ITEM 1. BUSINESS
SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report constitute “forward-looking
statements.” Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating
to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating
to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or
that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes
in government regulations; availability of management and other key personnel; availability, terms and deployment of capital; relationships
with third-party equipment suppliers; and worldwide political stability and economic growth. The words “believe,” “expect,”
“anticipate,” “intend” and “plan” and similar expressions identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.
Corporate
History
NU-MED PLUS, INC., a Utah corporation (“NU-MED”
or the “Company”) was incorporated in October 2011 in the state of Utah to develop, manufacture and market new technologies
utilizing nitric oxide in the medical device field, primarily through the creation of a nitric oxide generating compound formulation and
delivery systems. To date we have developed a hospital nitric oxide delivery system, a clinical nitric oxide delivery system, a mobile
rechargeable device to deliver nitric oxide gas, and a nitric oxide system that can be used for research applications. NU-MED is headquartered
in Salt Lake City, Utah.
EMERGING GROWTH COMPANY STATUS
As part of the Jumpstart 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 qualify as a “Smaller Reporting Company” and also have the advantage of not being required to provide the
same level of disclosure as larger companies. Section 107 of the JOBS Act also provides that an emerging growth company can take advantage
of the extended transition period provided in the Securities Act for complying with new or revised accounting standards. In other words,
an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private
companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section
102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates
for public and private companies until those standards apply to private companies. As a result of this election, our financial statements
may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up
to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed one billion
dollars, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended, or the Exchange Act, which would occur if the market value of our common units that are held by non-affiliates exceeds
$700.0 million as of the last business day of our most recently completed second fiscal quarter, and (iii) the date on which we have issued
more than $1.0 billion in non-convertible debt during the preceding three-year period. At this time, we expect to remain both a “Smaller
Reporting Company” and “Emerging Growth Company” for the foreseeable future.
Business
The mission of NU-MED is to design, develop, and market
technologies in the medical device field. Our technologies will focus on market niches in high growth trend areas. We hope each developed
technology will fill a current need in medical procedures by improving upon an existing technology or device, or by designing a device
to serve a need that is clearly defined and acknowledged by medical professionals.
NU-MED is a medical device company principally engaged
in the design, innovation, development, enhancement and commercialization of beginning, early, and selective later-stage quality medical
devices. The mission of NU-MED is to design, develop, and market technologies utilizing nitric oxide in the medical device field. Our
technologies will focus on market niches in high growth trend areas. Our products are developed to target a current need in medical procedures
by improving upon an existing technology or device or by designing a device to serve a currently unfilled need that is clearly defined
and acknowledged by medical professionals. Our focus has been on the creation of a nitric oxide generating formulation, a hospital bedside
nitric oxide delivery system, a clinical unit for use in medical clinics and rehabilitation centers and a mobile rechargeable device to
deliver nitric oxide gas to offer solutions to hospitals, health systems and the medical community throughout the world.
Products
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 vasodilator in infants. The only FDA approved use of nitric oxide at this time is for the treatment of 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 cost of delivering nitric oxide to patients has created limitations
in its use. Discoveries that have been made since the first FDA approved use of nitric oxide in 1999 have led to a number of new potential
uses, which still need FDA approval, in a wide variety of diseases and health complications, including COPD, flu viruses, bacterial infections,
tuberculosis, non-healing wounds, head injuries and much more. NU-MED hopes to take advantage of the expanding medical uses of nitric
oxide by developing a new method to generate nitric oxide that reduces the delivery costs and can be used in a variety of medical and
research settings. Given NU-MED’s size, we do not anticipate being involved in any clinical studies on new uses of nitric oxide
and will rely on other parties to continue to advance the uses of nitric oxide.
NU-MED PLUS has focused on the development of five
distinct products for the delivery of nitric oxide. NU-MED products have not been fully developed; therefore we have not made any submission
for FDA approval under any medical use.
1. Nitric
oxide proprietary formulation. Generates nitric oxide gas on demand, eliminating the need for compressed gas cylinders.
