MANAGEMENT’S DISCUSSION AND ANALYSIS OF FISCAL CONDITION AND RESULTS OF
The next dialogue of our plan of operation ought to be learn along side the monetary statements and associated notes that seem elsewhere on this prospectus. This dialogue incorporates forward-looking statements that contain dangers and uncertainties. Our precise outcomes might differ materially from these anticipated in these forward- trying statements because of numerous components, together with these mentioned in “Threat Elements” and elsewhere on this
report. All forward-looking statements converse solely as of the date on which they’re made. We undertake no obligation to replace such statements to mirror occasions that happen or circumstances that exist after the date on which they’re made.
Qualis Improvements, Inc. (the “Firm” or “Qualis”) was integrated within the state of Nevada on March 23, 2006, underneath the title “Hoopsoft Improvement Corp.” (“Hoopsoft”). After a number of title adjustments, the prior enterprise operations had been deserted, the Firm’s title was modified to Qualis Improvements, Inc., and the Firm had no operations till June of 2021.
In July, 2019, John Ballard and a Charles Achoa, fashioned a brand new firm named EMF Medical Gadgets Inc. for the event, upkeep, advertising and sale of an digital gadget for the remedy of ache that may make use of sure mental property pursuits held by LCMD. In Might 2021 the Firm modified its title to mPathix Well being Inc. Presently, John Ballard is the Chief Monetary Officer and Charles Achoa doesn’t take part in any administration or board place.
On June 28, 2021, the Firm entered right into a Share Alternate Settlement by and amongst mPathix Well being, Inc.
(previously often known as EMF Medical Gadgets, Inc.), a Delaware company (“mPathix”), pursuant to which mPathix was acquired by the Firm. The closing of the transaction (the “Closing”) occurred on or about June 29, 2021, and the Firm acquired the entire excellent shares of mPathix. In alternate, the Firm issued to mPathix’s
shareholders, their designees or assigns, an combination of 6,988,300 shares of Firm frequent inventory (the “Shares
Part”), or roughly 93.4% of the shares of frequent inventory of the Firm issued and excellent instantly after the Closing, and the Firm issued warrants to buy an extra 1,098,830 shares
(698,830 warrants issued to the Firm’s earlier CEO and 400,000 to CreoMed which is beneficially owned by Dr. Joseph Pergolizzi, the Firm’s performing CEO and chairman of the board) of the Firm‘s frequent inventory,
exercisable for 10 years at a $0.50 per share train value, topic to adjustment. In reference to the closing of the mPathix acquisition, the officers and administrators of mPathix had been appointed because the officers and administrators of the Firm. The Share Alternate Settlement has the next provision. Within the occasion that for the two-year interval following the Closing, QLIS sells extra shares for consideration per share lower than $0.50 per share, then it shall concern to Echo Assets LLLP (“Echo“), concurrently with such issuance, numerous shares of QLIS frequent inventory ample to make sure that Echo has the variety of shares that it could have had if it bought a professional rata portion of the frequent inventory in such subsequent providing at such decrease buy value.
The acquisition was accounted for as a “reverse merger” and recapitalization for the reason that stockholders of mPathix prior to the acquisition acquired a majority of the excellent shares of the frequent inventory of the Firm instantly following the completion of the transaction. mPathix was deemed to be the accounting acquirer within the transaction, and, consequently, the transaction was handled as a recapitalization of mPathix. Because of this, the Firm is taken into account to be the continuation of the predecessor, mPathix. Accordingly, the property and liabilities and the historic operations which can be mirrored within the Firm’s monetary statements are these of mPathix and are recorded on the historic price foundation of mPathix. The Firm’s property, liabilities and outcomes of operations had been consolidated with the property, liabilities and outcomes of operations of mPathix after consummation of the acquisition.
