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As filed with the Securities and Exchange Commission on June 24, 2015

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

GC Aesthetics plc*

(Exact name of registrant as specified in its charter)

 

Ireland   3842   Not applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

Suite 601, Q House, Furze Road

Sandyford, Dublin 18, Ireland

Telephone: +353 1293 3836

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Ayse Kocak

Chief Executive Officer

GC Aesthetics plc

Suite 601, Q House, Furze Road

Sandyford, Dublin 18, Ireland

Telephone: +353 1293 3836

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Scott D. Elliott

Michael D. Beauvais

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

Telephone: (617) 951-7000

 

Ian Crosbie

Chief Financial Officer

GC Aesthetics plc

Suite 601, Q House, Furze Road

Sandyford, Dublin 18, Ireland

Telephone: +353 1293 3836

 

Michael W. Benjamin

Ilir Mujalovic

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

Telephone: (212) 848-4000

 

 

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Proposed maximum

aggregate

offering price(1)(2)

 

Amount of

registration fee

Ordinary Shares,              par value

  $75,000,000   $8,715

 

 

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended.

 

(2) Includes shares that may be sold upon exercise of the underwriters’ option to purchase additional shares. See “Underwriting.”

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

* Until immediately prior to the completion of the initial public offering described in this registration statement, GC Aesthetics plc will be a shell company. GC Aesthetics plc will not have conducted any operations (other than activities incidental to its formation, the share-for-share exchange described in the accompanying prospectus and the initial public offering described herein). The separate entity through which we currently operate our business is Global Consolidated Aesthetics Limited, a private limited company organized under the laws of Ireland. Global Consolidated Aesthetics Limited and its subsidiaries will become wholly owned by GC Aesthetics plc pursuant to the share-for-share exchange by which the existing shareholders of Global Consolidated Aesthetics Limited will exchange their shares in Global Consolidated Aesthetics Limited for shares having substantially the same rights in GC Aesthetics plc. Unless otherwise indicated or the context otherwise requires, all references in this registration statement to the “Company,” “GCA,” “we,” “us” and “our” refer to (i) Global Consolidated Aesthetics Limited together with its consolidated subsidiaries, prior to the completion of the share-for-share exchange described above, and (ii) GC Aesthetics plc and its consolidated subsidiaries following such share-for-share exchange, which is expected to occur immediately prior to the completion of this offering. See “Prospectus Summary—Corporate Information.”


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated June 24, 2015

PROSPECTUS

             Ordinary Shares

GC Aesthetics plc

Ordinary Shares

 

 

This is GC Aesthetics plc’s initial public offering. We are selling              ordinary shares.

We expect the public offering price to be between $         and $         per ordinary share. Currently, no public market exists for the ordinary shares. After pricing of the offering, we expect that the ordinary shares will trade on the NASDAQ Global Market under the symbol “            .”

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”

Investing in the ordinary shares involves risks that are described in the “Risk Factors” section beginning on page 17 of this prospectus.

 

 

 

    

Per Share

      

Total

 

Public offering price

   $           $     

Underwriting discount(1)

   $           $     

Proceeds, before expenses, to us

   $           $     

 

  (1) The underwriters will receive compensation in addition to the underwriting discount. See “Underwriting.”

The underwriters may also exercise their option to purchase up to an additional              ordinary shares from us, at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The ordinary shares will be ready for delivery on or about                     , 2015.

 

 

Joint Book-Running Managers

 

BofA Merrill Lynch   Deutsche Bank Securities   Cowen and Company

 

 

William Blair

 

 

The date of this prospectus is                     , 2015.


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TABLE OF CONTENTS

 

    

Page

 

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     17   

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     50   

TRADEMARKS AND SERVICE MARKS

     53   

MARKET AND INDUSTRY DATA

     54   

USE OF PROCEEDS

     55   

DIVIDEND POLICY

     56   

CAPITALIZATION

     57   

DILUTION

     59   

CORPORATE STRUCTURE

     61   

SELECTED CONSOLIDATED FINANCIAL DATA

     62   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     67   

BUSINESS

     94   

MANAGEMENT

     106   

RELATED PARTY TRANSACTIONS

     117   

PRINCIPAL SHAREHOLDERS

     119   

DESCRIPTION OF SHARE CAPITAL

     122   

SHARES ELIGIBLE FOR FUTURE SALE

     143   

MATERIAL TAX CONSIDERATIONS

     145   

UNDERWRITING

     156   

LEGAL MATTERS

     163   

EXPERTS

     163   

ENFORCEMENT OF CIVIL LIABILITIES

     164   

WHERE YOU CAN FIND MORE INFORMATION

     164   

EXPENSES RELATED TO THIS OFFERING

     165   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1   

 

 

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the ordinary shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of ordinary shares. Our business, financial condition, results of operations and prospects may have changed since that date.

 

 

 

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PROSPECTUS SUMMARY

This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in our ordinary shares and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus, before deciding to buy our ordinary shares. Unless otherwise indicated or the context otherwise requires, all references in this prospectus to the “Company,” “we,” “us” and “our” refer to (i) Global Consolidated Aesthetics Limited together with its consolidated subsidiaries, prior to the completion of the share-for-share exchange by which the existing shareholders of Global Consolidated Aesthetics Limited exchange their shares in Global Consolidated Aesthetics Limited for shares having substantially the same rights in GC Aesthetics plc, which is expected to occur immediately prior to the completion of this offering (the “Share-for-Share Exchange”), and (ii) GC Aesthetics plc and its consolidated subsidiaries following the Share-for-Share Exchange.

Overview

We are a leading pure-play female aesthetics company committed to becoming the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime. Currently, we focus on the breast implant market outside of the United States, including pre- and post-breast implant surgery products globally. We have a significant presence in Europe, the Middle East and Africa (collectively, “EMEA”), Latin America and Asia-Pacific and we intend to continue to further expand in these regions, including China, Russia and the Middle East, and into new markets, including South Korea, Thailand and additional Commonwealth of Independent States (“CIS”) countries. We are evaluating the clinical programs necessary to sell our implant products in North America. To date, we have generated significant growth by focusing on the development, manufacturing and commercialization of one of the broadest ranges of implant products, principally silicone breast implants. Beyond breast implant products, we intend to expand our presence in other selected female aesthetics products, including those associated with implant surgery as well as other procedures, such as body sculpting treatments and dermal fillers.

We believe that through our two brands Nagôr and Eurosilicone, which have a combined 60 years of market presence, we have (i) a strong reputation for safety, quality and reliability, as evidenced by the five-year data from our ongoing Eurosilicone safety study, (ii) strong competitive advantages based on our innovative product design features—the result of our focused approach to research and development, which integrates feedback from women and surgeons, and (iii) a differentiated marketing and customer service approach, focusing on the needs of women. We have developed and marketed our comprehensive range of products, comprising over 1,100 stock keeping units (“SKUs”), to address the different needs and preferences of women and surgeons. All of our implants are manufactured with medical-grade silicone supplied from either NuSil Technology LLC (“NuSil”) or Applied Silicone Corporation (“ASC”), both of which are U.S.-based, International Organization for Standardization (“ISO”) 9001-certified sources. We have manufacturing facilities in the United Kingdom and France and sell our products in 75 countries, with direct sales activities in six countries, including Brazil, the world’s largest medical aesthetics market by total number of plastic surgery procedures.

We believe we have a significant opportunity to capitalize on favorable trends in the aesthetics market and benefit from the underlying growth in women’s disposable income, particularly in emerging markets, given the strength of our brands, quality and breadth of our product portfolio, differentiated customer service, strong customer relationships, expanding global infrastructure and new product development.

 

 

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We have a diversified revenue base, with approximately 47% of our 2014 revenues derived from sales in EMEA (inclusive of the United Kingdom, Switzerland, Bosnia, the European Economic Area (the “EEA”), the CIS countries, the Middle East and Africa), approximately 42% in Latin America (inclusive of Mexico, the Dominican Republic, Panama and South America) and approximately 11% in Asia-Pacific. Our revenues were approximately $52.8 million for the year ended December 31, 2014, as compared to approximately $44.6 million for the year ended December 31, 2013; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %. Our revenue was approximately $13.0 million for the three months ended March 31, 2015, as compared to approximately $10.8 million for the three months ended March 31, 2014; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %.

The Global Aesthetics Products Market

The global aesthetics products market in 2014 was estimated at $6.5 billion in total sales and is expected to grow at a compound annual growth rate (“CAGR”) of nearly 12%, reaching almost $10.2 billion in total sales by 2018, according to Medical Insight’s “The Global Aesthetic Market Study: Version XII” report (“Medical Insight”). We believe the overall market growth is driven by multiple factors, including a growing middle class, increasing female disposable income and increasing awareness and acceptance of aesthetics procedures, as well as continuous innovation and improved accessibility to aesthetics procedures, through an increase in the number of surgeons. While the United States has historically been the largest market for aesthetics products in terms of total revenues, a significant number of markets outside the United States have been growing faster in terms of revenues and plastic surgeon numbers. For example, Brazil, Mexico and China have experienced faster revenue growth than the aesthetics products market in the United States, providing attractive growth opportunities according to industry sources. Similarly, in 2013, Brazil surpassed the United States in total number of plastic surgery procedures, accounting for 12.9% of global plastic surgery procedures as compared to 12.5% for the United States, according to the International Society of Aesthetic Plastic Surgeons (“ISAPS”). We believe that this growth in markets outside of the United States will continue based on increasing penetration rates in many of those markets, increases in plastic surgeon numbers, improved accessibility and infrastructure for plastic surgery, and favorable demographic and economic trends.

Breast augmentation surgery represented the leading aesthetic surgical procedure, with approximately 15% of total aesthetic surgical procedures performed by plastic surgeons in 2013, based on ISAPS. The global breast implant market is forecasted to reach nearly $1.3 billion by 2018, with some estimates forecasting the market will reach nearly $1.5 billion by 2019, growing at a CAGR ranging from approximately 4% to 6% from 2014 to 2018. A number of international breast implant markets have recently shown significant growth, faster than that of the United States, and many non-U.S. markets are still highly underpenetrated, based on the number of women undergoing breast implant procedures, compared to the penetration of global brands in the United States. We believe that current trends in non-U.S. markets will continue to increase penetration rates in those markets, creating a significant growth opportunity for us, given our global focus.

The primary market for aesthetics procedures is comprised of middle- and upper-class women, which BCC Research’s “Medical Aesthetic Devices: Technologies and Global Markets” report (“BCC Research”) defines as women with access to sufficient income to afford such aesthetics procedures. The number of middle- and upper-income women globally is forecasted to grow at a CAGR of approximately 5% from 2014 to 2019 to 346 million, according to industry sources. In China alone, the middle-and upper-income female population is expected to reach 78 million by 2019, matching that of the United States. From 2014 to 2019, the aesthetics products market is estimated to grow at a CAGR of 1.5% in the United States, in contrast to 11.0%, 8.3% and 8.2% in China, Mexico and Brazil, respectively, according to BCC Research. Moreover, we estimate that the

 

 

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global aesthetics products market is projected to grow at a higher CAGR than the world gross domestic product (“GDP”), and, in China, Brazil and Mexico, the aesthetics products market is projected to grow at a higher CAGR than their respective GDPs. In contrast, the U.S. aesthetics products market is projected to grow more slowly than the GDP of the United States.

Our Competitive Strengths

We believe our pure-play focus has allowed us to become a leading player in the female aesthetics market. The following are our key competitive strengths:

Highly regarded and trusted brands with a strong safety profile. We have two prominent brands, Nagôr and Eurosilicone, which have a combined 60 years of market presence. Based on a company-sponsored, Eurosilicone breast implant study in Europe with 534 subjects, the peer-reviewed five-year clinical safety data published in the Plastic and Reconstructive Surgery journal of the American Society of Plastic Surgeons (“Plastic and Reconstructive Surgery”) supported the strong safety profile of our breast implant products, with low incidence of rupture and rates of capsular contracture comparable to rates experienced by others in our industry for primary augmentation surgery.

Broad product range recognized for quality. Breast implant products are our core competency. Unlike our primary competitors, who generate a very small portion of their total revenue from breast implant products, we generate substantially all of our revenue from our breast implant products and are focused on providing one of the most comprehensive selections of breast implant and other products, including over 1,100 SKUs, for our customers as well as consistently delivering high levels of customer satisfaction. We also are planning to launch pre- and post-breast implant surgery products in the second half of 2015.

Global sales and marketing platform. We sell our products in 75 countries and are one of the leading breast implant manufacturers globally by units sold. We believe our strong sales and marketing platform will help us to successfully launch product line extensions and thereby drive additional revenue growth, particularly in rapidly growing emerging markets.

Extensive in-house development and manufacturing capabilities. All of our products have been developed in-house. Our manufacturing operations allow us to rapidly develop new products based on our close relationships with women and surgeons and our extensive industry experience. We have manufacturing facilities in the United Kingdom and France, all of which are ISO certified and are regularly inspected by their respective regulatory bodies.

Focus on integrated marketing and delivering high-quality customer service. We believe that our customer-focused approach to product design, marketing and customer care is a key differentiator. Our integrated marketing approach includes woman-centric initiatives and surgeon-centric support programs.

Experienced management team. We are led by a proven management team with a successful track record in healthcare and aesthetics. Ayse Kocak is the only female chief executive officer of a breast implant company and has over 20 years of experience in the healthcare industry.

 

 

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Our Growth Strategies

Our goal is to become the leading pure-play female aesthetics company. We are committed to becoming the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime. To achieve these objectives, we are pursuing the following growth strategies:

Outperform the competition in existing markets. Our focus on female aesthetics and delivering high-quality service has distinguished our brands and has enabled us to gain market share from our major competitors in key markets, including Brazil and Mexico, the second and third largest markets by number of breast implant units sold. Based on internal estimates, from 2013 to 2014, our global market share outside of North America increased from 18% to 20%, based on breast implant units sold. We believe that as our brand awareness increases and our reputation for quality and service grows, we will be able to achieve additional growth in our existing markets.

Penetrate new geographical markets with a focus on direct operations and commercialize new products. We currently sell our products directly in six countries and through distributors in an additional 69 countries. We plan to increase the number of countries where we have our own direct sales operations, with a goal of adding nine direct countries by the end of 2017, including China, South Korea, Thailand and six European countries.

Leverage our surgeon relationships and strong brand recognition to introduce innovative products. By leveraging the established position of our Nagôr and Eurosilicone brands and strong surgeon relationships, we plan to expand our product range in female aesthetics. We plan to continue innovating and introducing new products like IMPLEO to expand our product portfolio to offer the best solutions for our customers.

Continue our customer-centric approach and launch additional novel initiatives. Unlike our larger competitors, we are a pure-play female aesthetics company. We intend to continue to effectively engage women and surgeons through an integrated approach that includes direct marketing, distribution partnerships and social media campaigns to help promote the acceptance of breast implants and help patients take action to change the way they feel about themselves.

Selectively pursue strategic acquisitions. We may selectively pursue complementary acquisitions that would allow us to enlarge our female aesthetics product portfolio, go direct in new or existing markets or expand further in existing markets.

Our Products

We believe that we are well positioned to continue our track record of developing a continuing stream of innovative products in the following categories:

Breast Augmentation and Breast Reconstruction Products. Our product portfolio addresses a comprehensive range of options as to shape, texture, volume, projection and gel cohesivity.

We recently commenced active promotion of the IMPLEO breast implant product line, which we believe are the first round implants to be both soft to the touch and deliver shape maintenance, resulting in a more natural look and feel. The IMPLEO breast implant product line also offers a range of texturing options and permits a small surgical incision due to the implants’ unbreakable gel. We believe that through this combination of features, a wider range of surgeons is able to deliver an outcome to women that was previously achievable only by the highest quality surgeons. The commercial impact of IMPLEO was significant in certain countries in

 

 

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2014, its first year of active promotion in these markets; it accounted for approximately 20% of our sales in France and for approximately 56% of our sales in the United Kingdom. IMPLEO is currently available in 44 of the 75 countries in which we sell our products, and we are planning to launch it in almost all of our other markets in 2015, subject to receiving required regulatory approvals.

We also produce a range of breast sizers, temporary, single-use products that can be used by surgeons during surgery to help identify the desired style and size of implant for each woman, as well as breast tissue expanders, temporary devices intended to aid in the process of recreating tissue coverage to allow for the placement of an implant to reconstruct the breast following cancer and other trauma injuries.

Other Implants. We offer a range of other implant products, including gluteal, testicular and calf implants, all made from medical-grade silicone. In 2014, these represented 5.5% of our sales.

Pre- and Post-Breast Implant Surgery Products. In the second half of 2015, we are planning to launch a range of products to offer a broader solution and reinforce our brand loyalty among women considering breast augmentation and those who have had the procedure, including (i) The Enhance Breast Boost Pack—a non-invasive product, comprising a specialized bra and silicone breast forms, which allows women to experience the look and feel of fuller breasts instantly, and (ii) Silgel scar management specialty products—gel and sheet products that minimize the appearance of post-surgery scars.

Our Five-Year Clinical Data

In June 2014, Plastic and Reconstructive Surgery published the peer-reviewed five-year results from an ongoing study to evaluate the safety profile of our Eurosilicone breast implant products. This multi-center, surgeon-led study, sponsored by us, monitors 1,010 Eurosilicone breast implants in 534 subjects who have undergone either augmentation or reconstructive surgery. Each patient had a three-month post-surgery follow-up evaluation and annual follow-ups thereafter. The study’s five-year results demonstrate a low rupture rate and a strong safety profile. For primary augmentation, (i) the total risk of rupture was assessed at 0.8% per patient (only one of the 1,010 implants was found to be ruptured on examination) and (ii) the incidence of severe capsular contracture was 10.7%, which we believe is consistent with rates experienced by others in our industry.

Summary Risk Factors

An investment in our ordinary shares involves a high degree of risk. Any of the factors set forth under “Risk Factors” in this prospectus may limit our ability to successfully execute our business strategy. You should carefully consider all of the information set forth in this prospectus and, in particular, you should evaluate the specific factors set forth under “Risk Factors” in deciding whether to invest in our ordinary shares. Some of the principal risks relating to our business and our ability to execute our business strategy include:

 

    We have incurred significant net operating losses and cannot assure you that we will ever achieve or maintain profitability.

 

    Our future profitability depends on the success of our breast implant products.

 

    Any negative publicity concerning our products or our competitors’ products could harm our business and reputation and negatively impact our financial results.

 

    Our success depends on our ability to continue to enhance our existing products and develop or commercialize new products that respond to customer needs and preferences.

 

 

 

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    The size of the addressable global aesthetics products market, and the breast implant products market in particular, has not been established with precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the size of these markets and the markets for our other products, our revenue and results of operations will be adversely affected.

 

    Each of our brands relies on a single-source supplier for medical-grade silicone, which is the primary constitutive ingredient of our products. These two suppliers are under common ownership, which could result in increased prices when we seek to renew our contracts with these suppliers.

 

    Recent studies have called into question the long-term safety of breast implants, which could have a material adverse effect on our business, results of operations and financial condition.

 

    If we acquire or attempt to acquire new businesses or products, we may be unable to complete these acquisitions or to successfully integrate them in a cost-effective and non-disruptive manner, and we may not realize the benefits we anticipate from such acquisitions.

 

    We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth.

 

    Our business could suffer if we lose the services of our senior management or other key personnel or are unable to attract and retain additional qualified personnel.

 

    If we fail to maintain and further develop our direct sales forces and distributor networks, our business could suffer. Additionally, our third-party distributors may not effectively sell our products or may engage in activities that could harm our reputation and sales of our products.

 

    If our IMPLEO line of breast implant products is not accepted in the markets where we operate, our business may be materially adversely affected.

 

    Risks associated with our global operations, including seeking, obtaining and maintaining regulatory approval to commercialize our products in the jurisdictions where our products are sold, could harm our business.

 

    Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

 

    Any disruption at our manufacturing facilities could adversely affect our business and results of operations.

 

    If we fail to compete effectively against our competitors, many of whom have greater resources than we have, our revenues and results of operations may be negatively affected.

 

    Our medical device products and operations, including manufacturing, are subject to extensive governmental regulation, including health, environmental, safety and anti-corruption and other laws, and our failure to comply with applicable requirements could cause our business to suffer.

 

    Based on our recurring losses from operations and net capital deficiency, and not taking into consideration any proceeds that we will receive in connection with this offering, our independent registered public accounting firm included an explanatory paragraph in its report on our audited financial statements relating to our ability to continue as a going concern.

 

 

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Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue during our most recently completed fiscal year as of the initial filing date of the registration statement of which this prospectus forms a part, we qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include:

 

    the ability to present more limited financial data, including presenting only two years of audited financial statements and only two years of selected financial data in the registration statement on Form F-1 of which this prospectus is a part;

 

    an exemption from certain disclosure obligations regarding executive compensation in the registration statement on Form F-1 of which this prospectus is a part and in our future periodic reports;

 

    an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); and

 

    exemptions from the requirements of holding a non-binding advisory vote on executive compensation and obtaining shareholder approval of any golden parachute payments.

We may take advantage of these exemptions for up to five years or such time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues as of the end of our fiscal year, we have more than $700 million in market value of our stock held by non-affiliates as of the end of our second fiscal quarter, or we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced disclosure obligations. We have taken advantage of reduced disclosure obligations regarding financial statements and executive compensation arrangements in this prospectus, and we may choose to take advantage of some but not all of these obligations in future filings. If we do, you may receive different and less information than you might get from other public companies.

We will not take advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. Since IFRS as issued by the International Accounting Standards Board (“IASB”) (“IFRS as issued by the IASB”) makes no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

Implications of Being a Foreign Private Issuer

We are also considered a “foreign private issuer.” In our capacity as a foreign private issuer, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ordinary shares. Moreover, while we must file an annual report on Form 20-F, we are not required to file periodic reports and financial statements with the Securities and Exchange Commission (“SEC”) as frequently or as promptly as U.S. companies whose securities are registered

 

 

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under the Exchange Act, although we do intend to furnish quarterly reports on Form 6-K. In addition, although we plan to comply with Regulation FD, which restricts the selective disclosure of material non-public information, we are not required to comply with Regulation FD. As a foreign private issuer, we also may elect, and have elected, to follow Irish corporate governance rules to the extent permitted.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

We have taken advantage of certain reduced reporting and other requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies.

Corporate Information

Global Consolidated Aesthetics Limited was incorporated in December 2007 under the laws of Ireland and is the holding company of Eurosilicone SAS and Nagôr Limited, the main operating entities within our group, which it acquired from Medicor Ltd. (which was in Chapter 11 bankruptcy proceedings) in May 2008. Eurosilicone SAS was incorporated in 1988 under the laws of France. Nagôr Limited was incorporated in 1979 under the laws of the Isle of Man, and operates as the registered branch of an overseas company in the United Kingdom. Global Consolidated Aesthetics Limited’s acquisition of Nagôr Limited and Eurosilicone SAS in May 2008 was funded in part by an equity investment in our ordinary shares led by Oyster Technology Investments Limited (“Oyster”). Montreux Equity Partners IV, L.P. (“Montreux”) first became a shareholder in Global Consolidated Aesthetics Limited pursuant to an investment in October 2010. Both Montreux and Oyster have made significant further equity investments in Global Consolidated Aesthetics Limited since their initial investments. See “Description of Share Capital—History of Security Issuances.”

GC Aesthetics plc was incorporated in April 2015 under the laws of Ireland. Upon the Share-for-Share Exchange, GC Aesthetics plc will become the holding company of Global Consolidated Aesthetics Limited and its subsidiaries. Until immediately prior to the completion of the initial public offering described in this prospectus, GC Aesthetics plc will be a shell company. GC Aesthetics plc will not have conducted any operations (other than activities incidental to its formation, the Share-for-Share Exchange described below and the initial public offering described herein). Global Consolidated Aesthetics Limited is the entity through which the Company currently operates its business. Upon the Share-for-Share Exchange, the historical consolidated financial statements of Global Consolidated Aesthetics Limited included in this prospectus will become the historical consolidated financial statements of GC Aesthetics plc.

 

 

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Our principal executive offices are located at Suite 601, Q House, Furze Road, Sandyford, Dublin 18, Ireland. Our telephone number at that address is +353 1293 3836. Our website address is www.gcaesthetics.com. Our website and the information contained on our website do not constitute a part of this prospectus.

 

LOGO

 

 

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The Offering

 

Ordinary shares offered by us

            ordinary shares.

 

Ordinary shares to be outstanding immediately after completion of this offering

            ordinary shares (             ordinary shares if the option to purchase additional shares is exercised in full).

 

Option to purchase additional ordinary shares

The underwriters have an option for a period of 30 days after the date of this prospectus to purchase up to an additional             ordinary shares.

 

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $         million, or approximately $         million if the underwriters exercise their option to purchase additional ordinary shares in full, at an assumed initial public offering price of $         per ordinary share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering as follows: (i) approximately $5.7 million to expand our sales and marketing activities in new countries, (ii) approximately $5.8 million to expand our sales and marketing activities in existing countries, including efforts related to the global launch of IMPLEO and pre- and post-breast implant surgery products, (iii) approximately $4.2 million to expand our product portfolio and (iv) approximately $5.0 million to expand our manufacturing capabilities. In addition, we intend to use the net proceeds of this offering to fund potential future acquisitions. We will use any remaining proceeds for working capital, debt service and other general corporate purposes. See “Use of Proceeds.”

 

Dividend policy

We do not currently expect to pay any dividends on our ordinary shares in the foreseeable future. Additionally, our ability to pay dividends on our ordinary shares is limited by restrictions on our and our subsidiaries’ ability to pay dividends or make distributions, including restrictions under the terms of the agreements governing our indebtedness and under Irish law.

 

Risk factors

You should read the “Risk Factors” section of this prospectus for a discussion of factors to consider carefully before deciding to invest in our ordinary shares.

 

Listing

We intend to apply to list our ordinary shares on the NASDAQ Global Market under the symbol “             .”

The number of ordinary shares to be outstanding after this offering is based on             ordinary shares of Global Consolidated Aesthetics Limited outstanding as of             , giving effect to the Share-for-Share Exchange, and excludes             ordinary shares of GC Aesthetics plc reserved for future issuance under its equity incentive plan to be adopted in connection with this offering.

 

 

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Unless context otherwise requires, this prospectus reflects and assumes the following:

 

    the completion, prior to or simultaneously with the completion of this offering, of the Share-for-Share Exchange;

 

    an initial public offering price of $         per ordinary share (the midpoint of the price range set forth on the front cover of this prospectus);

 

    the adoption of our amended and restated memorandum and articles of association, to be effective upon the completion of this offering;

 

    the exercise of all warrants and the conversion of all of our outstanding A Ordinary Shares, B Preference Shares and C Preference Shares into             ordinary shares and the issuance of ordinary shares as consideration for the cancellation of the rights of holders of B Preference Shares and C Preference Shares to receive dividends; and

 

    no exercise by the underwriters of their option to purchase up to             additional ordinary shares in this offering.

 

 

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Summary Consolidated Financial Data

The following summary consolidated financial data for the years ended December 31, 2014 and December 31, 2013 and as of December 31, 2014 and December 31, 2013 has been derived from the audited consolidated statements of operations and the audited statements of financial position of Global Consolidated Aesthetics Limited appearing elsewhere in this prospectus. The following summary consolidated financial data for the three months ended March 31, 2015 and March 31, 2014 and as of March 31, 2015 are derived from unaudited, interim consolidated statements of operations and unaudited, interim statements of financial position of Global Consolidated Aesthetics Limited, appearing elsewhere in this prospectus. We have prepared the unaudited interim financial statements on the same basis as the audited financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period. Our consolidated financial statements are presented in US dollars. However, the Euro is our measurement and functional currency and also that of the majority of our subsidiaries. The presentation currency of the Company is the US dollar. The following information should be read in conjunction with “Risk Factors,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

Statements of operations and comprehensive loss:

 

     Year ended
December 31,
    Three months ended
March 31,
 
     2014     2013             2015                     2014          
                 (unaudited)  
     (in thousands)  

Revenue

   $ 52,804      $ 44,630      $ 13,039      $ 10,805   

Cost of sales

     (26,038     (22,548     (6,490     (5,785

Operating expenses

     (41,835     (30,858     (11,302     (10,183
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  (15,069   (8,776   (4,753   (5,163

Other (expense) income (1)

  (74,958   (9,711   (69,258   (16,129

Income tax credit

  600      1,195      64      (14
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

$ (89,427 $ (17,292 $ (73,947 $ (21,306
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted loss per ordinary share

$ (18.74 $ (3.91 $ (15.32 $ (4.62
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares outstanding:

Basic and diluted

  4,772,101      4,425,800      4,825,800      4,608,022   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other financial data (unaudited):

Revenue Adjusted for Foreign Exchange (2)

$ 52,804    $         $ 13,039    $        

Adjusted Gross Profit (3)

  27,788      23,134      6,780      5,272   

Adjusted EBITDA (4)

  (8,112   (3,385   (2,886   (3,853

Adjusted Interest Expense (5)

  (6,202   (3,564   (1,953   (1,333

 

 

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     March 31, 2015 (unaudited)  
     Actual      Pro forma
adjustments(7)
     Pro Forma(7)      Offering
pro forma
adjustments
     Pro Forma,
as adjusted(8)(9)
 
            (in thousands)  

Balance sheet data

              

Cash and cash equivalents

   $ 3,245       $ 21       $ 3,266       $ —         $ —     

Total current assets

     40,132         21         40,153         —           —     

Total assets

     68,665         21         68,686         —           —     

Total current liabilities

     18,628         —           18,628         —           —     

Loans and borrowings

     51,596         —           51,596         —           —     

Total non-current liabilities

     241,169         (183,557      57,612         —           —     

Total liabilities(6)

     259,797         (183,557      76,240         —           —     

Accumulated Deficit

     (257,436      —           (257,436      —           —     

Total equity (deficiency)

     (191,132      183,578         (7,554      —           —     

 

(1) Other (expense) income includes the following:

 

     Year ended
December 31,
    Three months ended
March 31,
 
    

      2014      

   

      2013      

   

      2015      

   

      2014      

 
                 (unaudited)  
     (in thousands)  

Net interest (expense) income

   $ (33,746   $ (6,877   $ (7,060   $ (4,331

Loss on conversion of shareholder loans

     (27,737     —          —          (24,157

Gain (Loss) on equity derivatives

     5,182        (4,828     (39,956     10,934   

(Loss) Gain on foreign exchange

     (18,657     1,994        (22,242     1,425   

 

(2) We estimate Revenue Adjusted for Foreign Exchange by converting revenues for the period presented using the average exchange rates for the most recent corresponding period of the Euro, Sterling and the Brazilian Real, respectively, to one US dollar, our financial reporting currency. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction. We believe that Revenue Adjusted for Foreign Exchange is a useful measure, indicating the actual growth of our operations, excluding the impact of foreign currency exchange rates changes. Revenue Adjusted for Foreign Exchange is not calculated in accordance with IFRS. This calculation may differ from similarly titled measures used by others and, accordingly, Revenue Adjusted for Foreign Exchange is not meant to be a substitution for revenues presented in conformity with IFRS nor should such non-IFRS financial measure be considered in isolation. Moreover, the presentation of Revenue Adjusted for Foreign Exchange is not necessarily indicative of historical or future results of operations. Currency fluctuations affect general economic and business conditions, including, for example, a country’s inflation and international trade competitiveness and, as a result, a company’s performance cannot be evaluated solely on the basis of a revenue adjusted for foreign exchange presentation.

 

 

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The following table reconciles Revenue Adjusted for Foreign Exchange to revenues, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
     Three months ended
March 31,
 
     2014      2013      2015      2014  
                   (unaudited)  
     (in thousands)  

Reconciliation of Revenue Adjusted for Foreign Exchange to Revenue:

  

Revenue

   $ 52,804       $ 44,630       $ 13,039       $ 10,805   

Effect of movement in exchange rates(1)

     —              —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue adjusted for foreign exchange

$ 52,804    $      $ 13,039    $     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1) We estimate Revenue Adjusted for Foreign Exchange by converting revenues for the period presented using the average exchange rates for the most recent corresponding period of the Euro, Sterling and the Brazilian Real, respectively, to one US dollar. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction.

 

(3) Adjusted Gross Profit is defined as gross profit excluding depreciation that is included in the cost of sales. We believe that Adjusted Gross Profit is a useful measure, indicating the actual profitability of our production excluding these non-cash charges. Adjusted Gross Profit is not calculated in accordance with IFRS.

