For the fiscal year ended December 31, 2019

Commission file number 000-52534

PARALLAX HEALTH SCIENCES, INC.

(Exact name of registrant as specified in its charter)

Copy of all Communications to:

Peter Hogan, Esq.

Buchalter

1000 Wilshire Blvd., Suite 1500

Los Angeles, CA 90017

(213) 891-0700

Indicate the number of shares outstanding of each of the registrant’s

classes of Common Stock as of the latest practicable date.

270,723,289 common shares issued and outstanding as of May 15, 2020

Forward-Looking Statements

This Annual Report contains forward-looking statements. These statements relate to future events or the future financial performance of Parallax Health Sciences, Inc. (“Parallax” or the “Company”), and include statements made by the Company regarding insurance reimbursements, state licenses, product development and obtaining FDA clearances. 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 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 its industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 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.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it 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.

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “Common Stock” refer to the common shares; and “Preferred Stock” refer to the preferred shares; of the Company’s capital stock.

The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401, with an additional office located at 28 West 36th Street, 8th Floor, New York, NY 10018. The Company’s telephone number is (310) 899-4442.

The Company’s websites are at www.parallaxcare.com, www.parallaxhealthsciences.com, www.parallaxhealthmanagement.com, www.parallaxdiagnostics.com, and www.goodhealthoutcomes.com.

Parallax is a fully reporting company with its stock traded on the OTC Markets under the symbol “PRLX” (OTC.PRLX).

CORPORATE HISTORY

Formation and Development

On March 22, 2017, the Company formed a wholly-owned subsidiary, Parallax Behavioral Health, Inc. (“PBH”), a Delaware corporation, and on April 26, 2017, completed the asset acquisition of 100% of certain intellectual property (“Intellectual Property”) from ProEventa Inc., a Virginia Corporation (“ProEventa”), in accordance with the Intellectual Property Purchase Agreement between the Company, PBH and ProEventa (the “ProEventa Agreement”). ProEventa has an expertise in the development of behavioral health technologies, and is the wholly-owned subsidiary of Grafton Integrated Health Network, Inc., a non-profit Virginia corporation (“Grafton”). Pursuant to the ProEventa Agreement, the initial consideration for the Intellectual Property was paid to ProEventa in the form of a stock purchase agreement to purchase 2,500,000 shares of the Company’s Common Stock for $2,500, resulting in a net cost for the Intellectual Property of $622,500.  In addition, the Agreement included conditional contingent royalties and revenue sharing for future revenues generated from the Intellectual Property.

On September 20, 2018, the Company formed Parallax Communications, Inc, a Delaware corporation and wholly-owned subsidiary of Parallax Health Management, Inc.

On August 28, 2019, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Global Career Networks Inc., a Delaware corporation, (“GCN”) to acquire a 19% interest in GCN.  The Purchase Agreement was fully executed on September 6, 2019, with an effective date of October 15, 2019 (the “Effective Date”). Pursuant to the Purchase Agreement, in exchange for 6,666,667 shares of the Company’s restricted Common Stock, valued at $1,000,000, the Company acquired 760 shares of GCN common stock. In addition, in the event the market value of Parallax Common Stock one (1) year from Effective Date, is greater than $0.075 per share but less than $0.30 per share, the Company is required to issue GCN up to an additional 20,000,000 shares of restricted Common Stock, for an aggregate value of the Company’s Common Stock held by GCN of $2,000,000. At December 31, 2019, the Company recorded an impairment on the investment of $1,000,000.

In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 virus a global pandemic, and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States.  As of the date of the filing of this Annual Report, the WHO reports over 4 million confirmed COVID-19 cases and over 275,000 deaths worldwide, including over 75,000 in the U.S. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

The COVID-19 pandemic may adversely affect the Company’s customers’ operations, its employees and its employee productivity. It may also impact the ability of the Company’s subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These effects, and the direct effect of the virus and the disruption on the Company’s employees and operations, may negatively impact both the Company’s ability to meet customer demand and its revenue and profit margins. The Company’s employees, in many cases, are working remotely and using various technologies to perform their functions. The Company might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit the Company’s ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, the Company may experience a material adverse effect on its business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

On April 13, 2020, the Company received an Order of Suspension of Trading dated April 10, 2020 (the “Order”) from the United States Securities and Exchange Commission (“SEC”). The temporary suspension period was from 9:30 a.m. EDT on April 13, 2020, through 11:59 p.m. EDT on April 24, 2020.  The Order referred to questions raised regarding the accuracy of the Company’s recent press releases in relation to the Company’s development of a rapid screening test for COVID-19, and the Company’s access to “large quantities of COVID-19 diagnostics testing kits and personal protective equipment.”  

In an effort to protect the interests of shareholders, the SEC has issued similar orders and suspensions recently to several registrants, with concerns over the validity of claims made in connection with the availability of COVID-19 tests and supplies.  

The Company, along with its counsel, is cooperating fully with the SEC to substantiate the Company’s recent public announcements and business endeavors, and is addressing any questions and/or concerns raised regarding the accuracy of the assertions made in the Company’s press releases.  

Pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until the Company has strictly complied with all provisions of the rule, including the filing of a new Form 15c2-11 with FINRA.  

The Company is required to file its Annual Report with the SEC for the purposes of satisfying its financial reporting requirements. However, in addition to the Company's reporting obligations, the Company must have a FINRA Member Market Maker file a 15c2-11 with FINRA in order for the Company’s shares to resume trading on the OTCQB market. These actions do not impact or otherwise affect the Company's results of operations or disclosures as set out in this Annual Report. The Company believes that this Annual Report fully complies with the requirements of the Securities Exchange Act of 1934, as amended and, in accordance with generally accepted accounting principles, that it fairly presents, in all material respects, the financial condition and results of operations of the Company as at the relevant dates.

As of the date of filing of this Annual Report, the trading suspension period expired, and the Company is in the process compiling the information required for its 15c2-11 submission by a FINRA Member Market Maker. The Company anticipates the filing of a new Form 15c2-11 within the next 30 days.  If any party has any questions as to whether the Company has complied with the rule, they should contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for its common stock. Many brokers may be unwilling to engage in transactions in its common stock because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares.

Changes in Management

On April 6, 2017, the Company’s board of directors (the “Board”) elected Mr. J. Michael Redmond as Chairman, to serve until the next annual meeting of the shareholders, in accordance with the Company’s bylaws, and/or until his successor is duly appointed, or a resignation is duly tendered.

Effective July 6, 2017, the Board caused the departure of Mr. Redmond from his position as President and Chief Executive Officer of the Company and RoxSan Pharmacy, Inc., and concurrently Mr. Redmond was removed from all board member seats.

Effective July 7, 2017, pursuant to a unanimous Board resolution, Mr. Paul R. Arena was appointed as the Company’s President and Chief Executive Officer, and the Board caused Mr. Arena's election to the Board and the Boards of the Company’s wholly-owned subsidiaries, Parallax Health Management, Inc. and Parallax Behavioral Health, Inc.

On July 26, 2017, Dr. Jorn Gorlach resigned as a member of the Board.  This resignation did not involve any disagreement with the Company.

On June 4, 2018, Mr. Anand Kumar resigned as a member of the Board.  This resignation did not involve any disagreement with the Company.  Mr. Nathaniel T. Bradley, currently serving as Chief Technology Officer, succeeded him, and agreed to serve as a member of the Board until the next annual meeting of the shareholders and/or until his successor is duly appointed.

On May 15, 2019, Mr. David Appell joined the Company as its Chief Operating Officer. On February 2, 2020, Mr. Appell resigned his position.  His resignation was not the result of a disagreement with the Company on any matters relating to the Company's operations, policies or practices.  Concurrent with his resignation as COO, Mr. Appell will serve as Managing Director of the Company’s wholly-owned subsidiary, Parallax Communications, Inc. (“PCOM”). As Managing Director, Mr. Appell will provide business advisory and strategic planning advice to the Company with PCOM.  In exchange for these services, Mr. Appell will be paid $2,000 per month plus medical benefits.   

On March 1, 2020, Dr. David L. Stark was appointed as the Company’s President.  In connection with the appointment, Mr. Paul R. Arena, who has held the position of President since July 2017, remains the Company’s Chief Executive Officer and Chairman of the Board of Directors, but resigned the position of President to afford Dr. Stark’s appointment.

In 2013, the Company identified an opportunity to acquire RoxSan Pharmacy, Inc. (“RoxSan”), a California corporation, and began the due diligence process. The Company’s initial interest centered on utilizing the acquisition as a means of accelerating the commercialization of the Company’s Target System and diagnostic platform, as RoxSan had access to a nationwide network of doctors and sales representatives.  During the due diligence process, the Company became aware of numerous opportunities that RoxSan and its markets represented.  On March 21, 2013, the Company entered into a Letter of Intent with Shahla Melamed, RoxSan's sole Shareholder, to acquire RoxSan.  Between 2013 and 2015, four (4) amendments were also executed.

