Attached files
file | filename |
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EX-31 - EX 31.2 SEC 302 CERT - CFO - PARALLAX HEALTH SCIENCES, INC. | ex312section302certification.htm |
EX-32 - EX 32.2 SEC 906 CERT - CFO - PARALLAX HEALTH SCIENCES, INC. | ex322section906certification.htm |
EX-31 - EX 31.1 SEC 302 CERT - CEO - PARALLAX HEALTH SCIENCES, INC. | ex311section302certification.htm |
EXCEL - IDEA: XBRL DOCUMENT - PARALLAX HEALTH SCIENCES, INC. | Financial_Report.xls |
EX-32 - EX 32.1 SEC 906 CERT - CEO - PARALLAX HEALTH SCIENCES, INC. | ex321section906certification.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
or
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to _________
Commission File Number 000-52534
PARALLAX HEALTH SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Nevada | 46-4733512 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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One Boston Place, Suite 2600, Boston, MA | 02108 |
(Address of principal executive offices) | (Zip Code) |
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Registrant's telephone number, including area code: | (617) 209-7999 |
Copy of all Communications to:
Lawrence I. Washor
Washor & Associates
21800 Oxnard Street, Suite 790
Woodland Hills, CA 91367
(310) 479-2660
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.
x YES o NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
x YES o NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o |
| Accelerated filer | o |
Non-accelerated filer | o |
| Smaller reporting company | x |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
o YES x NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
126,303,018 common shares issued and outstanding as of May 14, 2013
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Companys unaudited interim consolidated financial statements for the nine months ended March 31, 2014 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2013, on Form 10-K, as filed with the Securities and Exchange Commission on April 14, 2014.
2
The accompanying notes are an integral part of these consolidated financial statements
3
PARALLAX HEALTH SCIENCES, INC. | |||||||||
(formerly to Endeavor Power Corp.) | |||||||||
(A DEVELOPMENT STAGE COMPANY) | |||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
(Unaudited) | |||||||||
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| Cumulative from |
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| December 30, 2008 |
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| For the three months ended |
| (inception) to |
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| March 31, 2014 |
| March 31, 2013 |
| March 31, 2014 |
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Revenue | $ | |
| $ | |
| $ | |
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Cost of sales |
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Gross profit |
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General and administrative expenses |
| 111,343 |
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| 114,784 |
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| 1,650,455 |
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Operating loss |
| (111,343 | ) |
| (114,784 | ) |
| (1,650,455 | ) |
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Other income (expenses) |
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Insurance claim refund |
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| 1,695 |
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| 1,695 |
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Depreciation and amortization |
| (1,997 | ) |
| (3,057 | ) |
| (45,142 | ) |
Amortization of deferred compensation |
| |
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| (20,080 | ) |
| (281,250 | ) |
Interest expense |
| (5,081 | ) |
| (5,118 | ) |
| (36,815 | ) |
Total other income (expenses) |
| (7,078 | ) |
| (26,560 | ) |
| (361,512 | ) |
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Net loss | $ | (118,421 | ) | $ | (141,344 | ) | $ | (2,011,967 | ) |
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Net (loss) per common share - basic and diluted | $ | (0.001 | ) | $ | (0.001 | ) |
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Weighted average common shares outstanding - basic and diluted |
| 126,303,018 |
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| 135,612,354 |
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The accompanying notes are an integral part of these consolidated financial statements
4
PARALLAX HEALTH SCIENCES, INC. | |||||||||
(formerly to Endeavor Power Corp.) | |||||||||
(A DEVELOPMENT STAGE COMPANY) | |||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
(Unaudited) | |||||||||
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| Cumulative from |
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| December 30, 2008 |
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| For the three months ended |
| (Inception) to |
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| March 31, 2014 |
| March 31, 2013 |
| March 31, 2014 |
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Cash flows from operations: |
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Net loss | $ | (118,421 | ) | $ | (141,344 | ) | $ | (2,011,967 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense |
| 1,581 |
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| 2,641 |
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| 39,309 |
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Amortization expense |
| 416 |
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| 416 |
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| 5,833 |
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Stock compensation |
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| 90,000 |
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| 5,000 |
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Stock options / amortization of stock options |
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| 281,250 |
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Accruals converted to convertible notes payable |
| 37,500 |
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| 37,500 |
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Changes in operating assets and liabilities: |
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Increase in prepaid expenses |
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| (69,920 | ) |
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Increase (decrease) in accounts payable and accrued expenses |
| 12,255 |
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| (129 | ) |
| 269,425 |
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Increase in related party payables |
| 66,385 |
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| 100,385 |
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| 879,139 |
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Net cash (used in) operating activities |
| (284 | ) |
| (17,951 | ) |
| (494,511 | ) |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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| (53,579 | ) |
Net cash (used in) investing activities |
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| (53,579 | ) |
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Cash flows from financing activities: |
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Proceeds from related party loans |
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| 9,200 |
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| 46,100 |
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Repayment of related party loans |
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| (1,450 | ) |
Proceeds from issuance of preferred shares |
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| 500,000 |
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Cash received upon merger |
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| 3,600 |
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Subscription payment |
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| 125 |
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Net cash provided by financing activities |
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| 9,200 |
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| 548,375 |
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Net increase (decrease) in cash |
| (284 | ) |
| (8,751 | ) |
| 285 |
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Cash - beginning of period |
| 569 |
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| 9,397 |
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Cash - end of period | $ | 285 |
| $ | 646 |
| $ | 285 |
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NON-CASH ACTIVITIES |
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Recapitalization of equity upon merger | $ | |
| $ | |
| $ | 265,793 |
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Conversion of debt into common stock | $ | |
| $ | |
| $ | 20,000 |
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Conversion of preferred stock into common stock | $ | |
| $ | |
| $ | 33,333 |
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Conversion of related party payable to related party convertible notes payable | $ | 337,500 |
| $ | |
| $ | 337,500 |
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Assignment of note payable to related party note | $ | (144,000 | ) | $ | |
| $ | |
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Change from related party to non-related party convertible note payable | $ | 144,000 |
| $ | |
| $ | 144,000 |
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Change from related party debt to non-related party debt | $ | 152,849 |
| $ | |
| $ | 152,849 |
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Cancellation of related party debt | $ | |
| $ | |
| $ | 43,500 |
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Subscriptions receivable | $ | |
| $ | |
| $ | (1,271 | ) |
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SUPPLEMENTAL INFORMATION |
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Interest paid | $ | |
| $ | |
| $ | |
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Income taxes paid | $ | |
| $ | |
| $ | |
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The accompanying notes are an integral part of these consolidated financial statements
6
PARALLAX HEALTH SCIENCES, INC.
(formerly Endeavor Power Corp.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2014
NOTE 1. OVERVIEW AND NATURE OF BUSINESS
The accompanying unaudited consolidated financial statements of Parallax Health Sciences, Inc., (formerly Endeavor Power Corp.) (the Company) have been prepared in accordance with generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles 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 that effect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company is a development stage company as defined by ASC 915-10, Accounting and Reporting by Development Stage Enterprises. A development stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. At March 31, 2014, the Company has not yet commenced operations. All activity from December 30, 2008 (date of inception) through March 31, 2014, relates to the Companys formation and ongoing development.
Parallax Health Sciences, Inc. was incorporated in the State of Nevada on July 6, 2005 under the name VB Biotech Laboratories, Inc. On September 21, 2007, the Company filed a Certificate of Amendment with the State of Nevada to change its operating name to VB Trade, Inc., with principal business operations to develop an online website that allowed web designers to sell their website designs in exchange for a commission on all products that were sold through the website. On September 21, 2007, the Company entered into a Plan of Merger (the Merger) with Endeavor Uranium, Inc., a mineral exploration company with mineral properties in the northwestern United States. Effectively, the Company changed its name to Endeavor Uranium, Inc. as part of the Merger transaction. On December 23, 2008, the Company entered into a Joint Venture Agreement (the Agreement) with Federated Energy Corporation, a Tennessee corporation, for working interests in prospective oil and gas wells located in Nowata County, Oklahoma. Effectively, on December 23, 2008, the Company changed its operating name to Endeavor Power Corporation.
In November 2010, Management assessed a potential business opportunity and determined that in an effort to create value for its Shareholders, the Company should change its business direction. On November 8, 2010, the Company discontinued its operations in its working interests in oil and gas exploration and changed its operating focus to the development of E-Waste processing services aimed at industrial and government clients. The Companys new direction sought to limit the impact of discarded E-Waste on the environment, as discarded computers and electronic equipment pose environmental hazards.
