ITEM
1. BUSINESS
Cautionary
Note Regarding Forward-Looking Statements; Risk Factor Summary
This
Annual Report on Form 10-K contains “forward-looking statements,” which include information relating to future events, future
financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,”
“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 may 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 management’s
good faith belief as of that time with respect to future events, and are subject to a number of risks, and uncertainties and assumptions
that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
These risks are more fully described in the “Risk Factors” section of this Annual Report on Form 10-K. The following
is a summary of such risks:
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Our
history of losses and expectation of continued losses. |
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Global
economic and political instability and conflicts, such as the conflict between Russia and Ukraine, could adversely affect our business,
financial condition or results of operations |
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Increasing
inflation could adversely affect our business, financial condition, results of operations or cash flows. |
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The
geographic, social and economic impact of COVID-19 on the Company’s business operations. |
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Our
ability to raise funding for, and the timing of, clinical studies and eventual U.S. Food and Drug Administration approval of our
product candidates. |
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Regulatory
actions that could adversely affect the price of or demand for our approved products. |
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Market
acceptance of existing and new products. |
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Favorable
or unfavorable decisions about our products from government regulators, insurance companies or other third-party payers. |
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Risks
of product liability claims and the availability of insurance. |
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Our
ability to successfully develop and commercialize our products. |
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Our
ability to generate internal growth. |
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Risks
related to computer system failures and cyber-attacks. |
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Our
ability to obtain regulatory approval in foreign jurisdictions. |
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Uncertainty
regarding the success of our clinical trials for our products in development. |
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Risks
related to our operations in Israel, including political, economic and military instability. |
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The
price of our securities is volatile with limited trading volume |
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Our
ability to comply with the continued listing requirements of the NASDAQ capital market. |
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Our
ability to maintain effective internal control over financial reporting and to remedy identified material weaknesses. |
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We
are a “smaller reporting company” and have reduced disclosure obligations that may make our stock less attractive to
investors. |
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Our
intellectual property portfolio and our ability to protect our intellectual property rights. |
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Our
ability to recruit and retain qualified regulatory and research and development personnel. |
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Unforeseen
changes in healthcare reimbursement for any of our approved products. |
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The
adoption of health policy changes and health care reform. |
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Lack
of financial resources to adequately support our operations. |
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Difficulties
in maintaining commercial scale manufacturing capacity and capability. |
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Changes
in our relationship with key collaborators. |
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Changes
in the market valuation or earnings of our competitors or companies viewed as similar to us. |
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Our
failure to comply with regulatory guidelines. |
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Uncertainty
in industry demand and patient wellness behavior. |
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General
economic conditions and market conditions in the medical device industry. |
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Future
sales of large blocks of our common stock, which may adversely impact our stock price. |
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Depth
of the trading market in our common stock. |
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.
Please see “Item 1A. Risk Factors” for additional risks which could adversely impact our business and financial performance.
Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the
impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from
those contained in any forward-looking statements. All forward-looking statements included in this Form 10-K are based on information
available to us on the date hereof. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Unless
the context otherwise indicates or requires, the terms “we,” “our,” “us,” “NanoVibronix,”
and the “Company,” as used in this Annual Report on Form 10-K, refer to NanoVibronix, Inc. and its subsidiaries as a combined
entity, except where otherwise stated or where it is clear that the terms mean only NanoVibronix, Inc. exclusive of its subsidiaries.
*
Overview
We
were organized as a Delaware corporation in October 2003. Through our wholly-owned subsidiary, NanoVibronix Ltd., a private company incorporated
under the laws of the State of Israel, we focus on noninvasive biological response-activating devices that target biofilm prevention,
pain therapy, and wound healing and can be administered at home, without the assistance of medical professionals. Our primary products,
which are in various stages of clinical and market development, currently consist of:
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UroShield™,
an ultrasound-based product that is designed to prevent bacterial colonization and biofilm in urinary catheters, increase antibiotic
efficacy and decrease pain and discomfort associated with urinary catheter use; |
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PainShield™,
a patch-based therapeutic ultrasound technology to treat pain, muscle spasm and joint contractures
by delivering a localized ultrasound effect to treat pain and induce soft tissue healing
in a targeted area. Our PainShield family of products include:
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PainShield™
MD, a single patch-based therapeutic ultrasound technology to treat pain, muscle spasm and joint contractures by delivering a localized
ultrasound effect to treat pain and induce soft tissue healing in a targeted area. |
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PainShield™
Plus, a dual patch-based therapeutic ultrasound technology to treat pain, muscle spasm and
joint contractures by delivering a localized ultrasound effect to treat pain and induce soft
tissue healing in a targeted area. Similar to PainShield MD, with a dual ultrasound delivery.
(we anticipate submitting our application for FDA Clearance in the second quarter of 2022);
and, |
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PainShield™Relief,
an over-the-counter patch-based therapeutic ultrasound technology to treat pain, muscle spasm and joint contractures by delivering
a localized ultrasound effect to treat pain and induce soft tissue healing in a targeted area. (we anticipate submitting our
application for FDA Clearance in the second quarter of 2022); and |
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WoundShield™,
a patch-based therapeutic ultrasound device intended to facilitate tissue regeneration and wound healing by using ultrasound to increase
local capillary perfusion and tissue oxygenation. |
Each
of our UroShield, PainShield, and WoundShield products employs a small, disposable transducer that transmits low frequency, low intensity
ultrasound acoustic waves that seek to repair and regenerate tissue, musculoskeletal and vascular structures, and decrease biofilm formation
on urinary catheters and associated urinary tract infections. Through their size, effectiveness and ease of use, these products are intended
to eliminate the need for technicians and medical personnel to manually administer ultrasound treatment through large transducers, thereby
promoting patient independence and enabling more cost-effective home-based care.
PainShield™,
MD is currently cleared for marketing in the United States by the U.S. Food and Drug Administration. In September 2020, the U.S. Food
and Drug Administration exercised its Enforcement Discretion to allow distribution of the UroShield device in the U.S. during the COVID-19
pandemic. . While the permitted use is currently temporary, it does permit the import of the UroShield to the U.S. during the ongoing
COVID-19 pandemic. All three of our products have CE Mark approval in the European Union, and a certificate allowing us to sell PainShield,
UroShield and WoundShield in Israel. We are able to sell PainShield, UroShield and WoundShield in India and Ecuador based on our CE Mark.
We have consummated sales of PainShield and UroShield in the relevant markets, and we saw sales increase in 2021; WoundShield has not
generated significant revenue to date. Outside of the United States we generally apply, through our distributor, for approval in a particular
country for a particular product only when we have a distributor in place with respect to such product.
In
the United States, PainShield and UroShield requires a prescription from a licensed healthcare practitioner. If U.S. Food and Drug Administration
clearance is obtained, we anticipate that WoundShield will require a prescription from a licensed healthcare practitioner in the United
States. UroShield has been approved through the U.S. Food and Drug Administration under Enforcement Discretion for the duration of the
Covid-19 health emergency and is intended to be sold directly to health care facilities and therefore will not require a prescription
for these venues. However, in other countries in which we sell PainShield, UroShield, and WoundShield, such products are eligible for
sale without a prescription.
In
addition to the need to obtain regulatory approvals, we anticipate that sales volumes and prices of our UroShield, PainShield, and WoundShield
products will depend in large part on the availability of insurance coverage and reimbursement from third party payers. Third party payers
include governmental programs such as Medicare and Medicaid in the United States, private insurance plans and workers’ compensation
plans. We do not currently have reimbursement codes for use of WoundShield in any of the markets in which we have regulatory authority
to sell WoundShield. Of the markets in which we have regulatory authority to sell PainShield, prior to January 2020, we only had reimbursement
codes in the United States (i.e., CPT codes) for clinical use only. Effective as of January 2020, the U.S. Centers for Medicare and Medicaid
Services (CMS) approved our PainShield™ for reimbursement for Medicare beneficiaries on a national basis. However, the company
continues to work toward a reimbursement value from CMS. We are working with qualified legal representation toward that goal. We were
notified on March 30, 2020 that our Medicare Enrollment Application was approved, and we are now an approved Medicare Supplier for Durable
Medical Equipment, or DME, through the National Supplier Clearinghouse, Palmetto-GBA as well as Noridian Administrative Services, LLC,
the two Medicare Administrative Contractors that handle DME reimbursement nationwide. PainShield is currently available for Medicare
reimbursement on a national level under new HCPCS (Healthcare Common Procedure Coding System) code K1004. With respect to UroShield,
which may be used in a clinical and home setting, we do not currently have reimbursement codes in any of the markets in which we have
regulatory authority to sell UroShield. We are seeking reimbursement codes for use of our products in the markets in which we have regulatory
authority, including the United States, to sell such products. We have made application for a dedicated CMS reimbursement code in 2021
and are still awaiting final approval. Our current ongoing research and planned research may facilitate our ability to obtain reimbursement
codes and there is no guarantee that we will be successful in obtaining such codes quickly, or at all. We have engaged a reimbursement
expert, Redemption Revenue Cycle Solutions, LLC, and plan on using outside regulatory counsel, to help facilitate reimbursement.
We
have completed six separate clinical studies with UroShield that together evaluated approximately 194 patients with urinary catheters.
In patients where the UroShield product was used there were no serious adverse events reported, while a variety of clinical beneficial
observations were seen including: catheter biofilm reduction, reduction in catheter associated pain, reduction in urinary tract infections,
and a significant decrease in bacteriuria rates. We completed a double blind clinical trial for UroShield in the United States in October
2018. The results of the study, entitled “The Effect of Surface Acoustic Waves on Bacterial Load and Preventing Catheter-Associated
Urinary Tract Infections (CAUTI) in Long Term Indwelling Catheters,” were published in the December 2018 issue of Medical &
Surgical Urology, a peer-reviewed journal in the field of urology. In the study, 55 patients in a skilled nursing facility chain treated
with long term indwelling catheters were evaluated. There was a significant difference between the treated group and the placebo group
in the number of colony forming units (“CFU”) present upon evaluation, as well as on the number of treated urinary tract
infections (“UTI”), and the effect lasted beyond the time of active treatment. The study concluded that the UroShield™
device was shown to be effective in significantly reducing the number of CFUs in patients with indwelling catheters. The study also concluded
that the UroShield™ device was shown to be effective in reducing the number of treated UTIs in this patient population, and surface
acoustic waves in the form of the UroShield™ device is an effective tool in the prevention of catheter-associated UTI and while
further evaluation is encouraged, can be safely utilized with a high likelihood of success. In July 2017, we engaged Idonea Solutions,
Inc., an FDA consultant, to assist in our efforts to obtain clearance under the FDA’s Enforcement Discretion, and obtain 510(k)
clearance which is still ongoing. If we are successful, we intend to pursue obtaining reimbursement codes and to target completion
of partnerships with leading catheter product companies for sales and marketing efforts in the United States. The Company has entered
into recent distribution partnerships for UroShield in the United States, U.K., Switzerland, Israel, India, and New Zealand.
We
have one clinical study which is ongoing for our product UroShield. We announced positive interim results from an independent, real world
patient study of its UroShield at Southampton University Health Sciences in December 2021. The independent study, which was launched
in the first half of 2021, was devised to evaluate how UroShield helps to reduce infection by preventing bacteria colonisation and the
buildup of biofilms on long-term indwelling urinary catheters in real world patients and to better understand the patient benefits and
experiences of using UroShield. The study consists of both laboratory and patient studies and is nearing completion. At the conclusion
of the study, Southern Health will be able to purchase the UroShield devices for all patients that want to continue using the device
and for additional patients in their care who have indwelling catheters. The research team have reported strong interest from both the
clinical teams and patients who live with long term catheters. Full results of the study are expected to be published in the second quarter
of 2022.
In
addition, we continue to expand our clinical development and marketing efforts in North America with respect to PainShield. In February
2018, we completed a clinical trial to evaluate the effect of PainShield in patients with trigeminal neuralgia. The double blinded, crossover
trial was conducted across the United States and included 59 patients with a diagnosis of unilateral trigeminal neuralgia. Among the
59 patients, 30 were in the active treatment group and 29 were in the control group. The values which were assessed include Visual Analog
Scale (“VAS”) pain score, both baseline prior to trial and VAS pain score at the end of the study. The study also assessed
breakthrough medications per week at the start of the trial and breakthrough medications per week at the end of the trial, with a particular
focus on the use of opioids. Breakthrough medications are used for chronic pain directly related to the pre-existing trigeminal neuralgia
condition. There was a significant difference in the outcomes of the two groups relative to pain, quality of life, and breakthrough medications
taken, which was directly correlated to pain experienced during treatment. Specifically, the control group saw an improvement in baseline
scores of 2.3% versus the treatment group, which saw a 55.2% improvement in baseline scores. Additionally, the control group saw a reduction
in breakthrough pain medication of 1.5% versus the treatment group, which saw a 46.4% reduction in breakthrough pain medication.
In
2019, the Company has completed a study which was intended to assess the PainShield’s ability to effectively treat Lateral Epicondylitis
(Tennis Elbow). This is a double blinded, randomized control trial. The study has been completed and we are contemplating submission
to an appropriate journal. The interim results were reported as follows:
91%
of the patients in the PainShield treatment group had complete or partial resolution of symptoms. Patients used PainShield in conjunction
with over-the-counter medication, as needed, but without the benefit of opioid-based prescription medication.
Results
of the Birmingham study further reinforce that PainShield is safe, easy-to-use and highly effective in treating soft tissue pain. Patients
in the study who wore our device reported marked reduction in pain and when combined with over-the-counter, anti-inflammatory medications,
those same patients reported a complete resolution of symptoms within 10 days.
Dr.
David Lemak, MD, Lead Investigator of the Birmingham Study, added, “Patient outcomes were markedly improved with the use of PainShield
and importantly, no patients returned with signs or symptoms of an exacerbation. Most encouraging are the results we were able to achieve
for our patients without the use of prescription opioid medications, which can often lead to prolonged use and addiction.”
The
Company has entered into distribution partnerships for PainShield in the United States, Israel, India, Malta, Australia, and New Zealand.
We also sell direct to consumer worldwide.
WoundShield
has been evaluated in two published clinical studies done to-date that suggest improved localized blood flow and oxygenation, and improved
topical oxygen saturation (Morykwas M, “Oxygen Therapy with Surface Acoustic Waveform Sonication,” European Wound Management
Association 2011; Covington S, “Ultrasound-Mediated Oxygen Delivery to Lower Extremity Wounds,” Wounds 2012; 24(8)). We supplied
devices for these studies but had no further involvement with them. We are pursuing licensing opportunities to develop commercial markets
for the WoundShield product.
Recent
Developments
In
April 2021, the U.S. Centers for Medicare and Medicaid Services (CMS) expanded its reimbursement approval of the company’s PainShield™
product by adding the device to its Durable Medical Equipment (DME) schedule.
In
August 2021, the Therapeutic Goods Administration (TGA), the Australian Regulatory body for Therapeutic
Devices, granted approval for the Company’s PainShield for use by patients in Australia. We since have sold product through our
Australian distributor.
In
addition, August 2021, we announced our intention to enter the Over-the-Counter (OTC) pain treatment
market with the introduction of PainShield Relief™, a non-prescription ultrasound therapy device that delivers fast pain relief
for nerve and soft tissue damage. Submission to the FDA had been delayed, but is now anticipated to be filed in the second quarter of
2022.
In
September 2021, we announced that we were contemplating launching a new, transdermal gel containing Nano-Cannabidiol (CBD) for the treatment
of joint pain and reducing inflammation. An ongoing impact analysis is being conducted internally. The adoption of the CBD technology
is currently be re-evaluated due to regulatory constraints and regulations.
In
September 2021, we announced that we entered into a Provider Participation Agreement with Orchid Medical, a national
provider of integrated ancillary and surgical cost containment solutions specifically for the workers’ compensation industry.
The agreement facilitates the reimbursement of the company’s PainShield™ product for eligible patients receiving benefits
under a worker’s compensation plan making it easier for plan beneficiaries to obtain the product for the treatment of pain. We
continue to focus on this market, and we hope to add additional agreements with other providers for the workers’ compensation market.
In
October 2021, we received positive results from a randomized, double-blind study conducted at Birmingham Orthopedic and Sports Specialists
in Birmingham, Alabama for our Painshield™ product.
In
December 2021, we signed an agreement with Applied Medical Solutions, LLC (“AMS”) for
the sale and distribution of its PainShield products to Veterans facilities located throughout the United States.
Additionally,
in December 2021 we received positive interim results from an independent, real world patient study of its UroShield at Southampton University
Health Sciences.
Additionally,
in December 2021 we filed three U.S. patent applications with the U.S. Patent & Trademark Office
related to its SAW technology and indwelling medical devices to protect targeted new product launches and improvements to existing medical
devices.
On
February 26, 2021, Protrade Systems, Inc. (“Protrade”) filed a Request for Arbitration (the “Request”) with the
International Court of Arbitration (the “ICA”) of the International Chamber of Commerce alleging the Company is in breach
of an Exclusive Distribution Agreement dated March 7, 2019 (the “Agreement”) between Protrade and the Company. Protrade alleges,
in part, that the Company has breached the Agreement by discontinuing the manufacture of the DV0057 Painshield MD device in favor of
an updated 10-100-001 Painshield MD device. Protrade claims damages estimated at $3 million.
On
March 15, 2022, the arbitrator issued a final award, which, although
finding that Protrade’s claims failed as a matter of law or were unsupported by the evidence, nevertheless awarded Protrade $1,500,250,
which consists of $1,432,000 for “lost profits” and $68,250 as reimbursement of arbitration costs, on the grounds
that the Company allegedly failed to supply Protrade with “requested patches.” We continue
to dispute the claims asserted by Protrade and intend to pursue the available options to vacate or seek correction of the award to Protrade.
As of December 31, 2021, the Company accrued the amount of the award to Protrade
amounting to $1,500,250 as part of “General and administrative expenses” and “Other accounts payable and accrued expenses”.
In March 2022, we announced
that PainGuard and UroGuard were approved by Health Canada / Santé Canada as licensed medical devices.
Business
Model
All
of our products consist of a reusable controller device and a disposable component, which includes a transducer, and in the case of PainShield,
a 30 day supply of adhering patches. The controllers have a life expectancy of up to three years, while the disposable transducer has
a life expectancy of up to a month and must be replaced to provide the intended therapy. The components are purchased by either the distributor
or end user for use in any of the intended applications. Once the controller is purchased by the end user, recurring revenue will be
realized by purchases of replacement disposables to the extent that the end user continues treatment with our product.
Our
products are intended to be distributed both by independent distributors as well as by potential licensees. Distributor cost is discounted
to account for their intended margins, based upon purchase volumes and/or periodic purchase commitments, with the disposable transducer
sold and distributed in the same fashion. We currently have an established distributor network and are implementing certain criteria
within such network to ensure the appropriate assignment of a distributor or licensee. We also intend to add additional distributors
to our network.
