Item 1. Business
Item
1. Business.
As
used in this Report, all references to “we,” “our” and “us” for periods prior to the closing of the
Share Exchange refer to Dror Ortho-Design Ltd., a company incorporated under the laws of the State of Israel, and for periods subsequent
to the closing of the Share Exchange refer to Dror Ortho-Design, Inc., a Delaware corporation and its direct and indirect subsidiaries.
Overview
We were incorporated as Novint Technologies, Inc. in the State of New
Mexico in April 1999. On February 26, 2002, we changed our state of incorporation to Delaware by merging with Novint Technologies, Inc.,
a Delaware corporation. On July 5, 2023, we entered into a share exchange agreement with the shareholders of Dror Ortho-Design, Ltd. (“Private
Dror”), pursuant to which the shareholders of Private Dror agreed to exchange all of their outstanding ordinary shares Private Dror
for shares of our Common Stock and convertible preferred stock (the “Share Exchange”). On August 14, 2023, the Share
Exchange was consummated and we changed our name from “Novint Technologies, Inc.” to “Dror Ortho-Design, Inc.”
Following the Share Exchange, we succeeded to the business of Private Dror as our sole line of business.
Our
Company
We
have reimagined the way people can correct their smile.
We
plan to disrupt the aligner market by offering millions of people a revolutionary alternative. We believe that people do not need to
change their lifestyle to correct their smile as they are required to do with existing aligner solutions.
Existing
aligner solutions generally share the same treatment principles, which are different from our solution. In most cases, patients seeking
to improve their smile need to undergo a 12-to-15 month process of wearing plastic aligners, which need to be worn the entire day and
should only be removed while eating or drinking. Patients are prescribed a series of 20 to 30 aligners that are intended to forcefully
move teeth progressively closer to their intended final position. This process causes pain every time a new aligner is used and restricts
blood circulation, which counterproductively slows down tooth movement. All-day aligner solutions are also intrusive, as patients need
to conduct their lives at work or school wearing the plastic aligners. In addition, most existing aligner therapies require multiple
visits to an orthodontist to monitor the progress of treatment plans through intraoral scanning, physical examination and patient testimony.
We
believe that recent rapid advancements in technology have made traditional aligner solutions no longer the most effective treatment option
for smile correction. Our Company has developed a proprietary AI-based platform to correct people’s smiles in a discreet and less
painful manner (the “Platform”). The Platform uses only one smart aligner to gently move teeth into their optimum position
with pulsating air while the patient is sleeping or at home. The Company has several patents for the technology used in the Platform
and is currently in the process of preparing the prototype for FDA approval.
Our
predecessor first generation Aerodentis System is a Class II medical device, which was cleared by FDA for commercialization in the U.S.
pursuant to the 510(k) notification process for movement and alignment of teeth during orthodontic treatment of malocclusion in April
2020. The Company is preparing to apply for 510(k) clearance for the Platform as a Class II medical device, which constitutes an updated
version of the currently cleared device. Such updated Platform contains new and/or different components than the original device, which
is why a new 510(k) clearance is required prior to marketing the Platform in the U.S. We have not yet filed a 510(k) submission for the
Platform, and it has, thus, not been found by the FDA to be substantially equivalent to the first generation Aerodentis System.
The
Company currently does not generate revenues to fund operations and anticipates that it will continue to incur significant losses as
it continues to develop the Platform. Please refer to “Risk Factors - We are in the development stage, are not generating revenues
and have no operating history in the manufacturing and distribution of orthodontic medical devices or platforms for consumer use.”
for additional information. The Company intends to spend approximately $2.5 million over the next 18 months on software and hardware
development as well as the accompanying regulatory approvals and IP protection associated with such software and hardware projects.
Our
Product
The
First Generation Aerodentis System
Our
Company was founded in 2005 with the goal of offering millions of people a chance to correct their smile in a more discreet and less
painful manner. The first generation of our product underwent ten years of development by a team of twelve orthodontists, engineers,
industrial designers and dental technicians. This team developed a new clinically-proven method for correcting Class 1 and Class 2 malocclusion
using pulsating air. The team discovered that using pulsating air improved blood circulation in the gums, which is essential to tooth
movement. This first-generation product (the “Aerodentis System”) was composed of a base control unit that contained a pump
and motor that would deliver pulses of air to a micro balloon that was part of a mouthpiece to be used by the patient to deliver the
treatment. The use of pulsating air is the base patented technology that distinguishes our Aerodentis System from clear aligner therapies,
which are designed to move teeth using continuous resistant force delivered by the aligner, which impairs blood flow.
1
Pictured:
Base control unit, containing micro-pump and controls, attached to the smart aligner. The smart aligner is composed of an outer mouthpiece
structure, which is shaped based on the final position of the teeth for a perfect smile. Behind the outer mouthpiece structure is a micro
balloon that is attached to the base control unit with a fine and flexible microtube. The balloon delivers pulsating air by inflating
and deflating. Behind the balloon is the “push structure,” which provides the balloon with a surface to push against as it
gently moves the teeth.
