UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.001

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

TABLE OF CONTENTS

EXPLANATORY NOTE

Nexeon MedSystems Inc is filing this General Form for Registration of Securities on Form 10, or this “registration statement,” to register its common stock, par value $0.001 per share (the “Common Stock”), pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”). Unless otherwise mentioned or unless the context expressly indicates otherwise, the terms “Company,” “we,” “us,” “our,” “Nexeon,” “Nexeon MedSystems” and similar terms refer to Nexeon MedSystems Inc.

A CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results may vary from any estimates, predictions, projections, assumptions, or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

General

Nexeon MedSystems Inc was incorporated in the State of Nevada on December 7, 2015. We are a development stage enterprise focusing on the development and commercialization of physician-driven, medical device innovations. We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. Since incorporation, we have not made any significant sale of assets or generated any form of revenue.

On February 16, 2016, Nexeon was the surviving entity following a merger with Nexeon MedSystem, Inc. (“NXDE”) – a Delaware corporation. As a result of the merger, 100% of NXDE’s issued and outstanding preferred shares were converted into 1,659,946 shares of the Company’s Restricted Common Stock. All NXDE shares of Common Stock, Options, and Deferred Compensation Units were canceled. Also pursuant to the merger, the Company shall pay a Three Percent (3%) royalty (the “NXDE royalty”) to a limited liability company (“NXDE LLC”) formed in connection with the merger (of which the former NXDE shareholders are members) on Net Product Sales derived by the Company’s, or its affiliates’ or licensees’, commercialization of patents and intellectual property acquired by the Company through this merger (see the section titled “Certain Relationships and Related Transactions” for more information).

Chief among the assets secured by the Company in its merger with NXDE was a 100% ownership interest in a number of patents relating to a micro-perforated balloon catheter system for use in the treatment of restenosis associated with hemodialysis. Initially, the Company will focus on driving development and commercialization of the aforementioned medical device. As part of this process, the Company will license, a to-be formed, wholly-owned subsidiary known as Pulsus Medical LLC, (“Pulsus”). Pulsus will enter into various other sub-license agreements as well as development and supply agreements in order to enhance the technology as well as to expedite the development process. Additionally, the Company’s Officers and Directors, from time to time, will perform periodic due diligence on complimentary patents and companies, which it may acquire with an intent to develop and commercialize various medical technologies.

From inception until the date of this filing, we have had limited operating activities, primarily consisting of:

Our business headquarters is located at 1708 Jaggie Fox Way, Lexington, KY 40511.

Our telephone number is 844-919-9990.

The Company’s website is www.nexeonmed.com . Neither the Company’s website, nor the information contained on or accessible through our website, are deemed to be incorporated by reference in, or considered part of, this registration statement.

Business Overview

The Company engages and collaborates with scientists across multiple disciplines in order to identify, validate, and develop high impact technologies that address areas of significant unmet needs in healthcare. Nexeon’s Officers and Directors include cross-disciplinary specialists with expertise in life sciences, computer and physical sciences as well as chemical and biomedical engineering, and have collectively been involved in the development of drugs, medical devices, and technologies with a wide range of applications.

Our Officers and Directors are establishing an international network of leading scientists, technologists, and entrepreneurs that we expect will afford us access to promising technologies, within various medical contexts, at a stage where such technologies are still being explored in the laboratories of their origin. We believe our focus on early-stage technologies enhances our ability to evaluate and validate those technologies that show strong clinical and commercial potential.

As of the date of this registration statement, the Company’s core focus is furthering the development of a micro-perforated balloon catheter system for use in treatment of restenosis associated with hemodialysis.

However, in the future, the Company intends to utilize the expertise of its Officers and Directors to engage in strategic acquisitions of additional companies, patents, and intellectual properties that we deem clinically and commercially compelling. As we develop this aspect of our business, our aim will be to focus on early-stage, disruptive technologies that have a mix of (i) a high probability to secure state and federal grant funding, (ii) low regulatory hurdles for FDA approval, (iii) and unique synergies with our other core business segments. However, there can be no assurances that the Company will successfully identify, acquire, or commercialize any additional technologies or intellectual property. As of the date of the registration statement, the Company is not contemplating any such acquisitions other than as described herein.

The following chart provides a broad overview of the Company’s general strategy for developing and commercializing medical technology:

The timeframes specified in the foregoing chart are estimates only. The Company cannot make any guarantees with respect to the particular timeframe in which various milestones and development targets are reached, and none should be inferred hereby.

Our Market and Methodology

The U.S. is the world’s largest market for R&D investment with projected expenditure of $465 billion in 2014 – comprising approximately 2.8 percent of the country’s GDP. Over the course of 2014, the federal government was expected to fund $123 billion of this total, with $37 billion of this contributing towards an aggregate of $63 billion expected to be spent in the U.S. academic space. Several academic institutions exceeded $1 billion of annual research spending in 2012. The opportunity to secure funding for early-stage, physician- and scientist-driven solutions is there, but the process to commercialize that science has been, in our opinion, complicated by regulations, business model development challenges, and venture capital issues.    

We believe that Nexeon has assembled the infrastructure, knowledge, personnel, and business model to optimize the non-dilutive capital available from various government agencies to develop promising technologies from an international pool of scientific research. It is our opinion that emphasizing a “Needs Driven/Business Model Driven” approach to translational medicine best expedites the commercialization process and aligns R&D with shareholder goals. We also believe that Nexeon’s cross-disciplinary approach is particularly well-suited to address a healthcare environment where the convergence of previously unrelated disciplines is becoming especially prominent.

The investment by the U.S. federal government in research through the nation’s universities, federal laboratories, and non-profit institutions generates innovations and inventions with considerable commercial potential. While much of this research results in thousands of U.S. patent applications each year, we believe there are many challenges to commercializing this university and federal research; thus, it is our opinion that only a fraction of the patents are actually licensed and/or monetized. It appears to us that the universities themselves lack the resources to attract investors and entrepreneurs, to identify marketable opportunities, to secure the required capital resources, and ultimately to transform the science into a profitable commercial product or service.

Another major engine of scientific and technological innovation exists within private sector R&D departments. Corporations appear to contribute a substantial portion of the multi-billion dollar investment in the life sciences sectors. In our opinion, corporations have proven to be most successful in making incremental changes to commercially-available products and then deploying their sales and marketing resources to launch a successful product. The inertia of a large corporation, however, in our opinion, limits the ability to focus on early-stage research ideas and the necessary processes involved in identifying, supporting, and optimizing early projects. Therefore, we believe that few internal innovation projects at these large corporations actually translate into more significant development projects.

Nexeon will adopt a development approach that we believe will enable us to identify and ultimately to commercialize valuable but early-stage, technological advances in the medical space. Prior to seeking the acquisition of patents, licensure, and/or investing capital, Nexeon evaluates life science projects pursuant to the following criteria:

Once an idea has been thoroughly scrutinized, Nexeon will move to acquire the science and implement the appropriate project management to drive early-stage development. We believe our rigorous screening of prospective technologies will mitigate some of the risk inherent to acquisition of undeveloped technologies and will also minimize the time between the initial at-risk capital raise and preliminary inflection points in technology development.

However, there can be no guarantee that the Company will identify and successfully acquire and commercialize any intellectual property or technologies in the future. As of the date of this registration statement, the Company has not identified and is not contemplating any technologies, ventures, and/or intellectual property not specifically described herein.

Pulsus Medical, LLC

Overview

Initially, the Company’s core focus will be on driving the development and commercialization of the intellectual property (IP) that will be held by a to-be formed, wholly-owned entity known as Pulsus Medical, LLC. This entity will continue the development of a micro-perforated balloon catheter system for use in treatment of restenosis associated with hemodialysis. The Company’s Chief Innovation Officer, Dr. Mark Bates MD, will serve as the Chief Executive Officer of Pulsus.

Funding & Development

Rosellini Scientific LLC, (“RSLLC”) the largest shareholder of Nexeon, has obtained (i) Federal NIH/SBIR awarded Grant #1R44HL129870-01, in the amount of $218,377 and the Matching Funds Grant #KSTC-184-512-16-234, in the amount of $150,000 (awarded by the State of Kentucky). RSLLC will make these funds available to Nexeon for use to finance the development and commercialization of the Pulsus medical device pursuant to the terms and conditions of the Grants. Upon successful completion of Phase I of the Grants, subject to the approval of both the Federal and State Agencies, RSLLC will assign Phase II of the Grants to Nexeon.

In addition to the two Grants described above, RSLLC has pending grant applications. There can be no assurance that any of these pending grants will be awarded.

Potential Customers

Potential customers are patients who have undergone hemodialysis grafts that require angioplasty. There are 350,000 hemodialysis patients in the U.S. With the hemodialysis patient population estimated to reach over 500,000 by 2020 (Weinhandl et al. 2010), the number of patients requiring grafts will reach over 150,000 (30% of 500,000), and most of these grafts will eventually require stenosis intervention, which our balloon catheter can provide. 

Competitive Landscape

The main competition for Company’s intravascular drug delivery system includes those companies developing drug-coated balloons (“DCBs”). DCBs have a more mature technology with recent regulatory approvals being obtained and many other DCB platforms in clinical trials. However, we believe that the Company’s approach can co-exist with DCBs due to the ability to use our platform for high flow-rate applications, while DCBs may be more applicable to other bodily regions.

An advantage of this approach over DCBs is in the regulatory path. DCBs are packaged with a drug and, therefore, are considered combination products requiring Premarket Approval (“PMA”) through the FDA. The PMA process requires a two-phase clinical trial to prove the safety and efficacy of the device prior to marketing approval. The Company’s approach does not include a packaged drug; the drug is administrated separately. Therefore, the regulatory path is through the 510(k) with Special Controls route. While this approach will need to prove safety and efficacy with a clinical validation study, such a study is, in our experience, typically far less costly and time-consuming when compared to the full, two-phase study required by the PMA process.

