Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(I.R.S. Employer I.D. No.)
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(§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).
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter: At June 30, 2016, the Companys last sale price of its stock was $0.349 resulting in an aggregate market value of our common stock held by non-affiliates of $7,936,869.
As of April 8, 2017, the Registrant had 37,241,744 shares of common stock issued and outstanding.
List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., part I, part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or other information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933: NONE
ITEM 1. BUSINESS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management. Statements in this periodic report that are not historical facts are hereby identified as forward-looking statements.
NU-MED PLUS, INC., a Utah corporation (NU-MED or the Company) was incorporated in October 2011 in the state of Utah as an early stage, emerging growth company, to develop, manufacture and market new technologies in the medical device field. NU-MEDs immediate focus is on the creation of a nitric oxide powder formulation along with a hospital nitric oxide generator and a mobile rechargeable device to deliver nitric oxide gas. NU-MED is headquartered in Salt Lake City, Utah.
EMERGING GROWTH COMPANY STATUS
As part of the Jumpstart Our Business Startups Act of 2012 (JOBS ACT), companies with less than $1.0 billion in gross revenue can qualify as an emerging growth company. We will qualify as an emerging growth company as defined in the JOBS Act, and, as such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, (ii) reduced disclosure obligations regarding executive compensation in our periodic and annual reports, (iii) not being required to comply with certain new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, and (iv) not being required to obtain stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of the reduced disclosure obligations. Additionally, we will qualify as a Smaller Reporting Company and also have the advantage of not being required to provide the same level of disclosure as larger companies. Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed one billion dollars, (ii) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common units that are held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. At this time we expect to remain both a Smaller Reporting Company and Emerging Growth Company for the foreseeable future.
The mission of NU-MED is to design, develop, and market technologies in the medical device field. Our technologies will focus on market niches in high growth trend areas. We hope each developed technology will fill a current need in medical procedures by improving upon an existing technology or device, or by designing a device to serve a need that is clearly defined and acknowledged by medical professionals.
NU-MED intends to become a medical device company principally engaged in the design, innovation, development, enhancement and commercialization of beginning, early, and selective later-stage quality medical devices. Our immediate focus is on the creation of a nitric oxide powder formulation, a hospital bedside nitric oxide generator and a mobile rechargeable device to deliver nitric oxide gas to offer solutions to hospitals, health systems and the medical community throughout the world.
Prior to the founding of NU-MED PLUS, our core team Jeff Robins, William Moon, and Dr. Craig Morrison investigated, researched, and worked on initial formulations of a conceptual product to convert nitric oxide from a proprietary formulation to a gas used in the medical field. Based on our teams backgrounds in the field of mechanical engineering, chemistry and medicine it was determined a potential niche market existed and the conceptual proprietary product could possibly be created. From this initial research and some initial testing, our team believed we could create a mechanical device that could deliver nitric oxide to medical patients and use a new formulation of nitric oxide that, when combined with the new delivery device, could be accomplished in a more economical method than those currently in existence. Recognizing the experimental nature of the intended product and the time and money commitments to get such a product to market, the team spent almost a year working on various initial equipment and formulizations before determining they could not proceed further without some additional capital. From this realization of the need for capital, NU-MED PLUS was incorporated and an initial private placement was completed to raise capital to create a small lab and purchase equipment and chemicals to start working on testing the theories of the founding team. Even with almost a year of working on the proposed product and formulation, NU-MED recognizes the difficulty in developing a medical product and that other companies could expend far more resources on a similar solution and beat NU-MED to the market. Investors in NU-MED face tremendous risk and would be betting on current management and its development staff, who have not had prior success in developing and marketing medical products. Although management believes they are developing a unique and economical solution for nitric oxide delivery, management acknowledges they have not developed medical products before and all of their prior development work has been for other companies and this will be the first time management and their team have tried to do so without the support of a large organization and such organizations funding capabilities. Additionally, because of the lack of funding, several of the team members, including William Moon and the person assisting in helping to formulate a powder nitric oxide, Tom Tait, are acting in part-time capacity to NU-MED as they continue to work for other organizations that have the ability to pay them a salary. NU-MED has verified that all consultants and part-time employees are permitted to work on NU-MEDs project without violating other employment commitments. Even with the ability to work on NU-MEDs project, NU-MEDs management team and consultants are not full time as they devote part of the time to other projects that have the ability to continue to pay salaries.
The core of the product embodiment is the kinetically controlled release of nitric oxide from a chemical reaction. The mechanical means to deliver a metered dose to a patient is of secondary concern and will be addressed once the nitric oxide generation has been optimized. A research laboratory, completed in July 2012, has been equipped with the appropriate safety measures (negative pressure fume hood), nitric oxide analyzer, and standard lab ware to assess chemical reactions that produce nitric oxide. The initial goal is developing a kinetic control and be able to complete testing to optimize the process. Initial efforts are focusing on a proprietary mixture that will show the requisite parameters for generating nitric oxide in a controlled manner. Once this stage of development is complete, we will move forward with additional development of the delivery system. The optimization may take an unknown direction that will necessitate changes in the anticipated design of the mechanical delivery apparatus. Additionally, unforeseen delays can hamper development timelines. Management believes it will take some time before a product will be finalized and testing completed. Until a final product is completed and testing done, no assurance can be given that we will be able to complete the product or achieve the costs savings for the patient.
We have begun preliminary work on the delivery systems but do not believe such systems will be available for several years. Our initial goals from the delivery system development will be to obtain a prototype for internal testing and file for provisional patent protection. Due to the costs of testing and FDA approvals, we do not anticipate moving beyond our lab testing for at least the next year or longer. Additionally we would need to raise substantially more capital for further testing and hire third party laboratories to move beyond the initial development and testing phase.
NU-MED PLUS will initially develop three distinct products. NU-MED products have not been fully developed; therefore we have not made any submission for FDA approval under any medical use nor do we anticipate any submittals for some time.