Description of Enterprise, Principal Merchandise, Companies
The Firm is now the holding firm underneath which mPathix operates. mPathix is a medical stage firm targeted on the event, manufacturing, and distribution of ache administration and different central nervous system (CNS) primarily based options.
We’re growing merchandise designed to deal with the unmet wants of sufferers who search options to conventional ache drugs and interventions or adjunctive therapies to their present remedy routine. We imagine that our merchandise will present clinicians and sufferers with new and differentiated set of ache administration instruments to satisfy the variety of affected person wants.
A key factor to the Firm’s progress technique is to accumulate the rights to or develop current units. Massive gadget firms have elevated the minimal market alternative they require in an effort to commit advertising assets to their merchandise. Because of this, there are a lot of merchandise which can be unsupported by such firms and are at present scheduled to be phased out or “sunsetted.” Qualis Improvements believes that it could actually create important worth by growing or buying rights to a portfolio of such merchandise, increasing their therapeutic makes use of and/or markets, bettering or enhancing such merchandise and dedicating the suitable quantity of promoting and different assets to maximize the worth of the Firm’s portfolio.
There are a number of key standards the Firm makes use of when evaluating product alternatives:
• The illness or situation largely has been ignored resulting from lack of curiosity by different, bigger firms and, in consequence, total competitors within the area is restricted.
• The gadget just isn’t promoting nicely for numerous causes (together with, amongst different issues, poor administration, poor reimbursement, improper or no accessible billing codes, inaccurate pricing, and restricted and/or poor medical outcomes) which, Qualis would try to remove, thereby growing product revenues.
• The gadget ought to be straightforward to fabricate, thereby avoiding the necessity for pricey funding by the Firm develop merchandise and complex manufacturing services.
• There ought to be a big, underserved affected person inhabitants. The gadget ought to have clear regulatory and reimbursement paths with the FDA and CMS, respectively (or already be authorised).
• The gadget ought to be comparatively straightforward to distribute/dispense and administer. Most significantly, the product will need to have a historical past of restricted adversarial occasions to sufferers.
Our deliberate product which is our sole product and is within the growth pipeline is SOLACE, a non-invasive medical gadget that makes use of electromagnetic induction to generate deep warmth beneath the floor of the pores and skin to cut back and relieve ache. SOLACE™ delivers radio frequency (RF) vitality constantly and thereby delivers thermal results to the tissue and makes use of a number of differentiated options vs different radio frequency units at present available on the market.
The SOLACE gadget relies on proprietary high-frequency magnetic induction expertise, which we discuss with as Electromagnetic Induction (“EMI”).Electromagnetic or magnetic induction is the use of electrical currents or a by-product of a present within the type of a sound or an acoustic wave or an electromagnetic vitality wave. Administered electrical currents or their derivatives have two attributes: (1) ache reduction and (2) regeneration of tissues.
Magnetic fields are induced beneath the pores and skin floor to create localized, planar warmth within the dermis and deeper muscle, whereas selectively avoiding delicate buildings within the dermis and fats layers. By comparability, our SOLACE gadget creates currents in discreet planes beneath the tissue floor somewhat than directing vitality by the planes and penetrating the dermis. Due to this fact, our EMI expertise could present for shorter length of remedies and a extra comfy affected person expertise vs. different energy-based applied sciences
SOLACE™ delivers RF vitality by way of a consumer-friendly hand-held applicator that enables for focused and ergonomic utility of RF vitality to discrete areas of concern. In distinction, competitor diathermy units make the most of a big drum applicator whereby the RF vitality is emitted throughout a big floor space. Diathermy is the managed manufacturing of deep heating beneath the pores and skin within the subcutaneous tissue, deep muscle tissue and joints for therapeutic functions. There are two forms of diathermy units available on the market at present: radio or excessive frequency and microwave. The drum applicatordesign limits the tissue concentrating on to bigger joints, whereas smaller joints or tissue areas (e.g. acromion of the shoulder, plantar facet of foot, neck) are largely unaddressed. The hand-held applicator from the SOLACE™ gadget offers a small floor space (approx. 3 cm2) which is coated in Teflon® that may simply be positioned to focus on smaller physique elements offering a differentiation in comparison with massive drum-type radio frequency units fail to adequately deal with.
