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Date Certain M&A of Dune Medical Devices, Ltd.

Gerbsman Partners – http://gerbsmanpartners.com has been retained by Dune Medical Devices, Ltd. (“Dune” or the “Company”), to solicit interest for the acquisition of Dune Medical Devices Ltd. by way of an asset purchase which would include include all or substantially all of Dune’s assets (including assets of Dune USA), including its Intellectual Property (“IP”), (collectively, the “Dune Assets”) and the option of transferring Dune’s operations, commercial agreements, approvals, authorizations, customer agreement and information, and all which would be required to continue and operate the Dune business (collectively the “Dune Business”).

Dune Medical Devices Ltd. is an Israeli-domiciled medical device company with offices in Caesarea, Israel, and wholly owned subsidiary Dune Medical Devices Inc. (“Dune USA”), with offices in Alpharetta, GA.  Dune’s principal business is to design, manufacture, sell and distribute medical devices that differentiate and characterize microscopic tissue for the purposes of identifying normal verses malignant tissue in real-time. 

Dune has been privately held since its founding in Israel in 2002. Dune USA the wholly owned subsidiary of Dune was incorporated in Delaware in 2007 and is headquartered in Alpharetta, GA. Over $100 million has been invested in its technology and products by Apax Partners, Aton Partners, The Kraft Group, Canepa Healthcare, other VC’s and private investors.  A loan in the amount of $5 million dollars was secured with Oxford Finance LLC (“Oxford”) in October 2015 and remains outstanding. To date, the MarginProbe device has been approved for marketing and sales in the United States, Israel and Europe, although commercialization has been limited to Israel and the United States.

Dune Medical has a “Robust intellectual property portfolio of 60+ patents”.

The Dune Business including all assets and Intellectual Property, are offered for sale by Dune and are all subject to pledges held to the benefit of Oxford, the senior secured lender which are registered with the applicable authorities in Israel and also in the United States. A condition to the sale of the Dune Business is to repay Oxford with the proceeds from the sale of the Dune Business, in exchange for the release of such pledges. Please note that with respect to assets of the Company in Israel, certain mandatory creditors under applicable law may be entitled to receive funds prior to Oxford and these include but are not limited to employees, tax authorities and landlord.  The transfer of certain assets particularly IP that was funded by the Israel Innovation Authority (IIA), are further subject to the R&D Law in Israel and require the approval of the State of Israel with respect to transfer of such assets outside of Israel.

 

The sale is being conducted with the cooperation of Dune. Dune and its employees will be available to assist purchasers with due diligence and assist with a prompt transition and possibility of continued employment by the purchaser.

Please see detailed sales letter – attached

MPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Dune Assets has been supplied by third parties and obtained from a variety of sources.  Nothing contained herein has been independently investigated or verified by Dune, Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Dune or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Dune, and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Dune or Gerbsman Partners’ negligence or otherwise. Consultants, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Seller’s, Consultants’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the Dune Business or Dune Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either expressed or implied, of any kind, nature, or type whatsoever from, or on behalf of Dune and Gerbsman Partners. Without limiting the generality of the foregoing, Dune and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Dune Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the Non-Disclosure Agreement attached hereto as Appendix A.

Company Profile

Dune Medical Devices Ltd is an  Israeli-domiciled  medical device company with offices in Caesarea Israel, with a wholly owned subsidiary, Dune Medical Devices Inc, with offices in Alpharetta, GA., Dune’s  principal business is to design, manufacture, sell and distribute medical devices that characterize and differentiate between tissue types instantaneously by touching the tissue with its proprietary sensors and analyzing the radio signal which is reflected from the tissue.   This, among others,  enables to identify microscopic malignant tissue for the purposes of differentiating between  normal and  malignant tissue in the operating room in real-time.

Dune’s commercial product, the MarginProbe (“MP”) device, is used intra-operatively in breast-conserving surgery (lumpectomy, partial mastectomy) for the purpose of evaluating the presence of microscopic residual cancer  on the surface of the excised tissue.  This enables the physician to remove additional suspicious tissue from the cavity in real-time, saving the patient from a subsequent re-excision surgical procedure. Its second product, the Smart Biopsy device, whose development was supported by a $3.5 million Horizon 2020 grant from the European Union, has recently begun its first-in-man clinical trial. Dune’s mission is to be the global leader in tissue characterization technology in the surgical oncology space.

Dune was granted its first CE mark in Europe in 2009, and was launched in Israel at that time. The U.S. Food and Drug Administration, or FDA, granted MarginProbe Premarket Approval (PMA) authorization in December 2012 as a Class III medical device (P110014);  Initial marketing release of MarginProbe in the U.S. started in late-year 2013.  Since the launch of the MP in 2013 there have been two PMA supplements and one additional CE mark, as follows:

  1. Table-top model of the console
  2. PMA supplement 2 Vers 1.2R for ROHS compliance.
  3. CE mark: Split Probe is a reposable device which allows retention of the cord for multiple uses with a fully-disposable probe.
  4. Pending PMA supplement for the MP 2020 with an updated look and feel; due to launch in early 2021.

The MarginProbe device is  indicated for use as an adjunctive diagnostic tool for identification of cancerous tissue at the margins (≤ 1mm) of the main ex-vivo lumpectomy specimen following primary excision and is indicated for intraoperative use, in conjunction with standard methods (such as intraoperative imaging and palpation) in patients undergoing breast lumpectomy surgery for previously-diagnosed breast cancer.

MarginProbe achieved approximately 22% market share in Israel during the third year of commercialization.   In the US, MarginProbe is currently being used in approximately 3,200 procedures annually, in 70 hospitals, reflecting a market share in the low single digits, consistent with targeted sales representative coverage in five key US geographies.  Worldwide revenue was approximately $800 thousand in the third quarter of 2019 and approximately $1 million in the fourth quarter of 2019, with over 90% of sales in the US.

The MarginProbe system includes a small transportable console and single use probe.  The probe is packaged as a single-use disposable device and delivered sterilized via ethylene oxide sterilization.  It has been engineered to prohibit re-sterilization, or re-processing for multiple use. The console is a capital acquisition and will only work with a Dune-manufactured probe. The business model is a recurring-revenue stream, with the console being acquired first through purchase or via a contracted  placement in the account for a fixed period of time.  The ASP for the probe and the console in the US are approximetly $1,000 and $32 thousand respectively. The probes are sold as single-use, disposable items in boxes of five. The system has proven to be an effective, easy-to-learn, and easy-to-use product which seamlessly integrates into workflow in the operating room with minimal staff training and adding no more than 10 minutes to the procedure..

Dune Medical Devices, Inc was incorporated in Delaware in 2007, (as a wholly owned subsidiary of Dune Medical Devices Ltd) and is headquartered in Alpharetta, GA . Dune has been privately-held since its founding in 2002. Over $100 million has been invested in its technology and products by Apax Partners, , Aton Partners, The Kraft Group, Canepa Healthcare (currently Avidity) and other VC’s and private investors.  A loan in the amount of $5 million dollars was secured with Oxford Finance LLC in October 2015. To date, the MarginProbe device has been approved for marketing and sales in the United States, Israel and Europe, although commercialization has been limited to Israel and the United States.

