Nevada
|
3841
|
46-3312262
|
(State or other jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification No.)
|
Harvey Kesner, Esq.
Arthur S. Marcus, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
(212) 930-9700
|
Jarrett Gorlin
Chief Executive Officer
MEDOVEX CORP.
1735 Buford Hwy., Suite 215-113
Cumming, Georgia 30040
844-633-6839
|
Joel Mayersohn, Esq.
Roetzel & Andress, LPA
350 East Las Olas Blvd.
Las Olas Centre II, Suite 1150
Fort Lauderdale, Florida 33301
(954) 462-4150
|
Title of each class of
securities to be registered
|
Amount
to be
registered
|
Proposed
maximum
offering price
per Share
(1)
|
Proposed
maximum
aggregate
offering
price
(1)
|
Amount of
registration fee
(2)
|
||||||||||
Units, Each Consisting of One Share of Common Stock, $0.001 Par Value Per Share, One Series A Warrant and One Series B Warrant | 1,552,500 units | $ | 6.50 | $ | 10,091,250 | $ | 1,299.75 | |||||||
Shares of Common Stock Included as Part of the Units (3) | 1,552,500 shares | (4 | ) | (4 | ) | - | ||||||||
Series A Warrants Included as Part of the Units | 1,552,500 warrants | (4 | ) | (4 | ) | - | ||||||||
Shares of Common Stock Underlying the Series A Warrants Included as Part of the Units (3)(5) | 1,552,500 shares | $ | 7.80 | $ | 12,109,500 | $ | 1,559.70 | |||||||
Series B Warrants Included as Part of the Units | 1,552,500 warrants | (4 | ) | (4 | ) | - | ||||||||
Shares of Common Stock Underlying the Series B Warrants Included as Part of the Units (3)(5) | 1,552,500 shares | $ | 7.80 | $ | 12,109,500 | $ | 1,559.70 | |||||||
Units underlying the Representative’s Unit Warrant (“Representative’s Units”) (6) | 94,500 units | (4 | ) | (4 | ) | - | ||||||||
Shares of Common Stock underlying the Representative’s Units (3) | 94,500 shares | $ | 6.50 | $ | 614,250 | $ | 79.12 | |||||||
Series A Warrants Included as Part of the Representative’s Units (7) | 94,500 warrants | (4 | ) | (4 | ) | - | ||||||||
Shares of Common Stock Underlying the Series A Warrants Included in the Representative’s Units (3)(5) | 94,500 shares | $ | 7.80 | $ | 737,100 | $ | 94.94 | |||||||
Series B Warrants Included as Part of the Representative’s Units (7) | 94,500 warrants | (4 | ) | (4 | ) | - | ||||||||
Shares of Common Stock Underlying the Series B Warrants Included in the Representative’s Units (3)(5) | 94,500 shares | $ | 7.80 | $ | 737,100 | $ | 94.94 | |||||||
Total | $ | 36,398,700 | $ | 4,688.16 |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the "Securities Act"). Includes the offering price of shares from the units that the underwriters have the option to purchase to cover over-allotments, if any. |
(2) | Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. |
(3) | Pursuant to Rule 416 under the Securities Act, the shares of Common Stock registered hereby also include an indeterminate number of additional shares of Common Stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions. |
(4) | No registration fee pursuant to Rule 457(g) under the Securities Act. |
(5) | Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The warrants are exercisable at a per share exercise price equal to 120% of the public offering price per unit. |
(6) | Estimated solely for the purpose of recalculating the registration fee pursuant to Rule 457(g) under the Securities Act, the proposed maximum aggregate offering price of the Representative's Units is $2,249,100 (which is equal to 7% of $32,130,000 ). |
(7) | 43% of all of the warrants included as part of the Representatives Warrant are exercisable at 120% of the public offering price per unit, and 57% of all of the warrants included as part of the Representative's Unit Warrant are exercisable at 165% of the public offering price per unit. |
PRELIMINARY PROSPECTUS
|
SUBJECT TO COMPLETION
|
DATED OCTOBER 7, 2014
|
Per Unit
|
Total
|
|||||||
Initial public offering price
|
$
|
6.00 |
$
|
8,100,000 | ||||
Underwriting discounts and commissions
(1)
|
$
|
0.54 |
$
|
729,000 | ||||
Proceeds to us, before expenses
|
$
|
5.46 |
$
|
7,371,000 | ||||
ViewTrade Securities Inc.
|
Page
|
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1 | |
10 | |
30 | |
30 | |
31 | |
31 | |
33 | |
34 | |
41 | |
57 | |
65 | |
66 | |
69 | |
70 | |
74 | |
76 | |
79 | |
79 | |
79 | |
F-1
|
1.
|
Conduct additional research to further refine the product.
|
2.
|
Submit the final version to regulatory agencies for their approval, including conducting additional studies as they may require.
|
3.
|
Finalize reimbursement, marketing and distribution strategies.
|
4.
|
Source vendor(s) for production and marketing/distribution partners (we currently do not plan to manufacture or distribute the product ourselves).
|
·
|
Temporary Relief.
Spinal injection, cryodenervation, RF ablation
,
and pulsed RF therapies are temporary, such that patients must return for repeated treatment over the course of the patient’s lifetime. Spinal injections effectiveness only lasts a period measured in months, while cryodenervation, RF ablation, and pulsed RF have generally been shown to be effective for approximately 6 months to 2 years.
|
·
|
Difficult to learn and teach.
Compared to the temporary relief treatments described above, the long term relief treatment of manual
tissue scraping and electrocautery performed separately
requires
a
spinal surgeon with excellent
endoscopy
skills
and special training. Spinal fusion is a very complex procedure requiring hours to complete and a team of medical professionals to perform.
|
·
|
Surgical mechanisms are bulky and difficult to use.
Spinal injections require large, painful needles. Manual tissue scraping and electrocautery performed separately requires four separate devices to be used that cannot be deployed simultaneously. Spinal fusion surgery is a very invasive and significant surgical procedure
.
|
·
|
High cost.
Spinal injection, cryodenervation, RF ablation, and pulsed RF therapies must be repeatedly applied to be effective, and the cost of such repeated visits to healthcare facilities can aggregate significantly over the course of a lifetime, not to mention the cost of lost productivity due to lower back pain in between treatments.
|
·
|
Invasive with long recovery time.
Spinal fusion surgeries are potentially risky, highly invasive surgeries that require significant recovery time with an average cost per patient of up to $108,000, plus an estimated 3 to 6 months of lost productivity in the workplace.
|
·
|
Longer Lasting.
The DenerVex is designed to provide long lasting relief from pain for patients that would otherwise be required to undergo repetitive therapies such as spinal injections and RF ablation.
|
·
|
Easy to teach and intuitive to use.
The DenerVex is intended to combine two procedures that are currently carried out in the manual tissue scraping and electrocautery performed separately into one procedure that does not require a specialist to conduct. We intend to offer a simple one-day or weekend course featuring a cadaver lab to train physicians in usage of the DenerVex.
|
·
|
Compact, next generation design.
The DenerVex is intended to be an all-in-one solution that comes in a sterile, single use package.
|
·
|
Cost efficient.
The DenerVex is designed as a single use device, so there are no sterilization or repair costs that are associated with many medical devices.
|
·
|
Less Invasive with minimal recovery time.
Use of the DenerVex will represent a less invasive solution to FJS than spinal fusion surgery and can be carried out through an out-patient procedure that does not require follow-up surgery to be effective.
|
·
|
Promoting the differentiated features of our DenerVex exclusive technology to penetrate the $11.5 billion global spine surgery devices market and establish DenerVex as a standard of care for treating FJS, as well as broadening the clinical applications of the DenerVex;
|
·
|
Investing in our infrastructure to broaden our market presence first in Europe, then in the U.S. and eventually worldwide, expand our global distribution footprint, and to ensure regulatory approval internationally; and
|
·
|
Leveraging the strength and experience of our world-class management team to selectively pursue opportunities to expand our portfolio of medical device products and businesses.
|
·
|
our lack of operating history.
|
·
|
our liquidity and the net losses that we expect to incur as we develop our business. If such losses mean that we do not continue as a going concern, investors could lose their entire investment
.
|
·
|
we will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.
|
·
|
obtaining FDA or other regulatory approvals or clearances for our technology. We are heavily dependent on the success of our first product, the DenerVex, which has not yet received regulatory approval. We will not be able to generate any revenue unless we receive regulatory approval. The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, costly and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product, our business will be substantially harmed.
|
·
|
implementing and achieving successful outcomes for clinical trials of our products. Our initial product, the DenerVex, is based on a currently clinically unproven approach to back pain treatment.
|
·
|
convincing physicians, hospitals and patients of the benefits of our technology and to convert them from current technology.
|
·
|
we face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully, than we do. We expect any product that we commercialize will compete with products from other companies in the medical device industry. Many of our potential competitors have substantially greater commercial infrastructures and financial, technical and personnel resources than we have. If we are not able to compete effectively against our competitors, our business will not grow and our financial condition and operations will suffer.
|
·
|
the ability of users of our products (when and as developed) to obtain third-party reimbursement.
|
·
|
any failure to comply with rigorous FDA and other government regulations, which may change or be reformed.
|
·
|
we depend on key personnel.
|
·
|
securing, maintaining and defending patent or other intellectual property protections for our technology. Our inability to obtain adequate patent protection for our products or failure to successfully defend against any claims that our products infringe the rights of third parties could also adversely affect our business. Any challenges relating to our intellectual property may require us to spend a substantial amount of time and money to resolve, if at all possible.
|
·
|
being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion & Analysis of Financial Condition and Results of Operations in this prospectus;
|
·
|
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act;
|
·
|
reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
|
·
|
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
|
Securities offered
|
1,350,000 units,
consisting of one share of common stock, one Series A Warrant to purchase one share of common stock and one Series B Warrant to purchase one share of common stock per unit purchased. The units will not be certificated and the shares of common stock, Series A Warrants and Series B Warrant will trade initially as a unit, and will trade separately 90 days from the date hereof, or earlier with the underwriter’s consent.
Each Series A Warrant is exercisable for one share of common stock. The Series A Warrants are immediately exercisable upon issuance in this initial public offering at an initial exercise price of 120% of the initial public offering price of one unit in this offering. The Series A Warrants will expire on the third anniversary of the date of issuance, and will not be listed on any securities exchange.
Each Series B Warrant is exercisable for one share of common stock. The Series B Warrants are exercisable immediately after issuance at an initial exercise price of 120% of the initial public offering price of one unit in this offering. The Series B Warrants will expire on the fifth anniversary of the date of issuance.