Nitric oxide powder formulation.
2. A hospital generator device with controls and safety monitors built in that delivers inhaled nitric oxide to replace expensive pressurized canisters. This delivery system is intended for hospitals. The goal is to have a system that delivers a metered therapeutic dose (up to 200ppm) of nitric oxide via a ventilator. Unlike current delivery systems that use expensive tanks of nitric oxide, this product would use a self-contained generation system based on a chemical reaction. This approach not only allows an on-demand system but management hopes it will provide possible cost savings to patients requiring nitric oxide therapy and other possible diagnosis using very high purity nitric oxide gas. Safe guards such as concentration monitoring, flow and gas purity would be standard.
3. A compact, mobile/portable rechargeable device to deliver inhaled nitric oxide gas. The portable system necessitates a design which can be deployed where a reliable source of power is not available or is difficult to access. The key feature will be a rechargeable battery pack that will power the unit for the full duration of a therapeutic session. It can be recharged using existing electricity supplies, a solar array or other alternative energy source. The unit will be designed as a low power but fully functional nitric oxide delivery system for inhalation therapy.
Nitric oxide is an extremely important bio-mediator in the human body that is produced from the amino acid l-arginine. Nitric oxide has anti-inflammatory properties, antibacterial, antiviral and antifungal properties which make it useful in certain medical treatments. At the present time inhaled nitric oxide (iNO) is used as a selective vaso-dilator in infants. The only currently FDA approved use of nitric oxide at this time is Hypoxia in premature infants and newborn babies. Management is not aware of any other potential uses of nitric oxide that have been cleared by the FDA but this may change as new submittals are made. The heavy costs of delivering nitric oxide to patients have created limitations in the use of nitric oxide. As an additional motivation to reduce these costs, discoveries that have occurred since the first FDA approved use of nitric oxide in 1999 have led to new potential uses, which still need FDA approval, in a wide variety of diseases and health complications, including COPD, flu viruses, bacterial infections, tuberculosis, and much more. NU-MED hopes to take advantage of the expanding medical uses of nitric oxide and the current high costs of delivering nitric oxide by developing a new generated nitric oxide method that reduces the delivery costs. Given NU-MEDs size, we do not anticipate being involved in any studies on new uses of nitric oxide and will rely on other parties to continue to advance the uses of nitric oxide.
The principal gas we aim to generate through our systems is medical grade nitric oxide, along with other various combinations of beneficial medical gases. Non-medical grade nitric oxide gas is produced and sold commercially by major gas companies as a specialty gas mixture and calibration gas. Nitrogen dioxide is present in all nitric oxide gas currently produced. Its presence limits the size of the dose of nitric oxide gas that can be administered for prospective uses in both humans and animals.
We hope to develop a proprietary compound formulation that will be utilized to produce medical grade nitric oxide gas in our hospital unit. Management believes that with the further refinement of our formulation, we can make and filter medical grade nitric oxide gas with minimal amounts of nitrogen dioxide, and that this process can produce medical grade nitric oxide gas in ample quantities for any current or prospective use and hopefully at a price less
than that of all currently available technologies. Management believes the only approved and available medical grade nitric oxide source is a product named Inomax. Since this is a single source market there is no price competition and price is set at a "market can bear" level. We believe, given this structure, there is ample room for a competitive response from NU-MED using on site generated nitric oxide at a lower cost to penetrate the market. The cost of materials and labor for the NU-MED product is anticipated to be low, providing attractive margins. Our product must have a known shelf life and be available in various configurations to yield known concentrations and volumes of gas. Packaging is a critical developmental process that we will address after completion of our formulation.
We approximate that non-clinical laboratory sales could take place earlier than United States Food and Drug Administration (FDA) approval. Management anticipates that selling our units earlier into the market as laboratory equipment or to international groups will pave the way for sales of our medical generators and formulation, but any financial contributions from intellectual property licenses and sales, non-medical generator and formulation sales will not be adequate to fund the substantial costs of the FDA approval process for human medical uses. Even with sales to laboratories or other uses, we will require additional funding, which we currently do not have in place and cannot say that we will be able to obtain, or to obtain at acceptable rates.
All human medical uses of nitric oxide gas require FDA approval prior to initiating sales in the United States and the approval of similar international agencies in their respective countries. Approval can be a long and expensive process, with no assurance that any such approval can or will ever be obtained. Our products from the compound formulation for nitric oxide to our delivery machine will have to be approved by the FDA prior to any sales for human use. Although the FDA can approve uses for nitric oxide and such uses can be expanded, our products, both the formulations and equipment, would also have to be approved to be used in association with the treatment using nitric oxide. Accordingly, although the uses of nitric oxide such as its use for hypoxia in newborns is already approved by the FDA, we still would need to have our machine and compound approved by the FDA for such treatment. Although having the use of nitric oxide would reduce our overall costs as we would not have to prove the efficacy of the treatment but only that our product and compounds are substantially equivalent to those already approved by the FDA. Even this level of approval still requires time and costs and creates additional uncertainty as to our ability to bring a product to the marketplace. We currently do not have the funds to seek such an approval and do not anticipate seeking FDA approval for several years. Focus over the next twelve months will be on continuing development and patent applications.
Current Product Development Status
Hospital NO Unit. Our team has created an initial prototype which is a ready for use as a hospital Nitric Oxide gas generating system which delivers a continuous intra-breath concentration of therapeutic NO to patients who are on a ventilator in a hospital setting. Our formulation used in the machine is available in tablet form now which will improve conversion efficiency of our existing proprietary formulation. This machine and NO formulations are only in the prototype stage and we are doing internal testing on the accuracy of the machine and dosage prior to moving forward with any animal or human tests. With any medical product, it will take years of refinement and testing before the product is ready for market.