Dune Medical believes its assets are attractive for a number of reasons:

  1. Unique, proven, easy-to-use platform technology.  Proprietary radiofrequency (RF) + artificial intelligence (AI) technology which characterizes tissue types in real time and determines whether cancerous in ALL solid tumor cancers. For biopsy, surgery and targeted therapy.
  2. Large unmet need in women’s health, with minimal improvement over past 25 years.  Lumpectomy surgeries average 20-40% re-operation rates, resulting in unnecessarily high cost and disease recurrence.
  3. Substantial body of published data demonstrating the success of MarginProbe in the hands of ordinary surgeons.  Commercial validation in over 70 hospitals and over 20,000 cases. Extensive proof of clinical benefits (30+ published papers and abstracts).
  4. Reimbursement becoming available based upon physician & patient demand.  Category 3 Stand-Alone CPT code in effect as of 7/1/19 and anticipating society guidelines imminently.
  5. Very strong competitive position and attractive business model.  Only PMA approved product on the market with competition at least 3-4 years behind. High gross margin (80%+), recurring-revenue business model.
  6. Significant upside in the technology platform.  Second product in human trials to launch in 2022. Application of core technology to other major cancers including lung and prostate with published feasibility work completed.
  7. Robust intellectual property portfolio.  Over 60 issued patents.

RFST Technology

Breakthrough Radio Frequency Spectroscopy Technology (RFST) technology measures the electrical properties of tissue in situ and in real time with exceptional accuracy.

Sensors emit an RF signal onto the tissue surface, energize the tissue and measure the signal which is reflected by the tissue.

Proprietary algorithms and AI technology analyze the signal to differentiate between tissue types based on each tissue’s electrical properties.  In the case of a surgical procedure, as with MarginProbe this enables the physician to immediately identify and excise remaining cancerous tissue.

Newly developed miniaturized sensors (not yet in commercial use) are used as arrays to cover tissue surfaces in open surgery (in development),

embedded in biopsy needles (in development) and in minimally invasive surgery devices for all cancers. 

Large unmet need in women’s health

The market for a technology which accurately characterizes tissue and identifies

cancer in real-time includes approximately 1.6 million surgical procedures and 5

million biopsy procedures worldwide for the main cancers, creating a multi-billion

dollar opportunity.

Breast cancer is a global problem and accounts for an estimated economic burden of nearly $30 billion. Escalating costs associated with breast cancer are in part related to the fact that nearly 25%, or 750,000, breast biopsies are incorrect. In addition, it is -estimated that nearly 10% to 50% of all lumpectomy procedures performed worldwide will require a second surgery when post-surgery pathology determines that the resection margins of the first surgery are not free of cancer cells.

Surgeons cannot identify cancer in the breast cavity by sight or palpation. In most

cases where cancer is left behind (i.e.positive margin), patients must have a second surgery (i.e., re-excision). Re-excision negatively impacts all healthcare constituents and places a tremendous cost on payers (e.g. $16,000 avg. hospital cost per patient).  Additionally, it diminishes the quality of care of patients due to disappointing outcomes, high re-excision rates, readmissions and increased recurrence. 

Substantial body of clinical evidence

Dune has executed an extensive series of clinical trials, including the largest trial ever done for intra-operative margin assessment devices in the US and Israel.  The trial was a pivotal PMA trial.  It was a prospective, multi-center, randomized (2:1), controlled, open-label study, which enrolled a total of 596 patients in 21 centers in the US and Israel.

Results included a threefold improvement in identification of cancer versus the standard of care.  Two additional randomized controlled trials are currently undergoing.  One post-approval trial for the FDA, a 440 patient, dual-arm, 11 center trial is expected to complete enrollment in March of 2020.  Additionally, an NHS-sponsored dual-arm, randomized, controlled trial of 460 patients has just completed enrollment in 12 centers in the United Kingdom and will be complete in December 2020.

Reimbursement traction

Three very important events have occurred during the last few months that will have a very positive impact on overall reimbursement and market adoption for the MarginProbe System.

  1. Pivotal Article Publication:
    An article published in the Journal of the American College of Surgeons https://doi.org/10.1016/j.jamcollsurg.2018.12.043 described breast cancer surgery re-excision rates based upon 291,000 Medicare claims from 2012-2018 which demonstrated an overall re-excision rate in Medicare recipients of 20%, with a range of 0% to 91.7% and concluded with a recommendation formalizing a re-excision frequency metric to improve quality and reduce the financial burden to the healthcare system. Two of the authors of this paper are David Euhus, M.D. and Mehran Habibi, M.D. from Johns Hopkins who recently adopted use of the MarginProbe system throughout the Hopkins system based upon the results of their participation in the Dune Medical FDA Post- Approval study in which they enrolled approximately 80 patients.

 

  1. CMS Comparative Billing Report Announcement:

Based upon the above study, on July 1st CMS announced that Breast Cancer Surgery Re- Excision Rates have been included in the CMS Comparative Billing Report (CBR) program focused on reducing payment for “no-value” procedures. Effective on July 1 breast cancer re-excisions are one of nine (9) procedures included in this effort by CMS and will undoubtedly bring greater attention to breast cancer surgery re-excisions. The announcement of this program to all members of the American Society of Breast Surgeons (ASBrS) is included below:

ASBrS July 29, 2019 CMS Announcement:
CMS Releases New Comparative Billing Report (CBR) on Breast Re-Excision Rates On July 29th, the Centers for Medicare and Medicaid Services (CMS) made an announcement that it released new Comparative Billing Reports (CBRs) related to breast re-excision rates. The CBR program is run through a CMS contractor and, as described on the CBR Website “present the results of statistical analyses that compare an individual provider’s billing practices for a specific billing code or policy group with the billing practices of that provider’s peer groups and national averages. Each CBR is unique to a single provider and is only available to that individual provider. CBRs are not publicly available.” It is important to note that the reports are intended to be educational only and are not part of any CMS audit program.
The reports define a “re-excision” as a follow-up breast excision within 365 days of a previous breast excision procedure. The excision procedures analyzed include the following codes:

CPT 19120 (Excision of cyst, fibroadenoma, or other benign or malignant tumor, aberrant breast tissue, duct lesion, nipple or areolar lesion, open, male or female, one or more lesion)

CPT 19301 (Mastectomy, partial)
CPT 19302 (Mastectomy, with axillary lymphadenectomy) CPT 19303 (Mastectomy, simple, complete)
CPT 19304 (Mastectomy, subcutaneous)

This report focuses on 3 metrics: Percent of re-excisions, Percent allowed amount for re-excisions , Percent of beneficiaries receiving a re-excision

The metrics compare provider utilization against others in the same specialty per your Medicare enrollment designation (here, General Surgery, Physician Assistant, Surgical Oncology, Plastic and Reconstructive Surgery, and Nurse Practitioner) as well as against all providers nationally. When CMS conducts the analysis, a report will be issued for any provider with a Medicare re- excision rate (as calculated by the CMS contractor) greater than 30 percent; if you do not have a re-excision rate greater than 30 percent, no report would be generated. A sample CBR can be viewed here.

Common Procedural Terminology (CPT) Code:
Effective on July 1, 2019 a CMS CPT Code has been published for use when billing for use of the MarginProbeTM System. This CPT Category III Code allows MarginProbe customers to begin billing health insurance plans electronically for our system. There are several very important aspects of this code to note. First, as you can see from the text description of the code (below), this code specifically describes the Dune Medical radio- frequency spectroscopy technology and will thus be for exclusive use with the MarginProbe System. Other approaches being developed to identify margin status intra-operatively will not be able to use this code. Second, this is a free- standing code that will not be “lumped” into a global reimbursement amount used to reimburse for breast cancer surgery.