The shares of common stock issuable from time to time upon the exercise of the Series A Warrants and the Series B Warrants are also being offered pursuant to this prospectus.
|
||
Common Stock:
|
|||
Common stock offered by us
|
1,350,000 shares
|
||
Common stock to be outstanding after this offering
|
9,131,175 shares
|
||
Offering price
|
|||
Over-allotment option
|
The underwriters have an option for a period of 45 days to purchase up to fifteen percent (15%) of the units being offered under this registration statement to cover over-allotments, as long as such purchases do not exceed an aggregate of fifteen (15%) of the number of units sold in the primary offering.
|
||
Use of proceeds
|
We expect to receive
approximately $7,085,000 in net proceeds from the sale of our units offered by us in this offering (approximately $8,178,500 if the underwriters exercise their over-allotment option in full), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, assuming the units are offered at $6.00 per unit, the midpoint of the estimated price range set forth on the cover of this prospectus. We intend to use the net proceeds from this offering for:
|
·
|
Regulatory approval, pre-clinical testing, clinical trials if required, product development and commercialization;
|
|||
·
|
continuing research and development related activities with respect to the DenerVex;
|
|||
·
|
maintenance and enforcement of existing and future patents, pursuit of existing patent applications and additional future patent applications;
|
|||
·
|
the remainder for working capital and general corporate purposes which may include the acquisition of medical products’ companies or their technologies or the development of new technologies.
|
|||
See “Use of Proceeds” for a more complete description of the intended use of proceeds from this offering.
|
Risk factors
|
You should read the "Risk Factors" section starting on page 15 of this prospectus for a discussion of factors to consider carefully before deciding to invest in our securities.
|
||
Proposed NASDAQ Capital Market Symbol
|
We intend to apply to list our common stock on The NASDAQ Capital Market under the symbol “MDVX,” the Series A Warrants will trade under the symbol “MDVXW,”
the Series B Warrants will trade under the symbol “MDVXT”
and our units will trade under the symbol “MDVXU.” No assurance can be given that our application will be approved.
|
·
|
1,150,000 shares of our common stock available for future issuance as of March 31, 2014 under our 2013 Stock Incentive Plan of which options to purchase 60,000 shares of common stock have been granted at a price of $2.50 per share; and
|
·
|
up to 3,105,000 shares of common stock issuable upon the full exercise of the Series A Warrants and the Series B Warrants offered hereby;
|
·
|
shares of common stock underlying
the Representative’s Unit Warrant to be issued to the representative of the underwriters in connection with this offering, of which 43% will have an exercise price per share equal to 120% of the public offering price, and 57% of which will have an exercise price per share equal to 165% of the public offering price, plus up to 202,500 shares, 202,500 Series A Warrants and 202,500 Series B Warrants if the over-allotment unit purchase option is exercised in full.
|
·
|
no exercise of the Representative’s Unit Warrant included as part of the Representative’s Units described above; and
|
·
|
no exercise by the representative of the underwriters of its over-allotment purchase option.
|
Period from Inception at February 1, 2013 to December 31, 2013 |
Six Months
Ended June 30,
2014
(unaudited)
|
||||||
(in thousands, except
per share data)
|
(in thousands,
except
per share data)
|
||||||
Consolidated Statement of Operations Data:
|
|||||||
Operating expenses:
|
|||||||
General and administrative
|
$ | 583 | $ | 910 | |||
Research and development
|
90 | 347 | |||||
Total operating expenses
|
673 | 1,257 | |||||
Loss from operations
|
(673 | ) | (1,257 | ) | |||
Net loss attributable to common stockholders
|
$ | (673 | ) | $ | (1,257 | ) | |
Net loss per share- basic and diluted
(1)
|
$ | (0.15 | ) | $ | (0.16 | ) | |
Weighted average shares- basic and diluted
|
4,469 | 7,781 |
As of June 30, 2014 |
(As
Adjusted
(2)
)
|
||||||
(in thousands)
|
(unaudited) | ||||||
Consolidated Balance Sheet Data:
|
(Actual) | ||||||
Cash
|
$ | 1,451 | 8,451 | ||||
Working capital
|
1,277 | 8,277 | |||||
Total assets
|
1,612 | 8,612 | |||||
Total stockholders’ equity
|
1,437 | 8,437 |
(1) | See our consolidated financial statements and related notes for a description of the calculation of the weighted-average number of shares used in computing the per common share data. |
(2) | Gives effect to the sale of the Units offered hereby, and the receipt of $7,000,000 of net proceeds therefrom. |
● | the announcement or introduction of new products by our competitors; |
● | our ability to upgrade and develop our systems and infrastructure to accommodate growth; |
● | our ability to attract and retain key personnel in a timely and cost effective manner; |
● | technical difficulties; |
● | the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations a nd infrastructure; |
● | our ability to identify and enter into relationships with appropriate and qualified third-party providers such as Devicix, L LC for necessary testing, clinical trials and manufacturing services; |
● | regulation by federal, state or local governments; and |
● |
general economic conditions, as well as economic conditions specific to the medical device and healthcare industries.
|
·
|
require us to incur substantial litigation expense, even if we are successful in the litigation;
|
·
|
require us to divert significant time and effort of our management;
|
·
|
result in the loss of our rights to develop, make or market our products; and
|
·
|
require us to pay substantial monetary damages or royalties in order to license proprietary rights from third parties or to satisfy judgments or to settle actual or threatened litigation.
|
·
|
a 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions;
|
·
|
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities and conduct comparative clinical effectiveness research;
|
·
|
new reporting and disclosure requirements on device manufacturers for any “transfer of value” made or distributed to physicians and teaching hospitals, as well as reporting of certain physician ownership interests
|
·
|
payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and
|
·
|
an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.
|
·
|
different regulatory requirements for medical devices or treatments in foreign countries;
|
·
|
lack of adequate reimbursement for the use of our product;
|
·
|
differing United States and foreign import and export rules;
|
·
|
reduced protection for intellectual property rights in foreign countries;
|
·
|
unexpected changes in tariffs, trade barriers and regulatory requirements;
|
·
|
economic weakness, including inflation, or political instability in particular foreign economies and markets;
|
·
|
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
|
·
|
foreign taxes, including withholding of payroll taxes;
|
·
|
foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
|
·
|
workforce uncertainty in countries where labor unrest is more common than in the United States;
|
·
|
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;
|
·
|
potential liability resulting from development work conducted by these distributors; and
|
·
|
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters.
|
·
|
design and develop products that are superior to other products in the market;
|
·
|
attract qualified scientific, medical, sales and marketing and commercial personnel;
|
·
|
obtain patent and/or other proprietary protection for our processes and products;
|
·
|
obtain required regulatory approvals; and
|
·
|
collaborate with others in the design, development and commercialization of new products.
|
·
|
decreased demand for our products or products that we may develop;
|
·
|
injury to our reputation;
|
·
|
withdrawal of clinical trial participants;
|
·
|
costs to defend the related litigation;
|
·
|
a diversion of management's time and our resources;
|
·
|
substantial monetary awards to trial participants or patients;
|
·
|
product recalls, withdrawals or labeling, marketing or promotional restrictions;
|
·
|
loss of revenue;
|
·
|
the inability to commercialize our products; and
|
·
|
a decline in our stock price.
|
·
|
the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
|
·
|
the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
|
·
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPPA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program. HIPAA and HITECH also regulate the use and disclosure of identifiable health information by health care providers, health plans and health care clearinghouses, and also impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of identifiable health information as well as requiring notification of regulatory breaches. HIPAA and HITECH violations may prompt civil and criminal enforcement actions as well as enforcement by state attorneys general;
|
·
|
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
|
·
|
the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests;
|
·
|
analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and
|
·
|
analogous anti-kickback, fraud and abuse and healthcare laws and regulations in foreign countries.
|
·
|
our inability to recruit and retain adequate numbers of effective sales and marketing personnel;
|
·
|
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to utilize our procedures;
|
·
|
the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
|
·
|
unforeseen costs and expenses associated with creating an independent sales and marketing organization.
|
·
|
the development of certain of our current or future products may be terminated or delayed;
|
·
|
our cash expenditures related to development of certain of our current or future products would increase significantly and we may need to seek additional financing;
|
·
|
we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted;
|
·
|
we will bear all of the risk related to the development of any such products; and
|
·
|
the competitiveness of any product that is commercialized could be reduced.
|
·
|
others may be able to make products that are the same as or similar to our products but that are not covered by the claims of the patents that we own or have exclusively licensed;
|
·
|
we or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own;
|
·
|
we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions;
|
·
|
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
|
·
|
issued patents that we own may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
|
·
|
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
|
·
|
we may not develop additional proprietary technologies that are patentable; and
|
·
|
the patents of others may have an adverse effect on our business.
|
·
|
only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;
|
·
|
reduced disclosure about our executive compensation arrangements;
|
·
|
no non-binding advisory votes on executive compensation or golden parachute arrangements;
|
·
|
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
|
·
|
our ability to commercialize our products, if approved;
|
·
|
results from or delays of clinical trials of our products, as well as results of regulatory reviews relating to the approval of our products;
|
·
|
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
|
·
|
new products, products or new uses for existing products or technologies introduced or announced by our competitors and the timing of these introductions or announcements;
|
·
|
regulatory or legal developments in the United States and other countries;
|
·
|
developments or disputes concerning patent applications, issued patents or other proprietary rights;
|
·
|
the recruitment or departure of key scientific or management personnel;
|
·
|
variations in our financial results or those of companies that are perceived to be similar to us;
|
·
|
sales of common stock by us or our stockholders in the future, as well as the overall trading volume of our common stock;
|
·
|
market conditions in the medical products sectors; and
|
·
|
general economic, industry and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies.