In
January 2013, the Aerodentis System composed of the base control unit and custom mouthpiece received the European CE Mark. In 2020, it
received FDA clearance via the 510(k) process as a Class II medical device, with broad indication for use “in movement and alignment
of teeth during orthodontic treatment of malocclusion.” Clinical trials demonstrated that Aerodentis System was suitable for adults
and pediatric patients with Class 1 and Class 2 malocclusion, including crowding, proclination and retroclination. Further, clinical
trials have demonstrated that the effectiveness of Aerodentis System was consistent with the results achieved by the Invisalign clear
aligners solution provided by Align Technology, Inc.
Pictured:
Close up of smart aligner with (1) outer structure formed based on the final tooth position desired for a perfect smile and (2) micro
balloon inserted between the outer structure and the inner structure to support the balloon’s expansion.
The
Platform
Building
on the Aerodentis System, we have developed a prototype of the Platform, our next generation, comprehensive enhanced solution to Class
1 and Class 2 malocclusion for which we intend to submit a 510(k) application for marketing in the U.S., as the Platform is beyond the
scope of our current FDA clearance. The prototype of the Platform was developed over the course of eighteen months and is intended to
advance the proven clinical features of the Aerodentis System while incorporating recent developments in artificial intelligence utilized
in our Aerodentis AI Cloud (as defined below) component of the Platform, secure wireless and Internet communications with Internet of
Things (“IoT”) devices used in our Smart Aligner System component of the Platform and advanced imaging and 3D printing technologies.
IoT devices revers to pieces of hardware, such as sensors, actuators, gadgets, appliances, or machines, that are programmed for certain
applications and can transmit data over the internet or other networks.
Our Platform
is comprised of three primary components:
● the
Aerodentis smartphone application;
● our
AI-based cloud service (“Aerodentis AI Cloud”), which is used to perform analytics and manage patient treatment plans; and
● the
smart aligner system used by the patient, which consists of: (i) a base control unit containing the pump and the IoT components and (ii)
a smart aligner containing the micro-balloon that gently pushes teeth into their intended final position using pulsating air (the “Smart
Aligner System”).
2
The following
provides a more detailed description of each of the components of our Platform:
Aerodentis
Smartphone Application
Our
freely downloadable Aerodentis smartphone application will allow potential patients to make a video of their smile and teeth and upload
the video to the Aerodentis AI Cloud. This 2D video will be converted into a 3D model using our proprietary patent-pending AI based image
analysis technology. The underlying algorithms will then perform an initial analysis to determine if the patient can potentially benefit
from our solution. This complex analysis will be performed in minutes and will deliver a “Go/No Go” response. Once a patient
begins treatment, they will use the smartphone application to provide their dental professional with ongoing remote monitoring of their
treatment progress. The smartphone application can be used to upload additional teeth videos showing progress and to transmit data from
the Smart Aligner System (described below), including the amount of time the patient used the Smart Aligner System and the pressure and
pulse levels administered.
Aerodentis
AI Cloud
The
Aerodentis AI Cloud will be used to analyze data uploaded by patients and to facilitate communication between patients and dental professionals.
If the analysis performed on the initial video upload from the Aerodentis smartphone application delivers a “Go” result,
the patient will be invited to have an intraoral scan performed by a dental professional from our network of participating providers.
The results of this intraoral scan will be uploaded to the Aerodentis AI Cloud by the dental professional, and the Aerodentis AI Cloud
will use a machine learning algorithm to compare the scan with the initial model generated from the patient’s initial video upload.
The machine learning algorithm is designed to learn with every scan how to improve the accuracy of the 3D images it generates from smartphone
videos. We believe that the Platform’s image analysis of smartphone videos will eventually approach the level of accuracy observed
in intraoral scans. If we achieve this, we will be in a position to be able provide highly accurate image analysis of teeth that can
be used throughout the dental industry since it would allow for smartphones to essentially replace the need for intraoral scans for certain
cases. This would dramatically increase the efficiency and treatment delivery cycle in the dental industry and result in a potentially
material economic benefit to our Company in the future.
The
Aerodentis AI Cloud will also be used for ongoing analysis of patient data and management of a patient’s treatment plan throughout
the treatment. A dental professional will use our Platform to develop a customized treatment plan, including any interproximal reduction
necessary before treatment begins, based on the Smart Aligner System. As a patient uploads progress videos from their smartphone, the
Platform will compare tooth positions in previous videos to current positions. A dental professional will be able to use this data to
remotely monitor the treatment progress and modify the treatment plan remotely as needed.
