Parallax Health Sciences Inc - Corporate Update - Q3, 2016

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3rd Quarter 2016 Corporate Update for Parallax Health Sciences, Inc.

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Parallax Health Sciences, Inc. (OTCQB.PRLX)
Corporate Update Q3, 2016

Parallax Acquisition of RoxSan Pharmacy Operations Update

As previously stated in a series of 8K releases, on August 13, 2015 (the "Closing Date"), Roxsan Pharmacy (“RoxSan”) and its sole shareholder, Shahla Melamed (the "Seller"), entered into an Agreement to sell 100% of the issued and outstanding shares of the RoxSan’ s common stock and its assets and inventory to Parallax Health Sciences, Inc. ("the Company"), a Nevada corporation (the “Purchase Agreement”). Pursuant to the Purchase Agreement, among other things, Parallax issued the Seller a Secured Promissory Note (the "Note") dated August 13, 2015 in the amount of $20,500,000 (the "Acquisition").

As a result of the Acquisition, RoxSan became a wholly owned subsidiary of the Company, and a change in control of RoxSan occurred. RoxSan was issued a new permit from the California Board of Pharmacy and the permit under the previous owner was retired.

In connection with the Acquisition, the Company entered into an Employment Agreement (the "Employment Agreement") with the Seller. Under the Employment Agreement, the Seller agreed to provide exclusive consulting services to the Company in the areas of public relations and marketing for a term of four (4) years.

Subsequent to the closing of the Acquisition, Company Management determined that there were several areas that required immediate attention to be addressed.

Pharmacy Compliance

Management created the position of Director of Compliance at Roxsan and put a senior pharmacist as the Director. Management developed a strategic plan covering its Regulatory Compliance goals. The first goal was to create foundational standard operating procedures in the filling, processing, and shipping of prescriptions.

Under this program an audit report ("Audit Report") was discovered that was previously discarded by the prior ownership as having “no relevance” as to the results of the findings in that audit. This audit was part of a due diligence requirement imposed by the Company upon the prior owner before the acquisition, which was to have a third party organization verify that the pharmacy was operating within compliance of state regulatory demands. The Audit Report dated prior to the acquisition, which was discovered in abandoned files, indicated that several areas of operation of the pharmacy were in violation of the most fundamental compliance rules, and strict warnings as to the consequences of what would happen to the pharmacy’s licenses if these areas were not immediately corrected. No corrections to the most egregious violations had been performed by the prior owner, and the Seller did not provide this “material” information while in due diligence prior to the acquisition. All areas recommended in the Audit Report to be corrected, were in fact implemented by the current ownership.

State Pharmacy Licenses

The former owner had developed a well-documented contentious relationship with the California Board of Pharmacy as well as a number of other states in which the previous owner was accused of regulatory violations. There were states that had suspended RoxSan’s Licenses under the prior ownership to operate in their state. The new management began an aggressive program in each state, to appeal to the State Pharmacy Boards to reinstate the licenses. It became apparent that many individual members on several state Board’s of Pharmacy, including the California Board of Pharmacy, the Nevada Board of Pharmacy and the Arizona Board of Pharmacy, had an extremely negative perception of Ms. Melamed. With the new management entering into the picture, the negative perception became extremely positive toward RoxSan’s new ownership, and its new Compliance Program. Thus far, RoxSan has obtained pharmacy licenses in 41 states, and is seeking to obtain licensing in the remaining nine states.

As a result of the efforts of new management, all of these issues were corrected and the pharmacy is currently operating in an entirely new status of having great relations with each of the previously strained relationships with individual state Boards of Pharmacy.

Pharmacy Benefit Management Business

The former owner had created a negative and challenging relationship with Payers and Pharmacy Benefit Management (PBM’s) as well as the cancellation of some pharmacy network contracts with PBM contracts that control the approvals for reimbursements for several health insurers. The new management established a plan of action and SOP’s to follow as well as address the criteria for contract re-approvals with the PBM’s.

Roxsan Pharmacy has become qualified and fully accredited member of FocusScript’s Compounding Pharmacy Network enabling Roxsan to participate in the Pharmacy Benefit Management Program for one of the largest health insurers in the United States. As of this update approximately 5% of the Compound Pharmacy’s in the US have been able to achieve this accreditation.

A market development has occurred that has produced a payer reaction to the exorbitantly high pricing trends for compound pain medications. That development has affected the viability of the compound pain medication management industry due to rejections and many of the ingredients becoming “non-covered”. Roxsan has developed a program to restructure the pharmacy’s approach to creating a more “ethically” based pricing structure with extraordinarily high efficacy formularies, and is working with several of the industry’s leading PBM’s in pursuit of partnership arrangements.    