Portable Delivery System. Nu-Med has also developed a prototype lightweight Portable NO Delivery System that can be worn comfortably by patients outside of the hospital setting for underserved chronic therapies, and for applications within the United States and in developing nations. This product has the capability to deliver high purity NO to the patient at prescribed intervals or 24 hours per day at controlled doses by means of a nasal cannula or a face mask. As with our hospital unit, we are in the preliminary testing phase and do not anticipate any commercialization for several years.
Future Product Development. Our newest product to be investigated is a one-time Single Treatment Disposable unit which will give rapid access to short term NO treatment. The entire unit is disposed of after treatment and is unique in the market, with no competitive product available. We also are investigating a Wound Healing System which may reduce the loss of a partial or full foot for diabetics by healing wounds and sores caused by their disease. To continue research on new developments and advance next generation designs on existing products management estimates the Company will need $1,250,000 for 2016.
Existing Clinical Applications of Inhaled nitric oxide and Potential Markets
Nitric oxide can be safely inhaled when delivered thru a ventilator, face mask, by nasal cannula, or via an endotracheal tube. An ideal inhaled NO delivery device requires delivery synchronized with respiration and minimal production of NO2 and should be simple to use with full monitoring capacity (high and low alarms and precise monitoring of NO, NO2, and O2).
Since the inception of the only FDA approved treatment of hypoxia in newborns with nitric oxide (INOMAX from Ikaria Holdings) management, initial research has shown approximately 394,000 patients have been treated worldwide over a ten-year period. Management believes the cost of a typical nitric oxide delivery system is approximately $30,000 each. Market expansion in the US will occur based on FDA approval for other medical uses of nitric oxide therapies.
Large companies with established brand names have a distinct advantage in the medical device arena. The cost of developing a product, followed by the costs of testing and licensing, favor larger, well financed and established companies. It will be difficult for NU-MED to compete in this industry and we will be required to focus on the niche products, if we hope to be able to compete. The number of companies that have a product or products involving nitric oxide and free radicals is quite large and difficult to determine precisely as this is not the main focus of these companies.
In addition to companies that may be working on similar solutions in the nitric oxide space but have not been public in any product offerings, NU-MED considers the following companies as direct competitors in the nitric oxide market space anticipated by Nu-Med Plus. This does not preclude that large pharmaceutical or medical supply companies will enter the critical care market with substantially similar products or systems.
Management believes Ikaria Holdings Inc. is currently the only company with an FDA approved nitric oxide (INOMAX) delivery system in commerce. The FDA approval is limited to persistent pulmonary hypertension in newborns (PPHN). Ikaria has submitted several other specific medical uses of nitric oxide to the FDA for approval. The INOMAX system consists of a pressurized tank source of nitric oxide gas and a delivery and monitoring system and is intended for non-portable hospital use.
GeNO LLC is a technology company focused on their GeNOsyl Nitrosyl system of nitric oxide generation and delivery. This is a unique patented system based on the conversion of nitrogen dioxide/dinitrogen tetroxide to pure nitric oxide. Several delivery platforms have been submitted for FDA approval ambulatory (portable), tank delivery and a respirator system. Approval is pending.
GeNOsys Inc. is a technology startup that is developing an on-demand nitric oxide source. The product is described as being able to replace pressurized tank sources of nitric oxide. There are currently no FDA filings.
12th Man Technologies is a consortium of three companies that have combined their respective strengths to offer nitric oxide tank gas at significant cost savings along with appropriate delivery system hardware. FDA submissions under generic drug application and 510(k) are anticipated. They are currently taking pre-market availability orders.
Many of our competitors, either alone or with their strategic partners, may have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Accordingly, our competitors may be more successful than we may be in obtaining approval for therapies or delivery hardware and achieving widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs and advanced technologies become available.
The Company currently has one paid employee and relies on its officers and consultants for most of its activities.
Description of Property
NU-MEDs corporate office is at 455 E 500 S, Suite 203, Salt Lake City, Utah 84111. Our R&D facility is located at 1266 S 1380 W Orem, Utah 84058. We pay rent of $950 per month for the corporate office and $388 per month for the R&D facility. Our corporate offices are leased from a law firm which runs an executive office structure. Until we expand our operations the executive office arrangement will provide us the flexibility to expand our corporate offices as needed without being committed to long term overhead or office space we currently do not need. Our leases are on a month to month basis. Management believes these facilities will serve our purposes for at least the next twelve months.
Our proposed products would use nitric oxide gas for use in medical treatment. Accordingly, our products will require prior FDA Class II approval. We have not submitted our products for approval and it is expected to take many years and may not be obtained, even after expending substantial resources in such efforts. Various laws and regulations govern or influence the research and development, manufacturing, safety, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these approvals and the subsequent compliance with applicable laws and regulations require the expenditure of substantial resources. Any failure by us to obtain or maintain, or any delay in obtaining or maintaining, regulatory approvals could materially adversely affect our business. Our policy will be to conduct our research and development activities in compliance with current FDA guidelines and with comparable guidelines in other countries where we may be conducting clinical trials or other developmental activities.
The following is a brief summary of applicable governmental regulations to which we may be subject in our planned business operations related to the use of our products in the medical field. It should be noted that we do not have the capital to engage in any regulatory approval at this time and instead, for the foreseeable future, we will be focused on the development of our technology and initial patent applications.
Clinical testing, manufacturing and marketing of human pharmaceutical products require prior approval from the FDA and comparable agencies in foreign countries. The FDA has established mandatory procedures and safety and efficacy standards that apply to the testing, manufacture and marketing of such products in the United States. In the United States, these procedures include pre-clinical studies, the filing of an Investigational New Drug Application ("IND") or equivalent, human clinical trials and approval of a New Drug Application ("NDA"). The results of pre-clinical testing, which include laboratory evaluation of product chemistry and animal studies to assess the potential safety and efficacy of the product and its formulations, must be submitted to the FDA as part of an IND that must be reviewed before clinical testing can begin.
