sec-comment-response-letter-round-2.docx

1037-00001 · Client 1037 · SEC Filings

sec-comment-response-letter-round-2.docx DOCUMENT Capital Markets

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CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10174 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

February 17, 2023

VIA EDGAR TRANSMISSION

Division of Corporation Finance Office of Life Sciences U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549

Attention: Ms. Jennifer Altman, Staff Attorney Mr. Kevin Bosch, Senior Staff Accountant

Re: Solstice Biomedical Devices Limited Registration Statement on Form S-1 File No. 333-268514 Filed November 14, 2022, as amended January 18, 2023 Second-Round Comment Letter dated February 8, 2023

Dear Ms. Altman and Mr. Bosch:

We are writing on behalf of our client, Solstice Biomedical Devices Limited, a private company limited by shares incorporated under the laws of Ireland (Companies Registration Office No. 587412), with its registered office at Unit 7, Lakeview Technology Campus, Parkmore East, Galway, H91 XK72, Ireland (the "Company" or "Solstice"). This letter responds to the comments of the staff (the "Staff") of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "Commission"), set forth in the Staff's second-round comment letter dated February 8, 2023 (the "Comment Letter"), relating to the Company's Registration Statement on Form S-1 (File No. 333-268514) (the "Registration Statement"), which was initially filed confidentially with the Commission on November 14, 2022, and subsequently amended by Amendment No. 1 filed on January 18, 2023.

Concurrently with the submission of this response letter, the Company is filing Amendment No. 2 to the Registration Statement ("Amendment No. 2"), which includes revised disclosure responsive to the Staff's comments contained in the Comment Letter, as well as other updates and the public filing of the Registration Statement. For the Staff's convenience, each of the Staff's comments is reproduced below in bold text, followed by the Company's response. All page references in this letter are to the marked version of Amendment No. 2, which has been filed concurrently herewith. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Registration Statement.

As set forth in the Registration Statement, the Company's American Depositary Shares ("ADSs"), each representing one ordinary share, par value $0.001 per share, of the Company, are proposed to be listed on the Nasdaq Global Market under the ticker symbol "SBDX." The proposed offering is for aggregate gross proceeds of approximately $85,000,000, with Keystone Mercer & Co., LLC acting as lead bookrunning manager and representative of the underwriters.

Comment 1 — Risk Factor Disclosure: Regulatory and Clinical Trial Risks

The Staff requests enhanced risk factor disclosure regarding the OrthoSync™ Intraoperative Imaging Platform's IDE clinical trial status, including specific risks associated with the ongoing pivotal trial enrollment and potential regulatory delays.

Response:

The Company acknowledges the Staff's comment and has revised the risk factor disclosure in Amendment No. 2 to provide enhanced and more specific disclosure regarding the regulatory and clinical trial risks associated with the Company's OrthoSync™ Intraoperative Imaging Platform (the "OrthoSync™ Platform").

As background, the Company received approval of an investigational device exemption ("IDE") from the U.S. Food and Drug Administration (the "FDA") for the OrthoSync™ Platform on September 2, 2022 (IDE No. G220035). The IDE authorizes the Company to conduct a pivotal clinical trial at six clinical sites in the United States to evaluate the safety and effectiveness of the OrthoSync™ Platform in intraoperative orthopedic imaging applications. As of the date of Amendment No. 2, patient enrollment is ongoing across all six approved sites, and the Company continues to make progress toward achieving its targeted enrollment objectives, although the enrollment timeline remains subject to the inherent uncertainties and variabilities of multi-site clinical investigation.

In response to the Staff's comment, the Company has added and enhanced specific risk factor language in the "Risk Factors" section of the prospectus included in Amendment No. 2, beginning on page 22, addressing the following matters:

(i) Enrollment Timeline Risk. The risk that enrollment in the OrthoSync™ pivotal trial may not be completed on the anticipated timeline due to a number of factors, including competition for eligible patients at participating sites, investigator availability, the impact of institutional review board ("IRB") scheduling and approval processes, potential clinical holds, and the possibility that one or more clinical sites may underperform relative to enrollment projections. The Company has disclosed that delays in enrollment could postpone the anticipated date of completion of the pivotal trial and, consequently, delay the submission of a premarket approval application ("PMA") or De Novo classification request to the FDA.

(ii) Clinical Data Risk. The risk that the clinical data generated from the pivotal trial may not be sufficient to support a PMA or De Novo submission, or that the data may reveal safety signals, adverse events, or a lack of demonstrated effectiveness that could prevent the Company from obtaining marketing authorization for the OrthoSync™ Platform. The Company has disclosed that clinical trials are inherently uncertain, that there can be no assurance that the OrthoSync™ Platform will achieve its primary and secondary efficacy endpoints, and that negative or inconclusive results could require the Company to conduct additional clinical work or abandon the product candidate entirely.

(iii) Additional FDA Requirements. The risk that the FDA may impose additional requirements following its review of the pivotal trial data, including requests for supplemental clinical studies, additional preclinical testing, post-market surveillance commitments, or labeling restrictions that could increase development costs, delay marketing authorization, or limit the commercial potential of the OrthoSync™ Platform. The Company has noted that FDA review timelines are not guaranteed and that the agency retains broad discretion to request additional information or data at any point during the review process.

(iv) Use of Proceeds Impact. The potential impact on the Company's planned allocation of IPO net proceeds if OrthoSync™ development costs exceed the Company's current estimates. The Company has disclosed that approximately 40% of estimated net proceeds from the offering (approximately $30,510,000) are allocated to OrthoSync™ clinical trial completion and regulatory submissions, and that cost overruns or delays could require the Company to reallocate proceeds from other budget categories, seek additional financing, or curtail or delay other planned activities. The Company has also noted that there can be no assurance that additional financing, if needed, would be available on acceptable terms or at all.

In addition, the Company has noted in the revised risk factor disclosure that the Company's lead product, the NeuroPath™ Guided Navigation System (the "NeuroPath™ System"), received FDA 510(k) clearance on June 14, 2021 (510(k) No. K211847), and holds a CE Mark that remains valid through May 2025. Separate and distinct risk factors have been included in Amendment No. 2 addressing the regulatory maintenance risks applicable to the Company's currently cleared and approved products, including risks associated with FDA post-market requirements, potential product recalls or safety communications, and the ongoing transition from the EU Medical Devices Directive (Council Directive 93/42/EEC, as amended) to the EU Medical Devices Regulation (Regulation (EU) 2017/745) (the "MDD/MDR Transition"). The Company has disclosed that the MDD/MDR Transition requires the Company to obtain new CE Marking certification under the MDR framework prior to the expiration of applicable transition periods, and that failure to do so could result in the loss of the Company's ability to market the NeuroPath™ System and any future products in the European Union and European Economic Area.

The Company has also enhanced its risk factor disclosure in Amendment No. 2 to address general risks associated with operating as an Irish-incorporated company whose shares are traded in the form of ADSs in the United States. These risk factors address, among other things, foreign private issuer reporting obligations, the potential loss of foreign private issuer status, differences between Irish corporate governance requirements and U.S. domestic issuer requirements, the enforceability of U.S. judgments in Ireland, and risks associated with holding ADSs rather than ordinary shares directly.

The Company respectfully submits that the revised risk factor disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 2 — Risk Factor Disclosure: PFIC Classification

The Staff notes that the risk factor discussion regarding the Company's potential classification as a "passive foreign investment company" (PFIC) under Section 1297 of the Internal Revenue Code should provide more specific guidance on the factual basis for the Company's conclusion and the potential consequences to U.S. holders of ADSs if the Company were classified as a PFIC.

Response:

The Company acknowledges the Staff's comment and has revised the risk factor disclosure in Amendment No. 2 to provide substantially greater specificity regarding both the factual basis for the Company's current expectation that it will not be classified as a PFIC for its current taxable year and the adverse consequences to U.S. holders of ADSs if such classification were to apply.

As set forth in the revised disclosure, a non-U.S. corporation is classified as a PFIC for U.S. federal income tax purposes for any taxable year in which either (a) 75% or more of its gross income consists of "passive income" (the "Income Test") or (b) 50% or more of the average quarterly value of its assets produce or are held for the production of passive income (the "Asset Test"), in each case as determined under Section 1297 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable Treasury Regulations.

The Company expects that it will not be classified as a PFIC for its taxable year ending December 31, 2023 ("FY2023"). The factual basis for this expectation is as follows:

• Active Trade or Business Income. The Company projects that more than 75% of its gross income for FY2023 will consist of active trade or business income derived from the design, manufacture, and commercialization of minimally invasive surgical navigation devices, principally revenue from sales and service contracts related to the NeuroPath™ System. For the fiscal year ended December 31, 2022 ("FY2022"), the Company reported total revenue of $47.3 million, representing 34% year-over-year growth from the Company's revenue of $35.3 million for the fiscal year ended December 31, 2021. The Company's revenue is generated from sales of capital equipment, embedded software licenses, and post-sale service and maintenance contracts, all of which constitute active business income for PFIC purposes. The Company does not currently derive material amounts of passive income, such as interest, dividends, rents, or royalties (other than incidental bank interest on operating cash balances), and does not expect to do so during FY2023.

• Active Asset Composition. The Company expects that the majority of its assets, measured on a quarterly average fair market value basis, will consist of assets used in or held for use in the Company's active trade or business, including manufacturing equipment, research and development assets, inventory, accounts receivable, and intellectual property. However, the Company acknowledges that the determination under the Asset Test may be affected by the expected increase in cash and cash equivalents resulting from the receipt of estimated net proceeds of approximately $76,275,000 from this offering. Cash and cash equivalents not deployed in the Company's active business operations could be treated as passive assets for purposes of the Asset Test. The Company intends to deploy the net proceeds of this offering in its active business operations as described in the "Use of Proceeds" section of the prospectus and believes that, taking into account the anticipated timing and rate of such deployment, it will not fail the Asset Test for FY2023. However, there can be no assurance in this regard.

