The Company’s unaudited interim consolidated financial statements for the three months ended March 31, 2019, form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2018, on Form 10-K, as filed with the Securities and Exchange Commission on April 1, 2019.

2

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements

3

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements

4

The accompanying notes are an integral part of these consolidated financial statements

5

Business Overview

The Company’s principal focus is on personalized patient care through remote healthcare services, behavioral health systems, and Point-of-Care diagnostic testing.  Parallax’s current family of companies that serve as the foundation for its cross-over business model of operations include:

● Parallax Health Management, Inc. (“PHM”) develops RPM and telehealth market products and services, and commercializes them, including the Fotodigm ® proprietary platform which allows for systems integration with a number of third-party services and solutions.  

● Parallax Behavioral Health, Inc. (“PBH”) acquired the intellectual property known as REBOOT ™ , the acronym for Reliable Evidence-Based Outcomes Optimization Technologies, as well as the Intrinsic Code ™ technology, a software platform specifically designed to improve health treatment outcomes through cloud-based and mobile behavioral technology systems that enable its users and user groups to more effectively achieve goals within a prescribed timeline. 

Parallax Care ™ is the Company’s technology-enabled digital healthcare system, structured with three separate divisions that can operate independently of one another, or integrate services to meet the various needs of the Company’s clientele: Optimized Outcomes, Connected Health and Smart Data.  Each of these divisions target a separate vertical market that are synergistic, compliment, and strengthen each other.

Operating Segments

● Remote Patient Monitoring  

The BHS segment commenced with the acquisition of the REBOOT ™ and Intrinsic Code ™ technologies in April 2017. The BHS segment will generate revenues primarily through licensing and subscription of software and systems. As of March 31, 2019, the BHS segment had not yet begun full operations, generating limited test market sales.

● Diagnostics/Corporate  

The Diagnostics/Corporate Segment supports the costs and operating expenses related to the continued development and exploitation of the Company’s proprietary Target System POS diagnostic platform and processes.  In addition, the Diagnostics/Corporate Segment provides management and administrative services to support the Company and consists of certain aspects of the Company’s executive management, corporate relations, legal, compliance, human resources, corporate information technology and finance departments.

Going Concern

The Company has incurred losses since inception resulting in an accumulated deficit of $18,946,375, and a working capital deficit of $5,599,653, and further losses are anticipated. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, which may not be available at commercially reasonable terms.  There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations and the Company may cease operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The Company will require additional financing in order to proceed with its plan of operations, including approximately $3,000,000 over the next 12 months to pay for its ongoing expenses. These cash requirements include working capital, general and administrative expenses, the development of the Company’s product line, and the pursuit of acquisitions. These cash requirements are in excess of the Company’s current cash and working capital resources. Accordingly, the Company will require additional financing in order to continue operations and to repay its liabilities. There is no assurance that the financing will be completed as planned or at all. If the Company is unable to secure adequate capital to continue the Company’s planned operations, the Company’s shareholders may lose some or all of their investment and the Company’s business may fail.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”).  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and that effect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The unaudited interim consolidated financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The unaudited interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue as a going concern.

NOTE: The following notes and any further reference made to “the Company”, "we", "us", "our" and "Parallax" shall mean Parallax Health Sciences, Inc., and its wholly-owned subsidiaries, Parallax Diagnostics, Inc., Parallax Health Management, Inc., and Parallax Behavioral Health, Inc. unless otherwise indicated.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements.  These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements.

The Company’s fiscal year-end is December 31.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. When the Company loses control of a subsidiary, a gain or loss is recognized and is calculated as the difference between:

● the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; 

and

● the carrying amount of the net assets (liabilities) of the subsidiary and any noncontrolling interest. 

Upon deconsolidation of a subsidiary, any loans to the former subsidiary made by the Company are measured at fair value at the deconsolidation date.  Any difference between the carrying amount of the loan to the subsidiary and its fair value is included as part of the gain or loss calculation upon deconsolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Value Hierarchy

The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. 

Level 2: Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. 

Level 3: Inputs to the valuation methodology are unobservable inputs based upon management’s best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk. 

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of nine months or less at the time of issuance to be cash equivalents. As of March 31, 2019, and December 31, 2018, the Company had no cash equivalents.