The results of the preclinical and clinical testing are then submitted to the FDA in the form of an NDA for approval to commence commercial sales. The FDA may, in responding to an NDA, grant marketing approval, request additional information or deny the approval if it determines that the NDA does not provide an adequate basis for approval. Among the conditions for an NDA approval is the requirement that the prospective manufacturer's quality control and manufacturing procedures conform on an ongoing basis with current Good Manufacturing Practices ("GMP"). In complying with GMP, we must continue to expend time, money and effort in the areas of production and quality control to ensure full compliance or engage the services of outside contractors who are well versed in compliance with these requirements. Following approval of the NDA, we are subject to periodic inspections by the FDA. Any determination by the FDA of manufacturing deficiencies could materially adversely affect our business.
European countries generally follow the same procedures. The European Union has established a unified filing system administered by the Committee for Proprietary Medicinal Products ("CPMP") designed to reduce the administrative burden of processing applications for pharmaceutical products derived from new technologies.
Following CPMP review and approval, marketing applications are submitted to member countries for final approval and pricing approval, as appropriate. In addition to obtaining regulatory approval of products, it is generally necessary to obtain regulatory approval of the facility in which the product will be manufactured. The approval process for medical devices in Europe is similar but is administered by private certification organizations known as Notified Bodies, which are accredited by each member state of the European Union. The receipt of regulatory approvals often takes a number of years, involves the expenditure of substantial resources and depends on a number of factors, including the severity of the disease in question, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. On occasion, regulatory authorities may require larger or additional studies, leading to unanticipated delay or expense. There can be no assurance that any approval will be granted and, even if granted, such approval may be withdrawn if compliance with regulatory standards is not maintained. In addition, the regulatory approval processes for products in the U.S., European countries and other countries around the world are undergoing or may undergo changes, and we cannot predict what effect any changes in the regulatory approval process may have on our business.
Clinical testing of an unapproved significant-risk medical device requires FDA approval in the form of an Investigational Device Exemption (IDE). The IDE application provides information to the FDA on device design and qualification, as well as on the study protocol. The FDA is mandated to respond to the IDE application within 30 days. An IDE may also be required for studies in which an approved device is used for a purpose distinct from its approved indication. This is typically the case when a trial is sponsored by a company for the purpose of expanding the indication of a device or making significant changes in the instructions for use.
Medical devices are regulated in the United States by the Center for Devices and Radiological Health (CDRH) of the FDA. The FDA/CDRH mandate is to promote and protect the public health by making safe and effective medical devices available in a timely manner. The standard for demonstrating safety and effectiveness is determined in part by the risk associated with the device in question. Devices are classified according to their perceived risk using a 3-tiered system (Class I, II, or III).
Class I devices (lowest risk) are subject to general controls, which are published standards pertaining to labeling, manufacturing, post-market surveillance, and reporting. Devices are placed into Class I when there is reasonable assurance that general controls alone are adequate to assure safety and effectiveness. The general controls that typically apply to Class I devices include prohibitions against adulteration and misbranding, requirements for establishing registration and device listing, adverse event reporting, and good manufacturing practices. Furthermore, remedies including seizure, injunction, criminal prosecution, civil penalties, and recall authority are provided to the FDA. Formal FDA review is not required for most Class I devices before their market introduction.
Class II devices are those higher-risk devices for which general controls alone have been found to be insufficient to provide reasonable assurance of safety and effectiveness, but for which there is adequate information available to establish special controls. Special controls may include performance standards, design controls, and post-market surveillance programs. In addition, most Class II devices require FDA clearance of a premarket notification application (PMA or 510(k)) before the device may be marketed. In the 510(k) application, the medical device manufacturer must provide data to demonstrate that the new device is substantially equivalent to a legally marketed device. Although substantial equivalence can usually be demonstrated on the basis of bench and animal testing alone, approximately 10% of 510(k) applications include clinical data.
Class III devices, such as heart valves, pacemakers/implantable cardioverter-defibrillators, and coronary stents, are judged to pose the highest potential risk. These devices are either life-sustaining/supporting, of substantial importance in preventing impairment of human health, or present a high risk of illness or injury. Consequently, general and special controls alone are inadequate to provide reasonable assurance of safety and effectiveness. Most Class III devices require FDA approval of a PMA before they can be legally marketed. Approval of the PMA generally requires clinical data demonstrating reasonable assurance that the device is safe and effective in the target population.
The Human Device Exemption (HDE) is a new pathway to allow for commercialization of Class III devices designed to address small markets, i.e., diseases or conditions that affect fewer than 4,000 patients in the United
States each year. Approval of an HDE requires demonstration that the device is safe and the probable benefits outweigh the probable risks. Although the process may require smaller clinical trials, an HDE device must continue to operate under local IRB approval at each participating institution and must continue to collect case report forms akin to an ongoing clinical trial. The PMA process typically involves a series of studies starting with first clinical use and culminating in a multicenter, prospective randomized control trial (pivotal trial). The complexity and extent of the clinical testing program is dictated by the nature of the device and its proposed use. The clinical study program is developed by the company in conjunction with clinician investigators, all in close collaboration with the FDA/CDRH.
The first and arguably most important step in this process is the pre-IDE meeting, in which the company, often accompanied by the lead clinical investigator(s), meets with the FDA/CDRH to present data about the device, its clinical development program, and its intended use after approval. The FDA/CDRH staff reviews existing bench and animal data (as well as any outside-the-United States clinical data) and makes informal, non-binding suggestions regarding the need (if any) for additional pre-clinical data (bench and animal), as well as the study design. The sponsor then submits an IDE application to the FDA/CDRH for formal review.