The following table reflects the reconciliation of Adjusted Gross Profit to gross profit, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
     Three months ended
March 31,
 
     2014      2013      2015          2014      
                   (unaudited)  
     (in thousands)  

Reconciliation of Adjusted Gross Profit to Gross Profit:

           

Gross profit

   $ 26,766       $ 22,082       $ 6,549       $ 5,020   

Depreciation included in cost of sales

     1,022         1,052         231         252   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Gross Profit

$ 27,788    $ 23,134    $ 6,780    $ 5,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(4) Adjusted EBITDA is defined as operating loss, adjusted for other expenses, depreciation, amortization and share-based and other equity-related compensation. We believe that Adjusted EBITDA is a useful metric for investors to understand and evaluate our operating results and ongoing profitability because it permits investors to evaluate our recurring profitability from our ongoing operating activities. Adjusted EBITDA is not calculated in accordance with IFRS. In addition, our calculation of Adjusted EBITDA may not be comparable to similar measures that other companies report because other companies may not calculate Adjusted EBITDA in the same manner as we do.

By providing this non-IFRS financial measure, together with a reconciliation to IFRS results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how we are executing strategic initiatives. We believe Adjusted EBITDA is widely used by investors and securities analysts as a supplemental measure to evaluate the overall operating performance of companies in our industry without regard to items, such as interest expense, provision for income taxes and depreciation and amortization expense, that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

Management uses Adjusted EBITDA:

 

    as a measurement used in comparing our operating performance on a consistent basis;

 

 

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    for planning purposes, including the preparation of our internal annual operating budget and financial projections; and

 

    to evaluate the performance and effectiveness of our operational strategies.

Although we use Adjusted EBITDA as a measure to assess the operating performance of our business, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under IFRS. Because of these limitations, management does not view Adjusted EBITDA in isolation or as a primary performance measure.

The following table reconciles Adjusted EBITDA to operating loss, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
           2014                 2013                 2015                 2014        
                 (unaudited)  
     (in thousands)  

Reconciliation of Adjusted EBITDA to operating loss:

        

Operating loss

   $ (15,069   $ (8,776   $ (4,753   $ (5,163

Add:

        

Other expenses

     —          183        —          —     

Depreciation

     1,123        1,175        251        276   

Amortization

     3,990        4,033        882        1,034   

Share-based and other equity-related compensation

     1,844        —          734        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ (8,112 $ (3,385 $ (2,886 $ (3,853
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(5) Adjusted Interest Expense is defined as interest expense adjusted for non-cash charges related to effective interest on our B Preference Shares and C Preference Shares. The B Preference Shares and C Preference Shares will convert into ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. However, we believe Adjusted Interest Expense is a useful metric for investors to understand and evaluate our results of operations as it permits investors to evaluate the cash costs of servicing our debt in prior periods. Adjusted Interest Expense is not calculated in accordance with IFRS.

The following table reconciles Adjusted Interest Expense to interest expense, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
           2014                 2013                   2015                     2014          
           (unaudited)  
     (in thousands)  

Reconciliation of Adjusted Interest Expense to interest expense:

        

Interest expense

   $ (33,746   $ (6,877   $ (7,060   $ (4,331

Non-cash charges related to effective interest on B Preference Shares and C Preference Shares

     27,544        3,313        5,107        2,998   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted interest expense

$ (6,202 $ (3,564 $ (1,953 $ (1,333
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(6) Includes the Credit Facility. In April 2015, we drew down an additional $10.0 million under the Credit Facility. At the same time, we issued 592,042 ordinary shares to OrbiMed for an aggregate subscription price of €5,920.42.

 

 

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(7) Reflects (i) the exercise of all warrants and exercisable options and the conversion of all of GC Aesthetics plc’s A Ordinary Shares, B Preference Shares and C Preference Shares into                      ordinary shares upon the completion of this offering, and the issuance of                      ordinary shares as consideration for the cancellation of the right of holders of B Preference Shares and C Preference shares to receive dividends; and (ii) the effectiveness of our amended and restated memorandum and articles of association.

 

(8) Reflects the pro forma adjustments described in footnote (7) above and the sale by us of                  ordinary shares in this offering at an assumed initial public offering price of $                 per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering as described in “Use of Proceeds.”

 

(9) Each $1.00 increase (decrease) in the assumed initial public offering price of $                 per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total shareholders’ equity, total capitalization and cash by approximately $                 , assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ordinary shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) each of additional paid-in capital, total shareholders’ equity, total capitalization and cash by approximately $                 , assuming that the assumed initial price to the public remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

 

 

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our ordinary shares. If any of the following risks actually occurs, our business, prospects, results of operations and financial condition could suffer materially, the trading price of our ordinary shares could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Relating to Our Business and Our Industry

We have incurred significant net operating losses and cannot assure you that we will ever achieve or maintain profitability.

We have incurred significant net operating losses. As of March 31, 2015, we had an accumulated deficit of $257.4 million. To date, we have financed our operations primarily through sales of our products, cash flow from operations, issuances of ordinary shares, preferred stock and convertible loan notes and borrowings under shareholder and bank loans and under an Amended and Restated Credit Agreement (the “Credit Facility”) with Royalty Opportunities S.À R.L. (“OrbiMed”), an affiliate of OrbiMed Advisors LLC. We have devoted substantial resources to developing, manufacturing and obtaining regulatory approval for our products, the commercial launch of our products, the development of a sales force, marketing team and management team for our business.

For the year ended December 31, 2014 and for the three months ended March 31, 2015, our gross profit was $26.8 million and $6.5 million, respectively. However, although we have achieved a positive gross profit, we still operate at a substantial net loss. Following this offering, we expect that our operating expenses will continue to increase as we continue to build our commercial infrastructure, develop, enhance and commercialize new products and incur additional operational costs associated with being a public company. The extent of our future net operating losses and the timing of profitability are uncertain. We will need to increase our sales significantly to achieve profitability, and we might not be able to do so. Even if we do significantly increase sales, we might not be able to achieve, sustain or increase profitability on a quarterly or annual basis in the future. If we do not achieve profitability, it will be more difficult for us to finance our business, accomplish our strategic objectives and our financial performance and results of operations may be materially adversely affected.

Our future profitability depends on the success of our breast implant products.

Sales of our breast implant products accounted for 91.3% and 90.9% of our revenues for the years ended December 31, 2014 and December 31, 2013, respectively. We expect our revenues to continue to be substantially based on sales of our breast implant products. Any product liability lawsuits, introduction of competitive products by our competitors and other third parties, the loss of market acceptance or regulatory approval of our breast implant products, adverse rulings by regulatory authorities, adverse publicity or other adverse events relating to us or our breast implant products may significantly impact our sales and profitability, which would adversely affect our business, financial condition and results of operations.

Our business depends on maintaining and strengthening our brand and generating and maintaining ongoing, profitable customer demand for our products, and a significant reduction in such demand could materially affect our results of operations.

Our success depends on the reputation of our brands, which, in turn, depends on factors such as the safety and quality of our products, our communication activities, including marketing and education efforts, and our management of the customer experience, including through our Experience Centres and GCA Comfort Guarantee. Maintaining, promoting and positioning our brands are important to expanding our customer base,

 

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and will depend largely on the success of our education and marketing efforts and our ability to provide a consistent, high-quality customer experience. We may need to make substantial investments in these areas in order to maintain and enhance our brand, and such investments may not be successful. Ineffective marketing, negative publicity, significant discounts by our competitors, product defects, counterfeit products, unfair labor practices and failure to protect the intellectual property rights in our brands are some of the potential threats to the strength of our business. To protect our brands’ status, we may need to make substantial expenditures to mitigate the impact of such threats. We believe that maintaining and enhancing our brands in the countries in which we currently sell our products and in new countries where we have limited brand recognition is important to expanding our customer base. If we are unable to maintain or enhance the strength of our brands in the countries in which we currently sell our products or new countries, then our growth strategy could be adversely affected.

Any negative publicity concerning our products or our competitors’ products could harm our business and reputation and negatively impact our financial results.

The responses of potential patients, physicians, the news media, legislative, regulatory and physician bodies and others to information about quality or complications or alleged complications of our products or our competitors’ products could result in negative publicity and could materially reduce market acceptance of our products. These responses or any investigations and potential resulting negative publicity may have a material adverse effect on our business and reputation and negatively impact our financial condition, results of operations or the market price of our ordinary shares. In addition, significant negative publicity could result in an increased number of product liability claims against us, which could materially adversely affect our business, financial condition and results of operations.

Our success depends on our ability to continue to enhance our existing products and develop or commercialize new products that respond to customer needs and preferences.

We may not be able to compete effectively with our competitors, and ultimately satisfy the needs and preferences of our customers, unless we can continue to enhance existing products and develop or acquire new innovative products. Product development requires the investment of significant financial, technological and other resources. Product improvements and new product introductions also require significant planning, design, development and testing at the technological, product and manufacturing process levels and we may not be able to timely or effectively develop product improvements or new products. Likewise, we may not be able to acquire new products on terms that are acceptable to us, or at all. Further, in most countries, we need to obtain regulatory approval in order to market and sell our products, which may limit our ability to act quickly in scaling commercialization in those countries. Our competitors’ new products may beat our products to market, be more effective with new features, obtain better market acceptance or render our products obsolete. Any new or modified products that we develop may not receive regulatory clearance or approval, or achieve market acceptance or otherwise generate any meaningful sales or profits for us relative to our expectations. Similarly, quality issues may arise with our products and although we have established internal procedures to minimize risks that may arise from quality issues, there can be no assurance that we will be able to eliminate or mitigate occurrences of these issues and associated liabilities. If we are unable to continue to enhance our existing products, develop or acquire new products, maintain the quality of our products or achieve market acceptance for our products, then our sales and profitability could be negatively impacted, which would adversely affect our business, financial condition and results of operations.

The size of the addressable global aesthetics products market, and the breast implant products market in particular, has not been established with precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the size of these markets and the markets for our other products, our revenue and results of operations will be adversely affected.

Our estimates of the addressable global aesthetics products market and the global breast implant market are based on a number of internal and third-party studies, reports and estimates, including, without limitation, the number of implants sold, the number of women and surgeons in the global market, third-party estimates regarding the number of certain types of aesthetics procedures performed annually, growth trends in the global

 

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aesthetics products industry, regulatory trends, the increase in women’s purchasing power and the number of middle- and upper- income women in the global market. In addition, different industry sources define the global aesthetics products market differently. Our definition of the global aesthetics products market includes the following segments: breast implant products, skin tightening and body shaping, energy devices, neuromodulators, dermal fillers, chemical peels, liposuctions, self- and physician-dispensed topicals and injectables, removal of localized fat deposits, device-based alternatives to toxins for wrinkle reduction and therapy treatments for hair loss, excessive sweating (hyperhidrosis), malfunctioning veins (sclerotherapy) and scars. While we do not currently compete in all of these segments in the global aesthetics products market, we believe these studies and estimates have historically provided and may continue to provide us with effective tools in estimating the total global aesthetics products market and the global breast implant products market. Nevertheless, these estimates may not be correct and the conditions supporting our estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the global aesthetics products market and the global breast implant products market may prove to be incorrect. If the actual number of customers who would elect to purchase our products and the annual total addressable market for our products is smaller than we have estimated, it may impair our projected revenue growth and have an adverse impact on our business.

Each of our brands relies on a single-source supplier for medical-grade silicone, which is the primary constitutive ingredient of our products. These two suppliers are under common ownership, which could result in increased prices when we seek to renew our contracts with these suppliers.

We rely on NuSil and ASC as the sole suppliers of the medical-grade silicone used in each of our two brands’ products. NuSil and ASC are separate legal entities under the common ownership of NuSil Investments LLC. If NuSil or ASC becomes unable or unwilling to supply medical-grade silicone for our products, we will not be able to replace NuSil or ASC quickly, and any replacement supplier would have to be qualified with the relevant regulatory authorities, which is an expensive and time-consuming process during which we may experience a supply interruption. We may also be unsuccessful in negotiating favorable terms with such a supplier. As a result, our financial position and results of operations may be adversely affected. There is also no guarantee that NuSil or ASC will be able to meet our demand to produce sufficient quantities of medical-grade silicone in a timely manner.

Our current agreements with NuSil and ASC expire in April 2018 and December 2017, respectively. There can be no assurance that NuSil and/or ASC will agree to continue to supply us with medical-grade silicone following the expiration of our contracts on terms that are acceptable to us, or at all, which would have a material adverse effect on our business, financial condition and results of operations for the reasons set forth above.

In addition, our reliance on NuSil and ASC involves a number of other risks, including, among others, that:

 

    our medical-grade silicone may not be manufactured in accordance with agreed upon specifications or in compliance with regulatory requirements, or our suppliers’ manufacturing facilities may not be able to maintain compliance with regulatory requirements;

 

    we may not be able to timely respond to unanticipated changes in customer orders, and if orders do not match forecasts, we may have excess or inadequate inventory of materials and components;

 

    we may be subject to price fluctuations when a supply agreement is renegotiated or if our existing contract is not renewed;

 

    NuSil or ASC may lose access to critical services and components, resulting in an interruption in the manufacture or shipment of medical-grade silicone or a shutdown of their facilities;

 

    we may be required to obtain regulatory approvals related to any change in our supply chain;

 

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    NuSil or ASC may wish to discontinue supplying products to us; and

 

    NuSil, ASC or their parent entity may encounter financial or other hardships unrelated to our demand for products, which could inhibit their ability to fulfill our orders and meet our requirements.

If any of these risks materializes, it could significantly increase our costs, disrupt our manufacturing process, our ability to generate revenues would be impaired, market acceptance of our products could be adversely affected and customers may instead purchase or use our competitors’ products, which could materially adversely affect our business, financial condition and results of operations.

Recent studies have called into question the long-term safety of breast implants, which could have a material adverse effect on our business, results of operations and financial condition.

Although silicone breast implants have received regulatory approval, including from the U.S. Food and Drug Administration (the “FDA”), in recent years, silicone breast implants have been linked to a rare type of cancer, anaplastic large-cell lymphoma (“ALCL”). In January 2011, the FDA indicated that there was a possible association between saline and silicone gel-filled breast implants and ALCL. The review indicated that those with implants may have a very small but increased risk of ALCL. In March 2015, France’s national cancer institute (“NCI”) noted that there is a clearly established link between ALCL and breast implants, but NCI did not recommend suspension of marketing approval of the implants. In their statement, NCI stated that implants with macrotexture were used in most women found with ALCL. We do not produce macrotexture implants. An article published in March 2015, Plastic and Reconstructive Surgery reported the results of a study of 173 cases of ALCL occurring in women with breast implants. Of these 173 cases, the manufacturer of the implant was known in 112 cases. Nagôr was the manufacturer in three cases reported in this study; Eurosilicone was not the manufacturer in any case reported in this study. We are separately aware of two cases of ALCL involving Eurosilicone implants; there may be additional cases of ALCL involving our products of which we are not yet aware. Future studies or clinical experience may indicate that breast implants, including our products, expose individuals to a more substantial risk of developing ALCL or other unexpected complications. As a result, we may be exposed to potential class actions and other lawsuits from any individual who may develop ALCL after using our products, which would have a significant negative impact our revenues and could prevent us from achieving our forecasted revenue targets or achieving or sustaining profitability. Moreover, if long-term results and clinical experience indicate that our products cause unexpected or serious complications, we could be subject to mandatory product recalls, suspension or withdrawal of regulatory clearances and approvals and significant legal liability.

If we acquire or attempt to acquire new businesses or products, we may be unable to complete these acquisitions or to successfully integrate them in a cost-effective and non-disruptive manner, and we may not realize the benefits we anticipate from such acquisitions.

Our success depends on our ability to continually enhance and broaden our product offerings in response to changing customer demands, competitive pressures and innovation. We may consider opportunities to partner with or acquire other businesses, products or technologies that may enhance our product platform or technology, expand the breadth of our operations or customer base or advance our business strategies. We do not know if we will be able to identify acquisitions or joint ventures we deem suitable or to successfully complete any future acquisitions or joint ventures, or whether we will be able to successfully integrate any acquired business, product or technology or retain any key employees related thereto. Integrating any business, product or technology we acquire could be expensive and time-consuming, disrupt our ongoing business, impact our liquidity and distract our management. If we are unable to integrate any acquired businesses, products or technologies effectively, our business may suffer. Whether as a result of unsuccessful integration, unanticipated costs, including those associated with assumed liabilities and indemnification obligations, or other factors, we may not realize the economic benefits we anticipate from acquisitions. In addition, any amortization or charges resulting from the costs of acquisitions could increase our expenses.

 

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We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth.

As of March 31, 2015, we had 437 employees. Effectively executing our growth strategy requires that we increase revenues through expanded sales and marketing activities, recruit and retain additional employees, increase production and continue to improve our operational, financial and management controls, reporting systems and procedures. Such growth could place a strain on our administrative and operational infrastructure and we may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Our management, personnel, systems and facilities currently in place may not be adequate to support this future growth. If we are not able to effectively expand our organization to manage and support our growth strategy, we may not be able to successfully execute our growth strategy, and our business, financial condition and results of operations may suffer and we may be exposed or subject to increased unforeseen or undisclosed liabilities as well as increased levels of indebtedness.

Our business could suffer if we lose the services of our senior management or other key personnel or are unable to attract and retain additional qualified personnel.

We are dependent upon the continued services of key personnel, including the members of our executive management team, who have extensive experience in our industry. The loss of any of these individuals could disrupt our operations or our strategic plans. Additionally, our future success will depend on, among other things, our ability to continue to hire and retain the necessary qualified sales, marketing, manufacturing, regulatory, development and managerial personnel, for whom we compete with numerous other companies, academic institutions and organizations. Competition for qualified management in our industry is intense and many of the companies with which we compete for management personnel have greater financial and other resources to dedicate to attracting and retaining personnel. The loss of key personnel or our inability to attract or retain other qualified personnel could have a material adverse effect on our business, results of operations and financial condition.

Although it will be subject to the underwriters’ lock-up arrangements and other restrictions on trading, a portion of the equity of our management team will not contain other contractual transfer restrictions at the time of this offering and is expected to become tradable after the expiration of the 180-day lock-up agreement with the underwriters. This liquidity will in many cases represent material wealth of such individuals that may impact retention and focus of existing key members of management.

If we fail to maintain and further develop our direct sales forces and distributor networks, our business could suffer. Additionally, our third-party distributors may not effectively sell our products or may engage in activities that could harm our reputation and sales of our products.

We have direct sales forces for our products in Brazil, France, Germany, Italy, Spain and the United Kingdom. We utilize a network of third-party distributors to sell our products in 69 additional countries and we also use agents, sub-distributors and representatives to supplement our direct sales forces in most of the countries where we sell directly. As we continue to expand into different countries and increase our marketing efforts, we will need to grow our distributor, sub-distributor and agent network and increase the size of our direct sales force. There is significant competition for sales personnel experienced in relevant medical device sales. If we are unable to attract, motivate, develop and retain qualified sales personnel, and thereby grow our direct sales forces in Europe, Latin America and Asia, or to expand our distributor, sub-distributor and agent network, we may not be able to maintain or increase our revenues. In addition, if our third-party distributors do not effectively sell our products, we may not be able to maintain or increase our revenues or expand into new countries. If a third-party distributor engages in certain activities, we may lose the ability to sell our products in certain countries or expand into new marks, which could adversely affect our reputation and our revenues.

 

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We lack direct sales and marketing capabilities in many countries, and are wholly dependent on our distributors for the commercialization of our products in these countries. If we are unable to maintain or establish sales capabilities on our own or through third parties, we may not be able to commercialize any of our products in those countries.

We have no direct sales or marketing capabilities in many of the countries in which our products are sold. We have entered into distribution agreements with third parties to market and sell our products in those countries in which we do not have a direct sales force. If we are unable to maintain or enter into such distribution arrangements on acceptable terms, or at all, we may not be able to successfully commercialize our products in certain countries. Moreover, to the extent that we enter into distribution arrangements with other companies, our revenues, if any, will depend on the terms of any such arrangements and the efforts of others. These efforts may turn out not to be sufficient and our third-party distributors may not effectively sell our products. In addition, although our contract terms require our distributors to comply with all applicable laws regarding the sale of our products, including anti-competition, anti-money laundering and sanctions laws, we may not be able to ensure proper compliance. If our distributors fail to effectively market and sell our products in full compliance with applicable laws, our results of operations and business may suffer.

If our IMPLEO line of breast implant products is not accepted in the markets where we operate, our business may be materially adversely affected.

While we have recently commenced active promotion of our IMPLEO line of breast implant products, we have not begun full production and sales at commercial levels, and cannot provide assurance that they will be accepted in all the markets in which we currently operate or in which we may operate in the future. We expect it will take time for women and surgeons to become familiar with our IMPLEO products. Demand and market acceptance for newly introduced products and services are subject to a great deal of uncertainty. Achieving market acceptance, if at all, will require us to undertake substantial marketing efforts to create awareness of and demand for our products. While we intend to make substantial expenditures in connection with marketing our IMPLEO line, we cannot be certain that such efforts will be successful in communicating the value of our products to our potential customers or, even if we are successful in communicating the value of such products to our customers, that our expenditures will lead to new revenues in excess of the costs we incurred and will incur in developing, manufacturing and commercializing the products. We have limited marketing experience and limited financial, personnel and other resources to undertake extensive marketing activities. Our efforts will be subject to all of the risks associated with the commercialization of new products, including, among other risks, unanticipated delays, expenses and technical problems or difficulties. There can be no assurance that sustainable markets for our IMPLEO line will materialize or that our strategies will result in its successful commercialization or market acceptance.

Risks associated with our global operations, including seeking, obtaining and maintaining regulatory approval to commercialize our products in the jurisdictions where our products are sold, could harm our business.

We have extensive global operations, which include seeking various regulatory approvals for most of our products in the jurisdictions where our products are sold. We expect that we are or will be subject to risks related to entering into these various countries, including:

 

    different regulatory requirements for product approvals;

 

    reduced protection for intellectual property rights;

 

    unexpected changes in tariffs, trade barriers and regulatory requirements;

 

    economic weakness, including inflation, currency controls and political instability in particular global economies and markets;

 

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    compliance with tax, employment, immigration and labor laws for employees living or traveling in these countries;

 

    different regulatory anti-corruption regimes;

 

    taxes, including withholding of payroll taxes; and

 

    business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters.

If any of these disruptions in the countries in which our products are sold materializes, our financial condition and results of operations may be adversely affected.

Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

Although we present our results of operations in US dollars, our functional currency is the Euro and a majority of our revenue is denominated in currencies other than the US dollar. In particular, we have significant revenue and expenses in the Euro, Sterling, US dollar and Brazilian Real. As such, unfavorable fluctuations in foreign currency exchange rates could have a material adverse effect on our results of operations.

Because our combined consolidated financial statements are presented in US dollars, we must translate revenues, expenses and income, as well as assets and liabilities, into US dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the US dollar and Euro against other currencies will affect our revenues, operating income and the value of balance sheet items originally denominated in other currencies. These changes cause our growth in consolidated earnings stated in US dollars to be higher or lower than our growth in local currency when compared against other periods. Given our lack of currency hedging arrangements to protect us from fluctuations in the exchange rates of the Euro and other foreign currencies in relation to the US dollar (and/or from inflation of such foreign currencies), we may be exposed to material adverse effects from such movements. We cannot predict any future trends in rates of inflation or exchange rates of foreign currencies against the US dollar, and there can be no assurance that any contractual provisions will offset their impact, or that any future currency hedging activities will be successful.

Developments in emerging market countries may adversely affect our business.

Many of the countries in which our products are sold are emerging markets. Our global growth strategy contemplates the expansion of our existing sales activities in Latin America, EMEA and Asia-Pacific, and the potential addition of a manufacturing facility in Latin America. Our exposure to other emerging markets has increased in recent years, as have the number and importance of our distributor arrangements. Economic and political developments in Brazil and other emerging markets, including economic crises or political instability, have had in the past and may have in the future a material adverse effect on our financial condition and results of operations. Maintaining and strengthening our position in these emerging markets is a key component of our global growth strategy. Moreover, as these markets continue to grow, competitors may seek to enter these markets and existing market participants will likely try to aggressively protect or increase their market shares. Increased competition may result in price reductions, reduced margins and our inability to gain or hold market share, which could have a material adverse effect on our financial condition and results of operations.

 

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If general economic conditions or changes in consumer spending, preferences or other trends reduce consumer demand for our products in the markets in which we sell our products, our revenues and profitability would suffer.

We are subject to the risks arising from adverse changes in general economic and market conditions. Elective procedures, such as breast augmentation, are typically not covered by insurance. Adverse changes in the economy may cause consumers to reassess their spending choices and reduce the demand for these surgeries and could have an adverse effect on consumer spending on discretionary procedures. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, wages and unemployment, housing prices, consumer debt, interest rates, fuel and energy costs, taxation, political conditions, the availability of consumer credit and consumer confidence in future economic conditions. While trends in consumer discretionary spending remain unpredictable, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower or during other periods of economic instability or uncertainty. This shift could have an adverse effect on our revenues. Furthermore, in addition to worsening economic conditions, consumer preferences and trends may shift due to a variety of factors, including changes in demographic and social trends, public health initiatives and product innovations, which may reduce consumer demand for our products and result in a material adverse effect on our business, financial condition and results of operations.

Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products and manage our inventory.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our breast implant and other products could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, which would cause our gross margin to suffer and could impair the strength of our brand. Conversely, if we underestimate customer demand for our products, our manufacturing facilities may not be able to deliver products to meet our requirements, and this could result in damage to our reputation and customer relationships. In addition, if we experience a significant increase in demand, additional supplies of raw materials or additional manufacturing capacity may not be available when required on terms that are acceptable to us, or at all, or suppliers or our manufacturing facilities may not be able to allocate sufficient capacity in order to meet our increased requirements, which could have an adverse effect on our ability to meet consumer demand for our products and our results of operations.

We and our distributors are required to maintain high levels of inventory, which could consume a significant amount of our resources and reduce our cash flows.

We and our distributors need to maintain substantial levels of inventory where the surgeons who use our breast implant products are located in order to ensure access to a wide range of our breast implant products and to protect ourselves and our distributors from supply interruptions, such as those caused by transportation- or importation-related delays. As a result of our and our distributors’ substantial inventory levels, we are subject to the risk that a substantial portion of our inventory becomes obsolete, which could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory.

 

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Various factors outside our direct control may adversely affect manufacturing, sterilization and distribution of our breast implant products and other products.

The manufacturing, sterilization and distribution of our breast implant products and other products are technically challenging. Changes that our suppliers may make outside the purview of our direct control can have an impact on our processes, on quality and the successful delivery of products to our customers. Mistakes and mishandling are not uncommon and can affect supply and delivery. Some of these risks include:

 

    failure to complete sterilization on time or in compliance with the required regulatory standards;

 

    transportation and import and export risk, particularly given the global nature of our supply and distribution chains;

 

    delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products;

 

    natural disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; and

 

    latent defects that may become apparent after products have been released and that may result in a recall of such products.

If any of these risks were to materialize, our ability to provide our products to customers on a timely basis would be adversely impacted.

Any disruption at our manufacturing facilities could adversely affect our business and results of operations.

Our principal offices are located in Dublin, Ireland. All of our implant manufacturing is conducted at our facilities in Ashby de la Zouche, United Kingdom, Cumbernauld, United Kingdom, and Apt, France. Our inventory of finished goods is held at these facilities, as well as at our facilities in Brazil and Spain. Our agents in Germany and Italy hold additional inventory.

Despite our efforts to maintain and safeguard our manufacturing facilities, including acquiring insurance and adopting maintenance and health and safety protocols, vandalism, terrorism or a natural or other disaster, such as fire or flood, could damage or destroy our inventory of finished goods, cause substantial delays in our operations and manufacturing, result in the loss of key information and cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and results of operations.

If we fail to compete effectively against our competitors, many of whom have greater resources than we have, our revenues and results of operations may be negatively affected.

Our industry is intensely competitive and subject to rapid change from the introduction of new products, technologies and other activities of industry participants. Our primary competitors include Mentor Worldwide, LLC, a division of Johnson & Johnson, and Allergan plc. These companies are well-capitalized pharmaceutical companies that have been the market leaders for many years and control a majority share of the breast implant products market. These competitors also enjoy several competitive advantages over us, including:

 

    greater financial and human resources for sales, marketing and product development;

 

    an established base of long-time customers;

 

    larger and more established distribution networks;

 

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    greater ability to cross-sell products; and

 

    more experience in conducting research and development, manufacturing and obtaining regulatory approvals or clearances.

In addition, in Brazil, we compete with Silimed Ltda (“Silimed”), a leading Brazilian supplier of breast implant products. In certain of the countries in which we operate, we also compete with several other breast implant manufacturers, including Groupe Sebbin SAS and Establishment Labs S.A., which sell their breast implant products at significantly lower prices than those of our Nagôr and Eurosilicone breast implant products.

We may in the future also face increased competition from our primary competitors if they choose to focus more efforts or resources on the breast implant market and increasing their market share. If we fail to compete effectively against our competitors, our revenues and results of operations may be negatively affected.

We have been and may in the future be subject to product liability or warranty claims or other litigation in the ordinary course of business that may be costly, divert management’s attention, harm our reputation and adversely affect our business, financial condition and results of operations. We may not be able to maintain adequate product liability insurance.

As a supplier of medical devices, we have been and may in the future be subject to product liability or warranty claims alleging that the use of our products has resulted in adverse health effects or other litigation in the ordinary course of business that may require us to make significant expenditures to defend these claims or pay damage awards. The breast implant industry has a particularly significant history of product liability litigation. The risks of litigation exist even with respect to products that have received or in the future may receive regulatory approval for commercial sale. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities and reputational harm. In addition, regardless of merit or eventual outcome, product liability claims are costly, distract management’s attention from our primary business, diminish our ability to commercialize our existing or new products, decrease demand for our products, damage our business reputation and result in loss of revenue. In addition, our silicone breast implant products are sold with our GCA Comfort Guarantee, a warranty providing for no-charge replacement implants throughout the life of the patient in the event of either (i) internal rupture of the implant due to the loss of shell integrity or (ii) severe capsular contracture.

We maintain product liability insurance, but this insurance is limited in amount and subject to significant deductibles. There is no guarantee that insurance will be available or adequate to protect against all claims. Our insurance policies are subject to annual renewal and we may not be able to obtain liability insurance in the future on acceptable terms or at all. In addition, our insurance premiums could be subject to increases in the future, which may be material. If the coverage limits are inadequate to cover our liabilities or our insurance costs continue to increase as a result of warranty or product liability claims or other litigation, then our business, financial condition and results of operations may be adversely affected.

If there are significant disruptions in our information technology systems, our business, financial condition and results of operations could be adversely affected.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory, product development tasks and customer service and technical support functions. We are currently implementing an enterprise resource planning system (“ERP system”). ERP system implementations are complex, long-term projects that require significant investment of capital and human resources, the re-engineering of many business processes and the attention of many employees who would otherwise be focused on other aspects of our business. Any disruptions, delays or deficiencies in the design and implementation of the improvements to our ERP system could result in potentially much higher costs than anticipated and could adversely affect our ability to develop and launch solutions, fulfill contractual obligations, file reports with the

 

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SEC in a timely manner or otherwise operate our business and our controls environment. Moreover, despite our security measures, our information technology systems, including the ERP system, are vulnerable to damage or interruption from fires, floods and other natural disasters, terrorist attacks, computer viruses or hackers, power losses and computer system or data network failures, which could result in significant data losses or theft of sensitive or proprietary information. Any of these consequences could have an adverse effect on our business.

In addition, a variety of our software systems are hosted by third-party service providers whose security and information technology systems are subject to similar risks. The failure of our or our service providers’ information technology could disrupt our entire operation or result in decreased sales, increased overhead costs and product shortages, all of which could have a material adverse effect on our reputation, business, financial condition and results of operations.

Fluctuations in insurance cost and availability could adversely affect our profitability and our risk management profile.

We hold a number of insurance policies, including product liability insurance, directors’ and officers’ liability insurance, public liability insurance and property insurance. If the costs of maintaining adequate insurance coverage increase significantly in the future, our results of operations could be materially adversely affected. Likewise, if any of our current insurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity from commercial insurance providers. If we operate our business without insurance, we could be responsible for paying claims or judgments against us and would be exposed to significant liabilities that would have otherwise been covered by insurance. A product liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse impact on our results of operations or financial condition.

Labor issues could adversely affect our business.

As of December 31, 2014, approximately 65% of our employees were covered by collective bargaining agreements or represented by labor unions. We are required to consult with our employee representatives, such as works councils, on certain matters, including restructurings, acquisitions and divestitures. Although we believe that our relations with our employees are good, there can be no assurance that new agreements will be reached or consultations will be completed without discord with these labor unions or works councils or on terms satisfactory to us. A strike, work slowdown or other labor unrest could impair our ability to supply our products to customers, which could result in reduced revenue and customer claims, and may distract our management from focusing on other aspects of our business and strategic priorities. In addition, as a result of our global operations, we are subject to differing labor relations laws and regulations, and our failure to comply with any of these laws could subject to us to monetary or other type of penalties, which could adversely affect our revenues and results of operations.

