THIS SUBSCRIPTION AGREEMENT IS EXECUTED IN RELIANCE UPON THE EXEMPTION PROVIDED
BY SECTION 4(2) AND REGULATION D, RULE 506 FOR TRANSACTIONS NOT INVOLVING A
PUBLIC OFFERING UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THIS OFFERING IS BEING MADE TO ACCREDITED INVESTORS PURSUANT TO
REGULATION D PROMULGATED UNDER THE SECURITIES ACT. NONE OF THE SECURITIES TO
WHICH THIS SUBSCRIPTION RELATES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION D OR UNDER THE SECURITIES ACT, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING
THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE SECURITIES
ACT.

 

MILLENNIUM HEALTHCARE INC.

 

SUBSCRIPTION AGREEMENT

 

SUBSCRIPTION AGREEMENT (“Subscription Agreement”) made as of this ___ day of
________, 2014 between Millennium Healthcare Inc., a Delaware corporation (the
“Company”), and the undersigned (the “Subscriber”).

 

WHEREAS, the Company is conducting a private offering (the “Offering”) of up to
$20,000,000 (“Maximum Offering Amount”) of the Company’s units (“Unit”), each
Unit consisting of one thousand (1,000) shares of common stock, par value
$0.0001 per share (“Common Stock” and such shares of Common Stock issued, the
“Common Shares”) and one (1) share of Series G Preferred Stock, par value
$0.0001 per share (“Series G Preferred Stock” and such shares of Series G
Preferred Stock issued, the “Preferred Shares”), having the rights, preferences
and limitations as set forth in the Certificate of Designation, in the form of
Exhibit A hereto (“Certificate of Designation”), at a purchase price of
$1,000.00 per unit. The Offering is being made exclusively to accredited
investors pursuant to an exemption from registration provided under Section 4(2)
of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506
promulgated thereunder; and

 

WHEREAS, the Subscriber desires to purchase that number of Units set forth on
such signature page hereof on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:

 

I. SUBSCRIPTION FOR UNITS; COVENANTS OF THE COMPANY

 

1.1 Subscription for Units. Subject to the terms and conditions hereinafter set
forth, the Subscriber hereby irrevocably subscribes for and agrees to purchase
from the Company, and the Company agrees to sell to the Subscriber, such number
of Units as is set forth on the signature page hereof. The purchase price is
payable by wire transfer to the Company in accordance with the wire instructions
set forth on Exhibit C attached hereto.

 

1

 

 

1.2 Offering Period. The Units will be offered for sale until the earlier of (i)
the date upon which subscriptions for the Maximum Offering offered hereunder
have been accepted, (ii) March 31, 2014 (subject to the right of the Company to
extend the Offering until June 30, 2014 without further notice to investors), or
(iii) the date upon which the Company elects to terminate the Offering (the
“Termination Date”). The Offering is being conducted on a “best-efforts” basis.

 

1.3 Closing. The Company may hold an initial closing (“Initial Closing”) at any
time after the receipt of accepted subscriptions from qualified investors prior
to the Termination Date. After the Initial Closing, subsequent closings with
respect to additional Units may take place at any time prior to the Termination
Date as determined by the Company, with respect to subscriptions accepted prior
to the Termination Date (each such closing, together with the Initial Closing,
being referred to as a “Closing”). The last Closing of the Offering, occurring
on or prior to the Termination Date, shall be referred to as the “Final
Closing”. Any subscription documents or funds received after the Final Closing
will be returned, without interest or deduction. In the event that the any
Closing does not occur prior to the Termination Date, all amounts paid by the
Subscriber shall be returned to the Subscriber, without interest or deduction.

 

II. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER

 

The Subscriber represents and warrants to the Company, with the intent that the
Company will rely thereon, that:

 

2.1 Accredited Investor. The Subscriber is an “accredited investor” as such term
is defined in Rule 501 of Regulation D promulgated under the Securities Act, it
is able to bear the economic risk of any investment in the Securities and the
information furnished in the accompanying investor questionnaire, which is
attached hereto as Exhibit B, is accurate and complete in all material respects.

 

2.2 Reliance on Exemptions. The Subscriber acknowledges that the Offering has
not been reviewed by the Securities and Exchange Commission (the “Commission”)
or any state agency because it is intended to be an offering exempt from the
registration requirements of the Securities Act and state securities laws. The
Subscriber understands that the Company is relying in part upon the truth and
accuracy of, and the Subscriber’s compliance with the representations,
warranties, agreements, acknowledgments and understandings of the Subscriber set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Subscriber to acquire the Units.

 

2.3 Investment Purpose. The Subscriber is purchasing the Units as principal for
its own account. The Subscriber is purchasing the Units for investment purposes
only and not with an intent or view towards further sale or distribution (as
such term is used in Section 2(11) of the Securities Act) thereof, and has not
pre-arranged any sale with any other purchaser and has no plans to enter into
any such agreement or arrangement.

 

2.4 Risk of Investment. The Subscriber recognizes that the purchase of the Units
involves a high degree of risk in that: (a) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (b)
transferability of the Common Shares and the Preferred Shares are limited; and
(c) the Company may require substantial additional funds to operate its business
and subsequent equity financings will dilute the ownership and voting interests
of Subscriber. Without limiting the generality of the representations set forth
in herein, the Subscriber represents that the Subscriber has carefully reviewed
the “Risk Factors” attached hereto as Exhibit D (the “Risk Factors”). The
Subscriber has received, read carefully and is familiar with this Agreement and
the Risk Factors.

 

2

 

 

2.5 No Registration. The Common Shares and the Preferred Shares have not been
registered under the Securities Act or any state securities laws and may not be
transferred, sold, assigned, hypothecated or otherwise disposed of unless
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration is available (including, without
limitation, under Rule 144 of the Securities Act, as such rule may be amended,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect (“Rule 144”)). The Subscriber represents and
warrants and hereby agrees that all offers and sales of the Common Shares and
the Preferred Shares shall be made only pursuant to such registration or to such
exemption from registration.