As part of the acquisition, the Company was required to obtain licensure from the State of California, and on July 31, 2015, the Company received notice that its pharmacy and sterile compounding licenses were issued by the California State Board of Pharmacy. 

On August 13, 2015, (the “Closing Date”), pursuant to a resolution of the Board, the Company entered into an Agreement to Purchase and Sell One Hundred Percent of the Issued and Outstanding Shares of RoxSan Pharmacy, Inc. (“RoxSan” or the “Pharmacy”), and its Assets and Inventory (the “Purchase Agreement”).  Pursuant to the Purchase Agreement between Parallax, RoxSan and its sole shareholder, Shahla Melamed (the “Seller” or “Melamed” or “Former Owner”), in exchange for 100% of RoxSan's common stock, and its assets and inventory, Parallax, among other things, issued the Seller a Secured Promissory Note (the “Note”) dated August 13, 2015, in the amount of $20.5 million (the “Acquisition”).  The Note bore interest at a rate of 6% per annum, and matured August 13, 2018 (“Maturity”).    As a result of the Acquisition, effective August 13, 2015, RoxSan became a wholly-owned subsidiary of Parallax. No change in control occurred as a result of the Acquisition.

In October 2015, shortly following the Company’s acquisition of RoxSan, Shahla Melamed (“Melamed”), initiated two (2) legal actions against the Company in the Superior Court of the State of California, County of Los Angeles, West District, Shahla Melamed v. Parallax Health Sciences, Inc., action numbers SC 124873 and SC 125702.  In the matter, action No. SC 124873, Melamed sought rescission of the August 13, 2015, Purchase Agreement. In the Matter, action No. SC125702, 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 also initiated legal action against Melamed and filed a complaint in October 2015, action number SC 124898, in the Superior Court of the State of California, County of Los Angeles, West District, Parallax Health Sciences, Inc., et al. v. Shahla Melamed, et al.  The complaint in that action alleges that Melamed breached several obligations under the Purchase Agreement, and the Company sought to reduce the Secured Note due to undisclosed material changes in the business.

In January 2019, Melamed requested mediation, seeking settlement of the pending litigation with the Company, including that which was initiated against the Company by her son, Hootan Melamed (Shahla and Hootan, collectively, the “Melameds”). Through mediation, the Company and the Melameds reached agreeable settlement terms, and on February 19, 2020, the Company received a counter-signed Settlement and Release Agreement (the “Settlement”).  Effective February 12, 2020 (the “Effective Date”), the Settlement is by and between Parallax Health Sciences, Inc., RoxSan Pharmacy, Inc., Michael Redmond, Edward Withrow III, Huntington Chase Financial Group, LLC, Calli Bucci and Dave Engert (collectively, “Parallax”), and Shahla Melamed and Hootan Melamed (collectively, the “Melameds”), and resolves all pending lawsuits between the parties in connection with the acquisition of RoxSan Pharmacy.

In consideration of the resolution of all existing and potential claims, including the cancellation of the Note in the principal sum of $20,500,000, and accrued interest of approximately $4,500,000, and without further action or litigation and without admission of liability by either party, the Settlement terms include the following:

●A payment of $4,000,000 (the “Settlement Sum”) to the Melameds, to be paid as follows: 

$1,250,000 within 90 days of the Effective Date; 

$1,250,000 within one (1) year of the Effective Date; 

$1,500,000 within two (2) years of the Effective Date. 

●The issuance of ten (10) million shares of the Company’s Common Stock to an entity owned by Shahla Melamed. 

In addition, in the event forty percent (40%) or more of the Company and/or its subsidiaries (including by way of merger) is sold within two (2) years of the Effective Date, the Company shall pay the Melameds, within two (2) weeks of receipt of the proceeds from such sale (the “Sale Proceeds”), any outstanding unpaid Settlement Sum plus an additional 10% of the Sale Proceeds received, up to a total of an additional $3,000,000 over and above the Settlement Sum.

On May 14, 2018, pursuant to unanimous resolutions of the boards of directors of RoxSan Pharmacy, Inc. and Parallax Health Sciences, Inc., RoxSan filed a Chapter 7 petition in the United States Bankruptcy Court for the Central District of California (the “Court”).  Mr. Timothy Yoo was appointed trustee (“Trustee”) on May 15, 2018.  In connection with this filing, RoxSan sought to discharge approximately $5 million of liabilities owed to various parties, and intercompany loans in excess of $1 million owed to Parallax.  The Chapter 7 bankruptcy proceeding by RoxSan Pharmacy, Inc. was fully discharged, and the case was closed on March 13, 2019, in U.S. Bankruptcy Court, Central District of California.

As a result of the loss of financial control of RoxSan, the Company derecognized the subsidiary as of September 30, 2018. The derecognition resulted in a gain of $4,478,268. The Company also extinguished $22,778,281 in debt and accrued interest related to the acquisition of RoxSan.

Overview

●Parallax Diagnostics, Inc. (“Parallax Diagnostics” or “PDI”) acquired a proprietary Point-of-Care diagnostic immunoassay testing platform and 25 test cartridges for the areas of infectious diseases, cardiac markers, drugs of abuse and various other medical conditions. PDI has recently become an FDA registered distribution partner for various lateral flow-through COVID-19 IgM/IgG antibody instant tests products. It has also registered and distributed approved Personal Protective Equipment (PPE) through an ecommerce website at GoodHealthOutcomes.com. 

●Parallax Health Management, Inc. (“PHM”) develops remote patient monitoring (“RPM”) and telehealth market products and services, and commercializes them, including the Good Health Outcomes™ software platform with Fotodigm® proprietary data capture 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. 

The Company envisions a world where healthcare is accessible, reliable and affordable, without compromising quality and economics of the healthcare industry.  Driven by a sincere desire to make people’s lives better and push back on the healthcare industry’s crippling economic outlook, the Good Health Outcomes™ platform was created; the Company’s design is for “outcomes realized through intelligent health.”

The Good Health Outcomes™ system facilitates cost-effective remote diagnosis, treatment and monitoring of patients with chronic diseases. Parallax’s integrated products and services provide Point-of-Care (“POC”) patient testing and monitoring, along with information communicated via cloud-based mobile smartphone applications that are agnostic as to operating systems and utilize sophisticated data analytics. Information is retrieved in real-time by physicians and other healthcare professionals and is integrated into electronic health records.  The Company’s digital products and services capitalize on the transformation of healthcare to provide improved compliance, diagnosis, monitoring and support to patients, along with cost savings and efficiencies to healthcare systems.

Good Health Outcomes™ encompasses 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.

The Company believes that the solutions lay in the empowerment of the patient, the payer and the provider; creating a model of healthcare that aligns all three interests and creates a singular goal of better health outcomes, at reduced cost.  The Good Health Outcomes™ platform involves these areas of focus:

●Behavioral Modification 

The Company believes in working to empower the patient to modify their behavior through personal empowerment. The Company has developed and designed a revolutionary technology that will aid in the challenges of behavior modification, and improve adherence to medical regimens, which can lead to lower costs and better health.

REBOOT™, the Company’s patented cloud-based behavioral software technology, along with COMPASS™, the Company’s mobile application that incorporates REBOOT™ with unique mobile phone features, and WIZARD™, which supports scalability of the REBOOT™/COMPASS™ platform, was developed by behavioral specialists at Grafton Integrated Health Network, a multistate behavioral healthcare organization with over 60 years of clinical experience and data in behavioral health.

●Connected Health 

Continually increasing healthcare costs, difficulty accessing care, and a greater need for convenience, are driving consumers to demand more value out of their healthcare dollar and seek care that meets their needs and preferences. The market is responding to this growing demand, and non-traditional care models are rapidly expanding, such as:

●Traditional providers (e.g., office-based primary care physicians (PCPs) and specialists, hospitals) are partnering with non-traditional care providers to expand reach.  

●New parties, such as consumer product and technology companies, are entering this billion-dollar market. 

●Non-traditional care models have the opportunity to complement traditional care models to help improve access and affordability, and to deliver a more personalized healthcare experience. 

To meet these changing demands, the Company has developed Good Health Outcomes™, the Company’s proprietary connected health platform that provides remote patient monitoring, telehealth, POC diagnostics and health education products and services on a single platform.  Currently in its beta stage, Fotodigm®, the integrated data capture utility, has the capability for systems integration of an unlimited number of third-party biometric measurement products, electronic health and medical record software (EHR, EMR) services and solutions. The Company is continuing the Fotodigm® beta stage to test economic models and delivery modalities in preparation for large-scale deployment of the Fotodigm® platform and the filing of 510k FDA approval of the Fotodigm® system.  The Good Health Outcomes™ platform is based on the following:

●Telehealth/Remote Patient Monitoring 

Improves digital connectivity among consumers, providers, health plans, and life sciences companies.  

Facilitates self-managed care, with the help of technology-enabled solutions. 