We are subject to credit risks related to our accounts receivable and failure to collect our accounts receivable could adversely affect our results of operations and financial condition.

The failure to collect outstanding receivables could have an adverse impact on our business, prospects, results of operations and financial condition. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, or if our customers cannot pay us as a result of currency exchange controls limiting the amount of US dollars that may be exported from certain countries in which we sell our products, then we might be required to make additional allowances, which would adversely affect our results of operations in the period in which the determination or allowance was made. The current economic climate and our significant operations in emerging markets could increase the likelihood of customer defaults and bankruptcies. If a material portion of our customers or distributors were to default, become insolvent or otherwise were not able to satisfy their obligations to us, we would be materially harmed. As of December 31, 2014, of our $13.9 million of trade receivables, $6.4 million were past due and $1.1 million were impaired, and, after giving effect to this allowance for doubtful accounts, we had exposure of $5.3 million. As of March 31, 2015, of our $13.0 million of gross trade receivables, $5.4 million were past due and $1.1 million were impaired, and, after giving effect to our allowance for doubtful accounts, we had exposure of $4.3 million.

 

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Risks Related to Our Financial Results and Need for Financing

Our quarterly revenues and results of operations are unpredictable and may fluctuate significantly from quarter to quarter due to many factors, including factors outside our control, which could adversely affect our business, results of operations and the trading price of our ordinary shares.

Our revenues and results of operations may vary significantly from quarter to quarter and year to year due to a number of factors, many of which are outside of our control and any of which may cause the price of our ordinary shares to fluctuate. Our revenues and results of operations will be affected by numerous factors, including:

 

    the impact of the buying patterns of patients and seasonal cycles in consumer spending, which may cause patients to delay elective procedures;

 

    our ability to drive increased sales of breast implant and other products;

 

    our ability to establish and maintain an effective and dedicated sales organization and distributor network;

 

    reimbursements related to reconstruction procedures;

 

    pricing pressure applicable to our products;

 

    timing of our development activities and initiatives and inspections by regulatory or governmental bodies;

 

    the mix of our products sold due to different profit margins among our products, direct versus distributor sales and geographic mix of our sales.

 

    foreign exchange rate changes;

 

    timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors;

 

    the ability of our suppliers to timely provide us with an adequate quality supply of medical-grade silicone;

 

    the evolving product offerings of our competitors;

 

    loss of existing regulatory approvals and legislative changes affecting the products we offer or those of our competitors;

 

    adverse publicity or government actions or legal costs related to various lawsuits;

 

    increased labor and related costs;

 

    interruption in the manufacturing or distribution of our products or loss of any of our manufacturing facilities;

 

    the effect of competing technological, industry and market developments; and

 

    our ability to expand the geographic reach of our sales and marketing efforts.

 

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Many of the products we may seek to develop and introduce in the future will require regulatory approval or clearance and import licenses before we can sell such products in the countries in which we sell our products. Given that the timing of such approvals, clearances or licenses may be uncertain, it will be difficult for us to forecast sales projections for these products with any degree of certainty before such approvals, clearances or licenses are obtained. In addition, we will be increasing our operating expenses as we expand our commercial capabilities. Accordingly, we may experience significant, unanticipated quarterly losses. If our quarterly or annual results of operations fall below the expectations of investors or securities analysts, the price of our ordinary shares could decline substantially.

We may need to raise substantial additional funds in the future to achieve our goals, these funds may not be available on acceptable terms or at all, and a failure to obtain this necessary capital when needed could force us to delay, limit, scale back or cease our some or all operations.

As of March 31, 2015, we had $3.2 million in cash and cash equivalents. We believe that our available cash on hand and proceeds from this offering will be sufficient to satisfy our liquidity requirements for at least the next twelve months. However, the continued growth of our business, including the expansion of our sales force and marketing programs, and development activities, will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict and actual sales may not be in line with our forecasts. As a result, we may need to raise substantial additional funds in the future. Our need to raise additional funds will depend on many factors, including:

 

    the revenues generated by our breast implant products and other products, and any future products that we may develop and commercialize;

 

    the costs associated with product guarantees;

 

    the cost associated with expanding our sales force and marketing programs;

 

    the cost associated with developing and commercializing our proposed products or technologies;

 

    the cost of obtaining and maintaining regulatory clearances and approvals for our current or future products;

 

    the cost of ongoing compliance with regulatory requirements;

 

    the cost of ongoing compliance and debt service obligations under the Credit Facility;

 

    expenses we incur in connection with potential litigation or governmental investigations;

 

    anticipated or unanticipated capital expenditures; and

 

    unanticipated administrative expenses and other costs.

As a result of these and other factors, we do not know whether or to what extent we may be required to raise additional funds. We may in the future seek additional funds from public or private offerings of our ordinary shares and other equity instruments, debt offerings, borrowings under term loans or other sources, subject to the restrictions under the Credit Facility. If we issue equity or debt securities to raise additional funds, our existing shareholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing shareholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our current or potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.

 

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If we are unable to raise additional funds on a timely basis or on terms that are acceptable to us, or at all, we may not be able to expand our sales force and marketing programs, enhance our current products or develop new products, take advantage of future opportunities, or respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer demand. We may also default on the principal and interest due under the Credit Facility. Any of these events could adversely affect our ability to achieve our strategic objectives, which could have a material adverse effect on our business, financial condition and results of operations.

Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business and restrict our operating flexibility.

We have a significant amount of indebtedness. As of April 2015, we have borrowed an aggregate principal amount of $59.0 million under the Credit Facility, which amount is guaranteed by substantially all of our subsidiaries and collateralized by substantially all of our assets. Beginning in February 2019, and quarterly thereafter, we are required to make principal payments equal to one-quarter of the aggregate principal amount outstanding under the Credit Facility as of January 22, 2019, until the outstanding principal has been repaid in full. We are also required to make cash interest payments on certain dates, including (i) the last day of each fiscal quarter, (ii) the maturity date and (iii) the date of any payment or prepayment of principal outstanding. This repayment structure will require a significant cash commitment.

If we decide or are required to repay the loans under the Credit Facility before their maturity dates, we are obligated to pay a prepayment penalty equal to 10% of the principal amount prepaid plus an additional fee based on the date of prepayment. We also would be required to make cash interest payments on any portion of such an accelerated repayment. The Credit Facility is subject to acceleration upon certain defaults and in the event any person or group, excluding Montreux, Oyster and their respective affiliates, acquires 35% or more of our share capital.

Our obligations under the Credit Facility coupled with our other financial obligations and contractual commitments could have significant adverse consequences for our business, including:

 

    requiring us to dedicate a substantial portion of cash and cash equivalents to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, capital expenditures, acquisitions, product development efforts and other general corporate purposes;

 

    causing us to incur substantial fees from time to time in connection with debt amendments, refinancings or prepayments;

 

    increasing our exposure to rising interest rates, because our borrowings are at variable interest rates;

 

    increasing our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness;

 

    limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and

 

    placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents and revenues from product sales. However, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under the Credit Facility.

 

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Failure to comply with the conditions of the Credit Facility could result in an event of default under the facility, which could result in an acceleration of amounts due under the Credit Facility. We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and OrbiMed could seek to enforce security interests in the collateral securing such indebtedness, which would have a material adverse effect on our business.

Changes in our effective tax rate may reduce our net income in future periods.

We cannot give any assurance as to what our effective tax rate will be because of, among other things, uncertainty regarding the tax policies of the jurisdictions where we operate. In general, under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally managed and controlled in Ireland, or if it is incorporated in Ireland. Trading income of an Irish resident company is generally taxable at the Irish corporation tax rate of 12.5%. Non-trading income of an Irish resident company (e.g., interest income, rental income, dividends or other passive income) is taxable at a rate of 25%. It is possible that in the future, whether as a result of a change in law or the practice of any relevant tax authority or as a result of any change in the conduct of our affairs, we could become, or be regarded as having become tax resident in a jurisdiction other than Ireland. Should we cease to be an Irish tax resident, we may be subject to a charge of Irish capital gains tax as a result of a deemed disposal of our assets. Our actual effective tax rate may vary from our expectation and that variance may be material. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such changes could cause a material adverse change in our effective tax rate.

A number of factors may increase our future effective tax rates, including: the jurisdictions in which profits are determined to be earned and taxed; the resolution of issues arising from tax audits that may be undertaken by various tax authorities; changes in the valuation of our deferred tax assets and liabilities; increases in expense not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions; changes in available tax credits; changes in share-based compensation; changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles; and challenges to the transfer pricing policies related to our structure. Currently, the Organization for Economic Co-Operation and Development is reviewing the tax rules relating to base erosion and profit shifting. Our effective tax rate could be affected to the extent that countries adopt proposals arising from this review.

If our tax rates were to increase as described above, such increases could cause a material and adverse change in our worldwide effective tax rate and we may have to take action, at potentially significant expense, to seek to mitigate the effect of such changes. In addition, any amendments to the current double taxation treaties between Ireland and other jurisdictions could subject us to increased taxation. In the normal course of business, we are subject to examination by various taxing authorities, including Ireland, France, Italy, Spain, the United Kingdom, Germany, Brazil and Mexico. Any such amendments to double taxation treaties or increases in taxation based on examinations by taxing authorities (if such increases are ultimately sustained) could result in increased charges, financial loss, including penalties, and reputational damage and materially and adversely affect our results, financial condition and prospects.

Future changes in financial accounting standards may cause adverse unexpected revenue or expense fluctuations and affect our reported results of operations.

A change in accounting standards could have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New pronouncements and varying interpretations of existing pronouncements have occurred and may occur in the future. Changes to existing rules or current practices may adversely affect our reported financial results of our business.

 

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Risks Related to Our Legal and Regulatory Environment

Our medical device products and operations, including manufacturing, are subject to extensive governmental regulation, including health, environmental, safety and anti-corruption and other laws, and our failure to comply with applicable requirements could cause our business to suffer.

Our medical device products and operations, including manufacturing, are subject to regulation by the agencies governing medical device products in the various countries in which we operate, manufacture and sell our products. These agencies enforce laws and regulations that are meant to assure product safety and effectiveness, including the regulation of, among other things:

 

    design, development and manufacturing;

 

    testing, labeling, content and language of instructions for use and storage;

 

    product safety;

 

    clinical trials;

 

    marketing, sales and distribution;

 

    regulatory clearances and approvals, including pre-market clearance and approval;

 

    conformity assessment procedures;

 

    product traceability and record keeping procedures;

 

    advertising and promotion;

 

    product complaints, complaint reporting, recalls and field safety corrective actions;

 

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

 

    post-market studies; and

 

    product import and export.

The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated revenues.

Failure to comply with applicable laws and regulations could jeopardize our ability to manufacture or sell our products and result in enforcement actions such as warning letters, fines, injunctions and civil penalties, termination of distribution, recalls or seizures of products, delays in the introduction of products into the market, total or partial suspension of production, refusal of the regulating agency to grant future clearances or approvals, withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our products and/or, in the most serious cases, criminal penalties. Any of these sanctions could result in higher than anticipated costs or lower than anticipated revenues and have a material adverse effect on our reputation, business, results of operations and financial condition.

 

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We are subject to various laws protecting the confidentiality of certain patient health information, and our failure to comply could result in penalties and reputational damage.

Numerous countries in which we operate, manufacture and sell our products have, or are developing, laws protecting the confidentiality of certain patient health information. European Union (“EU”) member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. For example, the EU Data Protection Directive, as implemented into national laws by the EU member states, imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. Data protection authorities from different EU member states may interpret the EU Data Protection Directive and national laws differently, which adds to the complexity of processing personal data in the EU, and guidance on implementation and compliance practices are often updated or otherwise revised. The EU Data Protection Directive prohibits the transfer of personal data to countries outside of the EU member states that are not considered by the European Commission to provide an adequate level of data protection.

We have policies and practices that we believe make us compliant with applicable privacy regulations. Nevertheless, any failure to comply with the rules arising from the EU Data Protection Directive and related national laws of EU member states, as well as privacy laws in other countries in which we operate, could lead to government enforcement actions and significant sanctions or penalties against us, adversely impact our results of operations and subject us to negative publicity.

A proposal for an EU Data Protection Regulation, intended to replace the current EU Data Protection Directive, is currently under consideration. The EU Data Protection Regulation is expected to introduce new data protection requirements in the EU and substantial fines for breaches of the data protection rules. If the draft EU Data Protection Regulation is adopted in its current form, it may increase our responsibility and liability in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new EU data protection rules.

We are required to comply with medical device reporting and vigilance requirements, and must report certain malfunctions, deaths and serious injuries associated with our products, which can result in voluntary corrective actions or agency enforcement actions.

All manufacturers placing medical devices on the market in the EEA are legally bound to report any incidents involving devices they produce or sell to the competent authority in whose jurisdiction the incident occurred if the incident led or might have led to the death of or serious injury to a patient, user or other person. Manufacturers are also required to report incidents that occur outside the EEA if they result in corrective action being taken within the EEA. Were we to submit an incident report, the relevant competent authority would file an initial report, and there would then be a further inspection or assessment if there are particular issues. Similar reporting and vigilance requirements exist in many of the other countries in which we operate. Failure to comply with such reporting and vigilance requirements may result in various penalties, including criminal or civil sanctions or revocation of our product clearances.

Malfunction of our products could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease manufacture and distribution of the affected products, initiate voluntary recalls and redesign the products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results. In addition, we may become subject to costly litigation by our surgeons or their patients.

If we fail to comply with our reporting obligations or corrective actions, regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, seizing the affected products, issuing warning

 

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letters or untitled letters, instituting administrative actions or criminal prosecution, imposing civil monetary penalties, revoking our device clearances or delaying the clearance of future products.

We may be subject to regulatory or enforcement actions if we engage in improper marketing or promotion of our products.

Our educational and promotional activities and training methods must comply with the applicable regulatory laws of the jurisdictions in which we operate, including, but not limited to, the prohibition of the promotion of a medical device for a use that has not been cleared or approved by the applicable regulator. Use of a device outside of its cleared or approved indications is known as “off-label” use. If a governing regulatory agency determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of warning letters, fines, penalties, injunctions or seizures, which could have an adverse impact on our reputation and financial results. Although our policy is to refrain from statements that could be considered off-label promotion of our products, regulatory agencies could disagree and conclude that we have engaged in off-label promotion. In addition, the off-label use of our products may increase the risk of product liability claims.

The regulatory approval process is costly and lengthy and we may not be able to obtain the clinical data require to successfully obtain approval to market and sell our products in the jurisdictions in which we intend to commercialize such products.

To market a medical device, in most jurisdictions, we must obtain approval or clearance from the relevant governing regulatory body. In some countries, this requires that we conduct controlled clinical trials designed to test the safety, and, depending on the device, the efficacy of the product for which we are seeking approval or clearance. Clinical testing is expensive, and typically takes many years, without any certainty of outcome. The data obtained from clinical trials may be inadequate to support approval or clearance. In addition, the occurrence of unexpected findings in connection with clinical trials may prevent or delay obtaining approval or clearance, and could affect approvals or clearances we have obtained for the product in other jurisdictions. The initiation and completion of any clinical trials may be prevented, delayed or halted for numerous reasons, including, but not limited to, the following reasons:

 

    regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol or place a clinical study on hold;

 

    subjects do not enroll in, or enroll at the expected rate, or complete a clinical study;

 

    subjects or investigators do not comply with study protocols;

 

    subjects do not return for post-treatment follow-up at the expected rate;

 

    subjects experience serious or unexpected adverse side effects for a variety of reasons that may or may not be related to our products, causing a clinical study to be put on hold;

 

    sites participating in an ongoing clinical study may withdraw, requiring us to engage new sites;

 

    difficulties or delays associated with establishing additional clinical sites;

 

    third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule or act in a manner that is inconsistent with the investigator agreement, clinical study protocol, good clinical practices or other regulatory requirements;

 

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    third-party organizations do not perform data collection and analysis in a timely or accurate manner;

 

    regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;

 

    changes in applicable statutes, regulations or policies;

 

    interim results are inconclusive or unfavorable as to immediate and long-term safety;

 

    the study design is inadequate to demonstrate safety; or

 

    the clinical trials do not meet the study endpoints.

Failure can occur at any stage of clinical testing. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing in addition to that which we have planned. Our failure to adequately demonstrate the safety and, if required, efficacy of any of our devices would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device in the target jurisdiction.

We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act, the Irish Criminal Justice (Money Laundering and Terrorist Financing) Act and other anti-corruption and anti-money-laundering laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our global operations expose us to trade and economic sanctions and other restrictions imposed by the United States, the European Union and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act (the “FCPA”) and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”). In addition, the U.K. Bribery Act of 2010 (the “Bribery Act”) prohibits both domestic and international bribery, as well as bribery across both private and public sectors. An organization that “fails to prevent bribery” by anyone associated with the organization can be charged under the Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery. The Irish Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended (the “Irish Money Laundering Act”), provides for criminal sanctions for engaging in “money laundering offences,” which are offenses committed where a person knows or believes that (or is reckless as to whether or not) the property represents the proceeds of criminal conduct and the party is involved in concealing or disguising the true nature, source, location, disposition, movement or ownership of property; converting, transferring, handling acquiring possession or using the property; or removing the property from, or bringing the property into, Ireland. Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or regulations could adversely impact our business, results of operations and financial condition.

Recent events in Ukraine and Crimea have resulted in the European Union and the United States imposing and escalating sanctions on Russia and certain businesses, sectors and individuals in Russia. The European Union and the United States have also suspended the granting of certain types of export licenses to

 

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Russia. Russia has imposed its own sanctions on certain individuals in the United States and may impose other sanctions on the United States and the European Union and/or certain businesses or individuals from these regions. Although our products are not currently subject to such sanctions, we cannot assure you that the current sanctions or any further sanctions imposed by the European Union, the United States or other international interests will not materially adversely affect our operations.

We have implemented and maintain policies and procedures designed to ensure compliance by us, our subsidiaries and our directors, officers, employees, representatives, distributors, consultants and agents with the FCPA, OFAC restrictions, the Bribery Act, the Irish Money Laundering Act and other export control, anti-corruption, anti-money-laundering and anti-terrorism laws and regulations. We cannot assure you, however, that our policies and procedures are sufficient or that directors, officers, employees, representatives, distributors, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct. Violations of the FCPA, OFAC restrictions, the Bribery Act, the Irish Money Laundering Act or other export control, anti-corruption, anti-money-laundering and anti-terrorism laws or regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Our relationships with customers, healthcare providers and professionals is subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

The medical device industry and related businesses have been the subject of various corruption investigations in connection with marketing to healthcare providers and hospitals in certain of the countries in which we operate. Surgeons and other health professionals play a primary role in the recommendation of our products. Our future arrangements with customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products. Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations involves substantial costs. It is possible that governmental authorities conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and the curtailment or restructuring of our operations.

Our operations involve hazardous materials and we and third parties with whom we contract must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our business activities involve the controlled storage and use of hazardous materials. We and suppliers with whom we may contract are subject to environmental, health and safety laws and regulations, including those governing the use, handling, storage, disposal and human exposure to hazardous and toxic materials. In some cases, these hazardous and toxic materials and various wastes resulting from their use are stored at our facilities pending their use and disposal. We cannot eliminate the risk of accidental contamination or injury from these materials, which could cause an interruption of our commercialization efforts, research and development efforts and business operations and environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and waste products. We cannot guarantee that the safety procedures utilized by the suppliers with whom we contract will comply with the standards prescribed by laws and regulations or will eliminate the risk of accidental contamination or injury from these materials. We may be held liable for any resulting damages and such liability could exceed our resources and European or other applicable authorities may curtail our use of certain materials and/or interrupt our manufacturing and business operations. Furthermore, liability under environmental laws and regulations can be

 

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joint and several and without regard to comparative fault, and environmental laws and regulations could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations, which could have an adverse impact on our business. We cannot predict the impact of such changes and cannot be certain of our future compliance. Although we believe that our activities conform in all material respects with environmental, health and safety laws, there can be no assurance that violations of environmental, health and safety laws and regulations will not occur in the future as a result of human error, accident, equipment failure or other causes. The failure to comply with past, present or future laws and regulations could result in the imposition of fines, third-party property damage and personal injury claims, investigation and remediation costs, the suspension of production or a cessation of operations. We also expect that our operations will be affected by other new environmental, health and safety laws and regulations on an ongoing basis. Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, and may require us to change how we manufacture our products, which could have an adverse impact on our business.

We do not currently carry comprehensive hazardous waste insurance coverage. In the event of an accident or environmental discharge, we may be held liable for any consequential damage and any resulting claims for damages, which may exceed our financial resources and may materially adversely affect our business, results of operations and prospects and the value of our ordinary shares.

Risks Related to Our Intellectual Property

If our trademarks, service marks or trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We rely on trademark protection to protect our business and our products and services. Our registered or unregistered trademarks, service marks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks, service marks and trade names, which we may need to build name recognition among potential partners or customers in our markets of interest. Over the long-term, if we are unable to establish name recognition based on our trademarks, service marks or trade names, then we may not be able to compete effectively and our business may be adversely affected.

If our intellectual property rights do not adequately protect our products or technologies, others could compete against us more directly, which would hurt our profitability.

Our success depends in part on our ability to protect our intellectual property rights. We rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies and seek protection of our rights, in part, through confidentiality and proprietary information agreements. Although we generally require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to assign or grant similar rights to their inventions to us, and endeavor to execute confidentiality agreements with all such parties, we cannot be certain that we have executed such agreements with all parties who may have contributed to our intellectual property or who had access to our proprietary information, nor can we be certain that our agreements with such parties will not be breached. In addition, these agreements may not provide adequate remedies for violation of our rights in the event of unauthorized use or disclosure of confidential and proprietary information. Such unauthorized use or disclosure may enable competitors to duplicate or surpass our technological achievements. We cannot guarantee that our trade secrets and other confidential proprietary information will not be publicly disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Failure to protect our proprietary rights could seriously impair our competitive position.

We have one patent. Our patent may be challenged, invalidated, circumvented or rendered unenforceable. We cannot assure you that we will be successful should our patent be challenged for any reason. If our patent is rendered invalid or unenforceable, or narrowed in scope, it could have an adverse effect on our

 

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business. We cannot assure you that any future patent applications held by us will result in an issued patent, or that if patents are issued to us, that such patents will provide meaningful protection against competitors or against competitive technologies. The issuance of a patent is not conclusive as to its validity or its enforceability. Courts or patent offices may invalidate our patents or find them unenforceable. Competitors may also be able to design around our patents or obtain patent protection for more effective technologies, designs or methods. If any of these developments were to occur, it could impair our competitive position and have an adverse effect on our business.

If our trademarks, service marks or trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

We rely on trademark protection to protect our business and our products and services. Our registered or unregistered trademarks, service marks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks, service marks and trade names, any of which we may need to build name recognition among potential partners or customers in our markets of interest. Over the long-term, if we are unable to establish name recognition based on our trademarks, service marks or trade names, then we may not be able to compete effectively and our business may be adversely affected.

The medical device industry is characterized by intellectual property litigation and we could become subject to litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages or prevent us from marketing our existing or future products.

Our commercial success will depend in part on not infringing or violating the intellectual property rights of others. Significant litigation regarding intellectual property occurs in our industry. Our competitors, some of which have substantially greater resources than we do and have made substantial intellectual property investments in competing technologies, may have applied for or obtained, or may in the future apply for and obtain, patent rights and other intellectual property that will prevent, limit or otherwise interfere with our ability to make, use and sell our products. We may not be aware of whether our products do or will infringe existing or future patents or the intellectual property rights of others. In addition, patent applications can be pending for many years, and may be confidential for a number of months after filing, and because pending patent claims can be revised before issuance, there may be applications of others now pending of which we are unaware that may later result in issued patents that will prevent, limit or otherwise interfere with our ability to make, use or sell our products. Any lawsuits resulting from allegations that the operation of our business infringes the intellectual property rights of third parties could subject us to significant liability for damages and invalidate our proprietary rights, even if they lack merit. Any potential intellectual property litigation also could force us to do one or more of the following:

 

    stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property;

 

    lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others;

 

    incur significant legal expenses;

 

    pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;

 

    pay the attorney fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;

 

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    redesign or rename, in the case of trademark claims, those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and/or infeasible; or

 

    attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.

Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If we are found to infringe the intellectual property rights of third parties, we could be required to pay substantial damages and/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products to avoid infringement. Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would be able to redesign our products in a way that would not infringe the intellectual property rights of others. If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products, all of which could have a material adverse effect on our business, results of operations and financial condition.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged know-how or trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.

Some of our employees were previously employed at other medical device companies, including our competitors or potential competitors, in some cases until recently. We may be subject to claims that we or our employees have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of these former employers or competitors. In addition, we may be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could have an adverse effect on our business, results of operations and financial condition.

Our distributors may face intellectual property infringement claims and our distribution agreements could require us to indemnify our distributors against any such claims, which could be time-consuming and costly to defend or settle and, if adversely adjudicated, could result in the loss of significant rights.

Third parties may assert claims against our distributors that our products infringe their intellectual property rights. Any such claims, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and technical personnel. Many of our customer and distributor agreements require us to indemnify and defend our distributors, as applicable, from third-party infringement claims and pay damages in the case of adverse rulings. Claims of this sort also could harm our relationships with our distributors and might deter future distributors from doing business with us. If any such proceedings result in an adverse outcome, we could be required to replace infringing technology or refund the distributor the amount paid for any infringing products. Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to enforce our intellectual property rights throughout the world.

Filing, prosecuting and defending our intellectual property in all countries throughout the world would be prohibitively expensive. Moreover, the laws of some countries outside of Europe and the United States do not afford intellectual property protection to the same extent as the laws of Europe and the United States, and many companies have encountered significant problems in protecting and defending intellectual property rights in

 

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certain foreign jurisdictions. If we face similar challenges in respect of material intellectual property matters, this could make it difficult for us to stop the misappropriation of our intellectual property rights, which could have an adverse effect on our business.

Risks Related to this Offering and Ownership of Our Ordinary shares

No public market for our ordinary shares currently exists and an active trading market may not develop or be sustained following this offering.

Prior to this initial public offering, there has been no public market for our ordinary shares. Although our ordinary shares are expected to be approved for listing on the NASDAQ Global Market, an active trading market may not develop or be sustained following the completion of this offering. The lack of an active market may impair your ability to sell your ordinary shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value or the trading price of your ordinary shares. An inactive market may also impair our ability to raise capital by selling ordinary shares and may impair our ability to acquire other companies or technologies by using our ordinary shares as consideration.

The price of our ordinary shares may be volatile, and you may not be able to resell our ordinary shares at or above the initial public offering price.

The initial public offering price for our ordinary shares has been determined through our negotiations with the underwriters and may not be representative of the price that will prevail in the open market following the offering. Our ordinary share price after the completion of this offering may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this prospectus and others, such as:

 

    a slowdown in the medical device industry, the aesthetics industry or the countries in which we operate;

 

    actual or anticipated quarterly or annual variations in our results of operations or those of our competitors;

 

    changes in foreign currency exchange rates;

 

    changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results;

 

    actual or anticipated changes in our growth rate relative to our competitors;

 

    changes in earnings estimates or recommendations by securities analysts;

 

    fluctuations in the values of companies perceived by investors to be comparable to us;

 

    announcements by us or our competitors of new products or services, significant contracts, commercial relationships, capital commitments or acquisitions;

 

    our ability to continue obtaining raw material from our suppliers;

 

    competition from existing technologies and products or new technologies and products that may emerge;

 

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    the entry into, modification of or termination of agreements with our sales representatives or distributors;

 

    developments with respect to intellectual property rights;

 

    sales, or the anticipation of sales, of our ordinary shares by us, our insiders or our other shareholders, including upon the expiration of contractual lock-up agreements;

 

    our ability to develop and market new and enhanced products on a timely basis;

 

    our commencement of, or involvement in, litigation;

 

    additions or departures of key management or technical personnel; and

 

    changes in laws or governmental regulations applicable to us.

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our ordinary shares, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our ordinary shares shortly following this offering. If the market price of our ordinary shares after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

We are an “emerging growth company” and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not “emerging growth companies.” We may take advantage of these exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of the following occurs: (i) the first fiscal year following the fifth anniversary of this offering, (ii) the first fiscal year after our annual gross revenue is $1 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities and (iv) the end of any fiscal year in which the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year. Most of the exemptions from reporting requirements relate to disclosures that we would only be required to make if we also cease being a foreign private issuer in the future. As a foreign private issuer that is also an emerging growth company:

 

    we are permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

 

    we are exempt from complying with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act;

 

    we are also exempt from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved;

 

    we are permitted to present reduced disclosures regarding executive compensation in our periodic reports; and

 

    we may take advantage of an extended transition period for complying with new or revised accounting standards.

 

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Following the completion of this offering, a small number of our shareholders will have a controlling influence over matters requiring shareholder approval, which could delay or prevent a change of control.

Following the completion of this offering, the largest beneficial owners of our ordinary shares, entities affiliated with Montreux, Oyster and OrbiMed, will own     %, in the aggregate, of our ordinary shares,     % if the underwriters exercise their option to purchase additional ordinary shares in full. In addition, these shareholders currently hold two director positions. As a result, these shareholders, should they choose to act together, or even if they act individually, will exert significant influence over our operations and business strategy and would together have sufficient voting power to control the outcome of matters requiring shareholder approval. These matters may include:

 

    the composition of the Board of Directors (the “Board”), which has the authority to direct our business and to appoint and remove our officers;

 

    approving or rejecting a merger, consolidation or other business combination;

 

    raising future capital; and

 

    amending our articles of association, which govern the rights attached to our ordinary shares.

This concentration of ownership of our ordinary shares could delay or prevent mergers, tender offers, open-market purchase programs or other purchases of our ordinary shares that might otherwise give you the opportunity to realize a premium over the then-prevailing market price of our ordinary shares. This concentration of ownership may also adversely affect the price of our ordinary shares.

Purchasers in this offering will experience immediate dilution in the book value of their investment.

The initial public offering price of our ordinary shares is higher than the net tangible book value per share of our ordinary shares immediately prior to this offering. Therefore, if you purchase our ordinary shares in this offering, you will incur an immediate dilution of $         in pro forma as adjusted net tangible book value per share as of                     , 2015 from the initial public offering price. New investors who purchase ordinary shares in this offering will contribute approximately     % of the total amount of equity capital raised by us through the date of this offering, and will own approximately     % of the outstanding share capital and approximately     % of the voting rights. We have also issued options and warrants to acquire ordinary shares at prices below the initial public offering price. To the extent outstanding options and warrants are ultimately exercised, there will be further dilution to investors who purchase ordinary shares in this offering. In addition, if the underwriters exercise their option to purchase additional ordinary shares or if we issue additional equity securities, investors purchasing ordinary shares in this offering will experience additional dilution. As a result of the dilution to investors purchasing ordinary shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

We do not anticipate paying any cash dividends in the foreseeable future, and accordingly, shareholders must rely on stock appreciation for any return on their investment.

After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our ordinary shares in the foreseeable future. In addition, our ability to pay cash dividends is currently prohibited by Irish law and the terms of our existing loan agreement and may be prohibited by future loan agreements. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain for the foreseeable future.

 

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We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and increasingly after we are no longer an “emerging growth company,” or if we lose our foreign private issuer status, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, U.S. securities laws and regulations and the NASDAQ Stock Market listing rules impose numerous requirements on public companies. Also, the Exchange Act requires, among other things, that we file annual and current reports with respect to our business and results of operations. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations.

These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on the Board and its committees or as executive officers. They are also often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Our registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements included in this prospectus.

Based on our recurring losses from operations and net capital deficiency, and not taking into consideration any proceeds that we will receive in connection with this offering, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements included elsewhere in this prospectus expressing doubt about our ability to continue as a going concern. While we believe that after receipt of the proceeds from this offering we will continue as a going concern for the foreseeable future, we may require additional funding to continue operations and realize our business objectives in the future. If we are unable to continue as a going concern in the future, we may be unable to meet our obligations under the Credit Facility, which could result in an acceleration of our obligation to repay all amounts owed thereunder, and we may be forced to liquidate our assets. In such a scenario, the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

In the course of preparing our consolidated financial statements, we have identified deficiencies in our internal control over financial reporting that could result in a finding of a material weakness. As of the date of this prospectus, these deficiencies have not been remediated. If we fail to achieve effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could materially and adversely affect our results of operations, investors’ views of us and, as a result, the value of our ordinary shares.