On May 26, 2011, Mr. Alfonso Knoll resigned from all positions with the Company, including but not limited to, that of President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary. The resignation did not involve any disagreement with the Company. On June 8, 2011, the Company entered into a Settlement Agreement and General Mutual Release (Settlement Agreement) to terminate Mr. Knolls Employment Agreement dated November 8, 2010, and to accept his resignation. Pursuant to the Settlement Agreement, Mr. Knoll immediately ceased all services to the Company and, on June 11, 2011, returned to the Company any and all shares of its common stock currently held by him.
On June 2, 2011, Mr. Matthew Carley was appointed as the Companys President, Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and Director. Mr. Carley accepted the appointment, but effectively resigned his positions on September 27, 2011. The Companys Board of Directors accepted the resignation of Mr. Carley, as well as the resignation of Mr. Keith Kress as a member of the Board of Directors. Simultaneously, the Board of Directors appointed Tom Mackay as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and the sole member of the Board of Directors.
In accordance with a change in management effective September 27, 2011, the Companys business operations changed. The Company intended to change its business focus to provide managerial services, and pursue potential funding opportunities for the Company. It also retained consultants to perform due diligence on certain mining properties located in Venezuela, Brazil, Bolivia, Guyana and several other South American countries. Management, however, determined that the outcome of such due diligence did not provide the Company a viable opportunity, nor did it provide sufficient economic benefit for the Company. Management therefore pursued other viable opportunities to increase shareholder market value.
During 2012, the Companys management entered discussions and assessed a potential business opportunity with Parallax Diagnostics, Inc., a Nevada corporation (Parallax), whose principal line of business is in the bio-medical sector. More specifically, Parallax is focused on the exploitation of a proprietary diagnostic and monitoring platform and processes in the area of infectious disease.
On August 15, 2012, the Company entered into a non-binding Letter of Intent (LOI) with Parallax, that outlined the terms and conditions for a proposed merger of the companies as understood by their respective boards. The terms of the LOI included, but were not limited to, an exchange of common stock, and a replacement of management.
On November 1, 2012, the Company, and its wholly owned subsidiary Endeavor Holdings, Inc. (Endeavor Holdings) entered into an Agreement and Plan of Merger (the Merger Agreement) with Parallax and the shareholders of Parallax (the Parallax Shareholders), whereby Endeavor Holdings acquired 100% (one hundred percent), or 24,870,000 shares, of Parallax common stock (the Parallax Stock) from the Parallax Shareholders (the Parallax Merger). In exchange for the Parallax Stock, the Company issued 90,375,750 shares of its common stock to the Parallax Shareholders. The 90,375,750 shares, issued at par value $.0001, represent approximately 60% of the Companys total issued and outstanding shares. The Common Stock Purchase Agreement, and subsequent transaction closing, was completed on October 22, 2012. On October 27, 2012, the Common Stock Purchase Agreement was finalized, and a change in control took place.
As a result of the transactions effected by the Merger Agreement, (i) Parallax merged with and into Endeavor Holdings whereupon Endeavor Holdings continued as the surviving entity and the corporate existence of Parallax ceased; (ii) the former business of Parallax is now the Companys primary business, (iii) the Companys existing business activities will continue as ancillary operations, and (iv) there is a change of control whereby the former shareholders of Parallax now own a controlling 60% ownership interest in the Company on a fully diluted basis.
As a further condition of the Merger Agreement, the then-current officer and director of the Company, Mr. Gardner Williams, resigned from all positions, and Mr. J. Michael Redmond was appointed to serve as Chief Executive Officer and President of the Company, and also as a Director on the Board of Directors. Additionally, Ms. Calli Bucci was appointed to serve as the Companys Treasurer, Chief Financial Officer, Dr. Roger Morris was appointed to serve as the Companys Chief Science Officer, and Mr. Mike Contarino was appointed to serve as the Companys Vice President. Mr. Edward W. Withrow III was appointed to serve as Executive Chairman of the Board of Directors, and Mr. Redmond, Dr. Jorn Gorlach, Mr. Anand Kumar, Mr. David Engert and Mr. E. William Withrow Jr. were appointed to serve as Directors.
7
About Parallax
Parallax was incorporated in the state of Delaware on December 30, 2008 under the name Roth Kline, Inc. (Roth Kline). In September 2010, Roth Kline acquired the right, title, and interest to certain FDA 510(k) cleared tests from Montecito BioSciences, Ltd., a Nevada corporation (Montecito), in perpetuity (the Assignment) in exchange for cash compensation in the form of royalties, and common stock. In addition, Roth Kline acquired the exclusive license to a suite of medical devices, tests and utility processes from Montecito in perpetuity (the License) in exchange for cash compensation in the form of royalties, and common stock. The Assignment and License agreements were modified in September 2011 to mitigate the payment terms, and increase the royalty percentages due to Montecito. On December 29, 2010, Roth Kline changed its name to Parallax Diagnostics, Inc. On January 11, 2011 (the Closing Date), Parallax entered into and closed a share exchange agreement (the Share Exchange Agreement) with ABC Acquisition Corp. (ABC) a Nevada corporation. On the Closing Date, pursuant to the terms and conditions of the Share Exchange Agreement, (i) ABC acquired 100% of the issued and outstanding shares of common stock of Parallax in exchange for the issuance of 21,000,000 shares of its common stock. Parallax merged with and into ABC whereupon ABC continued as the surviving entity and the corporate existence of Parallax ceased (the ABC Merger). Subsequent to the Closing Date, ABC changed its name to Parallax Diagnostics, Inc.
On November 26, 2012, Parallax changed its name to Endeavor Sciences, Inc. (ESI), and is a wholly owned subsidiary of Parallax Health Sciences, Inc.
On January 9, 2014, the Company changed its name from Endeavor Power Corp. (OTCQB.EDVP) to Parallax Health Sciences, Inc. (OTCQB.PRLX).
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $2,011,967, and a working capital deficit of $1,102,176, and further losses are anticipated in the development of its business. The Companys ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern.
The consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.
NOTE: The following notes and any further reference made to the Company, "we", "us", "our" and "Parallax" shall mean Parallax Health Sciences, Inc.(formerly Endeavor Power Corp.) and its wholly-owned subsidiary, Endeavor Sciences, Inc. (formerly Parallax Diagnostics, Inc.), unless otherwise indicated.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Companys financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.
The Companys fiscal year-end is December 31.
Development Stage Company
The Company is a development stage company as defined by ASC 915-10-05, Development Stage Entity. The Company is still devoting substantially all of its efforts on establishing the business, and its planned principal operations, namely its car rental operations, have not commenced. All losses accumulated since inception have been considered as part of the Companys development stage activities.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Endeavor Sciences, Inc., formerly Parallax Diagnostics, Inc. (ESI). All significant inter-company accounts and transactions have been eliminated. In November 2012, the Company acquired 100% of ESIs common stock in exchange for, among other things, approximately 60% of the Companys common stock (the Share Exchange).
As a result of the Share Exchange, a change in control occurred whereby the Company is the legal parent/accounting subsidiary of ESI, and ESI is the legal subsidiary/accounting parent of the Company. The Share Exchange has therefore been identified and recorded as a reverse acquisition and, pursuant to ASC 805-40-45-1, the consolidated financial statements historical and cumulative data are a continuation of the financial statements of the legal subsidiary, ESI. For cumulative purposes, the date of inception is that of ESI, December 30, 2008.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at March 31, 2014, the Company had no cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount 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. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying consolidated financial statements include the, estimates related to asset impairments of long lived assets and investments, classification of expenditures as either an asset or an expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from these estimates.
Convertible Debt
In accordance with ASC 470-20-25, the Company recognizes the advantageous value of conversion rights attached to convertible debt. Such rights give the debt holder the ability to convert debt into common stock at a price per share that is less than the trading price to the public on the date of the debt. The beneficial value is calculated as the intrinsic value (the market price of the stock at the commitment date in excess of the conversion rate) of the beneficial conversion feature of the debt, and is recorded as a discount to the related debt and an addition to additional paid in capital. The discount is amortized over the remaining outstanding period of related debt using the interest method.
8
Net Income (Loss) Per Common Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (ASC 260-10). Net earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Companys stock options and warrants.
Comprehensive Loss
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at March 31, 2014, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. As at March 31, 2014, the Company has not commenced its principal operations and, therefore, has not recognized any revenue.
Property and Equipment
Property and equipment is comprised of office equipment and medical testing and prototype equipment, recorded at cost and depreciated using the double declining balance method over the estimated useful lives of 5 to 7 years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized.
