regulation a offering circular under the ......murrieta, ca 92563 323-799-1342...
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amend. No. 3
FORM 1-A /A
REGULATION A OFFERING CIRCULAR UNDER THE SECURITIES ACT OF 1933
InSitu Biologics, Inc.
(Exact name of issuer as specified in its charter)
Delaware
(State of other jurisdiction of incorporation or organization)
James Segermark, CEO
Email: [email protected]
2155 Woodlane Drive, Suite 102
Woodbury, MN 55125
651-337-4799
(Address, including zip code, and telephone number,
including area code of issuer’s principal executive office)
Jillian Sidoti
Trowbridge Sidoti
38730 Sky Canyon Drive – Ste A
Murrieta, CA 92563
323-799-1342
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
5169 82-3415514
(Primary Standard Industrial Classification
Code Number)
(I.R.S. Employer Identification Number)
This Preliminary Offering Circular shall only be qualified upon order of the Commission, unless a subsequent
amendment is filed indicating the intention to become qualified by operation of the terms of Regulation A.
This Preliminary Offering Circular is following the offering circular format described in Part II of Form 1-A.
PART II – PRELIMINARY OFFERING CIRCULAR - FORM 1-A: TIER 2
Dated ____________________________
PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933
2155 Woodlane Drive, Suite 102
Woodbury, MN 55125
651-337-4799
InSitu Biologics, Inc.
1,739,132 Shares of Class A Common Stock at $5.75 per Share
Minimum Investment: 50 Shares ($287.50)
Maximum Offering: $10,000,009.50
The Company is hereby providing the information required by Part I of Form S-1 (17 9 CFR 239.18 and are
following the requirements for a smaller reporting company as it meets the definition of that term in Rule 405 (17
CFR 230.405).
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION
CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR
AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS
PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE. WE MAY
ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING
YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF OUR SALE TO YOU
THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING
STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
PLEASE REVIEW ALL RISK FACTORS ON PAGE 11 BEFORE MAKING AN INVESTMENT IN THIS
COMPANY. AN INVESTMENT IN THIS COMPANY SHOULD ONLY BE MADE IF YOU ARE CAPABLE
OF EVALUATING THE RISKS AND MERITS OF THIS INVESTMENT AND IF YOU HAVE SUFFICIENT
RESOURCES TO BEAR THE ENTIRE LOSS OF YOUR INVESTMENT, SHOULD THAT OCCUR.
2
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE
MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE
OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING
CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT
TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE
COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.
Because these securities are being offered on a “best efforts” basis, the following disclosures are hereby made:
Price to
Public
Commissions
(1)
Proceeds to
Company (2)
Proceeds
to
Other
Persons
(3)
Minimum Investment $ 287.50.00 $ 0.00 $ 287.50 None
Maximum Offering $ 10,000,009.00 $ 0.00 $ 10,000,009.00 None
(1) The Company does not currently have a broker dealer, however, may employ the services of a broker at some
point in the future if the board of directors finds it difficult to sell shares. See “PLAN OF DISTRIBUTION.”
(2) Does not reflect payment of expenses of this offering, which are estimated to not exceed $700,000 and which
include, among other things, legal fees, accounting costs, reproduction expenses, due diligence, marketing, consulting,
administrative services other costs of blue sky compliance, and actual out-of-pocket expenses incurred by the
Company selling the Shares, but which do not include administrative fees paid to technology providers. If the company
engages the services of broker-dealers in connection with the offering, their commissions will be an additional expense
of the offering. See the “Plan of Distribution” for details regarding the compensation payable in connection with this
offering. This amount represents the proceeds of the offering to the Company, which will be used as set out in “USE
OF PROCEEDS TO COMPANY.”
(3) There are no finder’s fees or other fees being paid to third parties from the proceeds, other than those disclosed
below. See “PLAN OF DISTRIBUTION.”
GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE
PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME
OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL
PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT
EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(D)(2)(I)(C) OF
REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO
REFER TO WWW.INVESTOR.GOV.
This offering (the “Offering”) consists of Class A Common Stock (the “Shares” or individually, each a “Share”) that
is being offered on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be
sold. The Shares are being offered and sold by InSitu Biologics, Inc., a Delaware Corporation (“InSitu Biologics” or
the “Company”). There are 1,739,132 Shares being offered at a price of $5.75 per Share with a minimum purchase of
50 shares per investor. The Shares are being offered on a best efforts basis to an unlimited number of accredited
investors and an unlimited number of non-accredited investors only by the Company. The maximum aggregate amount
of the Shares offered is $10,000,009.00 (the “Maximum Offering”). There is no minimum number of Shares that
needs to be sold in order for funds to be released to the Company and for this Offering to close.
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The Shares are being offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for
Tier 2 offerings. The Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A.
The offering is expected to expire on the first of: (i) all of the Shares offered are sold; or (ii) unless sooner terminated
by the Company’s CEO. Funds shall be deposited in a Company account. Funds will be promptly refunded without
interest, for sales that are not consummated. All funds received shall be held only in a non-interest bearing bank
account. Upon each closing under the terms as set out in this Offering Circular, funds will be immediately transferred
to the Company where they will be available for use in the operations of the Company’s business in a manner
consistent with the “ USE OF PROCEEDS TO COMPANY “ in this Offering Circular. This Offering may remain
open for a twelve (12) month period but may extend past the Closing Date at the discretion of the Company and in
accordance with the rules and provisions of Regulation A of the JOBS Act.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS CONCERNING THE COMPANY OTHER THAN THOSE CONTAINED IN THIS
OFFERING CIRCULAR, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON.
_____________________________________
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING
CIRCULAR, OR OF ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR
ANY OF ITS EMPLOYEES, AGENTS OR AFFILIATES, AS INVESTMENT, LEGAL, FINANCIAL OR
TAX ADVICE.
_____________________________________
BEFORE INVESTING IN THIS OFFERING, PLEASE REVIEW ALL DOCUMENTS CAREFULLY, ASK
ANY QUESTIONS OF THE COMPANY’S MANAGEMENT THAT YOU WOULD LIKE ANSWERED AND
CONSULT YOUR OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISORS AS TO
LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THIS INVESTMENT.
NASAA UNIFORM LEGEND
FOR RESIDENTS OF ALL STATES: THE PRESENCE OF A LEGEND FOR ANY GIVEN STATE
REFLECTS ONLY THAT A LEGEND MAY BE REQUIRED BY THAT STATE AND SHOULD NOT BE
CONSTRUED TO MEAN AN OFFER OR SALE MAY BE MADE IN A PARTICULAR STATE. IF YOU
ARE UNCERTAIN AS TO WHETHER OR NOT OFFERS OR SALES MAY BE LAWFULLY MADE IN
ANY GIVEN STATE, YOU ARE HEREBY ADVISED TO CONTACT THE COMPANY. THE SECURITIES
DESCRIBED IN THIS OFFERING CIRCULAR HAVE NOT BEEN REGISTERED UNDER ANY STATE
SECURITIES LAWS (COMMONLY CALLED “BLUE SKY” LAWS).
4
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF
THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE
NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________________________
NOTICE TO FOREIGN INVESTORS
IF THE PURCHASER LIVES OUTSIDE THE UNITED STATES, IT IS THE PURCHASER’S
RESPONSIBILITY TO FULLY OBSERVE THE LAWS OF ANY RELEVANT TERRITORY OR
JURISDICTION OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY PURCHASE OF THE
SECURITIES, INCLUDING OBTAINING REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR
OBSERVING ANY OTHER REQUIRED LEGAL OR OTHER FORMALITIES. THE COMPANY
RESERVES THE RIGHT TO DENY THE PURCHASE OF THE SECURITIES BY ANY FOREIGN
PURCHASER.
_____________________________________
Forward Looking Statement Disclosure
This Form 1-A, Offering Circular, and any documents incorporated by reference herein or therein contain
forward-looking statements and are subject to risks and uncertainties. All statements other than statements of
historical fact or relating to present facts or current conditions included in this Form 1-A, Offering Circular,
and any documents incorporated by reference are forward-looking statements. Forward-looking statements
give the Company’s current reasonable expectations and projections relating to its financial condition, results
of operations, plans, objectives, future performance and business. You can identify forward-looking statements
by the fact that they do not relate strictly to historical or current facts. These statements may include words
such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can
have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing
or nature of future operating or financial performance or other events. The forward-looking statements
contained in this Form 1-A, Offering Circular, and any documents incorporated by reference herein or therein
are based on reasonable assumptions the Company has made in light of its industry experience, perceptions of
historical trends, current conditions, expected future developments and other factors it believes are
appropriate under the circumstances. As you read and consider this Form 1-A, Offering Circular, and any
documents incorporated by reference, you should understand that these statements are not guarantees of
performance or results. They involve risks, uncertainties (many of which are beyond the Company’s control)
and assumptions. Although the Company believes that these forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could affect its actual operating and financial
performance and cause its performance to differ materially from the performance anticipated in the forward-
looking statements. Should one or more of these risks or uncertainties materialize, or should any of these
assumptions prove incorrect or change, the Company’s actual operating and financial performance may vary
in material respects from the performance projected in these forward-looking statements. Any forward-looking
statement made by the Company in this Form 1-A, Offering Circular or any documents incorporated by
reference herein speaks only as of the date of this Form 1-A, Offering Circular or any documents incorporated
by reference herein. Factors or events that could cause our actual operating and financial performance to differ
may emerge from time to time, and it is not possible for the Company to predict all of them. The Company
undertakes no obligation to update any forward-looking statement, whether as a result of new information,
future developments or otherwise, except as may be required by law.
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_____________________________________
About This Form 1-A and Offering Circular
In making an investment decision, you should rely only on the information contained in this Form 1-A and
Offering Circular. The Company has not authorized anyone to provide you with information different from
that contained in this Form 1-A and Offering Circular. We are offering to sell, and seeking offers to buy the
Shares only in jurisdictions where offers and sales are permitted. You should assume that the information
contained in this Form 1-A and Offering Circular is accurate only as of the date of this Form 1-A and Offering
Circular, regardless of the time of delivery of this Form 1-A and Offering Circular. Our business, financial
condition, results of operations, and prospects may have changed since that date. Statements contained herein
as to the content of any agreements or other documents are summaries and, therefore, are necessarily selective
and incomplete and are qualified in their entirety by the actual agreements or other documents. The Company
will provide the opportunity to ask questions of and receive answers from the Company’s management
concerning terms and conditions of the Offering, the Company or any other relevant matters and any
additional reasonable information to any prospective investor prior to the consummation of the sale of the
Shares. This Form 1-A and Offering Circular do not purport to contain all of the information that may be
required to evaluate the Offering and any recipient hereof should conduct its own independent analysis. The
statements of the Company contained herein are based on information believed to be reliable. No warranty can
be made as to the accuracy of such information or that circumstances have not changed since the date of this
Form 1-A and Offering Circular. The Company does not expect to update or otherwise revise this Form 1-A,
Offering Circular or other materials supplied herewith. The delivery of this Form 1-A and Offering Circular
at any time does not imply that the information contained herein is correct as of any time subsequent to the
date of this Form 1-A and Offering Circular. This Form 1-A and Offering Circular are submitted in connection
with the Offering described herein and may not be reproduced or used for any other purpose.
6
EXEMPTIONS UNDER JUMPSTART OUR BUSINESS STARTUPS ACT
We are an emerging growth company. An emerging growth company is one that had total annual gross
revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to
reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics,
setting the threshold to the nearest 1,000,000) during its most recently completed fiscal year. We would lose our
emerging growth status if we were to exceed $1,000,000,000 in gross revenues. We are not sure this will ever take
place.
Because we are an emerging growth company, we have the exemption from Section 404(b) of Sarbanes-
Oxley Act of 2002 and Section 14A(a) and (b) of the Securities Exchange Act of 1934. Under Section 404(b), we are
now exempt from the internal control assessment required by subsection (a) that requires each independent auditor
that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the
management of the issuer. We are also not required to receive a separate resolution regarding either executive
compensation or for any golden parachutes for our executives so long as we continue to operate as an emerging growth
company.
We hereby elect to use the extended transition period for complying with new or revised accounting standards
under Section 102(b)(1).
• We will lose our status as an emerging growth company in the following circumstances:
• The end of the fiscal year in which our annual revenues exceed $1 billion.
• The end of the fiscal year in which the fifth anniversary of our IPO occurred.
• The date on which we have, during the previous three-year period, issued more than $1 billion in non-
convertible debt.
• The date on which we qualify as a large accelerated filer.
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TABLE OF CONTENTS
EXEMPTIONS UNDER JUMPSTART OUR BUSINESS STARTUPS ACT 7
SUMMARY 9
RISK FACTORS 11
USE OF PROCEEDS TO COMPANY 34
DETERMINATION OF OFFERING PRICE 36
DILUTION 37
PLAN OF DISTRIBUTION 38
DESCRIPTION OF THE BUSINESS 41
DESCRIPTION OF PROPERTY 54
SELECTED FINANCIAL DATA 55
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
55
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES 58
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS 61
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS 62
CAPITALIZATION TABLE 63
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN RELATED-PARTY TRANSACTIONS
AND AGREEMENTS
65
SECURITIES BEING OFFERED 66
INTERESTS OF NAMED EXPERTS AND COUNSEL 69
DISQUALIFYING EVENTS DISCLOSURE 69
ERISA CONSIDERATIONS 69
WHERE YOU CAN FIND MORE INFORMATION 72
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Table of Contents
SUMMARY
The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this
Offering Circular and/or incorporated by reference in this Offering Circular. For full offering details, please
(1) thoroughly review this Form 1-A filed with the Securities and Exchange Commission (2) thoroughly review
this Offering Circular and (3) thoroughly review any attached documents to or documents referenced in, this
Form 1-A and Offering Circular.
Type of Stock Offering: Class A Common Stock
Price Per Share: $5.75
Minimum Investment: $287.50 per investor (50 shares of Class A Common
Stock)
Maximum Offering: $10,000,009.50. The Company will not accept
investments greater than the Maximum Offering amount.
Maximum Shares Offered: 1,739,132 Shares of Class A Common Stock
Use of Proceeds: See the description in section entitled “ USE OF
PROCEEDS TO COMPANY “ on page 34 herein.
Voting Rights: The Shares have voting rights that are pari pasu with the
Preferred Shares with one vote per share. The Class B
Shares have a two (2) votes per every share. See the
description of the voting rights all the Company’s other
classes of stock on page 66 herein.
Length of Offering: Shares will be offered on a continuous basis until either
(1) the maximum number of Shares or sold; (2) if the
Company in its sole discretion withdraws this Offering.
Implicit Valuation: The implicit valuation of the Company’s outstanding
shares is calculated by multiplying the number of shares
currently outstanding by the offering price per share.
The Offering
Class B Common Stock Outstanding (1) 1,500,000
Class A Common Stock in this Offering (2) 1,739,132 Shares
Class A Common Stock Outstanding 2,500,000
Preferred Stock Outstanding (3) 180,131 Shares
Total Stock to be outstanding after the offering without conversion. (4) 5,739,132 Shares
Total Stock to be outstanding after the offering with conversion. (5) 5,919,263 Shares
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1. There are 3 classes of stock in the Company at present: Preferred Stock, Class A Common Stock, and Class B
Common Stock. For a full description of the rights of each class of stock, please see the section of this Offering
Circular entitled “ Securities Being Offered “ on page 66 below.
2. The total number of Shares of Class A Common Stock (1,739,132) assumes that the maximum number of Shares
are sold in this offering.
3. The Company has Preferred Stock outstanding which is convertible on a 1 to 1.1 basis with our Class A Common
Stock.
4. Assumes Preferred Stock does not convert.
5. Assumes Preferred Stock does convert.
The Company may not be able to sell the Maximum Offering Amount. The Company will conduct one or more
closings on a rolling basis as funds are received from investors. Funds tendered by investors will be kept in an account
in the Company’s and will be immediately available to the Company. Once a subscription agreement is accepted by
the Company, funds are non-refundable.
The Company plans to begin sales immediately after this Preliminary Offering Circular has been qualified by the
Securities and Exchange Commission (the “SEC”). The Company will provide final pricing information in a final
Offering Circular or supplemental Preliminary Offering Circular. The net proceeds of the Offering will be the gross
proceeds of the Shares sold minus the expenses of the offering.
We are not listed on any trading market or stock exchange, and our ability to list our stock in the future is uncertain.
Investors should not assume that the Offered Shares will be listed. A public trading market for the Shares may not
develop.
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Table of Contents
RISK FACTORS
The purchase of the Company’s Class A Common Stock involves substantial risks. You should carefully consider the
following risk factors in addition to any other risks associated with this investment. The Shares offered by the
Company constitute a highly speculative investment and you should be in an economic position to lose your entire
investment. The risks listed do not necessarily comprise all those associated with an investment in the Shares and are
not set out in any particular order of priority. Additional risks and uncertainties may also have an adverse effect on
the Company’s business and your investment in the Shares. An investment in the Company may not be suitable for
all recipients of this Offering Circular. You are advised to consult an independent professional adviser or attorney
who specializes in investments of this kind before making any decision to invest. You should consider carefully
whether an investment in the Company is suitable in the light of your personal circumstances and the financial
resources available to you.
The discussions and information in this Offering Circular may contain both historical and forward-looking statements.
To the extent that the Offering Circular contains forward-looking statements regarding the financial condition,
operating results, business prospects, or any other aspect of the Company’s business, please be advised that the
Company’s actual financial condition, operating results, and business performance may differ materially from that
projected or estimated by the Company in forward-looking statements. The Company has attempted to identify, in
context, certain of the factors it currently believes may cause actual future experience and results may differ from the
Company’s current expectations.
Before investing, you should carefully read and carefully consider the following risk factors:
Risks Relating to the Company and Its Business
The Company Has Limited Operating History
The Company has a limited operating history and there can be no assurance that the Company’s proposed plan of
business can be realized in the manner contemplated and, if it cannot be, shareholders may lose all or a substantial
part of their investment. There is no guarantee that it will ever realize any significant operating revenues or that its
operations will ever be profitable.
The Company Is Dependent Upon Its Management, Founders, Key Personnel and Consultants to Execute the
Business Plan, And Many Of Them Will Have Concurrent Responsibilities At Other Companies
The Company’s success is heavily dependent upon the continued active participation of the Company’s current
executive officers as well as other key personnel and consultants. Many of them will have concurrent responsibilities
at other entities. Some of the advisors, scientists, consultants and others to whom the Company’s ultimate success
may be reliant have not signed contracts with the Company and may not ever do so. Loss of the services of one or
more of these individuals could have a material adverse effect upon the Company’s business, financial condition or
results of operations. Further, the Company’s success and achievement of the Company’s growth plans depend on the
Company’s ability to recruit, hire, train and retain other highly qualified scientific, technical and managerial personnel.
Competition for qualified employees and consultants among companies in the applicable industries is intense, and the
loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees and
consultants required for the initiation and expansion of the Company’s activities, could have a materially adverse
effect on it. The inability to attract and retain the necessary personnel, consultants and advisors could have a material
adverse effect on the Company’s business, financial condition or results of operations.
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New chemical entities derived from our Matrix BioHydrogel Program, which is in the early stages of development,
may require more time and resources for development, testing and regulatory clearance, and may not result in
viable commercial products
Our Matrix BioHydrogel Program is in the early stages of development, involves a novel therapeutic
approach and new chemical entities, requires significant further research and development and regulatory approvals
and is subject to the risks of failure inherent in the development of products based on innovative approaches. New
chemical entities derived from our Matrix BioHydrogel Program are molecules that have not previously been
approved and marketed as therapeutics, unlike products used to create candidates for our Drug Delivery Program, as
is the case with AnestaGel; we are using bupivacaine, a proven pain relief drug that has been used for many decades
in treating pain, and then we apply our formulation expertise and Matrix BioHydrogel technologies to active
pharmaceutical ingredients whose safety and efficacy have previously been established but which we aim to improve
in some manner through a new formulation. As a result, the product candidates from our Matrix BioHydrogel Program
may face greater risk of unanticipated safety issues or other side-effects, or may not demonstrate efficacy. Further,
the regulatory pathway for our new chemical entities may be more demanding.
Also, because our Matrix BioHydrogel Program is in early stages, we have not defined with precision those
indications we wish to pursue initially, each of which may have unique challenges. If the first indications pursued do
not show positive results, the credibility of any product candidate from this program may be tarnished, even if the
molecule might be effective for other indications. Our decisions regarding which indications to pursue may cause us
to fail to capitalize on indications that could have given rise to viable commercial products and profitable market
opportunities.
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Early indications of activity from GLP Pre-clinical (animal) studies of AnestaGel may not predict the results of
clinical (human) trials
There can be no assurance that clinical studies will demonstrate the safety or efficacy of AnestaGel in a
statistically significant manner. The failure of AnestaGel to show efficacy in Phase 2 or Phase 3 clinical trials would
significantly harm our business.
Clinical trial safety results, including for AnestaGel, may not be confirmed
While some clinical trials of our product candidates may show indications of safety and efficacy, there can
be no assurance that these results will be confirmed in subsequent clinical trials or provide a sufficient basis for
regulatory approval. In addition, side effects observed in clinical trials, or other side effects that appear in later clinical
trials, may adversely affect our or our collaborators’ ability to obtain regulatory approval or market our product
candidates. For example, the reduction in pain intensity on movement of AnestaGel compared to bupivacaine HCl in
previous trials may not be repeated in the ongoing AnestaGel trials. There can be no assurance that the additional
clinical trial that could be conducted for AnestaGel will be sufficient to obtain FDA approval, and any additional trials
would entail added expense and further delay or may preclude product approval, harming our business, prospects and
financial condition.
Regulatory action or failure to obtain product approvals could delay or limit development and
commercialization of our product candidates and result in failure to achieve anticipated revenues
The manufacture and marketing of our pharmaceutical product candidates and our research and development
activities are subject to extensive regulation for safety, efficacy and quality by numerous government authorities in
the United States and abroad. We or our third-party collaborators must obtain clearance or approval from applicable
regulatory authorities before we or they, as applicable, can perform clinical trials, market or sell our products in
development in the United States or abroad. Clinical trials, manufacturing and marketing of products are subject to
the rigorous testing and approval process of the FDA and equivalent foreign regulatory authorities. In particular, the
FDA rigorously focuses on the safety of drug products at every stage of drug development and commercialization
from initial clinical trials to regulatory approval and beyond, and the interpretation of data that may pertain to safety
can be subject to the interpretation of individual reviewers within the FDA. These rigorous and potentially evolving
standards, that often differ by therapeutic area, may delay and increase the expenses of our development efforts. The
FDA or other foreign regulatory agency may, at any time, halt our and our collaborators’ development and
commercialization activities due to safety concerns, in which case our business will be harmed. In addition, the FDA
or other foreign regulatory agency may refuse or delay approval of our or our collaborators’ drug candidates for failure
to collect sufficient clinical or animal safety data, and require us or our collaborators to conduct additional clinical or
animal safety studies which may cause lengthy delays and increased costs to our programs.
The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statutes and regulations govern
and influence the testing, manufacture, labeling, advertising, distribution and promotion of drugs and medical devices.
These laws and regulations are complex and subject to change. Furthermore, these laws and regulations may be subject
to varying interpretations, and we may not be able to predict how an applicable regulatory body or agency may choose
to interpret or apply any law or regulation to our pharmaceutical product candidates. As a result, clinical trials and
regulatory approval can take a number of years to accomplish and require the expenditure of substantial resources.
We or our third-party collaborators, as applicable, may encounter delays or rejections based upon administrative action
or interpretations of current rules and regulations. We or our third-party collaborators, as applicable, may not be able
to timely reach agreement with the FDA on our clinical trials or on the required clinical or animal data we or they
must collect to continue with our clinical trials or eventually commercialize our product candidates.
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We or our third-party collaborators, as applicable, may also encounter delays or rejections based upon
additional government regulation from future legislation, administrative action or changes in FDA policy during the
period of product development, clinical trials and FDA regulatory review. We or our third-party collaborators, as
applicable, may encounter similar delays in foreign countries. Sales of our pharmaceutical product candidates outside
the United States are subject to foreign regulatory standards that vary from country to country.
The time required to obtain approvals from foreign countries may be shorter or longer than that required for
FDA approval, and requirements for foreign licensing may differ from FDA requirements. We or our third-party
collaborators, as applicable, may be unable to obtain requisite approvals from the FDA and foreign regulatory
authorities, and even if obtained, such approvals may not be on a timely basis, or they may not cover the clinical uses
that we specify. If we or our third-party collaborators, as applicable, fail to obtain timely clearance or approval for our
development products, we or they will not be able to market and sell our pharmaceutical product candidates, which
will limit our ability to generate revenue.
We may depend to a large extent on third-party collaborators, and we have limited or no control over the
development, sales, distribution and disclosure for our pharmaceutical product candidates which are the
subject of third-party collaborative or license agreements
Our performance may depend to a large extent on the ability of third-party collaborators, if we are able to
enter into agreements, to successfully develop and obtain approvals for our pharmaceutical product candidates. We
hope to enter into agreements with many companies under which we grant such third parties the right to develop,
apply for regulatory approval for, market, promote or distribute AnestGel and certain other Matrix BioHydrogel based
product candidates, subject to payments to us in the form of product royalties and other payments. We have limited
or no control over the expertise or resources that any collaborator may devote to the development, clinical trial
strategy, regulatory approval, marketing or sale of these product candidates, or the timing of their activities. Any of
our present or future collaborators may not perform their obligations as expected. These collaborators may breach or
terminate their agreement with us or otherwise fail to conduct their collaborative activities successfully and in a timely
manner. Enforcing any of these agreements in the event of a breach by the other party could require the expenditure
of significant resources and consume a significant amount of management time and attention. Our collaborators may
also conduct their activities in a manner that is different from the manner we would have chosen, had we been
developing such product candidates ourselves. Further, our collaborators may elect not to develop or commercialize
product candidates arising out of our collaborative arrangements or not devote sufficient resources to the development,
clinical trials, regulatory approval, manufacture, marketing or sale of these product candidates. If any of these events
occur, we may not recognize revenue from the commercialization of our product candidates based on such
collaborations. In addition, these third parties may have similar or competitive products to the ones which are the
subject of their collaborations with us, or relationships with our competitors, which may reduce their interest in
developing or selling our product candidates. We may not be able to control public disclosures made by some of our
third-party collaborators, which could negatively impact our stock price.
Cancellation of collaborations regarding our product candidates may impact our revenues and adversely affect
potential economic benefits
Third-party collaboration agreements typically allow the third party to terminate the agreement (or a specific
program within an agreement) by providing notice.
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Our revenues, if any, may depend on collaboration agreements with other companies. These agreements may
subject us to obligations which must be fulfilled and also make our revenues dependent on the performance of
such third parties. If we are unable to meet our obligations or manage our relationships with our collaborators
under these agreements or enter into additional collaboration agreements or if our existing collaborations are
terminated, our revenues may decrease. Acquisitions of our collaborators can be disruptive
Our revenues, if any, may be based to a significant extent on collaborative arrangements with third parties,
pursuant to which we receive payments based on our performance of research and development activities set forth in
these agreements. We may not be able to fulfill our obligations or attain milestones set forth in any specific agreement,
which could cause our revenues to fluctuate or be less than anticipated and may expose us to liability for contractual
breach. In addition, these agreements may require us to devote significant time and resources to communicating with
and managing our relationships with such collaborators and resolving possible issues of contractual interpretation
which may detract from time our management would otherwise devote to managing our operations. Such agreements
are generally complex and contain provisions that could give rise to legal disputes, including potential disputes
concerning ownership of intellectual property under collaborations. Such disputes can delay or prevent the
development of potential new product candidates, or can lead to lengthy, expensive litigation or arbitration. From time
to time, our licensees may be the subject of an acquisition by another company. Such transactions can lead to turnover
of program staff, a review of development programs and strategies by the acquirer, and other events that can disrupt
a program, resulting in program delays or discontinuations.
If any of our collaborative agreements were to be terminated or delayed, our anticipated revenues may be
reduced or not materialize, and our products in development related to those agreements may not be commercialized.
Our cash flows are likely to differ from our reported revenues
Our revenues, if any, will likely differ from our cash flows from revenue-generating activities. Upfront
payments received upon execution of collaborative agreements are recorded as deferred revenue and generally
recognized on a straight-line basis over the period of our continuing involvement with the third-party collaborator
pursuant to the applicable agreement.
Our revenues, if any, may also depend on milestone payments based on achievements by our third-party
collaborators. Failure of such collaborators to attain such milestones would result in our not receiving
additional revenues
In addition to payments, if any, based on our performance of research and development activities, our
revenues may also depend on the attainment of milestones set forth in our collaboration agreements. Such milestones
are typically related to development activities or sales accomplishments. While our involvement is necessary to the
achievement of development-based milestones, the performance of our third-party collaborators is also required to
achieve those milestones. Under our third-party collaborative agreements, our third party collaborators will take the
lead in commercialization activities and we are typically not involved in the achievement of sales-based milestones.
Therefore, we are even more dependent upon the performance of our third-party collaborators in achieving sales-
based milestones. To the extent we and our third-party collaborators do not achieve such development-based
milestones or our third-party collaborators do not achieve sales-based milestones, we will not receive the associated
revenues, which could harm our financial condition and may cause us to defer or cut-back development activities or
forego the exploitation of opportunities in certain geographic territories, any of which could have a material adverse
effect on our business.
Our business strategy includes the entry into additional collaborative agreements. We may not be able to enter
into additional collaborative agreements or may not be able to negotiate commercially acceptable terms for
these agreements
Our current business strategy includes the entry into additional collaborative agreements for the development
and commercialization of our pharmaceutical product candidates. The negotiation and consummation of these types
of agreements typically involve simultaneous discussions with multiple potential collaborators and require significant
time and resources from our officers, business development, legal, and research and development staff. In addition,
in attracting the attention of pharmaceutical and biotechnology company collaborators, we compete with numerous
other third parties with product opportunities as well the collaborators’ own internal product opportunities. We may
not be able to consummate additional collaborative agreements, or we may not be able to negotiate commercially
acceptable terms for these agreements. If we do not consummate additional collaborative agreements, we may have
to consume money more rapidly on our product development efforts, defer development activities or forego the
exploitation of certain geographic territories, any of which could have a material adverse effect on our business.
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We will require and may have difficulty raising needed capital in the future
Our business currently does not generate sufficient revenues to meet our capital requirements and we do not
expect that it will do so in the near future. We have expended and will continue to expend substantial funds to complete
the research, development and clinical testing of our pharmaceutical product candidates. We will require additional
funds for these purposes, to establish additional clinical- and commercial-scale manufacturing arrangements and
facilities, and to provide for the marketing and distribution of our product candidates. Additional funds may not be
available on acceptable terms, if at all. If adequate funds are unavailable from operations or additional sources of
financing, we may have to delay, reduce the scope of or eliminate one or more of our research or development
programs which would materially harm our business, financial condition and results of operations.
