ITEM 1. BUSINESS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management. Statements in this periodic report that are not historical facts are hereby identified as “forward-looking statements.”
Corporate History
NU-MED PLUS, INC., a Utah corporation (“NU-MED” or the “Company”) was incorporated in October 2011 in the state of Utah as an early stage, emerging growth company, to develop, manufacture and market new technologies in the medical device field. NU-MED’s immediate focus is on the creation of a nitric oxide powder formulation along with a bedside nitric oxide generator and a mobile rechargeable device to deliver nitric oxide gas. NU-MED is headquartered in Salt Lake City, Utah.
EMERGING GROWTH COMPANY STATUS
As part of the Jumpstart Our Business Startups Act of 2012 (“JOBS ACT”), companies with less than one billion in gross revenue can qualify as an “emerging growth company.” We will qualify as an emerging growth company as defined in the JOBS Act, and, as such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, (ii) reduced disclosure obligations regarding executive compensation in our periodic and annual reports, (iii) not being required to comply with certain new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, and (iv) not being required to obtain stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of the reduced disclosure obligations. Additionally, we will qualify as a “Smaller Reporting Company” and also have the advantage of not being required to provide the same level of disclosure as larger companies. Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed one billion dollars, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common units that are held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. At this time we expect to remain both a “Smaller Reporting Company” and “Emerging Growth Company” for the foreseeable future.
Business
The mission of NU-MED is to design, develop, and market technologies in the medical device field. Our technologies will focus on market niches in high growth trend areas. We hope each developed technology will fill a current need in medical procedures by improving upon an existing technology or device, or by designing a device to serve a need that is clearly defined and acknowledged by medical professionals.
NU-MED intends to become a medical device company principally engaged in the design, innovation, development, enhancement and commercialization of beginning, early, and selective later-stage quality medical devices. Our immediate focus is on the creation of a nitric oxide powder formulation, a hospital bedside nitric oxide generator and a mobile rechargeable device to deliver nitric oxide gas to offer solutions to hospitals, health systems and the medical community throughout the world.
Prior to the founding of NU-MED PLUS, our core team Jeff Robins, William Moon, and Dr. Craig Morrison investigated researched and worked on initial formulations of a conceptual product to convert nitric oxide from a proprietary formulation to a gas used to in the medical field. Based on our team’s backgrounds in the field of mechanical engineering, chemistry and medicine it was determined a potential niche market existed and the conceptual proprietary product could possibly be created. From this initial research and some initial testing, our team believed we could create a mechanical device that could deliver nitric oxide to medical patients and use a new formulation of nitric oxide that, when combined with the new delivery device, could be accomplished in a more economical method than those currently in existence. Recognizing the experimental nature of the intended product and the time and money commitments to get such a product to market, the team spent almost a year working on various initial equipment and formulizations before determining they could not proceed further without some additional capital. From this realization of the need for capital, NU-MED PLUS was incorporated and an initial private placement was completed to raise some capital to create a small lab and purchase equipment, including chemicals to start working on testing the theories of the founding team. Even with almost a year of working on the proposed product and formulation, NU-MED recognizes the difficulty in developing a medical product and that other companies could expend far more resources on a similar solution and beat NU-MED to the market. Investors in NU-MED face tremendous risk and would be betting on current management and its development staff which have not had prior success in developing and marketing medical products. Although management believes they are developing a unique and economical solution for nitric oxide delivery, management acknowledges they have not developed medical products before and all of their prior development work has been for other companies and this will be the first time management and their team have tried to do so without the support of a large organization and such organizations funding capabilities. Additionally, because of the lack of funding, several of the team members, including the person assisting in helping to formulate a powder nitric oxide, Tom Tait, are acting as consultants to NU-MED as they continue to work for other organizations that have the ability to pay them a salary. NU-MED has verified that all consultants, such as Tom Tait, are permitted to work on NU-MED’s project without violating other employment commitments. Even with the ability to work on NU-MED’s project, NU-MED’s management team and consultants are not full time as they devote part of the time to other projects that have the ability to continue to pay salaries.
The core of the product embodiment is the kinetically controlled release of nitric oxide from a chemical reaction. The mechanical means to deliver a metered dose to a patient is of secondary concern and will be addressed once the nitric oxide generation has been optimized. A research laboratory, completed in July 2012, has been equipped with the appropriate safety measures (negative pressure fume hood), nitric oxide analyzer, and standard lab ware to assess chemical reactions that produce nitric oxide. The initial goal is developing a kinetic control and be able to complete testing to optimize the process. Initial efforts are focusing on a proprietary mixture that will show the requisite parameters for generating nitric oxide in a controlled manner. Once this stage of development is complete, we will move forward with additional development of the delivery system. The optimization may take an unknown direction that will necessitate changes in the anticipated design of the mechanical delivery apparatus. Additionally, unforeseen delays, such as obtaining needed chemicals, which we experienced in September and October of 2012, can hamper development timelines. Management believes it will take some time before a product will be finalized and testing completed. Until a final product is completed and testing done, no assurance can be given we will be able to complete the product or achieve the costs savings for the patient.
We have begun preliminary work on the delivery systems but do not believe such systems will be available for several years. Our initial goals from the delivery system development will be to obtain a prototype for internal testing and file for provisional patent protection. Due to the costs of testing and FDA approvals, we do not anticipate moving beyond our lab testing for at least the next year or longer. Additionally we would need to raise substantial more capital to further testing and hire third party laboratories to move beyond the initial development and testing phase.
Products
NU-MED PLUS will initially develop three distinct products. NU-MED products have not been fully developed therefore we have not made any submission for FDA approval under any medical use nor do we anticipate any submittals for some time.
1.
Nitric oxide powder formulation that is 99% pure- one year shelf life.
2. A “desktop” or “bedside” generator device with controls and safety monitors built in that delivers inhaled nitric oxide to replace expensive pressurized canisters. This delivery system is intended for hospital, clinic or physician’s office use. The goal is to have a system that delivers a metered therapeutic dose (up to 200ppm) of nitric oxide via cannula or respirator mask. Unlike current delivery systems that use expensive tanks of nitric oxide this product would use a self-contained generation system based on a chemical reaction. This approach not only allows an on-demand system but management hopes possible cost savings to patients requiring nitric oxide therapy and other possible diagnosis using very high purity nitric oxide gas. Safe guards such as concentration monitoring, flow and gas purity would be standard.
