Investing in the Company’s Series Seed Preferred Stock financing involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this Form C, including the Company’s financial statements and the related notes. The occurrence of any of the events or developments described below could have a material adverse effect on the Company’s business, results of operations, financial condition, prospects and the value of shares. In such an event, the value of your shares could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to the Company or that the Company currently deems immaterial may also impair the Company’s business operations.
Risks Related to the Company’s Limited Operating History, Financial Condition, Capital Requirements and the Company's Ability to Continue as a Going Concern
The Company expects to incur losses for the foreseeable future and may never achieve or maintain profitability. Therefore, it needs to continue to access additional funding to allow it to maintain its development and permitting program. While it has used and will continue to explore a range of financing options, including private equity from accredited investors, product crowdfunding on Indiegogo, equity crowdfunding under Title III, and funding and in kind support from strategic partners, licensees or purchasers, there can be no assurance that the Company will continue to be successful in its funding effort to support its program of producing a working prototype, testing it for efficacy, completing the regulatory approval process and bringing the micro-CPAP to market. If the Company is unable to obtain funding on a timely basis, it may be required to significantly curtail, delay or discontinue its development and permitting program or the commercialization of the micro-CPAP, or be unable to expand its operations or otherwise capitalize on its business opportunities, as desired, which could materially affect its business, financial condition and results of operations.
The Company is a development stage medical device company with a limited operating history and no products approved for commercial sale, and the Company has incurred significant losses since its inception. The Company anticipates that it will continue to incur losses for the foreseeable future, which, together with the Company’s limited operating history, makes it difficult to assess the Company’s future viability.
Before the Company reaches cashflow breakeven, the Company may be able to find a suitable buyer, a buyer who is committed to making the Company’s micro-CPAP device available to the public. There is no assurance that the Company will be able to raise adequate funds to continue to cover its cash burn rate until it reaches cashflow break even or to find a suitable buyer.
The Company's ongoing operating losses raise substantial doubt about the Company's ability to continue as a going concern. The Company has no current source of revenue to sustain its present activities, and it does not expect to generate revenue until, and unless, the Company receives regulatory approval of, and successfully commercializes, the Company's micro-CPAP device. As of September 30, 2017, the Company has accounts payable of $122,564 with $66,849 over 30 days. With $25,000 in the bank as of September 30 2017, plus cash available at its parent, Encite LLC, in addition to extending trade payables, the Company expects to be able to operate through the end of December 2017 and into January 2018. Under the Company's current financial plan, the $350,000 minimum amount that the Company is seeking to raise through this Title III financing will be sufficient for the Company to continue operating through May 31, 2018 if the Company is also able to raise another $250,000 from other sources such as pursuant to Rule 506 (c) or from strategic partners. If the Company is unable to raise $250,000 from other sources, it will not seek release of the Wefunder escrow account until $600,000 is available to be released. The Company's current financial plan allows the technology team to continue developing the technology as Airing’s priority focus and at our current level. The Company's use of proceed of the $600,000 under the operating plan includes payments of $520,00 to the Company’s parent company, Encite LLC, for its obligations under the terms of the License Agreement with Encite, under the terms of the Services Agreement with Encite and/or for payment of a portion of the outstanding balance of the loan from Encite. As of September 30, 2017 the loan balance was $888,073. The Company's ability to continue as a going concern will require it to obtain additional financing to fund its operations beyond May 31, 2018. The perception of the Company's ability to continue as a going concern may make it more difficult for the Company to obtain financing for the continuation of its operations and could result in the loss of confidence by investors, suppliers and employees.
Risks Related to the Company’s Business
The Company has encountered significant delays and cost overruns in the development of components necessary for the demonstration of a working prototype of the Company’s micro-CPAP device. There can be no assurance as to the timing of the demonstration of a working prototype or whether the Company will ever be successful in the development of the necessary components for such a demonstration. In such an event, you may lose all or part of your investment.
