Quarterly Report (10-q)

Date : 05/15/2019 @ 9:49PM
Source : Edgar (US Regulatory)
Stock : United Health Products, Inc. (PC) (UEEC)
Quote : 1.4  -0.02 (-1.41%) @ 8:49PM

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number: 000-27781

 

UNITED HEALTH PRODUCTS, INC.

(Exact name of Company as specified in its charter)

 

Nevada

 

84-1517723

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

10624 S. Eastern Ave., Suite A209

Henderson, NV

 

89052

(Address of Company's principal executive offices)

 

(Zip Code)

 

(877) 358-3444

(Company's telephone number, including area code)

 

None

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by checkmark whether the registrant has submitted electronically on its corporate website, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was required to submit such file). Yes ¨ No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging growth company

¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

The number of shares issued of the Registrant's Common Stock, as of May 15­, 2019 was 176,217,368 issued and  outstanding.

 

 
 
 
 

UNITED HEALTH PRODUCTS, INC.

 

FORM 10-Q QUARTERLY REPORT

 

TABLE OF CONTENTS

 

 

PAGE

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

Condensed Balance Sheets as of March 31, 2019 and December 31, 2018 (unaudited)

 

3

 

Condensed Statements of Operations for the Three Months Ended March 31, 2019 and March 31, 2018 (unaudited)

 

4

 

Condensed Statement of Stockholders’ Deficiency for the Three Months Ended March 31, 2019 and March 31, 2018 (unaudited)

5

 

 

Condensed Statements of Cash Flows for the Three Months Ended March 31, 2019 and March 31, 2018 (unaudited)

 

6

 

Notes to Condensed Financial Statements (unaudited)

 

7

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

12

 

Item 3.

Quantitative and Qualitative Disclosures

 

16

 

Item 4.

Controls and Procedures

 

16

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

17

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

17

 

Item 3.

Defaults Upon Senior Securities

 

17

 

Item 4.

Mine Safety Disclosures

 

17

 

Item 5.

Other Information

 

17

 

Item 6.

Exhibits and Reports on Form 8-K

 

18

 

SIGNATURES

 

20

  

 
2
 
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UNITED HEALTH PRODUCTS, INC.

Condensed Balance Sheets

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

Current Assets

 

 

 

 

 

 

Cash and Cash Equivalents

 

$ 6,310

 

 

$ 31,273

 

Accounts Receivable

 

 

11,010

 

 

 

11,010

 

Inventory

 

 

83,694

 

 

 

83,694

 

Total current assets

 

 

101,014

 

 

 

125,977

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$ 101,014

 

 

$ 125,977

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 240,147

 

 

$ 243,713

 

Liability for unissued shares

 

 

201,843

 

 

 

201,843

 

Accrued liabilities - related parties

 

 

70,000

 

 

 

25,000

 

Notes payable – related parties

 

 

129,121

 

 

 

8,121

 

Total current liabilities

 

 

641,111

 

 

 

478,677

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Deficiency

 

 

 

 

 

 

 

 

Common Stock - $.001 par value, 300,000,000 Shares

 

 

 

 

 

 

 

 

Authorized, 174,493,138 and 185,943,138 shares issued at March 31, 2019 and December 31, 2018, respectively and 174,493,138 and 171,793,138 shares outstanding at March 31, 2019 and December 31, 2018, respectively

 

 

174,493

 

 

 

185,943

 

Additional Paid-In Capital

 

 

22,008,293

 

 

 

19,198,343

 

Accumulated Deficit

 

 

(22,722,883 )

 

 

(19,736,986 )

Total Stockholders' Deficiency

 

 

(540,097 )

 

 

(352,700 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

 

$ 101,014

 

 

$ 125,977

 

 

See notes to unaudited condensed financial statements.

 

 
3
 
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UNITED HEALTH PRODUCTS, INC.

Condensed Statements of Operations

(Unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Revenues

 

$ -

 

 

$ 29,928

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

-

 

 

 

8,877

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

-

 

 

 

21,051

 

 

 

 

 

 

 

 

 

 

Operating Costs and Expenses

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

2,958,492

 

 

 

378,591

 

Research and development

 

 

27,405

 

 

 

-

 

Total Operating Expenses

 

 

2,985,897

 

 

 

378,591

 

 

 

 

 

 

 

 

 

 

Income/(Loss) from Operations

 

 

(2,985,897 )

 

 

(357,540 )

 

 

 

 

 

 

 

 

 

Other expenses

 

 

 

 

 

 

 

 

Interest Expense

 

 

-

 

 

 

-

 

Loss on settlement of debt

 

 

-

 

 

 

(3,632,500 )

 

 

 

 

 

 

 

 

 

Total other expenses

 

 

-

 

 

 

(3,632,500 )

 

 

 

 

 

 

 

 

 

Net Income/(Loss)

 

$ (2,985,897 )

 

$ (3,990,040 )

 

 

 

 

 

 

 

 

 

Net Loss per common share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$ (0.02 )

 

$ (0.02 )

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

172,172,581

 

 

 

168,143,298

 

 

See notes to unaudited condensed financial statements.