Impairment of Long-Lived Assets
In accordance with ASC 350-30, the Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Companys products under development will continue. Either of these could result in future impairment of long-lived assets.
Due to the Companys recurring losses, its patents were evaluated for impairment and it was determined that future cash flows were sufficient for recoverability of the asset.
Income Taxes
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
The Company has net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Fair Value Measurements
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
| Level 1 | Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. |
| Level 2 | Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. |
| Level 3 | Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. |
The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities. Pursuant to ASC 820 and 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Recently Adopted Accounting Standards
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
9
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 may have on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, the adoption of ASU No. 2013-07 may have on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Top 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard.
Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
| March 31, 2014 |
| December 31, 2013 |
| ||
Office equipment | $ | 8,385 |
| $ | 8,385 |
|
Medical devices and instruments |
| 45,194 |
|
| 45,194 |
|
Sub-total |
| 53,579 |
|
| 53,579 |
|
Accumulated depreciation |
| (39,309 | ) |
| (37,728 | ) |
Property and equipment, net | $ | 14,270 |
| $ | 15,851 |
|
Depreciation expense for the three months ended March 31, 2014 and March 31, 2013 was $1,581 and $2,641, respectively.
NOTE 4. INTANGIBLE ASSETS
Intangible assets consists of the following:
| March 31, 2014 |
| December 31, 2013 |
| ||
Products and processes | $ | 12,500 |
| $ | 12,500 |
|
Trademarks and patents |
| 12,500 |
|
| 12,500 |
|
Sub-total |
| 25,000 |
|
| 25,000 |
|
Accumulated amortization |
| (5,832 | ) |
| (5,416 | ) |
Intangible assets, net | $ | 19,168 |
| $ | 19,584 |
|
Amortization expense for the three months ended March 31, 2014 and March 31, 2013 was $416 and $416, respectively.
10
NOTE 5. NOTES AND LOANS PAYABLE
Notes and loans payable consists of the following:
| March 31, 2014 |
| December 31, 2013 |
| ||
Notes payable |
|
|
|
|
|
|
Phillip Knight |
| 9,075 |
|
| 9,075 |
|
THI Inc. |
| 10,000 |
|
| 10,000 |
|
Rast Trade | $ | 65,000 |
| $ | 65,000 |
|
Total notes payable |
| 84,075 |
|
| 84,075 |
|
|
|
|
|
|
|
|
Loans payable |
|
|
|
|
|
|
Regal Capital |
| 103,449 |
|
| | [2] |
Tom Mackay |
| 11,900 |
|
| | [2] |
Total loans payable |
| 115,349 |
|
| |
|
Total notes and loans payable | $ | 199,424 |
| $ | 84,075 |
|
|
|
|
|
|
|
|
Convertible notes payable |
|
|
|
|
|
|
The Kasper Group, Ltd. |
| 144,000 |
|
| | [1] |
|
|
|
|
|
|
|
In June 2010, the Company issued a note payable in the principal amount of $9,075 to a non-related party. Under the terms of the note, the amount is unsecured, non-interest bearing, and due upon demand. As of March 31, 2014, no demand has been made.
In June 2010, the Company issued a note payable in the principal amount of $10,000 to a non-related party. Under the terms of the note, the amount is unsecured, accrues interest at a rate of 8% per annum, and is due upon demand. As of March 31, 2014, no demand has been made. Interest in the amount of $3,212 and $3,015 has been accrued as of March 31, 2014 and December 31, 2013, respectively, and is included as part of accrued expenses on the accompanying consolidated balance sheets.
On April 21, 2011, the Company issued a note payable in the principal amount of $65,000 to a non-related party. The note is unsecured, bears interest at a rate of 10% per annum, and is due upon demand. As of March 31, 2014, no demand has been made. Interest in the amount of $20,800 and $19,197 has been accrued as of March 31, 2014 and December 31, 2013, respectively, and is included as part of accrued expenses on the accompanying consolidated balance sheets.
On September 30, 2010, the Company issued a Convertible Note Payable in the amount of $144,000 to a non-related party pursuant to a Confidential Settlement Agreement. On January 1, 2012, the note was assigned and purchased by The Kasper Group. Ltd., a former related party, and a new Convertible Promissory Note was issued (the Kasper Note). The Kasper Note bears interest at a rate of 7% per annum, is due by January 1, 2015, and contains a repayment provision to convert the debt into common stock of the Company at a rate of $0.25 per share. On March 31, 2014, the former related party resigned, and the note, included as a related party transaction at December 31, 2013[1], has been reclassified as a non-related party transaction at March 31, 2014. Interest in the amount of $22,645 and $20,160 has been accrued as of March 31, 2014 and December 31, 2013, respectively, and is included as an accrued expense on the accompanying consolidated balance sheets.
Certain loans payable in the aggregate sum of $115,349, previously classified as related party transactions at December 31, 2013[2], were reclassified as non-related party transactions as of March 31, 2014. The loans, which were made by former officers of the Company for the purpose of short term overhead requirements, are unsecured, non-interest bearing, and are due upon demand. As of March 31, 2014, no demand has been made.
As at March 31, 2014 and December 31, 2013, interest in the amount of $46,657 and $42,372, respectively, has been accrued on notes payable, and is included as part of accrued expenses on the accompanying consolidated balance sheets.
NOTE 6. RELATED PARTY TRANSACTIONS
Related party transactions consist of the following:
| March 31, 2014 |
| December 31, 2013 |
| ||
Accrued compensation |
|
|
|
|
|
|
J. Michael Redmond | $ | 467,212 |
| $ | 411,827 |
|
Huntington Chase Financial Group, Ltd. |
| | [2] |
| 300,000 |
|
MJ Management, LLC |
| 53,300 |
|
| 45,800 |
|
Tom Mackay |
| | [3] |
| 26,250 |
|
Gardner Williams |
| | [3] |
| 11,250 |
|
Total accrued compensation |
| 520,511 |
|
| 795,127 |
|
|
|
|
|
|
|
|
Cash advances |
|
|
|
|
|
|
Edward W. Withrow, III |
| 14,718 |
|
| 11,217 |
|
Tom Mackay |
| | [1] |
| 11,900 |
|
Regal Capital Development |
| | [1] |
| 103,449 |
|
Total cash advances |
| 14,718 |
|
| 126,566 |
|
Total related party payables |
| 535,229 |
|
| 921,693 |
|
|
|
|
|
|
|
|
Convertible notes payable |
|
|
|
|
|
|
Huntington Chase Financial Group, Ltd. |
| 383,600 | [2] |
| 46,100 |
|
The Kasper Group, Ltd. |
| | [1] |
| 144,000 |
|
Total convertible notes payable |
| 383,600 |
|
| 190,100 |
|
Less: unamortized discount |
| (115,080 | ) |
| |
|
Total convertible note payable, net of discount |
| 268,520 |
|
| 190,100 |
|
|
|
|
|
|
|
|
Total related party transactions | $ | 803,749 |
| $ | 1,111,793 |
|
|
|
|
|
|
|
|
[1] See Note 5 |
|
|
|
|
|
|
On November 15, 2010, the Company entered into an employment agreement with its CEO, Mr. J. Michael Redmond (the Employment Agreement). Under the Employment Agreement, Mr. Redmond agrees to serve as the President, CEO, and Director of the Company for a term of three years. As compensation for his services, Mr. Redmonds base salary will be $200,000 per annum for the first year, increasing to $225,000 in year 2, and $250,000 in year 3, contingent upon the Company meeting certain goals. In addition, Mr. Redmond was granted one million three hundred seventy five thousand (1,375,000) options at an exercise price of $0.10 per share. As of March 31, 2014 and December 31, 2013, respectively, $467,212 and $411,827 has been recorded as accrued compensation.
11
On January 2, 2012, the Company entered into a consulting agreement with Huntington Chase Financial Group LLC (HCFG), a Nevada corporation, whose principal is a related party. The consulting agreement provides for HCFG to provide advisory services to the Company for a period of three years for a fee of $12,500 per month, which has been deferred until such time as the Company reaches certain funding goals. As of March 31, 2014 and December 31, 2013, respectively, $337,500 and $300,000 and in compensation is owing under this Agreement. On March 31, 2014, the Company issued a modification to that certain Convertible Note Payable issued to HCFG dated December 31, 2012, to 1) increase the principal by $337,500 representing the unpaid compensation due HCFG under its consulting agreement through March 31, 2014, resulting in a modified principal sum owing of $383,600[2], and 2) modify the conversion strike price from $0.25 to $0.10. The note bears interest at a rate of 7% per annum, is due by December 31, 2015, and contains a repayment provision to convert the debt into common stock of the Company. The modification in conversion price resulted in a beneficial conversion feature. As a result, the difference between the conversion rate and the market rate of $115,080 has been classified as a discount on the note and will be amortized until maturity, or twenty-one (21) months. As of March 31, 2014, unamortized discount remains $115,080. As of March 31, 2014 and December 31, 2013, respectively, interest in the amount of $3,629 and $2,834 has been accrued, and is included as part of accrued expenses on the accompanying consolidated balance sheets.