Fair Value of Financial Instruments

As of March 31, 2019, and December 31, 2018, respectively, the carrying values of Company’s Level 1 financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximate fair value. The fair value of Level 3 instruments is calculated as the net present value of expected cash flows based on externally provided or obtained inputs. Certain Level 3 instruments may also be based on sales prices of similar assets. The Company’s fair value calculations take into consideration the credit risk of both the Company and its counterparties as of the date of valuation. See Note 6 for additional information about long-term debt.

There were no outstanding derivative financial instruments held by the Company as of March 31, 2019, and December 31, 2018.

Accounts Receivable

Accounts receivable are stated net of an allowance for doubtful accounts. The accounts receivable balance primarily includes amounts due from customers.  Charges to bad debt are based on both historical write-offs and specifically identified receivables.

The activity in the allowance for doubtful accounts receivable for the three months ended March 31, 2019, and the year ended December 31, 2018, respectively, is as follows:

Comprehensive Loss

As of March 31, 2019, and December 31, 2018, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Revenue Recognition

Revenue is recognized when: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.

The Company may have net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that the Company will not realize a future tax benefit, a valuation allowance is established.

As of March 31, 2019, the Company has not yet filed its 2012 through 2017 annual corporate income tax returns.  Due to the Company’s recurring losses, it is anticipated that no corporate income taxes are due for these periods.

Stock-Based Compensation

The Company records stock-based compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recently Adopted Accounting Standards 

The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board (“FASB”), the US Securities and Exchange Commission (“SEC”), and the Emerging Issues Task Force (“EITF”), to determine the impact of new pronouncements on US GAAP and the impact on the Company. The Company has recently adopted the following new accounting standards:

Adopted :

In June 2018, the FASB issued ASU No 2018-07 (“ASU 2018-07”), Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting.  ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 will be effective for the Company for annual periods beginning after December 15, 2018, and interim periods.  Early adoption is permitted.

Not yet adopted :

In August 2018, the FASB issued ASU No. 2018-13 (“ASU 2018-13”), Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.  ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. ASU 2018-13 will be effective for the Company for annual periods beginning after December 15, 2019, and interim periods.  Early adoption is permitted.  The Company is currently evaluating the impact of the application of this accounting standard update on its financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-15 (“ASU 2018-15”), Intangibles-Goodwill and Other Internal-Use Software (Subtopic 350-40).  ASU 2018-15 was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license.  ASU 2018-15 will be effective for the Company for annual periods beginning after December 15, 2019, and interim periods.  Early adoption is permitted.  The Company is currently evaluating the impact of the application of this accounting standard update on its financial statements and related disclosures.

Recently Issued Accounting Standards Updates: 

There were other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries. None of the updates are expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Other liabilities consists of certain payroll tax liabilities in the amount of $501,148 and $601,148 owed as of March 31, 2019, and December 31, 2018, respectively, by the bankrupt entity, RoxSan Pharmacy, Inc., that were not discharged under California bankruptcy laws.  The Company has retained a tax resolution specialist to aid the Company in resolving the liability with the taxing agencies on behalf of RoxSan. In addition, other liabilities includes $104,000 and $0 in costs related to certain legal settlements as of March 31, 2019, and December 31, 2018, respectively.  

During the year ended December 31, 2018, accounts payable and accrued expenses was reduced by $341,606, resulting from the extinguishment of debt consisting of accounts payable-vendors in the amount of $284,714 and accrued interest in the amount of $56,892.

In 2018, the Company established a reserve for future legal fees to be incurred in connection with pending legal actions (Note 16).  During the three months and the year ended March 31, 2019 and December 31, 2018, respectively, the reserve for legal fees was reduced by $90,000 and $0 for expenses incurred during the period.  As of March 31, 2019, and December 31, 2018, respectively, the reserve balance is $160,000 and $250,000.

Related party convertible debt consist of the following:

On August 31, 2016, as part of the Company’s acquisition of 100% of the issued and outstanding shares of Qolpom ® ’s common stock and its assets, inventory and intellectual property, the agreement provides for, among other things, the seller to receive up to $2,000,000 through a percentage of revenue generated from RPM business segment (“Revenue Share”), as well as a royalty of 3% (“Royalties”) of certain revenues generated from the Qolpom ® intellectual property, as defined in the agreement.  As of March 31, 2019, and December 31, 2018, respectively, the present value of future Revenue Share was $433,000 and $430,000; and the present value of future Royalties was $315,000 and $310,000.