Core Technology & Product Overview

The Company is developing an intravascular drug delivery system comprised of an inflatable, micro-perforated balloon. This balloon will be comprised of carbon nanotubes embedded within the host nylon polymer for increased mechanical strength. Only a small amount of carbon nanotubes (<5% by weight) is needed within the polymer to provide the necessary mechanical reinforcement to withstand high pressure (>20 Atmospheres, “ATM”). While high-pressure (>20 ATM) balloons are currently available, they are made from stiffer polymers such as polyethylene terephthalate (“PET”) and are not perforated. Therefore, existing high-pressure balloons are not applicable.

The carbon nanotubes help maintain structural integrity of the perforated balloon during inflation and drug delivery while allowing a more compliant polymer, such as nylon, to be used. Anti-restenotic drugs, such as paclitaxel, can then be delivered using pulsed flow. The drug is introduced through the proximal shaft of the catheter balloon. The drug, and carrier medium, then fills up the balloon and is released through the pores in the balloon. The drug then exits the balloon and is forced into the surround neointima for maximal therapeutic effect.

When compared to drug-coated balloons and drug-eluting stents, our approach is expected to provide the following benefits:

Innovation

Current drug-coated balloons provide only passive drug delivery. In our opinion, this micro-perforated balloon brings a much-needed, innovative improvement to intravascular drug delivery by enabling controllable pulsed flow delivery of anti-restenotic drugs to the diseased site. The specific innovations that are being developed include:

Advantages of our Approach

Our approach should reduce the need for follow up procedures by efficiently delivering anti-restenotic drugs, intravascularly, to direct the therapy immediately into the lesion. Currently, repeat angioplasty procedures are required to counter recurring restenosis. The need for compliant materials to perform intravascular drug delivery within the AV graft site eliminates the use of stents for this application. While drug-coated balloons could potentially be used to treat blockages distal to the AV graft, the high flow rate associated with such grafts can wash out the drug. This will result in most of the drug being systemically distributed, increasing the potential for adverse side effects. Our approach should deliver most, if not all, of the drug to the neointima due to the perpendicular, outward flow from the pores within the balloon.

Commercial Applications

The targeted clinical application is as an intervention for hemodialysis graft failures, particularly in delivering paclitaxel or similar anti-restenotic drugs. Pulsed-flow intravascular drug delivery can also potentially be applied to bodily sites where drug-eluting stents and drug-coated balloons are being used, including the superficial femoral artery in the thigh and the popliteal artery in the knee (Pastromas et al. 2014).  With the ability to deliver almost any type of drug, this approach not only has the potential to treat many blockages within the peripheral vasculature but may also transcend to other diseases such as cancer. Drugs that are difficult or impossible to take orally or drugs that lose efficacy when taken by standard intravenous delivery could potentially be used much more effectively with our intravascular delivery system. Therefore, this approach may not only extend or broaden the useful life of existing drugs, but it may also revive interest in abandoned drugs.

Marketing Plan

The most likely approach to getting this balloon technology to the clinic is to partner with a major medical device manufacturer. Therefore, The Company’s initial marketing efforts will involve approaching medical device companies with an interest in balloon catheter technology. If and when the pre-clinical efforts generate favorable data, we expect to present the data at relevant medical conferences such as the Annual Dialysis Conference and the International Society of Hemodialysis Congress. We also intend to publish our work in targeted medical and scientific journals, such as Hemodialysis International, to gain exposure. The key members of Nexeon have experience in building business relationships with the major medical device manufacturers. The inventor of our balloon technology and our Chief Innovation Officer, Dr. Mark Bates, has previously developed medical devices that have been adopted by potential medical device company partners including Boston Scientific and Cook Medical.

The Company cannot make any guarantees that it will successfully identify and engage a medical device manufacturer, that we will be able to present related data at relevant medical conferences, or publish our work in medical and scientific journals.

Revenue Stream

The revenue generated will largely depend upon the success of the business relationship established with the medical device company partner. If a co-marketing arrangement is established, then revenue sharing is the most likely option. If the technology is licensed, then it will generate a royalty stream with possible upfront and milestone payments. Finally, if the technology is sold outright, then the Company will receive one or more payments associated with the acquisition. Deals in this space vary depending on the quality of the data, the amount of IP, and the overall stage of development.

In the event the Company is not able to partner or sell our technology to a strategic partner, then it will need to pursue revenue streams by scaling/transferring manufacturing and employing a sales force. In evaluating a revenue stream, we believe it is most important to consider the payer of the technology. In this case, the payers are the insurers who provide reimbursement and the hospital sourcing managers that decide which technologies to purchase and deploy in their facility. As a device manufacturer, we would initially market to the physician directly, which should allow us to take advantage of locally negotiated rates. Within one to two years, we would expect sourcing and supply chain departments will want to cut costs at their facilities, which generally means that a Group Purchasing Organization (“GPO”) will work with us to negotiate lower rates in exchange for higher volume of sales. In some instances, the GPO can also be viewed as a sales channel, because they will have contracts with facilities outside the reach of our direct sales force and can market our technology on our behalf.

Intellectual Property

The Patents directly associated with the development of a micro-perforated balloon catheter system for use in treatment of restenosis associated with hemodialysis are shown in the table below. These patents are foundational to the novel technology that will be developed and the Company will actively continue to file patent applications for newly developed IP. See Exhibit 99.1 for a more complete listing of all of the Company’s Patents.

Production Plan

Production of the balloons will require contract manufacturing organizations (“CMOs”) that implement Good Manufacturing Practices (“GMP”) per FDA requirements. The balloon manufacturing partner, Interface Catheter Solutions, is well-versed in GMP procedures so the manufacturing and testing procedures used in this effort will be readily scalable and GMP-compliant. Currently, Interface Catheter Solutions is a component vendor and no contract exists. We plan to use FDA-registered, GMP-compliant testing facilities at Nelson Laboratories to validate the biological safety of our materials. All of these processes will be readily transferrable to a strategic partner who will eventually market our balloon.

Regulatory Plan

The Company will pursue US and EU regulatory approvals in parallel, with CE Marking expected prior to FDA approval. The Company can provide no guarantees that it will be successful in securing regulatory approval for the contemplated medical device.

The Company will engage Medidee Group to provide guidance on both of the aforementioned regulatory pathways. The first step in both the EU and US regulatory process is to implement a Quality Management System (“QMS”). For EU approval, the QMS must be in accordance with Annex II or V of the Medical Devices Directive (“MDD”). For US approval, we must meet the FDA Quality System Regulation (“QSR”) found in 21 CFR Part 820, which is commonly known as the FDA Good Manufacturing Practice (“GMP”). To fulfill these requirements, the team will begin by achieving ISO 13485 compliance and then, with the help of Emergo Group, adapting to ensure compliance with 21 CFR Part 820. After implementing the QMS, the EU and US regulatory paths diverge and will be pursued in parallel.

EU Regulatory Approval

After applying ISO 13485 standards to achieve QMS compliance, the Company or its affiliate will prepare and submit a Technical File / Design Dossier demonstrating that our intravascular drug delivery system complies with MDD 93/42/EEC. Prior to submitting the Technical File, we will submit our pre-clinical data and existing technical documentation to a Notified Body (DEKRA, SE the German Technical Certification Agency), who will review our material and provide a binding agreement outlining the requirements for a CE Mark. If DEKRA indicates that clinical data is not required, then we will assemble and submit the Technical File. However, based on previous interactions with DEKRA, we expect that safety data from 20 patients will be required to garner the CE Mark. We will include any additional clinical requirements provided by DEKRA in the design of our clinical trial proposed in the Scientific Plan. After submitting the Technical File and following an audit by DEKRA, we will be issued a CE Marking Certificate for the medical device. We will then prepare a Declaration of Conformity, which is a legally binding document stating that the device is in compliance with the applicable Directive.

US Regulatory Approval

The Company expects the FDA will consider our intravascular drug delivery system to be Class II device which allows approval through the 510(k) premarket notification process, but will require clinical data. After implementing the QMS, we will engage the FDA through the Pre-Submission Consulting process. Pre-Sub feedback will provide the necessary information and requirements to generate the Investigational Device Exemption (“IDE”) needed to run clinical studies.

To obtain an IDE, we will first complete all device testing, including biocompatibility testing. Upon successful completion of this testing, we will amalgamate all results into an IDE application submitted to the FDA. Once the FDA approves our IDE (usually within 30 days of submission), then we will conduct a first clinical trial that will serve as a pilot study to evaluate the safety and efficacy of the system, as well as to inform the design of a larger study if needed. Upon successful completion of the pilot study, the Company will need to secure additional financing to support the follow-on study, which could require anywhere from 20 to 100 patients. Following the clinical study, the Company will submit a 510(k) to the FDA for completeness review. The FDA will then conduct facility inspections of all the major suppliers involved in the design and production of the device, which requires all parties to be compliant with FDA QSR. Finally, the FDA will issue a 510(k) approval letter and require that we are fully compliant with QSR found in 21 CFR Part 820.

Dependence on One or a Few Major Customers

As of the date of this registration statement, the Company has not generated any revenues and does not have any customer relationships. If and when the Company secures regulatory approval to begin marketing and selling its device in the European Union, the United States, or both, it is possible that initially the Company may become dependent on one or a few major customers to generate the bulk of our revenue. However, the Company will endeavor to diversify its customer base through the use of a sales force and distributor relationships.

Employees

As of the date of this registration statement, the Company has two full-time employees, two part-time employees, and two contractors. None of our employees or consultants are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

References

Basile, C., Konner, K., & Lomonte, C (2012). The haemodialysis arteriovenous graft: is a new era coming Nephrology Dialysis Transplantation.

