosecution.
|
The
U.S. Food and Drug Administration also requires that our sales and marketing efforts, as well as promotions, be consistent with
various laws and regulations. Approved medical device promotions must be consistent with and not contrary to labeling, balanced,
truthful and not false or misleading, adequately substantiated (when required), and include adequate directions for use. In addition
to the requirements applicable to approved products, we may also be subject to enforcement action in connection with any promotion
of an investigational new device. A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, may
not represent in a promotional context that an investigational new device is safe or effective for the purposes for which it is
under investigation or otherwise promote the device.
If
the U.S. Food and Drug Administration investigates our marketing and promotional materials or other communications and finds that
any of our investigational devices, or future commercial products, if any, are being marketed or promoted in violation of the
applicable regulatory restrictions, we could be subject to the enforcement actions listed above, among others. Any enforcement
action (or related lawsuit, which could follow such action) brought against us in connection with alleged violations of applicable
device promotion requirements, or prohibitions, could harm our business and our reputation, as well as the reputation of any devices
that may be approved for marketing in the U.S. in the future.
The
applicable regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of our products. We cannot predict the likelihood, nature or extent of government regulation
that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable
to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
We
are, or may be, subject to federal, state and foreign healthcare laws and regulations and implementation of or changes to such
healthcare laws and regulations could adversely affect our business and results of operations.
In
both the United States and certain foreign jurisdictions, there are laws and regulations specific to the healthcare industry which
may affect all aspects of our business, including development, testing, marketing, sales, pricing, and reimbursement. Additionally,
there have been a number of legislative and regulatory proposals in recent years to change the healthcare system in ways that
could impact our ability to sell our products. If we are found to be in violation of any of these laws or any other federal or
state regulations, we may be subject to administrative, civil and/or criminal penalties, damages, fines, individual imprisonment,
exclusion from federal healthcare programs and the restructuring of our operations. Any of these could have a material adverse
effect on our business and financial results. Since many of these laws have not been fully interpreted by the courts, there is
an increased risk that we may be found in violation of one or more of their provisions. Any action against us for violation of
these laws, even if we ultimately are successful in our defense, will cause us to incur significant legal expenses and divert
our management’s attention away from the operation of our business.
We
may be subject, directly or indirectly, to applicable U.S. federal and state anti-kickback, false claims laws, physician payment
transparency laws, fraud and abuse laws or similar healthcare and security laws and regulations, which could expose us to criminal
sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare
providers, physicians and others will play a primary role in the recommendation, ordering and utilization of any products for
which we obtain regulatory approval. If we obtain U.S. Food & Drug Administration approval for any of our products and begin
commercializing those products in the United States, our operations may be subject to various federal and state fraud and abuse
laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician payment sunshine
laws and regulations. These laws may impact, among other things, our potential sales, marketing and education programs. In addition,
we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business.
The laws that may affect our ability to operate include:
●
the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering
or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or
in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of
any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such
as the Medicare and Medicaid programs;
●
federal civil and criminal false claims laws and civil monetary penalty laws, including the False Claims Act, which may be pursued
through civil whistleblower or qui tam actions, impose criminal and civil penalties against individuals or entities for knowingly
presenting, or causing to be presented, to the federal government, claims for payment or approval from Medicare, Medicaid or other
third-party payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay
money to the federal government;
●
federal criminal statutes created through the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
which prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program
or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or
under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly
and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements
in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their respective implementing
regulations, which imposes requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as
well as their respective business associates that perform services for them that involve the use, or disclosure of, individually
identifiable health information, relating to the privacy, security and transmission of individually identifiable health information;
●
the federal transparency requirements under The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act, enacted into law in the United States in March 2010 (known collectively as the “Affordable Care Act”), including
the provision commonly referred to as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices
and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program
to report annually to the U.S. Department of Health and Human Services information related to payments or other transfers of value
made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate
family members; and
●
state and federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities
that potentially harm consumers.
Additionally,
we may be subject to state and non-U.S. equivalents of each of the healthcare laws described above, among others, some of which
may be broader in scope and may apply regardless of the payor. Many U.S. states have adopted laws similar to the federal Anti-Kickback
Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not just governmental
payors, including private insurers. Several states impose marketing restrictions or require medical device companies to make marketing
or price disclosures to the state. There are ambiguities as to what is required to comply with these state requirements, and if
we fail to comply with an applicable state law requirement we could be subject to penalties.
Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some
of our future business activities could be subject to challenge under one or more of such laws. In addition, healthcare reform
legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amended the intent requirement
of the federal Anti-Kickback and criminal healthcare fraud statutes. As a result of such amendment, a person or entity no longer
needs to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation. Moreover,
the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.
Violations
of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including penalties, fines and/or exclusion or suspension
from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the U.S. government.
In addition, private individuals have the ability to bring actions on behalf of the U.S. government under the False Claims Act
as well, as under the false claims laws of several states.
Efforts
to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve
substantial costs. It is possible that governmental authorities will conclude that our existing or future business practices do
not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws
and regulations. Any such actions instituted against us could have a significant adverse impact on our business, including the
imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation
in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future
earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results
of operations. Even if we are successful in defending against such actions, we may nonetheless be subject to substantial costs,
reputational harm and adverse effects on our ability to operate our business. In addition, the approval and commercialization
of any of our products outside the United States will also likely subject us to non-U.S. equivalents of the healthcare laws mentioned
above, among other non-U.S. laws.
If
any of our employees, agents, or the physicians or other providers or entities with whom we expect to do business are found to
have violated applicable laws, we may be subject to criminal, civil or administrative sanctions, including exclusions from government
funded healthcare programs, or, if we are not subject to such actions, we may suffer reputational harm for conducting business
with persons or entities found, or accused of being, in violation of such laws. Any such events could adversely affect our ability
to operate our business and our results of operations.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products in such jurisdictions.
We
market our products in international markets. In order to market our products in other foreign jurisdictions, we must obtain separate
regulatory approvals from the appropriate governing body in each applicable country. The approval processes vary among countries
and can involve additional testing, and the time required to obtain approval may differ from that required to obtain CE mark or
U.S. Food and Drug Administration approval. Foreign regulatory approval processes may include all of the risks associated with
obtaining CE mark or U.S. Food and Drug Administration approval in addition to other risks. We may not obtain foreign regulatory
approvals on a timely basis, if at all. CE mark approval or any future U.S. Food and Drug Administration approval does not ensure
approval by regulatory authorities in other countries. We may not be able to file for regulatory approvals and may not receive
necessary approvals to commercialize our products in certain markets.