On April 26, 2017, as part of the Company’s acquisition of certain intellectual property (“Intellectual Property”) from ProEventa, Inc (“ProEventa”), the agreement provides for, among other things, ProEventa to receive a revenue sharing cash earn-out of up to $3,000,000 to be derived from certain net revenue generated by the Company; as well as Royalties of 3% of certain revenues generated from the Intellectual Property, ending at such time as the Company has paid ProEventa $25,000,000, as defined in the agreement. As of March 31, 2019, and December 31, 2018, respectively, the present value of future Revenue Share was $1,042,000 and $1,040,000; the present value of future Royalties was $693,000 and $690,000, and $2,700 and $0 in Royalties payable on earned revenues was accrued.

NOTE 9. CONVERTIBLE PREFERRED STOCK

The total number of authorized shares of preferred stock that may be issued by the Company is 10,000,000 with a par value of $0.001 per share.

On March 31, 2019, in connection with the settlement agreement with Mr. Dave Engert (Note 16), 36,339 shares of the Company’s Series A preferred stock held by Mr. Engert , with a book value of $100,000, were canceled and returned to treasury.  As a result, preferred paid in capital was reduced by $99,964.

As of March 31, 2019, and December 31, 2018, respectively, the Company had 977,352 and 1,013,691 shares of preferred stock issued and outstanding.

NOTE 10. COMMON STOCK

On January 28, 2019, pursuant to a majority shareholder consent, the Company increased its authorized common stock from 250,000,000 shares to 500,000,000 shares, with a par value of $0.001 per share.  

During the three months ended March 31, 2019, 3,689,328 shares of the Company’s common stock were issued in connection with the conversion of non-related party debt in the amount of $292,000.  As a result, $288,311 was recorded to paid in capital.

During the three months ended March 31, 2019, 2,716,667 shares of the Company’s common stock were issued in connection with stock awards to non-related parties, valued at $325,000. As  a result, $322,283 was recorded to paid in capital.

During the three months ended March 31, 2019, 5,000,000 shares of the Company’s common stock were issued in connection with a Simple Agreement Future Equity (“SAFE”) offering for cash in the amount of $500,000.  As a result, $495,000 was recorded to paid in capital.

During the three months ended March 31, 2019, 740,000 shares of the Company’s common stock were issued in connection with debt and debt service in the amount of $74,000.  As a result, $73,260 was recorded to paid in capital.  

During the three months and the year ended March 31, 2019, and December 31, 2018, respectively, a total of 12,145,995 and 21,358,611 shares of the Company’s common stock were issued.  A total of $74,000 and $434,000 in deferred stock compensation was recorded, and $124,357 and $1,095,193 was expensed. As of December 31, 2018 and 2017, respectively, there remains $1,098,452 and $1,148,809 in deferred stock compensation to be expensed over the next nineteen (19) months.

As of March 31, 2019 and December 31, 2018, respectively, the Company had 170,259,136 and 158,113,141 common shares issued and outstanding.

NOTE 11. WARRANTS AND OPTIONS

As of March 31, 2019, and December 31, 2018, respectively, the Company had 20,968,750 and 19,668,750 warrants, and 19,060,000 and 18,060,000 options, issued and outstanding.

NOTE 12. LEASES

The Company sub-leases office space for its headquarters in Santa Monica, California, for $5,600 per month, on a month-to-month basis.

Rent expense for the three months ended March 31, 2019 and 2018, was $17,360 and $19,397, respectively.

7

Dispute with Former Owner of RoxSan

Action No. SC125702:

In the Matter, action No. SC125702, in the Superior Court of the State of California, County of Los Angeles, West District, the former owner of RoxSan Pharmacy, Inc., Shahla Melamed (“Melamed”), alleges that the Company is in default under the terms of the Purchase Agreement and Secured Note, and the Company’s termination of Melamed’s employment agreement.  The Company firmly believes that it had adequate grounds to justify the termination of the employment, that it acted within its rights, and shall prevail in these proceedings.  A trial date, previously set for December 2018, is currently set for January 2020.

Action No. SC 124898:

Action No. CV2017-052804

On March 9, 2017, Dave Engert former Executive Chairman and director of the Company filed a lawsuit in Arizona and then on or about May 5, 2017, Mr. Engert, changed the venue and filed suit against the Company and RoxSan Pharmacy, Inc. in the United States District Court, Central District of California for an amount exceeding $75,000.  On October 23, 2017, the Company filed an answer and counterclaims against Mr. Engert for an amount exceeding $100,000.  The counterclaims include possible fraud and negligence committed by Mr. Engert and Mr. J. Michael Redmond, former successor Chairman of Mr. Engert, director, President and Chief Executive Officer of the Company and former President, Chief Executive Officer, Chairman and director of RoxSan Pharmacy, Inc.

