UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington
, D.C.20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 5, 2015
Madison Ventures Inc. |
(Exact name of registrant as specified in its charter) |
Nevada
(State or other jurisdiction of incorporation)
333-188753
(Commission File Number)
None
(IRS Employer Identification No.)
1208 Tamarind Road
Dasmarinas Village, Makati City
Metro Manila, Philippines 1222
(Address of principal executive offices and Zip Code)
+55 (442) 388-2645
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Forward-Looking Statements
This current report on Form 8-K contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. Forward-looking statements made in this Form 8-K include statements about:
· | our plans to develop and market a medical device using the license from Ocure Ltd.; | |
· | our belief that our proposed devices present a novel approach for treating anal fissures that are safe and simple to use by patients with minimal discomfort; | |
· | our plans to hire industry experts and expand our management team; | |
· | our belief that our devices will be classified as Class II medical devices and regulations applicable to our business and products; and | |
· | our beliefs regarding the future of our markets and competitors. |
These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
· | general economic and business conditions; | |
· | our ability to effectively develop and market products that we acquire or license; | |
· | risks inherent in the medical device industry; | |
· | competition for, among other things, capital, medical device products and skilled personnel; and | |
· | other factors discussed under the section entitled "Risk Factors". |
These risks may cause our company's or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
As used in this current report on Form 8-K and unless otherwise indicated, the terms "we", "us" and "our" refer to Madison Ventures Inc. and our wholly owned subsidiary, Madison-IL Ltd., an Israeli corporation (the " Subsidiary "). Unless otherwise specified, all dollar amounts are expressed in United States dollars.
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Item 1.01 Entry into a Material Definitive Agreement.
On August 5, 2015, we entered into an exclusive license agreement (the "License Agreement" ) with Ocure Ltd. ( "Ocure" ), an Israeli corporation with a principal address at High-Tech Village, Givat Ram Campus, Hebrew University, P.O. Box 39158, Jerusalem 91391, Israel, and Madison-IL Ltd. (the "Subsidiary" ), our wholly-owned subsidiary, incorporated in Israel. Pursuant to the License Agreement, Ocure granted to the Subsidiary an exclusive, sub-licensable, worldwide, license (the "License" ) to Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to Ocure's patents and patent applications (the "Licensed Technology" ) and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the Licensed Technology for uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
As consideration for the License, we agreed to provide the initial round of $250,000 to the Subsidiary for commercialization of the technology, payable as follows:
· | $10,000 ( paid to Ocure at the signing of the letter of intent dated February 27, 2015); | |
· | $90,000 at the later of May 11, 2015 or the final signing date of the License Agreement (the " Effective Date "); and | |
· | $150,000 at the later of June 5, 2015 or 18 calendar days after the Effective Date. |
The Effective Date will occur upon satisfaction of the Condition Precedent, approval of the Agreement by the Chief Scientist of the Israeli Ministry of the Economy.
In addition, we agreed to make the second round of an additional $250,000 available to the Subsidiary at the end of the initial six months period from the Effective Date, provided that Ocure has delivered on its applicable commitments and milestones as set out in the License Agreement for such six month period, the License will and have continued to be held in force, and that at such time and date, ownership and right to any additional assets (not including the Licensed Technology) then existing in Ocure will be fully transferred to the Subsidiary. The second round will be payable as follows:
· | $100,000 at the later of November 6, 2015 or 168 calendar days after the Effective Date; | |
· | $100,000 at the later of December 4, 2015 or 196 calendar days after the Effective Date; | |
· | $50,000 at the later of January 8, 2016 or 230 calendar days after the Effective Date. |
In the event that Ocure does not deliver on its applicable commitments and milestones for us to invest the second round payment to the Subsidiary, and we elect not to pay the second round payment, the License Agreement and the License will be terminated.
In consideration of the License for the Licensed Technology and with respect to any inventions, improvement, development or enhancement based upon, consists of, comprises, contains or incorporates the Licensed Technology invented following the Effective Date by the Subisdiary, its affiliate or sublicensee (the "New Inventions" ), we agreed that the Subsidiary will pay to Ocure royalties calculated as 5% of gross sales attributable to the Subsidiary and the Subsidiary's sublicenses. In addition, we agreed that the Subsidiary will promptly pay to Ocure 20% of any cash or non-cash consideration received, whether for sublicense initiation fee, annual fee, sublicense milestone payments, or other such non-sale based royalty consideration payable by a sublicense as consideration for or under a sublicense.
Immediately after the closing of the License Agreement and for a period of one month, the shareholders of Ocure and certain individuals designated by Ocure will have opportunity to purchase and acquire an equity stake in our company that will equate to a collective ownership stake of up to 1,775,000 shares of our common stock at the par value purchase price of $0.001 per share. In addition, we agreed to establish an incentive stock option plan reserving up to 20% of our issued share capital, as of the closing.
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The License Agreement provides that the Subsidiary will pay a monthly overhead fee to Van Leer Technology Ventures Jerusalem Ltd., in the amount of $1,000 per month plus VAT, for office overhead services.
The License Agreement provides that at the closing the parties will agree upon the terms according to which certain principals of Ocure will, on or before any portion of the second round payment is paid, enter into consulting and service agreements with the Subsidiary. The License Agreement provides that the consulting and service agreements will contain escrow release provisions and repurchase rights to govern the common shares issuable to the principals (10% to be released 30 days from the date of the second round payment with 10% being released every 90 days thereafter).
Following the consummation of the second round payment, we agreed to establish a board of directors consisting of five individuals (three representatives on behalf of Ocure and two representatives on behalf of our company) and procure director & officer liability insurance.
The closing of the License Agreement is subject to certain conditions, including:
· | Ocure providing us with certain materials relating to the budgets and milestones to be met by Ocure; | |
· | Obtaining all corporate and/or third party approvals required; | |
· | Obtaining the approval of the Office of the Chief Scientist of the Israeli Ministry of the Economy (the " OCS ") to Ocure's performance of the License Agreement (if the approval of the OCS is not obtained within 90 days of the date of the signature of the License Agreement, the License Agreement will become null and void); and | |
· | Our paying $90,000, the second tranche of the initial round of payment. |
The License Agreement will continue, on a country-by-country basis, until the later of: (a) the date of expiration of the last to expire of Ocure's rights in Ocure patents in such country or such other grant of statutory exclusivity, or (b) the end of a period of 15 years from the date of making the First Commercial Sale in such country; unless sooner terminated pursuant to the terms of the License Agreement. Should an Ocure patent expire prior to 15 years from the date of the First Commercial Sale in a particular country or countries, the License in that country or those countries will be deemed a License to the know-how and/or any other intellectual property rights which are not patents and are deemed part of the Licensed Technology. Thereafter, the Subsidiary will have an irrevocable option to obtain an exclusive license to the Licensed Technology by agreeing to pay Ocure 50% of the royalty and non-sale based sublicense consideration. A " First Commercial Sale" means the first sale of a product whose manufacture, use or sale is covered by the Licensed Technology and receipt of the sale proceeds by the Subsidiary, its affiliate or a sublicensee after receipt of all governmental and other regulatory approvals required to market and sell such product have been obtained in the country in which such product is sold.
The Subsidiary at its option, may terminate the License Agreement at any time by giving 90 days prior written notice to Ocure of the Subsidiary's intent to terminate.
Ocure, at its option, may terminate the License Agreement as follows:
· | Upon the Subsidiary's failure to cure a monetary breach of more than $10,000 within 90 days after receiving written notice of such breach from Ocure; or | |
· | Upon the Subsidiary's failure to cure a breach of a material term (other than a monetary breach) within 180 days after receiving written notice of such breach from Ocure; or | |
· | If an examination by Ocure's accountant shows an underreporting or underpayment by the Subsidiary in excess of 20% for any 12 month period; or | |
· | If the Subsidiary provides any false report, which has not been corrected within 60 days after written notice by Ocure or within 60 days after the Subsidiary becomes aware that false information has been provided, whichever occurs earlier. |
In addition, if our company or the Subsidary passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within 60 days, or if a receiver or liquidator is appointed and has not been removed within 60 days, or enters into winding up or insolvency or bankruptcy proceedings which have not been set aside within 60 days, all duties of Ocure and all rights (but not duties) of the Subsidiary under the License Agreement will immediately terminate without the necessity of any action being taken by Ocure or by the Subsidiary; and in addition, upon the Subsidiary passing a resolution to wind up, Ocure, at its option, may terminate the License Agreement immediately upon written notice to the Subsidiary.
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Business
Corporate Overview
We were incorporated in the state of Nevada on September 14, 2009. From inception until early 2015, we were engaged in the mineral exploration business.
Our Current Business
During early 2015, we decided to abandon our mineral exploration properties and on February 27, 2015, we entered into a letter of intent with Ocure Ltd. ( "Ocure" ), pursuant to which we agreed to exclusively license certain technology from Ocure related to the development of products and devices for the treatment of anal fissures under terms of a license agreement to be negotiated between us and Ocure.
On July 9, 2015, 2015 we incorporated Madison-IL Ltd. as our wholly-owned subsidiary under the laws of Israel. On August 5, 2015, our company and Madison-IL Ltd. entered into an exclusive license agreement with Ocure to license Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to Ocure's patents and patent applications and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the Licensed Technology for uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
With this licensing we are focusing our efforts on the development of products for the treatment of anal fissures. We are abandoning our efforts in the mineral exploration industry. Opportunities in that industry brought to our attention will be refused or redirected.
Based on the licensed technology, we intend to develop and produce propriety devices that present a novel approach for treating anal fissures that is safe and simple to use by patients with minimal discomfort.
The device that we intend to develop and market is a flexible medical foam wrapped with semi- occlusive wound dressing serving as a physical barrier to cover the anal fissure and maintain a moist physiological environment at the fissure lesion to provide optimal healing conditions. The rationale for our proposed device is that preserving the moist physiological environment in the injured lesion prevents fissure drying, promotes re-epithelialization and reduces the local pain in the rectum. This allows relieve of the anal spasm and accelerates the healing of the fissure wound. Insertion of the device is done with a specifically designed applicator to allow easy and accurate placement of the device in the anal canal. The device is intended to stay in the anal canal up to 24 hours. The device naturally exits the anal canal during bowel movement or is replaced manually after 12 hours. The device is intended for one-time use and is provided in a kit with a set of ten semi-occlusive wound dressings for 10-day treatment.
Marketing
Following completion of clinical approval, we intend to distribute our products mainly through distributors worldwide.
Market
Anal fissure represents a widespread anorectal problem encountered in the clinical practice and in non-clinical settings. Chronic anal fissures can occur in all age groups, though it is more common in young healthy adults. Annually, over four million people in the United States suffer from anal fissures. Based on current available treatments, about 750,000 patients are clinically treated in the United States. It is approximated that anal fissure represents 6% to 15% of all visits in colorectal units. Today, pharmacological treatments for anal fissure suffer from limited efficacy, side effects, high recurrences and patient dissatisfaction, while surgery treatment is more effective but causes irreversible damage to the anal muscles and carries a risk of fecal incontinence. We believe that currently, there is a significant medical need for a safe, non-invasive and effective treatment that will help to minimize pain, promote the healing of the fissure and reduce treatment duration.
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Competition
We believe that our proposed devices present a novel approach for treating anal fissures that are safe and simple to use by patients with minimal discomfort. The alternative treatments of anal fissure are based on drugs and surgical procedures.
The conventional therapies are:
Glyceryl trinitrate (Rectogesic): Side effects include severe headaches, blood pressure changes. Success rate is low and there is a slow healing process, if at all, of 6 to 8 weeks. The recurrence rate is as high as 50%. This is an off-label use of the drug administered, which is used twice a day.
Calcium channels blockers suffer from similar issues such as slow healing rates of 6 to 8 weeks, low success rate a recurrence rate of 40 to 60%. Drug administration is four times daily.
Botulinum toxin is expensive costing over $500 per shot. The recurrence rate is high at 40-55%. It is invasive and there is risk of temporary incontinence as well as the risk of abscess development.
The healing rate of medical therapy is only 40 - 60%, there are no approved treatments for anal fissure in the United States, and there is lack in industrial manufacturing of Nifedipine ointment in Europe.
Surgical procedures: Between 20% to 30% of chronic patients undergo an operation. There are over 100,000 operations conducted annually in the United States. Most anal fissure surgeries are performed in private clinics.
Research and Development Expenditures
We did not incur expenditures in research and development activities over the last two fiscal years. We intend to dedicate some of our capital to research and development in order to establish product sales in the foreseeable future.
Employees
We currently have no employees other than our sole director and officer. We intend to hire additional staff and to engage consultants in compliance, investor and public relations, and general administration. We also intend to engage experts in medical device industry and in general business to advise us in various capacities. As part of the License Agreement, we agreed that certain principals of Ocure would execute consulting and service agreements with our Subsidiary, and those agreements are being negotiated.