3. A compact, mobile/portable rechargeable device to deliver inhaled nitric oxide gas. The portable system necessitates a design which can be deployed where a reliable source of power is not available or difficult to access. The key feature will be a rechargeable battery packs that will power the unit for the full duration of a therapeutic session. It can be recharged using existing electricity supplies, a solar array or other alternative energy source. The unit will be designed as a low power but still fully functional nitric oxide delivery system for inhalation therapy. It would be virtually identical in function to the bedside version described above.
Nitric oxide is an extremely important bio-mediator in the human body that is produced from the amino acid l-arginine. Nitric oxide has anti-inflammatory properties, antibacterial, antiviral and antifungal properties which make it useful in certain medical treatments. At the present time inhaled nitric oxide (iNO) is used as a selective vaso-dilator in infants. The only use of nitric oxide that has been approved by the FDA at this time is Hypoxia in premature infants and newborn babies. Management is not aware of any other potential uses of nitric oxide that have been cleared by the FDA but this may change as new submittals are made. The heavy costs of delivering nitric oxide to patients have created limitations in the use of nitric oxide. As an additional motivation to reduce these costs, discoveries that have occurred since the first FDA approved use of nitric oxide in 1999 have led to new potential uses, which still need FDA approval, in a wide variety of diseases and health complications, including flu viruses, bacterial infections, tuberculosis, and much more. NU-MED hopes to take advantage of the expanding medical uses of nitric oxide and the current high costs of delivering nitric oxide by developing a new generated nitric oxide method that reduces the delivery costs. Given NU-MED’s size, we do not anticipate being involved in any studies on new uses of nitric oxide and will rely on other parties to continue to advance the uses of nitric oxide.
The principal gas we aim to generate through our systems is medical grade nitric oxide, along with other various combinations of beneficial medical gases. Non-medical grade nitric oxide gas is produced and sold commercially by major gas companies as a specialty gas mixture and calibration gas. Nitrogen dioxide is present in all nitric oxide gas currently produced. Its presence limits the size of the dose of nitric oxide gas that can be administered for prospective uses in both humans and animals.
We hope to develop a proprietary compound formulation that will be utilized to produce medical grade nitric oxide gas in our bedside and rechargeable device generators. Management believes that with the further refinement of our formulation, we can make or filter medical grade nitric oxide gas with minimal amounts of nitrogen dioxide, and that this process can produce medical grade nitric oxide gas in ample quantities for any current or prospective use and hopefully at a price less than that of all currently available technologies. Management believes the only approved and available medical grade nitric oxide source is a product named Inomax. Since this is a single source market there is no price competition and price is set at a "market can bear" level. We believe, given this structure there is ample room for a competitive response from NU-MED using on site generated nitric oxide at a lower cost to penetrate the market. The cost of materials and labor for the NU-MED product is anticipated to be low providing attractive margins. Our product must have a known shelf life and be available in various configurations to yield known concentrations and volumes of gas. Packaging is another critical developmental process that we will address after completion of our formulation.
We approximate that non-clinical laboratory sales could take place earlier than United States Food and Drug Administration (“FDA”) approval. Management anticipates that selling our units earlier into the market as laboratory equipment or to international groups will pave the way for sales of our medical generators and formulation, but any financial contributions from intellectual property licenses and sales, non-medical generator and formulation sales will not be adequate to fund the substantial costs of the FDA approval process for human medical uses. Even with sales to laboratories or other uses, we will require additional funding, which we currently do not have in place and cannot say if we will be able to obtain.
All human medical uses of nitric oxide gas require FDA approval prior to initiating sales in the United States, and the approval of similar international agencies in their respective countries. Approval can be a long and expensive process, with no assurance that any such approval can or will ever be obtained. Our products from the compound formulation for nitric oxide to our delivery machine will have to be approved by the FDA prior to any sales for human use. Although the FDA can approve “uses” for nitric oxide and such uses can be expanded, our products, both our formulations and equipment, would also have to be approved to be used in association with the treatment using nitric oxide. Accordingly, although the “uses” of nitric oxide such as its use for hypoxia in newborns is already approved by the FDA, we still would need to have our machine and compound approved by the FDA for such treatment. Although having the “use” of nitric oxide would reduce our overall costs since we would not have to prove the efficacy of the treatment but only that our product and compounds are “substantially equivalent” to those already approved by the FDA. Even this level of approval still requires time and costs and creates additional uncertainty as to our ability to bring a product to the marketplace. We currently do not have the funds to seek such an approval and do not anticipate seeking FDA approval for several years. Focus over the next twelve months will be on continuing development and patent applications.
Existing Clinical Applications of Inhaled nitric oxide and Potential Markets
Nitric oxide can be safely inhaled when delivered by face mask, by nasal cannula, or via an endotracheal tube. An ideal inhaled NO delivery device requires delivery synchronized with respiration and minimal production of NO2 and should be simple to use with full monitoring capacity (high and low alarms and precise monitoring of NO, NO2, and
O2).
Since the inception of the only FDA approved treatment of hypoxia in newborns with nitric oxide (INOMAX from Ikaria Holdings) management initial research has shown approximately 394,000 patients have been treated worldwide over a ten-year period. Management believes the cost of a typical nitric oxide delivery system is approximately $30,000 each. Market expansion in the US will occur based on FDA approvals for other medical uses of nitric oxide therapies.
Competition
Large companies with established brand names have a distinct advantage in the medical device arena. The costs of developing a product followed by the costs of testing and licensing favor larger well financed and establish
companies. It will be difficult for NU-MED to compete in this industry and we will have to focus on the niche products, if we hope to be able to compete. The number of companies that have a product or products involving nitric oxide and free radicals is quite large and difficult to determine precisely as this is not the main focus of these companies.
In addition to companies that may be working on similar solutions in the nitric oxide space but have not been public in any product offerings, NU-MED considers the following companies as direct competitors in the nitric oxide market space anticipated by Nu-Med Plus. This does not preclude that large pharmaceutical or medical supply companies will enter the critical care market with substantially similar products or systems.
Management believes Ikaria Holdings Inc. is the only company with an FDA approved nitric oxide (INOMAX) delivery system in commerce. The FDA approval is limited to persistent pulmonary hypertension in newborns (PPHN). Ikaria has submitted several other specific medical uses of nitric oxide to the FDA for approval. The system consists of a pressurized tank source of the nitric oxide and a delivery and monitoring system and is intended for non-portable hospital use.