Summary:

The combination of these three important events…(i) published landmark data supporting the rate of “no value” breast cancer re-excision surgeries by two key opinion leader users of the MarginProbe System, (ii) the decision by the Centers for Medicare Services to target “outlier physicians” with higher than average breast cancer surgery re-excision rates with Comparative Billing Reports and (iii) the availability of a technology-specific CPT billing code…represent a very significant opportunity for Dune and our customers to improve the quality of patient care by significantly reducing re-excision procedures and to receive adequate reimbursement for their high quality surgical service and will serve as significant catalysts for broader adoption of the Dune’s MarginProbe System.

  

Dune has a strong and growing IP portfolio

 

The Dune Israel team has direct oversight into production and manufacturing at three outsourced manufacturing facilities located in Shlomi ,Tiberias  and Yokneam all in the Northern part of  Israel

Production includes probes, consoles, beta systems and prototypes. All sterilization is also managed at Mediplast, located in Yavne, Israel .  The engineering team oversees configuration management, change management, control of sub-contractors and maintenance of manufacturing tooling.  The Israeli team also manages purchasing, inventory management, warehouses, shipments, cost of goods sold and production planning & control.  All technical support originates with the team in Israel and includes troubleshooting, repair, checkups, prevention and training.

Dune Medical has a robust quality system responsible for Audits, CAPA’s and non- conforming materials.  Since the approval of MarginProbe, Dune has successful passed 2 FDA audits at its Caesarea facility, 3 with its sub contractors as well as annual notified body reviews without any material findings.  Dune partners with Millstone in Olive Branch ,Mississippi as a distribution center for its US probe and console inventory. 

Company Management1

Lori Chmura – CEO, member of the BOD

Lori joined Dune in January 2016. Lori is a seasoned veteran in the healthcare space beginning her career as a CCRN working in critical care, trauma and emergency medicine at Yale New Haven Hospital, Emory University Hospital and St Joseph’s of Atlanta. She transitioned into the medical device industry with Datascope Corporation (now Maquet), taking on increasing levels of leadership, completing her 10-year tenure as the Vice President of North American Sales. She spent time as a regional Corporate Sales Director at Medtronic and then moved to Covidien Endomechanical Products, where she spent four years as the VP of Sales and Marketing. Most recently, she served as the VP of the US for Cordis, a Johnson and Johnson company. Lori is known as a champion of change management and passionate about delivering growth. She has led numerous women’s leadership initiatives and formerly served as the President of the Atlanta Chapter of the Healthcare Businesswomen’s Association. She also serves on the the board of directors of Pinecrest Academy in Atlanta. Lori earned a BSN from Southern Connecticut State University.

Mike Kaswan – CFO

Mike joined Dune in February of 2019 as a consulting CFO from Burkland Associates, which he joined in 2016. Prior to Burkland, Mike was the CEO of Persante Health Care, a leading provider of sleep apnea diagnostic and therapeutic services he formed via the private equity-backed acquisition of two private companies in the space. Previously, he was a healthcare venture capital and private equity investor at KBL Healthcare Ventures, where he was one of three partners managing a $100 million venture capital fund and two publicly-traded Special Purpose Acquisition Companies (SPACs) that raised over $180 million. He has an MBA with Distinction from Harvard Business School and a B.S. in Finance from the University of Virginia.

Gal Aharonowitz – COO, GM Israel

Gal leads R&D, manufacturing and worldwide logistics activities for the company. Gal is an industry veteran with more than 18 years of experience in leading product development and engineering teams at early-stage medical device companies and international public corporations. Prior to Dune, he was head of R&D at Lumenis Corp., where he managed a team of over 45 engineers. Prior to that, he was head of R&D at SHL Telemedicine, developing medical applications that are conveniently used from home. He earned a BSc degree in mechanical engineering from Ben-Gurion University in Israel

Avihai Lachman – Vice President of Research and Development

Avihai has over a decade of experience in developing radiofrequency technologies and is currently leading Dune’s effort in expanding the use of RF Spectroscopy for new clinical applications and disease sites. Avihai’s background encompasses both engineering and development within the field of RF, satellites and communication. He brings experience in mechanical design for RF modules and a proven track record of moving products from the concept phase to mass production.  He was previously the Director of Antennas and Defense R&D at Gilat, having spent 18 years there developing digital communication algorithms for satellite modems and tracking antenna systems for the in-flight connectivity market.  Avihai earned both Bachelor and Master of Science Degrees in Electrical Engineering from Ben-Gurion University in Beersheba, Israel.

Susan Turner – Vice President of Healthcare Economics

Susan Turner has over 20 years in medical device marketing and healthcare economics, with expertise in bringing products to market and establishing payment and coverage for innovative technologies. Over the past 17 years, her professional passion has been making an impact in women’s health.  Prior to Dune, she served in marketing in the start-up environment at International Brachytherapy Inc. (IBT) and Proxima Therapeutics, and later as Director of Health Economics & Reimbursement at Cytyc and Hologic.  Susan received her Bachelor of Science with a Major in Psychology and a Minor in Business from Clemson University, with advanced graduate work in Healthcare Administration from Mercer University.

Robin Fatzinger – Vice President of Clinical and Regulatory Affairs

Robin Fatzinger has over 25 years of experience in the medical device industry, with a focus on Clinical Affairs, Quality Assurance and Regulatory Affairs. She has an extensive background with 510(k), IDE and PMA submissions for small to multi-national medical device companies as well. Robin holds a bachelor’s degree in Biology from Muhlenberg College and a Masters of Education from Lehigh University. In addition, she is Regulatory Affairs Certified (RAC) and has participated in various industry trade association committees, including AdvaMed and the Association for the Advancement of Medical Instrumentation (AAMI).

1THE BIOGRAPHICAL INFORMATION CONCERNING THE CURRENT MANAGEMENT OF DUNE MEDICAL IS INCLUDED FOR INFORMATION PURPOSES ONLY. ALTHOUGH THIS SALE IS BEING CONDUCTED WITH DUNE’S COOPERATION, THIS SALE IS STRICTLY AN ASSET SALE OFFERED BY DUNE’S BOARD OF DIRECTORS. DUNE HAS NO ARRANGEMENT PURSUANT TO WHICH THE BUYER OF THE DUNE ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY OFFICERS OR EMPLOYEES.

Board of Directors

Amos Goren – Chairman of the Board

Dan Levangie – Director

Paul Enever , PhD – Director

Bill Scazulli – Director

Seeking a buyer of Dune Medical assets

Dune’s Board of Directors is seeking a buyer of the Dune Business  and Assets, in whole or in part.  Interested parties may bid on all or part of Dune’s Business or Assets, enabling the purchaser to leverage Dune’s Business or Assets to obtain new sales, enhance revenue streams or accentuate or augment other products.

The Bidding Process for Interested Buyers  

Interested and qualified parties will be expected to sign the Non-Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence data room documentation (“Due Diligence Access”), and the AirXpanders Video. Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the Dune Business and Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Dune or Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Dune and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same. 

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Dune Business Assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than February 14, 2020 (the “Bid Deadline”) at Dune’s corporate office located at 6120 Windward Parkway, Suite 160, Alpharetta, GA 30005.  Please also email steve@gerbsmanpartners.com with any bid.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $200,000 payable to Dune Medical Devices, Ltd.  Refundable deposit wiring instructions will be provided at a later date. The winning bidder will be notified within three (3) business days of the Bid Deadline.   Unsuccessful bidders will have their deposit returned to them within three (3) business days of notification that they are an unsuccessful bidder.