Coleman, J. N., Khan, U., & Gun'ko, Y. K (2006). Mechanical reinforcement of polymers using carbon nanotubes. Advanced Materials, 18(6), 689-706. doi:10.1002/adma.200501851

Escárcega, R. O., & Waksman, R (2014). Overview of the 2014 Food and Drug Administration Circulatory System Devices Panel Meeting Regarding the Lutonix® Drug Coated Balloon. Cardiovascular Revascularization Medicine, 0(0). doi:10.1016/j.carrev.2014.10.006

Khan, U., May, P., O’Neill, A., Vilatela, J. J., Windle, A. H., & Coleman, J. N (2011). Tuning the Mechanical Properties of Composites from Elastomeric to Rigid Thermoplastic by Controlled Addition of Carbon Nanotubes. Small, 7(11), 1579-1586. doi:10.1002/smll.201001959

Mabry, E (2008). Extruded tubing designed for balloon production. Medical Device And Diagnostic Industry, 30.

Moniruzzaman, M., Winey, K., Chattopadhyay, J., & Billups, W. E (2008). Synthesis and Characterization of Polyamide Nanocomposites Using Functionalized Carbon Nanotubes. American Physical Society, 2008 APS March Meeting, March 10-14, 2008, Abstract #C1.047, -1, 1047.

Saab, M. A (2000). Applications of high-pressure balloons in the medical device industry. Medical Device & Diagnostic Industry Magazine, 2000.

Schwab, S. J (2007). Hemodialysis vascular access: the Achilles' heel remains Kidney International, 72(6), 665-6. doi:10.1038/sj.ki.5002470

Spitalsky, Z., Tasis, D., Papagelis, K., & Galiotis, C (2010). Carbon nanotube–polymer composites: chemistry, processing, mechanical and electrical properties. Progress In Polymer Science.

Tran, C., Lucas, S., Phillips, D. G., Randeniya, L. K., Baughman, R. H., & Tran-Cong, T (2011). Manufacturing polymer/carbon nanotube composite using a novel direct process. Nanotechnology, 22(14), 145302. doi:10.1088/0957-4484/22/14/145302

Weinhandl, E. D., Foley, R. N., & Gilbertson, D. T (2010). Propensity-matched mortality comparison of incident hemodialysis and peritoneal dialysis patients. Journal Of The American Society of Nephrology.

Wild, C., Erdös, J., & Zechmeister, I (2014). Contrasting clinical evidence for market authorisation of cardio-vascular devices in Europe and USA: a systematic analysis of 10 devices based on Austrian pre-reimbursement assessments. BMC Cardiovascular Disorders.

Zeng, H., Gao, C., Wang, Y., Watts, P., Kong, H., & Cui, X (2006). In situ polymerization approach to multiwalled carbon nanotubes-reinforced nylon 1010 composites: mechanical properties and crystallization behavior. Polymer.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview  

Nexeon Medsystems, Inc. was incorporated on December 7, 2015. We are a development stage enterprise focusing on the development and commercialization of physician-driven medical device innovations for the treatment of cardiovascular disease. We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. Since incorporation, we have not made any significant sale of assets.

Our operations to date have been limited to organizing and staffing our Company, our merger with NXDE, which includes its IP portfolio, and organization of a private placement offering.

As of March 31, 2016, we had an accumulated deficit of $66,243. Our net loss was $65,328 for the three months ending March 31, 2015, compared with a net loss of $915 for the period between December 7, 2015 (inception) and December 31, 2015.  

We expect the Company will continue to incur significant expenses and increasing operating losses in connection with our ongoing activities, particularly as we continue to invest in research and development and initiate the requisite clinical trials to receive regulatory approval for our medical devices in both the United States and European Union. Additionally, if and when we initiate a launch of one or more of our products, we expect to incur substantial commercialization expenses related to the manufacture and distribution, as well as sales and marketing, of these products. Furthermore, upon the effectiveness of this registration statement, the Company will be subject to additional costs associated with operating as a public company. Accordingly, we may need to obtain additional funding to continue operations. Such financing may not be available to us on acceptable terms, or at all. In the event we require additional capital and are unable to secure such funding, we could be forced to delay, reduce, or eliminate our research and development activities, as well as any future commercialization of our products.

Results of Operations

Our results of operations reflect the period from December 7, 2015 (inception) to December 31, 2015.

Revenue

To date, the Company has not generated any revenues and has financed our operations with net proceeds from the private placement of our common stock and the receipt of certain non-dilutive research grant awards beginning during the second quarter of 2015. The Company’s ability to generate revenues will depend heavily on the successful completion of the requisite clinical trials and studies necessary to achieve approval to begin marketing our contemplated medical devices from the relevant regulatory authorities in the United States and European Union. See the Sections titled “Business – Regulatory Approval Process and Government Regulation” above for more information relating to the regulatory approval process.

Research & Development Activities  

Research and Development (“R&D”) expenses consist of the costs associated with our research and discovery efforts related to the design and development of our proposed medical devices. Primarily, R&D expenses are expected to include, but may not be limited to:

It is expected that the Company’s R&D activities and related expenses will increase significantly in the future as we increase the scope and rate of such efforts and begin more expensive development activities, including clinical trials and similar studies as required by the relevant regulatory authorities in our targeted jurisdictions (i.e. the United States and European Union).

The successful completion of the requisite clinical trials and studies to bring our contemplated medical devices to the U.S. and E.U. markets is highly uncertain. We cannot reasonably estimate or know the nature, timing, and estimated costs of the related efforts, nor can we make any assurances as to the period, if any, in which material net cash inflows from sales of our medical devices may commence. This uncertainty is due to the numerous risks and variables associated with developing and marketing medical devices, including, but not limited to:

Unfavorable developments with respect to any of the foregoing could mean significant changes in the cost and timing associated with our ability to bring our medical device to market and begin generating revenues.

General & Administrative Expenses

General and administrative expenses generally consist of salaries and similar costs associated with employees, including stock-based compensation expense. This category of expenses may also include facility costs and professional fees related to (i) legal and patent services; (ii) capital formation; (iii) investor and public relations services; and (iv) consulting and accounting services.

For the three months ended March 31, 2016, the Company’s general and administrative expenses were $48,636 as compared to $915 for the period from December 7, 2015, (inception) to December 31, 2015, an increase of $47,721. The increase was primarily due to an increase in professional fees and accounting services in the amounts of $34,202 and $10,523 respectively.

It is expected that our general and administrative expenses will increase in the future as we expand our R&D activities in pursuit of regulatory approval for our contemplated medical device. Such a rise in expenses could result from:

Liquidity and Capital Resources

Sources of Liquidity

To date, the Company has not generated any revenues. We have financed our operations to date through the private placement of our common stock and from loans from the Company's largest shareholder, Rosellini Scientific LLC. Through June 30, 2016, we have received $112,500 in net proceeds from the issuance of common stock from the private placement (see the Section titled “Recent Sales of Unregistered Securities” for more information). During the next Twelve (12) months, the Company will be seeking to raise an additional $3,000,000 in new capital via debt and/or equity financing, and/or via assignment of Federal Grants and matching funds from the State of Kenetucky from the Company’s largest shareholder, Rosellini Scientific LLC. There can be no assurance that the Company will be successful in completing any new debt and/or equity financing or receive assignments of Grants. In the event that the Company is unable to secure needed financing or is unable to secure such financing on terms we find favorable, we may be forced to delay, limit, or terminate product development and/or future product commercialization.

Maturing Obligations  

Until such time, if ever, as the Company can generate substantial revenues, we expect to finance our cash needs through a combination of future debt and equity financing, as well as expected non-dilutive research grant awards. Besides certain grant awards, as described earlier in this section, the Company does not have any committed external source of funds. To the extent that the Company secures additional capital through the sale of convertible debt or equity securities, the ownership interest of our stockholders may be diluted, and the terms of any such securities we issue may include liquidation or other preferences that adversely affect the rights of common stockholders. In cases where the Company secures certain debt financing, if any such is available, we may become subject to certain covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures, or declaring dividends. In the event the Company is unable to secure needed financing, or is unable to secure such financing on terms we find favorable, we may be forced to delay, limit, or terminate product development and/or future commercialization of the same.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support, or other benefits.

Critical Accounting Policies

Our management’s discussion and analysis of the Company’s financial condition and results of operations is based on our financial statements, which were prepared in conformity with generally accepted accounting principles. The preparation of our financial statements requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities at the date of the financial statements. These financial statements include some estimates and assumptions that are based on informed judgments and estimates of management. We evaluate our policies and estimates on an on-going basis and discuss the development, selection and disclosure of critical accounting policies with the Board of Directors. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our financial statements may differ based upon different estimates and assumptions.

The Company’s significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this registration statement. However, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

Property and Equipment

Property and equipment are stated at cost. Equipment is depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized based upon the lesser of the term of the lease or the useful life of the asset and such expense is included in depreciation expense. Repair and maintenance costs are expensed as incurred. The Company capitalizes all furniture and equipment with cost great than $500 and benefiting more than one accounting period in the period purchased.

Research and Development Expenses

Research and development expenses are charges to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, materials, supplies, and consulting costs.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

The Company does not currently own any property. As of the date of this registration statement, however, the Company leases approximately 400 sq. ft. of office space in Lexington, KY, for $5,700 per year.

The table below sets forth the shares beneficially-owned, as of the date of this registration statement, by (i) each person, group, or entity known to our Company to be the beneficial owner of more than 5% of our voting securities; (ii) each Executive Officer and Director of our Company; and (iii) all Executive Officers and Directors as a group. The number of shares beneficially-owned by each stockholder is determined pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934.

Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest.

In computing the percentage ownership for each individual and entity, the number of outstanding shares, in addition to the 20,242,265 shares issued and outstanding as of the date of this document, includes any and all shares subject to options or warrants held by that individual or entity that were exercisable on or within 60 days after the issuance date(s) of such options or warrants, and any shares that each individual or entity has the right to acquire beneficial ownership of within 60 days. These shares, however, are not considered outstanding for the purpose of computing the percentage ownership of any other stockholder. Each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned by them unless noted otherwise, subject to community property laws where applicable.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Nexeon MedSystems Inc, 1708 Jaggie Fox Way, Lexington, KY, 40511.