Historically, as a private company operating in Ireland, we were not required to prepare financial statements in accordance with IFRS as issued by IASB or to comply with the internal control requirements of the Sarbanes-Oxley Act. As a U.S. public company, our management will be required to report on the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 20-F for the year ended December 31, 2016. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In the course of preparing our consolidated financial statements, we have identified deficiencies in the design and operating effectiveness of our internal control over financial reporting, including deficiencies relating

 

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to: (i) revenue recognition in China; (ii) calculation of tax; and (iii) valuation of the equity derivatives associated with our B Preference Shares and C Preference Shares. These deficiencies, or other deficiencies that we may discover in the future, could result in one or more findings of a material weakness. We plan to take various measures to remediate these deficiencies, including upgrading our information technology systems, hiring additional finance and accounting personnel with appropriate training, building our financial management and reporting infrastructure, hiring external advisors and further developing and documenting our accounting policies and financial reporting procedures. These actions that we are taking are subject to ongoing management review, as well as audit committee oversight. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take and whether our efforts will be successful. Even if successful, remediation of the deficiencies we have identified, and of any additional deficiencies or material weaknesses we may identify, in our control over financial reporting may cause us to incur higher than anticipated operating expenses. Additionally, testing of internal controls, and any remediation undertaken in connection with control deficiencies identified as a result thereof, will require substantial attention from management. Moreover, when we cease to be an “emerging growth company” under the JOBS Act, our auditors may be required to express an opinion on the effectiveness of our internal controls. We can make no assurances that our internal controls will be effective. If our internal control over financial reporting is not effective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which could materially and adversely harm our results of operations, may cause investors to lose confidence in our reported financial information and may lead to a decline in the value of our ordinary shares. We also could be subject to, among other things, regulatory or enforcement actions by the SEC and the NASDAQ Stock Market and could be subject to securities litigation.

Future sales of our ordinary shares by existing shareholders could cause our stock price to decline.

Sales of a substantial number of our ordinary shares in the public market could occur at any time. These sales, or the perception in the market that our officers, directors or the holders of a large number of ordinary shares intend to sell shares, could reduce the market price of our ordinary shares. Based on ordinary shares outstanding as of                     , 2015, upon completion of this offering, we will have outstanding a total of              ordinary shares, assuming no exercise of the underwriters’ option to purchase additional ordinary shares. Of these ordinary shares, only the              ordinary shares sold in this offering by us, plus any ordinary shares sold upon exercise of the underwriters’ option to purchase additional ordinary shares, will be freely tradable, without restriction, in the public market immediately after the offering. Each of our directors and officers and all of our shareholders have entered into lock-up agreements with the underwriters that restrict their ability to sell or transfer their ordinary shares. The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus; however, Merrill Lynch, Pierce, Fenner & Smith Incorporated may, in its sole discretion, permit our directors, officers and shareholders to sell ordinary shares prior to expiration of the lock-up agreements.

After the lock-up agreements expire, based on ordinary shares outstanding as of                     , 2015, up to an additional              ordinary shares will be eligible for sale in the public market, approximately              of which are held by our directors and officers. In addition,              of our ordinary shares that are subject to outstanding options as of                     , 2015 will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and applicable securities laws.

In addition, after this offering, holders of an aggregate of approximately              ordinary shares will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other shareholders.

We cannot predict what effect, if any, sales of our ordinary shares in the public market or the availability of shares for sale will have on the market price of our ordinary shares. Future sales of substantial amounts of our ordinary shares in the public market, including ordinary shares issued upon exercise of outstanding options, or the perception that such sales may occur, however, could adversely affect the market price of our ordinary shares and also could adversely affect our future ability to raise capital through the sale of our ordinary shares or other equity-related securities of ours at times and prices we believe appropriate.

 

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Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways that may not yield a return.

Our management will have considerable discretion in the application of the net proceeds that we receive from this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment.

We expect to use the net proceeds from this offering primarily for expansion of our (i) sales and marketing activities in new countries, (ii) sales and marketing activities in existing countries, including efforts related to the global launch of IMPLEO and pre- and post-breast implant surgery products, (iii) product portfolio and (iv) manufacturing capabilities as well as potential future acquisitions. We intend to use the remaining proceeds for working capital, debt service and general corporate purposes. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our shareholders. If we do not invest or apply the net proceeds from this offering in ways that enhance shareholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

As a holding company, our only material assets will be our equity interests in our operating subsidiaries, and our principal source of revenue and cash flow will be distributions from such subsidiaries, which may be limited by law and/or contract in making such distributions.

As a holding company, our principal source of revenue and cash flow will be distributions from our subsidiaries. Therefore, our ability to carry out our business plan, to fund and conduct our business, service our debt and pay dividends (if any) in the future will depend on the ability of our subsidiaries to generate sufficient net income and cash flow to make upstream cash distributions to us. Our subsidiaries are separate legal entities, and although they may be wholly owned or controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends or otherwise. The ability of our subsidiaries to distribute cash to us will also be subject to, among other things, restrictions that may be contained in our subsidiaries’ agreements (as entered into from time to time), availability of sufficient funds in such subsidiaries and applicable laws and regulatory restrictions. Claims of any creditors of our subsidiaries generally will have priority as to the assets of such subsidiaries over our claims and claims of our creditors and shareholders. To the extent the ability of our subsidiaries to distribute dividends or other payments to us could be limited in any way, this could materially limit our ability to fund and conduct our business, service our debt and pay dividends (if any).

If we are a passive foreign investment company, U.S. investors in our ordinary shares could be subject to adverse U.S. federal income tax consequences.

The rules governing passive foreign investment companies (“PFICs”) can have adverse effects for U.S. investors for U.S. federal income tax purposes. The tests for determining PFIC status for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income. As discussed in “Material Tax Considerations—Material U.S. Federal Income Tax Considerations,” we do not believe that we are currently a PFIC, and we do not anticipate becoming a PFIC in the foreseeable future. Notwithstanding the foregoing, the determination of whether we are a PFIC depends on the particular facts and circumstances (such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected by the application of the PFIC rules, which are subject to differing interpretations. The fair market value of our assets is expected to depend, in part, upon (i) the market price of our ordinary shares and (ii) the composition of our income and assets, which will be affected by how, and how quickly, we spend any cash that is raised in any financing transaction, including this offering. In light of the foregoing, no assurance can be provided that we are not currently a PFIC or that we will not become a PFIC in any future taxable year.

 

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If we are or become a PFIC, U.S. holders of our ordinary shares would be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferential tax rates on capital gains or on actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. Whether U.S. holders of our ordinary shares make a timely qualified electing fund (“QEF”), election or mark-to-market election may affect the U.S. federal income tax consequences to U.S. holders with respect to the acquisition, ownership and disposition of our ordinary shares and any distributions such U.S. holders may receive. We do not, however, expect to provide the information regarding our income that would be necessary in order for a U.S. Holder to make a QEF election with respect to ordinary shares if we are classified as a PFIC. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC rules to our ordinary shares.

U.S. holders of 10% or more of the voting power of our ordinary shares may be subject to U.S. federal income taxation at ordinary income tax rates on undistributed earnings and profits.

There is a risk that we will be classified as a controlled foreign corporation (“CFC”) for U.S. federal income tax purposes. We will generally be classified as a CFC if more than 50% of our outstanding shares, measured by reference to voting power or value, are owned (directly, indirectly or by attribution) by “U.S. Shareholders.” For this purpose, a “U.S. Shareholder” is any U.S. person that owns directly, indirectly or by attribution, 10% or more of the voting power of our outstanding shares. If we are classified as a CFC, a U.S. Shareholder may be subject to U.S. income taxation at ordinary income tax rates on all or a portion of our undistributed earnings and profits attributable to “subpart F income” and may also be subject to tax at ordinary income tax rates on any gain realized on a sale of ordinary shares, to the extent of our current and accumulated earnings and profits attributable to such shares. The CFC rules are complex and U.S. Shareholders of the ordinary shares are urged to consult their own tax advisors regarding the possible application of the CFC rules to them in their particular circumstances. See “Material Tax Considerations—Controlled Foreign Corporation Considerations.”

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our ordinary shares would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model or the performance of our ordinary shares and results of operations fail to meet the expectations of analysts, the price of our ordinary shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of our ordinary shares or trading volume to decline.

We could be subject to securities class action litigation.

In the past, securities class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in the price of our ordinary shares, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and results of operations and divert management’s attention and resources from our business.

 

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Risks Related to Being a Foreign Private Issuer

As a foreign private issuer, we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.

As a foreign private issuer, we will be exempt from a number of requirements under U.S. securities laws that apply to public companies that are not foreign private issuers. In particular, we will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC under the Exchange Act.

We will also be exempt from the provisions of Regulation FD, which prohibits the selective disclosure of material nonpublic information to, among others, broker-dealers and holders of a company’s securities under circumstances in which it is reasonably foreseeable that the holder will trade in the company’s securities on the basis of the information. These exemptions and leniencies will reduce the protections and the frequency and scope of information to which you would be entitled if we were not a foreign private issuer.

We would lose our foreign private issuer status if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. We would also be required to follow U.S. proxy disclosure requirements with regard to the extent of disclosure of annual compensation of our five most highly compensated senior officers. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. exchanges that are available to foreign private issuers.

Provisions contained in our articles of association, as well as provisions of Irish law, could impair a takeover attempt.

Our articles of association that will come into effect immediately prior to the completion of this offering, together with certain provisions of the Companies Act 2014 of Ireland (the “Irish Companies Act”), could have the effect of delaying or preventing changes in control or changes in our management without the consent of the Board.

There are a number of approaches for acquiring an Irish public limited company, including a court-approved scheme of arrangement under the Irish Companies Act, through a tender offer by a third party, by way of a merger with a company incorporated in the EEA under the European Communities (Cross-Border Mergers) Regulations 2008 (as amended) and by way of a merger with a company incorporated in Ireland under the Irish Companies Act. Each method requires shareholder approval or acceptance and different thresholds apply.

The Irish Takeover Panel Act, 1997 and the Irish Takeover Rules 2013 made thereunder (the “Irish Takeover Rules”) will govern a takeover or attempted takeover of our company by means of a court-approved scheme of arrangement or a tender offer. The Irish Takeover Rules contain detailed provisions for takeovers, including as to disclosure, process, dealing and timetable. The Irish Takeover Rules could discourage an investor from acquiring 30% or more of the outstanding ordinary shares of the Company unless such investor was prepared to make a bid to acquire all outstanding ordinary shares.

 

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The Board may be limited by the Irish Takeover Rules in its ability to defend an unsolicited takeover attempt.

Under the Irish Takeover Rules, we will not be permitted to take certain actions that might “frustrate” an offer for our ordinary shares once the Board has received an offer, or has reason to believe an offer is or may be imminent, without the approval of more than 50% of shareholders entitled to vote at a general meeting of our shareholders and/or the consent of the Irish Takeover Panel. This could limit the ability of the Board to take defensive actions even if it believes that such defensive actions would be in the best interests of our company and shareholders.

Irish law differs from the laws in effect in the United States and U.S. investors may have difficulty enforcing civil liabilities against us, our directors or members of senior management named in this prospectus.

The majority of our directors and all of our executive officers named in this prospectus are non-residents of the United States, and all or a substantial portion of their assets are located outside the United States. As a result, it may not be possible to serve process on our officers and these directors, or us, in the United States or to enforce court judgments obtained in the United States against these individuals or us in Ireland based on the civil liability provisions of the U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or executive officers based on the civil liabilities provisions of the U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Ireland.

As an Irish company, we are principally governed by Irish law, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, differences relating to interested director and officer transactions and shareholder lawsuits. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or other officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our ordinary shares may have more difficulty protecting their interests than would holders of shares of a corporation incorporated in a jurisdiction of the United States.

The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation and these differences may make our ordinary shares less attractive to investors.

We are incorporated under Irish law and, therefore, certain of the rights of holders of our shares are governed by Irish law, including the provisions of the Irish Companies Act, and by our articles of association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations and these differences may make our ordinary shares less attractive to investors. The principal differences include the following:

 

    under Irish law, dividends may only be declared if we have, on an individual entity basis, profits available for distribution, within the meaning of the Irish Companies Act;

 

    under Irish law, each shareholder generally has preemptive rights to subscribe on a proportionate basis to any issuance of shares. Preemption rights may be disapplied under Irish law for renewable five-year periods by Irish companies by way of a provision in such companies’ articles of association or a special resolution of their shareholders, which is an option we will avail ourselves of prior to the completion of this offering;

 

   

under Irish law, certain matters require the approval of holders of 75% of the votes cast at a general meeting of our shareholders, including amendments to our articles of association. This may make it

 

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more difficult for us to complete certain types of corporate transactions deemed advisable by the Board;

 

    under Irish law, a bidder seeking to acquire us would need, on a tender offer, to receive shareholder acceptance in respect of 80% of our outstanding shares. If this 80% threshold is not achieved in the offer, under Irish law, the bidder cannot complete a “second step merger” to obtain 100% control of us. Accordingly, tender of 80% of our outstanding shares will likely be a condition in a tender offer to acquire us, not 50% as is more common in tender offers for corporations organized under U.S. law; and

 

    under Irish law, shareholders may be required to disclose information regarding their equity interests upon our request, and the failure to provide the required information could result in the loss or restriction of rights attaching to the shares, including prohibitions on the transfer of the shares, as well as restrictions on voting, dividends and other payments.

Our status as a “foreign private issuer” allows us to adopt IFRS, accounting principles, which are different than accounting principles under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”).

We have adopted and presented our combined consolidated financial statements in accordance with IFRS. IFRS is an internationally recognized body of accounting principles that are used by many companies outside of the United States to prepare their financial statements, and the SEC recently permitted foreign private issuers such as our company to prepare and file their financial statements in accordance with IFRS rather than U.S. GAAP. IFRS accounting principles are different from those of U.S. GAAP, and SEC rules do not require us to provide a reconciliation of IFRS accounting principles to those of U.S. GAAP. Investors who are not familiar with IFRS may misunderstand certain information presented in our consolidated financial statements. Accordingly, we suggest that readers of our combined consolidated financial statements familiarize themselves with the provisions of IFRS accounting principles in order to better understand the differences between these two sets of principles.

A future transfer of your ordinary shares, other than one effected by means of the transfer of book entry interests in DTC, may be subject to Irish stamp duty.

Transfers of ordinary shares effected by means of the transfer of book entry interests in the Depository Trust Company (“DTC”) should not be subject to Irish stamp duty where ordinary shares are traded through DTC, either directly or through brokers who hold such shares on behalf of customers through DTC. However, if you hold your ordinary shares as of record rather than beneficially through DTC or through a broker that holds your ordinary shares through DTC, any transfer of your ordinary shares could be subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paid or the market value of the shares acquired). Payment of Irish stamp duty is generally a legal obligation of the transferee. The potential for stamp duty to arise could adversely affect the price of our ordinary shares.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our operational results and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “might” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectation concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this prospectus, which include, but are not limited to, the following:

 

    We have incurred significant net operating losses and cannot assure you that we will ever achieve or maintain profitability.

 

    Our future profitability depends on the success of our breast implant products.

 

    Any negative publicity concerning our products or our competitors’ products could harm our business and reputation and negatively impact our financial results.

 

    Our success depends on our ability to continue to enhance our existing products and develop or commercialize new products that respond to customer needs and preferences.

 

    The size of the addressable global aesthetics products market, and the breast implant products market in particular, has not been established with precision and may be smaller than we estimate, possibly materially. If our estimates and projections overestimate the size of these markets and the markets for our other products, our revenue and results of operations will be adversely affected.

 

    Each of our brands relies on a single-source supplier for medical-grade silicone, which is the primary constitutive ingredient of our products. These two suppliers are under common ownership, which could result in increased prices when we seek to renew our contracts with these suppliers.

 

    Recent studies have called into question the long-term safety of breast implants, which could have a material adverse effect on our business, results of operations and financial condition.

 

    If we acquire or attempt to acquire new businesses or products, we may be unable to complete these acquisitions or to successfully integrate them in a cost-effective and non-disruptive manner, and we may not realize the benefits we anticipate from such acquisitions.

 

    We will need to significantly increase the size of our organization, and we may experience difficulties in managing growth.

 

    Our business could suffer if we lose the services of our senior management or other key personnel or are unable to attract and retain additional qualified personnel.

 

    If we fail to maintain and further develop our direct sales forces and distributor networks, our business could suffer. Additionally, our third-party distributors may not effectively sell our products or may engage in activities that could harm our reputation and sales of our products.

 

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    Risks associated with our global operations, including seeking, obtaining and maintaining approval to commercialize our products in the jurisdictions where our products are sold, could harm our business.

 

    If our IMPLEO line of breast implant products is not accepted in the markets where we operate, our business may be materially adversely affected.

 

    Risks associated with our global operations, including seeking, obtaining and maintaining regulatory approval to commercialize our products in the jurisdictions where our products are sold, could harm our business.

 

    Our results of operations could be materially adversely affected by fluctuations in foreign currency exchange rates.

 

    Any disruption at our manufacturing facilities could adversely affect our business and results of operations.

 

    If we fail to compete effectively against our competitors, many of whom have greater resources than we have, our revenues and results of operations may be negatively affected.

 

    Our quarterly revenues and results of operations are unpredictable and may fluctuate significantly from quarter to quarter due to factors outside our control, which could adversely affect our business, results of operations and the trading price of our ordinary shares.

 

    Our medical device products and operations, including manufacturing, are subject to extensive governmental regulation, including health, environmental, safety and anti-corruption and other laws, and our failure to comply with applicable requirements could cause our business to suffer.

 

    Based on our recurring losses from operations and net capital deficiency, and not taking into consideration any proceeds that we will receive in connection with this offering, our independent registered public accounting firm included an explanatory paragraph in its report on our audited financial statements relating to our ability to continue as a going concern.

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this prospectus.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from that referenced in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this prospectus speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

 

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PRESENTATION OF FINANCIAL INFORMATION

Historical Financial Information

We prepare our consolidated financial statements in accordance with IFRS as issued by the IASB. Although we maintain our books and records in Euros, we present our financial statements in US dollars. Unless otherwise indicated, all references to currency amounts in this prospectus are in US dollars. All references to “€” are to the Euro.

The financial information contained in this prospectus includes our consolidated financial statements as of December 31, 2014 and 2013 and for the years ended December 31, 2014 and 2013, which have been audited by our independent registered public accounting firm, KPMG, as stated in their report included in this prospectus. In addition, financial information contained in this prospectus includes unaudited, interim condensed consolidated financial statements as of March 31, 2015 and for the three months ended March 31, 2015 and March 31, 2014.

We have historically conducted our business through Global Consolidated Aesthetics Limited and its consolidated subsidiaries, and therefore our historical financial statements present the results of operations of such entities, presented on the assumption that the Share-for-Share Exchange, which is not expected to materially affect our historical results of operations, has occurred and is accounted for as a combination of businesses under common control of GC Aesthetics plc. Following the corporate reorganization and this offering, our financial statements will present the results of operations of GC Aesthetics plc and its consolidated subsidiaries.

This financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our combined consolidated financial statements, including the notes thereto, included elsewhere in this prospectus.

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them.

Non-IFRS Financial Measures

In this prospectus, we use Revenue Adjusted for Foreign Exchange, Adjusted Gross Profit, Adjusted EBITDA and Adjusted Interest Expense. These measures are not calculated in accordance with IFRS, and we refer to these as non-IFRS financial measures. We use these non-IFRS financial measures when planning, monitoring, and evaluating our performance. We consider these non-IFRS financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in foreign exchange rates, depreciation, amortization, non-cash charges and certain other expenses that we believe are not representative of our core business. Revenue Adjusted for Foreign Exchange, Adjusted Gross Profit, Adjusted EBITDA and Adjusted Interest Expense have important limitations as analytical tools, should not be viewed in isolation, and do not purport to be alternatives to net income as indicators of operating performance or cash flows from operating activities as measures of liquidity. Revenue Adjusted for Foreign Exchange, Adjusted Gross Profit, Adjusted EBITDA and Adjusted Interest Expense exclude some, but not all, items that affect net income or cash flows from operating activities and these measures may vary among companies. For more information regarding these non-IFRS financial measures and a reconciliation of such measures to comparable IFRS financial measures, please see the footnotes to the financial statements presented in “Prospectus Summary—Summary Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition—Key Financial Metrics.”

 

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TRADEMARKS AND SERVICE MARKS

We own or have rights to trademarks and service marks for use in connection with the operation of our business, including, but not limited to, COGEL, DREAMXCELL, EUROSILICONE, GC AESTHETICS, GCA, GCA BUSINESS BOOST, NAGOR and SILGEL. All other trademarks or service marks appearing in this prospectus that are not identified as marks owned by us are the property of their respective owners.

Solely for convenience, the registered trademarks, service marks and trade names referred to in this prospectus are listed without the ®, ™ and SM symbols, but we assert, to the fullest extent under applicable law, our applicable rights in these registered trademarks, service marks and trade names.

 

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MARKET AND INDUSTRY DATA

This prospectus includes estimates, projections and other information concerning our industry and market data that we obtained from periodic industry publications, third-party studies and surveys (certain of which we have sponsored) and internal company proprietary research and analysis. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. We are responsible for the industry and market data included in this prospectus and, although we believe such data included in this prospectus is reliable as of the date hereof, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained and analyzed the data they collected or because such data cannot always be verified with complete certainty due to limitations on the availability and reliability of raw data, the survey subject selection process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used by the sources in preparing the forecasts relied upon or cited herein. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Unless otherwise indicated, all market share information contained in this prospectus is based upon data prepared by one or more of the following sources: ISAPS, TechNavio Insights, Medical Insight, Inc., Euromonitor International, Ltd. and BCC Research LLC. None of these sources was commissioned by us to provide the data referred to herein, nor was such data prepared specifically for our use in this prospectus or otherwise. In addition, with exception of the Eurosilicone breast implant report published in Plastic and Reconstructive Surgery, discussed below, none of the publications, third-party studies and surveys referred to in this prospectus was sponsored by us.

As noted elsewhere in this prospectus, we sponsored the report prepared for Plastic and Reconstructive Surgery that included certain post-marketing data we have referred to herein. We are solely responsible for the data obtained from such report. Plastic and Reconstructive Surgery does not and will not have any liability or responsibility for any post-marketing data that is contained in this prospectus or otherwise disseminated in connection with the offer or sale of our ordinary shares. If you purchase our ordinary shares, your sole recourse for any alleged or actual inaccuracies in the market data used in this prospectus will be against us.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from our issuance and sale of              ordinary shares in this offering will be approximately $         million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us (or approximately $         million if the underwriters exercise their option to purchase additional ordinary shares in full). This estimate assumes an initial public offering price of $         per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus.

A $1.00 increase (decrease) in the assumed initial public offering price of $         per ordinary share would increase (decrease) the net proceeds to us from this offering by $         million, assuming the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

We intend to use the net proceeds of this offering as follows: (i) approximately $5.7 million to expand our sales and marketing activities in new countries, (ii) approximately $5.8 million to expand our sales and marketing activities in existing countries, including efforts related to the global launch of IMPLEO and pre- and post-breast implant surgery products, (iii) approximately $4.2 million to expand our product portfolio and (iv) approximately $5.0 million to expand our manufacturing capabilities. In addition, we intend to use the net proceeds of this offering to fund potential future acquisitions. We will use any remaining proceeds for working capital, debt service and other general corporate purposes.

 

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DIVIDEND POLICY

We have not declared or paid regular cash dividends on our ordinary shares. We currently expect to retain all future earnings for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Additionally, because we have an accumulated deficit, under Irish law, we may not declare or pay dividends and dividends may only be declared and paid if we have profits available for distribution. Our ability to pay dividends on our ordinary shares is further limited by restrictions on our and our subsidiaries’ ability to pay dividends or make distributions under the terms of the agreements governing our indebtedness. The declaration and payment of any dividends in the future will be determined by the Board, in its discretion, and will depend on a number of factors, including our earnings, capital requirements, overall financial condition and contractual restrictions.

It is anticipated that cash dividends on our ordinary shares, if any, will be paid in US dollars. As we are an Irish company, Irish dividend withholding tax (“DWT”), currently at a rate of 20%, will arise in respect of dividends or other distributions to our shareholders unless an exemption applies. There are exemptions that may be available to U.S. Holders (as defined in “Material U.S. Federal Income Tax Considerations”); such shareholders should consult their respective tax advisors. Where DWT arises, we are responsible for deducting DWT at source and accounting for the relevant amount to the Irish Revenue Commissioners. See “Material Irish Tax Considerations—Dividend Withholding Tax” and “Description of Share Capital—Dividends.”

 

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CAPITALIZATION

The following table sets forth the cash and cash equivalents and capitalization of Global Consolidated Aesthetics Limited as of March 31, 2015:

 

    on an actual basis;

 

    on a pro forma basis to reflect (i) the exercise of all warrants and exercisable options, and the conversion of all of GC Aesthetics plc’s A Ordinary Shares, B Preference Shares and C Preference Shares into                  ordinary shares upon the completion of this offering, and the issuance of                  ordinary shares as consideration for the cancellation of the right of holders of B Preference Shares and C Preference shares to receive dividends; and (ii) the effectiveness of our amended and restated memorandum and articles of association; and

 

    on a pro forma adjustments described above and the sale by us of                  ordinary shares in this offering at an assumed initial public offering price of $         per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds from this offering as described in “Use of Proceeds.”

The information below is illustrative only, and assumes an initial public offering price at the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our capitalization following this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing, including the amount by which actual offering expenses are higher or lower than estimated. The table should be read in conjunction with the information contained in “Use of Proceeds,” “Selected and Pro Forma Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as our consolidated financial statements and the related notes included elsewhere in this prospectus.

 

     March 31, 2015  
     Actual     Pro forma
adjustments
    Pro Forma     Offering
pro forma
adjustments
     Pro
Forma, as
adjusted(2)
 
    

(unaudited)

(in thousands)

 

Cash and cash equivalents

   $ 3,245      $ 21      $ 3,266      $ —         $ —     
  

 

 

     

 

 

      

 

 

 

Long-term debt, including current portion:

B Preference Shares

$ 115,204    $ (115,204 $ —      $ —      $ —     

C Preference Shares

  6,113      (6,113   —        —        —     

Equity derivative

  62,240      (62,240   —        —        —     

Shareholder loans(1)

  50,706      —        50,706      —        —     

Other loans and borrowings

  1,355      —        1,355      —        —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total long-term debt, including current portion

  235,618      (183,557   52,061      —        —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Shareholders’ equity / (deficiency):

Share capital

  70      232      302      —        —     

Additional paid-in capital

  35,021      183,346      218,367      —        —     

Accumulated deficit

  (257,436   —        (257,436   —        —     

Accumulated other comprehensive income

  31,213      —        31,213      —        —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total shareholders’ equity / (deficiency)

  (191,132   183,578      (7,554   —        —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total capitalization

$ 44,486    $ 21    $ (7,554 $ —      $ —     
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

 

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Except as otherwise indicated, the table above excludes:

 

    924,024 ordinary shares issuable upon the exercise of share options outstanding as of March 31, 2015 on completion of the vesting condition with a per ordinary share weighted-average exercise price of €0.01, issued under our 2010 Employee Share Option Plan; and

 

    an additional              ordinary shares reserved for future issuance under our equity incentive plans.

 

(1) Includes the Credit Facility. In April 2015, we drew down an additional $10.0 million under the Credit Facility. At the same time, we issued 592,042 ordinary shares to OrbiMed for an aggregate subscription price of €5,920.42.

 

(2) Each $1.00 increase (decrease) in the assumed initial public offering price of $         per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of additional paid-in capital, total shareholders’ equity, total capitalization and cash by approximately $        , assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of ordinary shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) each of additional paid-in capital, total shareholders’ equity, total capitalization and cash by approximately $        , assuming that the assumed initial price to the public remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will adjust based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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DILUTION

If you invest in our ordinary shares in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per ordinary share of our ordinary shares in this offering and the pro forma as adjusted net tangible book value per share of our ordinary shares after this offering.

As of                     , 2015, on a pro forma basis giving effect to the Share-for-Share Exchange, we would have had a net tangible book value of $         million, or $         per ordinary share. We calculate net tangible book value per ordinary share by dividing the net tangible book value by the number of outstanding our ordinary shares.

After giving effect to the receipt of the estimated net proceeds from our sale of ordinary shares in this offering, assuming an initial public offering price of $         per ordinary share (the midpoint of the offering range shown on the cover of this prospectus), and the application of the estimated net proceeds therefrom as described under “Use of Proceeds,” our pro forma as adjusted net tangible book value at                     , 2015 would have been approximately $        , or $         per ordinary share. This represents an immediate increase in net tangible book value per ordinary share of $         to existing shareholders and an immediate dilution in net tangible book value per ordinary share of $         to you, or     %. The following table illustrates this dilution per ordinary share.

 

Assumed initial public offering price per ordinary share

$                

Pro forma net tangible book value per ordinary share as of                     , 2015

Increase in net tangible book value per ordinary share attributable to new investors

Pro forma as adjusted net tangible book value per ordinary share after this offering

Dilution per ordinary share to new investors

$     

If the underwriters exercise their option to purchase additional ordinary shares in full, the pro forma as adjusted net tangible book value per ordinary share after giving effect to this offering would be $         per ordinary share. This represents an increase in pro forma as adjusted net tangible book value of $         per ordinary share to existing shareholders and dilution in pro forma as adjusted net tangible book value of $         per ordinary share to you, or    %.

A $1.00 increase (decrease) in the assumed initial public offering price of $         per ordinary share would decrease (increase) our pro forma net tangible book value, after giving effect to the offering, by $         , assuming no change to the number of our ordinary shares offered by us as set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated expenses payable by us.

The following table sets forth, as of                     , 2015, on the pro forma as adjusted basis described above, the number of ordinary shares purchased from us, the total consideration paid to us and the average price per share (i) paid by existing shareholders and (ii) to be paid by new investors purchasing ordinary shares in this offering, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

    

Shares purchased

   

Total consideration

   

Average price
per share

 
    

Number

    

Percent

   

Amount

    

Percent

   

Existing shareholders

   $                             $                             $                

New investors

            
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

$        100 $        100 $     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

If the underwriters were to fully exercise their option to purchase additional ordinary shares from us, the percentage of our ordinary shares held by existing shareholders would be     %, and the percentage of our ordinary shares held by new investors would be     %.

 

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Each $1.00 increase (decrease) in the assumed initial public offering price of $         per ordinary share would increase (decrease) total consideration paid by new investors by $         million, assuming the number of ordinary shares we are offering, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares offered by us would increase (decrease) total consideration paid by new investors by $         million, assuming that the assumed initial price to the public remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The number of ordinary shares reflected in the discussion and tables above is based on             ordinary shares outstanding as of                     , 2015, and excludes             ordinary shares issuable upon the exercise of outstanding options as of                     , 2015, having a weighted average exercise price of $         per ordinary share, issued under our 2010 Employee Share Option Plan.

Effective as of the date of the effectiveness of the registration statement of which this prospectus forms a part, an aggregate of             ordinary shares will be reserved for issuance under the GC Aesthetics Equity Incentive Plan 2015. Furthermore, we may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that any of our options are exercised, new options are issued under our equity incentive plans or we issue additional ordinary shares or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

 

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CORPORATE STRUCTURE

Global Consolidated Aesthetics Limited was incorporated in December 2007 under the laws of Ireland and is the holding company of Eurosilicone SAS and Nagôr Limited, the main operating entities within our group, which it acquired from Medicor Ltd. (which was in Chapter 11 bankruptcy proceedings) in May 2008. Eurosilicone SAS was incorporated in 1988 under the laws of France. Nagôr Limited was incorporated in 1979 under the laws of the Isle of Man, and operates as the registered branch of an overseas company in the United Kingdom. Global Consolidated Aesthetics Limited’s acquisition of Nagôr Limited and Eurosilicone SAS in May 2008 was funded in part by an equity investment in our ordinary shares led by Oyster. Montreux first became a shareholder in Global Consolidated Aesthetics Limited pursuant to an investment in October 2010. Both Montreux and Oyster have made significant further equity investments in Global Consolidated Aesthetics Limited since their initial investments. See “Description of Share Capital—History of Security Issuances.”

GC Aesthetics plc was incorporated in April 2015 under the laws of Ireland. Upon the Share-for-Share Exchange, GC Aesthetics plc will become the holding company of Global Consolidated Aesthetics Limited and its subsidiaries. Until immediately prior to the completion of the initial public offering described in this prospectus, GC Aesthetics plc will be a shell company. GC Aesthetics plc will not have conducted any operations (other than activities incidental to its formation, the Share-for-Share Exchange described below and the initial public offering described herein). Global Consolidated Aesthetics Limited is the entity through which the Company currently operates its business. Upon the Share-for-Share Exchange, the historical consolidated financial statements of Global Consolidated Aesthetics Limited included in this prospectus will become the historical consolidated financial statements of GC Aesthetics plc.

All of our operations are conducted through Eurosilicone SAS, Nagôr Limited and various other subsidiaries, which are organized and operated according to the laws of their countries of organization.