Our actual capital requirements will depend on many factors, including:
• regulatory actions with respect to our product candidates;
• continued progress and cost of our research and development programs;
• the continuation of our collaborative agreements that provide financial funding for our activities;
• success in entering into collaboration agreements and meeting milestones under such agreements;
• progress with preclinical studies and clinical trials;
• the time and costs involved in obtaining regulatory clearance;
• costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;
• costs of developing sales, marketing and distribution channels and our ability and that of our collaborators
to sell our pharmaceutical product candidates;
• costs involved in establishing manufacturing capabilities for clinical and commercial quantities of our
product candidates;
• competing technological and market developments;
• market acceptance of our product candidates;
• costs for recruiting and retaining employees and consultants; and
• unexpected legal, accounting and other costs and liabilities related to our business.
We may consume available resources more rapidly than currently anticipated, resulting in the need for
additional funding. We may seek to raise any necessary additional funds through equity or debt financings, convertible
debt financings, collaborative arrangements with corporate collaborators or other sources, which may be dilutive to
existing stockholders and may cause the price of our common stock to decline. In addition, in the event that additional
funds are obtained through arrangements with collaborators or other sources, we may have to relinquish rights to some
of our technologies or pharmaceutical product candidates that we would otherwise seek to develop or commercialize
ourselves. If adequate funds are not available, we may be required to significantly reduce or refocus our product
development efforts, resulting in delays in generating potential future product revenue.
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We and any third-party collaborators may not be able to manufacture sufficient quantities of our
pharmaceutical product candidates and components to support the clinical and commercial requirements of
our collaborators and ourselves at an acceptable cost or in compliance with applicable government regulations,
and we have limited manufacturing experience
We or any third-party collaborators to whom we have assigned such responsibility must manufacture our
pharmaceutical product candidates and components in clinical and commercial quantities, either directly or through
third parties, in compliance with regulatory requirements and at an acceptable cost. The manufacturing processes
associated with our product candidates are complex. We have not yet completed development of the manufacturing
process for any product candidates or components, including AnestaGel and our other Matrix BioHydrogel-based
drug candidates. If we and our third-party collaborators, where relevant, fail to timely complete the development of
the manufacturing process for our product candidates, we and our third-party collaborators, where relevant, will not
be able to timely produce product for clinical trials and commercialization of our product candidates. We have also
committed to manufacture and supply product candidates or components under a number of our collaborative
agreements with third-party companies. We have limited experience manufacturing pharmaceutical products, and we
may not be able to timely accomplish these tasks. If we and our third-party collaborators, where relevant, fail to
develop manufacturing processes to permit us to manufacture a product candidate or component at an acceptable cost,
then we and our third-party collaborators may not be able to commercialize that product candidate or we may be in
breach of our supply obligations to our third-party collaborators.
Our development and licensing partner, Lifecore Biomedicalis a multi-disciplinary site that we contract with
to manufacture our AnestaGel and Matrix BioHydrogel.. This is currently completed on an as needed basis. We
anticipate that in the future, should the Phase 1 Clinical Study, and Efficacy Study prove to be successful, that Lifecore
would continue to manufacture the Product. If we experience delays or technical difficulties in scaling up the
manufacturing of our product candidates, it could result in delays or added cost in our development programs. We
have not manufactured commercial quantities of any of our product candidates. In the future, we intend to develop
additional manufacturing capabilities for our product candidates and components to meet our demands and those of
our third-party collaborators by contracting with third-party manufacturers.
If we and our third-party collaborators, where relevant, are unable to manufacture our pharmaceutical product
candidates or components in a timely manner or at an acceptable cost, quality or performance level, and are unable to
attain and maintain compliance with applicable regulations, the clinical trials and the commercial sale of our product
candidates and those of our third-party collaborators could be delayed. Additionally, we may need to alter our facility
design or manufacturing processes, install additional equipment or do additional construction or testing in order to
meet regulatory requirements, optimize the production process, increase efficiencies or production capacity or for
other reasons, which may result in additional cost to us or delay production of product needed for the clinical trials
and commercial launch of our product candidates and those of our third-party collaborators.
If we or our third-party collaborators cannot manufacture our pharmaceutical product candidates or
components in time to meet the clinical or commercial requirements of our collaborators or ourselves or at an
acceptable cost, our operating results will be harmed.
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Failure to comply with ongoing governmental regulations for our pharmaceutical product candidates could
materially harm our business in the future
Marketing or promoting a drug is subject to very strict controls. Furthermore, clearance or approval may
entail ongoing requirements for post-marketing studies. The manufacture and marketing of drugs are subject to
continuing FDA and foreign regulatory review and requirements that we update our regulatory filings. Later discovery
of previously unknown problems with a product, manufacturer or facility, or our failure to update regulatory files,
may result in restrictions, including withdrawal of the product from the market. Any of the following or other similar
events, if they were to occur, could delay or preclude us from further developing, marketing or realizing full
commercial use of our product candidates, which in turn would materially harm our business, financial condition and
results of operations:
• failure to obtain or maintain requisite governmental approvals;
• failure to obtain approvals for clinically intended uses of our pharmaceutical product candidates under
development; or
• FDA required product withdrawals or warnings arising from identification of serious and unanticipated
adverse side effects in our product candidates.
Manufacturers of drugs must comply with the applicable FDA good manufacturing practice regulations,
which include production design controls, testing, quality control and quality assurance requirements as well as the
corresponding maintenance of records and documentation. Compliance with current good manufacturing practices
regulations is difficult and costly. Manufacturing facilities are subject to ongoing periodic inspection by the FDA and
corresponding state agencies, including unannounced inspections, and must be licensed before they can be used for
the commercial manufacture of our development products. We and/or our present or future suppliers and distributors
may be unable to comply with the applicable good manufacturing practice regulations and other FDA regulatory
requirements. We have not been subject to a good manufacturing regulation inspection by the FDA relating to our
product candidates. If we, our third-party collaborators or our respective suppliers do not achieve compliance for our
product candidates we or they manufacture, the FDA may refuse or withdraw marketing clearance or require product
recall, which may cause interruptions or delays in the manufacture and sale of our product candidates.
We have a history of operating losses, expect to continue to have losses in the future and may never achieve or
maintain profitability
We have incurred operating losses since our inception in 2014 and, as of December 31, 2017, had an
accumulated deficit of approximately $.5 million. We expect to continue to incur significant operating losses over the
next several years as we continue to incur significant costs for research and development, clinical trials,
manufacturing, sales, and general and administrative functions. Our ability to achieve profitability depends upon our
ability, alone or with others, to successfully complete the development of our proposed product candidates, obtain the
required regulatory clearances, and manufacture and market our proposed product candidates. Development of
pharmaceutical product candidates is costly and requires significant investment. In addition, we may choose to license
from third parties either additional drug delivery platform technology or rights to particular drugs or other appropriate
technology for use in our product candidates. The license fees for these technologies or rights would increase the costs
of our product candidates.
We do not anticipate meaningful revenues to derive from the commercialization and marketing of our product
candidates in development in the near future, and therefore do not expect to generate sufficient revenues to cover
expenses or achieve profitability in the near future.
We may develop our own sales force and commercial group to market future products but we have limited sales
and marketing experience with respect to pharmaceuticals and may not be able to do so effectively
We may choose to develop our own sales force and commercial group to market products that we may
develop in the future. Developing a sales force and commercial group will require substantial expenditures and the
hiring of qualified personnel. We have limited sales and marketing experience, and may not be able to effectively
recruit, train or retain sales personnel. If we are not able to put in place an appropriate sales force and commercial
group for AnestaGel, we may not be able to effectively launch the product. We may not be able to effectively sell our
product candidates, if approved, and our failure to do so could limit or materially harm our business.
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We and our third-party collaborators may not sell our product candidates effectively
We and any third-party collaborators compete with many other companies that currently have extensive and
well-funded marketing and sales operations. Our marketing and sales efforts and those of our third-party collaborators
may be unable to compete successfully against these other companies. We and our third-party collaborators, if
relevant, may be unable to establish a sufficient sales and marketing organization on a timely basis, if at all. We and
our third-party collaborators, if relevant, may be unable to engage qualified distributors. Even if engaged, these
distributors may:
• fail to satisfy financial or contractual obligations to us;
• fail to adequately market our product candidates;
• cease operations with little or no notice to us;
• offer, design, manufacture or promote competing product lines;
• fail to maintain adequate inventory and thereby restrict use of our product candidates; or
• build up inventory in excess of demand thereby limiting future purchases of our product candidates resulting
in significant quarter-to-quarter variability in our sales.
The failure of us or any third-party collaborators to effectively develop, gain regulatory approval for, sell,
manufacture and market our product candidates will hurt our business, prospects and financial results.
We will rely heavily on third parties to support development, clinical testing and manufacturing of our product
candidates
We will rely on third-party contract research organizations, consultants, service providers and suppliers to
provide critical services to support development, clinical testing, and manufacturing of our product candidates. For
example, we currently depend on third-party vendors to manage and monitor our clinical trials and to perform critical
manufacturing steps for our product candidates. These third parties may not execute their responsibilities and tasks
competently in compliance with applicable laws and regulations or in a timely fashion. We rely on third-parties to
manufacture or perform manufacturing steps relating to our product candidates or components. We anticipate that we
will continue to rely on these and other third-party contractors to support development, clinical testing, and
manufacturing of our product candidates. Failure of these contractors to provide the required services in a competent
or timely manner or on reasonable commercial terms could materially delay the development and approval of our
development products, increase our expenses and materially harm our business, financial condition and results of
operations.
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Key components of our product candidates are provided by limited numbers of suppliers, and supply shortages
or loss of these suppliers could result in interruptions in supply or increased costs
Certain components and drug substances used in our product candidates, including AnestaGel, and our other
Matrix BioHydrogel-based drug candidates, are currently purchased from a single or a limited number of outside
sources. The reliance on a sole or limited number of suppliers could result in:
• delays associated with redesigning a pharmaceutical product candidate due to a failure to obtain a single
source component;
• an inability to obtain an adequate supply of required components; and
• reduced control over pricing, quality and delivery time.
We have supply agreements in place for certain components of our pharmaceutical product candidates, but
do not have in place long term supply agreements with respect to all of the components of any of our product
candidates. Therefore the supply of a particular component could be terminated at any time without penalty to the
supplier. In addition, we may not be able to procure required components or drugs from third-party suppliers at a
quantity, quality and cost acceptable to us. Any interruption in the supply of single source components could cause us
to seek alternative sources of supply or manufacture these components internally. Furthermore, in some cases, we are
relying on our third-party collaborators to procure supply of necessary components. If the supply of any components
for our product candidates is interrupted, components from alternative suppliers may not be available in sufficient
volumes or at acceptable quality levels within required timeframes, if at all, to meet our needs or those of our third-
party collaborators. This could delay our ability to complete clinical trials and obtain approval for commercialization
and marketing of our product candidates, causing us to lose sales, incur additional costs, delay new product
introductions and could harm our reputation.
If we are unable to adequately protect, maintain or enforce our intellectual property rights or secure rights to
third-party patents, we may lose valuable assets, experience reduced market share or incur costly litigation to
protect our rights or our third-party collaborators may choose to terminate their agreements with us
Our ability to commercially exploit our products will depend significantly on our ability to obtain and
maintain patents, maintain trade secret protection and operate without infringing the proprietary rights of others.
As of December 31, 2017, we have licensed over 20 unexpired issued U.S. patents and over 23 unexpired
issued foreign patents (which include granted European patent rights that have been validated in various EU member
states). In addition, we have a pending U.S. patent application and over numerous foreign applications pending in
Europe, Australia, Japan, Canada and other countries.
There can be no assurance that the pending patent applications will be granted. The granted claims in the
U.S. include both composition of matter and method of treatment claims. There can be no assurance that the pending
patent applications will be granted.
The patent positions of pharmaceutical companies, including ours, are uncertain and involve complex legal
and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the
patent is issued. Consequently, our patent applications or those that are licensed to us may not issue into patents, and
any issued patents may not provide protection against competitive technologies or may be held invalid if challenged.
Our competitors may also independently develop products similar to ours or design around or otherwise circumvent
patents issued to us or licensed by us. In addition, the laws of some foreign countries may not protect our proprietary
rights to the same extent as U.S. law.
The patent laws of the U.S. have recently undergone changes through court decisions which may have
significant impact on us and our industry. Decisions of the U.S. Supreme Court and other courts with respect to the
standards of patentability, enforceability, availability of injunctive relief and damages may make it more difficult for
us to procure, maintain and enforce patents. In addition, the America Invents Act was signed into law in September
2011, which among other changes to the U.S. patent laws, changes patent priority from “first to invent” to “first to
file,” implements a post-grant opposition system for patents and provides a prior user defense to infringement. These
judicial and legislative changes have introduced significant uncertainty in the patent law landscape and may
potentially negatively impact our ability to procure, maintain and enforce patents to provide exclusivity for our
products.
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We also rely upon trade secrets, technical know-how and continuing technological innovation to develop and
maintain our competitive position. We require our employees, consultants, advisors and collaborators to execute
appropriate confidentiality and assignment-of-inventions agreements with us. These agreements typically provide that
all materials and confidential information developed or made known to the individual during the course of the
individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific
circumstances, and that all inventions arising out of the individual’s relationship with us will be our exclusive property.
These agreements may be breached, and in some instances, we may not have an appropriate remedy available for
breach of the agreements. Furthermore, our competitors may independently develop substantially equivalent
proprietary information and techniques, reverse engineer our information and techniques, or otherwise gain access to
our proprietary technology.
We may be unable to meaningfully protect our rights in trade secrets, technical know-how and other non-
patented technology. We may have to resort to litigation to protect our intellectual property rights, or to determine
their scope, validity or enforceability. In addition, interference, derivation, post-grant oppositions, and similar
proceedings may be necessary to determine rights to inventions in our patents and patent applications. Enforcing or
defending our proprietary rights is expensive, could cause diversion of our resources and may be unsuccessful. Any
failure to enforce or protect our rights could cause us to lose the ability to exclude others from using our technology
to develop or sell competing products.
Our future collaboration agreements may depend on our intellectual property
We expect to be party to collaborative agreements with pharmaceutical companies. Potential third-party
collaborators may have entered into these agreements based on the exclusivity that our intellectual property rights
confer on the products being developed. The loss or diminution of our intellectual property rights could result in a
decision by our third-party collaborators to terminate their agreements with us. In addition, these agreements are
generally complex and contain provisions that could give rise to legal disputes, including potential disputes concerning
ownership of intellectual property and data under collaborations. Such disputes can lead to lengthy, expensive
litigation or arbitration requiring us to devote management time and resources to such dispute which we would
otherwise spend on our business. To the extent that our agreements call for future royalties to be paid conditional on
our having patents covering the royalty-bearing subject matter, the decision by the Supreme Court in the case of
MedImmune v. Genentech could encourage our licensees to challenge the validity of our patents and thereby seek to
avoid future royalty obligations without losing the benefit of their license. Should they be successful in such a
challenge, our ability to collect future royalties could be substantially diminished.
We may be sued by third parties claiming that our product candidates infringe on their intellectual property
rights, particularly because there is substantial uncertainty about the validity and breadth of medical patents
We or our potential collaborators may be exposed to future litigation by third parties based on claims that
our product candidates or activities infringe the intellectual property rights of others or that we or our collaborators
have misappropriated the trade secrets of others. This risk is exacerbated by the fact that the validity and breadth of
claims covered in medical technology patents and the breadth and scope of trade secret protection involve complex
legal and factual questions for which important legal principles are unresolved. Any litigation or claims against us or
our collaborators, whether or not valid, could result in substantial costs, could place a significant strain on our financial
resources and could harm our reputation. We also may not have sufficient funds to litigate against parties with
substantially greater resources. In addition, pursuant to our collaborative agreements, we have provided our
collaborators with the right, under specified circumstances, to defend against any claims of infringement of the third
party intellectual property rights, and such collaborators may not defend against such claims adequately or in the
manner that we would do ourselves. Intellectual property litigation or claims could force us or our collaborators to do
one or more of the following, any of which could harm our business or financial results:
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• cease selling, incorporating or using any of our pharmaceutical product candidates that incorporate the
challenged intellectual property, which would adversely affect our revenue;
• obtain a license from the holder of the infringed intellectual property right, which license may be costly or
may not be available on reasonable terms, if at all; or
• redesign our product candidates, which would be costly and time-consuming.
Technologies and businesses which we acquire or license may be difficult to integrate, disrupt our business,
dilute stockholder value or divert management attention
We may acquire technologies, products or businesses to broaden the scope of our existing and planned
product lines and technologies. Future acquisitions expose us to:
• increased costs associated with the acquisition and operation of the new businesses or technologies and the
management of geographically dispersed operations;
• the risks associated with the assimilation of new technologies, operations, sites and personnel;
• the diversion of resources from our existing business and technologies;
• the inability to generate revenues to offset associated acquisition costs;
• the requirement to maintain uniform standards, controls, and procedures; and
• the impairment of relationships with employees and customers or third-party collaborators as a result of any
integration of new management personnel.
Acquisitions may also result in the issuance of dilutive equity securities, the incurrence or assumption of
debt or additional expenses associated with the amortization of acquired intangible assets or potential businesses.
Acquisitions may not generate any additional revenue or provide any benefit to our business.
Some of our pharmaceutical product candidates contain controlled substances, the making, use, sale,
importation and distribution of which are subject to regulation by state, federal and foreign law enforcement
and other regulatory agencies
Some of our product candidates currently under development contain, and our products in the future may
contain, controlled substances which are subject to state, federal and foreign laws and regulations regarding their
manufacture, use, sale, importation and distribution. For our product candidates containing controlled substances, we
and our suppliers, manufacturers, contractors, customers and distributors are required to obtain and maintain
applicable registrations from state, federal and foreign law enforcement and regulatory agencies and comply with
state, federal and foreign laws and regulations regarding the manufacture, use, sale, importation and distribution of
controlled substances. These regulations are extensive and include regulations governing manufacturing, labeling,
packaging, testing, dispensing, production and procurement quotas, record keeping, reporting, handling, shipment and
disposal. These regulations increase the personnel needs and the expense associated with development and
commercialization of drug candidates including controlled substances. Failure to obtain and maintain required
registrations or comply with any applicable regulations could delay or preclude us from developing and
commercializing our product candidates containing controlled substances and subject us to enforcement action. In
addition, because of their restrictive nature, these regulations could limit our commercialization of our product
candidates containing controlled substances. In particular, among other things, there is a risk that these regulations
may interfere with the supply of the drugs used in our clinical trials, and in the future, our ability to produce and
distribute our products in the volume needed to meet commercial demand.
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Write-offs related to the impairment of long-lived assets, inventories and other non-cash charges, as well as
stock-based compensation expenses may adversely impact or delay our profitability
We may incur significant non-cash charges related to impairment write-downs of our long-lived assets,
including goodwill and other intangible assets. We will continue to incur non-cash charges related to amortization of
other intangible assets. We are required to perform periodic impairment reviews of our goodwill at least annually.
However, there can be no assurance that upon completion of subsequent reviews a material impairment charge will
not be recorded. If future periodic reviews determine that our assets are impaired and a write-down is required, it will
adversely impact or delay our profitability.
The valuation of inventory requires us to estimate the value of inventory that may become expired prior to
use. We may be required to expense previously capitalized inventory costs upon a change in our judgment, due to,
among other potential factors, a denial or delay of approval of a product by the necessary regulatory bodies, changes
in product development timelines, or other information that suggests that the inventory will not be saleable.
Global credit and financial market conditions could negatively impact the value of our current portfolio of cash
equivalents, short-term investments or long-term investments and our ability to meet our financing objectives
Our cash and cash equivalents will be maintained in highly liquid investments with remaining maturities of
90 days or less at the time of purchase. Our short-term investments could consist primarily of readily marketable debt
securities with original maturities of greater than 90 days from the date of purchase but remaining maturities of less
than one year from the balance sheet date. Our long-term investments could consist primarily of readily marketable
debt securities with maturities in one year or beyond from the balance sheet date. While, as of the date of this filing,
we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash
equivalents, short-term investments or long-term investments, no assurance can be given that deterioration in
conditions of the global credit and financial markets would not negatively impact our current portfolio of cash
equivalents, short-term investments or long-term investments or our ability to meet our financing objectives.
We depend upon key personnel who may terminate their employment with us at any time, and we may need to
hire additional qualified personnel
Our success will depend to a significant degree upon the continued services of key management, technical
and scientific personnel. Competition for qualified personnel is intense, and the process of hiring and integrating such
qualified personnel is often lengthy. We may be unable to recruit such personnel on a timely basis, if at all. Our
management and other employees may voluntarily terminate their employment with us at any time. The loss of the
services of key personnel, or the inability to attract and retain additional qualified personnel, could result in delays to
product development or approval, loss of sales and diversion of management resources.
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We may not successfully manage our company through varying business cycles
Our success will depend on properly sizing our company through growth and contraction cycles caused in
part by changing business conditions, which places a significant strain on our management and on our administrative,
operational and financial resources. To manage through such cycles, we must expand or contract our facilities, our
operational, financial and management systems and our personnel. If we were unable to manage growth and
contractions effectively our business would be harmed.
Our business involves environmental risks and risks related to handling regulated substances
In connection with our research and development activities and our manufacture of materials and
pharmaceutical product candidates, we are subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain
materials, biological specimens and wastes. Although we believe that we have complied with the applicable laws,
regulations and policies in all material respects and have not been required to correct any material noncompliance, we
may be required to incur significant costs to comply with environmental and health and safety regulations in the future.
Our research and development involves the use, generation and disposal of hazardous materials, including but not
limited to certain hazardous chemicals, solvents, agents and biohazardous materials. The extent of our use, generation
and disposal of such substances has increased substantially since we started manufacturing and selling biodegradable
polymers. Although we believe that our safety procedures for storing, handling and disposing of such materials comply
with the standards prescribed by state and federal regulations, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. We currently contract with third parties to dispose of these substances
generated by us, and we rely on these third parties to properly dispose of these substances in compliance with
applicable laws and regulations. If these third parties do not properly dispose of these substances in compliance with
applicable laws and regulations, we may be subject to legal action by governmental agencies or private parties for
improper disposal of these substances. The costs of defending such actions and the potential liability resulting from
such actions are often very large. In the event we are subject to such legal action or we otherwise fail to comply with
applicable laws and regulations governing the use, generation and disposal of hazardous materials and chemicals, we
could be held liable for any damages that result, and any such liability could exceed our resources.
Risks Related To Our Industry
The market for our pharmaceutical product candidates is rapidly changing and competitive, and new products
or technologies developed by others could impair our ability to grow our business and remain competitive
The pharmaceutical industry is subject to rapid and substantial technological change. Developments by
others may render our product candidates under development or technologies noncompetitive or obsolete, or we may
be unable to keep pace with technological developments or other market factors. Technological competition in the
industry from pharmaceutical and biotechnology companies, universities, governmental entities and others
diversifying into the field is intense and is expected to increase.
We may face competition from other companies in numerous industries including pharmaceuticals, medical
devices and drug delivery. Our Matrix BioHydrogel based products, including AnestaGel, if cleared by the FDA and
other governing bodies, will compete with currently marketed oral opioids, transdermal opioids, local anesthetic
patches, anti-psychotics, stimulants, implantable and external infusion pumps which can be used for infusion of
opioids and local anesthetics. Products of these types are marketed by Purdue Pharma, AbbVie, Janssen, Medtronic,
Endo, AstraZeneca, Pernix Therapeutics, Tricumed, Halyard Health, Cumberland Pharmaceuticals, Pacira, Acorda
Therapeutics, Mallinckrodt, Shire, Johnson & Johnson, Eli Lilly, Pfizer, Novartis and others. Purdue Pharma, Sandoz,
Actavis, Collegium Pharmaceutical, Pfizer, Elite Pharmaceuticals, Intellipharmaceutics, Egalet, Teva Pharmaceuticals
and others have also announced regulatory approval or development plans for abuse deterrent opioid products.
Numerous companies are applying significant resources and expertise to the problems of drug delivery and several of
these are focusing or may focus on delivery of drugs to the intended site of action, including Alkermes, Pacira, Immune
Pharmaceuticals, Innocoll, Nektar, Kimberly-Clark, Acorda Therapeutics, Flamel, Alexza, Mallinckrodt, Hospira,
Pfizer, Cumberland Pharmaceuticals, Egalet, Acura, Elite Pharmaceuticals, Phosphagenics, Intellipharmaceutics,
Collegium Pharmaceutical, Heron Therapeutics and others. Some of these competitors may be addressing the same
therapeutic areas or indications as we are. Our current and potential competitors may succeed in obtaining patent
protection or commercializing products before us. Many of these entities have significantly greater research and
development capabilities than we do, as well as substantially more marketing, manufacturing, financial and
managerial resources. These entities represent significant competition for us. Acquisitions of, or investments in,
competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’
financial, marketing, manufacturing and other resources.
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We are engaged in the development of novel therapeutic technologies. Our resources are limited and we may
experience technical challenges inherent in such novel technologies. Competitors have developed or are in the process
of developing technologies that are, or in the future may be, the basis for competitive products. Some of these products
may have an entirely different approach or means of accomplishing similar therapeutic effects than our product
candidates. Our competitors may develop products that are safer, more effective or less costly than our product
candidates and, therefore, present a serious competitive threat to our product offerings.
The widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our
product candidates even if commercialized. Chronic and post-operative pain are currently being treated by oral
medication, transdermal drug delivery systems, such as drug patches, injectable products and implantable drug
delivery devices which will be competitive with our product candidates. These treatments are widely accepted in the
medical community and have a long history of use. The established use of these competitive products may limit the
potential for our product candidates to receive widespread acceptance if commercialized.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and
abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties,
contractual damages, reputational harm and diminished profits and future earnings
Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and
prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-
party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we would
market, sell and distribute our products. As a pharmaceutical company, even though we do not and may not control
referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state
healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our
business. These regulations include:
• the Federal Healthcare Anti-Kickback Statute, which prohibits, among other things, persons from knowingly
and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in
kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or
recommendation of, any good or service, for which payment may be made under a federal healthcare program
such as Medicare and Medicaid, and which will constrain our marketing practices and the marketing practices
of our licensees, educational programs, pricing policies, and relationships with healthcare providers or other
entities;
• the federal physician self-referral prohibition, commonly known as the Stark Law, which prohibits
physicians from referring Medicare or Medicaid patients to providers of “designated health services” with
whom the physician or a member of the physician’s immediate family has an ownership interest or
compensation arrangement, unless a statutory or regulatory exception applies;
• federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting,
or causing to be presented, claims for payment from Medicare, Medicaid, or other government
reimbursement programs that are false or fraudulent, and which may expose entities that provide coding and
billing advice to customers to potential criminal and civil penalties, including through civil whistleblower or
qui tam actions, and including as a result of claims presented in violation of the Federal Healthcare Anti-
Kickback Statute, the Stark Law or other healthcare-related laws, including laws enforced by the FDA;
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• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal
and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal
criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or
making any materially false statements in connection with the delivery of or payment for healthcare benefits,
items or services, and which as amended by the Health Information Technology for Economic and Clinical
Health Act, or HITECH, also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security and transmission of individually identifiable health information;
• federal physician sunshine requirements under the Affordable Care Act, which requires manufacturers of
drugs, devices, biologics and medical supplies to report annually to HHS information related to payments
and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership
and investment interests held by physicians and other healthcare providers and their immediate family
members and applicable group purchasing organizations;
• the Federal Food, Drug, and Cosmetic Act, which, among other things, strictly regulates drug product
marketing, prohibits manufacturers from marketing drug products for off-label use and regulates the
distribution of drug samples; and
• state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims
laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services
reimbursed by non- governmental third-party payors, including private insurers, state laws requiring
pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government and which may require drug
manufacturers to report information related to payments and other transfers of value to physicians and other
healthcare providers or marketing expenditures, and state and foreign laws governing the privacy and
security of health information in specified circumstances, many of which differ from each other in significant
ways and often are not preempted by federal laws such as HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare
laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our
business practices may not comply with current or future statutes, regulations or case law involving applicable fraud
and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws
or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and
administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such
as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any physicians or other healthcare
providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they
may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare
programs.
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Healthcare reform measures could hinder or prevent our product candidates’ commercial success.
In the United States, there have been, and we expect there will continue to be, a number of legislative and
regulatory changes to the healthcare system that could affect our future revenue and profitability and the future revenue
and profitability of our collaborators or potential collaborators. Federal and state lawmakers regularly propose and, at
times, enact legislation that results in significant changes to the healthcare system, some of which is intended to
contain or reduce the costs of medical products and services. For example, in March 2010, the President signed one
of the most significant healthcare reform measures in decades, the Affordable Care Act. It contains a number of
provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud
and abuse measures, all of which impact existing government healthcare programs and will result in the development
of new programs. The Affordable Care Act, among other things:
• imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded
prescription drugs”;
• increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1%
to 23.1%;
• requires collection of rebates for drugs paid by Medicaid managed care organizations;
• addresses new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate
Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, and for drugs that
are line extension products;
• requires manufacturers to participate in a coverage gap discount program, under which they must agree to
offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries
during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D; and
• mandates a further shift in the burden of Medicaid payments to the states.
Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For
example, automatic reductions to several government programs were enacted during “sequestration.” These
reductions included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went
into effect on April 1, 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act
of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, including
hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the
government to recover overpayments to providers from three to five years. Additional state and federal healthcare
reform measures may be adopted in the future, any of which could limit the amounts that federal and state governments
will pay for healthcare products and services, which could result in reduced demand for our product candidates once
approved or additional pricing pressures.
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We could be exposed to significant product liability claims which could be time consuming and costly to defend,
divert management attention and adversely impact our ability to obtain and maintain insurance coverage
The testing, manufacture, marketing and sale of our product candidates involve an inherent risk that product
liability claims will be asserted against us. Although we are insured against such risks up to an annual aggregate limit
in connection with clinical trials and commercial sales of our product candidates, our present product liability
insurance may be inadequate and may not fully cover the costs of any claim or any ultimate damages we might be
required to pay. Product liability claims or other claims related to our product candidates, regardless of their outcome,
could require us to spend significant time and money in litigation or to pay significant damages. Any successful
product liability claim may prevent us from obtaining adequate product liability insurance in the future on
commercially desirable or reasonable terms. In addition, product liability coverage may cease to be available in
sufficient amounts or at an acceptable cost. An inability to obtain sufficient insurance coverage at an acceptable cost
or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our
product candidates. A product liability claim could also significantly harm our reputation and delay market acceptance
of our product candidates.
Acceptance of our pharmaceutical product candidates in the marketplace is uncertain, and failure to achieve
market acceptance will delay our ability to generate or grow revenues
Our future financial performance will depend upon the successful introduction and customer acceptance of
our products in research and development, including AnestaGel and other Matrix BioHydrogel-based candidates.