We
also have a direct sales component, where we sell directly to consumers, in order to satisfy customer demand generated through on-line
advertising and social media. We expect that demand to increase once we are able to start marketing our PainShield Relief assuming it
receives FDA clearance
In
August 2019, we established our first license agreement with Medisana, Inc. (“Medisana”) with a total of 1,500 devices that
was shipped to Medisana directly from China, in April 2020. The devices were designed to carry the product labeling specific to the Medisana
brand, with the product name of PT100. The product labeling includes the words, “PAINSHIELD Ultrasonic therapy, Medisana”.
All instructions for use and packaging are specific to Medisana.
Our
business plan continues to focus on these types of transactions/agreements. We continue to focus on the foundational aspects of each
respective product, including the design and performance of each, the reimbursement, regulatory status, and quality control, in order
to strengthen our position with prospective partners.
Ultrasound
Technology and Our Products
As
noted above, our primary products are based on the use of low frequency ultrasound, which delivers energy through mechanical vibrations
in the form of sound waves. Ultrasound has long been used in physical therapy, physical medicine, rehabilitation and sports medicine.
Our
proprietary technology consists of a small, thin (1 millimeter) transducer that is capable of transmitting ultrasonic acoustic waves
onto treatment surfaces with a radius of up to 10 centimeters beyond the transducer. This technology allows us to treat wounds by implanting
our transducers into a small, portable self-adhering acoustic patch, thereby eliminating the need for technicians and medical personnel
to manually administer ultrasound therapy, which should reduce the cost of therapy. Moreover, we believe that, based upon the body of
evidence, the delivery of ultrasound through our portable devices is equal to or more effective than existing competitive products, as
our technology is better positioned to target the affected areas of the body.
While there are currently
a number of products on the market that treat pain through ultrasound therapy, we believe that our products differentiate themselves
because they are portable, without the requirement to be plugged into an outlet and they have a frequency of 100kHz (in contrast to other
devices, which have a frequency of closer to 1MHz and above), which means our products, when functioning as intended
and in accordance with applicable design specifications, should not produce heat that can damage tissue. Our products can therefore
(i) be self-administered by the patient without the need to be moved about the treated area by the patient or a clinician, (ii) be applied
for a significantly longer period without the risk of tissue damage and (iii) do not require the use of gel. We
are also aware of one product, the SAM® Sport4, which has recently received U.S. Food and Drug Administration approval and has CE
Mark approval, marketed by ZetrOZ, Inc., that we understand may eliminate certain of these requirements and limitations, namely the requirement
to be plugged in, the need for movement around the treated area and the relatively short safe treatment period. However, we understand
that this product does not generate surface acoustic waves as our products do, which means that the treatment area is generally limited
to that under the transducer, that the use of transmission gel is still required, and that the transducer thickness is significantly
greater than ours (approximately 1.5cm). It is also our understanding that the U.S. Food and Drug Administration has issued contraindications
which do not apply to the PainShield product.
There
has been an article published in 2019 on SAM® Sport4 regarding clinical evidence demonstrating that ultrasound dose timing (i.e.
daily treatment) and duration significantly impact benefits and treatment results, we are aware of a prospective randomized, double-blinded,
placebo-controlled study on the effects of the long-duration low-intensity ultrasound treatment using SAM® Sport4 suggesting that
ultrasound may be used as a conservative non-pharmaceutical and non-invasive treatment option for patients with knee osteoarthritis.
In
general, ultrasound offers the benefits by increasing local blood circulation, increasing vascular wall permeability, promoting protein
secretion, promoting enzymatic reactions, accelerating nitric oxide production, promoting angiogenesis (the formation of new blood vessels
from pre-existing vessels) and promoting fibroblast proliferation (fibroblasts are a type of cell that play a critical role in wound
healing). We believe that the body of evidence, and the positive therapeutic effect that ultrasound has for various indications, potentially
provides for future product development opportunities for us.
Our
proprietary technology consists of a small, thin (1 millimeter) transducer that is capable of transmitting ultrasonic acoustic waves
onto treatment surfaces with a radius of up to 10 centimeters beyond the transducer. This technology allows us to treat wounds by implanting
our transducers into a small, portable self-adhering acoustic patch, thereby eliminating the need for technicians and medical personnel
to manually administer ultrasound therapy, which should reduce the cost of therapy. Moreover, we believe that, based upon the body of
evidence, the delivery of ultrasound through our portable devices is equal to or more effective than existing competitive products, as
our technology is better positioned to target the affected areas of the body.
Traditional
ultrasound device and our portable ultrasound patch-based device and a comparison of their energy distribution, where the X-axis represents
treatment surface, and the Y-axis represents ultrasound energy penetration depth within tissue.
In
a comparison of a traditional ultrasound device and our portable ultrasound patch-based device, the bulk wave conventional ultrasound
machines with handheld transducers distribute the energy deeply into the body, as shown above in diagram (A) on the left. In comparison,
our device distributes the energy on the surface, as shown in diagram (B), thereby meaningfully increasing the treatment area. Our transducers
may also be incorporated into treatment patches, including patches that are designed to deliver medicine and other compounds through
the skin. The generation and delivery of low frequency ultrasound over a period of time to a specific area has been termed “targeted
slow-release ultrasound”. We believe that this delivery method of ultrasound may be comparable to that of slow release medication
in the pharmaceutical industry. This “targeted slow-release” capability is intended to allow for more frequent targeting
of the intended treatment area and thus may result in a more effective therapeutic response.
Micro
Vibrations Technology and Our Products
It
is well established that increasing blood flow to the wound and peri-wound area helps accelerate the healing of ischemic wounds. Micro-vibrations
applied on the skin tissue increase local blood flow and oxygen delivery to the wound area and stimulate angiogenesis and growth factors
that are helpful for the wound healing process. Vibration therapy has been found to stimulate blood flow due to mechanical stresses of
endothelial cells resulting in increased production of nitric oxide and vasodilation, as well as increase soft tissue and skin circulation.
(Maloney-Hinds et al., “The Role of Nitric Oxide in Skin Blood Flow Increases due to vibration in healthy adults and adults with
type 2 diabetes,” School of Medicine, Loma Linda University. Ca. Diabetes Technology & Therapeutics, 2009 p. 39-43). In addition,
micro vibrations induce skin surface nerve axon reflex and type IIa muscle fibers contraction rates, resulting in vasodilation (Nakagami
et al., “Effect of vibration on skin blood flow in an in vivo microcirculatory model”, The University of Tokyo, Bio-Science
Trends 2007; 1 (3): 161-166). Ten minutes of vibration therapy with laser doppler revealed a consistent increase in water content of
the upper dermis (TJ Ryan et al., “The effect of mechanical forces (vibration or external compression) on the dermal water content
of the upper dermis and epidermis, assessed by high frequency ultrasound”, Oxford Wound Healing Institute, Journal of Tissue Viability,
2001. In another study, mean blood flow increase was higher in the vibration group than the placebo group. Improvements in local blood
flow may be beneficial in the therapeutic alleviation of pain or other symptoms resulting from acute or chronic injuries (C. Button et
al., “The effect of multidirectional mechanical vibration on peripheral circulation of humans”, University of Otago New Zealand,
Clinical Physiology and functional Imaging, 2007 27, p211-216). A study on the effect of whole body vibration on lower extremity skin
blood flow suggests, that short duration vibration alone significantly increases lower extremity skin blood flow, doubling skin blood
for a minimum of 10 minutes following treatment (Lohman et al., “The effect of whole body vibration on lower extremity skin blood
flow in normal subjects”, Department of Physical Therapy, Loma Linda university, USA, Med Sci Monit, 2007; 13(2) 71-76). Vibration
has also been shown to stimulate angiogenesis and growth factors such as vascular endothelial growth factor (Suhr F et al., “Effects
of short-term vibration and hypoxia during high intensity cycling exercise on circulating level of angiogenic regulators in humans”,
J Appl Physiol, 2007, 103:474-483, Yue Z. et al., “On the cardiovascular effects of whole-body vibration I. Longitudinal effects:
hydrodynamic analysis”, Studies Appl Math, 2007, 119:95-109). Of import with respect to diabetic wounds, in which a prolonged inflammatory
phase occurs, vibration vasodilation has generated an indirect anti-inflammatory action, mainly by suppression of nuclear factor-kβ,
the key gene for inflammatory mediators (Sackner, M.A., “Nitric Oxide is released into circulation with whole-body, periodic acceleration”,
Chest 2005;127;30-39).
Urinary
catheter usage is associated with pain and discomfort caused by the friction between the catheter surface and the urethral tissue. Generally,
this friction is treated by applying lubricating gels and low friction catheter coatings. These methods are effective for a short term
during the catheter insertion as the lubricating gel is quickly absorbed into the surrounding tissue and loses its effect and the catheter
coatings lose their lubricity within a few days, as the coating is covered by a thin film of mucous.
Our
UroShield product provides vibrations along the surface of the urinary catheter that is in contact with urethral tissue. We believe that
these vibrations create a continuous acoustic lubrication effect along the surface of the indwelling catheter that is in contact with
the surrounding tissue, thus reducing catheter-tissue contact time, which may lessen trauma from urethra abrasion and adhesion. We have
also shown in animals and in humans that the micro-vibration technology can reduce the level of biofilm formation on urinary catheters.
Our
Products
Product
Design, Packaging, Identity
All
products were redesigned in the fourth quarter 2019, with an updated look and improved performance. These new designs were coupled with
new branding, packaging, instructional manuals, and marketing materials. Beginning in the fourth quarter of 2019, our manufacturers in
China have commenced producing the redesigned products for distribution and delivered their first completed units in April 2020.
UroShield
UroShield
is intended to prevent bacterial colonization and biofilm formation, increase antibiotic efficacy in the catheter lumen and decrease
pain and discomfort associated with urinary catheter use. It is designed to be used with any type of indwelling urinary catheter regardless
of the material or coating. We believe that UroShield may be the first medical device on the market that attempts to simultaneously address
all of the aforementioned catheter-related issues. UroShield is similar in design to WoundShield and PainShield, in that it uses a driver
unit that produces low frequency, low intensity ultrasound. The driver unit connects to a disposable transducer that is clipped onto
the external portion of the catheter to deliver ultrasound therapy to all catheter surfaces as well as the tissue surrounding the catheter.
Picture
of UroShield with actuator
We
believe the UroShield system has the following advantageous effects:
|
● |
Prevention
or Reduction of Biofilm. The low frequency ultrasound generated by UroShield has been shown to decrease adherence of bacteria
to catheter surfaces, thereby reducing biofilm. Biofilm is the complex matrix required for bacteria to grow and cause infection.
See the discussion of our Heidelberg 1 trial below. |
|
|
|
|
● |
Decreased
Catheter Associated Pain and Discomfort. We believe that UroShield creates an acoustic envelope on the surfaces of the catheter,
which decreases friction and tissue trauma, pain and discomfort caused by the catheter. In addition, in vivo (rabbit) studies have
shown the tissue in contact with the catheter remains healthier and less traumatized as a result of the application of low frequency
and low intensity ultrasound (Applebaum I, et.al., “The Effect of Acoustic Energy Induced By UroShield on Foley Catheter Related
Trauma and Inflammation in a Rabbit Model” Department of Urology, Shaarey Zedek Medical Center and the Hadassah Hebrew University
Medical School). |
|
|
|
|
● |
Acoustically
Augmented Antibiotic Therapy. Antibiotic resistance in biofilm bacteria is a well-known phenomenon. Although it has been known
that ultrasound can increase antibiotic efficacy in in-vitro models, we do not believe that there has been a practical ultrasound-based
medical device that was able to augment antibiotic efficacy in the clinical setting. In a clinical study, UroShield technology has
been shown to eradicate biofilm-residing bacteria by greater than 85% when applied simultaneously with an antibiotic in three clinically
relevant species, escherichia coli, staphylococcus epidermidis and pseudomonas aeruginosa (Banin E, et al., “Surface acoustic
waves increase the susceptibility of Pseudomonas aeruginosa biofilms to antibiotic treatment,” Biofouling, August 2011; we
supplied devices for this study, but had no further involvement with it). |
|
|
|
|
● |
Preservation
of the Patency of Catheters. We believe that low frequency ultrasound applied to catheters will add an anti-clogging effect and
will preserve patency of catheters. This effect is achieved by ultrasound waves creating an acoustic layer on the inner lumen of
the urinary catheter, thereby preventing adherence of biological material and biofilm formation. We believe that this anti-clogging
benefit will help prevent local infection and sepsis secondary to catheter obstruction. |
UroShield
has undergone a number of clinical trials. The Heidelberg 1 trial, conducted in 2005-2006, which we sponsored, was a 22 patient randomized,
double blind, sham-controlled, independent trial that tested UroShield’s safety and ability to prevent biofilm in patients with
an indwelling Foley catheter. The trial demonstrated that UroShield prevented biofilm in all patients with the active device as compared
to biofilm being found in seven of eleven of the control patients. In addition, there was a marked decrease in pain, discomfort and spasm
in the active UroShield patients, as evidenced by a statistically significant decrease in the requirement for the medications required
to treat urinary catheter associated pain and discomfort (Ikinger U, “Biofilm Prevention by Surface Acoustic Nanowaves: A New Approach
to Urinary Tract Infections?,” 25th World Congress of Endourology and SWL, Cancun, Mexico, October 2007).
In
a subsequent physician-sponsored trial, known as Heidelberg 2, conducted in 2007, 40 patients who underwent radical prostatectomies were
divided into two groups, with the active group receiving one intra-operative dose of antibiotics and UroShield and the control group
receiving one intra-operative dose of antibiotics and then five subsequent doses over three days. At the end of the trial, the control
group had four cases of bacteriuria, as compared to one in the active group. In a third trial, a physician-sponsored open label trial,
10 patients who received emergency placement of a urinary catheter due to acute obstruction were given a UroShield device and followed
with regard to their pain, discomfort, spasm and overall well-being. Within 24 hours, all patients showed improvement and increased toleration
of the catheter (Zillich S., Ikinger U, “Biofilmprävention durch akustische Nanowellen: Ein neuer Aspekt bei katheterassoziierten
Harnwegsinfektionen?,” Gesellschaft für Urologie, Heilbronn, Germany, May 2008). We supplied devices for this trial, but had
no further involvement with it.
As
recently announced, the Company submitted to The National Institute for Health and Care Excellence, for review, the findings from an
independent evaluation of its UroShield® device on patients who had used the device for up to two years. Clinical data from the study
conducted by Coventry University’s Assistant Professor, Ksenija Maravic da Silva, during 2020 reported statistically significant
outcomes for the device including a reduced number of urinary tract infections (UTIs), reduced instances of prescribed antibiotics, reduced
catheter blockages, reduced the need for unplanned catheter changes and reduced pain reported as a result of catheter associated complications.
The study also provided important insights into the lives of those using the device including improvement of overall well-being, relating
specifically to decreased levels of worry and increased ability to socialize. In addition, patient feedback on product improvements was
addressed and has been incorporated in the present commercially available device.
Market
for UroShield
According
to the Centers for Disease Control and Prevention, urinary tract infection (UTI) is an infection involving any part of the urinary system,
including urethra, bladder, ureters, and kidney. UTIs are the most common type of healthcare-associated infection reported to the National
Healthcare Safety Network (NHSN). Among UTIs acquired in the hospital, approximately 75% are associated with a urinary catheter, which
is a tube inserted into the bladder through the urethra to drain urine. Between 15-25% of hospitalized patients receive urinary catheters
during their hospital stay. The most important risk factor for developing a catheter-acquired urinary tract infection (CAUTI) is prolonged
use of the urinary catheter.
This
study was written up in the December 2018 issue of “Medical & Surgical Urology”, a leading peer-reviewed journal in the
field of urology.
Approximately
15-25% of patients who are admitted to a hospital will have an indwelling catheter at some point during their stay and 7% of nursing
home residents are managed by long term catheterization.
CAUTI
is the most common nosocomial infection in hospitals and nursing homes, representing over 40% of all hospital-acquired infections (HAIs)
and 20% of intensive care unit HAIs (Maki, P and Tambyah, D. Engineering Out the Risk for Infection with Urinary Catheters., Emerging
Infectious Diseases., Vol. 7, No. 2, March–April 2001). In addition, CAUTIs are the source for approximately 20% of healthcare
acquired bacteremia in acute care and 50% in long-term care facilities (Nicolle, Lindsay E. “Catheter Associated Urinary Tract
Infections.” Antimicrobial Resistance and Infection Control 3 (2014). The risk of acquiring CAUTI depends on the method and duration
of catheterization and patient susceptibility. Patients requiring a urinary catheter have a daily risk of approximately five percent
of developing bacteriuria and approximately 25% of patients develop nosocomial bacteriuria or candiduria over one week (Maki, P and Tambyah,
D. Engineering Out the Risk for Infection with Urinary Catheters., Emerging Infectious Diseases., Vol. 7, No. 2, March–April 2001).
Virtually all patients requiring indwelling urinary catheters for longer than a month become bacteriuric.
CAUTI
occurs because urethral catheters inoculate organisms into the bladder and promote colonization by providing a surface for bacterial
adhesion and causing mucosal irritation. The presence of a urinary catheter is the most important risk factor for bacteriuria. Once a
catheter is placed, the daily incidence of bacteriuria is 3-10%. Between 10% and 30% of patients who undergo short-term catheterization
(i.e., 2-4 days) develop bacteriuria and are asymptomatic. Between 90% and 100% of patients who undergo long-term catheterization develop
bacteriuria. About 80% of nosocomial UTIs are related to urethral catheterization; only 5-10% are related to genitourinary manipulation.
(John L. Brusch, Catheter-Related Urinary Tract Infection, Medscape, August 18, 2015).
The
global catheter market size was valued at USD 37.3 billion in 2018 and is expected to witness a CAGR of 9.7% through 2026. Rising prevalence
of chronic disorders leading to hospitalization has fueled the growth of this market. Presence of multi-national manufacturers, improving
medical facilities, supportive insurance policies are also some of the key factors propelling the market growth. North America is the
largest regional market due to the presence of multi-national manufacturers and sophisticated healthcare infrastructure along with high
product awareness levels. Asia Pacific is projected to expand at the maximum CAGR of 10.4%, over the study period. According to a Grandview
research report published 2018, there are 25 million Foley catheters sold annually in the United States and 75 million catheters sold
elsewhere yielding a total global Foley catheter market of 100 million units worldwide. The cost to treat a simple CAUTI has been estimated
at $13,793 per case (AHRQ), and the cost of treating bacteremia has been estimated at $8,355 (NIH) per case, yielding a total healthcare
burden of $830 million per year. While there are currently both antibiotic and silver coated catheters in the market, they often sell
for approximately $10 above the non-antimicrobial equivalent.