|
·
|
$2,300,000 for a human clinical trial
|
·
|
$1,100,000 for product development (including production of sample units)
|
·
|
$890,000 for regulatory, reimbursement and other experts to obtain regulatory approvals and be ready to sell to and be paid by our target customers
|
·
|
$726,000 for general and administrative expenses
|
·
|
$2,135,000 for working capital and other general corporate purposes
|
·
|
on an actual basis;
|
·
|
on a pro forma as adjusted basis to give further effect to the issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $6.00 per unit, which is the midpoint of the price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
As of June 30, 2014 | ||||||||
Actual
|
Pro Forma as
Adjusted
(1)
|
|||||||
Stockholders’ Equity:
|
||||||||
Preferred stock, $.001 par value, 500,000 shares authorized, none issued or outstanding actual, pro forma or pro forma as adjusted
|
- | - | ||||||
Common stock,
$.001 par value, 49,500,000 shares authorized, 7,781,175 issued and outstanding actual; 9,131,275 shares issued and outstanding pro forma as adjusted
|
7,782 |
9,131
|
||||||
Additional paid in capital
|
3,360,064 | 10,362,714 | ||||||
Accumulated deficit
|
(1,930,615 | ) | (1,930,615 | ) | ||||
Total stockholders’ equity
|
$ | 1,437,232 | $ | 8,441,231 |
·
|
1,150,000 shares of our common stock available for future issuance as of June 30, 2014 under our 2013 Stock Incentive Plan of which options to purchase 60,000 shares of common stock have been granted at a price of $2.50 per share; and
|
·
|
up to 2,700,000 shares of common stock issuable upon the full exercise of the Series A Warrants and Series B Warrants offered hereby;
|
·
|
shares of common stock underlying the warrants included as part of the Representatives' Unit Warrant to be issued to the representative of the underwriters in connection with this offering, of which 43% will have an exercise price per share equal to 120% of the public offering price, and 57% of which will have an exercise price per share equal to 165% of the public offering price , plus up to 202,500 shares, 202,500 Series A Warrants and 202,500 Series B Warrants if the over-allotment unit purchase option is exercised in full.
|
Assumed Initial Public Offering Price Per Share | $ | 6.00 | |||
Historical Net Tangible Book Value per share as of June 30, 2014 | $ | 0.18 | |||
Pro Forma Net, Tangible Book Value per share as of June 30, 2014 | $ | 0.92 | |||
Increase in Net Tangible Book Value per share Attribute to New Investment | $ | 0.74 | |||
Pro Forma Net Tangible Book Value per share after this Offering | $ | 0.92 | |||
Dilution per share to New Investors | $ | 5.08 |
Grant Date
|
Options Granted
|
Exercise Price
|
Estimated Fair Value of Underlying Stock
|
Intrinsic Value
|
|||||||||
October 14, 2013
|
60,000 | $ | 2.50 | $ | 2.50 |
None
|
Weighted fair value of options granted | $ | 2.50 | ||
Expected term (years) | 6 | |||
Risk-free interest rate | 2.75 | % | ||
Volatility | 81 | % | ||
Dividend yield | None |
Operating expenses:
|
||||
General and administrative
|
$
|
910,131
|
||
Research and development
|
347,150
|
|||
Total operating expenses
|
1,257,281
|
|||
Net loss
|
$
|
(1,257,281
|
)
|
Operating expenses:
|
||||
General and administrative
|
$ | 582,946 | ||
Research and development
|
90,387 | |||
Total operating expenses
|
673,333 | |||
Net loss
|
$ | (673,333 | ) |
1.
|
Conduct additional research to further refine the product.
|
2.
|
Submit the final version to regulatory agencies for their approval, including conducting additional studies as they may require.
|
3.
|
Finalize reimbursement, marketing and distribution strategies.
|
4.
|
Source vendor(s) for production and marketing/distribution partners (we currently do not plan to manufacture or distribute the product ourselves).
|
·
|
Temporary relief.
Spinal injection, cryodenervation, RF ablation, and pulsed RF therapies are non-permanent, such that patients must return for repeated treatment over the course of the patient’s lifetime. Spinal injections and cryodenervation effectiveness only lasts a few months, while RF ablation, and pulsed RF have generally been shown to be effective for approximately 6 months to2 years.
|
·
|
Difficult to learn and teach.
Manual tissue scraping
and electrocautery
performed separately and spine fusion procedures are specialized procedures that require a highly skilled specialist that is well-versed in endoscopy and surgery skills to administer.
|
·
|
Surgical mechanisms are bulky and difficult to use. Spinal injections require large, painful needles. Manual tissue scraping and electrocautery requires four separate devices to be used that cannot be deployed simultaneously. Spinal fusion surgery is a very invasive and significant surgical procedure. |
·
|
High cost
Spinal injection, cryodenervation, RF ablation, and pulsed RF therapies must be repeatedly applied to be effective, and the cost of such repeated visits to healthcare facilities can aggregate significantly over the course of a lifetime, not to mention the cost of lost productivity due to lower back pain in between treatments.
|
·
|
Invasive with long recovery time.
Spinal fusion surgeries are potentially risky, highly invasive surgeries that require significant recovery time with an average cost per client of up to $108,000 per patient, plus an estimated 3 to 6 months of lost productivity in the workplace.
|
·
|
Longer lasting.
The DenerVex is designed to provide long lasting relief to patients that would otherwise be required to undergo repetitive therapies such as spinal injection and RF ablation.
|
·
|
Easy to teach and intuitive to use.
The DenerVex will combine two procedures that are currently carried out in the manual tissue scraping
and electrocautery
performed separately into one procedure that does not require a specialist to conduct. We intend to offer a simple one-day or weekend course featuring a cadaver lab to train physicians in usage of the DenerVex.
|
·
|
Compact, next generation design.
The DenerVex is designed to be an all-in-one solution that comes in a sterile, single use package.
|
·
|
Cost efficient.
The DenerVex is designed to be a single use device, so there are no sterilization or repair costs that are associated with many medical devices.
|
·
|
Less Invasive with minimal recovery time.
Use of the DenerVex will represent a less invasive solution to FJS than spinal fusion surgery and can be carried out through an out-patient procedure that does not require follow-up surgery to be effective.
|
·
|
Promoting the differentiated features of our DenerVex exclusive technology to penetrate the $11.5 billion global spine surgery devices market and establish DenerVex as a standard of care for treating FJS, as well as broadening the clinical applications of the DenerVex;
|
·
|
Investing in our infrastructure to broaden our market presence first in Europe (with particular focus on the European Union and the business and patient data that we may be able to gather there), then in the U.S., and eventually worldwide, expand our global distribution footprint, and to ensure regulatory approval internationally; and
|
·
|
Leveraging the strength and experience of our world-class management team to selectively pursue opportunities to expand our portfolio of medical device products and businesses.
|
·
|
Not permanent.
Spinal injection, cryodenervation, RF ablation, and pulsed RF therapies are non-permanent, such that patients must return for repeated treatment over the course of the patient’s lifetime. The effectiveness of spinal injections and cryodenervation only last a few months. RF ablation and pulsed RF have generally been shown to be effective for only 6 months to 2 years.
|
·
|
Difficult to learn and teach.
Manual tissue scraping
and electrocautery
performed separately and spine fusion procedures are specialized procedures that require a highly skilled specialist that is well-versed in endoscopy and surgery skills to administer.
|
·
|
Surgical mechanisms are bulky and difficult to use.
Spinal injections require large, painful needles. RF ablation requires the purchase of a special power source to power its ablation needles. Manual tissue scraping and electrocautery performed separately requires four separate devices to be used that cannot be deployed simultaneously. Spinal fusion surgery is a very invasive and a significant surgical procedure.
|
·
|
High cost
Spinal injection, cryodenervation, RF ablation, and pulsed RF therapies must be repeatedly applied to be effective, and the cost of such repeated visits to healthcare facilities can aggregate significantly over the course of a lifetime, not to mention the cost of lost productivity due to lower back pain in between treatments.
|
·
|
Invasive with long recovery time.
Spinal fusion surgeries are potentially risky, highly invasive surgeries that require 3 to 6 months of recovery time.
|
·
|
Longer lasting.
The DenerVex provides long lasting pain relief to patients that would otherwise be required to undergo repetitive therapies such as spinal injection and RF ablation.
|
·
|
Easy to teach and intuitive to use.
The DenerVex combines two procedures carried out in the manual tissue scraping and electrocautry process into one procedure that does not require a specialist to conduct. We intend to offer a simple one-day or weekend course featuring a cadaver lab to train physicians in usage of the DenerVex device.
|
·
|
Compact, next generation design.
The DenerVex is an all-in-one solution that comes in a sterile, single use package.
|
·
|
Cost efficient.
The DenerVex is a single use device, so there are no sterilization or repair costs associated with the device. Unlike RF ablation, the Denervex does not require a specially-purchased power source, and uses the already-existing cauterization power sources generally found in most operating rooms.
|
·
|
Less Invasive with minimal recovery time.
Use of the DenerVex device represents a less invasive solution to FJS that can be carried out through an out-patient procedure that does not require follow-up surgery to be effective.
|
·
|
Promoting the differentiated features of our DenerVex exclusive technology to patients, pain care providers, doctors and hospitals in order to penetrate the $11.5 billion global spine surgery devices market and establish DenerVex as a standard of care for treating FJS. We will seek to increase awareness of FJS and new treatment options for FJS by developing a brand identity, promotional literature and training support materials in both traditional and electronic forms. As the market launch unfolds, we will monitor feedback from clinicians and field personnel and adjust the value proposition, market positioning and promotional/training materials accordingly;
|
·
|
Capitalizing on our highly efficient product development process expertise to innovate new technologies and techniques, while continuing to broaden the clinical applications of the DenerVex device. We believe that the involvement of James R. Andrews M.D. and the other prominent members of the Company’s Board of Directors, including Scott M.W. Haufe, M.D. and Randall R. Betz, M.D. will aid us in gaining market acceptance from practitioners and if needed, procuring clinical sites;
|
·
|
Leveraging the strength and experience of our world-class management team to selectively pursue opportunities to expand our portfolio of medical device products and businesses; and
|
·
|
Investing in our U.S. and international marketing infrastructure to broaden our market presence, expand our global distribution footprint, and to ensure regulatory approval internationally. Based on what we believe will bring the best value for shareholders, we may elect in the future to utilize strategic partners, distributors, or contract sales forces to assist in the commercialization of our products.
|
·
|
the quality of outcomes for medical conditions;
|
·
|
acceptance by surgeons and the medical device market generally;
|
·
|
ease of use and reliability;
|
·
|
technical leadership and superiority;
|
·
|
effective marketing and distribution;
|
·
|
speed to market; and
|
·
|
product price and qualification for coverage and reimbursement.
|
·
|
Class I: general controls, such as labeling and adherence to quality system regulations;
|
·
|
Class II: special controls, pre-market notification (often referred to as a 510(k) application), specific controls such as performance standards, patient registries, postmarket surveillance, additional controls such as labeling and adherence to quality system regulations; and
|
·
|
Class III: special controls and approval of a pre-market approval (“PMA”) application.
|
·
|
the FDA Quality Systems Regulation (QSR), which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products;
|
·
|
labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and
|
·
|
the Medical Device Reporting regulation, which requires reporting to the FDA of certain adverse experiences associated with use of the product.