Certain accrued compensation in the aggregate sum of $37,500, previously classified as related party transactions at December 31, 2013[3], were reclassified as non-related party transactions as of March 31, 2014, The accrued compensation, owed to former officers of the Company, is included as part of accrued expenses on the accompanying balance sheet as of March 31, 2014.
As at March 31, 2014 and December 31, 2013, respectively, related party payables of $535,229 and $921,693 consist of $520,511 and $795,127 in accrued compensation, and $14,718 and $126,566 in cash advances to the Company for operating expenses. The amounts owing are unsecured, non-interest bearing, and due upon demand. Convertible notes payable to related parties, net of unamortized discount, were $268,520 and $190,100 as of March 31, 2014 and December 31, 2013, respectively. The notes bear interest at a rate of 7% per annum and mature December 31, 2015. As of March 31, 2014 and December 31, 2013, the total amounts due to related parties are $803,749 and $1,111,793, respectively.
As at March 31, 2014 and December 31, 2013, interest in the amount of $3,629 and $2,834, respectively, of interest has been accrued on related party notes payable, and is included as part of accrued expenses on the accompanying consolidated balance sheets.
On January 7, 2014, 36,462,819 shares of the Companys common stock were purchased from certain shareholders by its Chairman, Edward W. Withrow III. On the same day, said shares were cancelled, for the benefit of the Company.
NOTE 7. COMMITMENTS AND CONTINGENCIES
In September 2010, the Company, through its wholly owned subsidiary, Endeavor Sciences, Inc. (ESI), acquired the exclusive rights, title, and interest in perpetuity (the Rights) to certain FDA 510(k) cleared tests held by Montecito BioSciences, Ltd., a Nevada corporation (Montecito), a related party, in the area of infectious diseases (the Assignment Agreement). Pursuant to the Assignment Agreement, in exchange for these Rights, Montecito received 50% of issued and outstanding shares of ESIs common stock, a $750,000 assignment fee (the Assignment Fee), and a royalty of 4% of all gross revenues earned from the Rights. The Assignment Fee is payable once the Company reaches certain funding goals. In addition, in September 2010, the Company acquired the exclusive license in perpetuity (the License) to certain Patent Applications initiated by Montecito for a suite of medical devices, tests and utility processes (the License Agreement). Pursuant to the License Agreement, and in exchange for this License, Montecito received 50% of issued and outstanding shares of ESIs common stock, a $750,000 license fee (the License Fee), and a royalty of 3½% of all gross revenues earned from the License. The License Fee is payable once the Company reaches certain funding goals. In September, 2011, the Assignment Agreement and License Agreement were modified (the Modifications) to i) mitigate the payment terms of the Assignment Fee and the License Fee (the Fees), and ii) increase the royalty rates by 1% respectively, until such time as the royalties paid exceed an aggregate sum of $1,500,000, at which point the royalty rates will revert back to their original rates. The 1% royalty earned under this increase shall be applied towards the respective Fees until such time as the Fees are paid in full. As a result of the Assignment Agreement, License Agreement, and Modifications, the Company has a contingent liability of $1,500,000 payable to Montecito.
On July 1, 2011, the Company entered into a Development and Supply Agreement with Corder Engineering, LLC for certain engineering services as well as the development and manufacturing of ten (10) evaluation units, including software, hardware and instrumentation, related to the Companys medical testing equipment (the Corder Agreement). The Corder Agreement is for an estimated term of twelve weeks, or until delivery of the evaluation units, and includes compensation in the amount of $35,000, which is payable upon certain stages of production over the twelve week term. As of March 31, 2014, payments totaling $22,500 have been made, and $12,500 is included as part of accounts payables on the accompanying balance sheet as of March 31, 2014.
On July 1, 2011, the Company entered into a Supply Agreement with Meyers Stevens Group, Inc. for the manufacturing of diagnostic assays related to the Companys medical testing equipment (the Meyer Agreement). The Meyer Agreement is for an estimated term of eight weeks, or until delivery of the assays, and includes compensation in the amount of $10,194, which is payable in two installments over the eight week term. As of March 31, 2014, payments totaling $8,980 have been made, and $1,214 is included as part of accounts payable on the accompanying balance sheet as of March 31, 2014.
NOTE 8. CONVERTIBLE PREFERRED STOCK
The total number of authorized shares of preferred stock that may be issued by the Company is 10,000,000 with a par value of $0.001 per share.
All preferred shares are convertible into the Companys common stock at a rate of 20 shares of common stock for each preferred share held, and were issued with 100% warrant coverage (Note 10). The number of shares of common stock underlying the warrants and the exercise price are subject to adjustment upon certain events.
On April 4, 2013, the Company received a Notice to Convert from one of its preferred shareholders, requesting that 1/3 (one-third) of his 36,339 shares of preferred stock holdings be converted into common shares. As a result, 12,112 shares of preferred stock were converted into 242,660 shares of the Companys restricted common stock were issued, and preferred paid in capital was reduced by $33,321.
As of March 31, 2014 and December 31, 2013, the Company had 823,691 shares of preferred stock issued and outstanding.
NOTE 9. COMMON STOCK
The total number of authorized shares of common stock that may be issued by the Company is 250,000,000 with a par value of $0.001 per share.
On April 1, 2013, in connection with a Notice to Convert, 12,112 shares of preferred stock were converted into common stock at a rate of 20 common shares to 1 preferred share. As a result, 242,660 restricted shares of common stock were issued, and $33,090 was recorded as paid in capital.
12
On December 31, 2013, pursuant to a Stock Purchase Agreement, the Company issued 11,459,279 shares of its common stock for cash in the amount of $1,146. As a result, additional paid in capital was reduced by $10,313.
On January 7, 2014, 36,462,819 shares of the Companys common stock were purchased from certain shareholders by its Chairman, Edward W. Withrow III. On the same day, said shares were cancelled, for the benefit of the Company. As a result of this transaction, the total issued and outstanding shares of common stock were reduced to 126,303,018 shares, and $36,462 was recorded as additional paid in capital.
As of March 31, 2014 and December 31, 2013, the Company has 126,303,018 and 162,765,837 common shares issued and outstanding, respectively.
NOTE 10. WARRANTS AND OPTIONS
As of March 31, 2014, the Company had 16,473,401 warrants and 1,900,000 options issued and outstanding.
On April 1, 2013, in connection with a Notice to Convert, 12,112 shares of preferred stock were converted into common stock. As a result, the 242,660 underlying warrants were cancelled.
On June 17, 2013, 14,535,706 warrants underlying 726,786 shares of preferred stock, which were to expire on June 17, 2013, were extended for a period of 2 years. The warrants now expire on June 17, 2015.
On September 30, 2013, 726,785 warrants underlying 36,339 shares of preferred stock, which were to expire on September 30, 2013, were extended for a period of 2 years. The warrants now expire on September 30, 2015.
On December 6, 2013, 726,785 warrants underlying 36,339 shares of preferred stock, which were to expire on December 6, 2013, were extended for a period of 2 years. The warrants now expire on December 6, 2015.