The following chart shows our corporate structure after giving effect to the Share-for-Share Exchange described above:

 

LOGO

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected historical consolidated financial data as of the dates and for the periods indicated. The selected historical financial data as of December 31, 2014, December 31, 2013 and for the two years in the period ended December 31, 2014 presented in this table have been derived from the audited consolidated financial statements of Global Consolidated Aesthetics Limited included elsewhere in this prospectus. The selected historical financial data as of March 31, 2015 and for the three months ended March 31, 2015 and March 31, 2014 presented in this table have been derived from the unaudited, interim condensed consolidated financial statements of Global Consolidated Aesthetics Limited included elsewhere in this prospectus. We have prepared the unaudited, interim financial statements on the same basis as the audited financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results to be expected for future periods. Our financial statements have been prepared in accordance with IFRS, as issued by the IASB.

This selected historical consolidated financial data should be read in conjunction with the disclosures set forth under “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus.

Consolidated Statements of Operations

 

     Year ended
December 31,
    Three months ended
March 31,
 
     2014     2013       2015         2014    
                 (unaudited)  
     (in thousands)  

Revenue

   $ 52,804      $ 44,630      $ 13,039      $ 10,805   

Cost of sales

     (26,038     (22,548     (6,490     (5,785
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     26,766        22,082        6,549        5,020   

Operating expenses

        

Distribution and selling expenses

     (18,187     (10,113     (4,097     (4,877

Administrative expenses

     (18,151     (15,042     (5,804     (3,778

Research and development expenses

     (1,507     (1,487     (519     (494

Amortization of intangible assets

     (3,990     (4,033     (882     (1,034

Other expenses

     —          (183     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     (41,835     (30,858     (11,302     (10,183
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (15,069     (8,776     (4,753     (5,163

Other income (expense):

        

Net interest (expense)

     (33,746     (6,877     (7,060     (4,331

Loss on conversion of shareholder loans

     (27,737     —          —          (24,157

(Loss) Gain on equity derivatives

     5,182        (4,828     (39,956     10,934   

(Loss) Gain on foreign exchange

     (18,657     1,994        (22,242     1,425   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense)

     (74,958     (9,711     (69,258     (16,129
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax credit

     (90,027     (18,487     (74,011     (21,292

Income tax credit (charge)

     600        1,195        64        (14
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (89,427   $ (17,292   $ (73,947   $ (21,306
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted loss per ordinary share

   $ (18.74   $ (3.91   $ (15.32 )    $ (4.62
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ordinary shares outstanding:

        

Basic and diluted

     4,772,101        4,425,800        4,825,800        4,608,022   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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     Year Ended
December 31,
    Three months ended
March 31,
 
     2014     2013     2015     2014  
                 (unaudited)  
     (in thousands)  

Net loss

   $ (89,427   $ (17,292   $ (73,947   $ (21,306

Other comprehensive income:

        

Items that may be reclassified to profit or loss in subsequent periods:

        

Foreign currency translation differences—foreign operations

     15,004        (2,192     19,062        (1,035

Items that will not be reclassified to profit or loss in subsequent years:

        

Net actuarial loss on retirement obligation, net of tax

     (36     30        (1     (21
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss

   $ (74,459   $ (19,454   $ (54,886   $ (22,362
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Financial Data

 

     Year ended
December 31,
    Three months ended
March 31,
 
     2014     2013     2015     2014  
                 (unaudited)  
     (in thousands)  

Other financial data (unaudited):

        

Revenue Adjusted for Foreign Exchange (1)

   $ 52,804      $        $ 13,039      $     

Adjusted Gross Profit (2)

     27,788        23,134        6,780        5,272   

Adjusted EBITDA (3)

     (8,112     (3,385     (2,886     (3,853

Adjusted Interest Expense (4)

     (6,202     (3,564     (1,953     (1,333

 

(1) We estimate Revenue Adjusted for Foreign Exchange by converting revenues for the period presented using the average exchange rates for the most recent corresponding period of the Euro, Sterling and the Brazilian Real, respectively, to one US dollar, our financial reporting currency. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction. We believe that Revenue Adjusted for Foreign Exchange is a useful measure, indicating the actual growth of our operations, excluding the impact of foreign currency exchange rates changes. Revenue Adjusted for Foreign Exchange is not calculated in accordance with IFRS. This calculation may differ from similarly titled measures used by others and, accordingly, Revenue Adjusted for Foreign Exchange is not meant to be a substitution for revenues presented in conformity with IFRS nor should such non-IFRS financial measure be considered in isolation. Moreover, the presentation of Revenue Adjusted for Foreign Exchange is not necessarily indicative of historical or future results of operations. Currency fluctuations affect general economic and business conditions, including, for example, a country’s inflation and international trade competitiveness and, as a result, a company’s performance cannot be evaluated solely on the basis of a revenue adjusted for foreign exchange presentation.

The following table reconciles Revenue Adjusted for Foreign Exchange to revenues, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
     Three months ended
March 31,
 
    

2014

    

2013

    

2015

    

2014

 
                   (unaudited)  
     (in thousands)  

Reconciliation of Revenue Adjusted for Foreign Exchange to Revenue:

  

Revenue

   $ 52,804       $ 44,630       $ 13,039       $ 10,805   

Effect of movement in exchange rates (1)

     —              —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue adjusted for foreign exchange

$ 52,804    $      $ 13,039    $     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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  (1) We estimate Revenue Adjusted for Foreign Exchange by converting revenues for the period presented using the average exchange rates for the most recent corresponding period of the Euro, Sterling and the Brazilian Real, respectively, to one US dollar. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction.

 

(2) Adjusted Gross Profit is defined as gross profit excluding depreciation that is included in the cost of sales. We believe that Adjusted Gross Profit is a useful measure, indicating the actual profitability of our production excluding these non-cash charges. Adjusted Gross Profit is not calculated in accordance with IFRS.

The following table reflects the reconciliation of Adjusted Gross Profit to gross profit, the most comparable IFRS measure, for each of the periods indicated:

     Year ended
December 31,
     Three months ended
March 31,
 
     2014      2013      2015          2014      
                   (unaudited)  
     (in thousands)  

Reconciliation of Adjusted Gross Profit to Gross Profit:

           

Gross profit

   $ 26,766       $ 22,082       $ 6,549       $ 5,020   

Depreciation included in cost of sales

     1,022         1,052         231         252   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Gross Profit

$ 27,788    $ 23,134    $ 6,780    $ 5,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(3) Adjusted EBITDA is defined as operating loss, adjusted for other expenses, depreciation, amortization and share-based and other equity-related compensation. We believe that Adjusted EBITDA is a useful metric for investors to understand and evaluate our operating results and ongoing profitability because it permits investors to evaluate our recurring profitability from our ongoing operating activities. Adjusted EBITDA is not calculated in accordance with IFRS. In addition, our calculation of Adjusted EBITDA may not be comparable to similar measures that other companies report because other companies may not calculate Adjusted EBITDA in the same manner as we do.

By providing this non-IFRS financial measure, together with a reconciliation to IFRS results, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how we are executing strategic initiatives. We believe Adjusted EBITDA is widely used by investors and securities analysts as a supplemental measure to evaluate the overall operating performance of companies in our industry without regard to items, such as interest expense, provision for income taxes and depreciation and amortization expense, that can vary substantially from company to company depending upon their financing and accounting methods, the book value of their assets, their capital structures and the method by which their assets were acquired.

Management uses Adjusted EBITDA:

 

    as a measurement used in comparing our operating performance on a consistent basis;

 

    for planning purposes, including the preparation of our internal annual operating budget and financial projections; and

 

    to evaluate the performance and effectiveness of our operational strategies.

Although we use Adjusted EBITDA as a measure to assess the operating performance of our business, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under IFRS. Because of these limitations, management does not view Adjusted EBITDA in isolation or as a primary performance measure.

 

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The following table reconciles Adjusted EBITDA to operating loss, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
           2014                 2013                 2015                 2014        
                 (unaudited)  
     (in thousands)  

Reconciliation of Adjusted EBITDA to operating loss:

        

Operating loss

   $ (15,069   $ (8,776   $ (4,753   $ (5,163

Add:

        

Other expenses

     —          183        —          —     

Depreciation

     1,123        1,175        251        276   

Amortization

     3,990        4,033        882        1,034   

Share-based and other equity-related compensation

     1,844        —          734        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ (8,112 $ (3,385 $ (2,886 $ (3,853
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(4) Adjusted Interest Expense is defined as interest expense adjusted for non-cash charges related to effective interest on our B Preference Shares and C Preference Shares. The B Preference Shares and C Preference Shares will convert into ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. However, we believe Adjusted Interest Expense is a useful metric for investors to understand and evaluate our results of operations as it permits investors to evaluate the cash costs of servicing our debt in prior periods. Adjusted Interest Expense is not calculated in accordance with IFRS.

The following table reconciles Adjusted Interest Expense to interest expense, the most comparable IFRS measure, for each of the periods indicated:

 

    

Year ended

December 31,

   

Three months ended
March 31,

 
    

    2014    

   

    2013    

   

    2015    

   

    2014    

 
           (unaudited)  

Reconciliation of Adjusted Interest Expense to interest expense:

     (in thousands)   

Interest expense

   $ (33,746   $ (6,877   $ (7,060   $ (4,331

Non-cash charges related to effective interest on B Preference Shares and C Preference Shares

     27,544        3,313        5,107        2,998   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted interest expense

$ (6,202 $ (3,564 $ (1,953 $ (1,333
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Consolidated Statements of Financial Position Data

 

     December 31,     March 31,  
     2014     2013     2015  
                 (unaudited)  
     (in thousands)  

Assets

      

Current

      

Cash and cash equivalents

   $ 10,616      $ 4,519      $ 3,245   

Restricted cash

     3,642        —          3,232   

Trade receivables, net

     12,840        10,006        11,878   

Inventories, net

     14,929        11,477        15,896   

Prepayments and other receivables

     4,539        4,574        5,534   

Tax receivables

     422        —          347   
  

 

 

   

 

 

   

 

 

 

Total current assets

  46,988      30,576      40,132   
  

 

 

   

 

 

   

 

 

 

Non-current

Goodwill and other intangible assets, net of amortization

  25,941      32,222      22,604   

Property, plant and equipment, net

  4,674      4,976      4,491   

Deferred tax assets

  1,113      1,334      982   

Other non-current assets

  434      618      456   
  

 

 

   

 

 

   

 

 

 

Total non-current assets

  32,162      39,150      28,533   
  

 

 

   

 

 

   

 

 

 

Total assets

$ 79,150    $ 69,726    $ 68,665   
  

 

 

   

 

 

   

 

 

 

Liabilities

Current

Trade payables

$ 7,206    $ 6,206    $ 6,229   

Accruals and other creditors

  9,027      6,887      10,052   

Other liabilities

  996      1,395      698   

Tax liabilities

  1,569      1,325      1,184   

Loans and borrowings

  794      27,072      465   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

  19,592      42,885      18,628   
  

 

 

   

 

 

   

 

 

 

Non-current

B and C Preference Shares

  116,210      46,518      121,317   

Equity derivative

  22,284      16,741      62,240   

Deferred tax liabilities

  4,926      6,485      4,245   

Provisions

  1,661      1,951      1,771   

Loans and borrowings

  51,457      19,759      51,596   

Other payables

  —        789      —     
  

 

 

   

 

 

   

 

 

 

Total non-current liabilities

  196,538      92,243      241,169   
  

 

 

   

 

 

   

 

 

 

Total liabilities

  216,130      135,128      259,797   
  

 

 

   

 

 

   

 

 

 

Commitments and contingencies

Equity / (deficiency)

Share capital

  70      65      70   

Additional paid-in capital

  34,287      31,411      35,021   

Accumulated deficit

  (183,489   (94,062   (257,436

Accumulated other comprehensive income

  12,152      (2,816   31,213   
  

 

 

   

 

 

   

 

 

 

Total equity / (deficiency)

  (136,980   (65,402   (191,132
  

 

 

   

 

 

   

 

 

 

Total equity and liabilities

$ 79,150    $ 69,726    $ 68,665   
  

 

 

   

 

 

   

 

 

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The consolidated financial statements included elsewhere in this prospectus, which are the subject of the following discussion and analysis, are those of Global Consolidated Aesthetics Limited and its consolidated subsidiaries. We have historically conducted our business through Global Consolidated Aesthetics Limited and its subsidiaries, and upon completion of the Share-for-Share Exchange, Global Consolidated Aesthetics Limited will become our wholly-owned subsidiary, whereby the historical consolidated financial statements of Global Consolidated Aesthetics Limited will become the historical consolidated financial statements of GC Aesthetics plc. See “Corporate Structure.”

You should read the following discussion and analysis of our financial condition and results of our operations in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus for each of the years ended December 31, 2014 and 2013. Our financial statements are prepared in accordance with IFRS as issued by the IASB. Our historical results are not necessarily indicative of the results that should be expected in the future. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The terms “Company,” “GC Aesthetics,” “we,” “our” or “us” as used herein refer to GC Aesthetics plc and its consolidated subsidiaries unless otherwise stated or indicated by context.

Overview

We are a leading pure-play female aesthetics company committed to becoming the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime. To date, we have generated significant growth by focusing on the development, manufacturing and commercialization of one of the broadest ranges of implant products, principally breast implants. We believe that through our two brands, Nagôr and Eurosilicone, which have a combined 60 years of market presence, we have (i) a strong reputation for safety, quality and reliability, as evidenced by the five-year data from our ongoing Eurosilicone safety study, (ii) strong competitive advantages based on our innovative product design features—the result of our focused approach to research and development, which integrates feedback from women and surgeons, and (iii) a differentiated marketing and customer service approach, focusing on the needs of women.

We have developed and marketed our comprehensive range of products, comprising over 1,100 SKUs, to address the different needs and preferences of women and surgeons. All of our implants are manufactured with medical grade silicone supplied from either NuSil or ASC, both of which are U.S.-based, ISO 9001-certified sources. We have manufacturing plants in the United Kingdom and France and sell our products in 75 countries, with direct sales activities in six countries, including Brazil, the world’s largest medical aesthetics market by total number of plastic surgery procedures.

We intend to expand our business by gaining market share in the countries in which we sell our products, entering new countries and expanding our product portfolio through product development, in-licensing and selective acquisitions. We have incurred significant net operating losses since inception. We anticipate that our operating losses will continue in the immediate- to near-term, as we continue to invest in our sales and marketing efforts, as well as product development, to expand our customer base. Our revenue for the year ended December 31, 2014 was $52.8 million, as compared to $44.6 million for the year ended December 31, 2013; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %. Our revenue for the three months ended March 31, 2015 was $13.0 million, as compared to $10.8 million for the three months ended March 31, 2014; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %.

 

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Key Financial Metrics

We use the following key financial metrics to evaluate and manage our business on an ongoing basis, which we believe are useful for investors to compare key financial data both within and across reporting periods:

 

    Revenue Adjusted for Foreign Exchange;

 

    Adjusted Gross Profit;

 

    Adjusted EBITDA; and

 

    Adjusted Interest Expense.

Revenue Adjusted for Foreign Exchange. We estimate Revenue Adjusted for Foreign Exchange by converting revenues into US dollars, our financial reporting currency. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction. We believe that Revenue Adjusted for Foreign Exchange is a useful measure, indicating the actual growth of our operations, excluding the impact of foreign currency exchange rates changes. Revenue Adjusted for Foreign Exchange is not calculated in accordance with IFRS.

The following table reflects the reconciliation of Revenue Adjusted for Foreign Exchange to revenue, the most comparable IFRS measure, for each of the periods indicated:

 

    

Year ended
December 31,

    

Three months ended
March 31,

 
    

2014

    

2013

    

2015

    

2014

 
                   (unaudited)  
     (in thousands)  

Reconciliation of Revenue Adjusted for Foreign Exchange to Revenue:

           

Revenue

   $ 52,804       $ 44,630       $ 13,039       $ 10,805   

Effect of movement in exchange rates(1)

     —              —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue adjusted for foreign exchange

$ 52,804    $               $ 13,039    $              
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) We estimate Revenue Adjusted for Foreign Exchange by converting revenues for the period presented using the average exchange rates for the most recent corresponding period of the Euro, Sterling and the Brazilian Real, respectively, to one US dollar. We estimate this metric because of the inherent transactional complexity associated with tracking the volume of transactions in the various currencies in which we operate, and applying the appropriate exchange rate from the most recent corresponding period to each transaction.

Adjusted Gross Profit. We define Adjusted Gross Profit as gross profit excluding depreciation that is included in the cost of sales. We believe that Adjusted Gross Profit is a useful measure, indicating the actual profitability of our production excluding this non-cash charge. Adjusted Gross Profit is not calculated in accordance with IFRS.

The following table reflects the reconciliation of Adjusted Gross Profit to gross profit, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
     Three months ended
March 31,
 
     2014      2013      2015          2014      
                   (unaudited)  
     (in thousands)  

Reconciliation of Adjusted Gross Profit to Gross Profit:

           

Gross profit

   $ 26,766       $ 22,082       $ 6,549       $ 5,020   

Depreciation included in cost of sales

     1,022         1,052         231         252   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Gross Profit

$ 27,788    $ 23,134    $ 6,780    $ 5,272   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Adjusted EBITDA. We define Adjusted EBITDA as operating loss, adjusted for other expenses, depreciation, amortization and share-based and other equity-related compensation. We believe that Adjusted EBITDA is a useful metric for investors to understand and evaluate our results of operations and ongoing profitability because it permits investors to evaluate our recurring profitability from our ongoing operating activities. Adjusted EBITDA is not calculated in accordance with IFRS. See “Summary—Summary Consolidated Financial Data.”

The following table reflects the reconciliation of Adjusted EBITDA to operating loss, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
           2014                 2013                 2015                 2014        
                 (unaudited)  
     (in thousands)  

Reconciliation of Adjusted EBITDA to operating loss:

        

Operating loss

   $ (15,069   $ (8,776   $ (4,753   $ (5,163

Add:

        

Other expenses

     —          183        —          —     

Depreciation

     1,123        1,175        251        276   

Amortization

     3,990        4,033        882        1,034   

Share-based and other equity-related compensation

     1,844        —          734        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

$ (8,112 $ (3,385 $ (2,886 $ (3,853
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Interest Expense. We define Adjusted Interest Expense as interest expense adjusted for non-cash charges related to effective interest on our B Preference Shares and C Preference Shares. The B Preference Shares and C Preference Shares will convert into ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. However, we believe that Adjusted Interest Expense is a useful metric for investors to understand and evaluate our results of operations, because it permits investors to evaluate the cash costs of servicing our debt. Adjusted Interest Expense is not calculated in accordance with IFRS. See Note 7 to our consolidated financial statements included elsewhere in this prospectus for more information on our B Preference Shares and C Preference Shares and the effective interest with respect to such shares.

The following table reflects the reconciliation of Adjusted Interest Expense to interest expense, the most comparable IFRS measure, for each of the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
    

    2014    

   

    2013    

   

    2015    

   

    2014    

 
           (unaudited)  

Reconciliation of Adjusted Interest Expense to interest expense:

     (in thousands)   

Interest expense

   $ (33,746   $ (6,877   $ (7,060   $ (4,331

Non-cash charges related to effective interest on B Preference Shares and C Preference Shares

     27,544        3,313        5,107        2,998   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted interest expense

$ (6,202 $ (3,564 $ (1,953 $ (1,333
  

 

 

   

 

 

   

 

 

   

 

 

 

Certain Factors Affecting Our Performance and Financial Condition

We conduct our business in 75 countries, a large majority of which are emerging markets. As a result, our performance is affected by a number of factors and risks relating to economic, social and political conditions, laws, practices and local customs in the countries in which we sell our products. For example, we may fail to collect outstanding receivables if customers default on payments owed to us or cannot pay us on account of foreign currency controls. In addition, inflation and foreign exchange rate movements may make our products more expensive in the countries in which our products are sold and increase the credit risks to which we are exposed. These risks are more prevalent in the emerging markets where we sell our products.

We currently have direct sales operations in six countries and sell through distributors in an additional 69 countries. We also use agents, sub-distributors and representatives to supplement our direct sales forces in most of the countries where we sell directly. In the future we intend to increase the number of countries in which we have our own direct sales operations. In the countries where we currently have direct sales operations, we have higher average selling prices and gross margins as compared to those in which we sell our products through

 

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distributors. We also have higher distribution, selling and administrative expenses as a result of our own sales operations in those countries. If our distributors do not sell our products effectively or if one or more of our distributors becomes insolvent or fails to comply with local or other laws, our results of operations will be negatively affected. In addition, changes in product mix sold and foreign currency exchange rates also impact our gross margin.

Our future profitability depends on several factors, including our ability to increase revenues through sales and marketing activities, the continued market and regulatory acceptance of our products and our ability to continue to enhance our existing products and develop or acquire new products that meet our customers’ needs and preferences.

Product development and improvements require investments of significant financial, technological and other resources in existing and new products. In addition, they require significant planning, design, development and testing at the technological, product and manufacturing process levels, and we may not be able to timely or cost-effectively develop new products or improve existing products. Likewise, we may not be able to acquire new products on terms that are acceptable to us, or at all.

Our success also depends on our ability to manage manufacturing costs, including raw materials costs, and manufacture products that meet applicable regulatory and commercial requirements and, where applicable, maintain regulatory approvals for our existing products and secure regulatory approvals for new products. The need to obtain and maintain regulatory approvals in order to market and sell our products may limit our ability to act quickly in scaling commercialization in those countries.

We also have and will continue to incur share compensation expenses. Prior to this offering, we have granted employee compensation in the form of equity awards to certain of our employees, pursuant to the terms of their respective employment arrangements. In addition, in connection with this offering, we expect to implement an equity compensation incentive plan that provides for future grants of equity and other incentive compensation awards to certain of our employees. The implementation of this plan will result in increased compensation expense in future periods. We will record the associated share compensation expense in the period in which we grant such awards.

Further, the activities associated with this initial public offering process, as well as any future public offerings, may have a significant impact on our results of operations and cash flows. We expect to incur substantial costs in connection with becoming a publicly traded company, such as a material increase in incremental administrative expenses and other related costs. These costs include expenses associated with our financial and operational reporting, investor relations, stock exchange fees, registrar and transfer agent fees, incremental insurance costs and accounting and legal services. See “Risk Factors—Risks Related to this Offering and Ownership of Our Ordinary Shares.”

Components of Our Results of Operations

Revenue

We generate our revenues through the sales of our breast implants and other products and freight services. We have direct operations in six countries and sales in 69 additional countries through distributors. The countries in which we currently sell our products directly are Brazil, the United Kingdom, France, Spain, Italy and Germany; we also use agents, sub-distributors and representatives in these countries. When we refer to sales in direct countries, we refer to sales by our own sales force and sales by our agents, sub-distributors and representatives in these countries (“direct countries”). Sales in direct countries contributed $20.6 million, or 39% of revenues, in 2014, with the remainder from countries in which we sell our products solely through distributors (“distributor countries”).

Our revenue can be significantly impacted by fluctuations in foreign currency exchange rates, as the majority of our sales are denominated in currencies other than the US dollar.

 

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Cost of Sales

We manufacture our implant products at our manufacturing facilities in the United Kingdom and France. Third parties manufacture our Enhance and Silgel products. Cost of sales primarily includes costs for raw materials and components, labor, sterilization, packaging, freight, manufacturing overhead and depreciation charges. Manufacturing overhead includes expenses for regulatory affairs, quality assurance, manufacturing engineering, material procurement, inventory control, facilities, equipment, operations supervision and management. Cost of sales also includes the cost of replacement breast implants under our GCA Comfort Guarantee in the event of rupture or severe capsular contracture.

Gross Profit

We expect our gross profit, which is calculated as revenues less cost of sales for a given period, to fluctuate in future periods as a result of several factors, including the changing mix of products sold with different gross margins, changing percentage of products sold to distributors versus directly to individual customers, changes in foreign exchange rates, changes in our manufacturing processes or costs and increased manufacturing output. Any new products that we sell in the future may change our gross profit. The gross profit margin of our direct operations is higher than that of our distributor operations due to the higher prices per implant and other products that we have been able to achieve when we sell direct.

Distribution and Selling Expenses

Our distribution and selling expenses primarily consist of compensation for personnel, including base salaries, share-based compensation and incentive compensation associated with sales results, benefits and travel for our sales, marketing and customer support personnel. Other significant expenses include the cost of agents, sales and marketing support for our distributors, if applicable, as well as expenses for trade shows, product demonstration samples, our surgeon-centric support programs and women-centric initiatives, including our Experience Centres. We expect our distribution and selling expenses to increase as our business expands.

Administrative Expenses

Our administrative expenses primarily consist of compensation for personnel, including base salaries, bonuses, benefits and all share-based compensation for our employees (except those in Distribution and Selling Expenses) and directors. Other administrative expenses include outside legal counsel, independent auditors and other outside consultants, insurance, facilities and information technology expenses. We expect our administrative expenses to increase in connection with becoming a public company, which may increase further when we no longer qualify for the “emerging growth company” exemptions we are afforded under the JOBS Act or if we lose our “foreign private issuer” status.

Research and Development Expenses

Our research and development (“R&D”) expenses primarily consist of regulatory expenses, clinical expenses, product development, consulting services, quality control and other costs associated with the development of our products. R&D expenses also include related personnel and consultant compensation costs. We either expense R&D costs as they are incurred or capitalize them. R&D costs are capitalized only if such costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and we have sufficient resources to complete development and use or sell the asset. If capitalized, the expenditure capitalized includes the cost of materials, direct labor, overhead costs directly attributable to preparing the asset for its intended use and capitalized borrowing costs. We expect our R&D expenses to increase as we continue to expand our product development and regulatory development programs.

 

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Amortization of Intangible Assets

Charges for amortization are related to trademarks, brands, our customer base, technology, registrations and R&D. Intangible assets, other than goodwill, are recognized where they are separable or arising from contractual or other legal rights and can be reliably measured. They are stated at cost (cost being the fair value at the date of acquisition where they relate to a business combination) less accumulated amortization and impairment losses. Amortization is charged to profit and loss account in the statement of comprehensive income on a straight-line basis.

Other Expenses

Other expenses consisted of exceptional costs in 2013 related to professional fees in respect of bank debt restructuring, which were non-recurring in 2014. We do not expect to incur these exceptional costs again, as this bank debt has been repaid.

Interest Expense

Interest expense includes interest expense net of interest income, arrangement and other fees incurred to secure the Credit Facility and non-cash charges with respect to our B Preference Shares and C Preference Shares relating to effective interest thereon. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. See Note 14 to our consolidated financial statements included elsewhere in this prospectus.

Gain (loss) on Equity Derivatives

Gain (loss) on equity derivatives relates to non-cash charges in respect of the equity derivatives associated with our B Preference Shares and C Preference Shares. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. See Note 14 to our consolidated financial statements included elsewhere in this prospectus.

Loss (gain) on Foreign Exchange

Loss (gain) on foreign exchange relates to non-cash charges in respect of foreign currency exchange rate changes for our foreign currency denominated loans and our B Preference and C Preference Shares. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. See Note 14 to our consolidated financial statements included elsewhere in this prospectus.

Income Tax Credit

Income tax expense on the profit or loss for the year comprises current and deferred tax. Taxation is recognized in profit or loss in the statement of operations, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case the related tax is recognized in other comprehensive income or directly in equity, respectively. Current tax is the expected tax payable on the taxable income for the relevant period, using tax rates and laws that have been enacted at the reporting period end date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. If the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting or taxable profit or loss, it is not recognized. Deferred tax is provided on temporary differences arising on investments in subsidiaries and

 

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joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the reporting year end date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

Results of Operations – Year Ended December 31, 2014 to Year Ended December 31, 2013

The following table sets forth our results of operations for the fiscal years ended December 31, 2014 and 2013. This data should be read together with our financial statements and related notes included elsewhere in this prospectus, and is qualified in its entirety by reference to such financial statements and related notes.

 

    

Year Ended

December 31,

    

Change from

Prior Period

 
    

2014

   

2013

    

$

   

%

 
     (in thousands, except percentages)  

Revenue

   $ 52,804      $ 44,630       $ 8,174        18.3%   

Cost of sales

     (26,038     (22,548      (3,490     15.5%   
  

 

 

   

 

 

    

 

 

   

Gross profit

  26,766      22,082      4,684      21.2%   

Operating expenses:

Distribution and selling expenses

  (18,187   (10,113   (8,074   79.8%   

Administrative expenses

  (18,151   (15,042   (3,109   20.7%   

Research and development expenses

  (1,507   (1,487   (20   1.3%   

Amortization of intangible assets

  (3,990   (4,033   43      (1.1)%   

Other expenses

  —        (183   183      *   
  

 

 

   

 

 

    

 

 

   

Operating expenses

  (41,835   (30,858   (10,977   35.6%   
  

 

 

   

 

 

    

 

 

   

Operating loss

  (15,069   (8,776   (6,293   71.7%   

Other income (expense):

Net interest (expense) income

  (33,746   (6,877   (26,869   390.7%   

Loss on conversion of shareholder loans

  (27,737   —        (27,737   *   

Gain (Loss) on equity derivatives

  5,182      (4,828   10,010      (207.3)%   

(Loss) Gain on foreign exchange

  (18,657   1,994      (20,651   *   
  

 

 

   

 

 

    

 

 

   

Other (expense)

  (74,958   (9,711   (65,247   *   
  

 

 

   

 

 

    

 

 

   

 

Loss before income tax credit

  (90,027   (18,487   (71,540   387.0%   

Income tax credit

  600      1,195      (595   (49.8)%   
  

 

 

   

 

 

    

 

 

   

Net loss

  (89,427   (17,292   (72,135   417.2%   

Other comprehensive income (loss):

Items that may be reclassified to profit or loss in subsequent periods:

Foreign currency translation differences—foreign operations

  15,004      (2,192   17,196      *   

Items that will not be reclassified to profit or loss in subsequent years:

Net actuarial (loss) gain on retirement obligation, net of tax

  (36   30      (66   (220.0)%   
  

 

 

   

 

 

    

 

 

   

Total comprehensive loss

$ (74,459 $ (19,454 $ (55,005   282.7%   
  

 

 

   

 

 

    

 

 

   

 

* Not meaningful.

 

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The following table sets forth our revenue by geographic region for the fiscal years ended December 31, 2014 and 2013.

 

    

Year Ended December 31,

 
    

2014

   

2013

 
    

$

    

%

   

$

    

%

 
     (in thousands, except for percentages)  

Revenue

          

Europe, Middle East and Africa (“EMEA”)

   $ 24,824         47.0   $ 24,182         54.2

Latin America

     22,171         42.0     13,880         31.1

Asia-Pacific

     5,809         11.0     6,568         14.7
  

 

 

      

 

 

    

Total revenue

$ 52,804      100.0 $ 44,630      100.0
  

 

 

      

 

 

    

Revenue

Revenues increased $8.2 million, or 18.3%, to $52.8 million for the year ended December 31, 2014, as compared to $44.6 million for the year ended December 31, 2013; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %. This increase was primarily due to growth in sales volumes, driven by sales of our breast implant products in Latin America resulting from increased commercialization activities, including the expansion of our sales organization, increased marketing activities and greater familiarity with our products and customer service offerings by plastic surgeons. In particular, sales in Brazil increased by $3.3 million, or 48.9%, to $10.0 million, sales in Mexico increased as a result of the addition of a new distributor from $0 to $4.7 million and sales in France increased by $0.7 million, or 48.4%, to $2.0 million.

The number of implant products sold for the year ended December 31, 2014 increased by approximately 50,000 units (each unit representing one implant), or approximately 20%, to approximately 280,000 units, as compared to approximately 235,000 units for the year ended December 31, 2013. Revenues from sales of breast implants, and other implantable products and other revenue for the year ended December 31, 2014 were $48.2 million, $2.9 million and $1.7 million, respectively, as compared to $40.6 million, $2.7 million and $1.4 million, respectively, for the year ended December 31, 2013.

The number of implant products sold in our distributor countries for the year ended December 31, 2014 increased by approximately 25,000 units, or approximately 15%, to approximately 190,000 units, as compared to approximately 165,000 units sold for the year ended December 31, 2013. The number of implant products sold in our direct countries for the year ended December 31, 2014 increased by approximately 20,000 units, or approximately 29%, to approximately 90,000 units, as compared to approximately 70,000 units sold for the year ended December 31, 2013. Implantable product revenue from direct countries for the year ended December 31, 2014, increased 30%, or $4.7 million, to $20.3 million, as compared to the year ended December 31, 2013, while implantable product revenue from distributor countries for the year ended December 31, 2014 increased by $3.2 million, or 11.8%, to $30.8 million, as compared to the year ended December 31, 2013.