Biographical Information

William Rosellini

William Rosellini has served as Chief Executive Officer and as a Director of the Company since inception on December 7, 2015. Since 2005, Mr. Rosellini has served as Chairman of Rosellini Scientific, LLC, which develops medical rehabilitation devices to support patients post-procedure. We believe that Mr. Rosellini is qualified to serve on our Board of Directors due to his role in founding the Company and in the development of its business strategy, as well as his experience developing medical devices. Mr. Rosellini received separate Masters Degrees in the fields of Regulatory Science and Regulatory Affairs, Computational Biology, Neuroscience, and Accounting. Additionally, Mr. Rosellini secured an MBA from the University of Texas at Dallas and a Juris Doctor from the Hofstra University School of Law. Mr. Rosellini currently serves as a member of the Board of Directors of Marathon Patent Group (OTCBB:MARA). Other than the foregoing, Mr. Rosellini does not currently, and has not for the last five years, served as a member of the Board of Directors for any other public companies.

Mark Bates

Mark C. Bates, MD, DSc.(hon), FACC, FSCAI, FSVM is the co-founder and Chief Innovation Officer for the Company and has been on the board of directors since inception in December 2015.  He was the founder of the acquired company (Nexeon MedSystems, Inc a Delaware corporation “NXDE”) where he was also the board Chairman and CEO.  Dr. Bates raised $30 million from publicly traded medical device companies and private investors to fund NXDE and led the organization through several important milestones, including but not limited to: manufacturing facility quality systems development and ISO certification, forest products through clinical trials, spinout and merger of the stent portfolio with CeloNova BioSciences, sale of an inventory saving system to Bisosenosrs International, sale of a cell therapy regenerative Medicine portfolio to Cook Medical, and finally the transition to Nexeon MedSystems Inc a Nevada corporation.  He is currently on the board of CeloNova BisoSciences, which recently sold their embolization portfolio to Boston Scientific for $70 million up front and milestone driven downstream payouts.   He currently is the co-director of one of the largest vascular centers in the U.S. and has more than 20 years of interventional cardiology experience during which time he has performed or supervised thousands of coronary and peripheral procedures.  Over the past five years, Dr. Bates has stayed involved in teaching with a part-time faculty position as Professor of Medicine and Surgery at West Virginia University School of Medicine in Charleston, West Virginia. Dr. bates does not currently, and has not for the last five years, served as a member of the Board of Directors for any other public companies.

Ron Conquest

Mr. Conquest has served as a Director of the Company since inception on December 7, 2015. Since 2009, Mr. Conquest has served as Chairman and CEO of WindGen Energy, Inc., which holds royalty agreements that will pay the company royalties for the sale of small wind turbines in the United States, Canada, the United Kingdom and the Republic of Ireland.

Mr. Conquest’s executive experience includes Chairman of the Board- and CEO-level corporate management along with domestic and international corporate finance. Mr. Conquest’s corporate operating experience includes being responsible for the day-to-day operations for RH Energy, Inc., an Oklahoma-based oil & gas Company with 200 employees; American Medical Support, Inc., an Oklahoma-based multi-state medical oxygen company with 50 employees; FTM Media, Inc., a California-based website development company with 100 employees; and GEM Distribution Systems, LLC, an Arizona-based candy and tobacco distribution company with 25 employees.

Mr. Conquest is qualified to serve on our Board of Directors because, as a result of his past business endeavors over the last four decades, we believe Mr. Conquest has gained significant insight into the challenges that entrepreneurs face in today’s competitive business environment and could help the Company navigate many of the challenges facing an early-stage company.

Mr. Conquest is currently a member of the Board of Directors of WindGen Energy, Inc. (WGEI.PK); besides this company, Mr. Conquest is not currently, and has not for the last five years, served as a member of the Board of Directors of any other public companies.

Elizabeth Rosellini

Dr. Elizabeth Rosellini has served as the Vice President of Clinical Affairs since inception on December 7, 2015. Between July 2012 and February 2014, Dr. Rosellini served as Chief Clinical Officer of Rosellini Scientific, LLC, which develops medical rehabilitation devices to support patients post-procedure, and later facilitated the spin out of Telemend Medical, Inc., a clinical engineering company that optimized delivery of medical devices and systems in hospitals and sub-acute care facilities. Dr. Rosellini holds a BA in Chemistry and Mathematics from the University of Texas at Austin as well as a Doctorate of Dental Surgery from Texas A&M University, where she developed specific interest and experience with head and neck R&D. Dr. Rosellini served on the leadership team of a number of portfolio projects initiated at Rosellini Scientific. She has unique experience with technical device development as well as co-morbidity management as related to cross-disciplinary approach to systemic healthcare treatment.

Christopher Miller

Mr. Miller has served as Interim Chief Financial Officer (“CFO”) of the Company since December 2015. Since 2002, Mr. Miller has been providing financial and business development consulting and interim CFO services, with a focus on early-stage companies. From 2006 to 2008, Mr. Miller provided public company valuation, financial modeling and due diligence services to Doherty & Company, LLC, a Los Angeles based broker-dealer specializing in venture capital, private equity funding, mergers and acquisitions advisory and valuations for early-stage companies. From June 2009 to June 2010, Mr. Miller served as a member of the Board of Directors of WindGen Energy, Inc. (WGEI.PK). Other than the foregoing, Mr. Miller does not currently, and has not for the last five years, served as a member of the Board of Directors for any public companies.  

Board Composition and Election of Directors

Our Board of Directors is currently comprised of three members. Pursuant to our Articles of Incorporation and Bylaws, Directors shall hold office until the next annual meeting of the stockholders and until his or her successor shall be elected and qualified. Directors may be removed, with or without cause and from time to time, as provided by Chapter 78 of the Nevada Revised Statues then in effect.

Director Independence

Our Board of Directors is currently composed of three members, none of whom qualify as independent Directors in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the Directors are not, and have not been for at least three years, one of our employees and that neither the Directors, nor any of their family members, have engaged in various types of business dealings with us. In addition, our Board of Directors has not made a subjective determination that no relationships exist, which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director, though such subjective determination is required by the NASDAQ rules. Had our Board of Directors made these determinations, our Board of Directors would have reviewed and discussed information provided by the Directors and us with regards to each Director’s business and personal activities and relationships as they may relate to us and our management.

Conflicts of Interest

Since we do not have an audit or compensation committee comprised of independent Directors, the functions that would have been performed by such committees are performed by our Board of Directors. The Board of Directors has not established an audit committee and does not have an audit committee financial expert, nor has the Board established a nominating committee. The Board is of the opinion that such committees are not necessary given the Company’s early stage of development, and to date, our Directors have been performing the functions of such committees. Thus, there is a potential conflict of interest in that our Directors have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions.

Family Relationships

Dr. Elizabeth Rosellini, the Company’s Vice President of Clinical Affairs is the sister of our CEO, Dr. William Rosellini. Other than the foregoing, there are no family relationships of any kind among our Named Executive Officers, Directors or persons nominated or chosen by us to become Officers or Named Executive Directors.

The tables below summarize all compensation awarded to, earned by, or paid to our Executive Officers for all services rendered in all capacities to us for the fiscal period(s) indicated.

Outstanding Equity Awards at Fiscal Year End

As of December 31, 2015, the Company had no outstanding equity awards made to our executives.

On April 1, 2016, pursuant to the 2016 Omnibus Incentive Plan the Company issued non-qualified options to purchase 252,000 shares of the Company’s common stock, with an exercise price of $1.00 and a term of three years to each Rosellini Scientific, LLC (see “Employment Agreements” below for more information), Dr. Mark Bates, and Dr. Elizabeth Rosellini for services rendered to the Company since inception. The options vest in monthly increments of 7,000, and the three-year term of such options starts upon vesting.

On January 1, 2016, the Company entered into an Employment Agreement with Ron Conquest.

On May 1, 2016, the Company entered into a Director Services Agreement with Dr. Mark Bates.

Equity Incentive Plan  

The Company may, from time to time, issue certain equity awards pursuant to our 2016 Omnibus Incentive Plan (the “Plan”). The Plan was adopted by our Board of Directors in January 2016 and was subsequently approved by our shareholders. As of June 30, 2016, non-qualified options to purchase a total of 1,008,000 shares of the Company’s common stock were issued under this Plan, all with an exercise price of $1.00 per share. All of these shares were issued on April 1, 2016 and vest in monthly increments of 28,000 for three years. Each option has a three-year term starting on each date of vesting.

As of June 30, 2016, Incentive Options to purchase a total of 252,000 shares of the Company’s common stock were issued under this Plan, all with an exercise price of $1.00 per share. These options were issued on June 1, 2016 and vest in monthly increments of 6, for three years. Each option has a three year-term starting on each date of vesting.

The Plan will be administered by a Committee of two or more non-employee Directors designated by the Board once outside Directors have been elected to the Board. In the interim the Board shall perform the requisite duties of the Committee with respect to awards made. The Committee currently determines to whom awards are made, the timing of any such awards, the type of securities, and number of shares covered by each award, as well as the terms, conditions, performance criteria, restrictions and other provisions of awards. The Committee has the authority to cancel or suspend awards, accelerate the vesting or extending the exercise period of any awards made pursuant to the Plan.

Shares Available under the 2016 Omnibus Incentive Plan

The maximum shares available for issuance under the Plan are 3,000,000, subject to adjustment as set forth in the Plan. Any shares subject to an award that expires, is cancelled or forfeited or is settled for cash shall, to the extent of such cancelation, forfeiture, expiration or cash settlement, again become available for awards under the Plan.