Smart
Aligner System
The
Platform’s Smart Aligner System features a newer, more advanced version of our first generation Aerodentis System, featuring completely
redesigned micropump and motor mechanisms. The redesign has significantly increased the pump’s pressure capacity, efficiency, and
durability. In addition, the base control unit of Smart Aligner System is now IoT-enabled to allow external secure communication with
the device using Wi-Fi and Bluetooth. The device will thus be able to communicate with the patient’s smartphone as well as the
Aerodentis AI Cloud and the designated dental professional, subject to FDA clearance.
The
clear aligner of a patient’s Smart Aligner System will be created using 3D printing based on various 3D images of the patient’s
teeth that are collected and analyzed in the Aerodentis AI Cloud. This will represent a significant development in our industry since,
today, aligners are not printed but produced using a thermoforming process. Other companies have implemented 3D printing to produce the
aligner models but not the actual aligners. Although using 3D printing is a superior method for production due to its level of precision
and customizability, it has not been implemented in the production of aligners in the traditional aligner market because it would be
financially prohibitive to do so, since traditional aligner solutions would need to print multiple aligners for each patient. Since our
solution requires only one smart aligner to be produced for each patient, we will be able to take advantage of this cost-effective production
method that will also have economies of scale.
3
Market
Opportunity
Malocclusion
is one of the most prevalent clinical dental conditions in the world, affecting approximately 60% to 75% of the global population. 1
It is estimated that there are approximately 500 million people globally with malocclusion who could benefit from straightening
their teeth. 2 However, most people afflicted by malocclusion do not seek orthodontic treatment due to a number of reasons,
including negative perceptions of metal braces, affordability of treatment, and accessibility to doctors in certain markets and geographies.
Annually, only approximately 21 million or 4.2% of the affected individuals elect treatment by orthodontists. 3 Today, most
orthodontic patients continue to have their malocclusions treated with the use of traditional corrective methods such as metal arch wires
and brackets, referred to as braces, augmented with elastics, metal expanders, headgear or functional appliances, and other ancillary
devices as needed. Upon completion of a patient’s treatment, their dental professional may recommend the patient use a retainer
appliance to preserve the benefits of their treatments.
According
to a 2022 study conducted by Precedent Research (“Precedence Research 2022 Study”), the global clear aligners market size
was estimated at $6.29 billion in 2022 and is expected to surpass around $46.3 billion by 2030, expanding at a compound annual growth
rate (CAGR) of 28.34% during the period 2022 to 2030. 4
Source :
Precedence Research Study, 2022
Our
Platform seeks to address this large and underserved global market by offering a discreet, less intrusive and less painful treatment
alternative to available clear aligners and traditional orthodontic treatments. Our Platform is optimized to correct malocclusions that
relate to the “social six,” which are the front upper six and lower six teeth. We believe that at least 30% of those who
currently seek treatment, or 6.6 million people, could benefit from using Aerodentis to correct their smiles. According to the Precedence
Research 2022 Study, by 2028, the market for clear aligners will surpass 22 million people, which is our total addressable market.
1 See
Alhammadi, Maged Sultan, et al. “Global distribution of malocclusion traits: A systematic review.” Dental press journal of
orthodontics 23 (2018): 40-e1.
2 Fortune
Business Insight. The global clear aligners market is projected to grow from $3.80 billion in 2023 to $17.27 billion by 2030, at a CAGR
of 24.2% during the forecast period, 2023-2030 (June 2023), available at https://www.fortunebusinessinsights.com/industry-reports/clear-aligners-market-101377.
3 Medi-Tech
Insights. Global Orthodontic Supplies Market Report 2027 – Improving Oral Health Care, available at https://meditechinsights.com/global-orthodontic-supplies-market/.
4 Precedence
Research. Clear Aligners Market (By Age: Adults, Teenagers; By Type: At-home aligners/Direct-to-consumer (DTC) Aligners, In-office Aligners;
By Product: Hard Type, Medium Type, Soft Type; By Material Type: Polyurethane, Plastic Polyethylene Terephthalate Glycol, Poly-vinyl
Chloride; By Distribution Channel: Direct Sales, Laboratories, Others; By End-User: Hospitals, Standalone Practices, Group Practices,
Others) - Global Industry Analysis, Size, Share, Growth, Trends, Regional Outlook, and Forecast 2022-2030 (October 2022), available at
https://www.precedenceresearch.com/clear-aligners-market.
4
Source :
Precedence Research Study, 2022
● Ourtotal
addressable market also stands to benefit from the recent trend toward dentists, rather than orthodontists, delivering orthodontic care
through clear aligners. In order for a smile correction solution to work properly, a treatment plan and monitoring needs to be executed
by a dental professional, such as dentists and orthodontists. Since the Aerodentis Platform provides the necessary information to develop
and administer a treatment plan using our solution, it may be used by dentists as well as orthodontists, which expands our target distribution
channel to cover both orthodontists and dentists. According to a 2019 Journal of Family Medicine and Primary Care article, approximately
36% of dentists were already performing orthodontic procedures such as the malocclusion corrections. 5 This is an indication
of an ongoing trend of dentists assuming more orthodontic treatment offerings in their practices. We believe that the ease of use of
our Platform will also facilitate eventually selling our solution directly to the consumer in qualified cases with remote dental professional
involvement.