• U.S. Subsidiary Active Income. The Company operates a wholly owned U.S. subsidiary, Solstice Surgical Inc., a Delaware corporation (EIN 87-4231568), located at 200 West Adams Street, Suite 1100, Chicago, IL 60606. Solstice Surgical Inc. provides sales support, market access, and clinical affairs services to the parent company under an intercompany cost-plus services agreement at a markup of 7.5% over actual costs incurred. The active income generated through the activities of Solstice Surgical Inc. further supports the Company's position that it satisfies the Income Test as a non-PFIC corporation, as the income derived from such activities constitutes active services income that is not passive in character.

The Company has emphasized in the revised risk factor disclosure that PFIC status is determined on an annual basis and cannot be determined with certainty until after the close of each taxable year. The determination depends on the Company's actual income composition, asset composition, and, critically, the fair market value of its assets (including goodwill and other unbooked intangibles), which for a publicly traded company is generally determined by reference to the market capitalization of the Company's outstanding equity. Accordingly, the Company has disclosed that fluctuations in the market price of the ADSs could affect the PFIC analysis and that no assurance can be given that the Company will not be classified as a PFIC in the current year or in any future year.

In addition, the Company has added expanded risk factor language describing in detail the adverse U.S. federal income tax consequences to U.S. holders if the Company were classified as a PFIC for any taxable year during which a U.S. holder holds ADSs, including:

• The "excess distribution" regime under Section 1291 of the Code, pursuant to which "excess distributions" (including certain gains on the sale or disposition of ADSs) would be allocated ratably over the U.S. holder's holding period and taxed at the highest marginal ordinary income tax rate in effect for each year to which such amounts are allocated, without regard to the holder's actual tax bracket in the year of receipt;

• The imposition of a non-deductible interest charge on the tax deemed deferred with respect to amounts allocated to prior taxable years;

• The loss of preferential long-term capital gains tax rates that would otherwise apply to gains realized on the sale or disposition of ADSs held for more than one year; and

• The availability of certain elections (including the "qualified electing fund" or "QEF" election under Section 1295 of the Code, and the "mark-to-market" election under Section 1296 of the Code) that may mitigate certain adverse consequences of PFIC classification, along with the limitations and conditions applicable to each such election.

The Company's tax advisors at Calderwood & Harkness LLP, including Sylvia Hartwell, specialist partner in the Tax Group, have analyzed the Company's PFIC status and the related disclosure. The reader is cross-referenced to the "Material Irish and U.S. Federal Income Tax Consequences" section of the prospectus, beginning on page 146 of Amendment No. 2, for a fuller discussion of the PFIC rules and their application to the Company and to U.S. holders of ADSs.

The Company respectfully submits that the revised risk factor and tax disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 3 — Use of Proceeds

Please revise your use of proceeds disclosure to provide greater specificity regarding the allocation of net proceeds, including the basis for the estimated amounts and whether any material expenditures are contingent on clinical or regulatory milestones. Additionally, please clarify whether the Company will have sufficient funds to accomplish all stated objectives if the overallotment option is not exercised.

Response:

The Company acknowledges the Staff's comment and has revised the "Use of Proceeds" section in Amendment No. 2 to provide significantly greater specificity regarding the allocation of estimated net proceeds, the basis for the estimated amounts, the contingent nature of certain planned expenditures, and the Company's ability to accomplish its stated objectives in the event the underwriters do not exercise their overallotment option.

As set forth in the revised disclosure, the Company estimates that it will receive net proceeds of approximately $76,275,000 from the sale of 6,666,667 ADSs at the public offering price of $11.0769 per ADS (assuming the overallotment option is exercised in full for an additional 1,000,000 ADSs), after deducting the underwriting discount of $5,525,000 (representing 6.5% of gross proceeds of $85,000,000) and estimated offering expenses of approximately $3,200,000. The Company currently intends to use the net proceeds of this offering as follows:

The Company has disclosed that the estimated amounts set forth above represent the Company's current intentions based on its present plans and business conditions. The allocation of net proceeds among the foregoing categories is based on the Company's management estimates, which in turn reflect the Company's current clinical development budget for the OrthoSync™ Platform, the Company's commercial expansion plan for the NeuroPath™ System, and the Company's research and development roadmap for next-generation navigation platforms, in each case as reviewed and approved by the Company's Board of Directors.

With respect to the 40% allocation for OrthoSync™ clinical trial completion and regulatory submissions, the Company has clarified in the revised disclosure that this allocation is partially contingent on the achievement of clinical enrollment milestones and regulatory milestones. Specifically, the Company has disclosed that:

• If the pivotal clinical trial for the OrthoSync™ Platform generates unfavorable clinical data, or if the FDA determines that additional clinical or preclinical studies are required prior to or as a condition of granting marketing authorization, the Company may need to increase the amount of proceeds allocated to OrthoSync™ development activities, which could require the reallocation of proceeds from other categories.

• Conversely, if the OrthoSync™ pivotal trial is completed at a cost below management's current estimates, the Company may reallocate the excess proceeds to other stated categories, principally commercial expansion and research and development.

• In all cases, the Company's management retains the discretion to reallocate the net proceeds among the stated categories as circumstances may require, taking into account the evolving needs of the business, changes in the regulatory environment, and market conditions. The Company has included appropriate disclosure of this flexibility in the revised Use of Proceeds section.

With respect to the impact of the overallotment option, the Company has clarified the following in the revised disclosure:

• The underwriters have been granted an overallotment option to purchase up to an additional 1,000,000 ADSs at the public offering price, less the underwriting discount, exercisable for a period of 30 days from the date of the final prospectus. If the overallotment option is not exercised, the number of ADSs sold in the offering would be 6,666,667, and the aggregate net proceeds to the Company would be correspondingly reduced.

• In the event the overallotment option is not exercised, the Company would prioritize the allocation of net proceeds to the OrthoSync™ clinical trial funding, maintaining the approximately 40% allocation to that category on a dollar basis to the extent feasible. The adjustment would primarily reduce the amount allocated to working capital and general corporate purposes, and to a lesser extent the amount allocated to research and development.

• Even without the exercise of the overallotment option, the Company believes it will have sufficient funds from the net proceeds of the firm offering, combined with the Company's existing cash and cash equivalents of approximately $11.8 million as of December 31, 2022, to fund its operations, including its planned clinical, regulatory, and commercial activities, for at least the next 18 months from the date of this prospectus. The Company's assessment in this regard takes into account its current revenue run rate (FY2022 revenue of $47.3 million), projected revenue growth, and anticipated operating expenses.

For reference, the Company's pre-IPO shares outstanding are 28,000,000 ordinary shares. Following the completion of the offering (assuming the overallotment option is exercised in full), the Company will have 35,666,667 ordinary shares outstanding (28,000,000 pre-IPO shares plus 7,666,667 ADSs/shares issued in the offering). If only the firm shares are sold and the overallotment option is not exercised, the post-IPO shares outstanding would be 34,666,667 ordinary shares (28,000,000 pre-IPO shares plus 6,666,667 ADSs/shares issued in the offering).

The Company respectfully submits that the revised Use of Proceeds disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 4 — Revenue Recognition Policies

We note the Company's FY2022 revenue of $47.3 million and 34% year-over-year revenue growth. Please provide additional disclosure regarding the Company's revenue recognition policies under IFRS 15, including (i) the nature and timing of performance obligations for the NeuroPath™ system (capital equipment sales, software licenses, and service contracts), (ii) any significant judgments or estimates involved in determining the transaction price and allocating it to performance obligations, and (iii) the impact, if any, of variable consideration or return provisions.

Response:

The Company acknowledges the Staff's comment and has made revisions to the "Critical Accounting Policies and Estimates" and "Revenue Recognition" sections in Amendment No. 2 to provide additional disclosure regarding the Company's revenue recognition policies under IFRS 15 — Revenue from Contracts with Customers, as applied to sales of the NeuroPath™ System.

The Company's revenue is primarily generated from the sale of the NeuroPath™ System to hospitals, ambulatory surgery centers, and other healthcare facilities in the United States and the European Union. The revised disclosure in Amendment No. 2 sets forth the following:

Nature and Composition of Deliverables. A typical NeuroPath™ system sale comprises the following deliverables: (a) capital equipment (i.e., the NeuroPath™ hardware platform, including the console, optical tracking cameras, instrument adapters, and related accessories); (b) embedded software licenses (delivered at the point of sale and integral to the functioning of the hardware platform); and (c) post-sale service and maintenance contracts, which provide the customer with ongoing technical support, software updates, preventative maintenance, and, in certain cases, hardware repair or replacement services.

Identification of Performance Obligations. The Company has identified two principal performance obligations in a standard NeuroPath™ system contract:

(i) Combined Hardware/Software Deliverable. The capital equipment and embedded software are treated as a single combined performance obligation because the embedded software is integral to the functionality of the hardware and the two components are not separately identifiable in the context of the contract. The customer cannot benefit from the hardware without the embedded software, and the two items are delivered simultaneously at the point of installation. Accordingly, the Company treats the combined hardware/software deliverable as a single performance obligation under IFRS 15.

(ii) Service and Maintenance Contract. The post-sale service and maintenance contract constitutes a distinct performance obligation, as the customer can benefit from the service independently of the hardware/software deliverable, and the Company's promise to provide ongoing services is separately identifiable from the initial product delivery. Service contracts are typically offered for terms of 12 to 36 months and may be renewed at the customer's option.

Timing of Revenue Recognition. The Company recognizes revenue for the combined hardware/software deliverable at the point in time when control of the product transfers to the customer, which typically occurs upon delivery to and installation at the customer site, when the customer has physical possession, the risks and rewards of ownership have passed, and the Company has a present right to payment. Revenue attributable to the service and maintenance contract is recognized over time on a straight-line basis over the term of the contract, as the customer receives and consumes the benefits of the Company's performance evenly over the contract period. The Company considers this method to be a faithful depiction of the transfer of services because the Company stands ready to perform throughout the service period and the customer benefits from the Company's availability.