We
operate in an intensely competitive and rapidly changing business environment, and there is a substantial risk our products could
become obsolete or uncompetitive.
The
medical device market is highly competitive. We compete with many medical device companies globally in connection with our current
products and products under development. We face intense competition from numerous pharmaceutical and biotechnology companies
in the therapeutics area, as well as competition from academic institutions, government agencies and research institutions. Abbott
Laboratories, Boston Scientific Corporation, Medtronic, Inc., and Johnson and Johnson, Gore Medical and Terumo Medical Corporation
produce a polytetrafluoroethylene mesh-covered stent and a double layer metal stent, respectively. Most of our current and potential
competitors, including but not limited to those listed above, have, and will continue to have, substantially greater financial,
technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel
resources than we do. There can be no assurance that we will have sufficient resources to successfully commercialize our products,
if and when they are approved for sale. The worldwide market for stent products is characterized by intensive development efforts
and rapidly advancing technology. Our future success will depend largely upon our ability to anticipate and keep pace with those
developments and advances. Current or future competitors could develop alternative technologies, products or materials that are
more effective, easier to use or more economical than what we or any potential licensee develop. If our technologies or products
become obsolete or uncompetitive, our related product sales and licensing revenue would decrease. This would have a material adverse
effect on our business, financial condition and results of operations.
We
may become subject to claims by much larger and better capitalized competitors enforcing their intellectual property rights against
us or seeking to invalidate our intellectual property or our rights thereto.
Based
on the prolific litigation that has occurred in the stent industry and the fact that we may pose a competitive threat to some
large and well-capitalized companies that own or control patents relating to stents and their use, manufacture and delivery, we
believe that it is possible that one or more third parties will assert a patent infringement claim against the manufacture, use
or sale of our stents based on one or more of these patents. These companies also own patents relating to the use of drugs to
treat restenosis, stent architecture, catheters to deliver stents, and stent manufacturing and coating processes and compositions,
as well as general delivery mechanism patents like rapid exchange that might be alleged to cover one or more of our products.
A number of stent-related patents are owned by very large and well-capitalized companies that are active participants in the stent
market. In addition, it is possible that a lawsuit asserting patent infringement, misappropriation of intellectual property, or
related claims may have already been filed against us of which we are not aware. As the number of competitors in the stent market
grows and as the geographies in which we commercially market grow in number and scope, the possibility of patent infringement
by us, and/or a patent infringement or misappropriation claim against us, increases.
Our
competitors have maintained their position in the market by, among other things, establishing intellectual property rights relating
to their products and enforcing these rights aggressively against their competitors and new entrants into the market. All of the
major companies in the stent and related markets, including Boston Scientific Corporation, C.R. Bard, Inc., W.L. Gore & Associates,
Inc. and Medtronic, Inc., have been repeatedly involved in patent litigation relating to stents since at least 1997. The stent
and related markets have experienced rapid technological change and obsolescence in the past, and our competitors have strong
incentives to stop or delay the introduction of new products and technologies. We may pose a competitive threat to many of the
companies in the stent and related markets. Accordingly, many of these companies will have a strong incentive to take steps, through
patent litigation or otherwise, to prevent us from commercializing our products. Such litigation or claims would divert attention
and resources away from the development and/or commercialization of our products and product development, and could result in
an adverse court judgment that would make it impossible or impractical to sell our products in one or more territories.
If
we fail to maintain or establish satisfactory agreements or arrangements with suppliers or if we experience an interruption of
the supply of materials from suppliers, we may not be able to obtain materials that are necessary to develop our products.
We
depend on outside suppliers for certain raw materials. These raw materials or components may not always be available at our standards
or on acceptable terms, if at all, and we may be unable to locate alternative suppliers or produce necessary materials or components
on our own.
Some
of the components of our products are currently provided by only one vendor, or a single-source supplier. For CGuard EPS and MGuard
Prime EPS, we depend on MeKo Laserstrahl-Materialbearbeitung for the laser cutting of the stent, Natec Medical Ltd. for the supply
of catheters, and Biogeneral Inc. for the fiber. We may have difficulty obtaining similar components from other suppliers that
are acceptable to the U.S. Food and Drug Administration or foreign regulatory authorities if it becomes necessary.
If
we have to switch to a replacement supplier, we will face additional regulatory delays and the interruption of the manufacture
and delivery of our stents for an extended period of time, which would delay completion of our clinical trials or commercialization
of our products. In addition, we will be required to obtain prior regulatory approval from the U.S. Food and Drug Administration
or foreign regulatory authorities to use different suppliers or components that may not be as safe or as effective. As a result,
regulatory approval of our products may not be received on a timely basis or at all.
In
addition, we rely on a third-party vendor to perform the sterilization process. A third-party vendor’s failure to properly
sterilize a component may cause delays or disruptions in our manufacturing process. During the quarter ended March 31, 2019, our
third-party sterilizer’s equipment failures resulted in significant interruption in sterilized product supply for the majority
of the quarter. As a result of this interruption in the delivery of sterilized products and our limited inventory levels on hand
prior to this interruption, we were unable to fulfill a significant portion of the orders received during the three months ended
March 31, 2019.
We
may be exposed to product liability claims and insurance may not be sufficient to cover these claims.
We
may be exposed to product liability claims based on the use of any of our products, or products incorporating our licensed technology,
in the market or clinical trials. We may also be exposed to product liability claims based on the sale of any products under development
following the receipt of regulatory approval. Product liability claims could be asserted directly by consumers, health-care providers
or others. We have obtained product liability insurance coverage; however such insurance may not provide full coverage for our
future clinical trials, products to be sold, and other aspects of our business. Insurance coverage is becoming increasingly expensive
and we may not be able to maintain current coverage, or expand our insurance coverage to include future clinical trials or the
sale of new products or existing products in new territories, at a reasonable cost or in sufficient amounts to protect against
losses due to product liability or at all. A successful product liability claim or series of claims brought against us could result
in judgments, fines, damages and liabilities that could have a material adverse effect on our business, financial condition and
results of operations. We may incur significant expense investigating and defending these claims, even if they do not result in
liability. Moreover, even if no judgments, fines, damages or liabilities are imposed on us, our reputation could suffer, which
could have a material adverse effect on our business, financial condition and results of operations.