Business
Model
Our
business model is focused on engaging the customer throughout their smile correction journey and beyond. Our solution provides an innovative,
proprietary end-to-end platform that spans all stages of customer engagement, from initial acquisition to treatment and ongoing maintenance—all
with minimal need for office visits and lifestyle inconvenience.
Customer
Initiated Dentist-Controlled Treatment
Unlike
other solutions in the market, such as traditional clear aligners, we believe our Platform will provide greater access and interaction
with the customers and allow customers to feel more involved in their own treatment process. We hope to engage the power of social media
and other digital outlets to initiate initial demand for our Platform by the customers.
5 See Jayaprakash, Poonam K., et al. “A survey on orthodontic
services provided by general dental practitioners.” Journal of family medicine and primary care 8.7 (2019): 2490-2495.
5
Customer
Engagement – Value Creation
Our
Platform is designed to have a high level of engagement with customers, if cleared for marketing in the U.S., as users will be able to
scan their teeth with any smartphone and see how our solution can improve their smile. We intend to engage the customer from their first
interest in correcting their smile and guide them throughout our convenient process.
Network
of Dental Professionals
If
cleared by FDA, the Platform will generally function via the following process: if the customer can benefit from our Platform, based
on the severity of their tooth alignment and malocclusions, they will be referred to a dental professional in our network for an intraoral
scan. Once the results of the scan are uploaded to our Aerodentis AI Cloud, a remote dental professional will develop a treatment plan
for that patient using our Platform. If the patient requires any tooth preparation before initiating treatment with the smart aligner,
the patient will again be referred to a dental professional in our network. The Company currently does not have any written agreements
or arrangements with any dental professionals governing provision of orthodontic services using our Platform.
Monetization
– Value Capture
We
intend to generate revenues by:
● reselling
our solution through a professional dental network;
● providing
ongoing monitoring and treatment plans for those who have completed their smile correction and may require smile maintenance throughout
their life; and
● eventually
selling directly to the consumer in qualified cases with remote dental professional involvement
Sales
and Marketing
We
intend to market our Platform in Israel, the European Union (“E.U.”), United Kingdom, United States, and Canada, subject
to each country’s requisite regulatory authorization. We intend to utilize social media to promote our Platform to our targeted
audience. The Platform has a potentially viral social media message that we hope will drive demand by placing user-generated content
on all major social medial platforms. Our marketing strategy themes and promotional messages will emphasize the ease and convenience
offered by our Platform as compared to other available treatments.
Research
and Development
We
have a research and development team with software development, medical device development, dental/orthodontic, data science and other
innovation focused backgrounds. Our current research and development efforts are primarily focused on enhancing the Platform and developing
software and processes to enable the manufacture of our smart aligner systems in volume as well as productizing the prototype through
the development of UI/UX and system integration with existing patent systems.
As
of March 2023, our outsourced software development team is composed of eight professionals with years of experience in artificial intelligence
development, data science, application and software engineering. Members of the team come from the elite intelligence units of the Israeli
Defense Force and have a breadth of experience in computer vision, imaging and targeting systems development. Our software development
team is headed by Yossi Avni, who has 25 years of experience in developing advanced artificial intelligence applications, behavioral
biometrics, behavioral profiling and advanced security systems and holds over 100 patents in these areas.
Our
hardware and systems development team is composed of six professionals with years of experience in FDA-compliant medical device development.
They are a part of Aran Research Development Prototypes Ltd. (“Aran”), a leading Israeli product design and development firm
and our third-party hardware development partner. Aran is ISO 13485 certified and maintains a ISO 7 cleanroom for testing and assembly.
Aran also has manufacturing facilities and a full suite of 3D printing capabilities, which are compliant with FDA guidelines. Our hardware
and systems development team is headed by Avi Kayton, a skilled development manager and systems engineer with 16 years of experience,
including extensive experience in medical device companies.
Intellectual
Property
We
have three issued U.S. patents, four pending U.S. patents and numerous global patent applications. These patents and applications cover
critical aspects of our Platform, including the movement of teeth using pulsating air, our diagnostic process, Platform technology, and
3D printing. Our issued U.S. patents 7819661, 10806376, and 10820965 expire in 2030, 2040, and 2040 respectively. We currently do not
own any trademarks.
6
We
intend to continue to pursue further intellectual property protection through U.S. and non-U.S. patent applications, trademark applications,
and non-disclosure and non-compete agreements. We also intend to seek to protect our software, documentation and other written materials
under trade secret and copyright laws. There can be no assurance that patents will be issued as a result of any patent application or
that patents that have been issued to us or may issue in the future will be found to be valid and enforceable and sufficient to protect
our technology or products.