Intellectual Property
Our proposed device and related concept are covered by two broad patents maintained in the United States and Europe:
1. | Medical Instrument of treating and/or diagnosing of anorectal disorders, and devices and methods of insertion of such: pending in the United States, Europe and Israel. TITLE: A DEVICE AND METHOD FOR THE PROLONGED DELIVERY OF AN ACTIVE AGENT TO A BODY CAVITY Applicant: BRAVER David. The European Patent Application No. 07713261.1 was filed: February 15, 2007 and US Patent Appl. No. 12/279,362 was filed: February 15, 2007 | |
2. | MEDICAL INSTRUMENTS OF TREATING AND/OR DIAGNOSING OF ANORECTAL DISORDERS, AND DEVICES AND METHODS... By Ocure Ltd. [BRAVER David et al] | |
European Patent Application No. 11770171.4 Filed August 25, 2011 |
||
U.S. Patent Application No. 13/818,692 Filed August 25, 2011 |
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The first patent describes the entire concept of the use of the device, while the second patent focuses on the unique design developed by Ocure.
Pursuant to the License Agreement, Ocure granted to the Subsidiary an exclusive, sublicensable, worldwide, license to Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to Ocure's patents and patent applications listed above and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the licensed technology for uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
Government Regulations
We anticipate that our products and operations will be subject to extensive and rigorous regulation by U.S. Food and Drug Administration ( "FDA" ) and countries or regions in which we market our products.
United States
The FDA regulates the development, testing, manufacturing, labeling, storage, recordkeeping, promotion, marketing, distribution, and service of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended uses. In addition, the FDA regulates the export of medical devices manufactured in the United States to international markets and the importation of medical devices manufactured abroad.
Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a pre-market approval ( "PMA" ) application. Both the 510(k) clearance and PMA processes can be expensive, and lengthy, and require payment of significant user fees, unless an exemption is available.
Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III-depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.
Class I devices are those for which safety and effectiveness can be reasonably assured by adherence to a set of regulations, referred to as General Controls, which require compliance with the applicable portions of the FDA's Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse events and malfunctions, and appropriate, truthful and non-misleading labeling and promotional materials. Some Class I devices, also called Class I reserved devices, also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.
Class II devices are those that are subject to the General Controls, as well as Special Controls, which can include performance standards, guidelines and postmarket surveillance. Most Class II devices are subject to premarket review and clearance by the FDA. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process. Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is "substantially equivalent," as defined in the statute, to either:
·
a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or
·
another commercially available, similar device that was cleared through the 510(k) process.
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To be "substantially equivalent," the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial equivalence.
After a 510(k) notice is submitted, the FDA determines whether to accept it for substantive review. If it lacks necessary information for substantive review, the FDA will refuse to accept the 510(k) notification. If it is accepted for filing, the FDA begins a substantive review. By statute, the FDA is required to complete its review of a 510(k) notification within 90 days of receiving the 510(k) notification. As a practical matter, clearance often takes longer, and clearance is never assured. Although many 510(k) premarket notifications are cleared without clinical data, the FDA may require further information, including clinical data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If the FDA agrees that the device is substantially equivalent, it will grant clearance to commercially market the device.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA application. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with a manufacturer's determination regarding whether a new premarket submission is required for the modification of an existing device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained. If the FDA requires us to seek 510(k) clearance or approval of a PMA application for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain this clearance or approval. In addition, in these circumstances, we may be subject to significant regulatory fines or penalties for failure to submit the requisite PMA application(s). In addition, the FDA is currently evaluating the 510(k) process and may make substantial changes to industry requirements.
If the FDA determines that the device is not "substantially equivalent" to a predicate device, or if the device is automatically classified into Class III, the device sponsor must then fulfill the much more rigorous premarketing requirements of the PMA approval process, or seek reclassification of the device through the de novo process. Pursuant to amendments to the statute in 2012, a manufacturer can also submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. We expect that our proposed device will be classified as Class II device and intend to submit a petition for direct de novo review for our proposed device.
Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are subject to the PMA application process, which is generally more costly and time consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA's satisfaction. Accordingly, a PMA application typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA's satisfaction reasonable assurance of the safety and effectiveness of the device for its intended use.
In addition, after a device is placed on the market, numerous FDA and other regulatory requirements continue to apply. These include establishment registration and device listing with the FDA; compliance with medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; and compliance with corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health. The FDA and the Federal Trade Commission (
"FTC"
) also regulate the advertising and promotion of our products to ensure that the claims we make are consistent with our regulatory clearances, that there is scientific data to substantiate the claims and that our advertising is neither false nor misleading. In general, we may not promote or advertise our products for uses not within the scope of our intended use statement in our clearances or make unsupported safety and effectiveness claims. Many regulatory jurisdictions outside of the United States have similar regulations to which we are subject.
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Our manufacturing processes are required to comply with the FDA's Good Manufacturing Practice ( "GMP" ) requirements contained in its Quality System Regulation ( "QSR" ) and associated regulations and guidance. The QSR covers, among other things, the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labeling, storage, installation, and servicing of all medical devices intended for human use. The QSR also requires maintenance of extensive records which demonstrate compliance with FDA regulation, the manufacturer's own procedures, specifications and testing as well as distribution and postmarket experience. Compliance with the QSR is necessary to receive FDA clearance or approval to market new products and is necessary for a manufacturer to be able to continue to market cleared or approved product offerings in the United States. A company's facilities, records, and manufacturing processes are subject to periodic scheduled or unscheduled inspections by the FDA, which may issue reports known as Forms FDA 483 or Notices of Inspectional Observations which list instances where the FDA inspector believes the manufacturer has failed to comply with applicable regulations and/or procedures. If the observations are sufficiently serious or the manufacturer fails to respond appropriately, the FDA may issue Warning Letters, or Untitled Letters, which are notices of intended enforcement actions against the manufacturer. If a Warning Letter or Untitled Letter is not addressed to the satisfaction of the FDA, or if the FDA becomes aware of any other serious issue with a manufacturer's products or facilities, it could result in fines, injunctions, civil penalties, delays, suspension or withdrawal of clearances, seizures or recalls of products, operating restrictions, total shutdown of production facilities, prohibition on export or import and criminal prosecution. Such actions may have further indirect consequences for the manufacturer outside of the United States, and may adversely affect the reputation of the manufacturer and the product. In the United States, routine FDA inspections usually occur every two years, and may occur more often for cause.
To a greater or lesser extent, most other countries require some form of quality system and regulatory compliance, which may include periodic inspections, inspections by third party auditors, and specialized documentation. Failure to meet all the requirements of these countries could jeopardize our ability to import, market, support and receive reimbursement for the use of our products in these countries.
In addition to the above, we may seek to conduct clinical research on products that have not yet been cleared or approved for particular indications in clinical studies or trials in the United States or other countries. Additional regulations govern the approval, initiation, conduct, documentation and reporting of clinical studies to regulatory agencies in the countries or regions in which they are conducted. Such investigational use is generally also regulated by local and institutional requirements and policies which usually include review by an ethics committee or institutional review board ( "IRB" ). Failure to comply with all regulations governing such studies could subject the company to significant enforcement actions and sanctions, including halting of the study, seizure of investigational devices or data, sanctions against investigators, civil or criminal penalties, and other actions. Without the data from one or more clinical studies, it may not be possible for us to secure the data necessary to support certain regulatory submissions, to secure reimbursement or demonstrate other requirements. We cannot assure that access to clinical investigators, sites and subjects, documentation and data will be available on the terms and timeframes necessary.
Products manufactured outside the United States by or for us are subject to U.S. Customs and FDA inspection upon entry into the United States. We must demonstrate compliance of such products to U.S. regulations and carefully document the eventual distribution or re-exportation of such products. Failure to comply with all applicable regulations could prevent us from having access to products or components critical to the manufacture of finished products and lead to shortages and delays.
Foreign Regulation
In order for us to market our products in other countries, we must obtain regulatory approvals and comply with extensive product and quality system regulations in other countries. These regulations, including the requirements for approvals or clearance and the time required for regulatory review, vary from country to country. Some countries have regulatory review processes which are substantially longer than U.S. processes. Failure to obtain regulatory approval in a timely manner and to meet all local requirements including language and specific safety standards in any foreign country in which we plan to market our products could prevent us from marketing products in such countries or subject us to sanctions and fines.
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Commercialization of medical devices in Europe is regulated by the European Union ( "EU" ). Similar to the U.S., the EU recognizes different class of medical devices. The EU recognizes Class I, Class IIa, Class IIb or Class III medical devices, with the classification determination depending on the amount of potential risk to the patient associated with use of the medical device. Classification involves rules found in the EU's Medical Device Directive. Key questions of relevance include the degree of the device's contact with the patient, invasiveness, active nature, and indications for use. The medical device classes recognized in the EU are as follows:
·
Class I, which are considered low risk devices, such as wheelchairs and stethoscopes, and require pre-market notification prior to placing the devices onto the EU market;
·
Class IIa, which are considered low-medium risk devices and require certification by a Notified Body (which is a private commercial entity designated by the national government of an EU member state as being competent to make independent judgments about whether a medical device complies with applicable regulatory requirements);
·
Class IIb, which are considered medium-high risk devices and require certification by a Notified Body; and
·
Class III, which are considered high-risk devices and require certification by a Notified Body.
We anticipate that our proposed device would be classified as a Class IIa medical device based on the EU's medical device classes.
The EU presently requires that all medical products bear the Conformit Europ enne ( "CE" ) mark, for compliance with the Medical Device Directive (93/42/EEC) as amended. The CE mark is an international symbol of adherence to certain essential principles of safety and performance mandated in applicable European medical device directives, which once affixed, enables a product to be sold in member countries of the EU and those affiliated which accept the CE mark. The CE mark is also recognized in many countries outside of the EU, such as Australia, and can assist in the clearance process. In order to affix the CE mark on products, a recognized European Notified Body must certify a manufacturer's quality system and design dossier for compliance with international and European requirements.
If we modify our existing products or develop new products in the future, we may need to apply for authorization to affix the CE mark to such products. We do not know whether we will be able to obtain authorization to affix the CE mark for new or modified products or whether we will continue to meet the safety and performance standards required to maintain the authorizations we have already received. If we are unable to maintain authorizations to affix the CE mark to our products, we will no longer be able to sell our products in member countries of the EU or those whose marketing authorizations are based on the CE Mark.
Regulations in other countries, including the requirements for approvals or clearance and the time required for regulatory review, vary from country to country. Certain countries have their own regulatory agencies. These regulations typically require regulatory approvals and compliance with extensive safety and quality system regulations. Failure to obtain regulatory approval in any foreign country in which we plan to market our products, or failure to comply with any regulation in any foreign country in which we market our products, may negatively impact our ability to generate revenue and harm our business. In addition, local regulations may apply which govern the use of our products and which could have an adverse effect on our product utilization if they are unfavorable. All such regulations are revised from time to time and in general are increasing in complexity, and in the scope and degree of documentation and testing required. There can be no assurance the outcomes from such documentation and testing will be acceptable to any particular regulatory agency or will continue to be acceptable over time. There are further regulations governing the importation, marketing, sale, distribution, use and service as well as the removal and disposal of medical devices. Failure to comply with any of these regulations could result in sanctions, fines and prevent us from marketing our products in these regions.
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Other Healthcare Laws
We may also be subject to federal and state healthcare laws and regulations pertaining to fraud and abuse, physician payment transparency and privacy and security laws and regulations. If our operations are found to violate any of the laws described above or any other laws and regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to market our products and materially adversely affect our business, results of operations and financial condition. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business.
Risk Factors
An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this report in evaluating our company and its business before purchasing shares of our company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. You could lose all or part of your investment due to any of these risks.
Risks Related to Our Company
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
Our financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have not generated any revenue from operations since our incorporation. We expect that our operating expenses will increase over the next 12 months as we ramp-up our business. As we cannot assure a lender that we will be able to successfully develop our products, we will almost certainly find it difficult to raise debt financing from traditional lending sources. If we cannot raise the money that we need in order to continue to operate our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail. As of December 31, 2014, we had total current liabilities of $38,101. If we are unable to meet our debt service obligations and other financial obligations, we could be forced to restructure or refinance, seek additional equity capital or sell our assets. We might then be unable to obtain such financing or capital or sell our assets on satisfactory terms.
In its report on the financial statements for the year ended March 31, 2014, our independent registered public accounting firm included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We may need to raise additional funds in the future which may not be available on acceptable terms or at all.
We may consider issuing additional debt or equity securities in the future to fund potential acquisitions or investments, to refinance existing debt, or for general corporate purposes. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our equity capitalization, requiring us to pay additional interest expenses. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements.
We are an early-stage company with a limited operating history, which may hinder our ability to successfully meet our objectives.
We are an early-stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects. As a result, the revenue and income potential of our business is unproven. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business. Errors may be made in predicting and reacting to relevant business trends and we will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies in evolving markets. We may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause our business, results of operations and financial condition to suffer.
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Because our sole director and officer is not a resident of the United States, investors may find it difficult to enforce, within the United States, any judgments obtained against our sole director and officer.
Our sole director and officer is not a resident of the United States, and all or a substantial portion of his assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against our sole director and officer, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.
If we are unable to successfully recruit and retain qualified personnel, we may not be able to continue our operations.
In order to successfully implement and manage our business plan, we will depend upon, among other things, successfully recruiting and retaining qualified personnel having experience in the medical device industry. Competition for qualified individuals is intense. We may not be able to find, attract and retain qualified personnel on acceptable terms. If we are unable to find, attract and retain qualified personnel with technical expertise, our business operations could suffer.