Provides a secure environment that protects consumer privacy. 

Delivers care outside the traditional clinical setting, potentially providing better access to care at a lower cost.  

Assists chronic disease management and improves population health outcomes.  

Empowers patients by providing a cost-effective tool that connects them with their doctors.  

Empowers doctors with improved patient scheduling flexibility and timely communications.  

Provides hospitals with a tool to address the problem and economic hardship caused by readmissions. 

Provides a virtual management tool for chronic disease management. 

●Target System  

Allows doctors to test patients in their office.  

Requires only a one-time learning process to perform all tests.  

Delivers test results in 12 minutes or less.  

Provides patients with important information at the time of testing.  

Costs less than outside lab-based tests, allowing for a reduction in payer costs and patient co-pays.  

Allows doctors to earn additional revenue that they cannot participate in with outside labs and testing not performed in their offices. 

Patients can test from their homes and transmit data to doctors. 

The Parallax Business Model

In the past 60 years, healthcare has transitioned from a direct relationship between doctor and patient, to one that has patients separated from their doctors by the introduction of a huge number of stakeholders, ranging from health insurers, employers, pharmacy benefit managers, imaging, diagnostic testing, lawyers, specialists and a plethora of others.  The patient and healthcare provider both want the same thing: information, quality of service, transparency, value for their hard-earned dollars, and more time in their day.

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●Patented behavioral machine learning technology; 

●Patented POC diagnostic testing technology; 

An example of the cross-over and cross-pollination model is further illustrated as follows:

●A customer has identified Good Health Outcomes™ as a solution for Remote Monitoring of their health or medical condition (i.e. a chronic disease); 

●The customer will be prescribed a medical regimen that includes prescription medication and biometric vitals (i.e. blood pressure, weight, glucose, et al); 

●The opportunity is created for Parallax to introduce its Medication Adherence product to the customer. 

The customer type will vary, depending upon the sales and marketing approach and target audience, but is primarily comprised of:

●Patients 

●Providers: Doctors, Nurses, Clinicians and Caregivers 

●Payers: Insurance Companies, Corporations, Government 

The Company believes that the current healthcare system is built on unsustainable models and significant challenges for all the stakeholders in the healthcare system. The Company also believes that it can deliver solutions which fill a void in the current market for high quality, high efficacy products and services delivered at reasonable and rational prices. The Company’s business strategy is to expand through organic growth, selective synergistic acquisition, and develop, license and/or acquire, quality products and or services that complement the Good Health Outcomes™ systems.

Products and Services

Parallax believes that its products and services can provide solutions that mitigate rising costs, reduce waste in spending through transparency, reduce the amount of unnecessary services, and increase the health and wellness of patients before they are sick.  

Remote healthcare products include patented and patent pending software and mobile apps (to be available for iPhone on Apple App Play Store and Android on Google Play)  and other services, as well as electronic kits and devices from third-party licensed platforms that are designated towards a patient’s primary health concern (i.e. diabetes, blood pressure, cardiovascular, general monitoring, etc.), and offer both audio and video options that interface with the patient’s healthcare providers.  Prescription medication dosage monitoring is also available.

Behavioral health products include the proprietary behavioral health technology, REBOOT™, which powers decision support that can also be delivered securely to any internet connected device.  The software can be used by an individual or an organization of any size, with the potential to transform the cost of treating and managing chronic illnesses such as pulmonary-COPD-asthma, diabetes, and cardiovascular disease by effecting the modification of behavior in patients being treated for these chronic diseases.

Diagnostics products include the Target System, the Company’s proprietary POC diagnostic immunoassay testing platform and test cartridges for the areas of infectious diseases, cardiac markers, drugs of abuse and various other medical conditions, and the patented SPARKS Mobile™, the next-generation handheld mobile analyzer currently under development. The Target System will allow doctors to test patients in their office, with test results delivered in 10 minutes or less.  This allows patients to be provided with important information at the time of testing. The costs of the Target System are less than outside lab-based tests, benefiting both payers and patients.  In addition, doctors will be able to generate additional revenue that would normally be paid to an outside laboratory, and patients can even perform test from their homes, with results transmitted directly to their doctor. The Company has also recently selected antigens and antibodies to be used as the markers for its rapid Coronavirus (“COVID-19”) screen test, currently in the pre-clinical stage of development, for use with its FDA-cleared Target System platform.

Through the development and design of the Good Health Outcomes™ platform, the Company’s telehealth, RPM and POC products and services are interoperable and interchangeable with any FDA cleared/approved medical device, providing ease of use and connectivity between patient and doctor.  The advancement in the Company’s technology is strengthened by the ability to scale its products to meet the demands of both individuals and large groups alike.

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Global COVID-19 Pandemic and Pandemic Viruses and Diseases of the Future

Data driven and behavioral technologies are well positioned to counter and deal with the current medical crisis within the U.S. and abroad.

The COVID-19 global pandemic is the cause of:

●Estimated $10s of trillions in economic losses on a global basis from economic closures and compound effects of COVID-19; 

●Over 1.4 million reported infected in the U.S. with over 83,000 deaths, and growing. 

Medication Nonadherence

Medication nonadherence is a priority public health consideration, affecting health outcomes and overall healthcare costs on a worldwide basis. Increasing adherence to medical regimens leads to better health outcomes in chronic disease and reduces the overall costs to the patient, payer and all of the stakeholders across the healthcare continuum.

The total cost of arthritis in the U.S. was an estimated $128 billion, split between $81 billion in direct medical expenses and $47 billion in related losses of productivity and care management.  Arthritis affects 23 percent of adults in the U.S., or 54 million people, and is expected to rise to 78 million cases by 2040. Arthritis also occurs with other chronic conditions, as many patients are unsure on how to manage their own symptoms.

●Strokes 

On its own, strokes in the U.S. create medical expenses of $33 billion annually and accounts for 1 out of 20 deaths in the country, or an estimated 130,000 deaths per year.

These nonadherence and chronic disease numbers are daunting in the best of conditions, but the reality is that the sheer volume of U.S. citizens reaching the age of 60 will impact the cost trajectory. The projected financial impact is not sustainable under the current healthcare system.

Parallax is led by experienced veterans with backgrounds from the healthcare, medical devices, drug development, technology, FDA regulatory, medical insurance billing and patient management, finance and management of early stage and high growth companies. The Company’s disciplined and organized approach is balanced by its optimism for the future, and the opportunities present in the current healthcare market. The Parallax team is grounded in a belief that success in business is built on a combination of research, planning and execution.

At Parallax, management continually strives to identify solutions to the challenges facing the current healthcare system.  The Company and its management team of professionals are committed to delivering the highest quality products and services to patients, payers, healthcare insurers and stakeholders that are accessible and reasonable, and are built upon sound business models and economics that are designed to provide for sustainable growth and increased value to the Company’s shareholders.

Overview

Parallax continues its focus on Point-of-Care diagnostics, with an emphasis on its Target System testing platform, including the Target Antigen Detection System, the flow-through test cartridge, and the FDA-cleared VT-1000 desktop analyzer and novel applications that detect and/or monitor infectious diseases, cardiac markers and drug of abuse assays.  The Company holds exclusive licenses, in perpetuity, to a line of proprietary, patented and/or patent-pending, FDA-cleared, Point-of-Care diagnostic tests to be utilized with its single platform diagnostic testing Target System.  Parallax, with its products and products in development, offers the potential to transform the diagnostic landscape by transitioning critical tests from the centralized lab directly to the hands of the physician or clinicians.  

The Company is also pursuing the expansion of the Target System’s test cartridges for the diagnoses of additional diseases.  The Company has identified a technology previously cleared by the FDA that can be utilized as a platform for a test cartridge that will detect CD4 and CD8 cells, which in turn determine a patient’s immune status.  In addition, the Company is in the process of developing a test cartridge for the diagnosis of the COVID-19 virus.

Target System Product Strategy

Point-of-Care diagnostic kits typically consist of test strips that the healthcare provider applies a patient’s sample to and then reads the strip either visually or with an instrument in order to determine a result.  They are simple to use, fast, disposable and reliable within an acceptable range. More sensitive analytes or tests requiring quantitative analysis and definitive antibody screening needed in most situations, must be sent out to a diagnostic lab, and hours or days later results arrive. These tests are comparatively complex, expensive, and time consuming; only centralized diagnostic facilities can manage sample handling and the cost of instruments and reagents.  A POC instrument that has the advantage of a test strip device in terms of ease of use and rapid results along with enzyme-linked immunosorbent assay (ELISA)-like capabilities for major diseases would circumscribe diagnosis routinely within the course of a patient visit. This could disrupt the current model.  The Company is planning to develop just such a device that it intends to sell to doctors and healthcare providers.