In
addition, as of October 1, 2008, Medicare stopped authorizing its payment to hospitals in which patients have developed a catheter-associated
urinary tract infection that was not present on admission. This provides hospitals in the United States with a substantial financial
incentive to reduce the occurrence of such infections through the use of products such as UroShield, which help prevent infections hospitals
would otherwise have to treat without reimbursement. In addition, it has been noted that the Centers for Medicare & Medicaid Services
may fine hospitals in the future when their patients develop CAUTI, which will likely increase the incentive of hospitals to invest in
technologies that may prevent this complication (Brown J, et al. “Never Events: Not Every Hospital-Acquired Infection Is Preventable,
Clinical Infectious Diseases, 2009, 49 (5)).
Competition
for UroShield
Several
types of products have been introduced to address the growing problem of catheter-acquired infection and biofilm formation on catheter
surfaces. Manufacturers offer antibiotic-coated and antiseptic-impregnated catheters. In addition, manufacturers have produced silver-coated
catheters, which have been shown in small studies to delay bacteriuria for about two to four days. However, larger studies did not corroborate
this result; on the contrary, silver hydrogel was associated with overgrowth of gram positive bacteria in the urine (Riley DK, Classen
DC, “A large randomized clinical trial of a silver-impregnated urinary catheter: lack of efficacy and staphylococcal superinfection,”
Am. J. Med. 1995 April; 98(4):349-56).
UroShield
has been designed to be added to any type of catheter, including Foley catheters and silver-coated catheters, to improve a catheter’s
infection prevention performance. UroShield is not intended to replace any existing products or technologies, but instead is intended
to assist these existing products or technologies in preventing catheter-acquired urinary injury and catheter associated complications.
While UroShield has been approved by the U.S. Food and Drug Administration (“FDA”) under Enforcement Discretion during the
COVID-19 health emergency, if we do not obtain permanent clearance from the FDA, UroShield may be unable to successfully compete in this
market due to an inability to obtain such permanent clearance from the FDA and failure to be adopted by health care practitioners and
facilities.
Regulatory
Strategy
UroShield
received CE Mark approval in September 2007 and was also approved for sale by the Israeli Ministry of Health in 2008. We are able to
sell UroShield in India and Ecuador based on our CE Mark. UroShield was granted a Canadian medical device license in September 2016,
although, due to a modification of regulatory standards in Canada, we have lost our Canadian license. We are working toward reinstatement
of our Canadian license. To that extent, we passed an audit in November 2020 with a notified body and we are waiting on a certificate.
In
the European Union, UroShield has been marketed for the prevention of biofilm, decreased pain and discomfort associated with urinary
catheters and increased antibiotic efficacy.
In
September 2020, the FDA exercised its Enforcement Discretion to allow distribution of the UroShield device in the United States. According
to the FDA, “UroShield® device can use Intended Use Code (IUC) 081.006: Enforcement discretion per final guidance, and FDA
product code QMK (extracorporeal acoustic wave generating accessory to urological indwelling catheter for use during the COVID-19 pandemic)”.
Accordingly,
the FDA’s Enforcement Discretion clears the way for import of UroShield to the U.S. during the Covid-19 pandemic, immensely expanding
the company’s addressable market for the device during this time period. The device is designed to aid in the prevention of CAUTI
incidence in patients requiring long-term indwelling catheterization.
After
reviewing the body of scientific evidence that we presented, the FDA took decisive action to clear the way for patient access to UroShield
for the duration of the Covid-19 pandemic. The evidence presented to the FDA on UroShield demonstrated decreases in the risk of catheter-associated
urinary tract infections and related complications in patients using UroShield who required long-term indwelling catheterization. Importantly,
we are unaware of any other commercially available device that can prevent catheter-associated urinary tract infection incidence and
achieve results comparable to UroShield.
We
intend to seek 510(k) clearance from the U.S. Food and Drug Administration through the de novo classification process for UroShield.
We are currently seeking advice from the FDA prior to submission.
The
FDA has made it clear that we will need to generate more clinical study data in order to achieve 510(k) clearance. Our intent
is to conduct a community based PRO study (Patient Reported Outcomes) measuring the impact UroShield will have on prevention of CAUTI,
Prevention of Blockage, and prevention of Pain.
Studies
completed to establish safety of UroShield for human use:
|
● |
A
large animal model (female sheep) study has been conducted to establish local tissue response
from a urinary catheter with UroShield attached as compared to a control group of animals
with a urinary catheter with no UroShield attached.
The
pre-clinical animal study was intended to demonstrate safety of UroShield device when used for 30-days with a urinary catheter. The
study compared local tissue and organ response in two groups of 4 (female) sheep where one group was catheterized (urethral) using
an uncoated silicone Foley catheter (only) and the other group was catheterized using an uncoated silicone Foley catheter with UroShield
device attached to it. All catheters were identical in their size, material composition and manufacturer.
After
30 days the animals were euthanized and local tissue and organs were examined. The results showed the group with UroShield device
had fewer observations of swelling, redness or discharge at the vulva as compared to the group without UroShield. The animals did
not exhibit signs of discomfort or pain during study period (of 30 days). The gross and histopathology findings were also very similar
between the two groups. |
|
|
|
|
● |
A
comparative study of leachables from a urinary catheter with and without UroShield attached
has been performed to demonstrate that the leachables with UroShield attached do not exceed
toxicological safe limits allowed for a medical device.
The
chemical characterization of leachables was intended to demonstrate safety for UroShield device for 30-day use with a urinary catheter.
The study compared leachables from a group consisting of 3 uncoated silicone catheters with leachables from a group consisting of
3 uncoated silicone catheters with UroShield attached to it. All catheters were identical in their size, material composition and
manufacturer.
The
exhaustive extractions were performed with non-polar, polar and aqueous solvents. An additional simulated use extraction using Saline
and Ethanol was performed. Overall the extractables from both groups were comparable and toxicological evaluation showed that all
compounds from extraction with UroShield were below the tolerable exposure limits. Most of compounds had a margin of safety greater
than 10 and 4 compounds had margin of safety between 1.5 and 10. Overall, the toxicological risk for using UroShield with a urinary
catheter is similar and at even lower as compared to a catheter without UroShield attached. |
Sales
and Marketing
Since
the FDA exercised its Enforcement Discretion to allow the distribution of the UroShield device in the United States, we have been actively
seeking partnerships for marketing our product in the United States. We believe the business opportunity for UroShield is in the hundreds
of millions in U.S. dollars to the extent that UroShield obtains permanent 510(k) clearance from the FDA, is recognized as effective
and becomes widely adopted for use on catheters. To that end, we are seeking a strategic partnership with various companies which have
an existing “footprint” in the Urology market. Those discussions and negotiations are ongoing at this time. We have appointed
distributors for UroShield in the United Kingdom. Malta, and Australia. We recently appointed Med Tech Solutions Group (MTSG) to assist
in our sales and marketing efforts in countries we are not represented. MTSG is based in San Antonio Texas and has sales representation
around the globe.
We
announced in May 2020, that we had expanded our license agreement with Ideal Medical International Limited to include exclusive rights
to distribute the Company’s UroShield® and PainShield® technologies in Canada and Turkey.
From
time to time we have had interest from strategic companies in the catheter market to partner, license or acquire the UroShield technology.
These strategic partners are active in the urology market and may be interested in integrating UroShield as an accessory, into its range
of products. Discussions with these partners are ongoing. There has also been interest from other companies with various invasive line
applications.
Clinical
Trials
To
date, we have conducted the clinical trials set forth below:
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
To
assess the safety of the UroShield Double Blind, Comparative, Randomized Study for the Safety
Evaluation of the UroShield System (HD1)
|
|
Dr.
U. Ikinger, Salem Academic Hospital, University of Heidelberg, Germany |
|
2005-2006
22
patients |
|
To
demonstrate that the use of the UroShield is safe and that the device is well tolerated by
the patients and user friendly to the medical staff.
Efficacy
objectives were to demonstrate that the UroShield helps in prevention of biofilm formation in comparison with the urinary catheter
alone, as well as bacteriuria. |
|
UroShield
was both safe and well tolerated.
UroShield
proved efficacious in prevention of biofilm. Subjects required significantly less medications than the control group for catheter
related pain and discomfort. |
|
|
|
|
|
|
|
|
|
Double
Blind, Comparative, Randomized Study for the Safety Evaluation of the UroShield System (HD2
)
Physician
initiated |
|
Dr.
U. Ikinger, Salem Academic Hospital, University of Heidelberg, Germany |
|
2007
40
patients
|
|
To
demonstrate that the use of the UroShield is safe and helps in prevention of biofilm formation and UTI in comparison with the urinary
catheter alone, as well as decrease antibiotic use. |
|
In
this trial, only 1/20 patients in UroShield device (no antibiotics) group developed urinary tract infection compared to 4/20 patients
within control group treated with the antibiotic prophylaxis alone. |
|
|
|
|
|
|
|
|
|
The
Effect of UroShield on Pain and Discomfort in Patients Released from the Emergency Room with
Urinary Catheter Due to Urine Incontinence
Physician
initiated |
|
Shaare
Zedek Medical Center Jerusalem, Israel. |
|
2007
10
patients
|
|
The
study aimed to assess the effectiveness of the UroShield in reducing pain and discomfort levels and improve the well-being of the
subjects. Efficacy objectives included reduction of pain, spasm, burning and itching sensation levels of the subjects. |
|
The
results demonstrated a reduction in pain, itching, burning and spasm levels. Additionally, the well-being of the subjects showed
a significant increase. |
|
|
|
|
|
|
|
|
|
The
Use of the UroShield Device in Patients with Indwelling Urinary Catheters Open labeled, comparative, randomized study |
|
Dr.
Shenfeld
Shaare
Zedek Medical Center Jerusalem, Israel.
|
|
2007-2009
40
patients
|
|
Patient
complaints related to catheter regarding pain according to VAS scale and discomfort according
to 0-10 scale
Presence
of Clinically Significant UTI
Presence
of Bacteriuria
Presence
of Biofilm
Use
of medication |
|
UroShield
device was effective in reducing postoperative catheter related pain discomfort and bladder spasms. There was also a notable trend
towards reduction of bacteriuria. |
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
Evaluation
of the UroShield in urinary and nephrostomies to reduce bacteriuria Physician initiated |
|
Prof.
P.Tenke,
Hungary
|
|
2010-2011
27
patients
|
|
●
Pain, disability and QOL
●
Catheter patency
●
Bacteriuria / UTI
●
Hospitalization period
●
Analgesics and Antibiotics intake |
|
Showed
reduction in pain and significant decrease in bacteriuria rate. |
|
|
|
|
|
|
|
|
|
Double
Blind, Randomized Control Study for Prevention of Bacterial Colonization and UTI associated with Indwelling Urinary Catheters |
|
Dr.
Shira Markowitz
Buffalo,
NY
|
|
2017
55
patients
|
|
To
demonstrate the use of the UroShield reduces bacterial colonization on the urinary catheter |
|
Final
results entitled “The Effect of Surface Acoustic Waves on Bacterial Load and Preventing Catheter-Associated Urinary Tract Infections
(CAUTI) in Long Term Indwelling Catheters,” which was published in the December 2018 issue of Medical & Surgical Urology,
a leading peer-reviewed journal in the field of urology. |
|
|
|
|
|
|
|
|
Mean
improvement advantage in treatment vs control was 87.2K CFU, (t (53) 18.1, p<0.001) at thirty days. At 60 days the mean improvement
advantage in treatment vs control was 87.5K CFU, (t (53) 18.1, p<0.001). At 90 days the mean improvement advantage in treatment
vs control was 79.3K CFU, (t (53) 12.4, p<0.001). |
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
|
|
|
|
|
|
|
|
After
cessation of treatment in the active group at 30 days, there was a minimal increase in CFU
count at both 60 and 90 days. In the same group, there was no statistical difference in the
decrease of CFU count from 30 to 60 days after treatment, t (28)=1. p= .326, however there
was a marginally significant increase in CFU from 60 to 90 days for the active group (28)=1.7
p= 0.09.
At
baseline, every enrolled patient had been treated for infection during the 90 days prior to enrollment. Compared to baseline, the
treatment group showed significant statistical and clinical improvement (100%) at 30 days relative to the sham control (73%). There
were no reported infections in the Treatment Group while in the control group there were seven reported infections.
At
90 days after treatment, the treatment group showed a significantly stronger improvement (89.7%) compared to the sham control (46.2%).
There were three reported infection in the Treatment group, while in the control group there were fourteen reported infections requiring
antimicrobial therapy. (logistic regression B=2.3, Wald Chi-Square (df=1) =10.1, p=0.001.) |
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
UroShield
Randomized Control trial |
|
5
different nursing facilities |
|
2017
- 2018
51
subjects |
|
51
subjects were evaluated with 26 in the active/treatment group and 25 in the control group. All patients had been treated for at least
one incident of a catheter-acquired urinary tract infection (CAUTI) requiring antibiotics in the preceding 6 months prior to trial
initiation. |
|
At
the 90-day evaluation, 13 of 25 subjects (52%) in the control group developed a CAUTI requiring systemic antibiotics while only 1
of 26 patients (4%) in the UroShield™ group required antibiotic. All study subjects had an initial colony count of greater
than 100,000 CFU cultured from their urinary tract. At thirty days, all subjects within the control group showed no change in the
number of their bacteria count which was greater than 100,000 CFU, while those in the treatment group showed a reduction to 10,000
CFU in 15 of 26 subjects and only 1,000 CFU in 10 of 26 subjects, proving a decrease in both bacterial colonization and the incidence
of Urinary Tract Infection. |
Recently
Completed, Current, Ongoing and Planned Clinical Trial
If
we are able to locate a strategic partner or otherwise obtain sufficient funding, we anticipate conducting the following clinical trial:
Trial |
|
Place |
|
Start
Date/Timing |
|
Objectives |
UroShield
U.S. Food and Drug Administration trial 80 patient trial |
|
To
be determined |
|
To
be determined |
|
Safety
and efficacy of UroShield in urinary catheter related pain and infection and biofilm formation.
The
results of previous clinical trials may not be predictive of future results, and the results of our planned clinical trial, if we
are able to locate a strategic partner or otherwise obtain sufficient funding, may not satisfy the requirements of the FDA. |
PainShield®
PainShield
is an ultrasound device, consisting of a reusable driver unit and a disposable patch, which contains our proprietary therapeutic transducer.
It delivers a localized ultrasound effect to treat pain and induce soft tissue healing in a targeted area, while keeping the level of
ultrasound energy at a safe and consistent level of 0.4 watts. We believe that PainShield is the smallest and most portable therapeutic
ultrasound device on the market and the only product in which the ultrasound transducer is integrated in a therapeutic disposable application
patch.
The
existing ultrasound therapy devices being used for pain reduction are primarily large devices used exclusively by clinicians in medical
settings. PainShield is able to deliver ultrasound therapy without being located in a health care facility or clinic because it is portable,
due to it being lightweight and battery operated. Because it is patch based and easy to apply, PainShield does not require medical personnel
to apply ultrasound therapy to the patient. The patient benefits include ease of application and use, faster recovery time, high compliance,
and increased safety and efficacy over existing devices that rely on higher-frequency ultrasound (Adahan M, et al, “A Sound Solution
to Tendonitis: Healing Tendon Tears With a Novel Low-Intensity, Low-Frequency Surface Acoustic Ultrasound Patch,” American Academy
of Physical Medicine and Rehabilitation Vol. 2, 685-687, July 2010). PainShield can be used by patients at home or work or in a clinical
setting and can be used even while the patient is sleeping. Its range of applications includes acute and chronic pain reduction and anti-inflammatory
treatment.
Picture
of PainShield with Patch
In
other countries outside the United States where the product is approved for such use,
PainShield is used to treat tendon disease and trigeminal neuralgia (a chronic pain condition that affects the trigeminal or 5th cranial
nerve, one of the most widely distributed nerves in the head); previously, the therapeutic options for these disorders have been very
limited. In the United States, PainShield is only cleared to treat pain, muscle spasms, and joint contractures associated with
or caused by various conditions or diseases. It has also been used to treat pelvic and abdominal pain. To date, to the best of our
knowledge, the only treatment options for several of these conditions are pain medication and surgery. Several additional causes
of pain, and the treatment of that pain with the PainShield product, can be explored through clinical trials.
Market
for PainShield
Pain-related
complaints are one of the most common reasons patients seek treatment from physicians (Prince V, “Pain Management in Patients with
Substance-Use Disorders,” Pain Management, PSAP-VII, Chronic Illnesses). According to Landro L, “New Ways to Treat Pain:
Tricking the Brain, Blocking the Nerves in Patients When all Else Has Failed,” Wall Street Journal, May 11, 2010, approximately
26% of adult Americans, or approximately 76.5 million people, suffer from chronic pain. The National Center for Health Statistics has
estimated that approximately 54% of the adult population experiences musculoskeletal pain. Studies have shown that low-frequency ultrasound
treatment has yielded positive results for a variety of indications, including tendon injuries and short-term pain relief (Warden SJ,
“A new direction for ultrasound therapy in sports medicine,” Sports Med. 2003; 33 (2):95-107), chronic low back pain (Ansari
NN, Ebadi S, Talebian S, Naghdi S, Mazaheri H, Olyaei G, Jalaie SA, “Randomized, single blind placebo controlled clinical trial
on the effect of continuous ultrasound on low back pain,” Electromyogr Clin Neurophysiol. 2006 Nov; 46(6):329-36) and sinusitis
(Ansari NN, Naghdi S, Farhadi M, Jalaie S, “A preliminary study into the effect of low-intensity pulsed ultrasound on chronic maxillary
and frontal sinusitis,” Physiother Theory Pract. 2007 Jul-Aug; 23(4):211-8). We believe that PainShield’s technology, portability
and ease of use may result in it becoming an attractive product in the pain management and therapy field.
Competition
There
are numerous products and approaches currently utilized to treat chronic pain. The pharmacological approach, which may be the most common,
focuses on drug-related treatments with the over-the-counter internal analgesic market estimated at $19 billion in 2019. Alternatively,
there are a large number of non-pharmacological pain treatment options available, such as ultrasound, transcutaneous electrical nerve
stimulation, or TENS, laser therapy and pulsed electromagnetic treatment. In addition, there are some technologies and devices in the
market that utilize low frequency ultrasound or patch technology. Many patients are initially prescribed anti-pain medication; however,
ongoing use of drugs may cause substantial side effects and lead to addiction. Therefore, patients and clinicians have shown increased
interest in alternative pain therapy using medical devices that do not carry these side effects.
