We have incurred losses since our inception and we may continue to incur losses. If we fail to generate significant revenues from sales of our products, we may never achieve or sustain profitability.

 

As of December 31, 2012, we had an accumulated deficit of approximately $65.5 million. The accumulated deficit has resulted principally from costs incurred in our research and development efforts and general operating expenses. We have incurred significant losses in each year since our inception in 1998. Net losses were approximately $5.7 million for the year ended December 31, 2012, approximately $8.3 million for the year ended December 31, 2011, and approximately $9.5 million for the year ended December 31, 2010. We may continue to incur operating losses as we continue to invest capital in the sales and marketing of our products, development of our product candidates and our business generally.

 

 

 

 

 

 

 

 

 

 

Our ClearPoint system components are purchased primarily by hospitals, which bill various third-party payors, including governmental healthcare programs, such as Medicare, and private insurance plans, for procedures in which our ClearPoint system is used. Reimbursement is a significant factor considered by hospitals in determining whether to acquire medical devices such as our ClearPoint system. Therefore, our ability to successfully commercialize our ClearPoint system depends significantly on the adequacy of coverage and reimbursement from these third-party payors.

 

Medicare pays hospitals a prospectively determined amount for inpatient operating costs. The prospective payment for a patient’s stay is determined by the patient’s condition and other patient data and procedures performed during the inpatient stay using a classification system known as Medicare Severity Diagnosis Related Groups, or MS-DRGs. Medicare pays a fixed amount to the hospital based on the MS-DRG into which the patient’s stay is assigned, regardless of the actual cost to the hospital of furnishing the procedures, items and services provided. Therefore, a hospital must absorb the cost of our products as part of the payment it receives for the procedure in which the product is used. In addition, physicians that perform procedures in hospitals are paid a set amount by Medicare for performing such services under the Medicare physician fee schedule. Medicare payment rates for both systems are established annually.  Some hospitals could believe third-party reimbursement levels are not adequate to cover the cost of our ClearPoint system. Furthermore, some physicians could believe third-party reimbursement levels are not adequate to compensate them for performing the procedures in which our products are used. Failure by hospitals and physicians to receive an amount that they consider to be adequate reimbursement for procedures in which our products are used will deter them from purchasing or using our products and will limit our sales growth.

 

One result of the current Medicare payment system, which is also utilized by most non-governmental third-party payors, is that a patient’s treating physician orders a particular service and the hospital in which the procedure is performed bears the cost of delivery of the service. Hospitals have limited ability to align their financial interests with those of the treating physician because Medicare law generally prohibits hospitals from paying physicians to assist in controlling the costs of hospital services, including paying physicians to limit or reduce services to Medicare beneficiaries even if such services are medically unnecessary. As a result, hospitals have traditionally stocked supplies and products requested by physicians and have had limited ability to restrict physician choice of products and services.

 

 

 

 

In the United States, we believe that existing billing codes apply to procedures in which physicians use our ClearPoint system. Reimbursement levels for procedures using our ClearPoint system or any product that we may market in the future could be decreased or eliminated as a result of future legislation, regulation or reimbursement policies of third-party payors. Any such decrease or elimination would adversely affect the demand for our products and our ability to sell our products on a profitable basis. Furthermore, if procedures using our ClearPoint system gain market acceptance and the number of these procedures increases, Centers for Medicare and Medicaid Services, or CMS, the federal agency that administers the Medicare Program, as well as other public or private payors, may establish new billing codes for those procedures that provide for a lower reimbursement amount than traditional approaches, which would adversely affect our financial results and business.