Presently, the Firm is within the technique of making ready the paperwork essential to submit an utility to the FDA for clearance of our deliberate gadget. We plan on additionally submitting a provisional patent for the adjustments and new growth of our gadget over our earlier licensed gadget from LCMD, The Firm has an gathered deficit of $2,588,000. It’s anticipated that the full anticipated monetary outlay to finish the event and FDA utility is roughly $250,000, mixed with working bills the Firm could not be capable to have sufficient money circulate to assist the Firm’s day by day operations leading to an opinion by the auditors of the Firm persevering with as a
We anticipate that our SOLACE gadget will probably be cleared by the FDA by way of the 510k course of and that it is going to be deemed to be considerably equal to the recognized predicate gadget referred to as the Bebe gadget, The Bebe gadget was initially cleared by the FDA in 2014 by the Marchito Entities and subsequently bought to LCMD by way of an Asset Buy Settlement and an Mental Property License Settlement. The Bebe gadget is indicated to be used within the remedy of chosen medical circumstances similar to ache reduction, muscle spasms, and joint contractures, however not for the remedy of malignancies.
On August 28, 2019, mPathix entered right into a Preliminary License Settlement with LCMD, licensing from LCMD sure patents, know the way, commerce secrets and techniques, 510(ok) clearances and different property (the “Property”) beforehand transferred
to LCMD by the Marchitto Entities (outlined beneath) in accordance with an Asset Buy Settlement and a separate Mental Property License Settlement dated November 10, 2015. Jim Holt who at present serves as the only real officer and director of LCMD can also be the director of mPathix. mPathix has an unique license to breed, distribute, promote, lease, show and carry out and in any other case use the Property (together with the SOLACE medical gadget) to be used in ache administration as of the August 28, 2019 settlement. In consideration, mPathix issued 2,000,000 shares of its frequent inventory to LCMD, and paid $110,000 in money to LCMD on or about on September 9, 2019. Moreover, mPathix agreed to pay persevering with royalties to LCMD, with an preliminary royalty cost of 6.0% of the online revenues from ache utility gross sales in every of the primary twelve months. After the primary twelve months, the royalty proportion decreases to five.5% for the following twelve-month interval. Following the second twelve-month interval, the royalty charge reduces to five% for the rest of the time period of the settlement. As of the date of this prospectus, no royalty funds have been made to or earned by LCMD since no revenues from medical gadget gross sales have been generated. On June 3, 2021, a Definitive License Settlement was signed by LCMD and mPathix Well being in an effort to finalize the phrases of the August 28, 2019
Preliminary License Settlement. Nevertheless the suitable to make use of the patents and mental property was in impact as of the August 28, 2019 date.
The phrases of our license with LCMD are contingent upon profitable fulfilment of a court docket ordered decision between LCMD and the unique house owners of the underlying mental property (the “Marchitto Entities”). LCMD is obligated
to pay to the Marchitto Entities the sum of $2,400,000 on or earlier than April 24, 2022. Ought to LCMD fail to satisfy their cost obligation, the unique license settlement between LCMD and the Marchitto Entities will terminate, and LCMD, and by extension the Firm, would lose its rights to the mental property within the Mental Property License Settlement, nevertheless LCMD will retain all different property underneath the Asset Buy Settlement.
Since buying the rights to the Bebe gadget, the Firm has undertaken an intensive design assessment to find out tips on how to enhance the use, efficacy, and security of the gadget. Based mostly on our efforts, we’ve recognized numerous design enhancements that are distinctive and distinct from the unique Bebe gadget design, together with up to date expertise of the circuit board, adjustments in materials within the headpiece producing warmth on a extra constant foundation, new design and different enhancements to the present electromagnetic induction expertise. Based mostly on these enhancements, the Firm plans to maneuver ahead on growing its personal gadget (i.e. the SOLACE gadget) and we’ll apply for a brand new 510(ok) utility to assist it.
