As filed with the Securities and Exchange Commission on February 5, 2024
Registration No. 333-276841
FORM S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Amendment No. 1
ARBOR HEALTH TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
47-3891205
(I.R.S. Employer Identification No.)
275 Kendall Avenue, Suite 1400 Cambridge, Massachusetts 02142 (617) 555-0140
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Rachel Moynihan General Counsel & Corporate Secretary Arbor Health Technologies Inc. 275 Kendall Avenue, Suite 1400 Cambridge, Massachusetts 02142 (617) 555-0140
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Theodore Langston Eric Johannsen Calderwood & Harkness LLP 125 Broad Street New York, New York 10004
Graham Neville Meridian Hale & Quivorn LLP 51 West 52nd Street New York, New York 10019
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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, please 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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
CALCULATION OF REGISTRATION FEE
The registrant previously paid the registration fee in connection with the initial filing of the Registration Statement on Form S-1 filed on January 22, 2024. The registration fee reflected above is carried forward for purposes of this Amendment No. 1.
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 this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
This Amendment No. 1 to Registration Statement on Form S-1 (this "Amendment No. 1") is being filed by Arbor Health Technologies Inc. for the purpose of amending its Registration Statement on Form S-1 (File No. 333-276841), originally filed with the Securities and Exchange Commission on January 22, 2024.
This Amendment No. 1 is being filed principally to:
1. revise the estimated initial public offering price range from $17.00 to $19.00 per share to a revised estimated initial public offering price range of $18.00 to $20.00 per share;
2. reflect corresponding revisions in the cover page, prospectus summary, use of proceeds, capitalization, dilution, and shares eligible for future sale sections of the prospectus;
3. update selected financial information and certain pro forma and other financial data; and
4. add additional exhibits and update the exhibit index accordingly.
Pursuant to Rule 430A under the Securities Act of 1933, as amended, the information contained in this Amendment No. 1 is subject to completion or amendment. In accordance with the rules of the Securities and Exchange Commission, this Amendment No. 1 includes only those portions of the Registration Statement that are being revised materially. Portions of the Registration Statement that are not being revised materially have been omitted from this Amendment No. 1 and remain unchanged from the Registration Statement as originally filed on January 22, 2024.
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND THE PROSPECTUS
The following table shows the location in the prospectus and elsewhere in this Registration Statement of the information required by the items of Form S-1.
The information in this preliminary 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 preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
Subject to Completion, dated February 5, 2024
Arbor Health Technologies Inc.
20,000,000 Shares of Common Stock
Arbor Health Technologies Inc. is offering 20,000,000 shares of its common stock. This is our initial public offering. We currently expect that the initial public offering price will be between $18.00 and $20.00 per share. The initial estimated price range disclosed in our preliminary prospectus dated January 22, 2024 was $17.00 to $19.00 per share. We have increased the estimated price range to reflect current market conditions and investor demand indications received during the course of our roadshow process. The actual initial public offering price will be determined through negotiations between us and the underwriters at the time of pricing and may be above, within, or below this estimated price range.
Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the New York Stock Exchange under the symbol "ARHT."
We have granted the underwriters an option for a period of 30 days to purchase up to an additional 3,000,000 shares of our common stock from us at the initial public offering price, less underwriting discounts and commissions, solely to cover over-allotments, if any.
Investing in our common stock involves risks. See "Risk Factors" beginning on the page specified in this prospectus for a discussion of information that should be considered in connection with an investment in our common stock.
The underwriters expect to deliver the shares against payment in New York, New York on or about , 2024.
Whitfield Barrow & Co., LLC is acting as representative of the underwriters and as lead left bookrunner for the offering. Calloway Pierce Securities LLC and Velthorn Capital Partners Inc. are acting as joint bookrunners, and Pemberton Wallis LLC is acting as co-manager.
Whitfield Barrow & Co., LLC Calloway Pierce Securities LLC Velthorn Capital Partners Inc. Pemberton Wallis LLC
The date of this prospectus is , 2024.
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections entitled "Risk Factors," "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, before making an investment decision.