GeNO LLC is a technology company focused on their GeNOsyl Nitrosyl system of nitric oxide generation and delivery. This is a unique patented system based on the conversion of nitrogen dioxide/dinitrogen tetroxide to pure nitric oxide. Several delivery platforms have been submitted for FDA approval - ambulatory (portable), tank delivery and a respirator system. Approval is pending.
GeNOsys Inc. is a technology startup that is developing an on-demand nitric oxide source. The product is described as being able to replace pressurized tank sources of nitric oxide. There are currently no FDA filings.
12th Man Technologies is a consortium of three companies that have combined their respective strengths to offer nitric oxide tank gas at significant cost savings along with appropriate delivery system hardware. FDA submissions under generic drug application and 510(k) are anticipated. They are currently taking pre-market availability orders.
Many of our competitors, either alone or with their strategic partners, may have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining approval for therapies or delivery hardware and achieving widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs and advanced technologies become available.
Employees
The Company currently has one employee and relies on its officers and consultants for most of its activities.
Description of Property
NU-MED’s corporate office is at 455 E 500 S, Suite 250, Salt Lake City, Utah 84111. Our R&D facility is located at 1266 S 1380 W Orem, Utah 84058. We pay rent of $1,000 per month for the corporate office and $388 for the R&D facility. Our corporate offices are leased from a law firm which runs an “executive office” structure. Until we expand our operations the executive office arrangement will provide us the flexibility to expand our corporate offices as needed without being committed to long term overhead or office space we currently do not need. Our leases are on a month to month basis. Management believes these facilities will serve our purposes for at least the next twelve months.
Regulations
Our proposed products would use nitric oxide gas for use in medical treatment. Accordingly, our products will require prior FDA Class II approval, we have not submitted our products for approval and it is expected to take
many years and may not be obtained even after expending substantial resources in such efforts. Various laws and regulations govern or influence the research and development, manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals, and the subsequent compliance with applicable laws and regulations require the expenditure of substantial resources. Any failure by us to obtain or maintain, or any delay in obtaining or maintaining, regulatory approvals could materially adversely affect our business. Our policy will be to conduct our research and development activities in compliance with current FDA guidelines, and with comparable guidelines in other countries where we may be conducting clinical trials or other developmental activities.
The following is brief summary of applicable governmental regulations which we may be subject in our planned business operations related to the use of our products in the medical field. It should be notes we do not have the capital to engage in any regulatory approval at this time and instead, for the foreseeable future, we will be focused on the development of our technology and initial patent applications.
Clinical testing, manufacturing and marketing of human pharmaceutical products require prior approval from the FDA and comparable agencies in foreign countries. The FDA has established mandatory procedures and safety and efficacy standards that apply to the testing, manufacture and marketing of such products in the United States. In the United States, these procedures include pre-clinical studies, the filing of an Investigational New Drug Application ("IND") or equivalent, human clinical trials and approval of a New Drug Application ("NDA"). The results of pre-clinical testing, which include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations, must be submitted to the FDA as part of an IND that must be reviewed before clinical testing can begin.
The results of the preclinical and clinical testing are then submitted to the FDA in the form of an NDA for approval to commence commercial sales. The FDA may, in responding to an NDA, grant marketing approval, request additional information or deny the approval if it determines that the NDA does not provide an adequate basis for approval. Among the conditions for an NDA approval is the requirement that the prospective manufacturer's quality control and manufacturing procedures conform on an ongoing basis with current Good Manufacturing Practices ("GMP"). In complying with GMP, we must continue to expend time, money and effort in the areas of production and quality control to ensure full compliance or engage the services of outside contractors who are well versed in compliance with these requirements. Following approval of the NDA, we are subject to periodic inspections by the FDA. Any determination by the FDA of manufacturing deficiencies could materially adversely affect our business.
European countries generally follow the same procedures. The European Union has established a unified filing system administered by the Committee for Proprietary Medicinal Products ("CPMP") designed to reduce the administrative burden of processing applications for pharmaceutical products derived from new technologies. Following CPMP review and approval, marketing applications are submitted to member countries for final approval and pricing approval, as appropriate. In addition to obtaining regulatory approval of products, it is generally necessary to obtain regulatory approval of the facility in which the product will be manufactured. The approval process for medical devices in Europe is similar but is administered by private certification organizations known as Notified Bodies, which are accredited by each member state of the European Union. The receipt of regulatory approvals often takes a number of years, involves the expenditure of substantial resources and depends on a number of factors, including the severity of the disease in question, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. On occasion, regulatory authorities may require larger or additional studies, leading to unanticipated delay or expense. There can be no assurance that any approval will be granted and, even if granted, such approval may be withdrawn if compliance with regulatory standards is not maintained. In addition, the regulatory approval processes for products in the U.S., European countries and other countries around the world are undergoing or may undergo changes, and we cannot predict what effect any changes in the regulatory approval process may have on our business.
Clinical testing of an unapproved significant-risk medical device requires FDA approval in the form of an Investigational Device Exemption (IDE). The IDE application provides information to the FDA on device design and qualification, as well as on the study protocol. The FDA is mandated to respond to the IDE application within
30 days. An IDE may also be required for studies in which an approved device is used for a purpose distinct from its approved indication. This is typically the case when a trial is sponsored by a company for the purpose of expanding the indication of a device or making significant changes in the instructions for use.
Medical devices are regulated in the United States by the Center for Devices and Radiological Health (CDRH) of the FDA. The FDA/CDRH mandate is to promote and protect the public health by making safe and effective medical devices available in a timely manner. The standard for demonstrating safety and effectiveness is determined in part by the risk associated with the device in question. Devices are classified according to their perceived risk using a 3-tiered system (class I, II, or III).
Class I devices (lowest risk) are subject to general controls, which are published standards pertaining to labeling, manufacturing, post-market surveillance, and reporting. Devices are placed into class I when there is reasonable assurance that general controls alone are adequate to assure safety and effectiveness. The general controls that typically apply to class I devices include prohibitions against adulteration and misbranding, requirements for establishing registration and device listing, adverse event reporting, and good manufacturing practices. Furthermore, remedies including seizure, injunction, criminal prosecution, civil penalties, and recall authority are provided to FDA. Formal FDA review is not required for most class I devices before their market introduction.