The commercial success of the current generation of small, simple to use diagnostic devices which provide rapid results in POC applications has been limited by their inability to provide precise, highly sensitive, quantitative measurement. Despite these limitations, the rapid increase in discovery of individual markers of disease processes, coupled with the advancements in rapid detection technologies, has made these tools available to medical professionals on a wide scale and POC diagnostics are quickly becoming a high growth industry.

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The Company also believes that there is growth opportunity for the exploitation of its Target System platform in developing nations and regions such as Africa, India, South America, Eastern Europe, Russia and Asia as well as developed markets of North America and Western Europe. One of the first initiatives to be developed for this market will combine the Company’s SPARKS Mobile™ (a portable hand-held diagnostic analyzer based on the VT-1000 Desktop Analyzer), currently in development, with a test for the COVID-19 virus, as well as a test for the monitoring of AIDS/TB patients through the use of a proprietary rapid point-of-care immunoassay CD4-CD8 test called PROMISE CD4, also in development.

The Diagnostics Products

The Company’s assets include a FDA-cleared VT-1000 Desktop Analyzer and more than two dozen FDA 510(k) cleared diagnostic tests.  The Desktop Analyzer and immunoassay system incorporates a flow-through rapid antigen test platform configuration that has the ability to produce high-performance quantitative blood test results with the ease of rapid qualitative diagnostic strips.  The Company has patents and patent applications related to its current and future products, as well as methods for future test development. The Target VT-1000 Desktop Analyzer is ideally suited for rapid development and commercialization of all new tests that may be introduced, as well as integrating remote patient monitoring and telehealth products and services into the Target System through the SPARKS Mobile™ platform.

VT-1000 Desktop Analyzer: Quantitative and Qualitative Immunoassay

TADS Components

The Target System provides the platform for the development of a series of quantitative tests for important diagnostic applications that can provide results at a patient's bedside, in a doctor's office, in the emergency room, in a clinic, in an ambulance, on the battlefield, on-site agri-business locations, rural and economically disadvantaged areas.  The Target System expects to meet the POC diagnostic market criteria as follows:

Rapid turnaround time 

Direct application of a non-critical volume or placement of sample directly into instrument 

Disposable device or minimal maintenance required 

Minimal technical expertise required 

Positive identification and specimen tracking strategy that eliminates specimen identification errors 

Simple strategy for calibration and QC 

Transferability of data to the LIS or HIS 

Agreement of result with accepted “Gold Standard” tests 

Affordable cost 

Diseases like COVID-19, malaria, cholera, hepatitis, yellow fever, West Nile virus, and other viral diseases present increasing health threats to large populations around the globe, with the largest problems existing at the stage of proper diagnosis. The Target System test cartridge format is readily adaptable, having been applied to viral and bacterial infections in the past such as Rubella, Rotavirus, and Streptococcus A.

The Company believes that it can adapt the VT-1000 Desktop Analyzer and SPARKS Mobile™ to the rapid, simple POC diagnosis of nearly every disease without the requirement of additional equipment. Further, the Company believes that the combination of a mobile, hand-held testing device along with test cartridges for a host of different diseases can improve disease diagnoses and healthcare in a vast majority of today’s underserved regions. In addition, the Target System platform allows for the monitoring of environmental components influencing the health of populations, such as the presence of toxins in soil and drinking water and contamination of food supply.

The SPARKS Mobile™ is the Company’s next-generation analyzer.  Utilizing re-engineered technology of the VT-1000 Desktop Analyzer, the SPARKS Mobile™ is a handheld device that is intended to utilize the Company’s TADS test cartridges and include a small, rapid testing format, in conjunction with a data acquisition and test reading, with connectivity and features similar to a smartphone device. The SPARKS Mobile™ is currently in the design stage of the development process.

SPARKS Mobile™

Design Concept

Whether searching for markers in the blood stream, or diagnosing a pathogen in urine, the Company’s SPARKS Mobile™ will be a portable tool for rapid diagnostics. The SPARKS Mobile™ will also provide an improvement in POC diagnostics and applications in countries with limited healthcare infrastructures and geographic limitations, both of which are of paramount importance in the combat against infectious diseases and in the fight against proliferation of endemic and pandemic diseases.  This innovative SPARKS Mobile™ will allow for a fast (minutes instead of hours or days) performance of tests at the point of care and will only require a test cartridge and a small number of ready-to-use solutions in preformatted quantities.  Moreover, the SPARKS Mobile™ will include the ability to store patient information, test data, and QC data, and transmit data through wireless connections.

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●achieve a portable monitoring system, which is compatible with proven and reliable ELISA-based target system technology. 

●expand readout capabilities to provide a mobile testing and monitoring platform. 

●increase the economy of scale and scope of the diagnostics and monitoring platform by the development of additional utility of the device without redundant infrastructure investments (additional data acquisition of patients, additional tests for other, predominant diseases). 

The densimeter/multi-light spectrum reflectometer utilizing immobilized enzyme antigens in blood plasma or urine, which is the core testing system of the VT-1000, will not change.  The testing technology in the initial SPARKS Mobile™ testing device will be based upon the same FDA. 510(k) cleared technology employed in the Company’s VT-1000 Desktop Analyzer and is compatible with existing TADS test cartridges. However, a number of innovative features will be integrated into the design to meet customer and patient needs, including those included in the Company’s most recent conceptualization of design and functionality and environmental interface:

●High Infrared Light Spectrum;  

●Easy Field Upgrades; 

●No Change of Equipment;  

●Printer Hook-up Capability;  

●Low Entry Cost for New Test Development and Analysis;  

●Safety, Security and Accuracy by design; and 

●Desk to Docking Station: Smart Phone Capability 

The SPARKS Mobile™ is being specifically designed to coordinate with the Target System and the TADS cartridges to provide reliable quantitative results within minutes, right at the point-of-care or site of testing. The continuity of the Company’s product and system upgrades and the continuous development of new tests based on an increasing point-of-care market paradigm, points to the VT-1000 Desktop Analyzer and the SPARKS Mobile™ as low cost alternatives to large laboratory analyzers and specialized training of personnel on multiple machinery. The ultimate value to the clinician or the attending physician is the ease of use, reproducibility and the history of accuracy of this type of rapid immunoassay principle in the area of quantitative analysis.  

The graphics below represent the Company’s most recent conceptualization of the design components and features for the SPARKS Mobile™, its technology, operational construct and environmental interface:  

SPARKS Mobile™

SPARKS Mobile™

Operation Concepts

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In summary, Quantitative Immunoassays are easy to construct and offer several valuable benefits to the researcher. They permit calculation of the absolute concentration of the component of study with high accuracy (error <10%) and high reproducibility. This enhances the quality of research results and also the productivity of research programs by facilitating the direct comparison of data obtained on separate occasions.

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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 quantitation of the target analyte have remained the domain of immunoassay analyzers.

Until the Company secures a minimum of five million dollars ($5,000,000) of additional capital to operate for the next twelve months it will remain highly vulnerable to competition.  The Company anticipates the need for a minimum of an additional three million dollars ($3,000,000) of investment capital for it to achieve its goals of developing a commercially viable rapid POC COVID-19 diagnostic test and the SPARKS Mobile™ Analyzer version of the VT-1000 Desktop Analyzer. The Company intends on exploring licensing partners for manufacturing and distribution of its product line. Should adequate funds be available from future funding resources, the Company intends on using a portion of the proceeds for research and development, including the further development of the SPARKS Mobile™ device and COVID-19 test cartridge.   There can be no assurance that such amount will prove adequate to develop the Company’s products. Furthermore, the Company’s competition has significantly greater resources that they can deploy and time to head off competition.

In Vitro Diagnostic Sales Leaders

A 2017 report from Kalorama Information ranked the top 10 companies in the In Vitro Diagnostics market, based upon estimated 2017 revenues from clinical diagnostic test instruments, reagents and supplies, as follows:

1.Roche Diagnostics, Switzerland www.roche.com  

2.Abbott Diagnostics, Abbott Park, IL www.abbott.com  

3.Siemens Medical Solutions Diagnostics, Deerfield, IL www.diagnostics.siemens.com  

4.Danaher Corporation, Washington, DC, www.danaher.com 

5.Thermo Fisher Scientific, Waltham, MA www.thermofisher.com 

6.Sysmex America, Inc. Lincolnshire, IL, www.sysmex.com 

7.bioMérieux SA, Marcy l’Etoile, France www.biomerieux.com  

8.Ortho Clinical Diagnostics, a division of Johnson & Johnson, Raritan, NJ www.jnj.com  

9.Bio-Rad Laboratories Inc., Hercules, CA www.bio-rad.com  

10.Beckman Coulter Inc., Fullerton, CA www.beckmancoulter.com  

Barriers to Use

The main barriers and constraints to the use of POC rapid diagnostic tests can be put into four main categories:  

Acceptability:Rapid tests need to be acceptable to policymakers, clinicians, patients, and the medical community. In the POC rapid test market, tests need to have sufficient sensitivity and specificity, and need to have an adequate predictive value. Ease of use is critical for POC use by clinicians. Culturally appropriate specimens and credible results are vitally important if rapid tests are to be accepted by patients. 