Our Company
Arbor Health Technologies Inc. is a healthcare technology company focused on improving clinical and financial outcomes for hospitals, health systems, and physician organizations. We provide a cloud-based clinical decision support and population health management platform that helps providers identify care gaps, stratify risk, optimize patient pathways, and support reimbursement integrity across value-based and fee-for-service models. In addition to our software platform, we offer revenue cycle management outsourcing services and real-time analytics capabilities designed to improve claims accuracy, reduce denials, accelerate collections, and furnish actionable operating insights to provider finance and care management teams.
As of December 31, 2023, our technology and services were utilized by more than 1,200 hospital systems and physician groups across 42 states. Our customer relationships range from regional multi-specialty practices to large integrated delivery networks. We believe our integrated offering, recurring revenue profile, embedded workflow functionality, and data-driven operating model position us to benefit from continued digitization in healthcare administration and increasing demand for measurable return on investment in clinical and revenue cycle operations.
Our workforce included approximately 3,400 employees as of December 31, 2023, including software engineers, data scientists, implementation specialists, reimbursement professionals, clinical informaticists, and customer support personnel. We operate with a disciplined approach to product development and service delivery, and we believe our combination of proprietary software, scaled services infrastructure, and healthcare domain expertise differentiates us in the markets we serve.
Summary Financial Data
For the fiscal year ended December 31, 2023, we generated revenue of $612.4 million, representing growth of 28% from $478.4 million for the fiscal year ended December 31, 2022. For the same period, we generated net income of $41.3 million and Adjusted EBITDA of $138.7 million, representing an Adjusted EBITDA margin of approximately 22.6%. We believe these results reflect continued adoption of our software modules, stable renewal rates, increased utilization of our revenue cycle offerings, and operating leverage across our platform.
The Offering
Unless otherwise indicated, all information in this prospectus assumes:
• no exercise of the underwriters' over-allotment option;
• the conversion of all outstanding shares of preferred stock into an aggregate of 80,000,000 shares of common stock upon the effectiveness of this registration statement; and
• the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider all of the risk factors described in our Registration Statement as originally filed on January 22, 2024, which remain applicable without material change except as supplemented below, together with the other information contained in this prospectus, before deciding whether to invest in our common stock. If any of the risks described in this prospectus or incorporated by reference into this Registration Statement were to occur, our business, financial condition, results of operations, and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment.
The initial public offering price of our common stock may not be indicative of the market price of our common stock after this offering, and the market price of our common stock may be volatile.
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the price at which our common stock will trade following the completion of this offering. The determination of the initial public offering price will take into account a number of factors, including prevailing market conditions, recent valuations of and market prices for companies in our industry, our financial condition and prospects, estimates of our business potential and earnings prospects, the history and prospects for the industry in which we compete, the general condition of the securities markets at the time of this offering, and other factors deemed relevant by us and the underwriters. The offering price does not necessarily bear any direct relationship to our assets, earnings, book value, historical operating results, or any other established criteria of value.
The estimated price range set forth on the cover page of this prospectus has been increased from the range disclosed in our preliminary prospectus dated January 22, 2024. This revised range reflects current market conditions and investor demand indications obtained during the roadshow process. The final initial public offering price may be above, within, or below the revised estimated price range of $18.00 to $20.00 per share. Even if the offering is priced within this range, investors purchasing shares in this offering may experience significant and immediate declines in the market value of their investment if the trading price of our common stock declines after the offering closes.
In addition, the market price of our common stock after this offering may be highly volatile and could be subject to wide fluctuations in response to factors including quarterly variations in operating results, changes in financial estimates by securities analysts, market reaction to our earnings releases, developments affecting our customers or competitors, changes in healthcare reimbursement or regulatory policy, broad market and industry trends, macroeconomic developments, and future sales of our common stock by us or our stockholders. As a result, investors may not be able to resell their shares at or above the initial public offering price.
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 20,000,000 shares of common stock offered by us in this offering will be approximately $353.0 million, based on an assumed initial public offering price of $19.00 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that our additional net proceeds will be approximately $53.6 million.
The following table summarizes the calculation of estimated net proceeds from this offering based on the assumed initial public offering price of $19.00 per share:
A $1.00 increase (decrease) in the assumed initial public offering price of $19.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $18.8 million, assuming that the number of shares offered by us remains the same and after deducting underwriting discounts and commissions, but before deducting estimated offering expenses.