National Accreditation

In addition, under the new management, Roxsan Pharmacy passed the inspection from the Verified Pharmacy Program (VPP) as part of the National Association of the Board of Pharmacy. This was a significant accomplishment, considering that the prior ownership had failed in passing the VPP inspection in the past. Passing the VPP inspection is an exhaustive process requiring high levels of regulatory systems and compliance. This extraordinary accomplishment was achieved in less than one year under the newly restructured operating compliance program under the new ownership, which included strict adherence to documentation retention and categorization.

Human Resources

In addition to the issues outlined above, it was determined that there were also personnel issues that Roxsan’s pharmacists, technicians and general operations employees had with the prior ownership. These issues involved compensation, benefits and management style of leadership, which lacked the opportunity for the employees to be empowered to effectively perform their duties. Management also addressed these issues with clarification of job responsibilities, compensation/benefit adjustments including stock option incentives and an overall more inclusive and open communication style of management.

Operational Structure and New Business Units

Management developed a system of operations that focused on differentiating unique business markets for Roxsan services and developed three additional areas of focus:

The Company established the RoxSan Fertility Group that is charged with delivering the highest level of service to Fertility Clinics in California, Arizona and Washington State. The Company built a new brand identity with new logo and website, and produced high quality collateral and sales support material, including mandarin language for our Chinese speaking patients (http://www.roxsanfertility.com/home-cn). The Company is currently developing a line of Chinese Herbs and holistic treatments that will augment the medical treatments supported by our network of Fertility Clinics; and

Management established the Roxsan Pharmaceutical Solutions Group that is charged with the development and execution of all of RoxSan’s custom compounding business that is working to develop high quality solutions for Roxsan customers; and

Management established Roxsan Life Nootropics business with the goal of developing a line proprietary Nootropics to target the growing “Brain Market”.

Dispute with Prior Owner

Prior to the Company's acquisition of Roxsan, the prior owner of Roxsan had become subject to two (2) disciplinary actions by the California Board of Pharmacy. In February 2015 the California Board of Pharmacy filed its First Amended Accusation against Shahla Melamed in Case No. AC201100427600. In April 2015 the First Amended Accusation was withdrawn and the Pharmacy Board filed new Accusation against Mrs. Melamed in Case No. AC201400545500.

The April 2015 Accusation alleges "causes for discipline" against Mrs. Melamed "stemming from nine consumer complaints". The Accusation includes allegations that Mrs. Melamed "Falsified the DEA Biennial Controlled Substance Inventory" report. The Accusation also alleges that Mrs. Melamed, Roxsan Pharmacy, and its then Pharmacist in Charge "Illegally Shipped Drugs Into Other States Without a License," and dispensed a drug which the United States Food and Drug Administration "has not approved...for any purpose in this country and has banned the drug's importation and interstate transfer except for research purposes." The Accusation sought, among other things, the "Revoking or suspending of Pharmacist License Number RPH 42096, issued to Shahla Keyvanfar Melamed".

On July 29, 2015, the prior owner executed a Stipulated Surrender of License and Order agreeing and stipulating to the surrender of her Pharmacist License. The California Board of Pharmacy issued a "Decision and Order" on October 7, 2015, adopting the Stipulated Surrender of License and Order. The California Board of Pharmacy issued a Notice of Decision and Denial of Reconsideration on November 6, 2015, following Mrs. Melamed's filing of a Petition for Reconsideration on October 26, 2015. Pursuant to the Notice, the Petition for Reconsideration was "deemed denied by operation of law" and the "Decision and Order with the effective date of November 6, 2015, is the Board of Pharmacy's final decision in this matter."

Following the acquisition of Roxsan by the Company, the prior owner initiated two (2) legal actions against the Company, entitled Shahla Melamed v. Parallax Health Sciences, et al.,in the Superior Court of the State of California, County of Los Angeles, West District, case number SC 124873 and SC 125705. In her Second Amended Complaint, case number SC 124873, which contains a single cause of action for rescission, the prior owner alleges that the Company "deliberately misrepresented facts and concealed material facts from Melamed in order to fraudulently induce her agreement to sell RoxSan..." and seeks that the "Purchase Agreement be deemed rescinded" along with monetary damages and declaratory relief. The First Amended Complaint in case number SC 125702 alleges that the Company is "in default under the terms of the Purchase Agreement and Secured Note" and the Company "has refused and continue[s] to refuse to allow [Mrs. Melamed] the benefits of her employment agreement...and have wrongfully denied [Mrs. Melamed] the contractual benefits to which she is and was entitled."