 

 

 

 

 

 

 

 

 

Many of the components and component assemblies of our ClearPoint system are provided to us by single-source suppliers. We generally purchase components and component assemblies through purchase orders rather than long-term supply agreements and generally do not maintain large volumes of inventory. While alternative suppliers exist and have been identified, the disruption or termination of the supply of components and component assemblies could cause a significant increase in the cost of these components, which could affect our operating results. Our dependence on a limited number of third-party suppliers and the challenges we may face in obtaining adequate supplies involve several risks, including limited control over pricing, availability, quality and delivery schedules. A disruption or termination in the supply of components could also result in our inability to meet demand for our ClearPoint system, which could harm our ability to generate revenues, lead to customer dissatisfaction and damage our reputation. Furthermore, if we are required to change the supplier of a key component or component assembly of our ClearPoint system, we may be required to verify that the new supplier maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a new supplier could also adversely affect our ability to meet demand for our ClearPoint system.

 

 

 

·

differences in treatment protocols and methods across the markets in which we expect to market our ClearPoint system;

 

·

requirements necessary to obtain product reimbursement;

 

·

product reimbursement or price controls imposed by foreign governments;

 

·

difficulties in compliance with foreign laws and regulations;

 

·

changes in foreign regulations and customs;

 

·

changes in foreign currency exchange rates and currency controls;

 

 

·

changes in a specific country’s or region’s political or economic environment; trade protection measures, import or export licensing requirements or other restrictive actions by United States or foreign governments; and

 

·

negative consequences from changes in tax laws.

 

 

 

In addition to the changes discussed above, the Affordable Care Act imposes a 2.3% excise tax on the sale of any taxable human medical device after December 31, 2012, subject to certain exclusions, by the manufacturer, producer or importer of such device. The total cost to the industry is expected to be approximately $30 billion over ten years. This new and significant tax burden could have a material negative impact on the results of our operations and the operations of our strategic partners. Further, the Affordable Care Act encourages hospitals and physicians to work collaboratively through shared savings programs, such as accountable care organizations, as well as other bundled payment initiatives, which may ultimately result in the reduction of medical device acquisitions and the consolidation of medical device suppliers used by hospitals. While passage of the Affordable Care Act may ultimately expand the pool of potential patients for our ClearPoint system, the above-discussed changes could adversely affect our financial results and business.

 

 

 

 

 

Under our co-development agreement, through December 31, 2012 we had paid Siemens approximately $1.4 million in connection with Siemens’ MRI software development work. The co-development agreement provides that, once the software for the ClearTrace system is commercially available, Siemens will pay us a fixed amount for each software license sold by Siemens until we recoup our investment in the software. However, if our agreement with Siemens is terminated, or if Siemens does not commercialize the software, we will not recover our investment in the software.

 

 

The ClearTrace system is still under development. To date, we have conducted only animal studies and other preclinical work with respect to the ClearTrace system. We cannot predict a timetable for completion of our development activities, and there can be no assurance that the development efforts will be successfully completed. Accordingly, we are not able to estimate when we will make a filing seeking regulatory approval or clearance to market the ClearTrace system in the United States or in any foreign market.

 

 

 

 

 

Outside the United States, the regulatory approval process varies among jurisdictions and can involve substantial additional testing. Clearance or approval by the FDA does not ensure clearance or approval by regulatory authorities in other jurisdictions, and clearance or approval by one foreign regulatory authority does not ensure clearance or approval by regulatory authorities in other foreign jurisdictions. The foreign regulatory approval process may include all of the risks associated with obtaining FDA clearance or approval in addition to other risks. In addition, the time required to obtain foreign clearance or approval may differ from that required to obtain FDA clearance or approval and we may not obtain foreign regulatory clearances or approvals on a timely basis, if at all.

 

 

 

 

 

We received 510(k) clearance to market our ClearPoint system for use in general neurological interventional procedures. In the future, we could seek to obtain additional, more specific indications for use of our ClearPoint system beyond the general neurological intervention claim, although we have no present plan to do so. Some of these expanded claims could require FDA 510(k) clearance. Other claims could require FDA approval of a PMA. Moreover, some specific ClearPoint system claims could require clinical trials to support regulatory clearance or approval. In the event we seek a new indication for use of, or new claims for, the ClearPoint system that we believe are necessary or desirable for successful commercialization, the FDA may refuse our requests for 510(k) clearance or PMA approval. Likewise, to the extent clinical trials are necessary, we may not successfully complete or have the funds to initiate such clinical trials.