We currently intend to use the net proceeds from this offering as follows:
• approximately $65.0 million to repay the outstanding balance under our senior secured revolving credit facility with Keypoint National Bank, N.A.;
• approximately $120.0 million for product development and research and development investment;
• approximately $100.0 million for potential acquisitions and strategic investments; and
• the balance for general corporate purposes and working capital.
The Keypoint National Bank, N.A. senior secured revolving credit facility currently bears interest at a rate equal to SOFR plus 200 basis points, matures on March 15, 2027, and is agented by Keypoint National Bank, N.A., with Stonemill Capital Bank participating as a syndicate member. As of December 31, 2023, approximately $65.0 million was outstanding under the facility. We expect to repay the outstanding balance in full promptly following the closing of this offering.
Our management will retain broad discretion over the allocation of the net proceeds from this offering. Pending use of the net proceeds, we intend to invest such amounts in short-term, investment-grade, interest-bearing obligations.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2023:
• on an actual basis;
• on a pro forma basis to give effect to the conversion of all outstanding preferred stock into 80,000,000 shares of common stock and the filing of our amended and restated certificate of incorporation immediately prior to the closing of this offering; and
• on a pro forma as adjusted basis to give further effect to (i) the sale by us of 20,000,000 shares of common stock in this offering at an assumed initial public offering price of $19.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) the application of a portion of the net proceeds to repay approximately $65.0 million outstanding under the Keypoint National Bank, N.A. revolving credit facility.
You should read this table together with the sections entitled "Use of Proceeds" 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.
The pro forma as adjusted information above is illustrative only and assumes no exercise of the underwriters' over-allotment option. If the underwriters exercise their over-allotment option in full, our pro forma as adjusted cash and cash equivalents, total stockholders' equity, and total capitalization would each increase by approximately $53.6 million, and the number of shares of common stock outstanding immediately after this offering would increase to 103,000,000 shares.
Each $1.00 increase (decrease) in the assumed initial public offering price of $19.00 per share would increase (decrease) additional paid-in capital, total stockholders' equity, and total capitalization by approximately $18.8 million, assuming the number of shares offered by us remains unchanged and after deducting underwriting discounts and commissions, but before deducting estimated offering expenses.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the assumed initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book value as of December 31, 2023 was approximately $438.7 million, or $5.48 per share, based on 80,000,000 shares of common stock outstanding after giving effect to the conversion of all outstanding preferred stock into common stock. Pro forma net tangible book value per share before this offering was therefore $5.48.
After giving effect to our sale of 20,000,000 shares of common stock in this offering at an assumed initial public offering price of $19.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses, and after application of a portion of the net proceeds to repay the outstanding balance under the Keypoint revolving credit facility, our pro forma as adjusted net tangible book value as of December 31, 2023 would have been approximately $791.7 million, or $7.92 per share. This represents an immediate increase in pro forma net tangible book value of $2.44 per share to existing stockholders and immediate dilution of $11.08 per share to new investors purchasing shares in this offering.
The following table illustrates this dilution on a per share basis:
A $1.00 increase (decrease) in the assumed initial public offering price of $19.00 per share would increase (decrease) our pro forma as adjusted net tangible book value by approximately $18.8 million, or approximately $0.19 per share, and would decrease (increase) the dilution to new investors by approximately $0.81 per share, assuming no change in the number of shares offered by us.
The following table summarizes, as of December 31, 2023 on a pro forma as adjusted basis after giving effect to this offering, the differences between existing stockholders and the new investors purchasing shares in this offering with respect to the number of shares purchased from us, the total consideration paid, and the average price per share paid, based on an assumed initial public offering price of $19.00 per share before deducting underwriting discounts and commissions and estimated offering expenses:
If the underwriters exercise their over-allotment option in full, the number of shares held by new investors would increase to 23,000,000, representing approximately 22.3% of the shares outstanding after this offering.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.
Non-GAAP Financial Measure
We define Adjusted EBITDA as net income before interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, transaction-related expenses, and certain other non-recurring items that management does not consider indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of performance and should not be considered in isolation or as a substitute for net income or any other measure prepared in accordance with U.S. generally accepted accounting principles.