The Committee can issue awards comprised of restricted stock, stock options, stock appreciation rights, stock units and other awards, as set forth in the Plan.

Transferability

Except as otherwise provided in the Plan, (i) during the lifetime of a Participant, only the Participant or the Participant’s guardian or legal representative may exercise an option or stock appreciation right, or receive payment with respect to any other award and (ii) no award may be sold, assigned, transferred, exchanged or encumbered, voluntarily or involuntarily, other than by will or the laws of descent and distribution.

Change in Control

In the event of a merger, the surviving or successor entity (or its parent) may continue, assume or replace outstanding awards as of the date of the relevant transaction and such awards or replacements therefore shall remain outstanding and be governed by their respective terms. Such awards or replacements can be executed in part on the condition that the contractual obligations represented by the award are expressly assumed by the surviving or successor entity (or its parent) with appropriate adjustments to the number and type of securities subject to the award and the exercise price thereof so as to preserve the intrinsic value of the award existing at the time of the relevant transaction. Alternatively, the surviving or successor entity (or its parent) could issue to a Participant a comparable equity-based award that preserves the intrinsic value of the original award existing at the time of the relevant transaction and contains terms and conditions that are substantially similar to those of the award.

If and to the extent that outstanding awards under the Plan are not continued, assumed or replaced in connection with a merger or relevant corporate transaction, then all outstanding awards shall become fully vested and exercisable for such period of time prior to the effective date of the relevant transaction as is deemed fair and equitable by the Committee and shall terminate at the effective date of said transaction.

Amendment & Termination

The Plan shall remain in effect until all shares subject to it are distributed, all awards have expired or terminated, or the 10 ^th anniversary of the Plan’s effective date; however, our Board of Directors may terminate, suspend or amend the Plan at any time. The Company shall submit any amendment to the Plan to its stockholders for approval only to the extent required by applicable laws or regulations or the rules of any securities exchange on which the Company’s shares may then be listed. No termination, suspension, or amendment of the Plan may materially impair the rights of any Participant under a previously granted award without the Participant’s consent, unless such action is necessary to comply with applicable law or stock exchange rules.

Employment Agreements

On May 1, 2016, the Company executed a Director Services Agreement with Dr. Mark Bates MD. Pursuant to this agreement, Dr. Bates is entitled to receive an annual Director’s Fee in the form of 250,000 Nonqualified Stock Options, which vest quarterly over a three (3) year period. The term of the Options are four (4) years from each vesting period with a strike price of $1.00 per share. Beginning May 1, 2016 Dr. Bates also receives a fee of $3,500.00 per month for consulting services.  

On January 1, 2016, the Company executed an Employment Agreement with Ron Conquest in the capacity of Chief Operating Officer and Director. Pursuant to this agreement Mr. Conquest will receive an annual salary in the amount of $100,000. Starting October 1, 2016, Mr. Conquest will receive an annual salary of $140,000. Starting October 1, 2017, Mr. Conquest will receive an annual salary of $175,000. The Term of this Employment Agreement is four years. In the event Mr. Conquest is terminated without “cause” (as defined in his Employment Agreement), the Company will be required to pay his then existing salary and benefits for a period equal to fifty percent (50%) of the remaining Term of his Employment Agreement. In the event the Company terminates Mr. Conquest’s employment as a result of a change in control, the Company will be responsible to pay his then existing salary and benefits for the remaining Term of the agreement. The Company also reimburses Mr. Conquest and his spouse for his health insurance and all out of pocket expenses.

The Company currently does not have formal employment agreements with its Chief Executive Officer, William Rosellini, its Chief Innovation Officer, Dr. Mark Bates MD (in his executive capacity); Christopher Miller, Interim Chief Financial Officer, or its Vice President of Clinical Affairs, Dr. Elizabeth Rosellini DDS.

Pursuant to the Contribution Agreement between the Company and Rosellini Scientific, LLC, any compensation paid by the Company for William Rosellini’s services will be made directly to his wholly-owned company, Rosellini Scientific, LLC. The Company has issued 252,000 Nonqualified Stock Options to Rosellini Scientific LLC providing his services in his capacity as CEO and Director, 252,000 Nonqualified Stock Options to Dr. Elizabeth Rosellini DDS in her capacity as Vice President of Clinical Affairs, and 252,000 Nonqualified Stock Options to Dr. Mark Bates in his capacity as Chief Innovation Officer and Director.

On June 1, 2016, The Company entered in to a three year Employment Agreement with Dr. Melanie McWade PhD as its Vice President of Emerging Therapies with a Salary of $80,000 per year, subject to review every six months. In addition to the base annual salary described in Section 4 of this Agreement, Executive shall be eligible for an annual performance-based bonus.  Executive’s standard bonus percentage is twenty (20%) of her annual base salary, to be earned by satisfactorily meeting criteria established by the CEO and approved by the Company Compensation Committee prior to March 1, each year.  Executive will receive the full twenty percent (20%) bonus amount if such criteria are satisfactorily met.  In the event that Executive’s performance exceeds this standard, Executive may be considered for a bonus in an amount larger than the standard bonus percentage stated above.  In the event that Executive’s performance falls short of this standard, Executive may receive less than the full bonus percentage. A minimum of seventy percent (70%) of the Annual Bonus shall be paid in cash, and the balance shall be paid in unrestricted common stock, or such other mutually agreeable consideration.  During the Term of this Agreement, the yearly annual bonus shall be paid within sixty (60) days of the calendar year end. In addition pursuant to the 2016 Omnibus Incentive Plan, the Company issued Dr. McWade Incentive Stock Options to purchase 252,000 shares of its common stock with an exercise price of $1.00. The options vest in monthly increments of 7,000 with a three-year term for each option beginning upon each date of vesting. 

Except as expressly indicated otherwise herein, the Company currently does not provide a salary or other compensation to certain of the foregoing individuals; however, the Board of Directors may decide, at its discretion, to enter into one or more employment agreements with these individuals contemplating the payment of salaries and other compensation at some point in the immediate future.

On February 16, 2016, the Company merged with Nexeon MedSystems, Inc. (“NXDE”) – a Delaware corporation. The Company, a Nevada corporation, was the surviving entity. The Company converted 100% of NXDE’s issued and outstanding common and preferred stock into 1,659,946 shares of the Company’s common stock. In addition to the conversion of NXDE shares into common shares of the Company, the Company shall pay a limited liability company formed by the former shareholders of NXDE for the purpose of receiving a royalty equal to Three Percent (3%) (the “NXDE royalty”) of Net Product Sales received by the Company, its affiliates and licensees derived from the commercialization of patents or other intellectual property owned by NXDE prior to the merger. Our Chief Innovation Officer and Director, Dr. Mark Bates, was the Chief Executive Officer of NXDE and received 392,831 shares of the Company’s common stock in the foregoing transaction.

As part of the Merger Agreement with NXDE, Dr. Mark Bates, M.D, the Company’s Chief Innovation Officer, and Director, converted $370,000 of debt owed to him by NXDE into 370,000 shares of our common stock and warrants to purchase 370,000 additional shares of common stock at a strike price of $2.00 per share and with a term of 36 months. In addition, Dr. Bates contributed $202,825 of accrued interest on his debt, which will be reflected as additional paid in capital to the Company during the first quarter of 2016. Dr. Bates, beginning May 1, 2016, will receive a monthly consulting fee of $3,500.00.

As part of the Merger Agreement with NXDE, Mr. Ralph Ballard, who was a co-founder and Director of NXDE converted $451,482 of debt owed to him by the Company and received 451,482 shares of our common stock and warrants to purchase 451,482 shares at a strike price of $2.00 per share and with a term of 36 months. In addition, three trusts representing three of Mr. Ballard’s children converted $427,076 of debt and received 427,076 shares of our common stock and warrants to purchase 427,076 shares of common stock at a strike price of $2.00 per share with a term of 36 months. The shares and warrants were issued to the three trusts. Mr. Ballard disclaims any beneficial ownership in the Units issued to the three trusts.

Subsequent to the Merger, three additional NXDE Shareholders converted a total of $34,261 in debt for 34,261 shares of our common stock and warrants to purchase 34,261 shares of our common stock at a strike price of $2.00 per share with a term of 36 months.

Subsequent to the Merger, Rosellini Scientific LLC exchanged a $175,000 promissory note with a term of five years bearing an annual interest rate of 8%, payable to Rosellini Scientific by Telemend Medical, Inc., a Delaware corporation, to the Company, in return for 175,000 shares of the Company’s common stock and warrants to purchase 175,000 shares of common stock with a strike price of $2.00 per share with a term of 36 months.

On December 15, 2015, the Company issued 500,000 shares of its common stock to its Chief Operating Officer, Ron Conquest, for the sum of $500 at the par value of $0.001. 212,000 shares of the 500,000 shares became vested upon issue and the remaining 288,000 shares shall vest over a 36 month period at the rate of 8,000 shares per month.

On January 2, 2016, the Company issued 252,000 shares of common stock to Christopher Miller, with a par value of $0.001, for certain accounting and budget-related services rendered as well as serving as Interim CFO until such time as a permanent CFO is hired. The shares vest over a 36 month period at the rate of 7,000 shares per month.

On January 2, 2016, the Company issued 1,800,000 shares of its common stock to its Vice President of Clinical Affairs, Dr. Elizabeth Rosellini DDS (the sister of our CEO), in return for 214 shares of common stock of Telemend Medical, Inc., a Delaware corporation, and 60,000 shares of common stock of Nuviant Medical, Inc., a Nevada corporation.

On January 2, 2016, the Company entered into a Contribution Agreement with Rosellini Scientific, LLC – a company controlled by our CEO, William Rosellini – and its wholly-owned subsidiary Belltower Associates, LLC (collectively, Rosellini Scientific, LLC and Belltower Associates, LLC are hereinafter referred to as “RS”). Under this agreement, the Company issued 13,200,000 shares of its common stock in return for, among other consideration:

Between March and April of 2016, the Company issued 112,500 shares of its common stock and warrants to purchase 112,500 shares of its common stock with a strike price of $2.00 per share and a term of 36 months, realizing aggregate proceeds of $112,500.