 

 

 

 

 

 

 

 

 

 

 

●

broad product offerings, which address the needs of physicians and hospitals in a wide range of procedures;

 

●

greater experience in, and resources for, launching, marketing, distributing and selling products, including strong sales forces and established distribution networks;

 

●

existing relationships with physicians and hospitals;

 

●

more extensive intellectual property portfolios and resources for patent protection;

 

●

greater financial and other resources for product research and development;

 

●

greater experience in obtaining and maintaining FDA and other regulatory clearances or approvals for products and product enhancements;

 

●

established manufacturing operations and contract manufacturing relationships; and

 

●

significantly greater name recognition and more recognizable trademarks.

 

 

 

 

 

 

 

●

decreased demand for our products;

 

●

injury to our reputation;

 

●

diversion of management’s attention;

 

●

significant costs of related litigation;

 

●

payment of substantial monetary awards by us;

 

●

product recalls or market withdrawals;

 

●

a change in the design, manufacturing process or the indications for which our products may be used;

 

●

loss of revenue; and

 

●

an inability to commercialize product candidates.

 

 

We entered into license and development agreements with Boston Scientific with respect to our MRI-safety technologies, pursuant to which Boston Scientific could incorporate our MRI-safety technologies into Boston Scientific’s implantable medical leads for cardiac and neuromodulation applications. There is no assurance that Boston Scientific will advance development efforts to incorporate our technologies into its product candidates, that any such development efforts will be successful or that patents will issue on any patent applications we licensed to Boston Scientific, in which case we would not receive future milestone payments or royalties provided for under our agreements with Boston Scientific. Further, Boston Scientific has no obligation to include our licensed intellectual property in its products or product candidates. Even if Boston Scientific incorporates our licensed intellectual property into its product candidates, Boston Scientific may be unable to obtain regulatory clearance or approval or successfully commercialize the related products, in which case we would not receive product royalties. To our knowledge, our licensed intellectual property has not been incorporated into any of Boston Scientific's currently commercialized products.

 

 

 

 

 

 

 

 

United States patents and patent applications may be subject to interference proceedings and United States patents may be subject to reissue and reexamination proceedings in the United States Patent and Trademark Office. Foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent offices. Any of these proceedings could result in either loss of the patent or denial of the patent application, or loss or reduction in the scope of one or more of the claims of the patent or patent application. Changes in either patent laws or in interpretations of patent laws may also diminish the value of our intellectual property or narrow the scope of our protection. Interference, reexamination and opposition proceedings may be costly and time consuming, and we, or the third parties from whom we license intellectual property, may be unsuccessful in such proceedings. Thus, any patents that we own or license may provide limited or no protection against competitors. In addition, our pending patent applications and those we may file in the future may not result in patents being issued or may have claims that do not cover our products or product candidates. Even if any of our pending or future patent applications are issued, they may not provide us with adequate protection or any competitive advantages. Our ability to develop additional patentable technology is also uncertain.

 

 

 

 

 

 

We received a non-exclusive, worldwide license from a third party to certain software code that is integrated into the software component of our ClearPoint system. In return, we agreed to pay the third party a license fee for each copy of the ClearPoint system software that we distribute, subject to certain minimum license purchase commitments which we have satisfied. Our agreement with the third party continues through July 2015. If we do not extend the agreement, we will not be able to purchase additional licenses after July 2015, which could impede our ability to commercialize our ClearPoint system until equivalent software could be identified, licensed or developed, and integrated into the software component of our ClearPoint system. These delays, if they occur, could harm our business, operating results and financial condition.