Seasonality
Our
business is generally not seasonal. However, we may experience moderate sales fluctuations, at certain periods of the year, such as January,
due to renewed consumer focus on health improvement and aesthetics.
Competition
The
dental industry is in a period of immense and rapid digital transformation involving products, technologies, distribution channels and
business models. We face competition in the market for our Platform from the clear aligners market and we expect competition from existing
competitors and new companies that may enter the market or introduce new technologies in the future. We compete with several well-established
companies both in the traditional orthodontic industry and the direct-to-consumer clear aligner industry, including Align Technologies,
Smile Direct Club, Dentsply Sirona (Byte), 3M Clarity Aligners, and Straumann Group. Although these companies offer clear aligner solutions,
and thus do not use technologies similar to the Platform, we expect that potential patients will view clear aligner products as alternatives
to the Platform. For this reason, we view any company in the clear aligners market as a potential competitor.
We believe
that the principal competitive factors in the market for orthodontic appliances include:
● price
and financing options;
● access
and convenience;
● aesthetic
appeal of the treatment method;
● comfort
associated with the treatment method;
● duration
and effectiveness of treatment;
● ease
of use; and
● orthodontist
chair time.
We
believe that our Platform will compare favorably with respect to each of these factors.
7
Government
Regulation
Our
products (including the currently cleared version, as well as the next generation Platform for which we have not yet submitted the requisite
510(k) application to FDA) are considered medical devices, and, accordingly, are subject to rigorous regulation by government agencies
in the United States and other countries in which we intend to sell our products. These regulations vary from country to country but
cover, among other things, the following activities with respect to medical devices:
● design,
development and manufacturing;
● testing,
labeling, content and language of instructions for use and storage;
● product
storage and safety;
● marketing,
sales and distribution;
● pre-market
clearance and approval;
● record
keeping procedures;
● advertising
and promotion;
● recalls
and field safety corrective actions;
● post-market
surveillance;
● post-market
approval studies; and
● product
import and export
FDA
Regulation
In
the U.S., numerous laws and regulations govern the processes by which medical devices are developed, manufactured, brought to market
and marketed. These include the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) and its implementing regulations issued
by FDA, among others. Unless an exemption applies, each medical device commercially distributed in the United States requires FDA clearance
of a 510(k) premarket notification (“510(k) clearance”), granting of a de novo request, or approval of an application
for premarket approval (“PMA”). In general, under the FD&C Act, medical devices are classified in one of three classes
on the basis of the controls necessary to reasonably assure their safety and effectiveness. A medical device’s classification determines
the level of FDA review and approval to which the device is subject before it can be marketed to consumers:
● Class
I devices, the lowest-risk FDA device classification, include devices with the lowest risk to the patient and are those for which safety
and effectiveness can be assured by adherence to FDA’s medical device general controls, including labeling, establishment registration,
device product listing, adverse event reporting, and, for some products, adherence to good manufacturing practices through FDA’s
Quality System Regulations.
● Class
II devices, moderate-risk devices, also require compliance with general controls and in some cases, special controls as deemed necessary
by FDA to ensure the safety and effectiveness of the device. These special controls may include performance standards, particular labeling
requirements, or post-market surveillance obligations. While most Class I devices are exempt from the 510(k) premarket notification requirement,
typically a Class II device also requires pre-market review and 510(k) clearance as well as adherence to the Quality System Regulations/good
manufacturing practices for devices.
● Class
III devices, high-risk devices that are often implantable or life-sustaining, also require compliance with the medical device general
controls and Quality System Regulations, and generally must be approved by FDA before entering the market through a PMA application.
Approved PMAs can include post-approval conditions and post-market surveillance requirements, analogous to some of the special controls
that may be imposed on Class II devices.
8
Our
manufacturing quality system is required to be in compliance with the Quality System Regulations enforced by FDA and similar regulations
enforced by other worldwide regulatory authorities. FDA’s Quality System Regulations require manufacturers to follow stringent
design, testing, process control, documentation, and other quality assurance procedures.