Class II devices are those higher-risk devices for which general controls alone have been found to be insufficient to provide reasonable assurance of safety and effectiveness, but for which there is adequate information available to establish special controls. Special controls may include performance standards, design controls, and post-market surveillance programs. In addition, most class II devices require FDA clearance of a premarket notification application (PMA or 510(k)) before the device may be marketed. In the 510(k) application, the medical device manufacturer must provide data to demonstrate that the new device is “substantially equivalent” to a legally marketed device. Although substantial equivalence can usually be demonstrated on the basis of bench and animal testing alone, approximately 10% of 510(k) applications include clinical data.
Class III devices, such as heart valves, pacemakers/implantable cardioverter-defibrillators, and coronary stents, are judged to pose the highest potential risk. These devices are either life-sustaining/supporting, of substantial importance in preventing impairment of human health, or present a high risk of illness or injury. Consequently, general and special controls alone are inadequate to provide reasonable assurance of safety and effectiveness. Most class III devices require FDA approval of a PMA before they can be legally marketed. Approval of the PMA generally requires clinical data demonstrating reasonable assurance that the device is safe and effective in the target population.
The Human Device Exemption (HDE) is a new pathway to allow for commercialization of class III devices designed to address small markets, ie, diseases or conditions that affect fewer than 4000 patients in the United States each year. Approval of an HDE requires demonstration that the device is safe and the probable benefits outweigh the probable risks. Although the process may require smaller clinical trials, an HDE device must continue to operate under local IRB approval at each participating institution and must continue to collect case report forms akin to an ongoing clinical trial. The PMA process typically involves a series of studies starting with first clinical use and culminating in a multicenter, prospective randomized control trial (pivotal trial). The complexity and extent of the clinical testing program is dictated by the nature of the device and its proposed use. The clinical study program is developed by the company in conjunction with clinician investigators, all in close collaboration with FDA/CDRH.
The first and arguably most important step in this process is the pre-IDE meeting, in which the company, often accompanied by the lead clinical investigator(s), meets with FDA/CDRH to present data about the device, its clinical development program, and its intended use after approval. The FDA/CDRH staff reviews existing bench and animal data (as well as any outside-the-United States clinical data) and makes informal non-binding suggestions regarding the need (if any) for additional pre-clinical data (bench and animal), as well as the study design. The sponsor then submits an IDE application to FDA/CDRH for formal review.
Clinical development of a new class III device is typically divided into pilot and pivotal trial phases. The purpose of the pilot phase (starting with first clinical use) is to establish safety and to assist in design of the pivotal trial. Pilot-phase testing is typically limited to fewer than 100 patients treated at a few centers. The purpose of the pivotal trial is to generate data that define patient populations in which use of the device is safe and effective. The dialogue initiated during the pre-IDE meeting continues and intensifies between FDA/CDRH and the company over the specifics of the pivotal trial and includes the patient population, the control group against which the new device will be evaluated, and the primary and secondary end points of the evaluation. For first-in-class devices, eg, drug-eluting stents, where there are few data regarding short- or long-term outcomes, FDA/CDRH requires prospective randomized controlled studies. Though high profile, devices that require randomized data for approval are the exception rather than the rule. The vast majority of device clinical trials are case series that carefully document product performance. Still more products are approved as “tools.”
When FDA/CDRH has substantial data on the device class metrics, comparisons may be made to historical data or objective performance criteria. When few data on existing standards are available, the FDA typically requires randomized rather than single-arm studies, in which the new device is compared against concurrent controls treated with current best medical practice. The comparison may be powered to show that the new treatment is superior to prior approaches, or that it is non-inferior (equivalent or better) compared with a previously approved device in a new area.
The specifics regarding study design may have profound impact on the time and cost of bringing a new device to market. Though the primary mission of the FDA/CDRH is to ensure safety and effectiveness of commercially available devices, when exerting regulatory oversight the agency must balance its primary mission with the costs of introducing new technologies to the clinical marketplace. This has been codified by the FDA Modernization Act and the FDA Modernization Act-II, which require the agency to pursue the “least burdensome means” available to establish device safety and efficacy. The trial must be conducted according to good clinical practices standard, with the approval of the local IRB at each participating center.
Every clinical site is federally mandated to have an IRB responsible to ensure the protection of the rights, safety, and welfare of research subjects. Regulation of the IRB review of protocols involving medical devices is under the purview of the FDA. The Office of Protection from Research Risks (OPRR) is responsible for oversight regarding all human research and is in direct communication with the FDA/CDRH. Studies involving human subjects that do not involve products regulated by the FDA fall under the direct purview of the OPRR. Both the FDA and the OPRR are in the Department of Health and Human Services. Each IRB must meet standards for the composition, leadership, and processes set forth by that department. IRBs are subject to periodic audits by the FDA to ensure that records and procedures are in compliance with regulations. The IRB process typically requires approximately 3 months, but at times can take considerably longer.
The company must also negotiate agreements with each clinical site addressing the many issues associated with the clinical trial. In addition to the study costs/reimbursement (per-patient enrolled and overhead), these agreements typically include indemnification and the assignment of ownership rights of new discoveries (intellectual property) made in the course of the study. The resources required at each center to perform the high quality research necessary for a PMA protocol are formidable. Pivotal studies required for a PMA application are typically large multicenter randomized trials and often represent the largest commercial risk and expense in the device development process. In addition to obtaining an IDE from the FDA and formally recruiting clinical sites, includes engaging a contract research organization (CRO), core laboratories, formation of a data safety monitoring board (DSMB), and an executive committee.
Though there are many similarities in the regulatory process in the United States and countries within the European Union, there are important differences that impact the time and cost associated with the introduction of a new medical device. The European Union system relies heavily on notified bodies (NBs), which are independent commercial organizations to implement regulatory control over medical devices. NBs have the ability to issue the CE mark, the official marking required for certain medical devices. NBs are designated, monitored, and audited by the relevant member states via the national competent authorities. Many functions performed by the FDA/CDRH
within the United States are performed by NBs, including medical device certification, device type designation, assessment and verification of quality systems, and review of design dossiers for high-risk devices. Currently, there are more than 50 active NBs within Europe. A company is free to choose any notified body designated to cover the particular class of device under review. After approval, post-market surveillance functions are the responsibility of the member state via the competent authority. NBs typically function in a closed manner, providing little visibility on criteria required for approval. This dynamic allows for a high degree of variation as well as competition among NBs. As a result, NBs are perceived by industry to be less bureaucratic organizations that can respond more quickly and efficiently than the FDA.