Additional, as offered for in June 3, 2021 Definitive License Settlement with LCMD, the Firm is not going to train its choice to satisfy LCMD‘s obligation to the Marchito Entities nor will it enter into any negotiations with the Marchitto Entities to safe property rights on their gadget after April 24, 2022 The proceeds of this providing usually are not supposed to be paid to LCMD by the Firm.
Until it was capable of license such mental property immediately from the Marchitto Entities. As of March 23, 2022, LCMD owns 1,878,955 shares of the Firm.
The Firm‘s license will terminate with LCMD on April 24, 2022, except LCMD satisfies its cost obligations to the Marchitto Entities described above. If LCMD satisfies these obligations, the license is not going to terminate as long as any required royalties are being paid by the Firm. LCMD has offered indication to the Firm concerning their capability to fulfill their cost obligations to the Marchitto Entities, and has not made any funds so far.
The Firm is within the technique of finalizing the SOLACE product design and can is starting to compile the information required to finish an utility with the FDA. Additional, given the substantial adjustments and modifications that we’ve recognized for our gadget, the Firm will search to file a provisional patents on the earliest potential date.
As of the date of this prospectus, we’ve one full-time workers, one full-time contracted guide, John Ballard, our present chief monetary officer (CFO), and 4 part-time contracted consultants. None of our workers is topic to a collective bargaining settlement. We imagine our relationships with our present worker is passable.
The place You Can Discover our Studies
Any individual or entity could learn and duplicate our experiences with the Fee on the Fee’s Public Reference Room at 100 F Road N.E., Washington, D.C. 20549. The general public could acquire info on the operation of the Public Room by calling the Fee toll free at 1-800-SEC-0330. The Fee additionally maintains an Web web site at http://www.sec.gov the place experiences, proxies and different disclosure statements on public firms could also be considered by the general public.
Now we have ready our consolidated monetary statements in accordance with accounting ideas typically accepted in america of America (“GAAP”). Moreover, we’ve begun the method of changing into a totally reporting firm with the Securities and Alternate Fee by the method of a S1 registration assertion with the intent to file this doc throughout the subsequent 60-90 days.
Acquisition of mPathix
On June 28, 2021, the Firm entered right into a Share Alternate Settlement (“Alternate Settlement”) by and amongst mPathix Well being, Inc. (previously EMF Medical Gadgets, Inc., a Delaware company) (“mPathix”) and Qualis. The closing of the transaction (the “Closing”) occurred on June 29, 2021 (the “Closing Date”). On the Closing Date, pursuant to the phrases of the Alternate Settlement, the Firm acquired the entire excellent shares (the “Shares”)
of mPathix. In alternate, the Firm issued to the mPathix shareholder’s, their designees or assigns, an combination
of 6,988,300 shares of Firm frequent stock (the “Shares Part”) or 93.36% of the shares of frequent inventory
of the Firm issued and excellent after the Closing (the “Share Alternate”), at a valuation of $0.50 per share, and the Firm issued warrants to buy an extra 1,098,830 shares (698,830 warrants issued to the Firm’s earlier CEO and 400,000 to CreoMed which is beneficially owned by Dr. Joseph Pergolizzi, the Firm’s performing CEO and chairman of the board) of the Firm‘s frequent inventory, exercisable for 10 years at a $0.50 per share train value, topic to adjustment. In reference to the closing of the mPathix acquisition, the officers and administrators of mPathix had been appointed because the officers and administrators of the Firm.