 

 
4
 
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UNITED HEALTH PRODUCTS, INC

Condensed Statement of Stockholders' Deficiency

Three Months Ended March 31, 2019 and March 31, 2018

(Unaudited)

 

 

 

 

 

 

 

 

 

   Additional

 

 

 

 

 

 

 

 

 

    Common Stock

 

 

   Paid-in

 

 

Accumulated

 

 

 

 

 

 

   Shares

 

 

   Amount

 

 

   Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2017

 

 

164,969,663

 

 

$ 164,969

 

 

$ 13,304,617

 

 

$ (13,730,851 )

 

$ (261,265 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares for notes payable and accrued interest

 

 

3,500,000

 

 

 

3,500

 

 

 

3,811,500

 

 

 

-

 

 

 

3,815,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

50,000

 

 

 

50

 

 

 

54,450

 

 

 

-

 

 

 

54,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

440,725

 

 

 

441

 

 

 

367,659

 

 

 

-

 

 

 

368,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for liability of unissued shares

 

 

62,500

 

 

 

63

 

 

 

4,937

 

 

 

-

 

 

 

5,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares held in escrow

 

 

14,150,000

 

 

 

14,150

 

 

 

(14,150 )

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,990,040 )

 

 

(3,990,040 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

 

183,172,888

 

 

$ 183,172

 

 

$ 17,529,013

 

 

$ (17,720,891 )

 

$ (8,705 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

185,943,138

 

 

$ 185,943

 

 

$ 19,198,343

 

 

$ (19,736,986 )

 

$ (352,700 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of shares held in escrow

 

 

-

 

 

 

-

 

 

 

2,343,500

 

 

 

-

 

 

 

2,343,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for services

 

 

400,000

 

 

 

400

 

 

 

379,600

 

 

 

-

 

 

 

380,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock

 

 

150,000

 

 

 

150

 

 

 

74,850

 

 

 

-

 

 

 

75,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of escrow shares

 

 

(12,000,000 )

 

 

(12,000 )

 

 

12,000

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,985,897 )

 

 

(2,985,897 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

 

174,493,138

 

 

$ 174,493

 

 

$ 22,008,293

 

 

$ (22,722,883 )

 

$ (540,097 )

 

See notes to unaudited condensed financial statements.

 

 
5
 
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UNITED HEALTH PRODUCTS, INC.

Condensed Statements of Cash Flows

(Unaudited)

 

 

 

For the Three Months

Ended March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net (Loss)

 

$ (2,985,897 )

 

$ (3,990,040 )

Adjustments to Reconcile net (loss) to Net Cash Used In Operating Activities:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

2,723,500

 

 

 

54,500

 

Loss on settlement of debt

 

 

 

 

 

 

3,632,500

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

-

 

 

 

(3,840 )

Inventory

 

 

-

 

 

 

5,997

 

Accounts payable and accrued expenses

 

 

(3,566 )

 

 

(17,493 )

Accrued liabilities – related party

 

 

45,000

 

 

 

-

 

Net Cash Used In Operating Activities

 

 

(220,963 )

 

 

(318,376 )

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from related party

 

 

121,000

 

 

 

-

 

Repayments to related party

 

 

-

 

 

 

(70,000 )

Repayment on notes payable

 

 

-

 

 

 

(10,000 )

Proceeds from sale of common stock

 

 

75,000

 

 

 

368,100

 

Cash flow provided by financing activities

 

 

196,000

 

 

 

288,100

 

Increase (Decrease) in Cash and Cash Equivalents

 

 

(24,963 )

 

 

(30,276 )

Cash and Cash Equivalents – Beginning of period

 

 

31,273

 

 

 

189,942

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS – END OF PERIOD

 

$ 6,310

 

 

$ 159,666

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ -

 

 

$ 5,000

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash Investing & Financing Activities:

 

 

 

 

 

 

 

 

Shares issued for debt and accrued interest

 

$ -

 

 

$ 182,500

 

Shares issued related to liability for unissued shares

 

$ -

 

 

$ 5,000

 

Shares issued and held in escrow

 

$ -

 

 

$ 14,150

 

Cancellation of shares

 

$ 12,000

 

 

$ -

 

 

See notes to unaudited condensed financial statements.

 

 
6
 
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UNITED HEALTH PRODUCTS, INC. AND SUBSIDIARY COMPANY

NOTES TO FINANCIAL STATEMENTS

FOR THE QUARTERS ENDED March 31, 2019 AND 2018

(unaudited)

 

Note 1. Organization and Basis of Preparation

 

United Health Products, Inc. ("United" or the "Company") is a product development and solutions company focusing its growth initiatives on the expanding wound-care industry and disposable medical supplies markets. The Company produces an innovative gauze product that absorbs exudate (fluids which have been discharged from blood vessels) by forming a gel-like substance upon contact.

 

Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 8 of Regulation S-X, as appropriate. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements for the interim period, have been included.

 

These interim condensed financial statements should be read in conjunction with the Company's audited financial statements and notes for the period ended December 31, 2018 filed with the Securities and Exchange Commission on Form 10-K filed on April 1, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate to make the information presented not misleading.

 

Note 2. Significant Accounting Policies

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred recurring net losses, negative working capital and operations have not provided cash flows. Additionally, the Company does not currently have sufficient revenue producing operations to cover its operating expenses and meet its current obligations. In view of these matters, there is substantial doubt about the Company's ability to continue as a going concern. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

The Chief Executive Officer has agreed to advance funds or make payments of the Company's obligations at his discretion. There is no written agreement to continue this support.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets, as well as in the healthcare industry, and any other parameters used in determining these estimates, could cause actual results to differ.

 

 
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Trade Accounts Receivable and Concentration Risk

 

We record accounts receivable at the invoiced amount and we do not charge interest. We review the accounts receivable by amounts due from customers which are past due, to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, we make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. We will also maintain a sales allowance to reserve for potential credits issued to customers. We will determine the amount of the reserve based on historical credits issued.

 

There was no provision for doubtful accounts recorded at March 31, 2019 and December 31, 2018. The Company recorded $0 and $0 in bad debt expense for the three month periods ended March 31, 2019 and 2018, respectively.

 

For the three months ended March 31, 2019, three customers made up 98.9% of the Company’s outstanding accounts receivable balance.

 

For the three months ended March 31, 2018, two customers accounted for 61.1% and 29.0% of the Company’s net revenue, respectively. 

 

For the year ended December 31, 2018, three customers made up 98.9% of the Company’s outstanding accounts receivable balance.

 

Inventory

 

Inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventory on the balance sheet consists of raw materials purchased by the Company and finished goods.