The
currently available ultrasound treatments for chronic pain have generally been accepted by the medical community as standard treatment
for pain management. However, the traditional ultrasound treatments, such as those manufactured or distributed by Mettler Electronics
Corp, Metron USA and Zimmer MedizinSysteme, are stationary devices found only in clinics and other health care facilities that need to
be administered to patients by health care professionals. We are aware of three companies that market smaller ultrasound devices capable
of certain self-administered use for the treatment of pain: Koalaty Products, Inc., Sun-Rain System Corp. and PhysioTEC. These devices
generally function in the same manner, at the same frequency and with the same administration and safety requirements and limitations
as traditional, larger ultrasound devices. We are also aware of one product, the
SAM® Sport4, which has recently received U.S. Food and Drug Administration approval and also has CE Mark approval, marketed by ZetrOZ,
Inc., that we understand may eliminate certain of these requirements and limitations, namely the requirement to be plugged in, the need
for movement around the treated area and the relatively short safe treatment period. However, we understand that this product does not
generate surface acoustic waves as our products do, which means that the treatment area is generally limited to that under the transducer,
that the use of transmission gel is still required, and that the transducer thickness is significantly greater than ours (approximately
1.5cm). It is also our understanding that the U.S. Food and Drug Administration has issued contraindications which do not apply to the
PainShield product.In addition, there are other patch-based methods of pain treatment, such as TENS therapy. TENS therapy may
be painful and irritating for the patient due to the muscle contractions resulting from the electrical pulses. PainShield combines the
efficacy of ultrasound treatment for pain with the ease of use and portability of a patch-based system. PainShield also may be self-administered
by the patient, including while the patient is sleeping. However, if we are unable to obtain widespread insurance coverage and reimbursement
for PainShield, its acceptance as a pain management treatment would likely be hindered, as patients may be reluctant to pay for the product
out-of-pocket.
The
CMS has approved PainShield for reimbursement for Medicare beneficiaries on a national basis effective January 2020.
Regulatory
Strategy
PainShield
received 510(k) clearance from the U.S. Food and Drug Administration in August 2008 for treatment of pain relief. PainShield received
CE Mark approval in July 2008 and was also approved for sale by the Israeli Ministry of Health in 2010. We are able to sell PainShield
in India and Ecuador based on our CE Mark.
In
the United States, a prescription from a licensed healthcare practitioner is required for the use of PainShield.
Recently,
we announced our intention to market a PainShield Relief product. The PainShield Relief is intended to be an Over-The Counter (OTC) product,
not requiring a prescription from a medical professional. We believe that such reclassification will open up mass market opportunities
which are currently not available to us due to the prescription requirement. However, there is no assurance that we will be able to remove
the prescription requirement for the use of PainShield Relief or that, even if we accomplish such reclassification and the use of PainShield
Relief no longer requires a prescription, PainShield Relief will be successful commercially in the mass market or we will be able to
generate significant revenues from the mass market opportunities, if any.
In order to eliminate the
requirement for a physician prescription, proof of safety and consumer “usability” need to be established. With no adverse
events reported on the PainShield MD device when we conmmenced the Usability study, we anticipated favorable results from
such study. We engaged User-View, Inc to facilitate our Usability study and received the favorable results we expected. The product
packaging and all instruction documents have been modified to meet OTC standards. We also engaged an outside laboratory to perform acoustic
testing on all PainShield products. We previously anticipated submission of a 510(k) for PainShield Relief to the FDA,
for OTC use as a class 1 device, in early April 2022, but we are reconsidering our target timeline for such submission and
whether any additional data or action steps are needed. We currently expect to submit the 510(k) to the FDA in the second quarter of
2022.
The
PainShield Plus, is a dual applicator device, which will also be submitted for specific clearance from the FDA. Submission for PainShield
Plus was made in late February 2022.
In
the United States, PainShield falls under the diathermy classification for the treatment of pain for initial reimbursement purposes.
The permitted reimbursement codes can be used in the outpatient supervised medical setting. We continue to work with the Centers for
Medicare and Medicaid Services and private insurers so that reimbursement can be extended to cover the administration of PainShield outside
of health care facilities and clinics. We have engaged outside legal counsel to assist with all aspects of reimbursement. In addition,
we intend to conduct clinical trials in order to effectively market PainShield for a larger range of indications. The targeted reimbursement
would be based upon specific indications, where study data serves as justification for payment.
Sales
and Marketing
PainShield
was introduced in 2009 as a treatment for pain, such as tendonitis, sports injuries, pelvic pain, and neurologic pain, depending
on the scope of the approval or clearance from each applicable jurisdiction, and we have sold over 5,000 units since its introduction.
We have entered into distribution agreements in United States, Europe, Australia, and India for the distribution of PainShield. We intend
to seek additional distribution opportunities in Europe, East Asia and Ecuador. In addition, we sell PainShield directly to patients
through our website in jurisdictions where direct-to-consumer sale is permitted. We are currently ramping up our marketing efforts
in the U.S. market and throughout the world to establish licensing and private label partnerships as well.
We have identified a unique
application for PainShield in applicable foreign jurisdictions where such application is authorized, which is the treatment of a severe
facial nerve pain called Trigeminal Neuralgia, otherwise known as tic douloureux. The FDA lists facial application as a contraindication
and has not cleared or approved PainShield for such use in the United States. We are in the process of pursuing FDA approval of the PainShield
for Trigeminal Neuralgia, which will likely require additional data and clinical investigation to support an application for premarket
approval (“PMA”) for this indication, if such PMA is required by FDA. Two studies were performed in Israel, “a
randomized control trial examining the efficacy of low intensity low frequency Surface Acoustic wave ultrasound in trigeminal neuralgia
pain”, and “A sound solution for Trigeminal Neuralgia”. Two trials which enrolled a total of 16 and 15 patients respectively,
both conducted at the Sheba Medical Center in Israel, concluded that this study supports the hypothesis that the application of Low Intensity
Low Frequency Surface Acoustic Wave Ultrasound (LILF/SAW) may be associated with a clinically significant reduction of pain severity
among patients suffering from trigeminal neuralgia disease. One of the studies showed a reduction in pain among 73% of the participants.
We believe this to be an ideal market to address with the PainShield. With few existing treatment alternatives, we believe the PainShield
could prove to be a practical and safe alternative. A broader RCT, targeting 60 patients suffering from unilateral trigeminal
neuralgia, was also completed. The article was published on January 22, 2019, in the Journal of Anesthesiology and Pain Research,
under the title “The Effect of a Surface Acoustic Wave (SAW) Device on the Symptomatology of Trigeminal Neuralgia”. We
cannot predict the success of any future trials, nor can we guarantee that FDA will grant approval for such use.
GlobalData’s
epidemiological analysis forecasts that the total prevalent cases of trigeminal neuralgia in the seven major markets (United States,
France, Germany, Italy, Spain, U.K and Japan) will grow at 15% between 2012 and 2022. According to an estimate by Ronald Brisman, M.D.,
in 2013 the prevalence of trigeminal neuralgia in the U.S. may have been as high as approximately 280,000 patients. With the favorable
results from our current, ongoing study (explained in detail below), we continue to plan to aggressively pursue this market in the
foreign jurisdictions where PainShield has been approved through direct marketing efforts and distributor relationships.
We
have also identified a market for PainShield in the professional sports industry, where in some cases, reimbursement may be available
from sports alumni organizations or, more likely, self-pay. In order to pursue this market, we are exhibiting at sports trainers meetings,
pursuing alumni associations, advertising in their media, and have recently engaged a national distributor in the United States. Discussions
and ongoing negotiations continue with other appropriate distributors in these various market segments.
Clinical
Trials
To
date, we have conducted or are in the process of conducting the clinical trials set forth below:
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
A
sound solution for Trigeminal Neuralgia Physician initiated
|
|
Dr.
Ch. Adahan
Sheba
Medical Center
|
|
2009
15
patients
|
|
●Reduction
in pain
●Reduction
in disability
●Improvement
of function and quality of life
●Accelerating
of healing |
|
73%
of the subjects experienced complete or near complete relief. |
|
|
|
|
|
|
|
|
|
Randomized
control trial examining the efficacy of low intensity low frequency Surface Acoustic wave ultrasound in trigeminal neuralgia pain
For Ph.D., Funded by Israeli Ministry of Health |
|
Dr.
M. Zwecker
Chaim
Sheba Medical Center, Tel Hashomer, Israel
|
|
2012-2012
16
patients
|
|
●Reduction
in pain
●Reduction
in disability
●Improvement
of function and quality of life
●Accelerating
of healing
|
|
In
conclusion this study supports the hypothesis that the application of Low Intensity Low Frequency Surface Acoustic Wave Ultrasound
(LILF/SAW) may be associated with a clinically significant reduction of pain severity among patients suffering from trigeminal neuralgia
disease. |
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
Treating
Rutgers university athletic injuries with bandaid sized ultrasound unit PainShield |
|
R.
Monaco,
G.
Sherman,
Rutgers
University Athletic, Rutgers, New Jersey
|
|
2011
35
patients
|
|
●To
assess the pain, functional capacity and discomfort of the subject
●To
assess the subject’s quality of life
●To
assess the injury status
●To
assess the efficacy of the treatment
●To
assess compliance factors |
|
Active
group:
74%
had improvement, 26% no change
Sham
group:
56%
no change, 44% had improvement
This
is an indication of the effectiveness of the device.
Lack
of funding for statistical analysis has stopped this trial prior to fulfillment. |
|
|
|
|
|
|
|
|
|
Reduction
of chronic abdominal and pelvic pain, urological and GI symptoms using wearable device delivering low frequency ultrasound |
|
D.
Wiseman,
Synechion
Institute for Pelvic Pain
|
|
2011
19
patients
|
|
●To
assess the efficacy of PainShield for pelvic and related pain |
|
Improvement
in pain related symptoms noted for all symptoms. |
|
|
|
|
|
|
|
|
|
The
Effects of the NanoVibronix’s PainShield® Surface Acoustic Waves on the Symptoms of Lateral Epicondylitis |
|
Dr.
David Lemak, a leading orthopedic surgeon with Birmingham Orthopedic and Sports Specialists. |
|
2019,
24 patients |
|
A
randomized, double blinded study for 30 days that evaluated the effectiveness and safety of PainShield™ Surface Acoustic Wave
(SAW) technology on patients suffering from pain and discomfort, as well as limited mobility caused by the effects of chronic or
acute lateral epicondylitis (LE) (“tennis elbow”). |
|
We
plan to publish an article at the time and in conjunction with adding a marketing partner. |
|
|
|
|
|
|
|
|
|
The
Effect of a Surface Acoustic Wave (SAW) Device on the Symptomatology of Trigeminal Neuralgia |
|
Shira
Markowitz, MD, New York, NY |
|
Early
2018 59 patients |
|
To
measure pain scores, quality of life, and breakthrough drug use of 59 patients with a diagnosis of unilateral trigeminal neuralgia. |
|
There
was a significant difference in the outcomes of the two groups relative to pain, quality of life, and breakthrough medications taken,
which was directly correlated to pain experienced during treatment. Specifically, the treatment group experienced a 55.2% improvement
in baseline pain scores versus 2.3% for the control group. The treatment group experienced a 46.4% reduction in breakthrough pain
medication versus 1.5% for the control group. |
If
we are able to obtain sufficient funding, we anticipate conducting the following clinical trials:
Trial |
|
Place |
|
Start
Date/Timing |
|
Objectives |
PainShield
for Pelvic Pain
200
patient trial |
|
To
be determined |
|
To
be determined |
|
Safety
and Efficacy of PainShield in Chronic Pelvic Pain |
WoundShield®
Our
WoundShield product was granted the European Wound Closure Customer Value Leadership Award, Ultrasound Therapy – Wound Closure
in 2014. WoundShield is intended to treat acute and chronic wounds with a disposable treatment patch that delivers localized therapeutic
low frequency ultrasound. The WoundShield patch has two configurations: one that is placed adjacent to the wound and another, called
the instillation patch, that is placed on the wound to enable instillation through sonophoresis, a process that increases the absorption
of semisolid topical compounds, including medications, into the skin. Based on studies conducted by BIO-EC Microbiology Laboratory and
Rosenblum, we believe that our WoundShield product possesses significant potential for the treatment of, among other things, diabetic
foot ulcers and burns (Gasser P, Study Report delivered by BIO-EC Microbiology Laboratory, Dec 2007, which we ordered, paid for, and
provided devices for; Rosenblum J, “Surface Acoustic Wave Patch Diathermy Generates Healing In Hard To Heal Wounds,” European
Wound Management Association 2011, for which we supplied devices but had no further involvement). In March 2020, we signed a license
agreement with Sanuwave Health, Inc. (“Sanuwave”) for the manufacture and delivery of our WoundShield technology. Under the
terms of the agreement, NanoVibronix received 127,000 warrants of Sanuwave stock upon signing, will receive a $250,000 milestone payment
based on FDA approval, and 10% royalty on Sanuwave’s gross revenues from sales or rentals of WoundShield. In return, Sanuwave has
received the worldwide, exclusive rights to the Company’s WoundShield product and technology. In addition, Sanuwave will bear the
costs and clinical validation responsibilities associated with obtaining approval for WoundShield from the U.S. Food and Drug Administration
and other regulatory agencies around the world.
Picture
of WoundShield Driver and Instillation Patch
WoundShield
delivers surface acoustic waves to the location of the wound. Surface acoustic waves move laterally across the surface of the wound,
which enables the transfer of the acoustic energy of the waves along the entire wound surface in a continuous and consistent mode, providing
access to the waves’ benefits for a longer treatment period than conventional ultrasound without the need for supervision or a
treatment session by a clinician.
The
technology has been found to have a positive effect on the epithelialization (healing by the growth of epithelial cells) of diabetic
wounds, as well as on the stimulation of the precursors of dermal and epidermal (skin) growth. As such, it is a useful adjunct to wound
care by increasing dermal and epidermal growth, including glycosaminoglycans, or GAGs (which bind to extracellular proteins like collagen,
fibronectin, laminin, etc. and retain considerable amounts of water, thus preserving the skin structure) as well as the amount of collagen
(a protein that helps skin heal) and decreasing the number of cells in mitosis (a type of cell division) (Rosenblum J, “Surface
Acoustic Wave Patch Diathermy Generates Healing In Hard To Heal Wounds,” European Wound Management Association 2011, for which
we supplied devices which were precursors to WoundShield, but had no further involvement). In addition, the WoundShield instillation
patch allows for administration of therapeutic agents into the wound area through a sonophoresis effect.
Many
key processes in wound healing are dependent upon an adequate supply of oxygen. Diabetic foot ulcers are particularly in need of an adequate
oxygen supply because the disease often results from poor perfusion (blood flow) and decreased oxygen tension. Oxygen is also important
for the immune system to combat bacteria, synthesize collagen, help with fibroblast proliferation (fibroblasts are a type of cell that
play a critical role in wound healing), form oxidative (taking place in the presence of oxygen) pathways for adenosine triphosphate,
or ATP, formation (ATP transports chemical energy within cells for metabolism), and the nitric oxide dependent signaling pathways. It
is generally believed that a lack of available oxygen is a basic contributing factor in the perpetuation of these wounds. Wound healing
experts have developed a technique of perfusing ischemic wounds (which occur when blood flow is blocked) with hyper-oxygenated saline,
while the wound is being treated with ultrasound, also known as sonication. This localized oxygenation therapy has many advantages over
the use of hyperbaric chambers (large chambers in which the oxygen pressure is above normal), a common method for delivering oxygen to
wounds, as it is more cost-effective, can be done at the patient’s bedside and can be administered more frequently. The WoundShield
instillation patch was tested as a potential ultrasound technology for this localized oxygen therapy. In one study (Morykwas M, “Oxygen
Therapy with Surface Acoustic Waveform Sonication,” European Wound Management Association 2011; we supplied devices for this study,
but had no further involvement with it), oxygen sensors were placed in the wound bed to directly measure partial pressure of oxygen in
an ischemic wound bed on a pig. The wound was perfused with hyperbaric oxygen and sonicated using the WoundShield instillation patch.
With surface acoustic wave ultrasound technology, tissue oxygen levels (partial pressure of oxygen in the blood, or PaO2) were raised
from a range of 20 mmHg (millimeters of mercury) to 60 mmHg in peripheral (periwound) areas, a 3 centimeter distance away from the transducer,
and from 40 mmHg to greater than 100 mmHg in the central wound bed lying below the WoundShield instillation patch (see table below).
The results of this study illustrated that the WoundShield instillation patch allowed oxygen to directly enter into the wound. The direct
entry of the oxygen increased the amount of oxygen reaching the wound, which has been shown to advance the healing process. In addition,
we believe that WoundShield’s small size, lower cost and ease of use makes localized oxygen treatment commercially viable.
In
2012, results were published of a human feasibility trial for the WoundShield instillation patch that was performed at Duke University
in North Carolina. Seven patients were treated with the WoundShield instillation patch for their wounds and average tissue oxygen levels
(PaO2) increased by an average of 58% over baseline (Covington S, “Ultrasound-Mediated Oxygen Delivery to Lower Extremity Wounds,”
Wounds 2012; 24(8)). We supplied devices for this trial, but had no further involvement with it.
Market
for Wound-Healing Devices
The
global wound care device market totaled approximately $24 billion in 2015 and it is expected to grow at a CAGR of 6.7% during 2016-2022
(as reported by P&S Global Research in January 2017). According to the Global Report on Diabetes produced by the World Health Organization
(“WHO”) in 2016, globally, an estimated 422 million adults were living with diabetes in 2014, compared to 108 million in
1980. According to a report entitled “Advances in Wound Closure Technology” by Frost and Sullivan (2005), foot complexities
are the most frequent causes for patients with diabetes to get hospitalized, with complications usually starting with the formation of
skin ulcers. In addition, according to the American Burn Association, approximately 486,000 patients received medical treatment annually
for burn injuries in 2016 in the United States. There are also policy-based factors that may increase the size of the wound care market.
We anticipate that reimbursement decisions with respect to hospital acquired wounds may create a large market opportunity for wound care
products, including WoundShield. Furthermore, in 2009, the Centers for Medicare and Medicaid Services announced that they would stop
reimbursements for treatment of certain complications that they believed were preventable with proper care. One such complication was
surgical site infections after certain elective procedures, including some orthopedic surgeries and bariatric surgery. We believe that
such developments incentivize medical care providers to invest in reducing the risk of infection through the use of wound care products,
including WoundShield.
Competition
for WoundShield
The
market for advanced wound care includes a number of competitors, such as Kinetic Concepts, Inc. (a subsidiary of the 3M Company), or
KCI, Smith and Nephew plc and Convatec Inc., all of whom market wound-healing medical devices. Due to their size, in general these companies
may have significant advantages over us. These competitors have their own distribution networks for their products, which gives them
an advantage over us in reaching potential customers. In addition, they are vertically-integrated, which may allow them to maximize efficiencies
that we cannot achieve with our third-party suppliers and distributors. Finally, because of their significantly greater resources, they
could potentially choose to focus on research and development of technology similar to ours, more than we are able to. In general, we
believe that these competitors 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. However, we believe that
our products differentiate us from these competitors, and we will be competitive on the basis of our technology. We believe that the
strength of these competitors may create an opportunity through strategic partnerships.