Affordability:Many rapid diagnostic tests are more expensive than the tests or syndromic algorithms they are intended to replace. Decreasing per-test costs, carefully designing diagnostic algorithms, and educating end users about the cost-savings of POC testing are important means of maximizing rapid test affordability. 

Availability:Rapid diagnostic tests are not always available in developing countries. Most tests have limited shelf lives, and many countries have weak public and private sector procurement and distribution systems. The consistency and quality of imported tests can also cause issues. To address these constraints, local government regulations, quality assurance, shelf life testing, and distribution systems all need to be assessed and improved. The Company, in conjunction with its license partner Montecito BioSciences, Ltd., intends to initially control all of the manufacturing for the Target System Desktop and SPARKS Mobile™ analyzers and test cartridges. 

Reimbursement:The ability to gain scale in reimbursement across a wide number of tests is still a challenge for POC diagnostic companies such as Parallax.  

Intellectual Property (Diagnostics)

The Company’s products include an FDA-cleared VT-1000 Desktop Analyzer and more than two dozen FDA-cleared tests.  The Company acquired the exclusive rights in perpetuity to a number of United States Patent and Trademark Office (“USPTO”) patents and pending patent applications on the Company’s products in the area of infectious diseases, as well as methods for future test development, through a License Agreement with Montecito BioSciences, Ltd.  The Company intends to seek intellectual property protection for all supporting products such as novel biomarker candidates, antibodies, proteins, and diagnostic tests surrounding its core indication areas, in order to create a barrier to entry for competitors.

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The Target System and certain of its related components were previously issued patents by the USPTO.  The following previously-issued patents have expired:  

The Company has retained a team of professionals in the field of patent protection and is continuously seeking out new opportunities for its products and products in development.

Key Patented and Patent-Pending Concepts

●Sample Analysis 

●Plurality of Isolated Antibodies to a Plurality of Cognate Antigens 

●Identifying Drugs, Targeting Moieties or Diagnostics 

●Determining the Immune Status of a Subject  

●Flow Through Testing System with Pressure Indicator 

●Novel Biomarker Candidates 

●Antibodies 

●Proteins 

●Diagnostic Testing 

The long legal journey toward medical device regulation began with the Pure Food and Drugs Act of 1906.  Medical devices were not included, as no one envisioned how technology would grow increasingly complex, and would ultimately require regulation. The Medical Device Amendments of 1976 gave the FDA authority to ensure the safety and effectiveness of a range of life-saving medical devices, while also protecting the public from fraudulent devices.  The Amendments:

●defined a medical device, 

●established three device classes (I, II, and III), 

●identified pathways to market, 

●established Advisory Panels, and 

●set clinical investigation requirements. 

Subsequent legislation strengthened the FDA’s regulatory authority.  The following table identifies the legislation and significance for the Major Medical Device:  

As part of the regulatory infrastructure, the FDA has established almost 1,700 classifications for generic medical devices.  Each one of the generic devices is assigned one of three regulatory Classes, based upon the control level necessary to assure the devices’ safety and effectiveness.  The least burdensome provision allows industry and FDA to consider the least burdensome appropriate means of evaluating a device’s effectiveness when there is a reasonable likelihood of its approval. The intent is to help expedite the availability of new device technologies without compromising scientific integrity in the decision-making process or FDA's ability to protect the public health. This provision does not lower the standard for premarket clearance.  The FDA maintains a database on its website at www.accessdata.fda.gov for many types of applications, including 510(k) records dating back to 1976, and PMA submissions.

Device classifications depend on the intended use of the device, its indications for use, and risk posed to the patient and/or user.

The FDA requires that medical devices obtain either Premarket Notification Clearance (“PNC” or “510(k)”) or Premarket Approval (“PMA”) prior to commercial distribution, unless an exemption is met.  Whether to submit a 510(k) or a PMA is determined by the applicant.  A 510(k) is normally submitted for a device that can be compared to a similar device already on the market, to illustrate the device’s safety and effectiveness.   A PMA is normally submitted for a device that is completely new to the market or is classified as a Class III device.

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The term “510(k)” refers to Section 510(k) of the Food, Drug and Cosmetic Act, wherein it provides a pathway to clearance for a device that maintains FDA standards, without the lengthy and costly PMA submission process. A 510(k) submission for clearance must demonstrate that the device is at least as safe and effective, that is, substantially equivalent, to an already legally marketed device.  The 510(k) submission must be made at least ninety days in advance of commercial distribution, and if the device meets the requirements, the FDA orders the device as “cleared.”

To further illustrate the 510(k) submission requirement, a 510(k) clearance is required when:

●introducing a device into commercial distribution (marketing) for the first time; 

●there is a significant change in the safety or effectiveness of a legally marketed device; or 

●a legally marketed device is being marketed for a new or different intended use. 

In contrast, a 510(k) is not required when:

●unfinished devices or components are sold for further processing or assembly by other parties, excluding the sale of direct replacement parts to end users; 

●the device is not being marketed or commercially distributed; 

●distributing another party’s domestically manufactured device; 

●repackaging or relabeling, if the condition of the device is not significantly changed; 

●the device was commercially distributed prior to May 28, 1976, and no significant changes to design, method, component, method of manufacture or intended use have been made; 

●acting as an importer of a foreign made medical device; or 

●the device falls into a Class I or II exemption classification; or is a Class III device requiring PMA.   

To summarize the 510(k) for Parallax’s VT-1000 Target System, the submission was made to the FDA on December 23, 1988, and received 510(k) clearance on January 27, 1989.  In this instance, the clearance process took approximately thirty days.  The VT-1000 will not require any further FDA clearance unless there are significant changes in the safety or effectiveness of the device, or its intended use is changed or appended.  The same is true for the 25 FDA-cleared tests.

Premarket Approval

Premarket Approval (PMA) is the most stringent type of device submission required by the FDA. A PMA application must be submitted to request FDA approval to market a device.  Unlike 510(k) clearance, PMA approval is based upon a determination that there is sufficient valid scientific evidence that the device is safe and effective for its intended use. PMA submissions include extensive research and development, three-phase clinical trials, and a lengthy FDA review process.  

To reasonably assure that a device is safe and effective, PMA requires valid scientific evidence that the probable benefits to health from the intended use of a device outweigh the probable risks, and that the device will significantly help a large portion of the target population. Sources of valid scientific evidence may include well controlled investigations, partially controlled studies, historical controls, well documented case histories by qualified experts, and robust human experience.  Independence is an important concept for PMAs, meaning that each PMA should establish the safety and effectiveness of the device under review, and that data about one device cannot be used to support another. 

The FDA can impose requirements at the time of approval of a PMA or HDE, or by regulation afterwards. One requirement may be the need for post-approval studies. The CDRH Post-Approval Studies Program helps ensure that well designed post-approval studies are conducted effectively and efficiently and in the least burdensome manner. Post-approval studies should not be used to evaluate unresolved premarket issues that are important to the initial establishment of device safety and effectiveness.

With post-approval studies, FDA can evaluate device performance and potential problems when the device is used more widely than in clinical trials and over a longer period of time. This allows FDA to build in accountability and gather essential post market information, including: 

●longer-term performance of the device (for example, effects of re-treatments and product changes) 

●community performance (clinicians and patients) 

●effectiveness of training programs 

●sub-group performance 

●outcomes of concern – real and potential 

Summary Comparison of 510(k) and PMA

FDA and COVID-19

Timeline of FDA support for test developers:

Since the beginning of January, the FDA has worked with more than 230 test developers who have or are expected to submit requests for FDA emergency authorization of their tests; to date, 20 authorizations have been granted. 

In addition, more than 110 laboratories have notified the FDA that they have begun using their own tests. 

For interested developers, the FDA provided recommendations for how to check a test for accuracy as well as a short form to make it easy to share their test information quickly in support of an Emergency Use Authorization (EUA). 

Emergency Use Authorization authorities:

An EUA, put into place by Congress, is a relaxed standard that allows tests to be made available based on less data than in non-urgent circumstances and allows for expedited FDA review. 

In many cases, the FDA can do this review in as little as a day, which it has done repeatedly. 

EUA authority is not a barrier to test availability. 

FDA policy updates:

The FDA recognized the urgent need for even faster testing availability. Although laboratories could use the EUA pathway, many were hesitant or didn’t know the pathway was available to them. 

To respond to this need, the FDA revised the process to allow labs to begin testing prior to FDA review of their validation data. This policy change was an unprecedented action to expand access to testing. Nevertheless, in the first week, only six laboratories took advantage of this further streamlined process because many laboratories did not have a test, or did not have the viral samples to check the accuracy of their test. 

In addition, the FDA implemented another change to empower states to take responsibility for tests developed and used by laboratories in their states without FDA review. 