Dune reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.  

Dune will require the successful bidder to close within a seven (7) day period.  Any or all of the Dune Assets will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Dune Assets shall be the sole responsibility of the successful bidder and shall be paid to Seller at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
415 505-4991

steve@gerbsmanpartners.com

James Skelton
949 466-7303

jim@jaskelton.com

Kenneth Hardesty
408 591-7528

ken@gerbsmanpartners.com

 

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Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various balance sheet issues for their technology, life science, medical device, cyber security, solar and cleantech portfolio companies.

These companies were not necessarily in crisis, but had cash (in some cases significant cash reserves) and/or investor groups that were about to provide additional funding. In order to stabilize their Go-Forward-Plan and maximize cash resources for future growth, there were specific needs to address Balance Sheet and Contingent Liability issues as soon as possible.

Some of these areas where Gerbsman Partners has assisted, these companies have been in the process of termination, restructuring and/or reduction of:

Prohibitive Executory Real Estate Leases, Computer and Hardware-related Leases and Senior/Sub-debt Obligations

Gerbsman Partners is the “innovator” in creating strategies to terminate or restructure prohibitive real estate leases and senior and sub-debt obligations.

To date, we have terminated or restructured $810 million of such obligations for private and public companies, and which has allowed them to return to financial viability.

Accounts/Trade Payable Obligations

Companies in a crisis, turnaround or restructuring situation typically have account and trade payable obligations that become prohibitive for the viability of the company on a go-forward-basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize value based on the reality or practicality of the situation.

Software and Technology-related Licenses

As per the above, software and technology-related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant, successful track record in these areas

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 108 companies in a wide and diverse spectrum of industries. In the process, GP has successfully restructured/terminated over $810 million of real estate executor contracts and equipment lease/sub-debt obligations, and has assisted in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington DC, McLean VA, San Francisco, Orange County, Europe and Israel.

steve@gerbsmanpartners.com
http://www.gerbsmanpartners.com

 

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The Bidding Process, Procedures for the Sale of certain Assets and Intellectual Property of AirXpanders, Inc.

Further to Gerbsman Partners sales letter of September 4, 2019 and “Update to Bidding Process” on September 9, 2019, regarding the sale of certain assets of AirXpanders, Inc. (“AirXpanders”), I am attaching an Asset Purchase Agreement (“APA”), Fixed Asset List, Trademark List, US Patent List, AirXpanders’s Data Room due diligence information list and Inventory list provided by the company.  Also, interested parties who would like to speak with Shalon Ventures regarding the potential go forward License relationship should email Barry Cheskin at bcheskin@sumadvisory.comand he will respond to you.

Please also be advised that the Bid Date for all interested parties has been moved up to Friday, September 27, 2019 from Wednesday, October 2, 2019.   The reason for this is that the fixed assets must be removed from the premises no later than September 30, 2019.

It is recommended that when potential interested parties bid, they should submit their bid on:

  1. Fixed Assets Only
  2. Inventory Only
  3. Intellectual Property – including Patents, Trademarks, Clinical Trials, etc. Only
  4. A combination of all of the above

Prior to the bid date of September 27, 2019, I would encourage and recommend that all interested parties have their counsel speak with Jonathan Bell, Esq., counsel to Oxford Finance LLC and AirXpanders Assest Liquidation Company LLC, to discuss any questions or comments of a legal nature relating to the transaction.  Jonathan is available at 617 310 6038 and bellj@gtlaw.com

Please review the “Important Legal Notice” below in that potential purchasers should not rely on any information contained provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.  

Ken, Jim and I will be following up to review the updated Bidding Process, schedule due diligence meetings and answer any questions regarding the “Date Certain M&A Process”.

Any and all the assets of AirXpanders will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

 

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by AirXpanders Assets Liquidation Company, LLC (“Seller”) to solicit interest for the acquisition of all, or substantially all of, AirXpanders’ assets (the “AirXpanders Assets”).  Seller recently stepped into a loan (the “AirXpanders Loan”) originally made by Oxford Finance LLC (“Oxford”) to AirXpanders, Inc. (“AirXpanders”), the repayment of which was secured by a pledge of substantially all of AirXpanders’ Assets.  Subsequent to the acquisition of the AirXpanders Loan, Seller is completing a UCC foreclosure with respect to the AirXpanders Assets in order to sell the AirXpanders Assets, free and clear of all liens, claims and interests, in accordance with the sale process outlined herein. 

 

IMPORTANT LEGAL NOTICE

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to AirXpanders’ Assets has been supplied by former employees of AirXpanders who are now engaged as consultants to AirXpanders Assets Liquidation Company, L.L.C. (the “Seller”).  Nothing contained herein has been independently investigated or verified by Seller, Gerbsman Partners, Oxford Finance, or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Seller or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Seller, Oxford Finance, and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Seller’s or Gerbsman Partners’ negligence or otherwise. Consultants, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Seller’s, Consultants’ or Gerbsman Partners’ negligence or otherwise. 

Any sale of the AirXpanders Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either expressed or implied, of any kind, nature, or type whatsoever from, or on behalf of Seller, Consultants and Gerbsman Partners. Without limiting the generality of the foregoing, Seller, Consultants and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the AirXpanders Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the Non-Disclosure Agreement attached hereto as Appendix A.

 

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign the Non-Disclosure Agreement (attached hereto as Appendix A) to have access to the due diligence data room documentation (“Due Diligence Access”), and the AirXpanders Video. Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the AirXpanders Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Seller or Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Seller and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.  

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the AirXpanders Assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than  Friday, September 27, 2019 at 2:00pm Pacific Daylight Time (the “Bid Deadline”) at Gerbsman Partners office, located at 211 Laurel Grove Avenue, Kentfield, CA 94904.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. In particular, please identify separately certain equipment or other fixed assets.  The attached AirXpanders fixed asset list may not be complete and bidders interested in the AirXpanders equipment must submit a separate bid for such assets. 

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $200,000 payable to AirXpanders Liquidation Company, LLC.  Refundable deposit wiring instructions will be provided at a later date. The winning bidder will be notified within three (3) business days of the Bid Deadline.   Unsuccessful bidders will have their deposit returned to them within three (3) business days of notification that they are an unsuccessful bidder. 

Seller reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.   

Seller will require the successful bidder to close within seven (7) days following acceptance of such party’s bid. Any or all of the AirXpanders Assets will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the AirXpanders Assets shall be the sole responsibility of the successful bidder and shall be paid to Seller at the closing of each transaction. 

For additional information, please see below and/or contact:

 

Steven R. Gerbsman                                                   

Gerbsman Partners                

steve@gerbsmanpartners.com                                 

 

Kenneth Hardesty                                                      

Gerbsman Partners                                                    

ken@gerbsmanpartners.com

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Sale of Assets of AirXpanders, Inc.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by AirXpanders Assets Liquidation Company, LLC (“Seller”) to solicit interest for the acquisition of all, or substantially all of, AirXpanders’ assets (the “AirXpanders Assets”).  Seller recently stepped into a loan (the “AirXpanders Loan”) originally made by Oxford Finance LLC (“Oxford”) to AirXpanders, Inc. (“AirXpanders”), the repayment of which was secured by a pledge of substantially all of AirXpanders’ Assets.  Subsequent to the acquisition of the AirXpanders Loan, Seller is completing a UCC foreclosure with respect to the AirXpanders Assets in order to sell the AirXpanders Assets, free and clear of all liens, claims and interests, in accordance with the sale process outlined herein. 