The current Management firmly believes that it had adequate grounds to justify the termination of Mrs. Melamed's employment, and that it acted within its rights with regard to Mrs. Melamed's other allegations.

The Company has likewise initiated legal action against the Seller and filed an action entitled Parallax Health Sciences, et al. v. Shahla Melamed, et al., in the Superior Court of the State of California, County of Los Angeles, West District, case number SC 124898. The Complaint in that action alleges that "...in breach of her obligations under the Purchase Agreement, Mrs. Melamed caused various bank accounts of Roxsan Pharmacy to be frozen by Wells Fargo Bank, NA."; ..."Mrs. Melamed has failed to pay all liabilities that arose prior to the closing of the Purchase Agreement..."; " Mrs. Melamed failed to secure marketing agreements . "In breach of her obligations under the Employment Agreement Mrs. Melamed has attempted to take operational control over the pharmacy and continued to attempt to oversee prescriptions on a daily basis at the physical location of the pharmacy; and that Mrs. Melamed concealed from the Company that "...all of the pharmacy’s corporate records were not accurate, complete, and current in all material respects under Section 3.5 of the Purchase Agreement. She likewise concealed that entering into the Purchase Agreement will result in a default of the lease agreement for the premises per Section 3.7(a) and 3.14; and she concealed that not all of the representations and warranties...were true. [Mrs. Melamed] likewise knew that the surge in revenues in a last few months prior to closing was artificial..." The Complaint seeks to reduce the Seller Note due to undisclosed material changes in the business.

Subsequently filed pleadings by the Company and Roxsan in case number SC 124873 allege, among other things, that: "(1) [Mrs. Melamed] misrepresented the true earnings and source of income for the pharmacy business to [Parallax] prior to the sale of the pharmacy; (2) [Mrs. Melamed] failed to disclose to [Parallax] that she had engaged in a fraudulent and illegal scheme to ship medications to states where her pharmacy was not licensed (such as Nevada) while she was the owner of the pharmacy;

All three (3) legal matters are currently pending.

Acquisition of QOLPOM

QOLPOM is an acronym that stands for Quality of Life Peace of Mind. Our primary goal at QOLPOM is to deliver a service that will allow clients who operate medically related residential based services to reduce costs, increase revenues and provide a better client experience through the adoption of innovative new technologies. The QOLPOM Hub, a medication dispensing, management and remote monitoring system developed by various health care technology companies in the last few years.

The Problem… In nearly all medical facilities at every level of care medication errors are a major concern and source of increasing liability exposure. For the individual in assisted and non-assisted living medication non-adherence is a growing problem. The problem is well known in the medical profession and its ramifications are well documented in regard to patient care and professional liability. The consequences are not only costly but potentially deadly. Yet the problem persists and, in fact, is getting worse as a result of our, in no small part, increasingly aging population.

QOLPOM Hub is a personal medication dispensing and remote monitoring solution that ensures seniors and chronic care patients at home (or elsewhere), take the correct medications on time and notifies caregivers and the patient’s healthcare team if they miss a medication dose or have a medical status report that is outside the limits that their healthcare team has deemed as unhealthy or of potential risk. It can capture (through external sensors), monitor and store vitals along with the electronic patient record for better follow-up by doctors and the health care team. It gives users access to digital health care monitoring and potentially medical interventions via telemedicine.

QOLPOM Hub automates the dispensing of packaged medications though a patented process, with these potential benefits:

  • reduces the risk of medication non-compliance; and
  • prolongs an independent quality of life for the client; and
  • provides peace of mind through real time monitoring for the caregiver.

It also bonds clients with their service providers and enables a Patient Care Circle that is unprecedented. In addition, the QOLPOM Hub features a full set of modern communications technologies specifically targeted for seniors, the chronically ill and the temporary or permanently disabled, that enable both voice and “videoconference” communication directly from the device. These same technologies will enable “virtual doctors visits” that will require no travelling, no time-off-work for a family member to accompany the patient or resultant stress from the “sortie”.

Parallax Diagnostics, Inc.

Parallax Diagnostics, Inc. (“Parallax-D”) is a wholly owned operating subsidiary of Parallax Health Sciences, Inc. Parallax-D has rights to, FDA approved, Point of Care diagnostic tests that utilize a single platform. Parallax is also developing a novel, handheld diagnostic testing system that is simple, rapid and elegant, offering the potential to transform the diagnostic landscape by transitioning critical tests from the centralized lab directly to the hands of the physician or clinicians.