The FDA has and will continue to play a pivotal role in this emergency response. …”

Manufacturing

The Company does not intend to manufacture in house, with the exception of prototype and small batch production of tests for clinical trials and in-house testing.  The Company is required to use manufacturers who operate under Good Manufacturing Practices (“GMP”).  A GMP is a production and testing practice that helps to ensure a quality product. Many countries have legislated that pharmaceutical and medical device companies must follow GMP procedures, and have created their own GMP guidelines that correspond with their legislation. Basic concepts of all of these guidelines remain more or less similar to the ultimate goals of safeguarding the health of the patient as well as producing good quality medicine, medical devices or active pharmaceutical products. In the U.S. a drug may be deemed adulterated if it has passed all of the specifications tests but is found to be manufactured in a condition which violates current good manufacturing practice guidelines. Therefore, complying with GMP is a mandatory aspect in pharmaceutical manufacturing.

Although there are a number of them, all guidelines follow a few basic principles:

●Manufacturing processes are clearly defined and controlled. All critical processes are validated to ensure consistency and compliance with specifications. 

●Manufacturing processes are controlled, and any changes to the process are evaluated. Changes that have an impact on the quality of the drug are validated as necessary. 

●Instructions and procedures are written in clear and unambiguous language. (Good Documentation Practices) 

●Operators are trained to carry out and document procedures. 

●Records are made, manually or by instruments, during manufacture that demonstrate that all the steps required by the defined procedures and instructions were in fact taken and that the quantity and quality of the drug was as expected. Deviations are investigated and documented. 

●Records of manufacture (including distribution) that enable the complete history of a batch to be traced are retained in a comprehensible and accessible form. 

●The distribution of the drugs minimizes any risk to their quality. 

●A system is available for recalling any batch of drug from sale or supply. 

●Complaints about marketed drugs are examined, the causes of quality defects are investigated, and appropriate measures are taken with respect to the defective drugs and to prevent recurrence. 

●GMP guidelines are not prescriptive instructions on how to manufacture products. They are a series of general principles that must be observed during manufacturing. When a company is setting up its quality program and manufacturing process, there may be many ways it can fulfill GMP requirements. It is the Company’s responsibility to determine the most effective and efficient quality process. 

The Company has not yet commenced commercial operations of the Target System, and thus has yet to develop methods of distribution for its diagnostics products beyond the business plan stage.

In order to commercially sell the VT-1000 Desktop Analyzer, the Company must have it manufactured under GMP.  The Company can and will provide demonstrations of the VT-1000 Desktop Analyzer capabilities to potential customers.

The Company will need to secure additional capitalization before it can acquire additional antibody markers, produce additional Target System cartridges or produce the VT-1000 Desktop Analyzer under GMP.

Principal Suppliers

The Company has not yet commenced commercial operations of the Target System, and thus has yet to establish principal suppliers of its diagnostics product line.

Overview

Parallax’s primary goal is to deliver Good Health Outcomes™ for patients through a service that allows healthcare providers of all types to reduce costs, increase revenues and provide a better patient experience and satisfaction. Connected Health and the Good Health Outcomes™ platform are a part of the Company’s overall healthcare strategy.  

Good Health Outcomes™ features Fotodigm® technology, a proprietary systems integration software component that provides biometric devices and electronic health records to interoperate.  The Good Health Outcomes™ platform provides medical practices including nursing, doctors offices, and hospital operations to provide remote patient monitoring (“RPM”), medication adherence, and an intelligent telemedicine delivery system.  Featuring distinctive Fotodigm® data capture and analysis capabilities, the Good Health Outcomes™ platform can be promoted directly through hospital and accredited nursing facilities, as well as health and wellness service providers, all seeking to integrate RPM and telehealth services as part of their offerings.

Good Health Outcomes™ integrates remote monitoring solutions to improve a patient’s compliance to therapy, pharmaceutical and other treatment regimens prescribed by their physicians.  Through the Good Health Outcomes™ platform, alerts and notifications, including visual, audible and vibratory, are sent to patients through email and SMS. In addition, cloud-based recordings are maintained for continuous patient monitoring and telehealth delivery, benefitting both caregivers and patients. Good Health Outcomes™ is network agnostic and captures data from any data-generating device, insulin meter, or scale, and works with any analog device, providing easy, flexible data management utilizing its Fotodigm® technology.

Parallax’s Connected Health systems will also offer automated medication dispensing through a patented process, which can reduce the costs and risks associated with noncompliance of medication, therapy and treatment.  This can, in turn, increase the financial yields and service delivery successes for healthcare providers, ultimately improving the quality of life and peace of mind for the patient, the doctors and the care providers overall.

Many cheap monitors do not give correct readings and can be deadly when monitoring critical patients. Therefore, biometric monitors should be high-quality products that come with a guarantee, rather than inexpensive brand-less ones. Biometric monitors keep a check on health conditions, and a person should never compromise with their health.

The Good Health Outcomes™ platform features a full set of modern communications technologies that provide cloud-based Health Insurance Portability and Accountability Act (“HIPAA”) compliant patient data security. The platform was designed specifically for patients’ ease of use, and provides real-time voice and “video conference” communication directly from any mobile or internet-connected device using biometric data collection. The platform, combined with systems integration services that interface with Electronic Health Records (“EHR”) and Electronic Medical Records (“EMR”) technology platforms, enables “virtual doctor visits,” increasing the conveniences for both patients and their doctors and care providers.  The Good Health Outcomes™ platform and its systems integration positioning allows for any physician, clinician, nurse, pharmacist, caregiver, or family member to support the treatment of the chronically ill, both acute and post-acute, in a persistently connected real-time environment, on a larger scale and with greater precision and patient satisfaction.  

RPM benefits are equally important in a residential environment. Seniors and chronically ill residents have shown to require less support and/or interventions, have higher group participation rates and improved cognitive capabilities, as well as an overall improved health, a more assured time with family, and longer residencies, which results in greater value-added contributions and greater job satisfaction from staff members.

The ability to remotely monitor each resident, from medication compliance and connected sensors, including vital sign, sleep monitoring, and fall detection devices, enables the residential caregiver to provide a significantly enhanced (and commercially desirable) service for optimal health conditions.  With the adoption of a centralized monitoring system, residences will also begin to see a marked reduction in the inter-dependencies that can exist between residents, and an improved state of health for every resident, further reducing the support load on staff members.  

Medication Monitoring/Compliance/Adherence

Product Strategy

Parallax’s product strategy is to eliminate obstructions to consumer adoption of remote patient care systems, so patients can stay out of the hospital longer and have a better quality of care and quality of life.

Remote patient monitoring systems enable efficient healthcare delivery to patients outside conventional hospital or clinical settings by transmitting real-time patient data for remote clinical review. Correlating vitals with medication history and consumption directly informs healthcare providers as to the real-time status of a patient, at home or in residences. Anomalies can be reported or alerted to those in need through a cloud-based network.  RPM systems incorporate wireless medical devices and computer-based software applications. The evolution of IoT and IoS technologies is clear, and will offer significant business opportunities for patients, residences and the healthcare system in general. RPM is a cost-effective means of keeping patients out of the hospital and having a better quality of care.

Product Benefits

RPM systems, even within the walls of a single building, can offer countless benefits for the overall healthcare management of clients.  There are countless tangible benefits to medication adherence as well, including significant reductions in hospitalizations, enhanced quality of life, and reductions in the effects of both overmedication and undermedication. Eliminating the distribution and administration of scheduled medications exonerates the residence from the liabilities associated with this task. Human error is all but eliminated. Corporate risks are significantly reduced for this activity and liability insurance premiums may be reduced as well.  Essentially, increasing medication adherence through automation, empowerment and monitoring improves patient outcomes and achieves benefits for all health system stakeholders.

Market Opportunities

Barriers to Entry

Despite the significant potential benefits to outcomes and patient satisfaction that may accrue through the leveraging of patient-generated health data (“PGHD”) in clinical care, data ownership remains a barrier to greater use of PGHD in some circumstances. Though the collection and use of PGHD is intuitive to experienced patients, inclusion of such data represents a shift in the way medicine has been practiced. Taking an active role in the collection and management of data about one’s health status increases patient activation, which is strongly related to better health outcomes in multiple conditions.

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The Company, through Assignment Agreements with La Frontera Community Solutions, Inc., acquired all worldwide rights, title and interest in and to the patent applications for the technology underlying the Fotodigm®  platform and systems.

Key Patented and Patent-Pending Concepts

As of December 31, 2019, the principal suppliers of the medical devices utilized with the Fotodigm® platform were:

The Company relies upon these suppliers to provide the majority of the delivery of its remote patient monitoring systems and services.  The services are web-based and although the Company relies on these vendors, it can also hold them accountable, receive volume-based pricing, discounts and partnership advantages through the competition of its suppliers. The Company has the ability to change vendors at any time in all service and product lines. Further, the Company is working towards the elimination of its reliance on software and hardware providers related to its in-home RPM offerings and services.