Future growth could strain our resources, and if we are unable to manage our growth, we may not be able to successfully implement our business plan.
We hope to experience rapid growth in our operations, which will place a significant strain on our management, administrative, operational and financial infrastructure. Our future success will depend in part upon the ability of our management to manage growth effectively. This will require that we hire and train additional personnel to manage our expanding operations. In addition, we must continue to improve our operational, financial and management controls and our reporting systems and procedures. If we fail to successfully manage our growth, we may be unable to execute upon our business plan.
Since the majority of our shares of common stock are owned by our two former officers and directors, our other stockholders may not be able to influence control of the company or decision making by management of the company.
Our two former officers and directors collectively beneficially own approximately 72.9% of our outstanding common stock. Their interests may not be, at all times, the same as that of our other stockholders. Where those conflicts exist, our stockholders will be dependent upon our current sole director exercising, in a manner fair to all of our stockholders, his fiduciary duties as officer or as member of our board of directors. Also, our two former officers and directors will have the ability to control the outcome of most corporate actions requiring stockholder approval, including the sale of all or substantially all of our assets and amendments to our articles of incorporation. This concentration of ownership may also have the effect of delaying, deferring or preventing a change of control of us, which may be disadvantageous to minority stockholders.
We have no employment or compensation agreements with our sole director and officer and as such he may have little incentive to devote time and energy to the operation of our company .
Our sole director and officer is not subject to any employment or compensation agreement with our company. Therefore, it is possible that he may decide to focus his efforts on other projects or companies which have a higher economic benefit to him. Currently, he is not obligated to spend any time at all on our business and could opt to leave our company for other opportunities or focus on other business which could negatively impact our ability to succeed. We do not have any expectation that our sole director or officer will enter into an employment or compensation agreement with our company in the foreseeable future and the loss of our sole director and officer may be highly detrimental to our ability to conduct ongoing operations.
Risks Relating to our Operations in Israel
Conditions in Israel and the surrounding Middle East may materially adversely affect our subsidiary's operations and personnel.
We anticipate that our subsidiary will have significant operations in Israel, including research and development. Since the establishment of the State of Israel in 1948, a number of armed conflicts and terrorist acts have taken place, which in the past, and may in the future, lead to security and economic problems for Israel. In addition, certain countries in the Middle East adjacent to Israel, including Egypt and Syria, recently experienced and some continue to experience political unrest and instability marked by civil demonstrations and violence, which in some cases resulted in the replacement of governments and regimes. Current and future conflicts and political, economic and/or military conditions in Israel and the Middle East region may affect our operations in Israel. The exacerbation of violence within Israel or the outbreak of violent conflicts involving Israel may impede our subsidiary's ability to engage in research and development, or otherwise adversely affect its business or operations. In addition, our subsidiary's future employees in Israel may be required to perform annual mandatory military service and be subject to being called to active duty at any time under emergency circumstances. The absence of these employees may have an adverse effect on our subsidiary's operations. Hostilities involving Israel may also result in the interruption or curtailment of trade between Israel and its trading partners, which could materially adversely affect our results of operations.
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The ability of our subsidiary to pay dividends is subject to limitations under Israeli law and dividends paid and loans extended by our subsidiary may be subject to taxes.
The ability of our subsidiary to pay dividends is governed by Israeli law, which provides that dividends may be paid by an Israeli corporation only out of its earnings as defined in accordance with the Israeli Companies Law of 1999, provided that there is no reasonable concern that such payment will cause such subsidiary to fail to meet its current and expected liabilities as they come due. Cash dividends paid by an Israeli corporation to United States resident corporate parents are subject to provisions of the Convention for the Avoidance of Double Taxation between Israel and the United States, which may result in our subsidiary having to pay taxes on any dividends it declares.
Risks Relating to Our Business
The License Agreement may be terminated or Ocure may cancel the license agreement.
If the approval of the Office of the Chief Scientist of the Israeli Ministry of the Economy is not obtained for Ocure's performance of the License Agreement within 90 days of the date of the signature of the License Agreement, the License Agreement provides that it will become null and void. If the License Agreement is terminated, our business may be materially adversely affected. Ocure may also terminate the License Agreement if we breach certain terms of the License Agreement.
Our business may be affected by unfavorable publicity or lack of consumer acceptance.
We are highly dependent upon consumer acceptance of the safety, efficacy and quality of our products. Consumer acceptance of a product can be significantly influenced by scientific research or findings, national media attention and other publicity about product use. A product may be received favorably resulting in high sales associated with that product that may not be sustainable as consumer preferences change. Future scientific research or publicity could be unfavorable to our industry or to any of our products and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived by our consumers as less than favorable or that may question earlier favorable research or publicity could have a material adverse effect on our ability to generate revenue. Adverse publicity in the form of published scientific research, statements by regulatory authorities or otherwise, whether or not accurate, that associates the use of our product with adverse effects, or that questions the benefits of our product or a similar product, or that claims that our products are ineffective, could reduce market acceptance of our products and could result in decreased product demand and could have a material adverse effect on our business, reputation, financial condition or results of operations.
If we are unable to successfully acquire, develop or commercialize new products, our operating results will suffer.
Our future results of operations will depend to a significant extent upon our ability to successfully develop and commercialize new products and businesses in a timely manner. There are numerous difficulties in, developing and commercializing new products, including:
· | developing, testing and manufacturing products in compliance with regulatory standards in a timely manner; | |
· | failure to receive requisite regulatory approvals for such products in a timely manner or at all; | |
· | developing and commercializing a new product is time consuming, costly and subject to numerous factors, including legal actions brought by our competitors, that may delay or prevent the development and commercialization of new products; |
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· | experiencing delays or unanticipated costs; | |
· | significant and unpredictable changes in the payer landscape, coverage and reimbursement for our products; | |
· | experiencing delays as a result of limited resources at FDA or other regulatory agencies; and | |
· | changing review and approval policies and standards at FDA and other regulatory agencies. |
As a result of these and other difficulties, products in development by us may or may not receive timely regulatory approvals, or approvals at all, necessary for marketing by us or other third-party partners. If any of our products are not approved in a timely fashion or, when acquired or developed and approved, cannot be successfully manufactured, commercialized or reimbursed, our operating results could be adversely affected. We cannot guarantee that any investment we make in developing products will be recouped, even if we are successful in commercializing those products.
Our expenditures may not result in commercially successful products.
We cannot be sure our business expenditures will result in the successful acquisition, development or launch of products that will prove to be commercially successful or will improve the long-term profitability of our business. If such business expenditures do not result in successful acquisition, development or launch of commercially successful brand products our results of operations and financial condition could be materially adversely affected.
Third parties may claim that we infringe their proprietary rights and may prevent us from manufacturing and selling some of our products.
The manufacture, use and sale of new products that are the subject of conflicting patent rights have been the subject of substantial litigation in the medical device industry. These lawsuits relate to the validity and infringement of patents or proprietary rights of third parties. Litigation may be costly and time-consuming, and could divert the attention of our management and technical personnel. In addition, if we infringe on the rights of others, we could lose our right to develop, manufacture or market products or could be required to pay monetary damages or royalties to license proprietary rights from third parties. Although the parties to patent and intellectual property disputes in the medical device industry have often settled their disputes through licensing or similar arrangements, the costs associated with these arrangements may be substantial and could include ongoing royalties. Furthermore, we cannot be certain that the necessary licenses would be available to us on commercially reasonable terms, or at all. As a result, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products, and could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our products are subject to a lengthy and uncertain U.S. regulatory review process. If we do not obtain and maintain the necessary U.S. regulatory authorizations, we will not be able to provide our products in the United States.
Our products and operations are subject to extensive regulation in the United States by the U.S. Food and Drug Administration or FDA. The FDA regulates the development, bench and clinical testing, manufacturing, labeling, storage, record keeping, promotion, sales, distribution and postmarket support and reporting of medical devices in the United States to ensure that medical products distributed in the United States are safe and effective for their intended uses. In order for us to market certain products for use in the United States, we generally must first obtain clearance from the FDA pursuant to the Federal Food Drug and Cosmetic Act. Clearance under Section 510(k) requires demonstration that a new device is substantially equivalent to another device with 510(k) clearance or grandfathered status. Clearance under the de novo review requires that a new device presents a moderate or low risk.
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In addition, if we develop products in the future that are not considered to be substantially equivalent to a device with 510(k) clearance or grandfathered status or presenting more than a moderate or low risk, we will be required to obtain FDA approval by submitting a PMA. The FDA may not act favorably or quickly in its review of our 510(k), de novo review or PMA submissions, or we may encounter significant difficulties and costs in our efforts to obtain FDA clearance or approval, all of which could delay or preclude sale of new products in the United States. Furthermore, the FDA may request additional data or require us to conduct further testing, or compile more data, including clinical data and clinical studies. Regulatory policy affecting our products can change at any time. The changes and their impact on our business cannot be accurately predicted. Changes in the FDA 510(k) or de novo review process could make approval more difficult to obtain, increase delay, add uncertainty and have other significant adverse effects on our ability to obtain and maintain approval for our products. The FDA may also, instead of accepting a 510(k) or de novo review submission, require us to submit a PMA, which is typically a much more complex, lengthy and burdensome application. To support a PMA, the FDA would likely require that we conduct one or more clinical studies to demonstrate that the device is safe and effective. In some cases such studies may be requested for non-PMA submissions as well. We may not be able to meet the requirements to obtain 510(k) or de novo review clearance or PMA approval, in which case the FDA may not grant any necessary clearances or approvals. In addition, the FDA may place significant limitations upon the intended use of our products as a condition to a 510(k) or de novo review clearance or PMA approval. Product applications can also be denied or withdrawn due to failure to comply with regulatory requirements or the occurrence of unforeseen problems following clearance or approval. Any delays or failure to obtain FDA clearance or approvals of new products we develop, any limitations imposed by the FDA on new product use, or the costs of obtaining FDA clearance or approvals could have a material adverse effect on our business, financial condition and results of operations.
Our products are subject to various international regulatory processes and approval requirements. If we do not obtain and maintain necessary international regulatory approvals, we will not be able to provide our products in foreign countries.
To be able to provide our products in other countries, we must obtain regulatory approvals and comply with the regulations of those countries which may differ substantially from those of the United States. These regulations, including the requirements for approvals and the time required for regulatory review, vary from country to country. Obtaining and maintaining foreign regulatory approvals is complex, and we cannot be certain that we will receive regulatory approvals in any foreign country in which we plan to market our products, or to obtain such approvals on a favorable schedule. If we fail to obtain or maintain regulatory approval in any foreign country in which we plan to market our products, our ability to generate revenue will be harmed.
The EU requires that manufacturers of medical products obtain the right to affix the CE mark to their products before selling them in member countries of the EU. The CE mark is an international symbol of adherence to quality assurance standards and compliance with applicable European medical device directives. In order to obtain the authorization to affix the CE mark to products, a manufacturer must obtain certification that its processes meet certain European quality standards. If we are unable to obtain permission to affix the CE mark to our products, we will not be able to sell our products in member countries of the EU and many affiliated countries that accept the CE mark, which would have a material adverse effect on our results of operations. Some member states of the European Union have additional requirements for registration and notification which may add to the time and effort to obtain market access. In addition, the regulations applied to end users of our products may increase over time, forcing us to provide additional solutions to regulations which do not apply directly to us, but which apply indirectly as they may limit our customers' ability to use our products.
We operate in a competitive industry and may face competition from potential competitors that develop products, treatments or procedures that are similar, more advanced, safer or more effective than ours.
Our potential competitors may develop products, treatments or procedures that are similar, more advanced, safer or more effective than ours. The medical device industry is very competitive and subject to significant technological and practice changes. We expect to face competition from many different sources with respect to our existing products and products that we may seek to develop or commercialize in the future.
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Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures that are safer, more effective, are more convenient or are less expensive than our existing products or any product that we may develop. Many of our potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we may have. Mergers and acquisitions in the medical device industry market may result in even more resources being concentrated among a smaller number of our potential competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
To successfully market and sell our products, we must address many issues with which we have little or no experience.
Over the long term, we intend to grow our business in the United States and internationally, and to do so we will need to attract distributors or expand our sales operations to effectively sell our products. Distributors may not commit the necessary resources to market and sell our products in accordance with our expectations. If future distributors do not perform adequately, or we are unable to locate distributors for particular geographic areas, we may not realize expected long term revenue growth. Sales of our products are subject to a number of risks, including:
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varying coverage and reimbursement processes and procedures;
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difficulties in staffing and managing foreign operations;
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reduced protection for intellectual property rights in some countries;
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export restrictions, trade regulations and foreign tax laws;
·
fluctuating foreign currency exchange rates;
·
foreign certification and regulatory requirements;
·
lengthy payment cycles and difficulty in collecting accounts receivable;
·
customs clearance and shipping delays;
·
political and economic instability; and
·
preference for locally produced products.
If one or more of these risks is realized, it could require us to dedicate significant resources to remedy the situation, our plan to market and sell our products may fail and our financial performance may suffer as a result.
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We anticipate that we will depend on limited or single source suppliers and vendors for components and services used in the manufacture of our products, and the partial or complete loss of these suppliers or vendors could cause customer supply or production delays and a substantial loss of revenues.