On April 1, 2016, pursuant to the 2016 Omnibus Incentive Plan, the Company issued non-qualified options to purchase 252,000 shares of common stock, with an exercise price of $1.00 with a term of three years to each of the following: Rosellini Scientific, LLC (see “Employment Agreements” below for more information); Dr. Mark Bates MD; Dr. Elizabeth Rosellini DDS; and Sheneka Rains (a consultant) for services rendered to the Company since inception as well as ongoing services to be provided from time to time. The options vest in monthly increments of 7,000, with a three-year term for each option beginning upon each date of vesting.

On June 1, 2016, pursuant to the 2016 Omnibus Incentive Plan, the Company issued Dr. Melanie McWade PhD Incentive Stock Options to purchase 252,000 shares of its common stock with an exercise price of $1.00. The options vest in monthly increments of 7,000 with a three-year term for each option beginning upon each date of vesting.

Unless otherwise stated, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Regulation D promulgated there under, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or contracts relating to compensation as provided under Rule 701. 

The recipients of the securities in the foregoing transactions represented their intentions to acquire the securities for investment only and not with a view to the resale or distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had access, through their relationships with the Company, to information about Nexeon MedSystems Inc.

There are no pending legal proceedings to which the Company is a party or in which any Director, Officer, or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder, is a party adverse to the Company or has a material interest adverse to the Company.

Market Information

There is no established public trading market in the Company’s common stock. Our securities are not listed for trading on any national securities exchange nor are bid or ask quotations reported by any over-the-counter quotation service.

Equity Compensation Plans

The Company and shareholders have approved the 2016 Omnibus Incentive Plan. Pursuant to the plan the Company has, on a case-by-case basis, elected to partially compensate certain Employees, Officers, Directors and Consultants with the issuance of shares of the company’s common stock, or options to purchase the same. See the Sections titled “Executive Compensation”; “Certain Relationships and Related Parties Transactions”; “Description of Registrant’s Securities to be Registered”; and “Recent Sale of Unregistered Securities” for more information.

Holders

As of the date of this registration statement there were 20,242,265 shares of common stock outstanding, which were held by approximately 110 shareholders of record. As of the date of this registration statement, we have no present commitments to issue shares of our capital stock to any 5% holder, Director, or nominee.

Dividends

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any further determination to pay dividends on our capital stock will be at the discretion of our Board of Directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our Board of Directors considers relevant.

Rule 144

As of the date of this registration statement, we have issued 20,242,265 shares of our common stock. These shares are currently restricted from trading under Rule 144. In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144.

If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.

In general, under Rule 144 as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning 90 days after the date of this registration statement, a number of shares that does not exceed the greater of:

Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

Rule 701 of the Securities Act allows for the resale of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the requirements relating to holding periods, volume and public information. Any of the Company’s employees, consultants or advisors, other than our affiliates, who purchased shares from us under a written compensatory plan or contract, may be entitled to rely on the resale provisions of Rule 701. However, all holders of Rule 701 shares are required to wait until 90 days after the effective date of this registration statement before selling shares in reliance upon Rule 701.

Set forth below is an enumeration of all securities issued by the Company since December 7, 2015, (inception) that have not been registered under the Securities Act.

On February 16, 2016, the Company merged with Nexeon MedSystems, Inc. (“NXDE”) – a Delaware corporation. The Company, a Nevada corporation, was the surviving entity. The Company converted 100% of NXDE’s issued and outstanding common and preferred stock into 1,659,946 shares of the Company’s common stock. In addition to the conversion of NXDE shares into common shares of the Company, the Company shall pay a limited liability company formed by the former shareholders of NXDE for the purpose of receiving a royalty equal to Three Percent (3%) (the “NXDE royalty”) of Net Product Sales received by the Company, its affiliates and licensees derived from the commercialization of patents or other intellectual property owned by NXDE prior to the merger. Our Chief Innovation Officer and Director, Dr. Mark Bates, was the Chief Executive Officer of NXDE and received 392,831 shares of the Company’s common stock in the foregoing transaction.

As part of the Merger Agreement with NXDE, Dr. Mark Bates, M.D, the Company’s Chief Innovation Officer, and Director, converted $370,000 of debt owed to him by NXDE into 370,000 shares of our common stock and warrants to purchase 370,000 additional shares of common stock at a strike price of $2.00 per share and with a term of 36 months. In addition, Dr. Bates contributed $202,825 of accrued interest on his debt, which will be reflected as additional paid in capital to the Company during the first quarter of 2016.  Dr. Bates, beginning May 1, 2016, will receive a monthly consulting fee of $3,500.00. 

As part of the Merger Agreement with NXDE, Mr. Ralph Ballard, who was a co-founder and Director of NXDE converted $451,482 of debt owed to him by the Company and received 451,482 shares of our common stock and warrants to purchase 451,482 shares at a strike price of $2.00 per share and with a term of 36 months. In addition, three trusts representing three of Mr. Ballard’s children converted $427,076 of debt and received 427,076 shares of our common stock and warrants to purchase 427,076 shares of common stock at a strike price of $2.00 per share with a term of 36 months. The shares and warrants were issued to the three trusts. Mr. Ballard disclaims any beneficial ownership in the Units issued to the three trusts.

Subsequent to the Merger, three additional NXDE Shareholders converted a total of $34,261 in debt for 34,261 shares of our common stock and warrants to purchase 34,261 shares of our common stock at a strike price of $2.00 per share with a term of 36 months.

Subsequent to the Merger, Rosellini Scientific LLC exchanged a $175,000 promissory note with a term of five years bearing an annual interest rate of 8%, payable to Rosellini Scientific by Telemend Medical, Inc., a Delaware corporation, to the Company, in return for 175,000 shares of the Company’s common stock and warrants to purchase 175,000 shares of common stock with a strike price of $2.00 per share with a term of 36 months.

On December 15, 2015, the Company issued 500,000 shares of its common stock to its Chief Operating Officer, Ron Conquest, for the sum of $500 at the par value of $0.001. 212,000 shares of the 500,000 shares became vested upon issue and the remaining 288,000 shares shall vest over a 36 month period at the rate of 8,000 shares per month.

On January 1, 2016, the Company issued 252,000 shares of common stock to Christopher Miller, with a par value of $0.001, for certain accounting and budget-related services rendered as well as serving as Interim CFO until such time as a permanent CFO is hired. The shares vest over a 36 month period at the rate of 7,000 shares per month.

On January 2, 2016, the Company issued 1,800,000 shares of its common stock to its Vice President of Clinical Affairs, Dr. Elizabeth Rosellini DDS (the sister of our CEO), in return for 214 shares of common stock of Telemend Medical, Inc., a Delaware corporation, and 60,000 shares of common stock of Nuviant Medical, Inc., a Nevada corporation.

On January 2, 2016, the Company entered into a Contribution Agreement with Rosellini Scientific, LLC – a company controlled by our CEO, William Rosellini – and its wholly-owned subsidiary Belltower Associates, LLC (collectively, Rosellini Scientific, LLC and Belltower Associates, LLC are hereinafter referred to as “RS”). Under this agreement, the Company issued 13,200,000 shares of its common stock in return for, among other consideration:

Between March and April of 2016, the Company issued 112,500 shares of its common stock and warrants to purchase 112,500 shares of its common stock with a strike price of $2.00 per share and a term of 36 months, realizing aggregate proceeds of $112,500.

On April 1, 2016, pursuant to the 2016 Omnibus Incentive Plan, the Company issued non-qualified options to purchase 252,000 shares of common stock, with an exercise price of $1.00 with a term of three years to each of the following: Rosellini Scientific, LLC (see “Employment Agreements” below for more information); Dr. Mark Bates MD; Dr. Elizabeth Rosellini DDS; and Sheneka Rains (a consultant) for services rendered to the Company since inception as well as ongoing services to be provided from time to time. The options vest in monthly increments of 7,000, with a three-year term for each option beginning upon each date of vesting.

On June 1, 2016, pursuant to the 2016 Omnibus Incentive Plan, the Company issued Dr. Melanie McWade PhD Incentive Stock Options to purchase 252,000 shares of its common stock with an exercise price of $1.00. The options vest in monthly increments of 7,000 with a three-year term for each option beginning upon each date of vesting.

Unless otherwise stated, the issuance of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Regulation D promulgated there under, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or contracts relating to compensation as provided under Rule 701. 

The recipients of the securities in the foregoing transactions represented their intentions to acquire the securities for investment only and not with a view to the resale or distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had access, through their relationships with the Company, to information about Nexeon MedSystems Inc.

General

Our authorized capital stock consists of 75,000,000 shares of common stock with a par value of $0.001. As of the Effective Date of this registration statement, there are 20,242,265 shares of our common stock and zero shares of preferred stock authorized.

We are registering on this registration statement only our common stock, the terms of which are described below. However, we also describe the terms of additional securities which the Company has outstanding as of the date of this registration statement.

Common Stock

The following description of certain matters relating to our securities does not purport to be complete and is subject in all respects to the applicable laws of the State of Nevada and the laws of the jurisdictions of the individual states and the Securities and Exchange Commission, as the case may be. Each share of our Common Stock is entitled to one vote at all meetings of our stockholders. Our stockholders are not permitted to cumulate votes in the election of Directors. All shares of our Common Stock are equal to each other with respect to liquidation rights and dividend rights. 

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to receive, on a pro rata basis, all of our assets remaining after satisfaction of all liabilities and preferences of outstanding preferred stock, if any.

Except as otherwise required by Nevada law, holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of Directors, can elect all of the Directors to be elected, if they so choose, and in such event, the holders of the remaining shares will not be able to elect any of our Directors.