Determination of Transaction Price and Allocation to Performance Obligations. The transaction price for a NeuroPath™ system sale is determined based on the consideration the Company expects to be entitled to receive from the customer in exchange for the deliverables. Where variable consideration exists (discussed below), the Company estimates the amount of variable consideration and includes it in the transaction price to the extent described below. The transaction price is allocated to the identified performance obligations using the relative standalone selling price ("SSP") method. The Company determines SSP for the combined hardware/software deliverable based on the price at which it sells the hardware/software to customers on a standalone basis, considering list prices and observed transaction prices across a representative sample of contracts. The SSP for service and maintenance contracts is determined based on the observable price charged when such contracts are sold separately (i.e., renewal pricing), adjusted for the terms and scope of the contract.

Significant Judgments and Estimates. The Company has disclosed that the application of IFRS 15 to NeuroPath™ system sales involves certain significant judgments and estimates, including: (a) the determination of SSP, particularly in cases where the Company offers bundled pricing for the hardware/software and service components; (b) the assessment of whether deliverables represent distinct performance obligations; and (c) the estimation of variable consideration (discussed below). The Company has noted that changes in these judgments or estimates could affect the timing and amount of revenue recognized.

Variable Consideration. Variable consideration in the Company's contracts arises primarily in connection with volume-based discounts offered to certain large institutional customers (such as multi-facility hospital systems) and, in limited circumstances, early payment incentives. The Company estimates variable consideration using the expected value method, which takes into account historical purchasing patterns and the specific terms of each contract. Variable consideration is included in the transaction price only to the extent that it is highly probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved (i.e., the "constraint" under IFRS 15). The Company has disclosed that, historically, variable consideration adjustments have not been material. For FY2022, variable consideration adjustments represented less than 1% of total revenue.

Return Provisions. The Company does not offer a general right of return to its customers. However, the Company has disclosed that limited acceptance provisions exist in contracts with certain hospital and surgery center customers, typically providing a period of 30 days following installation during which the customer may reject the system if it does not meet agreed-upon functional specifications. These acceptance provisions are not substantive return rights and, in the Company's experience, have historically resulted in immaterial reversals. For FY2022, FY2021, and FY2020, no material revenue reversals occurred as a result of the exercise of acceptance provisions.

Consistency with Audited Financial Statements. The Company has confirmed that the revenue recognition policies described in the revised disclosure are consistent with the policies applied in the preparation of the Company's audited consolidated financial statements for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022, which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IASB") and audited by the Company's independent registered public accounting firm, Calderwood & Associates LLP, which is registered with the Public Company Accounting Oversight Board (United States) ("PCAOB").

Gross Margin. The Company has disclosed that its gross margin for FY2022 was 68.2%, reflecting the Company's asset-light manufacturing model (under which certain hardware components are manufactured by qualified contract manufacturing partners under the Company's supervision and quality control) and the significant software component of the NeuroPath™ System, which carries minimal incremental cost of goods sold.

The Company respectfully submits that the revised revenue recognition disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 5 — Related-Party Transactions

Please expand your disclosure of related-party transactions to include a more detailed description of the intercompany services agreement between the Company and its wholly owned U.S. subsidiary, Solstice Surgical Inc., including the terms and pricing methodology. Additionally, please disclose any transactions with directors, officers, or holders of more than 5% of the Company's shares.

Response:

The Company acknowledges the Staff's comment and has expanded the related-party transaction disclosure in Amendment No. 2, beginning on page 118, to provide additional detail regarding the Company's intercompany services agreement with Solstice Surgical Inc. and other related-party transactions, as follows:

Intercompany Services Agreement with Solstice Surgical Inc.

The Company has disclosed that Solstice Biomedical Devices Limited and its wholly owned U.S. subsidiary, Solstice Surgical Inc., a corporation organized under the laws of the State of Delaware (EIN 87-4231568), with its principal office at 200 West Adams Street, Suite 1100, Chicago, IL 60606, are parties to an Intercompany Cost-Plus Services Agreement, dated as of March 15, 2020, as amended (the "Services Agreement"). Under the Services Agreement, Solstice Surgical Inc. provides certain sales support, market access, clinical affairs, and related services to Solstice Biomedical Devices Limited in connection with the commercialization and regulatory activities for the Company's products in the United States. The services provided include, among other things, customer account management, key opinion leader engagement, clinical evidence generation support, managed care and reimbursement strategy, and post-market surveillance coordination.

The pricing methodology under the Services Agreement is a cost-plus model under which Solstice Surgical Inc. charges the parent company for all direct and indirect costs incurred in providing the agreed-upon services, plus a markup of 7.5% over such actual costs. The pricing methodology was established on an arm's-length basis and is supported by a contemporaneous transfer pricing study prepared by an independent economics firm, consistent with the arm's-length standard under Section 482 of the Code and applicable OECD Transfer Pricing Guidelines. The Services Agreement is reviewed annually by the Company's management and the Board of Directors to ensure that the terms remain at arm's length and commercially reasonable.

The Company has disclosed the aggregate amounts paid by Solstice Biomedical Devices Limited to Solstice Surgical Inc. under the Services Agreement for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022. For FY2022, the aggregate amount paid under the Services Agreement was approximately $8.2 million (inclusive of the 7.5% markup).

Transactions with 5%+ Shareholders

The Company has disclosed the following holders of more than 5% of the Company's pre-IPO ordinary shares and the nature of their investments in the Company:

• Greystone Ventures Fund III, L.P. — Holds 5,600,000 ordinary shares, representing approximately 20.0% of the Company's pre-IPO outstanding shares. Managing Partner: Julian Reyes Linley CPAs LLP. Greystone participated in the Company's Series B preferred financing round (February 2019) and Series C preferred financing round (August 2020), each of which converted into ordinary shares upon the Company's corporate reorganization in connection with this offering.

• Pinnacle Health Innovation Fund, L.P. — Holds 4,480,000 ordinary shares, representing approximately 16.0% of the Company's pre-IPO outstanding shares. Managing Partner: Dr. Amara Osei. Pinnacle participated in the Company's Series B and Series C preferred financing rounds on the same terms and at the same valuation as other investors in the respective rounds.

• Elkridge Growth Partners II, L.P. — Holds 2,800,000 ordinary shares, representing approximately 10.0% of the Company's pre-IPO outstanding shares. Managing Partner: Henrik Johansson. Elkridge participated in the Company's Series C preferred financing round.

In connection with this offering, the Company, the foregoing 5%-or-greater shareholders, and certain other shareholders are entering into a Registration Rights Agreement, to be dated as of the closing of this offering, pursuant to which such shareholders will be granted customary demand registration rights and piggyback registration rights with respect to their ordinary shares (including ordinary shares represented by ADSs). Such registration rights will become exercisable following the expiration of the 180-day lock-up period applicable to such holders, which lock-up period is currently expected to expire on or about August 29, 2023 (calculated as 180 days from the anticipated date of the final prospectus, March 2, 2023). The terms of the Registration Rights Agreement are described in the "Description of Share Capital — Registration Rights" section of the prospectus.

The Company has disclosed the terms of the prior Series B and Series C preferred financing rounds in which these investors participated, including the per-share price, aggregate investment amounts, and the conversion mechanics applied in connection with the Company's corporate reorganization.

Founder and Officer Share Ownership

The Company has also expanded its disclosure to describe the share ownership of the Company's founders and executive officers:

• Dr. Cormac Tierney (Chief Executive Officer and Director) — Holds 4,200,000 ordinary shares, representing approximately 15.0% of the Company's pre-IPO outstanding shares. Dr. Tierney acquired his shares through a founder grant at the time of the Company's incorporation, for nominal consideration of €0.001 per share.

• Dr. Siobhán Kelleher (Chief Technology Officer and Director) — Holds 3,360,000 ordinary shares, representing approximately 12.0% of the Company's pre-IPO outstanding shares. Dr. Kelleher acquired her shares through a founder grant at the time of the Company's incorporation, for nominal consideration of €0.001 per share.

• Ronan McBride (Chief Financial Officer) — Holds 840,000 ordinary shares, representing approximately 3.0% of the Company's pre-IPO outstanding shares. Mr. McBride acquired his shares through an initial equity allocation made in connection with his appointment as Chief Financial Officer in January 2019, for nominal consideration of €0.001 per share.

• Declan Whitfield (Board Chair, Non-Executive Director) — Holds 700,000 ordinary shares. Mr. Whitfield acquired his shares through an equity grant made in connection with his appointment to the Board of Directors.

The Company has disclosed the nominal consideration paid by each founder and executive officer in connection with the acquisition of their respective shares.

Other Related-Party Transactions

The Company has confirmed in the revised disclosure that, other than the transactions described above and as otherwise disclosed in the notes to the Company's audited consolidated financial statements for FY2020, FY2021, and FY2022, there are no other material related-party transactions to which the Company is or has been a party during the periods covered by the financial statements included in the Registration Statement.

The Company respectfully submits that the expanded related-party transaction disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 6 — Dilution Disclosure

Please revise the dilution table to clearly present (i) the net tangible book value per share before and after the offering, (ii) the dilution per share to new investors, and (iii) the impact of the overallotment option on dilution. The current presentation does not clearly reconcile the pre-IPO and post-IPO share counts.

Response:

The Company acknowledges the Staff's comment and has made substantial revisions to the "Dilution" section in Amendment No. 2 to present a clear and reconciled dilution analysis. The revised disclosure is set forth beginning on page 52 of the marked version of Amendment No. 2 and includes the following:

Pre-IPO Net Tangible Book Value. As of December 31, 2022, the Company had 28,000,000 ordinary shares outstanding. The Company's net tangible book value as of that date has been derived from the Company's audited consolidated balance sheet for FY2022, calculated as total assets of $93.6 million, less intangible assets, less total liabilities. The resulting net tangible book value, and the net tangible book value per ordinary share on a pre-IPO basis, are set forth in the revised dilution table.