Clinical development of a new Class III device is typically divided into pilot and pivotal trial phases. The purpose of the pilot phase (starting with first clinical use) is to establish safety and to assist in design of the pivotal trial. Pilot-phase testing is typically limited to fewer than 100 patients treated at a few centers. The purpose of the pivotal trial is to generate data that define patient populations in which use of the device is safe and effective. The dialogue initiated during the pre-IDE meeting continues and intensifies between the FDA/CDRH and the company over the specifics of the pivotal trial and includes the patient population, the control group against which the new device will be evaluated, and the primary and secondary end points of the evaluation. For first-in-class devices, e.g. drug-eluting stents, where there are few data regarding short- or long-term outcomes, the FDA/CDRH requires prospective randomized controlled studies. High profile devices that require randomized data for approval are the exception rather than the rule. The vast majority of device clinical trials are case series that carefully document product performance. Still more products are approved as tools.
When the FDA/CDRH has substantial data on the device class metrics, comparisons may be made to historical data or objective performance criteria. When few data on existing standards are available, the FDA typically requires randomized rather than single-arm studies, in which the new device is compared against concurrent controls treated with current best medical practice. The comparison may be powered to show that the new treatment is superior to prior approaches, or that it is non-inferior (equivalent or better) compared with a previously approved device in a new area.
The specifics regarding study design may have profound impact on the time and cost of bringing a new device to market. Though the primary mission of the FDA/CDRH is to ensure safety and effectiveness of commercially available devices, when exerting regulatory oversight, the agency must balance its primary mission with the costs of introducing new technologies to the clinical marketplace. This has been codified by the FDA Modernization Act and the FDA Modernization Act-II, which require the agency to pursue the least burdensome means available to establish device safety and efficacy. The trial must be conducted according to good clinical practices standards, with the approval of the local IRB at each participating center.
Every clinical site is federally mandated to have an IRB responsible to ensure the protection of the rights, safety, and welfare of research subjects. Regulation of the IRB review of protocols involving medical devices is under the purview of the FDA. The Office of Protection from Research Risks (OPRR) is responsible for oversight regarding all human research and is in direct communication with the FDA/CDRH. Studies involving human subjects that do not involve products regulated by the FDA, fall under the direct purview of the OPRR. Both the FDA and the OPRR are in the Department of Health and Human Services. Each IRB must meet standards for the composition, leadership, and processes set forth by that department. IRBs are subject to periodic audits by the FDA to ensure that records and procedures are in compliance with regulations. The IRB process typically requires approximately three months, but at times can take considerably longer.
The company must also negotiate agreements with each clinical site addressing the many issues associated with the clinical trial. In addition to the study costs/reimbursement (per-patient enrolled and overhead), these agreements typically include indemnification and the assignment of ownership rights of new discoveries (intellectual property) made in the course of the study. The resources required at each center to perform the high quality research necessary for a PMA protocol are formidable. Pivotal studies required for a PMA application are typically large multicenter randomized trials and often represent the largest commercial risk and expense in the device development process. In addition to obtaining an IDE from the FDA and formally recruiting clinical sites, it also includes engaging a contract research organization (CRO), core laboratories, formation of a data safety monitoring board (DSMB), and an executive committee.
Though there are many similarities in the regulatory process in the United States and countries within the European Union, there are important differences that impact the time and cost associated with the introduction of a new medical device. The European Union system relies heavily on notified bodies (NBs), which are independent commercial organizations to implement regulatory control over medical devices. NBs have the ability to issue the CE mark, the official marking required for certain medical devices. NBs are designated, monitored, and audited by the relevant member states via the national competent authorities. Many functions performed by the FDA/CDRH within the United States are performed by NBs, including medical device certification, device type designation, assessment and verification of quality systems, and review of design dossiers for high-risk devices. Currently, there are more than 50 active NBs within Europe. A company is free to choose any notified body designated to cover the particular class of device under review. After approval, post-market surveillance functions are the responsibility of the member state via the competent authority. NBs typically function in a closed manner, providing little visibility on criteria required for approval. This dynamic allows for a high degree of variation as well as competition among NBs. As a result, NBs are perceived by industry to be less bureaucratic organizations that can respond more quickly and efficiently than the FDA.
Criteria for approval of high-risk devices are different in the European Union. To receive approval to market a Class III high-risk (and some Class II) device in the United States, the manufacturer must demonstrate the device to be reasonably safe and effective, which typically requires a prospective, randomized controlled clinical trial. To receive approval to market a device in the European Union, the manufacturer must demonstrate that the device is safe and that it performs in a manner consistent with the manufacturers intended use. This difference has a profound impact on the size and scope of the clinical studies for regulatory approval.
The demonstration of safety and efficacy for a new medical device is a long, arduous, and expensive developmental path from early concept to introduction into clinical practice.
We will be subject to environmental and other rules related to the handling of nitric oxide. We will be using very small testing quantities of nitric oxide and do not anticipate any material issues in relation to nitric oxide as it relates to environmental or other regulatory issues.
In addition to the foregoing, our present and future business may be subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research, as well as national restrictions on technology transfer, and import, export and customs regulations and similar laws and regulations in foreign countries. Due to the extensive regulatory requirements, management does not anticipate any submittals for some time until the technology is more developed and tested in the lab. At such time as management feels initial submittals are warranted, significant additional capital will need to be raised to proceed with even initial submittals As such, we believe any commercialization of our product is years away and we will continue to be reliant on loans and stock sales to stay in business.
Concentration of Customers
Currently we do not have any customers and will not have any customers for some time until our product is through the development stage and testing stage. This may take several years.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
Presently we have 2 patents pending for our Nitric Oxide systems and we hope to file additional patents for our products which will help us build a strong IP portfolio and value for our company and our shareholders. Our two initial preliminary patents cover Gas Generator #62-014866 and a Controlled Delivery of Medical gases using Diffusion Membrane #14529112. We are also pursuing a proprietary protection strategy of our key formulations and methods for further strengthening the overall Intellectual Property portfolio. We have no trademarks. We also have no franchises, concessions, royalty agreements or labor contracts.
Research and Development Costs During the Last Two Fiscal Years
We are currently expensing most of our costs under a general operating expense category instead of capitalizing any research and development expenses.