Even if approved for marketing, our product candidates may not achieve market acceptance. The degree of market
acceptance will depend upon a number of factors, including:
• the receipt of regulatory clearance of marketing claims for the uses that we are developing;
• the establishment and demonstration in the medical community of the safety and clinical efficacy of our
products and their potential advantages over existing therapeutic products, including oral medication,
transdermal drug delivery products such as drug patches, injectable therapeutics, or external or implantable
drug delivery products; and
• pricing and reimbursement policies of government and third-party payors such as insurance companies,
health maintenance organizations, hospital formularies and other health plan administrators.
Physicians, patients, payors or the medical community in general may be unwilling to accept, utilize or
recommend any of our products. If we are unable to obtain regulatory approval, commercialize and market our future
products when planned and achieve market acceptance, we will not achieve anticipated revenues.
If users of our products are unable to obtain adequate reimbursement from third-party payors, or if new
restrictive legislation is adopted, market acceptance of our products may be limited and we may not achieve
anticipated revenues
The continuing efforts of government and insurance companies, health maintenance organizations and other
payors of healthcare costs to contain or reduce costs of health care may affect our future revenues and profitability,
and the future revenues and profitability of our potential customers, suppliers and third-party collaborators and the
availability of capital. For example, in certain foreign markets, pricing or profitability of prescription pharmaceuticals
is subject to government control. In the United States, recent federal and state government initiatives have been
directed at lowering the total cost of health care, and the U.S. Congress and state legislatures will likely continue to
focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid
systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the
announcement or adoption of such proposals could materially harm our business, financial condition and results of
operations.
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The successful commercialization of our product candidates will depend in part on the extent to which
appropriate reimbursement levels for the cost of our product candidates and related treatment are obtained by
governmental authorities, private health insurers and other organizations, such as HMOs. Third-party payors often
limit payments or reimbursement for medical products and services. Also, the trend toward managed health care in
the United States and the concurrent growth of organizations such as HMOs, which could control or significantly
influence the purchase of health care services and products, as well as legislative proposals to reform health care or
reduce government insurance programs, may limit reimbursement or payment for our products. The cost containment
measures that health care payors and providers are instituting and the effect of any health care reform could materially
harm our ability to operate profitably.
If we or our third-party collaborators are unable to train physicians to use our pharmaceutical product
candidates to treat patients’ diseases or medical conditions, we may incur delays in market acceptance of our
products
Broad use of our product candidates will require extensive training of numerous physicians on the proper
and safe use of our product candidates. The time required to begin and complete training of physicians could delay
introduction of our products and adversely affect market acceptance of our products. We or third parties selling our
product candidates may be unable to rapidly train physicians in numbers sufficient to generate adequate demand for
our product candidates. Any delay in training would materially delay the demand for our product candidates and harm
our business and financial results. In addition, we may expend significant funds towards such training before any
orders are placed for our products, which would increase our expenses and harm our financial results.
Our Independent Auditor Firm Has Expressed In Its Report To Our Audited Financial Statements A Substantial
Doubt About Our Ability To Continue As A Going Concern.
We have not yet entered into the commercialization stage of our products and therefore commercialization is uncertain
and expected to require substantial expenditures. We have not yet generated sufficient revenues from our operations
to fund our activities, and are therefore dependent upon external sources for financing our operations. There is a risk
that we will be unable to obtain necessary financing to continue our operations on terms acceptable to us or at all. As
a result, our independent auditor firm has expressed in its auditors’ report on the financial statements a substantial
doubt regarding our ability to continue as a going concern. Our financial statements do not include any adjustments
that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. This going
concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt
securities or otherwise. Future reports on our financial statements may include an explanatory paragraph with respect
to our ability to continue as a going concern. If we cannot continue as a going concern, our stockholders may lose
their entire investment in the Class A Common Stock.
Our Operating Plan Relies In Large Part Upon Assumptions And Analyses Developed By The Company. If These
Assumptions Or Analyses Prove To Be Incorrect, The Company’s Actual Operating Results May Be Materially
Different From Our Forecasted Results
Whether actual operating results and business developments will be consistent with the Company’s expectations and
assumptions as reflected in its forecast depends on a number of factors, many of which are outside the Company’s
control, including, but not limited to:
• whether the Company can obtain sufficient capital to sustain and grow its business
• our ability to manage the Company’s growth
• whether the Company can manage relationships with key vendors and advertisers
• demand for the Company’s products and services
• the timing and costs of new and existing marketing and promotional efforts
• competition
• the Company’s ability to retain existing key management, to integrate recent hires and to attract, retain and
motivate qualified personnel
• the overall strength and stability of domestic and international economies
Unfavorable changes in any of these or other factors, most of which are beyond the Company’s control, could
materially and adversely affect its business, results of operations and financial condition.
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To Date, The Company Has Had Operating Losses And Does Not Expect To Be Initially Profitable For At Least
The Foreseeable Future, And Cannot Accurately Predict When It Might Become Profitable
The Company has been operating at a loss since the Company’s inception, and the Company expects to continue to
incur losses for the foreseeable future. Further, the Company may not be able to generate significant revenues in the
future. In addition, the Company expects to incur substantial operating expenses in order to fund the expansion of the
Company’s business. As a result, The Company expects to continue to experience substantial negative cash flow for
at least the foreseeable future and cannot predict when, or even if, the Company might become profitable.
Risks Relating to This Offering and Investment
The Company May Undertake Additional Equity or Debt Financing That May Dilute The Shares In This Offering
The Company may undertake further equity or debt financing which may be dilutive to existing shareholders,
including you, or result in an issuance of securities whose rights, preferences and privileges are senior to those of
existing shareholders, including you, and also reducing the value of Shares subscribed for under this Offering.
An Investment In The Shares Is Speculative And There Can Be No Assurance Of Any Return On Any Such
Investment
An investment in the Company’s Shares is speculative and there is no assurance that investors will obtain any return
on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including
the risk of losing their entire investment.
The Shares Are Offered On A “Best Efforts” Basis And The Company May Not Raise The Maximum Amount
Being Offered
Since the Company is offering the Shares on a “best efforts” basis, there is no assurance that the Company will sell
enough Shares to meet its capital needs. If you purchase Shares in this Offering, you will do so without any assurance
that the Company will raise enough money to satisfy the full USE OF PROCEEDS TO COMPANY which the
Company has outlined in this Offering Circular or to meet the Company’s working capital needs.
If The Maximum Offering Is Not Raised, It May Increase The Amount Of Long-Term Debt Or The Amount Of
Additional Equity It Needs To Raise
There is no assurance that the maximum amount of Shares in this offering will be sold. If the maximum Offering
amount is not sold, we may need to incur additional debt or raise additional equity in order to finance our operations.
Increasing the amount of debt will increase our debt service obligations and make less cash available for distribution
to our shareholders. Increasing the amount of additional equity that we will have to seek in the future will further
dilute those investors participating in this Offering.
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We Have Not Paid Dividends In The Past And Do Not Expect To Pay Dividends In The Foreseeable Future, So
Any Return On Investment May Be Limited To The Value Of Our Shares
We have never paid cash dividends on our Shares and do not anticipate paying cash dividends in the foreseeable
future. The payment of dividends on our Shares will depend on earnings, financial condition and other business and
economic factors affecting it at such time that management may consider relevant. If we do not pay dividends, our
Shares may be less valuable because a return on your investment will only occur if its stock price appreciates.
The Company May Not Be Able To Obtain Additional Financing
Even if the Company is successful in selling the maximum number of Shares in the Offering, the Company may
require additional funds to continue and grow its business. The Company may not be able to obtain additional
financing as needed, on acceptable terms, or at all, which would force the Company to delay its plans for growth and
implementation of its strategy which could seriously harm its business, financial condition and results of operations.
If the Company needs additional funds, the Company may seek to obtain them primarily through additional equity or
debt financings. Those additional financings could result in dilution to the Company’s current shareholders and to you
if you invest in this Offering.
An Investment in the Company’s Shares Could Result In A Loss of Your Entire Investment
An investment in the Company’s Shares offered in this Offering involves a high degree of risk and you should not
purchase the Shares if you cannot afford the loss of your entire investment. You may not be able to liquidate your
investment for any reason in the near future.
There Is No Assurance The Company Will Be Able To Pay Distributions To Shareholders
While the Company may choose to pay distributions at some point in the future to its shareholders, there can be no
assurance that cash flow and profits will allow such distributions to be made.
There is No Public Trading Market for the Company’s Shares
At present, there is no active trading market for the Company’s securities and the Company cannot assure that a
trading market will develop. The Company’s Class A Common Stock has no trading symbol. In order to obtain a
trading symbol and authorization to have the Company’s securities trade publicly, the Company must file an
application on Form 211 with, and receive the approval by, the Financial Industry Regulatory Authority (“FINRA”)
of which there is no assurance, before active trading of the Company’s securities could commence. If the Company’s
securities ever publicly trade, they may be relegated to the OTC Pink Sheets. The OTC Pink Sheets provide
significantly less liquidity than the NASD’s automated quotation system, or NASDAQ Stock Market. Prices for
securities traded solely on the Pink Sheets may be difficult to obtain and holders of the Shares and the Company’s
securities may be unable to resell their securities at or near their original price or at any price. In any event, except to
the extent that investors’ Shares may be registered on a Form S-1 Registration Statement with the Securities and
Exchange Commission in the future, there is absolutely no assurance that Shares could be sold under Rule 144 or
otherwise until the Company becomes a current public reporting company with the Securities and Exchange
Commission and otherwise is current in the Company’s business, financial and management information reporting,
and applicable holding periods have been satisfied.
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Sales Of Our Shares By Insiders Under Rule 144 Or Otherwise Could Reduce The Price Of Our Shares, If A
Trading Market Should Develop
Certain officers, directors and/or other insiders may hold shares in the Company and may be able to sell their stock in
a trading market if one should develop. The availability for sale of substantial amounts of stock by officers, directors
and/or other insiders could reduce prevailing market prices for our securities in any trading market that may develop.
Should Our Securities Become Quoted On A Public Market, Sales Of A Substantial Number Of Shares Of Our
Type Of Stock May Cause The Price Of Our Type Of Stock To Decline
Should a market develop and our shareholders sell substantial amounts of our Shares in the public market, Shares sold
may cause the price to decrease below the current offering price. These sales may also make it more difficult for us
to sell equity or equity-related securities at a time and price that we deem reasonable or appropriate.
Because The Company Does Not Have An Audit Or Compensation Committee, Shareholders Will Have To Rely
On Our Directors To Perform These Functions
The Company does not have an audit or compensation committee comprised of independent directors or any audit or
compensation committee. The board of directors performs these functions as a whole. No members of the board of
directors are independent directors. Thus, there is a potential conflict in that board members who are also part of
management will participate in discussions concerning management compensation and audit issues that may affect
management decisions.
The Company Has Made Assumptions In Its Projections and In Forward-Looking Statements That May Not Be
Accurate
The discussions and information in this Offering Circular may contain both historical and “forward-looking
statements” which can be identified by the use of forward-looking terminology including the terms “believes,”
“anticipates,” “continues,” “expects,” “intends,” “may,” “will,” “would,” “should,” or, in each case, their negative or
other variations or comparable terminology. You should not place undue reliance on forward-looking statements.
These forward-looking statements include matters that are not historical facts. Forward-looking statements involve
risk and uncertainty because they relate to future events and circumstances. Forward-looking statements contained in
this Offering Circular, based on past trends or activities, should not be taken as a representation that such trends or
activities will continue in the future. To the extent that the Offering Circular contains forward-looking statements
regarding the financial condition, operating results, business prospects, or any other aspect of the Company’s business,
please be advised that the Company’s actual financial condition, operating results, and business performance may
differ materially from that projected or estimated by the Company. The Company has attempted to identify, in context,
certain of the factors it currently believes may cause actual future experience and results to differ from its current
expectations. The differences may be caused by a variety of factors, including but not limited to adverse economic
conditions, lack of market acceptance, reduction of consumer demand, unexpected costs and operating deficits, lower
sales and revenues than forecast, default on leases or other indebtedness, loss of suppliers, loss of supply, loss of
distribution and service contracts, price increases for capital, supplies and materials, inadequate capital, inability to
raise capital or financing, failure to obtain customers, loss of customers and failure to obtain new customers, the risk
of litigation and administrative proceedings involving the Company or its employees, loss of government licenses and
permits or failure to obtain them, higher than anticipated labor costs, the possible acquisition of new businesses or
products that result in operating losses or that do not perform as anticipated, resulting in unanticipated losses, the
possible fluctuation and volatility of the Company’s operating results and financial condition, adverse publicity and
news coverage, inability to carry out marketing and sales plans, loss of key executives, changes in interest rates,
inflationary factors, and other specific risks that may be referred to in this Offering Circular or in other reports issued
by us or by third-party publishers.
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Investors In This Offering Will Experience Immediate And Substantial Dilution
Due to our significant accumulated deficit, investors in this offering will suffer immediate and substantial dilution of
$4.24 per share or approximately 73.65% of the offering price of the shares if the maximum offering is sold. Further,
if all of the shares offered hereby are sold, investors in this offering will own approximately 29.38% of the then
outstanding shares of common stock, but will have paid approximately 100% of the total consideration for our
outstanding shares. See “Dilution.”
The Company Has Significant Discretion Over The Net Proceeds Of This Offering
The Company has significant discretion over the net proceeds of this Offering. As is the case with any business,
particularly one without a proven business model, it should be expected that certain expenses unforeseeable to
management at this juncture will arise in the future. There can be no assurance that management’s use of proceeds
generated through this offering will prove optimal or translate into revenue or profitability for the Company. Investors
are urged to consult with their attorneys, accountants and personal investment advisors prior to making any decision
to invest in the Company.
The Offering Price For The Type Of Stock Has Been Determined By The Company
The price at which the Shares are being offered has been arbitrarily determined by the Company. There is no
relationship between the offering price and our assets, book value, net worth, or any other economic or recognized
criteria of value. Rather, the price of the Shares was derived as a result of internal decisions based upon various factors
including prevailing market conditions, our future prospects and our capital structure. These prices do not necessarily
accurately reflect the actual value of the Shares or the price that may be realized upon disposition of the Shares.
You Should Be Aware Of The Long-Term Nature Of This Investment
There is not now, and likely will not be in the near future, a public market, for the Shares. Because the Shares have
not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction,
the Shares may have certain transfer restrictions. It is not currently contemplated that registration under the Securities
Act or other securities laws will be effected. Limitations on the transfer of the Shares may also adversely affect the
price that you might be able to obtain for the Shares in a private sale. You should be aware of the long-term nature of
your investment in the Company. You will be required to represent that you are purchasing the Securities for your
own account, for investment purposes and not with a view to resale or distribution thereof.
Neither The Offering Nor The Securities Have Been Registered Under Federal Or State Securities Laws, Leading
To An Absence Of Certain Regulation Applicable To The Company
The Company also has relied on exemptions provided by Regulation A of the JOBS Act from securities registration
requirements under applicable state and federal securities laws. Investors in the Company, therefore, will not receive
any of the benefits that such registration would otherwise provide. Prospective investors must therefore assess the
adequacy of disclosure and the fairness of the terms of this Offering on their own or in conjunction with their personal
advisors.
The Shares In This Offering Have No Protective Provisions.
The Shares in this Offering have no protective provisions. As such, you will not be afforded protection, by any
provision of the Shares or as a Shareholder in the event of a transaction that may adversely affect you, including a
reorganization, restructuring, merger or other similar transaction involving the Company. If there is a “liquidation
event” or “change of control” the Shares being offered do not provide you with any protection. In addition, there are
no provisions attached to the Shares in the Offering that would permit you to require the Company to repurchase the
Shares in the event of a takeover, recapitalization or similar transaction.
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The Shares In This Offering Are Subject to A Right of First Refusal Under Certain Circumstances.
The Shares in this Offering are subject to a right of first refusal. Until the Shares are listed on an exchange and made
available for trading, no Shareholder shall sell, assign, pledge or in any manner transfer any of the Shares of the
corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, without
first giving written notice thereof to the Company, who then shall have the right to purchase the Shares from the
Shareholder, subject to certain limitations. For a complete description of this right of first refusal, see “ Securities
Being Offered “ below and the Company’s Bylaws.
You Will Not Have A Vote Or Influence On The Management Of The Company
Substantially all decisions with respect to the management of the Company will be made exclusively by the officers,
directors, managers or employees of the Company. You will have a very limited ability, if at all, to vote on issues of
Company management and will not have the right or power to take part in the management of the Company and will
not be represented on the board of directors or by managers of the Company. Accordingly, no person should purchase
Shares unless he or she is willing to entrust all aspects of management to the Company.
No Guarantee of Return on Investment
There is no assurance that you will realize a return on your investment or that you will not lose your entire investment.
For this reason, you should read this Form 1-A, Offering Circular and all exhibits and referenced materials carefully
and should consult with your own attorney and business advisor prior to making any investment decision.
IN ADDITION TO THE RISKS LISTED ABOVE, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT
FORESEEN OR FULLY APPRECIATED BY THE MANAGEMENT. IT IS NOT POSSIBLE TO FORESEE ALL
RISKS THAT MAY AFFECT THE COMPANY. MOREOVER, THE COMPANY CANNOT PREDICT
WHETHER THE COMPANY WILL SUCCESSFULLY EFFECTUATE THE COMPANY’S CURRENT
BUSINESS PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE
RISKS AND MERITS OF AN INVESTMENT IN THE SECURITIES AND SHOULD TAKE INTO
CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHER FACTORS, THE RISK FACTORS
DISCUSSED ABOVE.
USE OF PROCEEDS TO COMPANY
The Use of Proceeds is an estimate based on the Company’s current business plan. We may find it necessary or
advisable to reallocate portions of the net proceeds reserved for one category to another, or to add additional
categories, and we will have broad discretion in doing so. For example, if our research and development activities
need to be bolstered beyond our initial estimates we may allocate additional resources by reallocating proceeds from
other categories such as marketing for the purposes of research and development. We do not believe we will reallocate
from our fixed costs such as equipment or rent. The Company believes that funding at nearly any level could result
in significant progress being made toward gaining a Phase 1 Clinical Study. The Company believes it is nearing the
time to enter clinical (human) studies, after one more pre-clinical (animal) study to confirm certain blood levels of the
drug bupivacaine during the first 24-24 hours of use of AnestaGel. Upon completion of that GLP Pre-clinical study,
the company anticipates discussing the results of all the pre-clinical and bench testing and making an application f to
begin a Phase 1 Clinical Study. This would examine the safety of AnestaGel, and the Company would be applying
for an Investigational New Drug (“IND”) with the United States Food and Drug Administration (“FDA”), which it
has not yet done. The Company has completed the capital acquisition of its laboratory equipment in previous
financings, and further laboratory expenses are directly related to compounding products. The Company can slow
down or accelerate product development, pre-clinical studies, and clinical studies based on available funds. Nearly
all expenses are variable, and employees are willing to delay compensation from time to time, if need be. The
Company estimates that net proceeds of only $900,000 could allow for just over two years of operations and adequate
time to seek additional, most likely, private funding or a commercial partner. In the event the Company raises $1
million it believes it could be able to complete GLP studies required for Phase 1 Clinical Studies conduct a Pre-IND
meeting with the FDA, and complete the protocol for the Phase I Clinical Studies. The Company would need to seek
additional funding from other sources to complete the manufacturing for, and the Clinical Studies, adding 12-24
months to the current 24-month timeline. If the Company were to raise $3 million it believes it could be financed to
complete all of the above and finish manufacturing for Phase 1 Clinical Studies. The Company would need to seek
additional funding from other sources to complete the Clinical Studies, adding 12 months to the current 24-month
timeline. If the Company raises $5 million it believes it could complete all of the above and the Phase 1 Clinical Study,
including analysis of the results, submission for peer review. Timelines would not be affected. If the Company raises
$7.5 million it believes it could complete all of the above, and a commercial manufacturing program. Timelines would
not be affected. If the Company raises $10 million it believes could complete all of the above and an 80-person
clinical study for Efficacy via the 505(b)2 pathway.
The maximum gross proceeds from the sale of the Shares in this Offering are $10,000,009.00. The net proceeds from
the offering, assuming it is fully subscribed, are expected to be approximately $9,040,009.00 after the payment of
offering costs including broker-dealer and selling commissions, but before printing, mailing, marketing, legal and
accounting costs, and other compliance and professional fees that may be incurred. The estimate of the budget for
offering costs is an estimate only and the actual offering costs may differ from those expected by management.
A portion of the proceeds from this Offering may ultimately be used to compensate or otherwise make payments to
officers or directors of the Company. The officers and directors of the Company may be paid salaries and receive
benefits that are commensurate with similar companies, and a portion of the proceeds may be used to pay these
ongoing business expenses.
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The Company reserves the right to change the use of proceeds set out herein based on the needs of the ongoing
business of the Company and the discretion of the Company’s management. The Company may reallocate the
estimated use of proceeds among the various categories or for other uses if management deems such a
reallocation to be appropriate. Until sufficient funds are raised by the Company to sufficiently fund research
activities, management may utilize some or all of the funds from this Offering for further capital raising efforts,
rather than as set out in this Use of Proceeds section of the Offering Circular.
The Company has attempted to identify, in context, certain of the factors it currently believes may cause actual
future experience and results to differ from its current expectations. The differences may be caused by a variety
of factors, including but not limited to adverse economic conditions, lack of market acceptance, reduction of
consumer demand, unexpected costs and operating deficits, lower sales and revenues than forecast, default on
leases or other indebtedness, loss of suppliers, loss of supply, loss of distribution and service contracts, price
increases for capital, supplies and materials, inadequate capital, inability to raise capital or financing, failure
to obtain customers, loss of customers and failure to obtain new customers, the risk of litigation and
administrative proceedings involving the Company or its employees, loss of government licenses and permits
or failure to obtain them, higher than anticipated labor costs, the possible acquisition of new businesses or
products that result in operating losses or that do not perform as anticipated, resulting in unanticipated losses,
the possible fluctuation and volatility of the Company’s operating results and financial condition, adverse
publicity and news coverage, inability to carry out marketing and sales plans, loss of key executives, changes
in interest rates, inflationary factors, and other specific risks that may be referred to in this Offering Circular
or in other reports issued by us or by third-party publishers.
Category 100% 75% 50% 25% 10% Gross Proceeds $ 10,000,010 $ 7,500,007 $ 5,000,005 $ 2,500,002 $ 1,000,001
Offering Expenses(1) $ 700,001 $ 525,000 $ 350,000 $ 175,000 $ 100,000
Selling Commissions & Fees(2) $ 0 $ 0 $ 0 $ 0 $ 0
Net Proceeds $ 9,300,009 $ 6,975,007 $ 4,650,004 $ 2,325,002 $ 900,001
Compensation and Benefits $ 2,835,000 $ 1,785,000 $ 861,000 $ 430,000 $ 230,000
Travel $ 100,560 $ 100,560 $ 61,485 $ 23,760 $ 23,760
Communications and Utilities $ 38,460 $ 38,460 $ 28,920 $ 7,980 $ 7,980
Office Supplies and Support $ 7,200 $ 7,200 $ 7,200 $ 2,400 $ 2,400
Laboratory Supplies and Support $ 1,866,025 $ 1,628,425 $ 1,299,842 $ 590,000 $ 390,000
Facility $ 50,666 $ 31,333 $ 31,333 $ 12,000 $ 12,000
Marketing & Promotion $ 0 $ 0 $ 0 $ 0 $ 0
Corporate Items $ 523,166 $ 471,046 $ 462,243 $ 208,862 $ 66,000
Regulatory Fees and Consultants $ 3,262,982 $ 2,837,983 $ 1,872,981 $ 1,025,000 $ 157,861
Legal and Accounting $ 120,000 $ 75,000 $ 25,000 $ 25,000 $ 10,000
Contingency $ 495,950 $ 0 $ 0 $ 0 $ 0
Total Use of Net Proceeds $ 9,300,009 $ 6,975,007 $ 4,650,004 $ 2,325,002 $ 900,001
Total Use of Gross Proceeds $ 10,000,010 $ 7,500,007 $ 5,000,004 $ 2,500,002 $ 1,000,001
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1. Total expenditures for offering proceeds are anticipated to be $700,000, These direct and indirect expenditures
include primarily SEC legal, preliminary legal and accounting, auditing services, marketing expenses, digital
advertising expenses, filing fees, and other similar expenses related to the Regulation A offering. The Company has
agreed to pay FundAthena, Inc., doing business as Manhattan Street Capital (“Manhattan Street Capital”) for its
services in hosting the offering of the shares on its online platform. This compensation consists of: (i) $25 per investor
in cash paid when such investor deposits funds into escrow; with a minimum payment of $5,000 per month while the
offering is live to investors (ii) a warrant to purchase that number of shares of Common Stock determined by
multiplying $25 by the total number of investors in this offering and dividing by the price at which our common stock
is sold in this offering, The warrants will have an exercise price equal to the price at which our common stock is sold
in this offering Manhattan Street Capital does not directly solicit or communicate with investors with respect to
offerings posted on its site, although it does advertise the existence of its platform, which may include identifying a
broad selection of issuers listed on the platform. Warrants will be delivered to Manhattan Street Capital promptly
upon the close of the offering. If the offering does not complete successfully for any reason, the warrants earned will
be promptly delivered to Manhattan Street Capital. Payments of cash and warrants to Manhattan Street Capital are
not contingent upon the success of the offering.
2. The Company has not currently engaged a broker dealer at this time, but may do so at some time in the future.
3. Expenses related to the salaries associated with research and development work on our products.
4. Expense related to supplies to pursue research and development, animal studies, and FDA testing.
5. Expenses related to the FDA approval of our products.
DETERMINATION OF OFFERING PRICE
This Offering is a self-underwritten offering, which means that it does not involve the participation of an
underwriter to market, distribute or sell the common stock offered under this offering. Our Offering Price is arbitrary
with no relation to value of the company. The Company has engaged Manhattan Street Capital, LLC to perform
administrative and technology related functions in connection with this offering, but not for underwriting or placement
agent services.
If all the Shares in this offering are fully subscribed and sold, the Shares offered herein will constitute
approximately 29.38% of the total Shares of stock of the Company.
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DILUTION
The term “dilution” refers to the reduction (as a percentage of the aggregate Shares outstanding) that occurs
for any given share of stock when additional Shares are issued. If all the Shares in this offering are fully subscribed
and sold, the Shares offered herein will constitute approximately 29.38% of the total Shares of stock of the Company.
The Company anticipates that subsequent to this offering the Company may require additional capital and such capital
may take the form of Class A Common Stock, other stock or securities or debt convertible into stock. Such future
fund raising will further dilute the percentage ownership of the Shares sold herein in the Company.
If you invest in our Class A Common Stock, your interest will be diluted immediately to the extent of the
difference between the offering price per share of our Class A Common Stock and the pro forma net tangible book
value per share of our Class A Common Stock after this offering. As of the date of this Offering, the net tangible book
value of the Company was approximately $(331,881.00) since the Company has not generated any revenue to date.
Based on the number of Shares of Class A Common Stock and Class B Common Stock issued and outstanding as of
the date of this Offering Circular, that equates to a net tangible book value of approximately ($0.07905) per share of
Common Stock on a pro forma basis. Net tangible book value per share consists of shareholders’ equity adjusted for
the retained earnings (deficit), divided by the total number of Shares of Class A Common Stock outstanding. The pro
forma net tangible book value, assuming full subscription in this Offering, would be $1.52 per share of Common
Stock.
Thus, if the Offering is fully subscribed, the net tangible book value per share of Class A and Class B
Common Stock (assuming conversion of the Preferred Stock) owned by our current shareholders will have
immediately increased by approximately $1.59 without any additional investment on their part and the net tangible
book value per Share for new investors in the Class A Common Stock will be immediately diluted to $1.52 per Share.
These calculations do not include the costs of the offering, and such expenses will cause further dilution.
100% 75% 50% 25% 10% Net Tangible Assets $ 9,668,128.50 $ 12,711,609.00 $ 8,363,779.00 $ 4,015,949.00 $ 1,407,251.00
Offering Expenses $ 700,000.67 $ 525,000.50 $ 350,000.33 $ 175,000.17 $ 100,000.00
Net Tangible $ 8,968,127.84 $ 12,186,608.50 $ 8,013,778.67 $ 3,840,948.83 $ 1,307,251.00
New Shares 1,739,132.00 1,304,349 869,566 434,783 173,913
Total Shares 5,919,263 5,502,492 5,067,709 4,632,926 4,372,056
Previous Value ($0.07905) ($0.07905) ($0.07905) ($0.07905) ($0.07905)
Book Value per Share $ 1.5151 $ 2.2147 $ 1.5813 $ 0.8291 $ 0.2990
Increase to Old
Shareholders $ 1.5941 $ 2.2938 $ 1.6604 $ 0.9081 $ 0.3781
Change in Value $ 4.2349 $ 3.5353 $ 4.1687 $ 4.9209 $ 5.4510
Percentage Dilution 73.65 % 61.48 % 72.50 % 85.58 % 94.80 %
Percentage of Outstanding 29.38 % 23.70 % 17.16 % 9.38 % 3.98 %
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PLAN OF DISTRIBUTION
We are offering a Maximum Offering of up to $10,000,000 in Shares of our Class A Common Stock. The
offering is being conducted on a best-efforts basis without any minimum number of shares or amount of proceeds
required to be sold. There is no minimum subscription amount required (other than a per investor minimum purchase)
to distribute funds to the Company. The Company will not initially sell the Shares through commissioned broker-
dealers, but may do so after the commencement of the offering. Any such arrangement will add to our expenses in
connection with the offering. If we engage one or more commissioned sales agents or underwriters, we will
supplement this Form 1-A to describe the arrangement. Funds tendered by investors will be kept in an account at
Evolve bank in the name of the Company and will be immediately available to the Company. All subscribers will be
instructed by the Company or its agents to transfer funds by wire, check, or ACH transfer directly to the bank account
established for this Offering or deliver checks made payable to “InSitu Biologics, Inc.” Subscribers have no right to
a return of their funds unless the Company rejects a subscription agreement within ten (30) days of tender, in which
event investor funds held in the account at US Bank, N.A. will promptly be refunded to each investor without interest.
The Company may terminate the offering at any time for any reason at its sole discretion and may extend the Offering
past the Closing Date if the absolutely discretion of the Company and in accordance with the rules and provisions of
Regulation A of the JOBS Act.
None of the Shares being sold in this offering are being sold by existing securities holders. All of the Class
A Common Stock was authorized as of June 15, 2017 and issued by the Company.
After the Offering Statement has been qualified by the Securities and Exchange Commission (the “SEC”),
the Company will accept tenders of funds to purchase the Shares. The Company does not intend to use an escrow
agent as this is a “best efforts” offering and funds will be available immediately to the Company for use.
The Offering Circular will be furnished to prospective investors in this offering via download 24 hours a
day, 7 days a week on the Manhattan Street Capital website; www.manhattanstreetcapital.com.
We will also use our existing website, www.InSitu Biologics.com, to provide notification of the Offering.
The Offering Circular will also be furnished to prospective investors via download 24 hours per day, 7 days per week
on the www.InSitu Biologics.com website.