Overview

On April 26, 2017, the Company completed the acquisition of 100% of certain intellectual property from ProEventa Inc., a Virginia Corporation (“ProEventa”), in accordance with the Intellectual Property Purchase Agreement between the Company and ProEventa (the “ProEventa Agreement”). ProEventa has an expertise in the development of behavioral health technologies, and is the wholly-owned subsidiary of Grafton Integrated Health Network, Inc., a non-profit Virginia corporation (“Grafton”), Pursuant to the ProEventa Agreement, in exchange for 100% of that certain intellectual property, among other things, consideration to ProEventa included:

●a stock purchase agreement to purchase 2,500,000 shares of the Company’s Common Stock; and 

●a revenue sharing agreement, providing for a cash earn-out to be paid to the ProEventa shareholders of up to $3,000,000, to be derived from certain net revenue generated by the Company, as defined in the agreement; and 

●a royalty agreement, providing for a royalty of 3% of the revenues generated from the intellectual property, ending at such time as the Company has paid ProEventa $25,000,000; and 

●a limited license to ProEventa for the use of certain of the Intellectual Property’s technology at Grafton Schools. 

On April 26, 2017, in conjunction with the ProEventa Agreement, the Company entered into a consulting agreement with James Gaynor, founder of ProEventa, that, among other things, provides for consideration to Mr. Gaynor as follows:

●a stock purchase agreement to purchase 500,000 shares of the Company’s Common Stock at $0.001 per share; and 

●a grant of options to purchase 1,000,000 shares of the Company’s Common Stock at a price of $0.25 per share, vesting annually over a three (3) year period beginning September 1, 2017. 

With the completion of this acquisition, the patented technology entitled “Platform for Optimizing Data Driven Outcomes,” is added to the Company’s patent portfolio.  

Product History

For over a decade, Grafton School, Inc. (“Grafton”), a Virginia corporation, perfected a manual system of outcomes developed by Dr. Lisa Marshall and James Gaynor, that re-invented utilizing cloud computing and the internet.  In March 2014, ProEventa, Inc. (a Latin word meaning, “Good Outcomes”), and wholly-owned subsidiary of Grafton, was formed, and began marketing the software based on rights granted by Grafton. REBOOT™ (“REBOOT™”), an acronym for Reliable Evidence-Based Outcomes Optimization Technology, is the behavioral health platform, and was developed to provide goal obtainment through mastery of skills in a customized and fully automated data analysis and intervention model.

The technology is supported by applied behavioral analytics and over 25 years of efficacy studies and reduction to practice at Grafton, combined with over $3.75 million-dollar invested to transition the system to a cloud-based platform with mobile applications.

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Ultimately, through the goal mastery process and the deployment of REBOOT™, the Company will continue to provide individuals with the support they need to make meaningful and sustainable improvements in their functioning and quality of life.

Product Strategy

The patented feature set of the REBOOT™ platform allows it to provide progressive-predictive analytics and goal optimization intelligence on concurrent and compounding goals for an individual or group of people. Its’ utility is broad and has use cases in many vertical growth markets. The company has integrated REBOOT™ into its Good Health Outcomes™ remote patient monitoring platform and through that is offering patented data driven outcomes solutions to its clients within healthcare services provider organizations.

The product strategy is to enter the market through the healthcare initiative of the Company’s Good Health Outcomes™ remote patient care and through its diagnostics divisions. The integration of REBOOT™ is a key differentiating advantage within the remote patient care market.  The software can be harnessed to assess and prioritize patient goals, provide interventions, track behavioral data and provide meaningful feedback toward goal obtainment, as well as real time decision support with robust progress reporting. The resulting decision and patient support, combined with the remote patient care and diagnostics technologies, make for a technology advantage and a feature set that is designed to take away market share from competitors and capture new client accounts in healthcare field focused on doctors, nursing operations, and hospitals.

The technology can be marketed through user licensing or enterprise licensing contracts within the healthcare market, in both platform and supported mobile applications, including the Company’s application known as COMPASS™ .

The Company believes that healthcare organizations for the first time will have the opportunity to “scale” their patient adherence programs while having visibility into its effectiveness and bottom-line impact. Individual users will have a goal wizard, virtual coach and rules engine that will help create a path toward wellness. With personalized analysis, decision support and “goal” mastery feedback, the individual will be primed, guided and motivated to adhere to their treatment plan.

Increased awareness of the importance of behaviors in combating the COVID-19 global pandemic

Social distancing, washing hands, contact tracing and controlling human behaviors that enable the reduction in the transmission of viruses and disease have captured the attention of the medical community and the general population.  The medical reimbursement and payers within the health insurance system have begun to fund mobile and cloud-based technologies designed to assist in behavioral management.

Increased Exposure to Drugs and Alcohol

In the United States, illicit drug use and alcoholism have grown significantly among all age groups due to increased availability of prescription drugs and medication. This has resulted in an unfortunate trend of increased prescription medication abuse by secondary school and college-aged young adults.

Development of New Treatments and Programs

Clinical advancements in therapy and medication management have yielded new and better procedures for both psychological and detoxification treatments. Over the past several years, medication-assisted opioid therapy, which allows patients to rid their system of substance dependence through new-aged medication treatments, has led to an increased demand for treatment. Another driver is the future need for clinics to provide youth, elderly and gender-specific programs.

Healthcare Reform and Affordability

Healthcare in the U.S. has undergone significant changes in recent years that are favorable for the substance abuse treatment industry. Healthcare reform, specifically the Affordable Care Act (“ACA”), the Mental Health Parity and Addiction Equity Act (“MHPAEA”) and the Medicaid Certified Match Substance Abuse Program (“MCMSAP”), has led to more affordable substance abuse treatment.

Growth in Private Insurance

Following the 2014 health insurance exchange implemented by healthcare reform, the number of people with private health insurance increased significantly. According to a study published by the CDC in January 2020, Private health insurance spending increased 5.8% in 2018, which was faster than growth of 4.9% in 2017.

Increased Awareness

One of the biggest challenges for the industry has been the reluctance of substance abusers and addicts to undergo treatment. Individuals afflicted by substance abuse typically refuse treatment due to the social stigma associated with admitting they have a problem or lack of knowledge about the treatments available. However, recent efforts by health and government agencies have resulted in greater public awareness and acceptance of substance abuse as a disease.

Autism Disorder and Treatment Industry

Although the specific causes of autism are still not known, one thing is. The rate is increasing, and the market for treatment is growing.

Based on new government data, as of 2017, 1 in 45 children in the United States, aged 3-17, have autism. This is up from only 1 in 150 children back in 2000.

Research firm, Market Data’s March 2018 report entitled, “The U.S. Autism Treatment Market,” states that market data analysts estimate that there are currently 1.4 million American children with autism. Another 700,000 adults have autism, having “aged out” of children’s programs, and, 81% of autistic children are male.

The total annual costs for children with Autism Spectrum Disorder (“ASD”) in the United States in 2017 were estimated to be between $11.5 billion and $60.9 billion - a significant economic burden.

Insurance coverage is a problem, but the share of children with access to insurance coverage is expected to increase from the 36% level today. In addition, the number of self-funded private employers covering autism treatment continues to grow.

Autism Treatment Options

In the past, it was thought that the best way to treat the symptoms of autism was to medicate. Data suggest that approximately 58% of patients with a diagnosis of childhood autism receive some type of pharmaceutical treatment. However, this segment of the market has been shrinking in value as concerns continue over the side effects of commonly used drugs.

Today, this attitude is changing, as Applied Behavior Analysis (“ABA”) programs have become more widespread and have displayed good outcomes. There are basically three types of ABA program providers: brick and mortar centers, community providers, and in-home therapists.

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Market Opportunities

With healthcare costs continuously on the rise, REBOOT™ is positioned to be unique as an evidenced based, cost-effective approach in improving patient care.  The selection of the healthcare market as the Company’s focal effort is a choice based upon the market size and market demand for outcomes improvement across the market that is both target rich and highly scalable.

Nine large multi-site ABA program providers operate an estimated 296 brick and mortar centers, and employ thousands of therapists. Together, they account for about $390 million in revenues, representing a 38% market share of ABA programs.

Principal Suppliers

As of December 31, 2019, the principal suppliers for the Behavioral Health platform were:

The Company relies upon these suppliers to provide the majority of the delivery of its behavioral health platform products and services.  The services are web-based and although the Company relies on these vendors, it can also hold them accountable, receive volume-based pricing, discounts and partnership advantages through the competition of its suppliers. The Company has the ability to change vendors at any time in all service and product lines. Further, the Company is working towards the elimination of its reliance on software and hardware providers related to its in-home behavioral health offerings and services.