Headquartered in San Jose, California, AirXpanders was a U.S. based medical device company whose principal business was to design, manufacture, sell and distribute medical devices used in two-stage breast reconstruction procedures following mastectomy. The first application of this technology, commercialized in the US and Australia, was tissue expansion for post-mastectomy breast reconstruction. Other applications of the technology may include tissue expansion in various parts of the body, including breasts, buttocks, thighs, etc. 

AirXpanders sought to engage in a sale of its assets or other restructuring during the first half of 2019. It became clear that bidders would require a sale process through Section 363 of Chapter 11 of the United States Bankruptcy Code.  AirXpanders determined that it had insufficient resources to complete a Chapter 11 process, and accordingly filed a proceeding under Chapter 7 of the United States Bankruptcy Code on July 24, 2019.  A Trustee was appointed by the Bankruptcy Court who elected not to market AirXpanders’ assets.  Oxford then filed a motion for relief from the automatic stay, which motion has been granted. Oxford thereafter is transferring its notes owed by AirXpanders to Seller, who is foreclosing on the AirXpanders Assets for the purpose of selling them on an “as is, where is” basis.

AirXpanders was incorporated in Delaware in 2005 and was headquartered in San Jose, California. AirXpanders has been publicly traded on the Australian stock exchange since 2015 (ASX: AXP). Nearly $130 million has been invested in the technology and products of AirXpanders.

Seller has retained key past employees on a consulting basis (“Consultants”) who will endeavor to make themselves available to assist potential purchasers with due diligence and assist with a prompt and efficient transition at a mutually convenient time.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to AirXpanders’ Assets has been supplied by former employees of AirXpanders who are now engaged in as Consultants to Seller.  Nothing contained herein has been independently investigated or verified by Seller, Gerbsman Partners, Oxford Finance, or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Seller or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Seller, Oxford Finance, and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Seller’s or Gerbsman Partners’ negligence or otherwise. Consultants, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Seller’s, Consultants’ or Gerbsman Partners’ negligence or otherwise.

Any sale of the AirXpanders Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either expressed or implied, of any kind, nature, or type whatsoever from, or on behalf of Seller, Consultants and Gerbsman Partners. Without limiting the generality of the foregoing, Seller, Consultants and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the AirXpanders Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the Non-Disclosure Agreement attached hereto as Appendix A.

Company Profile

AirXpanders was a U.S. based medical device company whose principal business was to design, manufacture, sell and distribute medical devices used in two-stage breast reconstruction procedures following mastectomy. The primary product, the AeroForm Tissue Expander System (AeroForm), is a needle-free, patient-controlled tissue expander used in patients undergoing two-stage breast reconstruction following mastectomy prior to the insertion of a breast implant.  AirXpanders’ mission was to be the global leader in reconstructive surgery products and to become the standard of care in two-stage breast reconstruction.

AeroForm was granted its first CE mark in Europe in October 2012, was approved by Australia’s Therapeutic Goods Administration, or TGA, in Australia in October 2013, and initial marketing release of AeroForm was in Australia in January 2015.  U.S. Food and Drug Administration, or FDA, granted AeroForm de novo marketing authorization in December 2016 (as a Class II medical device), and initial marketing release of AeroForm in the U.S. started in January 2017.  After FDA de novo clearance for AeroForm, AirXpanders submitted a 510(k) application for a product change related to enhanced film material. This 510(k) was cleared by the FDA in April 2017. The product covered in this clearance, internally referred to as AeroForm 3.0, is the primary product marketed in the US until AirXpanders filed for Chapter 7 in July 2019.  In Australia, AeroForm achieved approximately 20% market share during the third year of commercialization.   In the US, market share was in the single digits, due to the short time period the product was available in the US.  Worldwide revenue reached approximately $2mm per quarter, with over 90% of sales in the US in the most recent quarters.

The AeroForm Tissue Expander System is the primary product and the core technology of AirXpanders.  The device kit consists of an implant and a remote controller.   The implant is a two-layer balloon system which contains a cartridge of CO2.   The remote controller is used to open the magnetic valve in the CO2 cartridge, enabling the controlled release of CO2 into the balloon.  Unlike a conventional saline tissue expander, the patient can do the expansion entirely on her own, with no need to go back to the doctor every week or so for the saline injections necessary to fill a saline based tissue expander.   The patient has full control over the pace of her expansion and avoids the inconvenience and pain of repeated saline injections.  Plastic surgeons also prefer to avoid the repeated saline injections, as they are not reimbursed for this activity.

The product is packaged and delivered sterilized via ethylene oxide sterilization.  The remote control is “paired” with a single implant at the time of the surgery and will work only with that paired implant.  The system has proven to be an effective, easy-to-learn, and easy-to-use product for patients who choose two stage breast reconstruction post-mastectomy.

AirXpanders was incorporated in Delaware in 2005 and was headquartered in San Jose, California. AirXpanders has been publicly traded on the Australian stock exchange since 2015 (ASX: AXP). Nearly $130 million has been invested in the technology and products of AirXpanders. To date, AeroForm has been approved for marketing and sales in the United States, Australia and Europe, although commercialization has been limited to Australia and the United States, given more favorable pricing and reimbursement in those countries.

As a public company headquartered in the United States, AirXpanders was also an SEC filing company, although shares of AirXpanders were only traded in Australia.   More information, including recent 10-Q and 10-k filings, can be found at the SEC web site, https://www.sec.gov/edgar/searchedgar/companysearch.html

AirXpanders, Inc. believes its assets are attractive for a number of reasons:

  • AirXpanders’ intellectual property and its license covers an implantable device with inflatable chamber, compressed gas source and antenna. This includes claims related to an external device in wireless communication with an antenna to control the incremental release of gas from the gas source and inflate the chamber.
  • These patents include five (5) issued U.S. patents, 45 issued OUS patents, three (3) pending U.S. patent applications, and nine(9) pending foreign applications in Australia, Canada, and Europe.
  • US FDA clearances include the initial 510(k) de novo clearance in 2016 (DEN150055); a subsequent 510(k) clearance for a material change cleared in April 2017 (K170075) and an additional clearance for the Smooth Shell version of the AeroForm implant in July 2019 (K191138).  The AeroForm Tissue Expander System is indicated for use in soft tissue expansion in breast reconstruction following mastectomy, for the treatment of underdeveloped breasts, and for the treatment of soft tissue deformities in the breast.  The AeroForm Tissue Expander is intended for temporary subcutaneous or submuscular implantation and is not intended for use beyond six months.
  • The AeroForm Tissue Expander System is CE marked, however, the newer smooth shell version has not yet been reviewed by a notified body for CE.    AirXpanders notified body was BSI.
  • AirXpanders executed an extensive series of clinical trials, including the largest trial ever done for tissue expanders in the US.   The XPAND trial was a pivotal IDE trial in the US.  It was a prospective, multi-center, randomized (2:1) controlled, open label study, which enrolled a total of 150 patients for 256 implants.   Results included significantly shorter time to expansion and time to reconstruction for AeroForm versus saline expanders.
  • AeroForm was sold in the US and in Australia.   A direct sales force was in place in Australia until June of 2018, when AirXpanders transitioned to a distributor.  AeroForm has very strong surgeon support in Australia and is estimated to have 20% market share.
  • Over 4,500 AeroForm devices have been implanted.
  • Over 160 hospitals ordered AeroForm in the twelve months ending July 2019.  Average price in the US was approximately $2,600 per unit (a unit refers to an implant and a remote controller).
  • AeroForm, like other tissue expanders, is fully reimbursed as a supply cost under the tissue expansion DRG system.  In fact, the Women’s Health and Cancer Rights Act of 1998 requires any insurance company which covers mastectomy procedures to also cover post-mastectomy breast reconstruction.   To further encourage doctors to discuss reconstruction efforts with their patients, Congress passed the Breast Cancer Education Act in 2015, requiring doctors to inform women undergoing a mastectomy of their reconstruction options.
  • AirXpanders developed an economic calculator and information kit for use with hospital Value Analysis Committee’s (“VAC’S”) in the US.
  • AirXpanders achieved ISO 13485 certification.
  • AirXpanders received California FDB (Food and Drug Branch) approval.
  • AirXpanders was vertically integrated with significant manufacturing capacity.   Manufacturing capability was located in San Jose, CA and in San José, Costa Rica.   While the contract manufacturer in San José, Costa Rica could be re-engaged, AirXpanders also maintained a full production line, with limited capacity, and the ability to further expand.