 

 

 

 

If we fail to meet any of those requirements while our loans from Boston Scientific are outstanding, we will be required to assign Boston Scientific title to the patents and patent applications that we own and that we license to Boston Scientific. However, upon any such assignment to Boston Scientific, Boston Scientific will grant us an exclusive, royalty-free, perpetual worldwide license to the same patents and patent applications in all fields of use outside neuromodulation and implantable medical leads for cardiac applications. As of January 31, 2013, our licensing arrangements with Boston Scientific included seven wholly-owned issued United States patents, two wholly-owned pending United States patent applications, nine wholly-owned issued foreign patents, five wholly-owned pending foreign patent applications, eight co-owned issued United States patents, seven co-owned pending United States patent applications, 14 co-owned issued foreign patents and 15 co-owned pending foreign patent applications.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

●

design, development and manufacturing;

 

●

testing, labeling and storage;

 

●

product safety;

 

●

marketing, sales and distribution;

 

●

premarket clearance or approval;

 

●

recordkeeping procedures;

 

●

advertising and promotions;

 

●

recalls and field corrective actions;

 

●

post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; and

 

●

product export.

 

 

●

untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;

 

●

customer notifications or orders for the repair or replacement of our products or refunds;

 

●

recall, detention or seizure of our products;

 

●

operating restrictions or partial suspension or total shutdown of production;

 

●

refusing or delaying requests for 510(k) clearances or PMA approvals of new products or modified products;

 

●

withdrawing 510(k) clearances or PMA approvals that have already been granted; or

 

●

refusing to grant export approval for our products.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

●

The federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, individuals or entities from knowingly and willfully soliciting, receiving, offering or providing any kickback, bribe or other remuneration, directly or indirectly, in exchange for or to induce the purchase, lease or order, or arranging for or recommending of, any item or service for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs.

 

●

Federal false claims laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid or other federally-funded healthcare programs that are false or fraudulent, or are for items or services not provided as claimed, and which may apply to entities like us to the extent that our interactions with customers may affect their billing or coding practices. Changes to the federal false claims law enacted as part of the Affordable Care Act will likely increase the number of whistleblower cases brought against providers and suppliers of health care items and services.

 

●

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to the privacy and security rules normally associated with HIPAA, established new federal crimes for knowingly and willfully executing a scheme to defraud any healthcare benefit program or making false statements in connection with the delivery of or payment for healthcare benefits, items or services.

 

●

State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, and the Foreign Corrupt Practices Act, which may apply to items or services reimbursed by any third-party payor, including commercial insurers, or when physicians are employees of a foreign government entity.

 

●

The Affordable Care Act, which imposes certain reporting obligations on manufacturers of drugs, devices and biologics. Specifically, such manufacturers are required to report payments or other transfers of value to or on behalf of a physician or teaching hospital by such manufacturers, as well as any ownership or investment interest held by physicians in such manufacturers. On February 1, 2013, CMS issued the final rule to implement this so-called “Sunshine” provision of the Affordable Care Act. Under the final rule, we will be subject to the data collecting, reporting and public disclosure obligation. Data collecting obligations must begin by August 1, 2013, with reporting obligations beginning on March 31, 2014.  Reported data will be made publicly available by September 30, 2014.  Violations of the reporting requirements are subject to civil monetary penalties.

 

●

The Affordable Care Act also grants the Office of Inspector General additional authority to obtain information from any individual or entity to validate claims for payment or to evaluate the economy, efficiency or effectiveness of the Medicare and Medicaid programs, expands the permissible exclusion authority to include any false statements or misrepresentations of material facts, enhances the civil monetary penalties for false statements or misrepresentation of material facts, and enhances the Federal Sentencing Guidelines for those convicted of federal healthcare offenses.

 

 

 

 

●

keeping us informed of new developments in their respective fields of practice;

 

●

advising us on our research and development projects related to their respective fields;

 

●

advising us on improvements to methods, processes and devices related to their respective fields (such as advice on the development of prototype devices);

 

●

assisting us with the technical evaluation of our methods, processes and devices related to their respective fields;

 

●

advising us with respect to the commercialization of products in their respective fields; and

 

●

providing training and other similar services on the proper use of our products.