Warrants Outstanding |
| |||||||||
|
| Number of |
| Remaining |
| Exercise Price |
| Weighted |
| |
|
| Common |
| Contractual Life |
| times Number |
| Average |
| |
Exercise Price |
| Shares |
| (in years) |
| of Shares |
| Exercise Price |
| |
|
|
|
|
|
|
|
|
|
|
|
$0.27518 |
| 14,535,706 |
| 1.20 |
| $ | 4,000,000 |
| $0.27518 |
|
$0.41278 |
| 726,785 |
| 1.49 |
|
| 300,000 |
| $0.41278 |
|
$0.41278 |
| 726,785 |
| 1.68 |
|
| 300,000 |
| $0.41278 |
|
$0.41278 |
| 484,125 |
| 2.09 |
|
| 199,837 |
| $0.41278 |
|
|
| 16,473,401 |
|
|
| $ | 4,799,837 |
| $0.41278 |
|
Warrant Activity |
|
|
|
|
| Number of |
| Weighted Average |
|
| Shares |
| Exercise Price |
|
Outstanding at December 31, 2013 | 16,473,401 |
| $0.41278 |
|
Issued | |
| |
|
Exercised | |
| |
|
Expired / Cancelled | |
| |
|
Outstanding at March 31, 2014 | 16,473,401 |
| $0.41278 |
|
Options Outstanding | ||||||||||
|
|
|
| Remaining |
| Exercise Price |
| Weighted |
| |
|
| Number of |
| Contractual Life |
| times Number |
| Average |
| |
Exercise Price |
| Shares |
| (in years) |
| of Shares |
| Exercise Price |
| |
|
|
|
|
|
|
|
|
|
|
|
$0.10 |
| 1,375,000 |
| 6.75 |
| $ | 137,500 |
| $0.10 |
|
$0.25 |
| 225,000 |
| 2.00 |
|
| 56,250 |
| $0.25 |
|
$0.25 |
| 225,000 |
| 1.83 |
|
| 56,250 |
| $0.25 |
|
|
| 1,900,000 |
|
|
| $ | 250,000 |
| $0.20 |
|
Options Activity |
|
|
|
|
| Number of |
| Weighted Average |
|
| Shares |
| Exercise Price |
|
Outstanding at December 31, 2013 | 1,900,000 |
| $0.20 |
|
Issued | |
| |
|
Exercised | |
| |
|
Expired / Cancelled | |
| |
|
Outstanding at March 31, 2014 | 1,900,000 |
| $0.20 |
|
NOTE 11. INCOME TAXES
The components of the cumulative net deferred tax asset at March 31, 2014 and December 31, 2013, the statutory tax rate, the effective tax rate and the amount of the valuation allowance are indicated below:
| March 31, 2014 |
| December 31, 2013 |
| ||
|
|
|
|
|
|
|
Income (loss) before taxes | $ | (118,421 | ) | $ | (504,494 | ) |
Statutory rate |
| 34% |
|
| 34% |
|
|
|
|
|
|
|
|
Computed expected tax payable (recovery) | $ | 40,300 |
| $ | 171,500 |
|
Non-deductible expenses |
| |
|
| |
|
Change in valuation allowance |
| (40,300 | ) |
| (171,500 | ) |
|
|
|
|
|
|
|
Reported income taxes | $ | |
| $ | |
|
The significant components of deferred income tax assets and liabilities at March 31, 2014 and December 31, 2013 are as follows:
| March 31, 2014 |
| December 31, 2013 |
| ||
|
|
|
|
|
|
|
Net operating loss carried forward | $ | 682,800 |
| $ | 642,500 |
|
|
|
|
|
|
|
|
Valuation allowance |
| (682,800 | ) |
| (642,500 | ) |
|
|
|
|
|
|
|
Net deferred income tax asset | $ | |
| $ | |
|
13
As at March 31, 2014, the Company had approximately $2,008,000 of federal net operating losses which expire commencing in the year 2026.
NOTE 12. SUBSEQUENT EVENTS
On April 17, 2014, pursuant to a resolution of the board of directors, the Company executed an Agreement to Purchase One Hundred Percent of the Issued and Outstanding Shares of a California-based pharmacy Corporation (the Pharmacy) and its Assets and Inventory (the Purchase Agreement) between the Company, the Pharmacy and its sole shareholder (the Seller). The fully executed Purchase Agreement is dated March 27, 2014 and was received from the Seller on April 17, 2014.
Pursuant to the Purchase Agreement, in exchange for 100% of the Pharmacys common stock and 100% of the Pharmacys Assets and Inventory, among other things, the Company shall deliver to the Seller by, or prior to, the Closing Date, which shall be no later than July 15, 2014:
1.
Cash in the amount of $15 million;
2.
A subordinate Promissory Note in the amount of $5 million, bearing interest at a rate of 6% per annum commencing three (3) years from the date of the Promissory Note, to be repaid after the senior credit facility has been paid in full, over a period of twelve (12) months; and
3.
An ownership of Common Stock in the Company, representing approximately 9.9% of the issued and outstanding stock in the Company on a fully diluted basis.
Certain terms and conditions of the Purchase Agreement remain confidential pursuant to a written non-disclosure agreement with the Seller until the Closing.
The Closing is subject to the Company obtaining the necessary financing and the required regulatory approval for the acquisition of the Pharmacy prior to the Closing. In the event that the Company does not obtain the requisite financing and regulatory approval by the Closing Date, the transaction will not occur without a modification mutually acceptable to both parties.
On April 30, 2014, the Company entered into an Agreement with KeyBanc Capital Markets, Inc. (KBCM) for the purpose of introducing the Company to representatives of Potential Lenders/Investors for the financing required to purchase the Pharmacy. In exchange for KBCMs services, the Company shall pay KBCM a fee equal to 1.5% of the aggregate dollar amount of any loan or commitment to lend and/or invest amounts provided to the Company by the Potential Lenders/Investors. The Fee shall be payable upon i) the closing of a credit and/or investment agreement or ii) the execution by the Potential Lenders/Investors and the Company of a commitment document for a loan or investment.
* * * * *
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or the Companys future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors that may cause the Company or the Companys industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The Companys unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with the Companys financial statements and the related notes that appear elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in the Companys capital stock.
As used in this quarterly report, the terms "we", "us", "our" and "Parallax" mean Parallax Health Sciences, Inc. (formerly Endeavor Power Corp.), and its wholly-owned subsidiary, Endeavor Sciences, Inc. (formerly Parallax Diagnostics, Inc.), unless otherwise indicated.
Corporate History and Overview
The Company was incorporated in the State of Nevada on July 6, 2005, and began its development activities in the field of online website design and commerce. In September 2007, it merged with Endeavor Uranium, Inc. and began activities in the mineral exploration field, with mineral properties in the northwestern United States. Furthering the Companys development, on December 23, 2008, the Company entered into a Joint Venture Agreement with Federated Energy Corporation, a Tennessee corporation, for working interests in prospective oil and gas wells, and changed its operating name to Endeavor Power Corporation. The Companys development activities in oil and gas exploration continued until November, 2010.
In November 2010, management assessed a potential business opportunity and determined that in an effort to create value for its Shareholders, the Company should change its business direction. On November 8, 2010, the Company discontinued its operations in its working interests in oil and gas exploration and changed its operating focus to the development of E-Waste processing services aimed at industrial and government clients. The Companys new direction sought to limit the impact of discarded E-Waste on the environment, as discarded computers and electronic equipment pose environmental hazards. However, in accordance with a change in management effective September 27, 2011, the Companys business operations changed, and its activities in the e-waste were discontinued.
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The Company began developing activities in managerial services, and pursued potential funding opportunities for the Company. It also retained consultants to perform due diligence on certain mining properties located in Venezuela, Brazil, Bolivia, Guyana and several other South American countries. Management, however, determined that the outcome of such due diligence did not provide the Company a viable opportunity and that it did not provide sufficient economic benefit for the Company. Management therefore ceased its due diligence, and continued its operations in managerial services whilst pursuing other viable business opportunities to increase shareholder value.
During 2012, the Companys management entered discussions and assessed a potential business opportunity with Parallax Diagnostics, Inc., a Nevada corporation (Parallax), whose principal business is in the bio-medical sector. More specifically, Parallax is focused on the exploitation of a proprietary diagnostic and monitoring platform and processes in the area of infectious disease. Parallax, in its development stage, holds the right, title, and interest to certain FDA 510(k) approved tests in perpetuity. In addition, Parallax acquired the exclusive license to a suite of medical devices, tests and utility processes in perpetuity.
On November 1, 2012, the Company, and its wholly owned subsidiary Endeavor Holdings, Inc. entered into an Agreement and Plan of Merger (the Merger Agreement) with Parallax and the shareholders of Parallax. As a result of the transactions effected by the Merger Agreement, (i) Parallax merged with and into Endeavor Holdings whereupon Endeavor Holdings continued as the surviving entity and the corporate existence of Parallax ceased; (ii) the former business of Parallax is now the Companys primary business, (iii) the Companys existing business in managerial services will continue as ancillary operations, and (iv) there is a change of control whereby the former shareholders of Parallax now own a controlling 60% ownership interest in the Company on a fully diluted basis. On November 26, 2012, Parallax Diagnostic, Inc. changed its name to Endeavor Sciences, Inc. (ESI), a wholly owned subsidiary of Parallax Health Sciences, Inc., (formerly Endeavor Power Corp.)