Post-IPO Net Tangible Book Value (Firm Offering Only — No Overallotment Exercise). Assuming the sale of 6,666,667 ADSs at the public offering price of $11.0769 per ADS (with each ADS representing one ordinary share), the Company's post-IPO ordinary shares outstanding would be 34,666,667 shares (28,000,000 pre-IPO shares plus 6,666,667 shares issued in the firm offering). The Company's adjusted net tangible book value reflecting the receipt of net proceeds from the firm offering (calculated as 6,666,667 ADSs multiplied by $11.0769 per ADS, less the underwriting discount and estimated offering expenses allocated on a pro rata basis to the firm offering) is set forth in the revised dilution table.

Post-IPO Net Tangible Book Value (Full Overallotment Exercise). Assuming the sale of 7,666,667 ADSs (including the exercise in full of the underwriters' overallotment option for an additional 1,000,000 ADSs), the Company's post-IPO ordinary shares outstanding would be 35,666,667 shares (28,000,000 pre-IPO shares plus 7,666,667 shares issued in the offering). The Company's adjusted net tangible book value reflecting the receipt of full net proceeds of approximately $76,275,000 is set forth in the revised dilution table.

Dilution to New Investors. The revised dilution table clearly presents the dilution per ordinary share (and per ADS, given the 1:1 ADS-to-ordinary-share ratio) to new investors purchasing ADSs at the public offering price of approximately $11.08 per ADS ($11.0769 exact), in each of the firm offering scenario and the full overallotment exercise scenario. The dilution per share to new investors is calculated as the difference between the public offering price per ADS and the adjusted net tangible book value per share immediately following the completion of the offering.

The ADSs are to be issued under the Deposit Agreement among the Company, Meridian Trust Company, N.A. (as depositary), and the holders from time to time of the ADSs (CUSIP 83472R 109). Each ADS represents one ordinary share, par value $0.001 per share, of the Company.

Sensitivity Analysis. The Company has added a sensitivity table showing the impact on dilution to new investors at alternative offering prices of $10.08 per ADS (−$1.00) and $12.08 per ADS (+$1.00), and in each case both with and without the full exercise of the overallotment option, to assist investors in understanding the dilution impact under different pricing assumptions.

Lock-Up Arrangements. The Company has disclosed that an aggregate of 23,480,000 ordinary shares, representing approximately 83.9% of the Company's pre-IPO outstanding shares, are subject to lock-up agreements that restrict the sale, offer, pledge, or other transfer of such shares for a period of 180 days from the date of the final prospectus (anticipated to be March 2, 2023, with the lock-up period expiring on or about August 29, 2023). The lock-up agreements are subject to waiver by Keystone Mercer & Co., LLC, as representative of the underwriters, in its sole discretion.

The holders subject to lock-up agreements are as follows:

The Company has noted that while the lock-up agreements are in effect, the shares covered thereby will not be available for sale in the public market, but that upon expiration of the lock-up period (or earlier waiver), the sale or availability for sale of a substantial number of ordinary shares (including shares represented by ADSs) in the public market could adversely affect the market price of the ADSs and could impair the Company's future ability to raise capital through the sale of equity or equity-related securities. The Company has disclosed that the potential entry of these shares into the public market could have a dilutive impact on new investors.

The Company respectfully submits that the revised Dilution disclosure in Amendment No. 2 is responsive to the Staff's comment.

Comment 7 — Irish Withholding Tax Disclosure

Please revise the tax disclosure to more clearly explain the application of Irish dividend withholding tax to U.S. holders of ADSs, including the standard rate, the treaty-reduced rate, and the procedures for claiming treaty benefits through the depositary.

Response:

The Company acknowledges the Staff's comment and has revised the "Material Irish and U.S. Federal Income Tax Consequences" section of the prospectus included in Amendment No. 2, beginning on page 146, to more clearly and comprehensively explain the application of Irish dividend withholding tax ("DWT") to U.S. holders of ADSs, including the following:

Standard Rate. Under Irish tax law, dividends paid by the Company on its ordinary shares (including dividends paid to ADS holders, who are treated as the beneficial owners of the underlying ordinary shares for Irish tax purposes) are generally subject to Irish DWT at the standard rate of 25%. DWT is a withholding tax imposed on the Company at the time of dividend payment and is remitted by the Company to the Irish Revenue Commissioners on behalf of the shareholders.

Treaty-Reduced Rate. Under the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the "U.S.–Ireland Double Taxation Convention"), the rate of Irish DWT applicable to dividends paid to qualifying U.S. residents is reduced from 25% to 15%, provided that the beneficial owner of the dividend is a U.S. resident entitled to treaty benefits and has complied with the applicable procedural requirements to claim such benefits. In certain cases, a further reduced rate of 5% may be available for dividends received by qualifying U.S. corporate holders that own at least 10% of the voting stock of the Company, subject to additional conditions under the treaty.

Procedures for Claiming Treaty Benefits. The Company has disclosed that U.S. holders of ADSs who wish to claim the reduced treaty rate of Irish DWT must submit applicable treaty benefit documentation to Meridian Trust Company, N.A., as depositary under the Deposit Agreement, in advance of each dividend payment date. Such documentation typically includes a completed IRS Form W-9 (or applicable IRS Form W-8, for certain U.S. holders that are not U.S. citizens or residents) and a self-certification as to the holder's tax residency and entitlement to treaty benefits. The depositary will use commercially reasonable efforts to apply the reduced treaty rate of DWT to dividends distributed to holders who have timely submitted the required documentation; however, there can be no assurance that the depositary will be able to process all claims in a timely manner or that the Irish Revenue Commissioners will accept the documentation provided. Holders who do not submit the required documentation in a timely manner will be subject to DWT at the standard rate of 25%, and such holders will be required to apply directly to the Irish Revenue Commissioners for a refund of the excess withholding.

Foreign Tax Credit Implications for U.S. Holders. The Company has disclosed that Irish DWT paid on dividends received by a U.S. holder of ADSs may generally be claimed as a credit against such holder's U.S. federal income tax liability, subject to applicable limitations under Section 904 of the Code (including the foreign tax credit limitation, which limits the credit to the amount of U.S. tax attributable to the holder's foreign-source income). Alternatively, a U.S. holder may elect to deduct Irish DWT in computing its taxable income, rather than claiming a credit, subject to applicable requirements. The Company has noted that U.S. holders should consult their own tax advisors regarding the availability and calculation of foreign tax credits and the interaction of the Irish DWT rules with the U.S. foreign tax credit provisions.

Interaction with PFIC Rules. The revised tax disclosure cross-references the discussion of the Company's potential PFIC classification (as discussed in the response to Comment 2 above and in the tax disclosure section of the prospectus) and notes that if the Company were classified as a PFIC, the ability of U.S. holders to claim foreign tax credits for Irish DWT could be adversely affected under the PFIC excess distribution regime. The Company has included appropriate cautionary language in the revised tax disclosure regarding this interaction.

The Company respectfully submits that the revised Irish withholding tax disclosure in Amendment No. 2 is responsive to the Staff's comment.

The Company believes that the foregoing responses and the revisions reflected in Amendment No. 2 to the Registration Statement are fully responsive to the Staff's comments set forth in the Comment Letter dated February 8, 2023. The Company is available and willing to provide any additional information or supplemental materials that the Staff may require to complete its review. The Company would be happy to arrange a telephone call with the Staff at the Staff's convenience to discuss any of the foregoing responses or any other aspect of the Registration Statement.

The Company respectfully requests that the Staff complete its review of the Registration Statement at the Staff's earliest convenience, as the Company intends to proceed with the offering promptly following the effectiveness of the Registration Statement and listing of its ADSs on the Nasdaq Global Market under the ticker symbol "SBDX." The Company respectfully requests acceleration of the effectiveness of the Registration Statement as soon as practicable following the resolution of any remaining comments.

The Company acknowledges that it is responsible for the adequacy and accuracy of the disclosure in the filing, that Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing, and that the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We appreciate the Staff's time and attention to this matter and look forward to a prompt resolution of the remaining review process.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Natasha Forbes Lead Associate, Capital Markets

Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10174 Telephone: (212) 558-4127

Email: nforbes@calderwoodharkness.com

cc:

Dr. Cormac Tierney, Chief Executive Officer, Solstice Biomedical Devices Limited Ronan McBride, Chief Financial Officer, Solstice Biomedical Devices Limited Fiona Drennan, General Counsel, Solstice Biomedical Devices Limited Theodore Langston, Partner, Calderwood & Harkness LLP Vivienne St. Claire, Partner, Calderwood & Harkness LLP Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Margaret "Meg" Hollister, Managing Director, Keystone Mercer & Co., LLC Harrison Blake, Partner, Pellwick Raine LLP Patricia Yuen, Engagement Partner, Calderwood & Associates LLP

Use of Proceeds Category	Approximate % of Net Proceeds	Approximate Dollar Amount
OrthoSync™ clinical trial completion and regulatory submissions (IDE No. G220035), including patient enrollment costs, site management organization fees, data monitoring committee expenses, biostatistical analysis, and anticipated PMA/De Novo submission fees	40%	$30,510,000
Commercial expansion in the U.S. and EU, including sales force build-out for the NeuroPath™ System, establishment of additional distribution partnerships, and market development activities in targeted surgical specialties	25%	$19,069,000
Research and development on next-generation navigation platforms, including hardware iteration, software development, and early-stage preclinical work	20%	$15,255,000
Working capital and general corporate purposes, including potential strategic acquisitions and in-licensing opportunities	15%	$11,441,000
Total estimated net proceeds	100%	$76,275,000
Lock-Up Holder	Shares Subject to Lock-Up
Dr. Cormac Tierney, CEO and Director	4,200,000
Dr. Siobhán Kelleher, CTO and Director	3,360,000
Ronan McBride, CFO	840,000
Declan Whitfield, Board Chair	700,000
Greystone Ventures Fund III, L.P.	5,600,000
Pinnacle Health Innovation Fund, L.P.	4,480,000
Elkridge Growth Partners II, L.P.	2,800,000
Other insiders	1,500,000
Total locked-up shares	23,480,000