For the year ended December 31, 2014, the number of implant products sold in EMEA decreased by approximately 5,000 units, or approximately 5%, to approximately 105,000 units, as compared to approximately 110,000 units for the year ended December 31, 2013 and the number of implant products sold in Asia-Pacific decreased by approximately 10,000 units, or approximately 22%, to approximately 35,000 units, for the year ended December 31, 2014. The decrease in sales in Asia-Pacific was the result of price competition in Australia and Thailand, resulting in reduced purchases of our products in such countries. During the same period, the number of implants sold in Latin America increased by approximately 60,000 units, or approximately 75%, to approximately 140,000 units as compared to approximately 80,000 units for the year ended December 31, 2013. Revenue from sales of implant products in EMEA, Latin America and Asia-Pacific for the year ended December 31, 2014 increased (decreased) by $0.3 million, $8.5 million and $(0.8) million, respectively, or 1.3%,

 

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63% and (12)%, respectively, to $23.9 million, $22.0 million and $5.6 million, respectively, as compared to the year ended December 31, 2013. Implantable product revenue in EMEA increased from $23.6 million in 2013 to $23.9 million in 2014, despite the decrease in units sold for the year ended December 31, 2014 as a result of our shift to direct sales in certain European countries.

Cost of Sales

Cost of sales increased $3.5 million, or 15.5%, to $26.0 million for the year ended December 31, 2014, as compared to $22.5 million for the year ended December 31, 2013. This increase was primarily due to an increase in sales volume.

Gross Profit

Gross profit increased $4.7 million, or 21.2%, to $26.8 million for the year ended December 31, 2014, as compared to $22.1 million for the year ended December 31, 2013. This increase was primarily due to an increase in sales volume and a shift to direct sales in certain countries. Excluding the impact of depreciation, gross profit increased $4.7 million, or 20.1%, to $27.8 million for the year ended December 31, 2014, as compared to $23.1 million for the year ended December 31, 2013. Our gross margin increased 121 basis points to 50.7%, as compared to 49.5% in 2013. The increase in gross margin was driven by additional sales volume, and moving to direct sales in two countries, offset by the significant increase in sales to our Mexican distributor where the average selling price was lower than the Company average.

Distribution and Selling Expenses

Distribution and selling expenses increased $8.1 million, or 79.8%, to $18.2 million for the year ended December 31, 2014, as compared to $10.1 million for the year ended December 31, 2013. This increase was primarily due to increased compensation and other costs as a result of an expansion of our direct sales operations in Brazil, the United Kingdom, France and Spain, and the establishment of our direct sales operations in Italy and Germany.

Administrative Expenses

Administrative expenses increased $3.1 million, or 20.7%, to $18.2 million for the year ended December 31, 2014, as compared to $15.0 million for the year ended December 31, 2013. This increase was primarily due to compensation, including share-based compensation, and other employee related expenses due to the expansion of our senior management team.

Research and Development Expenses

R&D expenses, which are related predominately to our breast implant products, remained constant at $1.5 million for the years ended December 31, 2014 and for the year ended December 31, 2013.

Other Expenses

Other expenses of $0.2 million for the year ended December 31, 2013 was associated with professional fees related to bank debt restructuring. There were no such expenses for the year ended December 31, 2014.

Amortization

Amortization expenses remained constant at $4.0 million for the years ended December 31, 2014 and December 31, 2013.

 

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Other Income (Expense)

Other income (expense) increased $65.3 million, to an expense of $75.0 million for the year ended December 31, 2014, as compared to an expense of $9.7 million for the year ended December 31, 2013. This increase in expense was due to (i) loss on conversion of shareholder loans of $27.7 million for the year ended December 31, 2014, (ii) a non-cash gain on the equity derivatives associated with our B Preference Shares and C Preference Shares of $5.2 million for the year ended December 31, 2014, an increase of $10.0 million, compared to the loss of $4.8 million for the year ended December 31, 2013; (iii) an increase in interest expense of $26.9 million, or 390.7%, to $33.7 million for the year ended December 31, 2014, as compared to $6.9 million for the year ended December 31, 2013, which was primarily due to increased borrowings on shareholder loans and non-cash charges in respect of the effective interest on our B Preference Shares and C Preference Shares, and (iv) a non-cash loss on foreign exchange movements related to our foreign currency denominated loans and our B Preference Shares and C Preference Shares of $18.7 million for the year ended December 31, 2014, an increase of $20.7 million compared to the gain of $2.0 million for the year ended December 31, 2013. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. Excluding the impact of non-cash charges, our interest expense increased $2.6 million, or 74.0%, to $6.2 million for the year ended December 31, 2014, as compared to $3.6 million for the year ended December 31, 2013.

Income Tax Credit

Income tax credit decreased $0.6 million, or 49.8%, to $0.6 million for the year ended December 31, 2014, as compared to $1.2 million for the year ended December 31, 2013. This decrease was primarily due to an increased corporation tax charge and a reduction in the origination and reversal of temporary differences in certain deferred tax assets. See Note 17 to our consolidated financial statements included elsewhere in this prospectus.

 

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Results of Operations – Three months ended March 31, 2015 compared to three months ended March 31, 2014

The following table sets forth our results of operations for the three months ended March 31, 2015 compared to the three months ended March 31, 2014. This data should be read together with our unaudited, interim condensed consolidated financial statements and related notes included elsewhere in this prospectus, and is qualified in its entirety by reference to such financial statements and related notes.

 

    

Three months ended
March 31,

   

Change from

Prior Period

 
    

2015

   

2014

   

$

   

%

 
     (unaudited)  
     (In thousands except percentages)  

Revenue

   $ 13,039      $ 10,805      $ 2,234        20.7%   

Cost of sales

     (6,490     (5,785     (705     12.2%   
  

 

 

   

 

 

   

 

 

   

Gross profit

  6,549      5,020      1,529      30.5%   

Operating expenses:

Distribution and selling expenses

  (4,097   (4,877   780      (16.0)%   

Administrative expenses

  (5,804   (3,778   (2,026   53.6%   

Research and development expenses

  (519   (494   (25   5.1%   

Amortization of intangible assets

  (882   (1,034   152      (14.7)%   
  

 

 

   

 

 

   

 

 

   

Operating expenses

  (11,302   (10,183   (1,119   11.0%   
  

 

 

   

 

 

   

 

 

   

Operating loss

  (4,753 )     (5,163   410      7.9%   

Other income (expense):

Net interest (expense)

  (7,060   (4,331   (2,729   63.0%   

Loss on conversion of shareholder loans

  —        (24,157   24,157      *   

(Loss) Gain on equity derivatives

  (39,956   10,934      (50,890   (465.4)%   

(Loss) Gain on foreign exchange

  (22,242   1,425      (23,667   *   
  

 

 

   

 

 

   

 

 

   

Other income (expense)

  (69,258   (16,129   (53,129   329.4%   
  

 

 

   

 

 

   

 

 

   

Loss before income tax credit (charge)

  (74,011   (21,292   (52,719   247.6%   

Income tax credit (charge)

  64      (14   78      *   
  

 

 

   

 

 

   

 

 

   

Net loss

$ (73,947 $ (21,306 $ (52,641   247.1%   
  

 

 

   

 

 

   

 

 

   

Other comprehensive income (loss):

Items that may be reclassified to profit or loss in subsequent periods:

Foreign currency translation differences—foreign operations

$ 19,062    $ (1,035 $ 20,097      *   

Items that will not be reclassified to profit or loss in subsequent years:

Net actuarial loss on retirement obligation, net of tax

  (1 )     (21   20      95.2%   
  

 

 

   

 

 

   

 

 

   

Total comprehensive loss

$ (54,886 $ (22,362 $ (32,524   145.4%   
  

 

 

   

 

 

   

 

 

   

 

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The following table sets forth our revenue by geographic region for the three months ended March 31, 2015 and March 31, 2014.

 

     For the three months ended
March 31,
 
     2015     2014  
     Dollars      % Total     Dollars      % Total  
    

(unaudited)

(in thousands, except for percentages)

 

Revenue

          

Europe, Middle East and Africa (“EMEA”)

     6,609         50.7     5,822         53.9

Latin America

     5,581         42.8     3,173         29.4

Asia-Pacific

     849         6.5     1,810         16.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue

$ 13,039      100 $ 10,805      100
  

 

 

    

 

 

   

 

 

    

 

 

 

Revenue

Revenues increased $2.2 million, or 21%, to $13.0 million for the three months ended March 31, 2015, as compared to $10.8 million for the three months ended March 31, 2014; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %. This increase was primarily due to growth in sales volumes, driven by sales of our breast implant products in Latin America resulting from increased commercialization activities, including the expansion of our sales organization, increased marketing activities and greater familiarity with our products and customer service offerings by plastic surgeons. In particular, sales in Brazil increased by $1.0 million, or by 50%, to $3.0 million, and sales in Mexico increased as a result of the addition of a new distributor from $0.1 million to $1.0 million.

The number of implant products sold for the three months ended March 31, 2015 increased by approximately 18,000 units (each unit representing one implant), or approximately 33%, to approximately 72,000 units, as compared to approximately 54,000 units for the three months ended March 31, 2014. Revenues from sales of breast implants, and other implantable products and other revenue for the three months ended March 31, 2015 were $11.7 million, $1.1 million and $0.2 million, respectively, as compared to $9.8 million, $0.7 million and $0.3 million, respectively, for the three months ended March 31, 2014.

The number of implant products sold in our distributor countries for the three months ended March 31, 2015 increased by approximately 7,000 units, or approximately 20%, to approximately 43,000 units, as compared to approximately 36,000 units sold for the three months ended March 31, 2014. The number of implant products sold in our direct countries for the three months ended March 31, 2015 increased by approximately 11,000 units, or approximately 60%, to approximately 29,000 units, as compared to approximately 18,000 units sold for the three months ended March 31, 2014. Implantable product revenue from direct countries for the three months ended March 31, 2015 increased 37%, or $1.5 million, to $5.7 million, as compared to the three months ended March 31, 2014, while implantable product revenue from distributor countries for the three months ended March 31, 2015 increased by $0.8 million, or 12%, to $7.1 million, as compared to the three months ended March 31, 2014.

For the three months ended March 31, 2015, the number of implant products sold in EMEA increased by approximately 7,000 units, or approximately 27%, to approximately 31,000 units, as compared to approximately 24,000 units for the three months ended March 31, 2014 and the number of implant products sold in Asia-Pacific decreased by approximately 6,000 units, or approximately 51%, to approximately 6,000 units, for the three months ended March 31, 2015. The decrease in sales in Asia-Pacific was the result of price competition in Australia and Thailand, resulting in reduced purchases of our products in such countries. During the same period, the number of implants sold in Latin America increased by approximately 17,000 units, or approximately 94%, to approximately 36,000 units, as compared to approximately 19,000 units for the three months ended March 31, 2014. Revenue from sales of implant products in EMEA, Latin America and Asia-Pacific increased (decreased) by $0.8 million, $2.4 million and $(0.9) million, respectively, or 15%, 76% and (53)%, respectively, to $6.4 million, $5.5 million and $0.8 million, respectively, as compared to the three months ended March 31, 2014.

 

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Cost of Sales

Cost of sales increased $0.7 million, or 12.2%, to $6.5 million for the three months ended March 31, 2015, as compared to $5.8 million for the three months ended March 31, 2014. This increase was primarily due to an increase in sales volume and a $0.2 million catch-up provision for replacement of implant products under the GCA Comfort Guarantee, which was partially offset by the impact of foreign exchange rates on costs incurred in Euros.

Gross Profit

Gross profit increased $1.5 million, or 30.5%, to $6.5 million for the three months ended March 31, 2015, as compared to $5.0 million for the three months ended March 31, 2014. This increase was primarily due to an increase in sales volume and the impact of foreign exchange rates on the cost of sales incurred in Euros. Excluding the impact of depreciation, gross profit increased $1.5 million, or 28.6%, to $6.8 million for the three months ended March 31, 2015, as compared to $5.3 million for the three months ended March 31, 2014. Our gross margin increased 370 basis points to 50.2% for the three months ended March 31, 2015, as compared to 46.5% for the three months ended March 31, 2014. The increase in gross margin was driven by additional sales volume and the impact of foreign exchange rates on cost of sales incurred in Euros, offset by the significant increase in sales to our Mexican distributor where the average selling price was lower than the Company average and a $0.2 million catch-up provision for replacement of implant products under the GCA Comfort Guarantee.

Distribution and Selling Expenses

Distribution and selling expenses decreased $0.8 million, or 16.0%, to $4.1 million for the three months ended March 31, 2015, as compared to $4.9 million for the three months ended March 31, 2014. This decrease was primarily due to increased compensation and other costs as a result of an expansion of our direct sales operations in Brazil, the United Kingdom, France and Spain, and the establishment of our direct sales operations in Italy and Germany, offset by the impact of foreign exchange rates on costs incurred in Euros, Brazilian Reais and Sterling.

Administrative Expenses

Administrative expenses increased $2.0 million, or 53.6%, to $5.8 million for the three months ended March 31, 2015, as compared to $3.8 million for the three months ended March 31, 2014. This increase was primarily due to compensation, including share-based compensation, and other employee related expenses due to the expansion of our senior management team.

Research and Development Expenses

R&D expenses, which are related predominately to our breast implant products, increased 5.1% to $0.5 million for the three months ended March 31, 2015 as compared to $0.5 million for the three months ended March 31, 2014.

Amortization

Amortization of intangible assets decreased $0.2 million, or 14.7%, from $1.0 million for the three months ended March 31, 2014 to $0.9 million for the three months ended March 31, 2015.

Other Income (Expense)

Other income (expense) increased $53.1 million, to an expense of $69.3 million for the three months ended March 31, 2015, as compared to an expense of $16.1 million for the three months ended March 31, 2014. This increase in expense was due to (i) loss on conversion of shareholder loans of $24.2 million for the three months ended March 31, 2014, (ii) a non-cash loss on the equity derivatives associated with our B Preference Shares and C Preference Shares of $40.0 million for the three months ended March 31, 2015 compared to a gain of $10.9 million for the three months ended March 31, 2014; (iii) an increase in interest expense of $2.7 million to $7.1 million for the three months ended March 31, 2015, as compared to $4.3 million for the three months

 

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ended March 31, 2014, which was primarily due to increased borrowings on shareholder loans and non- cash charges in respect of the effective interest on our B Preference Shares and C Preference Shares, and (iv) a non-cash loss on foreign exchange movements related to our foreign currency denominated loans and our B Preference Shares and C Preference Shares of $22.2 million for the three months ended March 31, 2015, an increase of $23.7 million compared to the gain of $1.4 million for the three months ended March 31, 2014. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods. Excluding the impact of non-cash charges, our interest expense increased $0.7 million, or 46.6%, to $2.0 million for the three months ended March 31, 2015, as compared to $1.3 million for the three months ended March 31, 2014.

Income Tax Credit

Income tax credit increased $0.1 million to $0.1 million for the three months ended March 31, 2015, as compared to $0 million for the three months ended March 31, 2014. This was primarily due to an increased deferred tax credit.

Liquidity and Capital Resources

Overview

Since our inception, we have incurred significant net operating losses and anticipate that our losses will continue in the immediate- to near-term. Based on our recurring losses from operations and net capital deficiency, and not taking into consideration any proceeds that we will receive in connection with this offering, our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements for the year ended December 31, 2014 expressing doubt about our ability to continue as a going concern. To date, we have financed our operations primarily through sales of our products, cash flow from operations, issuances of ordinary shares, preferred shares and convertible loan notes and borrowings under shareholder and bank loans and the Credit Facility. We have devoted substantially all of our resources to developing, manufacturing and obtaining regulatory approvals for our products, commercialization of our products and the development of a sales force, marketing team and management team for our business.

Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:

 

    the revenues generated by our breast implant and other products and any other future products that we may develop and commercialize;

 

    the costs associated with expanding our sales force and marketing programs;

 

    the cost associated with developing and commercializing our proposed products or technologies;

 

    the cost of obtaining and maintaining regulatory clearances and approvals for our current or future products;

 

    the cost of ongoing compliance with regulatory requirements;

 

    expenses in connection with potential litigation or governmental investigations;

 

    capital expenditures; and

 

    unanticipated administrative expenses and other costs.

 

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Our primary short-term capital needs, which are subject to change, include expenditures related to:

 

    support of our commercialization efforts related to current and future products;

 

    new product development, acquisitions, improvements to existing products and R&D efforts;

 

    payment of interest due under the Credit Facility and other loans;

 

    potential facilities expansion needs; and

 

    entry into new direct countries.

At March 31, 2015, we had $3.2 million in cash and cash equivalents. Although we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash used, we believe that our available cash on hand and proceeds from this offering will be sufficient to satisfy our liquidity requirements for at least the next twelve months. However, the continued growth of our business will significantly increase our expenses and cash requirements. In addition, the amount of our future product sales is difficult to predict, and actual sales may not be in line with our forecasts. As a result, we may be required to seek additional funds in the future from issuances of equity or debt securities, obtaining additional credit facilities or loans or from other sources, subject to the restrictions under the Credit Facility or other agreements. For example, the Credit Facility currently restricts our ability to incur additional pari passu debt. Moreover, additional capital, if needed, may not be available to us on satisfactory terms, if at all. Any additional equity financing may be dilutive to shareholders, and debt financing, if available, may include additional restrictive covenants. For a further discussion of going concern and other factors that may impact our future liquidity and capital funding requirements, see “Risk Factors—Risks Related to Our Financial Results and Need for Financing.” For a description of our Credit Facility, see “Indebtedness—Credit Facility” below.

Cash Flows

Our historical cash outflows have primarily been associated with activities relating to commercialization and increases in working capital and repayment of loans.

The following table shows a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:

 

     Year ended
December 31,
    Three months ended
March 31,
 
    

      2014      

   

      2013      

   

      2015      

   

      2014      

 
                 (unaudited)  
     (in thousands)  

Net cash used in operating activities

   $ (12,940   $ (1,299   $ (3,056   $ (805

Net cash used in investing activities

     (2,669     (705     (1,130     (192

Net cash provided (used) by financing activities

     22,248        4,026        (1,991     8,685   

Effect of exchange rate fluctuations on cash and cash equivalents

     (542     63        (1,194     (32
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

$ 6,097    $ 2,085    $ (7,371 $ 7,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Net cash used in operating activities for the year ended December 31, 2014 was $12.9 million, as compared to net cash used in operating activities of $1.3 million for the year ended December 31, 2013. The change in net cash used in operating activities was primarily associated with the increase in net loss of $72.1 million and an increase in cash outflows from operating assets and liabilities resulting from an increase in inventories and accounts receivable as a result of our strong growth in sales, partially offset by an increase in accounts payable. The net loss for the year ended December 31, 2014 was significantly impacted by non-cash charges associated with (i) our B Preference Shares and C Preference Shares relating to (A) $27.5 million in

 

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effective interest, as compared to $3.3 million for the year ended December 31, 2013, (B) a $5.2 million gain on the associated equity derivative, as compared to a loss of $4.8 million for the year ended December 31, 2013, (C) a $15.4 million foreign exchange loss on B Preference Shares and C Preference Shares, as compared to a gain of $1.8 million for year ended December 31, 2013 and (D) a $27.7 million loss on conversion of shareholder loans during the year ended December 31, 2014, and (ii) a $3.3 million foreign exchange loss on foreign currency denominated loans, as compared to a $0.2 million gain for the year ended December 31, 2013. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods.

Net cash used in operating activities for the three months ended March 31, 2015 was $3.1 million, as compared to net cash used in operating activities of $0.8 million for the three months ended March 31, 2014. The change in net cash used in operating activities was primarily associated with the increase in net loss of $52.6 million and an increase in cash outflows from operating assets and liabilities resulting from an increase in inventories and accounts receivable as a result of our strong growth in sales, partially offset by an increase in accounts payable. The increase in net loss for the three months ended March 31, 2015 was significantly impacted by non-cash charges associated with (i) our B Preference Shares and C Preference Shares relating to (A) $5.1 million in effective interest, as compared to $3.0 million for the three months ended March 31, 2014, (B) a $40.0 million loss on the associated equity derivative, as compared to a gain of $10.9 million for the three months ended March 31, 2014, (C) an $18.5 million foreign exchange loss on B Preference Shares and C Preference Shares, as compared to a gain of $0.6 million for three months ended March 31, 2014, and (D) a $24.2 million loss on conversion of shareholder loans during the three months ended March 31, 2014, and (ii) a $3.7 million foreign exchange loss on foreign currency denominated loans, as compared to a $0.8 million gain for the three months ended March 31, 2014. The B Preference Shares and C Preference Shares will convert to ordinary shares in connection with this offering; as a result, no further charges in respect thereof will be incurred in future periods.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2014 was $22.2 million, as compared to net cash provided by financing activities of $4.0 million for the year ended December 31, 2013. The change in net cash provided was primarily due to the issuance of preferred shares and funds borrowed under the Credit Facility, offset by higher financing costs and repayment of our bank loans.

Net cash used in financing activities for the three months ended March 31, 2015 was $2.0 million, as compared to net cash provided by financing activities of $8.7 million for the three months ended March 31, 2014. The change in net cash used was primarily due to the issuance of preferred shares and funds borrowed under the Credit Facility, offset by repayment of our bank loans in the three months ended March 31, 2014.

Investing Activities

The net cash used in investing activities for the year ended December 31, 2014 was $2.7 million, as compared to net cash used in investing activities of $0.7 million for the year ended December 31, 2013. The change in net cash used was primarily due to an increase of $1.0 million in our capital expenditure program to support the maintenance of and expansion of our manufacturing facilities and $1.0 million due to an investment in product registrations.

The net cash used in investing activities for the three months ended March 31, 2015 was $1.1 million, as compared to net cash used in investing activities of $0.2 million for the three months ended March 31, 2014. The change in net cash used was primarily due to an increase of $0.4 million in our capital expenditure program to support the maintenance of and expansion of our manufacturing facilities and $0.5 million due to an investment in product registrations.

 

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Indebtedness

Credit Facility

On January 22, 2014, our wholly-owned subsidiary, GC Aesthetics Finance Limited, entered into a $34 million senior term loan facility with OrbiMed. This term loan facility was amended on November 26, 2014 to provide for an additional senior term loan facility of $15 million and was further amended on April 27, 2015 to provide for an additional senior term loan facility of $10 million (together, these term loan facilities are referred to herein as the “Credit Facility”). All three tranches of loans under the Credit Facility have been fully drawn down.

Interest is payable at a rate equal to 8.50% plus the higher of (i) the three-month London Interbank Offered Rate and (ii) 1% in the relevant period. In addition, during the term of the Credit Facility, we must pay an amount of additional interest for each fiscal year equal to the sum of (A) 1.80% of the aggregate revenues of our products for such fiscal year, up to €50 million of such revenues, plus (B) 2.15% of the aggregate revenues of our products during such fiscal year in excess of €50 million but not exceeding €75 million (“Additional Interest”).

The maturity date of the Credit Facility is January 22, 2020. Commencing on February 22, 2019, and quarterly thereafter, unless otherwise waived by OrbiMed, we are obligated to repay one-quarter of the outstanding aggregate principal amount under the Credit Facility. A 10% prepayment premium will be payable if the Credit Facility is repaid prior to the maturity date. In addition, on any repayment of the loans under the Credit Facility (whether on or before the maturity date), we must pay OrbiMed an additional premium, calculated on a variable scale depending on the date of repayment, up to a maximum amount of $16.2 million, less the aggregate amount of all payment of Additional Interest we have previously paid.

The Credit Facility is secured by first-priority security interests over the shares or other equity interests of our significant subsidiaries and over the most significant assets of such subsidiaries, including their bank accounts, receivables and intellectual property.

The Credit Facility contains restrictive covenants that require us to maintain certain cash reserves and a specified minimum revenue base, and that limit our ability to transfer or dispose of certain assets, engage in new lines of business, change certain members of our management team, merge with or acquire other companies, incur additional debt, create new liens and encumbrances, pay dividends or subordinated debt and enter into certain transactions with affiliates, among other things. In addition, the Credit Facility will become repayable in full immediately in the event that any “person” or “group” (within the meaning of Rule 13d of the Exchange Act) other than Montreux or Oyster obtains ownership, directly or indirectly, of more than 35% of our voting shares. We are currently in compliance with all covenants under the Credit Facility.

Other Indebtedness

€80,951 of our interest bearing loan notes issued to certain of our shareholders on May 30, 2008 and December 24, 2009 (the “PIK Loan Notes”) remain outstanding. Interest accrues at 15% per annum and as at December 31, 2014 had a balance of €438,985 and will continue to accrue until settled. In addition, as at December 31, 2014, €1.8 million accrued interest on the portion of the PIK Loan Notes that was previously converted to B Preference Shares remains outstanding and continues to accrue interest at a rate of 8% per annum. Unless we repay these amounts, they will remain outstanding until the earlier of (i) May 30, 2016 and (ii) the completion of a sale transaction (defined as a direct or indirect sale of all or substantially all of the Company’s business and/or assets or transfer or disposal of the legal or beneficial ownership of the ordinary shares of the Company resulting in a change in control of the Company, “Sale Transaction”). Notwithstanding the provisions concerning repayment on a Sale Transaction, the outstanding principal and accruing interest in respect of the PIK Loan Notes are all subject to a subordination agreement with OrbiMed dated January 22, 2014, and pursuant to the terms of such agreement will not, without the consent of OrbiMed, be repaid until six months after the maturity date of the Credit Facility. See “Related Party Transactions.”

 

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€70,734 remains outstanding to Dreamxcell Holdings Limited and we agreed to repay such balance in the event of a Sale Transaction.

We also have other loans with banks and regional development authorities in certain countries outstanding in an aggregate amount of $458,065 as of December 31, 2014. A portion of these loans are interest free and unsecured and the remainder accrues interest at a rate of 27.57% per annum. For a complete discussion of our bank loans, see Note 8 to our audited financial statements.

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2014. Amounts we pay in future periods may vary from those reflected in the table.

 

    Contractual
amount
    Less than
1 Year
     1 to 3
years
    3 to 5
years
    More than
5 years
 
    (in thousands)  

Preference shares(1)(3)

    106,919        —           —          —          106,919   

Cumulative dividend related to preference shares(1)(3)

    65,697        —           —          —          65,697   

Debt obligations(2)(3)

    52,924        532         407        49,098        2,887   

Interest and other payments related to debt obligations(2)(3)

    32,173        6,271         12,989        10,648        2,265   

Operating lease obligations

    1,687        748         642        271        26   
 

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total contractual obligations

  259,400      7,551      14,038      60,017      177,794   
 

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) The B Preference Shares and C Preference Shares will convert into ordinary shares in connection with this offering. Cumulative dividend related to preference shares represents the cash dividend payable to preference shareholders at 8% annually up to the maturity date.

 

(2) In April 2015, we drew an additional $10.0 million under the Credit Facility, as described in "—Indebtedness—Credit Facility" above. Interest and other payments related to debt obligations were calculated as follows:

Payment In Kind loans—interest is calculated based on the cash interest compounded at the end of May each year up to the maturity date.

Shareholders' loans—interest is calculated based on the cash interest up to the maturity date.

Finance lease liabilities—interest is calculated based on the cash interest up to the maturity date.

 

(3) Contractual amount above is reconciled to the amount disclosed in Note 20 to our financial statements included in this prospectus as follows:

 

     (in thousands)
Contractual
cash flows
 

Preference shares

  

As presented above:

  

Preference shares

     106,919   

Cumulative dividend related to preference shares

     65,697   
  

 

 

 

Total

  172,616   
  

 

 

 

As disclosed in Note 20 to the financial statements:

B Preference shares and C preference shares

  172,616   
  

 

 

 

 

     Contractual cash flows  
Debt obligations           As disclosed in Note 20 to the financial statements:  
     As presented
above
     Payment
In Kind
loans
     Shareholders'
loans
     Finance
lease
liabilities
     Bank and
other loans
     Total  
     (in thousands)  

Debt obligations

     52,924         581         51,135         750         458         52,924   

Interest and other payments related to debt obligations

     32,173         795         31,252         126         —           32,173   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  85,097      1,376      82,387      876      458      85,097   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Off-Balance Sheet Arrangements

As of December 31, 2014 and March 31, 2015, we had no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Seasonality

We do not believe that seasonality has a material impact on our revenues or results of operations.

Critical Accounting Policies

The preparation of financial statements in accordance with IFRS requires our Board and management to make critical accounting estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates and judgments are continually evaluated and are based on historical experience and other factors, including the expectation of future events that are believed to be reasonable under the circumstances at any particular point in time. The resulting accounting estimates will, by definition, seldom equate to the related actual results. The estimates and assumptions that are material to our financial reporting are discussed further below and are subject to a degree of subjectivity and complexity.

The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Note that the preparation of the financial statements included in this prospectus requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

While our significant accounting policies are more fully described in Note 2 to our financial statements included in this prospectus, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Significant management judgments and estimates must be made and used in connection with the recognition of revenue in each accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of the business or market conditions. To date there have been no material differences arising from these judgments and estimates.

Revenue from products is generally recorded as of the date of shipment, consistent with our typical shipment terms. Where the shipment terms do not permit revenue to be recognized as of the date of shipment, revenue is recognized when we have satisfied all of our obligations to the customer in accordance with the shipping terms.

Revenue is recognized to the extent that it is probable that economic benefit will flow to the Company, that the risks and rewards of ownership have passed to the buyer and that the revenue can be measured. This normally occurs on dispatch in relation to goods sold to end users and distributors. No revenue is recognized if there is uncertainty regarding recovery of the consideration due at the outset of the transaction or the possible return of goods. Revenue is disclosed net of value added tax, trade discounts, rebates and other allowances.

 

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Allowance for Slow-Moving and Obsolete Inventory

We evaluate the realizability of our inventory on a case-by-case basis and make adjustments to the inventory provision based on our estimates of expected losses. We write off any inventory that is approaching its “use-by” date and for which no further re-processing can be performed. We also consider recent trends in revenues for various inventory items and instances where the realizable value of inventory is likely to be less than its carrying value. There were no material changes in estimates made during the years ended December 31, 2014 or 2013 that would have had a material impact on the carrying values of inventory during those periods.

Trade Receivables

We evaluate customer accounts with past-due outstanding balances or specific accounts for which we have information that the customer may be unable to meet its financial obligations. Based upon a review of these accounts and management’s analysis and judgment, we estimate the future cash flows expected to be recovered from these receivables. The amount of the impairment on doubtful receivables is measured individually and recorded as a specific allowance against that customer’s receivable balance to the amount expected to be recovered. The allowance is reevaluated and adjusted periodically as additional information is received.

Impairment Testing

For impairment assets purposes, certain of our assets, comprising trademarks, brands, registrations, goodwill, research and development and customer base purchased on acquisition, are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating unit level.

Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Company at which management monitors goodwill. Cash generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Our corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the Company’s cash-generating unit to which the corporate asset belongs.

An impairment loss is recognized for the amount by which the asset’s (or the cash-generating unit’s) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to our latest Board approved budget, adjusted as necessary to exclude the effects of future reorganizations and asset enhancement where relevant. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and cash-generating unit asset-specific risk factors.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in the statement of operations. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the cash-generating unit on a pro rata basis.

With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.

 

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Ordinary Shares Valuation and Share-Based Compensation

We operate an equity-settled, share-based payment plan that includes the issuance of equity options to our employees in accordance with the provisions set out in the 2010 Employee Share Option Plan (the “2010 Plan”).

Options granted under this plan have a maximum exercise period of seven years from the grant date. The awards vest on an installment basis with a portion of the award vesting immediately and the remaining portion vesting over a number of months on a pro-rata basis. The number of option shares in respect of which an option may be exercised is cumulative, so that once an option is exercisable as to any option shares it continues to be exercisable as to such option shares until the option is fully exercised or lapses as provided in the plan. There are no market conditions attached to the options granted and outstanding.

The following equity options, as granted to our employees, were outstanding under the 2010 Plan as follows:

 

    

Number of
options

    

Weighted average
exercise price

 

Outstanding, January 1, 2013

     —         0.00   
  

 

 

    

 

 

 

Outstanding, December 31, 2013

  —      0.00   

Granted during the year

  1,179,791      0.01   

Forfeited during the year

  —        —     

Expired during the year

  —        —     

Exercised during the year

  —        —     
  

 

 

    

 

 

 

Outstanding, December 31, 2014

  1,179,791    0.01   
  

 

 

    

 

 

 

Exercisable, December 31, 2014

  368,885    0.01   
  

 

 

    

 

 

 

Outstanding, December 31, 2014

  1,179,791    0.01   

Granted during the year

  256,414      0.01   

Forfeited during the year

  —        —     

Expired during the year

  —        —     

Exercised during the year

  —        —     
  

 

 

    

 

 

 

Outstanding, March 31, 2015

  1,436,205    0.01   
  

 

 

    

 

 

 

Exercisable, March 31, 2015

  512,181    0.01   
  

 

 

    

 

 

 

The exercise price for equity options outstanding at December 31, 2014 and March 31, 2015 was €0.01 ($0.0133) and €0.01 ($0.0113), respectively. The weighted average remaining contractual life of the outstanding equity options, which have a seven-year term, is 6.72 years at March 31, 2015. There were no equity options outstanding at December 31, 2013.