 

 

 

 

 

●

HIPAA and its implementing regulations, known as the HIPAA Privacy and Security Rules, apply to covered entities, which include most healthcare facilities that purchase and use our products. The HIPAA Privacy and Security Rules set forth minimum standards for safeguarding individually identifiable health information, impose certain requirements relating to the privacy, security and transmission of individually identifiable health information and provide certain rights to individuals with respect to that information. HIPAA also requires covered entities to contractually bind third parties, known as business associates, in the event that they perform an activity or service for or on behalf of the covered entity that involves access to patient identifiable health information.

 

 

●

The federal Health Information Technology for Economic and Clinical Health Act, or HITECH, which strengthens and expands the HIPAA Privacy and Security Rules and its restrictions on use and disclosure of patient identifiable health information, including imposing liability on business associates of covered entities.

 

●

Both HITECH and most states have data breach laws that necessitate the notification in certain situations of a breach that compromises the privacy or security of personal information.

 

●

Other federal and state laws restricting the use and protecting the privacy and security of patient information may apply, many of which are not preempted by HIPAA.

 

●

Federal and state consumer protection laws are being applied increasingly by the United States Federal Trade Commission, or FTC, and state attorneys general to regulate the collection, use, storage and disclosure of personal or patient information, through websites or otherwise, and to regulate the presentation of website content.

 

●

Other countries also have, or are developing, laws governing the collection, use and transmission of personal or patient information.

 

●

Federal and state laws regulating the conduct of research with human subjects.

 

 

 

 

 

 

 

 

 

 

 

●

expanding our sales and marketing infrastructure and capabilities;

 

●

expanding our assembly capacity and increasing production;

 

●

implementing appropriate operational and financial systems and controls;

 

●

improving our information systems;

 

●

identifying, attracting and retaining qualified personnel in our areas of activity; and

 

●

hiring, training, managing and supervising our personnel.

 

 

 

 

 

 

 

 

 

 

·

broker-dealers must deliver, prior to the transaction, a disclosure schedule prepared by the SEC relating to the penny stock market;

 

·

broker-dealers must disclose the commissions payable to the broker-dealer and its registered representative;

 

·

broker-dealers must disclose current quotations for the securities;

 

·

a broker-dealer must furnish its customers with monthly statements disclosing recent price information for all penny stocks held in the customer’s account and information on the limited market in penny stocks.

 

 

 

 

 

In August 2012, we filed a registration statement with the SEC covering certain outstanding shares of our common stock and shares of our common stock underlying certain warrants held by some of our existing securityholders. That registration statement became effective in September 2012, and as such all of the shares of our common stock covered by the registration statement are now freely transferable, unless held by an affiliate of ours.  Likewise, the registration statement of which this prospectus is a part registers approximately 9.0 million shares of our common stock and approximately 4.5 million shares of common stock issuable upon the exercise of warrants.  In addition to the shares of our common stock covered by those registration statements, as of January 31, 2013, approximately 34.3 million of our outstanding shares were freely transferable or could be publicly resold pursuant to Rule 144 under the Securities Act. Of those shares, approximately 10.3 million shares were held by our affiliates and approximately 24.0 million shares were held by non-affiliates of the company. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned restricted securities for at least six months, including our affiliates, would be entitled to sell such securities, subject to the availability of current public information about the company. A person who has not been our affiliate at any time during the three months preceding a sale, and who has beneficially owned his shares for at least one year, would be entitled under Rule 144 to sell such shares without regard to any limitations under Rule 144. Under Rule 144, sales by our affiliates are subject to volume limitations, manner of sale provisions and notice requirements. Any substantial sale of common stock pursuant to the registration statements, Rule 144 or otherwise may have an adverse effect on the market price of our common stock by creating an excessive supply. Likewise, the availability for sale of substantial amounts of our common stock could reduce the prevailing market price.