|
Name
|
Position(s)
|
Age
|
Steve Gorlin | Director | 77 |
Major General C.A. “Lou” Hennies | Director (2) (3) | 78 |
James R. Andrews, M.D. | Director | 72 |
Scott M. W. Haufe, M.D. | Director (2) | 48 |
Thomas E. Hills | Director (1) (3) | 38 |
Randal R. Betz, M.D. | Director | 62 |
John C. Thomas, Jr. | Director (1) | 60 |
Lar ry Papasan | Chairman of the Board (2) (3) | 73 |
Jarrett Gorlin | Chief Executive Officer and Director (1) | 39 |
Patrick Kullmann | President and Chief Operating Officer | 58 |
Charles Farrahar | Chief Financial Officer | 53 |
Dennis Moon | Senior Vice President | 38 |
(1)
|
Member of audit committee
|
(2)
|
Member of compensation committee
|
(3)
|
Member of nominating and corporate governance committee
|
●
|
appointing, approving the compensation of and assessing the independence of our registered public accounting firm;
|
●
|
overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm;
|
●
|
reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;
|
●
|
monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
|
●
|
overseeing our internal audit function;
|
●
|
overseeing our risk assessment and risk management policies;
|
●
|
establishing policies regarding hiring employees from the independent registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns;
|
●
|
meeting independently with our internal auditing staff, independent registered public accounting firm and management;
|
●
|
reviewing and approving or ratifying any related person transactions; and
|
●
|
preparing the audit committee report required by Securities and Exchange Commission, or SEC, rules.
|
●
|
identifying individuals qualified to become members of our board of directors;
|
●
|
recommending to our board of directors the persons to be nominated for election as directors and to each of our board’s committees;
|
●
|
developing, recommending to the board, and assessing corporate governance principles, codes of conduct and compliance mechanisms; and
|
●
|
overseeing the evaluation of our board of directors.
|
●
|
reviewing and recommending corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers;
|
●
|
making recommendations to our board of directors with respect to, the compensation level of our executive officers;
|
●
|
reviewing and recommending to our board of directors employment agreements and significant arrangements or transactions with executive officers;
|
●
|
reviewing and recommending to our board of directors with respect to director compensation; and
|
●
|
overseeing and administering our equity-based incentive plans;
|
·
|
personal and professional integrity, ethics and values;
|
·
|
experience in corporate management, such as serving as an officer or former officer of a publicly-held company;
|
·
|
development or commercialization experience in large medical products companies;
|
·
|
experience as a board member or executive officer of another publicly-held company;
|
·
|
strong finance experience;
|
·
|
diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;
|
·
|
diversity of background and perspective, including with respect to age, gender, race, place of residence and specialized experience;
|
·
|
conflicts of interest; and
|
·
|
practical and mature business judgment.
|
Name & Position
|
Fiscal Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
All Other Compensation ($)
|
Total
($)
|
||||||||||||||||
Jarrett Gorlin, CEO
|
2013
|
37,500 | 0 | 0 | 0 | 37,500 | ||||||||||||||||
Patrick Kullmann, COO
|
2013
|
25,000 | 0 | 0 | 0 | 25,000 | ||||||||||||||||
Charles Farrahar, CFO
|
2013
|
22,917 | 0 | 0 | 0 | 22,917 | ||||||||||||||||
Dennis Moon, VP
|
2013
|
25,000 | 0 | 0 | 0 | 25,000 |
a.
|
Termination without cause
|
b.
|
Termination upon death or disability
|
c.
|
Termination by the Company for cause
|
d.
|
Termination by the employee for good reason, including material diminishment of position, demands to move or change in control of the Company
|
e.
|
Termination by the Company without cause, upon disability or by employee with good reason
|
f.
|
Termination for other reasons
|
Name & Position
|
Annual Salary
|
|||
Jarrett Gorlin, CEO
|
$ | 180,000 | ||
Patrick Kullmann, President & COO
|
$ | 170,000 | ||
Charles Farrahar, CFO
|
$ | 110,000 | ||
Dennis Moon, VP
|
$ | 120,000 |
|
●
|
the related person’s interest in the related person transaction;
|
|
●
|
the approximate dollar value of the amount involved in the related person transaction;
|
|
●
|
the approximate dollar value of the amount of the related person’s interest in the transaction without
regard to the amount of any profit or loss;
|
|
|
●
|
whether the transaction was undertaken in the ordinary course of our business;
|
|
●
|
whether the terms of the transaction are no less favorable to us than terms that could have been reached
with an unrelated third party;
|
|
|
●
|
the purpose of, and the potential benefits to us of, the transaction; and
|
|
●
|
any other information regarding the related person transaction or the related person in the context of the
proposed transaction that would be material to investors in light of the circumstances of the particular
transaction.
|
|
|
|
●
|
interests arising solely from the related person’s position as an executive officer of another entity
(whether or not the person is also a director of such entity) that is a participant in the transaction, where
(i) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (ii) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction and (iii) the amount involved in the transaction is less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; and
|
|
|
|
●
|
a transaction that is specifically contemplated by provisions of our charter or bylaws.
|
|
|
·
|
qualified incentive stock options (“QISOs”);
|
·
|
nonqualified stock options; and
|
·
|
awards of restricted stock and/or restricted stock units.
|
Percentage of Shares
Beneficially Owned
|
|||||||||
Number of Shares Beneficially Owned
(1)
|
Before Offering
|
After Offering
|
|||||||
Scott M.W. Haufe, M.D., Director
|
772,608 | (2) | 9.9 | % | 8.5% | ||||
Renee Honig
|
600,000 | 7.7 | % | 6.6% | |||||
Jarrett Gorlin, Director and Officer
|
559,478 | (3) | 7.2 | % | 6.1% | ||||
Larry W. Papasan, Director
|
196,076 | (4) | 2.5 | % | 2.1% | ||||
John C. Thomas, Jr.
|
50,000 | (5) | 0.6 | % | 0.5% | ||||
Patrick Kullmann, Officer
|
193,576 | (6) | 2.5 | % | 2.1% | ||||
Charles Farrahar, Officer
|
193,576 | 2.5 | % | 2.1% | |||||
Major General C.A. “Lou” Hennies, Chairman
|
99,288 | (4) | 1.3 | % | 1.1% | ||||
James R. Andrews, M.D., Director
|
99,288 | (4) | 1.3 | % | 1.1% | ||||
Thomas E. Hills, Director
|
99,288 | (4) | 1.3 | % | 1.1% | ||||
Steve Gorlin, Director
|
417,474 | (7) | 5.4 | % | 4.6% | ||||
Randal R. Betz, M.D., Director
|
99,288 | (4) | 1.3 | % | 1.1% | ||||
Dennis Moon, Officer
|
193,576 | (4) | 2.5 | % | 2.1% | ||||
Officers and Directors as a Group
(12 persons)
|
2,973,576 | 38.2 | % | 32.3% |
(1)
|
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to shares beneficially owned and options exercisable within 60 days. Beneficial ownership is based on information furnished by the individuals or entities.
|
(2)
|
Includes 532,335 shares held by Morgan Stanley Smith Barney custodian for Nicole Haufe Roth IRA and 237,773 shares held by Nicole Haufe. Mr. Haufe disclaims beneficial ownership of the shares.
|
(3)
|
Represents shares held by The Jarrett S. & Rebecca L. Gorlin Family Limited Partnership. Mr. Gorlin disclaims beneficial ownership of the shares.
|
(4)
|
Includes 2,500 shares pursuant to options exercisable within 60 days.
|
(5)
|
Includes 50,000 shares pursuant to options exercisable within 60 days. Does not include 150,000 shares issuable upon the exercise of options which are not exercisable within 60 days.
|
(6)
|
Includes 96,788 shares held by Pamela M.C. Kullmann. Mr. Kullmann disclaims beneficial ownership of Pamela M.C. Kullmann’s shares.
|
(7)
|
Includes 125,000 shares held by his spouse, Debbie Gorlin. Steve Gorlin disclaims beneficial ownership of Debbie Gorlin’s shares.
|
·
|
1% of the number of shares of our common stock then outstanding, which will equal approximately 91,312 shares immediately after this offering; or
|
·
|
the average weekly trading volume in our common stock on the NASDAQ Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
|
Underwriters
|
Number of Units
|
|
ViewTrade Securities Inc.
|
||
Total
|
(1)
|
We have agreed to pay the underwriters a non-accountable expense allowance in the amount of 1% of the total public offering price of the units sold (excluding the over-allotment option).
|
·
|
stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress.
|
·
|
overallotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the overallotment option. In a naked short position, the number of shares involved is greater than the number of shares in the overallotment option. The underwriters may close out any short position by exercising their overallotment option and/or purchasing shares in the open market.
|
·
|
syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the overallotment option. If the underwriters sell more shares than could be covered by exercise of the overallotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.
|
·
|
penalty bids permit the representative to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
|
·
|
the information set forth in this prospectus and otherwise available to the representative;
|
·
|
our prospects and the history and prospects for the industry in which we compete;
|
·
|
an assessment of our management;
|
·
|
our prospects for future earnings;
|
·
|
the general condition of the securities markets at the time of this offering;
|
·
|
the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and
|
·
|
other factors deemed relevant by the underwriters and us.