The acquisition was accounted for as a “reverse merger” and recapitalization for the reason that stockholders of mPathix prior to the acquisition acquired a majority of the excellent shares of the frequent inventory of the Firm instantly following the completion of the transaction. mPathix was deemed to be the accounting acquirer within the transaction, and, consequently, the transaction was handled as a recapitalization of mPathix. Because of this, the Firm is taken into account to be the continuation of the predecessor, mPathix. Accordingly, the property and liabilities and the historic operations which can be mirrored within the Firm’s monetary statements are these of mPathix and are recorded on the historic price foundation of mPathix. The Firm’s property, liabilities and outcomes of operations had been consolidated with the property,
liabilities and outcomes of operations of mPathix after consummation of the acquisition.
Inventory Based mostly Compensation
On March 1, 2021, Mr. Ahmet Demir Bingol, the Firm’s CEO entered into an Employment Settlement with the
Firm, with an efficient date of March 16, 2021, through which he receives an annual base wage of $250,000, plus bonus compensation to not exceed 80% of base wage. As well as, Mr. Bingol was granted 698,830 warrants to buy 698,830 of the Firm’s common inventory, valued at $165,378 (primarily based on the Black Scholes valuation mannequin on the date of grant). The warrants are exercisable for a interval of ten years at $0.50 per share in entire or partly, as both a money train or as a cashless train, and totally vest at grant date. Mr. Bingol’s employment additionally offers
for medical insurance coverage, incapacity advantages and one yr of severance pay if his employment is terminated with out trigger or resulting from a change in management. Mr. Bingol’s compensation was authorised by the Firm’s Board of Administrators on
March 1, 2021.
On September 9, 2021, the Board of Administrators authorised a modified Employment Settlement for Mr. Bingol which was subsequently signed on October 1, 2021. The modification resulted in altering Mr. Bingol’s position from CEO to President and in lowering Mr. Bingol’s base wage from $250,000 to $150,000 per yr. As well as, his bonus plan was reset with a goal bonus at fifty p.c (50%) of Govt’s Base Wage, primarily based upon the precise achievement of
monetary and different targets as established within the annual finances authorised by the Board, in its sole and absolute discretion. Additional, on October 1, 2021, Mr. Bingol’s beforehand issued warrants had been modified such that he’ll
obtain 300,000 warrants that vest instantly at an train value of $0.50 and 398,830 warrants that vest over a interval of three years with an train value of $0.50. Because of this, in accordance with ASC 718-20-35-2A and 718-20-35-3, instantly previous to the modification, the Firm calculated the truthful worth of the warrants and decided that there was no change to the truthful worth. Subsequent to the modification, the Firm will acknowledge a lack of $9,484 over the remaining three yr vesting interval.
On February 24, 2022, Mr. Bingol entered right into a separation settlement whereby he’ll terminate his employment efficient April 15,2022. He obtained no severance cost and there have been no disagreements between he or the Firm. A complete of 300,000 warrants have vested with the remaining 398,830 unvested warrants expiring.
On Might 1, 2021, the Firm’s subsidiary entered right into a consulting settlement with Discovery Constructing, Inc., the entity of John Ballard, the Firm’s CFO, for Mr. Ballard to offer CFO providers to the Firm. The consulting
settlement terminates July 31, 2022. Below this consulting settlement, Mr. Ballard will probably be entitled to a month-to-month consulting payment of $10,000 and customary inventory totaling 300,000 primarily based on the Firm changing into publicly traded and the supply of as much as 10 of the Firm’s medical units.
Mental Property License Settlement
On August 28, 2019 (“Efficient Date”), the Firm entered right into a Preliminary Mental Property License
Settlement with Life Care Medical Gadgets Restricted. (LCMD), underneath which the Firm acquired the rights to sure mental property associated to utilizing ache remedy merchandise. The Firm entered right into a Binding Letter of Settlement with LCMD on June 3, 2021, consummating the phrases of the Preliminary Mental Property Settlement and clarifying that the suitable to make use of the patents and mental property was in impact as of August 28, 2019.