Criteria for approval of high-risk devices are different in the European Union. To receive approval to market a class III high-risk (and some class II) device in the United States, the manufacturer must demonstrate the device to be reasonably safe and effective, which typically requires a prospective, randomized controlled clinical trial. To receive approval to market a device in the European Union, the manufacturer must demonstrate that the device is safe and that it performs in a manner consistent with the manufacturer’s intended use. This difference has a profound impact on the size and scope of the clinical studies for regulatory approval.
The demonstration of safety and efficacy for a new medical device is a long, arduous, and expensive developmental path from early concept to introduction into clinical practice.
We will be subject to environmental and other rules related to the handling of nitric oxide. We will be using very small testing quantities of nitric oxide and do not anticipate any material issues in relation to nitric oxide as it relates to environmental or other regulatory issues.
In addition to the foregoing, our present and future business may be subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research, as well as national restrictions on technology transfer, and import, export and customs regulations and similar laws and regulations in foreign countries. Due to the extensive regulatory requirements, management does not anticipate any submittals for some time until the technology is more developed and tested in the lab. At such time as management feels initial submittals are warranted, significant additional capital will need to be raised to proceed with even initial submittals As such, we believe any commercialization of our product is years away and we will continue to be reliant on loans and stock sales to stay in business.
Concentration of Customers
Currently we do not have any customers and will not have any customers for some time until our product is through the development stage and testing stage. This may take several years.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
We have no patents or trademarks. We also have no franchises, concessions, royalty agreements or labor contracts.
Research and Development Costs During the Last Two Fiscal Years
We were only formed in 2011 and have spent most of our time raising initial capital and setting up our organization and initial lab.
ITEM 1A.
ITEM 1A. RISK FACTORS
NU-MED’s operations are subject to a number of risks including:
Risk Factors Relating to NU-MED’ Proposed Activities
We currently do not have the capital to fund operations and are dependent on raising additional capital to stay in business.
NU-MED is still in the development stages and does not have an operating history in which to judge an investment decision. Additionally, NU-MED is currently undercapitalized and relying on equity and debt investments to continue operations. Although we have identified the product we want to develop and market, we are still in the design and development stage with the product. Given we will be producing a medical device, it may take years of testing before we are able to start selling our product and we will need more capital infusions to get the product developed and to market. Investors in NU-Med would be placing their money in a company with unproven and undeveloped products which are potentially years away from being able to sell and no support for the eventual commercial application or market for the product. Given the uncertainties facing the company, investors should look to an investment in NU-MED as highly speculative and risky with a high probability of losing their entire investment.
We are still in the product development phase of our operations so the ultimate success of our products is unknown.
NU-MED is entering into a new business. NU-MED has focused on the development of medical products which requires extensive capital investment and can be a very lengthy process subject to extensive regulatory approval. The ultimate success of NU-MED and its products is very uncertain. Investors will therefore be placing their money in an undercapitalized company with no proven operations.
Nitric oxide is a regulated chemical and is subject to extensive environmental regulations related to its handling and disposal which may increase our costs and subject us to environmental regulations.
Although NU-MED operates as a research and development company at this time and we use only small quantities of nitric oxide, we are still subject to the environmental and other workplace rules related to the handling and disposal of nitric oxide. These rules will require that we keep records of our handling and disposal of any nitric oxide. Additionally, if we mishandle or do not dispose properly of the nitric oxide, we would be subject to fines and penalties. At this time, we do not anticipate handling large quantities of nitric oxide and should not see substantial additional costs or contingencies from our use of nitric oxide. However, as we expand our operations, the environmental and workplace rules related to the handling of nitric oxide could increase our overall costs.
We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.
Certain aspects of our business are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage, handling, treatment and disposal of materials. For example, high-pressure gas cylinders can be regarded as hazardous materials. Although we believe our safety procedures for handling and disposing of these materials and waste products comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We do not maintain insurance for any environmental liability or toxic tort claims that may be asserted against us.
We will need additional financing which will potentially dilute current investors and we may not be able to obtain such financing.
NU-MED intends to engage in product development that will require substantial capitalization as we attempt to develop or products. Accordingly, NU-MED’ future success and profitability may be based on our ability to obtain
additional financing on favorable terms. Any additional financing may cause dilution to current investors and there can be no assurance that any additional financing will be on terms that are favorable to NU-MED and our shareholders.
We currently have note payables that may be converted into shares of our common stock which could result in substantial dilution to current investors.
We have a note payables which may be converted into shares of our common stock at $0.01 per share of principal and interest. With approximately $200,000 in principal and $20,862 in accrued interest on the notes, if the notes are converted, over 22,000,000 additional shares would be issued. If the notes were converted into shares of our common stock, investors would suffer substantial dilution to their ownership percentage in NU-MED and to their overall value. We would expect any issuance to be very dilutive to current investors resulting in potential loss of value to the investors.
The medical product business is highly competitive and subject to extensive regulations making it difficult and very expensive to bring new products into the marketplace.
We face vigorous competition from companies throughout the world, including multinational companies which are better financed and have more experience in medical product design. Most of these competitors have greater resources than we do and may be able to respond to changing business and economic conditions more quickly than us. Our ability to compete with these companies will be limited. Additionally, with extensive regulation and testing of medical devices, it is extremely costly to bring a medical device to market and we may not be able to obtain the necessary capital to bring a medical device to market. As such, an investment in the Company is very risky and could result in the loss of an investor’s entire investment.
Our success will be dependent on the ability of management to develop medical devices.
Our success depends on our ability to develop medical productions. With limited resources, we will be dependent on current management to be able to develop the medical devices. None of our current management members has extensive experience developing medical products or bringing them to market. As such, investors will be placing money with individuals with no proven success in developing and selling medical devices thereby creating high risk of loss of an investor’s entire investment in the Company.
Our success depends, in part, on our key personnel.
Our success depends, in part, on our ability to retain our key personnel, including our executive officers and senior management team. Our management team has created our business model and the initial focus on our first medical device. The unexpected loss of one or more of our key executives could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. Competition for these employees can be intense. We may not be able to attract, assimilate or retain qualified personnel in the future, and our failure to do so could adversely affect our business.
Our ability to commercialize pharmaceutical products successfully may depend in part on the availability of reimbursement for our products from:
* Government and health administration authorities;
* Private health insurers; and
* Other third party payors, including Medicare.
We cannot predict the availability of reimbursement for health care products. Third-party payors, including Medicare, are challenging the prices charged for medical products and services. Government and other third-party
payors progressively are limiting both coverage and the level of reimbursement for new drugs. Third-party insurance coverage may not be available to patients for any of our products.