On October 8, 2018, a settlement was reached between Mr. Engert and the Company (the “Settlement”). The Settlement includes, among other things, a cash payment to Mr. Engert in the amount of $139,000, and the cancellation of all of Mr. Engert’s equity holdings in the Company.  The Settlement resulted in a net loss to the Company of $33,272. On April 10, 2019, a stipulation for dismissal was filed, and the matter has been fully resolved.

In May 2019, the Company amended the private placement equity offering (the “Offering”) previously established in March 2019.  The revised Offering is for the purchase of the 50,000,000 shares, or a maximum of $6,000,000, in Common Stock, plus equal Warrants at an exercise price of $0.25 per share for a term of three (3) years (the Common Stock and the Warrants together, the “Units”).  The Offering provides for, among other thing, the purchase of the Units at a price of $0.125 per share, with a minimum total Offering of $1,000,000, and a minimum investment of 200,000 shares, or $25,000.  Prior to the Offering, the Company is selling $1,000,000 in Units through a Simple Agreement Future Equity (“SAFE”) offering.  The SAFE Units are sold at a 20% discount of the offering Unit price of $0.125, and are not a part of, nor reduce, the $1,000,000 minimum. The initial closing will occur on or before June 15, 2019, unless extended by the Company in its discretion.  The Company may sell Units in one or more closings.

In connection with the SAFE offering, the Company issued 2,500,000 shares of its restricted common stock at $0.10 per share, for cash in the amount of $250,000.  As a result, $247,500 was recorded to paid in capital.

The Company retained Maxim Group, LLC (“Maxim”) to serve as its placement agent for the Offering. The Company has agreed to pay the placement agent a placement fee equal to 7% of the aggregate gross proceeds raised in the Offering and warrants exercisable for a term of five years to purchase 7% of the number of shares of common stock included in the Units sold in the Offering at an exercise price of $0.125 per share.

In connection with the Company’s agreement with Maxim, the Company issued Maxim 1,000,000 shares of its restricted common stock, valued at $71,000.  As a result, $70,000 was recorded to paid in capital.

On May 6, 2019, in connection with an equity funding, the Company issued 6,000,000 shares of its restricted common stock for cash in the amount of $500,000.  As a result, $494,000 was recorded to paid in capital

*    *    *    *    *

8

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or the Company’s future financial performance. In some cases, forward-looking statements can be identified by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause the Company’s or the Company’s industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

The Company’s unaudited interim consolidated financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to "common shares" refer to the common shares in the Company’s capital stock. The following discussion should be read in conjunction with the Company’s financial statements and the related notes that appear elsewhere in this quarterly report.

NOTE : The following sections of this quarterly report and any further reference made to “the Company”, "we", "us", "our" and "Parallax " shall mean Parallax Health Sciences, Inc., and its wholly-owned subsidiaries, Parallax Diagnostics, Inc., Parallax Health Management, Inc., and Parallax Behavioral Health, Inc., unless otherwise indicated.

Description of Business   

The Parallax Care ™ technology-enabled digital healthcare system is structured with three separate divisions that can operate independently of one another, or integrate services to meet the various needs of the Company’s clientele: Optimized Outcomes, Connected Health and Smart Data.  Each of these divisions target a separate vertical market that are synergistic, compliment, and strengthen each other and the  Company value proposition as a whole.

Operating Segments

The Company’s current operations include the following business segments for financial statement presentation: Remote Patient Monitoring (RPM), Behavioral Health Services (BHS), and Corporate.

● Remote Patient Monitoring  

The RPM segment generates revenues through fees charged for the license and utilization of its proprietary system that provides software integrations of the Fotodigm ® platform.  Additionally, the RPM segment generates incremental revenues through the delivery of acute, post-acute and chronic health patient management software systems that enable Parallax customers to bill for and collect payments from patients and third-party payers for telemonitoring and remote services that they deliver.

● Behavioral Health Services  

The BHS segment commenced with the acquisition of the REBOOT ™ and Intrinsic Code ™ technologies. The BHS segment will generate revenues primarily through licensing and subscription of software and systems. As of March 31, 2019, the BHS segment had not yet begun full operations, generating limited test market sales.