2. A
hospital delivery device with controls and safety monitors built in that delivers inhaled nitric oxide to a patient at therapeutic levels.
This delivery system is intended for hospitals specifically intensive care units. The goal is to have a system that delivers a metered
therapeutic dose (up to 40 ppm) of nitric oxide via a ventilator. The core technology allows dilution of nitric oxide to therapeutic levels
to be accomplished without the use of injectors or valves. Safeguards such as concentration monitoring, flow and gas purity would be standard.
3. A
clinical delivery unit that is designed for treatment in an office or physician’s clinic. A unit powered by a wall outlet, administration
of the nitric oxide would be via cannula or non-rebreather face mask
4. 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 is a rechargeable battery pack
that powers the unit for the full duration of a therapeutic session. It can be recharged using existing electrical sources, a solar array
or other alternative energy source. The unit is designed as a low power but fully functional nitric oxide delivery system for inhalation
therapy, that can be used as a transport device during the movement of a patient or as a delivery device in those remote areas of the
world that do not currently have electrical power readily available.
5. A
disposable unit that will deliver a therapeutic dose of nitric oxide to a patient and will then be placed into a container to be incinerated.
This unit would be used for the treatment of patients in a pandemic, where a large number of patients must be treated and there is insufficient
capacity to sterilize the unit after use by each patient. The dispensing devices would be isolated and destroyed after use to ensure that
another patient is not exposed to the bacteria or virus carried by the patient originally treated.
6. A
unit that is one of the world’s first nitric oxide dilution systems designed for research. A patent pending technology utilizes
pure 100% nitric oxide from a pressurized tank source and dilutes it with air or other non-reactive diluent gas to provide a 1 to 500
ppm source of high purity nitric oxide for investigational applications.
The principal gas we aim to generate through each
of our systems described above is medical grade nitric oxide, along with other various combinations of be6neficial 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.
A longer-term goal is to further develop our proprietary
compound formulation option that will be utilized to produce medical grade nitric oxide for use in all delivery units. 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. For a number of years the only approved and
available medical grade nitric oxide delivery device was 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, while still 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 the sale of our research unit
for non-clinical laboratory work could take place earlier than 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 delivery devices, but any financial
contributions from intellectual property licenses and sales and other non-medical 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 have no assurance 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 be obtained. Our products from
the compound formulation for nitric oxide to our delivery machines 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 use
of nitric oxide for the treatment of hypoxia in newborns is approved by the FDA, we still would need to have our dispensing unit and compound
approved by the FDA for such treatment. In order for our dispensing unit to be used 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 requires time, carries substantial 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. We are currently working to secure funding that will enable us to submit
the hospital unit for FDA approval.
Current Product
Development Status
Hospital NO Unit. Our team has created an initial
prototype and is nearing completion of the first production unit for use as a hospital nitric oxide gas delivery system. The device delivers
a continuous intra-breath concentration of therapeutic NO to patients who are on a ventilator in a hospital setting. We are performing
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 a period of refinement and testing before the product is ready for market.
Clinical Delivery System. The clinical system
is a simplified version of the hospital unit. While it can be used in a hospital setting it was designed to be operated and used in a
less medically intensive environment, such as a doctor’s office or physician’s clinic and does not incorporate the alarms
needed in an intensive care setting. It is a smaller and more portable unit, lending itself to clinical use on an as needed basis, rather
than full-time use for which the hospital unit is designed. Administration is via nasal cannula or non-rebreather face mask. Similar to
a dialysis center concept, patients would be treated with nitric oxide in a clinical setting on an as needed basis.
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 for 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 in the near future.
Reagent Delivery. During development of the
Nu-Med line of medical nitric oxide delivery systems it was discovered that a system could be built that would provide the research community
with a variable concentration source of nitric oxide for conducting research and experiments. A preliminary system has been built that
can provide a wide range of concentrations and flow rates of NO. This was reduced to practice and a delivery system is now available
for research use.
Future Product Development. Utilizing our core
technology, 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 surgical loss of a partial or full foot for diabetics by healing
diabetic wounds and sores caused by their disease.