 

2.6 Prior Investment Experience. The Subscriber is sufficiently experienced in
financial and business matters to be capable of evaluating the merits and risks
of its investments, and to make an informed decision relating thereto, and to
protect its own interests in connection with the purchase of the Units.

 

2.7 Information. The Subscriber acknowledges careful review of this Subscription
Agreement, including the Certificate of Designation and all other exhibits
thereto (collectively, the “Offering Documents”) as well as the Company’s
filings with the Commission, as required pursuant to the Securities and Exchange
Act of 1934, as amended (the “Exchange Act”) including, but not limited to the
business section and the financial statements contained in the Company’s
registration statement on Form 10 filed on December 6, 2013, which are available
on the Internet at www.sec.gov, all of which the undersigned acknowledges have
been provided to the undersigned. The undersigned has been given the opportunity
to ask questions of, and receive answers from, the Company concerning the terms
and conditions of this Offering and the Offering Documents and to obtain such
additional information, to the extent the Company possesses such information or
can acquire it without unreasonable effort or expense, necessary to verify the
accuracy of same as the undersigned reasonably desires in order to evaluate the
investment. The undersigned understands the Offering Documents, and the
undersigned has had the opportunity to discuss any questions regarding any of
the Offering Documents with its counsel or other advisor. Notwithstanding the
foregoing, the only information upon which the undersigned has relied is that
set forth in the Offering Documents. The undersigned has received no
representations or warranties from the Company, its employees, agents or
attorneys in making this investment decision other than as set forth in the
Offering Documents. The undersigned does not desire to receive any further
information.

 

2.8 Investment Decision. In making the decision to invest in the Units the
Subscriber has relied solely upon the information provided by the Company in the
Offering Materials. To the extent necessary, the Subscriber has retained, at its
own expense, and relied upon appropriate professional advice regarding the
investment, tax and legal merits and consequences of this Subscription Agreement
and the purchase of the Units hereunder. The Subscriber disclaims reliance on
any statements made or information provided by any person or entity in the
course of Subscriber’s consideration of an investment in the Units other than
the Offering Documents.

 

2.9 No Representations. The Subscriber hereby represents that, except as
expressly set forth in the Offering Documents, no representations or warranties
have been made to the Subscriber by the Company or any agent, employee or
affiliate of the Company, and in entering into this transaction the Subscriber
is not relying on any information other than that contained in the Offering
Documents and the results of independent investigation by the Subscriber.

 

3

 

 

2.10 Tax Consequences. The Subscriber acknowledges that the Offering may involve
tax consequences and that the contents of the Offering Documents do not contain
tax advice or information. The Subscriber acknowledges that it must retain its
own professional advisors to evaluate the tax and other consequences of an
investment in the Units.

 

2.11 No Recommendation or Endorsement. The Subscriber understands that no
federal, state or other regulatory authority has passed on or made any
recommendation or endorsement of the Units. Furthermore, the foregoing
authorities have not confirmed the accuracy or determined the adequacy of this
Subscription Agreement. Any representation to the contrary is a criminal
offense.

 

2.12 No General Solicitation. The Subscriber represents that the Subscriber was
not induced to invest by any form of general solicitation or general advertising
including, but not limited to, the following: (a) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over the news or radio; and (b) any seminar or meeting whose
attendees were invited by any general solicitation or advertising.

 

2.13 The Subscriber. The Subscriber (i) if a natural person, represents that the
Subscriber has reached the age of 21 and has full power and authority to execute
and deliver this Subscription Agreement and all other related agreements or
certificates and to carry out the provisions hereof and thereof; (ii) if a
corporation, partnership, or limited liability company or partnership, or
association, joint stock company, trust, unincorporated organization or other
entity, represents that such entity was not formed for the specific purpose of
acquiring the Units, such entity is duly organized, validly existing and in good
standing under the laws of the state of its organization, the consummation of
the transactions contemplated hereby is authorized by, and will not result in a
violation of state law or its charter or other organizational documents, such
entity has full power and authority to execute and deliver this Subscription and
all other related agreements or certificates and to carry out the provisions
hereof and thereof and to purchase and hold the Units, the execution and
delivery of this Subscription has been duly authorized by all necessary action,
this Subscription Agreement has been duly executed and delivered on behalf of
such entity and is a legal, valid and binding obligation of such entity; or
(iii) if executing this Subscription Agreement in a representative or fiduciary
capacity, represents that it has full power and authority to execute and deliver
this Subscription in such capacity and on behalf of the subscribing individual,
ward, partnership, trust, estate, corporation, or limited liability company or
partnership, or other entity for whom the Subscriber is executing this
Subscription Agreement, and such individual, partnership, ward, trust, estate,
corporation, or limited liability company or partnership, or other entity has
full right and power to perform pursuant to this Subscription and make an
investment in the Company, and represents that this Subscription constitutes a
legal, valid and binding obligation of such entity. The execution and delivery
of this Subscription Agreement will not violate or be in conflict with any
order, judgment, injunction, agreement or controlling document to which the
Subscriber is a party or by which it is bound;

 

2.14 Legends. The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Common Shares and the Preferred
Shares, that such securities have not been registered under the Securities Act
or any state securities or “blue sky” laws and setting forth or referring to the
restrictions on transferability and sale thereof contained in this Subscription
Agreement. The Subscriber is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the transferability of
such Common Shares and Preferred Shares. The legend to be placed on each
certificate shall be in form substantially similar to the following:

 

4

 

 

THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO THE EXEMPTION FROM THE
REGISTRATION PROVISIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED PROVIDED BY
RULE 506 OF REGULATION D UNDER SUCH ACT AND/OR SECTION 4(2) OF SUCH ACT. THESE
SECURITIES CANNOT BE TRANSFERRED, OFFERED, OR SOLD UNLESS THE SECURITIES ARE
REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE.