A reconciliation of Adjusted EBITDA to net income is set forth below:
Revenue increased by 28% from 2022 to 2023, driven by increased adoption of our cloud-based software offerings and expanded service penetration among existing customers. Net income improved due to operating leverage and disciplined cost management, notwithstanding continued investments in product development and implementation capacity.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those described under "Risk Factors."
Overview
We are a healthcare technology company delivering clinical decision support, population health management, revenue cycle management outsourcing, and real-time analytics services to healthcare provider organizations. Our revenue is generated from subscription arrangements, implementation and support services, outsourcing engagements, and analytics-related offerings. Our business model is characterized by recurring software revenue, long-term customer relationships, and substantial investments in platform development, data integration, and customer success infrastructure.
For the fiscal year ended December 31, 2023, revenue increased to $612.4 million from $478.4 million for the fiscal year ended December 31, 2022, representing growth of 28.0%. This increase was principally attributable to expansion within our installed base, new customer additions, higher utilization of our revenue cycle management services, and increased analytics-related revenue. Net income increased to $41.3 million in 2023 from $18.9 million in 2022. Adjusted EBITDA increased to $138.7 million in 2023.
Key Factors Affecting Our Performance
Our results of operations are influenced by a number of factors, including customer retention and expansion, the pace of implementation of new customer contracts, hiring and retention of skilled personnel, reimbursement and policy developments in healthcare, and the timing and magnitude of research and development expenditures. We continue to invest significantly in product enhancement, machine-learning enabled workflow tools, interoperability capabilities, and data security infrastructure.
Liquidity and Capital Resources
Historically, our principal sources of liquidity have included cash generated from operations, equity financings, and borrowings under our revolving credit facility. As of December 31, 2023, we had cash and cash equivalents of $52.4 million and $65.0 million outstanding under our senior secured revolving credit facility with Keypoint National Bank, N.A.
Keypoint Revolving Credit Facility
On March 15, 2022, we entered into a senior secured revolving credit agreement with Keypoint National Bank, N.A., as administrative agent and lender, with Stonemill Capital Bank as a syndicate member. The facility bears interest at a floating rate equal to SOFR plus 200 basis points and matures on March 15, 2027. Borrowings under the facility are secured by substantially all of our assets, subject to customary exclusions.
On January 18, 2024, we entered into the First Amendment to the Credit Agreement. The First Amendment, among other things, clarified and updated the agreement's change of control provisions to include a carve-out for this initial public offering and related corporate reorganization transactions, added a permitted equity issuance carve-out to facilitate the issuance of common stock in this offering and equity awards under our post-IPO compensation arrangements, and revised mandatory prepayment mechanics to address the application of a portion of the net proceeds of this offering to outstanding borrowings. We expect to use approximately $65.0 million of the net proceeds from this offering to repay the outstanding balance under the facility in full.
Cash Flows. Our operating cash flows have benefited from increasing scale and improving profitability. Cash usage has continued to reflect disciplined but meaningful investments in engineering, implementation personnel, and infrastructure to support growth. We expect our capital expenditures to remain manageable relative to revenue as we continue to leverage public cloud infrastructure and standardized deployment processes.
Research and Development
Research and development is central to our growth strategy. During 2023, we intensified investment in product roadmap initiatives, including clinical workflow optimization, patient risk scoring, denial prediction, payer rule updates, and interoperability enhancements. We generated approximately $8.7 million of research and development tax credits during fiscal 2023 and had cumulative federal research and development tax credit carryforwards of approximately $12.4 million as of December 31, 2023. We expect that a portion of the proceeds of this offering will support continued product innovation and expansion of our engineering and data science capabilities.
Income Taxes
Our effective tax profile is influenced by federal and state taxes, research and development tax credits, and jurisdictional nexus determinations. As of December 31, 2023, we had state tax nexus in ten states: Massachusetts, New York, California, Texas, Illinois, Florida, Pennsylvania, Ohio, New Jersey, and Georgia. Our state tax obligations may change over time as our employee footprint, customer concentration, and service delivery models evolve. We continue to evaluate our nexus profile and related state income and franchise tax exposure on an ongoing basis.