|
Report of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated Financial Statements
|
|
Consolidated Balance Sheets
|
F-3
|
Consolidated Statements of Operations
|
F-4
|
Consolidated Statements of Changes in Stockholders’ Equity
|
F-6
|
Consolidated Statements of Cash Flows
|
F-7
|
Notes to Consolidated Financial Statements
|
F-8 - F-19
|
June 30,
|
December 31,
|
||||||
2014
|
2013
|
||||||
(Unaudited)
|
(Restated)
|
||||||
Assets
|
|||||||
Current Assets
|
|||||||
Cash
|
$
|
1,450,808
|
$
|
2,606,075
|
|||
Prepaid expenses
|
1,437
|
3,252
|
|||||
Total Current Assets
|
1,452,245
|
2,609,327
|
|||||
Property and Equipment, Net
|
7,125
|
3,463
|
|||||
Deferred initial public offering costs
|
152,916
|
29,775
|
|||||
Total Assets
|
$
|
1,612,286
|
$
|
2,642,565
|
|||
Liabilities and Stockholders' Equity
|
|||||||
Current Liabilities
|
|||||||
Accounts payable
|
$
|
103,096
|
$
|
36,125
|
|||
Accrued liabilities
|
71,958
|
30,000
|
|||||
Total Liabilities
|
175,054
|
66,125
|
|||||
Commitments
|
|||||||
Stockholders' Equity
|
|||||||
Preferred stock - $.001 par value: 500,000 shares authorized, no shares outstanding
|
--
|
--
|
|||||
Common stock - $.001 par value: 49,500,000 shares authorized, 7,781,175 shares issued and outstanding
|
7,782
|
7,782
|
|||||
Common stock subscription receivable
|
--
|
(100,000
|
)
|
||||
Additional paid-in capital
|
3,360,064
|
3,341,991
|
|||||
Deficit accumulated during the development stage
|
(1,930,614
|
)
|
(673,333
|
)
|
|||
Total Stockholders' Equity
|
1,437,232
|
2,576,440
|
|||||
Total Liabilities and Stockholders' Equity
|
$
|
1,612,286
|
$
|
2,642,565
|
For the six months ended June 30, 2014
|
Period of February 1, 2013 (inception) to December 31, 2013
|
|||||||
(Unaudited)
|
||||||||
Revenues
|
$
|
-
|
$
|
--
|
||||
Operating Expenses
|
||||||||
General and administrative
|
910,131
|
582,946
|
||||||
Research and development
|
347,150
|
90,387
|
||||||
Total Operating Expenses
|
1,257,281
|
673,333
|
||||||
Net Loss
|
$
|
(1,257,281
|
)
|
$
|
(673,333
|
)
|
||
Basic and diluted net loss per common share
|
$
|
(0.16
|
)
|
$
|
(0.15
|
)
|
||
Basic and Diluted weighted average common shares outstanding
|
7,781,175
|
4,469,000
|
Common Stock
|
Common
Stock
Subscription
|
Additional
Paid-in Capital
|
Accumulated Deficit
|
Total Stockholders' Equity
|
|||||||||||||||||
Shares
|
Amount
|
||||||||||||||||||||
Balance
- February 1, 2013 (Inception)
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
$
|
--
|
||||||||||
Issuance of common stock to founders, on February 1, 2013 at $0.01 per share
|
2,624,892
|
2,625
|
--
|
24,495
|
--
|
27,120
|
|||||||||||||||
Issuance of common stock to founder in exchange for cash of $7,750 ($0.01 per share on February 1, 2013) and contribution of technology asset pursuant to a Contribution and Royalty Agreement dated January 31, 2013
|
750,108
|
751
|
--
|
6,999
|
7,750
|
||||||||||||||||
Common stock of the Company outstanding upon completion of the merger on September 13, 2013, originally issued on August 28, 2013 at $0.04 per share
|
3,050,000
|
3,050
|
--
|
118,950
|
--
|
122,000
|
|||||||||||||||
Issuance of common stock in private placement, completed in December 2013, net of offering costs at $2.50 pursuant to a private placement memorandum dated September 16, 2013
|
1,356,175
|
1,356
|
(100,000
|
)
|
3,155,295
|
--
|
3,056,651
|
||||||||||||||
Stock based compensation
|
--
|
--
|
--
|
36,252
|
--
|
36,252
|
|||||||||||||||
Net loss
|
--
|
--
|
--
|
--
|
(673,333
|
)
|
(673,333
|
)
|
|||||||||||||
Balance
- December 31, 2013, restated
|
7,781,175
|
$
|
7,782
|
$
|
(100,000
|
)
|
$
|
3,341,991
|
$
|
(673,333
|
)
|
$
|
2,576,440
|
||||||||
Collection of subscription receivable
|
100,000
|
100,000
|
|||||||||||||||||||
Stock based compensation
|
18,073
|
18,073
|
|||||||||||||||||||
Net loss
|
(1,257,281
|
)
|
(1,257,281
|
)
|
|||||||||||||||||
Balance
– June 30, 2014
|
7,781,175
|
$
|
7,782
|
$
|
--
|
$
|
3,360,064
|
$
|
(1,930,614
|
)
|
$
|
1,437,232
|
For the six months ended June 30, 2014
|
Period of Inception (February 1, 2013) to December 31, 2013
|
||||||
(Unaudited)
|
(Restated)
|
||||||
Cash Flows from Operating Activities
|
|||||||
Net loss
|
$
|
(1,257,281
|
)
|
$
|
(673,333
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|||||||
Depreciation and amortization
|
677
|
472
|
|||||
Stock based compensation
|
18,073
|
36,252
|
|||||
Changes in operating assets and liabilities:
|
|||||||
Prepaid expenses
|
1,815
|
(3,252
|
)
|
||||
Accounts payable
|
66,972
|
36,125
|
|||||
Accrued liabilities
|
41,959
|
30,000
|
|||||
Net Cash Used in Operating Activities
|
(1,127,785
|
)
|
(573,736
|
)
|
|||
Cash Flows from Investing Activities
|
|||||||
Expenditures for property and equipment
|
(4,341
|
)
|
(3,935
|
)
|
|||
Net Cash Used in Investing Activities
|
(4,341
|
)
|
(3,935
|
)
|
|||
Cash Flows from Financing Activities
|
|||||||
Deferred initial public offering costs
|
(123,141
|
)
|
(29,775
|
)
|
|||
Proceeds from issuances of stock to founders
|
--
|
156,870
|
|||||
Collection of common stock subscription receivable
|
100,000
|
--
|
|||||
Proceeds from issuance of common stock in private placement, net of offering costs
|
--
|
3,056,651
|
|||||
Net Cash Provided by Financing Activities
|
(23,141
|
)
|
3,183,746
|
||||
Net Increase (Decrease) in Cash
|
(1,155,267
|
)
|
2,606,075
|
||||
Cash - Beginning of period
|
2,606,075
|
--
|
|||||
Cash - End of period
|
$
|
1,450,808
|
$
|
2,606,075
|
As Originally Reported
|
As Restated
|
|||||||
Assets
|
$ | 4,235,565 | $ | 2,642,565 | ||||
Liabilities
|
677,126 | 66,125 | ||||||
Stockholders' Equity
|
$ | 3,576,440 | $ | 2,576,440 |
Useful Life
|
June 30, 2014
|
December 31, 2013
|
|||||||
Furniture and fixtures
|
7 years
|
$
|
4,622
|
$
|
2,760
|
||||
Computers and software
|
3 years
|
3,654
|
1,175
|
||||||
8,276
|
3,935
|
||||||||
Less accumulated depreciation
|
(1,151
|
)
|
(472
|
)
|
|||||
Total
|
$
|
7,125
|
$
|
3,463
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining Term
(Years)
|
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding at 02/01/2013 (Inception)
|
--
|
|||||||||||||||
Granted
|
60,000
|
$
|
2.50
|
9.8
|
$
|
--
|
||||||||||
Exercised
|
--
|
|||||||||||||||
Cancelled
|
--
|
--
|
||||||||||||||
Outstanding at 12/31/2013
|
60,000
|
$
|
2.50
|
9.8
|
$
|
--
|
||||||||||
Exercisable at 12/31/2013
|
15,000
|
$
|
2.50
|
9.8
|
$
|
--
|
||||||||||
Granted
|
--
|
|||||||||||||||
Exercised
|
--
|
|||||||||||||||
Cancelled
|
--
|
|||||||||||||||
Outstanding at 6/30/2014
|
60,000
|
$
|
2.50
|
9.6
|
$
|
--
|
||||||||||
Exercisable at 6/30/2014
|
15,000
|
$
|
2.50
|
9.6
|
$
|
--
|
December 31, 2013
|
|||
(Restated)
|
|||
Current Income Tax Expense
:
|
|||
Federal
|
$
|
--
|
|
State
|
--
|
||
Total Current Income Tax Expense
|
--
|
||
Deferred Income Tax Benefit
|
|||
Federal
|
228,000
|
||
State
|
26,000
|
||
Total Deferred Tax Benefit
|
254,000
|
||
Valuation Allowance
|
(254,000
|
)
|
|
Total
|
$
|
--
|
Statutory rate - federal
|
34.0
|
%
|
||
State taxes, net of federal benefit
|
4.0
|
|||
Income tax benefit
|
38.0
|
%
|
||
Less valuation allowance
|
(38.0
|
)
|
||
Total
|
0.0
|
%
|
December 31, 2013
|
|||
(Restated)
|
|||
Deferred Tax Assets:
|
|||
Start-up costs
|
$
|
240,000
|
|
Share-based compensation
|
14,000
|
||
Total Deferred Tax Assets
|
254,000
|
||
Valuation Allowance
|
(254,000
|
)
|
|
Net Deferred Tax Asset
|
$
|
--
|
Amount
|
||||
Securities and Exchange Commission registration fee
|
$
|
4,588.68
|
||
FINRA filing fee
|
2,130.13
|
|||
NASDAQ Capital Stock Market listing fee
|
55,000.00
|
|||
Accountants’ fees and expenses
|
15,000.00
|
|||
Legal fees and expenses
|
180,000.00
|
|||
|
||||
Transfer Agent’s fees and expenses
|
*
|
|||
Printing and engraving expenses
|
*
|
|||
Miscellaneous
|
10,000.00
|
|||
Total expenses
|
$
|
*
|
*
|
To be provided by amendment.
|
23
|
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
|
23
|
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
23
|
For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
23
|
In a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
|
23
|
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
|
(iii)
|
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
(iv)
|
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
MEDOVEX CORP.
|
|||
By:
|
/s/ Jarrett Gorlin
|
||
Jarrett Gorlin
|
|||
Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ Jarrett Gorlin
|
Chief Executive Officer, President and Director
|
|||
Jarrett Gorlin
|
(principal executive officer)
|
October 7, 2014
|
||
/s/ Charles Farrahr
|
Chief Financial Officer
|
|||
Charles Farrahar
|
(principal financial and accounting officer)
|
October 7, 2014
|
||
/s/ *
|
||||
Larry Papasan
|
Chairman of the Board of Directors
|
October 7, 2014
|
||
/s/ *
|
||||
Clyde A. Hennies
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
Scott M.W. Haufe
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
James R. Andrews
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
Thomas E. Hills
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
Randal Betz
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
Steve Gorlin
|
Director
|
October 7, 2014
|
||
/s/ *
|
||||
John Thomas
|
Director
|
October 7, 2014
|
Exhibit Number
|
Description
|
|
1.1
|
Form of Underwriting Agreement, as amended.*
|
|
1.2
|
Form of Underwriter's Warrant Agreement, as amended.*
|
|
1.3
|
Form of Public A Warrant Agreement.
|
|
1.4
|
Form of Public B Warrant Agreement.