 

 

 

 

●

delaying, deferring or preventing a change in corporate control;

 

●

impeding a merger, consolidation, takeover or other business combination involving us; or

 

●

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

•

our ability to market, commercialize and achieve market acceptance for our products;

 

•

the anticipated progress of our research and product development activities;

 

•

our ability to successfully complete the development of our current product candidates;

 

 

•

our ability to obtain regulatory clearance or approval for our current product candidates;

 

•

our ability to generate additional product candidates in the future;

 

•

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and

 

•

the estimates regarding the sufficiency of our cash resources.

 

 

 

 

 

 

 

 

 

 

 

 

 

*	Represents beneficial ownership of less than 1% of our outstanding common stock.

(1)	Includes an aggregate of 6,622,515 shares issuable upon exercise of warrants and an aggregate of 66,668 shares issuable upon exercise of options, and assumes a cash exercise of such warrants and options.

(2)	Does not take into account any limitations on exercise contained in any warrants.

(3)	Includes an aggregate of 4,500,842 shares issuable upon exercise of warrants, and assumes a cash exercise of such warrants.

(4)	Assumes the securityholder does not sell any of the shares of common stock included in this prospectus.

(5)	Assumes the securityholder sells all of the shares of common stock included in this prospectus.

(6)	Includes an aggregate of 2,021,673 shares issuable upon exercise of warrants and an aggregate of 66,668 shares issuable upon exercise of options, and assumes a cash exercise of such warrants and options.

(7)

This securityholder has granted Perkins Capital Management Inc. voting and investment power with respect to the shares owned by the securityholder.  Richard C. Perkins, in his capacity as portfolio manager at Perkins Capital Management Inc., may also be deemed to have voting and investment power with respect to the shares owned by the securityholder.  Mr. Perkins disclaims any beneficial ownership of the shares.

(8)	Benson T. Ross has voting and investment power with respect to the shares owned by BTR Partners LP.

(9)

Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd (“EAM”), has discretionary authority to vote and dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares.  Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by EAM.  Mr. Hoe and Mr. Lane disclaim any beneficial ownership of these shares.

(10)	Anita Siegel has voting and investment power with respect to the shares owned by Harbor Watch Partners LP.

(11)

Empery Asset Management LP, the authorized agent of Hartz Capital Investments, LLC (“HCI”), has discretionary authority to vote and dispose of the shares held by HCI and may be deemed to be the beneficial owner of these shares.  Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by HCI.  Mr. Hoe and Mr. Lane disclaim any beneficial ownership of these shares.

(12)	Thomas H. Sharpe has voting and investment power with respect to the shares owned by LBB Capital Partners, LP.

(13)	Mr. James E. Besser has voting and investment power with respect to the shares owned by Manchester Explorer, L.P.

(14)	Richard O. McCall has voting and investment power with respect to the shares owned by the Mary McCall ROM Trust.

(15)

UBS O’Connor LLC is the investment manager of O’Connor Global Multi-Strategy Alpha Master Limited and consequently has voting control and investment power over securities held by O’Connor Global Multi-Strategy Alpha Master Limited.  Jeffrey Putman is Executive Director of UBS O'Connor LLC. Mr. Putman disclaims beneficial ownership of the shares held by UBS O’Connor LLC FBO O’Connor Global Multi-Strategy Alpha Master Limited. UBS O’Connor LLC is a wholly-owned subsidiary of UBS AG, a company whose securities are listed on the New York Stock Exchange.

(16)	Lindsay A. Rosenwald and Michael S. Weiss share voting and investment power with respect to the shares owned by Opus Point Healthcare Innovations Fund, LP.

 

 

(17)	Lindsay A. Rosenwald and Michael S. Weiss share voting and investment power with respect to the shares owned by Opus Point Healthcare (Low Net) Fund, LP.

(18)	Lindsay A. Rosenwald and Michael S. Weiss share voting and investment power with respect to the shares owned by Opus Point Healthcare Value Fund, LP.

(19)	Kellie Seringer has voting and investment power with respect to the shares owned by Parallax Biomedical Fund LP.

(20)	Mr. Pietrangelo is one of our directors.  Mr. Pietrangelo joined our Board of Directors in March 2010.