Our focus is on tests that detect and/or monitor, remotely, infectious diseases and various other medical conditions. We are further developing a rapid test that can be done at the point of care to determine the immune status of patients that are immune-compromised. The company has a technology that is being used as a platform for a test that will detect CD4 and CD8 cells which in turn determine a patient’s immune status. This novel test will be focused on the areas of immune status identification as part of the treatment program for those individuals afflicted with HIV and AIDS. The test will be used as a monitoring test to determine the patients immune status levels and provide an indication that the medical treatments they are using are working. This test, should provide great value to patients, caregivers and medical professionals in that it allows for the remote testing and monitoring of patients without the cost and inconvenience of multiple visits to the healthcare providers facility.

Opportunity for the growth in the Point of Care Market

In recent years, there has been a continuing shift from the use of laboratory-based analyzers to more technologically advanced point-of-care tests that can be performed in a matter of minutes. Unlike the centralized clinical laboratory segment, which is mature and highly competitive, the point-of-care market is still a relatively early stage market. Although certain simple single analyte diagnostic tests have been developed, such tests have remained incapable of precise and highly sensitive quantitative measurements. As a result, medical tests that require precise quantization of the target analyte have remained the domain of immunoassay analyzers. Parallax believes that there is significant market potential for advanced point-of-care diagnostic products that provide quick and accurate diagnosis during a patient visit, shortening the decision time to medical intervention and minimizing the need for additional patient follow-up, thereby reducing overall health care delivery costs.

The dominant value proposition of Parallax Diagnostics, Inc. is that its business model has the capacity, once deployed into the marketplace, to:

  • Charge as much as 80% less than a comparable test at outside diagnostic labs; and
  • Provide results in less than 15 minutes in a majority of the tests compared with days in outside diagnostic labs; and
  • Reduce the cost of expense to the healthcare insurer/payer; and
  • Provide a new source of revenue for the doctor; and
  • Increase the quality of care by allowing the doctor and patient to discuss the test results at the doctors office at the same appointment as the test is administered; and
  • The Parallax-D platform is a single solution that has very little variance in how a test is performed which reduces the need for increased knowledge of test protocols; and
  • The Parallax-D platform is ubiquitous and interoperable with a large number of potential tests, which will allow for economy of scale in that a single platform investment will offer the capability to provide an enormous value for the costs and dramatically increase the ROI on the purchase of the Parallax-D testing system.

Parallax Diagnostic Synergies with Roxsan Pharmacy, Inc

The genesis of the Company’s pursuit of Roxsan Pharmacy was to exploit RoxSan’s visibility with over 3,000 doctors across the United States, and it is still a driving force behind the acquisition and operation. Management continues to see this unique opportunity to bypass medical devise distributers and agents as a strategy that reduces the risk inherent with utilizing third parties to promote your products and services.

The RoxSan Fertility Group is uniquely positioned as one of the nations largest providers of Fertility drugs to fertility clinics in the country and there is an opportunity to provide multiple tests to Roxsan Fertility Group’s clinics they service.

Parallax Diagnostics Synergies with QOLPOM

As noted above, the market for Remote Healthcare Monitoring and Medicine Adherence Management is one that is growing with that growth being driven by multiple factors. The obvious cost benefit derived from treating and monitoring patients on a remote basis is driven by cost. What is also apparent to anyone who understands the complex nature of the serious problems associated with the Healthcare system in the United States, such as runaway costs and shrinking reimbursements, coupled with an expanding aging population requiring medical attention can see the value of treating and monitoring people from their homes, which expands the number of patients that can be seen by a doctor and at the same time reducing the cost of delivering these services.

A large number of patients and those recently discharged from hospitals or are in facilities for long term care, are constantly being monitored through tests or monitoring instruments for weight and heart rate. Management believes that Parallax-D is positioned to provide tests and testing instruments such as its Mobile Target System analyzer currently in development, and augment the healthcare reach of the doctors with their patients.

QOLPOM and Synergies with Roxsan Pharmacy

As the QOLPOM Hub solution increases market penetration, the ability to offer a combined integrated medication supply service through the fully accredited and widely licensed pharmacy operations of Roxsan to deliver the drug component of the medication dispensing solution, an effective chain of medication management control can be realized as a total solution to all the constituents involved. RoxSan Pharmacy will service, up to its full capacity, the delivery of prescription drugs as part of the QOLPOM Medication Adherence delivered to patients through the QOLPOM Hub and drug dispensing system.

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Rachel Jiang
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