|
|
2.1
|
Agreement and Plan of Merger, dated September 16, among MEDOVEX Corp. f/k/a SpineZ Corp. and Debrider Inc.
|
|
3.1
|
Articles of Incorporation of Spinez Corp.
|
|
3.2
|
Certificate of Amendment to the Articles of Incorporation of Spinez Corp. (changing the name of the company to MEDOVEX Corp. and effecting the reverse split of the outstanding shares of MEDOVEX Corp.’s common stock)
|
|
3.3
|
Bylaws of MEDOVEX Corp.
|
|
4.1 | Specimen of Unit Certificate | |
4 .2
|
Specimen of certificate for MEDOVEX Corp. Common Stock.*
|
|
4.3 | Specimen of A Warrant | |
4.4 | Specimen of B Warrant | |
5.1
|
Opinion of Sichenzia Ross Friedman Ference LLP .*
|
|
10.1
|
2013 Stock Incentive Plan.
|
|
10.2
|
Employment Agreement between MEDOVEX Corp. and Jarrett Gorlin dated October 14, 2013.
|
|
10.3
|
Employment Agreement between MEDOVEX Corp. and Patrick Kullmann dated October 14, 2013.
|
|
10.4
|
Employment Agreement between MEDOVEX Corp. and Charlie Farrahar dated October 14, 2013.
|
|
10.5
|
Employment Agreement between MEDOVEX Corp. and Dennis Moon dated November 11, 2013.
|
|
10.6
|
Contribution and Royalty Agreement between MEDOVEX and Scott W. Haufe, dated January 31, 2013.
|
|
10.7
|
Co-Development Agreement between MEDOVEX Corp. and Dr. James Andrews dated September 30, 2013.
|
|
10.8
|
Consulting Agreement between MEDOVEX Corp. and Robb Knie dated December 2, 2013.
|
|
10.9
|
Engineering Services Agreement between MEDOVEX Corp. and Devicix, LLC dated November 25, 2013.
|
|
10.10
|
Form of Indemnification Agreement.*
|
|
14
|
Business and Code of Ethics of MEDOVEX Corp.*
|
|
21
|
Subsidiaries of MEDOVEX Corp.
|
|
23.1
|
Consent of Marcum, LLP .*
|
|
23.2
|
Consent of Sichenzia Ross Friedman Ference LLP (Included in Exhibit 5.1). *
|
|
24.1
|
Power of Attorney (included on signature page)
|
|
99.1
|
Audit Committee Charter.*
|
|
99.2
|
Nominating and Corporate Governance Charter.*
|
|
99.3
|
Compensation Committee Charter.*
|
Very truly yours,
|
|||||
MEDOVEX, INC.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
|||||
Confirmed as of the date first above-
|
|||||
mentioned
|
|||||
VIEWTRADE SECURITIES, INC
|
|||||
As Representative of the several
|
|||||
Underwriters listed on
Schedule I
hereto
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
Underwriter
|
Number of Underwritten Units to be Purchased
|
Viewtrade Securities, Inc.
|
|
Total:
|
Issuer:
|
Medovex, Inc. (the “Company”)
|
Symbol:
|
“________” (Units)
“________” (Shares)
“________” (Warrants)
|
Securities Offered:
|
_____________ Units, each Unit consisting of one share of Common stock, par value $0.001 per share (“Common Stock”) and one Series A warrant to purchase one share of Common Stock (“Series A Warrants”) and one Series B warrant to purchase one share of Common Stock (“Series B Warrants”)
|
Size:
|
____________ Underwritten Units and Series B Warrant
|
Over-allotment option:
|
Up to____________ Additional Units
|
Public offering price:
|
$______ per Unit including the Series A and Series B Warrant
|
Underwriting discounts and commissions:
|
$______ per Unit including the Series A and Series B Warrant
|
Net proceeds (excluding the over-allotment):
|
$____________ (after deducting the underwriters’ discounts and commissions and estimated offering expenses payable by the Company)
|
Trade date:
|
_________, 2014
|
Settlement date:
|
_________, 2014
|
CUSIP Nos.:
|
__________ for the Units
__________ for the Shares
_________ for the Series A Warrants
__________ for the Series B Warrants
|
Underwriters:
|
Viewtrade Securities, Inc.
|
Warrant No. [ ]
|
Original Issue Date: __________, 2014
|
|
|
MEDOVEX, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|
|
(1)
|
The undersigned Holder hereby exercises its right to purchase _________________ Warrant Units pursuant to the Unit Warrant.
|
|
|
(2)
|
(PLEASE CHECK ONE METHOD OF PAYMENT) _____The Holder shall pay the sum of $____________ to the Company in accordance with the terms of the Unit Warrant OR _______The Holder shall exercise the Unit Warrant cashless in accordance with the terms of the Unit Warrant.
|
|
|
(3)
|
Pursuant to this Exercise Notice, the Company shall deliver to the holder _______________ Warrant Units in accordance with the terms of the Unit Warrant.
|
|
|
(4)
|
By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 11 of this Unit Warrant to which this notice relates.
|
Dated: ________, ____
|
Name of Holder:
|
||
(Print)
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
(Signature must conform in all respects to name of holder as specified on the face of the Unit Warrant)
|
Date
|
Number of Warrant
Units Available to be
Exercised
|
Number of Warrant Units
Exercised
|
Number of
Warrant Units
Remaining to
be Exercised
|
Dated: _______________, ____
|
|||
(Signature must conform in all respects to name of holder as specified on the face of the Unit Warrant)
|
|||
Address of Transferee
|
|||
In the presence of:
|
|||
Re:
|
Medovex Corp., Amendment No. 1 to Form S-1 Registration Statement
|
Very truly yours,
|
/S/ SICHENZIA ROSS FRIEDMAN FERENCE LLP
Sichenzia Ross Friedman Ference LLP
|
·
|
Acts of dishonesty and/or embezzlement, including borrowing money from the Company without approval of a senior officer or using Company property for personal use or personal gain.
|
·
|
Accepting or giving bribes or kickbacks to or from the Company's customers, vendors, or suppliers.
|
·
|
Making favorable freight arrangements for customers that result in you obtaining a personal benefit.
|
·
|
Misusing Company property.
|
·
|
Abusing or misusing property belonging to customers, vendors, suppliers, and other third parties.
|
·
|
Looking up or obtaining information on workstation screens, company records or elsewhere about the Company's financial or proprietary information, unless there is a business need to do so that has been expressly approved by your supervisor.
|
·
|
Using Company information for your own benefit or to benefit someone else, either directly or indirectly.
|
·
|
Trading in the Company's stock while in possession of important inside information about the Company that has not been publicly disclosed.
|
·
|
Falsifying or destroying Company records or documents except as part of a normal and previously approved record destruction program.
|
·
|
Failing to report any matters accurately or timely to a supervisor or superior or misrepresenting or misstating facts in any oral or written report.
|
·
|
Failing to report wrongdoings to senior management.
|
·
|
Performing work for a person or entity that has a business relationship with the Company or for a person or entity that competes with the Company without prior approval of management.
|
(i)
|
writing or orally notifying the Company's Chief Financial Officer, your supervisor or an officer of the Company; or
|
(ii)
|
writing to the Chairperson of the Audit Committee of Medovex Corp., 1735 Buford Hwy Ste 215-113 Cumming GA 30041, in an envelope with a legend such as "
To be opened by the Audit Committee
."
|
Signature | Date |
Print Name |
I.
|
PURPOSE
|
II.
|
MEMBERSHIP
|
A.
|
The Audit Committee shall be comprised of a minimum of three directors.
|
B.
|
All Audit Committee members shall be independent as defined by the listing standards of The NASDAQ Stock Market LLC (“NASDAQ”), or such other exchange on which the Company is listed, and the rules and regulations of the Securities and Exchange Commission (the “SEC”), as amended and as may be amended from time to time. No Audit Committee member or immediate family member of such Audit Committee member may be an “affiliated person” of the Company, as that term is defined by the SEC, or have participated in the preparation of the Company’s financial statements or those of any current subsidiary of the Company at any time during the past three years.
|
C.
|
Audit Committee members, including a Chairman, shall be appointed at the annual meeting of the Board of Directors for one year terms based on the Governance and Nomination Committee’s recommendations. Each member of the Audit Committee shall serve until the earlier of his or her death, resignation, retirement or removal by the Board of Directors or until his or her successor shall be appointed.
|
D.
|
All Audit Committee members shall be financially literate and shall be capable of reading and understanding fundamental financial statements, including the balance sheet, income statement and cash flow statement. At least one member shall qualify as an “audit committee financial expert,” as that term is defined by the SEC.
|
E.
|
Compensation for Audit Committee members shall be limited solely to director fees without any additional direct or indirect compensation from the Company.
|
III.
|
MEETINGS
|
A.
|
The Audit Committee shall meet as many times during the year as deemed necessary to fulfill its responsibilities, but at a minimum shall hold at least four meetings each year. Each member is required to attend at least 75% of each year’s meetings.
|
B.
|
At least annually, the Audit Committee will meet separately with the Company’s independent auditor, with management and with the head of the Company’s internal audit function, if any.
|
C.
|
A majority of the members of the Audit Committee shall constitute a quorum.
|
D.
|
The Audit Committee may also conduct meetings by telephone conference calls so long as each member can communicate with the other members.
|
E.
|
The Audit Committee may form and delegate authority to one or more members of the Audit Committee as deemed necessary to fulfill the Audit Committee’s responsibilities.
|
F.
|
Information related to the agenda for each meeting shall be distributed to the Audit Committee members prior to meetings to allow directors to prepare for the meetings.
|
G.
|
Minutes shall be maintained for all Audit Committee meetings.
|
H.
|
The Audit Committee shall regularly report to the Board of Directors regarding the execution of its duties and responsibilities and other recommendations resulting from its meetings.
|
IV.
|
RESPONSIBILITIES
|
A.
|
The Audit Committee shall adopt and maintain a formal written charter that shall be approved by the Board of Directors and published on the Company’s website. The Audit Committee shall review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board of Directors for its approval.
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B.
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The Audit Committee shall annually review its performance and report the results to the Board of Directors.
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C.
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The Audit Committee shall cause the report required by the rules of the SEC to be included in the Company’s proxy statement.
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D.
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The Audit Committee shall have the authority to utilize reasonable amounts of time of the Company’s personnel and shall have the authority to retain independent consultants, outside legal counsel, outside accountants, and other advisors as it may deem appropriate to assist and advise it in connection with its responsibilities and to approve related fees and engagement terms.
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E.