Critical Accounting Policies and Estimates
Our discussion of critical accounting policies and estimates has been updated in response to comments received from the Staff of the Securities and Exchange Commission in connection with our initial filing. In particular, we have expanded our disclosure regarding revenue recognition for multi-element contracts, capitalization and amortization of certain software development costs, stock-based compensation assumptions, and valuation methodologies associated with prior-period equity awards. We believe these revisions improve transparency regarding the judgments and estimates that materially affect our reported results.
Emerging Growth Company Status
We are an emerging growth company and, as such, may take advantage of certain reduced reporting requirements and exemptions from various public company obligations. We have elected to take advantage of some, but not all, of the available accommodations.
BUSINESS
There has been no material change to the information set forth under the caption "Business" in the Registration Statement as originally filed on January 22, 2024, and that information is incorporated herein by reference for purposes of this Amendment No. 1.
MANAGEMENT
There has been no material change to the information set forth under the caption "Management" in the Registration Statement as originally filed on January 22, 2024, except that the following identifies our directors and executive officers and our expected committee composition following the completion of this offering.
Executive Officers and Directors
Board Committees Following This Offering
Upon completion of this offering, our board of directors expects to maintain an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.
• Audit Committee: Carolyn Whittemore (Chair), Howard Feng, and Dr. Samuel Obadina.
• Compensation Committee: Dr. Samuel Obadina (Chair), Carolyn Whittemore, and Diana Coltrane.
• Nominating and Corporate Governance Committee: Howard Feng (Chair), Carolyn Whittemore, and Leonard Corbett.
Our board has determined that each of Carolyn Whittemore and Dr. Samuel Obadina qualifies as an independent director under applicable New York Stock Exchange rules, and we expect to comply with the phase-in provisions available to newly public companies where applicable.
Equity Incentive and Employee Stock Purchase Plans
On January 15, 2024, our board of directors adopted, subject to stockholder approval and effectiveness of this offering, the Arbor Health Technologies Inc. 2024 Equity Incentive Plan, pursuant to which 10,300,000 shares of common stock have been reserved for issuance, and the Arbor Health Technologies Inc. 2024 Employee Stock Purchase Plan, pursuant to which 2,060,000 shares of common stock have been reserved for issuance. Additional information regarding these plans is included in the Registration Statement as originally filed and the related exhibits.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information known to us regarding the beneficial ownership of our common stock as of December 31, 2023, after giving effect to the conversion of all outstanding preferred stock into common stock, and as adjusted to reflect the sale of shares in this offering and the full exercise of the underwriters' over-allotment option. Except as otherwise indicated, the persons and entities listed below have sole voting and investment power with respect to the shares beneficially owned, subject to community property laws where applicable.
No shares are being sold by any existing stockholder in this offering. All shares offered hereby are being offered by Arbor Health Technologies Inc.
Percentages in the table above are based on 80,000,000 shares of common stock outstanding prior to the completion of this offering and 103,000,000 shares outstanding after the offering, assuming full exercise of the underwriters' over-allotment option.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common stock and impair our ability to raise capital through future sales of equity securities.
Upon completion of this offering, we will have 100,000,000 shares of common stock outstanding, or 103,000,000 shares if the underwriters exercise their over-allotment option in full. Of these shares, the 20,000,000 shares sold in this offering will be freely tradable without restriction under the Securities Act, except for any shares purchased by our affiliates as that term is defined in Rule 144 under the Securities Act.
Lock-Up Agreements
We, our directors, executive officers, and substantially all of our stockholders have agreed, subject to certain exceptions, not to offer, sell, contract to sell, pledge, grant any option to purchase, lend, or otherwise dispose of any shares of our common stock or securities convertible into or exchangeable for shares of our common stock for a period of 180 days after the date of the final prospectus without the prior written consent of Whitfield Barrow & Co., LLC, as representative of the underwriters. These lock-up agreements cover approximately 80,000,000 shares, representing 100% of our pre-offering outstanding shares, and have been executed by approximately 45 signatories.