You will be required to complete a subscription agreement in order to invest. The subscription agreement
includes a representation to the effect that, if you are not an “accredited investor” as defined under securities law, you
are investing an amount that does not exceed the greater of 10% of your annual income or 10% of your net worth, as
described in the subscription agreement.
The Company has engaged Manhattan Street Capital to perform the following administrative and technology
related functions in connection with this offering, but not for underwriting or placement agent services. Manhattan
Street Capital will contract the services of a third party, FundAmerica, for the purpose of payment processing and
storage of confidential investor data.
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1. Accept investor data from potential investors on behalf of the Company;
2. Reject investors that do not pass anti-money laundering (“AML”) or that do not provide the required information;
3. Process Subscription Agreements and reject investors that do not complete subscription Agreements;
4. Reject investments from potential investors who do not meet requirements for permitted investment limits for
investors pursuant to Regulation A, Tier 2;
6. Reject investments from potential investors wtih inconsistent, incorrect or otherwise flagged (e.g. for underage or
AML reasons) subscriptions;
8. Oversee transmital by FundAmerica of data to the company’s transfer agent in the form of book-entry data for
maintaining the company’s responsibilities for managing investors (investor relationship management, aka “IRM”)
and record keeping;
9. Receive and transmit investor data to FundAmerica to store investor details and data confidentially and not disclose
to any third party except as required by regulators, by law or in our performance under this Agreement (e.g. as needed
for AML); and
10. The Company has agreed to pay FundAthena, Inc., doing business as Manhattan Street Capital (“Manhattan Street
Capital”) for its services in hosting the offering of the shares on its online platform. This compensation consists of:
(i) $25 per investor in cash paid when such investor deposits funds into escrow; minimum $5,000 per month while
the offering is live to investors (ii) a warrant to purchase that number of shares of Common Stock determined by
multiplying $25 by the total number of investors in this offering and dividing by the price at which our common stock
is sold in this offering, The warrants will have an exercise price equal to the price at which our common stock is sold
in this offering. Manhattan Street Capital does not directly solicit or communicate with investors with respect to
offerings posted on its site, although it does advertise the existence of its platform, which may include identifying a
broad selection of issuers listed on the platform. Warrants will be delivered to Manhattan Street Capital promptly
upon the close of the offering. If the offering does not complete successfully for any reason, the warrants earned will
be promptly delivered to Manhattan Street Capital. Payments of cash and warrants to Manhattan Street Capital are
not contingent upon the success of the offering.
Funds will be deposited in an account at US Bank, NA. Payments are processed via Fundamerica U.S. Bank, N.A.
and will be made immediately available to the Company. No escrow account will be utilized. If a subscription is
rejected, funds will be returned to subscribers within thirty days of such rejection without deduction or interest. Upon
acceptance by us of a subscription, a confirmation of such acceptance will be sent to the subscriber by the Company.
Manhattan Street Capital has not investigated the desirability or advisability of investment in the shares nor approved,
endorsed or passed upon the merits of purchasing the Shares. Manhattan Street Capital is not participating as an
underwriter and under no circumstance will it solicit any investment in the Company, recommend the Company’s
securities or provide investment advice to any prospective investor, or make any securities recommendations to
investors. Manhattan Street Capital is not distributing any securities offering prospectuses or making any oral
representations concerning the securities offering prospectus or the securities offering. Based upon Manhattan Street
Capital’s anticipated limited role in this offering, it has not and will not conduct extensive due diligence of this
securities offering and no investor should rely on Manhattan Street Capital’s involvement in this offering as any basis
for a belief that it has done extensive due diligence. Manhattan Street Capital does not expressly or impliedly affirm
the completeness or accuracy of the Form 1-A and/or Offering Circular presented to investors by the Company. All
inquiries regarding this offering should be made directly to the Company.
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This offering will commence on the qualification of this Offering Circular, as determined by the Securities and
Exchange Commission and continue indefinitely until all of the offered Shares are sold or the Offering is terminated
in the Company’s sole discretion. Funds received from investors will be counted towards the Offering only if the form
of payment, such as a check, clears the banking system and represents immediately available funds held by us prior
to the termination of the subscription period, or prior to the termination of the extended subscription period if extended
by the Company, and only for investors that pass the Anti Money Laundering check and that complete their
Subscription Agreement.
If you decide to subscribe for any Class A Common Stock in this offering, you must deliver a check, certified funds
or another acceptable form of payment for acceptance or rejection. The minimum investment amount for a single
investor is 50 shares of Class A Common Stock in the cumulative principal amount of $287.50. All subscription
checks should be sent to PrimeTrust and made payable to InSitu Biologics. If a subscription is rejected, all funds will
be returned to subscribers within thirty days of such rejection without deduction or interest. Upon acceptance by the
company of a subscription, a confirmation of such acceptance will be sent to the investor.
The Company maintains the right to accept or reject subscriptions in whole or in part, for any reason or for no reason.
All monies from rejected subscriptions will be returned by the Company to the investor, without interest or deductions.
This is an offering made under “Tier 2” of Regulation A, and the shares will not be listed on a registered national
securities exchange upon qualification. Therefore, the shares will be sold only to a person if the aggregate purchase
price paid by such person is no more than 10% of the greater of such person’s annual income or net worth, not
including the value of his primary residence, as calculated under Rule 501 of Regulation D promulgated under Section
4(a)(2) of the Securities Act of 1933, as amended. In the case of sales to fiduciary accounts (Keogh Plans, Individual
Retirement Accounts (IRAs) and Qualified Pension/Profit Sharing Plans or Trusts), the above suitability standards
must be met by the fiduciary account, the beneficiary of the fiduciary account, or by the donor who directly or
indirectly supplies the funds for the purchase of the shares. Investor suitability standards in certain states may be
higher than those described in this Form 1-A and/or Offering Circular. These standards represent minimum suitability
requirements for prospective investors, and the satisfaction of such standards does not necessarily mean that an
investment in the Company is suitable for such persons. Different rules apply to accredited investors.
Each investor must represent in writing that he/she/it meets the applicable requirements set forth above and in the
Subscription Agreement, including, among other things, that (i) he/she/it is purchasing the shares for his/her/its own
account and (ii) he/she/it has such knowledge and experience in financial and business matters that he/she/it is capable
of evaluating without outside assistance the merits and risks of investing in the shares, or he/she/it and his/her/its
purchaser representative together have such knowledge and experience that they are capable of evaluating the merits
and risks of investing in the shares. Broker-dealers and other persons participating in the offering must make a
reasonable inquiry in order to verify an investor’s suitability for an investment in the company. Transferees of the
shares will be required to meet the above suitability standards.
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The shares may not be offered, sold, transferred, or delivered, directly or indirectly, to any person who (i) is named
on the list of “specially designated nationals” or “blocked persons” maintained by the U.S. Office of Foreign Assets
Control (“OFAC”) at www.ustreas.gov/offices/enforcement/ofac/sdn or as otherwise published from time to time, (ii)
an agency of the government of a Sanctioned Country, (iii) an organization controlled by a Sanctioned Country, or
(iv) is a person residing in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.
A “Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC
and available at www.ustreas.gov/offices/enforcement/ofac/sdn or as otherwise published from time to time.
Furthermore, the shares may not be offered, sold, transferred, or delivered, directly or indirectly, to any person who
(i) has more than fifteen percent (15%) of its assets in Sanctioned Countries or (ii) derives more than fifteen percent
(15%) of its operating income from investments in, or transactions with, sanctioned persons or Sanctioned Countries.
The sale of other securities of the same class as those to be offered for the period of distribution will be limited and
restricted to those sold through this Offering. Because the Shares being sold are not publicly or otherwise traded, the
market for the securities offered is presently stabilized.
DESCRIPTION OF THE BUSINESS
InSitu Biologics™, LLC was formed in 2014. In November 2017, InSitu Biologics, LLC was converted into a
Delaware Corporation under the name, InSitu Biologics, Inc. InSitu Biologics, Inc. (“Company” or “InSitu”)
researches, develops, tests and manufactures implantable time release products composed of its proprietary tunable,
bio-polymeric hydrogel, Matrix™ BioHydrogel. InSitu has developed AnestaGel™, a patented drug-delivery product
based on technology originally created by scientists at the Cleveland Clinic. AnestaGel has been developed for the
perioperative pain management market. AnestaGel has unique features including being completely biocompatible, pH
neutral, site-specific placement and tunable.
The Company is completing its product development and pre-clinical testing, which will then bring us to the next
steps in our business: small scale production of AnestaGel for human use, and the clinical (human) study of AnestaGel
for people having certain surgeries. The Company believes it is nearing the time to enter clinical (human) studies,
after one more pre-clinical (animal) study to confirm certain blood levels of the drug bupivacaine during the first 24-
24 hours of use of AnestaGel. Upon completion of that GLP Pre-clinical study, the company anticipates discussing
the results of all the pre-clinical and bench testing and making an application f to begin a Phase 1 Clinical Study. This
would examine the safety of AnestaGel, and the Company would be applying for an Investigational New Drug
(“IND”) with the United States Food and Drug Administration (“FDA”), which it has not yet done. If the Company
is successful in proving safety in the Phase 1 Study, the Company believes it would be required to then perform an
efficacy study of approximately 80 subjects. The Company has been advised that under the 505(b)2 pathway, that if
the efficacy study is successful, it could then be in position to apply for commercial clearance of AnestaGel.
The 505(b)(2) new drug application (NDA) is one of three U.S. Food and Drug
Administration (FDA) drug approval pathways and represents an appealing regulatory
strategy for many clients. The pathway was created by the Hatch-Waxman Amendments
of 1984, with 505(b)(2) referring to a section of the Federal Food, Drug, and Cosmetic
Act. The provisions of 505(b)(2) were created, in part, to help avoid unnecessary
duplication of studies already performed on a previously approved drug; 505(b)(2) gives
the FDA express permission to rely on data not developed by the NDA applicant.
A 505(b)(2) NDA contains full safety and effectiveness reports but allows at least some
of the information required for NDA approval, such as safety and efficacy information on
the active ingredient, to come from studies not conducted by or for the applicant.
Exparel from Pacira was approved on the basis of a 505(b)(2) NDA that relied, in part, on
FDA’s previous findings of safety for Marcaine. The eventual AnestaGel 505(b)(2) NDA
will establish efficacy and safety via a showing of comparable bioavailability to
Marcaine (and possibly Exparel) along with nonclinical and clinical studies needed to
ensure that differences between Marcaine and the listed drug(s) do not adversely affect
safety and effectiveness.
Summary
AnestaGel represents a potentially transformational technology in the perioperative pain control market. Its tunable,
programmable nature, and the ability to modify its form factor to meet the need of nearly every surgery has not been
contemplated for a targeted pain molecule.
• Matrix BioHydrogel is a tunable, biocompatible, and pH neutral platform. It allows AnestaGel to provide
target site-specific, non-migratory placement, a flexible and high dose drug-load reservoir capacity, and
tunable and a predictable pharmacological effect.
• The characteristics of Matrix BioHydrogel permit AnestaGel to be manufactured in a variety of form factors,
allowing the product to be designed on an application-specific basis and to suit physician and hospital
preference.
• Based on InSitu’s MULTIPLE preclinical (animal) feasibility studies, the data suggests that AnestaGel may
deliver faster and longer lasting pain relief than liposome based technologies.
• InSitu’s process development and licensing partner is Lifecore Biomedical.
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AnestaGel has only been tested in the pre-clinical (animal) model. However, based on that data AnestaGel’s financial
opportunity is as potentially disruptive as the technology.InSitu believes AnestaGel is a unique, novel product for pain
control that after further pre-clinical studies, and studies performed under the rules of the United States Food and Drug
Administration (FDA), AnestaGel could be a safe, efficacious, and manufacturable product alternative to opioids used
in controlling surgical pain.
AnestaGel
AnestaGel uses a novel approach to deliver sustained-released analgesics into the target tissue. The AnestaGel product
uses InSitu’s proprietary Matrix BioHydrogel platform, which is based on a patent portfolio and proof of concept for
a biocompatible hydrogel created by the Cleveland Clinic Foundation (CCF) beginning in the early 2000’s.
All of the components of Matrix BioHydrogel are made in the body or can be metabolized by the body. InSitu’s ability
to accurately tune the physical form and rate of absorption to the targeted length of use for a particular tissue is highly
desirable. InSitu believes that AnestaGel, composed of the Company’s Matrix BioHydrogel technology and any of
the “caine” family of pharmaceuticals, could be commercialized to have therapeutic application in many different
surgical patient populations that suffer from pain.
AnestaGel offers a new approach to perioperative pain management that is opioid-sparing, tunable, biocompatible,
target site-specific, and flexible.
The Company believes that AnestaGel can be used in three distinct markets for perioperative pain management:
• Surgical Site / Perioperative: There are an estimated 90 million surgical procedures in the US, resulting in
$10B of drugs / devices being sold in the US.
• Peripheral Nerve Block: This occurs in the majority of surgical procedures, and is a product market that is
estimated to grow to $20B by the year 2025
• Epidural: There are an estimated 2.5M procedures in the US and a product market estimated at $1B
Sources: U.S. Department of Health & Human Services; Pacira Pharmaceuticals; National Center for Biotechnology
Information (NCBI)
Unique Characteristics and Advantages
AnestaGel has the following characteristics and advantages:
• Matrix BioHydrogel is a tunable, biocompatible, and pH neutral platform. It allows AnestaGel to provide
target site-specific, non-migratory placement, a flexible and high dose drug-load reservoir capacity, and
tunable and a predictable pharmacological effect.
• The characteristics of Matrix BioHydrogel permit AnestaGel to be manufactured in a variety of form factors,
allowing the product to be designed on an application-specific basis and to suit physician and hospital
preference.
• The data from InSitu’s preclinical GLP and feasibility studies suggests that AnestaGel may deliver faster
and longer lasting pain relief than liposome based technologies.
• InSitu’s process development and licensing partner is a Lifecore Biomedical, a wholly owned subsidiary of
Landec Corporation. Lifecore is a contract development and manufacturing company and has developed
numerous products related to hyaluaronic acid and valuable methods for making those related products.
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Sizable Product Market Need
AnestaGel applications can address untapped, rapid growth opportunities and large existing patient populations, based
on InSitu’s market research. InSitu believes that AnestaGel has many applications because it can be delivered in
various forms and viscosities and may be long lasting for perioperative applications.
Rapid Growth Opportunities
• There is tremendous demand for non-opioid alternatives for perioperative pain management.
• AnestaGel provides a technical platform to develop products that could be used for multiple procedures
performed in Ambulatory Surgery Centers (ASC’s).
Acceptance and Interest
• Medical Community: Biomaterial injections into synovial joints for temporary therapeutic treatments are
currently considered routine therapy. Expanding the use of this class of materials has been contemplated for
years.
• Patients: Therapeutic patient driven choice is expected to become an increasingly important factor.
AnestaGel technology is easily understood and a natural biomaterial. The growing patient awareness and
interest in potentially dangerous biomaterials in the pain management market will potentially promote the
acceptance and use of AnestaGel in the future.
History
The original patent portfolio and proof of concept for this biocompatible hydrogel was created by the Cleveland Clinic
Foundation (“CCF”) in the early 2000’s. The Company has licensed a number of patents from this portfolio. Please
see Exhibit 6 “License Agreement”.
Since then, extensive time, talent and money has been devoted to the development and research of the technology
behind AnestaGel by InSitu. InSitu Biologic founders, James Segermark (“Jim”) and William Taylor (“Bill”), became
involved with the CCF technology, in 2007 and 2006. The original focus and work concentrated on using a form of
the hydrogel for bulking applications.
Taylor and Segermark completed their work on these projects around 2009. Jim and Bill continued to develop
numerous hydrogels for various medical applications. In early 2014, after completing elution studies, they formed
InSitu Biologics to begin making and testing AnestaGel. InSitu procured an exclusive, royalty free license. InSitu has
since transitioned the biohydrogel bulking agent to a far more sophisticated, implantable delivery vehicle for the newly
created bio-absorbable subcutaneous regional pain control market.
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The Market
Operative Pain Management
Operative pain management is a vast market that remains dominated by opioids. It is an area that hospitals, doctors
and patients continue to find inadequate, despite inroads of new options.
According to The New Guidelines Released for Postoperative Pain Management, by Dr. Laurie Barclay and Pauline
Anderson, acute postoperative pain is common, occurring in more than 80% of patients, with approximately 75% of
these having moderate, severe, or extreme pain. Postoperative pain relief is inadequate in more than half of patients,
which can negatively affect quality of life, function, and functional recovery, as well as increasing the risks for
postsurgical complications and persistent postsurgical pain.
Numerous studies and research reinforces the fact that postoperative pain relief remains inadequate and there is a
major need for non-opioid alternatives. A sample of the research findings are presented below:
• 73% of inpatient and 57% of outpatient surgeries have moderate to extreme pain postoperatively, despite
opioid use by nearly 90% of patients. Pain continues to be undermanaged, according to, Habib AS, Miller
research by Gan TJ TE, White W, Apfelbaum JL. Results from a US national survey, Curr Med Res Opin.
2014
• Experiencing postoperative pain was the most common concern (59%) of patients. Almost 25% of patients
who received pain medications experienced adverse effects.
• In the United States, more than 73 million surgeries are performed annually, and up to 75% of patients
experience pain after surgery. Managing patient pain after surgery often remains top of mind for hospitals
despite inroads in new technology, therapies, and processes that have helped lower pain experiences,
according to Elizabeth A Reid, Content Manager, Guidepoint; a leading global research services firm.
• There are about 46 million inpatient and 53 million outpatient surgeries performed in the United
States each year that require drugs for post-operative pain, and over half of these patients still
experience inadequate pain relief, according to a report by Cara Therapeutics on the acute pain
market.
• Acute postoperative pain is a serious problem for many patients. Nearly 50% of postoperative patients have
moderate pain, and more than one-third suffer severe pain. There are serious consequences to unrelieved
pain, both physically and psychologically, according to PAINWeek.
• Inadequately managed and undertreated postoperative pain remains a major clinical, economic and social
challenge. The current standard of care for the treatment of post-operative pain relies heavily on the use of
opioids supplemented by other classes of pain medications, the combination of which is known as multi-
modal pain therapy.
• Given the negative side effects and costs associated with opioid use in particular, there is increasing focus
from hospitals, payors and regulators on treatments that reduce opioid use in the treatment of postoperative
pain
• Stronger, Longer, and Opioid-sparing Postoperative Pain Management Approaches Are Urgently Needed
• Untapped Opportunity: Long-acting Anesthetics Currently Make Up Only 5% of the Postoperative Pain
Relief Market
• According to Post-Surgical Pain Management TRACKER data from January 2015, “opioids were the most-
used treatments, with oral and IV/PCA opioids used in the majority of cases. But early feedback from the
TRACKER’s panel demonstrates a broad range of post-surgical pain management regimens, with various
user preferences. Data shows that while opioids are leading the pack, local anesthetic infiltration and nerve
blocks are popular and gaining market share. Guidepoint’s Post-Surgical Pain Management TRACKER also
tracks the usage of EXPAREL, a single-dose, non-opioid, long-acting local anesthetic currently indicated for
injection into tissues at the site of surgery, and finds that usage is lower than short-acting local anesthetics
although the drug has been used in many cases and is growing share in its largest segment of use, the
orthopedic setting.”
• With more than 12 months of treatment data collected, Guidepoint’s Post-Surgical Pain Management
TRACKER shows a slow and steady trend of physicians exploring and moving to newer non-opioid
therapies, such as EXPAREL, and pumps.
• Although 2015 saw a slight decline in opioid treatment share, TRACKER data finds that opioids are still
used by the majority (90-95 percent) of post-operative arthroplasty patients.
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The Opioid Challenge
“Annually, more than 70 million postsurgical patients receive opioids, and research shows one in 15 will go on to
long-term use, indicating that the surgical setting has become an inadvertent gateway to the overall societal
epidemic....the best way for hospitals to take immediate action is to implement strategies to minimize preventable
opioid exposure,” according to Dr. Scott Sigman, orthopedic surgeon and team physician for the U.S. Ski Jump Team.
“States Move to Control How Painkillers Are Prescribed.” New York Times, March 2016.
“Opioids present several potential problems, including side effects such as nausea and vomiting, post-operative ileus,
respiratory depression, urinary retention, constipation and the potential for long-term dependence,” according to a
report by Frost & Sullivan in 2014, Every Patient’s Pain is Personal. Although opioids prove to be an effective
treatment for pain management, the drawbacks include the increased risk of fall-related injuries and potential abuse
and addiction. As a result, many doctors are turning to emerging alternatives, including new formulations of local
anesthetics and elastomeric pumps. EXPAREL has detailed its commitment to “providing patients with long-acting,
non-opioid analgesic options”. Halyard continues to conduct studies on how its products reduce opioid consumption.
Future adoption of these therapies could impact usage of other modalities, according to Guidepost. In the U. S. there
is a 55% increase in length of hospital stay due to opioid related AEs; according to Kessler ER, Shah M, Gruschkus
SK, Raju A. Pharmacotherapy, 2013.Given the negative side effects and costs associated with opioid use, there is
increasing focus from hospitals, payors and regulators on treatments that reduce opioid use in the treatment of
postoperative pain.
Addressing the Opioid Epidemic Continues to Gain Attention
The issues associated with opioid addiction continue to garner major focus, which heightens the attention and
importance of the development of safer, more effective products for pain management. Following the lead of the
National Institutes of Health (NIH), the United States Surgeon General weighed in on this topic in a letter sent to all
physicians in August 2016. While much of the focus is on patients in chronic pain, the need for a more effective,
longer-lasting product for post-operative pain management is critical, and represents a significant positive behind the
early commercial acceptance and success of FDA cleared EXPAREL, and in the development of superior alternatives
such as AnestaGel.
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License Agreement
The Company entered into a license agreement with Lifecore Biomedical, LLC (“Lifecore”) on November
14, 2014, in connection with certain patents whereby Lifecore granted the Company an exclusive
worldwide license, including the right to grant further sublicenses to develop, use, import, export,
distribute, market, promote, offer for sale and sell Products. Lifecore retains the right to manufacture and
supply to Company and all sublicensees any and all Products developed under the License Agreement The
license agreement has an initial term of 5 years with the Company having to option to
renew the agreement if certain regulatory, clinical or sales milestones are met and if the
Company pays a renewal fee in the low six figures for each renewal(s). Notwithstanding
any renewal, the license agreement will expire at the last to expire valid patent claim of
the last to expire licensed patent. Each party may terminate if the other party materially
breaches the agreement, subject to notice and opportunities to cure. We may terminate
the license agreement at any time on 60 days’ notice. Similarly, if the Company were to
sublicense a product to a third party that is developed under the licensed patents, the
Company would pay Lifecore a sublicense fee in the mid six figures for each product that
is sublicensed.
Competition
EXPAREL (bupivacaine liposome injectable suspension) by Pacira Pharmaceuticals, Inc. is a direct competitor to the
AnestaGel product. Currently EXPAREL dominates the market for non-opioid products used for postsurgical pain
control. EXPAREL is a non-opioid local analgesic indicated for administration into the surgical site to produce
postsurgical analgesia. EXPAREL combines bupivacaine with the DepoFoam® drug delivery platform to provide
postsurgical pain control with a single intraoperative infiltration. EXPAREL’s revenues exceeded $230 million in
2015. Expaerel is an FDA approved and commercially available drug.
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Which Pain Management Approach Provides Better Pain Relief at Specific Time Points (Anesthesiologists’
Clinical Perspective)
Source: Frost & Sullivan
Unlike the claim of up to 72 hours of pain control marketed by Pacira, anesthesiologist respondents stated that when
EXPAREL was used without any adjunctive medications, it provided, on average, only 25 hours of pain relief in their
clinical experience. Yet, according to Frost & Sullivan’s research, clinicians expect that almost half of major surgery
patients will have severely disabling pain beyond 25 hours.
EXPAREL’s own clinical data is focused on bunionectomy and hemorrhoidectomy cases, where the
clinicians surveyed reported that pain is lower in comparison to major surgery at that 25-hour threshold. Frost &
Sullivan’s research found that 85% of applications of the drug reported in this survey were neither of those two
surgeries.
Relying on EXPAREL as a primary method of post-operative pain relief for major surgical cases runs the risk of
under-treating pain later in the critical recovery period. The duration of actual pain relief the two products provide is
a significant difference between the products. EXPAREL’s claims to provide “up to 72 hours of pain control” are not
supported by clinical perspective of participants surveyed or in independent research. The FDA’s medical review for
EXPARELreported; “In the clinical trials described in the medical review, the duration of EXPAREL’s analgesic
effect appears to be no more than 24 hours and not longer than that of encapsulated bupivacaine HCl,”Buvanendran
A, Fiala J, Patel KA, Golden AD, Moric M, Kroin JS. The incidence and severity of postoperative pain following
inpatient surgery. Pain Med. 2015;16(12):2277–2283.
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Soft Tissue Market Opportunity
Source: Pacira Pharmaceuticals Corporate Presentation
Orthopedic Market Opportunity
Source: Pacira Pharmaceuticals Corporate Presentation
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There are a number of companies that are in various stages of development with new options for post-operative, non-
opioid pain management, including (but not limited to) the following:
• Xaracoll – developing a collagen matrix with bupivacaine for postoperative pain management
• Regeneron Pharmaceuticals developing Fasinumab
• Innocoll, with its bupivicaine collagen sponge
• Heron Therapeutics and its HTX-011 product, a mix of bupivacaine and meloxicam for post-operative pain.
Intellectual Property & Patent Portfolio
The materials and AnestaGel applications are supported by a strong patent portfolio consisting of over 20 issued
patents (primarily the Calabro patents through The Cleveland Clinic Foundation), and numerous published, pending,
and filed and patents. InSitu’s manufacturing and development Trade Secrets are aligned with the patent portfolio and
maximize InSitu’s core competencies across many medical platforms. In general terms, patents 6,982,298, 7,465,766
and 8,207,262 are foundation patents. These explain the chemistry of the hydrogel and introduce basic applications
for the hydrogel. Patents 8,138,265, 8,080,260 and 8,410,180 are application specific, but will become foundational
patents in the future as InSitu expands IP to include tissue engineering, delivery of hydrogel, and materials/cells to
target sites and ways to manipulate the formulation specifically. The Company’s existing patents primarily relate to:
• Crosslinking technology and variations using multiple biopolymer backbones
• Tunability of gel to create multiple physical forms
• Drug delivery in numerous applications
• Manufacturing Capabilities
• Significantly developed, proprietary methods
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51
Title Inventors Country Application No. Date
Filed Status Focus License
Status
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
Czech Republic
05773274.5 7/8/2005 Issued as Pat No. 1773943 Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
Europe 04701177.0 1/9/2004 Published Annuity due: 01/09/2017
Synthetic macromolecular network generally; Methods of making and hydrogel so-made
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Europe 05773274.5 7/8/2005 Issued as Pat No. 1773943 Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, DanielP. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
France 05773274.5 7/8/2005 Issued as Pat No. 1773943Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Germany 05773274.5 7/8/2005 Issued as Pat No. 1773943 Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David
United Kingdom
05773274.5 7/8/2005 Issued as Pat No. 1773943Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Haynes, Keiji Kamohara, DanielP. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Hong Kong
07109551.5 9/3/2007 Published - Annuity due 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material (Extension from EP1)
Licensed (via European application)
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, DanielP. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Italy 05773274.5 7/8/2005 Issued as Pat No. 1773943Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
United States
60/439,201 1/10/2003 Expired Broad macromolecular network generally; T-HA hydrogels
Licensed through correspondi ng utility patents claiming priority
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
Sweden 05773274.5 7/8/2005 Issued as Pat No. 1773943 Annuity due: 07/08/2017
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
United States
10/753,779 1/8/2004 Issued as U.S. Pat. No.6,982,298 on1/3/2006; 3rd
maintenance fee due 7/3/2017
Broad macromolecular network generally; T-HA hydrogels
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci,
United States
11/176,544 7/7/2005 Issued as U.S. Pat. No. 7,465,766 on 12/16/2008; 3rd
maintenance fee due 6/16/2020
Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed
Marshall Strome
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
United States
11/198,803 8/5/2005 Issued as U.S. Pat. No. 7,368,502 on 5/6/2008; 3rd
maintenance fee due 11/06/2019
Methods of making macromolecular networks and hydrogels (Divisional of US1)
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, DanielP. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
United States
12/283,661 9/15/2008 Issued as U.S. Pat. No.8,207,262 on6/26/2012; 2nd
maintenance fee due 12/26/2019
Broader synthetic macromolecular network/ hydrogel claims;
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Aniq B. Darr, Richard A. Gross
United States
12/320,609 1/29/2009 Issued as U.S. Pat. No. 8,138,265 on 3/20/2012; 2nd
maintenance fee due 9/20/2019
Method of making hydrogel in situ
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, Keiji Kamohara
United States
12/320,613 1/29/2009 Issued as U.S. Pat. No. 8,021,350 on 9/20/2011; 2nd
maintenance fee due 3/20/2019
Method of treating regurgitation of cardiac valves
Licensed
Hydroxyphenyl Cross-Linked Macromolecular Network and
Peter A. Zahos, Anthony Calabro, Aniq
United States
12/380,469 2/27/2009 Issued as U.S. Pat. No. 8,137,688 maintenance fee due on
Synthetic nucleus pulposus
Licensed
Applications Thereof
B. Darr, Richard A. Gross
9/20/2019 3/20/2012; 2nd
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Richard A. Gross, Aniq B.Darr
WIPO PCT/US2004/000 478
1/9/2004 National Phase Licensed via EP only (other jurisdictions dropped)
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Anthony Calabro, Lee Akst, Daniel S. Alam, James Chan, Aniq B. Darr, Kiyotaka Fukamachi, Richard A. Gross, David Haynes, Keiji Kamohara, Daniel P. Knott, Hilel Lewis, Alex Melamud, Anthony Miniaci, Marshall Strome
WIPO PCT/US2005/024 391
7/8/2005 National Phase Licensed via EP only (other jurisdictions dropped)
Hydroxyphenyl Cross-Linked Macromolecular Network and Applications Thereof
Lee Michael Akst, Daniel S. Alam, Robert Tracy Ballock, Mary P. Bronner, Michael C. Byrd, Anthony Calabro, James Chan, Aniq B. Darr, Brian L. Davis, Linda M. Graham, Richard A. Gross, Philip Daniel Knott,
United States
60/586,585 7/9/2004 Expired Synthetic, implantable tissue matrix; Specific synthetic tissues made of that material
Licensed through US and EP pats/apps claiming priority
Peter J. Koltai, Hilel Lewis, Alex Melamud, Anthony Miniaci, George F. Muschler, Shuvo Roy, Marshall Strome
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
Europe 09710120.8 2/13/2009 Issued as Pat No. 2249891; Annuity due 02/13/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
Germany 09710120.8 2/13/2009 Issued as Pat No. 2249891; Annuity due 02/13/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
Spain 09710120.8 2/13/2009 Issued as Pat No. 2249891;Annuity due 02/13/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
France 09710120.8 2/13/2009 Issued as Pat No. 2249891; Annuity due 02/13/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang
United Kingdom
09710120.8 2/13/2009 Issued as Pat No. 2249891; Annuity due 02/03/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Chin, Anthony Calabro
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
Italy 09710120.8 2/13/2009 Issued as Pat No. 2249891; Annuity due 02/13/2017
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Macromolecular Enhancement of Fascia Lata ECM and Methods of Use
Kathleen Derwin, Joseph Iannotti, LiKang Chin, Anthony Calabro
United States
61/065,527 2/13/2008 Expired Licensed through issued US patent claiming priority
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
United States
12/378,296 2/13/2009 Issued as U.S. Pat. No. 8,080,260 on 12/20/2011; 2nd
maintenance fee due 6/20/2019
Enhancement of ECM using Calabro material (fascia lata); Patch for tissue (e.g. tendon) repair
Licensed
Molecular Enhancement of Extracellular Matrix and Methods of Use
Kathleen Anne Derwin, Joseph Patrick Iannotti, LiKang Chin, Anthony Calabro
WIPO PCT/US2009/034 071
2/13/2009 National Phase Licensed via EP only (other jurisdictions dropped)
Hydrogel Material for Nucleus Pulposis Replacement
Peter A. Zahos, Anthony Calabro, Aniq B. Darr
United States
61/391,909 2/27/2008 Expired Synthetic nucleus pulposus
Licensed through US patent claiming priority
Novel Methods and Compositions to Treat Stress Urinary Incontinence
Anthony Calabro, Aniq B. Darr, Firouz Daneshgari
United States
61/049,275 4/30/2008 Expired Licensed through issued US patent
Compositions and Methods to Treat Urinary Incontinence
Anthony Calabro, AniqB. Darr, Firouz Daneshgari
United States
12/378,256 4/30/2009 Issued as U.S. Pat. No.8,410,180 on4/2/2013; 1st
maintenance
Methods of treating SUI using hydroxyphenyl- substituted
Licensed
feedue 10/2/2016
collagen network
InSitu has also begun filing its own patent applications. The Company’s focus applies specifically to drug delivery,
and expands on applications and introduces concepts for tissue engineering, drug elution, different types of depots
(drug any type of material that can hold an excess of drug material.