● Diagnostics/Corporate  

The Diagnostics/Corporate Segment supports the costs and operating expenses related to the continued development and exploitation of the Company’s proprietary Target System POS medical diagnostic and monitoring platform and processes.  In addition, the Diagnostics/Corporate Segment provides management and administrative services to support the Company and consists of certain aspects of the Company’s executive management, corporate relations, legal, compliance, human resources, and corporate information technology and finance departments.  

Recent Developments

On January 28, 2019, pursuant to a majority shareholder consent, the Company increased its authorized common stock from 250,000,000 shares to 500,000,000 shares, with a par value of $0.001 per share.

In April 2019, the Company entered into an employment agreement with Mr. David Appell to serve as the Company’s Chief Operating Officer. The agreement commences May 15, 2019, is for an initial term of two (2) years, and provides a base compensation of $250,000 year one, and $275,000 in year two, as well as various performance bonuses, and customary employee benefits. In addition, the agreement includes a grant to purchase 3,000,000 restricted common shares at $0.001 per share, of which 25% vest immediately, and the remainder vest when certain earnings goals are met, as well as options granted to purchase 3,000,000 shares of the Company's Common Stock at an exercise price of $0.25 per share.  The options are for a period of five (5) years, and vest annually over the term of the agreement, with an initial vesting of 25%.

In addition, the Company entered into an employment agreement with Ms. Amanda L. Perry to serve as the Company’s Chief Legal Officer. The agreement commences May 15, 2019, is for an initial term of two (2) years, and provides a base compensation of $130,000 year one, and $140,000 in year two, as well as various performance bonuses, and customary employee benefits. In addition, the agreement includes a grant to purchase 500,000 restricted common shares at $0.001 per share, of which 25% vest immediately, and the remainder vest when certain earnings goals are met, as well as options granted to purchase 500,000 shares of the Company's Common Stock at an exercise price of $0.25 per share.  The options are for a period of five (5) years, and vest annually over the term of the agreement, with an initial vesting of 25%.

In May 2019, the Company amended the private placement equity offering (the “Offering”) previously established in March 2019.  The revised Offering is for the purchase of the 50,000,000 shares, or a maximum of $6,000,000, in Common Stock, plus equal Warrants at an exercise price of $0.25 per share for a term of three (3) years (the Common Stock and the Warrants together, the “Units”).  The Offering provides for, among other thing, the purchase of the Units at a price of $0.125 per share, with a minimum total Offering of $1,000,000, and a minimum investment of 200,000 shares, or $25,000.  Prior to the Offering, the Company sold $1,000,000 in Units through a Simple Agreement Future Equity (“SAFE”) offering.  The SAFE Units were sold at a 20% discount of the offering Unit price of $0.125, and are not a part of, nor reduce, the $1,000,000 minimum. The initial closing will occur on or before June 15, 2019, on a date chosen by the Company, unless extended by the Company in its discretion.  The Company may sell Units in one or more closings.

In May 2019, the Company established a second location at 28 West 36th Street, 8th Floor, New York, NY 10018.

As of March 31, 2019, the Company had total assets of $1,360,774 compared with total assets of $1,364,357 at December 31, 2018. The decrease in total assets of $3,583 is attributable to an increase in cash of $1,392, an increase in accounts receivable of $25,180, and $30,155 of amortization related to intangible assets.

As of March 31, 2019, the Company had total liabilities of $7,845,649 compared with total liabilities of $7,345,916 at December 31, 2018. The increase in total liabilities of $499,766 is attributable to an increase in accounts payable and accrued expenses of $119,572, a decrease in short-term debentures of $183,092, an increase in related party short-term debentures of $44,339, an increase in notes payable of $20,000, an increase in convertible notes payable of $210,913, an increase in related party convertible notes payable of $20,000, an increase in related party payables of $255,138, an increase in license fees payable of $3,000, an increase in royalties payable of $7,700, an increase in long-term debentures, net of unamortized discount, of $2,100, and an increase in secured notes payable of $63.

Costs of sales in the amount of $5,111 for the three months ended March 31, 2019, consists of equipment and other costs related to the Company’s remote health care systems.

Costs of sales in the amount of $5,538 for three months ended March 31, 2018, consists of equipment and other costs related to the Company’s remote health care systems.

The Company has not yet fully launched the medical diagnostics and testing activities of the Company’s Connected Health division.