Our
first generation Aerodentis System is a Class II medical device, which was cleared by FDA for commercialization in the U.S. pursuant
to the 510(k) notification process for movement and alignment of teeth during orthodontic treatment of malocclusion in April 2020. We
are preparing to apply for 510(k) clearance for the updated version of the currently cleared device. Such updated Platform contains new
and/or different components than the original device, which is why a new 510(k) clearance is required prior to marketing the Platform
in the U.S. We have not yet filed a 510(k) submission for the Platform, and it has, thus, not been found by the FDA to be substantially
equivalent to the first generation Aerodentis System. The manufacture, marketing and distribution of the Aerodentis System, as well as
our next-generation Platform once cleared by FDA, if ever, is subject to continuing regulation and enforcement by FDA and other government
authorities, which includes routine FDA inspections of our facilities to determine compliance with facility registration requirements,
product listing requirements, medical device reporting regulations, and Quality System Regulations, among others. If FDA finds that we
have failed to comply with Quality System Regulations or other legal or regulatory requirements, it or other government agencies may
institute a wide variety of enforcement actions against us, ranging from Warning Letters to more severe sanctions, including but not
limited to financial penalties, withdrawal of 510(k) clearances already granted, and criminal prosecution. We have passed our International
Organization for Standardization (“ISO”) and Medical Device Single Audit Program (“MDSAP”) certification process
and have added the U.S. to our ISO/MDSAP certification in 2019
The
510(k) Process
Under
the 510(k) process, the manufacturer must submit to FDA a premarket notification demonstrating that the device is “substantially
equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments
of 1976 were enacted, and for which a PMA is not required, a device that has been reclassified from Class III to Class II or Class I,
or another commercially available device that was cleared through the 510(k) process. To be “substantially equivalent,” the
proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the
predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the
predicate device. Clinical data is sometimes required to support substantial equivalence.
After
a 510(k) premarket notification is submitted, FDA determines whether to accept it for substantive review. If it lacks necessary information
for substantive review, FDA will refuse to accept the 510(k) notification. If it is accepted for filing, FDA begins a substantive review.
By statute, FDA is required to complete its review of a 510(k) notification within 90 days of receiving the 510(k) notification. As a
practical matter, clearance often takes longer, and clearance is never assured. FDA may require further information, including clinical
data, to make a determination regarding substantial equivalence, which may significantly prolong the review process. If FDA agrees that
the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially
market the device.
Post-Market
Regulation
After
a device is cleared or approved for marketing, numerous and extensive regulatory requirements may continue to apply. These include but
are not limited to:
● annual
and updated establishment registration and device listing with FDA;
● Quality
System Regulation requirements, which require manufacturers to follow stringent quality assurance procedures during all aspects of the
design and manufacturing process;
● restrictions
on sale, distribution, or use of a device;
9
● labeling,
advertising, promotion, and marketing regulations, which require that promotion is truthful,
not misleading, and provide adequate directions for use and that all claims are substantiated,
and also prohibit the promotion of products for unapproved or “off-label” uses
(i.e., indications that are inconsistent with or beyond the scope of the applicable FDA approval
or clearance) and impose other restrictions on labeling;
● clearance
or approval of product modifications to legally marketed devices that could significantly
affect safety or effectiveness or that would constitute a major change in intended use;
● medical
device reporting regulations, which require that a manufacturer report to FDA if a device
it markets may have caused or contributed to a death or serious injury, or has malfunctioned
and the device or a similar device that it markets would be likely to cause or contribute
to a death or serious injury if the malfunction were to recur;
● correction,
removal, and recall reporting regulations, and FDA’s recall authority;
● complying
with the federal law and regulations requiring Unique Device Identifiers on devices; and
● post-market
surveillance activities and regulations, which apply when deemed by FDA to be necessary to
protect the public health or to provide additional safety and effectiveness data for the
device.
FDA
has broad regulatory compliance and enforcement powers. If FDA determines that we failed to comply with applicable regulatory requirements,
it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
● warning
letters, untitled letters, fines, injunctions, consent decrees, and civil penalties;
● recalls,
withdrawals, or administrative detention, or seizure of our products;
● operating
restrictions or partial suspension or total shutdown of production;
● refusing
or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified
products;
● withdrawing
510(k) clearances or PMA approvals that have already been granted;
● refusal
to grant export or import approvals for our products; or
● criminal
prosecution.
International
Regulation
Many
countries throughout the world have established regulatory frameworks for marketing and commercialization of medical devices. As a designer,
manufacturer, and marketer of medical devices, we are obligated to comply with the respective frameworks of these countries to obtain
and maintain access to these global markets. The frameworks often define requirements for marketing authorizations which vary by country.
Failure to obtain appropriate marketing authorization and to meet all local requirements, including specific quality and safety standards
in any country in which we currently market our products, could cause commercial disruption and/or subject us to sanctions and fines.
Delays in receipt of, or a failure to receive, such marketing authorizations, or the loss of any previously received authorizations,
could have a material adverse effect on our business, financial condition and results of operations.
There
is currently no premarket government review of medical devices in the European Economic Area (“EEA”). However, all medical
devices placed on the market in the EEA must meet the relevant essential requirements laid down in Annex I of Directive 93/42/EEC concerning
medical devices, or the Medical Devices Directive. The most fundamental essential requirement is that a medical device must be designed
and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of
users and others. In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and
packaged in a suitable manner. The European Commission has adopted various standards applicable to medical devices. These include standards
governing common requirements, such as sterilization and safety of medical electrical equipment, and product standards for certain types
of medical devices. There are also harmonized standards relating to design and manufacture. While not mandatory, compliance with these
standards is viewed as the easiest way to satisfy the essential requirements as a practical matter. Compliance with a standard developed
to implement an essential requirement also creates a rebuttable presumption that the device satisfies that essential requirement.
