Harvesting ◾ 375
The time-frame necessary to achieve these developmental milestones may
be long and uncertain, and we may not successfully complete these mile-
stones for any of our intended products in development.
Prior to conducting clinical trials, which are necessary to obtain approval
by FDA to market a product, we must obtain FDA clearance. Even after
obtaining clearance, the FDA can halt clinical trials at any time for safety rea-
sons or for any violations, by us or by the clinical investigators, of the FDA’s
requirements for conducting clinical trials. If we are unable to receive clear-
ance to conduct clinical trials, or if our clinical trials are halted by the FDA,
we would not be able to achieve any revenue from such products since it is
illegal to sell any medical device for human use without FDA approval.
Regulatory clearances or approvals, if granted, may include signicant limi-
tations on the indicated uses for which the product may be marketed. Prior
to granting such clearances or approvals, the FDA and certain foreign regu-
latory authorities often impose numerous requirements with which medical
device manufacturers must comply. FDA enforcement policy strictly prohibits
the marketing of cleared or approved medical devices for uncleared or unap-
proved uses. In addition, product clearances or approvals could be withdrawn
for failure to comply with regulatory standards or because of the occurrence
of unforeseen problems following the initial marketing. We will be required
to adhere to applicable FDA good manufacturing practice (“GMP”) regula-
tions and similar regulations in other countries, which include testing, control,
and documentation requirements. Ongoing compliance with GMP and other
applicable regulatory requirements will be monitored through periodic inspec-
tions by federal and state agencies, including FDA and CDHS, and by compa-
rable agencies in other countries. Failure to comply with applicable regulatory
requirements, including marketing products for unapproved uses, could result
in, among other things, warning letters, nes, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, refusal of the
government to grant pre-market clearance or pre-market approval for devices,
withdrawal of clearances or approvals and criminal prosecution. Changes in
existing regulations or adoption of new governmental regulations or policies
could prevent or delay regulatory approval of our products.
There can be no assurance that we will be able to obtain FDA 510(k)
clearance or PMA approval for our products under development or other
necessary regulatory approvals or clearances on a timely basis or at all.
Delays in receipt of or failure to receive U.S. or foreign clearances or
approvals, the loss of previously obtained clearances or approvals, or
376 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
failure to comply with existing or future regulatory requirements would
likely have a material adverse effect on our business, nancial condition,
and results of operations.
We May Be Adversely Affected by
Environmental Laws and Regulations
We are subject to a variety of laws, rules and regulations in the United
States related to the use, storage, handling, discharge, and disposal of cer-
tain chemical materials such as isocyanates, dimethylacetamide, and glycols
used in our research and manufacturing processes. Those regulations could
potentially require us to acquire expensive equipment or to incur substan-
tial other expenses to comply with them. If we incur such expenses, our
product costs could signicantly increase. Our failure to comply with pres-
ent or future environmental laws, rules, and regulations could result in nes,
suspension of production or cessation of operations. Although we are not
aware of any claim involving violation of environmental or occupational
safety and health laws and regulations, there can be no assurance that such
a claim may not arise in the future.
OTHER RISKS
Our Future Success Depends on the Continued Service of
Management, Engineering and Sales Personnel and Our
Ability to Identify, Hire, and Retain Additional Personnel
Our success depends, to a signicant extent, upon the efforts and abilities
of Dr.Michael Szycher, our president and chief executive ofcer, and other
members of senior management. The loss of the services of one or more of
our senior management or other key employees could adversely affect our
business. We do not maintain key person life insurance on any of our of-
cers, employees, or consultants.
There is intense competition for qualied employees in the medical indus-
try, particularly for highly skilled design, applications and engineers and sales
people. We may not be able to continue to attract and retain technologists,
managers, or other qualied personnel necessary for the development of our
business or to replace qualied individuals who could leave us at any time in
the future. Our anticipated growth is expected to place increased demands on
our resources, and will likely require the addition of new management and
Harvesting ◾ 377
engineering staff as well as the development of additional expertise by existing
management employees. If we lose the services of or fail to recruit engineers
or other technical and management personnel, our business could be harmed.
Periods of Rapid Growth and Expansion Could Place a Signicant
Strain on Our Resources, Including Our Employee Base
To manage our possible future growth effectively, we will be have to con-
tinue to improve our operational, nancial and management systems. This
process is complex and requires, among other things, that data from existing
systems be made compatible with the upgraded systems. During transitional
periods, we could experience delays in ordering materials, inventory track-
ing problems and other inefciencies, which could cause delays in ship-
ments of products to our customers.