On July 22, 2013, the Company entered into a binding Letter of Intent for the acquisition of a privately held California corporation, whose primary operations are in the pharmaceutical industry (the NewCo). On April 17, 2014, pursuant to a resolution of the board of directors, the Company executed an Agreement to Purchase One Hundred Percent of the Issued and Outstanding Shares of a California-based pharmacy Corporation (the Pharmacy) and its Assets and Inventory (the Purchase Agreement) between the Company, the Pharmacy and its sole shareholder (the Seller). The fully executed Purchase Agreement is dated March 27, 2014 and was received from the Seller on April 17, 2014.
Pursuant to the Purchase Agreement, in exchange for 100% of the Pharmacys common stock and 100% of the Pharmacys Assets and Inventory, among other things, the Company shall deliver to the Seller by, or prior to, the Closing Date, which shall be no later than July 15, 2014:
1.
Cash in the amount of $15 million;
2.
A subordinate Promissory Note in the amount of $5 million, bearing interest at a rate of 6% per annum commencing three (3) years from the date of the Promissory Note, to be repaid after the senior credit facility has been paid in full, over a period of twelve (12) months; and
3.
An ownership of Common Stock in the Company, representing approximately 9.9% of the issued and outstanding stock in the Company on a fully diluted basis.
Certain terms and conditions of the Purchase Agreement remain confidential pursuant to a written non-disclosure agreement with the Seller until the Closing.
The Closing is subject to the Company obtaining the necessary financing and the required regulatory approval for the acquisition of the Pharmacy prior to the Closing. In the event that the Company does not obtain the requisite financing and regulatory approval by the Closing Date, the transaction will not occur without a modification mutually acceptable to both parties.
On January 9, 2014, the Company changed its name from Endeavor Power Corp. (OTCQB.EDVP) to Parallax Health Sciences, Inc. (OTCQB.PRLX)
The Company is a development stage company as defined by ASC 915-10, Accounting and Reporting by Development Stage Enterprises. A development stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. At March 31, 2014, the Company has not yet commenced its principal operations, which is in the bio-medical and diagnostics sector.
The following summary of the Companys financial condition should be read in conjunction with the consolidated financial statements for the quarter ended March 31, 2014, which are included herein.
Balance Sheet
As at March 31, 2014, the Company had total assets of $33,723, compared with total assets of $36,004 as at December 31, 2013. The decrease in total assets of $2,281 is attributable to a decrease in cash of $284, $1,581 of depreciation related to equipment, and $416 of amortization related to the intangible assets.
As at March 31, 2014, the Company had total liabilities of $1,370,981, compared with $1,369,921 as at December 31, 2013. The increase in total liabilities of $1,060 is attributable to an increase of $49,755 in accounts payable and accrued expenses, an increase of $115,349 in notes and loans payable, an increase of $144,000 in convertible notes payable, a decrease of $386,464 in related party payables, and an increase of $78,420 in convertible related party loans, net of unamortized discount.
Results of Operations
Three months ended March 31, 2014 compared to three months ended March 31, 2013
The financial information provided includes the accounts of the Company and its wholly owned subsidiary, Endeavor Sciences, Inc., formerly Parallax Diagnostics, Inc. (ESI), on a consolidated basis. All significant inter-company accounts and transactions have been eliminated.
|
|
| Cumulative from |
| |||||
|
|
| December 30, 2008 |
| |||||
| For the three months ended |
| (inception) to |
| |||||
| March 31, 2014 |
| March 31, 2013 |
| March 31, 2014 |
| |||
Revenue | $ | |
| $ | |
| $ | |
|
Cost of sales | $ | |
| $ | |
| $ | |
|
Gross profit (loss) | $ | |
| $ | |
| $ | |
|
General and administrative expenses | $ | 111,343 |
| $ | 114,784 |
| $ | 1,650,455 |
|
Operating (loss) | $ | (111,343 | ) | $ | (114,784 | ) | $ | (1,650,455 | ) |
Insurance claim refund | $ | |
| $ | 1,695 |
| $ | 1,695 |
|
Depreciation and amortization | $ | (1,997 | ) | $ | (3,057 | ) | $ | (45,142 | ) |
Amortization of deferred compensation | $ | |
| $ | (20,080 | ) | $ | (281,250 | ) |
Interest expense | $ | (5,081 | ) | $ | (5,118 | ) | $ | (36,815 | ) |
Net (loss) | $ | (118,421 | ) | $ | (141,344 | ) | $ | (2,011,967 | ) |
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Revenue
For the three months ended March 31, 2014 and 2013, no revenue was generated.
As a development stage company, the Company has not yet launched its major business activity, which is medical diagnostics and testing.
Cost of sales
For the three months ended March 31, 2014 and 2013, no costs of sales were incurred.
As a development stage company, the Company has not yet launched its major business activity, which is medical diagnostics and testing.
General and Administrative Expenses
| For the three months ended |
|
|
|
| ||||
| March 31, 2014 |
| March 31, 2013 |
| Variances |
| |||
Legal, accounting, and management services | $ | 51,437 |
| $ | 49,250 |
| $ | 2,187 |
|
Salaries, taxes and benefits |
| 59,622 |
|
| 63,051 |
|
| (3,429 | ) |
Office supplies and miscellaneous expenses |
| 285 |
|
| 2,484 |
|
| (2,199 | ) |
Total general and administrative expenses | $ | 111,343 |
| $ | 114,784 |
| $ | 3,441 |
|
During the three months ended March 31, 2014, the Company incurred operating expenses totaling $111,343, compared with $114,784 for the three months ended March 31, 2013. The increase in operating expenses of $3,441 is attributable to:
·
an increase in legal, accounting and management fees of $2,187 due to an increase in legal fees of $2,141; and an increase in audit fees of $46;
·
a decrease in salaries and related taxes and benefits of $3,429, due to a decrease in payroll taxes of $3,429; and
·
a decrease in office supplies and miscellaneous expenses of $2,199, due to a decrease in filing fees of $1,900 due to a change in service provider; and a decrease in other miscellaneous office expenses of $299.
Net Loss
During the three months ended March 31, 2014, the Company incurred a net loss of $118,421, compared with a net loss of $141,344 for the three months ended March 31, 2013. The decrease in net loss of $22,923 is primarily attributable to a decrease in general and administrative expenses of $3,441, a decrease in insurance income of $1,695, a decrease in depreciation and amortization of $1,060, a decrease in amortization of stock compensation of $20,080, and a decrease in interest expense of $37.
Liquidity and Capital Resources
Working Capital |
|
|
|
| Increase |
| |||
| At March 31, 2014 |
| At December 31, 2013 |
| (Decrease) |
| |||
Current Assets | $ | 285 |
| $ | 569 |
| $ | (284 | ) |
Current Liabilities |
| 1,102,461 |
|
| 1,179,821 |
|
| (77,360 | ) |
Working Capital (Deficit) | $ | (1,102,176 | ) | $ | (1,179,252 | ) | $ | 77,076 |
|
As at March 31, 2014, the Company had cash in the amount of $285 compared to $569 as of December 31, 2013.
The Company had a working capital deficit of $1,102,176 as of March 31, 2014, compared to a working capital deficit of $1,179,252 as of December 31, 2013. The decrease in working capital deficit of $77,076 is primarily attributable to a decrease in cash of $284; an increase in accounts payable and accrued expenses of $49,755; an increase in notes and loans payable of $115,349; an increase of $144,000 in convertible notes payable, and a decrease in related party payables of $386,464.
Cash Flows |
|
|
|
|
| ||||
| For the three months ended |
| Increase |
| |||||
| March 31, 2014 |
| March 31, 2013 |
| (Decrease) |
| |||
Net cash used in operating activities | $ | (284 | ) | $ | (17,951 | ) | $ | 17,667 |
|
Net cash used in investing activities |
| |
|
| |
|
| |
|
Net cash provided by financing activities |
| |
|
| 9,200 |
|
| (9,200 | ) |
Increase (decrease) in cash | $ | (284 | ) | $ | (8,751 | ) | $ | 8,467 |
|
Cash Flows from Operating Activities
During the three months ended March 31, 2014, the Company used $284 of cash flow for operating activities compared with $17,951 for the three months ended March 31, 2013. The decrease in cash used for operating activities of $17,667 is attributable a decrease in net loss of $22,923, a decrease in depreciation and amortization expense of $1,060, a decrease in stock compensation of $90,000, an increase in accruals converted to related party loans of $37,500, a decrease in prepaid expenses of $69,920, an increase in accounts payable and accrued expenses of $12,384, and a decrease in related party payables of $34,000.
Cash Flows from Investing Activities
During the three months ended March 31, 2014 and 2013, the Company had no cash flows from investing activities.