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The Company shall provide the Audit Committee with the appropriate funding, as determined by the Audit Committee, to compensate any independent auditor or outside consultant engaged by the Audit Committee or to perform ordinary administrative functions that are necessary or appropriate for the Audit Committee to carry out its duties.
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F.
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The Audit Committee shall develop and oversee procedures for (i) receiving, retaining and addressing complaints regarding accounting, internal accounting controls or auditing matters, and (ii) confidential and anonymous submissions by Company employees regarding questionable accounting or auditing matters.
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G.
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The Audit Committee shall have the authority to perform any other activities consistent with this charter, the Company’s bylaws, any guidelines or other policies adopted by the Board of Directors from time to time, and applicable law as the Audit Committee or the Board of Directors deems necessary or appropriate.
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A.
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The Audit Committee shall be responsible for communicating to the independent auditor that the Board of Directors and the Audit Committee are the independent auditor’s clients and the independent auditor is ultimately accountable to the Board of Directors and the Audit Committee.
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B.
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The Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work performed by an independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services. The Audit Committee shall have the authority to evaluate and recommend the selection or replacement of the independent auditor for auditing the financial statements of the Company. The independent auditor shall report directly to the Audit Committee.
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C.
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The Audit Committee shall review and pre-approve the auditor’s written proposed audit scope, fees for the current fiscal year, staffing requirements and non-audit work to be performed by the independent auditor.
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D.
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Review and pre-approve all audit and permissible non-audit services and fees by the Audit Committee shall be made in accordance with the Company’s policy for the Approval of Services Performed by Independent Auditors to help ensure compliance with the rules and regulations of the SEC. The authority to grant preapprovals may be delegated to the Chairman, whose decisions will be presented to the full Audit Committee at its next regularly scheduled meeting.
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E.
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In addition to actively engaging in a dialogue with the independent auditor regarding any relationships or services that may impact the independent auditor’s objectivity and independence, the Audit Committee annually shall obtain from the independent auditor the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) regarding the independent auditor’s communications with the Audit Committee concerning independence.
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F.
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The Audit Committee shall discuss with the independent auditor the matters required to be discussed by Auditing Standard No. 16, or any successor standard that may be promulgated by the PCAOB, including the quality and acceptability of the accounting principles applied in the financial statements and changes in accounting policies, and any other matters required to be discussed with the independent auditor under generally accepted auditing standards.
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G.
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The Audit Committee shall at least annually obtain and review a report by the independent auditor describing the independent auditor’s internal quality-control procedures and any material issues raised by the most recent internal quality-control review, peer review, PCAOB review or by any inquiry or investigation conducted by governmental or professional authorities during the preceding five years with respect to independent audits carried out by the independent auditor, and any steps taken to deal with such issue.
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H.
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The Audit Committee shall provide for time with the independent auditor, out of management’s presence, for discussions concerning internal controls and internal control over financial reporting, the quality and clarity of the Company’s financial disclosures, aggressiveness or conservatism of the Company’s accounting principles, significant decisions or estimates by management, and any other issues that the Audit Committee deems necessary.
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I.
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The Audit Committee shall require the independent auditor to report at least annually regarding (i) the independent auditor’s internal quality control procedures; (ii) any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm; and (iii) any steps taken to deal with any such issues.
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J.
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The Audit Committee shall review with the independent auditor any accounting disagreements with management and any significant audit recommendations made by the independent auditor, as well as the Company’s progress with respect to implementing any such recommendations or resolving such disagreements.
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K.
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The Audit Committee shall review with Company management on at least an annual basis management’s analysis of any significant accounting issues, changes, estimates, judgments or unusual items relating to the Company’s financial statements and the selection, application and effects of critical accounting policies applied by the Company and review all reports of the independent auditor delivered on such subjects (including, for example, its analysis, if any, of the effects of alternative treatments of financial information within GAAP and the ramifications of the use of alternative treatments).
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L.
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The Audit Committee shall review all material written communications to management, including any management letters or internal control reports, prepared by the independent auditor or by the Company’s internal audit function, if any, and management’s responses to such letters or reports.
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M.
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The Audit Committee shall review management’s assessments of the effectiveness of the Company’s internal control over financial reporting and the independent auditor’s attestation report on internal control over financial reporting.
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N.
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The Audit Committee shall confirm with the independent auditor that it is not aware of any violations of Rule 13b2-2 promulgated by the SEC relating to improper influence on the conduct of audits or any illegal act that would require it to inform Company management and the Audit Committee.
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O.
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The Audit Committee shall review the impact of applicable rotation requirements and staffing independence requirements (particularly with regard to the lead audit partner and the hiring by the Company of employees or former employees of the independent auditor).
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P.
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Following completion of the annual audit and at such other times as the Audit Committee deems appropriate, review separately with the independent auditor, with management and with the head of the Company’s internal audit function, if any, any significant problems or difficulties encountered during the course of the audit and review with the independent auditor management’s responses to such problems or difficulties.
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A.
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The Audit Committee shall review and concur with the appointment, oversight and dismissal of the Director of Internal Audit.
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B.
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The Audit Committee shall review and approve the internal auditors’ proposed audit plan for the current fiscal year in addition to monitoring the progress of the audit plan.
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C.
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The Audit Committee shall annually review the qualifications and size of the internal audit staff for potential deficiencies in achieving audit objectives and carrying out its responsibilities.
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D.
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The Audit Committee shall provide for time with the Director of Internal Audit, out of management’s presence, for discussions concerning internal controls and internal control over financial reporting, independence, audit authority, any significant difficulties, any disagreements with management and any restrictions imposed on the scope of audits or access to required information.
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E.
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The Audit Committee shall review a summary of the internal audit findings and the Company’s progress with implementing corrective actions.
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F.
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The Audit Committee shall review and reassess the adequacy of the internal audit charter annually and recommend any proposed changes to the Director of Internal Audit.
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A.
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The Audit Committee shall review and discuss with corporate financial management and the independent auditor the disclosure, quality and content of the annual audited financial statements to be included in the Company’s annual report on Form 10-K, the quarterly financial statements to be included in quarterly reports on Form 10-Q and any other financial disclosures to be included in SEC filings prior to their release, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations portion of the Company’s quarterly reports on Form 10-Q or the annual report on Form 10-K. Following consultation with Company management and the independent auditor, the Audit Committee shall recommend to the Board of Directors whether the audited financial statements should be included in the Company’s Form 10-K.
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B.
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The Audit Committee shall annually review and discuss the Company’s system of internal control over financial reporting with the internal audit function, if any, financial management and the independent auditor, including any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees that is reported to the Audit Committee.
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C.
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The Audit Committee shall discuss at least annually with the independent auditor, Company management and the head of the Company’s internal audit function, if any, the Company’s exposure to material risks, the manner in which management assesses, monitors and manages its exposure, the adequacy of the Company’s risk management activities and the nature of any unusual transactions.
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D.
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The Audit Committee shall discuss at least annually with the Company’s general counsel any legal or regulatory matters that, in the opinion of management, may have a material impact on the financial statements.
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E.
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After each of the first three fiscal quarters and after the fiscal year, the Audit Committee shall review with management the financial results, the proposed earnings release, including the use of pro forma or adjusted non-GAAP financial measures, and the issuance of any earnings guidance.
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F.
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The Audit Committee shall discuss, by meeting or conference call prior to the filing of the Form 10-Q or Form 10-K, significant issues related to the quarterly or annual audited financial statements with corporate financial management and the independent auditor.
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G.
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The Audit Committee shall review and approve, to the extent required by applicable law, the rules or listing standards of NASDAQ or such other exchange on which the Company is listed, or the Company’s internal policies, all related person transactions (as that term is defined by Item 404 of Regulation S-K or any successor rule) and modify, as necessary from time to time, the Company’s policy with respect to the review and approval of related person transactions.
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I.
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PURPOSE
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II.
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MEMBERSHIP
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A.
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The Governance and Nomination Committee shall be comprised of a minimum of three directors, one of whom shall serve as chairman. In the event of the death, resignation, removal or other inability of a member of the Governance and Nomination Committee to fulfill his or her duties, the Board of Directors shall appoint a successor to replace such member as promptly as reasonably practical. No action taken by the Governance and Nomination Committee prior to such appointment shall be invalid because the Governance and Nomination Committee was comprised of fewer than three members at the time of such action, unless otherwise provided by law.
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B.
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All Governance and Nomination Committee members shall be independent as defined by the listing standards of The NASDAQ Stock Market LLC (“NASDAQ”) or such other exchange on which the Company may be listed, as may be amended from time to time.
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C.
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Governance and Nomination Committee members, including the chairman, shall be appointed at the annual meeting of the Board of Directors by a majority of the Board of Directors for one year terms. Each member of the Governance and Nomination Committee shall serve until the earlier of his or her death, resignation, retirement or removal by the Board of Directors or until his or her successor shall be appointed.
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D.
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Compensation for Governance and Nomination Committee members shall be limited solely to director fees without any additional direct compensation from the Company.
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III.
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MEETINGS
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A.
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The Governance and Nomination Committee shall meet as many times during the fiscal year as deemed necessary to fulfill its responsibilities, but at a minimum shall hold at least three meetings each year.
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B.
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A majority of the members of the Governance and Nomination Committee shall constitute a quorum.
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C.
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The Governance and Nomination Committee may also conduct meetings by telephone conference calls, so long as each member can communicate with the other members.
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D.
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The Governance and Nomination Committee may form and delegate authority to one or more members of the Governance and Nomination Committee as deemed necessary to fulfill the Governance and Nomination Committee’s responsibilities.
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E.
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Information related to the agenda for each meeting shall be distributed to the Governance and Nomination Committee members prior to meetings to allow directors to prepare for the meetings.
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F.
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Minutes shall be maintained for all Governance and Nomination Committee meetings and the results reported to the Board of Directors.
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IV.
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RESPONSIBILITIES
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A.
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The Governance and Nomination Committee shall adopt and maintain a formal written charter that shall be approved by the Board of Directors and published on the Company’s website. The Governance and Nomination Committee shall review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board of Directors for its approval.
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B.
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The Governance and Nomination Committee shall annually review its performance and report the results to the Board of Directors.
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C.
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The Governance and Nomination Committee shall have the authority to utilize reasonable amounts of time of the Company’s personnel and shall have the authority to retain independent consultants, outside legal counsel, outside accountants, and other advisors as it may deem appropriate to assist and advise it in connection with its responsibilities and to approve related fees and engagement terms.
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D.