  

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Common Shares and the
Preferred Shares upon which it is stamped, if (a) such Preferred Shares are
being sold pursuant to a registration statement under the Securities Act, (b)
such holder delivers to the Company an opinion of counsel, in a reasonably
acceptable form, to the Company that a disposition of the Common Shares and the
Preferred Shares is being made pursuant to an exemption from such registration,
or (c) such holder provides the Company with reasonable assurance that a
disposition of the Preferred Shares may be made pursuant to the Rule 144 under
the Securities Act without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold.

 

2.15 Address. The Subscriber hereby represents that the address of the
Subscriber furnished by the Subscriber at the end of this Subscription Agreement
is the undersigned’s principal residence if the Subscriber is an individual or
its principal business address if it is a corporation or other entity.

 

2.16 Survival. The representations and warranties of the Subscriber contained
herein will be true at the date of execution of this Subscription Agreement by
the Subscriber and as of the Closing Date in all material respects as though
such representations and warranties were made as of such times and shall survive
the Closing Date and the delivery of the Units. The Subscriber agrees that it
will notify and supply corrective information to the Company immediately upon
the occurrence of any change therein occurring prior to the Company’s issuance
of the Units.

 

III. REPRESENTATIONS BY THE COMPANY

 

The Company represents and warrants to the Subscriber, except as set forth in
the disclosure schedules attached hereto:

 

3.1 Organization. The Company is duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization. The Company has
full power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted, and is registered or qualified to
do business and in good standing in each jurisdiction in which the nature of the
business conducted by it or the location of the properties owned or leased by it
requires such qualification and where the failure to be so qualified would have
a material adverse effect upon the Company’s financial condition (a “Material
Adverse Effect”), and no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification.

 

3.2 Due Authorization and Valid Issuance. The Company has all requisite power
and authority to execute, deliver and perform its obligations under the Offering
Documents, and when executed and delivered by the Company will constitute legal,
valid and binding agreements of the Company enforceable against the Company in
accordance with their terms, except as rights to indemnity and contribution may
be limited by state or federal securities laws or the public policy underlying
such laws, and except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally, and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

5

 

 

3.3 Noncontravention. The execution and delivery of the Offering Documents, the
issuance and sale of the Units under the Offering Documents, the fulfillment of
the terms of the Offering Documents, and the consummation of the transactions
contemplated thereby will not (i) conflict with or constitute a violation of, or
default (with the passage of time or otherwise) under (1) any material bond,
debenture, note or other evidence of indebtedness, lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company is a party or by which it or any of its
properties are bound, (2) the charter, bylaws or other organizational documents
of the Company or any subsidiary or (3) any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company or its properties, except for any such
conflicts, violations or defaults that are not reasonably likely to have a
Material Adverse Effect, or (ii) result in the creation or imposition of any
lien, encumbrance, claim, security interest or restriction whatsoever upon any
of the material properties or assets of the Company or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in any
material bond, debenture, note or any other evidence of indebtedness, indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which it is bound or to which any of the material
property or assets of the Company is subject. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body in the
United States or any other person is required for the execution and delivery of
the Offering Documents and the valid issuance and sale of the Units to be sold
pursuant to the Offering Documents, other than such as have been made or
obtained, and except for any post-closing securities filings or notifications
required to be made under federal or state securities laws.

 

3.4 No Violation. The Company is not (a) in violation of its charter, bylaws or
other organizational document; (b) in violation of any law,

 

IV. Reserved.

 

 

V. USE OF PROCEEDS

 

The proceeds of the Offering will be employed by the Company substantially for
general working capital.

 

VI. INDEMNIFICATION

 

6.1 The Subscriber agrees to indemnify and hold harmless the Company, placement
agent, if any, against and in respect of any and all loss, liability, claim,
damage, deficiency, and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses whatsoever (including, but not limited to,
attorneys' fees reasonably incurred in investigating, preparing, or defending
against any litigation commenced or threatened or any claim whatsoever through
all appeals) arising out of or based upon any false representation or warranty
or breach or failure by the Subscriber to comply with any covenant,
representation or other provision made by it herein or in any other document
furnished by it in connection with this Subscription Agreement, provided,
however, that such indemnity, shall in no event exceed the net proceeds received
by the Company from the Subscriber as a result of the sale of Units to the
Subscriber.

 

6

 

 

6.2 The Company agrees to indemnify and hold harmless the Subscriber against and
in respect of any and all loss, liability, claim, damage, deficiency, and all
actions, suits, proceedings, demands, assessments, judgments, costs and expenses
whatsoever (including, but not limited to, attorneys' fees reasonably incurred
in investigating, preparing, or defending against any litigation commenced or
threatened or any claim whatsoever through all appeals) arising out of or based
upon any false representation or warranty or breach or failure by the Company to
comply with any covenant, representation or other provision made by it herein or
in any other document furnished by it in connection with this Subscription
Agreement.

 

VII. MISCELLANEOUS

 

7.1 Notice. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Subscription Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally, (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party), or (c) one (1) business day after deposit
with an overnight courier service, in each case properly addressed to the party
to receive the same. The addresses and facsimile numbers for such communications
shall be:

 

To the Company:

 

Millennium Healthcare Inc.

400 Garden City Plaza, Suite 440

Garden City, New York 11530

Attention: Dominick Sartorio

Telephone: 516-628-5500

 

 

With a copy to (which shall not constitute notice):

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Attention: Andrea Cataneo

Telephone: 212-930-9700

Facsimile: 212-930-9725

 

If to the Subscriber, to its address and facsimile number set forth at the end
of this Subscription Agreement, or to such other address and/or facsimile number
and/or to the attention of such other person as specified by written notice
given to the Company five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (a) given by the recipient of such notice,
consent, waiver or other communication, (b) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission, or (c)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (a), (b) or (c) above, respectively.