ITEM 1A. RISK FACTORS
NU-MEDs operations are subject to a number of risks including:
Risk Factors Relating to NU-MED Proposed Activities
We currently do not have the capital to fund operations and are dependent on raising additional capital to stay in business.
NU-MED is still in the development stages and does not have an operating history on which to judge an investment decision. Additionally, NU-MED is currently undercapitalized and is relying on equity and debt investments to continue operations. Although we have identified the product we want to develop and market, we are still in the design and development stage with the product. Given that we will be producing a medical device, it may take years of testing before we are able to start selling our product and we will need more capital infusions to get the product developed and to market. Investors in NU-Med would be placing their money in a company with unproven and undeveloped products which are potentially years away from being able to sell and with no support for the eventual commercial application or market for the product. Given the uncertainties facing the company, investors should look to an investment in NU-MED as highly speculative and risky with a high probability of losing their entire investment.
We are still in the product development phase of our operations so the ultimate success of our products is unknown.
NU-MED is entering into a new business. NU-MED has focused on the development of medical products which requires extensive capital investment and can be a very lengthy process subject to extensive regulatory approval. The ultimate success of NU-MED and its products is very uncertain. Investors will therefore be placing their money in an undercapitalized company with no proven operations.
Nitric oxide is a regulated chemical and is subject to extensive environmental regulations related to its handling and disposal, which may increase our costs and subject us to environmental regulations.
Although NU-MED operates as a research and development company at this time and we use only small quantities of nitric oxide, we are still subject to the environmental and other workplace rules related to the handling and disposal of nitric oxide. These rules require that we keep records of our handling and disposal of any nitric oxide. Additionally, if we mishandle or do not dispose properly of the nitric oxide, we could be subject to fines and penalties. At this time, we do not anticipate handling large quantities of nitric oxide and should not see substantial additional costs or contingencies from our use of nitric oxide. However, as we expand our operations, the environmental and workplace rules related to the handling of nitric oxide could increase our overall costs.
We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.
Certain aspects of our business are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, distribution, storage, handling, treatment and disposal of materials. For example, high-pressure gas cylinders can be regarded as hazardous materials. Although we believe our safety procedures for handling and disposing of these materials and waste products comply with these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials. In the event of contamination or injury, or failure to comply with environmental, occupational health and safety and export control laws and regulations, we could be held liable for any resulting damages and any such liability could exceed our assets and resources. We do not maintain insurance for any environmental liability or toxic tort claims that may be asserted against us.
We will need additional financing, which will potentially dilute current investors, and we may not be able to obtain such financing.
NU-MED intends to engage in product development that will require substantial capitalization as we attempt to develop our products. Accordingly, NU-MED future success and profitability may be based on our ability to obtain additional financing on favorable terms. Any additional financing may cause dilution to current investors and there can be no assurance that any additional financing will be on terms that are favorable to NU-MED and our shareholders.
We currently have note payables that may be converted into shares of our common stock, which could result in substantial dilution to current investors.
We have note payables which may be converted into shares of our common stock. Two of the notes, with total principal balances of $309,910 are convertible at $0.01 per share of principal and interest. With approximately $309,910 in principal and $65,674 in accrued interest on the notes, if the notes and accrued interest are converted, over 37,558,354 additional shares would be issued. In addition, there is a note with a remaining principal balance of $27,500 which is convertible into shares of common stock at $0.25 per share. If the note were converted an additional 110,000 shares of common stock would be issued. If all of the notes and accrued interest were converted into shares of our common stock, investors would suffer substantial dilution to their ownership percentage in NU-MED and to their overall value. We would expect any issuance to be very dilutive to current investors, resulting in potential loss of value to the investors.
The medical product business is highly competitive and subject to extensive regulations, making it difficult and very expensive to bring new products into the marketplace.
We face vigorous competition from companies throughout the world, including multinational companies which are better financed and have more experience in medical product design. Most of these competitors have greater resources than we do and may be able to respond to changing business and economic conditions more quickly than us. Our ability to compete with these companies will be limited. Additionally, with extensive regulation and testing of medical devices, it is extremely costly to bring a medical device to market and we may not be able to obtain the necessary capital to bring a medical device to market. As such, an investment in the Company is very risky and could result in the loss of an investors entire investment.
Our success will be dependent on the ability of management to develop medical devices.
Our success depends on our ability to develop medical products. With limited resources, we will be dependent on current management to be able to develop the medical devices. None of our current management members has extensive experience developing medical products or bringing them to market. As such, investors will be placing money with individuals with no proven success in developing and selling medical devices, thereby creating high risk of loss of an investors entire investment in the Company.
Our success depends, in part, on our key personnel.
Our success depends, in part, on our ability to retain our key personnel, including our executive officers and senior management team. Our management team has created our business model and the initial focus on our first medical device. The unexpected loss of one or more of our key executives could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. Competition for these employees can be intense. We may not be able to attract, assimilate or retain qualified personnel in the future, and our failure to do so could adversely affect our business.
Our ability to commercialize pharmaceutical products successfully may depend, in part, on the availability of reimbursement for our products from:
* Government and health administration authorities;
* Private health insurers; and
* Other third party payers, including Medicare.
We cannot predict the availability of reimbursement for health care products. Third-party payers, including Medicare, are challenging the prices charged for medical products and services. Government and other third-party payers progressively are limiting both coverage and the level of reimbursement for new drugs. Third-party insurance coverage may not be available to patients for any of our products.
The continuing efforts of government and third-party payers to contain or reduce the costs of health care may limit our commercial opportunity. If government and other third-party payers do not provide adequate coverage and reimbursement for any product we bring to market, doctors may not prescribe them or patients may ask to have their physicians prescribe competing treatments with more favorable reimbursement. In some foreign markets, pricing and profitability of prescription pharmaceuticals are subject to government control. In the United States, we expect that there will continue to be federal and state proposals for similar controls. In addition, we expect that increasing emphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives could decrease the price that we receive for any products in the future. Further, cost control initiatives could impair our ability to commercialize our products and our ability to earn revenues from this commercialization.