Cash Flows from Financing Activities
During the three months ended March 31, 2014, the Company had no cash flows from financing activities, compared with $9,200 during the same period last year. The decrease in cash flows provided from financing activities of $9,200 is attributable to a decrease in related party loans.
During the three months ended March 31, 2014, the Company did not receive any proceeds from the issuance of common shares or other equity instruments.
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Future Financings
The Company has suffered recurring losses from operations. The continuation of the Companys operations is dependent upon the Companys attaining and maintaining profitable operations and raising additional capital as needed. The Company anticipates that it will have to raise additional funds through private placements of the Companys equity securities and/or debt financing to complete its business plan.
The Company will require additional financing in order to proceed with its plan of operations, including approximately $2,000,000 over the next 12 months to pay for its ongoing expenses. These cash requirements include working capital, general and administrative expenses, the development of the Companys product line, and the pursuit of acquisitions. These cash requirements are in excess of the Companys current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay its liabilities. There is no assurance that the financing will be completed as planned or at all. If the Company is unable to secure adequate capital to continue the Companys planned operations, the Companys shareholders may lose some or all of their investment and the Companys business may fail.
The Company anticipates continuing to rely on equity sales of its common stock in order to continue to fund its business operations. Issuances of additional shares will result in dilution to the Companys existing stockholders. There is no assurance that the Company will achieve any additional sales of its equity securities or arrange for debt or other financing to fund its planned business activities.
Contractual Obligations
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
Going Concern
The Company has incurred losses since inception resulting in an accumulated deficit of $2,011,967, and further losses are anticipated in the development of its business. The Companys ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern.
The consolidated unaudited financial statements included with this annual report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Companys assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated unaudited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
The discussion and analysis of the Companys financial condition and results of operations are based upon the Companys consolidated unaudited financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by managements application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Companys financial statements is critical to an understanding of its consolidated financial statements.
Net Income (Loss) Per Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (ASC 260-10). Net earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible preferred shares and the exercise of the Companys stock options and warrants.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States and 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. The Company regularly evaluates estimates and assumptions, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Companys estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Endeavor Sciences, Inc., formerly Parallax Diagnostics, Inc. (ESI). All significant inter-company accounts and transactions have been eliminated.
In November 2012, the Company acquired 100% of ESIs common stock in exchange for, among other things, approximately 60% of the Companys common stock (the Share Exchange). As a result of the Share Exchange, a change in control occurred whereby the Company is the legal parent/accounting subsidiary of ESI, and ESI is the legal subsidiary/accounting parent of the Company. The Share Exchange has therefore been identified and recorded as a reverse acquisition and, pursuant to ASC 805-40-45-1, the consolidated financial statements historical and cumulative data are a continuation of the financial statements of the legal subsidiary, ESI. For cumulative purposes, the date of inception is that of ESI, December 30, 2008.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 605, Revenue Recognition. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured.
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Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recently Adopted Accounting Standards:
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (FASB), the US Securities and Exchange Commission (SEC), and the Emerging Issues Task Force (EITF), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:
Adopted:
Effective January 2012, the Company adopted ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 was effective for interim and annual periods beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Effective January 2012, the Company adopted ASU No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 is intended to increase the prominence of items reported in other comprehensive income and to facilitate convergence of accounting guidance in this area with that of the IASB. The amendments require that all non-owner changes in shareholders equity be presented in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the provisions of ASU 2011-05 that require the presentation of reclassification adjustments on the face of both the statement of income and statement of other comprehensive income. Amendments under ASU 2011-05 that were not deferred under ASU 2011-12 will be applied retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this update did not have a material impact on the consolidated financial statements.
Not Yet Adopted:
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASBs deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income. However, the amendments require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect, if any, the adoption of ASU 2013-02 may have on its consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Top 205): Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify when an entity should apply the liquidation basis of accounting and to provide principles for the measurement of assets and liabilities under the liquidation basis of accounting, as well as any required disclosures. The amendments in this standard is effective prospectively for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. The Company is evaluating the effect, if any, the adoption of ASU No. 2013-07 may have on its consolidated financial statements.
In July 2013, the FASB issued ASU No 2013-11, Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward Exists. The objective of ASU 2013-11 is to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits, and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, and interim reporting periods therein. Early adoption is permitted. The Company is evaluating the effect, if any, adoption of ASU No. 2013-11 will have on its consolidated financial statements.
In April 2014, the FASB issued ASU No. 2014-08 Presentation of Financial Statements (Top 205): Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. The objective of ASU No. 2014-08 is to clarify the criteria for determining which disposals can be presented as discontinued operations and also modifies related disclosure requirements. The standard is required to be adopted by public business entities in annual periods beginning on or after December 15, 2014, and interim periods within those annual periods. Early adoption is permitted for new disposals beginning in the first quarter of 2014, provided financial statements have not been issued before the release of this standard.
Recently Issued Accounting Standards Updates:
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
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ITEM 4. CONTROLS AND PROCEDURES
Managements Report on Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to the Companys management, including the Companys president, chief executive officer and chief financial officer to allow for timely decisions regarding required disclosure. In designing and evaluating the Companys disclosure controls and procedures, the Companys management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Companys management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of March 31, 2014, the end of the Companys period covered by this quarterly report, the Company carried out an evaluation, under the supervision and with the participation of the Companys president, chief executive officer and chief financial officer of the effectiveness of the design and operation of the Companys disclosure controls and procedures. Based on the foregoing, the Companys president, chief executive officer and chief financial officer concluded that the Companys disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
Changes in Internal Control over Financial Reporting
There have been no changes in the Companys internal controls over financial reporting that occurred during the three month period ended March 31, 2014 that have materially or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
Audit Committee
The Companys Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by the Companys Board of Directors. The Company intends to establish an audit committee during the year 2014. When established, the audit committee's primary function will be to provide advice with respect to the Companys financial matters and to assist the Companys Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor the Companys financial reporting process and internal control system; (ii) review and appraise the audit efforts of the Companys independent accountants; (iii) evaluate the Companys quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and the Companys Board of Directors.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company knows of no material existing or pending legal proceedings against it, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Companys directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company.
ITEM 1A. RISK FACTORS
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following represents all recent unregistered securities issued by the registrant, including sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities:
On December 31, 2013, pursuant to a Stock Purchase Agreement, the Company issued 11,459,279 shares of its common stock for cash in the amount of $1,146. As a result, additional paid in capital was reduced by $10,313.