 

7

 

 

7.2 Entire Agreement; Amendment; Waiver. This Subscription Agreement supersedes
all other prior oral or written agreements between the Subscriber, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Subscription Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Subscriber makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Subscription Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the holders of at least a majority of the
Units then outstanding (or if prior to the closing, the Subscribers purchasing
at least a majority of the Units to be purchased at the closing). No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Units then outstanding.

 

7.3 Severability. If any provision of this Subscription Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Subscription Agreement in that jurisdiction or the validity or
enforceability of any provision of this Subscription Agreement in any other
jurisdiction.

 

7.4 Governing Law; Jurisdiction; Waiver of Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Subscription
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in New York County, New York for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Subscription Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereby irrevocably waives any right it may have, and agrees not to request, a
jury trial for the adjudication of any dispute hereunder or in connection with
or arising out of this Subscription Agreement or any transaction contemplated
hereby.

 

7.5 Headings. The headings of this Subscription Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Subscription Agreement.

 

7.6 Successors and Assigns. This Subscription Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Subscription Agreement or any rights
or obligations hereunder without the prior written consent of the holders of at
least a majority the Units then outstanding, except by merger or consolidation.
The Subscriber shall not assign its rights hereunder without the consent of the
Company, which consent shall not be unreasonably withheld.

 

8

 

 

7.7 No Third Party Beneficiaries. This Subscription Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

7.8 Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

7.9 Legal Effect. The Subscriber acknowledges that: (a) it has read this
Agreement and the exhibits hereto; and (b) it understands the terms and
consequences of this Agreement and is fully aware of its legal and binding
effect.

 

7.10 No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

7.11 Independent Legal Advice. The parties hereto acknowledge that they have
each received independent legal advice with respect to the terms of this
Agreement and the transactions contemplated herein or have knowingly and
willingly elected not to do so

 

7.12 Counterparts. This Agreement may be executed in two or more counterparts
each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

 

 

 

[Signature page follows.]

 

9

 

 

NUMBER OF UNITS ______ X $1,000.00 = $_________ (the “Purchase Price”)

 

___________________________   ____________________________ Signature   Signature
(if purchasing jointly)       ___________________________  
____________________________ Name Typed or Printed   Name Typed or Printed      
___________________________   ____________________________ Title (if Subscriber
is an Entity)   Title (if Subscriber is an Entity)      
___________________________   ____________________________ Entity Name (if
applicable)   Entity Name (if applicable       ___________________________  
____________________________ Address   Address       ___________________________
  ____________________________ City, State and Zip Code   City, State and Zip
Code       ___________________________   ____________________________
Telephone-Business   Telephone-Business       ___________________________  
____________________________ Telephone-Residence   Telephone-Residence      
___________________________   ____________________________ Facsimile-Business  
Facsimile-Business       ___________________________  
____________________________ Facsimile-Residence   Facsimile-Residence          
  Tax ID # or Social Security #   Tax ID # or Social Security #

 

Name in which Common Shares and Preferred Shares should be issued:

 

______________________________________________________________________________

 

Dated:______________, 2014

 

This Subscription Agreement is agreed to and accepted as of ________________,
2014.

 

Millennium Healthcare Inc.

 

By:____________________________________

Name: Dominick Sartorio

Title: Chief Executive Officer

 

10

 

 

CERTIFICATE OF SIGNATORY

 

(To be completed if Units are

being subscribed for by an entity)

 

 

I, ____________________________, am the ____________________________ of
__________________________________________ (the “Entity”).

 

I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Units, and certify further that the Subscription Agreement has been duly and
validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand this ________ day of _________________,
2014

 

 

_______________________________________

(Signature)

 

11

 

 

EXHIBIT A

CERTIFICATE OF DESIGNATION

 

12

 

 

EXHIBIT B

ACCREDITED INVESTOR QUESTIONNAIRE

 

The undersigned Subscriber is an “accredited investor” as that term is defined
in Regulation D promulgated under the Securities Act and amended by the
Dodd-Frank Wall Street Reform and Consumer Protection Act by virtue of being
(initial all applicable responses):

 

______A small business investment company licensed by the U.S. Small Business
Administration under the Small Business Investment Company Act of 1958,  
______A business development company as defined in the Investment Company Act of
1940,   ______A national or state-chartered commercial bank, whether acting in
an  individual or fiduciary capacity,   ______An insurance company as defined in
Section 2(13) of the Securities Act,   ______An investment company registered
under the Investment Company Act of 1940,   ______An employee benefit plan
within the meaning of Title I of the Employee Retirement Income Security Act of
1974, where the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, insurance company, or
registered investment advisor, or an employee benefit plan which has total
assets in excess of $5,000,000,   _____A private business development company as
defined in Section 202(a)(22) of the Investment Advisors Act of 1940,   _____An
organization described in Section 501(c)(3) of the Internal Revenue Code, a
corporation or a partnership with total assets in excess of $5,000,000,   _____A
natural person whose individual net worth, or joint net worth with that person's
spouse, at the time of purchase exceeds $1,000,000.  For purposes of this
Exhibit A-1, “net worth” means the excess of total assets at fair market value
over total liabilities. For purposes of calculating net worth under this
section, (i) the primary residence shall not be included as an asset, (ii) to
the extent that the indebtedness that is secured by the primary residence is in
excess of the fair market value of the primary residence, the excess amount
shall be included as a liability, and (iii) if the amount of outstanding
indebtedness that is secured by the primary residence exceeds the amount
outstanding 60 days prior to the execution of this questionnaire, other than as
a result of the acquisition of the primary residence, the amount of such excess
shall be included as a liability.   _____Any trust, with total assets in excess
of $5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person as described in
Section 506(b)(2)(ii) of Regulation D,   _____A natural person who had an
individual income in excess of $200,000 in each of the two most recent calendar
years, and has a reasonable expectation of reaching the same income level in the
current calendar year.  For purposes of this Exhibit A-1, “income” means annual
adjusted gross income, as reported for federal income tax purposes, plus (i) the
amount of any tax-exempt interest income received; (ii) the amount of losses
claimed as a limited partner in a limited partnership; (iii) any deduction
claimed for depletion; (iv) amounts contributed to an IRA or Keogh retirement
plan; (v) alimony paid; and (vi) any amount by which income from long-term
capital gains has been reduced in arriving at adjusted gross income pursuant to
the provisions of Section 1202 of the Internal Revenue Code of 1986, as amended.
  _____A corporation, partnership, trust or other legal entity (as opposed to a
natural person) and all of such entity's equity owners fall into one or more of
the categories enumerated above. (Note: additional documentation may be
requested).