The continuing efforts of government and third-party payors to contain or reduce the costs of health care may limit our commercial opportunity. If government and other third-party payors do not provide adequate coverage and reimbursement for any product we bring to market, doctors may not prescribe them or patients may ask to have their physicians prescribe competing drugs with more favorable reimbursement. In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We Sell
Some of the products we manufacture and sell may expose us to product liability claims relating to personal injury or death caused by such products. Although we will maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.
Our auditors have indicated in their audit opinion that there is a substantial doubt about our ability to continue as a going concern which will affect our ability to raise capital or borrow money.
Our auditors have issued an audit opinion indicating that there is a substantial doubt about our ability to remain as a going concern. As such, any potential investor or lender is unlikely to be willing to provide additional capital or loans to us. Without additional capital, we will not be able to remain in business or execute on our business plan. Even if we are able to obtain additional capital, given the “going concern” modification, it is likely investors would suffer substantial dilution to their investment.
General Risks Relating to Investors
We intend to take advantage of the disclosure requirements of the JOBS Act provided for emerging growth companies including not providing all of the accounting disclosure that other companies will be required to provide which may limit an investor’s ability to compare our financial statements with other companies.
Under the JOBS Act, we can elect to not comply with new or revised accounting standards which will allow us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. Until the standards are required for private companies, we will not have to adopt those standards. As such, our financial statements may not be comparable to companies that comply with public company effective dates. This could affect an investor’s ability to evaluate our financial statements compared to other public companies. In addition to the financial statements, the JOBS Act along with being a “Smaller Reporting Company” allows us to provide less disclosure on certain issues such as executive compensation as other companies which could affect an investor’s ability to compare us to other companies.
We do not intend to pay dividends in the near future.
NU-MED has not paid, and does not plan to pay, dividends in the foreseeable future, even if we were profitable. Earnings, if any, are expected to be used to expand operations, for research and development and for general corporate purposes, rather than to make distributions to shareholders.
Investors will not have cumulative voting and will not be able to elect directors based on the percentages of ownership.
Holders of Common Stock are not entitled to cumulate their votes for the election of directors or otherwise. The present shareholders of NU-MED will be able to elect all of the directors of NU-MED and effectively control NU-MED’s affairs making it difficult for investors to be able to change management or the direction of the NU-MED. (See "DESCRIPTION OF SECURITIES.")
We may issue more stock without shareholder input or consent which could dilute the book value of your investment.
The board of directors has authority, without action by or vote of the shareholders, to issue all or part of the authorized but unissued shares. In addition, the board of directors has authority, without action by or vote of the shareholders, to fix and determine the rights, preferences, and privileges of the preferred stock, which may be given voting rights superior to that of the common stock. Any issuance of additional shares of common stock or preferred stock will dilute the ownership percentage of shareholders and may further dilute the book value of our shares. It is likely we will seek additional capital in the future to fund operations. Any future capital will most likely reduce current shareholders’ percentage of ownership. Additionally, with the board of directors having the ability to set the rights, preferences and privileges of the preferred stock the board of directors, without shareholder approval, can create classes of stock which are superior to the common stock in both voting and preferences, including dividend and liquidation preferences. As such, current and future holders of common stock may have less voting power per share and dividend rights then subsequently issued preferred stock.
A relatively small number of stockholders and managers have significant influence over us and other stockholders will not be able to have a voice in the direction of the company and stockholders may disagree with the decisions of management.
A small number of our stockholders and management acting together would be able to exert significant influence over us through their ability to influence the election of directors and all other matters that require action by our stockholders. The voting power of these individuals could have the effect of preventing or delaying a change in control of our company which they oppose even if our other stockholders believe it is in their best interests. In addition, our executive officer has the ability to influence our day-to-day operations. These factors could negatively affect our company and our stock price as other investors may be unwilling to invest in a company with such a consolidation of control. Additionally, if stockholders dislike the decisions of management, it will be difficult for stockholders to get rid of current management.
The departure of certain key personnel could affect the financial condition of NU-MED due to the loss of their expertise.
Our business plan was developed by our officers and will depend on their ability to design and create the initial models for our products. Without their expertise, it is unlikely we will be able to complete the development and design of initial products. We do not have the funds, at this time, to hire additional personnel and without current management, it would be unlikely we would be able to obtain further funding. The loss of any member of management would severely hinder our ability to develop our proposed products. A failure on our part to retain the services of these key personnel could have a material adverse effect on our operating results and financial conditions. We do not maintain key man life insurance on any of our employees.
Employees
The Company currently has one employee and relies on its officers and consultants for most of its activities.
ITEM 2.
ITEM 2. PROPERTIES
NU-MED’s corporate office is at 455 E 500 S, Suite 250, Salt Lake City, Utah 84111. Our R&D facility is located at 1266 S 1380 W Orem, Utah 84058. We pay rent of $1,000 per month for the corporate office and $388 for the R&D facility. Our corporate offices are leased from a law firm which runs an “executive office” structure. Until we expand our operations the executive office arrangement will provide us the flexibility to expand our corporate offices as needed without being committed to long term overhead or office space we currently do not need. Our leases are on a month to month basis. Management believes these facilities will serve our purposes for at least the next twelve months.
ITEM 3.
Item 3
Articles of Incorporation and Bylaws
3.01
Articles of Incorporation
Incorporated
by reference*
3.02
Bylaws
Incorporated
by reference*
Item 4
Item 4 Instruments Defining the Rights of Security Holders
4.01
Specimen Stock Certificate
Incorporated
by reference*
10.01
Consulting Contract - SCS
Incorporated
By reference**
10.02
Consulting Agreement - Tait
This Filing
10.03
Amended Promissory Note - SCS
This Filing
31.01
CEO certification
This Filing
31.02
CFO certification Pursuant
This Filing
32.01
CEO certification
This Filing
32.02
CFO certification
This Filing
101. INS
XBRL Instance
101. XSD
XBRL Schema
101. CAL
XBRL Calculation
101. DEF
XBRL Definition
101. LAB
XBRL Label
101. PRE
XBRL Presentation
*The exhibits were filed with the original Form 10 filed by NU-MED on December 10, 2012, file number 000-54808.
**The consulting contract was filed with the Form 8-K dated January 7, 2014 and filed on January 8, 2014.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NU-MED PLUS, INC.
