PRF Technologies Ltd F-1/A, filed Aug 10, 2020

PRF Technologies Ltd. (PRFX)

F-1/A 2020-08-10

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Israel	2834	Not Applicable
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

	Per Ordinary Share		Total
Initial public offering price	$		$
Underwriting discounts and commissions⁽¹⁾	$	-	$
Net Proceeds to us (before expenses)	$		$

Maxim Group LLC	Joseph Gunnar & Co., LLC
Joint Book-Runner	Joint Book- Runner

PROSPECTUS SUMMARY		1
RISK FACTORS		8
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		35
USE OF PROCEEDS		36
DIVIDEND POLICY		37
CAPITALIZATION		37
DILUTION		39
SELECTED FINANCIAL DATA		42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		43
BUSINESS		52
MANAGEMENT		69
PRINCIPAL SHAREHOLDERS		88
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		90
DESCRIPTION OF SHARE CAPITAL		91
SHARES ELIGIBLE FOR FUTURE SALE		97
MATERIAL TAX CONSIDERATIONS		99
UNDERWRITING		111
EXPENSES RELATED TO THIS OFFERING		115
LEGAL MATTERS		115
ENFORCEABILITY OF CIVIL LIABILITIES		116
EXPERTS		117
WHERE YOU CAN FIND MORE INFORMATION		117
INDEX TO FINANCIAL STATEMENTS		F-1

Ordinary shares to be offered		2,550,000 ordinary shares.

Ordinary shares to be outstanding immediately after this offering		8,746,677 ordinary shares (or 9,129,177 ordinary shares if the underwriters exercise their over-allotment option in full).

Over-allotment option		The underwriters have a 45-day option to purchase up to 382,500 additional ordinary shares at the public offering price less discounts.

Use of proceeds		We estimate that the net proceeds to us from this offering will be approximately $20,343,500, or approximately $23,545,025 if the underwriters exercise their option to purchase 382,500 additional ordinary shares in full, after deducting the estimated underwriting discount and estimated offering expenses payable by us, based on an assumed initial public offering price of $9.00 per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus. We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, (i) to conduct and complete two Phase 3 clinical trials for PRF-110, (ii) development activities and preparation of initial NDAs, (iii) purchase of directors and officers liability insurance, and (iv) for general corporate purposes including, general and administrative expenses and working capital. See “Use of Proceeds” for more information about the intended use of proceeds from this offering.
Principal Shareholder		Upon the closing of this offering, assuming an offering size as set forth on the cover page of this prospectus and an initial public offering price of $9.00 per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), the Medica III Investment group will beneficially own, 3,355,808 ordinary shares, or approximately 38.37% of our ordinary shares (or approximately 36.76 % of our ordinary shares if the underwriters’ option to purchase additional shares is exercised in full). As a result, we will not be a “controlled company” within the meaning of the listing rules of the Nasdaq Capital Market. See the sections titled “Management—Controlled Company Exception” and “Principal Shareholders.”

Proposed Nasdaq Capital Market symbol		“PRFX”

Risk Factors		You should carefully read the section titled “Risk Factors” and other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in our ordinary shares.

	●	247,937 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at an exercise price of $7.56 per share that were issued in August and December 2019 in connection with a bridge financing;

	●	49,587 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at an exercise price of $7.56 per share that were issued to Joseph Gunnar & Co., LLC, the placement agent for the bridge financing; and

	●	127,500 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at $11.25 per share to be issued the representatives of the underwriters.

	Year Ended December 31,
	2019			2018
Operating Expenses:
Research and development expenses	$	(136,000	)	$	(223,000	)
Selling, general and administrative expenses		(553,000	)		(277,000	)
Operating Loss		(689,000	)		(500,000	)
Financial expense, net		(590,000	)		(328,000	)
Net Loss and Comprehensive loss		(1,279,000	)		(828,000	)
Basic and diluted net loss per share		(4.17	)		(3.24	)
Weighted average number of shares of ordinary share used in computing basic and diluted net loss per share		576,556			576,556
Pro forma weighted average number of ordinary shares outstanding used in computing basic and diluted loss per share (unaudited) (1)		5,795,534			-
Pro forma basic and diluted loss per ordinary share (unaudited) (2)		(0.13	)		-

	As of December 31,
	2019			2018

Cash and cash equivalents	$	941,000		$	40,000
Restricted cash		6,000			6,000
Other current assets		25,000			34,000
Total current assets		972,000			80,000
Other non-current asset		192,000			-
Total current liabilities		6,339,000			18,000
Convertible debt		-			4,520,000
Derivative warrant liability		447,000			-
Temporary equity		6,621,000			6,621,000
Shareholders’ deficit		(12,243,000	)		(11,078,000	)

	●	initiate and manage clinical trials for PRF-110;

	●	seek regulatory approvals;

	●	implement internal systems and infrastructures;

	●	hire management and other personnel; and

	●	progress PRF-110 towards commercialization.