 

____________________________________ _________________________________ Name of
Subscriber (Print)  Name of Joint Subscriber (if any) (Print)
____________________________________ _________________________________ Signature
of Subscriber Signature of Joint Subscriber (if any)
____________________________________ _________________________________ Capacity
of Signatory (for entities) Date

 

13

 

EXHIBIT C

WIRE INSTRUCTIONS

 

14

 

 

EXHIBIT D

RISK FACTORS

 

An investment in the Company’s common stock involves an extremely high degree of
risk.  You should carefully consider the risks described below and the other
information contained in this prospectus before deciding to invest in the
Company’s common stock.  You should only purchase our securities if you can
afford to suffer the loss of your entire investment.

 

RISKS RELATED TO OUR BUSINESS

 

The Company has incurred loss since inception and the Company’s auditor has
expressed substantial doubt about our ability to continue as a going concern.

 

The Company commenced generating revenues from operations in 2011, and raised
funds during 2012 from the sale of common stock in the amount of $216,000; the
additional funding through preferred stock in the amount of $477,500; and
through the issuance of various notes in the amount of $1,990,000. However, the
Company incurring losses of $5,740,481 in the nine months ended September 30,
2013 and $17,952,356 for the year ended December 31, 2012. The Company had
losses of approximately $844,023 for the nine months ended September 30, 2013
and $888,899 for the year ended December 31, 2012 from operations that did not
include the fair value of common stock issued for services rendered, under
employment/consulting agreements and depreciation and amortization expenses. The
Company had an accumulated deficit in the amount of $41,056,056 and cash of
$46,079 as of September 30, 2013.

 

In their report dated June 6, 2013, the Company’s then independent registered
auditor, KBL, LLP, stated that the Company’s financial statements for the fiscal
year ended December 31, 2012, were prepared assuming that it would continue as a
going concern. However, they also expressed substantial doubt about the
Company’s ability to continue as a going concern. The Company’s ability to
continue as a going concern is an issue raised as a result of significant losses
due to certain debt instruments. The Company’s continue to experience operating
losses. We can give no assurance as to our ability to raise sufficient capital
or our ability to continue as a going concern.

   

The Company’s success depends on the successful raise of sufficient working
capital.

 

The success of the Company’s business strategy depends on the Company’s ability
to successfully secure raising additional working capital. The Company’s ability
to continue as a going concern is an issue raised as a result of significant
losses due to certain debt instruments. The Company also continues to experience
operating losses. Although not specifically determined at this time, the company
intends to continue to investigate and pursue options and methods of raising
capital to meet its financing needs and financial goals, however we can give no
assurance as to our ability to raise such sufficient capital or our ability to
continue as a going concern.

 

The Company is dependent on the continued participation and level of service of
its third-party service provider(s).

 

The Company relies on third-party service providers to provide certain services
to us and/or our customers. If any of these third-party service providers stop
supporting the Company or if our network of providers does not expand, we will
likely have to expand our internal team to meet the needs of our customers,
which could increase our operating costs and result in lower gross margins. We
can make no assurance that we will be able to establish and maintain the
third-party relationships or establish additional relationships as necessary to
support growth and profitability of our business on economically viable terms.

 

15

 

 

Defects, failures or quality issues associated with the products the Company
distributes could lead to recalls or safety alerts, negative publicity regarding
the Company and litigation, including product liability claims, that could
adversely affect its business and reputation and result in loss of customers.
Loss reserves are difficult to estimate.

 

The design, manufacture and marketing of medical devices of the types the
Company distributes entail inherent risks. There are a number of factors that
could result in an unsafe condition, injury or death of a patient with respect
to products that the Company distributes, including quality issues, component
failures, manufacturing flaws, unanticipated or improper uses of the products,
design defects or inadequate disclosure of product-related risks or
product-related information. Any of these issues could lead to a recall of, or
safety alert relating to, one or more of the products distributed by the
Company. Any recall, whether voluntary or required by the FDA could result in
significant costs and significant negative publicity. Negative publicity
including regarding a quality or safety issue, whether accurate or inaccurate,
could reduce market acceptance of the products, harm the Company’s reputation,
decrease demand for the products, result in the loss of customers, lead to
product withdrawals and/or harm the Company’s ability to successfully launch and
market in the future. The foregoing problems could also result in enforcement
actions by state and federal governments or other enforcement bodies, or product
liability claims or lawsuits including those being brought by individuals or by
groups seeking to represent a class or establish multi-district litigation
proceedings, and a material adverse effect on our business, results of
operations, financial condition and/or liquidity.

 

Healthcare reform could impact the demand for the Company’s services.

 

The Patient Protection and Affordable Care Act and The Health Care and Education
Reconciliation Act of 2010, or the “Affordable Care Act”, were signed into law
in March 2010 and will result in significant reforms to the U.S. healthcare
system and the structure of the healthcare provider delivery system.  The full
impact of the Affordable Care Act is uncertain, and will depend on future
regulations and guidance to be promulgated by the Centers or Medicare & Medicaid
Services.  Any new reimbursement methodologies and mechanisms adopted by
Medicare, Medicaid or other commercial third party payors as a direct or
indirect result of the affordable care Act could have an impact on the demand
and reimbursement for our services.

 

The Company faces competition from existing providers, as well as new providers
entering its markets.