 

Intellectual Property Summary

 

  • AirXpanders intellectual property covers an Implantable device with inflatable chamber, compressed gas source and antenna. This includes claims related to an external device in wireless communication with an antenna to control the incremental release of gas from the gas source and inflate the chamber.
  • These patents include five (5) issued U.S. patents, 45 issued OUS patents, three (3) pending U.S. patent applications, and nine (9) pending foreign applications in Australia, Canada, and Europe. In the US, AirXpander owns, or co-owns with Shalon Ventures, all currently issued patents.  Additional US patents, based upon early disclosures of Shalon Ventures, may be available.  A royalty of 3% of net sales of the licensed inventions is paid to Shalon Ventures with respect to  licensed patents and patent applications under an exclusive license entered into with Shalon Ventures on March 9, 2005, amended on March 9, 2009, January 9, 2012, and January 15, 2014, collectively referred to as the License Agreement. The License Agreement provides AirXpanders with certain rights to OUS patents owned by Shalon Ventures, exclusive rights to the co-owned US patents, and patent prosecution rights for patents owned or co-owned by Shalon Ventures and licensed to AirXpanders.   The License Agreement with Shalon Ventures is currently in dispute –  Shalon Ventures sent a termination notice on July 18, 2019 due to non-payment of certain nominal royalties, but that license is not terminable due to the pendency of the Chapter 7 proceeding.  In addition, there is a 90 day cure period post termination notice to bring the payment of royalties current.

AirXpanders’ Assets

AirXpanders has developed a unique, FDA cleared product that meets the needs of physicians and patients alike.  The concept is unique, well protected by patents, and well recognized by plastic surgeons throughout the US and Australia.   Key assets fall into a variety of categories, including:

  • Patents, patent applications, and trademarks
  • Regulatory approvals in US, Australia, and Europe
  • Established customers, accounts, surgeon advocates and satisfied patients
  • Established hospital reimbursement, and a track record of success with GPO accounts and hospital VAC’s
  • The only needle free tissue expander available
  • Positive long-term clinical feedback from top surgeons and their patients
  • Next generation product designs, including significant cost reduction and design simplification
  • Manufacturing and equipment developed internally and easily scalable

The AirXpanders Assets will be sold, in whole or in part, to the highest bidder. The sale of these assets is being conducted by Seller, who has secured an interest in the secured loans provided by Oxford Finance, LLC. Certain former employees of AirXpanders will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, AirXpanders former employees should not be contacted directly without the prior consent of Gerbsman Partners.

Previous Management

 

Frank Grillo — President & CEO, and Executive Director

Mark Payne – Vice President, Research and Development

 

The Bidding Process for Interested Buyers  

Interested and qualified parties will be expected to sign the Non-Disclosure Agreement (attached hereto as Appendix A) to have access to the due diligence data room documentation (“Due Diligence Access”), and the AirXpanders Video. Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the AirXpanders Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Seller or Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Seller and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same. 

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the AirXpanders Assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than  Wednesday, October 2, 2019 at 2:00pm Pacific Daylight Time (the “Bid Deadline”) at Gerbsman Partners office, located at 211 Laurel Grove Avenue, Kentfield, CA 94904.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. In particular, please identify separately certain equipment or other fixed assets.  The attached AirXpanders fixed asset list may not be complete and bidders interested in the AirXpanders equipment must submit a separate bid for such assets.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $200,000 payable to AirXpanders Liquidation Company, LLC.  Refundable deposit wiring instructions will be provided at a later date. The winning bidder will be notified within three (3) business days of the Bid Deadline.   Unsuccessful bidders will have their deposit returned to them within three (3) business days of notification that they are an unsuccessful bidder.

Seller reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.  

Seller will require the successful bidder to close within seven (7) days following acceptance of such party’s bid. Any or all of the AirXpanders Assets will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the AirXpanders Assets shall be the sole responsibility of the successful bidder and shall be paid to Seller at the closing of each transaction.

For additional information, please see below and/or contact:

 

Steven R. Gerbsman                                                                                                           

steve@gerbsmanpartners.com                                

 

Kenneth Hardesty                                                                                                             

ken@gerbsmanpartners.com

 

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August, 2019
 
This article was published by Steven R. Gerbsman and Robert Tillman in May, 2007.
 
Please read, review any similarities to today and “be prepared”.
“The more things change, the more they remain the same”
 

San Francisco, May, 2007The Black Swan Pushes Events to the Tipping Point-Maximizing Enterprise Value in the  upcoming Crisis

We are currently in one of the best economic times in our country’s history. The stock market is at all time highs, unemployment is at all-time lows, interest rates are low, money is plentiful and deal valuations are high and getting higher. There are, of course, many worrisome trends: terrorism, excessive government spending, trade deficits, potential high oil prices, immigration and over the longer term, such issues as an aging population and (possibly) global warming. Although problems and worries always exist, in historical terms, times are very good indeed.
The big questions for us as specialists in maximizing enterprise value are:Will it end?

Yes. Of course. Even fundamentally healthy economies experience frequent and often violent corrections. The current world economy has evolved in many ways over the past decade. All large businesses are international. The primary economies of the world are very tightly linked together. Money is far more liquid and moves around the world with far less “friction” than it did in the past. The pace of technical change continues to increase. Nevertheless, we do not believe that the laws of history, and especially, the laws of human nature, have been repealed.As always, “The more things change, the more that they remain the same.”When will it end?

Unfortunately, no one knows the answer to this question. In historical terms, the current economic expansion has continued for a very long time and has survived numerous shocks, including war, a doubling of energy prices, natural disasters and localized economic downturns , such as the bursting of the sub-prime mortgage bubble. It appears to be “ripe” for a downturn. On the other hand, inherently unstable situations often persist for far longer than anyone could believe possible. During the 2000 Internet bubble, it seemed to us for quite some that the old rules of business no longer applied and that 25 year-old CEOs knew something us old guys did not know. When the crash occurred, we were relieved to find out that we were not so obsolete after all.