We
face risks associated with litigation and claims.
We
may, in the future, be involved in one or more lawsuits, claims or other proceedings. These suits could concern issues including
contract disputes, employment actions, employee benefits, taxes, environmental, health and safety, fraud and abuse, personal injury
and product liability matters.
We
are subject to a lawsuit filed by Bosti in July 2019, seeking €1,830,000 (which is approximately $2 million), the amount
Bosti was due to receive from its Russian subsidiary, or alternatively, €1,024,000 (which is approximately $1.1 million),
the amount Bosti paid to InspireMD Ltd., for the MGuard Prime EPS returned to InspireMD Ltd. in connection with the voluntary
field corrective action of our MGuard Prime EPS we initiated in 2014. See “Part I, Item 3 — Legal Proceedings”.
While we believe that the claims in this suit are without merit, due to the uncertainties of litigation, however, we can give
no assurance that we will prevail on the claims made against us in such lawsuit. Also, we can give no assurance that any other
lawsuits or claims brought in the future will not have an adverse effect on our financial condition, liquidity or operating results.
Adverse outcomes in some or all of these claims may result in significant monetary damages that could adversely affect our ability
to conduct our business.
Our
business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, research data, our
proprietary business information and that of our suppliers, technical information about our products, clinical trial plans and
employee records. Similarly, our third-party providers possess certain of our sensitive data and confidential information. The
secure maintenance of this information is critical to our operations and business strategy. Despite the implementation of security
measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses,
malware, ransomware, cyber fraud, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks
or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems
inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including
by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication
of attempted attacks and intrusions from around the world have increased. Any such breach could compromise our networks and the
information stored there could be accessed, publicly disclosed, encrypted, lost or stolen. Any such access, inappropriate disclosure
of confidential or proprietary information or other loss of information, including our data being breached at third-party providers,
could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information,
disruption of our operations or our product development programs and damage to our reputation, which could adversely affect our
business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays
in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
The
loss of key members of our senior management team or our inability to attract and retain highly skilled scientists and laboratory
and field personnel could adversely affect our business.
We
depend on the skills, experience and performance of our senior management and research personnel. The efforts of each of these
persons will be critical to us as we continue to further develop our products, increase sales and broaden our product offerings.
If we were to lose one or more of these key employees, we may experience difficulties in competing effectively, developing our
technologies and implementing our business strategies. Our research and development programs and commercial laboratory operations
depend on our ability to attract and retain highly skilled scientists and technicians. We may not be able to attract or retain
qualified scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses.
There can be no assurance that we will be able to attract and retain necessary personnel on acceptable terms given the intense
competition among medical device, biotechnology, pharmaceutical and healthcare companies, universities and non-profit research
institutions for experienced management, scientists, researchers, sales and marketing and manufacturing personnel. If we are unable
to attract, retain and motivate our key personnel to accomplish our business objectives, we may experience constraints that will
adversely affect our ability to support our operations, and our results of operations may be materially and adversely affected.
We
are an international business, and we are exposed to various global and local risks that could have a material adverse effect
on our financial condition and results of operations.
We
operate globally and develop and market products in multiple countries. Consequently, we face complex legal and regulatory requirements
in multiple jurisdictions, which may expose us to certain financial and other risks. In addition, we are subject to global events
beyond our control, including war, public health crises, such as pandemics and epidemics, trade disputes and other international
events. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results
of operations.
For
example, in December 2019, a strain of coronavirus was reported to have surfaced in Wuhan, China, and has reached multiple other
countries, including Italy, currently our largest market, resulting in government-imposed quarantines and other public health
safety measures. At this point, the extent to which the coronavirus may impact our business cannot be estimated; however, certain
component parts of our delivery system are sourced from China, and the continued outbreak and spreading of the coronavirus may
adversely impact our suppliers and in turn our manufacture of CGuard EPS. In addition, procedures with CGuard EPS, which are generally
scheduled or non-emergency procedures, may be postponed as hospitals shift resources to patients affected by the coronavirus.
The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot
be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain
the coronavirus or treat its impact, among others. Moreover, the coronavirus outbreak has begun to have indeterminable adverse
effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected
to the extent that this coronavirus or any other epidemic harms the global economy generally.
International
sales and operations are subject to a variety of risks, including:
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foreign
currency exchange rate fluctuations;
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greater
difficulty in staffing and managing foreign operations;
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greater
risk of uncollectible accounts;
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longer
collection cycles;
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logistical
and communications challenges;
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potential
adverse changes in laws and regulatory practices, including export license requirements, trade barriers, tariffs and tax laws;
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changes
in labor conditions;
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burdens
and costs of compliance with a variety of foreign laws;
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political
and economic instability;
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the
escalation of hostilities in Israel, which could impair our ability to manufacture our products;
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increases
in duties and taxation;
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foreign
tax laws and potential increased costs associated with overlapping tax structures;
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greater
difficulty in protecting intellectual property;
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the
risk of third party disputes over ownership of intellectual property and infringement of third party intellectual property
by our products; and
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general
economic and political conditions in these foreign markets.
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International
markets are also affected by economic pressure to contain reimbursement levels and healthcare costs. Profitability from international
operations may be limited by risks and uncertainties related to regional economic conditions, regulatory and reimbursement approvals,
competing products, infrastructure development, intellectual property rights protection and our ability to implement our overall
business strategy. We expect these risks will increase as we pursue our strategy to expand operations into new geographic markets.
We may not succeed in developing and implementing effective policies and strategies in each location where we conduct business.
Any failure to do so may harm our business, results of operations and financial condition.
Even
if one or more of our products are approved by the U.S. Food and Drug Administration, we may fail to obtain an adequate level
of reimbursement for our products by third party payors, such that there may be no commercially viable markets for our products
or the markets may be much smaller than expected.