At
present, ultrasound treatment for wounds is limited only to wound debridement (removal of damaged tissue or foreign objects from a wound)
and such products are marketed by Arobella Medical, LLC, which produces the Qoustic Wound Therapy System, Misonix Inc., which produces
SonicOne products, and Alliqua Biomedical, Inc., which produces the MIST Therapy System. Due to their size, in general these companies
may have the same advantages over us as discussed with respect to our competitors in the paragraph above. However, these ultrasound devices
are indicated for use only in medical clinics and require an operator to deliver their treatment, thus limiting their use and application.
The MIST Therapy System and Quostic Therapy System are a non-contact ultrasound device that delivers ultrasound through a mist that is
applied directly on the wound.
We
believe that these therapies are less advantageous than WoundShield because they require an operator to deliver the treatment and the
removal of bandages to target the wound bed. In contrast, the WoundShield patch sits on normal skin bordering the open wound and no manipulation
of the wound bandage is required. Moreover, WoundShield can be self-administered, without an operator, in both clinics and home settings.
We also believe that WoundShield will prove to be an effective alternative to treating chronic wounds at a lower price than the existing
products being used by medical practitioners. As such, we believe that facilities that are reimbursed based upon diagnosis-related groups
will be more inclined to adopt WoundShield because it will provide the same therapeutic results at a significantly lower cost than traditional
ultrasound therapies.
We
are also aware of a small clinical study, for which results were reported in August 2013, in which a small ultrasound device showed positive
results in the treatment of venous ulcers, a type of chronic wound. We understand that this product does not generate surface acoustic
waves as our products do, which means that the treatment area is generally limited to that of the transducer’s diameter. We believe
our products would have certain other advantages over this potential device, if developed, including that our products weigh less and
are thinner. However, given the early stage of development of this potential device, we cannot say with certainty how our products would
compare.
The
most common method of oxygen administration for wound healing is hyperbaric oxygen therapy, especially to treat specific ulcerations
in diabetic patients. Hyperbaric oxygen therapy has been shown to increase vascular endothelial growth factor expression, which measures
the creation of new blood vessels (Fok TC, at el, “Hyperbaric oxygen results in increased vascular endothelial growth factor (VEGF)
protein expression in rabbit calvarial critical-sized defects”, Schulich School of Medicine and Dentistry, University of Western
Ontario, Canada). The activation of endothelial cells by VEGF sets in motion a series of steps toward the creation of new blood vessels
(J Lewis et al, National Cancer Institute, Understanding Cancer and Related Topics, Understanding Angiogenesis). We believe that the
WoundShield instillation patch, which can be used as an oxygen instillation system, will be complementary to, or in some cases an alternative
to, the use of hyperbaric chamber therapy. This complementary treatment option will allow the treating physician greater therapeutic
versatility in treating wounds. For a certain populace of patients, we believe that the WoundShield instillation patch could provide
physicians with an alternative to hyperbaric oxygen therapy because it provides the same benefits as hyperbaric oxygen therapy at a lower
cost to the patient. There are a number of competitors in the hyperbaric chamber therapy market, including approximately eight companies
in the United States. Due to their size, in general these companies may have the same advantages over us discussed with respect to our
competitors in the first paragraph of this section. However, we believe that the WoundShield instillation patch possesses certain advantages
over the existing hyperbaric chamber therapy, including lower cost and greater ease of use. In addition, we believe that the WoundShield
instillation patch will not necessarily compete with hyperbaric chamber therapy, but rather will often complement such therapy.
While
we believe that WoundShield is well positioned to capture a share of the wound care market, WoundShield may be unable to achieve its
anticipated place in the wound care market due to a number of factors, including, but not limited to, an inability to obtain the approval
of the U.S. Food and Drug Administration, for which it is indicated and its failure to be adopted by health care practitioners and facilities
or patients because of its status as a new product in a market that relies on patient-focused initiative to treat wounds.
Regulatory
Strategy
For
a general discussion of the U.S. Food and Drug Administration approval process with respect to our products, and regulation of our products
in general, see “– Government Regulation” below.
Our
general regulatory strategy for WoundShield has been focused on seeking U.S. Food and Drug Administration approval for a variety of indications.
WoundShield obtained CE Mark approval in November 2012. Sanuwave has received the worldwide, exclusive rights to the Company’s
WoundShield product and technology. Accordingly, the Company does not expect to continue to directly engage in sales and marketing activities
for the WoundShield technology and expects Sanuwave to undertake such activities.
Sales
and Marketing
WoundShield
has generated minimal revenues to date. In March 2020, we signed a license agreement with Sanuwave Health, Inc. for the manufacture and
delivery of our WoundShield technology.
Clinical
Trials
With
respect to WoundShield, to date, we have conducted the following evaluation studies:
Purpose |
|
Doctor/Location |
|
Time,
subjects |
|
Objectives |
|
Results |
Clinical
evaluation
Physician
initiated
|
|
Dr.
J. Rosenblum,
Shaare
Zedek
Medical
Center |
|
2008
8
patients |
|
To
evaluate novel technology on wound healing in diabetic foot ulcers. |
|
Therapy
showed significant changes in wound, wound size was reduced, patients felt less pain, necrotic tissue was less adhesive, necrotic
tissue decreased in size. The duration of the trial was one week. |
|
|
|
|
|
|
|
|
|
Clinical
evaluation
Physician
initiated
|
|
Dr.
J. Rosenblum,
Shaare
Zedek
Medical
Center |
|
2010
8
patients |
|
To
evaluate novel technology on wound healing in diabetic foot ulcers. |
|
The
device, a precursor device to WoundShield using the same technology as WoundShield, had a positive effect on both epithelization
of diabetic wounds and stimulating the precursors of dermal and epidermal growth. The duration of the trial was one week. |
|
|
|
|
|
|
|
|
|
Clinical
evaluation
Physician
initiated
|
|
Dr.
S. Covington |
|
2010
7
patients |
|
The
study aimed to determine if hyper oxygenated saline delivered by surface acoustic waves improves tissue oxygenation in lower extremity
wounds. |
|
Surface
acoustic wave technology in conjunction with oxygenated saline can increase interstitial oxygen in wound bed. This trial to validate
proof of concept was put on hold due to financial constraints. The duration of the trial was two weeks. |
Third
Party Reimbursement
NanoVibronix
has entered into an agreement with Redemption Revenue Cycle Solutions LLC (“RRCS”), beginning on January 1, 2019. RRCS has
an expertise in establishing reimbursement at a reasonable rate, and facilitating the billing for both NanoVibronix and its distributors.
We have also retained McGuireWoods to assist in improving our PainShield reimbursement.
We
anticipate that sales volumes and prices of the products we commercialize will depend in large part on the availability of coverage and
reimbursement from third party payers. Third party payers include governmental programs such as Medicare and Medicaid, private insurance
plans and workers’ compensation plans, among others. These third -party payers may deny coverage and reimbursement for a product
or therapy, in whole or in part, if they determine that the product or therapy was not medically appropriate or necessary. The third-party
payers also may place limitations on the types of physicians or clinicians that can perform specific types of procedures. In addition,
third party payers are increasingly challenging the prices charged for medical products and services. Some third -party payers must also
pre-approve coverage for new or innovative devices or therapies before they will reimburse health care providers who use the products
or therapies. Even though a new product may have been approved or cleared by the U.S. Food and Drug Administration for commercial distribution,
we may find limited demand for the device until adequate reimbursement has been obtained from governmental and private third -party payers.
Over-the-counter
products, such as the anticipated PainShield Relief product that we are developing, are generally not reimbursed by any third-party payers.
In
international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted
price ceilings on specific product lines and procedures. There can be no assurance that procedures using our products will be considered
medically reasonable and necessary for a specific indication, that our products will be considered cost-effective by third party payers,
that an adequate level of reimbursement will be available or that the third -party payers’ reimbursement policies will not adversely
affect our ability to sell our products profitably.
In
the United States, some insured individuals are receiving their medical care through managed care programs, which monitor and often require
pre-approval of the services that a member will receive. Some managed care programs are paying their providers on a per capita basis,
which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment
per member per month, and consequently, may limit the willingness of these providers to use certain products, including ours.
One
of the components in the reimbursement decision by most private insurers and governmental payers, including the Centers for Medicare
and Medicaid Services, which administers Medicare, is the assignment of a billing code. Billing codes are used to identify the procedures
performed when providers submit claims to third party payers for reimbursement for medical services. They also generally form the basis
for payment amounts.
Obtaining
reimbursement approval for a product from any government or other third -party payer is a time-consuming and costly process that could
require us or our distributors to provide supporting scientific, clinical and cost-effectiveness data for the use of our product to each
payer. Even if a code is obtained for a product, a third -party payer must still make coverage and payment determinations. When a payer
determines that a product is eligible for reimbursement, the payer may impose coverage limitations that preclude payment for some uses
that are approved by the FDA or other foreign regulatory authorities. We believe that the overall escalating costs of medical products
and services has led to, and will continue to lead to, increased pressures on the health care industry to reduce the costs of products
and services. In addition, health care reform measures, as well as legislative and regulatory initiatives at the federal and state levels,
create significant additional uncertainties. There can be no assurance that third party coverage and reimbursement will be available
or adequate, or that future legislation, regulation, or reimbursement policies of third -party payers will not adversely affect the demand
for our products or our ability to sell these products on a profitable basis. The unavailability or inadequacy of third -party payer
coverage or reimbursement would have a material adverse effect on our business, operating results and financial condition.
UroShield.
We expect these products to be used in inpatient settings and therefore reimbursed under the Diagnosis Related Group (DRG) or per
diem reimbursement system. In addition, in an outpatient or home setting, we anticipate that these products will initially be purchased
privately until a reimbursement code is obtained. However, we believe that if we can empirically demonstrate UroShield’s efficacy
in preventing recurrent hospitals admission in chronic Foley catheter patients and reducing overall per-patient cost, third party payers
may accelerate the reimbursement approval process since the device could reduce their overall per-patient cost. We believe the natural
progression of the adoption of this technology will allow for use in the home setting. We intend to pursue reimbursement in the Medicare
Part B code to support the use for long term catheter use and infection prevention in the home.
PainShield.
Effective as of January 2020, CMS approval for Medicare reimbursement was added through code K1004. The value of the reimbursement
has not yet been confirmed. We continue to work toward a favorable reimbursement with outside legal counsel and reimbursement consultants.
WoundShield.
We believe that the initial usage of these products will be in the hospital setting. Reimbursement in the hospital setting is typically
governed by the DRG system, which is a prospective payment methodology that assigns a predetermined, fixed amount based on the patient’s
diagnoses. Such reimbursement will be sought by Sanuwave Health Inc. as the licensee of this technology.
New
Product Under Development
Renooskin
In
2016, we started developing a device for the facial rejuvenation market called Renooskin. Previous in vitro studies on human skin were
done showing that the SAW technology provided skin rejuvenation comparable to Retinol A which is a well-accepted anti-aging cream. We
have developed a head band like applicator for the PainShield SAW treatment and are in the process of arranging for a pilot trial with
a cosmetic dermatologist and/or plastic surgeon. We believe that, subject to proof of efficacy of the Renooskin and receiving regulatory
approval, the device can be sold in a non-reimbursement market since cosmetic devices are private pay. We are still considering several
paths towards commercialization.
Intellectual
Property
Stemming
from a combination of patent, copyright, trademark and trade secret laws, as well as non-disclosure agreements and other contracts, our
intellectual property rights represent a vital resource to the management of our company. Therefore, we are continuing our practice of
investing in obtaining appropriate legal protection for our innovations whenever possible and have adopted a more fully integrative approach
to the management of our intellectual property that mutually aligns with our ongoing R&D strategies, commercial opportunities based
on market analyses, and longer-term business objectives.
From
our patented technologies to our trademarked brands, we believe our intellectual property has substantial value and has significantly
contributed to our success to date.
Patents
We
seek patent protection for our inventions not only to differentiate our products and technologies, but also to develop opportunities
for licensing and secure our rights to profits therefrom. With the aim of optimizing commercial and regulatory success, our proprietary
technology and innovative applications thereof are protected by product, system, process, and method-of-use patent claims. We believe
that our granted patents and pending applications collectively protect our technology, both in terms of our existing products, as well
as our anticipated pipeline of new offerings.
Our
patent portfolio includes at least the following issued patents, as well as a number of corresponding foreign patents in relevant jurisdictions:
(1) U.S. Patent No. 7,393,501 to “Method, Apparatus and System for Treating Biofilms Associated With Catheters” (expiring
on December 19, 2023); (2) U.S. Patent No. 7,829,029 to “Acoustic Add-On Device for Biofilm Prevention in Urinary Catheter”
(expiring on October 27, 2025); (3) U.S. Patent No. 9,028,748 to “System and Method for Surface Acoustic Wave Treatment of Medical
Devices” (expiring on July 11, 2030); and (4) U.S. Patent No. 9,585,977 directed to “System and Method for Surface
Acoustic Waves Treatment of Skin” (expiring on August 20, 2033). These patents cover a wide range of embodiments and applications
of our proprietary surface acoustic wave (SAW) technology, including our commercialized PAINSHIELD®, PAINSHIELD PLUSTM,
WOUNDSHIELD® and UROSHIELD® devices. Specifically, the patents provide for methods of generating SAW on surfaces of indwelling
medical devices and to topical and urological applications therefor for alleviating pain, wound healing, and preventing formation of
bacterial biofilms on catheters.
In
addition to the above patents, our pending patent applications and new filings are representative of our ongoing efforts to broaden our
portfolio as we continue developing new applications for our ultrasound technology. Although not yet granted, the aim of our growing
number of patent applications is to secure our rights within additional industry sectors we foresee as most readily benefiting from our
technology. Therefore, looking beyond just pain management and urology, our patent applications relate to, inter alia: novel transdermal
patches uniquely configured to work with our ultrasound technology to additionally provide for improved absorption and transdermal delivery
of therapeutic agents during treatment; cosmetic applications of our ultrasound technology to provide anti-aging benefits; and certain
new or improved stand-alone therapeutic medical devices or so-called “indwelling medical devices” (e.g., catheters, intravenous
(IV) needle assemblies, and percutaneous endoscopic gastronomy (PEG) tubes) that include our SAW-generating technology to provide the
accompanying antimicrobial effect for preventing infections typically associated with available indwelling devices.
We
intend to further grow our patent portfolio by continuing to patent new technology as it is developed, to defend intellectual
property as we believe necessary by actively pursuing any infringements, to pursue the commercial opportunities our patents provide
for our innovations, and to continue to develop our brands and trademarks.
Trademarks
In
addition to patent protection, we own numerous registered trademarks for our commercialized WOUNDSHIELD® (in the U.S. and Canada),
NanoVibronix® (in the U.S. and Canada), WOUNDSHIELD® (in the U.S. and Canada), PAINSHIELD®. (in the U.S. and Canada), and
UROSHIELD® (in the U.S.). Generally, the protection afforded by trademarks is perpetual, subject to paying timely renewals and continuing
proper use in commerce. In addition to the above, we expect to pursue additional trademark registrations to the extent we believe they
would be beneficial and cost-effective.
Other
Rights
We
regularly enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and
business partners to protect our trade secrets, proprietary technology and other confidential information. We control the use of our
proprietary technology through relevant provisions, notifications, and disclaimers provided on our website, our customer terms of use,
and our vendor terms and conditions.
Government
Regulation
U.S.
Food and Drug Administration Regulation
Each
of our products must be approved, cleared by, or registered with the U.S. Food and Drug Administration before it is marketed in the United
States. Before and after approval or clearance in the United States, our products, approved or cleared products and product candidates,
are subject to extensive regulation by the U.S. Food and Drug Administration under the Federal Food, Drug, and Cosmetic Act and/or the
Public Health Service Act, as well as by other regulatory bodies. The U.S. Food and Drug Administration regulations govern, among other
things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising
and promotion, import and export, marketing and sales, distribution and market withdrawal and recalls of medical devices
and pharmaceutical products. PainShield has already obtained 510(k) marketing approval by the U.S. Food and Drug Administration.
In
September 2020, the FDA exercised its Enforcement Discretion to allow distribution of the UroShield device in the United States. According
to the FDA, “UroShield® device can use Intended Use Code (IUC) 081.006: Enforcement Discretion per final guidance, and FDA
product code QMK (extracorporeal acoustic wave generating accessory to urological indwelling catheter for use during the COVID-19 pandemic)”.
Accordingly, the FDA’s Enforcement Discretion clears the way for import of UroShield to the U.S. for limited use during the Covid-19
pandemic. The U.S. FDA may terminate or revoke this Enforcement Discretion at any time (after which the applicable products may no longer
be used). The Enforcement Discretion does not ensure that UroShield will obtain 510(k) marketing approval.
U.S.
Food and Drug Administration Approval or Clearance of Medical Devices
In
the United States, medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending
on the extent of controls the U.S. Food and Drug Administration determines are necessary to reasonably ensure their safety and efficacy:
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Class
I: general controls, such as labeling and adherence to quality system regulations, and a pre-market notification (510(k)) unless
exempt; |
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Class
II: special controls, pre-market notification (510(k)) unless exempt, specific controls such as performance standards, patient registries
and post-market surveillance and additional controls such as labeling and adherence to quality system regulations; and |
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Class
III: special controls and approval of a Pre-Market Approval, or PMA, application. |
WoundShield
and PainShield are classified as Class II medical devices and require U.S. Food and Drug Administration authorization prior to marketing,
by means of 510(k) clearance, except for our UroShield product, which we intend to seek clearance from the U.S. Food and Drug Administration
through the de novo classification process, described below.
To
request marketing authorization by means of a 510(k) clearance, we must submit a pre-market notification demonstrating that the proposed
device is substantially equivalent to another legally marketed medical device, has the same intended use, and is as safe and effective
as a legally marketed device and does not raise different questions of safety and effectiveness than a legally marketed device. 510(k)
submissions generally include, among other things, a description of the device and its manufacturing, device labeling, medical devices
to which the device is substantially equivalent, safety and biocompatibility information and the results of performance testing. In some
cases, a 510(k) submission must include data from human clinical studies. Marketing may commence only when the U.S. Food and Drug Administration
issues a clearance letter finding substantial equivalence. The typical duration to receive 510(k) approval is approximately nine months
from the date of the initial 510(k) submission, although there is no guaranty that the timing will not be longer.
The
U.S. Food and Drug Administration may require us to perform clinical studies to show a product candidate’s safety and efficacy
in addition to technological equivalence in support of our filed 510(k). No matter which regulatory pathway we may take in the future
towards marketing products in the United States, we believe we will be required to provide clinical proof of device effectiveness and
safety.