The lock-up agreements contain customary exceptions, including transfers for estate planning purposes, transfers pursuant to domestic relations orders, the establishment of Rule 10b5-1 trading plans as disclosed in this prospectus, open-market purchases made after completion of this offering, and dispositions of up to 10% of vested restricted stock units to satisfy tax withholding obligations, in each case subject to customary conditions.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell those shares in the public market, subject to the availability of current public information about us and, in the case of shares held by affiliates, subject to volume, manner of sale, and notice requirements. Persons who are not our affiliates and who have held restricted securities for more than one year may generally sell such securities without regard to these requirements, provided current public information is available.
Rule 701
Shares issued under compensatory benefit plans and contracts in reliance on Rule 701 are generally eligible for resale 90 days after the date of this prospectus, subject to Rule 144 limitations applicable to affiliates. As of the date of this prospectus, shares issuable under our equity compensation arrangements may become available for sale in the public market from time to time, subject to the lock-up agreements described above and the requirements of the securities laws.
Registration Rights
Certain holders of our securities, including Brindoval Trelvon Partners Fund IV, L.P. and Ridgeline Growth Equity Fund III, LLC, are entitled to registration rights pursuant to our amended and restated registration rights agreement. These rights include, among other things, two demand registration rights, customary piggyback registration rights, and the right to request registration on Form S-3 following the date that is 12 months after the effective date of the registration statement of which this prospectus forms a part, in each case subject to specified conditions and limitations.
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement, Arbor Health Technologies Inc. has agreed to sell to the underwriters named below, and each underwriter has severally agreed to purchase, the respective number of shares of common stock set forth opposite its name.
Whitfield Barrow & Co., LLC is acting as representative of the underwriters and lead left bookrunner. Calloway Pierce Securities LLC and Velthorn Capital Partners Inc. are acting as joint bookrunners, and Pemberton Wallis LLC is acting as co-manager.
The underwriting agreement will provide that the obligations of the underwriters are subject to certain conditions precedent and that the underwriters are committed to purchase all of the shares offered hereby if any are purchased, other than those shares covered by the over-allotment option described below.
Underwriting Discounts and Commissions
The underwriters propose initially to offer the shares to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $0.684 per share. After the initial public offering, the public offering price and other selling terms may be changed by the representative.
The following table shows the per share and total underwriting discounts and commissions payable by us to the underwriters, assuming an initial public offering price of $19.00 per share:
The underwriting discount equals 6.0% of the public offering price. Of this amount, the underwriting syndicate currently expects to allocate approximately 20% as a management fee, 60% as a selling concession, and 20% as an underwriting fee, subject to final agreement at pricing.
Over-Allotment Option
We have granted the underwriters an option, exercisable for 30 days after the date of this prospectus, to purchase up to 3,000,000 additional shares of common stock from us at the initial public offering price, less underwriting discounts and commissions, solely to cover over-allotments, if any. If the underwriters exercise this option in full, the total number of shares sold by us will increase to 23,000,000 shares, and the gross proceeds to us before deducting underwriting discounts and commissions and offering expenses will increase accordingly.
Lock-Up Agreements
We, our executive officers, directors, and substantially all holders of our outstanding capital stock have entered into lock-up agreements with the representative that, subject to specified exceptions, prohibit them from disposing of or hedging any shares of our common stock or securities convertible into or exchangeable for our common stock for a period of 180 days after the date of the final prospectus without the prior written consent of Whitfield Barrow & Co., LLC.
The lock-up agreements include customary carve-outs for transfers for estate planning purposes, transfers pursuant to certain family law arrangements, the establishment of Rule 10b5-1 trading plans where no sales may occur during the lock-up period except as otherwise permitted, open-market purchases following the offering, and dispositions of up to 10% of shares underlying vested restricted stock units for the purpose of satisfying tax withholding obligations.
Price Stabilization, Short Positions, and Passive Market Making
In connection with this offering, the underwriters may engage in transactions that stabilize, maintain, or otherwise affect the price of our common stock. Specifically, the underwriters may over-allot shares, creating a syndicate short position. The underwriters may also bid for and purchase shares of our common stock in the open market to cover syndicate short positions or to stabilize the price of our common stock. These transactions may include syndicate covering transactions, stabilizing transactions, and the imposition of penalty bids. The underwriters may also engage in passive market making transactions in accordance with Rule 103 of Regulation M.
