UNITED HEALTH PRODUCTS, INC. 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
this report and in our annual report on Form 10-K for the fiscal year ended
Company Overview
The Company develops, manufactures, and markets a patented hemostatic gauze for
the healthcare and wound care sectors. Our gauze product, HemoStyp, is a
neutralized, oxidized, regenerated cellulose ("NORC") derived from cotton and
designed to absorb exudate/drainage from superficial wounds and help control
bleeding. The Company is in the process of seeking regulatory approval to sell
our Hemostyp product line into the
Our HemoStyp Gauze Products
HemoStyp hemostatic gauze is a collagen-like natural substance created from chemically treated cellulose derived from cotton. It is an effective hemostatic agent registered with the FDA for superficial use under a 510k approval obtained in 2012 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 quickly converts to a gel that subsequently breaks down into glucose and salts. Because of its benign impact on body tissue and the fact that it degrades to non-toxic end products, HemoStyp does not impede the healing of body tissue as do certain competing hemostatic products. Laboratory testing has shown HemoStyp to be 100% absorbable in the human body within 24 hours whereas other organic regenerated cellulose products may take several days to be fully absorbed. A comparative human trial conducted in 2019 and 2020 on 236 surgical patients demonstrated the effectiveness of HemoStyp in vascular, thoracic and abdominal procedures.
HemoStyp hemostatic gauze is a flexible, silk-like material that is applied by placing the gauze onto the bleeding tissue. The supple material can be easily folded and manipulated as needed to fit the size of the wound or incision. In surface bleeding and surgical situations, the product quickly converts to a translucent gel that allows the physician or surgeon to monitor the coagulation process. The gel maintains a neutral pH level which avoids damaging the surrounding tissue. In superficial bleeding situations, HemoStyp can be bonded to an adhesive plastic bandage or integrated into a traditional gauze component to address a broad range of needs, including traumatic bleeding injuries and prolonged bleeding following hemodialysis.
Potential Target Markets
Our technology can be marketed as HemoStyp Gauze in various configurations and sizes both nationally and internationally. Our potential customer base for our HemoStyp includes, without limitation, the following (noting that we have several formats of Trauma Gauze):
· Hospitals and Surgery Centers for all Internal Surgical usage (in the
event we obtain FDA Class III approval)
· Hospitals, Clinics and Physicians for external trauma
· EMS, Fire Departments and other First Responders
· Military Medical Care Providers
· Nursing Homes and Assisted Living Facilities
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· Hemodialysis centers
· Dental and Oral & Maxillofacial Surgery Offices
· Veterinary hospitals
Primary Strategy
Our HemoStyp technology received an FDA 510k approval in 2012 for use in external or superficial bleeding situations and we believe there is an opportunity for HemoStyp products to address unmet needs in several medical applications that represent attractive commercial opportunities. However, the Class III surgical markets, both domestic and international, represent the most attractive market for our products due to the smaller number of competitors offering Class III approved hemostatic agents and the resulting premium pricing for products that can meet the demanding requirements of the human surgical environment. In 2018, we made the decision to focus our efforts and resources on accessing these Class III markets to maximize the value potential of our HemoStyp. The Class III Pre-market approval (PMA) process requires a substantial investment of time and resources so we made the strategic determination to pause our sales and marketing to non-Class III markets in order to devote our full attention to the FDA process. Our extensive laboratory testing and our completed human trial indicate that the HemoStyp technology can successfully compete against established Class III market participants and allow us to gain a significant market share.
As of the filing date of this Form 10-Q, the Company's PMA application is under
Substantive Review by the FDA. On
In anticipation of receiving a Class III PMA, we are evaluating paths to rapidly grow our revenue and profits in this market segment with the objective of maximizing shareholder value. Options under consideration include (i) a sale or merger of the Company with an industry leader in the wound care and surgical device sectors, which may include a pre-sale collaboration on commercialization and distribution, (ii) one or more commercial partnerships with established market participants, without any specific, associated sale or merger transaction, and (iii) a capital raising program to establish and grow our own marketing and distribution capabilities and generate revenue and profits organically.