We anticipate that we will depend on limited or single source suppliers for certain key components, and limited vendors for certain services, used to manufacture our products, making us susceptible to quality issues, shortages and price changes. Any of these limited or single source suppliers or vendors could stop producing or supplying our components or stop performing services used to manufacture our products, cease operations or be acquired by, or enter into exclusive arrangements with, one or more potential competitors. As a result, these suppliers and vendors could stop providing components or services to us at commercially reasonable prices, or at all. Because there are a limited number of suppliers and vendors that manufacture the components and provide the services used to manufacture our products, it may be difficult to quickly identify alternate suppliers or vendors or to qualify alternative components or services on commercially reasonable terms, and our ability to satisfy customer demand may be adversely affected, which could result a substantial loss of revenue.
In the future, we may be subject to product liability and negligence claims relating to the use of our products that could be expensive, divert management's attention and harm our business.
Our business exposes us to significant risks of product liability claims, which are inherent to the medical device industry. Claims could be brought against us if use or misuse of our device causes, or merely appears to have caused, personal injury or death. Product liability claims may be brought by individuals or by groups seeking to represent a class. Future product liability claims against us, regardless of their merit, may result in negative publicity about us that could ultimately harm our reputation and could have a material adverse effect on our business, financial condition, results of operations.
We may be subject to product recalls that could negatively affect our business.
We may be subject to product recalls, withdrawals or seizures if any of our products are believed to cause injury or if we are alleged to have violated governmental regulations in the manufacture, labeling, promotion, sale or distribution of our products. A recall, withdrawal or seizure of any of our products could materially and adversely affect consumer confidence in our brand and lead to decreased demand for our products. In addition, a recall, withdrawal or seizure of our products would require significant management attention, would likely result in substantial and unexpected expenditures and could materially and adversely affect our business, financial condition or results of operations.
Risks Relating to Our Common Stock
Because we can issue additional shares of common stock, our stockholders may experience dilution in the future.
We are authorized to issue up to 75,000,000 shares of common stock, of which 6,850,000 shares of common stock are issued outstanding as of August 5, 2015. Our board of directors has the authority to cause us to issue additional shares of common stock without consent of our stockholders. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
Because we were a shell company, you will not be able to resell your shares in certain circumstances, which could hinder the resale of your shares.
We have, until now, been classified as a "shell company" within the meaning of Rule 405, promulgated pursuant to Securities Act of 1933 because we have had nominal assets and nominal operations. Accordingly, the shares of our common stock can only be resold through registration under Section 5 the Securities Act of 1933, Section 4(a)(1), if available, or by meeting the conditions of Rule 144(i). Another implication of us being a shell company is that we cannot file registration statements under Section 5 of the Securities Act of 1933 using a Form S-8, a short form of registration to register securities issued to employees and consultants under an employee benefit plan. Additionally, though exemptions, such as Section 4(a)(1) of the Securities Act of 1933 may be available for holders of our shares to resell their shares, because we are a shell company, such holders may not rely on the safe harbor from being deemed statutory underwriter under Section 2(11) of the Securities Act of 1933, as provided by Rule 144, to resell his or her securities. Only after we (i) are not a shell company, and (ii) have filed all reports and other materials required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934, as applicable, during the preceding 12 months (or for such shorter period that we may be required to file such reports and materials, other than Form 8-K reports); and have filed current "Form 10 information" with the SEC reflecting our status as an entity that is no longer a shell company for a period of not less than 12 months, can our securities be resold pursuant to Rule 144. "Form 10 information" is, generally speaking, the same type of information as we are required to disclose in a prospectus, but without an offering of securities. These circumstances regarding how Rule 144 applies to shell companies may hinder your resale of your shares of our company.
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Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.
Although our common stock is currently quoted on the OTC Bulletin Board and the OTC Pink marketplace of OTC Markets Group Inc., there is no market for our common stock. Even when a market is established and trading begins, trading through the OTC Bulletin Board or the OTC Pink marketplace is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in our stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.
Trading of our stock is restricted by the Securities Exchange Commission's penny stock regulations, which may limit a stockholder's ability to buy and sell our common stock.
The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, the Financial Industry Regulatory Authority (known as "FINRA" ) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We do not intend to pay dividends on any investment in the shares of stock of our company.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock's price. This may never happen and investors may lose all of their investment in our company.
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Item 9.01 Financial Statements and Exhibits.
Exhibits
No. |
Description |
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10.2 |
Licensing Agreement dated August 5, 2015 with Ocure Ltd. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Madison Ventures Inc. |
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August 11, 2015 | By: | /s/ Gene Gregorio |
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Gene Gregorio |
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President, Secretary,
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EXHIBIT 10.2
Exclusive License Agreement
Between
Madison Ventures Inc.
And
Madison-IL Ltd.
And
Ocure Ltd.
Date: August 5, 2015
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THIS EXCLUSIVE LICENSE AGREEMENT (" Agreement "), is entered into on August 5, 2015 by Ocure Ltd., an Israeli corporation with a principal address at High-Tech Village, Givat Ram Campus, Hebrew University, P.O. Box 39158, Jerusalem 91391, Israel (" Ocure "), Madison Ventures Inc., a Nevada corporation with its principal address at 1208 Tamarind Road, Dasmarinas Village, Makati City, Metro Manila, Philippines 1222 (" Madison "), and Madison-IL Ltd., an Israeli corporation with Israeli incorporation number 515285633 (" Madison Israeli Subsidiary ").
WHEREAS, Ocure is the owner of certain inventions, know-how and rights pertaining to a semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, including without limitation all rights pursuant to the patent applications, and issued patents listed in Exhibit A ; and,
WHEREAS, Ocure is a limited liability company that had in the past operated in the framework of a technologic incubator venture centre, in accordance with the rules and regulations of the Office of the Chief Scientist of the Israeli Ministry of the Economy (the " OCS ") and in accordance with Directive 8.3 of the Director General of the Ministry of the Economy regarding technological incubators; and
WHEREAS, the Madison Israeli Subsidiary will be established for the purpose of holding the exclusive global license rights as provided for herein, and for the purpose of acting as the operating entity for the Overall Enterprise (as defined herein). For clarity of overall organizational structure, Madison will hold 100% of the shares of the Madison Israeli Subsidiary (the wholly owned subsidiary of Madison), which in turn will hold the exclusive global license rights to the Ocure technology as provided for herein; and
WHEREAS, Madison and Madison Israeli Subsidiary desire to secure the exclusive License for Madison Israeli Subsidiary to use, develop , manufacture, market, otherwise commercialize, sublicense and exploit the inventions disclosed and claimed in the patent applications and issued patents in Exhibit A ; and,
NOW, THEREFORE, in consideration of the foregoing, the provisions set forth herein and the mutual benefits to be derived herefrom, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Ocure, Madison and Madison Israeli Subsidiary, hereby agree as follows:
SECTION 1 DEFINITIONS
1.1
"
Affiliate
" means any entity, which controls, is controlled by, or is under common control with a party by ownership or control of at least fifty percent (50%) of the voting stock or other ownership.
1.2
"
Closing
" shall be the fulfillment by the Parties, or waiver by the relevant Party, to the extent applicable, of the following conditions and the consummation by the Parties of the following transactions: (a) Ocure shall have provided Madison with the materials referenced in Section 3.1 below, (b) the Parties shall have received all corporate and/or third party approvals required for their respective execution and performance of this Agreement and the transactions considered hereby, (c) the satisfaction of the Condition Precedent, and (d) Madison shall have executed the payment with respect to the Initial Round according to Section 3.2(b) below; which shall take place electronically, with documents sent to the Parties' counsel.
2
1.3
"
Confidential Information
" means: any information in any form or medium, including without limitation written records, documents, computer-readable disks, tapes, printouts, sound recordings, photographs, reproductions, sketches, notes, or copies or excerpts of them, or other documents or materials, that the disclosing party considers confidential, whether or not marked as confidential. Confidential Information includes inventions, software, source code, object code, algorithms, procedures, databases, compilations, technical data, formulas, theories, methods, equipment, samples, designs, data, specifications, drawings, blueprints, prototypes, models, business plans, customer lists, contacts and information, sales and marketing reports, proposals, prices, costs, personnel and payroll records, mailing lists, accounting records, and other trade secrets and information concerning the businesses and other ventures which the disclosing party now operates or may operate in the future.
1.4
"
Effective Date
" means the date of Closing, by which date inter alia the Condition Precedent (as defined below) is satisfied, upon which this Agreement is deemed to take effect and both Parties become subject to the rights and obligations set forth herein.
1.5
"
Field of Use
" means those uses of the Licensed Technology in uses classified as medical devices, or those otherwise approved ultimately as an OTC (over-the-counter) remedy.
1.6
"
Party
" shall mean Ocure or Madison and/or the Madison Israeli Subsidiary, individually, and "Parties" shall mean Ocure, Madison and Madison Israeli Subsidiary collectively.
1.7
"
Gross Sales
" means the actual gross proceeds received by Madison Israeli Subsidiary and/or Madison Israeli Subsidiary's sublicenses from third parties in the manufacturing, distribution, sale, licensing, franchising, commercialization or exploitation of the Licensed Technology and/or New Inventions (as defined in Section 3.3(b)), less shipping, duty customs costs and taxes for such sales.
1.8
"
Licensed Technology
" means Ocure's semi-occlusive wound dressing for ambulatory treatment of acute and chronic anal fissure, pursuant to the Ocure Patents. .
1.9
"
Ocure Exclusive Licensed Product(s)
" means product(s) whose manufacture, use or sale is covered in whole or in part by any claim of the Licensed Technology; product(s) which are made in whole or in part using a process or machine covered in whole or in part by a claim of the Licensed Technology; is otherwise covered by, or falls within the scope of, a claim, in whole or in part, or the sale of which would infringe a claim but for the grant of the License; or product(s) made, at least in part, using Licensed Technology. Ocure Exclusive Licensed Product(s) shall also include any service rendered in whole or in part through the use of a product, process or machine covered in whole or in part by any claim of any of the Licensed Technology or enabled by Licensed Technology.
1.10
"
Ocure Patent(s)
" are those United States patent applications and issued patents listed in Exhibit A hereto and any corresponding foreign patent applications and issued patents, and any divisionals, continuations (excluding continuations-in-part), reissues and reexaminations to the extent that the claims are directed to subject matter within the Field of Use.
1.11
"
Sale
" means any bona fide transaction for which cash or non-cash consideration is received or expected for the sale, use, lease, import, transfer or other disposition of Ocure Exclusive Licensed Product(s).
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1.12
"
Secondary Round
" has the meaning set out in Section 3.2.
1.13
"
Term
" means the term of this Agreement which shall commence on the Effective Date and continue, on a country-by-country basis, until the later of: (a) the date of expiration of the last to expire of Ocure's rights in Ocure Patents in such country or such other grant of statutory exclusivity, or (b) the end of a period of fifteen (15) years from the date of making the First Commercial Sale in such country; unless sooner terminated pursuant to the terms of this Agreement. Should a Ocure Patent expire prior to fifteen (15) years from the date of the First Commercial Sale in a particular country or countries, the License in that country or those countries shall be deemed a License to the Know-how and/or any other intellectual property rights which are not patents and are deemed part of the Licensed Technology. Thereafter, the Madison Israeli Subsidiary shall have an irrevocable option to obtain an exclusive license to the Licensed Technology by agreeing to pay Ocure fifty percent (50%) of the consideration set forth in Section 3.3.A "
First Commercial Sale
" shall mean the first sale of an Ocure Exclusive Licensed Product and receipt of the sale proceeds by the Madison Israeli Subsidiary, an Affiliate or a sublicensee after receipt of all governmental and other regulatory approvals required to market and sell the Ocure Exclusive Licensed Product have been obtained in the country in which such Ocure Exclusive Licensed Product is sold.
1.14
"
Territory
" means "ALL COUNTRIES AND TERRITORIES OF THE WORLD".
SECTION 2 EXCLUSIVE LICENSE
2.1
Grant of Exclusive License
.
Ocure grants to Madison Israeli Subsidiary, an exclusive, sublicensable, worldwide, license to the Licensed Technology and to its production, use, import, offer for sale, sell, lease, distribute, or otherwise commercialize the Licensed Technology in the Field of Use only in the Territory,allsubject to and in accordance with the terms and conditions of this Agreement (the "
License
").
2.2
This Agreement will survive the bankruptcy or insolvency of Ocure.
2.3
Sublicensing
.
So long as it remains the licensee hereunder, Madison Israeli Subsidiary shall have the right to grant sublicense of the Licensed under Section 2.1 to third parties, subject to the provisions herein.
The right to sublicense is subject to the following conditions:
a)
In each such sublicense, the sublicensee shall be prohibited from granting further sublicenses and shall be subject to terms substantially similar to the terms and conditions of the License granted to Madison Israeli Subsidiary under this Agreement, including the material terms and conditions of this Agreement. Madison Israeli Subsidiary shall include a requirement that the sublicense use commercially reasonable efforts to bring the subject matter of the sublicense into commercial use as quickly as is reasonably practicable. The sublicensee shall be responsible for its sublicense and shall not grant any rights that are inconsistent with the rights granted to, and obligations of, Madison Israeli Subsidiary hereunder. No such sublicense agreement shall contain any provision that would cause it to extend beyond the Term of this Agreement.