CALDERWOOD & HARKNESS LLP 425 Lexington Avenue New York, NY 10174 Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
February 17, 2023
VIA EDGAR TRANSMISSION
Division of Corporation Finance Office of Life Sciences U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Attention: Ms. Jennifer Altman, Staff Attorney Mr. Kevin Bosch, Senior Staff Accountant
Re: Solstice Biomedical Devices Limited Registration Statement on Form S-1 File No. 333-268514 Filed November 14, 2022, as amended January 18, 2023 Second-Round Comment Letter dated February 8, 2023
Dear Ms. Altman and Mr. Bosch:
We are writing on behalf of our client, Solstice Biomedical Devices Limited, a private company limited by shares incorporated under the laws of Ireland (Companies Registration Office No. 587412), with its registered office at Unit 7, Lakeview Technology Campus, Parkmore East, Galway, H91 XK72, Ireland (the "Company" or "Solstice"). This letter responds to the comments of the staff (the "Staff") of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the "Commission"), set forth in the Staff's second-round comment letter dated February 8, 2023 (the "Comment Letter"), relating to the Company's Registration Statement on Form S-1 (File No. 333-268514) (the "Registration Statement"), which was initially filed confidentially with the Commission on November 14, 2022, and subsequently amended by Amendment No. 1 filed on January 18, 2023.
Concurrently with the submission of this response letter, the Company is filing Amendment No. 2 to the Registration Statement ("Amendment No. 2"), which includes revised disclosure responsive to the Staff's comments contained in the Comment Letter, as well as other updates and the public filing of the Registration Statement. For the Staff's convenience, each of the Staff's comments is reproduced below in bold text, followed by the Company's response. All page references in this letter are to the marked version of Amendment No. 2, which has been filed concurrently herewith. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Registration Statement.
As set forth in the Registration Statement, the Company's American Depositary Shares ("ADSs"), each representing one ordinary share, par value $0.001 per share, of the Company, are proposed to be listed on the Nasdaq Global Market under the ticker symbol "SBDX." The proposed offering is for aggregate gross proceeds of approximately $85,000,000, with Keystone Mercer & Co., LLC acting as lead bookrunning manager and representative of the underwriters.
Comment 1 — Risk Factor Disclosure: Regulatory and Clinical Trial Risks
The Staff requests enhanced risk factor disclosure regarding the OrthoSync™ Intraoperative Imaging Platform's IDE clinical trial status, including specific risks associated with the ongoing pivotal trial enrollment and potential regulatory delays.
Response:
The Company acknowledges the Staff's comment and has revised the risk factor disclosure in Amendment No. 2 to provide enhanced and more specific disclosure regarding the regulatory and clinical trial risks associated with the Company's OrthoSync™ Intraoperative Imaging Platform (the "OrthoSync™ Platform").
As background, the Company received approval of an investigational device exemption ("IDE") from the U.S. Food and Drug Administration (the "FDA") for the OrthoSync™ Platform on September 2, 2022 (IDE No. G220035). The IDE authorizes the Company to conduct a pivotal clinical trial at six clinical sites in the United States to evaluate the safety and effectiveness of the OrthoSync™ Platform in intraoperative orthopedic imaging applications. As of the date of Amendment No. 2, patient enrollment is ongoing across all six approved sites, and the Company continues to make progress toward achieving its targeted enrollment objectives, although the enrollment timeline remains subject to the inherent uncertainties and variabilities of multi-site clinical investigation.
In response to the Staff's comment, the Company has added and enhanced specific risk factor language in the "Risk Factors" section of the prospectus included in Amendment No. 2, beginning on page 22, addressing the following matters:
(i) Enrollment Timeline Risk. The risk that enrollment in the OrthoSync™ pivotal trial may not be completed on the anticipated timeline due to a number of factors, including competition for eligible patients at participating sites, investigator availability, the impact of institutional review board ("IRB") scheduling and approval processes, potential clinical holds, and the possibility that one or more clinical sites may underperform relative to enrollment projections. The Company has disclosed that delays in enrollment could postpone the anticipated date of completion of the pivotal trial and, consequently, delay the submission of a premarket approval application ("PMA") or De Novo classification request to the FDA.
(ii) Clinical Data Risk. The risk that the clinical data generated from the pivotal trial may not be sufficient to support a PMA or De Novo submission, or that the data may reveal safety signals, adverse events, or a lack of demonstrated effectiveness that could prevent the Company from obtaining marketing authorization for the OrthoSync™ Platform. The Company has disclosed that clinical trials are inherently uncertain, that there can be no assurance that the OrthoSync™ Platform will achieve its primary and secondary efficacy endpoints, and that negative or inconclusive results could require the Company to conduct additional clinical work or abandon the product candidate entirely.
(iii) Additional FDA Requirements. The risk that the FDA may impose additional requirements following its review of the pivotal trial data, including requests for supplemental clinical studies, additional preclinical testing, post-market surveillance commitments, or labeling restrictions that could increase development costs, delay marketing authorization, or limit the commercial potential of the OrthoSync™ Platform. The Company has noted that FDA review timelines are not guaranteed and that the agency retains broad discretion to request additional information or data at any point during the review process.
(iv) Use of Proceeds Impact. The potential impact on the Company's planned allocation of IPO net proceeds if OrthoSync™ development costs exceed the Company's current estimates. The Company has disclosed that approximately 40% of estimated net proceeds from the offering (approximately $30,510,000) are allocated to OrthoSync™ clinical trial completion and regulatory submissions, and that cost overruns or delays could require the Company to reallocate proceeds from other budget categories, seek additional financing, or curtail or delay other planned activities. The Company has also noted that there can be no assurance that additional financing, if needed, would be available on acceptable terms or at all.
In addition, the Company has noted in the revised risk factor disclosure that the Company's lead product, the NeuroPath™ Guided Navigation System (the "NeuroPath™ System"), received FDA 510(k) clearance on June 14, 2021 (510(k) No. K211847), and holds a CE Mark that remains valid through May 2025. Separate and distinct risk factors have been included in Amendment No. 2 addressing the regulatory maintenance risks applicable to the Company's currently cleared and approved products, including risks associated with FDA post-market requirements, potential product recalls or safety communications, and the ongoing transition from the EU Medical Devices Directive (Council Directive 93/42/EEC, as amended) to the EU Medical Devices Regulation (Regulation (EU) 2017/745) (the "MDD/MDR Transition"). The Company has disclosed that the MDD/MDR Transition requires the Company to obtain new CE Marking certification under the MDR framework prior to the expiration of applicable transition periods, and that failure to do so could result in the loss of the Company's ability to market the NeuroPath™ System and any future products in the European Union and European Economic Area.
The Company has also enhanced its risk factor disclosure in Amendment No. 2 to address general risks associated with operating as an Irish-incorporated company whose shares are traded in the form of ADSs in the United States. These risk factors address, among other things, foreign private issuer reporting obligations, the potential loss of foreign private issuer status, differences between Irish corporate governance requirements and U.S. domestic issuer requirements, the enforceability of U.S. judgments in Ireland, and risks associated with holding ADSs rather than ordinary shares directly.
The Company respectfully submits that the revised risk factor disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 2 — Risk Factor Disclosure: PFIC Classification
The Staff notes that the risk factor discussion regarding the Company's potential classification as a "passive foreign investment company" (PFIC) under Section 1297 of the Internal Revenue Code should provide more specific guidance on the factual basis for the Company's conclusion and the potential consequences to U.S. holders of ADSs if the Company were classified as a PFIC.
Response:
The Company acknowledges the Staff's comment and has revised the risk factor disclosure in Amendment No. 2 to provide substantially greater specificity regarding both the factual basis for the Company's current expectation that it will not be classified as a PFIC for its current taxable year and the adverse consequences to U.S. holders of ADSs if such classification were to apply.
As set forth in the revised disclosure, a non-U.S. corporation is classified as a PFIC for U.S. federal income tax purposes for any taxable year in which either (a) 75% or more of its gross income consists of "passive income" (the "Income Test") or (b) 50% or more of the average quarterly value of its assets produce or are held for the production of passive income (the "Asset Test"), in each case as determined under Section 1297 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable Treasury Regulations.
The Company expects that it will not be classified as a PFIC for its taxable year ending December 31, 2023 ("FY2023"). The factual basis for this expectation is as follows:
• Active Trade or Business Income. The Company projects that more than 75% of its gross income for FY2023 will consist of active trade or business income derived from the design, manufacture, and commercialization of minimally invasive surgical navigation devices, principally revenue from sales and service contracts related to the NeuroPath™ System. For the fiscal year ended December 31, 2022 ("FY2022"), the Company reported total revenue of $47.3 million, representing 34% year-over-year growth from the Company's revenue of $35.3 million for the fiscal year ended December 31, 2021. The Company's revenue is generated from sales of capital equipment, embedded software licenses, and post-sale service and maintenance contracts, all of which constitute active business income for PFIC purposes. The Company does not currently derive material amounts of passive income, such as interest, dividends, rents, or royalties (other than incidental bank interest on operating cash balances), and does not expect to do so during FY2023.
• Active Asset Composition. The Company expects that the majority of its assets, measured on a quarterly average fair market value basis, will consist of assets used in or held for use in the Company's active trade or business, including manufacturing equipment, research and development assets, inventory, accounts receivable, and intellectual property. However, the Company acknowledges that the determination under the Asset Test may be affected by the expected increase in cash and cash equivalents resulting from the receipt of estimated net proceeds of approximately $76,275,000 from this offering. Cash and cash equivalents not deployed in the Company's active business operations could be treated as passive assets for purposes of the Asset Test. The Company intends to deploy the net proceeds of this offering in its active business operations as described in the "Use of Proceeds" section of the prospectus and believes that, taking into account the anticipated timing and rate of such deployment, it will not fail the Asset Test for FY2023. However, there can be no assurance in this regard.