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Raw materials

 

$ 46,121

 

 

$ 46,121

 

Finished goods

 

 

37,573

 

 

 

37,573

 

 

 

$ 83,694

 

 

$ 83,694

 

 

During the three months ended March 31, 2019 and 2018, the Company determined $0 and $0, respectively, of inventory should be impaired and written-off to cost of goods sold.

 

Stock Based Compensation

 

The Company issues restricted stock to consultants and employees for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock for non-employees is measured at the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached and expense is recognized during the term at which the counterparty's performance is earned or at the date the shares are considered non-forfeitable. The Company recognized consulting expenses and a corresponding increase to additional paid-in-capital related to stock issued for services. Compensation for employee stock grants are recognized at the fair market value of the shares at the date of grant and recognized at the grant date, as it is considered that the shares issued are considered non-forfeitable at the date of grant. Stock compensation for the periods presented were issued for past services provided, accordingly, all shares issued are fully vested, and there is no unrecognized compensation associated with these transactions.

 

Per Share Information

 

Basic earnings per share are calculated using the weighted average number of common shares outstanding for the period presented. Diluted earnings per share is computed using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. The dilutive effect of potential common shares is not reflected in diluted earnings per share because the Company incurred a net loss for the three months ended March 31, 2019 and 2018 and the effect of including these potential common shares in the net loss per share calculations would be anti-dilutive.

 

The total potential common shares as of March 31, 2019 and 2018, include 50,100,000 and 14,150,000, respectively, of common stock  until a change of control in the Company occurs. See Notes 3 and 4 below.

 

 
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 New Accounting Pronouncements, Recently Adopted Accounting Pronouncements

 

Leases

 

 In February 2016, the FASB issued Accounting Standards Update (ASU) No. ASU 2016-02, Leases, which amends existing lease accounting guidance, including the requirement to recognize most lease arrangements on the balance sheet. The adoption of this standard will result in the Company recognizing a right-of-use asset representing its rights to use the underlying asset for the lease term with an offsetting lease liability. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has determined there is no impact to the financial statements as the Company does not have any lease agreements.  

 

The Company considers all new pronouncements and management has determined that there have been no other recently adopted or issued accounting standards that had or will have a material impact on its financial statements. 

 

Note 3. Related Party Transactions

 

As of March 31, 2019 and December 31, 2018, notes payable to related parties totaled $129,121 and $8,121, respectively. These amounts are owed to Doug Beplate, our Chief Executive Officer. During the three months ended March 31, 2019, Mr. Beplate advanced the Company $121,000. During the year ended December 31, 2018, Mr. Beplate gave a personal vehicle to an employee of the Company valued at $30,000 in lieu of the Company paying travel expenses and consulting expenses. During 2018, the Company repaid a net amount of $305,207 of the outstanding notes payable balance from proceeds of private placements. These loans were for operating expenses of the Company, are due on demand and have no interest rate.

 

Per Mr. Beplate’s services agreement, he receives monthly compensation of $15,000 per month. During the year ended December 31, 2018, he received his entire salary of $180,000 and $61,500 of previously accrued compensation was paid, leaving a balance of $25,000.  During the three months ended March 31, 2019, $45,000 of compensation was accrued, leaving a balance of $70,000.

 

During the period ended March 31, 2019, 1,600,000 shares of common stock issued to Nate Knight who is the Chief Financial Officer of the Company, 500,000 shares of common stock issued to the office administrator, who is a person affiliated with the Company’s CEO and 50,000 shares of common stock issued to a Technical Product Supervisor, who is the son of the office administrator which had been held in escrow became vested by the Board of Directors. These shares had a fair market value of $1.09 per share at the date of issuance and $2,343,500 has been expensed during the three-month period ended March 31, 2019.

 

 The Company, by board resolution, approved an executive compensation stock bonus package for Mr. Beplate such that upon the sale of all or substantially all of the assets of the Company or other change in control or merger transaction in which the Company is involved, or in the event that no such transaction occurs by December 31, 2019, Mr. Beplate shall receive an amount equal to 15% post issuance of the then outstanding shares of the Company's common stock on a fully diluted basis. It was intended that the board approved stock bonus package will be in lieu of the 5% stock bonus that Mr. Beplate is already entitled to in the event of a sale of the Company’s assets or change in control or merger transaction per his services agreement. See “Note 4” regarding the granting of Restricted Stock Unit Agreements (“RSU’s”) to various officers, directors and consultants covering an aggregate of 50,100,000 shares of common stock to be issued upon the satisfaction of certain conditions described in Note 4. Included in the RSU’s are 33,000,000 to Douglas Beplate in lieu of the compensation stock bonus package described above.

 

During the three months ended March 31, 2019, the Company issued 100,000 shares of common stock to each of two directors for services rendered.  The shares had a fair market value of $190,000.

 

Note 4. Issuances of Securities

 

Share issuances 2018

 

During the three months ended March 31, 2018, the Company issued an aggregate of 18,203,225 shares of common stock. The Company issued 50,000 shares of common stock valued at fair market value of $1.09 for services, 440,725 shares of common stock were sold for total proceeds of $276,100, $92,000 of proceeds were received for 133,333 shares of common stock not yet issued and recorded as liability for unissued shares, 62,500 shares of common stock were issued related to $5,000 of previously recorded liability for unissued shares and 14,150,000 shares of common stock with a fair market value of $15,423,500 were issued and placed in escrow. The 14,150,000 shares will be released from escrow upon the change of control of the Company, but would not be considered outstanding until and unless released from escrow (see “share issuances 2019” below). Management is unable to determine when a change of control will occur and $0 has been expensed as of March 31, 2018. The Company also issued 3,500,000 shares of common stock to convert $172,500 of notes payable and $10,000 of accrued interest. The shares were valued at their fair market value of $1.09 which resulted in a loss on debt settlement of $3,632,500.