In order to continue to grow, we will have to hire, train, motivate, and
manage new and existing employees. In addition, our continued growth and
the evolution of our business plan will require signicant additional manage-
ment, technical and administrative resources. We may not be able to effec-
tively manage the growth and evolution of our current business.
The Anti-Takeover Provisions of Our Amended
and Restated Certicate of Incorporation and of
the Massachusetts Corporation Law May Delay,
Defer, or Prevent a Change of Control
Our board of directors has the authority to issue up to 5,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of our common
stock will be subject to, and may be harmed by, the rights of the holders of
any shares of preferred stock that may be issued in the future. The issuance
of preferred stock may delay, defer or prevent a change in control because
the terms of any issued preferred stock could potentially prevent or severely
restrict us from the consummation of any merger, reorganization, sale of
substantially all of our assets, liquidation or other extraordinary corporate
transaction, without the approval of the holders of the then outstanding
shares of preferred stock. In addition, the issuance of preferred stock could
have a dilutive effect on our current stockholders.
378 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
Our stockholders must give substantial advance notice, prior to the rel-
evant meeting, to nominate a candidate for director or present a proposal
to our stockholders at a meeting. These notice requirements could inhibit
a takeover by delaying stockholder action. In addition, our bylaws and
Massachusetts law provide for staggered board members with each member
elected for three years. In addition, directors may only be removed by stock-
holders for cause and with a vote of 80% of the stock.
Potential Healthcare Reform Legislation
May Adversely Affect Our Business
Political, economic, and regulatory inuences are subjecting the health-
care industry in the United States to fundamental change. Potential
reforms proposed over the last several years have included mandated
basic healthcare benets, controls on healthcare spending through limita-
tions on the growth of private health insurance premiums and Medicare
and Medicaid spending, the creation of large insurance purchasing
groups and other fundamental changes in the healthcare delivery system.
In addition, some states in which we operate are also considering various
healthcare reform proposals. We anticipate that federal and state govern-
ments will continue to review and assess alternative healthcare delivery
systems and payment methodologies and that the public debate of these
issues will likely continue in the future. Due to uncertainties regarding
the ultimate features of reform initiatives and their enactment and imple-
mentation, we cannot predict which, if any, of such reform proposals will
be adopted, when they may be adopted or what impact they may have
on us and there can be no assurance that the adoption of reform pro-
posals will not have a material adverse effect on our business, operating
results or nancial condition.
USE OF PROCEEDS
The Company will not receive any proceeds from sales by the selling secu-
rity holders. However, we will receive funds from the selling security holders
upon exercise of their warrants. The exercise price of the majority of these
warrants is $1.50.
Harvesting ◾ 379
SELLING SECURITY HOLDERS
The following table and notes set forth, to the best of our knowledge, the
name of each selling security holder, the nature of any position, ofce, or
other material relationship which the selling security holder has had, within
the past three years, with CardioTech or with any of our predecessors or
afliates, the amount of shares of CardioTech common stock that are bene-
cially owned by such security holder, the amount to be offered for the secu-
rity holder’s account and the amount to be owned by such security holder
after completion of the offering.
Selling Security
Holder
Number of Shares
of CardioTech
Common Stock
Benecially
Owned Prior to
the Offering
Number of Shares
of CardioTech
Common Stock
Being Offered
Hereby
Number of
Shares of
CardioTech
Common Stock
to be Owned
Upon
Completion of
the Offering
Fechtor, Detwiler &
Co. Inc.
100,000 100,000 0
Michael Adams 325,089 40,000 285,089
Michael Szycher 2,967,379 40,000 2,927,379
Alan Edwards* 80,047 40,000 40,047
John Mattern 40,000 40,000 0
Robert Detwiler 125,000 125,000 0
William Petty 70,000 25,000 45,000
Total 3,707,515 410,000 3,297,515
* Alan Edwards served as an ofcer of CardioTech,Ltd. prior to its sale in November of
2000.
Because the selling security holders may, under this prospectus, sell all
or some portion of their CardioTech common stock, no estimate can be
given as to the amount of CardioTech common stock that will be held by
the selling security holders upon completion of the offering. In addition,
the selling security holders identied above may have sold, transferred or
otherwise disposed of all or a portion of their CardioTech common stock
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