After
a device receives 510(k) clearance, any product modification that could significantly affect the safety or effectiveness of the product,
or that would constitute a significant change in intended use, requires a new 510(k) clearance or, if the device would no longer be substantially
equivalent, would require a PMA. If the U.S. Food and Drug Administration determines that the product does not qualify for 510(k) clearance,
then a company must submit and the U.S. Food and Drug Administration must approve a PMA before marketing can begin.
A
PMA application must provide a demonstration of safety and effectiveness, which generally requires extensive nonclinical and clinical
trial data. Information about the device and its components, device design, manufacturing and labeling, among other information, must
also be included in the PMA. As part of the PMA review, the U.S. Food and Drug Administration will inspect the manufacturer’s facilities
for compliance with quality system regulation requirements, which govern testing, control, documentation and other aspects of quality
assurance with respect to manufacturing. If the U.S. Food and Drug Administration determines the application or manufacturing facilities
are not acceptable, the U.S. Food and Drug Administration may outline the deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any requested additional information, the U.S. Food and Drug Administration
ultimately may decide that the application does not satisfy the regulatory criteria for approval. During the review period, a U.S. Food
and Drug Administration advisory committee, typically a panel of clinicians and statisticians, is likely to be convened to review the
application and recommend to the U.S. Food and Drug Administration whether, or upon what conditions, the device should be approved. The
U.S. Food and Drug Administration is not bound by the advisory panel decision. While the U.S. Food and Drug Administration often follows
the panel’s recommendation, there have been instances where the U.S. Food and Drug Administration has not. If the U.S. Food and
Drug Administration finds the information satisfactory, it will approve the PMA. The PMA approval can include post-approval conditions,
including, among other things, restrictions on labeling, promotion, sale and distribution, or requirements to do additional clinical
studies post-approval. Even after approval of a PMA, a new PMA or PMA supplement is required to authorize certain modifications to the
device, its labeling or its manufacturing process. Supplements to a PMA often require the submission of the same type of information
required for an original PMA, except that the supplement is generally limited to that information needed to support the proposed change
from the product covered by the original PMA. The typical duration to receive PMA approval is approximately two years from the date of
submission of the initial PMA application, although there is no guarantee that the timing will not be longer.
As
stated above, we anticipate that our UroShield product will receive a de novo review from the U.S. Food and Drug Administration. De novo
review is a two-step process that requires a company to submit a 510(k) and complete a standard review, including an analysis of the
risk to the patient and operator associated with the use of the device and the substantial equivalence rationale. Once that has been
accomplished, and the medical device in question has been determined to be not substantially equivalent to another approved device, the
product is automatically classified as a Class III device. The manufacturer can then submit a request for an evaluation to have the product
reclassified from Class III into Class I or Class II. The U.S. Food and Drug Administration will review the device classification proposal
and either recommend special controls to create a new Class I or II device classification or determine that the product is a Class III
device. If the U.S. Food and Drug Administration determines that the level of risk associated with the use of the device is appropriate
for a Class II or Class I designation, then the product can be cleared as a 510(k) and the U.S. Food and Drug Administration will issue
a new classification regulation and product code. If the device is not approved through de novo review, then it must go through the standard
PMA process for Class III devices.
Clinical
Trials of Medical Devices
One
or more clinical trials are generally required to support a PMA application and more recently are becoming necessary to support a 510(k)
submission. Clinical studies of unapproved or uncleared medical devices or devices being studied for uses for which they are not approved
or cleared (investigational devices) must be conducted in compliance with U.S. Food and Drug Administration requirements. If an investigational
device could pose a significant risk to patients, the sponsor company must submit an investigational device exemption application to
the U.S. Food and Drug Administration prior to initiation of the clinical study. An investigational device exemption application must
be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device on humans and
that the testing protocol is scientifically sound. The investigational device exemption will automatically become effective 30 days after
receipt by the U.S. Food and Drug Administration unless the U.S. Food and Drug Administration notifies the company that the investigation
may not begin. Clinical studies of investigational devices may not begin until an institutional review board has approved the study.
During
the study, the sponsor must comply with the U.S. Food and Drug Administration’s investigational device exemption requirements.
These requirements include investigator selection, trial monitoring, adverse event reporting, and record keeping. The investigators must
obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational
devices, and comply with reporting and record keeping requirements. The sponsor, the U.S. Food and Drug Administration, or the institutional
review board at each institution at which a clinical trial is being conducted may suspend a clinical trial at any time for various reasons,
including a belief that the subjects are being exposed to an unacceptable risk. During the approval or clearance process, the U.S. Food
and Drug Administration typically inspects the records relating to the conduct of one or more investigational sites participating in
the study supporting the application.
Post-Approval
Regulation of Medical Devices
After
a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
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the
U.S. Food and Drug Administration quality systems regulation, which governs, among other things, how manufacturers design, test,
manufacture, exercise quality control over, and document manufacturing of their products; |
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labeling
and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other
restrictions on labeling; |
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if applicable, the Electronic Product Regulations found
in 21 CFR parts 1000-1050, which provide additional requirements applicable to electronic products, including records and reporting
requirements; and |
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the
Medical Device Reporting regulation, which requires reporting to the U.S. Food and Drug Administration of certain adverse experiences
associated with use of the product. |
Good
Manufacturing Practices Requirements
Manufacturers
of medical devices are required to comply with the good manufacturing practices set forth in the quality system regulations promulgated
under section 520 of the Food, Drug and Cosmetic Act as further set forth in the Code of Federal Regulations as 21 CFR Part 820. Current
good manufacturing practices (“CGMP”) regulations require, among other things, quality control and quality assurance as well
as the corresponding maintenance of records and documentation. The manufacturing facility for an approved product must meet current good
manufacturing practices requirements to the satisfaction of the U.S. Food and Drug Administration pursuant to a pre-PMA approval inspection
before the facility can be used. Manufacturers, including third party contract manufacturers, are also subject to periodic inspections
by the U.S. Food and Drug Administration and other authorities to assess compliance with applicable regulations. Failure to comply with
or to promptly comply with statutory and regulatory requirements subjects a manufacturer, and possibly us, to possible legal or
regulatory action, including the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending
manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the U.S. Food and
Drug Administration and could result in the imposition of marketing restrictions through labeling changes or in product recall.
Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy
of the product occur following the approval.
International
Regulation
We
are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including
in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations,
duties and tax requirements. The time required to obtain clearance required by foreign countries may be longer or shorter than that required
for U.S. Food and Drug Administration clearance, and requirements for licensing a product in a foreign country may differ significantly
from U.S. Food and Drug Administration requirements.
The
primary regulatory environment in Europe is the European Union, which consists of 27 member states and 32 competent authorities encompassing
most of the major countries in Europe. In the European Union, the European Medicines Agency and the European Union Commission determined
that PainShield, UroShield, and WoundShield are to be regulated as medical device products. These products are classified as Class II
devices. These devices are CE Marked and as such can be marketed and distributed within the European Economic Area. We are required to
be recertified each year for CE by Intertek, which conducts an annual audit. The audit procedure, which includes on-site visits at our
facility, requires us to provide Intertek with information and documentation concerning our management system and all applicable documents,
policies, procedures, manuals, and other information.
The
primary regulatory bodies and paths in Asia, Australia, and Latin America are determined by the requisite country authority. In most
cases, establishment registration and device licensing are applied for at the applicable Ministry of Health through a local intermediary.
The requirements placed on the manufacturer are typically the same as those contained in ISO 9001 or ISO 13485, requirements for quality
management systems published by the International Organization of Standardization. In some countries outside Europe, we are or will be
able to sell on the basis of our CE Mark. We have the Health for PainShield, WoundShield and UroShield, a certificate by the Israel Ministry
of Health allowing us to sell PainShield, WoundShield and UroShield in Israel, a certificate allowing us to sell PainShield in Australia,
and we are able to sell PainShield, WoundShield and UroShield in India and Ecuador based on our CE Mark. In addition, our distributor
in Korea has applied for approval to sell PainShield and UroShield. We generally apply, through our distributor, for approval in a particular
country for a particular product only when we have a distributor in place with respect to such product.
European
Good Manufacturing Practices
In
the European Union, the manufacture of medical devices is subject to good manufacturing practice, as set forth in the relevant laws and
guidelines of the European Union and its member states. Compliance with good manufacturing practice is generally assessed by the competent
regulatory authorities. Typically, quality system evaluation is performed by a notified body, which also recommends to the relevant competent
authority for the European Community CE Marking of a device. The competent authority may conduct inspections of relevant facilities,
and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining approval for each product,
in many cases each device manufacturing facility must be audited on a periodic basis by the notified body. Further inspections may occur
over the life of the product.
U.S.
Fraud and Abuse and Other Health Care Laws
In
the United States, federal and state fraud and abuse laws prohibit the payment or receipt of kickbacks, bribes or other remuneration
intended to induce the purchase or recommendation of health care products and services. Other provisions of federal and state laws prohibit
presenting, or causing to be presented, to third party payers for reimbursement, claims that are false or fraudulent, or which are for
items or services that were not provided as claimed. In addition, other health care 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 health care programs. 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 potential
purchasers of such products. The health care laws that may be applicable to our business or operations include:
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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 health care 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
health care 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, or HIPAA, which prohibits 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 health care 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 health care 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, which
also impose obligations and requirements on health care 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. |
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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 payers, 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. |
Manufacturing
and Suppliers
In
December 2018, we announced we appointed Quasar Engineering Ltd, as contract manufacturer for the PainShield®, UroShield® and
WoundShield®, as well as other devices. Following our agreement with Sanuwave, Quasar is no longer the manufacturer of the WoundShield®.
Quasar is a medical device manufacturer, located in China, with over 30 years of experience, serving major brands worldwide, with complex
catheters, disposables, and U.S. Food and Drug Administration regulated assemblies. Starting in the fourth quarter of 2019, we started
using Quasar to manufacture all of our newly redesigned products. Quasar temporarily shut down for sixty days in early 2020, due to the
COVID-19 outbreak which lead to a significant delay in the production of goods needed to fulfill our sales orders, and became fully operational
in April 2020. Presently, we are no longer experiencing delays in the production of our products.
Quasar
is anticipating the addition of a new manufacturing facility in Singapore late in the third quarter of 2022. Our product manufacturing
will move to this plant when it is on-line. Several components will continue to be produced in China, but final production will be completed
in Singapore.
We
order certain component parts on an as-needed basis, generally from the manufacturer that provides us with the most competitive pricing.
Our most significant suppliers for these components are B Star, Inc, Plastic One, Rotel Product Engineering Ltd., and Sinpro Electronics
Co., Ltd. We do not have written agreements with any of these suppliers, but we believe anyone could be easily replaced if necessary.
Customers
We
currently sell our products both directly, through our website, and indirectly via distribution agreements, with approximately 99% of
our sales coming through distributors in 2021. We expect that percentage to continue to grow as we enter into additional distribution
agreements, until we launch PainShield Relief. We have exclusive and non-exclusive distribution agreements for our products with medical
product distributors based in the United States, in the United Kingdom and various countries throughout Europe, India, Canada and Asia.
Our largest customer is Ultra Pain Products Inc, comprising approximately 77% of total sales.
We
are currently in discussions with several distribution companies with access to various markets in the United States, Europe, and Asia,
as well as Veterans Administration facilities. Our current agreements stipulate that distributors will be responsible for carrying out
local marketing activities and sales. We are responsible for training, providing marketing guidance, marketing materials, and technical
guidance. In addition, in most cases, all sales costs, including sales representatives, incentive programs, and marketing trials, will
be borne by the distributor. We expect any future distribution agreements to contain substantially similar stipulations. Under our current
agreements, distributors purchase our products from us at a fixed price. Our current agreements with distributors are generally for a
term of approximately two to three years and automatically renew for an additional annual terms unless modified by either party.
Employees
Our
People and Human Capital Resources
Employees
As
of December 31, 2021, we had 12 full-time employees and four part-time employees, which is an increase from the 11 full-time employees
and one-part-time employee we had as of December 31, 2020, and as of March 15, 2022, we have added one additional full-time employee
in 2022 We also regularly work with several independent consultants and other contract organizations to support our business and we regularly
evaluate additional talent to help support our product manufacturing, development, financial, and other capabilities.
Diversity
and Inclusion
We
believe that an inclusive culture is required to understand and develop products that benefit all patients. By embracing differences,
we aim to foster an environment of respect and trust in an effort to facilitate creativity, spark passion, and help us achieve better
outcomes for all those who work at the Company. We are committed to creating and maintaining a workplace free from discrimination or
harassment, including on the basis of any class protected by applicable law, and our recruitment, hiring, development, training, compensation,
and advancement practices are based on qualifications, performance, skills, and experience without regard to gender, race, or ethnicity.
Our management team and employees are expected to exhibit and promote honest, ethical, and respectful conduct in the workplace, including
adhering to the standards for appropriate behavior set forth in our code of conduct.
Compensation
and Benefits
We
operate in a highly competitive environment for human capital, particularly as we seek to attract and retain talent with relevant experience
in the medical device sector. Therefore, we strive to provide a total rewards package to our employees that is competitive with our peer
companies, including competitive healthcare benefits and in certain cases, stock options. We also offer paid leave as mandated by government
regulations, flexible work schedules, and other benefits as mandated by government regulations.
We
also offer key employees the benefit of equity ownership in NanoVibronix through stock option grants. We believe these grants both help
promote alignment between our employees and our stockholders and provide retention benefits, as the awards generally vest over a three-year
period.
We
do not have any employees that are represented by a labor union or that have entered into a collective bargaining agreement with the
Company.
Safety,
Wellness, and Our Response to COVID-19
At
NanoVibronix, we believe that health matters to everyone, and the safety health, and wellness of our employees is one of our top priorities.
We are committed to developing and fostering a work environment that is safe, professional, and promotes teamwork, diversity, and trust
in order to afford all of our employees the opportunity to contribute to the best of their abilities.
During
2020 and 2021, in response to the COVID-19 pandemic, we took certain measures and responded to changes in our operational needs, including
actions designed to provide a safe work environment for our employees. These actions included investing in technology solutions to support
increased work-from-home capabilities, shifting work schedules to reduce the number of people present in our offices, requiring mask
wearing and social distancing, making hand sanitizer readily available, and other measures intended to comply with health and safety
protocols as required by federal, state, and local governmental agencies, as well as guidance from the U.S. Centers for Disease Control
and Prevention and similar public health authorities.
Available
Information
The
Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments thereto, are
filed with the SEC. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and files or furnishes reports, proxy statements and other information with the SEC. Such reports and other
information filed by the Company with the SEC are available free of charge on the Company’s website at nanovibronix.com, as soon
as reasonably practicable after we have electronically filed with, or furnished to, the SEC. The SEC maintains an internet site that
contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The contents of these websites are not incorporated into this filing. Further, the Company’s references to website URLs are intended
to be inactive textual references only.
ITEM
1A. RISK FACTORS
Risks
Related to Our Business
We
have a history of losses and we expect to continue to incur losses and may not achieve or maintain profitability.
For
the fiscal year ended December 31, 2021 we had a net loss of approximately $14.3 million, with revenues of approximately $1.7 million.
As of December 31, 2021, we had an accumulated deficit of approximately $57 million. We expect to incur losses for at least the next
year, as we continue to incur expenses related to seeking U.S. Food and Drug Administration approval for UroShield, and market acceptance
of PainShield, which will require costly additional clinical trials and research, further product development and professional fees associated
with regulatory compliance. Even if we succeed in commercializing our new products, we may not be able to generate sufficient revenues
to cover our expenses and achieve profitability or be able to maintain profitability.
Global
economic and political instability and conflicts, such as the conflict between Russia and Ukraine, could adversely affect our business,
financial condition or results of operations.
Our
business could be adversely affected by unstable economic and political conditions within the United States and foreign jurisdictions
and geopolitical conflicts, such as the conflict between Russia and Ukraine. While we do not have any customer or direct supplier relationships
in either country at this time, the current military conflict, and related sanctions, as well as export controls or actions that may
be initiated by nations including the United States, the European Union or Russia (e.g., potential cyberattacks, disruption of energy
flows, etc.) and other potential uncertainties could adversely affect our business and/or our supply chain, business partners, employees
or customers, and interrupt our ability to supply products, or otherwise adversely impact our business.
Increasing
inflation could adversely affect our business, financial condition, results of operations or cash flows.
Inflation,
as well as some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb
inflation may have negative effects on the economies of those countries generally. If the United States or other countries where we operate
experience substantial inflation in the future, our business may be adversely affected. This could have a material adverse effect on
our business, financial condition, results of operations, or cash flows. Specifically, our existing distributor agreements limit the
amount that we can increase the price that we sell our products to the distributors. Accordingly, an inflationary environment, including
factors such as increasing freight and materials prices, could make it less profitable for us to do business.
The
ongoing COVID-19 pandemic has and may continue to adversely impact our business.
The
ongoing COVID-19 pandemic has and may continue to adversely impact our business, as our operations are based in and rely on third parties
located in countries affected by the pandemic. Our third-party manufacturer, which is based in China, temporarily shut down for sixty
days during 2020 due to the pandemic and became fully operational in April 2020 which led to a significant delay in the production of
goods needed to fulfill our sales orders which were scheduled to be fulfilled in our first quarter of 2020. We were able to fulfill these
orders in the second quarter of 2020. Additionally, the notified regulatory body we rely on to obtain European CE approval is located
in Italy and was shut down for approximately six weeks from March to April 2020, which delayed our submission for CE mark approval for
the year 2020. The CE Mark approval was subsequently approved in April 2020. The various precautionary measures taken by many governmental
authorities around the world in order to limit the spread of COVID-19 have had and may continue to have an adverse effect on the global
markets and global economy, including on the availability and pricing of employees, resources, materials, manufacturing and delivery
efforts and other aspects of the global economy. The financial downturn had compelled us to furlough or reduce working hours for much
of our operating staff in 2020, and continue to force remaining staff as well as third-party contractors, to work remotely from time
to time. In addition, many staff members continue to operate remotely from their homes, which is continuing to result in delays in obtaining
certain financial records. We also rely on third-party professionals to provide services such as the preparation of our financial statements
and to conduct audits, and many of these parties have been affected by government-imposed precautionary measures, thereby delaying our
receipt of these services. Such government-imposed precautionary measures may have been relaxed in certain countries or states, but there
is no assurance that more strict measures will be put in place again due to a resurgence in COVID-19 cases. Therefore, the COVID-19 pandemic
has and may again disrupt production and cause delays in the development, supply and delivery of our products, our operation, further
divert the attention and efforts of the medical community coping with COVID-19 and disrupt the marketplace in which we operate. The extent
to which COVID-19 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 COVID-19, its variants and the actions to contain COVID-19 or treat its impact,
among others. The COVID-19 pandemic could continue to materially disrupt our business and operations, hamper our ability to raise additional
funds or sell or securities, continue to slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and
make it hard to adequately staff our operations.