The total expense of equity options for the twelve months ended December 31, 2014 was $1.8 million.

The total expense of equity options for the three months ended March 31, 2015 and March 31, 2014, was $0.7 million and $0 million, respectively.

The fair value of equity options granted is estimated using the Black-Scholes-Merton option valuation model, which incorporates various assumptions including expected life, volatility, risk-free interest rates and dividend yield.

 

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The following tables list the inputs to the models used for the equity option plan:

 

    

12 months ended
December 31, 2014

 

3 months ended
March 31, 2015

Dividend yield (%)

   0%   0%

Expected volatility (%)

   50%   50%

Risk–free interest rate (%)

   0.17%   1.29%

Expected life of equity options (years)

   7 years   5 years

Weighted average share price (€)

   €3.47   €4.52

Model used

   Black-Scholes-Merton   Black-Scholes-Merton

The expected life of equity options represents the estimated duration between grant date and the expected exercise or cancellation date. We estimated the expected life of equity options granted based on the terms and conditions of the equity awards granted to our employees.

We estimated the volatility of our outstanding equity options based on peer company analysis.

We obtain the risk-free interest rate figures based on a U.S. government security of similar term to the equity option at the grant date. U.S. securities were chosen for reference on the basis that we intend to list our ordinary shares in the United States.

We have never paid or declared any cash dividends on our ordinary shares and we do not have present plans to pay cash dividends on our ordinary shares. Consequently, we used an expected dividend yield of zero in the Black-Scholes-Merton option valuation model.

Our Board has historically estimated the fair value of our ordinary shares on each grant date, including consideration of the conclusions of the contemporaneous valuations performed by an independent valuation specialist. The contemporaneous valuations were performed in accordance with applicable methodologies, approaches and assumptions of the technical practice-aid issued by American Institute of Certified Public Accountants and considered many objective and subjective factors to determine the fair market value of the ordinary shares for each valuation date. The following factors, among others, were considered:

 

    our stage of development and business strategy;

 

    the financial condition and operating results of publicly owned companies with similar lines of business and their historical volatility;

 

    external market conditions that could affect companies in the aesthetics products and medical device sectors;

 

    the prices of our preference shares sold to outside investors and the rights, preferences and privileges of our preference shares as compared to those of our ordinary shares, including the liquidation preference of our preference shares;

 

    the likelihood of a liquidity event such as an initial public offering, a merger or the sale of the Company;

 

    the lack of marketability of our ordinary shares as a private company; and

 

    recent relevant transactions.

Following the closing of this offering, our Board will determine the fair value of our ordinary shares based on its closing price as reported on the NASDAQ Global Market on the date of grant.

 

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Income Taxes

Given the global nature of our business and the multiple tax jurisdictions in which we operate, the determination of our provision for income taxes requires significant judgments and estimates, the ultimate tax outcome of which may be uncertain. Although we believe our estimates are reasonable, the final outcome of these matters may be different than those reflected in the historical income tax provisions and accruals. Such differences could have a material effect on the income tax provision and results of operations in the period during which such determination is made.

Deferred tax assets and liabilities are determined using enacted tax rates for the effects of net operating losses and temporary differences between the book and tax bases of assets and liabilities. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. While management considers the scheduled reversal of deferred tax liabilities, and projected future taxable income, in making this assessment, there can be no assurance that these deferred tax assets may be realizable.

In addition, we may also be subject to audits in the multiple taxing jurisdictions in which we operate. These audits can involve complex issues that may require an extended period of time for resolution. Management believes that adequate provisions for income taxes have been made in the financial statements.

Fair Value of Equity Derivatives

We have an equity derivative and, as required under IFRS 13, this equity derivative is required to be revalued annually. We employed third-party experts to provide a Company valuation.

The valuation was undertaken with regard to comparable market transactions between informed market participants. The transaction values are derived from data publicly available; however, due to the limited activity levels for transactions for peer companies, a degree of professional judgment was used by the consultants with regard to the final valuation. For this reason, the valuation of the equity derivative is classified as level three (as defined by IFRS 13) and presented in the Fair Value Table in our financial statements.

The individual derivatives share value is based on using a Black-Scholes-Merton valuation model based on the enterprise value of the Company.

Functional and Presentation Currency

The Company financial statements are presented in US dollars. While the Company’s consolidated financial statements are presented in US dollars, the functional currency of the Company and most of its subsidiaries is the Euro. Items included in the individual financial statements of each of our subsidiaries are measured using the currency of the primary economic environment in which the entity operates, primarily the Euro, Sterling, Mexican Peso and Brazilian Real.

Foreign Currency Transactions

Transactions in foreign currencies are re-measured at the foreign exchange rate in effect at the date of the transaction. Monetary assets are translated at the rate in effect at the balance sheet date. Non-monetary assets carried at historical cost are translated at their historical rates.

For financial statement presentation, monetary and non-monetary assets are translated at the rate in effect at the balance sheet date. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting year are translated to functional currencies at the foreign exchange rate in effect at that date. Foreign exchange differences arising on translation are recognized in the statement of comprehensive income.

 

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Qualitative and Quantitative Disclosures about Market Risk

The following discussion provides forward-looking quantitative and qualitative information about our potential exposure to market risk. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for collection of receivables from our customers and distributors (credit risk), the impact of interest rate changes (interest rate risk), foreign currency exchange rate changes (foreign currency exchange risk) and inflation.

Credit Risk

Our sales are to a broad range of direct-users and distributors, most of which are in emerging markets. As a result of our operations in emerging markets, we are exposed to a greater possibility of loss arising from customer default. We seek to address this risk by performing credit checks before commencing new client relationships, maintaining customer credit limits and regularly monitoring our commercial relationships with our customers. No single customer represented more than 10% of our sales in 2014 or the three months ended March 31, 2015. Trade receivables net of impairment losses were $11.9 million at March 31, 2015 compared to $12.8 million at December 31, 2014 and $10.0 million at December 31, 2013. The decrease is mainly due to improved credit control and the impact of foreign exchange rate changes. As of March 31, 2015, of our $13.0 million of gross trade receivables, $5.4 million were past due and $1.1 million were impaired, and, after giving effect to our allowance for doubtful accounts, we had exposure of $4.3 million. For more information on our trade receivables, see Notes 4 and 20 to our consolidated financial statements included elsewhere in this prospectus.

Foreign Currency Exchange Risk

Although our financial statements are presented in US dollars, our functional currency and the functional currency for the majority of our subsidiaries is the Euro, and as a result, we may incur foreign exchange gains or losses resulting from movements in the exchange rate of the Euro, particularly versus the US dollar, Sterling, Mexican Peso and Brazilian Real.

Our products are available in 75 countries and our sales and costs are incurred in multiple currencies, including the US dollar, the Euro, Sterling, Mexican Peso and Brazilian Real. Accordingly, we are exposed to significant currency risk. We may not be able to change our prices to reflect the impact of foreign exchange rate changes. We manage this foreign currency risk, in part, through operational means, including managing foreign currency revenues in relation to same currency costs as well as managing foreign currency assets in relation to same currency liabilities; however, we are not able to fully match our foreign currency revenues to our costs. We are also exposed to potential earnings effects from the revaluation of our assets and liabilities. Other methodologies to limit our foreign exchange risks are being evaluated, which may include foreign exchange forward contracts or options.

In an appreciating US dollar environment, we expect our sales to fall and our profitability to increase, and vice versa in a depreciating US dollar environment.

Commodities Price Risk

The Company is dependent on the ability of our suppliers to provide raw manufacturing products on a timely basis at favorable pricing terms. The loss of certain principal suppliers, significant increases in costs of raw materials or a significant reduction in raw material availability could have a material adverse effect on our operations, cash flows and financial position.

The Company has two key suppliers of raw materials for manufacturing, one for each of our brands, Nagôr and Eurosilicone. These two suppliers are under common ownership. Purchases from these two suppliers

 

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comprised 43%, 31%, 53% and 43% of all purchases made during the years ended December 31, 2014 and December 31, 2013, and the three months ended March 31, 2015 and March 31, 2014, respectively. The largest supplier accounted for 59%, 55%, 50% and 47% during the years ended December 31, 2014 and December 31, 2013, and the three months ended March 31, 2015 and March 31, 2014, respectively, of all raw materials purchases. Any significant interruption by the suppliers could have a material adverse impact on our operations. See Note 13 to our consolidated financial statements included elsewhere in this prospectus.

Interest Rate Risk

Our exposure to interest rate risk relates primarily to the floating interest rate of the Credit Facility. Interest on the $59.0 million principal is payable at a rate equal to 8.50% plus the higher of (i) the three-month London Interbank Offered Rate and (ii) 1% in the relevant period. We have no current intention to hedge our interest rate risk.

Inflation

Although at reduced levels in recent years, inflation continues to apply upward pressure on the cost of goods and services that we use. The competitive environments in many countries substantially limit our ability to fully recover these higher costs through increased selling prices. We continually seek to mitigate the adverse effects of inflation through cost containment and improved productivity and manufacturing processes.

Recently Issued Accounting Standards

The following new standards impacted the Company:

 

    Amendments to IAS 27, Separate Financial Statements;

 

    Amendments to IAS 32, Financial Instruments: Presentation re: Offsetting Financial Assets and Financial Liabilities;

 

    Amendments to IAS 36, Impairment of Assets: Recoverable Amount Disclosures for Non-Financial Assets;

 

    IFRIC 21, Levies;

 

    Amendments to IFRS 10, Consolidated Financial Statements;

 

    Amendments to IFRS 12, Disclosure of Interests in Other Entities;

 

    Amendment to IAS 19, Employee Benefits;

 

    Amendments to IAS 39, Financial instruments: Recognition and Measurement re: Novation of Derivatives and Continuation of Hedge Accounting;

 

    Annual Improvements (2010-2012 Cycle); and

 

    Annual Improvements (2011-2013 Cycle).

The amendments to the foregoing standards did not have a significant impact on our financial statements. We reviewed the other new standards and International Financial Reporting Interpretations Committee’s and related guidance issued by the IASB during the year, and considered their applicability to the Company, and only those items listed above were considered applicable.

 

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Emerging Growth Company Status

As a company with less than $1.0 billion in revenue during our most recently completed fiscal year as of the initial filing date of the registration statement of which this prospectus forms a part, we qualify as an “emerging growth company” under the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include:

 

    the ability to present more limited financial data, including presenting only two years of audited financial statements and only two years of selected financial data in the registration statement on Form F-1 of which this prospectus is a part;

 

    an exemption from certain disclosure obligations regarding executive compensation in the registration statement on Form F-1 of which this prospectus is a part and in our future periodic reports;

 

    an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; and

 

    exemptions from the requirements of holding a non-binding advisory vote on executive compensation and obtaining shareholder approval of any golden parachute payments.

We may take advantage of these exemptions for up to five years or such time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues as of the end of any fiscal year, we have more than $700 million in market value of our shares held by non-affiliates as of the end of our second fiscal quarter or we issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced disclosure obligations. We have taken advantage of reduced disclosure obligations regarding financial statements and executive compensation arrangements in this prospectus, and we may choose to take advantage of some but not all of these obligations in future filings. If we do, you may receive different and less information than you might get from other public companies.

We will not take advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Since IFRS makes no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

Foreign Private Issuer Status

We are also considered a “foreign private issuer.” In our capacity as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our ordinary shares. Moreover, while we must file an annual report on Form 20-F, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, although we do intend to furnish quarterly reports on Form 6-K. In addition, although we plan to comply with Regulation FD, which restricts the selective disclosure of material non-public information, we are not required to comply with Regulation FD. As a foreign private issuer, we also may elect, and have elected, to follow Irish corporate governance rules to the extent permitted.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities

 

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are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.

We have taken advantage of certain reduced reporting and other requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies.

Controls and Procedures

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS. We have not performed an evaluation of our internal control over financial reporting, such as required by Section 404 of the Sarbanes-Oxley Act, nor have we engaged an independent registered public accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date or for any period reported in our financial statements. In the course of preparing our consolidated financial statements, we have identified deficiencies in the design and operating effectiveness of our internal control over financial reporting, including deficiencies relating to (i) revenue recognition in one of the countries in which we sell our products; (ii) calculation of tax; and (iii) valuation of the equity derivatives associated with our B Preference Shares and C Preference Shares. These deficiencies, or other deficiencies that may arise in the future, could result in one or more findings of a material weakness. We plan to take various measures to remediate these deficiencies, including upgrading our information technology systems, hiring additional finance and accounting personnel with appropriate training, building our financial management and reporting infrastructure, hiring external advisors and further developing and documenting our accounting policies and financial reporting procedures. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take and whether our efforts will be successful.

Presently, our management is not required to perform an annual assessment of the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 20-F for the year ended December 31, 2016. Our independent registered public accounting firm will first be required to attest to the effectiveness of our internal control over financial reporting for our Annual Report on Form 20-F for the first year in which we are an accelerated filer and we are no longer an “emerging growth company” under the JOBS Act. See “Risk Factors—Risks Related to this Offering and Ownership of Our Ordinary Shares.”

 

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BUSINESS

Overview

We are a leading pure-play female aesthetics company committed to becoming the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime. To date, we have generated significant growth by focusing on the development, manufacturing and commercialization of one of the broadest ranges of implant products, principally silicone breast implants. We believe that through our two brands Nagôr and Eurosilicone, which have a combined 60 years of market presence, we have (i) a strong reputation for safety, quality and reliability, as evidenced by the five-year data from our ongoing Eurosilicone safety study, (ii) strong competitive advantages based on our innovative product design features—the result of our focused approach to research and development, which integrates feedback from women and surgeons, and (iii) a differentiated marketing and customer service approach, focusing on the needs of women.

We have developed and marketed our comprehensive range of products, comprising over 1,100 SKUs, to address the different needs and preferences of women and surgeons. All of our implants are manufactured with medical-grade silicone supplied from either NuSil or ASC, both of which are U.S.-based, ISO 9001-certified sources. We have manufacturing facilities in the United Kingdom and France and sell our products in 75 countries, with direct sales activities in six countries, including Brazil, the world’s largest medical aesthetics market by total number of plastic surgery procedures.

The global aesthetics products market in 2014 was estimated at $6.5 billion in total sales and is expected to grow at a CAGR of nearly 12%, reaching almost $10.2 billion in total sales by 2018, according to Medical Insight. We believe the overall market growth is driven by multiple factors, including a growing middle class in emerging markets, an increase in women’s disposable income, increasing awareness and acceptance of aesthetics procedures, as well as continuous innovation and improved accessibility to aesthetics procedures. While the United States has historically been the largest market for aesthetics products in terms of total revenues, a significant number of markets outside of the United States have been growing faster in terms of revenues and plastic surgeon numbers, For example, Brazil, Mexico and China have experienced faster revenue growth than the aesthetics products market in the United States, providing attractive growth opportunities, according to industry sources. The global breast implant market is forecasted to reach nearly $1.3 billion by 2018, with some estimates forecasting the market will reach nearly $1.5 billion by 2019, growing at a CAGR ranging from approximately 4% to 6% from 2014 to 2018.

We have a diversified revenue base, with approximately 47% of our 2014 revenues derived from sales in EMEA, approximately 42% in Latin America and approximately 11% in Asia-Pacific. Our revenues were approximately $52.8 million for the year ended December 31, 2014, as compared to approximately $44.6 million for the year ended December 31, 2013; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %. Our revenues were approximately $13.0 million for the three months ended March 31, 2015, as compared to approximately $10.8 million for the three months ended March 31, 2014; excluding the impact of changes in foreign exchange rates, we estimate that this represents growth of         %.

We seek to become the trusted brand and partner for women and surgeons. We believe we have an opportunity to expand the current female aesthetics market by making aesthetics procedures more acceptable and accessible by dispelling misconceptions, offering a platform that provides women with support to make informed decisions about their bodies and, ultimately, providing innovative, high-quality products to meet their needs. Our strategy to support long-term growth is to (i) continue to outperform our competitors and gain market share through our singular focus on female aesthetics and delivery of high-quality service, (ii) expand our direct sales efforts in existing markets and new high-growth markets, such as China, South Korea, Thailand and the CIS countries, and commercialize new female aesthetics products in existing markets, (iii) continue developing and

 

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maintaining our surgeon relationships and strong brand recognition to introduce innovative products, (iv) leverage our customer-centric approach and launch additional novel initiatives, and (v) selectively pursue strategic acquisitions to enlarge our product portfolio, go direct in new markets or expand further in existing markets.

The Global Aesthetics Products Market

The global aesthetics products market in 2014 was estimated at $6.5 billion in total sales and is expected to grow at a CAGR of nearly 12%, reaching almost $10.2 billion in total sales by 2018, according to Medical Insight. We believe the overall market growth is driven by multiple factors, including a growing middle class, increasing female disposable income and increasing awareness and acceptance of aesthetics procedures, as well as continuous innovation and improved accessibility to aesthetics procedures, through an increase in the number of surgeons.

While the United States has historically been the largest market for aesthetics products in terms of total revenues, a significant number of markets outside the United States have been growing faster in terms of revenues and plastic surgeon numbers. We believe that this growth in markets outside the United States will continue based on increasing penetration rates in many of those markets, increases in plastic surgeon numbers, improved accessibility and infrastructure for plastic surgery and favorable demographic and economic trends. For example, in 2013, Brazil surpassed the United States in total number of plastic surgery procedures, accounting for 12.9% of global plastic surgery procedures, as compared to 12.5% for the United States, according to ISAPS. The international market has also seen significant growth in the number of plastic surgeons. While the number of plastic surgeons in the United States grew at a CAGR of approximately 1% from 2010 to 2013, the number of plastic surgeons in certain countries outside the United States grew at an estimated average CAGR of 8% for the same period. For example, China and South Korea grew their plastic surgeon populations at CAGRs of approximately 12% and 18%, respectively, from 2010 to 2013. Brazil’s plastic surgeon population of 5,473 in 2013 is close to that of the United States, at 6,133. We believe the increase in the plastic surgeon population is representative of improved accessibility and a growing infrastructure supportive of further expansion of the overall aesthetics market.

Overview of the Global Breast Implant Market

Breast augmentation surgery represented the leading aesthetic surgical procedure, with approximately 15% of total aesthetic surgical procedures performed by plastic surgeons in 2013, based on ISAPS. The global breast implant market is forecasted to reach nearly $1.3 billion by 2018, with some estimates forecasting the market will reach nearly $1.5 billion by 2019, growing at a CAGR ranging from approximately 4% to 6% from 2014 to 2018. Breast implant surgery is used to enhance aesthetic appearance and comprises two general categories: (i) breast augmentation procedures for cosmetic purposes and (ii) breast reconstruction procedures to replace breast tissue that has been removed, mainly due to cancer or trauma.

 

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Non-U.S. Market Penetration Rates Compared to U.S. Penetration Rate

 

LOGO

As illustrated above, many of the non-U.S. markets are still highly underpenetrated, based on the number of women undergoing breast implant procedures, compared to the penetration of global brands in the United States. We believe that current trends in non-U.S. markets will continue to increase penetration rates in those markets, creating a significant growth opportunity for us, given our global focus.

Favorable Demographics and Economic Trends for the Global Aesthetics Market

The primary market for aesthetics procedures is comprised of middle- and upper-class women, which BCC Research defines as women with access to sufficient income to afford such aesthetics procedures. The number of middle- and upper-income women globally is forecasted to grow at a CAGR of approximately 5% from 2014 to 2019 to 346 million, according to industry sources. In China alone, the middle- and upper-income female population is expected to reach 78 million by 2019, matching that of the United States. From 2014 to 2019, the aesthetics products market is estimated to grow at a CAGR of 1.5% in the United States, in contrast to 11.0%, 8.3% and 8.2% in China, Mexico and Brazil, respectively, according to BCC Research. Moreover, the Company estimates that the global aesthetics products market is projected to grow at a higher CAGR than the world GDP, and, in China, Brazil and Mexico, the aesthetics products market is projected to grow at a higher CAGR than their respective GDPs. In contrast, the U.S. aesthetics products market is projected to grow more slowly than the GDP of the United States.

In addition, the breast implant market has grown despite economic slowdowns in various geographies. For example, in Brazil, the number of breast implant units sold grew by 11.5% in 2012, according to industry sources, while the country’s GDP growth slowed to only 1.8% over that same period. In Europe, the number of breast implant units sold grew by 12.8% in 2012, according to the same source; in contrast, overall GDP grew by 0.3% over that same period. We believe these statistics are indicative of the stability and growth of the breast implant market throughout economic cycles.

Furthermore, Euromonitor projects the global annual disposable income per capita for women will grow at a CAGR of approximately 6% over the next five years. We believe this growth will help drive the expansion of the global aesthetics market. In addition, over the next 20 years, it is estimated that there will be a significant increase in the world’s middle-class population, which is expected to account for a significant increase in purchasing power and discretionary spending. We believe much of this growth in purchasing power will come from emerging markets, due to increasing annual disposable incomes in those markets. For example, according to Euromonitor, over the next five years, the annual disposable incomes in Asia-Pacific and Latin America are forecasted to expand at a CAGR of approximately 9% and 20%, respectively, outpacing the 4% growth in the United States.

 

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Our Opportunity

We believe we have a significant opportunity to capitalize on the favorable trends in the aesthetics market and benefit from the underlying growth in women’s disposable income, particularly in emerging markets, given the strength of our brands, quality and breadth of product portfolio, differentiated customer service, strong customer relationships, expanding global infrastructure and new product development. Currently, we focus on the breast implant products market outside of the United States, as well as on other pre- and post-breast implant surgery products globally. We have a significant presence in Europe, Latin America and Asia-Pacific and we intend to continue to further expand in these regions as well as in Russia and the Middle East and into emerging markets, including China, Thailand and additional CIS countries. We are evaluating the clinical programs required for our implant products in North America. Beyond breast implant products, we intend to expand our presence in other selected female aesthetics products, including those associated with implant surgery as well as other procedures, such as body sculpting treatments and dermal fillers.

We seek to become the trusted brand and partner for women and surgeons. We believe we have an opportunity to expand the current female aesthetics market by making aesthetics procedures more acceptable and accessible by dispelling misconceptions, offering a platform that provides women with support to make informed decisions about their bodies and, ultimately, providing innovative, high-quality products to meet their needs.

Competitive Strengths

We believe our pure-play focus has allowed us to become a leading player in the female aesthetics market. The following are our key competitive strengths:

Highly regarded and trusted brands with a strong safety profile. We have two prominent brands, Nagôr and Eurosilicone, which have a combined 60 years of market presence, and a well-established track record for safety, quality and reliability. Millions of women worldwide have used our products. Based on a company-sponsored, Eurosilicone breast implant study in Europe with 534 subjects, the peer-reviewed five-year clinical safety data published in Plastic and Reconstructive Surgery supported the strong safety profile of our breast implant products, with low incidence of rupture and rates of capsular contracture comparable to rates experienced by others in our industry for primary augmentation surgery.

Broad product range recognized for quality. Breast implant products are our core competency. Unlike our primary competitors, who generate a very small portion of their total revenue from breast implant products, we generate substantially all of our revenue from our breast implant products, and are focused on providing one of the most comprehensive selections of breast implant and other products for our customers. Our product portfolio, including our breast implant products, includes over 1,100 SKUs. Our breast implant products include round and anatomical implants with different projections, textures and gel cohesivities. Through this breadth of product offerings, we believe our breast implant products allow surgeons and women to achieve their desired look and feel. We believe they recognize that our breast implant products offer an attractive profile of shape retention, durability and natural feel, and we are focused on consistently delivering high levels of customer satisfaction. We also are planning to launch pre- and post-breast implant surgery products in the second half of 2015.

Global sales and marketing platform. We sell our products in 75 countries and are one of the leading breast implant manufacturers globally by units sold. Through our strong sales and marketing platform, we promote the Nagôr and Eurosilicone brands globally through our direct sales activities in Brazil, Spain, the United Kingdom, France, Germany and Italy and an additional 69 countries through distributors. We believe our strong sales and marketing platform will help us to successfully launch product line extensions and thereby drive additional revenue growth, particularly in rapidly growing emerging markets.

Extensive in-house development and manufacturing capabilities. All of our products have been developed in-house. Our manufacturing operations allow us to rapidly develop new products based on our close relationships with women and surgeons and our extensive industry experience. We have manufacturing facilities

 

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in the United Kingdom and France, all of which are ISO certified and are regularly inspected by their respective regulatory bodies. We remain focused on innovation to produce differentiated, best-in-class products for our customers. An example of our commitment to innovation is the development and recent well-received launch of our IMPLEO product line, which we believe is the first round implant that offers shape maintenance, an unbreakable gel and a natural feel—important qualities for women and surgeons in choosing a breast implant.

Focus on integrated marketing and delivering high-quality customer service. We believe that our customer-focused approach to product design, marketing and customer care is a key differentiator. Our integrated marketing approach includes woman-centric initiatives, including our Experience Centres, which allow women to consider a variety of implants and gain familiarity with aesthetics procedures in a comfortable and supportive setting, our VIP Club, through which we work with partners to offer women discounts to complementary products, and an online community of blogs, which provide women with additional information on breast implants, breast implant surgery and alternatives. In addition, we offer surgeon-centric support programs, including Business Boost, our program that assists surgeons in building their businesses. We believe our GCA Comfort Guarantee is distinctive in our industry and we are not aware of any other implant company that offers an equivalent lifetime guarantee for implant replacement in the event of rupture or severe capsular contracture. Our customer service teams provide comprehensive telephonic and email customer support to our sales representatives and customers. We believe our commitment to delivering customer satisfaction will help expand our addressable market and create the opportunity to gain additional market share.

Experienced management team. We are led by a proven management team, with a successful track record in healthcare and aesthetics. Ayse Kocak is the only female chief executive officer of a breast implant company and has over 20 years of experience in the healthcare industry. Our management team has over 135 years of combined experience across diverse backgrounds, including significant experience with pharmaceutical and healthcare product companies, and has been the team responsible for developing, implementing and executing our strategy for continued growth.

Our Growth Strategies

Our goal is to become the leading pure-play female aesthetics company. We are committed to becoming the trusted brand and partner for women seeking to look healthy, youthful, vibrant and beautiful, and to feel confident about themselves throughout their lifetime. To achieve these objectives, we are pursuing the following growth strategies:

Outperform the competition in existing markets. Our focus on female aesthetics and delivering high-quality service has distinguished our brands and has enabled us to gain market share from our major competitors in key markets, including Brazil and Mexico, the second and third largest markets by number of breast implant units sold, as shown in the market share gain data depicted below. Based on internal estimates, from 2013 to 2014, our global market share outside of North America increased from 18% to 20%, based on breast implant units sold. We believe that as our brand awareness increases and our reputation for quality and service grows, we will be able to achieve additional growth in our existing markets.

 

LOGO

 

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Penetrate new geographical markets with a focus on direct operations and commercialize new products. We currently sell our products directly in six countries and through distributors in an additional 69 countries. We plan to increase the number of countries where we have our own direct sales operations, with a goal of adding nine direct countries by the end of 2017, including China, South Korea, Thailand and six European countries. In countries where we sell our products directly to customers, we have greater control over our commercial activities, including the ability to implement changes (such as in the pricing of our products) more quickly. We have historically seen stronger growth in our market share and sales revenue in countries where we sell our products directly. For example, based on internal estimates, in Spain, we increased our market share from approximately 13% in 2011, when we established direct operations, to approximately 24% in 2014, with sales in Spain growing at a CAGR of approximately 54% over the same period. Similarly, in Brazil, we increased our market share from approximately 13% in 2012, when we established direct operations, to approximately 19% in 2014, with sales in Brazil growing at a CAGR of approximately 45% over the same period. Overall, sales in our direct countries grew at a rate of approximately 30% from 2013 to 2014, as compared to a rate of approximately 12% in countries where we sell our products through distributors. We are evaluating the clinical programs required for our implant products in North America. We also plan to expand our product portfolio by commercializing additional female aesthetics products in the markets where we currently operate.

Leverage our surgeon relationships and strong brand recognition to introduce innovative products. By leveraging the established position of our Nagôr and Eurosilicone brands and strong surgeon relationships, we plan to expand our product range in female aesthetics. We recently launched our new breast implant product, IMPLEO, which has been well received by women and surgeons and has already achieved strong sales performance in several key markets. We plan to continue innovating and introducing new products like IMPLEO to expand our product portfolio to offer the best solutions for our customers. We also intend to leverage our brands and market position to help drive revenues as we introduce new pre- and post-implant surgery products into our markets.

Continue our customer-centric approach and launch additional novel initiatives. Unlike our larger competitors, we are a pure-play female aesthetics company, and we are focused on supporting our surgeons through programs such as Business Boost, streamlining their ordering and shipping processes, familiarizing them with our commitment to quality through factory tours and offering highly-responsive customer service. We intend to continue to effectively engage women and surgeons through an integrated approach that includes direct marketing, distribution partnerships and social media campaigns to help promote the acceptance of breast implants and help patients take action to change the way they feel about themselves. For example, we have launched Experience Centres that allow women to experience the implant that is right for them in a relaxed and supportive environment, helping women get comfortable with making the decision to have an aesthetic procedure. Our goal is to help women enhance their lifestyles, increase their self-confidence by finding their desired fit and be 100% satisfied with our products, with peace of mind from our GCA Comfort Guarantee lifetime warranty. We believe these efforts will help expand our addressable market by encouraging more women to consider aesthetics procedures, including breast implant surgery.

Selectively pursue strategic acquisitions. We may selectively pursue complementary acquisitions that would allow us to enlarge our female aesthetics product portfolio, go direct in new or existing markets or expand further in existing markets. We expect to expand our product portfolio by adding products, such as garments, anti-scar treatments, fillers, toxins and body sculpting treatments. We may go direct in more markets by acquiring certain of our existing distributors, which we believe will contribute to increased gross margins and allow us to control our messaging to more effectively market our products with key decision makers. In addition, we may pursue acquisitions of other aesthetic implant players where it will provide complementary product lines, technology or market access.

Our Products

We have developed and marketed our comprehensive range of products, comprising over 1,100 SKUs, to address the different needs and preferences of women and surgeons.

 

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We have two strong and established brands, Nagôr and Eurosilicone, which have a combined 60 years of market experience in breast implant products. Nagôr products are manufactured at our facilities in the United Kingdom and Eurosilicone products are manufactured at our facility in France. All of our implants are manufactured with medical-grade silicone supplied from either NuSil or ASC, both of which are U.S.-based, ISO 9001-certified sources.

Breast Augmentation and Breast Reconstruction Products

Breast Implant Products. Our product portfolio addresses a comprehensive range of options:

 

Shape

Round and anatomical (also known as teardrop)

Texture

Smooth and three different textures

Volume

100ml to 800ml

Projection

Low to extra-high

Gel cohesivity

Five different cohesivities

We recently commenced active promotion of the IMPLEO breast implant product line, which we believe are the first round implants to be both soft to the touch and deliver shape maintenance, resulting in a more natural look and feel. The IMPLEO breast implant product line also offers a range of texturing options and permits a small surgical incision due to the implants’ unbreakable gel. We believe that through this combination of features, a wider range of surgeons is able to deliver an outcome to women that was previously achievable only by the highest quality surgeons.

The commercial impact of IMPLEO was significant in certain countries in 2014, its first year of active promotion in such markets; it accounted for approximately 20% of our sales in France and for approximately 56% of our sales in the United Kingdom in 2014. IMPLEO is currently available in 44 of the 75 countries in which we sell our products, and we are planning to launch it in almost all of our other markets in 2015, subject to receiving required regulatory approvals.

Breast Sizers. We produce a range of these temporary, single-use products that can be used by surgeons during surgery to help identify the desired style and size of implant for each woman.

Breast Tissue Expanders. These are used in breast reconstruction following cancer and other trauma injuries, and are temporary devices intended to aid in the process of recreating tissue coverage to allow for the placement of an implant to reconstruct the breast.

Other Implants

We offer a range of other implant products, including gluteal, testicular and calf implants, all made from medical-grade silicone. In 2014, these represented 5.5% of our sales.

Pre- and Post-Breast Implant Surgery Products

In the second half of 2015, we are planning to launch a range of products to offer a broader solution and reinforce our brand loyalty among women considering breast augmentation and those who have had the procedure, including the following products:

The Enhance Breast Boost Pack. Based upon our extensive experience and understanding of the female breast form, this non-invasive product, comprising a specialized bra and silicone breast forms, allows women to experience the look and feel of fuller breasts instantly, and we believe this will lead to an increase in the number of women considering surgical augmentation and consulting surgeons.