Preferred Stock

As of the date of this registration statement, the Company has zero shares of preferred stock authorized.

Share Purchase Warrants, Options, & Other Convertible Securities

As of the date of this registration statement, the Company had warrants outstanding to purchase an aggregate of 1,570,319 shares of our common stock. All of these warrants have a strike price of $2.00 per share and a term of 36 months.

On April 1, 2016 the Company issued, pursuant to its 2016 Omnibus Incentive Plan, Nonqualified Stock Options to purchase an aggregate of 1,008,000 shares of our Common Stock at an exercise price of $1.00 per share. Aggregately, these options shall vest in monthly increments of 28,000 for three years following the issuance date. These options have a three-year term, which begins with each date of vesting. In addition on June 1, 2016 the Company issued to an employee, pursuant to its 2016 Omnibus Incentive Plan, 252,000 Incentive Stock Options to purchase shares of our Common Stock at an exercise price of $1.00 per share. These options shall vest in monthly increments of 7,000 for three years following the issuance date. These options have a three-year term, which begins with each date of vesting.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings for use in the operation of our business and do not intend to declare or pay any cash dividends in the foreseeable future. Any further determination to pay dividends on our capital stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors considers relevant.

Market for Our Shares of Common Stock

As of the date of this registration statement, there is no public market for our securities. There has been no public trading of our securities, and, therefore, no high and low bid pricing.

We plan to contact a market maker immediately following the completion of the Offering and apply to have the shares quoted on the OTC Bulletin Board (“OTCBB”). The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter securities. The OTCBB is not an issuer listing service, market or exchange. Although the OTCBB does not have any listing requirements to be eligible for quotation on the OTCBB, issuers must remain current in their filings with the SEC. Market makers are not permitted to begin quotation of a security of an issuer that does not meet this requirement. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30- or 60-day grace period if they do not make their required filing during that time.

We cannot guarantee that our application will be accepted or approved and our stock listed and quoted for sale. As of the date of this filing, there have been no discussions or understandings between the Company and any market maker regarding participation in a future trading market for our securities.

Anti-Takeover Provisions

In the future, we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and if it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest”, which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of Directors: (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

The effect of the control share law is that the acquiring entity, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring entity once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring entity, then those shares do not become permanent non-voting shares. The acquiring entity is free to sell its shares to others.

If the buyers of those shares themselves do not acquire a controlling interest, then the control share law does not govern their shares. If control shares are accorded full voting rights and the acquiring entity has acquired control shares with a majority or more of the voting power, then any stockholder of record, other than an acquiring entity, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares. Nevada’s control share law may have the effect of discouraging takeovers of the Company.

In addition to the control share law, Nevada has a business combination law that prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s Board of Directors approves the combination in advance.

For purposes of Nevada law, an “interested stockholder” is any person who is: (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada’s business combination law is to discourage parties potentially interested in taking control of our Company from doing so if it cannot obtain the approval of our Board of Directors.

Our Officers and Directors are indemnified as provided by the Nevada Revised Statutes (“NRS”) and our bylaws. Under the NRS, unless modified by a corporation's Articles of Incorporation, a Director is not liable to a corporation, its stockholders, or creditors for damages unless the Director's action or failure constituted a breach of fiduciary duty and such breach involved intentional misconduct, fraud, or a knowing violation of law. Our bylaws provide that we will indemnify our Directors and Officers to the fullest extent permissible under Nevada law if such person acted in good faith and in a manner which such person reasonably believed to be in, or not opposed to, the best interests of the Company and, with respect to any criminal action, had no reasonable cause to believe such conduct was unlawful. The Company has entered into Indemnification Agreements with each of its Directors a copy of which is attached hereto as Exhibit 10.07

The Company may purchase and maintain Directors and Officers Liability Insurance or make other financial arrangements on behalf of any individual entitled to indemnity. Our bylaws also provide that we will advance all expenses incurred to any person entitled to indemnity upon receipt of an undertaking by, or on behalf of, such person to repay said amounts should it be ultimately determined that the person was not entitled to indemnification.

The Company’s financial statements for the period from December 7, 2015, (inception) through December 31, 2015, and for NXDE for the years ending December 31, 2014, and December 31, 2015, have been audited by Paritz & Company P.A., an independently-registered, public accounting firm. The financial statements have been prepared in accordance with generally accepted accounting principles and are included at the end of this registration statement. In addition included herein is an unaudited pro forma consolidated financial statement dated December 31, 2015, which assumes the merger of NXNV and NXDE occurred on that date. An unaudited interim financial statement as of and for the period ended March 31. 2016 is also included herewith.

The Company has not had any disagreements with our auditors on any matters of accounting principles, practices, or financial statement disclosure.

Financial Statements:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Nexeon MedSystems Inc

(A Nevada Corporation)

Financial Statements

December 31, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders’

Nexeon MedSystems, Inc.

We have audited the accompanying balance sheets of Nexeon MedSystems, Inc. as of December 31, 2015 and the related statements of operations, changes in stockholders’ deficit and cash flows for the period from December 7, 2015 (Inception) to December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nexeon MedSystems, Inc. as of December 31, 2015, and the results of its operations and cash flows for the period from December 7, 2015 (Inception) to December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As discussed in Note 2 the Company has has not commenced operations and has an accumulated a deficit of $915 as of December 31, 2015. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.  Management plans are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Hackensack, New Jersey

June 30, 2016

The Accompanying Notes are an Integral Part of the Financial Statements

The Accompanying Notes are an Integral Part of the Financial Statements

The Accompanying Notes are an Integral Part of the Financial Statements

The Accompanying Notes are an Integral Part of the Financial Statements

Nexeon MedSystems Inc

Notes to Financial Statements

Operations

Nexeon MedSystems Inc (the “Company”) was incorporated in the State of Nevada on December 7, 2015. The Company’s primary purpose is to acquire an existing medical device development company.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. However, the Company has not commenced operations and has an accumulated a deficit of $915 as of December 31, 2015. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern.

Management expects to seek potential business opportunities for merger or acquisition of existing companies. Currently the Company has yet to locate any merger of acquisition candidates. Management is not currently limiting their search for merger or acquisition candidates to any industry or locations. Management, while not especially experienced in matters relating to public company management, will rely upon their own efforts and, to a much lesser extent, the efforts of the Company’s shareholders, in accomplishing the business purposes of the Company.

Development Stage Company

The company is considered to be in the development stage as defined in ASC 915 “Development Stage Entities.” The company is devoting substantially all of its efforts to the development of its business plans. The company has elected to adopt early application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements; and does not present or disclose inception-to-date information and other remaining disclosure requirements of Topic 915.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Nexeon MedSystems Inc

Notes to Financial Statements

Per Share Data

Net loss per share (EPS) of Common Stock is computed based upon the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock. Basic and diluted EPS were the same for the period from inception through December 31, 2015, as the Company had no potentially dilutive securities.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.

All tax positions are first analyzed to determine if the weight of available evidence indicates that it is more likely than not that the position will be sustained under audit, including resolution of any related appeals or litigation processes. After the initial analysis, the tax benefit is measured as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

If the Company is required to pay interest on the underpayment of income taxes, the Company recognizes interest expense in the first period the interest becomes due according to the provisions of the relevant tax law.

If the Company is subject to payment of penalties, the Company recognizes an expense for the amount of the statutory penalty in the period when the position is taken on the income tax return. If the penalty was not recognized in the period when the position was initially taken, the expense is recognized in the period when the Company changes its judgment about meeting minimum statutory thresholds related to the initial position taken.

Nexeon MedSystems Inc

Notes to Financial Statements

Start-up Costs

In accordance with ASC 720, “Start-up Costs”, the company expenses all costs incurred in connection with the start-up and organization of the company.

Fair Value Measurements

The company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The company has no assets or liabilities valued at fair value on a recurring basis

Recently Issued Accounting Pronouncements

On June 10, 2014, FASB issued ASU No. 2014-10, Development Stage Entities . The update removes the definition of a development stage entity from FASB ASC 915 and eliminates the requirement for development stage entities to present inception-to-date information on the statements of operations, cash flows and members’ equity. The Company early adopted this standard for the period covered herein.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern . The amendments require management to perform interim and annual assessments of an entity’s ability to continue as a going concern and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements.

Other than as noted above the Company has not implemented any pronouncements that had material impact on the financial statements and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Nexeon MedSystems Inc

Notes to Financial Statements

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the period from inception to December 31, 2015 to the company’s effective tax rate is as follows: 

The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets at December 31, 2015 are as follows:

Change in valuation allowance:

The Company has approximately $915 of net operating losses (“NOL”) carryovers to offset taxable income, if any, in future years which expire in fiscal 2035. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs period because it is more likely than not that all of the deferred tax asset will not be realized.

Common and Preferred Stock

The Company’s Articles of Incorporation authorize 75,000,000 shares of Common Stock $0.001 par value and 25,000,000 shares of Preferred Stock $0.001 par value. The Articles of Incorporation were amended on February 22, 2016 to cancel the authorization of Preferred Stock.

On December 7, 2015 the Company issued 500,000 shares to the Company’s founder at par.

Nexeon MedSystems Inc

Notes to Financial Statements

During the period from inception to December 31, 2015, the Company's chief operating officer loan $415 to the Company. The loan is non-interest bearing with no set terms of repayment.

On January 1, 2016, the Company executed a four year Employment Agreement with Ron Conquest in the capacity of Chief Operating Officer and Director. Pursuant to this agreement Mr. Conquest will receive an annual salary in the amount of $100,000. Starting October 1, 2016, Mr. Conquest will receive an annual salary of $140,000. Starting October 1, 2017, Mr. Conquest will receive an annual salary of $175,000. In the event Mr. Conquest is terminated without "cause" (as defined in his Employment Agreement), the Company will be required to pay his then existing salary and benefits for a period equal to fifty percent (50%) of the remaining Term of his Employment Agreement. In the event the Company terminates Mr. Conquest's employment as a result of a change in control, the Company will be responsible to pay his then existing salary and benefits for the remaining Term of the agreement.  