 

 
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Share issuances 2019

 

During the three months ended March 31, 2019, 150,000 shares of common stock were sold to non-affiliated investors in a private placement for total cash proceeds of $75,000, 200,000 shares of common stock were issued to securities counsel for services rendered with a fair value of $190,000 and 100,000 shares of common stock were issued to each of two directors for services rendered with a fair value of $190,000.

 

During the three months ended March 31, 2019, the following events occurred with respect to the aforementioned 14,150,000 shares held in escrow: During the period ended March 31, 2019, the Company issued (i)1,600,000 shares to Nate Knight who is the Chief Financial Officer of the Company, 500,000 shares to the office administrator, who is a person affiliated with the Company’s CEO and 50,000 shares to a Technical Product Supervisor, who is the son of the office administrator which had been held in escrow became vested by the Board of Directors for services provided. These shares had a fair market value of $1.09 per share at the date of issuance and $2,343,500 has been expensed during the three  month period ended March 31, 2019.

 

The Company canceled 12,000,000 shares of the aforementioned 14,150,000 shares issued (which were not considered outstanding) in the first quarter of 2019 to various officers, directors and consultants.

 

Restricted stock units

 

The Board approved restricted stock unit agreements with its officers, directors and consultants covering an aggregate of 50,100,000 shares of common stock to be issued and delivered to such persons upon the earlier of (i) a change in control of the Company by a cash tender offer, merger, acquisition or otherwise or (ii) the Company achieving gross revenues of $20,000,000 in gross revenues on a go forward basis, or (iii) the commencement of an event by a third party without the Board’s approval to effect, or seek to effect, a change in control of the Company or the Company’s management.

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

 

 

 

Grant

 

 

 

Number of

 

 

Date Fair

 

 

 

Units

 

 

Value

 

Total awards outstanding at December 31, 2018

 

 

-

 

 

$ -

 

Units granted

 

 

50,100,000

 

 

$ 0.94

 

Units Exercised/Released

 

 

-

 

 

$ -

 

Units Cancelled/Forfeited

 

 

-

 

 

$ -

 

Total awards outstanding at March 31, 2019

 

 

50,100,000

 

 

$ 0.94

 

 

Management is unable to determine when a change of control will occur and as of March 31, 2019, there was $47,094,000 of unrecognized compensation cost related to unvested restricted stock unit awards.

 

Note 5. Litigation

 

There are no legal proceedings pending or threatened against us, and we are unaware of any governmental authority initiating a proceeding against us, except as follow:

 

During 2017, a Complaint was filed with the United States District Court, Southern District of New York by Steven Safran as Plaintiff against the Company and Douglas Beplate, its CEO, as Defendant. This court case was transferred to the United States District Court in Las Vegas, Nevada. Mr. Safran is seeking damages and monies allegedly owed pursuant to an employment agreement and allegedly unpaid loans of $245,824 provided to Defendants. The Company has denied Plaintiff’s allegations and intends to vigorously defend said lawsuit. The parties have held various depositions and the Company has a motion to dismiss which is pending with the court. No accrual has been recorded related to this litigation.

 

In July 2015, the Company entered into a consulting agreement retaining the services of Maxim Group LLC. An amended agreement was executed in January 2018. A total of 4 million shares of common stock were issued to Maxim in exchange for its obligation to perform certain advisory and other services. In the fourth quarter of 2018, the Company notified Maxim of its intent to file for arbitration pursuant to the consulting agreement. Maxim, without providing a similar notice to the Company, immediately filed a complaint with FINRA seeking release of a restrictive legend from a Company stock certificate in the amount of 500,000 shares. The Company filed an affirmative defense that the required notice of arbitration was not provided to the Company prior to filing. The Company also filed a counterclaim for breach of contract seeking restitution of the original 4 million shares issued to Maxim and the Company filed several counterclaims alleging material misrepresentations by Maxim to various entities. The Company intends to vigorously defend Maxim’s complaint and to obtain relief pursuant to its counterclaims. Currently, the Company and Maxim have a scheduled arbitration with FINRA which will be held in September 2019.

 

 
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Philip Forman, who served in positions as Chairman, a director, Chief Executive Officer and Chief Medical Advisor at various time between 2011 and October 2015, has filed a lawsuit against the Company and our Chief Executive Officer, Douglas Beplate, in the United States District Court of the District of Nevada.. The claimant is claiming, among other things, that: the June 25, 2015 Amendment to his November 10, 2014 Employment Agreement with the Company, which terminated the Employment Agreement on October 1, 2015, is not valid because of lack of consideration; that a July 22, 2015 Stock Purchase Agreement pursuant to which the claimant sold Company shares issued to him under the Amendment to a third a party is unenforceable (despite the fact that all payment for the shares under the Stock Purchase Agreement was made); that the plaintiff’s 2014 Employment Agreement is enforceable and that he is entitled to cash and stock compensation under that Employment Agreement (without giving regard to the Amendment); that if the Amendment is enforceable, he is entitled to the shares issued under the Amendment (without mention that those shares were sold to a third party under the Stock Purchase Agreement described above); and that the Company and Mr. Beplate defrauded the plaintiff relating to the foregoing. The plaintiff is seeking declaratory judgment regarding the parties’ relative rights under the Employment Agreement, the Amendment and the Stock Purchase Agreement; money damages of no less than $2,795,000; and punitive damages of $8,280,000. The Company believes that it has meritorious defenses to the matters claimed as well as counterclaims against the claimant. We plan to vigorously respond to the claims and pursue our remedies. We cannot predict the outcome with certainty.