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b)
Madison Israeli Subsidiary shall notify Ocure of each sublicense to be granted hereunder, regarding the identity of the Sublicensee and the material terms and conditions of the Sublicense. Madison Israeli Subsidiary shall furnish to Ocure a copy of each fully-executed sublicense agreement and any amendments thereof within fourteen (14) days of execution. Madison Israeli Subsidiary shall also promptly forward to Ocure a copy of all royalty reports received by Madison Israeli Subsidiary from sublicensee(s).
c)
Each such sublicense shall include the following provisions for the benefit of Ocure:
(i)
Madison Israeli Subsidiary shall ensure that any sublicense shall include material terms that bind the sublicensee to observe the terms of this Agreement, the breach of which terms shall be a material breach resulting in the prompt termination of the sublicense. In such an event, the Madison Israeli Subsidiary undertakes to take all reasonable steps to enforce such terms upon the sublicensee, including the termination of the sublicense. In all cases, the Madison Israeli Subsidiary shall immediately notify Ocure of any breach of the material terms of a sublicense, and shall copy Ocure on all correspondence with regard such breach.
(ii)
Confidentiality obligations on sublicensee to maintain the confidentiality of Ocure Confidential Information.
(ii)
Obligation of sublicensee to inform Madison Israeli Subsidiary and Ocure of infringement and litigation related to the Licensed Technology.
(iii)
Disclaimer of Warranty by Ocure; Limitation of Liability of Ocure; Indemnification by the sublicensee of Ocure.
2.4 | Agreements with Principals of Ocure |
i) At the Closing, the Parties will agree upon the terms according to which certain Principals of Ocure will, on or before any portion of the Secondary Round is paid, enter into employment, consulting and service agreements, as applicable , with Madison and/or the Madison Israeli Subsidiary, as applicable, defining among other things compensation and commitment provisions as mutually agreeable to the parties (the " Engagement Agreements "). The material terms upon which such Engagement Agreements will be based on the terms attached hereto as Exhibit C ; Exhibit C shall also include a list of the Principals of Ocure who shall enter into such consulting and service agreements.
ii) The
Engagement Agreements, as referred to in Section 2.4(i) above
, will contain escrow released provisions and repurchase rights to govern the common shares issuable to the Principals that require and mandate the continued involvement of the Principals in the future operations of any of Ocure, the Madison Israeli Subsidiary or Madison
(
together the"
Overall Enterprise
"),and most particularly during the entirety of the first 3 years of business following the Closing, in order for the Principals to "retain" the entirety of the escrow shares they individually or collectively subscribe for as per Section 3.4(i).
The Engagement Agreements will refer to and define among other things their individual shareholdings, compensation and commitment terms as mutually agreeable to the parties. Commencing
30 days from the date of payment of the Secondary Round of the Financing, 10% of each Principals escrow securities, shall be released, with 10% being released every 90 days thereafter over the course of the initial 3 year
engagement term
, subject to certain acceleration events as shall be provided for in the said
Engagement Agreements
.
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iii) Upon execution of the Engagement Agreements provided for in Section 2.4(i) above, Madison Israeli Subsidiary and the respective Principals of Ocure shall enter into industry standard non-competition and non-disclosure agreements (the " Non-Disclosure/Non-Competition Agreements "), on terms acceptable to the parties, wherein such parties will agree not to develop directly or indirectly products, services, or a business enterprise which could reasonably be expected to be in any manner competitive to Madison and/or the Madison Israeli Subsidiary.
iv) Ocure and Madison Israeli Subsidiary agree to work together in good faith to develop a future financing strategy that provides adequate and on-going capitalization to Madison in order to fund its future working capital requirements and expansion initiatives. The parties shall negotiate in good faith the timing and pricing of such future additional financings, with a view to minimizing long-term dilution. It is agreed that during the Calendar year 2015, Madison will on a best efforts basis seek an additional financing round consisting of 1,000,000 units at $1.00 per unit, each unit consisting of one common share and one-half of one warrant for gross proceeds of $1,000,000. Full warrants will be exercisable at $2.00 per share for two (2) years. Madison understands that there may be interest from some outside third parties known to the Principals to make investment into Madison, and as such agrees here to allow for this financing to be arranged by the Principals, or as otherwise agreed by the parties as may be necessary.
v) Following the consummation of the payment with respect to the Secondary Round referenced in Section 3.2(c) the parties shall establish a Board of Directors for Madison consisting of five (5) individuals (three representatives on behalf of Ocure, and two representatives on behalf of Madison), such individuals to be mutually agreed by the parties in advance, with a view to ensuring that the composition of the Board includes appropriate industry, finance, accounting and business experience. At such time, Madison shall procure a D&O liability insurance in a per claim amount to be agreed upon between the parties, and the terms of which and the identity of the insurer are reasonably satisfactory to the Board, including the consent of the directors appointed by Ocure.
SECTION 3 CASH PAYMENTS, ROYALTIES, STOCK AND OPTIONS
3.1 | Cash Payments . Madison shall provide $250,000 USD to Ocure as payment to procure the License under the terms of this Agreement. These proceeds shall be submitted by Madison to counsel for direct release to Ocure based on timed and scheduled release dates derived from budgets and specific target milestones mutually agreed upon by the parties as a general basis for such release. The funding will be utilized by Ocure as required for the proper day to day management and operation of the business by Ocure and development of the Licensed Technology so that the Madison Israeli Subsidiary may carry out its business plan of marketing Ocure Exclusive Licensed Products. The budgets and milestones to be met by Ocure in obtaining and retaining such funding shall be detailed in the materials provided to Madison as referenced below (where such material has been provided to Madison to its satisfaction prior to the signature of this Agreement), and contained specifically in Exhibit B hereto: |
o | A comprehensive 3-year proforma financial projection | |
o | Copies of any/all relevant contracts, documentation/ communications with interested parties (JV, Strategic Alliance, investors, etc.) | |
o | A Use of Proceeds for the initial proposed $250,000 USD payment |
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o
A detailed month-to-month Budget for the next 6 months (tied to the Use of Proceeds)
o
A table of expected milestones and deliverables for the next 6 months
o
Articles of Association for the Company
3.2 |
Schedule of Cash Payments |
Initial Round
The initial round of $250,000, as referred to in Section 3.1 above, shall be made available to the Madison Israeli Subsidiary in staged tranches, payable as follows:
a. | $10,000 (already paid at the signing of the Letter of Intent dated February 27, 2015), | ||
b. | $90,000 at the later of 11 May 2015 or the Effective Date. | ||
c. | $150,000 at the later of 5 June 2015 or 18 calendar days after the Effective Date. |
Secondary Round
The Secondary round of an additional $250,000 shall be made available to the Madison Israeli Subsidiary at the end of the initial six months period from the Effective Date provided that Ocure has delivered on its applicable commitments and milestones as per Exhibit B for such six month period, the License shall and have continued to be held in force, and that at such time and date, ownership and right to any additional assets (not including the Licensed Technology) then existing in Ocure will be fully transferred to the Madison Israeli Subsidiary.
The Secondary Round shall follow the same tranche structure as the initial payment with such amounts and release dates comprised of three (3) tranches, payable as follows:
a.
$100,000 at the later of 6 November 2015 or 168 calendar days after the Effective Date,
b.
$100,000 at the later of 4 December 2015 or 196 calendar days after the Effective Date, and
c.
$50,000 at the later of 8 January 2016 or 230 calendar days after the Effective Date.
In the event that Ocure does not deliver on its applicable commitments and milestones as per
Exhibit B
for Madison to invest the consummate the Secondary Round payment to the Madison Israeli Subsidiary, and Madison elects not to pay the Secondary Round payment, then this Agreement and the License thereunder shall be terminated.
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3.3 |
Royalties |
a.
Reserved.
b.
The parties shall co-operate in the further development of the Licensed Technology and in such regard shall inform each other of all Know-how and any New Inventions (as defined below) developed by the parties; such New Inventions shall be owned by the Madison Israeli Subsidiary. Notwithstanding the aforesaid, the Madison Israeli Subsidiary shall be required to pay Royalties, whether attributable to Madison Israeli Subsidiary and/or to Madison Israeli Subsidiary's sublicenses (as provided for in Section 3.3(c) below) on the Gross Sales relating to the New Inventions.
For the purpose of this Agreement, "
New Inventions
" shall mean: any inventions, improvement, development or enhancement based upon, consists of, comprises, contains or incorporates the Licensed Technology invented following the Effective Date by the Madison Israeli Subsidiary, an Affiliate or Sublicensee.
c.
In consideration of the License for the Licensed Technology and with respect to the New Inventions (as as set out in Section 3.3(b) above, Ocure shall receive, and Madison Israeli Subsidiary shall pay to Ocure, the following during the Term:
i)
Royalties ("
Royalties
") calculated as 5% (five percent) of:
i.
Gross Sales attributable to Madison Israeli Subsidiary; and
ii.
Gross Sales attributable to Madison Israeli Subsidiary's sublicenses, provided that Royalties on any Sale of Ocure Exclusive Licensed Product(s) by Madison Israeli Subsidiary to Madison Israeli Subsidiary's sublicenses shall not be due until the resale of such Ocure Exclusive Licensed Product(s) by the sublicense.
(ii)
Madison Israeli Subsidiary shall promptly pay to Ocure twenty percent (20%) ("Non-Sale Based Sublicense Consideration") of any cash or non-cash consideration received, whether for sublicense initiation fee, annual fee, sublicense milestone payments, or other such non sale based royalty consideration payable by a sublicense as consideration for or under a sublicense. Non Sale Based Sublicense Consideration does not include (i) the Sale-based Royalties set forth in Section 3.3(c)(i) payable to Ocure by Madison Israeli Subsidiary under this Agreement, or (ii) any equity investments and/or loans made by a sublicense in and to Madison Israeli Subsidiary, provided however that such equity investments and/or loans are not made in consideration for the grant of any sublicense. Any non-cash consideration received by the Madison Israeli Subsidiary from such sublicenses shall be valued at its fair market value as of the date of receipt.
d)
Royalties and Non-Sale Based Sublicense Consideration payable by Madison Israeli Subsidiary to Ocure under this Section 3.3 shall be accompanied by reports as set forth in Section 3.3 (f, g) below.
e)
Payments of Royalty and Non-Sale Based Sublicense Consideration: The Royalty and Non-Sale Based Sublicense Consideration payments shall be calculated on a calendar quarter basis and paid, without set-off or counterclaim, for each quarter within 60 days of the end of such quarter. Any amounts not paid within 60 days shall bear interest, calculated from the end of the quarter for which such payment was due,at the prime lending rate charged by HSBC to its most credit worthy customers plus two percent (2%). To the extent that the revenue received by Madison Israeli Subsidiary for the manufacturing, distribution, sale, licensing, franchising or exploitation of the Licensed Technology is in a form other than the lawful currency of the United States, the Royalty shall be paid to Ocure in the lawful currency of the United States based on published foreign exchange rates (as constituted on the last day of the applicable quarter) reasonably designated by Ocure. Madison Israeli Subsidiary shall be responsible for maintaining books and records in accordance with Generally Accepted Accounting Principles as required by international accounting standards which accurately document its revenues and the Royalty. Payment of Value Added Tax - or of any analogous foreign tax, charge or levy (if charged), applicable to the sale of Ocure Exclusive Licensed Products shall be added to each payment in accordance with the statutory rate in force at such time.
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f)
Report of Sales: Within 60 days following the close of the first calendar quarter in which there are any revenues generated from the Licensed Technology, Madison Israeli Subsidiary shall provide Ocure with a full written report showing the sales in such quarter and the amount of Royalty payable with respect thereto, certified by the accountant for Madison Israeli Subsidiary. Thereafter, within 60 days following the close of each calendar quarter, Madison Israeli Subsidiary shall provide Ocure with a written report showing the amount of sales in such quarter and the amount of Royalty and/or Non-Sale Based Sublicense Consideration payable with respect thereto. Madison Israeli Subsidiary shall require and cause its Affiliates and sublicenses to prepare and provide similar such reports to Ocure.
g)
Examination of Books and Records: Upon the written request of Ocure and, except as otherwise provided below, at Ocure' expense, Madison Israeli Subsidiary shall allow and make available on an annual basis its books and records to be examined and audited by a registered auditing firm for the purpose of determining compliance with Royalty and Non-Sale Based Sublicense Consideration payment obligations under this Agreement, where such books shall be managed in accordance with Generally Accepted Accounting Principles as required by international accounting standards. If such audit discloses any discrepancy in the amount of Royalty and/or Non-Sale Based Sublicense Consideration paid, the appropriate adjustment shall be made immediately thereafter. To the extent of an overpayment, the amount due from Ocure shall be deducted from future payments. In the event that any such examination or audit shall determine that the Royalty and/or Non-Sale Based Sublicense Consideration actually paid for any period was less than 95% of the amount properly payable, or was greater than the amount that should have been paid, Madison Israeli Subsidiary shall pay the reasonable expenses actually incurred by Ocure in connection therewith, in addition to all previously unpaid Royalties and Non-Sale Based Sublicense Consideration. Ocure and its representatives shall not use or disclose such books and records, nor any of the specific information contained therein, to any third parties except as reasonably necessary if Madison Israeli Subsidiary is in breach of this Agreement. Madison Israeli Subsidiary shall, and shall require and cause its Affiliates and sublicenses to retain such books of accounts for five (5) years after the end of each calendar year during the period of this Agreement, and, if this Agreement is terminated for any reason whatsoever, for five (5) years after the end of the calendar year in which such termination becomes effective.
h)
Should any payment required to be made to Ocure in accordance with the provisions of this Agreement be subject to withholding of any taxes assessable upon Ocure, the Madison Israeli Subsidiary shall inform Ocure of such withholding requirement sufficiently in advance of such withholding to allow Ocure to obtain and provide the Madison Israeli Subsidiary with an appropriate certificate of exemption, if available. No withholding shall be made if an exemption is obtained. All payments made shall be free and clear of any other withholding of any kind.