The Company has been contacted by several medical technology companies that are active in the surgical equipment and hemostatic products sectors, and who have expressed an interest in the Company's products and business strategy. In response to these inbound contacts, we continue to engage in regular discussions to evaluate the potential commercial partnerships as we approach the FDA decision on our Class III PMA application. There can be no assurances that any specific transaction will occur as a result of this strategy. No assurances can be given that the Company will identify suitable strategic or commercialization candidate(s) or complete a transaction.
Manufacturing and Packaging of our Products
The Company's NORC products are manufactured largely in
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Patents and Trademarks
Our NORC technology is protected through patents issued by the
On
The Company has registered trademarks for the following:
· BooBoo Strips · The Ultimate Bandage · Hemostrip ·Nik Fix
Results of Operations for the three months ending
The following table sets forth a summary of certain key financial information
for the three months
For the Three Months Ended September 30,
2021 2020
Revenue $ - $ 136
Gross profit $ - $ 102
Operating (expenses) $ (724,416 ) $ (9,105,901 )
Operating (loss) $ (724,416 ) $ (9,105,799 )
Other income (expense) $ - $ (115,560 )
Net (loss) $ (724,416 ) $ (9,221,359 )
Basic and diluted $ (0.00 ) $ (0.05 )
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Three Months ended
During the three months ended
Total operating expenses for the three months ended
The decrease in operating expenses is mainly due to a decrease in stock-based
compensation expense of
Other income (expense) for the three months ended
The net loss for the three months ended
Results of Operations for the nine months ending
The following table sets forth a summary of certain key financial information
for the nine months ended
For the Nine Months Ended September 30,
2021 2020
Revenue $ 59 $ 563
Gross profit $ 34 $ 368
Operating (expenses) $ (28,729,704 ) $ (10,377,849 )
Operating (loss) $ (28,729,670 ) $ (10,377,481 )
Other income (expense) $ (346,360 ) $ (162,751 )
Net (loss) $ (29,076,030 ) $ (10,540,232 )
Basic and diluted $ (0.13 ) $ (0.06 )
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Nine Months ended
During the nine months ended
Total operating expenses for the nine months ended
The increase in operating expenses is due primarily to an increase in
stock-based compensation expenses of
The increase in stock-based compensation is primarily related to vesting and
amortization of RSUs. During the nine months ended
During the nine months ended
Other income (expense) for the nine months ended
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The Company's net loss for the nine months ended
Financial Condition, Liquidity and Capital Resources
As of
Cash Flows
The Company's cash on hand at
The following table summarizes selected items from our statements of cash flows
for the nine months ended
For the Nine Months Ended
September 30,
2021 2020
Net cash used in operating activities $ (457,629 ) $ (1,180,494 )
Net cash used in investing activities - (92,089 )
Net cash provided by financing activities 565,000 1,262,664
Net increase (decrease) in cash and cash equivalents
Net Cash Provided by (Used in) Operating Activities
Net cash used in operating activities for the nine months ended
Net cash used in operating activities for the nine months ended
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The Company did not have any investing activities during the nine months ended
Net cash used in investing activities for the nine months ended
Net Cash Provided by (Used in) Financing Activities
Net cash provided by financing activities for the nine months ended
Net cash provided by financing activities for the nine months ended
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with generally accepted accounting principles in
Revenue Recognition
The Company recognizes revenue 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.
The Company receives orders for its HemoStyp products directly from its customers. Revenues are recognized based on the agreed upon sales or transaction price with the customer when control of the promised goods are transferred to the customer. The transfer of goods to the customer and satisfaction of the Company's performance obligation will occur either at the time when products are shipped or when the products arrive and are received by the customer. No discounts were offered by the Company. The Company does not provide an estimate for returns as there is no anticipation for any returns in the normal course of business.
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Stock Based Compensation
The Company accounts for share-based compensation under the provisions of ASC 718, Compensation-Stock Compensation. Under the fair value recognition provisions, stock-based compensation expense is measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measured. Share-based compensation for all stock-based awards to employees and directors is recognized as an expense over the requisite service period, which is generally the vesting period.
The Company accounts for stock compensation arrangements with non-employees in accordance with Accounting Standard Update (ASU) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which requires that such equity instruments are recorded at the value on the grant date.
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