 

In the Southern District of New York, FSR Inc commenced a lawsuit in 2018 against Korsair Holdings A.G. seeking among other claims for relief, rescission of the transfer of 3,050,000 shares of United Health Products that FSR sold to Korsair in 2011. Third-Party Plaintiff, JEC Consulting Associates, LLC as Liquidator of LeadDog Capital L.P., Intervenor (“Intervenor”) in the above matter, filed a third-party complaint against United Health Products, and Douglas K. Beplate (“Beplate”) alleging among other things that the Company and Mr. Beplate refused to have the Rule 144 restrictive legend removed from the Korsair certificate held by JEC, and concomitantly fraudulently deprive JEC as Liquidator of LeadDog of the ability to sell the Shares in the open market, knowingly, intentionally and directly causing economic harm to LeadDog Capital L.P. Intervenor as Third Party Plaintiff further alleges that the Company and Mr. Beplate as Third-Party Defendants are not only monetarily liable to Third-Party Plaintiff for compensatory damages of $2,500,000 but should be made to pay exemplary damages in an amount determined by the Court, but not less than an equal amount - $2,500,000. Third-Party Plaintiff demands judgment for the above referenced amounts and for the Court to also declare that the 3,050,000 shares are free trading; that Third-Party Plaintiff’s rights to 2.5 million of the Shares are superior to the claims of Plaintiff FSR; that Plaintiff FSR has no claim to  2.5 million of the 3,050,000 Shares reflected by the Korsair certificate; that the Company and Mr. Beplate are to instruct its current transfer agent to remove the restrictive legend on the Korsair certificate for the Shares; and an order directing the Company and Mr. Beplate to instruct the Company’s transfer agent to exchange the Korsair certificate for new free-trading, unrestricted certificates. As of the filing date of this Form 10-Q, the Company and Mr. Beplate have not been served with the summons and complaint, but upon service will vigorously defend this lawsuit. Further, the Company believes that it had legal right to decline to instruct the transfer agent to remove the restrictive legend from the Korsair Shares where the ownership of the aforementioned shares have been in dispute and the Korsair shares have not been submitted for transfer to its transfer agent in proper form under the uniform commercial code.

 

Note 6. Other Notes Payable

 

During the year ended December 31, 2017, the Company received a total of $75,000 related to a note payable. The note had a maturity date of May 15, 2017 and interest accrued at the rate of 20% per annum. The Company paid down $42,500 of the balance during 2017 leaving a balance of $32,500 as of December 31, 2017. During the year ended December 31, 2018, the Company paid $10,000 of the balance and issued 1,000,000 shares of common stock to settle the remaining balance of $22,500. The balance was $0 as of December 31, 2018 and March 31, 2019.

 

The Company has recognized a "Liability for unissued shares" for shares granted to employees and consultants along with shares purchased by investors, but unissued as of the balance sheet date. The granted shares are recorded at the fair market value of the shares to be issued at the grant date and a corresponding current liability is recorded for these unissued shares. The activity in this account and balances, classified as Liabilities for unissued shares, as of March 31, 2019 and December 31, 2018 was as follows:

 

 

 

2019

 

 

2018

 

Balance, beginning

 

$ 201,843

 

 

$ 211,843

 

Issuance of shares in satisfaction of liability

 

 

-

 

 

 

10,000

 

Balance, ending

 

$ 201,843

 

 

$ 201,843

 

 

The total number of shares granted but unissued were 2,414,059 and 2,414,059, as of March 31, 2019 and December 31, 2018, respectively.

 

  Note 7. Subsequent Events

 

The Company has evaluated events subsequent to March 31, 2019, through the date whereupon the financial statements were issued and has determined that there are no other material events that need to be disclosed, except as follows:

 

The Company raised $200,000 at a purchase price of $0.50 per share from securities counsel to the Company and $877,000 at a purchase price of $0.65 per share, from various non-affiliated investors. As of the filing date of this form 10-Q, the Company has cash on hand of approximately $801,500.

 

On April 22, 2019, the Company agreed to issue to Mr. Beplate convertible demand loans representing all outstanding cash loans made by Mr. Beplate to the Company. For any outstanding loans made on or before April 15, 2019, the loans are convertible at $.50 per share and for all loans subsequent to April 15, 2019, the notes are convertible at $.65 per share, in each case at the sole discretion of Mr. Beplate. Currently, Mr. Beplate holds $192,121 in convertible notes at $.50 per share (including the $121,129 owed at March 21, 2019). All future cash  loans made by Mr. Beplate, if any, would  be  made with convertible demand notes issued to him and convertible at $.65 per share.

 

 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes appearing elsewhere in this quarterly report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under 'Risk Factors' in our annual report on Form 10-K for the fiscal year ended December 31, 2018, filed with SEC on April 1, 2019.

 

Recent Developments

 

The following developments in the Company’s business have occurred since the beginning of 2018:

 

 

·

In February 2018, the Company completed and submitted to the U.S. Food and Drug Administration (“FDA”) all materials relevant for the pre-market approval (“PMA”) for HemoStyp under the FDA’s new and innovative CtQ Pilot-Program as a Class III application for internal surgical procedures. The CtQ Pilot Program was created to identify products that have a chemical makeup of demonstrated safe interaction with the body – as evidenced by years of prior product usage and studies – to be approved for Class III internal surgical use. The FDA reviewed UHP’s HemoStyp as one of the participants for the program.

 

·

The Company’s 2” x 4” Trauma Gauze™ product has been selected as the feature component for a new Advanced Wound Care Kit for Dick’s Sporting Goods (NYSE DKS). With today’s environment when the unexpected can happen anywhere, both in the wild and in urban areas, having an advanced trauma kit can be the difference between survival and tragedy. The Hemostyp pouches have been included under the Field and Stream label and are available in their stores nationwide since February 2018.

 

·

In January 2018, the Company’s distribution partner, Quantum Health Group, filed an application for Class III use in general internal surgical procedures with the Ministry of Food and Drug Safety (“MFDS”) in South Korea. The Ministry of Food and Drug Safety provides the vision of "Safe Food and Drug, Healthy People, Well-being Society" and making extensive efforts to safeguard consumers and promote the public health by ensuring the safety of all foods, drugs, cosmetics, herbal medicines, and medical devices. Quantum received a response requiring additional data and testing. The Company intends to respond to the request and complete our application following the expected FDA Class III approval.