We did, however, underestimate the staying power of technically insolvent companies with broken or non-existent business models. Many of these companies had significant cash on the balance sheet (offset, of course, by significant liabilities) and investors who continued to infuse more cash far beyond the point of reason. Today, there exist immense pools of uncommitted cash, much of it in the hands of entities, such as private equity funds and hedge funds that are subject to minim al regulatory scrutiny and whose operations are obscured from the public view. In addition, the weakness of the dollar against both the Euro and the Pound Sterling makes U.S. assets a relative bargain. These factors tend to mitigate against an economic downturn. For how much longer they will continue to do so we do not know (and if we did know, we would certainly would not tell).

How will it end?

Fast, hard and unexpectedly. Two books shed a great deal of light on the process:

The first book, The Tipping Point by Malcolm Gladwell describes how human behavior causes events to cascade rapidly once a certain critical mass (the “Tipping Point”) has been achieved. Examples in the business world include periodic economic “panics” and the spread of certain technologies and products, such as personal computers, iPods, cell phones, etc. It is very difficult to predict in advance when the “tipping point” in any situation will be reached, but history has shown that, once it has been reached, events proceed very quickly.

The second book, The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb describes how highly improbable, and hence unpredictable, events periodically create massive change. The title of the book derives from the observation that the existence of even a single black swan disproves the assertion that all swans are white. Historical examples include the Fall of France at the beginning of World War II, the rise of the Internet and 9/11.

There are many obvious candidates for a “black swan” event that pushes the world economy over “the tipping point” into a downturn – a war with Iran, a nuclear terrorist attack or a worldwide bird flu or small pox epidemic, but generally, it is what you do not see that gets you. We are fundamentally optimists about the long-term prospects of the world economy. In many highly measurable ways, the wor ld really is improving, driven by technological innovation, a lowering of barriers to trade and increasing economic integration. Nevertheless, we are old enough to have lived through many “bumps” along the road and know that such discontinuities will always occur. We believe that we will see a significant economic event sometime over the next 12-18 months, either localized to a particular sector or geographic region or globally.

Our Advice?

Before such an event occurs:

As a board member, investor or stakeholder:

1.    Implement tight cash flow, receivables and inventory reporting so that you are alerted to problems early.

2.    Focus on the control, preservation and forecasting of CASH on a weekly, monthly and quarterly basis.

3.    Require “bottoms up” forecasting for all aspects of revenue and expense. Have the CEO and CFO defend ALL numbers.

4.    Hold the CEO responsible and accountable for Performance. If you are off the business plan/forecast, re-forecast based on the reality of “what is” today.

5.    Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.

6.    Review all companies in your portfolio. Identify and define action plans to fix weaknesses now.

7.    Utilize professional resources to assist in maximizing enterprise value, when appropriate.

When such an event occurs:

1.    Face up to reality and act quickly. When things are going bad, waiting seldom improves them. We have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.

2.    Call for assistance early. The earlier professionals can get involv ed in the process, the better the potential outcome in maximizing enterprise value. Many times boards request assistance only after a company has run out of cash. Many more options exist to maximize enterprise value if a company has some running room.

About Gerbsman Partners

 

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property.  Since 2001, Gerbsman Partners has been involved in maximizing value for 107 technology, medical device, life science, digital marketing/social commerce, cyber security and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $ 2.3 billion of financings, restructurings and M&A transactions.Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Boston, Orange County, VA/DC, Europe and Israel.

 

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SALE OF BioInspire Technologies, Inc.

Gerbsman Partners (www.gerbsmanpartners.com) has been retained by BioInspire Technologies, Inc. (www.bioinspiretechnologies.com) to solicit interest for the acquisition of all, or substantially all, the assets of BioInspire Technologies, Inc. 

BioInspire Technologies (BioInspire) is a privately held biotechnology company located in Palo Alto, California, founded in 2009. BioInspire has developed a bioabsorbable, drug eluting implant for targeted drug delivery with initial focus in the ENT market.  The acquisition of BioInspire enables immediate access to proprietary technology and preclinical combination products.

BioInspire has a patent portfolio that consists of eight (8) US patents covering broad claims covering product formulation, indications, manufacturing and methods of delivery.  These cover multiple applications in the pipeline.

BioInspire has developed: 

  • A novel technology for targeted drug delivery via a protein based, bioabsorbable implant, SinuBand
  • Techniques for manufacture and testing of the SinuBand implant
  • Approved 510(k) for the SinuBand implant (w/o API)
  • Eight (8) US patents with pending applications in EU
  • Patented delivery method for ENT applications

BioInspire has no recurring revenues, product or collaboration related. Its value lies in the preclinical and clinical assets produced by its underlying and proprietary technology.

 

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to BioInspire’s Assets has been supplied by BioInspire.  It has not been independently investigated or verified by Gerbsman Partners or its agents.Potential purchasers should not rely on any information contained in this memorandum or provided by BioInspire, or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

BioInspire, Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of BioInspire’s or Gerbsman Partners’ negligence or otherwise.  

Any sale of the BioInspire Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of BioInspire or Gerbsman Partners.  Without limiting the generality of the foregoing, BioInspire and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the BioInspire Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent.  This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

 

Historical Company Information

BioInspire was founded to develop novel technologies to address targeted therapeutics via resorbable stint/implant technology.  Initial development focused on the cardiovascular market.  Later focus transitioned to ENT markets for clinical success.

SinuBand FP Sinus Implant is a two-sided, sterile, single-use, bioresorbable dressing (Figure 1) that is applied after ethmoidectomy performed as part of endoscopic sinus surgery (ESS).  The implant matrix is made from Fibrinogen Concentrate (Human), Polyethylene Glycol 400, Calcium Chloride Dihydrate and Riboflavin.  Each implant contains 300-1200 µg fluticasone propionate (FP), an intranasal corticosteroid.  Implants are two-sided with a white side to be placed against the mucosa and a yellow side containing a colorant (riboflavin), so that it is visible while it is being positioned on the sinus mucosa.  The implant is pre-loaded in a single-use, disposable delivery tool for ease of insertion and positioning in the post-surgical ethmoid sinus.  SinuBand FP Sinus Implant has a preliminary classification by the Office of Combination Products (OCP) as a biologic (BLA) combination product with biologic (Fibrinogen Concentrate [Human]), drug (FP) and device (delivery tool) constituent parts.

SinuBand FP is an implant that is to be used as a sinus dressing following ESS.  A delivery tool pre-loaded with the implant is part of the product configuration to ease insertion of the implant through the nasal passage and placement on the ethmoid sinus surface.  The dimensions of each implant to be inserted into the sinus are 2 cm x 0.9 cm with thickness < 0.5 mm.

 

BioInspire Company Profile

BioInspire Technologies (BioInspire) developed SinuBand FP (Fluticasone Propionate), a sinus implant intended for use following ethmoid sinus surgery to maintain sinus patency and serve as an adhesion barrier.  The product reduces surgical edema and inflammation following ESS.  SinuBand FP is a combination product with biologic (Fibrinogen Concentrate [Human]), drug (FP) and device (delivery tool) constituent parts.

The biologic component, Fibrinogen Concentrate, provides the structural matrix for the implant, similar to the use of a synthetic polymer in traditional nasal/sinus packing materials.  Fibrinogen was chosen as the optimal material for the SinuBand products for several reasons:

  • It can be formulated to create a solid, non-adherent film when dry with sufficient mechanical strength to allow ease of delivery.
  • It conforms to and creates a barrier on the surface of the tissue while maintaining patency of the sinus; it does not obstruct breathing or normal post-operative sinus drainage.
  • It is fully biocompatible and bioresorbable within the early post-operative period.