February 21, 2014
By: /s/ Jeffrey L. Robins
Jeffrey L. Robins, CEO, Principal Executive
February 21, 2014
By: /s/ Jeffrey L. Robins
Jeffrey L. Robins, Principal Accounting Officer
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this registration statement to be signed on its behalf by the undersigned in the capacities and on the dates stated.
Signature
Title
Date
/s/ Jeffrey L. Robins
Director, CEO
February 21, 2014
Jeffrey L. Robins
/s/ William G. Moon
Director, Vice President of Operations
February 21, 2014
William G. Moon
/s/ Dr. Craig Morrison
Director, Vice President of Technology
February 21, 2014
Dr. Craig Morrison
Nu-Med Plus, Inc.
(A Development Stage Company)
Financial Statements
December 31, 2013 and 2012
Page No.
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity (Deficit)
Statements of Cash Flows
Notes to the Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Nu-Med Plus, Inc. (A Development Stage Company)
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of Nu-Med Plus, Inc. (A Development Stage Company) as of December 31, 2013 and 2012, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended and from inception on October 19, 2011 through December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nu-Med Plus, Inc. (A Development Stage Company) as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended and from inception on October 19, 2011 through December 31, 2013, in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company does not currently have sufficient funding for its operations and additional debt and equity funding will need to be obtained to meet the Company’s operating needs. This raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/HJ & Associates, LLC
HJ & Associates, LLC
Salt Lake City, Utah
February 21, 2014
Nu-Med Plus, Inc.
(A Development Stage Company)
Balance Sheets
Nu-Med Plus, Inc.
(A Development Stage Company)
Statements of Operations
The accompanying notes are an integral part of these financial statements.
Nu-Med Plus, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
The accompanying notes are an integral part of these financial statements.
Nu-Med, Inc.
(A Development Stage Company)
Statements of Cash Flows
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Nu-Med Plus, Inc. is an emerging growth early stage medical device company principally engaged in the design, innovation, development, enhancement and commercialization of beginning, early, and selective later-stage quality medical devices. The Company's immediate focus is on a nitric oxide powder formulation that is 99% pure-with one year shelf life, a "desktop" generator device with controls plus safety monitors built in that delivers inhaled nitric oxide to replace expensive pressurized canisters and a compact mobile rechargeable device to deliver inhaled nitric oxide gas. The Company is incorporated in Utah.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments which are necessary for a fair statement of the results for interim periods have been included.
b. Revenue Recognition
The Company is currently developing its products. It is anticipated that revenue will be recognized on product sales once the product has been shipped to the customers, persuasive evidence of an agreement exists, the price is fixed or determinable, and collectability is reasonably assured.
c. Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
d. Cash and Cash Equivalents
The Company considers all deposit accounts and investment accounts with an original maturity of 90 days or less to be cash equivalents.
e. Fixed Assets
Fixed assets are stated at cost. Expenditure for minor repairs, maintenance, and replacement parts which do not increase the useful lives of the assets are charged to expense as incurred. Expenditures, exceeding $500, for new assets or that increase the useful life of existing assets are capitalized. Depreciation is computed using the straight-line method. The lives over which the fixed assets are depreciated are five to seven years.
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f. Earnings per Share
The computation of earnings per share of common stock is based on the weighted average number of shares outstanding during the period of the financial statement.
For the year ended
For the year ended
December 31, 2013
December 31, 2012
Net loss (numerator)
$ (332,290)
$ (262,744)
Shares (denominator)
27,819,829
22,635,311
Net loss per share amount
$ (0.01)
$ (0.01)
Diluted earnings per share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. During the year there were no outstanding common stock equivalents. Furthermore, due to the net loss for the year, common stock equivalents would not be included in the calculation of the net loss per common share, as their inclusion would be anti-dilutive.
g. Income Taxes
Deferred taxes are provided on an asset and liability approach whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
h. Equity Instruments Issued for Non-Cash Items
In accordance with ASC Topic 718, the Company records equity instruments issued for non-cash items at the grant-date fair value of the equity instruments issued.
i. Research and Development Costs
Research and development costs are expenses as incurred. These costs consist primarily of consulting fees and payroll related costs. The costs for the years ended December 31, 2013 and 2012 were $66,214 and $22,134, respectively.
NOTE 3 - GOING CONCERN
The Company anticipates that the funds on hand as of December 31, 2013, will not be sufficient and funding through the sale of equity capital and short term related party and other shareholder loans in order to meet the planned expenditures for development, operations, and administrative cost over the next 12 months will be required. Planned expenditures are approximately $220,000 for 2014. The company is funded through February 2014 and are in negotiations with 3 other investors to take the Company through 2014. Management will adjust any salaries and expenditures based on the need for successful continuous operations. If plans to obtain further financing prove to be insufficient to fund operations, continued viability could be at risk. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
NOTE 4 - FIXED ASSETS
Fixed assets and related accumulated depreciation consisted of the following at December 31, 2013, and December 31, 2012:
December 31, 2013
December 31, 2012
Computer and office equipment
$ 48,273
$ 19,354
Accumulated depreciation
(5,031)
(1,835)
Total Fixed Assets
$ 43,242
$ 17,519
Depreciation expense for the years ended December 31, 2013 and 2012, was $3,195 and $1,817, respectively.
NOTE 5 - PREFERRED STOCK
On October 19, 2011, the Company filed Articles of Incorporation with the State of Utah so as to authorize 10,000,000 shares of preferred stock having a par value of $0.001 per share. No preferred shares are issued or outstanding at December 31, 2013.
NOTE 6 - COMMON STOCK
On October 19, 2011, the company filed Articles of Incorporation with the State of Utah so as to authorize 90,000,000 shares of common stock having a par value of $0.001 per share. Immediately after authorization, 13,000,000 shares of the common stock were issued, at par, to Company's founding members. This issuance also resulted in the recognition of a $13,000 stock subscription receivable as of December 31, 2011.
On June 30, 2012, the $13,000 stock subscription was relieved, in full, in exchange for 2012 compensation paid to the Company's three founding members.
On January 19, 2012, the Company initiated a private placement through which it received gross proceeds of $87,563 for the issuance, on April 18, 2012, of 5,843,500 common shares valued at $0.015 per share. Stock issuance costs incurred in connection with this private placement totaled $3,006.
On April 18, 2012, the Company also issued 7,860,512 common shares valued at $0.015 per share for a total value of $117,907 to consultants and contractors for future services to be provided from the date of issuance through April 1, 2016.