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Other areas of IP focus on tuning the hydrogel to target a desired elution rate of a delivered drug or bioactive
molecule. The IP describes the types of depots, or drug reservoirs, which could work with the formulation, the binding
matrix that holds the depots in place during the elution process, and ways to tune the reservoirs (and matrix) to work
with multiple types of drug molecules and bioactive molecules of various size and molecular weight. Finally, the
Company’s IP strategy contemplates all of the different formulations and configurations that can be delivered through
a variety of placement devices.
Clinical Data and Process
GOOD LABORATY PRQCTICES (GLP) STUDY SUMMARY
Statistical analysis was performed by Technomics Research, LLC (Long Lake, MN, USA). The total force
generated was analyzed using an unpaired t-test and calculated using the average force from each rat at each time
point from 2 to 72 hours for 0–72 hours and from 2 to 120 hours for 0–120 hours. The difference between the right
paw and left paw was evaluated using a repeated-measures analysis of variance. The area under the curve analysis
was performed using the left paw average force value data and the difference was tested by an unpaired t-test.
Ninety rats with 30 in each group were included in the GLP portion of the study testing both mechanical allodynia
and pathology. Additionally, six rats were included in the final non-GLP pharmacokinetic analysis. We first analyzed
the total force generated from 2 to 72 hours after injection in the left (injured) paw. We found that the sustained release
hydrogel with bupivacaine group had significantly higher force generated than the control (P=0.0004) and the
liposome bupivacaine (P=0.0002) groups. We then evaluated the total force generated from 2 to 120 hours after
injection. The sustained release hydrogel with bupivacaine group had significantly higher force generated when
compared to the control group (P=0.0024) and the liposome bupivacaine group (P=0.0005), as shown in Tables 2 and
3. Finally, we compared the right (uninjured) to left (injured) paw values for each group and found that the right paw
generated significantly higher force than the left at all time points for all three groups.
Specifically, the GLP study illustrates that a single injection of sustained release hydrogel with bupivacaine
administered near the sciatic nerve produced long-lasting analgesia in a rat model. When compared to both a negative
control (sustained release hydrogel without bupivacaine) and a positive control (liposome bupivacaine), sustained
release hydrogel with bupivacaine performed significantly better on assessing analgesia via mechanical allodynia
produced from a sciatic nerve injection in rats from 0 to 72 hours and from 0 to 120 hours. This study is based on
previous rat pain models which used similar incisions and force testing for assessment of analgesia. It must be noted,
however, that while the volumes were the same between sustained release hydrogel with bupivacaine and the positive
control, the dosages of bupivacaine were different. The concentration of bupivacaine in sustained release hydrogel
with bupivacaine was 105 mg/mL and in liposome bupivacaine was 13.3 mg/mL
This analgesic effect of sustained release hydrogel with bupivacaine on the injured paw was supported by the data
regarding the right paw. There was no significant difference between the right paw data when comparing sustained
release hydrogel with bupivacaine to control and sustained release hydrogel with bupivacaine to liposome
bupivacaine. This suggests that all rats performed equally well with regards to force assessment via the eVF testing
in their uninjured paw and, thus, further validates testing on the injured paw. Furthermore, as there were significant
differences in force generation at all time points between the left and right paws for each group, we can conclude
that again force assessment via the eVF was accurate as the injured paw performed significantly worse in force
assessment when compared to the uninjured paw.
Previous studies have illustrated the neurotoxic effects of local anesthetics. The neuronal injury can be
characterized as either perineural inflammation or decreased number of myelinated fibers. The exact mechanism of
neuronal injury is unknown; however, research suggests different mechanisms depending on the type of local
anesthetic used. Furthermore, they showed that as the concentration of bupivacaine increased, there was increased
neurotoxicity. Consistent with these results, the sustained release hydrogel with bupivacaine group did show some
nerve damage histologically, but this damage was minimal to mild at 5 days and minimal at the 42-day time point.
This likely would resolve completely over time. The liposome bupivacaine (positive control) group did not show
any measurable neurotoxicity, which was similar to previous pathologic findings obtained when injected
perineurally in a porcine model. As described earlier, the concentration of sustained release hydrogel with
bupivacaine was higher than that of liposome bupivacaine, which may account for the differences in neuronal
damage on histopathology.
Finally, the pharmacokinetic pilot study results suggest that bupivacaine remained longer in the blood of rats that
received a sciatic nerve injection of sustained release hydrogel with bupivacaine than after injection of bupivacaine
hydrochloride and liposome bupivacaine, indicating prolonged release. In rats weighing between 350 and 450 g, the
concentrations of bupivacaine injected were between 23 and 30 mg/kg for sustained release hydrogel with
bupivacaine and 3 and 3.7 mg/kg for liposome bupivacaine. Thus, the differences could be related to the differences
in the concentration of bupivacaine injected. However, even at a lower concentration, liposome bupivacaine failed
to produce measurable blood levels beyond 24 hours, whereas the sustained release hydrogel with bupivacaine
produced measurable serum bupivacaine levels at 72 hours in one rat and 96 hours in another. Serum bupivacaine
cmax levels of the sustained release hydrogel with bupivacaine are similar to previous studies involving larger
dosages of liposome bupivacaine in animals.
In conclusion sustained release hydrogel with bupivacaine provides long lasting analgesia via release of bupivacaine
from a biohydrogel matrix with no severe negative pathological findings in a rat model performed under GLP when
compared to both positive and negative controls.
DESCRIPTION OF PROPERTY
The Company owns no real property. The Company leases approximately 2,000 square feet of office and lab space as
discussed in our section entitled “Use of Proceeds.”
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SELECTED FINANCIAL DATA
The following summary financial data should be read in conjunction with Management's Discussion and
Analysis and the Financial Statements and Class A Common Stock thereto, included elsewhere in this Offering. The
statement of operations and balance sheet data from inception through the year ended December 31, 2017 and
December 31, 2017 are derived from our audited financial statements.
As of
December
31, 2017
As of
December
31, 2016
TOTAL ASSETS $ 204,694 $ 212,096
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Current Liabilities 126,684 90,975
Notes Payable 409,891 300,000
TOTAL LIABILITIES 536,575 390,375
TOTAL SHAREHOLDERS’ DEFICIT (331,881 ) (178,879 )
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 204,694 212,096
Year
Ended
December
31, 2017
Year
Ended
December
31, 2016
Revenues $ 0 $ 0
Expenses 275,705 300,554
Interest Expense 41,457 30,000
Net Loss (317,252 ) (330,554 )
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
You should read the following discussion and analysis of our financial condition and results of our operations together
with our financial statements and related notes appearing at the end of this Offering Circular. This discussion contains
forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and
the timing of events may differ materially from those contained in these forward-looking statements due to a number
of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular.
BUSINESS
InSitu Biologics, Inc. (the “Company”) was formed as InSitu Biologics, LLC as a Minnesota limited liability company
on June 4, 2014 and was converted as a Delaware Corporation for the general purpose of engaging in any lawful
activity for which corporations may be organized under the law of the State of Delaware. The Company is in the pre-
clinical phase of product testing, and has not applied to the FDA for any exploration of a new drug compound.
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There are three classes of stock in the Company:
1. Class B Common Stock
2. Class A Common Stock and
3. Preferred Stock
The total number of shares of all classes of stock the Company is authorized to issue is 110,000,000 shares, 10,000,000
of which are authorized as Preferred Stock; 10,000,000 of which are authorized as Class B Common Stock; and
10,000,000 of which are authorized as Class A Common Stock. The Shares being sold in this Offering are all Class
A Common Stock.
Description of Rights of Classes of Stock
All Shares of Class A Common Stock shall be identical and have one vote per share. The Shares to be issued pursuant
to this Offering will be Class A Common Stock. All holders of shares of Class B Common Stock (which are not being
sold in this Offering) shall be identical and shall at every meeting of the stockholders be entitled to two votes for each
share of the capital stock held by such stockholder. All of the other terms (except for voting) of the Class A Common
Stock shall be identical to the Class B Common Stock, except for the right of first refusal that attaches to the Class A
Common Stock, as explained in this Offering Circular and in the Company’s Bylaws.
The Preferred Stock is convertible to the Class A Common Stock on a 1 to 1.1 basis meaning for every Preferred
Share owned by a Shareholder, they may convert it into 1.1 shares of Class A Common Stock after the Regulation A+
offering is qualified by the Securities Exchange Commission.
Results of Operations
The year ended December 31, 2016
Revenue. Total revenue for the year ended December 31, 2016 was $0. June 4, 2014 (date of inception) to December
31, 2016, the Company was in the start-up phase.
Operating Expenses. Operating expenses for the year ended December 31, 2016 were $300,554. Operating expenses
for the period were comprised of research and development expenses and general administrative expenses.
Net Loss. The Company realized a net loss of ($330,554) for the year ended December 31, 2016.
The year ended December 31, 2017
Revenue. Total revenue for the period ended December 31, 2017 was $0.
Operating Expenses. Operating expenses for the period December 31, 2017 were $275,705. Operating expenses were
for research and development expenses and other general administrative expenses.
Net Loss. Net loss for the period ended December 31, 2017 was $317,252.
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Liquidity and Capital Resources
The Company had net cash of $209,158 at December 31, 2016 and net cash of $147,852 as of December 31, 2017.
During the year ended December 31, 2016, we used $274,479 of cash to cover the operating expenses. For the period
ended December 31, 2017, cash was used for operating expenses of $301,054.
For the year ended December 31, 2016, $30,000 of Company cash was used for interest expense. For the period ended
December 31, 2017 $41,547 of Company cash was used for interest expense were met by the founders.
The Company believes that funding at any level could result in significant progress being made toward gaining the
Phase 1 Clinical Study. The Company has not yet applied for an Investigational New Drug (“IND”). The Company
has completed the capital acquisition of its laboratory equipment and further laboratory expenses are directly related
to compounding products. The Company has the ability to slow down or accelerate product development, pre-clinical
studies, and clinical studies based on available funds. Nearly all expenses are variable, and employees are willing to
delay compensation from time to time if need be.
Related Party Transactions.
In June 2017, the Company entered in to a line of credit (“LOC”) for continued financing of the Company’s operating
expenses. This senior non-subordinated LOC provides for up to $130,000 of funding to be repaid at the non-usurious
interest rate of 6%. As of December 31, 2017, the Company had accessed approximately $109,891 of the available
funds.
In exchange for waiving all of the rights granted to 524 Investments, LLC in connection with their First Round
Investment of $1,000,000 resulting in 99.95% of all equity purchased, with the exception of a board seat appointment,
524 Investments shall maintain shares which allow them 2 votes for every Class B Share.
In January 2018 the related party note and all other Noteholders agreed to convert their Notes to the shares under the
terms of the current Preferred Stock Offering. The notes and accrued interest were converted into 95,131 preferred
shares at a conversion rate of five to one. The Preference is 10% more shares upon conversion to Common A shares
when the Company conducts its anticipated Regulation A Plus Offering. In receiving that discount as part of the debt
conversion in January 2018, Noteholders also agreed to accept a 6% interest rate instead of the 10% interest rate.
Subsequent to December 31, 2017, and through January 15, 2018, the Company accepted the last subscription to sell
Preferred Stock with rights to conversion as defined in the Company’s Confidential Private Placement Memorandum.
The amount held in escrow as of February 12, 2018, is $48,000.
Trend Information
Because we are still in the startup phase and have only recently launched the Company, we are unable to identify any
recent trends in site visitations, revenue or expenses since the latest financial year. Thus, we are unable to identify any
known trends, uncertainties, demands, commitments or events involving our business that are reasonably likely to
have a material effect on our revenues, income from continuing operations, profitability, liquidity or capital resources,
or that would cause the reported financial information in this Offering to not be indicative of future operating results
or financial condition.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
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Critical Accounting Policies
We have identified the policies outlined in this Offering Circular and attachments as critical to our business operations
and an understanding of our results of operations. Those policies outlined are not intended to be a comprehensive list
of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically
dictated by accounting principles generally accepted in the United States, with no need for management’s judgment
in their application. The impact and any associated risks related to these policies on our business operations is
discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operation where
such policies affect our reported and expected financial results. Note that our preparation of the consolidated financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported
amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not
differ from those estimates.
Revenue Recognition
The Company had no revenue during 2017 or 2016. The Company had no product returns during 2017 or 2016.
Additional Company Matters
The Company has not filed for bankruptcy protection nor has it ever been involved in receivership or similar
proceedings. The Company is not presently involved in any legal proceedings material to the business or financial
condition of the Company. The Company does not anticipate any material reclassification, merger, consolidation, or
purchase or sale of a significant proportion of assets (not in the ordinary course of business) during the next 12 months.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors, executive officers and significant employees of the Company as of the date of this filing are as follows:
Name
Position
Age
Term of Office
PT Hours
(1)
FT Hours
(2)
Executive Officers
James Segermark
CEO, President,
Treasurer
56
NA
40
James Knapp Chairman Treasurer 42 10 NA
William Taylor CSO, Secretary 47 NA 40
Directors
James Segermark Director 56 NA 40
James Knapp Director 42 10 NA
William Taylor Director 47 NA 40
(1) Approximate Hours Worked Per Week For Part Time Employee
(2) Approximate Hours Worked Per Week For Full Time Employee
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Directors, Executive Officers and Significant Employees
As of the date of this filing, INSITU BIOLOGICS has two full-time employees. It has also established a business
board of directors. In addition, INSITU BIOLOGICS has engaged with other key individuals possessing a range of
expertise including mechanical engineering, process engineering, software engineering, computational modeling and
other areas. These additional key individuals could start employment at INSITU BIOLOGICS at such time as the
company has sufficient capital or financing to fund the expanded launch of its business activities and research and
development.
The number of business and direct research personnel hired by INSITU BIOLOGICS will scale based upon funds
raised in the equity crowdfunding offering and as operating needs warrant. Certain skilled executive positions, such
as a person to manage U.S. FDA requirements, could be filled in a timely fashion as the business progresses, but most
likely the use of consultants and experts in the field could prove to be a more productive and cost effective means of
handling requirements.
INSITU BIOLOGICS board members serve unless and until a successor is elected and qualified. Board members will
not receive compensation for attendance in board meetings, but may be reimbursed for reasonable expenses incurred
during the course of their performance. Personnel currently serving as officers and board members of INSITU
BIOLOGICS include:
Jim Segermark, President, Chief Executive Officer
Jim Segermark, has served on the Board of InSitu Biologics since its inception in 2014. Jim became an employee of
InSitu Biologics on January 1, 2018. Jim has been the founder, inventor, investor, and owner operator of numerous
medical device ventures. Jim has as an extensive record of developing, managing and selling medical related
companies. Jim has also established successful joint ventures and acted as a project consultant for strategic medical
device opportunities.
In 2013 and 2014, Mr. Segermark worked as an independent consultant for Pacific Place Enterprises in
Lincoln, Nebraska and Capture Vascular in Telluride, Colorado.
Jim was the founder of Eight Medical Corporation, a hyperthermic lavage system cleared by the FDA, which was sold
in September of 2012. For three years prior to founding Eight Medical, Jim operated ThermaSolutions, Inc., a
turnaround company in the hyperthermic lavage market. Jim was the Founder, Chairman (and first patient) of VMBC,
LLC, TheVasclip Company, from 2001 - 2007. He founded ViaMedics, LLC in 1998, a designer and manufacturer of
proprietary medical devices. This company spun out The Vasclip Company and completed other product line based
transactions. Jim served in various senior management positions at Microvena Corporation from 1991 until January
of 1998. Jim served on the Board of Directors for Microvena from 1995-1997, and Infinity Extrusion and Engineering
from 1995-1998.
Jim entered the medical device industry in 1987, marketing cardiac monitoring equipment for Circadian, Incorporated,
and then marketed angioplasty products for the USCI Division of C.R. Bard. Jim founded his first company, Vascular
Dynamics, Incorporated, a designer and manufacturer of exact medical models, in 1989. VDI was successfully sold
and remains the industry standard for working vascular models today.
Jim holds dozens of patents and in the past 36 months has helped launch several new ventures. Jim recently helped
launch AliveLock, Awestruck Medical and Capture Vascular as a consultant to the CEO’s for each company.
Jim holds his MBA from Cardinal Stritch University, Milwaukee, Wisconsin with an emphasis in Finance and holds
a B.S. from Carroll University, Waukesha, Wisconsin.
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James Knapp, Chairman, Board of Directors
James Knapp has served on the Board of InSitu since May of 2015. James, CRPC, CFP, APMA is the President of
Heritage Wealth Architects, a financial advisory firm that James founded in 2012. . James is responsible for leading
all aspects of the firm. Earlier in his career, as a CFP, James led a franchise for one of the largest financial planning
firms in the country. James specializes in advising executives, small business owners, and high net-worth individuals
concerned with tax-planning, compensation, buying, growing or selling their businesses. James started HWA as a fee
for service firm with a vision to provide clients with a personalized, flexible and thorough array of options to create
and conserve wealth. At the center of his client-focused firm is the commitment to honor his fiduciary responsibilities,
and really listen to each individual’s goals and dreams. James is a Business Management graduate of Luther College,
and lives in St. Paul, where he enjoys spending time with his family, traveling, hunting, fishing, climbing mountains
and playing golf.
William J. Taylor, Chief Scientist
Bill Taylor has served on the Board of InSitu since its inception in 2014. Bill became an employee at InSitu Biologics
on January 1, 2018. Bill is a successful medical device development program manager and scientist. From May 2011
through October 2017, Bill lead multiple projects for ACIST Medical Systems including CVi – A2000V, CVi –
CPT2000, and RXi rapid exchange FFR system and Navvus catheter; an ultrathin microcatheter pressure sensor. In
2007, Bill was recruited to lead a biohydrogel technology development program in cooperation with the Cleveland
Clinic Foundation and was able to complete biocompatibility testing, fundamental physical and chemical property
design package, initial application identification and start feasibility analysis. Bill was the lead project manager in the
construction, qualification and validation of PDL Biopharma’s (formerly Protein Design Labs, Inc.) state-of-the-art,
$200 million production facility in Brooklyn Park, MN. Throughout his career he has been the program manager in
medical device and biopharmaceutical product development including Retavase (Roche), Osteoarthritis injectable,
and several consumable kits. Prior to 2004, Bill was a principal scientist, inventor and program manager at Gradient
Technology. Bill has authored industry papers in chemical remediation and demilitarization utilizing biological
systems.
Bill has his Bachelor of Science from the University of Minnesota with a double major in Chemical Engineering and
Biology.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
From inception to the date of this Offering, the Company has paid no compensation to its officers or directors. The
Company may hire additional officers in the future and pay them directly, and may choose to compensate its directors
in the future.
Name
Capacity in which
compensation
was received
Cash
Compensation
($)
Other
Compensation
($)
Total
Compensation
($)
Executive Officers
James Segermark
CEO, President
and Secretary $ 144,000 $ 0 $ 144,000
James Knapp CFO and Treasurer $ 36,000 $ 0 $ 36,000
William Taylor
Chief Scientific
Officer $ 144,000 $ 0 $ 144,000
Directors
James Segermark Director $ 0 $ 0 $ 0
James Knapp Director
William Taylor Director $ 0 $ 0 $ 0
Advisory Agreements
The Company has agreed to pay FundAthena, Inc., doing business as Manhattan Street Capital (“Manhattan Street
Capital”) for its services in hosting the offering of the shares on its online platform. This compensation consists of:
(i) $25 per investor in cash paid when such investor deposits funds into escrow; minimum $5,000 per month while
the offering is live to investors (ii) a warrant to purchase that number of shares of Common Stock determined by
multiplying $25 by the total number of investors in this offering and dividing by the price at which our common stock
is sold in this offering, The warrants will have an exercise price equal to the price at which our common stock is sold
in this offering. Manhattan Street Capital does not directly solicit or communicate with investors with respect to
offerings posted on its site, although it does advertise the existence of its platform, which may include identifying a
broad selection of issuers listed on the platform. Warrants will be delivered to Manhattan Street Capital promptly
upon the close of the offering. If the offering does not complete successfully for any reason, the warrants earned will
be promptly delivered to Manhattan Street Capital. Payments of cash and warrants to Manhattan Street Capital are
not contingent upon the success of the offering.
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Employment Agreements
The Company has not entered into any employment agreements with its executive officers or other employees to date.
It may enter into employment agreements with them in the future.
Stock Incentive Plan
In the future, the Company may establish a management stock incentive plan pursuant to which stock options and
awards may be authorized and granted to our directors, executive officers, employees and key employees or
consultants. Details of such a plan, should one be established, have not been decided upon as of the date of this
Offering. Stock options or a significant equity ownership position in the Company may be utilized by us in the future
to attract one or more new key senior executives to manage and facilitate our growth.
Cash Incentive Plan (CIP)
The Board of Directors has proposed, and Shareholders have approved, a cash payment plan for Segermark, Taylor
and Knapp, that aligns Shareholder goals in growing value and monetizing their investment with a cash payment to
each of the named participants in the CIP. The CIP is being developed, however, the basic outline of the CIP is as
follows:
1. For the initial $50,000,000 realized by the Company in total remuneration from the sale or license of AnestaGel
or any of the Company’s related technology, One Percent (1%) of those monies shall go in to a pool to be paid
to the plan participants.
2. Each additional $50,000,000 realized by the Company in total remuneration from the sale or license per above,
shall compound one more percent to each payment and each payment shall be reconciled to the first dollar of
the Transaction. The CIP shall be capped at 12% of total remuneration. If this Tier of 12% were to be reached,
it would mean that the Transaction was minimally worth $600,000,000 to the Company.
3. For as long as payments are made for the Transaction to the Company and its successors and/or assigns, the
CIP shall be paid to its Participants.
Board of Directors
Our board of directors currently consists of three directors:
None of our directors are “independent” as defined in Rule 4200 of FINRA’s listing standards. We may appoint an
independent director(s) to our board of directors in the future, particularly to serve on appropriate committees should
they be established.
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Committees of the Board of Directors
We may establish an audit committee, compensation committee, a nominating and governance committee and other
committees to our Board of Directors in the future, but have not done so as of the date of this Offering Circular. Until
such committees are established, matters that would otherwise be addressed by such committees will be acted upon
by the entire Board of Directors.
Director Compensation
We currently do not pay our directors any compensation for their services as board members, with the exception of
reimbursing and board related expenses. In the future, we may compensate directors, particularly those who are not
also employees and who act as independent board members, on either a per meeting or fixed compensation basis.
Limitation of Liability and Indemnification of Officers and Directors
Our Bylaws limit the liability of directors and officers of the Company. The Bylaws state that the Company shall
indemnify, in accordance with and to the full extent now or hereafter permitted by law, any person who was or is a
party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the
corporation), by reason of his or her acting as a director or officer of the corporation (or a director or officer serving
at the request of the corporation in any other capacity for or on behalf of the corporation) against any expenses
(including attorneys’ fees, judgments, fines, ERISA or other excise taxes, penalties and amounts paid in settlement)
actually and reasonably incurred by such director or officer in respect thereof; provided, however, that, the corporation
shall not be obligated to indemnify any such director or officer with respect to proceedings, claims or actions initiated
or brought voluntarily by such director and not by way of defense. Expenses that may be subject to indemnification
hereunder shall be paid in advance of the final disposition of the action, suit or proceeding to the full extent permitted
by Delaware law subject to the corporation’s receipt of any undertaking required thereby. The provisions of this article
of the Company’s Bylaws shall be deemed to constitute a contract between the Company and each director or officer
who serves in such capacity at any time while this article and the relevant provisions of Delaware law are in effect,
and each such director or officer shall be deemed to be serving as such in reliance on the provisions of this article of
the Company’s Bylaws, and any repeal of any such provisions or of such article of the Company’s Bylaws shall not
affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of
facts. If a claim under this article of the Company’s Bylaws is not paid in full within thirty (30) days after a written
claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation
to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant also shall be entitled to
be paid the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the
required undertaking, if any, has been provided to the corporation) that the claimant has not met the standards of
conduct that make it permissible under Delaware law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation to
have made a determination prior to the commencement of such action that indemnification of the claimant is proper
under the circumstances because the claimant has met the applicable standard of conduct set forth in the Delaware
law, nor an actual determination by the corporation that the claimant has not met such standard of conduct shall be a
defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. The
rights of indemnification and advancement provided by this article of the Company’s Bylaws are not exclusive of any
other right to indemnification or advancement provided by law, agreement or otherwise, and shall apply to actions,
suits or proceedings commenced after the date hereof, whether or not arising from acts or omissions occurring before
or after the adoption hereof, and shall continue as to a person who has ceased to be a director or officer of the
corporation and shall inure to the benefit of the heirs, executors and administrators of such a person.
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There is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is
required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for
indemnification.
For additional information on indemnification and limitations on liability of our directors and officers, please review
the Company’s Bylaws, which are attached to this Offering Circular.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
Beneficial ownership and percentage ownership are determined in accordance with the rules of the Securities and
Exchange Commission and includes voting or investment power with respect to shares of the Company’s stock. This
information does not necessarily indicate beneficial ownership for any other purpose.
Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each shareholder
named in the following table possesses sole voting and investment power over their shares of the Company’s stock.
The following table sets forth information regarding beneficial ownership of all classes of our stock by any of our
directors or executive officers as of the date of the Regulation A offering:
Class A
Common
Prior To
Offering %
Class A
Common
After
Offering %
Class B
Common
Before
Offering %
Class B
Common
After
Offering %
Preferred
Shares
Before
Offering %
Preferred
Shares After
Offering %
Joseph Glab 500,000 20 % 500,000 12 % 0 0 % 0 0 % 0 0 % 0
James Segermark 465,000 19 % 465,000 11 % 0 0 % 0 0 % 0 0 % 0 0 %
Stefano Sinicropi 500,000 20 % 500,000 12 % 0 0 % 0 0 % 0 0 % 0 0 %
Daniel Sipple 500,000 20 % 500,000 12 % 0 0 % 0 0 % 0 0 % 0 0 %
William Taylor 500,000 20 % 500,000 12 % 0 0 % 0 0 % 0 0 % 0 0 %
524
Investments,
LLC (1) 0 0 % 0 % 1,500,000 100 % 1,500,000 100 % 22,627 38 % 22,627 38 %
Conrad
Tanasychuk 0 0 % 0 % 0 0 % 0 0 % 36,208 62 % 36,208 62 %
New Shares
Under
Regulation
A Offering NA NA 1,739,132 41 % NA 0 % NA 0 % NA NA NA NA
Total Shares 2,465,000 100 % 4,204,132 100 % 1,500,000 100 % 1,500,000 100 % 58,835.00 100.00 % 58,835.00 100.00 %
(1) 524 Investments, LLC is managed by James Knapp.
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CAPITALIZATION TABLE
The following table sets forth information regarding ownership by class of stock of our Preferred Stock, Class B
Common Stock, and Class A Common Stock by all shareholders as of the date of this Regulation A offering.
Column1
Class A
Common
Shares
Class B
Common
Shares
Preferred
Shares TOTAL Percentage
Joseph Glab 500,000 0 0 500,000 12 %
James Segermark 465,000 0 0 465,000 12 %
Stefano Sinicropi 500,000 0 0 500,000 12 %
Daniel Sipple 500,000 0 0 500,000 12 %
William Taylor 500,000 0 0 500,000 12 %
James Knapp 20,000 0 0 20,000 0.47 %
Jake Hutchins 15,000 0 0 15,000 0.35 %
Private Offering Investors and Convertible
Notes (1) 0 0 121,296 121,296 2.9 %
524 Investments, LLC (2) 0 1,500,000 22,627 1,522,627 36 %
Conrad Tanasychuk 0 0 36,208 36,208 0.8 %
Total Shares 2,500,000 1,500,000 180,131 0 %
Cumulative Total 4,180,131 100 %
(1) From July through October 2014, we entered into a Convertible Loan Agreement (the “Loan Agreement”)
with five individuals. The principal loan amounts total $300,000 and accrued interest at a rate of 10%
annually. In January 2018 the related party note and all other Noteholders agreed to convert their Notes to
the shares under the terms of the current Preferred Stock Offering. The notes and accrued interest were
converted into 95,131 preferred shares at a conversion rate of five to one. The Preference is 10% more shares
upon conversion to Common A shares when the Company conducts its anticipated Regulation A Plus
Offering. In receiving that discount as part of the debt conversion in January 2018, Noteholders also agreed
to accept a 6% interest rate instead of the 10% interest rate.
(2) James Knapp beneficially owns the shares issued to 524 Investments, LLC
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN RELATED-PARTY TRANSACTIONS
AND AGREEMENTS
From July through October 2014, we entered into a Convertible Loan Agreement (the “Loan Agreement”)
with five individuals. The principal loan amounts total $300,000 and accrued interest at a rate of 10% annually. In
January 2018 the related party note and all other Noteholders agreed to convert their Notes to the shares under the
terms of the current Preferred Stock Offering. The notes and accrued interest were converted into 95,131 preferred
shares at a conversion rate of five to one. The Preference is 10% more shares upon conversion to Common A shares
when the Company conducts its anticipated Regulation A Plus Offering. In receiving that discount as part of the debt
conversion in January 2018, Noteholders also agreed to accept a 6% interest rate instead of the 10% interest rate.