 

 

·

In March 2018, the Company obtained Class III and CE mark approval for HemoStyp in the European Economic Area (EEA). The EEA comprises the 28 European Union members and certain other countries. Accordingly, HemoStyp was approved for use in internal surgical procedures in more than 30 countries. This approval expired in August of 2018 and a new application will be prepared in conjunction with the new CE standards for Class III following the expected FDA Class III approval. The EEA approval was granted following the provision of all required documentation to the relevant regulatory agencies. The CE marking– CE is an acronym for the French term "Conformité Européenne"– certifies that a product has met EEA health, safety, and environmental requirements, which ensure consumer safety. Manufacturers in the EEA and abroad must meet CE marking requirements where applicable to market their products in Europe. A manufacturer who has gone through the conformity assessment process may affix the CE mark to its product. With the CE marking, the product may be marketed throughout the EEA and certain other countries, with a combined population exceeding 517 million and a GDP greater than $17 trillion.

 

·

In July 2018, the Company announced that it has been accepted as a Walmart.com supplier and offers two HemoStyp wound care products for online retail sale. Hemostrips® Hemostatic Bandages and Boo-boo Strip Hemostatic Bandages.

 

·

On August 8, 2018, the Company announced that its protocol submission for human testing had been reviewed by the FDA in furtherance of our efforts to achieve Class III approval for the product in the U.S. This FDA review was provided to the Institutional Review Board (IRB) for protocol and hospital site approval. UHP started the human trial study in November. The IRB is a committee that is independent of the FDA, and that is formally designated to approve, monitor, and review biomedical and behavioral research involving humans. The purpose of the IRB is to assure that appropriate steps are taken to protect the rights and welfare of humans participating as subjects in a research study. The Company’s human trial protocol calls for the application of HemoStyp in abdominal, cardiovascular thoracic and vascular surgical procedures to control bleeding sites. Prior to finalizing its human trial protocol, we submitted a Q-Sub – a request for FDA review — to the FDA, in conjunction with its previously filed Class III PMA submission application.

 

·

The IRB approved HemoStyp human trial is a prospective, non-inferiority, multi-center, randomized, open-label trial to observe HemoStyp in the management of bleeding during surgery; and, to assess the efficacy and safety of HemoStyp as an adjunct for management of secondary hemostasis in an operative setting. Our independently developed protocol has established endpoints for bleeding control.

 

·

We expect that the human trials will be the last step to clear in obtaining FDA PMA Class III approval for HemoStyp. We have recruited a team of leading surgeons to conduct the study, and our lead investigator has successfully conducted over 20 medical device studies. We aim to complete this final regulatory stage as part of our strategy to supply the domestic and international hemostasis surgical markets.

 

·

On October 25, 2018, the Company announced that, in connection with the FDA PMA Class III approval process for HemoStyp, UHP has been contacted by several medical technology companies that are active in the surgical equipment and hemostatic products sectors, and who had expressed an interest in the Company's products and business strategy. In response to these inbound contacts, and to maximize shareholder value, the Company's board of directors has determined to conduct a review of strategic alternatives, which include a potential sale of the Company, joint venture or other commercial partnership, or a standalone growth plan. To assist in this review, the Company has retained Société Générale to serve as financial advisor to the Company and it has retained the law firm of Ruskin Moscou Faltischek PC to assist in the strategic review. There can be no assurances that any specific transaction will occur as a result of the retention of these firms.

 

 
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Our HemoStyp Gauze Products

 

HemoStyp Hemostatic Gauze is a collagen-like natural substance created from chemically treated cellulose. It is an effective hemostatic agent registered with the FDA to help control bleeding from open wounds and body cavities. The HemoStyp hemostatic material contains no chemical additives, thrombin or collagen, and is hypoallergenic. When the product comes in contact with blood it expands slightly and converts to an adhesive gel that subsequently dissolves into glucose and saline. Because of its purity and the fact that it simply degrades to non-toxic end products, HemoStyp does not cause significant delay in healing as do certain other hemostatic materials. Additional testing has shown HemoStyp to be 100% absorbable in 24 hours or less. Tests have also been conducted to demonstrate the effectiveness of HemoStyp in thoracic and abdominal procedures. The Company continues to test for the effectiveness and the IFU (Instructions for Use) for abdominal and thoracic procedures.

 

HemoStyp Hemostatic Gauze is a flexible cloth-like material that is applied by folding the gauze as needed to fit the size of the wound or incision, and then placing the gauze onto the bleeding tissue. In surgical situations, the product converts to a transparent gel with a neutral pH level that allows the surgeon to monitor the coagulation process and also avoids damage to the surrounding tissue. In first responder or other non-surgical situations, putting a bandage on top of the gauze is optional and, in many cases, unnecessary. Since EMS (Emergency Medical Services) work is pre-hospital, rinsing the gauze out with saline or water is not necessary, as a wound will be debrided and possibly reopened prior to suturing at the hospital.

 

Our hemostatic gauze product line includes various configurations which have been developed to address the specific needs of our market segments and our existing customers, including the U.S. military. Our HemoStyp gauze products are sold in different sizes for use in superficial trauma cases, as a dental gauze and as a nasal dressing, and in a range of formats for veterinary applications, among others uses. The Company's hemostatic gauze product line now includes the following products:

 

 

·

Veterinary Market type Products;

·

Dental gauze for oral surgery;

·

Several formats of Trauma Gauze™ for battlefield trauma;

Adhesive bandages for use by consumers on cuts and abrasions; and,

·

Island dressings to support intravenous procedures such as kidney dialysis.