Existing Clinical Applications of Inhaled Nitric Oxide and Potential
Markets
Nitric oxide can be safely inhaled, utilizing our
delivery device, 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). Our delivery devices were designed with all of
these requirements in mind. As a result, we believe it will be the best and most efficient delivery system available when it is commercialized.
Since the inception of the only FDA approved treatment
of hypoxia in newborns with nitric oxide (INOMAX from Ikaria Holdings) 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.
Competition
Large companies with established brand names have
a distinct advantage in the medical device arena. The cost of developing a device, 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 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 which they anticipate to enter. This does not preclude that additional large pharmaceutical
or medical supply companies will enter the critical care market with substantially similar products or systems.
Mallinckrodt Inc. acquired the only company with an
FDA approved nitric oxide (INOMAX) delivery system for use in medical facilities. The FDA approval is limited to the treatment of persistent
pulmonary hypertension in newborns (PPHN). Mallinckrodt Inc. 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. The FDA has approved
the GeNOsyl Advanced Delivery System (ADS) for use with neonates.
Beyond Air (formerly AIT Therapeutics) (AITB) is a
company that has acquired a technology that produces nitric oxide from electrical discharge through air. They are currently in clinical
trials testing the product for use in the treatment of cystic fibrosis and chronic obstructive pulmonary distress.
Many of our competitors, either alone or with their
strategic partners, may have substantially greater financial, technical and human resources than we do and significantly greater experience
in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization
of those products. Accordingly, our competitors may be more successful than we may be in obtaining approval for therapies or delivery
hardware and achieving widespread market acceptance. We anticipate that we will face intense and increasing competition as new drugs and
advanced technologies become available.
Employees
The Company currently has two employees and relies
on its officers and consultants for most of its activities.
Regulations
Our proposed products would use nitric oxide gas for
use in medical treatment. Accordingly, our products will require prior FDA Class II approval. We have not submitted our products for approval
and it is expected to take many years and may not be obtained, even after expending substantial resources in such efforts. Various laws
and regulations govern or influence the research and development, manufacturing, safety, labeling, storage, record keeping and marketing
of our products. The lengthy process of seeking these approvals and the subsequent compliance with applicable laws and regulations require
the expenditure of substantial resources. Any failure by us to obtain or maintain, or any delay in obtaining or maintaining, regulatory
approvals could materially adversely affect our business. Our policy will be to conduct our research and development activities in compliance
with current FDA guidelines and with comparable guidelines in other countries where we may be conducting clinical trials or other developmental
activities.
The following is 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 the application for FDA regulatory approval of our devices is a long and costly pathway. As we do not currently have
the capital to engage in any regulatory approval, for the foreseeable future we will be focused on the development of our technology and
additional 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 several 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) applications, 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 manufacturer’s intended use. This difference has a profound impact on the size and scope
of the clinical studies for regulatory approval.
The demonstration of safety and efficacy for a new
medical device is a long, arduous, and expensive developmental path from early concept to introduction into clinical practice.
We will be subject to environmental and other rules
related to the handling of nitric oxide. We will be using very small testing quantities of nitric oxide and do not anticipate any material
issues in relation to nitric oxide as it relates to environmental or other regulatory issues.
In addition to the foregoing, our present and future
business may be subject to various laws and regulations relating to safe working conditions, clinical, laboratory and manufacturing practices,
the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds
and infectious disease agents, used in connection with our research, as well as national restrictions on technology transfer, and import,
export and customs regulations and similar laws and regulations in foreign countries. Due to the extensive regulatory requirements, management
does not anticipate any submittals for some time until the technology is more developed and tested in the lab. At such time as management
feels initial submittals are warranted, significant additional capital will need to be raised to proceed with even initial submittals
As such, we believe any commercialization of our product is years away and we will continue to be reliant on loans and stock sales to
stay in business.
Concentration of Customers
Currently we do not have any customers and will not
have any customers until our product is through the development and testing stages and receives FDA approval.
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts, including Duration
Presently we have two patents approved and one patent
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 approved patents cover Gas Generator #62-014866 and our disposable delivery device.