The
availability and levels of reimbursement by governmental and other third-party payors affect the market for our products. The
efficacy, safety, performance and cost-effectiveness of our products and of any competing products are factors that may impact
the availability and level of reimbursement. Reimbursement and healthcare payment systems in international markets vary significantly
by country and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval
in some countries, we may be required to produce clinical data, which may involve one or more clinical trials that compares the
cost-effectiveness of our products to other available therapies. We may not obtain international reimbursement or pricing approvals
in a timely manner, if at all. Our failure to receive international reimbursement or pricing approvals would negatively impact
market acceptance of our products in the international markets in which those approvals are sought.
We
believe that future reimbursement may be subject to increased restrictions both in the U.S. and in international markets. There
is increasing pressure by governments worldwide to contain healthcare costs by limiting both the coverage and the level of reimbursement
for therapeutic products and by refusing, in some cases, to provide any coverage for products that have not been approved by the
relevant regulatory agency. Future legislation, regulation or reimbursement policies of third party payors may adversely affect
the demand for our products and limit our ability to sell our products on a profitable basis. In addition, third party payors
continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and
services. If reimbursement for our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, market acceptance of our products would be impaired, and future revenues, if any, would be adversely affected.
In
the United States and European Union, our business could be significantly and adversely affected by healthcare reform initiatives
and/or other legislation or judicial interpretations of existing or future healthcare laws and/or regulations.
The
Affordable Care Act, signed into law in the United States in March 2010, contains certain provisions which are not yet fully implemented
and for which it is unclear what the full impact will be from the legislation.
The
legislation also focuses on a number of provisions aimed at improving quality, broadening access to health insurance, enhancing
remedies for fraud and abuse, adding transparency requirements, and decreasing healthcare costs, among others. Uncertainties remain
regarding what negative unintended consequences these provisions will have on patient access to new technologies, pricing and
the market for our products, and the healthcare industry in general. The Affordable Care Act includes provisions affecting the
Medicare program, such as value-based payment programs, increased funding of comparative effectiveness research, reduced hospital
payments for avoidable readmissions and hospital acquired conditions, and pilot programs to evaluate alternative payment methodologies
that promote care coordination (such as bundled physician and hospital payments). Additionally, the provisions include a reduction
in the annual rate of inflation for hospitals which started in 2011 and the establishment of an independent payment advisory board
to recommend ways of reducing the rate of growth in Medicare spending. Any reduction in reimbursement from Medicare or other government
programs may result in a similar reduction in payments from private payors.
Judicial
challenges, as well as legislative initiatives to modify, limit, or repeal the Affordable Care Act have been asserted against
the Affordable Care Act since its enactment and continue to evolve. Since taking office, President Trump has continued to support
the repeal of all or portions of the Affordable Care Act. For example, President Trump directed executive departments and federal
agencies to waive, defer, grant exemptions from, or delay the implementation of provisions of the Affordable Care Act that would
impose a fiscal or regulatory burden on individuals and certain entities to the maximum extent permitted by law.. Due to such
efforts, certain elements of the Affordable Care Act have been invalidated or suspended, which has, in turn, led to additional
challenges against the law as a whole. For example, the Tax Cuts and Jobs Act of 2017 included a provision repealing, effective
January 1, 2019, the tax imposed by the Affordable Care Act’s “individual mandate.” As a result, in December
2018, a district court in Texas held that the individual mandate is unconstitutional and that the rest of the Affordable Care
Act is, therefore, invalid. On appeal, the Fifth Circuit Court of Appeals affirmed the holding on the individual mandate but remanded
the case back to the lower court to reassess whether and how such holding affects the validity of the rest of the Affordable Care
Act. Substantial uncertainty remains as to the future of the Affordable Care Act after the U.S. Supreme Court declined to expedite
its review of the Fifth Circuit’s holding on January 21, 2020. It is, thus, unlikely that these issues will be resolved
before the next presidential election in November 2020. The current administration may seek to pass additional reform measures
before the upcoming election. We cannot predict the outcome of the election, nor can we predict the healthcare-reform-related
initiatives that the newly elected (or re-elected, as applicable) administration will put forth thereafter. There is no way to
know whether, and to what extent, if any, the Affordable Care Act will remain in-effect in the future, and it is unclear how judicial
decisions, subsequent appeals, election-related measures, or other efforts to repeal and replace or, possibly, to restore the
Affordable Care Act will impact the U.S. healthcare industry or our business.
We
cannot predict the impact that such actions against the Affordable Care Act will have on our business, and there is uncertainty
as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States,
or the effect of any future legislation or regulation. However, it is possible that such initiatives could have an adverse effect
on our ability to obtain approval and/or successfully commercialize products in the United States in the future. For example,
any changes that reduce, or impede the ability to obtain, reimbursement for the type of products we intend to commercialize in
the United States (or our products more specifically, if approved) or reduce medical procedure volumes could adversely affect
our business plan to introduce our products in the United States.
In
May 2017, the European parliament and the council of the European Union approved a new Medical Device Regulation (EU) 2017/745
which has replaced the existing medical device directives (93/42/EEC). The new regulations will come into full application in
May 2020. The new Medical Device Regulation imposes stricter requirements on medical device manufacturers and strengthens the
supervising competences of the competent authorities of European Union member states, the notified bodies and the authorized representatives.
As a result, the new legislation can prevent or delay the CE marking and certifications of our products under development or impact
our ability to modify our currently CE marked products on a timely basis. If we fail to comply with the modified regulation and
requirements it can adversely affect our business, operating results and prospects.
Risks
Related to Operating in Israel
We
anticipate being subject to fluctuations in currency exchange rates because we expect a substantial portion of our revenues will
be generated in Euros and U.S. dollars, while a significant portion of our expenses will be incurred in New Israeli Shekels.
We
expect a substantial portion of our revenues will be generated in U.S. dollars and Euros, while a significant portion of our expenses,
principally salaries and related personnel expenses, is paid in New Israeli Shekels, or NIS. As a result, we are exposed to the
risk that the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the Euro or the U.S. dollar,
or that the timing of this devaluation will lag behind inflation in Israel. Because inflation has the effect of increasing the
dollar and Euro costs of our operations, it would therefore have an adverse effect on our dollar-measured results of operations.
The value of the NIS, against the Euro, the U.S. dollar, and other currencies may fluctuate and is affected by, among other things,
changes in Israel’s political and economic conditions. Any significant revaluation of the NIS may materially and adversely
affect our cash flows, revenues and financial condition. Fluctuations in the NIS exchange rate, or even the appearance of instability
in such exchange rate, could adversely affect our ability to operate our business.