The Company’s business is dependent on the successful development, regulatory approval and commercialization of the Company’s micro-CPAP device. The Company may be unable to obtain regulatory approval or clearance for the Company’s micro-CPAP device under applicable regulatory requirements. The denial or delay of any such approval or clearance would delay commercialization of the Company’s micro-CPAP device and adversely impact the Company’s potential to generate revenue, its business and its results of operations.
The Company’s micro-CPAP device may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval or clearance, if any.
As an early stage company, the Company has never obtained marketing approval for any product candidate, and it may be unable to successfully do so for the Company’s micro-CPAP device. Failure to successfully complete any of these activities in a timely manner for the Company’s micro-CPAP device could have a material adverse impact on the Company’s business and financial performance.
Even if the Company’s micro-CPAP device obtains regulatory approval or clearance, the device may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.
The Company currently relies on third-party suppliers to assist in the technological development of the Company’s micro-CPAP device, and the Company intends to rely on third-party manufactures to produce commercial quantities of the Company’s micro-CPAP device. The loss of these suppliers or inability to establish relationships with third-party manufacturers, or their failure to comply with applicable regulatory requirements or to provide the Company with sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect the Company’s business.
The Company’s micro-CPAP device, if approved, could face significant competition and the Company’s failure to effectively compete may prevent the Company from achieving significant market penetration. Most of the Company’s competitors have significantly greater resources than the Company does, and the Company may not be able to successfully compete. If coverage and adequate reimbursement from third-party payors are not available, it may make it difficult for the Company to sell certain of its products profitably.
As a virtual company with no employees, the Company currently has no sales organization. If the Company is unable to establish sales capabilities on its own or through third parties, it may not be able to market and sell its micro-CPAP device effectively in the United States and foreign jurisdictions, if approved, or generate product revenue.
As a virtual company with no employees, the Company will need to staff up and hire it own work force if the Company is not acquired soon after it demonstrates a working prototype of its micro-CPAP device. The Company may fail to attract and retain the necessary employees, including senior management and key scientific and engineering personnel, necessary to manage the growth required to successfully complete the development of its micro-CPAP device or any future micro-CPAP device, conduct its clinical trials and commercialize its current or any future micro-CPAP device.
If product liability lawsuits are brought against the Company, the Company may incur substantial liabilities and may be required to limit commercialization of its current or future micro-CPAP device.
If the Company is not successful in discovering, developing, acquiring and commercializing improvements to its micro-CPAP device, its ability to expand its business and achieve its strategic objectives would be impaired.
The Company has in the past engaged and may in the future engage in strategic transactions that could affect the Company’s liquidity, dilute the Company’s existing stockholders, increase the Company’s expenses and present significant challenges in focus and energy to the Company’s management or prove not to be successful.
Any collaboration arrangements that the Company may enter into in the future may not be successful, which could adversely affect the Company’s ability to develop and commercialize its micro CPAP device.
Risks Related to Intellectual Property
The Company’s micro-CPAP device and any future products that it commercializes could be alleged to infringe patent rights and other proprietary rights of third parties, which may require costly litigation and, if the Company is not successful, could cause the Company to pay substantial damages and/or limit the Company’s ability to commercialize its products. If the Company is unable to obtain, maintain and enforce intellectual property protection directed to the Company’s micro-CPAP device and any future technologies that the Company develops, others may be able to make, use, or sell products substantially similar to the Company’s products, which could adversely affect the Company’s ability to compete in the market.
The Company’s intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of the Company’s rights to the relevant intellectual property or technology or increase the Company’s financial or other obligations to its licensors.
The Company may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property for which it is the licensee.
The Company may not be able to protect its intellectual property rights throughout the world. If the Company’s trademarks and trade names are not adequately protected, then the Company may not be able to build name recognition in its markets of interest and its business may be adversely affected.
The Company has not yet registered trademarks for a commercial trade name for its lead micro-CPAP device in the United States or foreign jurisdictions and failure to secure such registrations could adversely affect its business. If the Company is unable to protect the confidentiality of its proprietary information and know-how, the value of the Company’s technology and products could be adversely affected.