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Further, an initial investor 524 Investments, LLC was issued units originally in InSitu Biologics, LLC. In the
conversion of the LLC to the current Delaware corporation, the Company has elected to issue Class B Common Shares
to the 524 Investments, LLC.
Class B Common Shares are entitled to two votes for every share held by 524 Investments, LLC. Currently, 524
Investments, LLC holds 1,500,000 shares of Class B Common Stock. Further, 524 Investments, LLC, as the sole
holder of Class B Common Stock, is entitled to appoint one director to the Board of Directors for an initial term.
Thereafter, the board member must stand for reelection. The initial term shall be for three (3) years.
SECURITIES BEING OFFERED
The Company is offering Shares of its Class A Common Stock. Except as otherwise required by law, the Company’s
Bylaws or its Certificate of Incorporation, each Class A Common Stock shareholder shall not be entitled to vote. The
Shares of Class A Common Stock, when issued, will be fully paid and non-assessable. Since the holders of Class A
Common Stock issued pursuant to this Offering Circular do have voting rights with one vote per share. However, the
Class B Shares have 2 votes per share and therefore, the Class A shareholders should not expect to be able to influence
any decisions by management of the Company through voting on Company matters.
There is one other class of stock in the Company as of the date of this Offering Circular. The Company does not
expect to create any additional classes of stock during the next 12 months, but the Company is not limited from
creating additional classes which may have preferred dividend, voting and/or liquidation rights or other benefits not
available to holders of its Class A Common Stock if it chooses to do so.
The Company does not expect to declare dividends for holders of Class A Common Stock in the foreseeable future.
Dividends will be declared, if at all (and subject to the rights of holders of additional classes of securities, if any), in
the discretion of the Company’s Board of Directors. Dividends, if ever declared, may be paid in cash, in property, or
in shares of the capital stock of the Company, subject to the provisions of law, the Company’s Bylaws and the
Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Company
available for dividends such sums as the Board of Directors, in its absolute discretion, deems proper as a reserve for
working capital, to meet contingencies, for equalizing dividends, for repairing or maintaining any property of the
Company, or for such other purposes as the Board of Directors shall deem in the best interests of the Company.
There is no minimum number of Shares that needs to be sold in order for funds to be released to the Company and for
this Offering to close. The Company anticipates numerous closings to take place during the Offering.
The minimum subscription that will be accepted from an investor is Two Hundred Eighty Seven Dollars and Fifty
Cents ($287.50) (the “Minimum Subscription”). A subscription for Two Hundred Eighty Seven Dollars and Fifty
Cents ($287.50) or more in the Shares may be made only by tendering to the Company the executed Subscription
Agreement (electronically or in writing) delivered with the subscription price in a form acceptable to the Company,
via check, wire, or ACH (or other payment methods the Company may later add). The execution and tender of the
documents required, as detailed in the materials, constitutes a binding offer to purchase the number of Shares stipulated
therein and an agreement to hold the offer open until the expiration date or until the offer is accepted or rejected by
the Company, whichever occurs first.
The Company reserves the unqualified discretionary right to reject any subscription for Shares, in whole or in part. If
the Company rejects any offer to subscribe for the Shares, it will return the subscription payment, without interest or
reduction. The Company’s acceptance of your subscription will be effective when an authorized representative of the
Company issues you written or electronic notification that the subscription was accepted.
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There is a right of first refusal attached to the Class A Common Stock in this Offering. Aside from this restriction,
there are no liquidation rights, preemptive rights, conversion rights, redemption provisions, sinking fund provisions,
impacts on classification of the Board of Directors where cumulative voting is permitted or required related to the
Class A Common Stock, provisions discriminating against any existing or prospective holder of the Class A Common
Stock as a result of such Shareholder owning a substantial amount of securities, or rights of Shareholders that may be
modified otherwise than by a vote of a majority or more of the Shares outstanding, voting as a class defined in any
corporate document as of the date of filing. The Class A Common Stock will not be subject to further calls or
assessment by the Company. There are no restrictions on alienability of the Class A Common Stock in the corporate
documents other than a right of first refusal and those disclosed in this Offering Circular. The Company intends to
engage a transfer agent and registrant for the Shares. For additional information regarding the Shares, please review
the Company’s Bylaws, which are attached to this Offering Circular. There are no restrictions on alienability other
than the right of first refusal.
The right of first refusal is defined in the Company’s Bylaws as follows:
Restrictions on Transfers of Shares. Until the Common Stock of the corporation is listed on an exchange and is made
available for trading, no stockholder shall sell, assign, pledge or in any manner transfer any of the shares of Common
Stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by gift or
otherwise, except by a transfer which meets the requirements hereinafter set forth in this Section.
(a) If the stockholder receives from anyone a bona fide offer acceptable to the stockholder to purchase any of its shares
of Common Stock, then the stockholder shall first give written notice thereof to the corporation. The notice shall name
the proposed transferee and state the number of shares to be transferred, the price per share and all other terms and
conditions of the offer.
(b) For ten (10) days following receipt of such notice, the corporation shall have the option to purchase all (but not
less than all) the shares specified in the notice at the price and upon the terms set forth in such bona fide offer. In the
event the corporation elects to purchase all the shares, it shall give written notice to the selling stockholder of its
election and settlement for said shares shall be made as provided below in paragraph (c).
(c) In the event the corporation elects to acquire the shares of the selling stockholder as specified in said selling
stockholder’s notice, the Secretary of the corporation shall so notify the selling stockholder and settlement thereof
shall be made in cash within fifteen (15) days after the Secretary of the corporation receives said selling stockholder’s
notice; provided that if the terms of payment set forth in said selling stockholder’s notice were other than cash against
delivery, the corporation shall pay for said shares on the same terms and conditions set forth in said selling
stockholder’s notice.
(d) In the event the corporation does not elect to acquire all of the shares specified in the selling stockholder’s notice,
said selling stockholder may, within a sixty-day period following the expiration of the rights granted to the corporation
herein, sell elsewhere the shares specified in said selling stockholder’s notice which were not acquired by the
corporation, in accordance with the provisions of paragraph (c) of this Section provided that said sale shall not be on
terms and conditions more favorable to the purchaser than those contained in the bona fide offer set forth in said
selling stockholder’s notice. All shares so sold by said selling stockholder shall continue to be subject to the provisions
of this Section in the same manner as before said transfer.
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(e) Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the
provisions of this Section:
(i) A stockholder’s transfer of any or all shares held either during such stockholder’s lifetime or on death by will or
intestacy to such stockholder’s immediate family. “Immediate family” as used herein shall mean spouse, lineal
descendant, father, mother, brother, or sister of the stockholder making such transfer and shall include any trust
established primarily for the benefit of the stockholder or his immediate family.
(ii) A stockholder’s bona fide pledge or mortgage of any shares with a commercial lending institution, provided that
any subsequent transfer of said shares by said
institution shall be conducted in the manner set forth in this Section.
(iii) A stockholder’s transfer of any or all of such stockholder’s shares to the corporation.
(iv) A corporate stockholder’s transfer of any or all of its shares to an affiliate thereof or pursuant to and in accordance
with the terms of any merger, consolidation, or reclassification of shares or capital reorganization of the corporate
stockholder.
(v) A corporate stockholder’s transfer of any or all of its shares to any or all of its stockholders.
(vi) A transfer by a stockholder which is limited or general partnership to any or all of its partners or retired partners,
or to any such partner’s or retired partner’s estate. In any such case, the transferee, assignee or other recipient shall
receive and hold such Common Stock subject to the provisions of this Section 8.14, and there shall be no further
transfer of such Common Stock except in accordance with this Section.
(f) The provisions of this Section may be waived with respect to any transfer either by the corporation, upon duly
authorized action of the Board of Directors, or by the stockholders, upon the express written consent of the owners of
a majority of the voting power of the corporation (excluding the votes represented by those shares to be sold by the
selling stockholder). This Section may be amended or repealed only upon the express vote or written consent of the
owners of a majority of the voting power of each outstanding class of voting securities of the corporation or by the
duly authorized action of the Board of Directors.
(g) Any sale or transfer, or purported sale or transfer, of securities of the corporation shall be null and void unless the
terms, conditions, and provisions of this Section are strictly observed and followed.
(h) The foregoing right of first refusal shall automatically terminate upon the date securities of the corporation are
first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States
Securities and Exchange Commission under the Securities Act of 1933, as amended, or upon the listing of the
securities of the corporation on any stock exchange subject to the Securities Exchange Act of 1934. These provisions
of this Section shall also not apply to the corporation’s securities that are sold or granted to shareholders in any private
placement or securities prior to the date securities of the corporation are first offered to the public pursuant to a
Regulation A offering qualified by the United States Securities and Exchange Commission.
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INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Offering as having prepared or certified any part of this Offering or
having given an opinion upon the validity of the securities being registered or upon other legal matters in connection
with the registration or offering of the Shares was employed on a contingency basis, or had, or is to receive, in
connection with the Offering, a substantial interest, direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter,
managing or principal underwriter, voting trustee, director, officer, or employee.
Trowbridge Sidoti LLP is providing legal services relating to this Form 1-A.
DISQUALIFYING EVENTS DISCLOSURE
Recent changes to Regulation A promulgated under the Securities Act prohibit an issuer from claiming an exemption
from registration of its securities under such rule if the issuer, any of its predecessors, any affiliated issuer, any director,
executive officer, other officer participating in the offering of the interests, general partner or managing member of
the issuer, any beneficial owner of 20% or more of the voting power of the issuer’s outstanding voting equity
securities, any promoter connected with the issuer in any capacity as of the date hereof, any investment manager of
the issuer, any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers
in connection with such sale of the issuer’s interests, any general partner or managing member of any such investment
manager or solicitor, or any director, executive officer or other officer participating in the offering of any such
investment manager or solicitor or general partner or managing member of such investment manager or solicitor has
been subject to certain “Disqualifying Events” described in Rule 506(d)(1) of Regulation D subsequent to September
23, 2013, subject to certain limited exceptions. The Company is required to exercise reasonable care in conducting an
inquiry to determine whether any such persons have been subject to such Disqualifying Events and is required to
disclose any Disqualifying Events that occurred prior to September 23, 2013 to investors in the Company. The
Company believes that it has exercised reasonable care in conducting an inquiry into Disqualifying Events by the
foregoing persons and is aware of the no such Disqualifying Events.
It is possible that (a) Disqualifying Events may exist of which the Company is not aware and (b) the SEC, a court or
other finder of fact may determine that the steps that the Company has taken to conduct its inquiry were inadequate
and did not constitute reasonable care. If such a finding were made, the Company may lose its ability to rely upon
exemptions under Regulation A, and, depending on the circumstances, may be required to register the Offering of the
Company’s Class A Common Stock with the SEC and under applicable state securities laws or to conduct a rescission
offer with respect to the securities sold in the Offering.
ERISA CONSIDERATIONS
Trustees and other fiduciaries of qualified retirement plans or IRAs that are set up as part of a plan sponsored and
maintained by an employer, as well as trustees and fiduciaries of Keogh Plans under which employees, in addition to
self-employed individuals, are participants (together, “ERISA Plans”), are governed by the fiduciary responsibility
provisions of Title 1 of the Employee Retirement Income Security Act of 1974 (“ERISA”). An investment in the
Shares by an ERISA Plan must be made in accordance with the general obligation of fiduciaries under ERISA to
discharge their duties (i) for the exclusive purpose of providing benefits to participants and their beneficiaries; (ii)
with the same standard of care that would be exercised by a prudent man familiar with such matters acting under
similar circumstances; (iii) in such a manner as to diversify the investments of the plan, unless it is clearly prudent not
do so; and (iv) in accordance with the documents establishing the plan. Fiduciaries considering an investment in the
Shares should accordingly consult their own legal advisors if they have any concern as to whether the investment
would be inconsistent with any of these criteria.
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Fiduciaries of certain ERISA Plans which provide for individual accounts (for example, those which qualify under
Section 401(k) of the Code, Keogh Plans and IRAs) and which permit a beneficiary to exercise independent control
over the assets in his individual account, will not be liable for any investment loss or for any breach of the prudence
or diversification obligations which results from the exercise of such control by the beneficiary, nor will the
beneficiary be deemed to be a fiduciary subject to the general fiduciary obligations merely by virtue of his exercise
of such control. On October 13, 1992, the Department of Labor issued regulations establishing criteria for determining
whether the extent of a beneficiary’s independent control over the assets in his account is adequate to relieve the
ERISA Plan’s fiduciaries of their obligations with respect to an investment directed by the beneficiary. Under the
regulations, the beneficiary must not only exercise actual, independent control in directing the particular investment
transaction, but also the ERISA Plan must give the participant or beneficiary a reasonable opportunity to exercise such
control, and must permit him to choose among a broad range of investment alternatives.
Trustees and other fiduciaries making the investment decision for any qualified retirement plan, IRA or Keogh Plan
(or beneficiaries exercising control over their individual accounts) should also consider the application of the
prohibited transactions provisions of ERISA and the Code in making their investment decision. Sales and certain other
transactions between a qualified retirement plan, IRA or Keogh Plan and certain persons related to it (e.g., a plan
sponsor, fiduciary, or service provider) are prohibited transactions. The particular facts concerning the sponsorship,
operations and other investments of a qualified retirement plan, IRA or Keogh Plan may cause a wide range of persons
to be treated as parties in interest or disqualified persons with respect to it. Any fiduciary, participant or beneficiary
considering an investment in Shares by a qualified retirement plan IRA or Keogh Plan should examine the individual
circumstances of that plan to determine that the investment will not be a prohibited transaction. Fiduciaries,
participants or beneficiaries considering an investment in the Shares should consult their own legal advisors if they
have any concern as to whether the investment would be a prohibited transaction.
Regulations issued on November 13, 1986, by the Department of Labor (the “Final Plan Assets Regulations”) provide
that when an ERISA Plan or any other plan covered by Code Section 4975 (e.g., an IRA or a Keogh Plan which covers
only self-employed persons) makes an investment in an equity interest of an entity that is neither a “publicly offered
security” nor a security issued by an investment company registered under the Investment Company Act of 1940, the
underlying assets of the entity in which the investment is made could be treated as assets of the investing plan (referred
to in ERISA as “plan assets”). Programs which are deemed to be operating companies or which do not issue more
than 25% of their equity interests to ERISA Plans are exempt from being designated as holding “plan assets.”
Management anticipates that we would clearly be characterized as an “operating company” for the purposes of the
regulations, and that it would therefore not be deemed to be holding “plan assets.”
Classification of our assets of as “plan assets” could adversely affect both the plan fiduciary and management. The
term “fiduciary” is defined generally to include any person who exercises any authority or control over the
management or disposition of plan assets. Thus, classification of our assets as plan assets could make the management
a “fiduciary” of an investing plan. If our assets are deemed to be plan assets of investor plans, transactions which may
occur in the course of its operations may constitute violations by the management of fiduciary duties under ERISA.
Violation of fiduciary duties by management could result in liability not only for management but also for the trustee
or other fiduciary of an investing ERISA Plan. In addition, if our assets are classified as “plan assets,” certain
transactions that we might enter into in the ordinary course of our business might constitute “prohibited transactions”
under ERISA and the Code.
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Under Code Section 408(i), as amended by the Tax Reform Act of 1986, IRA trustees must report the fair market
value of investments to IRA holders by January 31 of each year. The Service has not yet promulgated regulations
defining appropriate methods for the determination of fair market value for this purpose. In addition, the assets of an
ERISA Plan or Keogh Plan must be valued at their “current value” as of the close of the plan’s fiscal year in order to
comply with certain reporting obligations under ERISA and the Code. For purposes of such requirements, “current
value” means fair market value where available. Otherwise, current value means the fair value as determined in good
faith under the terms of the plan by a trustee or other named fiduciary, assuming an orderly liquidation at the time of
the determination. We do not have an obligation under ERISA or the Code with respect to such reports or valuation
although management will use good faith efforts to assist fiduciaries with their valuation reports. There can be no
assurance, however, that any value so established (i) could or will actually be realized by the IRA, ERISA Plan or
Keogh Plan upon sale of the Shares or upon liquidation of us, or (ii) will comply with the ERISA or Code requirements.
The income earned by a qualified pension, profit sharing or stock bonus plan (collectively, “Qualified Plan”) and by
an individual retirement account (“IRA”) is generally exempt from taxation. However, if a Qualified Plan or IRA
earns “unrelated business taxable income” (“UBTI”), this income will be subject to tax to the extent it exceeds $1,000
during any fiscal year. The amount of unrelated business taxable income in excess of $1,000 in any fiscal year will be
taxed at rates up to 36%. In addition, such unrelated business taxable income may result in a tax preference, which
may be subject to the alternative minimum tax. It is anticipated that income and gain from an investment in the Shares
will not be taxed as UBTI to tax exempt shareholders, because they are participating only as passive financing sources.
INVESTOR ELIGIBILITY STANDARDS
The Shares will be sold only to a person who is not an accredited investor if the aggregate purchase price paid by such
person is no more than 10% of the greater of such person’s annual income or net worth, not including the value of his
primary residence, as calculated under Rule 501 of Regulation D promulgated under Section 4(a)(2) of the Securities
Act of 1933, as amended. In the case of sales to fiduciary accounts (Keogh Plans, Individual Retirement Accounts
(IRAs) and Qualified Pension/Profit Sharing Plans or Trusts), the above suitability standards must be met by the
fiduciary account, the beneficiary of the fiduciary account, or by the donor who directly or indirectly supplies the
funds for the purchase of Shares. Investor suitability standards in certain states may be higher than those described in
this Offering Circular. These standards represent minimum suitability requirements for prospective investors, and the
satisfaction of such standards does not necessarily mean that an investment in the Company is suitable for such
persons.
Each investor must represent in writing that he/she/it meets the applicable requirements set forth above and in the
Subscription Agreement, including, among other things, that (i) he/she/it is purchasing the Shares for his/her/its own
account and (ii) he/she/it has such knowledge and experience in financial and business matters that he/she/it is capable
of evaluating without outside assistance the merits and risks of investing in the Shares, or he/she/it and his/her/its
purchaser representative together have such knowledge and experience that they are capable of evaluating the merits
and risks of investing in the Shares. Transferees of Shares will be required to meet the above suitability standards.
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WHERE YOU CAN FIND MORE INFORMATION
The Company has filed a Regulation A Offering Statement on Form 1-A with the SEC under the Securities Act of
1933 with respect to the shares of the Class A Common Stock offered hereby. This Preliminary Offering Circular,
which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering
Statement or the exhibits and schedules filed therewith. For further information about us and the Class A Common
Stock offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements
contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit
to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference
to the full text of such contract or other document filed as an exhibit to the Offering Statement. Upon the completion
of this Offering, the Company will be required to file periodic reports and other information with the SEC pursuant
to the Securities Exchange Act of 1934. You may read and copy this information at the SEC’s Public Reference Room,
100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website that contains
reports, proxy statements and other information about issuers, including the Company, that file electronically with the
SEC. The address of this site is www.sec.gov.
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SIGNATURES
Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Woodbury, State of Minnesota, on June 29, 2018
InSitu Biologics, Inc.,
/s/_______________________________
By: James Segermark
Chief Executive Officer and Director
June 29, 2018
_/s/_______________________________
By: James Knapp
Chief Financial Officer, Chief Accounting Officer,
/s/_______________________________
By: James Knapp
Director
June 29, 2018
73
ACKNOWLEDGEMENT ADOPTING TYPED SIGNATURES
The undersigned hereby authenticate, acknowledge and otherwise adopt the typed signatures above and as otherwise
appear in this filing and Offering.
InSitu Biologics, Inc.,
/s/________________________________
By: James Segermark
Chief Executive Officer and Director
June 29, 2018
/s/________________________________
By: James Knapp
Chief Financial Officer, Chief Accounting Officer,
/s/_____________________________
By: James Knapp
Director
June 29, 2018
74
InSitu Biologics, Inc. FKA:
InSitu Biologics, LLC
Financial Statements
As of and for the Years Ended December 31, 2017 and 2016
F-1
In Situ Biologics, Inc. FKA:
InSitu Biologics, LLC
Table of Contents
Page
Independent auditors’ report F-3
Financial Statements:
Balance Sheets F-4
Statements of Operations F-5
Statements of Changes in Equity (Deficit) F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8 - F-13
F-2
INDEPENDENT AUDITORS' REPORT
Board of Directors
InSitu Biologics, Inc. (FKA:InSitu Biologics, LLC)
Woodbury, MN
We have audited the accompanying financial statements of InSitu Biologics, Inc. (FKA: InSitu Biologics, LLC),
which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of operations, deficit
and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in the United States of America. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of InSitu Biologics, Inc. as of December 31, 2017 and 2016 and the results of its operations and cash flows for the
years then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying financial statements have been prepared assuming the Company will continue as a going concern.
As discussed in Note 1 to the financial statements, the Company's accumulated deficit, cash used in operations, and
the need for additional working capital to support future operations raise substantial doubt about its ability to continue
as a going concern. Management's plans with regard to these matters are also described in Note 1 to the financial
statements. The financial statements do not include any adjustments that might result from this uncertainty. Our
opinion is not modified with respect to that matter.
Minneapolis, Minnesota
February 15, 2018
F-3
Table of Contents
InSitu Biologics, Inc.
(FKA: InSitu Biologics, LLC)
Balance Sheets
December
31,
December
31,
2017 2016
ASSETS
Current Assets
Cash and cash equivalents $ 147,852 $ 209,158
Total current assets 147,852 209,158
Other Assets
Patents net of $108 and of $0 accurrrulated amortization, respectively 19,285 -
Deferred offering costs 35,000 -
Security deposits and other 2,557 2,938
Total other assets 56,842 2,938
TOTAL ASSETS $ 204,694 $ 212,096
LIABILITIES AND (DEFICIT)
Current Liabilities
Accounts payable $ 20,000 $ 25,838
Accrued interest 106,684 65,137
Total current liabilities 126,684 90,975
Long-term Liabilities
Notes payable-long-term 409,891 300,000
Total long-term liabilities 409,891 300,000
Total liabilities 536,575 390,975
Deficit
Preferred stock, $.00001 par value: authorized 10,000,000 shares; issued and
outstanding 34,693 shares - -
Class A common stock, $.00001 par value: authorized 10,000,000 shares; issued
and outstanding 4,000,000 shares, Class B common stock, .00001 par value:
authorized 10,000,000 shares; issued and outstanding 0 shares, undesignated stock,
$.00001 par value; authorized 80,000,000 shares; issued and outstanding 0 shares 40 -
Additional paid-in capital 164,210 -
Members’ deficit - (178,879 )
Accurrrulated deficit (496,131 ) -
Total deficit (331,881 ) (178,879 )
TOTAL LIABILITIES AND (DEFICIT) $ 204,694 $ 212,096
See notes to financial statements.
F-4
Table of Contents
InSitu Biologics, Inc.
(FKA: InSitu Biologics, LLC)
Statements of Operations
Years Ended December
31,
2017 2016
Expenses:
Research and development expense $ 194,262 $ 217,902
Other general and administrative 81,443 82,652
Total expenses 275,705 300,554
Operating loss (275,705 ) (300,554 )
Interest expense 41,547 30,000
Net loss $ (317,252 ) $ (330,554 )
See notes to financial statements.
F-5
Table of Contents
InSitu Biologics , Inc.
(FKA: InSitu Biologics , LLC)
Statements of Changes in Equity (Deficit)
Common Stock Preferred Stock
Additional
Paid-In Member
Members'
Equity Accumulated
Shares Amount Shares Amount Capital Units (Deficit) Deficit Total
Balance as of
December
31, 2015 - $ - - $ - $ - 8,000,000 $ 151,675 $ - $ 151,675
Net loss - - - - - - (330,554 ) - (330,554 )
Balance as of
December
31, 2016 - - - - - 8,000,000 (178,879 ) - (178,879 )
Loss for the
period
January 1,
2017
to
November
15, 2017 - - - - - - (260,820 ) - (260,820 )
Conversion
from LLC to
Corporation 4,000,000 40 - - (40 ) (8,000,000 ) 439,699 (439,699 ) -
Proceeds
from sales of
convertible
preferred
stock, net
of
issuance
costs of
$5,750 - - 34,693 - 164,250 - - - 164,250
Loss for
period
November
30, 2017
to
December
31, 2017 - - - - - - - (56,432 ) (56,432 )
Balance as of
December
31, 2017 4,000,000 $ 40 34,693 $ - $ 164,210 - $ - $ (496,131 ) $ (331,882 )
See notes to financial statements.
F-6
Table of Contents
InSitu Biologics, Inc.
(FKA: InSitu Biologics, LLC)
Statements of Cash Flows
Years Ended December
31,
2017 2016
Cash flows from operating activities
Net loss $ (317,252 ) $ (330,554 )
Adjustments to reconcile net loss to cash used by operating activities:
Amortization 3,046 237
Changes in operating assets and liabilities
Accounts receivable - -
Accounts payable (25,838 ) 25,838
Security deposit (2,557 ) -
Accrued interest 41,547 30,000
Net cash used by operating activities (301,054 ) (274,479 )
Cash flows from investing activities
Payment for security deposit
Payments for patent costs (19,393 ) -
Net cash used by investing activities (19,393 ) -
Cash flows from financing activities
Payments for deferred offering costs (15,000 )
Proceeds from note payable 109,891 -
Proceeds from sale of preferred stock, net 164,250 -
Net cash provided by financing activities 259,141 -
Net change in cash and cash equivalents (61,306 ) (274,479 )
Cash and cash equivalents - beginning of year 209,158 483,637
Cash and cash equivalents - end of year $ 147,852 $ 209,158
Non-cash transactions
Conversion of LLC to Corporation $ 439,699 $ -
Deferred offering costs included in accounts payable $ 20,000 $ -
See notes to financial statements.
F-7
Table of Contents
Note 1. Nature of Business and Summary of Significant Accounting Policies
Nature of business and significant accounting policies:
Nature of business:
InSitu Biologics, Inc. (FKA: InSitu Biologics, LLC) (the “Company”, “we” or “our”) is developing implantable time
release products composed of its proprietary tunable, bio-polymeric hydrogel, Matrix™. Implantable, tunable
compounds similar to Matrix are gaining attention in biomedical applications targeting tissue and nerves. The
Company is pursuing applications for soft and bone tissues. Procured through an exclusive license agreement (see
Note 2) via our manufacturing and advance development partner, the Matrix was invented and originally patented
through the Cleveland Clinic Foundation. We have further developed, manufactured and completed testing and
performed preliminary animal studies in several applications supporting conceptual clinical applications. Upon
completion of a battery of bench and per-clinical tests, we intend to partner with a leader in the Operative Pain
Management product market to accelerate any further clinical studies prior to commercialization.
The Company’s activities are subject to significant risks and uncertainties including failing to secure additional
funding to license or operationalize the Company’s technology.
Going concern and management plans:
As of December 31, 2017, the Company has no revenues and has a shareholders’ deficit position of $331,881. The
Company’s cash position of $147,852 is not adequate to meet the projected cash requirements of the Company through
February 28, 2019, which raises substantial doubt that the Company is able to continue as a going concern.
Management’s plans regarding the shortfall are as follows:
Management is pursuing additional funding through the sale of common stock and preferred stock to certain potential
investors. Amounts raised will be used two thirds for research and development and the remaining third for other
general and administrative expenses (see note 8).
Although the Company cannot rely on the equity offerings, the Company’s recent fund raising has resulted in its
present cash position covering approximately half of the cash needed for the following 12 months and is optimistic
the remainder of the funds needed will easily be raised. The Company needs additional capital to meet its projected
operations and equipment needs through at least February 2019. If the Company is not able to raise additional working
capital, it would have a material adverse effect on the operations of the Company and the continuing research and
development of its product.
Use of estimates:
Management uses estimates and assumptions in preparing the financial statements in accordance with accounting
principles generally accepted in the United States of America. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and
expenses. Actual results could vary from the estimates that were used.
Revenue recognition:
The Company will recognize revenue when persuasive evidence of a sales arrangement exists, delivery of goods or
services occurs through the transfer of title and risks and rewards of ownership, the selling price is fixed or
determinable, and collectability is reasonably assured.
Shipping and handling expense:
Shipping and handling charges incurred by the Company will be included in cost of goods sold. There were no
shipping expenses in either year.
F-8
Table of Contents
Cash:
The Company considers all highly liquid investments purchased with original maturities of three months or less and
any certificates of deposit that do not contain material early withdrawal penalties to be cash equivalents. The Company
maintains its cash in bank deposits which are federally insured.
Intangibles:
Intangible assets consist of patents which are being amortized using the straight-line method over their estimated
useful lives of 15 years. The Company periodically reviews the unamortized value of its patents to determine if any
adverse conditions exist or a change in circumstances has occurred that would indicate the asset is “more likely than
not” impaired, or a change in the remaining useful life is warranted. If an impairment indicator exists, the Company
tests the intangible asset for recoverability based on future undiscounted cash flows. The Company determined the
patents were not impaired as of December 31, 2017.
Deferred Offering Costs:
Deferred offering costs primarily consisting of direct fees and costs relating to the Company’s proposed Regulation
A+ Tier 2 offering, are capitalized. The deferred offering costs will be offset against the Company’s planned offering
proceeds upon the closing of the offering. In the event the offering is terminated, all of the deferred offering costs will
be expensed within the statement of operations. There was $35,000 in deferred offering costs capitalized as of
December 31, 2017 in long-term assets on the balance sheet. There were no deferred offering costs capitalized as of
December 31, 2016.
Income taxes:
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it
is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
GAAP requires management to evaluate tax positions taken and to recognize a tax liability (or asset) if the Company
has taken an uncertain position that more likely than not would not be sustained upon examination by taxing
authorities. Management has analyzed the tax positions taken and has concluded that as of December 31, 2017, there
are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or
disclosure in the financial statements. The Company recognizes accrued interest and penalties related to uncertain tax
positions in income tax expense.
Through November 15, 2017, the Company was treated as a limited liability co mpany (LLC) for federal and state
income tax purposes. As such, the Company’s income, losses, and credits were included in the income tax returns of
its members. Therefore, no provision or liability for federal or state income taxes has been included in t he financial
statements for the period the Company was an LLC.
The accounting for uncertainty in income taxes normally does not affect the financial statements of an entity that is
not subject to income tax. As it relates to the Company, additional income taxes due to an adjustment to income or
disallowed deductions generally would be imposed on the members rather than the Company itself. However, there
are certain exceptions where the Company would bear the burden of an uncertain tax position.
The Company is not currently under examination by any taxing jurisdiction.
F-9
Table of Contents
Research and development:
Research and development costs include cost of research activities as well as engineering and technical efforts required
to develop new products or make improvements to existing products. Research and development costs are expensed
as incurred. Research and development expenses for the years ended December 31, 2017 and 2016 were $194,262
and $217,902 respectively.