If
there are significant shifts in the political, economic and military conditions in Israel and its neighbors, it could have a material
adverse effect on our business relationships and profitability.
Our
executive office, sole manufacturing facility and certain of our key personnel are located in Israel. Our business is directly
affected by the political, economic and military conditions in Israel and its neighbors. Since the establishment of the State
of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. A state of hostility, varying
in degree and intensity, has caused security and economic problems in Israel. Although Israel has entered into peace treaties
with Egypt and Jordan, and various agreements with the Palestinian Authority, there has been a marked increase in violence, civil
unrest and hostility, including armed clashes, between the State of Israel and the Palestinians since September 2000. The establishment
in 2006 of a government in the Gaza Strip by representatives of the Hamas militant group has created heightened unrest and uncertainty
in the region. In mid-2006, Israel engaged in an armed conflict with Hezbollah, a Shiite Islamist militia group based in Lebanon,
and in June 2007, there was an escalation in violence in the Gaza Strip. From December 2008 through January 2009 and again in
November and December 2012, Israel engaged in an armed conflict with Hamas, which involved missile strikes against civilian targets
in various parts of Israel and negatively affected business conditions in Israel. In July and August 2014, an armed conflict took
place between Israel and Hamas, and since September 2015, there has been an increase in sporadic terror incidents conducted by
individuals not necessarily associated with terror organizations. Political uprisings and social unrest in Syria are affecting
its political stability, which has led to the deterioration of the political relationship between Syria and Israel and have raised
new concerns regarding security in the region and the potential for armed conflict. Similar civil unrest and political turbulence
is currently ongoing in many countries in the region. The continued political instability and hostilities between Israel and its
neighbors and any future armed conflict, terrorist activity or political instability in the region could adversely affect our
operations in Israel and adversely affect the market price of our shares of common stock. In addition, several countries restrict
doing business with Israel and Israeli companies have been and are today subjected to economic boycotts. The interruption or curtailment
of trade between Israel and its present trading partners could adversely affect our business, financial condition and results
of operations.
In
addition, many of our officers or key employees may be called to active duty at any time under emergency circumstances for extended
periods of time. See “— Our operations could be disrupted as a result of the obligation of certain of our personnel
residing in Israel to perform military service.”
Our
operations could be disrupted as a result of the obligation of certain of our personnel residing in Israel to perform military
service.
Many
of our officers and employees reside in Israel and may be required to perform annual military reserve duty. Currently, all male
adult citizens and permanent residents of Israel under the age of 40 (or older, depending on their position with the Israeli Defense
Forces reserves), unless exempt, are obligated to perform military reserve duty annually and are subject to being called to active
duty at any time under emergency circumstances. Our operations could be disrupted by the absence for a significant period of one
or more of our key officers and employees due to military service. Any such disruption could have a material adverse effect on
our business, results of operations and financial condition.
We
may not be able to enforce covenants not-to-compete under current Israeli law.
We
have non-competition agreements with most of our employees, many of which are governed by Israeli law. These agreements generally
prohibit our employees from competing with us or working for our competitors for a specified period following termination of their
employment. However, Israeli courts are reluctant to enforce non-compete undertakings of former employees and tend, if at all,
to enforce those provisions for relatively brief periods of time in restricted geographical areas and only when the employee has
unique value specific to that employer’s business and not just regarding the professional development of the employee. Any
such inability to enforce non-compete covenants may cause us to lose any competitive advantage resulting from advantages provided
to us by such confidential information.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could
result in litigation and adversely affect our business.
A
significant portion of our intellectual property has been developed by our Israeli employees in the course of their employment
for us. Under the Israeli Patent Law, 5727-1967 (the “Israeli Patent Law”), inventions conceived by an employee during
the term and as part of the scope of his or her employment with a company are regarded as “service inventions,” which
belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights.
The Israeli Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation
and Royalties Committee (the “C&R Committee”), a body constituted under the Israeli Patent Law, shall determine
whether the employee is entitled to remuneration for his inventions. The C&R Committee (decisions of which have been upheld
by the Israeli Supreme Court) has held that employees may be entitled to remuneration for their service inventions despite having
specifically waived any such rights. We generally enter into intellectual property assignment agreements with our employees pursuant
to which such employees assign to us all rights to any inventions created in the scope of their employment or engagement with
us. Although our employees have agreed to assign to us service invention rights and have specifically waived their right to receive
any special remuneration for such assignment beyond their regular salary and benefits, we may face claims demanding remuneration
in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration
or royalties to our current or former employees, or be forced to litigate such claims, which could negatively affect our business.
It
may be difficult for investors in the United States to enforce any judgments obtained against us or some of our directors or officers.
The
majority of our assets other than cash are located outside the U.S. In addition, certain of our officers are nationals and/or
residents of countries other than the U.S., and all or a substantial portion of such persons’ assets are located outside
the U.S. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us
or any of our non-U.S. officers, including judgments predicated upon the civil liability provisions of the securities laws of
the U.S. or any state thereof. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted
outside of the U.S. Israeli courts may refuse to hear a U.S. securities law claim because Israeli courts may not be the most appropriate
forums in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that the Israeli law,
and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, certain content of applicable U.S.
law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be
governed by the Israeli law. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal and state
securities laws against us or any of our non-U.S. directors or officers.
The
tax benefits that are currently available to us under Israeli law require us to satisfy specified conditions. If we fail to satisfy
these conditions, we may be required to pay increased taxes and would likely be denied these benefits in the future.
InspireMD
Ltd. has been granted a “Beneficiary Enterprise” status by the Investment Center in the Israeli Ministry of Industry
Trade and Labor, and we are therefore eligible for tax benefits under the Israeli Law for the Encouragement of Capital Investments,
1959. The main benefit is a two-year exemption from corporate tax, commencing when we begin to generate net income derived from
the beneficiary activities in facilities located in Israel, and a reduced corporate tax rate for an additional five to eight years,
depending on the level of foreign investment in each year. In addition, under the January 1, 2011 amendment to the Israeli Law
for the Encouragement of Capital Investments, 1959, a uniform corporate tax rate of 16% applies to all qualifying income of “Preferred
Enterprise,” which we may be able to apply as an alternative tax benefit.