Risks Related to the Company’s Series Seed Preferred Stock and This Offering
The Company’s stock price may be volatile and you may not be able to resell shares of the Company’s Series Seed Preferred Stock at or above the price that you paid. Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
If the Company sells shares of its common or preferred stock in future financings, stockholders may experience immediate dilution.
The Company’s parent company, Encite LLC, and its principal stockholders and management own a significant percentage of the Company’s stock and will be able to exert significant control over matters subject to stockholder approval.
The Company has broad discretion to determine how to use the funds raised in this offering, and may use them in ways that may not enhance the Company’s operating results or the price of the Series Seed Preferred Stock.
Claims for indemnification by the Company’s directors and officers may reduce its available funds to satisfy successful third-party claims against the Company and may reduce the amount of money available to the Company.
The Company does not currently intend to pay dividends on the Series Seed Preferred Stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of the Series Seed Preferred Stock.
Risks Related to the Company’s License and Services Agreements with Encite LLC
The Company licenses its core micro-CPAP technology from its parent, Encite LLC (Encite), and the Company could lose its rights to this license if a dispute with Encite arises or if the Company fails to comply with the financial and other terms of the license. As a virtual company with no employees, the Company is entirely dependent on the services agreement with Encite. If Encite fails to perform under the services agreement or if the Company fails to comply with the financial and other terms of the services agreement, the Company may be unable to achieve the Company’s plans.
Risks Related to Other Applications for the Technology Underlying the Micro-CPAP Device Outside the Field-Of-Use in the License Agreement with Encite LLC.
The Company is paying for the development of the technology underlying the key components that will be used in the Company's micro-CPAP device. It is possible that these components will not operate successfully to create a working prototype of the micro-CPAP or a commercially viable version of the micro-CPAP device even though there may be other applications for the technology underlying that components that ultimately turn out to be commercially viable. The Company has no rights to the technology underlying the components of the micro-CPAP device outside of the Field of Use, namely pulmonary diseases or conditions as specified in License Agreement with the Company's parent, Encite LLC. The Company will derive no benefits from the exploitation of the technology underlying the components outside of the Field of Use. Those benefits could be substantial.
The Company is highly dependent on the services of Stephen Marsh, the Company's President.
The Company is highly dependent on the services of Stephen Marsh, the Company's President, head of technology development and a member of the
Board of Directors. Although Mr. Marsh spends
significant time working on the Company's micro-CPAP device and is highly active in the overall management of all aspects of the Company's business and technology development , he does not devote his full time and attention to the Company. Mr. Marsh is also active in the management of other technologies being developed by the Company's parent company, Encite LLC. If for any reason Mr. Marsh is unwilling or unable to continue in his current roles for the Company, the Company's ability to develop a working prototype of the Company's micro-CPAP device could be seriously compromised.
Risks Related to Government Regulation
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if the Company is ultimately unable to obtain regulatory approval or other marketing authorizations for the Company’s micro-CPAP device, the Company’s business will be substantially harmed.
Modifications to the Company’s micro-CPAP device cleared under the 510(k) clearance process, if any, may require new 510(k) clearances or other marketing authorizations, and if the Company makes modifications to such products without obtaining requisite marketing authorization, the Company may be required to cease marketing or recall the modified products until clearances or other marketing authorizations are obtained.
Even if the Company receives regulatory approval of the its micro-CPAP device, the Company will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and the Company may be subject to penalties if it fails to comply with regulatory requirements or experience unanticipated problems with its micro-CPAP device.
The Company’s micro-CPAP device, if authorized for marketing, may cause or contribute to adverse medical events that the Company is required to report to the FDA, and if the Company fails to do so, it would be subject to sanctions that could harm the Company’s reputation, business, financial condition and results of operations. The discovery of serious safety issues with the Company’s micro-CPAP device, or a recall of the Company’s products either voluntarily or at the direction of the FDA or another governmental authority, if such products are marketed, could have a negative impact.
Recently enacted and future legislation may increase the difficulty and cost for the Company to obtain marketing approval of and commercialize the Company’s micro-CPAP device and affect the prices that the Company may obtain.
Stephen Marsh is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Phil Huyck is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Ken Pryde is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.
Arthur Anderson is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.