 

The Company’s medical equipment and device business operates in competitive
areas and markets. Basic barriers to entry-level product distribution in the
healthcare industry can be relatively low and the products the Company
distributes may face challenges in market adoption due to the reliance of
physicians and other medical professionals on existing devices, equipment and
diagnostic tools. In addition, physicians and other medical professionals may
view certain devices distributed by the Company as a screening tool for existing
illnesses, rather than as an early detection or preventative tool. As a result,
certain products may be deemed to compete directly with existing, established
procedures, which could impair market adoption of such products.

 

The Company’s physician practice administration business operates in competitive
areas and markets. The Company’s clients compete with other PAD practice
management providers, practices and surgical clinics that provide PAD and
atherectomy procedures and vascular surgeons. Basic barriers to entry-level
practice management in the cardiovascular and PAD care industry can be
relatively low.

 

New distributors and new healthcare providers that enter the Company’s markets
impact the Company’s market share, business volume and growth rates. Increased
competitive pressures require the Company to commit resources to marketing
efforts, which impacts the Company’s margins and profitability. There can be no
assurance that the Company will be able to compete effectively with existing
providers in its markets or that new competitors will not enter into its
markets. These existing and new competitors may have greater financial and other
resources than the Company does. Increased competition could also make it more
difficult for the Company to expand its business.

 

16

 

 

The development of alternative treatments could diminish demand for the
Company’s services.

 

The healthcare industry is dynamic, and new, technologically intensive devices
are constantly under development. New devices that are more effective could
decrease patient demand or profitability for the products that the Company
currently distributes and patients could seek treatment elsewhere.

 

If the Company is found not to be in compliance with applicable laws and
regulations, it could be subject to significant fines or penalties, be forced to
curtail certain of our operations or rearrange material agreements to its
detriment.

 

The Company is subject to numerous federal and state laws and regulations,
including, but not limited to, federal and state anti-kickback laws, controlled
substances laws, the federal Stark law and state self-referral laws, false
claims laws, the HIPAA, Medicare and Medicaid regulations and laws regulating
the business of insurance. These laws and regulations are extremely complex and
could be subject to various interpretations. Many aspects of the Company’s
business, to date, have not been the subject of federal or state regulatory
review and the Company may not have been in compliance at all times with all
applicable laws and regulations. If the Company is found by a court or
regulatory authority to have violated any applicable laws or regulations, the
Company could be subject to significant fines or penalties or be forced to
curtail certain of its operations.

 

The Company’s success depends on retaining key members of its management team.

 

The success of the Company’s business strategy depends on the continued
contribution of key members of its management team. The loss of key members of
this team could disrupt its growth plans and its ability to implement its
business strategy.

 

Economic instability could continue to adversely affect the Company.

 

Financial markets and the economies in the United States and internationally may
continue to experience disruption and volatility as they have in recent years
and conditions could worsen. As a result, the economic environment (including
deteriorating economic conditions in certain countries in Europe) may, among
other things:

 

  ● increase the sales cycle for certain of our products;

 

  ● slow the adoption of new technology;

 

  ● adversely affect the Company’s suppliers, which could disrupt the Company’s
ability to distribute the products; and

 

  ● limit the Company access to capital on terms acceptable to the Company.

 

These conditions may continue in the future. Any of these conditions could have
a material adverse effect on the Company’s business, results of operations,
financial condition and/or liquidity.

 

We may be subject to significant liability claims and litigation, including
potential exposure from the use of our product candidates as well as from
physician locations under management, and our insurance may be inadequate to
cover claims that may arise.

 

Our business exposes us to potential liability risks inherent in the
administration and support of healthcare facilities and the processing,
marketing and distribution of medical device products. Such liability claims may
be expensive to defend and result in large judgments against us. We face an
inherent risk of product liability exposure related to current and any future
product candidates and will face an even greater risk with respect to any
commercial sales of such products once distribution begins. No product candidate
has been widely used over an extended period of time, and therefore safety data
is limited. The manufacturing process and handling requirements are extensive,
which increases the risk of quality failures and subsequent product liability
claims.

 

17

 

 

We will need to increase our insurance coverage when we begin commercializing
product candidates, if ever. At that time, we may not be able to obtain or
maintain product liability insurance on acceptable terms with adequate coverage
or at all, or if claims against us substantially exceed our coverage, then our
financial position could be significantly impaired.

 

Whether or not we are ultimately successful in any product liability litigation
that may arise, such litigation could consume substantial amounts of our
financial and managerial resources, decreased demand for our products and injure
our reputation.

 

We seek to maintain errors and omissions, directors and officers, workers'
compensation and other insurance at levels we believe to be appropriate to our
business activities. If, however, we were subject to a claim in excess of this
coverage or to a claim not covered by our insurance and the claim succeeded, we
would be required to pay the claim from our own limited resources, which could
have a material adverse effect on our financial condition, results of operations
and business. Additionally, liability or alleged liability could harm our
business by diverting the attention and resources of our management and damaging
our reputation.

 

There is no guarantee that the market for our products or services will develop,
and it exposes us to risks inherent in the long-term distribution and growth of
our products and services.

 

There currently is no significant global market for our product candidates, nor
is there any guarantee that such markets will develop in the near future, or at
all. Adverse outcomes or limitations of our products or services, including, but
not limited to damage, destruction or a failure in performance or facility or
systems of our service providers, could harm our reputation and business and
expose us to significant liability from customers. While we believe that we will
procure insurance to cover certain of these risks, we may in fact have
insufficient insurance to cover losses beyond the limits on its policies, which
could have a material adverse effect on our financial condition.

 

Health care companies have been the subjects of federal and state
investigations, and we could become subject to investigations in the future.