The
tax benefits available to a Beneficiary Enterprise or a Preferred Enterprise are dependent upon the fulfillment of conditions
stipulated under the Israeli Law for the Encouragement of Capital Investments, 1959 and its regulations, as amended, which
include, among other things, maintaining our manufacturing facilities in Israel. If we fail to comply with these conditions,
in whole or in part, the tax benefits could be cancelled and we could be required to refund any tax benefits that we received
in the past. If we are no longer eligible for these tax benefits, our Israeli taxable income would be subject to regular
Israeli corporate tax rates. The standard corporate tax rate for Israeli companies in 2019 and thereafter is 23% of taxable
income. The termination or reduction of these tax benefits would increase our tax liability, which would reduce our
profits.
In
addition to losing eligibility for tax benefits currently available to us under Israeli law, if we do not maintain our manufacturing
facilities in Israel, we will not be able to realize certain tax credits and deferred tax assets, if any, including any net operating
losses to offset against future profits.
The
tax benefits available to Beneficiary Enterprises may be reduced or eliminated in the future. This would likely increase our tax
liability.
The
Israeli government may reduce or eliminate in the future tax benefits available to Beneficiary Enterprises and Preferred Enterprises.
Our Beneficiary Enterprise status and the resulting tax benefits may not continue in the future at their current levels or at
any level. The tax benefit period is twelve years from the year of election, which means that after a year of election, the two-year
exemption and eight years of reduced tax rate can only be used within the next twelve years. The Company elected the year 2007,
as a year of election and 2011 as an additional year of election. The 2011 amendment regarding Preferred Enterprise may not be
applicable to us or may not fully compensate us for the change. The termination or reduction of these tax benefits would likely
increase our tax liability. The amount, if any, by which our tax liability would increase will depend upon the rate of any tax
increase, the amount of any tax benefit reduction, and the amount of any taxable income that we may earn in the future.
Risks
Related to Our Common Stock, Preferred Stock and Warrants
The
market prices of our common stock and our publicly traded warrants are subject to fluctuation and have been and may continue to
be volatile, which could result in substantial losses for investors.
The
market prices of our common stock and our Series A Warrants and Series B Warrants have been and are likely to continue to be highly
volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:
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technological innovations
or new products and services by us or our competitors;
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additions or departures of key personnel;
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our ability to execute our business plan;
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operating results that fall below expectations;
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loss of any strategic relationship;
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industry developments;
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economic, political and other external factors;
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period-to-period fluctuations in our financial
results.
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In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also significantly affect the market prices
of our common stock and our publicly traded warrants.
Our
common stock could be delisted from the NYSE American if we fail to regain compliance with the NYSE American’s stockholders’
equity continued listing standards. Our ability to publicly or privately sell equity securities and the liquidity of our common
stock could be adversely affected if we are delisted from the NYSE American.
On
August 7, 2019, we received a notice indicating that we do not meet certain of the NYSE American’s continued listing standards
as set forth in Part 10 of the Company Guide. Specifically, we were not in compliance with Section 1003(a)(iii) of the Company
Guide because we reported stockholders’ equity of less than $6 million as of June 30, 2019, and had net losses in our five
most recent fiscal years ended December 31, 2018. As a result, we had become subject to the procedures and requirements of Section
1009 of the Company Guide. On August 25, 2019, we submitted a plan of compliance to NYSE Regulation, addressing how we intend
to regain compliance with Section 1003(a)(iii) of the Company Guide by August 7, 2020, which was accepted by NYSE American on
October 11, 2019.
If
we do not regain compliance by August 7, 2020, or fail to remain in compliance as of August 7, 2020, or anytime thereafter, with
Section 1003(a)(iii) of the Company Guide, or if we do not maintain our progress consistent with the plan during the applicable
plan period, the NYSE American will initiate delisting proceedings. There is no assurance that we will be able to regain compliance
with Section 1003(a)(iii) of the Company Guide as of August 7, 2020. Even if the net proceeds from our capital raises provide
us with sufficient stockholders’ equity to regain compliance with Section 1003(a)(iii) of the Company Guide by August 7,
2020, we will be subject to ongoing review for compliance with NYSE American requirements, and there can be no assurance that
we will continue to remain in compliance with this standard.
Delisting
from NYSE American would adversely affect our ability to raise additional financing through the public or private sale of equity
securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value
and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of confidence
by employees, the loss of institutional investor interest and fewer business development opportunities.
A
low trading price could lead the NYSE American to take actions toward delisting our common stock, including immediately suspending
trading in our common stock.
On
January 7, 2019, we received notification from the NYSE American that our shares of common stock have been selling for a low price
per share for a substantial period of time. Pursuant to Section 1003(f)(v) of the Company Guide, the NYSE American could take
action to delist our common stock in the event that our common stock trades at levels viewed as abnormally low for a substantial
period of time. NYSE American had advised us that if our common stock trades below $0.20 on a 30 trading day average, then it
will be considered non-compliant with NYSE American’s low selling price requirement. On March 29, 2019, we effected a 1-for-50
reverse stock split of our common stock.
Although
on July 8, 2019, we received notice from NYSE American that we have resolved the continued listing deficiency with respect to
low selling price pursuant to Section 1003(f)(v) of the Company Guide, in accordance with Section 1009(h) of the Company Guide,
if we are again determined to be below any of the continued listing standards within 12 months of July 8, 2019, NYSE American
will examine the relationship between the two incidents of noncompliance and re-evaluate our method of financial recovery from
the first incident. NYSE Regulation will then take the appropriate action, which depending on the circumstances, may include truncating
the compliance procedures described in section 1009 of the Company Guide or immediately initiating delisting proceedings. If in
the future we fall below the continued listing criterion of a minimum average share price of $0.20 over a 30-day trading period,
our common stock will be subject to immediate review by NYSE American. There can be no assurance that the market price of our
common stock will remain above the levels viewed as abnormally low for a substantial period of time. In any event, other factors
unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely
affect the market price of our common stock to fall below the levels viewed as low selling price for a substantial period of time
and lead the NYSE American to immediately suspend trading in our common stock.