 

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Silgel scar management specialty products. These gel and sheet products leverage our experience of working with medical-grade silicone in products that minimize the appearance of post-surgery scars, and help us build upon our existing relationships with surgeons and access other market channels, such as pharmacies and internet sales.

Our Five-Year Clinical Data

In June 2014, Plastic and Reconstructive Surgery published the peer-reviewed five-year results from an ongoing study to evaluate the safety profile of our Eurosilicone breast implant products. This multi-center, surgeon-led study, sponsored by us, monitors 1,010 Eurosilicone breast implants in 534 subjects who have undergone either augmentation or reconstructive surgery. Each patient had a three-month post-surgery follow-up evaluation and annual follow-ups thereafter. The study’s five-year results demonstrate a low rupture rate and a strong safety profile for primary augmentation surgery. The primary augmentation total risk of rupture was assessed at 0.8% per patient; only one of the 1,010 implants was found to be ruptured on examination. The incidence of primary augmentation severe capsular contracture was 10.7%, which we believe is consistent with rates experienced by others in our industry.

Product Development

All of our products have been developed in-house. Through integrating our significant experience developing, manufacturing and securing regulatory approval for our breast implant products and our close relationships with women and surgeons, we believe that we are well positioned to continue our track record of developing innovative products based on customer needs. We have a team of 5 people involved in product development as of March 31, 2015. We intend to continue to invest into our current product portfolio to help us maintain one of the broadest and safest ranges of implants.

Sales and Marketing

As of December 31, 2014, we had a sales organization of 63 employees. We currently sell our products directly in six countries and through distributors in an additional 69 countries. The countries in which we sell our products directly are Brazil, the United Kingdom, France, Spain, Italy and Germany. In certain of the countries where we sell direct, we also use agents, sub-distributors and representatives. We believe the expansion of our sales force provides us with significant opportunities for future growth as we continue to penetrate existing markets and enter new markets. In addition, we believe that as we expand our female aesthetics product portfolio, we can leverage this platform to sell these additional products.

We believe one of the keys to our commercial success has been our ability to partner with the plastic surgeon community through medical and education initiatives, including publications, conferences, workshops and key opinion leader (KOL) sponsorship programs, as well as surgeon-specific initiatives, including providing consultation kits and arranging factory tours. In addition, our sales team is supported by customer service teams, which provide telephonic and email customer support to our customers and sales representatives.

Our marketing team leads our efforts in brand development, advertising, tradeshow attendance, educational forums, product messaging and website development. They also educate surgeons on the advantages of our products through a variety of methods and custom training tools. We intend to continue to promote broader acceptance of aesthetics procedures and to drive adoption of our products by engaging women and surgeons through our integrated, customer-centric approach that includes our Experience Centres, GCA Comfort Guarantee, Business Boost and ongoing communication through social media. We believe these efforts will expand our addressable market by encouraging additional women to consider aesthetics procedures and additional surgeons to use our products.

We sell our products through distributors in the 69 countries in which we do not have direct operations. We also use agents, sub-distributors and representatives in countries where we have direct operations. We have

 

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developed long-standing relationships with a number of our distributors. We require that all of our distributors adhere to confidentiality obligations and comply with health, environmental and labor regulatory standards as well as anti-corruption, sanctions and similar regulatory regimes to which we are subject, including those of the United Kingdom, Ireland, France and the United States.

Manufacturing and Supply

We manufacture our products in ISO-certified manufacturing facilities located in the United Kingdom and France, with raw materials and components sourced by external suppliers. We perform inspections of these materials before use in our manufacturing operations. Throughout the manufacturing process, we maintain rigorous quality control testing. We believe our facilities comply with international current Good Manufacturing Practice (“cGMP”) regulations for medical devices, and we are subject to periodic inspections and audits by various foreign regulatory bodies. As a result, we must follow stringent design, testing, production, control, documentation and other quality assurance procedures during all aspects of the manufacturing process. Our in-house manufacturing team includes over 260 employees. We believe our manufacturing experience, proprietary know-how and trade secrets represent a barrier to entry for potential competitors. We increased our unit production by 60% in 2014 and are evaluating the construction of a new manufacturing facility in Latin America.

We obtain our medical-grade silicone from NuSil and ASC, each of which is the sole-source supplier for our respective brands.

NuSil: We entered into a supply agreement with NuSil in April 2015. The agreement expires, unless earlier terminated or renewed, in April 2018. Each party has the right to terminate the agreement in the event of a breach by the other party, subject to notice and an opportunity to cure.

ASC: We entered into a supply agreement with ASC in December 2008, which was subsequently amended in January 2010, January 2012, January 2014 and December 2014. The agreement expires, unless earlier terminated or renewed, in December 2017. Each party has the right to terminate the agreement in the event of a material breach by the other party, subject to notice and an opportunity to cure.

Competition

Our industry is intensely competitive and subject to rapid change from the introduction of new products and technologies and other activities of industry participants. While we believe that our technology, knowledge, experience, customer service and brand reputation provide us with competitive advantages, we face significant competition from companies selling similar products.

Our primary competitors include Mentor Worldwide, LLC, a division of Johnson & Johnson, and Allergan plc. These companies are well-capitalized and control a majority share of the breast implant products market. These competitors also enjoy several competitive advantages over us, including greater financial and human resources for sales, marketing and product development, larger and more established distribution networks, greater ability to cross-sell products and more experience in conducting research and development, manufacturing and obtaining regulatory approvals and clearances. We also compete with these companies for personnel, licensing and development partners, complementary businesses and technologies we may seek to acquire and exclusive distribution arrangements. In addition, we compete with Silimed, a leading Brazilian supplier of breast implant products. In certain of the countries in which we operate, we also compete with several other breast implant manufacturers, including Groupe Sebbin SAS and Establishment Labs S.A., which sell their breast implant products at significantly lower prices than those of our Nagôr and Eurosilicone breast implant products.

The key competitive factors affecting the success of our products are safety, brand reputation, product quality, product innovation and customer service. For our products to be successful, we must be able to manufacture and effectively market them to a sufficient number of women, surgeons, clinics and hospitals, such that they purchase our current products and the new products we may introduce.

 

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Government Regulation

Medical Devices

Our breast implant products are characterized as Class III medical devices in many of the countries in which we operate, while others of our products are characterized as Class I, Class IIa or Class IIb medical devices in many of the countries in which we operate. Sales of medical devices are subject to regulatory requirements that vary widely from country to country, ranging from simple product registration requirements in some countries to more complex and stringent clearance and post-market controls in others.

For example, in order to be placed on the market within the EEA, medical devices must meet the essential requirements set out in the relevant medical device legislation. The principal legislation regulating general medical devices in the EEA is Directive 93/42/EEC (and subsequent amending directives), referred to herein as the EU Medical Devices Directive. In the case of low-risk (Class I) medical devices, such as Silgel, the manufacturer may self-certify conformity with the EU Medical Devices Directive by issuing a declaration of conformity. In the case of medium- to high-risk (Class IIa, IIb and III) medical devices, such as our breast implant products and tissue expanders, an EC Certificate issues from a notified body. Where a medical device meets the essential requirements set out in the EU Medical Devices Directive and complies with the appropriate conformity assessment procedure, based on the classification of the medical device, an EC Certificate will be issued and a CE Mark may then be affixed to the product. Once a CE Mark has been affixed to the medical device, it may then be placed on the market in any country within the EEA, Switzerland and Turkey (subject to certain localized registration and language requirements).

We have received an EC Certificate from the notified body for all of our breast implant products and our breast tissue expanders, allowing us to affix the CE mark to each such product. In order to maintain our EC Certificate and CE Mark, we must continue to comply with the EU Medical Devices Directive and pass annual facilities audit inspections by an inspection agency of the EEA. In addition, a notified body or other competent authority in an EEA country may perform post-marketing audits on our products and premises from time to time. Failure to comply with such requests in a timely manner, and any adverse findings in any such audit, could result in the withdrawal of our EC Certificate and our CE Mark, and the recall or withdrawal of our products from the EEA market. Each EC Certificate is generally valid for a maximum of five years. Our existing EC Certificates for Eurosilicone breast implant medical device products are valid until November 2018 (EC Design Certificate for breast implants) and August 2015 (EC Full Quality Assurance Certificate for breast implant and other implant products, including breast tissue expanders) and our existing EC Certificates for Nagôr breast implant medical device products are valid until March 2019 (EC Design Certificates for each of saline and silicone breast implants), May 2017 (EC Full Quality Assurance Certificate covering round breast tissue expanders) and April 2019 (EC Full Quality Assurance Certificate covering anatomical breast tissue expanders). At the end of each period of validity, we are required to apply to the notified body for a renewal of our certificate of conformity. There may be delays in the renewal of our certificate of conformity and the notified body may require modifications to our products or to the related technical files before it agrees to issue a new certificate of conformity.

In Brazil, marketing authorization requires submission of an application to the Brazilian Health Surveillance Agency (ANVISA), which will approve products deemed safe and effective. The manufacturing facilities in which the products are produced also must be operated in compliance with Brazilian cGMP regulations. An import license may be obtained following approval of a product. Maintenance of a product registration in Brazil requires annual inspection of the manufacturing facility. Our existing marketing approvals in Brazil covering Eurosilicone breast implant products are valid until October 2019 (breast implants) and December 2018 (tissue expanders).

In Mexico, marketing authorization requires submission of an application to the Federal Commission for the Protection against Sanitary Risk (“COFEPRIS”). COFEPRIS will approve products deemed safe and effective. The manufacturing facilities in which products are produced are not required to be inspected.

 

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Following approval, an import license for a product may be obtained. Our existing marketing approvals in Mexico covering Eurosilicone breast implant products are valid until May 2018 (Matrix range), January 2019 (Round Textured range), and February 2019 (Round Smooth range) and January 2019 (for breast tissue expanders) and for Nagôr Breast implant products are valid until February 2018 (IMPLEO and Cogel ranges) and May 2018 (GFX and RGI ranges).

In China, marketing authorization requires submission of an application to the Chinese Food and Drug Administration (“CFDA”), which will approve products deemed safe and effective. The registration process involves review of clinical data as well as additional pre-clinical studies, including physical, chemical and biocompatibility data. We currently are in the process of re-registering our products with the CFDA. The review of the initial re-registration application takes approximately 12 months, and we expect the CFDA to complete its review of our application in mid-2015. After its initial review, the CFDA may request additional data, which we must provide within 12 months of such a request. If our registration is approved, our product registration will be valid for five years.

We have also obtained an ISO 13485 quality system certification, which confirms that our medical device manufacturing quality management system is compliant with globally recognized standards set forth by the ISO. We are required to keep up-to-date and remain compliant with the most recently issued standards.

Approval in one jurisdiction does not assure that a product will be approved in another jurisdiction. The processes and time periods required to obtain marketing approvals vary widely from jurisdiction to jurisdiction, and in some instances we may not receive marketing approval for a product in a particular jurisdiction within the timeframe we anticipate. In order to maintain our marketing authorizations, we must comply with the laws and regulations of each jurisdiction in which we sell our products. In addition, we will be subject to the laws and regulations of any additional jurisdiction in which we obtain marketing approval for a product. Failure to comply with applicable laws and regulations could jeopardize our ability to sell our products and result in a variety of enforcement actions.

Other Regulations

Our global activities are subject to the Bribery Act, the FCPA and other countries’ anti-bribery laws. These laws generally prohibit companies and their intermediaries from offering, promising, authorizing or providing payments or anything of value to any foreign government official, government staff member, political party or political candidate for the purpose of obtaining or retaining business or securing any other improper advantage. The Bribery Act, in addition, prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery. Companies have the burden of proving that they have adequate procedures in place to prevent bribery. The enforcement of such laws has increased dramatically in recent years, and authorities have indicated that the medical device industry will be a significant focus for enforcement efforts. Although we have procedures in place to ensure that we, our employees and our agents comply with the Bribery Act, the FCPA and related laws, there is no assurance that such procedures will protect us against liability under the Bribery Act, the FCPA or related laws for actions taken by our agents, including our distributors, employees and intermediaries with respect to our business.

We also are subject to anti-money-laundering laws and regulations and economic sanctions and other restrictions imposed by the European Union and other governments and organizations. Under these laws and regulations, as well as other export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may, among other things, require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities, and modifications to compliance programs. If we or our employees or agents violate these laws or regulations, it could adversely impact our business, results of operations and financial condition.

In addition, our business activities involve the use of hazardous materials. We and certain of our suppliers are subject to environmental, health and safety laws and regulations, including those governing the use,

 

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handling, storage, disposal and human exposure to hazardous and toxic materials. Many of our operations require permits and controls to monitor or prevent pollution. We have incurred and will continue to incur substantial ongoing capital and operating expenditures to ensure compliance with these laws and regulations and we expect that our operations will be affected by increasingly stringent and new environmental, health and safety laws and regulations on an ongoing basis, which likely will result in additional costs, and may require us to change how we manufacture our products.

For a discussion of the risks relating to the failure to comply with these laws and regulations, see “Risk Factors.”

Trademarks and Other Intellectual Property

We regard intellectual property and other proprietary rights as important to our success. We own trademarks and service marks that have been registered with various jurisdictions in which we operate, including, but not limited to, COGEL, DREAMXCELL, EUROSILICONE, GC AESTHETICS, GCA, GCA BUSINESS BOOST, NAGOR and SILGEL. We have made application to register various trademarks and service marks in a number of additional countries and expect to continue to do so in the future. However, there can be no assurance that we will be able to obtain the registration for the marks in every jurisdiction where registration has been sought or that we will be able to maintain registrations in the jurisdictions where we currently have them.

We also rely upon trade secrets and know-how to develop and maintain our competitive position. We protect our intellectual property rights through a variety of methods, including trademark and trade secret laws, as well as confidentiality agreements with vendors, employees, consultants and others who have access to our proprietary information.

We also own domain names, including gcaesthetics.com, and one patent related to the manufacturing process for texturing on the exterior or surface of breast implants.

Employees

As of December 31, 2014, 2013 and 2012, we had 420, 330 and 311 employees, respectively. As of December 31, 2014, we employed a total of 401 full-time employees and 19 part-time employees, with 63 in our sales organization, including sales and marketing and customer service employees, 267 in manufacturing, three in product development, 21 in quality and regulatory and 66 in administrative and other functions. Our employees in Brazil, France and Spain are represented by labor unions or collective bargaining arrangements. We believe we have good relationships with these labor unions and our employees.

Properties

Our principal executive offices are located at Suite 601, Q House, Furze Road, Sandyford, Dublin 18, Ireland. We lease approximately 10,000 square feet in Ashby de la Zouch, United Kingdom under leases that expire in February 2018 and June 2019. We also lease approximately 31,000 square feet in the Cumbernauld, United Kingdom under leases that expire from April 2017 through May 2018. We use the facilities in Ashby de la Zouch and Cumbernauld primarily for manufacturing for our Nagôr products. We manufacture our Eurosilicone products in Apt, France under leases for approximately 35,000 square feet that expire in January 2017, February 2027 and April 2025. We believe that our existing facilities are sufficient to meet our needs through at least 2016.

Legal Proceedings

We are involved from time to time in various lawsuits, including product liability claims, arising out of or incident to the ordinary conduct of our business. Although no assurances can be given, we do not expect that any of these matters will have a material adverse effect on our business or financial condition.

 

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MANAGEMENT

Our Executive Officers and Directors

Below is a list of the names and ages of our directors and officers as of April 15, 2015, and a brief description of the business experience of each of them. The business address for our directors and officers is c/o GC Aesthetics plc, Suite 601, Q House, Furze Road, Sandyford, Dublin 18, Ireland.

 

Name

  

Age

  

Position

Ayse Kocak

   43    Chief Executive Officer, Director (Class I)

Ian Crosbie

   47    Chief Financial Officer

Vikash Agarwal

   40    Chief Corporate Development & Strategy Officer

Barry Hatt

   59    Chief Technical Operations Officer

Bernardo Garduño

   47    VP Sales, Latin America

Ayhan Aslan

   48    VP Sales, Emerging Markets

Ignasi Salla

   43    Director Sales, Europe

Julia Marsan

   53    Global Human Resources Director

Emma Park

   45    General Counsel

Daniel K. Turner III

   53    Chairman (Class II)

William McCabe

   59    Director (Class II)

Declan McKeon

   64    Director (Class III)

Michel Rouif

   54    Director (Class III)

Executive Officers

Ayse Kocak has served as our Chief Executive Officer since February 2013 and has been a member of the Board since February 2012. Prior to joining the Company as Chief Executive Officer, from February 2009 to February 2013, Ms. Kocak started and served as a general manager at moksha8 Pharmaceuticals, Inc. in Mexico, a specialty pharmaceutical company that focuses on therapeutics to treat the central nervous system and mental health disorders. Previously, Ms. Kocak served in various commercial roles with subsidiaries of Pfizer Inc. around the world, including in the United States, Europe, Latin America, Africa and the Middle East, and was involved in the launch and commercialization of Lipitor®, Viagra®, Norvasc® and Geodon®. Ms. Kocak holds a bachelor’s degree from Bosphorous University.

Ian Crosbie has served as our Chief Financial Officer since January 2015. Prior to joining the Company, from November 2013 to December 2014, Mr. Crosbie served as a senior vice president of corporate development at Circassia Pharmaceuticals plc, a specialty biopharmaceutical company that develops a range of immunotherapies for the treatment of allergies. Previously, Mr. Crosbie was an independent corporate consultant from May 2013 to October 2013 and a managing director at Jefferies International Ltd. from March 2008 to April 2013. Mr. Crosbie holds a master’s degree in Engineering, Economics and Management from Oxford University.

Vikash Agarwal has served as our Chief Corporate Development & Strategy Officer since June 2015. Previously, from August 2014 to June 2015, Mr. Agarwal served as our Vice President of Corporate Business Development & Strategic Planning. Prior to joining the Company, from January 2013 to August 2014, Mr. Agarwal served as head of mergers and acquisitions for Sun Pharmaceuticals Industries Ltd., a global specialty pharmaceutical company. Previously, Mr. Agarwal was an independent advisor in the health care industry from December 2011 to December 2012 and held various positions in the investment banking department of HSBC Bank plc from April 2006 to November 2011. Mr. Agarwal holds a master’s in business administration from INSEAD and a bachelor’s degree from Delhi University.

Barry Hatt has served as our Chief Technical Operations Officer since April 2015. Previously, from May 2011 to March 2015 and May 2008 to May 2011, Mr. Hatt served as our Chief Operating Officer and Vice President of Manufacturing and Operations, respectively. Previously, Mr. Hatt has held various management positions in both pharmaceutical and medical devices sectors with Bristol-Myers Squibb Company, Warner-

 

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Lambert Co. and Inamed Corp. At Inamed, he ran the international breast implant manufacturing operations. Mr. Hatt holds a Ph.D. in microbiology and a bachelor’s degree from University College, Dublin.

Bernardo Garduño has served as our Vice President of Sales—Latin America since January 2014. He served as Mexico Country Manager / Regional Manager of Hispanic Latin America from October 2012 to December 2013. Prior to joining the Company, from July 2005 to August 2012, Mr. Garduño held a variety of positions, most recently regional commercial director—Latin America, at Hospira Inc., a pharmaceutical and medical device company that develops and manufactures injectable pharmaceutical drugs and infusion technologies. Mr. Garduño holds a master’s degree in Regional Studies/International Political Economy from the University of Tsukuba, a post-graduate diploma in Globalization/Economic Development from Sophia University, Japan and a bachelor’s degree from Universidad de las Americas—Puebla.

Ayhan Aslan has served as our Vice President of Sales—Emerging Markets since February 2013. Prior to joining the Company, from March 2004 to March 2013, Mr. Aslan served as the international commercial director of MN Pharmaceuticals, a manufacturer of active pharmaceutical ingredients and finished dosage forms, until it was acquired by Amgen. Mr. Aslan also served on the board of directors of MN Pharmaceuticals. Mr. Aslan holds a bachelor’s degree from the University of Marmara.

Ignasi Salla has served as our Director of Sales—Europe since January 2015. Previously, from March 2011 to January 2015, Mr. Salla served as our Country Manager for Spain. Prior to joining the Company, from November 2005 to March 2011, Mr. Salla served as a sales manager for Mediform Group, an aesthetics distributor in Spain. Mr. Salla holds a bachelor’s degree from Escuela de Administración de Empresas, Barcelona.

Julia Marsan has served as our Global Human Resources Director since December 2013. Prior to joining the Company, from 2006 to 2012, Ms. Marsan was the human resources director for DX Network Services, an independent mail, parcels and logistics end-to-end network operator in the United Kingdom and Ireland. Ms. Marsan holds a bachelor’s degree from the University of Leeds.

Emma Park has served as our General Counsel since June 2015. Prior to joining the Company, Ms. Park served as legal director and senior legal advisor with Royal Mail plc from May 2013 to May 2015 and as senior associate at Bond Dickinson LLP from January 2011 to May 2013. Ms. Park was admitted as a Solicitor of the Supreme Court in 1996, practicing first with Clifford Chance LLP and then with a number of other law firms and in industry. Ms. Park holds an LLB (Honours) in English law and French law from King’s College London, a Maîtrise de Droit Privé from the Panthéon-Sorbonne, University of Paris I, and a Postgraduate Diploma in Legal Practice from the College of Law London.

Board of Directors

Daniel K. Turner III has been a member of the Board and its Chairman since October 2010. Mr. Turner is the managing director and a general partner at Montreux Equity Partners, a private investment company he founded in 1993. Mr. Turner currently serves on the boards of directors of moksha8 Pharmaceuticals, Inc. and has served on the boards of directors of multiple companies, including Epirus Biopharmaceuticals, Inc., Glaukos Corporation, Orexigen Therapeutics, Inc., Renal CarePartners, Inc., Transcept Pharmaceuticals, Inc. and Tobira Therapeutics, Inc. Mr. Turner holds a bachelor’s degree from California State University, Sacramento.

William McCabe has been a member of the Board since May 2008. Mr. McCabe is the executive chairman of Oyster Capital Partners, a private investment company he founded in September 2000. Mr. McCabe is also the chief executive officer of Novaerus Limited, a position he has held since September 2013. Mr. McCabe currently serves on the board of directors of Fieldaware Group Limited, Novaerus Group Limited, Novaerus UK Limited and Oyster Technologies Limited and has served on the boards of directors of Datahug Limited and Fleetmatics Group Limited. Mr. McCabe holds a bachelor’s degree from Queens University of Belfast.

 

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Declan McKeon has been a member of the Board since April 2015. Mr. McKeon has been a consultant to PricewaterhouseCoopers (“PwC”) since 2007. From 1986 to 2007, Mr. McKeon served as a partner at PwC and held leadership positions on the audit and business advisory teams in Ireland and was an executive of the PwC Europe audit and business advisory services group. Mr. McKeon currently serves on the boards of directors of Icon plc and Ryanair plc. Mr. McKeon holds both a master’s degree in Business and Accounting and a bachelor’s degree from University College Dublin.

Michel Rouif has been a member of the Board since April 2015. Dr. Rouif is an aesthetic plastic surgeon in France and has been in private practice since 1994. Dr. Rouif is also a professor at François Rabelais University in Tours and René Descartes University, in Paris, France. Dr. Rouif is Board Certified in France in Plastic, Reconstructive and Aesthetic Surgery and Microsurgery, and has a Diploma of Legal Compensation of Bodily Injuries. Dr. Rouif received a medical degree from René Descartes University, in Paris, France.

There are no family relationships among any of our directors or executive officers.

Composition of the Board

Immediately following the completion of this offering, the Board will consist of five directors, including four non-executive directors and one executive director, to serve terms that expire in three separate years in a manner similar to a “staggered” board of directors under Delaware law. Directors are elected to serve three-year terms, except that the current term of                      will expire at the annual general meeting in 2016, the current terms of                      will expire at the annual general meeting in 2017 and the current terms of                      will expire at the annual general meeting in 2018. A director may be re-elected to serve for an additional term an unlimited number of times. As a result of the staggered terms, not all of our directors will be elected in any given year.

Messrs. McCabe and Turner were appointed to the Board pursuant to a shareholders’ agreement, which will terminate in connection with the listing of our ordinary shares on the NASDAQ Global Market. For a further discussion of this agreement, see “Related Party Transactions—Shareholders’ Agreement.”

The directors are appointed by the general meeting of shareholders. A director may, subject to compliance with certain Irish statutory procedures, be removed with or without cause by a resolution passed by a majority of the votes cast by those present in person or by proxy at a meeting and who are entitled to vote. The Board may also in certain circumstances appoint additional directors.

Foreign Private Issuer Status

The listing rules of the NASDAQ Stock Market (the “NASDAQ Listing Rules”) permit foreign private issuers, such as us, to follow “home country” corporate governance practices instead of the otherwise applicable corporate governance standards of the NASDAQ Stock Market, except to the extent that such laws would be contrary to U.S. securities laws. A foreign private issuer making its initial U.S. listing on the NASDAQ Stock Market and following home country corporate governance practices in lieu thereof must disclose any significant ways in which its corporate governance practices differ from those followed by U.S. companies listed on the NASDAQ Stock Market.

When our ordinary shares are listed on NASDAQ, we intend to continue to follow Irish corporate governance practices in lieu of the corporate governance requirements of the NASDAQ Stock Market in respect of the following requirements:

 

    NASDAQ Listing Rule 5605(b)(1) requires that a majority of the board of directors must be comprised of independent directors. Irish law does not require a company’s board of directors to be comprised of a majority of independent directors, and our articles of association do not provide that a majority of the board must be independent.

 

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    NASDAQ Listing Rule 5605(b)(2) requires independent directors to have regularly scheduled meetings at which only independent directors are present. Irish law does not require independent directors to hold regular meetings separate from meetings of the full board of directors. Our articles do not require our independent directors to meet separately from the full board of directors.

 

    NASDAQ Listing Rule 5605(c)(2) requires each listed company to have an audit committee comprised of only independent directors. Irish law does not require a company to establish an audit committee comprised of only independent directors. The Company has established an Audit Committee, but membership is not limited only to independent directors. The Audit Committee will comply with the requirements of Exchange Act Rule 10A-3, as required.

 

    NASDAQ Listing Rule 5605(d)(2) requires each listed company to have a compensation committee comprised only of independent directors. Irish law does not require a company to establish a compensation committee or require that each member of any such committee to be independent. The Company has established a Compensation Committee, but membership is not limited only to independent directors.

 

    NASDAQ Listing Rule 5605(e) requires director nominees be selected or recommended for selection by either a majority of the independent directors or a committee comprised solely of independent directors. Irish law does not prescribe specific requirements for the selection of director nominees. The Company has established a Nominating and Corporate Governance Committee, but membership is not limited only to independent directors.

 

    NASDAQ Listing Rule 5620(c) requires that for any meeting of shareholders, the quorum must be no less than 33 1/3% of the outstanding ordinary shares. Irish law does not provide for any minimum quorum requirement. Our articles of association currently provide that one or more shareholders representing at least 50% of the issued shares carrying voting rights are represented in person or by proxy at a meeting. See “Description of Share Capital.”

 

    NASDAQ Listing Rule 5635 requires that a company obtain shareholder approval prior to making certain issuances of securities. Under Irish law, the board of directors of a company may issue authorized but unissued new shares without shareholder approval once authorized to do so by the articles of association of the company or by an ordinary resolution adopted by the shareholders at a general meeting. Based on this Irish law requirement, our articles of association authorize the Board to issue new shares up to the amount of our authorized but unissued share capital without shareholder approval for a period of five years from the date our articles of association were adopted. See “Description of Share Capital—Issuance of Shares.”

 

    NASDAQ Listing Rule 5635 requires that our shareholders be given the opportunity to vote on any equity compensation plans and material revisions thereto, except in certain limited cases. Under Irish law, there is no general statutory requirement for equity compensation plans to be approved by way of shareholder resolution. As such, while we may choose to seek shareholder approval for any equity compensation plans, we do not intend to solicit shareholder approval of such plans in our memorandum and articles of association.

Except as stated above, intend to comply with the listing requirements generally applicable to U.S. domestic companies listed on the NASDAQ Stock Market, subject to certain exemptions provided by U.S. securities laws. Such exemptions include the exemption from the U.S. proxy rules and proxy filing obligations, as well as exemptions provided to emerging growth companies by the JOBS Act, which include exemptions from certain obligations related to (i) auditor attestation requirements, (ii) certain executive compensation disclosure requirements, (iii) the presentation of financial data in registration statements and (iv) the requirement of holding a non-binding advisory vote on executive compensation. See “Summary—Implications of Being an Emerging Growth Company” and “Risk Factors—As a foreign private issuer, we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.”

 

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We may in the future decide to use other foreign private issuer exemptions available with respect to other NASDAQ Listing Rules. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on the NASDAQ Global Market, may provide less protection and information than is accorded to investors under the NASDAQ Listing Rules applicable to domestic issuers. See “Risk Factors—We are an ‘emerging growth company’ and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our ordinary shares less attractive to investors” and “Risk Factors—As a foreign private issuer, we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.”

Board Structure and Committee Composition

The Board has established, or will establish prior to the completion of this offering, an audit committee; a compensation committee; and a nominating and corporate governance committee.

Audit Committee

Upon completion of this offering, our audit committee will consist of                      and                     , who will serve as chairman of the committee, and will have at least one independent member. We anticipate that, prior to the completion of this offering, the Board will determine that                      meets the independence requirements under the NASDAQ Listing Rules and under Rule 10A-3 under the Exchange Act. The Board has determined that                      is an “audit committee financial expert” within the meaning of Item 407 of Regulation S-K. The audit committee’s primary responsibilities and duties upon completion of this offering will include:

 

    appointing, approving the compensation of, and assessing the qualifications, performance and independence of our independent registered public accounting firm;

 

    pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

 

    reviewing the internal audit plan with the independent registered public accounting firm and members of management responsible for preparing our financial statements;

 

    reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;

 

    reviewing the adequacy of our internal control over financial reporting;

 

    establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

 

    recommending, based upon the audit committee’s review and discussions with management and the advice of the independent registered public accounting firm, whether our audited financial statements shall be included in our Annual Report on Form 20-F;

 

    monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

 

    annually reviewing and reassessing the adequacy of the committee charter with regard to compliance with the listing requirements of the NASDAQ Stock Market;

 

    reviewing all related party transactions for potential conflict of interest situations and approving all permissible related party transactions; and

 

    reviewing and discussing with management and our independent registered public accounting firm our earnings releases and scripts.

 

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Compensation Committee

Upon completion of this offering, our compensation committee will consist of                      and             , who will serve as chairman of the committee. The NASDAQ Listing Rules applicable to foreign private issuers do not require our compensation committee to be comprised entirely of independent directors. The compensation committee’s responsibilities upon completion of this offering will include reviewing and approving the compensation of our executive officers, overseeing and administering our compensation plans and reviewing and making recommendations to the Board with respect to director compensation.

Nominating and Corporate Governance Committee

In addition to the audit committee and the compensation committee, the Company will establish a nominating and corporate governance committee. The responsibilities of the Nominating and Corporate Governance Committee upon completion of this offering will include identifying individuals qualified to become members of the Board and recommending such persons to the Board to be nominated for election as directors, making recommendations to the Board regarding the composition and function of each Board committee and developing and recommending to the Board a set of corporate governance principles.

Compensation

Non-Executive Director Compensation

We will pay the reasonable costs and expenses incurred by our directors in connection with attending meetings of the Board and its committees. The aggregate compensation, including benefits in kind, we have paid or accrued for payments to our non-executive directors for board service for the year ended December 31, 2014 was €36,000.

Executive Officer Compensation

For the year ended December 31, 2014, the aggregate amount of the compensation and benefits paid or provided to our executive officers totaled approximately $3.6 million. We pay our executive officers in local currencies and have applied the applicable exchange rates as of December 31, 2014 to determine the aggregate amount set forth in the preceding sentence. This amount includes salaries, cash bonuses, health insurance and life insurance benefits, car, housing and certain fuel and meal allowances and fees paid to our chief executive officer in her capacity as a member of our Board.

For the year ended December 31, 2014, each of our executive officers was eligible for and received an annual bonus based 50% on the attainment of specified company targets and 50% on the attainment of specified personal goals.

For the year ended December 31, 2014, we granted options exercisable for an aggregate of 897,669 A ordinary shares to our executive officers, which have a weighted-average exercise price of €0.01 per share. These options have a variety of vesting schedules, under which a portion of the options vest on the date of the grant and the remaining options vest in equal monthly installments over the vesting term. These options all terminate on December 18, 2021. We have employment agreements with our executive officers that provide for benefits upon termination. See “—Employment Agreements.” No director, executive officer or any relative of such persons has been advanced any loans, credits or guarantees by us.

Pension Contributions

We operate pension plans for our employees in the United Kingdom and France, and we will match each employee’s contributions up to 8% and 10%, respectively, of the employee’s base salary. As of December 31, 2014, we have set aside $450,000 to fund retirement obligations with respect to our operations in France.

 

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