	●	the timing of regulatory approvals in the countries, and for the uses, we seek;

	●	the competitive environment;

	●	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;

	●	our ability to enter into strategic agreements with pharmaceutical and biotechnology companies with strong marketing and sales capabilities;

	●	the adequacy and success of distribution, sales and marketing efforts; and

	●	the pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations and other plan administrators.

	●	restrictions on such drugs, manufacturers or manufacturing processes;

	●	requirements to conduct post-marketing studies or clinical trials;

	●	refusal to approve pending applications or supplements to approved applications that we submit;

	●	fines, restitution or disgorgement of profits or revenues;

	●	damage to relationships with any potential collaborators;

	●	an increase in the scope and complexity of our operations; and

	●	the loss or reduction of control over certain of our assets.

	●	the outcomes of preclinical studies, clinical trials and other research regarding PRF-110 and future product candidates;

	●	the commercialization and pricing of our products;

	●	our competitors’ development, marketing and sale of products that compete with our products; and

	●	our expectations regarding future growth, including;

	As of December 31, 2019
	Actual			Pro Forma			Pro Forma as Adjusted^(1,2)
	(unaudited)
	(in dollars, except share data)
Cash⁽¹⁾⁽²⁾	$	941,000		$	941,000		$	21,285,000
Other assets		223,000			223,000			31,000
Total current liabilities		6,339,000			166,000			166,000
Total non-current liabilities		447,000			-
Shareholders’ equity (deficit) ^{(1, 2)} :
Convertible preferred shares, par value NIS 0.03 per share; 18,300,000 shares authorized, 2,954,267 shares issued and outstanding, actual; and no shares authorized, issued and outstanding pro forma; and pro forma as adjusted		6,621,000			-			-
Ordinary share par value NIS 0.03 per share; 4,700,000 shares authorized, 576,556 shares issued and outstanding; 4,700,000 shares authorized and 6,075,782 shares issued and outstanding, pro forma; 4,700,000 shares authorized and 8,625,782 shares issued and outstanding, pro forma, as adjusted		5,000			53,000			75,000
Additional paid-in capital		180,000			13,373,000			33,503,000
Accumulated deficit		(12,428,000	)		(12,428,000	)		(12,428,000	)
Total shareholders’ equity (deficit)	$	(12,243,000	)	$	998,000		$	21,150,000

	●	373,388 ordinary shares issuable upon the exercise of options to purchase our ordinary shares at a weighted average exercise price of $1.64 per share, issuable pursuant to the 2008 PainReform Option Plan and 2019 PainReform Option Plan, of which 301,117 options have vested;

	●	247,937 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at an exercise price of $7.56 per share that were issued in August and December 2019 in connection with a bridge financing; and

	●	49,587 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at $7.56 per share that were issued to Joseph Gunnar & Co., LLC, the placement agent for the bridge financing; and

	●	127,500 ordinary shares issuable upon exercise of the warrants to purchase our ordinary shares at $11.25 per share to be issued the representatives of the underwriters.

Assumed initial public offering price per ordinary share				$	9.00
Historical net tangible book value (deficit) per share as of December 31, 2019 (giving effect to the reverse split)	$	(21.23	)
Increase per share attributable to the conversion of our convertible preferred shares and convertible debt	$	21.39
Pro forma net tangible book value per share	$	0.16
Increase per share attributable to this offering	$	2.29
Pro forma as adjusted net tangible book value per share after this offering				$	2.45
Dilution per share to new investors in this offering				$	6.55

											Average
	Shares Purchased					Total Consideration					Price Per
	Number		Percent			Amount		Percent			Share
Existing shareholders ⁽¹⁾		6,075,782		70.43	%	$	13,344,000		36.77	%	$	2.19
New investors		2,550,000		29.57	%		22,950,000		63.23			9.00
Total		8,625,782		100.0	%		36,294,000		100.0	%	$	4.20

	Year Ended December 31, 2019			Year Ended December 31, 2018
Net cash used in operating activities	$	(609,000	)	$	(635,000	)
Net cash used in investing activities		-			-
Net cash provided by financing activities		1,510,000			488,000
Increase (decrease) in cash and cash equivalents and restricted cash		901,000			(147,000	)
Cash and cash equivalents and restricted cash, at the beginning of year		46,000			193,000
Cash and cash equivalents and restricted cash, at the end of year	$	947,000		$	46,000

	Payments due by period
	Less than 1 year		Total
Other accounts payable	$	166,000	$	166,000
Convertible notes and August and December 2019 Convertible Notes		6,723,000		6,723,000
Total	$	6,889,000	$	6,889,000

	●	staffing for financial, accounting and external reporting areas, including segregation of duties;

	●	reconciliation of accounts;

	●	proper recording of expenses and liabilities in the period to which they relate;

	●	evidence of internal review and approval of accounting transactions;

	●	documentation of processes, assumptions and conclusions underlying significant estimates; and

	●	documentation of accounting policies and procedures.