General Risks Relating to Investors
We intend to take advantage of the disclosure requirements of the JOBS Act provided for emerging growth companies, including not providing all of the accounting disclosure that other companies will be required to
provide, which may limit an investors ability to compare our financial statements with other companies.
Under the JOBS Act, we can elect to not comply with new or revised accounting standards which will allow us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. Until the standards are required for private companies, we will not be required to adopt those standards. As such, our financial statements may not be comparable to those of companies that comply with public company effective dates. This could affect an investors ability to evaluate our financial statements compared to other public companies. In addition to the financial statements, as we qualify as a Smaller Reporting Company, the JOBS Act allows us to provide less disclosure on certain issues, such as executive compensation, which could affect an investors ability to compare us to other companies.
We do not intend to pay dividends in the near future.
NU-MED has not paid, and does not plan to pay, dividends in the foreseeable future, even if we were profitable. Earnings, if any, are expected to be used to expand operations, for research and development and for general corporate purposes, rather than to make distributions to shareholders.
Investors will not have cumulative voting and will not be able to elect directors based on the percentages of ownership.
Holders of common stock are not entitled to accumulate their votes for the election of directors or otherwise. The present shareholders of NU-MED will be able to elect all of the directors of NU-MED and effectively control NU-MEDs affairs, making it difficult for investors to be able to change management or the direction of NU-MED. (See "DESCRIPTION OF SECURITIES.")
We may issue more stock without shareholder input or consent, which could dilute the book value of your investment.
The board of directors has authority, without action by or vote of the shareholders, to issue all or part of the authorized but unissued shares. In addition, the board of directors has authority, without action by or vote of the shareholders, to fix and determine the rights, preferences, and privileges of the preferred stock, which may be given voting rights superior to that of the common stock. Any issuance of additional shares of common stock or preferred stock will dilute the ownership percentage of shareholders and may further dilute the book value of our shares. It is likely we will seek additional capital in the future to fund operations. Any future capital will most likely reduce current shareholders percentage of ownership. Additionally, with the board of directors having the ability to set the rights, preferences and privileges of the preferred stock the board of directors, without shareholder approval, can create classes of stock which are superior to the common stock in both voting and preferences, including dividend and liquidation preferences. As such, current and future holders of common stock may have less voting power per share and dividend rights then subsequently issued preferred stock.
A relatively small number of stockholders and managers have significant influence over us, other stockholders will not be able to have a voice in the direction of the company, and stockholders may disagree with the decisions of management.
A small number of our stockholders and management, acting together, will be able to exert significant influence over us through their ability to influence the election of directors and all other matters that require action by our stockholders. The voting power of these individuals could have the effect of preventing or delaying a change in control of our company which they oppose, even if our other stockholders believe it is in their best interests. In addition, our executive officer has the ability to influence our day-to-day operations. These factors could negatively affect our company and our stock price, as other investors may be unwilling to invest in a company with such a consolidation of control. Additionally, if stockholders dislike the decisions of management, it will be difficult for stockholders to make changes to current management.
The departure of certain key personnel could affect the financial condition of NU-MED due to the loss of their expertise.
Our business plan was developed by our officers and will depend on their ability to design and create the initial models for our products. Without their expertise, it is unlikely we will be able to complete the development and design of initial products. We do not have the funds, at this time, to hire additional personnel, and without current management it is unlikely we would be able to obtain further funding. The loss of any member of management would severely hinder our ability to develop our proposed products. A failure on our part to retain the services of these key personnel could have a material adverse effect on our operating results and financial conditions. We do not maintain key man life insurance on any of our employees.
The Company currently has one employee and relies on its officers and consultants for most of its activities.
ITEM 2. PROPERTIES
NU-MEDs corporate office is at 455 E 500 S, Suite 203, Salt Lake City, Utah 84111. Our R&D facility is located at 1266 S 1380 W Orem, Utah 84058. We pay rent of $950 per month for the corporate office and $388 per month for the R&D facility. Our corporate offices are leased from a law firm which runs an executive office structure. Until we expand our operations the executive office arrangement will provide us the flexibility to expand our corporate offices as needed, without being committed to long term overhead or office space we currently do not need. Our leases are on a month to month basis. Management believes these facilities will serve our purposes for at least the next twelve months.
ITEM 3. LEGAL PROCEEDINGS
Subsequent to December 31, 2016, the Company filed an action against its former CFO for the return of unearned shares of stock issued to him. The Company also included in that action a restraint against him selling stock into the market in violation of the agreement made that he would not sell stock until such time as there was a stable and sustainable market for the stock. The former CFO has filed a counter action against the Company. The Company believes it will prevail in this action.
ITEM 4. MINING SAFETY DISCLOSURE
NU-MED has no mining operations.
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's Common Stock is quoted on the over the counter bulletin board and OTCQB under the symbol NUMD. The first sale of the shares occurred in the third quarter of 2014. The following high and low bid prices for the Company's Common Stock is based on over-the-counter quotations that reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not necessarily represent actual transactions. Furthermore, the Companys common stock has traded sporadically and in low volume. Consequently, the information provided below may not be indicative of the Company's common stock price under different conditions.
At April 8, 2017, the Company had approximately 147 shareholders of record. As of April 8, 2017, the Company had 37,241,744 shares of its Common Stock issued and outstanding.
NU-MEDs transfer agent is Interwest Stock Transfer Company, 1981 Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117; telephone number 801-272-9294.
Recent Sales of Unregistered Securities
g. Earnings per Share
The computation of earnings per share of common stock is based on the weighted average number of shares
h. Concentrations and Credit Risk - The Company has relied on a small group of investors to fund the its operations. If this group becomes unable or unwilling to provide additional funding, the Company may be unable to remain in business or to execute on its business plan.