In
addition, the NYSE American has advised us that its policy is to immediately suspend trading in shares of, and commence delisting
procedures with respect to, a listed company if the market price of its shares falls below $0.06 per share at any time during
the trading day.
The
respective certificate of designation for the Series B Preferred Stock and the Series C Preferred Stock contains anti-dilution
provisions that may result in the reduction of the conversion price in the future. This feature may result in an indeterminate
number of shares of common stock being issued upon conversion of the Series B Preferred Stock or the Series C Preferred Stock.
Sales of these shares will dilute the interests of other security holders and may depress the price of our common stock.
The
respective certificate of designation for our Series B Preferred Stock and Series C Preferred Stock contains anti-dilution provisions,
which provisions require the lowering of the applicable conversion price, as then in effect, to the purchase price of equity or
equity-linked securities issued in subsequent offerings. In accordance with this anti-dilution price protection, because the effective
common stock purchase price in each of the March 2018 public offering, the April 2018 public offering, the July 2018 public offering,
the April 2019 and the September 2019 public offering was below the then current Series B Preferred Stock and the Series C Preferred
Stock conversion price, we reduced the Series B Preferred Stock and the Series C Preferred Stock conversion price upon pricing
of each such public offering. As a result of these obligations, if in the future, while any of our Series B Preferred Stock or
Series C Preferred Stock is outstanding, we issue securities at an effective common stock purchase price of less than the applicable
conversion price of our Series B Preferred Stock or Series C Preferred Stock, as then in effect, we will be required, subject
to certain limitations and adjustments as provided in the respective certificate of designation for the Series B Preferred Stock
and the Series C Preferred Stock, to reduce the relevant conversion price. This reduction in the conversion prices will result
in a greater number of shares of common stock being issuable upon conversion of the Series B Preferred Stock or Series C Preferred
Stock for no additional consideration, causing greater dilution to our stockholders and investors in our offerings. Furthermore,
as there is no floor price on the conversion price, we cannot determine the total number of shares issuable upon conversion. As
such, it is possible that we may not have a sufficient number of available shares to satisfy the conversion of the Series B Preferred
Stock or the Series C Preferred Stock if we enter into a future transaction that reduces the applicable conversion price. The
foregoing features will increase the number of shares of common stock issuable upon conversion, assuming that the effective offering
price of our common stock in a subsequent financing is lower than the conversion price of these securities then in effect, of
the Series B Preferred Stock or Series C Preferred Stock for no additional consideration, and will result in a greater dilutive
effect on our stockholders.
Offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our publicly traded securities
to decline.
Sales
of a significant number of shares of our common stock or our warrants in the public market could harm the market prices of our
common stock or warrants and make it more difficult for us to raise funds through future offerings of common stock or warrants.
Our stockholders and the holders of our options and warrants may sell substantial amounts of our common stock or our publicly
traded warrants in the public market. In addition, we will be required to issue additional shares of common stock to the holders
of our Series B Preferred Stock upon conversion of shares of our Series B Preferred Stock and the payment of the dividends thereunder
in common stock and to the holders of our Series C Preferred Stock upon conversion of such shares of our Series C Preferred Stock,
as a result of the full ratchet anti-dilution price protection in the respective certificate of designation for the Series B Preferred
Stock and the Series C Preferred Stock, if the effective common stock purchase price in a subsequent offering is less than the
respective then current conversion price of the Series B Preferred Stock or the Series C Preferred Stock, which in turn will increase
the number of shares of common stock available for sale. See “Risk Factors — Risks Related to Our Common Stock,
Preferred Stock and Warrants— The respective certificate of designation for the Series B Preferred Stock and the Series
C Preferred Stock contains anti-dilution provisions that may result in the reduction of the conversion price in the future. This
feature may result in an indeterminate number of shares of common stock being issued upon conversion of the Series B Preferred
Stock or the Series C Preferred Stock. Sales of these shares will dilute the interests of other security holders and may depress
the price of our common stock.”
In
addition, the fact that our stockholders, option holders and warrant holders can sell substantial amounts of our common stock
or our publicly traded warrants in the public market, whether or not sales have occurred or are occurring, could make it more
difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time
and price that we deem reasonable or appropriate, or at all.
We
do not expect to pay dividends in the future. As a result, any return on investment may be limited to the value of our common
stock.
We
do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common
stock will depend on our earnings, financial condition and other business and economic factors as our board of directors may consider
relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investment in our common stock
will only occur if our stock price appreciates.
The
Series B Preferred Stock provides for the payment of dividends in cash or in shares of our common stock, and we may not be permitted
to pay such dividends in cash, which will require us to have shares of common stock available to pay the dividends.
Each
share of the Series B Preferred Stock is entitled to receive cumulative dividends at the rate per share of 15% per annum of the
stated value per share, until the fifth anniversary of the date of issuance of the Series B Preferred Stock. The dividends are
payable, at our discretion, in cash, out of any funds legally available for such purpose, or in pay-in-kind shares of common stock
calculated based on the conversion price, subject to adjustment as provided in the certificate of designation for the Series B
Preferred Stock. The conversion price is subject to reduction if in the future we issue securities for less than the conversion
price of our Series B Preferred Stock, as then in effect. As there is no floor price on the conversion price, we cannot determine
the total number of shares issuable upon conversion or in connection with the dividend. It is possible that we will not have a
sufficient number of available shares to pay the dividend in common stock, which would require the payment of the dividend in
cash. We will not be permitted to pay the dividend in cash unless we are legally permitted to do so under Delaware law, which
requires cash to be available from surplus or net profits, which may not be available at the time payment is due. In light of
our recurring losses and negative cash flows from operating activities, we do not expect to have cash available to pay the dividends
on our Series B Preferred Stock or to be permitted to make such payments under Delaware law, and will be relying on having available
shares of common stock to pay such dividends, which will result in dilution to our shareholders. If we do not have such available
shares, we may not be able to satisfy our dividend obligations.
There
is no public market for our preferred stock.
There
is no established trading market for our preferred stock. A trading market for our preferred stock is not expected to develop,
and even if a market develops for our preferred stock, it may not provide meaningful liquidity. The absence of a trading market
or liquidity for our preferred stock may adversely affect their value.
We
are subject to financial reporting and other requirements that place significant demands on our resources.