• U.S. Subsidiary Active Income. The Company operates a wholly owned U.S. subsidiary, Solstice Surgical Inc., a Delaware corporation (EIN 87-4231568), located at 200 West Adams Street, Suite 1100, Chicago, IL 60606. Solstice Surgical Inc. provides sales support, market access, and clinical affairs services to the parent company under an intercompany cost-plus services agreement at a markup of 7.5% over actual costs incurred. The active income generated through the activities of Solstice Surgical Inc. further supports the Company's position that it satisfies the Income Test as a non-PFIC corporation, as the income derived from such activities constitutes active services income that is not passive in character.
The Company has emphasized in the revised risk factor disclosure that PFIC status is determined on an annual basis and cannot be determined with certainty until after the close of each taxable year. The determination depends on the Company's actual income composition, asset composition, and, critically, the fair market value of its assets (including goodwill and other unbooked intangibles), which for a publicly traded company is generally determined by reference to the market capitalization of the Company's outstanding equity. Accordingly, the Company has disclosed that fluctuations in the market price of the ADSs could affect the PFIC analysis and that no assurance can be given that the Company will not be classified as a PFIC in the current year or in any future year.
In addition, the Company has added expanded risk factor language describing in detail the adverse U.S. federal income tax consequences to U.S. holders if the Company were classified as a PFIC for any taxable year during which a U.S. holder holds ADSs, including:
• The "excess distribution" regime under Section 1291 of the Code, pursuant to which "excess distributions" (including certain gains on the sale or disposition of ADSs) would be allocated ratably over the U.S. holder's holding period and taxed at the highest marginal ordinary income tax rate in effect for each year to which such amounts are allocated, without regard to the holder's actual tax bracket in the year of receipt;
• The imposition of a non-deductible interest charge on the tax deemed deferred with respect to amounts allocated to prior taxable years;
• The loss of preferential long-term capital gains tax rates that would otherwise apply to gains realized on the sale or disposition of ADSs held for more than one year; and
• The availability of certain elections (including the "qualified electing fund" or "QEF" election under Section 1295 of the Code, and the "mark-to-market" election under Section 1296 of the Code) that may mitigate certain adverse consequences of PFIC classification, along with the limitations and conditions applicable to each such election.
The Company's tax advisors at Calderwood & Harkness LLP, including Sylvia Hartwell, specialist partner in the Tax Group, have analyzed the Company's PFIC status and the related disclosure. The reader is cross-referenced to the "Material Irish and U.S. Federal Income Tax Consequences" section of the prospectus, beginning on page 146 of Amendment No. 2, for a fuller discussion of the PFIC rules and their application to the Company and to U.S. holders of ADSs.
The Company respectfully submits that the revised risk factor and tax disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 3 — Use of Proceeds
Please revise your use of proceeds disclosure to provide greater specificity regarding the allocation of net proceeds, including the basis for the estimated amounts and whether any material expenditures are contingent on clinical or regulatory milestones. Additionally, please clarify whether the Company will have sufficient funds to accomplish all stated objectives if the overallotment option is not exercised.
Response:
The Company acknowledges the Staff's comment and has revised the "Use of Proceeds" section in Amendment No. 2 to provide significantly greater specificity regarding the allocation of estimated net proceeds, the basis for the estimated amounts, the contingent nature of certain planned expenditures, and the Company's ability to accomplish its stated objectives in the event the underwriters do not exercise their overallotment option.
As set forth in the revised disclosure, the Company estimates that it will receive net proceeds of approximately $76,275,000 from the sale of 6,666,667 ADSs at the public offering price of $11.0769 per ADS (assuming the overallotment option is exercised in full for an additional 1,000,000 ADSs), after deducting the underwriting discount of $5,525,000 (representing 6.5% of gross proceeds of $85,000,000) and estimated offering expenses of approximately $3,200,000. The Company currently intends to use the net proceeds of this offering as follows:
The Company has disclosed that the estimated amounts set forth above represent the Company's current intentions based on its present plans and business conditions. The allocation of net proceeds among the foregoing categories is based on the Company's management estimates, which in turn reflect the Company's current clinical development budget for the OrthoSync™ Platform, the Company's commercial expansion plan for the NeuroPath™ System, and the Company's research and development roadmap for next-generation navigation platforms, in each case as reviewed and approved by the Company's Board of Directors.
With respect to the 40% allocation for OrthoSync™ clinical trial completion and regulatory submissions, the Company has clarified in the revised disclosure that this allocation is partially contingent on the achievement of clinical enrollment milestones and regulatory milestones. Specifically, the Company has disclosed that:
• If the pivotal clinical trial for the OrthoSync™ Platform generates unfavorable clinical data, or if the FDA determines that additional clinical or preclinical studies are required prior to or as a condition of granting marketing authorization, the Company may need to increase the amount of proceeds allocated to OrthoSync™ development activities, which could require the reallocation of proceeds from other categories.
• Conversely, if the OrthoSync™ pivotal trial is completed at a cost below management's current estimates, the Company may reallocate the excess proceeds to other stated categories, principally commercial expansion and research and development.
• In all cases, the Company's management retains the discretion to reallocate the net proceeds among the stated categories as circumstances may require, taking into account the evolving needs of the business, changes in the regulatory environment, and market conditions. The Company has included appropriate disclosure of this flexibility in the revised Use of Proceeds section.
With respect to the impact of the overallotment option, the Company has clarified the following in the revised disclosure:
• The underwriters have been granted an overallotment option to purchase up to an additional 1,000,000 ADSs at the public offering price, less the underwriting discount, exercisable for a period of 30 days from the date of the final prospectus. If the overallotment option is not exercised, the number of ADSs sold in the offering would be 6,666,667, and the aggregate net proceeds to the Company would be correspondingly reduced.
• In the event the overallotment option is not exercised, the Company would prioritize the allocation of net proceeds to the OrthoSync™ clinical trial funding, maintaining the approximately 40% allocation to that category on a dollar basis to the extent feasible. The adjustment would primarily reduce the amount allocated to working capital and general corporate purposes, and to a lesser extent the amount allocated to research and development.
• Even without the exercise of the overallotment option, the Company believes it will have sufficient funds from the net proceeds of the firm offering, combined with the Company's existing cash and cash equivalents of approximately $11.8 million as of December 31, 2022, to fund its operations, including its planned clinical, regulatory, and commercial activities, for at least the next 18 months from the date of this prospectus. The Company's assessment in this regard takes into account its current revenue run rate (FY2022 revenue of $47.3 million), projected revenue growth, and anticipated operating expenses.
For reference, the Company's pre-IPO shares outstanding are 28,000,000 ordinary shares. Following the completion of the offering (assuming the overallotment option is exercised in full), the Company will have 35,666,667 ordinary shares outstanding (28,000,000 pre-IPO shares plus 7,666,667 ADSs/shares issued in the offering). If only the firm shares are sold and the overallotment option is not exercised, the post-IPO shares outstanding would be 34,666,667 ordinary shares (28,000,000 pre-IPO shares plus 6,666,667 ADSs/shares issued in the offering).
The Company respectfully submits that the revised Use of Proceeds disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 4 — Revenue Recognition Policies
We note the Company's FY2022 revenue of $47.3 million and 34% year-over-year revenue growth. Please provide additional disclosure regarding the Company's revenue recognition policies under IFRS 15, including (i) the nature and timing of performance obligations for the NeuroPath™ system (capital equipment sales, software licenses, and service contracts), (ii) any significant judgments or estimates involved in determining the transaction price and allocating it to performance obligations, and (iii) the impact, if any, of variable consideration or return provisions.
Response:
The Company acknowledges the Staff's comment and has made revisions to the "Critical Accounting Policies and Estimates" and "Revenue Recognition" sections in Amendment No. 2 to provide additional disclosure regarding the Company's revenue recognition policies under IFRS 15 — Revenue from Contracts with Customers, as applied to sales of the NeuroPath™ System.
The Company's revenue is primarily generated from the sale of the NeuroPath™ System to hospitals, ambulatory surgery centers, and other healthcare facilities in the United States and the European Union. The revised disclosure in Amendment No. 2 sets forth the following:
Nature and Composition of Deliverables. A typical NeuroPath™ system sale comprises the following deliverables: (a) capital equipment (i.e., the NeuroPath™ hardware platform, including the console, optical tracking cameras, instrument adapters, and related accessories); (b) embedded software licenses (delivered at the point of sale and integral to the functioning of the hardware platform); and (c) post-sale service and maintenance contracts, which provide the customer with ongoing technical support, software updates, preventative maintenance, and, in certain cases, hardware repair or replacement services.
Identification of Performance Obligations. The Company has identified two principal performance obligations in a standard NeuroPath™ system contract:
(i) Combined Hardware/Software Deliverable. The capital equipment and embedded software are treated as a single combined performance obligation because the embedded software is integral to the functionality of the hardware and the two components are not separately identifiable in the context of the contract. The customer cannot benefit from the hardware without the embedded software, and the two items are delivered simultaneously at the point of installation. Accordingly, the Company treats the combined hardware/software deliverable as a single performance obligation under IFRS 15.
(ii) Service and Maintenance Contract. The post-sale service and maintenance contract constitutes a distinct performance obligation, as the customer can benefit from the service independently of the hardware/software deliverable, and the Company's promise to provide ongoing services is separately identifiable from the initial product delivery. Service contracts are typically offered for terms of 12 to 36 months and may be renewed at the customer's option.
Timing of Revenue Recognition. The Company recognizes revenue for the combined hardware/software deliverable at the point in time when control of the product transfers to the customer, which typically occurs upon delivery to and installation at the customer site, when the customer has physical possession, the risks and rewards of ownership have passed, and the Company has a present right to payment. Revenue attributable to the service and maintenance contract is recognized over time on a straight-line basis over the term of the contract, as the customer receives and consumes the benefits of the Company's performance evenly over the contract period. The Company considers this method to be a faithful depiction of the transfer of services because the Company stands ready to perform throughout the service period and the customer benefits from the Company's availability.