Recent Accounting Pronouncements In October 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-16, Income Taxes (Topic 740); Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires entities to recognize the income tax consequences of many intercompany asset transfers at the transaction date. The seller and buyer will immediately recognize the current and deferred income tax consequences of an intercompany transfer of an asset other than inventory. The tax consequences were previously deferred until the asset is sold to a third part or recovered through use. This guidance will become effective on January 1, 2018.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. This ASU addresses the following eight specific cash flow issues: Debt costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. This guidance will become effective on January 1, 2018. We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09, Compensation Stock Compensation (Topic 718); Improvements to Employee Share-Based Payments Accounting. The ASU changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. This guidance will become effective January 1, 2017. We do not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements.
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update ("ASU") 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current accounting treatment. This ASU changes the guidance on sale-leaseback transactions, initial direct costs and lease execution costs, and, for lessors, modifies the classification criteria and the accounting for sales-type and direct financing leases. For public business entities, this ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact of this ASU on its financial statements and disclosures.
The Company has reviewed all other FASB-issued ASU accounting pronouncements and interpretations thereof that have effective dates during the period reported and in future periods. The Company has carefully considered the new pronouncements that alter previous GAAP and does not believe that any new or modified principles will have a
material impact on the companys reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Companys financial management and certain standards are under consideration.
NU-MED is focused on the development of medical devices with the first product aimed at the delivery of nitrogen oxide to patients. NU-MED believes the current delivery systems and supply of nitrogen oxide are costly and creates an opportunity to develop a machine that can utilize cheaper delivery devices for nitrogen oxide. In an effort to develop products, shortly after the founding of NU-MED management raised initial capital to be able to establish a lab and purchase equipment to work on the initial designs for a new medical device to deliver nitrogen oxide.
Our lab has been successfully equipped and we are proceeding with development of our proprietary product technology. Our technology is at the early development stage and management plans are to concentrate on further improvement of our technology. Our budget requirements for the next year will be centered upon factors relating to the testing, research and enhancement with the intention being to patent our formulation and design. Included in our budget for the next year is the costs of chemical standards, gases and equipment we have projected we will need. Contained also within in our budget are auditing costs and legal fees, which include patent filing expenses. Projected costs to continue operation for the next year are $1,250,000 and may increase depending on the costs of patent applications and ongoing development work. At this time, we do not have the funds to operate at this level and are seeking financing either through debt or equity. If we cannot raise the needed capital, we may not be able to remain in business.
Management believes, with the costs to develop new technology, it is important to divide the capital needs into phases to be able to track development progress and anticipate capital needs better. Rather than trying to raise a larger amount of capital upfront, which management felt would result in higher dilution than otherwise would be required, management has chosen to raise capital in tranches as product development progresses. With the first phase of establishing a lab and completing initial design completed, management anticipates having to seek additional capital in the near future to create prototype machines and begin initial testing and further development. The exact amount of capital and the time frame to continue the development of the initial products is still unknown as management continues to modify current designs. Management believes it may take years before a commercial product is able to be marketed and will have to rely on outside funding to support operations through not only the development and testing phases, but the licensing phase and initial marketing cycles.
At December 31, 2016, we had assets of $35,533 with current assets of $12,450 and liabilities of $4,474,833. Our current assets consisted of cash in the amount of $12,450. At December 31, 2015, we had current assets of $45,715 of which $30,903 was cash with the balance being prepaid expense, and liabilities of $15,299,409. We currently do not have the cash to pay ongoing expenses and have had to rely on loans from shareholders to cover expenses. Without additional capital, we will not be able to stay in business and move our business plan forward. Subsequent to December 31, 2016, we entered into a $700,000 stock subscription agreement, under which we have drawn $300,000. We currently have no commitments beyond this stock subscription for the needed capital. Since we will not have a commercial product in the next twelve months, we will have to rely on outside funding to support our operations and product development and testing efforts. Given the financial state of NU-MED, we will not be able to seek traditional bank financing and have to rely on private stock sales and potential loans from investors and shareholders. If we are unable to raise additional capital, we will be forced to suspend operations until such capital can be raised or go out of business. We cannot project the full costs to bring our proposed product to market or the timing of such commercialization. Given that our product is in the medical field, testing is very expensive and we will need additional capital prior to completing the testing phase. Any refinement or modification of the product after the prototype is developed would also require additional capital. At this time, we will have to continue to rely on outside capital and a budget that may require adjustment as we move further in the product development phase.
For the year ended December 31, 2016, we had no revenues and operating expenses of $1,224,599, gain on derivative of $10,944,813 and interest expense of $15,908 resulting in a net profit of $9,652,488 compared to a net loss for the year ended December 31, 2015 of $8,884,217. Our operating losses have increased as we have moved forward with several patent filings and have had to retain additional consultants to assist with ongoing development work. We were able to utilize our stock to pay for many of the consultants which has allowed us to preserve our limited cash. We anticipate losses to continue for the foreseeable future and for the losses to increase as we hire personnel and move into more development and testing phases of our proposed products. Additionally, we are preparing patent applications which will require additional capital to pay for outside attorneys and consultants. We will be dependent on outside capital to support operations for the foreseeable future and at this time do not have any commitments for additional capital.
We had a gain on derivative liability of $10,944,813 during the year ended December 31, 2016, compared to loss of $7,915,171 for the year ended December 31, 2015.
The Company does not have any off-balance sheet arrangements and it is not anticipated that the Company will enter into any off-balance sheet arrangements.
The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.
The Company has had no disagreements with its independent registered public accounting firms with respect to accounting practices or procedures or financial disclosure.
There have been no changes in internal control over financial reporting that occurred during the last fiscal year that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.
The following table sets forth information with respect to the officers and directors of NU-MED. NU-MEDs directors serve for a term of one year and thereafter until their successors have been duly elected by the stockholders and qualified. NU-MEDs officers serve for a term of one year and thereafter until their successors have been duly appointed by the Board of Directors and qualified.