We
are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended, including the requirements
of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires us to conduct an annual management assessment of the effectiveness
of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management,
administrative, operational, internal audit and accounting resources. Any failure to maintain effective internal controls could
have a material adverse effect on our business, operating results and stock price. Moreover, effective internal control is necessary
for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud,
we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business
and reputation with investors may be harmed.
There
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
The
ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 require us to identify material weaknesses
in internal control over financial reporting, which is a process to provide reasonable assurance regarding the reliability of
financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Our
management, including our chief executive officer and chief financial officer, does not expect that our internal controls and
disclosure controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control
system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, in our company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Further, controls
can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the
controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased transaction
volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.
In
addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial
statements. Such an occurrence could discourage certain customers or suppliers from doing business with us and adversely affect
how our stock trades. This could in turn negatively affect our ability to access equity markets for capital.
Delaware
law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that
stockholders may consider favorable.
Our
board of directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences
and other rights and limitations of the preferred stock. Accordingly, we may issue shares of preferred stock with a preference
over our common stock with respect to dividends or distributions on liquidation or dissolution, or that may otherwise adversely
affect the voting or other rights of the holders of common stock. Issuances of preferred stock, depending upon the rights, preferences
and designations of the preferred stock, may have the effect of delaying, deterring or preventing a change of control, even if
that change of control might benefit our stockholders. In addition, we are subject to Section 203 of the Delaware General Corporation
Law. Section 203 generally prohibits a public Delaware corporation from engaging in a “business combination” with
an “interested stockholder” for a period of three years after the date of the transaction in which the person became
an interested stockholder, unless (i) prior to the date of the transaction, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii)
the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also
officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange offer; or (iii) on or subsequent to the date
of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section
203 could delay or prohibit mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage
attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price
above the prevailing market price.
We
have a staggered board of directors, which could impede an attempt to acquire us or remove our management.
Our
board of directors is divided into three classes, each of which serves for a staggered term of three years. This division of our
board of directors could have the effect of impeding an attempt to take over our company or change or remove management, since
only one class will be elected annually. Thus, only approximately one-third of the existing board of directors could be replaced
at any election of directors.
As
a former shell company, resales of shares of our restricted common stock in reliance on Rule 144 of the Securities Act are subject
to the requirements of Rule 144(i).
We
previously were a “shell company” and, as such, sales of our securities pursuant to Rule 144 under the Securities
Act of 1933, as amended, cannot be made unless, among other things, at the time of a proposed sale, we are subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all reports and other materials
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended, as applicable, during the preceding
12 months, other than Form 8-K reports. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply
regardless of holding period, restrictive legends on certificates for shares of our common stock cannot be removed except in connection
with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration
requirements of, the Securities Act of 1933, as amended. Because our unregistered securities cannot be sold pursuant to Rule 144
unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue
to comply with such requirements.
If
securities and/or industry analysts fail to continue publishing research about our business, if they change their recommendations
adversely or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
The
trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish
about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly,
we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In
addition, it is likely that in some future period our operating results will be below the expectations of securities analysts
or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their
expectations, our stock price could decline.
Aspects
of the tax treatment of the securities may be uncertain.
The
tax treatment of our preferred stock and our warrants is uncertain and may vary depending upon whether you are an individual or
a legal entity and whether or not you are domiciled in the United States. In the event you are a non-U.S. investor, you should
consult your tax advisors as to the consequences, under the tax laws of the country where you are resident for tax purposes, of
acquiring, holding and disposing of our preferred stock and our warrants.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains “forward-looking statements,” which include information relating to future events,
future financial performance, strategies, expectations, competitive environment and regulation. Words such as “may,”
“will,” “should,” “could,” “would,” “predicts,” “potential,”
“continue,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking
statements. Forward-looking statements should not be read as a guarantee of future performance or results and will probably not
be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information
we have when those statements are made or our management’s good faith belief as of that time with respect to future events,
and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed
in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited
to:
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our history of recurring
losses and negative cash flows from operating activities, significant future commitments and the uncertainty regarding the
adequacy of our liquidity to pursue our complete business objectives, and substantial doubt regarding our ability to continue
as a going concern;
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our need to raise additional capital to meet
our business requirements in the future and such capital raising may be costly or difficult to obtain and could dilute out
stockholders’ ownership interests;
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our ability to regain and maintain compliance
with NYSE American listing standards;
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our ability to generate revenues from our products
and obtain and maintain regulatory approvals for our products;
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our ability to adequately protect our intellectual
property;
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our dependence on a single manufacturing facility
and our ability to comply with stringent manufacturing quality standards and to increase production as necessary;
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the risk that the data collected from our current
and planned clinical trials may not be sufficient to demonstrate that our technology is an attractive alternative to other
procedures and products;
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market acceptance of our products;
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negative clinical trial results or lengthy product
delays in key markets;
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an inability to secure and maintain regulatory
approvals for the sale of our products;
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intense competition in our industry, with competitors
having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing
and sales, distribution and personnel resources than we do;
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entry of new competitors and products and potential
technological obsolescence of our products;
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inability to carry out research, development
and commercialization plans;
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loss of a key customer or supplier;
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technical problems with our research and products
and potential product liability claims;
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product malfunctions;
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price increases for supplies and components;
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adverse economic conditions;
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insufficient or inadequate reimbursement by
governmental and other third-party payers for our products;
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our efforts to successfully obtain and maintain
intellectual property protection covering our products, which may not be successful;
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adverse federal, state and local government
regulation, in the United States, Europe or Israel and other foreign jurisdictions;
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the fact that we conduct business in multiple
foreign jurisdictions, exposing us to foreign currency exchange rate fluctuations, logistical and communications challenges,
burdens and costs of compliance with foreign laws and political and economic instability in each jurisdiction;
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the escalation of hostilities in Israel, which
could impair our ability to manufacture our products; and
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loss or retirement of key executives and research
scientists.
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The
foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein
or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking
statements. You should review carefully the risks and uncertainties described under the heading “Item 1A. Risk Factors”
in this Annual Report on Form 10-K for a discussion of these and other risks that relate to our business and investing in shares
of our common stock. The forward-looking statements contained in this Annual Report on Form 10-K are expressly qualified in their
entirety by this cautionary statement. We do not undertake any obligation to publicly update any forward-looking statement to
reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated
events.