If
we are unable to raise additional capital, our clinical trials and product development will be limited and our long-term viability will
be threatened; however, if we do raise additional capital, your percentage ownership as a stockholder could decrease and constraints
could be placed on the operations of our business.
We
have experienced negative operating cash flows since our inception and have funded our operations primarily from proceeds of the sale
of our securities, with only limited revenue being generated from our product sales. In order to fully realize our business objectives,
we may need to raise additional capital. We will seek to raise such additional funds through equity or debt financings, or strategic
alliances with third parties, either alone or in combination with equity financings. These financings could result in substantial dilution
to the holders of our common stock, or require contractual or other restrictions on our operations or on alternatives that may be available
to us. If we raise additional funds by issuing debt securities, these debt securities could impose significant restrictions on our operations
through the imposition of restrictive covenants and requiring us to pledge assets in order to secure repayment. In addition, if we raise
funds through the sale of equity, we may issue equity securities with rights superior to our common stock, including voting rights, rights
to proceeds upon our liquidation or sale, rights to dividends and rights to appoint board members. There can be no assurance that we
will be able to complete a required financing on acceptable terms or at all. If such financing is not available on satisfactory terms,
or is not available in sufficient amounts, we may be required to delay, limit or eliminate the development of business opportunities.
The failure to procure such required financing could have a material adverse effect on our business, financial condition and results
of operations, or threaten our ability to continue as a going concern.
A
variety of factors could impact the timing and amount of any required financings, including, without limitation:
|
● |
unforeseen
developments during our clinical trials; |
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● |
delays
in our receipt of required regulatory approvals; |
|
● |
delayed
market acceptance of our products; |
|
● |
unanticipated
expenditures in our acquisition and defense of intellectual property rights, and/or the loss of those rights; |
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● |
the
failure to develop strategic alliances for the marketing of some of our product candidates; |
|
● |
unforeseen
changes in healthcare reimbursement for any of our approved products; |
|
● |
lack
of financial resources to adequately support our operations; |
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● |
difficulties
in maintaining commercial scale manufacturing capacity and capability; |
|
● |
unanticipated
difficulties in operating in international markets; |
|
● |
unanticipated
financial resources needed to respond to technological changes and increased competition; |
|
● |
unforeseen
problems in attracting and retaining qualified personnel; |
|
● |
enactment
of new legislation or administrative regulations; |
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● |
the
application to our business of new regulatory interpretations; |
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● |
claims
that might be brought in excess of our insurance coverage; |
|
● |
the
failure to comply with regulatory guidelines; and |
|
● |
the
uncertainty in industry demand; |
|
● |
the
delisting of our common stock from the NASDAQ Capital Market; and |
|
● |
the
geographic, social and economic impact of COVID-19 on the Company’s business operations. |
Any
required financing efforts may divert our management from their day-to-day activities, which may adversely affect its ability to develop
and commercialize our products Moreover, if we complete additional financing by issuing equity securities, the percentage ownership of
its existing stockholders may be reduced, and accordingly these stockholders may experience substantial dilution. Given our need for
cash and that equity issuances are the most common type of fundraising for similarly situated companies, the risk of dilution is particularly
significant for our stockholders.
In
addition, although we have no present commitments or understandings to do so, we may seek to expand our operations and product lines
through acquisitions or joint ventures. Any acquisition or joint venture would likely increase our capital requirements.
If
we fail to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable
markets for our approved products or the markets may be much smaller than expected.
The
availability and levels of reimbursement by governmental and other third party payers affect the market for our approved products. The
efficacy, safety, performance and cost-effectiveness of our product and product candidates, and of any competing products, will determine
the availability and level of reimbursement. Reimbursement and healthcare payment systems 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 approved
products to other available therapies. We may not obtain reimbursement or pricing approvals in markets we seek to enter in a timely manner,
if at all. Our failure to receive reimbursement or pricing approvals in target markets would negatively impact market acceptance of our
products in these jurisdictions, placing us at a material cost disadvantage to our competitors.
Even
if we obtain reimbursement approvals for our products, we believe that, in the future, reimbursement for any of our products or product
candidates may be subject to increased restrictions both in the United States and in international markets. Future legislation, regulation
or policies of third party payers that limit reimbursement may adversely affect the demand for our products currently under development
and our ability to sell our products on a profitable basis. In addition, third party payers continually attempt to contain or reduce
the costs of healthcare by challenging the prices charged for healthcare products and services.
In
the United States, specifically, health care providers, such as hospitals and clinics, and individual patients, generally rely on third-party
payers. Third-party reimbursement is dependent upon decisions by the Centers for Medicare and Medicaid Services, contracted Medicare
carriers or intermediaries, individual managed care organizations, private insurers, other governmental health programs and other payers
of health care costs. Failure to receive or maintain favorable coding, coverage and reimbursement determinations for our products by
these organizations could discourage medical practitioners from using or prescribing our products due to their costs. In addition, with
recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures
will likely continue to focus on health care reform including the reform of the Medicare and Medicaid programs, and on the cost of medical
products and services, which could limit reimbursement. Additionally, third-party payers are increasingly challenging the prices charged
for medical products and services, and imposing conditions on payment. We may be unable to sell our products on a profitable basis if
third-party payers deny coverage, provide low reimbursement rates or reduce their current levels of reimbursement.
The
medical device and therapeutic product industries are highly competitive and subject to rapid technological change. If our competitors
are able to develop and market products that are safer and more effective than any products we may develop, our commercial opportunities
will be reduced or eliminated.
Our
success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products. We face
competition from established medical device companies, such as Neurometrix Inc., Zetrox, Kinetic Concepts, Inc., (a subsidiary of the
3M Company) and Smith & Nephew plc, manufacturers of certain portable ultrasound devices capable of self-administered use, as well
as from academic institutions, government agencies, and private and public research institutions in the United States and abroad. Most,
if not all, of our principal competitors have significantly greater financial resources and expertise than we do in research and development,
manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, marketing approved products, protecting
and defending their intellectual property rights and designing around the intellectual property rights of others. Other small or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements, or mergers with, or acquisitions
by, large and established companies, or through the development of novel products and technologies.
The
industry in which we operate has undergone, and we expect it to continue to undergo, rapid and significant technological change, and
we expect competition to intensify as technological advances are made. Our competitors may be able to respond to changes in technology
or the marketplace faster than us. Our competitors may develop and commercialize medical devices that are safer or more effective or
are less expensive than any products that we may develop. We also compete with our competitors in recruiting and retaining qualified
scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring
technologies complementary to our programs or advantageous to our business. Given our small size and lack of resources, we are often
at a disadvantage with our competitors in all of these areas, which could limit or eliminate our commercial opportunities.
We
face the risk of product liability claims and may not be able to obtain insurance.
Our
business exposes us to the risk of product liability claims that are inherent in the development of medical devices and products. If
the use of one or more of our products harms people, we may be subject to costly and damaging product liability claims brought against
us by clinical trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. We currently
carry clinical trial and product liability insurance for the products we sell. However, we cannot predict all of the possible harms or
side effects that may result and, therefore, the amount of insurance coverage we hold may not be adequate to cover all liabilities we
might incur. We intend to expand our insurance coverage to include the sale of additional commercial products as we obtain marketing
approval for our product candidates in development and as our sales expand, but we may be unable to obtain commercially reasonable product
liability insurance for such products. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential
product liability claims and we continue to make sales, or if our coverages turns out to be insufficient, we may be exposed to significant
liabilities, which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused
by our products and do not have sufficient insurance coverage, our liability could exceed our total assets and our ability to pay the
liability. A product liability claim or series of claims brought against us would decrease our cash and could reduce our value or marketability.
Our
product candidates may not be developed or commercialized successfully.
Our
product candidates are based on a technology that has not been used previously in the manner we propose and must compete with more established
treatments currently accepted as the standards of care. Market acceptance of our products will largely depend on our ability to demonstrate
their relative safety, efficacy, cost-effectiveness and ease of use.
We
are subject to the risks that:
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● |
the
U.S. Food and Drug Administration or a foreign regulatory authority finds our product candidates ineffective or unsafe; |
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● |
we
do not receive necessary regulatory approvals; |
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● |
the
regulatory review and approval process may take much longer than anticipated, requiring additional time, effort and expense to respond
to regulatory comments and/or directives; |
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● |
we
are unable to get our product candidates in commercial quantities at reasonable costs; and |
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● |
the
patient and physician community does not accept our product candidates. |
In
addition, our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, including:
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● |
adverse
or ambiguous results; |
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● |
undesirable
side effects that delay or extend the trials; |
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● |
the
inability to locate, recruit, qualify and retain a sufficient number of clinical investigators or patients for our trials; and |
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regulatory
delays or other regulatory actions. |
Additionally,
we currently have limited experience in marketing or selling our products, and we have a limited marketing and sales staff and distribution
capabilities. Developing a marketing and sales force is time-consuming and will involve the investment of significant amounts of financial
and management resources, and could delay the launch of new products or expansion of existing product sales. In addition, we compete
with many companies that currently have extensive and well-funded marketing and sales operations. If we fail to establish successful
marketing and sales capabilities or fail to enter into successful marketing arrangements with third parties, our ability to generate
revenues will suffer.
Furthermore,
even if we enter into marketing and distributing arrangements with third parties, we may have limited or no control over the sales, marketing
and distribution activities of these third parties, and these third parties may not be successful or effective in selling and marketing
our products. If we fail to create successful and effective marketing and distribution channels, our ability to generate revenue and
achieve our anticipated growth could be adversely affected. If these distributors experience financial or other difficulties, sales of
our products could be reduced, and our business, financial condition and results of operations could be harmed.
We
cannot predict whether we will successfully develop and commercialize our product candidates. If we fail to do so, we will not be able
to generate substantial revenues, if any.
If
we fail to retain our key management, or to attract and keep additional key personnel, we may be unable to successfully execute our business
plan.
Our
success depends on our ability to attract, retain and motivate highly qualified management and personnel. As a small company with ten
full-time employees and four contract employees, our success depends on the continuing contributions of our management team and qualified
personnel and on our ability to attract and retain highly qualified personnel. We face intense competition in our hiring efforts from
other medical device companies, as well as from universities and nonprofit research organizations, and we may have to pay higher salaries
to attract and retain qualified personnel. We are also at a disadvantage in recruiting and retaining key personnel as our small size
and limited resources may be viewed as providing a less stable environment, with fewer opportunities than would be the case at one of
our larger competitors. The loss of one or more of these individuals, or our inability to attract additional qualified personnel, could
substantially impair our ability to implement our business plan. In addition, the replacement of key personnel likely would involve significant
time and costs, and may significantly delay or prevent the achievement of our business objectives.
Our
need to increase the size of our organization and may not successfully manage our growth.
We
are a clinical-stage company with a small number of planned employees, and our management systems currently in place are not likely to
be adequate to support our future growth plans. Our ability to grow and to manage our growth effectively will require us to hire, train,
retain, manage and motivate additional employees and to implement and improve its operational, financial and management systems. These
demands also may require the hiring of additional senior management personnel or the development of additional expertise by our senior
management personnel. Hiring a significant number of additional employees, particularly those at the management level, would increase
our expenses significantly. Moreover, if we fail to expand and enhance its operational, financial and management systems in conjunction
with its potential future growth, such failure could have a material adverse effect on our business, financial condition and results
of operations.
Our
failure to protect our intellectual property rights could diminish the value of our solutions, weaken our competitive position and reduce
our revenue.
We
regard the protection of our intellectual property, which includes patents and patent applications, trade secrets, trademarks and domain
names, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law
rights, as well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees, consultants
and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure
and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual
property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies
by others.
We
have obtained patents and we have patent applications pending in both the United States and foreign jurisdictions. There can be no assurance
that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, or that these
patents will not be challenged by third parties or found to be invalid or unenforceable. We have also obtained trademark registration
in the United States and in foreign jurisdictions. Effective trade secret, trademark and patent protection is expensive to develop and
maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to
protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or
which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through
additional patent filings that could be expensive and time-consuming.
Monitoring
unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate
to prevent misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps
to enforce, our intellectual property rights. Further, our competitors may independently develop technologies that are similar to ours
but which avoid the scope of our intellectual property rights. Further, the laws in the United States and elsewhere change rapidly, and
any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property
could result in competitors offering solutions that incorporate our most technologically advanced features, which could seriously reduce
demand for our products. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we
are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel,
which could harm our business, whether or not the litigation results in a determination that is unfavorable to us. In addition, litigation
is inherently uncertain, and thus we may not be able to stop our competitors from infringing our intellectual property rights.
We
could incur substantial costs and disruption to our business as a result of any dispute related to, or claim of infringement of another
party’s intellectual property rights, which could harm our business and operating results.
In
recent years, there has been significant litigation in the United States over patents and other intellectual property rights. From time
to time, we may face allegations that we or customers who use our products have infringed the trademarks, copyrights, patents and other
intellectual property rights of third parties, including allegations made by our competitors or by non-practicing entities, or that we
or our customers have misappropriated the intellectual property rights of such third parties. We cannot predict whether assertions of
third party intellectual property rights or claims arising from these assertions will substantially harm our business and operating results.
If we are forced to defend any infringement or misappropriation claims or attacks on the validity of our intellectual property rights,
whether they are with or without merit or are ultimately determined in our favor, we may face costly litigation and diversion of technical
and management personnel. Most of our competitors have substantially greater resources than we do and are able to sustain the cost of
complex intellectual property litigation to a greater extent and for longer periods of time than we could. Furthermore, an adverse outcome
of a dispute may require us, among other things: to pay damages, potentially including treble damages and attorneys’ fees, if we
are found to have willfully infringed a party’s patent or other intellectual property rights; to cease making, licensing or using
products that are alleged to incorporate or make use of the intellectual property of others; to expend additional development resources
to redesign our products; and to enter into potentially unfavorable royalty or license agreements in order to obtain the rights to use
necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. In any
event, we may need to license intellectual property which would require us to pay royalties or make one-time payments. Even if these
matters do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary
to resolve them could harm our business, operating results, financial condition and reputation.
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.
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.
Risks
Related to the Regulation of Our Products
We
are subject to extensive governmental regulation, including the requirement of U.S. Food and Drug Administration approval or clearance
before our product candidates may be marketed and after approval or clearance and during the marketing of our products.
The
process of obtaining U.S. Food and Drug Administration approval is lengthy, expensive and uncertain, and we cannot be sure that our additional
product candidates will be approved in a timely fashion, or at all. If the U.S. Food and Drug Administration does not approve or clear
our product candidates in a timely fashion, or at all, our business and financial condition would likely be adversely affected.
Both
before and after approval or clearance of our product candidates, we, our product candidates, our suppliers and our contract manufacturers
are subject to extensive regulation by governmental authorities in the United States and other countries. Failure to comply with applicable
requirements could result in, among other things, any of the following actions:
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FDA
issuance of Form 483 or Warning Letters, which may be made public and may lead to further regulatory or enforcement actions, or similar
letters by other regulatory authorities; |
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fines
and other monetary penalties; |
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unanticipated
expenditures; |
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delays
in U.S. Food and Drug Administration approval and clearance, or U.S. Food and Drug Administration refusal to approve or clear a product
candidate; |
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product
recall or seizure; |
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interruption
of manufacturing or clinical trials; |
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operating
restrictions; |
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injunction
or other restrictions imposed on our operations, including closing our facilities or our contract manufacturers’ facilities;
or |
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criminal
prosecutions. |
In
addition to the approval and clearance requirements, numerous other regulatory requirements apply, both before and after approval or
clearance, to us, our products and product candidates, and our suppliers and contract manufacturers. These include requirements related
to the following:
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testing
and quality control; |
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manufacturing; |
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quality
assurance |
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labeling; |
|
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advertising; |
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promotion
(including the prohibition on promoting devices for “off-label”uses); |
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distribution; |
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export; |
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reporting
to the U.S. Food and Drug Administration certain adverse experiences associated with the use of the products, as well as our discovery
of defects or a product’s failure to comply with design specifications or applicable law; and |
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obtaining
additional approvals or clearances for certain modifications to the products or their labeling or claims. |
We
are also subject to inspection by the U.S. Food and Drug Administration to determine our compliance with regulatory requirements, as
are our suppliers and contract manufacturers, and we cannot be sure that the U.S. Food and Drug Administration will not identify compliance
issues that may disrupt production or distribution, or require substantial resources to correct. We also cannot be sure that the U.S.
Food and Drug Administration will agree with our analysis of, conclusions regarding, or handling of various situations that arise with
our products. If it is determined that we failed to comply with any of our regulatory obligations, we could be subject to a wide range
of enforcement actions that could limit our ability to continue to successfully commercialize impacted products or otherwise adversely
impact us.
The
U.S. Food and Drug Administration’s requirements may change and additional government regulations may be promulgated that could
affect us, our product candidates, and our suppliers and contract manufacturers. We cannot predict the likelihood, nature or extent of
government regulation that may arise from future legislation or administrative action. There can be no assurance that we will not be
required to incur significant costs to comply with such laws and regulations in the future, or that such laws or regulations will not
have a material adverse effect upon our business.
UroShield
has not been cleared or approved by the FDA, nor has it undergone the same type of review as an FDA-approved or cleared device.
In
September 2020, the FDA exercised its Enforcement Discretion to allow distribution of our UroShield device in the United States. This
temporary authorization is limited to use as an extracorporeal acoustic wave generating accessory to urological indwelling catheter for
use during the COVID-19 pandemic. The FDA may terminate or revoke this enforcement discretion policy at any time (after which the applicable
products may no longer be used). There is no guarantee that our collaborators or customers will purchase or use the UroShield, that any
sales of UroShield by us will generate any revenue or profits, or that we will ever be successful in obtaining FDA clearance or approval
for the UroShield.
Failure
to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.
International
sales of our products and any of our product candidates that we commercialize are subject to the regulatory requirements of each country
in which the products are sold. Accordingly, the introduction of our product candidates in markets outside the United States where we
do not already possess regulatory approval will be subject to regulatory approvals in those jurisdictions. The regulatory review process
varies from country to country. Many countries impose product standards, packaging and labeling requirements, and import restrictions
on medical devices. In addition, each country has its own tariff regulations, duties and tax requirements, as well as reimbursement and
healthcare payment systems. The approval by foreign government authorities is unpredictable and uncertain, and can be expensive. We may
be required to perform additional pre-clinical, clinical or post-approval studies even if U.S. Food and Drug Administration approval
has been obtained. Our ability to market our approved products could be substantially limited due to delays in receipt of, or failure
to receive, the necessary approvals or clearances.
We
are uncertain regarding the success of our clinical trials for our products in development.