Advertising costs:
Advertising costs will be charged to expense when incurred. There were no advertising and marketing costs for the
years ended December 31, 2017 and 2016.
Fair value of financial instruments:
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses
approximate their fair value due to the short-term nature of these instruments. The carrying value of long-term debt is
the remaining amount due to debtors under borrowing arrangements. To estimate the fair value of debt, the Company
estimates the interest rate necessary to secure financing to replace its debt. At December 31, 2017 and 2016, the fair
value of long-term debt was not significantly different than its carrying value.
Future Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance creating Accounting Standards
Codification (“ASC”) Section 606, “Revenue from Contracts with Customers”. The new section will replace Section
605, “Revenue Recognition” and creates modifications to various other revenue accounting standards for specialized
transactions and industries. The section is intended to conform revenue accounting principles with a concurrently
issued International Financial Reporting Standards with previously differing treatment between United States practice
and those of much of the rest of the world, as well as to enhance disclosures related to disaggregated revenue
information. The updated guidance is effective for annual reporting periods beginning after December 15, 2018, and
interim periods within that reporting period. The Company will further study the implications of this statement in
order to evaluate the expected impact on its financial statements.
During February 2016, the FASB issued ASU No. 2016-02, “Leases.” ASU No. 2016-02 was issued to increase
transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12
months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU No. 2016-02 is effective
for fiscal years beginning after December 15, 2019, with earlier application permitted. Upon adoption, the lessee will
apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment
in the year of adoption. The Company is currently assessing the effect that ASU No. 2016 -02 will have on its results
of operations, financial position and cash flows.
Note 2. License Agreement
The Company entered into a license agreement with Lifecore Biomedical, LLC (“Lifecore”) on November 14, 2014,
in connection with certain patents whereby Lifecore granted the Company an exclusive worldwide license, including
the right to grant further sublicenses to develop, use, import, export, distribute, market, promote, offer for sale and
sell Products. Lifecore retains the right to manufacture and supply to Company and all sublicensees any and all
Products developed under the License Agreement. The Company paid an initial fee and expensed the initial fee as the
license fee does not meet the definition of an asset as the technology is still subject to clinical studies and will pay a
milestone payment for each Product developed by Company or a sublicensee. The License Agreement is for a period
of 5 years with the Company having to option to renew the agreement under certain conditions.
F-10
Table of Contents
Note 3. Patents:
Intangible assets consist of patents which are being amortized using the straight-line method over their estimated
useful lives of 15 years. Amortization of patents was $108 and $0 for the years ended December 31, 2017 and 2016,
respectively. Estimated future amortization expense is $1,293 for each of the next five years and $12,820 thereafter.
Note 4. Financing Arrangements
Notes:
Unsecured notes have been issued bearing interest rates of 6% and 10%. The notes had certain conversion features
applicable to when the Company was an LLC as well as a Preferred Payment upon a Liquidity Event as defined in the
note agreement. These conversion features were amended in January 2018 when the notes were converted into
Company Preferred Stock (see note 8) and the Preferred Payment provision was eliminated.
Years Ended December
31,
2017 2016
Note payable to investor including interest at 10% per annum payable September 23, 2024 $ 50,000 $ 50,000
Note payable to investor including interest at 10% per annum payable September 24, 2024 50,000 50,000
Note payable to investor including interest at 10% per annum payable November 6, 2024 150,000 150,000
Note payable to investor including interest at 10% per annum payable December 8, 2024 50,000 50,000
Note payable to 524 Investments, LLC including interest at 6% per annum payable
December 12, 2027, senior to other debt 109,891 --
Total $ 409,891 $ 300,000
Interest expense related to the note with 524 Investments, LLC (a related party) was $546 in 2017 and $0 in 2016.
Accrued interest on the note was $546 as of December 31, 2017 and $0 as of December 31, 2016.
Approximate future maturities of long-term debt as of December 31, 2017 (see Note 8 for debt converted into equity
after December 31, 2017), are as follows:
Year ending December 31:
2024 $ 300,000
2027 109,891
Total $ 409,891
F-11
Table of Contents
Note 5. Rental and Lease Information
The Company leased office and lab space on a month-to-month basis through December 31, 2017. In November 2017,
the Company entered into a three-year lease that expires December 31, 2020, with a three-year renewal option. The
lease requires monthly payments for base rent plus a share of building operating expenses
Rental expenses for the years ended December 31, 2017 and 2016 amounted to $6,336 and $6,715, respectively.
Minimum future rental payments are as follows:
2018 $ 14,630
2019 15,078
2020 $ 15,879
Note 6. Equity
Conversion from LLC to C-corporation:
On November 15, 2017, the Company converted all outstanding units into stock with the election of a tax status
change from LLC to a corporation (“the conversion”). Prior to the conversion, the Company had 8,000,000 member
units issued and outstanding. Member units entitled each member to one vote for each unit held by the member. Upon
the conversion, each membership unit was converted into one half share of common stock. The Company authorized
110,000,000 shares with 10,000,000 shares designated as Preferred Stock, 10,000,000 shares designated as Class A
Common Stock with one vote per share, 10,000,000 shares designated as Class B Common Stock with two votes per
share, and the remaining stock as undesignated.
Note 7. Income Taxes
The Company had net operating loss carry-forwards of approximately $56,430 as of December 31, 2017 which expire
in 2037. The Company has recorded a deferred tax asset of $14,100 reflecting the benefit of the loss carryforwards.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will
be generated to use the existing deferred tax assets. A significant piece of objective evidence evaluated was the
cumulative loss incurred to date. Such objective evidence limits the ability to consider other subjective evidence such
as projections for future growth.
On the basis of this evaluation, as of December 31, 2017, a valuation allowance of $14,100 has been recorded to offset
the total amount of the deferred tax asset based on the projected tax rate due to the tax reform signed into law on
December 22, 2017. The amount of the deferred tax asset considered realizable; however, could be adjusted if
estimates of future taxable income during the carryforward period are reduced or increased, or if objective negative
evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective
evidence such as our projections for growth.
The Company is subject to U.S. federal income tax as well as income tax of the State of Minnesota. With limited
exceptions, tax years prior to fiscal 2014 are no longer open to federal, state and local examination by taxing
authorities.
F-12
Table of Contents
Note 8. Subsequent Events
Management has evaluated subsequent events through February 15, 2018, the date on which the financial statements
were available for issue, and identified the following significant events to disclose.
In January 2018 the related party note and all other Noteholders agreed to convert their Notes to the shares under the
terms of the current Preferred Stock Offering. The notes and accrued interest were converted into 95,131 preferred
shares at a conversion rate of five to one. The Preference is 10% more shares upon conversion to Common A shares
when the Company conducts its anticipated Regulation A Plus Offering. In receiving that discount as part of the debt
conversion in January 2018, Noteholders also agreed to accept a 6% interest rate instead of the 10% interest rate.
Subsequent to December 31, 2017, and through January 15, 2018, the Company accepted the last subscription to sell
Preferred Stock with rights to conversion as defined in the Company’s Confidential Private Placement Memorandum.
The amount held in escrow as of February 12, 2018, is $298,000.
F-13
PART III: EXHIBITS
Index to Exhibits
Description Item Exhibit
Charters (including amendments) Item 17.2 1A-2A
Bylaws Item 17.2 1A-2B
Subscription Agreement Item 17.4 1A-4
Material Contracts Item 17.6 1A-6
Consent of Independent Auditors Item 17.11 1A-11
Legal Opinion Item 17.12 1A-12
Testing The Waters Item 17.13 1A-13
75
EXHIBIT 2A
1
2
3
4
EXHIBIT 2B
BYLAWS
OF
INSITU BIOLOGICS, INC.
(a Delaware corporation)
(Adopted November 15, 2017)
OFFICES
Registered Office. The registered office shall be in the City of Dover, County of Kent, State of Delaware.
Other Offices. The corporation may also have offices at such other places both within and without the State of
Delaware as the board of directors may from time to time determine or the business of the corporation may require.
MEETINGS OF STOCKHOLDERS
Place, Time and Purposes. All meetings of the stockholders for the election of directors shall be held within or outside
the State of Delaware as may be fixed from time to time by the board of directors. Meetings of stockholders for any
other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Annual Meetings. Annual meetings of stockholders, commencing with the year 2015, shall be held on the first day in
December if not a legal holiday or weekend, and if a legal holiday, then on the next business day following, at 9:00
a.m., or at such other date and time as shall be designated from time to time by the board of directors and stated in the
notice of the meeting, at which time the voting stockholders by majority may elect a board of directors and transact
such business as may properly be brought before the meeting.
Annual Meeting Notices. Notice of the annual meeting stating the place, date and hour of the meeting shall be given
to each stockholder entitled to vote at such meeting not less than ten (10) or more than sixty (60) days before the date
of meeting.
Voting Lists. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten
(10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any voting stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept
at the time and place of meeting during the whole time thereof, and may be inspected by any voting stockholder who
is present.
1
Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called by the Chairman of the Board or may be called by the
President or the Secretary at the request in writing of a majority of the board of directors, or at the request in writing
of stockholders owning capital stock of the corporation representing a majority of the total votes entitled to be cast by
stockholders of the corporation. Such request shall state the purpose or purposes of the proposed meeting.
Special Meeting Notices. Written notice of a special meeting stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such meeting.
Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute, the certificate of incorporation or these bylaws. A quorum, once established,
shall not be broken by the withdrawal of enough votes to leave less than a quorum and the votes present may continue
to transact business until adjournment. If, however, such quorum shall not be present or represented at any meeting
of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any questions brought before such meeting, unless the
question is one upon which by express provision of the statutes, the certificate of incorporation or these bylaws, a
different vote is required in which case such express provision shall govern and control the decision of such questions.
Voting of Shares. Unless otherwise specifically provided by statute or the certificate of incorporation, each
stockholder shall at every meeting of the stockholders be entitled to one vote for each share of the capital stock having
voting power held by such stockholder.
Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate
action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no
proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period.
2
Informal Action by Stockholders. Except as otherwise provided in the certificate of incorporation and subject to the
requirements of statute, any action required or permitted to be taken at any annual or special meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of any corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not consented in writing.
DIRECTORS
Number, Tenure and Qualifications. The directors constituting the initial board of directors shall be that number so
elected, pursuant to the Written Consent of the Incorporator of the corporation. The number of directors which shall
constitute the whole board shall be such number of members, not less than one (1) but without a maximum number,
as the board of directors may from time to time determine by resolution. The directors shall be elected at the annual
meeting of the stockholders by voting stockholders, except as provided this Article, and each director elected shall
hold office until his or her successor is elected and qualified, or until his or her earlier resignation or removal. Directors
need not be stockholders.
Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of
directors may be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum,
or by a sole remaining director, and any director so chosen shall hold office until the next annual election and until
his or her successor is duly elected and shall qualify, or until his or her earlier resignation or removal. If there are no
directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling
any vacancy or newly created directorship, the directors then in office shall constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total number of the voting shares at the time
outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies
or newly created directorships, or to replace the directors chosen by the directors then in office.
General Powers. The business of the corporation shall be managed by its board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not by statute or by certificate of
incorporation or by these bylaws directed or required to be exercised or done by the stockholders.
Meetings. The board of directors of the corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
First Meeting. The first meeting of each newly elected board of directors shall be held immediately after, and at the
same place as, the annual meeting of stockholders and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum shall be present.
3
Regular Meetings. Regular meetings of the board of directors may be held at such time and at such place as shall from
time to time be determined by the board.
Special Meetings. Special meetings of the board of directors may be called by the Chairman of the Board or CEO on
two (2) days’ notice to each director; special meetings may also be called by the written request of.the majority of the
board.
Quorum. At all meetings of the board, a majority of the directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of directors the directors present thereat
may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum
shall be present.
Informal Action by Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, any
action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be
taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the board or committee.
Participation by Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these bylaws,
members of the board of directors, or any committee designated by the board, may participate in a meeting of the
board or such committee by means of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section
shall constitute presence in person at such meeting.
Committees. The board of directors may, by resolution passed by a majority of the whole board, designate one or
more committees, each committee to consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee; provided, however, that, if the resolution of the board of directors so
provides, in the absence or disqualification of any such member or alternate member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or
they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in
the place of any such absent or disqualified member or alternate member. Any such committee, to the extent provided
in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation as provided for in the General Corporation
Law of Delaware (the “Law”).
4
Meeting Minutes. Each committee shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Compensation of Directors. The directors may be paid their expenses, if any, of attendance at each meeting of the
board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may be allowed similar compensation
for attending committee meetings.
NOTICES
Written Notice. Except as otherwise provided herein, whenever under the provisions of the Law, of the certificate of
incorporation or of these bylaws, notice of any meeting is required to be given to any director or stockholder, such
notice (a) shall be given not less than ten (10) nor more than sixty (60) days before the date of said meeting, (b) shall
be in writing and (c) shall be given in person or by mail or courier o such director or voting stockholder. If mailed or
sent by courier, such notice shall be addressed to such director or voting stockholder at his or her address as it appears
on the records of the corporation, with postage or freight thereon prepaid, and shall be deemed to be given at the time
when the same shall be deposited in the United States mail or with such courier. Notice to directors may also be given
by facsimile, which notice shall be deemed to be delivered upon receipt by the sender of transmission confirmation.
Without limiting the manner by which notice otherwise may be given, under the provision of the statutes, as such laws
may be amended from time to time, or of the certificate of incorporation or of these bylaws, such notice shall also be
effective if given by a form of electronic transmission consented to by the stockholder or director to whom the notice
is given. Any such consent shall be revocable by the stockholder or director by written notice to the corporation. Such
consent shall be deemed revoked if (i) the corporation is unable to deliver by electronic transmission two (2)
consecutive notices given by the corporation in accordance with such consent and (ii) such inability becomes known
to the Secretary or an Assistant Secretary of the corporation, or to the transfer agent, or other person responsible for
the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not
invalidate any meeting or other action.
Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the certificate
of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent thereto.
OFFICERS
Number. The officers of the corporation shall be chosen by the board of directors and shall consist of a President, a
Treasurer and a Secretary. The board of directors may also choose Vice-Presidents, and one or more Assistant
Treasurers and Assistant Secretaries. The board of directors may appoint such other officers and agents as it shall
deem desirable who shall hold their offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board. Any number of offices may be held by the same person, unless
the certificate of incorporation or these bylaws otherwise provide.
5
Election and Term of Office. The board of directors at its first meeting after each annual meeting of stockholders shall
appoint a President, a Treasurer and a Secretary. If the election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as is convenient. The officers of the corporation shall hold office until the
earliest of the following events to occur: (a) their successors are chosen and duly qualified; (b) they resign, (c) they
are removed as hereinafter provided or (d) their termination of employment with the corporation, if they were
employed by the corporation at any time after their appointment.
Removal. Any officer elected or appointed by the board of directors may be removed at any time by either the
Chairman of the Board or the affirmative vote of a majority of the board of directors.
Vacancies. Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
Salaries. The salaries of all officers of the corporation shall be fixed by the board of directors.
The Chairman of the Board. The Chairman of the Board, in the event of such appointment or election, shall preside
at all meetings of the stockholders and directors and shall see that orders and resolutions of the board of directors are
carried into effect. The Chairman of the Board shall perform such other duties and have such other powers as the
board of directors or the Chief Executive Officer may from time to time prescribe.
The Chief Executive Officer. The Chief Executive Officer, in the event of such appointment or election, shall be the
chief executive officer of the corporation, shall be responsible for the general and active management of the business
of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect; provided,
however, that if there be no Chief Executive Officer, the President shall have all powers of the Chief Executive Officer.
The Chief Executive Officer shall have the power to execute bonds, mortgages, deeds, contracts and other documents
on behalf of the corporation. The Chief Executive Officer may vote all shares of stock of any other corporation
standing in the name of the corporation, except where the voting thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation, and in general shall perform all duties incident to the office
of the Chief Executive Officer and such other duties as may be prescribed by the board of directors from time to time.
The Chief Executive Officer shall have general powers of supervision and management of the business of the
corporation and shall be the final arbiter of all differences between officers of the corporation. The Chief Executive
Officer’s decision as to any matter affecting the officers of the corporation shall be final and binding as between the
officers of the corporation, subject only to the board of directors of the corporation.
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The President. The President shall be the principal operating officer of the corporation, unless and until a Chief
Operating Officer is appointed. In accordance with the policies and objectives prescribed by the board of directors,
the President shall establish operating procedures for and administer and direct, all aspects of the corporation’s
operations. In the absence of the Chairman of the Board or in the event of the Chairman of the Board’s inability to
act, the President may preside at meetings of the voting stockholders and directors and shall have and exercise the
duties of the Chairman of the Board including the power to execute bonds, deeds, mortgages, contracts and other
documents on behalf of the corporation and to vote all shares of stock of any other corporation standing in the name
of the corporation, except where the voting thereof shall be exclusively delegated by the board of directors to some
other officer or agent of the corporation. In addition, the President shall have the power to execute documents where
by law the signature of the President is required. In general, the President shall have all powers and shall perform all
duties usually vested in the office of the President of a corporation and such other duties and powers as the board of
directors or the Chief Executive Officer may from time to time prescribe.
Chief Financial Officer. The Chief Financial Officer, in the event of such appointment or election, shall be the
principal accounting and financial officer of the corporation and shall (a) have charge of and be responsible for the
maintenance of adequate books of account for the corporation, (b) have charge of all funds and securities of the
corporation and be responsible for the receipt and disbursement thereof and (c) perform all other duties incident to the
office of Chief Financial Officer. If appointed, the Chief Financial Officer shall perform such other duties and have
such other powers as the board of directors or the Chief Executive Officer may from time to time prescribe.
The Chief Operating Officer. The Chief Operating Officer, in the event of such appointment or election, shall be the
principal operating officer of the corporation. Within the policies and objectives prescribed by the board of directors
and under the general supervision of the Chief Executive Officer, the Chief Operating Officer shall establish operating
procedures for, administer and direct all aspects of the corporation’s operations. Except in those instances in which
the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of
execution is expressly prescribed by the board of directors or these bylaws, the Chief Operating Officer may execute
certificates for the corporation’s shares, and any contracts, deeds, mortgages, bonds, or other instruments which the
board of directors has authorized to be executed. The Chief Operating Officer may vote all securities which the
corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent
of the corporation by the board of directors. The Chief Operating Officer shall perform such other duties and have
such other powers as the board of directors or the Chief Executive Officer may from time to time prescribe.
The Vice-Presidents. In the absence of the President or in the event of his or her inability or refusal to act, the Vice-
President, if one shall be elected (or in the event there be more than one Vice-President, the Vice-Presidents in the
order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.
The Vice-Presidents shall perform such other duties and have such other powers as the board of directors or the
President may from time to time prescribe.
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The Treasurer. If required by the board of directors, the Treasurer shall give a bond for the faithful discharge of his or
her duties in such sum and with such surety or sureties as the board of directors shall determine. The Treasurer shall
(a) have charge and custody of and be responsible for all funds and securities of the corporation, receive and give
receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in
the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance
with the provisions of these bylaws, and (b) in general perform all the duties incident to the office of Treasurer and
such other duties as the board of directors or the President may from time to time prescribe.
The Secretary. The Secretary shall (a) keep the minutes of the stockholders’ and of the board of directors’ meetings
in one or more books provided for that purpose, (b) see that all notices are duly given in accordance with the provisions
of these bylaws or as required by law, (c) be custodian of the corporate records of the corporation, (d) keep or oversee
a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder,
(e) have general charge or oversee of the stock transfer books of the corporation and (f) in general perform all duties
incident to the office of Secretary. The Secretary shall perform such other duties and have such other powers as the
board of directors or the President may from time to time prescribe.
The Assistant Treasurers and Assistant Secretaries. The Assistant Treasurers shall, if required by the board of
directors, give bonds for the faithful discharge of their duties in such sums and with such surety or sureties as the
board of directors shall determine. The Assistant Treasurers and Assistant Secretaries, in general, shall perform such
duties as shall be assigned to them by the Treasurer or the Secretary, respectively, or by the President or the board of
directors, and in the event of the absence, inability or refusal to act of the Treasurer or the Secretary, the Assistant
Treasurers and Assistant Secretaries (in the order designated, or in the absence of any designation, then in the order
of their election) shall perform the duties of the Treasurer or the Secretary, respectively.
INTERESTED DIRECTORS AND OFFICERS
No contract or transaction between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or
a committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted
for such purpose, if:
The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are
known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
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The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good
faith by vote of the stockholders without counting the vote of any stockholder who is an interested director.
The common or interested directors may be counted in determining the presence of a quorum at a meeting
of the board of directors or of a committee which authorizes the contract or transaction.
CERTIFICATES OF STOCK
Certificate of Stock. No holder of stock in the corporation shall be entitled to have a certificate, as all stock of the
corporation shall be held electronically in book entry form.
Fixing Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without
a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination
of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
Stock Transfer Agreements. The corporation shall have power to enter into and perform any agreement with
any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of
stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the
General Corporation Law of Delaware.
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Restrictions on Transfers of Shares. Until the Common Stock of the corporation is listed on an exchange and
is made available for trading, no stockholder shall sell, assign, pledge or in any manner transfer any of the shares of
Common Stock of the corporation or any right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the requirements hereinafter set forth in this Section.
(a) If the stockholder receives from anyone a bona fide offer acceptable to the stockholder to purchase any of its shares
of Common Stock, then the stockholder shall first give written notice thereof to the corporation. The notice shall name
the proposed transferee and state the number of shares to be transferred, the price per share and all other terms and
conditions of the offer.
(b) For ten (10) days following receipt of such notice, the corporation shall have the option to purchase all (but not
less than all) the shares specified in the notice at the price and upon the terms set forth in such bona fide offer. In the
event the corporation elects to purchase all the shares, it shall give written notice to the selling stockholder of its
election and settlement for said shares shall be made as provided below in paragraph (c).
(c) In the event the corporation elects to acquire the shares of the selling stockholder as specified in said selling
stockholder’s notice, the Secretary of the corporation shall so notify the selling stockholder and settlement thereof
shall be made in cash within fifteen (15) days after the Secretary of the corporation receives said selling stockholder’s
notice; provided that if the terms of payment set forth in said selling stockholder’s notice were other than cash against
delivery, the corporation shall pay for said shares on the same terms and conditions set forth in said selling
stockholder’s notice.
(d) In the event the corporation does not elect to acquire all of the shares specified in the selling stockholder’s notice,
said selling stockholder may, within a sixty-day period following the expiration of the rights granted to the corporation
herein, sell elsewhere the shares specified in said selling stockholder’s notice which were not acquired by the
corporation, in accordance with the provisions of paragraph (c) of this Section provided that said sale shall not be on
terms and conditions more favorable to the purchaser than those contained in the bona fide offer set forth in said
selling stockholder’s notice. All shares so sold by said selling stockholder shall continue to be subject to the provisions
of this Section in the same manner as before said transfer.
(e) Anything to the contrary contained herein notwithstanding, the following transactions shall be exempt from the
provisions of this Section:
(i) A stockholder’s transfer of any or all shares held either during such stockholder’s lifetime or on death by
will or intestacy to such stockholder’s immediate family. “Immediate family” as used herein shall mean
spouse, lineal descendant, father, mother, brother, or sister of the stockholder making such transfer and shall
include any trust established primarily for the benefit of the stockholder or his immediate family.
(ii) A stockholder’s bona fide pledge or mortgage of any shares with a commercial lending institution,
provided that any subsequent transfer of said shares by said institution shall be conducted in the manner set
forth in this Section.
(iii) A stockholder’s transfer of any or all of such stockholder’s shares to the corporation.
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(iv) A corporate stockholder’s transfer of any or all of its shares to an affiliate thereof or pursuant to and in
accordance with the terms of any merger, consolidation, or reclassification of shares or capital reorganization
of the corporate stockholder.
(v) A corporate stockholder’s transfer of any or all of its shares to any or all of its stockholders.
(vi) A transfer by a stockholder which is limited or general partnership to any or all of its partners or retired
partners, or to any such partner’s or retired partner’s estate. In any such case, the transferee, assignee or other
recipient shall receive and hold such Common Stock subject to the provisions of this Section 8.14, and there
shall be no further transfer of such Common Stock except in accordance with this Section.
(f) The provisions of this Section may be waived with respect to any transfer either by the corporation, upon duly
authorized action of the Board of Directors, or by the stockholders, upon the express written consent of the owners of
a majority of the voting power of the corporation (excluding the votes represented by those shares to be sold by the
selling stockholder). This Section may be amended or repealed only upon the express vote or written consent of the
owners of a majority of the voting power of each outstanding class of voting securities of the corporation or by the
duly authorized action of the Board of Directors.
(g) Any sale or transfer, or purported sale or transfer, of securities of the corporation shall be null and void unless the
terms, conditions, and provisions of this Section are strictly observed
and followed.
(h) The foregoing right of first refusal shall automatically terminate upon the date securities of the corporation are
first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States
Securities and Exchange Commission under the Securities Act of 1933, as amended, or upon the listing of the
securities of the corporation on any stock exchange subject to the Securities Exchange Act of 1934. These provisions
of this Section shall also not apply to the corporation’s securities that are sold or granted to shareholders in any private
placement or securities prior to the date securities of the corporation are first offered to the public pursuant to a
Regulation A offering qualified by the United States Securities and Exchange Commission.
GENERAL PROVISIONS
Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of
incorporation, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve
or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was created.
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Loans to Officers. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist
any officer or other employee of the Corporation or of its subsidiaries, including any officer or employee who is a
director of the Corporation or any of its subsidiaries, whenever, in the judgment of the Board of Directors, such loan,
guarantee or assistance may reasonably be expected to benefit the Corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall
approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in these Bylaws shall
be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at law.
Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or
such other person or persons as the board of directors may from time to time designate.
Fiscal Year. The fiscal year of the corporation shall be as designated by the board of directors from time to time.
Seal. The corporation shall not have a seal unless otherwise determined by the affirmative vote of a majority of the
board of directors.
INDEMNIFICATION
The corporation shall indemnify, in accordance with and to the full extent now or hereafter permitted by law,
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by
or in the right of the corporation), by reason of his or her acting as a director or officer of the corporation (or a director
or officer serving at the request of the corporation in any other capacity for or on behalf of the corporation) against
any and all direct and indirect expenses (including attorneys’ fees, judgments, fines, ERISA or other excise taxes,
penalties and amounts paid in settlement) actually and reasonably incurred by such director or officer in respect
thereof; provided, however, that, the corporation shall not be obligated to indemnify any such director or officer with
respect to proceedings, claims or actions initiated or brought voluntarily by such director and not by way of defense.
Expenses that may be subject to indemnification hereunder shall be paid in advance of the final disposition of the
action, suit or proceeding to the full extent permitted by the Law subject to the corporation’s receipt of any undertaking
required thereby.
Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized
from time to time by the Board of Directors in its discretion, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with
respect to the indemnification and advancement of expenses of directors and officers of the Corporation.
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The provisions of this Article shall be deemed to constitute a contract between the corporation and each
director or officer who serves in such capacity at any time while this Article and the relevant provisions of the Law
are in effect, and each such director or officer shall be deemed to be serving as such in reliance on the provisions of
this Article, and any repeal of any such provisions or of such Article shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state of facts.
If a claim under this Article is not paid in full within thirty (30) days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant also shall be entitled to be paid the expense of
prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if
any, has been provided to the corporation) that the claimant has not met the standards of conduct that make it
permissible under the Law for the corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the corporation. Neither the failure of the corporation to have made a determination
prior to the commencement of such action that indemnification of the claimant is proper under the circumstances
because the claimant has met the applicable standard of conduct set forth in the Law, nor an actual determination by
the corporation that the claimant has not met such standard of conduct shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
The rights of indemnification and advancement provided by this Article are not exclusive of any other right
to indemnification or advancement provided by law, agreement or otherwise, and shall apply to actions, suits or
proceedings commenced after the date hereof, whether or not arising from acts or omissions occurring before or after
the adoption hereof, and shall continue as to a person who has ceased to be a director or officer of the corporation and
shall inure to the benefit of the heirs, executors and administrators of such a person.
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director,
officer, partner, member, manager, trustee, employee or agent of another corporation or of a partnership, limited
liability company, joint venture, trust or other enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the General Corporation Law of the State
of Delaware
AMENDMENTS
These bylaws may be altered, amended or repealed and new bylaws may be adopted by the affirmative vote
of a unanimous vote of the board of directors at any meeting of the board or a majority vote of the voting stockholders
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EXHIBIT 1A-4
SUBSCRIPTION AGREEMENT
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR
PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST
UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE
ILLIQUID FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET EXISTS FOR THE SECURITIES,
AND NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOLLOWING THIS OFFERING.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING CIRCULAR HAS
BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING
CIRCULAR DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A
REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF
THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY
OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH
THIS OFFERING OVER THE WEB-BASED PLATFORM MAINTAINED BY THE COMPANY MANHATTAN
STREET CAPITAL (THE “PLATFORM”). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
INVESTORS WHO ARE NOT “ACCREDITED INVESTORS” (AS THAT TERM IS DEFINED IN SECTION 501
OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE
AMOUNT THEY MAY INVEST, AS SET OUT IN SECTION 4. THE COMPANY IS RELYING ON THE
REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER IN THIS SUBSCRIPTION
AGREEMENT AND THE OTHER INFORMATION PROVIDED BY SUBSCRIBER IN CONNECTION WITH
THIS OFFERING TO DETERMINE THE APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THE SUBSCRIPTION AGREEMENT,
THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS AVAILABLE ON THE PLATFORM
COLLECTIVELY, THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT
COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES OR AGENTS
(INCLUDING “TESTING THE WATERS” MATERIALS) AS INVESTMENT, LEGAL OR TAX ADVICE. IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE INVESTOR’S OWN COUNSEL,
ACCOUNTANT AND OTHER PROFESSIONAL ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER
RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.
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THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION
RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND
ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF,
ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S
MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,”
“BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING
STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE
COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE
FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH
THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE
THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH
DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE. THE OFFERING
MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN
WHICH THE SECURITIES ARE NOT BEING OFFERED OR IN ANY STATE OR JURISDICTION IN WHICH
AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO.
THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED BY THE COMPANY
SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NO
REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OR COMPLETENESS OF
THE INFORMATION CONTAINED IN ANY OFFERING MATERIALS, AND NOTHING CONTAINED IN THE
OFFERING MATERIALS IS OR SHOULD BE RELIED UPON AS A PROMISE OR REPRESENTATION AS TO
THE FUTURE PERFORMANCE OF THE COMPANY.
THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND FOR ANY REASON
WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING
AND/OR ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE
SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF
SECURITIES SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE
OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE DELIVERY NOR THE PURCHASE OF
THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.
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TO:
InSitu Biologics, Inc.