Exemption From Registration. The shares of Common Stock referenced herein were issued in reliance upon an exemption from registration afforded either under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering, or Regulation D promulgated thereunder, or Regulation S for offers and sales of securities outside the U.S.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY STANDARDS
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibits required by Item 601 of Regulation S-B
Exhibit Number | Description of Exhibit | Filing Reference |
(2) | Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession | |
2.1 | Share Exchange Agreement between Endeavor Power Corporation, Endeavor Holdings, Inc. and Parallax Diagnostics, Inc. and the Parallax Shareholders dated October 1, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
2.2 | Letter of Intent between Parallax Diagnostics, Inc. and Endeavor Power Corporation dated August 15, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
(3) | Articles of Incorporation and Bylaws | |
3.1 | Articles of Incorporation | Filed with the SEC on March 5, 2007 as part of the Companys Registration Statement on Form SB-2. |
3.1(a) | Amended and Restated Articles of Incorporation | Filed with the SEC on May 17, 2010 as part of the Companys Annual Report on Form 10-K. |
3.2 | Bylaws | Filed with the SEC on March 5, 2007 as part of the Companys Registration Statement on Form SB-2. |
3.2(a) | Amended Bylaws | Filed with the SEC on May 17, 2010 as part of the Companys Annual Report on Form 10-K. |
3.3 | Articles of Merger between Endeavor Power Corporation and Parallax Diagnostics, Inc. filed with Secretary of State of Nevada on November 6, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
3.4 | Certificate of Amendment filed with the Secretary of State of Nevada on January 9, 2014 | Filed with the SEC on April 14, 2014 as part of the Companys Annual Report on Form 10-K. |
(4) | Instruments Defining the Rights of Security Holders | |
4.1 | 2011 Equity Incentive Plan dated March 26, 2011 | Filed with the SEC on March 31, 2011 as part of the Companys Current Report on Form 8-K. |
4.2 | Sample Stock Option Agreement | Filed with the SEC on March 31, 2011 as part of the Companys Current Report on Form 8-K. |
4.3 | Sample Stock Award Agreement for Stock Units | Filed with the SEC on March 31, 2011 as part of the Companys Current Report on Form 8-K. |
4.4 | Sample Stock Award Agreement for Restricted Stock | Filed with the SEC on March 31, 2011 as part of the Companys Current Report on Form 8-K. |
4.5 | 2010 Employee Stock Option Plan of Parallax Diagnostics, Inc, dated October 1, 2010 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
4.6 | Sample Stock Option Agreement | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
(10) | Material Contracts | |
10.1 | Second Amendment to Joint Venture Agreement between the Company and Federated Energy Corporation dated September 15, 2009 | Filed with the SEC on September 19, 2009 as part of the Companys Current Report on Form 8-K. |
10.2 | Farmount Agreement between the Company and Togs Energy, Inc. and M-C Production & Drilling Co, Inc. dated July 21, 2009 | Filed with the SEC on July 23, 2009 as part of the Companys Current Report on Form 8-K. |
10.3 | Convertible Promissory Note to Regal Capital Development, Inc. dated August 25, 2009 | Filed with the SEC on September 4, 2009 as part of the Companys Current Report on Form 8-K. |
10.4 | Common Stock Purchase Warrant to Regal Capital Development, Inc. dated August 25, 2009 | Filed with the SEC on September 4, 2009 as part of the Companys Current Report on Form 8-K. |
10.5 | Settlement Agreement between the Company and Regal Capital Development, Inc. dated September 11, 2010 | Filed with the SEC on July 12, 2010 as part of the Companys Current Report on Form 8-K. |
10.6 | Promissory Note to Regal Capital Development, Inc. dated September 11, 2010 | Filed with the SEC on July 12, 2010 as part of the Companys Current Report on Form 8-K. |
10.7 | Amended Promissory Note to Regal Capital Development, Inc. dated September 11, 2010 | Filed with the SEC on April 14, 2011 as part of the Companys Annual Report on Form 10-K. |
10.8 | Settlement Agreement between the Company and Andrew I. Telsey, P.C., dated August 3, 2010 | Filed with the SEC on August 22, 2011 as part of the Companys Quarterly Report on Form 10-Q. |
10.9 | Settlement Agreement between the Company and Regal Capital Development, Inc. dated September 17, 2010 | Filed with the SEC on October 21, 2010 as part of the Companys Current Report on Form 8-K. |
10.10 | Promissory Note to Regal Capital Development, Inc. dated September 17, 2010 | Filed with the SEC on October 21, 2010 as part of the Companys Current Report on Form 8-K. |
10.11 | Employment Agreement between the Company and Alfonso Knoll dated November 8, 2010 | Filed with the SEC on November 12, 2010 as part of the Companys Current Report on Form 8-K. |
10.12 | Promissory Note to Regal Capital Development, Inc. dated November 23, 2010 | Filed with the SEC on November 30, 2010 as part of the Companys Current Report on Form 8-K. |
10.13 | Amendment to Employment Agreement between the Company and Alfonso Knoll dated November 17, 2010 | Filed with the SEC on November 30, 2010 as part of the Companys Current Report on Form 8-K. |
10.14 | Consulting Agreement between the Company and The Musser Group, LLC dated February 21, 2011 | Filed with the SEC on February 25, 2011 as part of the Companys Current Report on Form 8-K. |
10.15 | Promissory Note to Marans Invest & Finance S.A. dated April 8, 2011 | Filed with the SEC on August 22, 2011 as part of the Companys Quarterly Report on Form 10-Q. |
10.16 | Promissory Note to Rast Trade Corp. dated April 21, 2011 | Filed with the SEC on August 22, 2011 as part of the Companys Quarterly Report on Form 10-Q. |
10.17 | Settlement Agreement between the Company and Mr. Alfonso Knoll dated June 8, 2011 | Filed with the SEC on June 16, 2011 as part of the Companys Current Report on Form 8-K. |
10.18 | Settlement Agreement between the Company and The Musser Group, LLC dated July 19, 2011 | Filed with the SEC on August 22, 2011 as part of the Companys Quarterly Report on Form 10-Q. |
10.19 | Assignment of Intellectual Property between Roth Kline, Inc. and Montecito BioSciences, Ltd. dated September 10, 2010 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.20 | License of Intellectual Property between Roth Kline Inc. and Montecito BioSciences, Ltd. dated September 10, 2010 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.21 | Modification to the Assignment of Intellectual Property between Roth Kline, Inc. and Montecito BioSciences, Ltd. | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.22 | Modification to the License of Intellectual Property between Roth Kline Inc. and Montecito BioSciences, Ltd. dated September 10, 2010 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.23 | Employment Agreement between Roth Kline, Inc. and Michael Redmond dated November 15, 2010 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.24 | Development and Supply Agreement between Parallax Diagnostics, Inc. and Corder Engineering, LLC dated July 1, 2011 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.25 | Supply Agreement between Parallax Diagnostics, Inc. and Meyer Stevens Group, Inc. dated July 1, 2011 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.26 | Consulting Agreement between Parallax Diagnostics, Inc. and Huntington Chase Financial Group, LLC dated January 2, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.27 | Consulting Agreement between Parallax Diagnostics, Inc. and Greg Suess dated July 11, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.28 | Convertible Preferred Purchase Agreement between Parallax Diagnostics, Inc. and Hamburg Investment Company, LLC, dated June 17, 2011 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.29 | Convertible Preferred Purchase Agreement between Parallax Diagnostics, Inc. and Huntington Chase Financial Group, LLC, dated June 17, 2011 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.30 | Convertible Preferred Purchase Agreement between Parallax Diagnostics, Inc. and Huntington Chase Financial Group, LLC, dated September 30, 2011 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
10.31 | Consulting Agreement between Endeavor Power Corporation and Capital Group Communications, Inc. dated January 10, 2013 | Filed with the SEC on May 15, 2013 as part of the Companys Quarterly Report on Form 10-Q. |
(14) | Code of Ethics | |
14.1 | Code of Ethics | Filed with the SEC on April 14, 2011 as part of the Companys Annual Report on Form 10-K. |
(16) | Letter Re Change in Certifying Accountant | |
16.1 | Letter from Moore and Associates, Chartered dated August 13, 2009 | Filed with the SEC on August 13, 2009 as part of the Companys Current Report on Form 8-K. |
16.2 | Letter from Seale & Beers, CPAs dated August 26, 2009 | Filed with the SEC on August 27, 2009 as part of the Companys Current Report on Form 8-K. |
16.3 | Letter from M&K CPAs, PLLC dated March 12, 2010 | Filed with the SEC on March 12, 2010 as part of the Companys Current Report on Form 8-K. |
16.4 | Letter from Ron Chadwick, P.C. dated August 3, 2010 | Filed with the SEC on August 4, 2010 as part of the Companys Current Report on Form 8-K. |
16.5 | Letter from Davis Accounting Group, P.C. dated November 29, 2010 | Filed with the SEC on November 30, 2010 as part of the Companys Current Report on Form 8-K. |
16.6 | Letter from M&K CPAs, PLLC dated October 23, 2012 | Filed with the SEC on October 25, 2012 as part of the Companys Current Report on Form 8-K. |
(23) | Consent Letters | |
23.1 | Letter from Seale & Beers, CPAs dated April 14, 2014 | Filed with the SEC on April 14, 2014 as part of the Companys Annual Report on Form 10-K. |
(31) | Section 302 Certifications | |
Filed herewith. | ||
Filed herewith. | ||
(32) | Section 906 Certifications | |
Filed herewith. | ||
Filed herewith. | ||
(99) | Other Documents | |
99.1 | Confidential Private Placement Memorandum for Parallax Diagnostics dated July 1, 2012 | Filed with the SEC on November 15, 2012 as part of the Companys Current Report on Form 8-K. |
99.2 | Patent Report issued by Marathon Patent Group on April 1, 2013 | Filed with the SEC on April 16, 2013 as part of the Companys Annual Report on Form 10-K. |
(100) | XBRL Related Documents | |
101.INS** | XBRL Instance Document | Filed herewith. |
101.SCH** | XBRL Taxonomy Extension Schema Document | Filed herewith. |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. |
101.LAB** | XBRL Taxonomy Extension Labels Linkbase Document | Filed herewith. |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. |
*
Filed herewith.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of 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.
| PARALLAX HEALTH SCIENCES, INC. |
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Dated: May 20, 2014 | /s/ J. Michael Redmond |
| J. Michael Redmond |
| President, Chief Executive Officer and Director |
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Dated: May 20, 2014 | /s/ Calli Bucci |
| Calli Bucci |
| Chief Financial Officer |
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