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On
April 5, 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the E.U.
Medical Device Directive and became effective on May 26, 2021. The Medical Devices Regulation, among other things, is intended to establish
a uniform, transparent, predictable, and sustainable regulatory framework across the EEA for medical devices and ensure a high level
of safety and health while supporting innovation. The new regulations, among other things:
● strengthen
the rules on placing devices on the market and reinforce surveillance once they are available;
● establish
explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance, and safety of devices placed
on the market;
● improve
the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;
● set
up a central database to provide patients, healthcare professionals, and the public with comprehensive information on products available
in the E.U.; and
● strengthen
rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before
they are placed on the market.
We
received our European CE mark and ISO/MDSAP certification in 2019. In light of our ISO/MDSAP certification, we believe that we are in
substantial compliance with applicable E.U. regulations and do not anticipate having to make any material expenditures as a result of
E.U. or other currently applicable regulatory requirements. Under Medical Devices Regulation, manufacturing facilities are subject to
periodic inspections by regulatory authorities and must comply with device safety and effectiveness requirements as set forth therein.
To that end, we have implemented controls and procedures intended to ensure that our Access Dental Lab Quality System meets FDA’s
and ISO requirements. We passed our audit to renew our ISO/MDSAP certification in April 2023.
Quality
System Regulations
Our
manufacturing quality system is required to be in compliance with the Quality System Regulations enforced by FDA and similar regulations
enforced by other worldwide regulatory authorities. FDA’s Quality System Regulations require manufacturers to follow stringent
design, testing, process control, documentation, and other quality assurance procedures. If FDA finds that we have failed to comply with
Quality System Regulations or other legal or regulatory requirements, it or other government agencies may institute a wide variety of
enforcement actions against us, ranging from Warning Letters to more severe sanctions, including but not limited to financial penalties,
withdrawal of 510(k) clearances already granted, and criminal prosecution. In addition, under Canadian regulation, manufacturing facilities
are subject to periodic inspections by regulatory authorities and must comply with device safety and effectiveness requirements as required
by the Medical Devices Regulation.
State
Professional Regulation
Our
ability to conduct business in each state is dependent in part upon that particular state’s treatment of remote healthcare delivery
under such state’s laws, rules and policies governing the practice of dentistry, which are subject to changing political, regulatory
and other influences. Orthodontists and dentists who provide professional services to a patient via teledentistry must, in most instances,
hold a valid license to practice or to provide treatment in the state in which the patient is located. In addition, certain states require
an orthodontist or dentist providing telehealth services to be physically located in the same state as the patient. Failure to comply
with these laws and regulations can give rise to civil or criminal penalties.
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Other
U.S. Federal and State Laws
We
are also subject to various laws inside and outside the U.S. concerning our relationships with healthcare professionals and government
officials, price reporting and regulation, the promotion, sales and marketing of our products and services, the importation and exportation
of our products, reimbursement for our products and services, the operation of our facilities, and the distribution of our products.
Initiatives sponsored by government agencies, legislative bodies, and the private sector regarding these matters, including efforts to
limit the growth of healthcare expenses generally, are ongoing in markets where we do business. It is not possible to predict at this
time the long-term impact of such cost containment and other measures on our future business.
We
intend to enter into contracts with orthodontists, dentists, or professional corporations to deliver our products and services to their
patients. Such contractual relationships will be subject to various state laws that prohibit the practice of dentistry by lay entities
or persons and are intended to prevent unlicensed persons from interfering with or influencing the orthodontist’s or dentist’s
professional judgment. In addition, laws in various states also generally prohibit the sharing of professional services income with nonprofessional
or business interests. Activities other than those directly related to the delivery of healthcare may be considered an element of the
practice of dentistry in many states. Under the corporate practice of dentistry restrictions of certain states, non-clinical decisions
and activities may implicate the restrictions on the corporate practice of dentistry. We will continually monitor state requirements
as to what constitutes the practice of dentistry and take steps to ensure that the orthodontists and dentists who utilize our services
and teledentistry platform handle all clinical aspects of their patients’ care to ensure we do not violate those laws and regulations.
As
a participant in the health care industry we are subject to extensive and frequently changing regulation under many other laws administered
by governmental entities at the federal, state, and local levels, some of which are, and others of which may be, applicable to our business.
Laws regulating medical device manufacturers and health care providers cover a broad array of subjects.
Several
states have fraud and abuse and consumer protection laws that apply to healthcare items or services reimbursed by any third-party payor,
including commercial insurers, not just those reimbursed by a federally funded healthcare program, or apply regardless of payor. The
scope of these laws and the interpretations of them vary from state to state and are enforced by state courts and regulatory authorities,
each with broad discretion. A determination of liability under such laws could result in fines and penalties and restrictions on our
ability to operate in these jurisdictions.