(21)	Parthenia R. Kiersted has voting and investment power with respect to the shares owned by PRK Partners, LP.

(22)

Each of Sabby Healthcare Volatility Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd. (collectively, the “Sabby Funds”) has indicated that Hal Mintz has voting and investment power over the shares held by it.  Each of the Sabby Funds has also indicated that Sabby Management, LLC serves as its investment manager, that Hal Mintz is the manager of Sabby Management, LLC and that each of Sabby Management, LLC and Hal Mintz disclaim beneficial ownership over these shares except to the extent of any pecuniary interest therein.

(23)	Mr. Spencer is one of our directors.  Mr. Spencer joined our Board of Directors in March 2010.

(24)	Jonathan Watson has voting and investment power with respect to the shares owned by Starlight Investment Holdings Limited.

(25)

Wolverine Asset Management, LLC (“WAM”), the investment manager of Wolverine Flagship Fund Trading Limited, and John Ziegelman, in his capacity as portfolio manager of WAM, each have voting and investment power over these securities.  WAM and Mr. Ziegelman each disclaim beneficial ownership over these securities.

 

 

 

 

The selling securityholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling securityholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

 

The selling securityholders may use any one or more of the following methods when disposing of shares or interests therein:

 

·

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

·

block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;

 

·

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

·

an exchange distribution in accordance with the rules of the applicable exchange;

 

·

privately negotiated transactions;

 

·

settlement of short sales;

 

·

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

 

·

broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

 

·

a combination of any such methods of sale; and

 

·

any other method permitted by applicable law.

 

The selling securityholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling securityholders to include the pledgee, transferee or other successors-in-interest as selling securityholders under this prospectus. The selling securityholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

In connection with the sale of our common stock or interests therein, the selling securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling securityholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling securityholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The aggregate proceeds to the selling securityholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling securityholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.

 

The selling securityholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.

 

The selling securityholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling securityholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the shares of our common stock to be sold, the names of the selling securityholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

 

 

We have advised the selling securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling securityholders and their affiliates. In addition, to the extent applicable, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling securityholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling securityholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

 

We have agreed to indemnify the selling securityholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus.

 

 

 

 

 

Quarter Ended	High Bid	Low Bid
Fiscal 2013
First Quarter 2013 (through March 8, 2013)	$1.95	$1.39
Fiscal 2012
Fourth Quarter 2012 (through December 31, 2012)	$2.76	$1.52
Third Quarter 2012 (through September 30, 2012)	$4.05	$1.85
Second Quarter 2012 (beginning May 21, 2012)	$2.20	$0.50

 

 

As of March 8, 2013, we had 57,320,447 shares of common stock outstanding and no shares of preferred stock outstanding. As of March 8, 2013, we had 658 stockholders of record.  In addition, as of March 8, 2013, options and warrants to purchase 19,755,805 shares of common stock were outstanding, as were convertible notes held by Boston Scientific in the aggregate principal amount of approximately $4,300,000.

 

 

 

 

 

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted-average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
		(a)				(b)				(c)
Equity compensation plans approved by stockholders (1)			3,854,475			$	1.29				52,600
Equity compensation plans not approved by stockholders (1)(2)(3)			2,521,000			$	1.79				0
Total			6,375,475			$	1.49				52,600

 

(1)	The information presented in this table is as of December 31, 2012.

 

(2)

We adopted our 2010 Non-Qualified Stock Option Plan in December 2010. The plan provided for the issuance of non-qualified stock options to purchase up to 2,565,675 shares of our common stock. We awarded options to purchase 2,371,000 shares of our common stock under the plan, and we ceased making awards under the plan upon the adoption of our 2012 Incentive Compensation Plan.

 

(3)	In November 2012, we entered into a written compensatory contract with Robert C. Korn, our Vice President, Global Sales & Marketing, pursuant to which we awarded Mr. Korn non-qualified stock options to purchase 150,000 shares of our common stock.