These activities may raise or maintain the market price of our common stock above independent market levels or prevent or retard a decline in the market price of our common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time without notice.
Directed Share Program
We do not currently expect to conduct a directed share program in connection with this offering.
Discretionary Accounts
The underwriters have informed us that they do not intend to confirm sales of the shares offered hereby to any account over which they exercise discretionary authority without first receiving the written approval of the customer.
FINRA Matters and Conflicts of Interest
The offering will be conducted in compliance with applicable Financial Industry Regulatory Authority, Inc. rules. We believe no FINRA member participating in the offering has a conflict of interest within the meaning of FINRA Rule 5121 that would require the offering to be made in accordance with that rule, other than interests arising in the ordinary course from customary underwriting compensation and related arrangements. The participating firms have advised us that FINRA has raised no objections to the underwriting terms and arrangements disclosed in this prospectus.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
There has been no material change to the information set forth under the caption "Material U.S. Federal Income Tax Consequences to Non-U.S. Holders" in the Registration Statement as originally filed on January 22, 2024, and that disclosure is incorporated herein by reference for purposes of this Amendment No. 1. The opinion of Calderwood & Harkness LLP regarding certain tax matters will be filed as an exhibit to this Registration Statement by further amendment.
LEGAL MATTERS
Certain legal matters relating to the validity of the shares of common stock offered by this prospectus will be passed upon for us by Calderwood & Harkness LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Meridian Hale & Quivorn LLP, New York, New York.
EXPERTS
The consolidated financial statements of Arbor Health Technologies Inc. included in this prospectus and elsewhere in the registration statement have been audited by Kellerman & Associates LLP, an independent registered public accounting firm, as stated in their report appearing herein, and are included in reliance upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the common stock offered by this prospectus. This prospectus, which forms part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and the common stock offered hereby, you should refer to the registration statement and the exhibits and schedules filed as a part of the registration statement.
Upon completion of this offering, we will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith will file reports, proxy statements, and other information with the Securities and Exchange Commission. The Securities and Exchange Commission maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission at www.sec.gov.
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable by the registrant in connection with the issuance and distribution of the securities being registered hereby. All amounts are estimates except the Securities and Exchange Commission registration fee.
Item 14. Indemnification of Directors and Officers
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:
1. for any breach of the director's duty of loyalty to the corporation or its stockholders;
2. for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
3. under Section 174 of the Delaware General Corporation Law relating to unlawful payment of dividends or unlawful stock purchases or redemptions; or
4. for any transaction from which the director derived an improper personal benefit.
Our amended and restated certificate of incorporation, to be effective upon the completion of this offering, will include provisions eliminating the personal liability of directors to the fullest extent permitted by the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding by reason of the fact that the person is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation in such capacity for another enterprise, against expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding, subject to the standards set forth therein.
Our amended and restated bylaws will provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. We also expect to enter into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These agreements will require us, among other things, to indemnify those directors and executive officers against certain liabilities that may arise by reason of their status or service and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.
We expect to maintain a directors' and officers' liability insurance program with an aggregate coverage limit of $100 million, consisting of a primary policy issued by Northbridge Specialty Insurance Company in the amount of $50 million, a first excess layer issued by Pinnacle Re Assurance Ltd. in the amount of $25 million excess of $50 million, and a second excess layer issued by Atlas Guard Insurance Company in the amount of $25 million excess of $75 million, under policy number NSI-IPO-2024-00473.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, or controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities
Since January 1, 2021, we have issued and sold securities that were not registered under the Securities Act as set forth below. All share numbers have been adjusted to reflect the conversion ratio applicable to our outstanding preferred stock immediately prior to the completion of this offering.
In each of the transactions described below, the sales of securities were deemed to be exempt from registration under the Securities Act either in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering, Rule 506 of Regulation D promulgated thereunder, Rule 701 promulgated under the Securities Act, or pursuant to other applicable exemptions from registration. All recipients either received adequate information about us or had access, through their relationships with us, to such information.