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3.4
Payment of Stock/Options:
In addition to the above, and as consideration for the grant of the License, Madison will grant the following to Ocure at the Closing:
(i) | Immediately after the Closing and for a period of one month, the Shareholders of Ocure and certain individuals designated by Ocure, all as set out in Exhibit D hereto (the "Designated Parties"), shall have opportunity to purchase and acquire an equity stake in Madison (trading symbol MAVT: OTCPK) that will equate to a collective ownership stake of up to 1,775,000 shares of common stock in Madison, of 25% of the shares of Madison issued, in addition to the approximately 7.100,000 issued and outstanding Madison shares, or otherwise held for issuance, as at the date the Initial Round of Financing has been paid to Ocure. Each of theDesignated Parties, or any of their respective designees will have the right to acquire such proportion of the said Madison shares as equals his/her proportion of equity shares of Ocure. The shares available for acquisition in Madison by the Designated Parties shall have an associated par value purchase price of $0.001/share and shall be accompanied by an industry standard form share subscription agreement to be completed by each of the Designated Parties, which shall include certain representations and warranties surrounding investor suitability and accreditation (whether accredited or non-accredited), residency declaration, security law required share escrow provisions, amongst other required regulatory disclosure. A certified check, bank draft, or wire transfer, shall accompany each executed subscription agreement. | |
(ii) | In addition to the shares in Section 3.4(i), Madison shall establish an incentive stock option plan reserving up to 20% of the Madison issued share capital, as of the Closing (including in such issued share capital number the shares of Designated Parties as provided for in Section 3.4(i) above) for purchase on exercise of any potential future options. Option allocations for the Principals of Ocure who are to serve as members of management and the Board of Madison shall be negotiated by the parties and granted upon establishment of the option plan and execution of an Engagement Agreement with each such Principal as per Section 2.4(i). The Principals shall be granted options in such number as is determined at the Closing and as set out in Exhibit E hereto, with an expiry date as indicated in such Exhibit E, although each option will expire upon such Principal's Engagement Agreement terminating. Without affecting the foregoing, Madison, the Principals and other parties as may be deemed appropriate may be granted options, such number to be determined on a case-by-case basis, carrying a future expiration date, unless they leave the employ of the organization prior to such time. Each party shall be granted options at a price equal to (i) the investment price associated with the financing underlying the investment payments as per Sections 3.1 and 3.2) or, if lower than such investment price (ii) the closing trading price of Madison's shares on the stock market or quotation system on the day prior to the option grant. |
3.5
Overhead Fee
. The Madison Israeli Subsidiary shall pay a monthly overhead fee to Van Leer Technology Ventures Jerusalem Ltd. ("Van Leer"), in the amount of $1,000 per month plus VAT (if and to the extent applicable), for office overhead services provided by Van Leer to Madison Israeli Subsidiary.
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3.6 | Country; Place of Payment; Interest; Foreign Taxes . |
a)
All dollar amounts referred to in this Agreement are expressed in United States dollars and all payments to Ocure shall be made in United States dollars by check payable to "Ocure Ltd." or by electronic wire transfer to Ocure as follows:
|
Wire To: |
Ocure Ltd. Bank Name: Bank Leumi Bank Account No.: 047250082 Branch No.: 968 Swift Code: LUMIILITXXX IBAN: IL76 0109 6800 0004 7250 082 |
b)
If Madison Israeli Subsidiary receives revenues from Gross Sales or consideration from sublicenses in currency other than United States dollars, revenues shall be converted into United States dollars at the conversion rate for the foreign currency used by Madison Israeli Subsidiary's bank on the day the bank credits such funds to Madison Israeli Subsidiary's account.
c)
Madison Israeli Subsidiary shall pay all taxes which may be assessed or levied on, or on account of, the Ocure Exclusive Licensed Product made, used, sold, leased, transferred, or disposed of hereunder and all taxes (other than taxes imposed by the United States of America or the states or jurisdictions within such States) levied on or on account of the amounts (including royalty payments) payable to, or for the account of Madison Israeli Subsidiary under this Agreement. These taxes are not deductible from any payments due Ocure.
3.7
No Dilution
. The Initial Round and the Secondary Round of Financing will be raised at USD$1.00 per share, and Madison will not issue any common shares at a price below $1.00 per share until completion of the Secondary Round without the consent of Ocure.
SECTION 4 PATENT AND REIMBURSEMENT
4.1
Ocure shall work closely with Madison Israeli Subsidiary to develop a suitable strategy for the prosecution and maintenance of Ocure Patents; provided that Ocure shall maintain final authority in all decisions regarding the prosecution and maintenance of Ocure Patents. Madison Israeli Subsidiary shall promptly reimburse Ocure for all pre-approved future documented attorneys' fees, expenses, official fees and other charges incident to the preparation, prosecution and maintenance of Ocure Patents. Madison Israeli Subsidiary may elect to surrender Ocure Patent rights in any country upon at least sixty (60) days' prior written notice to OcureThereafter, such country shall be deleted from the scope of the License in relation to such patent(s) or application(s) and Ocure shall be free to grant rights in and to such patents or patent applications solely with respect to such country to third parties, without further notice or obligation to the Madison Israeli Subsidiary, and the Madison Israeli Subsidiary shall have no rights whatsoever to exploit such patents or patent applications in such country. Such notice shall not relieve Madison Israeli Subsidiary from responsibility to reimburse Ocure for patent-related expenses incurred prior to the expiration of the sixty (60) day notice period (or such longer period specified in Madison Israeli Subsidiary's notice). Ocure shall provide Madison Israeli Subsidiary with itemized statements reflecting the expenses owed to Ocure for the preparation, prosecution and maintenance of Ocure Patents and Madison Israeli Subsidiary shall reimburse Ocure for such expenses within thirty (30) days after receipt of such statement.
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4.2
Although the Madison Israeli Subsidiary shall be responsible and maintain final authority in all decisions regarding the selection and management of patent counsel, both Ocure and Madison Israeli Subsidiary will be involved in all phases of patent prosecution: preparation, office action responses, filing strategies for continuation or divisional applications, etc. Madison Israeli Subsidiary will request that copies of all documents prepared by patent counsel be provided to Ocure for review and comment prior to filing to the extent practicable under the circumstances. Each application and every patent registration relating to the Licensed Technology shall be made and registered in the name of Ocure.
4.3
Madison Israeli Subsidiary shall confer with Ocure as to the countries in which Madison Israeli Subsidiary shall seek patent protection, but may make the final decision in its discretion.
4.4
Madison Israeli Subsidiary and its sublicenses shall comply with all United States and foreign laws with respect to patent and copyright marking of Ocure Exclusive Licensed Product(s).
4.5
Madison Israeli Subsidiary shall provide to Ocure prompt notice of all matters that come to Madison Israeli Subsidiary's attention that may affect the preparation, prosecution or maintenance of any Ocure Patents. In particular, Madison Israeli Subsidiary must immediately notify Ocure if Madison Israeli Subsidiary or any Affiliate or sublicense does not qualify as a "small entity" as provided by the United States Patent and Trademark Office.
SECTION 5 TERM AND TERMINATION
5.1
This Agreement shall terminate at the end of the Term unless sooner terminated as herein provided.
5.2
Madison Israeli Subsidiary, at its option, may terminate this Agreement at any time by giving ninety (90) days prior written notice to Ocure of Madison Israeli Subsidiary's intent to terminate.
5.3
Ocure, at its option, may terminate this Agreement as follows:
a)
Upon Madison Israeli Subsidiary's failure to cure a monetary breach of more than $10,000 within ninety (90) days after receiving written notice of such breach from Ocure; or
b)
Upon Madison Israeli Subsidiary's failure to cure a breach of a material term (other than a monetary breach) within one hundred eighty days (180) days after receiving written notice of such breach from Ocure; or
c)
An examination by Ocure's accountant pursuant to Section 3.3 f, g shows an underreporting or underpayment by Madison Israeli Subsidiary in excess of twenty (20%) for any twelve (12) month period; or
d)
Madison Israeli Subsidiary provides any false report, which has not been corrected within sixty (60) days after written notice thereof by Ocure or within sixty (60) days after Madison Israeli Subsidiary becomes aware that false information has been provided, whichever occurs earlier.
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5.4
If Madison or the Madison Israeli Subsidiary passes a resolution for voluntary winding up or a winding up application is made against it and not set aside within sixty (60) days, or if a receiver or liquidator is appointed and has not been removed within sixty (60) days, or enters into winding up or insolvency or bankruptcy proceedings which have not been set aside within sixty (60) days, all duties of Ocure and all rights (but not duties) of Madison Israeli Subsidiary under this Agreement shall immediately terminate without the necessity of any action being taken by Ocure or by Madison Israeli Subsidiary; and in addition, Ocure, at its option, may terminate this Agreement immediately upon written notice to Madison Israeli Subsidiary. Madison and/or Madison Israeli Subsidiary each undertake to notify Ocure within three (3) days if any of the abovementioned events occur.
5.5
Upon termination of this Agreement, except under Section 5.1, Madison Israeli Subsidiary shall have ninety (90) days to complete the manufacture of work in progress and one hundred eighty (180) days to complete the sale of any Ocure Exclusive Licensed Product(s) in stock or in the course of manufacture at the time of termination; provided, however, that all such Sales are subject to the royalty and accounting obligations set forth in this Agreement, even if such royalty obligations arise from transactions subsequent to the effective date of termination.
5.6
Upon termination of this Agreement, Madison Israeli Subsidiary shall, return to Ocure within thirty (30) days all Confidential Information fixed in any tangible medium of expression and all material relating to the Licensed Technology. Upon termination of this Agreement for any reason other than the expiration of its Term, the License shall terminate, the Licensed Technology and all rights included therein shall revert to Ocure, and Ocure shall be free to enter into agreements with any other third parties for the granting of a license or to deal in any other manner with such right as it shall see fit at its sole discretion.
Without derogating from the above, upon the termination of the Agreement any time for any reason other than the expiration of its term, the Madison Israeli Subsidiary shall transfer and assign to Ocure all of its rights in the New Inventions and any information and documents, in whatever form, relating thereto, including without limitation any data, results, regulatory information (including applications, registrations, licenses, authorizations, approvals and all clinical studies, tests, and manufacturing batch records relating to Ocure Exclusive Licensed Products, and all data contained in any of the foregoing) and files that relate to the Licensed Technology and the Ocure Exclusive Licensed Products.
5.7
Madison Israeli Subsidiary's obligation to pay Royalties and/or Non-Sale Based Sublicense Consideration accrued during the Term of this Agreement under Section 3.3 hereof and/or pursuant to Section 5.5 above shall survive termination of this Agreement. For the avoidance of doubt, the parties acknowledge and agree that in no event shall the termination of this Agreement release Madison Israeli Subsidiary, its Affiliates or sublicenses from the obligation to pay any amounts that become due on or before the effective date of termination.
5.8
Notwithstanding termination of this Agreement any section of this Agreement which by its nature is intended to survive termination, shall so survive.
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SECTION 6 CONFIDENTIALITY
6.1
Each Party agrees to maintain in confidence and not to disclose to any third party any Confidential Information received from the other Party pursuant to this Agreement, including any Confidential Information disclosed to the other Party prior to the Effective Date; provided however, that Confidential Information may be disclosed to legal counsel or, upon execution of an appropriate confidentiality agreement, to sublicensees or potential sublicensees, corporate partners or potential corporate partners, investment bankers or consultants. Each Party agrees to ensure that its employees have access to Confidential Information only on a need-to-know basis and that they are obligated to abide by the confidentiality obligations hereunder and such party shall be responsible for the compliance of any such persons with the confidentiality provisions and for any harm caused to the other party as a result of such disclosure. The foregoing obligation shall not apply to:
a)
Information that is known to the receiving party prior to the time of disclosure, in each case, to the extent evidenced by written records promptly disclosed to the disclosing party upon receipt of the Confidential Information;
b)
Information disclosed to the receiving party by a third party that has a right to make such disclosure without any obligation of confidentiality;
c)
Information that is independently developed by the receiving party by employees not having access to or knowledge of the disclosing party's Confidential Information, in each case, to the extent evidenced by written records disclosed to the receiving party;
d)
Information that becomes patented, published or otherwise part of the public domain as a result of acts by the disclosing party, or a third person obtaining such information as a matter of right without any obligation of confidentiality;
e)
Information that is required to be disclosed by order of any governmental authority or a court of competent jurisdiction; provided that the receiving party shall use reasonable efforts to obtain confidential treatment of such information by the authority or court.