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The Governance and Nomination Committee shall evaluate periodically and, when appropriate, make recommendations to the Board of Directors concerning the criteria for membership, the size and composition of the Board of Directors and its committees and the chairmanship of the Board of Directors and its committees. The Governance and Nomination Committee shall also consider whether and how it takes into account diversity in identifying director nominees.
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E.
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Nominees for openings on the Board of Directors shall be reviewed, screened and, if appropriate, recommended, according to the nomination values listed in the Corporate Governance Guidelines, by the Governance and Nomination Committee to the Board of Directors for further consideration.
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F.
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The Governance and Nomination Committee shall review and evaluate suggestions concerning potential candidates for election to the Board of Directors, including self-nominations and nominations from shareholders and other third parties.
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G.
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The Governance and Nomination Committee shall recommend to the Board individuals to fill any vacancy that may occur from time to time on the Board of Directors and shall recommend to the Board of Directors the slate of nominees to be proposed for election to the Board of Directors at each annual meeting of shareholders.
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H.
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The Governance and Nomination Committee shall be responsible for administering the Company’s education requirements for new and existing directors.
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I.
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The Governance and Nomination Committee shall monitor and make recommendations to the Board of Directors regarding corporate governance matters, and shall develop and periodically assess the Company’s Corporate Governance Guidelines and recommend amendments as needed to the Board of Directors.
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J.
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The Governance and Nomination Committee shall annually review the performance of the Board of Directors, its committees and the chief executive officer, including through the use of self assessments in the discretion of such Committee, and report its findings to the Board of Directors, including recommendations as needed.
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K.
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The Governance and Nomination Committee shall be responsible for overseeing the Company’s overall ethics and business conduct, including the Company’s Code of Business Conduct and management’s compliance with the Code of Business Conduct. The Governance and Nomination Committee shall review the Code of Business Conduct on an annual basis and recommend amendments as needed to the Board of Directors.
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L.
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The Governance and Nomination Committee shall periodically assess the adequacy of the Company’s directors and officers liability insurance coverage.
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M.
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The Governance and Nomination Committee, in conjunction with the Company’s Chief Executive Officer, is responsible for establishing and conducting orientation programs for new directors. Such orientation programs, which shall be evaluated periodically and revised as appropriate, shall be designed to familiarize new directors with the Company’s businesses, strategies and challenges and to assist new directors in developing and maintaining skills necessary or appropriate for the performance of their responsibilities.
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N.
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The Governance and Nomination Committee shall periodically consider (i) whether to require all non-employee directors to own and hold a specific monetary amount or number of shares of the Company’s common stock while serving as a director of the Company, and (ii) if such ownership levels are imposed, the amount of time that such directors or new non-employee directors would be given to acquire such ownership.
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O.
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The Governance and Nomination Committee shall, in uncontested elections of directors where any director nominee receives a greater number of votes “withheld” from his or her election than votes “for” such election and in accordance with the Company’s Corporate Governance Guidelines, (i) promptly consider such director nominee’s offer to resign and (ii) recommend to the Board of Directors whether to accept or reject such resignation.
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P.
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The Governance and Nomination Committee shall review all charitable contributions made by the Company at least annually.
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Q.
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The Chairman of the Board and the Chief Executive Officer shall consult with Chairman of the Governance and Nomination Committee in the scheduling of Board meetings and the setting of meeting agendas.
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R.
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The Governance and Nomination Committee shall have the authority to perform any other activities consistent with this charter, the Company’s bylaws, any guidelines or other policies adopted by the Board of Directors from time to time, and applicable law as the Governance and Nomination Committee or the Board of Directors deems necessary or appropriate.
|
I.
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PURPOSE
|
II.
|
MEMBERSHIP
|
A.
|
The Compensation Committee shall be comprised of a minimum of three directors. In the event of the death, resignation, removal or other inability of a member of the Compensation Committee to fulfill his or her duties, the Board of Directors shall appoint a successor to replace such member as promptly as reasonably practical. No action taken by the Compensation Committee prior to such appointment shall be invalid because the Compensation Committee was comprised of fewer than three members at the time of such action, unless otherwise provided by law.
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B.
|
All Compensation Committee members shall meet the director and committee member independence requirements of The NASDAQ Stock Market LLC (“NASDAQ”) or such other exchange on which the Company is listed, as may be amended from time to time. In addition, unless otherwise determined by the Board, each member will qualify as a “non-employee director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and as an “outside director” as defined in Section 162(m) of the Internal Revenue Code, as amended. Each Compensation Committee member shall be free of any relationship or affiliation (including any affiliation with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company) that, in the judgment of the Board of Directors, would impair the director’s judgment as a member of the Compensation Committee.
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C.
|
Compensation Committee members, including a chairman, shall be appointed at the annual meeting of the Board of Directors for one year terms based on the Governance and Nomination Committee’s recommendations. Each member of the Compensation Committee shall serve until the earlier of his or her death, resignation, retirement or removal by the Board of Directors or until his or her successor shall be appointed.
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D.
|
Compensation for Compensation Committee members shall be limited solely to director fees without any additional direct compensation from the Company. Compensation Committee members may not accept, directly or indirectly, any consulting, advisory, or other compensatory fees from the Company or its subsidiaries.
|
III.
|
MEETINGS
|
A.
|
The Compensation Committee shall meet as many times during the year as deemed necessary to fulfill its responsibilities, but at a minimum shall hold at least three meetings each year.
|
B.
|
A majority of the members of the Compensation Committee shall constitute a quorum.
|
C.
|
The Compensation Committee may also conduct meetings by telephone conference calls so long as each member can communicate with the other members.
|
D.
|
The Compensation Committee may form and delegate authority to one or more members of the Compensation Committee as deemed necessary to fulfill the Compensation Committee’s responsibilities.
|
E.
|
Information related to the agenda for each meeting shall be distributed to the Compensation Committee members prior to meetings to allow directors to prepare for the meetings.
|
F.
|
Minutes shall be maintained for all Compensation Committee meetings and the results reported to the Board of Directors.
|
IV.
|
RESPONSIBILITIES
|
A.
|
The Compensation Committee shall adopt and maintain a formal written charter that shall be approved by the Board of Directors and published on the Company’s website. The Compensation Committee shall review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board of Directors for its approval.
|
B.
|
The Compensation Committee shall have the authority to utilize reasonable amounts of time of the Company’s personnel and shall have the authority, in its sole discretion, to retain or obtain the advice of a compensation consultant, legal counsel, outside accountant, and other adviser as it may deem appropriate to assist and advise it in connection with its responsibilities. The Compensation Committee shall be directly responsible for the appointment, compensation, and oversight of the work of such adviser retained by the Compensation Committee. The Company shall provide for appropriate funding, as determined by the Compensation Committee, for payment of reasonable compensation to any such adviser retained by the Compensation Committee, and the Compensation Committee shall have sole authority to approve reasonable fees and engagement terms related to the foregoing.
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C.
|
The Compensation Committee shall annually review an assessment of any potential conflicts of interest raised by the work of compensation consultants, whether retained by the Compensation Committee or by management, that are involved in determining or recommending executive or director compensation.
|
D.
|
The Compensation Committee shall, prior to selecting or receiving advice from a compensation consultant, legal counsel or other adviser (other than the Company’s in-house legal counsel), and annually thereafter, assess the independence (taking into consideration the factors specified in NASDAQ Rule 5605(d)(3)(D)(i)-(vi) or such other relevant rules or regulations) of such adviser.
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E.
|
The Compensation Committee shall annually recommend to the Board of Directors all compensation and benefits plans for the Company’s chief executive officer, as well as all goals and objectives that it considers relevant to such compensation and benefits plans, taking into account the Governance and Nomination Committee’s annual evaluation of the chief executive officer’s performance.
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F.
|
The Compensation Committee shall establish the compensation of each of the Company’s other executive officers. The Company’s chief executive officer may be present when the Compensation Committee sets the compensation of the Company’s other executive officers, provided, however, that no executive officer may be present during voting and deliberations of the Compensation Committee regarding that executive officer’s compensation.
|
G.
|
The Compensation Committee shall periodically evaluate the Company’s compensation philosophy concerning executive compensation and recommend any changes to the Board of Directors.
|
H.
|
The Compensation Committee shall periodically evaluate the executive officers’ compensation and benefit plans and recommend changes to the Board of Directors as deemed necessary to maintain alignment with the Company’s compensation philosophy.
|
I.
|
The Compensation Committee shall approve employment agreements, severance agreements and change in control agreements, if any, for the Company’s chief executive officer and other executive officers and all amendments to such agreements.
|
J.
|
The Compensation Committee shall periodically evaluate the directors’ fee compensation plan and recommend changes to the Board of Directors as deemed necessary to maintain alignment with the Company’s compensation philosophy.
|
K.
|
The Compensation Committee also shall periodically evaluate the methodology for awarding incentive compensation, including any equity-based compensation, to all non-executive employees (including new hires) and other service providers and the levels of such compensation and, as appropriate, shall approve changes to such methodology.
|
L.
|
The Compensation Committee shall review and discuss with Company management, prior to filing with the Securities and Exchange Commission, the Company’s Compensation Discussion and Analysis disclosure and, based on such review and discussion, recommend to the Board of Directors whether such Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K or the Company’s timely filed annual proxy statement.
|
M.
|
The Compensation Committee shall annually review and assess whether the risks arising from the Company’s compensation policies and practices are reasonably likely to have a material adverse effect on the Company.
|
N.
|
The Compensation Committee shall recommend to the Board of Directors that the Company’s shareholders (1) approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement (a “say on pay vote”) and (2) when such matter is put to the shareholders, vote, on a non-binding, advisory basis, for the frequency recommended by the Board of Directors for future say on pay votes.
|
O.
|
The Compensation Committee shall recommend to the Board of Directors, at least once every six years, whether to put the say on pay vote to the Company’s shareholders every one, two or three years.
|
P.
|
The Compensation Committee shall review the results of the most recent say on pay vote and consider whether any adjustments to the Company’s compensation policies and practices are necessary or appropriate in light of such say on pay vote.
|
Q.
|
The Compensation Committee shall prepare and provide an annual compensation committee report for inclusion in the Company’s annual report on Form 10-K or the Company’s timely filed annual proxy statement.
|
R.
|
The Compensation Committee shall have the authority to perform any other activities consistent with this charter, the Company’s bylaws, any guidelines or other policies adopted by the Board of Directors from time to time, and applicable law as the Compensation Committee or the Board of Directors deems necessary or appropriate.
|
S.
|
The Compensation Committee shall act as administrator of any employee benefit plan that the Board of Directors in the future may authorize the Compensation Committee to administer.
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