 

Impact of Technology on the Market and Why BioInspire Assets are Attractive

SinuBand Nasal Dressing: Cleared 510(k):

BioInspire’s SinuBand Nasal/Sinus Dressing is a Class I device that was cleared on July 27, 2016 under premarket notification review (K160101) by the Center for Devices and Radiological Health (CDRH).  SinuBand is indicated for use in patients undergoing nasal/sinus surgery as a space-occupying dressing to separate mucosal surfaces and prevent formation of adhesions (SinuBand 510 (k) Summary).

SinuBand addresses Unmet Clinical Need

Intranasal steroids (sprays) are first-line therapy but poor compliance limits usage and effectiveness.  Also, nasal sprays are unable to reach sinuses for full therapeutic impact.  The alternative, oral steroids, are effective but have severe side-effects.  Intranasal steroids can be used for surgical management Surgical Management.  However, the underlying inflammatory disease continues.  Post-surgical polyps and adhesion result in interventions.  Medical therapy limitations apply to post-op care.  SinuBand fills this unmet need by providing directed therapeutic impact via effective drug delivery as a vehicle to manage mucosal inflammation.  The highly conformable film adheres to any wound or mucosal surface.  SinuBand elutes fluticasone propionate post application and fully resorbs.

BioInspire’s Assets

  • Intellectual Property
  • Preclinical and safety studies have been completed on the SinuBand FP product demonstrating safety and efficacy
  • Clinical feasibility via a controlled, randomized, partially double blinded study
  • Techniques for manufacture and testing of the SinuBand implant

Development Pipeline

Initial pipeline focus is on optimizing steroid delivery in post-surgical and then allergic rhinitis applications.  Multiple FDA pre-sub interactions have improved clarity on the post-surgical regulatory path.  There is significant potential for expanding indications to other ENT and non-ENT indication

The assets of BioInspire will be sold in whole or in part (collectively, the “BioInspire Assets”). The sale of these assets is being conducted with the cooperation of BioInspire.  BioInspire and its consultants will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”).  Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Igenica Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of BioInspire Inc., Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and neither BioInspire nor Gerbsman Partners (or their respective, staff, agents, or attorneys) makes any representations as to the accuracy or completeness of the same.  

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the BioInspire Assets.  Sealed bids must be submitted so that the bid is actually received by Gerbsman Partners no later than Monday, April 22, 2019 at 3:00 p.m. Pacific Time (the “Bid Deadline”) at Igenica’s office, located at 863A Mitten Road Ste. 100B2, Burlingame, California 94010.  Please also email steve@gerbsmanpartners.com with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way. 

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable.  All bids must be accompanied by a refundable deposit check in the amount of $100,000 (payable to BioInspire, Inc.).  The winning bidder will be notified within 3 business days after the Bid Deadline.  Non-successful bidders will have their deposit returned to them.

BioInspire reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest bid will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission. 

BioInspire will require the successful bidder to close within 7 business days.  Any or all of the assets of Igenica will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the BioInspire Assets shall be the sole responsibility of the successful bidder and shall be paid to BioInspire at the closing of each transaction.

 

For additional information, please see below and/or contact:

Steven R. Gerbsman                                                                                   

steve@gerbsmanpartners.com                                  

 

Kenneth Hardesty

ken@gerbsmanpartners.com

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The Bidding Process, Procedures for the Sale of certain Assets and Intellectual Property of TrueFacet. Inc

Further to Gerbsman Partners sales letter of February 20,2019 regarding the sale of certain assets of TrueFacet, Inc. (“TrueFacet”), I am attaching a link below for updated information power point regarding the Assets and Intellectual Property of TrueFacet for interested parties bidding on the assets and IP of TrueFacet and TrueFacet’s Data Room due diligence information list. 

Ken, Dennis and I will be following up to review the updated Bidding Process, schedule due diligence meetings and answer any questions regarding the “Date Certain M&A Process”.

I will be sending out a draft Asset Purchase Agreement “APA” in a couple of weeks prior to the bid date of March 22, 2019.

Any and all the assets of TrueFacet will be sold on an “as is, where is” basis and will be subject to “The Bidding Process for Interested Buyers”, outlined below.

Gerbsman Partners (http://www.gerbsmanpartners.com) has been retained by TrueFacet (https://www.truefacet.com) to solicit interest for the acquisition of part or substantially all of TrueFacet’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “TrueFacet Assets”).

 

IMPORTANT LEGAL NOTICE

The information in this memorandum does not constitute the whole or any part of an offer or a contract, nor does it purport to contain all information that may be required or relevant to a recipient’s evaluation of any transaction and recipients will be responsible for conducting their own investigations and analysis.

The information contained in this memorandum relating to the TrueFacet Assets has been supplied by TrueFacet. It has not been independently investigated or verified by Gerbsman Partners, its agents or any other party.

Potential purchasers should not rely on any information contained in this memorandum or provided by TrueFacet or Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

TrueFacet and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, completeness and reasonableness of any information provided in connection herewith and (ii) do not accept liability for the information provided in connection herewith, including information contained in this memorandum, whether that liability arises by reasons of TrueFacet’s or Gerbsman Partners’ negligence or otherwise. 

Any sale of the TrueFacet Assets will be made on an “as-is, where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of TrueFacet and Gerbsman Partners. Without limiting the generality of the foregoing, TrueFacet and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the TrueFacet Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

Except as otherwise noted, this memorandum speaks as of the date hereof.  The delivery of this memorandum should not and does not create any implication that there has been no change in the business and affairs of TrueFacet since such date.  Neither TrueFacet nor Gerbsman Partners, or their respective staff, agents and attorneys, undertakes any obligation to update any information contained herein.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

 

The Bidding Process for Interested Buyers

Interested and qualified parties will be required to sign a Non-Disclosure Agreement (attached hereto as Attachment A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it acknowledges and agrees to the bidding procedures described herein; (ii) that it has had an opportunity to inspect and examine the TrueFacet Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of TrueFacet or Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and TrueFacet and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.  

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of all or part of the TrueFacet Assets. Each sealed bid must be submitted so that it is received by the Company no later than Tuesday, March 22, 2019 at 3:00pm Eastern Daylight Time (the “Bid Deadline”) at TrueFacet’s office, located at 530 7th Avenue # 1502, New York, NY. 10018.  Please also email steve@gerbsmanpartners.com with any bid.  For additional information regarding bid requirements and considerations, please contact Steve Gerbsman at steve@gerbsmanpartners.com.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of $200,000 (payable to TrueFacet, Inc.).  The deposit should be wired to TrueFacet’s attorneys (information will be provided).  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by TrueFacet counsel.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder. 

TrueFacet is free to conduct the sale process as it determines in its sole discretion (including, without limitation, terminating further participation in the process by any party, negotiating with prospective purchasers and entering into an agreement with respect to a sale transaction without prior notice to you or any other person) and any procedures relating to such transaction may be changed at any time without prior notice to you or any other person.  For greater certainty, TrueFacet reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.  

TrueFacet will require the successful bidder to close within 7 business days from the Bid Deadline. Any or all of the assets of TrueFacet will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or other taxes, if any, relating to the sale of the TrueFacet Assets shall be the sole responsibility of the successful bidder and shall be paid to TrueFacet at the closing of each transaction. 

For additional information, please see below and/or contact: 

Steven R. Gerbsman                                           

steve@gerbsmanpartners.com 

Ken Hardesty

ken@gerbsmanpartners.com 

 

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