Phase 1:	The drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

Phase 2:	The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

Phase 3:	The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Phase 4:	Post-approval studies, which are conducted following initial approval, are typically conducted to gain additional experience and data from treatment of patients in the intended therapeutic indication.

Name	Age	Position
Prof. Eli Hazum	72	Acting Chief Executive Officer and Chief Technology Officer

Dr. David E. Weinstein	62	President and Chief Medical Officer

Dr. Ehud Geller	73	Acting Chief Financial Officer

Dr. Sigal Aviel	56	Chief Operating Officer

	●	a business or professional relationship maintained on a regular basis;

	●	control; and

	●	refrain from any act involving a conflict of interest between the performance of his or her duties in the company and his or her other duties or personal affairs;

	●	refrain from any activity that is competitive with the business of the company;

	●	at least a majority of the shares held by shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or

	●	the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company.

	●	each of our executive officers and directors;

	●	each person or entity known by us to beneficially own 5% or more of our outstanding shares; and

	●	all of our executive officers and directors as a group.

	Ordinary Shares Beneficially Owned Before The Offering*		Percentage Owned Before The Offering			Ordinary Shares Beneficially Owned After The Offering		Percentage Owned After The Offering

5% Shareholders
XT Hi-Tech Investments (1992) Ltd. ⁽¹⁾		1,750,537		28.25	%		1,750,537		20.01	%
D Partners 2 ⁽²⁾		570,122		9.20	%		570,122		6.52
Medica III Investment group ⁽³⁾		3,355,808		54.15	%		3,355,975		38.37

Executive officers and directors
Dr. Ehud Geller⁽³⁾		3,355,808		54.15	%		3,355,975		38.37
Dr. David E. Weinstein ⁽⁴⁾		117,125		1.86	%		117,125		1.32
Dr. Sigal Aviel⁽⁵⁾		76,749		1.22	%		76,749		0.87
Professor Eli Hazum ⁽⁶⁾		153,882		2.42	%		153,882		1.73
Assif Stoffman ⁽⁷⁾		-		-			-		-
Ellen S. Baron		-		-			-		-
Augustine Lawlor		-		-			-		-
Total for all directors, director nominees and executive officers as a group (7 persons)		3,703,564		59.65	%		3,703,564		42.29	%

**	Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.

(1)	XT Hi-Tech Investments (1992) Ltd., is an indirect wholly owned subsidiary of XT Investments Ltd., which is a direct wholly-owned subsidiary of XT Holdings Ltd., of which Orona Investments Ltd. (“Orona”) and Lynav Holdings Ltd. (“Lynav”) are each the direct owners of one-half of the outstanding ordinary shares. Orona is indirectly owned 56% by Mr. Udi Angel, who also indirectly owns 100% of the means of control of Orona. Lynav is held 95% by CIBC Bank and Trust Company (Cayman) Ltd. (“CIBC”) as trustee of a discretionary trust established in the Cayman Islands. Udi Angel is member of the board of directors of XT Hi-Tech Investments (1992) Ltd. and has a casting vote with respect to various decisions taken by the board including voting and disposition over shares held by XT Hi-Tech Investments (1992) Ltd. The principal business address XT Hi-Tech Investments (1992) Ltd. is 9 Andrei Sakharov St., Haifa, Israel.

Approximate Number of Ordinary Shares			Description
	2,550,000		After the date of this prospectus, freely tradeable ordinary shares sold in this offering.

	2,794,222		After 180 days from the date of this prospectus, except as otherwise discussed below, the lock-up period will expire, and these additional ordinary shares will be saleable, subject, in some cases, to holding periods and volume limitations.

	3,697,731	⁽¹⁾	After 365 days from the date of this prospectus, except as otherwise discussed below, the lock-up period will expire, and these additional ordinary shares will be saleable, subject, in some cases, to holding periods and volume limitations.

	●	amortization over an eight-year period of the cost of purchasing a patent, rights to use a patent and rights to know-how, which are used for the development or advancement of the company, commencing in the year in which such rights were first exercised;