During January 2016, the Company entered into agreements with two parties for the issuance of an aggregate of 15,000,000 shares of common stock valued at $322,360 in exchange for 1,735,000 shares of common stock in Nuviant Medical Inc., a Nevada corporation, 389 shares of common stock in Telemend Medical, Inc., a Delaware corporation, 167 shares of common stock in MicroTransponder Inc., a Delaware corporation, the assignment of one Federal NIH Grant in the amount of $218,377 and one State of Kentucky Matching Funds Grant in the amount of $150,000 along with the option to purchase, for no additional consideration, all of the common stock or membership interests owned or controlled by Rosellini Scientific, LLC, to be exercised no later than September 30, 2016, of three Delaware limited liability companies and two Delaware corporations.

The Company initiated a private placement of its common stock effective February 1, 2016 through July 31, 2016. The private placement is for the sale of 2,500,000 units at $1.00 per unit. One unit consists of one share of restricted common stock and one common stock warrant. The warrants have an exercise price of $2.00 per share and expire 36 months from the expiration date of the private placement. To date $112,500 has been subscribed for in cash.

On February 16, 2016, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with Nexeon MedSystems, Inc (a Delaware company) ("NXDE"), pursuant to which the NXDE was merged with and into the Company, with the Company continuing as the surviving entity. The transaction is being accounting for as a business combination. The foregoing transaction is referred to herein as the Merger. In exchange for 100% of the issued and outstanding preferred stock of NXDE, immediately prior to the closing of the Merger, the Company issued 1,659,943 shares of common stock to the Preferred Stockholders of NXDE. In addition, the merger agreement provides for the conversion of $645,000 of debt and $379,307 of accrued interest relating to the debt of NXDE under the provisions of a private placement of the the Company referred to above and provides for a Royalty Agreement with the shareholders of the Company.

On January 1, 2016, the Company issued 252,000 shares of common stock to Christopher Miller, with a par value of $0.001, for certain accounting and budget-related services rendered as well as serving as Interim CFO until such time as a permanent CFO is hired. The shares vest over a 36 month period at the rate of 7,000 shares per month.

Nexeon MedSystems Inc

Notes to Financial Statements

On April 1, 2016, the Company issued warrants to purchase 370,000 shares of common stock to the Company's Chairman and Chief Innovation Officer at a strike price of $2 per share over a term of 36 months.

On April 1, 2016, the Company issued non-qualified options to purchase 252,000 shares of common stock each to an entity owned by the Company's chief executive officer, the Company's chairman, and to the Company's vice president of clinical affairs. The options are subject to vesting over 36 months in monthly increments of 7,000.

The Company has evaluated subsequent events through June 30, 2016, which is the date the financial statements are available to be issued.

Nexeon MedSystems, Inc.

(A Delaware Corporation)

Financial Statements

December 31, 2015 and 2014

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders’

Nexeon MedSystems, Inc.

We have audited the accompanying balance sheets of Nexeon MedSystems, Inc. as of December 31, 2015 and 2014 and the related statements of operations, changes in stockholders’ deficit and cash flows for the years ended December 31, 2015 and 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nexeon MedSystems, Inc. as of December 31, 2015 and 2014, and the results of its operations and cash flows for the years ended December 31, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As discussed in Note 2 the Company has losses from operations and has an accumulated a deficit of $16,944,713 and a working capital deficiency of $1,352,563 as of December 31, 2015. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern.  Management plans are also discussed in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Hackensack, New Jersey

June 30, 2016

The Accompanying Notes are an Integral Part of the Financial Statements

The Accompanying Notes are an Integral Part of the Financial Statements 

The Accompanying Notes are an Integral Part of the Financial Statements

The Accompanying Notes are an Integral Part of the Financial Statements

Nexeon MedSystems, Inc.

Notes to Financial Statements

Operations

Nexeon MedSystems, Inc. (the “Company”) was incorporated in the State of Delaware on September 11, 2008. The Company’s primary purpose is the development and commercialization of a unique series of breakthrough therapies for people with cardiovascular disease.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company has losses from operations and has an accumulated a deficit of $16,944,713 as of December 31, 2015 and a working capital deficiency of $1,352,563 as of December 31, 2015. The Company currently has limited liquidity, and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Management will seek potential business opportunities for merger or acquisition of existing companies. The Company identified a merger candidate in November 2015 and completed a merger on February 16, 2016. Management, while not especially experienced in matters relating to public company management, will rely upon their own efforts and that of its Board of Directors in accomplishing the business purposes of the Company. Management began in the first quarter of 2016 to form new capital in the form of an SEC Regulation D, Rule 506 Private Placement in the amount of $2,500,000 offering shares and warrants of the Company’s Common Stock.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Nexeon MedSystems, Inc.

Notes to Financial Statements

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our credit obligations with stockholders approximate fair value because the effective yields on these obligations, which include contractual interest rates are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

Property and Equipment

Property and equipment are stated at cost. Equipment is depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized based upon the lesser of the term of the lease or the useful life of the asset and such expense is included in depreciation expense. Repair and maintenance costs are expensed as incurred. The Company capitalizes all furniture and equipment with cost great than $500 and benefiting more than one accounting period in the period purchased.

Research and Development Expenses

Research and development expenses are charges to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, materials, supplies, and consulting costs.

Nexeon MedSystems, Inc.

Notes to Financial Statements

Revenue Recognition

In accordance with ASC Topic 605 “Revenue Recognition”, revenue should not be recognized until it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. During the year ended December 31, 2014, the Company recognized revenue from the sale and assignment of certain patent rights to a third party.

Advertising expense

The Company’s policy is to expense advertising costs as the costs are incurred.

Per Share Data

Net loss per share (EPS) of Common Stock is computed based upon the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock. Basic and diluted EPS were the same for the period from inception through December 31, 2015, as the Company had no dilutive securities.

Income Taxes

The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented

Recently Issued Accounting Pronouncements

On June 10, 2014, FASB issued ASU No. 2014-10, Development Stage Entities . The update removes the definition of a development stage entity from FASB ASC 915 and eliminates the requirement for development stage entities to present inception-to-date information on the statements of operations, cash flows and members’ equity. The Company early adopted this standard for the period covered herein.

Nexeon MedSystems, Inc.

Notes to Financial Statements

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern . The amendments require management to perform interim and annual assessments of an entity’s ability to continue as a going concern and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements.

Other than as noted above the Company has not implemented any pronouncements that had material impact on the financial statements and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Property and equipment consists principally of office equipment and furniture, and is stated at a cost of $33,887 at December 31, 2015 and 2014 net of accumulated depreciation $23,249 and $20,160 at December 31, 2015 and 2014 respectively. Depreciation expense totaled $3,089 and $3,390 for the years ended December 31, 2015 and 2014, respectively.

The equipment is being depreciated on the straight-line bases over the estimated useful lives of the asset of 4-5 years.

The Company currently leases approximately 400 square feet of office space located at 1708 Jaggie Fox Way, Lexington, Kentucky, 40511 for a monthly rate of $475.

The Company has loans from various stockholders and related entities of the stockholders in the aggregate amount of $970,000 and $925,000 at December 31, 2015 and 2014, respectively. The loans bear interest at 12% per annum. As of December 31, 2015 and 2014, accrued interest outstanding on the stockholder loans was $537,629 and $424,488, respectively.

Nexeon MedSystems, Inc.

Notes to Financial Statements

The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the years ended December 31, 2015 and 2014 to the Company’s effective tax rate is as follows:

Nexeon MedSystems, Inc.

Notes to Financial Statements

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2015 and 2014 are as follows:

As of December 31, 2015, the Company had approximately $6,170,000 of federal and state net operating loss carryovers (“NOLs”) which begin to expire in 2029.  Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.  

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

The Company files U.S. federal and state of Kentucky and California tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2012. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.

Common and Preferred Stock

The Company’s Articles of Incorporation authorize 3,000,000 shares of Common Stock $0.0001 par value and 14,000,000 shares of Preferred Stock $0.0001 par value. As of December 31, 2015 and 2014, 11,000,000 shares of Preferred Stock were designated as Series A Preferred Stock and 3,000,000 shares of preferred stock were designated as Series B Preferred Stock.

As of December 31, 2015 and 2014, the Company had 1,795,500 shares of common stock issued and outstanding consisting of 1,535,750 shares of unrestricted common stock and 259,750 shares of restricted common stock. The Company had 10,222,137 shares of Series A Preferred Stock issued and outstanding as of December 31, 2015 and 2014 and 815,034 shares of Series B Preferred Stock issued and outstanding as of December 31, 2015 and 2014.

Nexeon MedSystems, Inc.

Notes to Financial Statements

On February 16, 2016, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with Nexeon MedSystems, Inc (a Nevada company) ("NXNV"), pursuant to which the the Company was merged with and into NXNV, with NXNV continuing as the surviving entity. The transaction is being accounting for as a business combination. The foregoing transaction is referred to herein as the Merger. In exchange for 100% of the issued and outstanding preferred stock of the Company, immediately prior to the closing of the Merger, NXNV issued 1,659,946 shares of common stock to the Preferred Stockholders of the Company. As a result of the Merger, the stockholders of the Company acquired 9.67% of NXNV's issued and outstanding common stock. In addition, the merger agreement provides for the conversion of $645,000 of debt and $379,307 of accrued interest relating to the debt of the Company under the provisions of a private placement of the NXNV and provides for a Royalty Agreement with the shareholders of the Company.

The Company has evaluated subsequent events through June 30, 2016, which is the date the financial statements were available to be issued. 

Nexeon MedSystems Inc

Pro Forma Financial Statements

Unaudited

December 31, 2015