Health
Information Privacy and Security Laws
There
are numerous U.S. federal and state laws and regulations related to the privacy and security of PII, including health information. Among
others, the federal Health Insurance Portability and Accountability Act of 1996, as amended by HITECH, and their implementing regulations,
which we collectively refer to as HIPAA, establish privacy and security standards that limit the use and disclosure of PHI and require
covered entities and business associates to implement administrative, physical, and technical safeguards to ensure the confidentiality,
integrity, and availability of individually identifiable health information in electronic form, among other requirements.
Violations
of HIPAA may result in civil and criminal penalties. We must also comply with HIPAA’s breach notification rule which requires notification
to affected individuals and HHS, and in certain cases to media outlets, in the case of a breach of unsecured PHI. The regulations also
require business associates of covered entities to notify the covered entity of breaches by the business associate.
State
attorneys general also have the right to prosecute HIPAA violations committed against residents of their states, and HIPAA standards
have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal
information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates
for compliance.
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Many
states also have laws that protect the privacy and security of sensitive and personal information, including health information. These
laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, the laws of the State of California,
are more restrictive than HIPAA. Where state laws are more protective than HIPAA, we must comply with the state laws we are subject to,
in addition to HIPAA. California passed the California Consumer Privacy Act or CCPA on June 28, 2018, which went into effect January
1, 2020. On November 3, 2020, the California Privacy Rights Act of 2020 (“CPRA”), which amends the CCPA and adds new privacy
protections that became effective on January 1, 2023, was enacted through a ballot initiative. While information we maintain that is
covered by HIPAA may be exempt from the CCPA, other records and information we maintain on our patients may be subject to the CCPA. In
certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not
only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of
action to individuals who believe their personal information has been misused. In addition, state and federal privacy laws subject to
frequent change.
In
addition to HIPAA and state health information privacy laws, we may be subject to other state and federal privacy laws, including laws
that prohibit unfair privacy and security practices and deceptive statements about privacy and security, laws that place specific requirements
on certain types of activities, such as data security and texting, and laws requiring holders of personal information to maintain safeguards
and to take certain actions in response to a data breach.
Foreign
data protection, privacy, and other laws and regulations are often more restrictive than those in the U.S. The E.U., for example, traditionally
has imposed stricter obligations under its laws and regulations relating to privacy, data protection and consumer protection than the
U.S. In May 2018, the General Data Protection Regulation (the “GDPR”), which governs data practices and privacy in the E.U.,
became effective and replaced the data protection laws of the individual member states. GDPR requires companies to meet stringent requirements
regarding the handling of personal data of individuals in the E.U. These more stringent requirements include expanded disclosures to
inform members about how we may use their personal data, increased controls on profiling members, and increased rights for members to
access, control and delete their personal data. In addition, there are mandatory data breach notification requirements. The law also
includes significant penalties for non-compliance, which may result in monetary penalties of up to 20 million Euros or 4% of a company’s
worldwide turnover, whichever is higher. GDPR and other similar regulations require companies to give specific types of notice and informed
consent is required for the placement of a cookie or similar technologies on a user’s device for online tracking for behavioral
advertising and other purposes and for direct electronic marketing, and the GDPR also imposes additional conditions in order to satisfy
such consent, such as a prohibition on pre-checked consents. It remains unclear how the U.K. data protection laws or regulations will
develop in the medium to longer term and how data transfer to the U.K. from the E.U. will be regulated. Outside of the E.U., there are
many other countries with data protection laws, and new countries are adopting data protection legislation with increasing frequency.
Many of these laws may require consent from individuals for the use of data for various purposes, including marketing, which may reduce
our ability to market our products.
There
is no harmonized approach to these laws and regulations globally. Consequently, we increase our risk of non-compliance with applicable
foreign data protection laws and regulations when we expand internationally. We may need to change and limit the way we use personal
information in operating our business and may have difficulty maintaining a single operating model that is compliant. Compliance with
such laws and regulations will result in additional costs and may necessitate changes to our business practices and divergent operating
models, limit the effectiveness of our marketing activities, adversely affect our business, results of operations, and financial condition,
and subject us to additional liabilities.
Environmental
Matters
We
have no material expenditures for compliance with Federal, State or local provisions regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment.
Employees
As
of August 14, 2023, we had 3 full-time employees and 1 part-time employee.
Company
Information
Our
principal executive offices are located at Shatner Street 3, Jerusalem, Israel, and our telephone number is +972 (0)74-700-6700. Our
web page address is www.aerodentis.com. References to our website address do not constitute incorporation by reference of the information
contained on the website, and the information contained on the website is not part of this document or any other document that we file
with or furnish to the SEC.
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