 

Existing and Potential Target Markets

 

Our technology is marketed as HemoStyp Gauze but is also available to customers with customized private labeling. We are customer driven. We distribute both nationally and internationally. We are servicing (or intend to service) our customers through distributors, sales representatives, industry-specialized telephone support, and the Internet. Our current and potential customer base for our HemoStyp includes, without limitation:

 

·

Hospitals and Surgery Centers for all Internal Surgical usage, post FDA Class III approval

 

·

Hospitals, Clinics and Physicians – For external trauma

·

EMS, Fire Departments and Other First Responders

·

Public Safety, Police Departments and Military

·

Correctional Facilities

·

Schools, Universities and Day Care Facilities

·

Nursing Homes and Assisted Living Environments

·

Home Care Providers

·

Dental offices

·

Sports Medicine Providers

·

Veterinarians

·

Municipalities and Government Agencies and

·

Occupational and Industrial Healthcare Professionals

Consumers

 

 
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  Plan of Operation

 

We believe that the Class III surgical markets, both domestic and international, represent the most attractive market for our products due to the limited competition from other Class III approved ORC (Oxidized Regenerated Cellulose) products and the resulting premium pricing for hemostatic agents that can meet the demanding requirements of the human surgical environment. In addition, our preliminary tests lead us to believe that the HemoStyp technology can compete successfully against established market participants and allow us to gain market share. Given this assessment, we have devoted considerable resources in 2018 and currently to completing the FDA process and gaining access to this market in the U.S.

 

In February 2018, the Company completed and submitted to the FDA all materials relevant for the pre-market approval (“PMA”) for HemoStyp as a Class III application for internal surgical procedures. The 2017 U.S. market for hemostatic products used in internal surgery procedures is estimated at in excess of US$7 billion, of which the market for ORC or similar mechanical hemostatic products is estimated to be US$3.38 billion. This market is expected to grow at 6.2% annually to reach $4.57 billion by 2023 (source: October 2018 Market Data Forecast).

 

In anticipation of receiving Class III approval, our strategy is to devote resources and seek partnerships that allow us to penetrate this market along with the other markets to which the Company already has access. We are evaluating the best paths to rapidly grow our revenue and profits, which could include commercial partnerships and licensing agreement with established market participants, in addition or as an alternative to raising the necessary capital to establish and grow our own marketing and distribution capabilities. We will carefully evaluate the returns on investment in each addressable market to ensure the judicious deployment of our capital to create shareholder value.

 

We believe that refocusing the Company to become a stronger, medical technology corporation with a patented technology will enhance the Company’s value and overall market strength and allows for revenue generation via organic growth. Nevertheless, we have engaged Société Générale as described under “Recent Developments” to advise the Company on potential strategic alternatives including the possible sale of the Company and/or its intellectual assets. In the event that a transaction is not completed on terms satisfactory to the Company, if at all, the Company would require substantial additional financing to execute an organic business development strategy addressing all of its intended markets.

 

Results of Operations

 

Three Months ended March 31, 2019 versus Three Months ended March 31, 2018

 

During the first quarter of 2019 and 2018, the Company had $0 and $29,928 of revenues, respectively. Revenues decreased compared to the prior year due to a change in focus and a pivot of all the Company’s energy in making our technology and product more commercially viable, by attempting to obtain FDA class III approval for internal surgical purposes. This process requires 100% of the Company’s resources and energy so the focus was removed from sales and marketing and full attention was focused on the FDA process. The reason for this change is that the Company believes the greatest value to its shareholders would come from this FDA class III approval for general surgical use. The anticipated completion of the human trials is expected to allow the Company to foster interest from potential merger and acquisition candidates. Also, with the Company’s focus on an acquisition partner, the Company did not want to engage new distribution partners that may create conflicts with the new prospective acquisition companies and tie their hands from a revenue or branding perspective. However, if a merger and acquisition candidate is identified current vendor and future relationships and all pending purchase orders will be handed to the acquiring company for its facilitation. No assurances can be given that the Company will complete a transaction with a merger candidate on terms satisfactory to us, if at all.

 

Total operating expenses for the first quarter of 2019 and 2018 were $2,985,897 and $378,591, respectively. The increase in operating expenses is due primarily to an increase in consulting/professional fees. The Company issued 400,000 shares of common stock for services valued at $380,000 and 2,150,000 shares of common stock valued at $2,343,500 vested during the first quarter of 2019 compared to 50,000 shares of common stock for services valued at $54,500 during the first quarter of 2018.

 

Our net loss for the quarter ended March 31, 2019 was $2,985,897 as compared to net loss of $3,990,040 for the comparable period of the prior year. The decrease in the net loss is due to the Company having an increase in operating expenses of $2,607,306 as explained above offset by a decrease of $3,632,500 in loss on settlement of debt.  

 

Financial Condition, Liquidity and Capital Resources

 

As of March 31, 2019, the Company had a negative working capital of $540,097 and stockholders' deficiency of $540,097. The Company has not as yet attained a level of operations which allows it to meet its current overhead and may not attain profitable operations within the next few business operating cycles, nor is there any assurance that such an operating level can ever be achieved. The report of our independent registered public accounting firm on our 2018 financial statements includes a reference to going concern which indicated substantial doubt about our ability to continue as a going concern. While the Company has in the past funded its initial operations with private placements, and loans from related parties, there can be no assurance that adequate financing will continue to be available to the Company and, if available, on terms that are favorable to the Company. Our ability to continue as a going concern is also dependent on many events outside of our direct control, including, among other things, our ability to achieve our business goals and objectives, as well as improvement in the economic climate.

 

 
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Cash Flows

 

The Company's cash on hand at March 31, 2019 and December 31, 2018 was $6,310 and $31,273, respectively. Subsequent to March 31, 2019, the Company raised $200,000 at a purchase price of $0.50 per share from securities counsel to the Company and $877,000 at a purchase price of $0.65 per share, from various non-affiliated investors. As of the filing date of this form 10-Q, the Company has cash on hand of approximately $870,000.

 

Net cash used in operating activities for the three months ended March 31, 2019 was $220,963. The Company had net loss of $2,985,897 offset by stock issued for services of $380,000 and vesting of escrow shares of $2,343,500. The Company also had a decrease in accounts payable and accrued expenses of $3,566 and an increase in accrued liabilities – related party of $45,000. Net cash provided by financing activities was $196,000. This was due to the Company receiving $75,000 in proceeds from the sale of stock and receiving $121,000 from related party advances.