Determination of Transaction Price and Allocation to Performance Obligations. The transaction price for a NeuroPath™ system sale is determined based on the consideration the Company expects to be entitled to receive from the customer in exchange for the deliverables. Where variable consideration exists (discussed below), the Company estimates the amount of variable consideration and includes it in the transaction price to the extent described below. The transaction price is allocated to the identified performance obligations using the relative standalone selling price ("SSP") method. The Company determines SSP for the combined hardware/software deliverable based on the price at which it sells the hardware/software to customers on a standalone basis, considering list prices and observed transaction prices across a representative sample of contracts. The SSP for service and maintenance contracts is determined based on the observable price charged when such contracts are sold separately (i.e., renewal pricing), adjusted for the terms and scope of the contract.
Significant Judgments and Estimates. The Company has disclosed that the application of IFRS 15 to NeuroPath™ system sales involves certain significant judgments and estimates, including: (a) the determination of SSP, particularly in cases where the Company offers bundled pricing for the hardware/software and service components; (b) the assessment of whether deliverables represent distinct performance obligations; and (c) the estimation of variable consideration (discussed below). The Company has noted that changes in these judgments or estimates could affect the timing and amount of revenue recognized.
Variable Consideration. Variable consideration in the Company's contracts arises primarily in connection with volume-based discounts offered to certain large institutional customers (such as multi-facility hospital systems) and, in limited circumstances, early payment incentives. The Company estimates variable consideration using the expected value method, which takes into account historical purchasing patterns and the specific terms of each contract. Variable consideration is included in the transaction price only to the extent that it is highly probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved (i.e., the "constraint" under IFRS 15). The Company has disclosed that, historically, variable consideration adjustments have not been material. For FY2022, variable consideration adjustments represented less than 1% of total revenue.
Return Provisions. The Company does not offer a general right of return to its customers. However, the Company has disclosed that limited acceptance provisions exist in contracts with certain hospital and surgery center customers, typically providing a period of 30 days following installation during which the customer may reject the system if it does not meet agreed-upon functional specifications. These acceptance provisions are not substantive return rights and, in the Company's experience, have historically resulted in immaterial reversals. For FY2022, FY2021, and FY2020, no material revenue reversals occurred as a result of the exercise of acceptance provisions.
Consistency with Audited Financial Statements. The Company has confirmed that the revenue recognition policies described in the revised disclosure are consistent with the policies applied in the preparation of the Company's audited consolidated financial statements for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022, which were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IASB") and audited by the Company's independent registered public accounting firm, Calderwood & Associates LLP, which is registered with the Public Company Accounting Oversight Board (United States) ("PCAOB").
Gross Margin. The Company has disclosed that its gross margin for FY2022 was 68.2%, reflecting the Company's asset-light manufacturing model (under which certain hardware components are manufactured by qualified contract manufacturing partners under the Company's supervision and quality control) and the significant software component of the NeuroPath™ System, which carries minimal incremental cost of goods sold.
The Company respectfully submits that the revised revenue recognition disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 5 — Related-Party Transactions
Please expand your disclosure of related-party transactions to include a more detailed description of the intercompany services agreement between the Company and its wholly owned U.S. subsidiary, Solstice Surgical Inc., including the terms and pricing methodology. Additionally, please disclose any transactions with directors, officers, or holders of more than 5% of the Company's shares.
Response:
The Company acknowledges the Staff's comment and has expanded the related-party transaction disclosure in Amendment No. 2, beginning on page 118, to provide additional detail regarding the Company's intercompany services agreement with Solstice Surgical Inc. and other related-party transactions, as follows:
Intercompany Services Agreement with Solstice Surgical Inc.
The Company has disclosed that Solstice Biomedical Devices Limited and its wholly owned U.S. subsidiary, Solstice Surgical Inc., a corporation organized under the laws of the State of Delaware (EIN 87-4231568), with its principal office at 200 West Adams Street, Suite 1100, Chicago, IL 60606, are parties to an Intercompany Cost-Plus Services Agreement, dated as of March 15, 2020, as amended (the "Services Agreement"). Under the Services Agreement, Solstice Surgical Inc. provides certain sales support, market access, clinical affairs, and related services to Solstice Biomedical Devices Limited in connection with the commercialization and regulatory activities for the Company's products in the United States. The services provided include, among other things, customer account management, key opinion leader engagement, clinical evidence generation support, managed care and reimbursement strategy, and post-market surveillance coordination.
The pricing methodology under the Services Agreement is a cost-plus model under which Solstice Surgical Inc. charges the parent company for all direct and indirect costs incurred in providing the agreed-upon services, plus a markup of 7.5% over such actual costs. The pricing methodology was established on an arm's-length basis and is supported by a contemporaneous transfer pricing study prepared by an independent economics firm, consistent with the arm's-length standard under Section 482 of the Code and applicable OECD Transfer Pricing Guidelines. The Services Agreement is reviewed annually by the Company's management and the Board of Directors to ensure that the terms remain at arm's length and commercially reasonable.
The Company has disclosed the aggregate amounts paid by Solstice Biomedical Devices Limited to Solstice Surgical Inc. under the Services Agreement for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022. For FY2022, the aggregate amount paid under the Services Agreement was approximately $8.2 million (inclusive of the 7.5% markup).
Transactions with 5%+ Shareholders
The Company has disclosed the following holders of more than 5% of the Company's pre-IPO ordinary shares and the nature of their investments in the Company:
• Greystone Ventures Fund III, L.P. — Holds 5,600,000 ordinary shares, representing approximately 20.0% of the Company's pre-IPO outstanding shares. Managing Partner: Julian Reyes Linley CPAs LLP. Greystone participated in the Company's Series B preferred financing round (February 2019) and Series C preferred financing round (August 2020), each of which converted into ordinary shares upon the Company's corporate reorganization in connection with this offering.
• Pinnacle Health Innovation Fund, L.P. — Holds 4,480,000 ordinary shares, representing approximately 16.0% of the Company's pre-IPO outstanding shares. Managing Partner: Dr. Amara Osei. Pinnacle participated in the Company's Series B and Series C preferred financing rounds on the same terms and at the same valuation as other investors in the respective rounds.
• Elkridge Growth Partners II, L.P. — Holds 2,800,000 ordinary shares, representing approximately 10.0% of the Company's pre-IPO outstanding shares. Managing Partner: Henrik Johansson. Elkridge participated in the Company's Series C preferred financing round.
In connection with this offering, the Company, the foregoing 5%-or-greater shareholders, and certain other shareholders are entering into a Registration Rights Agreement, to be dated as of the closing of this offering, pursuant to which such shareholders will be granted customary demand registration rights and piggyback registration rights with respect to their ordinary shares (including ordinary shares represented by ADSs). Such registration rights will become exercisable following the expiration of the 180-day lock-up period applicable to such holders, which lock-up period is currently expected to expire on or about August 29, 2023 (calculated as 180 days from the anticipated date of the final prospectus, March 2, 2023). The terms of the Registration Rights Agreement are described in the "Description of Share Capital — Registration Rights" section of the prospectus.
The Company has disclosed the terms of the prior Series B and Series C preferred financing rounds in which these investors participated, including the per-share price, aggregate investment amounts, and the conversion mechanics applied in connection with the Company's corporate reorganization.
Founder and Officer Share Ownership
The Company has also expanded its disclosure to describe the share ownership of the Company's founders and executive officers:
• Dr. Cormac Tierney (Chief Executive Officer and Director) — Holds 4,200,000 ordinary shares, representing approximately 15.0% of the Company's pre-IPO outstanding shares. Dr. Tierney acquired his shares through a founder grant at the time of the Company's incorporation, for nominal consideration of €0.001 per share.
• Dr. Siobhán Kelleher (Chief Technology Officer and Director) — Holds 3,360,000 ordinary shares, representing approximately 12.0% of the Company's pre-IPO outstanding shares. Dr. Kelleher acquired her shares through a founder grant at the time of the Company's incorporation, for nominal consideration of €0.001 per share.
• Ronan McBride (Chief Financial Officer) — Holds 840,000 ordinary shares, representing approximately 3.0% of the Company's pre-IPO outstanding shares. Mr. McBride acquired his shares through an initial equity allocation made in connection with his appointment as Chief Financial Officer in January 2019, for nominal consideration of €0.001 per share.
• Declan Whitfield (Board Chair, Non-Executive Director) — Holds 700,000 ordinary shares. Mr. Whitfield acquired his shares through an equity grant made in connection with his appointment to the Board of Directors.
The Company has disclosed the nominal consideration paid by each founder and executive officer in connection with the acquisition of their respective shares.
Other Related-Party Transactions
The Company has confirmed in the revised disclosure that, other than the transactions described above and as otherwise disclosed in the notes to the Company's audited consolidated financial statements for FY2020, FY2021, and FY2022, there are no other material related-party transactions to which the Company is or has been a party during the periods covered by the financial statements included in the Registration Statement.
The Company respectfully submits that the expanded related-party transaction disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 6 — Dilution Disclosure
Please revise the dilution table to clearly present (i) the net tangible book value per share before and after the offering, (ii) the dilution per share to new investors, and (iii) the impact of the overallotment option on dilution. The current presentation does not clearly reconcile the pre-IPO and post-IPO share counts.
Response:
The Company acknowledges the Staff's comment and has made substantial revisions to the "Dilution" section in Amendment No. 2 to present a clear and reconciled dilution analysis. The revised disclosure is set forth beginning on page 52 of the marked version of Amendment No. 2 and includes the following:
Pre-IPO Net Tangible Book Value. As of December 31, 2022, the Company had 28,000,000 ordinary shares outstanding. The Company's net tangible book value as of that date has been derived from the Company's audited consolidated balance sheet for FY2022, calculated as total assets of $93.6 million, less intangible assets, less total liabilities. The resulting net tangible book value, and the net tangible book value per ordinary share on a pre-IPO basis, are set forth in the revised dilution table.
Post-IPO Net Tangible Book Value (Firm Offering Only — No Overallotment Exercise). Assuming the sale of 6,666,667 ADSs at the public offering price of $11.0769 per ADS (with each ADS representing one ordinary share), the Company's post-IPO ordinary shares outstanding would be 34,666,667 shares (28,000,000 pre-IPO shares plus 6,666,667 shares issued in the firm offering). The Company's adjusted net tangible book value reflecting the receipt of net proceeds from the firm offering (calculated as 6,666,667 ADSs multiplied by $11.0769 per ADS, less the underwriting discount and estimated offering expenses allocated on a pro rata basis to the firm offering) is set forth in the revised dilution table.
Post-IPO Net Tangible Book Value (Full Overallotment Exercise). Assuming the sale of 7,666,667 ADSs (including the exercise in full of the underwriters' overallotment option for an additional 1,000,000 ADSs), the Company's post-IPO ordinary shares outstanding would be 35,666,667 shares (28,000,000 pre-IPO shares plus 7,666,667 shares issued in the offering). The Company's adjusted net tangible book value reflecting the receipt of full net proceeds of approximately $76,275,000 is set forth in the revised dilution table.
Dilution to New Investors. The revised dilution table clearly presents the dilution per ordinary share (and per ADS, given the 1:1 ADS-to-ordinary-share ratio) to new investors purchasing ADSs at the public offering price of approximately $11.08 per ADS ($11.0769 exact), in each of the firm offering scenario and the full overallotment exercise scenario. The dilution per share to new investors is calculated as the difference between the public offering price per ADS and the adjusted net tangible book value per share immediately following the completion of the offering.
The ADSs are to be issued under the Deposit Agreement among the Company, Meridian Trust Company, N.A. (as depositary), and the holders from time to time of the ADSs (CUSIP 83472R 109). Each ADS represents one ordinary share, par value $0.001 per share, of the Company.
Sensitivity Analysis. The Company has added a sensitivity table showing the impact on dilution to new investors at alternative offering prices of $10.08 per ADS (−$1.00) and $12.08 per ADS (+$1.00), and in each case both with and without the full exercise of the overallotment option, to assist investors in understanding the dilution impact under different pricing assumptions.
Lock-Up Arrangements. The Company has disclosed that an aggregate of 23,480,000 ordinary shares, representing approximately 83.9% of the Company's pre-IPO outstanding shares, are subject to lock-up agreements that restrict the sale, offer, pledge, or other transfer of such shares for a period of 180 days from the date of the final prospectus (anticipated to be March 2, 2023, with the lock-up period expiring on or about August 29, 2023). The lock-up agreements are subject to waiver by Keystone Mercer & Co., LLC, as representative of the underwriters, in its sole discretion.
The holders subject to lock-up agreements are as follows:
The Company has noted that while the lock-up agreements are in effect, the shares covered thereby will not be available for sale in the public market, but that upon expiration of the lock-up period (or earlier waiver), the sale or availability for sale of a substantial number of ordinary shares (including shares represented by ADSs) in the public market could adversely affect the market price of the ADSs and could impair the Company's future ability to raise capital through the sale of equity or equity-related securities. The Company has disclosed that the potential entry of these shares into the public market could have a dilutive impact on new investors.
The Company respectfully submits that the revised Dilution disclosure in Amendment No. 2 is responsive to the Staff's comment.
Comment 7 — Irish Withholding Tax Disclosure
Please revise the tax disclosure to more clearly explain the application of Irish dividend withholding tax to U.S. holders of ADSs, including the standard rate, the treaty-reduced rate, and the procedures for claiming treaty benefits through the depositary.
Response:
The Company acknowledges the Staff's comment and has revised the "Material Irish and U.S. Federal Income Tax Consequences" section of the prospectus included in Amendment No. 2, beginning on page 146, to more clearly and comprehensively explain the application of Irish dividend withholding tax ("DWT") to U.S. holders of ADSs, including the following:
Standard Rate. Under Irish tax law, dividends paid by the Company on its ordinary shares (including dividends paid to ADS holders, who are treated as the beneficial owners of the underlying ordinary shares for Irish tax purposes) are generally subject to Irish DWT at the standard rate of 25%. DWT is a withholding tax imposed on the Company at the time of dividend payment and is remitted by the Company to the Irish Revenue Commissioners on behalf of the shareholders.
Treaty-Reduced Rate. Under the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the "U.S.–Ireland Double Taxation Convention"), the rate of Irish DWT applicable to dividends paid to qualifying U.S. residents is reduced from 25% to 15%, provided that the beneficial owner of the dividend is a U.S. resident entitled to treaty benefits and has complied with the applicable procedural requirements to claim such benefits. In certain cases, a further reduced rate of 5% may be available for dividends received by qualifying U.S. corporate holders that own at least 10% of the voting stock of the Company, subject to additional conditions under the treaty.
Procedures for Claiming Treaty Benefits. The Company has disclosed that U.S. holders of ADSs who wish to claim the reduced treaty rate of Irish DWT must submit applicable treaty benefit documentation to Meridian Trust Company, N.A., as depositary under the Deposit Agreement, in advance of each dividend payment date. Such documentation typically includes a completed IRS Form W-9 (or applicable IRS Form W-8, for certain U.S. holders that are not U.S. citizens or residents) and a self-certification as to the holder's tax residency and entitlement to treaty benefits. The depositary will use commercially reasonable efforts to apply the reduced treaty rate of DWT to dividends distributed to holders who have timely submitted the required documentation; however, there can be no assurance that the depositary will be able to process all claims in a timely manner or that the Irish Revenue Commissioners will accept the documentation provided. Holders who do not submit the required documentation in a timely manner will be subject to DWT at the standard rate of 25%, and such holders will be required to apply directly to the Irish Revenue Commissioners for a refund of the excess withholding.
Foreign Tax Credit Implications for U.S. Holders. The Company has disclosed that Irish DWT paid on dividends received by a U.S. holder of ADSs may generally be claimed as a credit against such holder's U.S. federal income tax liability, subject to applicable limitations under Section 904 of the Code (including the foreign tax credit limitation, which limits the credit to the amount of U.S. tax attributable to the holder's foreign-source income). Alternatively, a U.S. holder may elect to deduct Irish DWT in computing its taxable income, rather than claiming a credit, subject to applicable requirements. The Company has noted that U.S. holders should consult their own tax advisors regarding the availability and calculation of foreign tax credits and the interaction of the Irish DWT rules with the U.S. foreign tax credit provisions.
Interaction with PFIC Rules. The revised tax disclosure cross-references the discussion of the Company's potential PFIC classification (as discussed in the response to Comment 2 above and in the tax disclosure section of the prospectus) and notes that if the Company were classified as a PFIC, the ability of U.S. holders to claim foreign tax credits for Irish DWT could be adversely affected under the PFIC excess distribution regime. The Company has included appropriate cautionary language in the revised tax disclosure regarding this interaction.
The Company respectfully submits that the revised Irish withholding tax disclosure in Amendment No. 2 is responsive to the Staff's comment.
The Company believes that the foregoing responses and the revisions reflected in Amendment No. 2 to the Registration Statement are fully responsive to the Staff's comments set forth in the Comment Letter dated February 8, 2023. The Company is available and willing to provide any additional information or supplemental materials that the Staff may require to complete its review. The Company would be happy to arrange a telephone call with the Staff at the Staff's convenience to discuss any of the foregoing responses or any other aspect of the Registration Statement.
The Company respectfully requests that the Staff complete its review of the Registration Statement at the Staff's earliest convenience, as the Company intends to proceed with the offering promptly following the effectiveness of the Registration Statement and listing of its ADSs on the Nasdaq Global Market under the ticker symbol "SBDX." The Company respectfully requests acceleration of the effectiveness of the Registration Statement as soon as practicable following the resolution of any remaining comments.
The Company acknowledges that it is responsible for the adequacy and accuracy of the disclosure in the filing, that Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing, and that the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
We appreciate the Staff's time and attention to this matter and look forward to a prompt resolution of the remaining review process.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Natasha Forbes Lead Associate, Capital Markets
Calderwood & Harkness LLP 425 Lexington Avenue New York, NY 10174 Telephone: (212) 558-4127
Email: nforbes@calderwoodharkness.com
cc:
Dr. Cormac Tierney, Chief Executive Officer, Solstice Biomedical Devices Limited Ronan McBride, Chief Financial Officer, Solstice Biomedical Devices Limited Fiona Drennan, General Counsel, Solstice Biomedical Devices Limited Theodore Langston, Partner, Calderwood & Harkness LLP Vivienne St. Claire, Partner, Calderwood & Harkness LLP Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Margaret "Meg" Hollister, Managing Director, Keystone Mercer & Co., LLC Harrison Blake, Partner, Pellwick Raine LLP Patricia Yuen, Engagement Partner, Calderwood & Associates LLP
Use of Proceeds Category | Approximate % of Net Proceeds | Approximate Dollar Amount
OrthoSync™ clinical trial completion and regulatory submissions (IDE No. G220035), including patient enrollment costs, site management organization fees, data monitoring committee expenses, biostatistical analysis, and anticipated PMA/De Novo submission fees | 40% | $30,510,000
Commercial expansion in the U.S. and EU, including sales force build-out for the NeuroPath™ System, establishment of additional distribution partnerships, and market development activities in targeted surgical specialties | 25% | $19,069,000
Research and development on next-generation navigation platforms, including hardware iteration, software development, and early-stage preclinical work | 20% | $15,255,000
Working capital and general corporate purposes, including potential strategic acquisitions and in-licensing opportunities | 15% | $11,441,000
Total estimated net proceeds | 100% | $76,275,000
Lock-Up Holder | Shares Subject to Lock-Up
Dr. Cormac Tierney, CEO and Director | 4,200,000
Dr. Siobhán Kelleher, CTO and Director | 3,360,000
Ronan McBride, CFO | 840,000
Declan Whitfield, Board Chair | 700,000
Greystone Ventures Fund III, L.P. | 5,600,000
Pinnacle Health Innovation Fund, L.P. | 4,480,000
Elkridge Growth Partners II, L.P. | 2,800,000
Other insiders | 1,500,000
Total locked-up shares | 23,480,000

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