 

Both federal and state government agencies have heightened civil and criminal
enforcement efforts. There are numerous ongoing investigations of health care
companies, as well as their executives and managers. In addition, amendments to
the Federal False Claims Act, including under Healthcare Reform, have made it
easier for private parties to bring “ qui tam ” (whistleblower) lawsuits against
companies under which the whistleblower may be entitled to receive a percentage
of any money paid to the government. The Federal False Claims Act provides, in
part, that an action can be brought against any person or entity that has
knowingly presented, or caused to be presented, a false or fraudulent request
for payment from the federal government, or who has made a false statement or
used a false record to get a claim approved. The government has taken the
position that claims presented in violation of the federal anti-kickback law,
Stark Law or other healthcare-related laws, including laws enforced by the FDA,
may be considered a violation of the Federal False Claims Act. Penalties include
substantial fines for each false claim, plus three times the amount of damages
that the federal government sustained because of the act of that person or
entity and/or exclusion from the Medicare program. In addition, a majority of
states have adopted similar state whistleblower and false claims provisions.

  

We are not aware of any government investigations involving any of our physician
facilities or management. While we believe that we are in material compliance
with applicable governmental healthcare laws and regulations, any future
investigations of our business, clients or executives could cause us to incur
substantial costs, and result in significant liabilities or penalties, as well
as damage to our reputation.

 

It is uncertain to what extent the government, private health insurers and
third-party payors will approve coverage or provide reimbursement for the
products distributed or the physician practices to which our administration
services relate. Availability for such reimbursement may be further limited by
an increasing uninsured population and reductions in Medicare and Medicaid
funding in the United States.

 

To the extent that health care providers cannot obtain coverage or reimbursement
for cardiovascular procedures and treatment or for medical device products, they
may elect not to provide such therapies and products to their patients and,
thus, may not need our products or services. Further, as cost containment
pressures are increasing in the health care industry, government and private
payors may adopt strategies designed to limit the amount of reimbursement paid
to health care providers.

 

18

 

 

Similarly, the trend toward managed health care and bundled pricing for health
care services in the United States, which may accelerate under the healthcare
reform legislation approved by Congress on March 23, 2010 and thereafter signed
into law (“Healthcare Reform”), could significantly influence the purchase of
healthcare support services and products, resulting in lower prices and reduced
demand for our products and support services.

 

Federal health care programs, such as Medicare, are subject to changes in
coverage and reimbursement rules and procedures, including retroactive rate
adjustments. These contingencies could materially decrease the range of
physician services and products covered by such programs or the reimbursement
rates paid directly or indirectly to physicians could significantly influence
the products sold to, and our administration and support services for, such
physicians and their facilities. To the extent that any health care reform
favors the reimbursement of other product and services over products and
services the company provides, such reform could affect our ability to sell our
products and services, which may have a material adverse effect on our revenues.

 

The limitation on reimbursement available from private and government payors may
reduce the demand for, or the price of, physician services and products, which
could have a material adverse effect on our revenues. Additional legislation or
regulation relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future which could adversely affect the
revenues generated from the sale of our products and services provided to such
healthcare facilities.

 

Furthermore, there has been a trend in recent years towards reductions in
overall funding for Medicare and Medicaid. There has also been an increase in
the number of people who do not have any form of health care coverage in recent
years and who are not eligible for or enrolled in Medicare, Medicaid or other
governmental programs. The extent to which the reforms brought about under
Healthcare Reform may be successful in reducing the number of such uninsured is
unclear, and the reduced funding of governmental programs and increase in
uninsured populations could have a negative impact on the demand for our
administration services to the extent they relate to such products sold and
administrative services provided to physician facilities which are reimbursed by
government and private payors.

 

Additionally, and more specifically reimbursements and reimbursement rates for
Peripheral Arterial Disease (PAD) procedures are currently under review and a
negative change could drastically affect the Company’s ability to successfully
and profitably perform practice management and administration for physicians
which could further result in the discontinuance of that business segment.

  

Unintended consequences of recently adopted healthcare reform legislation in the
U.S. may adversely affect our business.

 

The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the U.S., comprehensive
programs are under consideration that seek to, among other things, increase
access to healthcare for the uninsured and control the escalation of healthcare
expenditures within the economy. On March 23, 2010, healthcare reform
legislation was approved by Congress and has been signed into law. While we do
not believe this legislation will have a direct impact on our business, the
legislation has only recently been enacted and requires the adoption of
implementing regulations, which may have unintended consequences or indirectly
impact our business. For instance, the scope and implications of the recent
amendments pursuant to the Fraud Enforcement and Recovery Act of 2009 (“FERA”),
have yet to be fully determined or adjudicated and as a result it is difficult
to predict how future enforcement initiatives may impact our business. Also, in
some instances our clients may be health insurers that will be subject to
limitations on their administrative expenses and new federal review of
“unreasonable” rate increases that could impact the prices they pay for our
services. If the legislation causes such unintended consequences or indirect
impact, it could have a material adverse effect on our business, financial
condition and results of operations.

 

19

 

 

Defects or disruptions in our services and products along with changes in
reimbursement rates and procedures could diminish demand, delay or defer
collection cycles for accounts receivable and subject us to substantial
liability.

 

Because our products and service are complex, our services may be subject to
errors and our products may have defects that are identified after use that
could result in unanticipated downtime for our customers and harm our reputation
and our business. We have from time to time found defects and errors in our
services and products and new defects and errors may be detected in the future.
In addition, our customers may use products and services in unanticipated ways
that may cause a disruption in service or product use. Since our customers use
our products and services for important aspects of their business, any errors,
defects, disruptions in service or other performance problems with our products
or services could hurt our reputation and may damage our customers’ businesses.
Furthermore, our customers are physician and healthcare profession facilities
who rely on health care programs, such as Medicare, for medical procedures
performed and medical devices used in their practices and are subject to changes
in coverage and reimbursement rules and procedures, including retroactive rate
adjustments. These contingencies could materially decrease the range of
physician services and products covered by such programs or the reimbursement
rates paid. If that occurs, customers could elect not to renew, or delay or
withhold payment to us, we could lose future sales or customers may make
warranty claims against us, all of which could result in an increase in our
provision for doubtful accounts, an increase in collection cycles for accounts
receivable, create substantial doubt on account collectability or the expense
and risk of litigation.