6.2
The placement of a copyright notice on any Confidential Information shall not be construed to mean that such information has been published and will not release Madison or Madison Israeli Subsidiary from their obligation of confidentiality hereunder.
SECTION 7 INFRINGEMENT AND LITIGATION
7.1
Ocure and Madison Israeli Subsidiary are responsible for notifying each other promptly of any infringement of Ocure Patents or any misappropriation of Ocure Confidential Information that may come to their attention. Ocure and Madison Israeli Subsidiary shall consult one another in a timely manner concerning any appropriate response thereto.
7.2
With respect to any Ocure Patents licensed to Madison Israeli Subsidiary pursuant to this Agreement, Madison Israeli Subsidiary shall have the right, but not the obligation to prosecute in its own name such infringement or misappropriation at its own expense, so long as such License is exclusive at the time of the commencement of such action. Before Madison Israeli Subsidiary commences an action with respect to any infringement of such patents, Madison Israeli Subsidiary shall give careful consideration to the views of Ocure in making its decision whether or not to sue. The Madison Israeli Subsidiary shall, or, if relevant, shall make best efforts to ensure that its Affiliate or sublicensee shall, continuously keep Ocure apprised of all developments in the action and shall continuously provide Ocure with full information and copies of all documents relevant to the proceedings, including without limitation, all documents filed with the courts by the parties to the legal action(s) and all correspondence with the other parties to the proceedings, and shall seek Ocure's input on any substantive submissions or positions taken in the litigation regarding the scope, validity or enforceability of the Ocure Patents. Madison Israeli Subsidiary shall not settle or compromise any such suit in a manner that imposes any obligations or restrictions on Ocure or grants any rights to Ocure Patents, without Ocure's advance written consent. Financial recoveries from any such litigation will first be applied to reimburse Madison Israeli Subsidiary for its outside counsel fees and court costs, following which Ocure will be reimbursed for same. After which, any additional recoveries, after the deductions set forth above, will be split 65% to Madison Israeli Subsidiary and 35% to Ocure and the Madison Israeli Subsidiary shall pay Royalties on the portion of the recovery related to sales, or sublicensee consideration payments, on the portion of the recovery not related to sales, with respect thereof, provided however that if the Madison Israeli Subsidiary notified Ocure that it shall not be prosecuting such infringement, and Ocure initiated proceedings on its own costs and expenses - any recovery obtained in such action shall be paid to Ocure (minus costs and expenses, if any, paid by the Madison Israeli Subsidiary).
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7.3
Madison Israeli Subsidiary's prosecution rights under Section 7.2 shall be subject to the continuing right of Ocure to intervene and join Madison Israeli Subsidiary in any claim or suit for infringement or misappropriation of Ocure Patents. If Ocure elects to join as a party, Ocure shall jointly control the action with Madison Israeli Subsidiary. Ocure shall retain the right to hire its own counsel, the costs of which are reimbursable as set forth in Section 7.2. Any financial recoveries shall be shared equally between Ocure and Madison Israeli Subsidiary.
In any claim or suit for infringement of Ocure Patents under Section 7.2, Madison Israeli Subsidiary may request that Ocure join as a party. Madison Israeli Subsidiary shall not join Ocure as a party to any action without Ocure's prior written consent, which shall not be unreasonably withheld, subject to the following conditions:
a) In the event the court or other adjudicating body requires that Ocure be joined as an indispensable party or in some other capacity to establish or maintain standing to an infringement action, Madison Israeli Subsidiary shall immediately notify Ocure of the same and transmit the corresponding court documents to allow for Ocure to respond as it deems appropriate. If the court or other adjudicating body ultimately maintains such requirement, then Ocure shall consent to joinder, and Madison Israeli Subsidiary may join Ocure, as a party in such action.
b) Madison Israeli Subsidiary shall reimburse Ocure for any out-of-pocket costs and expenses Ocure incurs, including reasonable attorneys' fees, as part of an action brought by Madison Israeli Subsidiary in which Madison Israeli Subsidiary has requested Ocure join as a party, irrespective of whether Ocure becomes a co-plaintiff.
7.4
If Madison Israeli Subsidiary fails to prosecute such infringement or misappropriation, Ocure shall have the right, but not the obligation, to prosecute such infringement or misappropriation at its own expense. In such event, financial recoveries will be entirely retained by Ocure.
7.5
In any action to enforce any of the Ocure Patents, either Party, at the request and expense of the other Party, shall cooperate to the fullest extent reasonably possible. This provision shall not be construed to require either Party to undertake any activities, including legal discovery, at the request of any third party except as may be required by lawful process of a court of competent jurisdiction.
7.6
If a declaratory judgment action is brought naming Madison Israeli Subsidiary or Ocure as a defendant and alleging invalidity or unenforceability of any of the Ocure Patents, whether brought as an independently filed declaratory judgment action or as a counterclaim in any infringement-related litigation, Ocure may elect to take over the sole defense of the declaratory judgment action or the declaratory judgment counterclaim portion of the other litigation, at its own expense. Each party shall promptly notify the other party hereto of its receipt of any such allegations. Madison Israeli Subsidiary shall cooperate fully with Ocure in connection with any such defense.
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7.7
In the event that Madison Israeli Subsidiary does challenge the validity or enforceability of one or more of the Ocure Patents (or any claims therein), Ocure may, at its option, upon written notice to Madison Israeli Subsidiary: (1) terminate this Agreement or (2) require an augmented royalty of up to two (2) times the Royalties payable under Section 3.1 or equal to 8%.Such challenge of validity or enforceability includes, but is not limited to, actions before the United States Patent and Trademark Office, such as through reexamination. Any challenge by Madison Israeli Subsidiary of the Patents shall be brought in the United States District Court in Harris County, Texas, or, when appropriate, the United States Patent and Trademark Office, with at least thirty (30) days written notice to Ocure. Madison Israeli Subsidiary shall pay all of Ocure's reasonable attorneys' fees, costs, and expenses associated with an unsuccessful challenge. A challenge shall be deemed unsuccessful if any claim of a challenged Ocure Patent remains valid and enforceable after the challenge (even when the claim is narrowed in scope). Under no circumstance shall Ocure pay any of Madison Israeli Subsidiary's attorneys' fees, costs, and expenses related to any challenge of one or more of the Ocure Patents.
7.8
Non-assert. Madison Israeli Subsidiary and Ocure agree that Madison Israeli Subsidiary shall not assert Ocure Patents infringement claims against not-for-profit research institutions for activities related to research, teaching, education, or academic purposes.
SECTION 8 DISCLAIMER OF WARRANTY; LIMITATION OF LIABILITY; INDEMNIFICATION
8.1 | Ocure represents and warrants that Ocure has not received notice of any claim by a third party of an ownership interest in or infringement of third party rights by the Ocure Patents. Except for the foregoing and as set forth in Section 12.2, Ocure makes no representations or warranties of any kind, express or implied, concerning the Ocure Patents, including, but not limited to, representations and warranties as to non-infringement, merchantability and fitness for any particular purpose. |
8.2 | THE OCURE PATENTS AND THE LICENSED TECHNOLOGY, AND ANY OTHER INFORMATION OR TECHNOLOGY PROVIDED BY OCURE AND USED IN THE MANUFACTURE, USE, IMPORT, SALE, OFFER FOR SALE, LEASE, OR OTHER TRANSFER OF OCURE EXCLUSIVE LICENSED PRODUCT(S) ARE PROVIDED ON AN "AS IS" BASIS AND OCURE MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT THERETO. BY WAY OF EXAMPLE BUT NOT OF LIMITATION, OCURE MAKES NO REPRESENTATIONS OR WARRANTIES (I) OF COMMERCIAL UTILITY, OR (II) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR (III) THAT THE USE OF THE OCURE PATENTS, OR THE LICENSED TECHNOLOGY, OR OCURE EXCLUSIVE LICENSED PRODUCT(S) WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER PROPRIETARY OR PROPERTY RIGHTS OF OTHERS. |
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8.3 |
IN NO EVENT SHALL OCURE BE LIABLE TO MADISON OR MADISON ISRAELI SUBSIDIARY OR MADISON ISRAELI SUBSIDIARY'S SUBLICENSES, OR THEIR RESPECTIVE SUCCESSORS OR ASSIGNS OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM (I) ARISING FROM THE USE OF THE LICENSED TECHNOLOGY, OR (II) ARISING FROM THE MANUFACTURE, USE, IMPORT, OR SALE OR OFFER FOR SALE, LEASE OR OTHER TRANSFER OF OCURE EXCLUSIVE LICENSED PRODUCT(S). IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY (I) FOR LOSS OF PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR (II) FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES OF ANY KIND, EVEN IF SUCH PARTY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. |
UNDER NO CIRCUMSTANCES THE LIABILITY OF ANY PARTY UNDER OR ARISING OUT OF THIS AGREEMENT, WHETHER FOR BREACH OF CONTRACT, IN TORT (INCLUDING BUT NOT LIMITED TO NEGLIGENCE) OR OTHERWISE SHALL EXCEED IN AGGREGATE AN AMOUNT OF $500,000 (FIVE HUNDRED THOUSAND) USD.
8.4
MADISON AND MADISON ISRAELI SUBSIDIARYSHALL INDEMNIFY, DEFEND, AND HOLD HARMLESS OCURE, ITS TRUSTEES, OFFICERS, SHAREHOLDERS, AGENTS, SUBCONTRACTORS, STUDENTS AND EMPLOYEES (INDIVIDUALLY, A "INDEMNIFIED PARTY", AND COLLECTIVELY, THE "INDEMNIFIED PARTIES") FOR, FROM AND AGAINST ANY AND ALL LIABILITY, LOSS, DAMAGE, ACTION, CLAIM OR EXPENSE SUFFERED OR INCURRED BY THE INDEMNIFIED PARTIES (INCLUDING, BUT NOT LIMITED TO,ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES OF LITIGATION) (INDIVIDUALLY, A "LIABILITY", AND COLLECTIVELY, THE "LIABILITIES") BASED UPON, ARISING OUT OF, OR OTHERWISE RELATING TO THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY CAUSE OF ACTION RELATING TO PRODUCT LIABILITY, CONCERNING ANY BREACH OF THIS AGREEMENT BY MADISON OR MADISON ISRAELI SUBSIDIARYOR ANY OF ITS SUBLICENSES,USE OF THE OCURE PATENT RIGHTS GRANTED AND/OR LICENSED TECHNOLOGY UNDER THIS AGREEMENT BY MADISON ISRAELI SUBSIDIARY OR ANY OF ITS SUBLICENSES, OR OCURE EXCLUSIVE LICENSED PRODUCT MANUFACTURED, USED, IMPORTED, SOLD OR OFFERED FOR SALE, LEASED, TRANSFERRED OR OTHERWISE DISPOSED OF PURSUANT TO ANY RIGHT OR LICENSE GRANTED UNDER THIS AGREEMENT.
8.5
The Indemnified Party shall promptly notify Madison Israeli Subsidiary of any claim or action giving rise to Liabilities. Madison Israeli Subsidiary shall have the right to defend any such claim or action, at its cost and expense with attorneys satisfactory to Ocure. Madison Israeli Subsidiary shall not settle or compromise any such claim or action in a manner that imposes any restrictions or obligations on Ocure or grants any rights to the Ocure Patents or Ocure Exclusive Licensed Product(s) without Ocure's prior written consent. If Madison Israeli Subsidiary fails or declines to assume the defense of any such claim or action within thirty (30) days after notice thereof,or if representation of such Indemnified Party by the counsel retained by Madison Israeli Subsidiary would be inappropriate because of actual or potential differences in the interests of such Indemnified Party or any other party represented by such counsel, Ocure may assume the defense of such claim or action for the account and at the risk of Madison Israeli Subsidiary, and any liabilities related thereto shall be conclusively deemed a liability of Madison Israeli Subsidiary. Madison Israeli Subsidiary shall pay promptly to the Indemnified Party any Liabilities to which the foregoing indemnity relates, as incurred. The indemnification rights of Ocure or any other Indemnified Party contained herein are in addition to all other rights which Ocure or such other Indemnified Party may have at law or in equity or otherwise.
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SECTION 9 RESERVED
SECTION 10 REPRESENTATIONS AND WARRANTIES
Representations and Warranties of Ocure
Ocure is the sole owner of the Ocure Patents.
Due Establishment. It is an independent legal entity formally established at its place of incorporation, and has obtained all government approvals and registrations necessary for its existence, which approvals and registrations are continuing and effective and it has sufficient authority to conduct its business in accordance with its business license, approval certificate, articles of association or similar corporate documents;
Litigation. There is no lawsuit, arbitration or other legal or government procedure pending or threatened against it which, based on its knowledge, could materially and adversely affect its performance of this Agreement;
Disclosure. It has disclosed to each of the other parties all documents issued by any Government Authority that might have a material adverse effect on the performance of its obligations under this Agreement;
No Dissolution. It is not the subject of any liquidation or dissolution proceedings; and
No Bankruptcy. It has neither been declared bankrupt by a court of competent jurisdiction nor entered into any bankruptcy proceedings.