On October 2, 2012, the Company received $1,500 for 100,000 common shares valued at $0.015 per share, issued November 15, 2012.
On September 2, 2013, the Company issued 3,000,000 common shares valued at $0.015 per share for a total value of $45,000 to a consultant, as compensation, for prior services.
On October 28, 2013, the Company issued 168,334 common shares valued at $0.30 per share for a total value of $50,500 in exchange for a $50,000 note payable and for $500 in accrued interest.
In November and December of 2013, the Company received $40,300 for a Stock Subscription Payable, for which common stock is to be issued in 2014, at a value of $0.30 per share.
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Operating Lease Obligations
The Company leases office space for which it incurred lease payments, on a month to month basis, beginning in February of 2012 for $1,000 per month. The Company also had a one year lease on lab space beginning April 1, 2012 and ending March 31, 2013, with a monthly lease payment of $388. Pursuant to the lease agreement, at the end of one year, the term is month to month at the same rate of $388 per month.
NOTE 8 - RELATED PARTY TRANSACTIONS
Contributed Services
During the year ended December 31, 2013, Company Officers contributed additional services to the Company in the amount of $3,184. The Company officers received no compensation and have no expectation of compensation for these services, either now or in the future, and waive their rights to any such compensation.
Compensation of Officers
In October of 2011, 13,000,000 shares of common stock were issued to the Company's three founding members. The issuance resulted in the recognition of a $13,000 stock subscription receivable as of December 31, 2011. On June 30, 2012, the $13,000 stock subscription was relieved, in full, in exchange for 2012 compensation paid to these founding members.
Additionally, for 2012 the Company agreed to compensate its Chief Executive Officer $3,600 per month. Beginning in January 2013 the Company agreed to compensate its CEO $3,550 per month.
NOTE 9 - LOAN PAYABLE
The Company received proceeds from a loan in the amount of $1,700 during 2011. This loan was due upon demand, had no stated interest rate, and was retired, in full, by payment in the second quarter of 2012. No interest was paid or recognized, during the year, due to the immateriality of such interest.
The Company received, during the year ended December 31, 2013, additional proceeds from a loan in the amount of $91,600. The Lender agreed to loan the Company up to $10,000 per month effective September 2012, for up to one year. This loan was memorialized in writing on September 30, 2013. The loan is considered to be a demand note, with a maturity 30 days from the receipt of demand and the holder may not make demand for payment until six month from the date thereof. On December 31, 2013, the Company accrued additional interest on this note, at a rate of 8.0% in the amount of $8,321 for the year. The total loan balance and accrued interest is $130,100 and $8,727 respectively. The note contains a conversion option. The conversion price is one share for each $0.01 of principal and accrued but unpaid interest of the note subject to a beneficial ownership limitation. That limitation prevents the holder from owning more than 4.9% of the number of shares of the common stock outstanding after conversion. If the holder's ownership has not previously been reduced to less than 4.9% of the number of shares outstanding, then the limitation shall be 9.9%.
On September 4, 2013 the Company entered into an agreement with a shareholder wherein shareholder would provide financing to the Company for two months at $25,000 per month. The note is due six months from the date it is presented and surrendered to the Company and bears an interest rate of 8% per annum. In September and October 2013, the Company received two $25,000 loans for a total of $50,000, and on October 28, 2013, the outstanding balance of $50,000 along with accrued interest of $500 was converted into common stock at a value of $0.30 per share.
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
On November 14, 2012, the Company issued a $100,000 convertible promissory note to a consultant as compensation for services provided and to be provided during the period April, 1, 2012, through March 31, 2013. This note is due on demand, bears annual interest at 5.5%, and is convertible into shares of common stock at a conversion price to be agreed upon immediately prior to conversion. On September 27, 2013, the Company amended the note to include the conversion price which is one share for each $0.01 of principle and accrued but unpaid interest of the note. Of the original $100,000, $75,000 had been expensed as part of the professional/consulting fees on the statement of operations during the year ended December 31, 2012, and the remaining $25,000 was expensed ratably using the straight-line method over the last three months in the service period. On December 31, 2013, the Company has accrued additional interest on this note in the amount of $5,500 for the year ended December 31, 2013. As of December 31, 2013, the company accrued interest on this note in the total amount of $9,629.
The Company has evaluated these convertible under the provisions of ASC Topic 815 and has concluded that neither of the convertible contains an embedded derivative requiring bifurcation from the host contract. Therefore, we have accounted for the conversion features of these instruments in accordance with ASC Topic 470. Accordingly, we have recognized the value of beneficial conversion features in these instruments as the difference between the conversion price and the fair value of the Company’s common stock on the date of the transaction. As a result the Company has recognized debt discounts resulting from these beneficial conversion features amounting to $50,000 and $65,050, respectively, for the November 14, 2012 and September 27, 2013 notes. The value of these discounts is to be accreted to the loans over the remaining contractual lives of the loans. Accretion recognized as additional interest expense during the periods ended December 31, 2013 and December 31, 2012 was $84,334 and $0, respectively. The ending value of the debt discount as of December 31, 2013 and December 31, 2012 was $30,716 and $0, respectively.
NOTE 10 - INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31, 2013, and 2012, consists of the following:
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
NOTE 10 - INCOME TAXES (continued)
The income tax provision differs from the amount of income tax determined by applying the U.S. federal and applicable state income tax rates to pretax income from continuing operations for the years ended December 31, 2013, and 2012, due to the following:
Net deferred tax liabilities consist of the following components as of December 31, 2013, and 2012:
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. If a change in ownership occurs, then net operating loss carryforwards may be limited as to use in future years. At December 31, 2013, the Company had net operating loss carryforward of approximately $583,000 that may be offset against future taxable income from the year 2014 through 2031. The availability of some of the net operating loss will extend into 2033 if not previously utilized. During 2013, the Company evaluated its deferred tax assets and concluded that none of the asset is currently realizable and that a full valuation allowance should be recorded. The valuation allowance increased by $140,600 and leaves the Company with a net deferred tax asset of $0 as of December 31, 2013.
Included in the balance at December 31, 2013, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
NOTE 11 - SUBSEQUENT EVENTS
The company has evaluated subsequent events in accordance with ASC topic 855 and has identified the following subsequent events:
Nu-Med Plus, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Period from Inception on October 19, 2011 Through
December 31, 2013
On January 7, 2014, the Company issued 1,800,000 common shares at $0.01 per share to a consultant, as compensation, for current and future services.