2155 Woodlane Drive, Suite 102
Woodbury, MN 55125
Ladies and Gentlemen:
1. Subscription.
(a) The undersigned (“Subscriber”) hereby irrevocably subscribes for and agrees to purchase Common Stock (the
“Securities”), of InSitu Biologics, Inc., a Delaware corporation (the “Company”), at a purchase price of $5.75 per
share (the “Per Security Price”) with a minimum purchase of 50 shares or $287.50 or higher subject to the discretion
of the manager (“Minimum Purchase,”) upon the terms and conditions set forth herein. The rights of the Common
Stock are as set forth in the Certificate of Incorporation, as amended, included in the Exhibits to the Offering Circular
of the company filed with the SEC (the “Offering Circular”).
(b) Subscriber understands that the Securities are being offered pursuant to an offering circular dated
_______________________________ (the “Offering Circular”), filed with the SEC as part of the Offering Circular.
By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Subscription
Agreement, copies of the Offering Circular and Offering Statement, including the Exhibits thereto, and any other
information required by the Subscriber to make an investment decision.
(c) Subscriber’s subscription may be accepted or rejected in whole or in part, at any time prior to a Closing Date (as
hereinafter defined), by the Company at its sole discretion. In addition, the Company, at its sole discretion, may
allocate to Subscriber only a portion of the number of Securities Subscriber has subscribed for. The Company will
notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber’s
subscription is rejected, Subscriber’s payment (or portion thereof if partially rejected) will be returned to Subscriber
without interest and all of Subscriber’s obligations hereunder relating to the rejected portion of the subscription shall
terminate.
(d) The aggregate number of Securities sold shall not exceed 1,739,132 shares of Class A Common Stock (the
“maximum number of shares”). The Company may accept subscriptions until _____________________________,
unless the earliest of extended by the Company in its sole discretion in accordance with applicable SEC regulations
(the “Termination Date”) or until the maximum number of shares under the Offering are sold. The Company may
elect at any time to close all or any portion of this offering, on various dates at or prior to the Termination Date (each
a “Closing Date”).
(e) In the event of rejection of this subscription in its entirety, or in the event the sale of the Securities (or any portion
thereof) is not consummated for any reason, this Subscription Agreement shall have no force or effect, except for
Section 5 hereof, which shall remain in force and effect.
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(f) The terms of this Subscription Agreement shall be binding upon Subscriber and its transferees, heirs, successors
and assigns (collectively, “Transferees”); provided that for any such transfer to be deemed effective, the Transferee
shall have executed and delivered to the Company in advance an instrument in a form acceptable to the Company in
its sole discretion, pursuant to which the proposed Transferee shall acknowledge, agree, and be bound by the
representations and warranties of Subscriber and the terms of this Subscription Agreement, and the Company consents
to the transfer in its sole discretion.
2. Purchase Procedure.
(a) Payment. The purchase price for the Securities shall be paid simultaneously with the execution and delivery to the
Company of the signature page of this Subscription Agreement. Subscriber shall deliver a signed copy of this
Subscription Agreement, along with payment for the aggregate purchase price of the Securities by any means
approved by the Company, including but not limited to a check for available funds made payable to InSitu Biologics,
Inc., by ACH electronic transfer or by wire transfer to an account designated by the Company, or by any other
methods, such as credit cards, Paypal or other electronic transfer or methods approved by the Company.
(b) Deposit arrangements. Payment for the Securities must be received by Prime Trust, LLC (the “Escrow Agent”)
from Subscriber by ACH electronic transfer, wire transfer of immediately available funds, check or other means
approved by the Company, in the amount as set forth in Appendix A on the signature page hereto. Subscriber shall
receive notice and evidence of the digital entry of the number of the Securities owned by Subscriber reflected on the
books and records of the Company and verified by the Transfer Agent, which books and records shall bear a notation
that the Securities were sold in reliance upon Regulation A.
3. Representations and Warranties of the Company.
The Company represents and warrants to Subscriber that the following representations and warranties are true and
complete in all material respects as of the date of each Closing Date, except as otherwise indicated. For purposes of
this Agreement, an individual shall be deemed to have “knowledge” of a particular fact or other matter if such
individual is actually aware of such fact. The Company will be deemed to have “knowledge” of a particular fact or
other matter if one of the Company’s current officers has, or at any time had, actual knowledge of such fact or other
matter.
(a) Organization and Standing. The Company is a corporation duly formed, validly existing and in good standing
under the laws of the State of Delaware. The Company has all requisite power and authority to own and operate its
properties and assets, to execute and deliver this Subscription Agreement, and any other agreements or instruments
required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased)
makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material
adverse effect on the Company or its business.
4
(b) Issuance of the Securities. The issuance, sale and delivery of the Securities in accordance with this Subscription
Agreement have been duly authorized by all necessary corporate action on the part of the Company. The Securities,
when so issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription
Agreement, will be duly and validly issued, fully paid and non-assessable.
(c) Authority for Agreement. The execution and delivery by the Company of this Subscription Agreement and the
consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities)
are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the
Company. Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited
by considerations of public policy and by federal or state securities laws.
(d) No filings. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 4 hereof,
no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or
filing or registration with, any governmental body, agency or official is required by or with respect to the Company
in connection with the execution, delivery and performance by the Company of this Subscription Agreement except
(i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii) for such
other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license,
consent, authorization, approval or exemption or give any such notice or make any filing or registration would have
a material adverse effect on the ability of the Company to perform its obligations hereunder.
(e) Capitalization. The authorized securities of the Company immediately prior to the initial investment in the
Securities is as set forth under “Securities Being Offered” of the Offering Circular. Except as set forth in the offering
Circular, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of
first refusal), or agreements of any kind (oral or written) for the purchase or acquisition from the Company of any of
its securities.
(f) Financial statements. Complete copies of the Company’s consolidated financial statements consisting of the
balance sheets of the Company as of December 31, 2017 and the related statements of operations, stockholders’ equity
and cash flows for the period then ended (the “Financial Statements”) have been made available to the Subscriber and
appear in the Offering Circular. The Financial Statements are based on the books and records of the Company and
fairly present, in all material respects, the consolidated financial condition of the Company as of the respective dates
they were prepared and the results of the operations and cash flows of the Company for the periods indicated. Baker
Tilly, which has audited the Financial Statements, is an independent accounting firm within the rules and regulations
adopted by the SEC.
5
(g) Proceeds. The Company shall use the proceeds from the issuance and sale of the Securities as set forth under the
“Use of Proceeds to Issuer” in the Offering Circular.
(h) Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or
investigation before any court, arbitrator, mediator or governmental body, or to the Company’s knowledge, currently
threatened in writing (a) against the Company or (b) against any consultant, officer, manager, director or key employee
of the Company arising out of his or her consulting, employment or board relationship with the Company or that could
otherwise materially impact the Company.
4. Representations and Warranties of Subscriber. By executing this Subscription Agreement, Subscriber (and, if
Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom
Subscriber is so purchasing) represents and warrants, which representations and warranties are true and complete in
all material respects as of each Closing Date:
(a) Requisite Power and Authority. Such Subscriber has all necessary power and authority under all applicable
provisions of law to execute and deliver this Subscription Agreement and other agreements required hereunder and to
carry out their provisions. All action on Subscriber’s part required for the lawful execution and delivery of this
Subscription Agreement and other agreements required hereunder have been or will be effectively taken prior to the
Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required
hereunder will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability
of equitable remedies.
(b) Investment Representations. Subscriber understands that the Securities have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”). Subscriber also understands that the Securities are being
offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon
Subscriber’s representations contained in this Subscription Agreement.
(c) Illiquidity and Continued Economic Risk. Subscriber acknowledges and agrees that there is no ready public market
for the Securities and that there is no guarantee that a market for their resale will ever exist. Subscriber must bear the
economic risk of this investment indefinitely and the Company has no obligation to list the Securities on any market
or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended)
with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber is able to bear
the economic risk of losing Subscriber’s entire investment in the Securities. Subscriber also understands that an
investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk
factors relating to the purchase of Securities.
6
(d) Accredited Investor Status or Investment Limits. Subscriber represents that either:
(i) Subscriber is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act.
Subscriber represents and warrants that the information set forth in response to question (c) on the signature page
hereto concerning Subscriber is true and correct; or
(ii) The purchase price set out in paragraph (b) of the signature page to this Subscription Agreement, together with
any other amounts previously used to purchase Securities in this offering, does not exceed 10% of the greater of the
Subscriber’s annual income or net worth.
Subscriber represents that to the extent it has any questions with respect to its status as an accredited investor, or the
application of the investment limits, it has sought professional advice.
(e) Shareholder information. Within five days after receipt of a request from the Company, the Subscriber hereby
agrees to provide such information with respect to its status as a shareholder (or potential shareholder) and to execute
and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which
the Company is or may become subject. Subscriber further agrees that in the event it transfers any Securities, it will
require the transferee of such Securities to agree to provide such information to the Company as a condition of such
transfer.
(f) Company Information. Subscriber understands that the Company is subject to all the risks that apply to early-stage
companies, whether or not those risks are explicitly set out in the Offering Circular. Subscriber has had an opportunity
to discuss the Company’s business, management and financial affairs with managers, officers and management of the
Company and has had the opportunity to review the Company’s operations and facilities. Subscriber has also had the
opportunity to ask questions of and receive answers from the Company and its management regarding the terms and
conditions of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties
have been made to Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect
to the business or prospects of the Company or its financial condition.
(g) Valuation. The Subscriber acknowledges that the price of the Securities was set by the Company on the basis of
the Company’s internal valuation and no warranties are made as to value. The Subscriber further acknowledges that
future offerings of Securities may be made at lower valuations, with the result that the Subscriber’s investment will
bear a lower valuation.
(h) Domicile. Subscriber maintains Subscriber’s domicile (and is not a transient or temporary resident) at the address
shown on the signature page.
(i) No Brokerage Fees. There are no claims for brokerage commission, finders’ fees or similar compensation in
connection with the transactions contemplated by this Subscription Agreement or related documents based on any
arrangement or agreement binding upon Subscriber. The undersigned will indemnify and hold the Company harmless
against any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any such claim.
7
(j) Foreign Investors. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended), Subscriber hereby represents that it has satisfied itself as to the full observance
of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this
Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities,
(ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and continued
beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s
jurisdiction.
5. Indemnity. The representations, warranties and covenants made by the Subscriber herein shall survive the closing
of this Agreement. The Subscriber agrees to indemnify and hold harmless the Company and its respective officers,
directors and affiliates, and each other person, if any, who controls the Company within the meaning of Section 15 of
the Securities Act against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited
to, any and all reasonable attorneys’ fees, including attorneys’ fees on appeal) and expenses reasonably incurred in
investigating, preparing or defending against any false representation or warranty or breach of failure by the
Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any other document
furnished by the Subscriber to any of the foregoing in connection with this transaction.
6. Governing Law; Jurisdiction. This Subscription Agreement shall be governed and construed in accordance with the
laws of the State of Delaware
EACH OF THE SUBSCRIBER AND THE COMPANY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE STATE OF DELAWARE
AND NO OTHER PLACE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS SUBSCRIPTION AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF
SUBSCRIBER AND THE COMPANY ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH
ITS AND HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS SUBSCRIPTION AGREEMENT. EACH OF SUBSCRIBER AND
THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN THE MANNER AND IN THE ADDRESS SPECIFIED IN SECTION 8
AND THE SIGNATURE PAGE OF THIS SUBSCRIPTION AGREEMENT.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR THE ACTIONS
OF EITHER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
THEREOF, EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY
UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. EACH OF
THE PARTIES HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS SUBSCRIPTION AGREEMENT. IN THE EVENT OF LITIGATION, THIS
SUBSCRIPTION AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
8
7. Digital (“electronic”) signatures, often referred to as an “e-signature,” enable paperless contracts and help speed up
business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures.
You may execute this Subscription Agreement by providing one of the following: (i) your original, scanned or faxed
signature; or (ii) your electronic signature, as prescribed in the bulleted paragraphs below.
* The mechanics of the electronic signature requested herein include your execution of this Subscription Agreement
and other governing agreements (such as bylaws, articles of incorporation, board resolutions, etc.) for the Company
in a single signature block. By typing in your name, with the underlying software recording your IP address, your
browser identification, the timestamp, and a security hash within an SSL encrypted environment, you will have
accepted and agreed, without reservation, to all of the terms and conditions contained within this Subscription
Agreement and and other governing agreements. Your electronically signed Agreements will be stored by the
Company in such a manner that the Company can access them at any time.
* You hereby consent and agree that the electronic signature below constitutes your signature, acceptance and
agreement of both the Subscription Agreement and other governing agreements as if each of these documents were
actually signed by you in writing. Further, all parties agree that no certification authority or other third-party
verification is necessary to validate any electronic signature; and that the lack of such certification or third party
verification will not in any way affect the enforceability of your signature or resulting contract between you and the
Company. You understand and agree that your e-signature executed in conjunction with the electronic submission of
this Subscription Agreement and other governing agreements shall be legally binding and that such transaction has
been authorized by you. You agree that your electronic signature below is the legal equivalent of your manual
signature on both this Subscription Agreement and other governing agreements and that you consent to be legally
bound by terms and conditions of such Agreements. The Subscription Agreement and other governing agreements
may be executed in counterparts and by electronic signature, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
* Furthermore, you hereby agree that all current and future notices, confirmations and other communications regarding
this Subscription Agreement or the other governing agreements specifically, and/or future communications in general
between the parties, may be made by email, sent to the email address of record as set forth in the vesting information
below or as otherwise from time to time changed or updated and disclosed to the other party, without necessity of
confirmation of receipt, delivery or reading, and such form of electronic communication is sufficient for all matters
regarding the relationship between the parties. If any such electronically sent communication fails to be received for
any reason, including but not limited to such communications being diverted to the recipients’ spam filters by the
recipients’ email service provider, or due to a recipients’ change of address, or due to technology issues by the
recipients’ service provider, the parties agree that the burden of such failure to receive is on the recipient and not the
sender, and that the sender is under no obligation to resend communications via any other means, including but not
limited to postal service or overnight courier, and that such communications shall for all purposes, including legal and
regulatory, be deemed to have been delivered and received. No physical, paper documents will be sent to you, and if
you desire physical documents then you agree to be satisfied by directly and personally printing, at your own expense,
the electronically sent communication(s) and maintaining such physical records in any manner or form that you desire.
* Your Consent is Hereby Given: By signing this Subscription Agreement, you are explicitly agreeing to receive
documents electronically, including your copy of this signed Subscription Agreement and other governing
agreements, as well as ongoing disclosures, communications and notices.
* By signing this document, the Subscriber is agreeing to both other governing agreements and the Subscription
Agreement and all provisions, clauses, representations, warranties, acknowledgments and covenants contained
therein, each of which: (i) shall be binding on the heirs, executors, administrators, successors and permitted assigns
of the undersigned, and (ii) may not be cancelled, withdrawn, revoked, or terminated by the undersigned except as set
forth therein. If there is more than one signatory hereto, the representations, warranties, acknowledgments and
agreements of the undersigned are made jointly and severally.
8. Miscellaneous.
(a) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or
plural, as the identity of the person or persons or entity or entities may require.
(b) This Subscription Agreement is not transferable or assignable by Subscriber.
(c) The representations, warranties and agreements contained herein shall be deemed to be made by and be binding
upon Subscriber and its heirs, executors, administrators and successors and shall inure to the benefit of the Company
and its successors and assigns.
(d) None of the provisions of this Subscription Agreement may be waived, changed or terminated orally or otherwise,
except as specifically set forth herein or except by a writing signed by the Company and Subscriber.
(e) In the event any part of this Subscription Agreement is found to be void or unenforceable, the remaining provisions
are intended to be separable and binding with the same effect as if the void or unenforceable part were never the
subject of agreement.
9
(f) The invalidity, illegality or unenforceability of one or more of the provisions of this Subscription Agreement in
any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Subscription Agreement
in such jurisdiction or the validity, legality or enforceability of this Subscription Agreement, including any such
provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
(g) This Subscription Agreement supersedes all prior discussions and agreements between the parties with respect to
the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the
subject matter hereof.
(h) The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto
and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof
shall confer, third-party beneficiary rights upon any other person.
(i) The headings used in this Subscription Agreement have been inserted for convenience of reference only and do
not define or limit the provisions hereof.
(j) This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument.
(k) If any recapitalization or other transaction affecting the stock of the Company is effected, then any new, substituted
or additional securities or other property which is distributed with respect to the Securities shall be immediately subject
to this Subscription Agreement, to the same extent that the Securities, immediately prior thereto, shall have been
covered by this Subscription Agreement.
(l) No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement
shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
[SIGNATURE PAGE FOLLOWS]
10
InSitu Biologics, Inc.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned, desiring to purchase Common Stock of InSitu Biologics, Inc., by executing this signature page,
hereby executes, adopts and agrees to all terms, conditions and representations of the Subscription Agreement.
(a) The number of shares of Common Stock the undersigned hereby irrevocably subscribes for is: ______________
(print number of Securities)
(b) The aggregate purchase price (based on a purchase price of $5.75 per Security) for the shares the undersigned
hereby irrevocably subscribes for is: $_____________
(print aggregate purchase price)
(c) EITHER (i) The undersigned is an accredited investor (as that term is defined in Regulation D under the Securities
Act because the undersigned meets the criteria set forth in the following paragraph(s) of Appendix A attached hereto:
OR (ii) The amount set forth in paragraph (b) above (together with any previous investments in the Securities pursuant
to this offering) does not exceed 10% of the greater of the undersigned’s net worth or annual income.
(print applicable number from Appendix A)
(d) The Securities being subscribed for will be owned by, and should be recorded on the Company’s books as held in
the name of:
___________________________________________
(print name of owner or joint owners)
11
If the Securities are to be purchased in joint names, both Subscribers must sign:
11
Signature Signature
Name (Please Print) Name (Please Print)
Email address Email address
Address Address
Telephone Number Telephone Number
Social Security Number/EIN Social Security Number
Date Date
* * * * *
12
This Subscription is accepted InSitu Biologics, Inc.
on _____________, 2018
By:
Name:
Title:
12
APPENDIX A
An accredited investor includes the following categories of investor:
(1) Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered
pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13)
of the Act; any investment company registered under the Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment
decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited
investors;
(2) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of
1940;
(3) Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1,000,000.
(i) Except as provided in paragraph (5) (ii) of this section, for purposes of calculating net worth under this paragraph
(5):
(A) The person’s primary residence shall not be included as an asset;
(B) Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary
residence at the time of the buy or sale of securities, shall not be included as a liability (except that if the amount of
such indebtedness outstanding at the time of buy or sale of securities exceeds the amount outstanding 60 days before
such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included
as a liability); and
13
(C) Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the
primary residence at the time of the buy or sale of securities shall be included as a liability;
(ii) Paragraph(5)(i) of this section will not apply to any calculation of a person’s net worth made in connection with a
purchase of securities in accordance with a right to purchase such securities, provided that:
(A) Such right was held by the person on July 20, 2010;
(B) The person qualified as an accredited investor on the basis of net worth at the time the person acquired such right;
and
(C) The person held securities of the same issuer, other than such right, on July 20, 2010.
(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or
joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation
of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as described in §230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited investors.
14
EXHIBIT 6
1
2
3
4
5
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
Void after
Warrant No.: ________ _______________
INSITU BIOLOGICS, INCORPORATED
WARRANT TO PURCHASE SHARES
This Warrant is issued to _________________ (“NAME”) by InSitu Biologics, Incorporated, a Delaware corporation
(the “Company”), in connection with revenues received from HDS.
1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth, the holder of this Warrant is
entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company
shall notify the holder hereof in writing), to purchase from the Company up to fully paid and nonassessable shares of
the Company’s Common Stock (each a “Share” and collectively the “Shares”) at an exercise price of $ per Share
(such price, as adjusted from time to time, is herein referred to as the “Exercise Price”).
2. Exercise Period. This Warrant shall be exercisable, in whole or in part, during the term commencing on
the issuance date of this Warrant and ending at 5 p.m. California time on Five Years From The Date of Issuance (the
“Exercise Period”).
3. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section
2 above, the holder may exercise from time to time, in whole or in part, the purchase rights evidenced hereby. Such
exercise shall be affected by:
(i) the surrender of the Warrant, together with a notice of exercise to the Secretary of the Company
at its principal offices; and
(ii) the payment to the Company of an amount equal to the aggregate Exercise Price for the number
of Shares being purchased; or
(iii) The Holder of this Warrant may also exercise this Warrant as to any or all of the Securities and,
in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise
in payment of the aggregate Purchase Price, elect instead to receive upon such exercise a reduced number of
Securities (the “Net Number”) determined according to the following formula (a “Cashless Exercise”):
Net Number = (A x B) - (A x C)
---------------------
B
For purposes of the foregoing formula:
A= the total number of Securities with respect to which this Warrant is then being exercised in a
Cashless Exercise.
B= the Market Price on the Trading Day immediately preceding the date of the Subscription
Agreement.
C= the Purchase Price for the applicable Securities at the time of such exercise.
1
There cannot be a Cashless Exercise unless “B” exceeds “C.”
(a) For the purpose of this Warrant, the term “Trading Day” means (x) if the Securities are not listed
on the NYSE Euronext or NYSE AMEX but sale prices of the Securities are reported on Nasdaq Global Market,
Nasdaq Global Select Market, Nasdaq Capital Market or another automated quotation system, a day on which trading
is reported on the principal automated quotation system on which sales of the Securities are reported, (y) if the
Securities are listed on the NYSE Euronext or NYSE AMEX, a day on which there is trading on such stock exchange,
(z) if clauses (x) and (y) are both inapplicable, a day on which quotations are reported by National Quotation Bureau
Incorporated, or, if clauses (x), (y) and (z) are each inapplicable, any day which is not a Saturday, a Sunday or a day
on which banking institutions are not required to be open in the State of New York.
(b) For the purpose of this Warrant, the term “Market Price” means, of any date, the value of the
Security determined as follows:
(1) If the Security is listed on any established stock exchange or a national market system,
including without limitation the NYSE Euronext, NYSE AMEX, Nasdaq Global Market, the Nasdaq Global Market
Select or the Nasdaq Capital Market, its Market Price will be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall
Street Journal or such other source as the parties hereto mutually agree;
(2) If the Security is regularly quoted by a recognized securities dealer but selling prices
are not reported, the Market Price will be the mean between the high bid and low asked prices for the Security on the
day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such
bids and asks were reported), as reported in The Wall Street Journal or such other source as the parties hereto mutually
agree; or
(3) In the absence of an established market for the Security, the Market Price will be
determined in good faith by the Board.
4. Certificates for Shares; Amendments of Warrants. Upon the exercise of the purchase rights evidenced by
this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable
thereafter, and in any event within thirty (30) days of the delivery of the subscription notice. Upon partial exercise,
the Company shall promptly issue an amended Warrant representing the remaining number of Shares purchasable
thereunder. All other terms and conditions of such amended Warrant shall be identical to those contained herein.
5. Issuance of Shares. The Company covenants that (i) the Shares, when issued pursuant to the exercise of
this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof, (ii) during the Exercise Period the Company will reserve from its authorized and
unissued Common Stock sufficient Shares in order to perform its obligations under this warrant.
6. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable
upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time before the
expiration of this Warrant subdivide the Shares, by split-up or otherwise, or combine its Shares, or issue additional
shares of its Shares as a dividend, the number of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a
combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the
same. Any adjustment under this Section 6(a) shall become effective at the close of business on the date the
subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record
date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital
reorganization, or change in the capital stock (including because of a change of control) of the Company (other than
as a result of a subdivision, combination, or stock dividend provided for in Section 6(a) above), then the Company
shall make appropriate provision so that the holder of this Warrant shall have the right at any time before the expiration
of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and
amount of shares of stock and other securities and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of Shares as were purchasable by the holder of this Warrant
immediately before such reclassification, reorganization, or change. In any such case appropriate provisions shall be
made with respect to the rights and interest of the holder of this Warrant so that the provisions hereof shall thereafter
be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and
appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate
purchase price shall remain the same.
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(c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of
shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall promptly notify the
holder of such event and of the number of Shares or other securities or property thereafter purchasable upon exercise
of this Warrant.
7. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor
on the basis of the Exercise Price then in effect.
8. Representations of the Company. The Company represents that all corporate actions on the part of the
Company, its officers, directors and stockholders necessary for the sale and issuance of this Warrant have been taken.
9. Representations and Warranties by the Holder. The Holder represents and warrants to the Company as
follows:
(a) This Warrant and the Shares issuable upon exercise thereof are being acquired for its own
account, for investment and not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”). Upon exercise of
this Warrant, the Holder shall, if so requested by the Company, confirm in writing, in a form satisfactory to
the Company, that the securities issuable upon exercise of this Warrant are being acquired for investment
and not with a view toward distribution or resale.
(b) The Holder understands that the Warrant and the Shares have not been registered under the Act
by reason of their issuance in a transaction exempt from the registration and prospectus delivery requirements
of the Act pursuant to Section 4(2) thereof, and that they must be held by the Holder indefinitely, and that
the Holder must therefore bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Act or is exempted from such registration. The Holder further
understands that the Warrant Shares have not been qualified under the California Securities Law of 1968 (the
“California Law”) by reason of their issuance in a transaction exempt from the qualification requirements
of the California Law pursuant to Section 25102(f) thereof, which exemption depends upon, among other
things, the bona fide nature of the Holder’s investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the purchase of this Warrant and the Shares purchasable pursuant
to the terms of this Warrant and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of the Shares pursuant to the terms
of this Warrant.
(e) The Holder is an “accredited investor” as such term is defined in Rule 501 of Regulation D
promulgated under the Act.
10. Restrictive Legend.
The Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the
following form:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144 OR IN THE
OPINION OF COUNSEL FOR THE COMPANY, REGISTRATION UNDER THE ACT IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.
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(ii) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AMENDED AND RESTATED
VOTING AGREEMENT AND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF
WHICH IS AVAILABLE UPON REQUEST FROM THE COMPANY. THESE TRANSFER
RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SECURITIES. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED
FOR A PERIOD NOT TO EXCEED 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A
REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING
IF REQUESTED BY THE UNDERWRITERS IN ACCORDANCE WITH SUCH AGREEMENT.
11. Warrants Transferable. Subject to compliance with the terms and conditions of this Section 11, this
Warrant and all rights hereunder are transferable, without charge to the holder hereof (except for transfer taxes), upon
surrender of this Warrant properly endorsed or accompanied by written instructions of transfer. With respect to any
offer, sale or other disposition of this Warrant or any Shares acquired pursuant to the exercise of this Warrant before
registration of such Warrant or Shares, the holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such holder’s counsel, or other evidence, if
requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration
or qualification (under the Act as then in effect or any federal or state securities law then in effect) of this Warrant or
the Shares and indicating whether or not under the Act certificates for this Warrant or the Shares to be sold or otherwise
disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance
with such law. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, if so
requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such Shares, all in accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 11 that the opinion of counsel for the holder or other evidence
is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly with details thereof
after such determination has been made. Each certificate representing this Warrant or the Shares transferred in
accordance with this Section 11 shall bear a legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required. In
order to ensure compliance with such laws, the Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
12. Rights of Stockholders. No holder of this Warrant shall be entitled, as a Warrant holder, to vote or receive
dividends or be deemed the holder of the Shares or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to
any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
13. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall
be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid,
(b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or
similar overnight courier, freight prepaid or (d) one business day after the business day of facsimile transmission, if
delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed to the
Company, at the address of its principal corporate offices (attention: President), or at such other address as a party
may designate by ten days advance written notice to the other party pursuant to the provisions above.
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14. Governing Law. This Warrant and all actions arising out of or in connection with this Agreement shall
be governed by and construed in accordance with the laws of Delaware, without regard to the conflicts of law
provisions of California or of any other state.
15. Rights and Obligations Survive Exercise of Warrant. Unless otherwise provided herein, the rights and
obligations of the Company, of the holder of this Warrant and of the holder of the Shares issued upon exercise of this
Warrant, shall survive the exercise of this Warrant.
(Signature Page Follows)
InSitu Biologics, Incorporated
By: Its:
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EXHIBIT A
NOTICE OF EXERCISE
TO: InSitu Biologics, Incorporated
2155 Woodlane Drive, Suite 102
Woodbury, Minnesota 55125
Attention: President
1. The undersigned hereby elects to purchase shares of Common Stock of InSitu Biologics, Incorporated (the
“Shares”) pursuant to the terms of the attached Warrant.
2. The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith
payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.
3. Please issue a certificate or certificates representing said Shares in the name of the undersigned or in such
other name as is specified below:
(Name)
(Address)
4. The undersigned hereby represents and warrants that the aforesaid Shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution
thereof, and that the undersigned has no present intention of distributing or reselling such shares and all representations
and warranties of the undersigned set forth in Section 9 of the attached Warrant (including Section 9(e) thereof) are
true and correct as of the date hereof.
(Signature)
(Name)
(Date) (Title)
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EXHIBIT B
FORM OF TRANSFER
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the right represented by
the attached Warrant to purchase shares of Common Stock of INSITU BIOLOGICS, INCORPORATED to which the
attached Warrant relates, and appoints Attorney to transfer such right on the books of INSITU BIOLOGICS,
INCORPORATED, with full power of substitution in the premises.
Dated: _____________
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
Address:
Signed in the presence of:
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EXHIBIT 1A-11
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement on Form 1-A/A of InSitu Biologics, Inc.
(FKA: InSitu Biologics, LLC) of our report dated February 15, 2018, relating to the financial statements, which
includes an explanatory paragraph relating to the Company's ability to continue as a going concern, included in the
Regulation A Offering Circular.
Minneapolis, Minnesota
March 21, 2018
EXHIBIT 12
InSitu Biologics, Inc.
2155 Woodlane Drive, Suite 102
Woodbury, MN 55125
March 20, 2018
Re: Qualification Statement forInSitu Biologics, Inc. on Form 1-A
To whom it may concern:
I have been retained by InSitu Biologics, Inc. (the “Company”), in connection with the Qualification Statement (the
“Qualification Statement”) on Form 1-A, relating to the offering of 1,739,132 Common Shares to be sold. You have
requested that I render my opinion as to whether or not the securities proposed to be issued on terms set forth in the
Qualification Statement will be validly issued, fully paid, and non-assessable. The purchasers of the securities will
have no obligation to make payments to the Company other than the price for the securities. Purchasers will not have
any obligations to creditors of the Company due to the purchasers’ ownership of the Common Shares.
In connection with the request, I have examined the following:
1. Articles of Incorporation of the Company;
2. Bylaws of the Company; and
3. The Qualification Statement
I have examined such other corporate records and documents and have made such other examinations, as I have
deemed relevant.
Based on the above examination, I am of the opinion that the securities of the Company to be issued pursuant to the
Qualification Statement are validly authorized and will be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit and to the Qualification Statement and to the reference to
our firm under “Experts” in the related Prospectus. In giving the foregoing consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and
regulations of the Securities and Exchange Commission.
Sincerely,
/s/
Jillian Ivey Sidoti, Esq.