Representations and Warranties of Madison and Madison Israeli Subsidiary
Due Establishment. It is an independent legal entity formally established at its place of incorporation, and has obtained all government approvals and registrations necessary for its existence, which approvals and registrations are continuing and effective and it has sufficient authority to conduct its business in accordance with its business license, approval certificate, articles of association or similar corporate documents;
Authorization. It is fully authorized to sign this Agreement and to fulfill its obligations hereunder;
No Violation. Its signing of this Agreement and performance of any of its obligations hereunder will not violate its business license, approval certificate, articles of association or similar corporate documents; any applicable Laws, or the conditions attached to any authorization or approval granted by any Government Authority; and any agreement which is binding on the party;
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Litigation. There is no lawsuit, arbitration or other legal or government procedure pending or threatened against it which, based on its knowledge, could materially and adversely affect its performance of this Agreement;
Disclosure. It has disclosed to each of the other parties all documents issued by any Government Authority that might have a material adverse effect on the performance of its obligations under this Agreement;
No Dissolution. It is not the subject of any liquidation or dissolution proceedings; and
No Bankruptcy. It has neither been declared bankrupt by a court of competent jurisdiction nor entered into any bankruptcy proceedings.
SECTION 11 NOTICES
11.1 |
Any notice or other communication of the Parties required or permitted to be given or made under this Agreement shall be in writing and be deemed effective upon receipt if delivered personally, by reputable courier, by facsimile with confirmation or electronic transmission with confirmation, or by certified or registered mail, postage prepaid, return receipt requested, addressed to the other Party as follows (or as changed by written notice pursuant to this Section): |
If for Ocure:
Attention: Mr. Amos Bar-Shalev
Ocure Ltd.
High-Tech Village, Givat Ram Campus,
Hebrew University,
P.O. Box 39158
Jerusalem 91391
Israel
Tel.: ______________Fax.: _____________
E-mail: amosbarshalev@gmail.com
If for Madison:
Attention: Eugene Gregorio_
Madison Ventures Inc.
1208 Tamarind Road, Dasmarinas Village,
Makati City, Metro Manila,
Philippines 1222
Tel.: +52 (442) 388-2645
E-mail: gene.gregorio@gmail.com
If for Madison Israeli Subsidiary :
Attention: Miryam Sani and Vered Caplan
Madison-IL Ltd.
9 Etzel St. Ramat Gan Israel, 52284 Israel
Tel.: 011-972523496664
E-mail: mirisani@013.net and vered.c@orgenesis.com
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SECTION 12 ADDITIONAL PROVISIONS
12.1
Legal Compliance
. Madison Israeli Subsidiary shall comply with all prevailing laws, rules and regulations pertaining to the development, testing, manufacture, marketing, sale, use, import or export of Ocure Patents and Ocure Exclusive Licensed Product(s). Madison Israeli Subsidiary and its sublicenses shall comply with all United States laws and regulations controlling the export of certain commodities and technical data, including without limitation all Export Administration Regulations under the United States Department of Commerce and International Traffic in Arms Regulations under the Department of State. Among other things, these laws and regulations prohibit or require an Exclusive License for the export of certain types of commodities and technical data to specified countries. Madison Israeli Subsidiary hereby gives written assurance that it will comply with, and will make best commercial efforts to cause its sublicenses to comply with, all United States export control laws and regulations, that Madison Israeli Subsidiary bears sole responsibility for any violation of such laws and regulations by itself or its sublicenses, and that it will indemnify, defend, and hold Ocure harmless (in accordance with Section 8.4) for the consequences of any such violation.
12.2
Power and Authority; Due Authorization; No Conflict; Enforceability; Binding Effect
. Each Party represents and warrants to the other Party that (i) such Party has the power and authority to execute, deliver and perform its obligations under this Agreement, (ii) the execution, delivery and performance of this Agreement have been duly authorized by such Party and does not and shall not conflict with any agreement or instrument to which it is bound, (iii) this Agreement constitutes the legal, valid and binding obligation of such Party, enforceable against it in accordance with its terms, and (iv) this Agreement, and the interests, rights, duties and obligations hereunder, shall be binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns.
12.3
Entire Agreement; Further Assurances
. This Agreement, including Exhibits A and B attached hereto, constitutes the entire agreement between the Parties, and supersedes any prior or contemporaneous negotiations, understandings and agreements, with respect to the subject matter hereof. Each Party shall execute and deliver such further documents and take such further actions as may be required or reasonably requested by the other Party to effectuate the purposes of this Agreement.
12.4
No Assignment; No Amendment; No Waiver
. This Agreement may not be assigned or transferred, in whole or in part, by operation of law or otherwise, by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed. This Agreement may not be amended or modified, by course of conduct or otherwise, except in a writing duly executed by each of the Parties. Any waiver of any provision of this Agreement shall be in writing duly executed by the waiving Party. The failure or delay by either Party to seek redress for any breach or default under this Agreement, or to insist upon the strict performance of any provision of this Agreement, shall not constitute a waiver thereof or of any other provision of this Agreement, and such Party shall have all remedies provided herein and at law and in equity with respect to such act and any subsequent act constituting the same.
12.5
Reserved.
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12.6
Resolution of Disputes
.
a) In the event of any dispute or disagreement between the Parties either in interpreting any provision of this Agreement or about the performance of either Party and upon the written request of either Party, each of the Parties will appoint a designated representative to attempt to resolve such dispute or disagreement. The designated representatives will discuss the problem and negotiate in good faith in an effort to resolve the dispute without any formal proceedings. The specific format of such discussion shall be left to the discretion of the designated representatives. No litigation for the resolution of such dispute may be commenced until the designated representatives have met and either Party has concluded in good faith that amicable resolution through continued negotiation does not appear likely (unless either Party fails or refuses to appoint a designated representative and schedule a meeting of such representatives within thirty (30) days after a request to do so by the other Party).
b) Each party shall continue to perform its undisputed obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement; provided, however, that a party may suspend performance of its undisputed obligations during any period in which the other party fails or refuses to perform its undisputed obligations. Nothing in this Section 12.6(b) is intended to relieve Madison Israeli Subsidiary from its obligation to make undisputed payments pursuant to Sections 3 and 4 of this Agreement.
c) The parties agree that all applicable statutes of limitation and time-based defenses (such as estoppel and laches) shall be tolled while the procedures set forth in Sections 12.6(a) are pending. The parties shall cooperate in taking any actions necessary to achieve this result.
12.7
Governing Law; Jurisdiction and Venue; Attorneys' Fees
. This Agreement shall be construed in accordance with the laws of the State of Israel and the parties attorn to the exclusive jurisdiction of the competent courts of Tel Aviv, Israel in respect of all disputes arising hereunder. It is agreed that the parties performance of the transactions considered herein shall be subject to the provisions of the Encouragement of Industrial Research and Development Law 1984 of the State of Israel and the applicable directives, rules and regulations of the OCS, to which Ocure is bound. In the event either Party commences any proceeding against the other Party with respect to this Agreement, the prevailing Party (as determined by the authority before whom such proceeding is commenced) shall be entitled to recover reasonable attorneys' fees and costs as may be incurred in connection therewith in addition to any such other relief as may be granted.
12.8
Severability
. In the event any provision of this Agreement is determined to be invalid or unenforceable, it is the desire and intention of the Parties that such invalidity or unenforceability not invalidate or render unenforceable the remainder of the Agreement and that such provision be reformed and construed in such a manner that it will, to the maximum extent practicable, be deemed valid and enforceable, and the rights and obligations of the Parties shall be construed and enforced accordingly.
12.9
Construction of Agreement
. The Parties acknowledge and agree that both Parties substantially participated in negotiating the provisions of this Agreement; therefore, both Parties agree that this Agreement shall not be construed more favorably toward one Party than the other Party, regardless of which Party primarily drafted the Agreement. The Section and other headings in this Agreement are for convenience of reference only and shall not affect, expressly or by implication, the meaning or interpretation of any of the provisions hereof.
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12.10
Third Party Beneficiaries
. Nothing in this Agreement, express or implied, is intended to confer any benefits, rights or remedies on any other person or entity, other than the Parties and their successors and permitted assigns.
12.11
Counterparts
. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
12.12
Condition Precedent
. The respective obligations of each Party to effect the provisions considered herein are subject to the fulfillment of the following condition precedent, whereby Ocure shall receive the approval of the OCS to Ocure's performance of this Agreement (the "Condition Precedent"). Should the Condition Precedent set forth in this Section 12.12 not be fulfilled within 90 (ninety) days of the date this Agreement is signed, this Agreement will become null and void and cease to have effect without any indemnity being due by each Party.
IN WITNESS WHEREOF the Parties, intending to be legally bound, have caused this Agreement to be executed and delivered by their duly authorized representatives and effective as of the Effective Date.
Ocure Ltd. |
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Madison Ventures Inc. |
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||
Signature: | /s/ Amos Bar Shalev |
|
Signature: |
/s/ Gene Gregorio |
|
Amos Bar Shalev, |
|
|
Eugenio ("Gene") Gregorio |
|
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Chief Executive Officer |
|
|
Chief Executive Officer |
|
|
Madison-IL Ltd. |
|||||
Signature: | /s/ Miryam Sani | ||||
Miryam Sani | |||||
Director |
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EXHIBIT A
OCURE PATENTS
The device and the concept are covered by two broad patents maintained in the US and Europe:
1.
Medical Instrument of treating and/or diagnosing of anorectal disorders, and devices and methods of insertion of such: pending in the US, Europe and Israel. TITLE: A DEVICE AND METHOD FOR THE PROLONGED DELIVERY OF AN ACTIVE AGENT TO A BODY CAVITY Applicant: BRAVER David. The European Patent Application No. 07713261.1 was filed: 15 February 2007 and US Patent Appl. No. 12/279,362 was filed: 15-Feb-2007
2.
MEDICAL INSTRUMENTS OF TREATING AND/OR DIAGNOSING OF ANORECTAL DISORDERS, AND DEVICES AND METHODS... By Ocure Ltd. [BRAVER David et al]
-
European Patent Application No. 11770171.4 Filed 25-Aug-2011
-
USA Patent Application No. 13/818,692 Filed 25-Aug-2011
The initial patent describes the entire concept of the use of the device, while the second patent focuses on the unique design developed by Ocure.
On an "as is" basis as of the Effective Date
EXHIBIT B
OCURE CORPORATE MILESTONES
EXHIBIT C
TERMS OF CONSULTING AND SERVICES AGREEMENTS
Name of Consultant: |
Amos Bar Shalev |
Engaging company: |
Madison Ventures Inc. |
Position: |
CEO |
Scope of Position: |
part-time (20%) |
Commencement Date: |
Approval of the Israeli Chief Scientist Office to Exclusive License Agreement |
Notice Period: |
30 days |
Consideration: |
$1,000/month for the first 6 months; thereafter as shall be agreed upon between the parties. |
Options |
Following the adoption by the Madison Ventures Inc. (" Madison ") of an option plan, and subject to the approval of the Board of Directors of Madison, the consultant shall be granted options to purchase ordinary shares of Madison (the " Options "), all in the terms and conditions stipulated in an option agreement which shall be signed between the Madison and the Consultant. |
Name of Consultant: |
Miryam Sani |
Engaging company: |
Madison-IL Ltd. |
Position: |
Regulatory Affairs and Clinical Studies |
Scope of Position: |
full time |
Commencement Date: |
Approval of the Israeli Chief Scientist Office to Exclusive License Agreement |
Notice Period: |
30 days |
Tern |
one year |
Consideration: |
NIS 12,000 per month, less withholding tax |
|
Name of Consultant: |
Zeev Cohen |
Engaging company: |
Madison-IL Ltd |
Position: |
Engineer |
Scope of Position: |
full time |
Commencement Date: |
Approval of the Israeli Chief Scientist Office to Exclusive License Agreement |
Term |
one year |
Notice Period: |
in accordance with applicable law |
Consideration: |
NIS 12,000 per month, less withholding tax |
|
EXHIBIT D
SHAREHOLDERS OF OCURE AND INDIVIDUALS ENTITLED TO PURCHASE SHARES OF MADISON
Name of Shareholder |
|
|
|
|
David Braver |
|
|
8.63 | % |
Miryam Sani |
|
|
2.16 | % |
Oren Gershtein |
|
|
0.26 | % |
Shlomi Schwartzblat |
|
|
0.22 | % |
Amir Avraham |
|
|
0.10 | % |
Shmuel Ravid |
|
|
0.08 | % |
Van Leer Technology Ventures Jerusalem Ltd. |
|
|
0.54 | % |
Jerusalem Development Authority |
|
|
0.43 | % |
Docor International BV |
|
|
1.01 | % |
Van Leer Technology Ventures Jerusalem Ltd. (as a trustee for the state of Israel) |
|
|
8.15 | % |
Lundar Industries Inc. |
|
|
2.66 | % |
Amos Bar Shalev |
|
|
0.75 | % |
|
|
|
|
|
Total |
|
|
25.00 | % |
|
EXHIBIT E
ALLOCATION OF OPTIONS TO PRINCIPALS AND OTHER THIRD PARTIES
Amos Bar Shalev 6%
Shlomi Schwartzblat 2%
Miryam Sani 3%
Iris Shahar 1%
David Braver 1%