 

RISKS ASSOCIATED WITH INVESTING IN THE COMPANY’S COMMON STOCK

 

The Company’s Stock Has Historically Had a Limited Market and the Trading Prices
May Be Volatile.

 

The market price of the Company’s shares of common stock may be based on factors
that may not be indicative of future market performance.  Consequently, the
market price of the Company’s common stock may vary greatly.  There is a
significant risk that the Company’s stock price may fluctuate dramatically in
the future in response to any of the following factors, some of which are beyond
the Company’s control:

  

  ● variations in the Company’s quarterly operating results;

 

  ● announcements that the Company’s revenue or income/loss levels are below
analysts’ expectations;

 

  ● general economic slowdowns;

 

  ● changes in market valuations of similar companies;

 

  ● announcements by the Company or its competitors of significant contracts; or

 

  ● acquisitions, strategic partnerships, joint ventures or capital commitments.

 

Because the Company’s Shares Are Deemed “Penny Stocks,” You May Have Difficulty
Selling Them In The Secondary Trading Market.

 

The SEC has adopted regulations which generally define a “penny stock” to be any
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions.  Additionally, if the equity security is not registered or
authorized on a national securities exchange that makes certain reports
available, the equity security may also constitute a “penny stock.”  As the
Company’s common stock comes within the definition of penny stock, these
regulations require the delivery by the broker-dealer, prior to any transaction
involving the Company’s common stock, of a risk disclosure schedule explaining
the penny stock market and the risks associated with it. The broker-dealer also
must provide the customer with bid and offer quotations for the penny stock, the
compensation of the broker-dealer and any salesperson in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer’s account.  In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction.  These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for the Company’s
common stock. The ability of broker-dealers to sell the Company’s common stock
and the ability of shareholders to sell the Company’s common stock in the
secondary market would be limited.  As a result, the market liquidity for the
Company’s common stock would be severely and adversely affected. The Company can
provide no assurance that trading in the Company’s common stock will not be
subject to these or other regulations in the future, which would negatively
affect the market for the Company’s common stock.

 

20

 

 

The Company Will Be Subject To The Reporting Requirements Of Federal Securities
Laws, Which Can Be Expensive.

 

Upon the effectiveness of this registration statement, the Company will become
subject to the information and reporting requirements under the Securities
Exchange Act of 1934 and other federal securities laws, and the compliance
obligations of the Sarbanes-Oxley Act of 2002.  The costs of preparing and
filing annual and quarterly reports and other information with the SEC will
cause our expenses to be higher than they would be if the Company was a
privately-held company.

 

The Company’s failure to maintain effective internal control over financial
reporting could lead to inaccuracies in its reported financial results.

 

A material weakness is a significant deficiency, or combination of significant
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented
or detected.  If the Company’s independent registered public accounting firm
were to determine that a significant deficiency were to exist, or if the Company
was otherwise unable to achieve and maintain effective internal controls on a
timely basis, management would not be able to conclude that we have effective
internal control over financial reporting for purposes of Section 404 of the
Sarbanes-Oxley Act of 2002.  In addition, the Company’s independent registered
public accounting firm would not be able to certify as to the effectiveness of
its internal control over financial reporting.  Moreover, any failure to
establish and maintain effective systems of internal control and procedures may
impair its ability to accurately report its financial results.  Such failures
and the reporting that the Company’s system of internal controls over financial
reporting was not effective could result in a restatement of its financial
statements and cause investors to lose confidence in the reliability of its
financial statements, which could result in a decline in the Company’s stock
price.

  

In addition to potential dilution associated with future fundraising
transactions, we currently have significant numbers of securities outstanding
that are convertible into or exercisable for our Common Stock, which could
result in significant additional dilution and downward pressure on our stock
price.

 

The issuance of these shares in the future would result in significant dilution
to our current stockholders and could adversely affect the price of our Common
Stock and the terms on which we could raise additional capital. In addition, the
issuance and subsequent trading of shares could cause the supply of our Common
Stock available for purchase in the market to exceed the purchase demand for our
Common Stock. Such supply in excess of demand could cause the market price of
our Common Stock to decline.

 

Actual and beneficial ownership of large quantities of our Common Stock and
certain Preferred Stock by our executive officers and directors may
substantially reduce the influence of other stockholders.

 

As a result, such persons may have the ability to exercise enhanced control and
influence over the approval process for actions that require stockholder
approval, including the approval of mergers, sales of assets or other
significant corporate transactions or other matters submitted for stockholder
approval. Furthermore, at certain times the interests of our substantial
stockholders may conflict with the interests of our other stockholders.

 

21

 

 

If we are unsuccessful in raising the required capital or building or
contracting for commercial sales and marketing capabilities in the United
States, our revenues from any future products will be adversely affected.

 

We currently have no capabilities or experience in the selling, marketing or
commercial distribution of medical device products. We currently have product
candidates that are ultimately approved for marketing, and would need to hire
and develop an internal sales and marketing organization and/or outsource these
functions to one or more third parties.

 

We may be unable to secure the required capital or be unable to establish
sufficient marketing, sales and distribution capabilities necessary to
successfully inventory, commercialize and gain market acceptance for any of our
product candidates. In addition, co-promotion or other marketing arrangements
with third parties to commercialize product candidates could significantly limit
the revenues we recognize from such product candidates, and these third parties
may fail to commercialize the product candidates successfully.

 

Factors outside the Company's control could require us to record an asset
impairment of goodwill.

 

We are required to analyze goodwill and other intangible assets for impairment.
Factors out of the Company's control, including, but not limited to the economic
environment, market capitalization, federal and local government regulations and
anticipated cash flows of the Company could require us to record an impairment
charge for goodwill. The accounting guidance establishes a method of testing
goodwill for impairment on an annual basis, or on an interim basis if an event
occurs that would reduce the fair value of a reporting unit or an
indefinite-lived intangible asset below its carrying value. If an impairment is
found to exist, we will be required to record a non-cash asset impairment charge
which could be significant.

 

22