Our patent pending covers 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 our costs under a general operating expense
category instead of capitalizing any research and development expenses.
ITEM 1A. RISK FACTORS
NU-MED’s operations are subject to a number
of risks including:
Risk Factors Relating to NU-MED’s 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 a medical device development company
focused on the development of systems for the delivery of nitric oxide. NU-MED is currently undercapitalized and is relying on equity
and debt investments to continue operations. We have identified the products we want to develop and market. We have moved forward in the
design and development stage with these products. 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 some developed 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 a development-stage 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’s 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.
The medical product business is highly competitive
and subject to extensive regulations, making it difficult and very expensive to bring new products into the marketplace.
We face vigorous competition from companies throughout
the world, including multinational companies which are better financed and have more experience in medical product design. Most
of these competitors have greater resources than we do and may be able to respond to changing business and economic conditions more quickly
than us. Our ability to compete with these companies will be limited. Additionally, with extensive regulation and testing of medical
devices, it is extremely costly to bring a medical device to market and we may not be able to obtain the necessary capital to bring a
medical device to market. As such, an investment in the Company is very risky and could result in the loss of an investor’s entire
investment.
Our success will be dependent on the ability
of management to develop medical devices.
Our success depends on our ability to develop
medical 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 investor’s entire investment in the Company.
Our success depends, in part, on our key personnel.
Our success depends, in part, on our ability to
retain our key personnel, including our executive officers and senior management team. Our management team has created our business
model and the initial focus on our first medical device. The unexpected loss of one or more of our key executives could adversely affect
our business. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified
personnel. Competition for these employees can be intense. We may not be able to attract, assimilate or retain qualified personnel
in the future, and our failure to do so could adversely affect our business.
Our ability to commercialize pharmaceutical
products successfully may depend, in part, on the availability of reimbursement for our products from:
|
* |
Government and health administration authorities; |
|
* |
Private health insurers; and |
|
* |
Other third party 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.
We May Be Subject to Product Liability Claims
if People or Property Are Harmed by the Products We Sell
Some of the products we manufacture and sell may
expose us to product liability claims relating to personal injury or death caused by such products. Although we will maintain liability
insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will be available
to us on economically reasonable terms, or at all.
Our auditors have indicated in their audit
opinion that there is a substantial doubt about our ability to continue as a going concern, which will affect our ability to raise capital
or borrow money.
Our auditors have issued an audit opinion indicating
that there is a substantial doubt about our ability to continue as a going concern. As such, any potential investor or lender is unlikely
to be willing to provide additional capital or loans to us. Without additional capital, we will be unable to remain in business or to
execute on our business plan. Even if we are able to obtain additional capital, given the “going concern” modification, it
is likely investors would suffer substantial dilution to their investment.
General Risks Relating to Investors
We intend to take advantage of the disclosure
requirements of the JOBS Act provided for emerging growth companies, including not providing all of the accounting disclosure that other
companies will be required to provide, which may limit an investor’s ability to compare our financial statements with other companies.
Under the JOBS Act, we can elect to not comply
with new or revised accounting standards which will allow us to delay the adoption of new or revised accounting standards that have different
effective dates for public and private companies. Until the standards are required for private companies, we will not 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 investor’s 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 investor’s ability to compare us to other companies.
We do not intend to pay dividends in the near
future.
NU-MED has not paid, and does not plan to pay,
dividends in the foreseeable future, even if we were profitable. Earnings, if any, are expected to be used to expand operations, for research
and development and for general corporate purposes, rather than to make distributions to shareholders.
Investors will not have cumulative voting and
will not be able to elect directors based on the percentages of ownership.
Holders of common stock are not entitled to 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-MED’s 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.
Employees
The Company currently has two employees and relies
on its officers and consultants for most of its activities.
The outbreak of the coronavirus may negatively
impact our business, results of operations and financial condition.
In December 2019, a novel strain of coronavirus
was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including
the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public
Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared
a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020
the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted
in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect
our business, results of operations and financial condition. The ultimate extent of the impact of any epidemic, pandemic or
other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly
uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other
health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts
of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial
condition and results of operations.