We
believe that all of our products in development, which currently consists of only RenooSkin, will require clinical trials to determine
their safety and efficacy by regulatory bodies in their target markets, including the U.S. Food and Drug Administration and various foreign
regulators. There can be no assurance that we will be able to successfully complete the U.S. and foreign regulatory approval processes
for products in development. In addition, there can be no assurance that we will not encounter additional problems that will cause us
to delay, suspend or terminate our clinical trials. In addition, we cannot make any assurance that clinical trials will be deemed sufficient
in size and scope to satisfy regulatory approval requirements, or, if completed, will ultimately demonstrate our products to be safe
and efficacious.
We
depend on Sanuwave for developing and commercializing our WoundShield technology.
In
March 2020, we entered into a license agreement with Sanuwave for the manufacture and delivery of our WoundShield technology. Under this
agreement, Sanuwave has received the worldwide, exclusive rights to our WoundShield technology. Sanuwave will bear the cost and clinical
validation responsibilities associated with obtaining approval for WoundShield from the FDA and other regulatory agencies around the
world. Sanuwave is also responsible for manufacturing and commercializing the WoundShield product and technology. Our right to receive
a milestone payment under the license agreement depends on the achievement of FDA approval by Sanuwave and our ability to receive royalties
under the agreement depends on Sanuwave’s successful commercialization of the WoundShield product and technology.
The
development and commercialization of the WoundShield product and technology and our ability to receive a potential milestone and royalty
payments under the license agreement with Sanuwave, could be adversely affected if Sanuwave:
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lacks or does not devote sufficient time and resources to the development and commercialization of the WoundShield product and technology;
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lacks or does not devote sufficient capital to fund the development and commercialization of the WoundShield product and technology;
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develops, either alone or with others, products that compete with the WoundShield product and technology;
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fails to gain the requisite regulatory approvals for the WoundShield product and technology;
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does not successfully commercialize the WoundShield product and technology;
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does not conduct its activities in a timely manner;
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terminates its license with us; or
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does not effectively pursue and enforce intellectual property rights relating to the WoundShield product and technology.
We
have limited or no control over the occurrence of any of the foregoing. Furthermore, disagreements with Sanuwave could lead to disputes,
which could be time-consuming and expensive. If any of these issues arise, it may delay the development and commercialization milestone
and royalties based on further development and sales of the WoundShield product and technology.
Healthcare
reform measures could adversely affect our business and financial results.
In
the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare
system in ways that may adversely affect our business and financial results. Federal and state lawmakers regularly propose and, at times,
enact legislation that could result in significant changes to the healthcare system, some of which are intended to contain or reduce
the costs of medical products and services. Current and future legislative proposals to further reform healthcare or reduce healthcare
costs may limit coverage of or lower reimbursement for our products. The cost containment measures that payers and providers are instituting
and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our products.
For example, the Patient Protection and Affordable Act of 2010, commonly referred to as the Affordable Care Act, contains a number of
provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures,
all of which will impact existing government healthcare programs and will result in the development of new programs.
There
have been executive, judicial and Congressional challenges to certain aspects of the Affordable Care Act. For example, President Trump
signed several Executive Orders and other directives designed to delay the implementation of certain provisions of the Affordable Care
Act. Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the Affordable Care Act. While Congress
has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the Affordable Care Act such as
removing penalties, starting January 1, 2019, for not complying with the Affordable Care Act’s individual mandate to carry health
insurance and delaying the implementation of certain fees mandated by the Affordable Care Act. On December 14, 2018, a Texas U.S. District
Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the individual mandate was repealed by Congress
as part of the Tax Cuts and Jobs Act of 2017. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld
the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine
whether the remaining provisions of the Affordable Care Act are invalid as well. The United States Supreme Court is currently reviewing
this case, but it is unknown when a decision will be reached. Although the Supreme Court has not yet ruled on the constitutionality of
the Affordable Care Act, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from
February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace.
The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit
access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements,
and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the Affordable Care
Act. It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration
will impact the Affordable Care Act and negatively affect our business, financial condition and results of operations.
The
current presidential administration and Congress may pursue significant changes to the current healthcare laws. We face uncertainties
that might result from modifications or repeal of any of the provisions of the Affordable Care Act, including as a result of current
and future executive orders and legislative actions. The impact of those changes on us and potential effect on our industry as a whole
is currently unknown. Any changes to the Affordable Care Act are likely to have an impact on our results of operations, and may negatively
affect our business, financial condition and results of operations. We cannot predict what other healthcare programs and regulations
will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States
may negatively affect our business, financial condition and results of operations.
We
expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential
administration. Changes in healthcare policy could increase our costs and subject us to additional regulatory requirements that may interrupt
commercialization of our current and future solutions. Changes in healthcare policy could increase our costs, decrease our revenue and
impact sales of and reimbursement for our current and future products.
Further,
it is possible that additional governmental action is taken in response to the COVID-19 pandemic.
If
we fail to comply with the U.S. federal and state fraud and abuse and other health care laws and regulations, we could be subject to
criminal and civil penalties and exclusion from the Medicare and Medicaid programs, which would have a material adverse effect on our
business and results of operations.
All
of our financial relationships with health care providers and others who provide products or services to federal health care program
beneficiaries are potentially governed by the federal and state fraud and abuse laws, and other health care laws and regulations may
be or become applicable to our business and operations and expose us to risk. For example:
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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 health care 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
health care 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, or HIPAA, which prohibits 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 health care 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 health care 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, which
also impose obligations and requirements on health care 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. |
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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 payers, 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. |
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
business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation
has strengthened these laws. Efforts to ensure that our business arrangements with third parties and our operations are compliant with
applicable health care laws and regulations will involve the expenditure of appropriate, and possibly significant, resources. If we are
found to be in violation of any current or future statutes or regulations involving applicable fraud and abuse or other health care laws
and regulations, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment,
exclusion from government funded health care programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished
profits and future earnings, which could have a material adverse effect on our business, results of operations and financial condition.
If any physicians or other health care providers or entities with whom we expect to do business are found to not be in compliance with
applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded health
care programs, which could adversely affect our ability to operate our business and our results of operations.
Risks
Related to our Operations in Israel
We
conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability
in Israel and its region.
Our
principal offices and manufacturing facilities are located in Israel and most of our officers and employees are residents of Israel.
Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since
the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors.
Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners
could adversely affect our operations and results of operations and could make it more difficult for us to raise capital. Civil unrest
and political turbulence has occurred in other countries in the region, including Syria which shares a common border with Israel, and
is affecting the political stability of those countries. The civil war that has been ongoing in Syria has escalated, and this instability
and any intervention may lead to additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely
believed to be developing nuclear weapons. Iran also has a strong influence among extremist groups in the region. These situations may
potentially escalate in the future to more violent events which may affect Israel and our operations. Any armed conflicts, terrorist
activities or political instability in the region could adversely affect business conditions and could harm our results of operations.
For example, any major escalation in hostilities in the region could result in a portion of our employees being called up to perform
military duty for an extended period of time. Our operations could be disrupted by the absence of a significant number of our employees.
Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing
us to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties
with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under
those agreements pursuant to force majeure provisions in such agreements.
Our
commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle
East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks
or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have
a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect
business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business
and trade activity with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact
on our operating results, financial condition or the expansion of our business.
Because
a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency
fluctuations and inflation.
We
expect our revenues from future licensing agreements to be denominated mainly in U.S. dollars or in Euros. We pay a substantial portion
of our expenses in U.S. dollars; however, a portion of our expenses, related to salaries of the employees in Israel and payment to part
of the service providers in Israel and other territories, are paid in New Israeli Shekels, or NIS, and in other currencies. In addition,
a portion of our financial assets is held in NIS and in other currencies. As a result, we are exposed to the currency fluctuation risks,
and we do not attempt to hedge against such risks. For example, if the NIS strengthens against the U.S. dollar, our reported expenses
in U.S. dollars may be higher than anticipated. In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our
financial assets held in NIS will decline.
It
may be difficult for investors in the United States to enforce any judgments obtained against us or any of our directors or officers.
Almost
all of our assets are located outside the United States, although we do maintain a permanent place of business within the United States.
In addition, some of our officers and directors are nationals and/or residents of countries other than the United States, and all or
a substantial portion of such persons’ assets are located outside the United States. 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. directors or officers, including judgments
predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Additionally, it may
be difficult to assert U.S. securities law claims in actions originally instituted outside of the United States. 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.
Risks
Related to Our Organization and Our Securities
The
price of our securities may be volatile, and the market price of our securities may drop below the price you pay.
We
expect that the price of our securities will fluctuate significantly. Market prices for securities of early-stage medical device companies
have historically been particularly volatile. In addition to the factors discussed in this “Risk Factors” section and elsewhere
in this report, these factors include:
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progress,
or lack of progress, in developing and commercializing our products; |
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favorable
or unfavorable decisions about our products or intellectual property from government regulators, insurance companies or other third-party
payers; |
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our
ability to recruit and retain qualified regulatory and research and development personnel; |
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changes
in investors’ and securities analysts’ perception of the business risks and conditions of our business; |
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changes
in our relationship with key collaborators; |
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changes
in the market valuation or earnings of our competitors or companies viewed as similar to us; |
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changes
in key personnel; |
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depth
of the trading market in our common stock; |
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changes
in our capital structure, such as future issuances of securities or the incurrence of additional debt; |
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the
granting or exercise of employee stock options or other equity awards; |
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realization
of any of the risks described under this section entitled “Risk Factors”; and |
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general
market and economic conditions. |
In
recent years, the stock markets, in general, have experienced extreme price and volume fluctuations especially in the biotechnology sector.
Broad market and industry factors may materially harm the market price of shares of our common stock. In the past, following periods
of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against
that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and
resources could be diverted. On March 12, 2020, the WHO declared COVID-19 to be a pandemic, and the COVID-19 pandemic has resulted in
significant financial market volatility and uncertainty in recent weeks. In addition, U.S. and global markets are experiencing volatility
and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. A
continuation or worsening of the levels of market disruption and volatility could have an adverse effect on our ability to access capital,
on our business, results of operations and financial condition, and on the market price of our common shares.
We
have a significant number of warrants and options, and future sales of our common stock upon exercise of these options or warrants, or
the perception that future sales may occur, may cause the market price of our common stock to decline, even if our business is doing
well.
Sales
of a significant number of shares of our common stock in the public market could harm the market price of our common stock and make it
more difficult for us to raise funds through future offerings of common stock. Our stockholders and the holders of our outstanding warrants
and options, upon exercise of these options or warrants, may sell substantial amounts of our common stock in the public market. The availability
of these shares of our common stock for resale in the public market has the potential to cause the supply of our common stock to exceed
investor demand, thereby decreasing the price of our common stock.
In
addition, the fact that our stockholders and holders of our warrants and options can sell substantial amounts of our common stock 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.
Although
our shares of common stock are listed on the NASDAQ Capital Market, we currently have a limited trading volume, which results in higher
price volatility for, and reduced liquidity of, our common stock.
Although
our shares of common stock are listed on the NASDAQ Capital Market under the symbol “NAOV,” trading volume in our common
stock has been limited and an active trading market for our shares of common stock may never develop or be maintained. The absence of
an active trading market increases price volatility and reduces the liquidity of our common stock. As long as this condition continues,
the sale of a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices
prevailing immediately before such shares are offered.
If
we fail to comply with the continued listing requirements of the NASDAQ Capital Market, our common stock may be delisted and the price
of our common stock and our ability to access the capital markets could be negatively impacted.
Our
common stock is currently listed for trading on the NASDAQ Capital Market. We must satisfy NASDAQ’s continued listing requirements,
including, among other things, a minimum stockholders’ equity of $2.5 million and a minimum closing bid price of $1.00 per
share or risk delisting, which would have a material adverse effect on our business. A delisting of our common stock from the NASDAQ
Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price
of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable
to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business
development opportunities.
On
March 2 2022, the Company received notice from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid
price of the Company’s common stock for the 30 consecutive business day period between January
14, 2022, through March 1, 2022, we did not meet the minimum bid price of $1.00 per share required for continued listing on the
Nasdaq Capital Market pursuant to Nasdaq Listing Rule 555(a)(2). The letter also indicated that the Company will be provided with a compliance
period of 180 calendar days, or until August 29, 2022 (the “Compliance Period”), in which to regain compliance pursuant to
Nasdaq Listing Rule 5810(c)(3)(A).
There
is no assurance that we can regain compliance with such minimum listing requirements. If our common stock were delisted from NASDAQ,
trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the
OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain
accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell
our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed
on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny
stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with
the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing
a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade
in our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable
to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business
development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of
our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition
and results of operations, including our ability to attract and retain qualified employees and to raise capital.
If
we fail to maintain effective internal control over financial reporting, our business, financial condition or results of operations may
be adversely affected.
As
a public reporting company, we are required to establish and maintain effective internal control over financial reporting. Failure to
establish such internal control, or any failure of such internal control once established, could adversely impact our public disclosures
regarding our business, financial condition or results of operations. Any failure of our internal control over financial reporting could
also prevent us from maintaining accurate accounting records and discovering accounting errors and financial frauds.
Rules
adopted by the Securities and Exchange Commission pursuant to Section 404 of Sarbanes-Oxley Act of 2002 require annual assessment of
our internal control over financial reporting. The standards that must be met for management to assess the internal control over financial
reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards.
We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting.
If we cannot assess our internal control over financial reporting as effective, investor confidence and share value may be negatively
impacted. In addition, management’s assessment of internal control over financial reporting may identify weaknesses and conditions
that need to be addressed in our internal control over financial reporting or other matters that may raise concerns for investors. Any
actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting (including those
weaknesses identified in our periodic reports), or disclosure of management’s assessment of our internal control over financial
reporting may have an adverse impact on the price of our securities.
As
disclosed in Part II, Item 9A, “Controls and Procedures,” we have identified material weaknesses in our internal control
over financial reporting due to a lack of a full and complete testing of our disclosure controls and procedures. We concluded that our
internal control over financial reporting and related disclosure controls and procedures were not effective as of December 31, 2021.
Our management is in the process of implementing remediation measures with respect to the controls and written policies and procedures
as described in Part II, Item 9A, “Controls and Procedures,” and management expects that such measures, once fully implemented, will
be sufficient to remediate such material weaknesses in our internal control over financial reporting that existed as of December
31, 2021.
We
are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to our filing status will
make our common stock less attractive to investors.
We
are a “smaller reporting company” and, thus, have certain decreased disclosure obligations in our SEC filings, including,
among other things, simplified executive compensation disclosures and only being required to provide two years of audited financial statements
in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it
harder for investors to analyze our results of operations and financial prospects and may make our common stock a less attractive investment.
If some investors find our common stock less attractive, there may be a less active trading market for our common stock and our stock
price may be more volatile.
Anti-takeover
provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of us, which may be beneficial
to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board
and management.
Certain
provisions of our amended and restated certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition
or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium
for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of
our board of directors. These provisions also could limit the price that investors might be willing to pay in the future for our securities,
thereby depressing the market price of our securities. Stockholders who wish to participate in these transactions may not have the opportunity
to do so. These provisions, among other things:
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allow
the authorized number of directors to be changed only by resolution of our board of directors; |
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authorize
our board of directors to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion
of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential
hostile acquirer to prevent an acquisition that our board of directors does not approve; |
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establish
advance notice requirements for stockholder nominations to our board of directors or for stockholder proposals that can be acted
on at stockholder meetings; and |
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limit
who may call a stockholder meeting. |
In
addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law that may, unless certain criteria
are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or
combining with us for a prescribed period of time.
If
securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our
securities and their trading volume could decline.
The
trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about
us or our business. Currently there is only one research coverage by a securities and industry analyst. If one or more of the analysts
who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to
cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the
price of our securities and their trading volume to decline.
We
may be subject to ongoing restrictions related to grants from the Israeli Office of the Chief Scientist.
Through
our Israeli subsidiary, as of December 31, 2017, we received grants of $437,000 from the Office of the Chief Scientist of the Israeli
Ministry of Industry, Trade and Labor, or the Office of the Chief Scientist, for research and development programs related to products
that we are not currently commercializing or marketing. Because we are no longer developing the product to which the grants relate, we
do not believe that we are subject to any material conditions with respect to the grants, except for the restrictions on our ability
to make certain transfers of the technology or intellectual property related to these grants described below. We could in the future
determine to apply for further grants. If we receive any such grants, we would have to comply with specified conditions, including paying
royalties with respect to grants received. If we fail to comply with these conditions in the future, sanctions might be imposed on us,
such as grants could be cancelled and we could be required to refund any payments previously received under these programs.
Pursuant
to the Israeli Encouragement of Industrial Research and Development Law, any products developed with grants from the Office of the Chief
Scientist are required to be manufactured in Israel and certain payments may be required in connection with the change of control of
the grant recipient and the financing, mortgaging, production, exportation, licensing and transfer or sale of its technology and intellectual
property to third parties, which will require the Office of the Chief Scientist’s prior consent and, in case such a third party
is outside of Israel, extended royalties and/or other fees. This could have a material adverse effect on and significant cash flow consequences
to us if, and when, any technologies, intellectual property or manufacturing rights are exported, transferred or licensed to third parties
outside Israel. If the Office of the Chief Scientist does not wish to give its consent in any required situation or transaction, we would
need to negotiate a resolution with the Office of the Chief Scientist. In any event, such a transaction, assuming it was approved by
the Office of the Chief Scientist, would involve monetary payments, such as royalties or fees, of not less than the applicable funding
received from the Office of the Chief Scientist plus interest, not to exceed, in aggregate, six times the applicable funding received
from the Office of the Chief Scientist.
Because
we do not expect to pay cash dividends for the foreseeable future, you must rely on appreciation of our common stock price for any return
on your investment. Even if we change that policy, we may be restricted from paying dividends on our common stock.
We
do not intend to pay cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the
future will be at the discretion of our board of directors and will depend upon results of operations, financial performance, contractual
restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, you will have
to rely on capital appreciation, if any, to earn a return on your investment in our common stock. Investors seeking cash dividends in
the foreseeable future should not purchase our common stock.
Our
ability to use our net operating loss carry forwards and certain other tax attributes may be limited.
Our
ability to utilize our federal net operating loss, carryforwards and federal tax credit may be limited under Sections 382 and 383 of
the Internal Revenue Code of 1986, as amended. The limitations apply if an “ownership change,” as defined by Section 382,
occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect
“five percent shareholders” increases by more than 50% over their lowest ownership percentage at any time during the applicable
testing period (typically three years). If we have experienced an “ownership change” at any time since our formation, we
may already be subject to limitations on our ability to utilize our existing net operating losses and other tax attributes to offset
taxable income. In addition, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership
change” and, consequently, Section 382 and 383 limitations. As a result, if we earn net taxable income, our ability to use our
pre-change net operating loss carryforwards and other tax attributes to offset U.S. federal taxable income may be subject to limitations,
which could potentially result in increased future tax liability to us.