 

Net cash used in operating activities for the three months ended March 31, 2018 was $318,376. The Company had net loss of $3,990,040 offset by stock issued for services of $54,500 and loss on settlement of debt of $3,632,500. The Company also had an increase in accounts receivable of $3,840, a decrease in inventory of $5,997 and a decrease in accounts payable and accrued expenses of $17,493. Net cash provided by financing activities was $288,100. This was due to the Company receiving $368,100 in proceeds from the sale of stock and repaying $70,000 in related party advances and $10,000 in notes payable.

 

Off-Balance Sheet Arrangements

 

As of March 31, 2019, we have no off-balance sheet arrangements.

 

Critical Accounting Policies

 

The preparation of financial statements and related disclosures in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

 

Revenue Recognition

 

The Company recognizes revenues in accordance with ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of its HemoStyp product by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

 

Stock Based Compensation

 

The Company issues restricted stock to consultants and employees for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock for non-employees is measured at the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached and expense is recognized during the term at which the counterparty's performance is earned or at the date the shares are considered non-forfeitable. The Company recognized consulting expenses and a corresponding increase to additional paid-in-capital related to stock issued for services.

 

 
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company is in the process of implementing disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the ''Exchange Act''), that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports are recorded, processed, summarized, and reported within the time periods specified in rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.

  

As of March 31, 2019, the Chief Executive Officer and Chief Financial Officer carried out an assessment of the effectiveness of the design and operation of our disclosure controls and procedure and concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2019, because of the material weakness described below.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

 

The material weakness identified during management's assessment was the lack of sufficient resources with SEC, generally accepted accounting principles (GAAP) and tax accounting expertise. This control deficiency did not result in adjustments to the Company's interim financial statements. However, this control deficiency could result in a material misstatement of significant accounts or disclosures that would result in a material misstatement to the Company's interim or annual financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.

 

The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures in the Quarterly Report on Form 10-Q, to ensure that the Company's Quarterly Report and the financial statements forming part thereof are in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Quarterly Report fairly present, in all material respects, the Company's financial condition, results of operations, and cash flows for the periods presented.

 

Changes in Internal Control over Financial Reporting

 

During the three months ended March 31, 2019, there were no changes in our system of internal controls over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

See “Note 5” in the Notes to Condensed Financial Statements.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

(a) From January 1, 2019 through March 31, 2019, we had no sales or issuances of unregistered common stock, except we made sales or issuances of unregistered securities listed in the table below:

 

Date of Sale

 

Title of Security

 

Number Sold

 

Consideration Received and Description of Underwriting or Other Discounts to Market Price or Convertible Security, Afforded to Purchasers

 

Exemption from Registration Claimed

 

If Option, Warrant or Convertible Security, terms of exercise or conversion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan. – March 31, 2019

 

Common Stock

 

2,700,000

 

$75,000 in cash, $2,723,500 in services rendered,

 

Rule 506;

 

Not applicable

no commissions paid

Section 4(2)

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not applicable.

 

 
17
 
Table of Contents

 

Item 6. Exhibits

 

The following exhibits are filed with this report, or incorporated by reference as noted:

 

3(i)

 

Articles of Incorporation of the Company dated February 28, 1997. (1)

   

 

3(ii)

 

Amendment to Articles of Incorporation. (1)

   

 

3(iii)

 

By-laws of the Company. (2)

 

 

3(iv)

 

August 2015 Amendment to Articles of Incorporation. (3)

   

 

10.1

 

Services Agreement with Louis Schiliro (5)

   

 

10.2

 

Services Agreement – Nate Knight (4)

   

10.3

 

January 2015 Services Agreement with Douglas Beplate (6)

   

 

10.4

 

Restricted Stock Unit Agreement - Louis Schiliro (8)

   

 

10.5

 

Restricted Stock Unit Agreement - Douglas Beplate (8)

   

 

21

 

Subsidiaries of the Registrant – none

   

 

31.1

 

Certification of Principal Executive Officer*

   

 

31.2

 

Certification of Principal Financial Officer*

   

 

32.1

 

Section 1350 Certificate by Principal Executive Officer*

 

 

32.2

 

Section 1350 Certificate by Principal Financial Officer*

 

 

99.1

 

2013 Employee Benefit and Consulting Services Compensation Plan (7)

 

 
18
 
Table of Contents

 

101.SCH

Document, XBRL Taxonomy Extension (*)

101.CAL

Calculation Linkbase, XBRL Taxonomy Extension Definition (*)

101.DEF

Linkbase, XBRL Taxonomy Extension Labels (*)

101.LAB

Linkbase, XBRL Taxonomy Extension (*)

101.PRE

Presentation Linkbase (*)

___________ 

* Filed herewith.

 

(1)

Incorporated by reference to the Company's Form 10-Q for the quarter ended September 30, 2014.

(2)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 2005.

(3)

Incorporated by reference to Form 8-K dated August 7, 2015 – date of earliest event filed on August 10, 2015.

(4)

Incorporated by reference to Form 8-K dated November 23, 2014.

(5)

Incorporated by reference to the Company's Form 10-Q for the quarter ended June 30, 2018.

(6)

Incorporated by reference to the Form 8-K dated January 16, 2015.

(7)

Incorporated by reference to Form 10-Q for the quarter ended June 30, 2015.

 

 

(8)

Incorporated by reference to form 10-K for the fiscal year ended December 31, 2018.

 

 
19
 
Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned, thereunto duly authorized on May 15, 2019.

 

 

United Health Products, Inc.

 

By:

/s/ Douglas Beplate

 

Douglas Beplate

Principal Executive Officer

 

 

By:

/s/ Nate Knight

 

Nate Knight

 

Principal Financial Officer

 

 
20

 

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