The present invention relates to a method for producing high affinity antibodies that are antigen-specific. The method involves binding a plurality of antibody-producing B-cells from a mammal to a plurality of cognate antigens; sorting the bound antibody-producing B-cell and cognate antigen; amplifying nucleic acid sequences encoding each antibody, or fragment thereof, from the B-cells; and expressing each antibody in a protein expression system. Antibodies produced in this manner are useful in diagnostic and therapeutic applications. This family of cases covers a technique for obtaining a population of antibodies produced by B-cells, without any a priori information about the population of antibodies, and use of the same in an array for profiling antigen expression.

ApplicationCountryDate FiledStatusDate GrantedPatent Number 

2.60/608,526United States09/09/2004ProvisionalN/AN/A - continued under 2a 

2a.11/221,252United States09/07/2005AbandonedN/AN/A - continued under 2b 

2b13/253,366United States10/05/2011Granted02/21/20179,573,990 

3.Patent 9,588,114 (US) – “Flow Through Testing System with Pressure Indicator” 

This family of cases covers an improved assay cassette with pressure-sensitive microcapsules for ensuring that a sufficient reduction in pressure is achieved there by maximizing contact between the sample and analytic compound. A device for performing immunoassays on analytes. The device includes an immunosorbent membrane, an absorbent material, a piston component located below said absorbent material to draw analytes in a sample through the immunosorbent membrane into the absorbent material, and discrete groups of pressure-sensitive microcapsules located on the immunosorbent membrane.

ApplicationCountryDate FiledStatusDate GrantedPatent Number 

3.61/814,916United States04/23/2013ProvisionalN/AN/A - continued under 3a 

3a.14/786,272United States04/23/2014Granted03/07/20179,588,114 

3b.PCT14/35073United States10/22/2015ClosedClosed 

ApplicationCountryDate FiledStatusDate GrantedPatent Number 

4.60/608,342United States09/09/2004ProvisionalN/AN/A - continued under 4a 

4a.11/221,038United States09/07/2005AbandonedN/AN/A - continued under 4b 

4b12/769,036United States04/28/2010Pending 

5. Application 14/492,641 - “Method for Determining the Immune Status of a Subject” 

ApplicationCountryDate FiledStatusDate GrantedPatent Number 

5.60/845,395United States09/18/2006ProvisionalN/AN/A - continued under 2a 

5a.11/856,925United States09/18/2007AbandonedN/AN/A  

Summary of Open Applications available for continuation filings (from above):

4b. US12/769,036 - “Method of Identifying Drugs, Targeting Moieties or Diagnostics” 

5a. US14/492,641 - “Method for Determining the Immune Status of a Subject” 

III.The Company, through a License Agreements with ProEventa, Inc., acquired all rights, title and interest in and to the following patent and patent applications and the invention in its entirety: 

1.Patent 10,061,812 (US)– “Platform for Optimizing Data Driven Outcomes” 

A computer-based method for tracking outcome specific data specifically for optimizing, managing, and tracking data driven outcomes. Process utilizes a multi-dimensional platform to facilitate data-driven outcomes processes through assessment, goal development, data tracking, graphing, and re-evaluation. The process allows for optimization of best practices, successful actions, and success-based plan execution, which is identified through automatic data-mining and analysis as well as user specified parameters, algorithms, and analytics.  The process can be utilized by a client, patient, student, service provider, program, product, service, device, organization, business, department, or so forth.  The tool can be utilized across various industries for client behavior management, educational instruction, school improvement activities, program evaluation, organizational key performance indicators, financial management, weight management, tracking insurance claims, or so forth.

This patent application covers the intellectual property known as “REBOOT™”, which stands for “Reliable Evidence Based Outcomes Optimization Technologies,” a structured, scalable and sustainable software system used to identify, monitor, and evaluate a single user or an entire organization's progress towards mastery of any achievable task, objective or goal.

ApplicationCountryDate FiledStatusDate GrantedPatent Number 

1.61/791,218United States03/15/2013ProvisionalN/AN/A - continued under 1a 

1a.14/212,429United States03/14/2014Granted08/28/201810,061,812 

1b.GB1517371.9United Kingdom03/14/2014Published12/02/2015Publication GB2526749 

1c.2014228758Australia03/14/2014PublishedPublication 2014228758 

1d.2014144749A1Worldwide09/18/2014Pending 

There can be no assurance that the Company will be granted patents for any of the patent applications it has filed with the USPTO or other patent organization worldwide.

The Company’s intellectual property portfolio rights will be protected and enforced.   

A detailed third-party validity report is pending from a highly respected IP valuation group to identify infringement claims and possible damages within the Human Diagnostics and Behavioral Healthcare markets. The Company is reviewing various strategies to best monetize value for its shareholders through a variety of possible licensing strategies, which could include litigation.  The Company is focused on possible non-dilutive litigation financing, as well as various hybrid contingency proposals, for a patent enforcement initiative that will begin to address damages stemming from infringement.

Expired Patents

The Target System and certain of its related components were previously issued patents by the USPTO.  The following previously-issued patents have expired:  

Trademarks

The Company will also utilize trademark applications to protect its Intellectual Property that may not be suitable for patent protection. Unlike patent applications, which in many cases must be filed in advance of a particular date, there is no specific date by which a trademark application must be filed. Instead, the time constraint is in a different direction. In the United States, an ordinary so-called “use” trademark application can only be filed after the goods or services have been in interstate commerce.

On January 2, 2016, trademark application 86/863,854 was filed with the USPTO for the word mark, “QOLPOM®”.  On September 5, 2017, the trademark was registered, registration number 5279137.

On December 19, 2017, trademark application 87/726,201 was filed with the USPTO for the word mark, “Fotodigm®”.  On September 25, 2018, the trademark was registered, registration number 5572183.

Facilities

The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, California, 90401, with an additional office located at 28 West 36th Street, 8th Floor, New York, NY 10018. The Company’s telephone number is (310) 899-4442 (phone) and (888) 899-3966 (fax).

The Company is not required to deliver an Annual Report to its stockholders, but will voluntarily send an Annual Report, together with its annual audited financial statements upon request. The Company is required to file annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission. The Company’s Securities and Exchange Commission filings are available to the public over the internet at the SEC's website at www.sec.gov.

The public may read and copy any of the Company’s materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The internet address of the site is www.sec.gov.

Although the Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item, the following information is being provided:

COVID-19 Pandemic

In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 virus a global pandemic, and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States.  As of the date of the filing of this Annual Report, the WHO reports over 4 million confirmed COVID-19 cases and over 275,000 deaths worldwide, including over 75,000 in the U.S. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

The COVID-19 pandemic may adversely affect the Company’s customers’ operations, its employees and its employee productivity. It may also impact the ability of the Company’s subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These effects, and the direct effect of the virus and the disruption on the Company’s employees and operations, may negatively impact both the Company’s ability to meet customer demand and its revenue and profit margins. The Company’s employees, in many cases, are working remotely and using various technologies to perform their functions. The Company might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit the Company’s ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, the Company may experience a material adverse effect on its business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

None.

The Company’s principal executive office is located at 1327 Ocean Avenue, Suite B, Santa Monica, CA 90401.  On May 1, 2019, the Company leased an additional office located at 28 West 36th Street, 8th Floor, New York, NY 10018.  As of December 31, 2019, the Company sub-leases the Santa Monica office for approximately $5,600 a month, and sub-leases the New York office for approximately $8,900 a month.  This space is sufficient to meet its needs at December 31, 2019.  However, once the Company expands its business to a significant degree, it will require additional space. The Company does not currently own any real estate.

The pharmacy operations located at 465 N. Roxbury Drive, Beverly Hills, CA 90210 ceased in December 2017, and the space was vacated in January 2018.  

Dispute with Landlord-Beverly Hills, CA

Upon the completion of the acquisition of RoxSan Pharmacy, Inc., in August 2015, the Company became aware that the former owner, Shahla Melamed (“Melamed”), among other things, failed to properly notify the landlord or the Roxbury Drive property owners (the “Lessors”) of the change in ownership of the pharmacy, as required in the lease agreements.  Subsequently, in an effort to unwind the acquisition of the pharmacy, Melamed attempted to undermine the Company’s efforts to obtain any lease assignment or new lease from the Lessors.  As a result, no lease assignments or lease agreements were made as of December 31, 2017, and the Company vacated the space in January 2018.

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Dispute with Former Owner of RoxSan

In October 2015, shortly following the Company’s acquisition of RoxSan, Shahla Melamed (“Melamed”), initiated two (2) legal actions against the Company in the Superior Court of the State of California, County of Los Angeles, West District, Shahla Melamed v. Parallax Health Sciences, Inc., action numbers SC 124873 and SC 125702.  In the matter, action No. SC 124873, Melamed sought rescission of the August 13, 2015, Purchase Agreement. In the Matter, action No. SC125702, 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 also initiated legal action against Melamed and filed a complaint in October 2015, action number SC 124898, in the Superior Court of the State of California, County of Los Angeles, West District, Parallax Health Sciences, Inc., et al. v. Shahla Melamed, et al  The complaint in that action alleges that Melamed breached several obligations under the Purchase Agreement, and the Company sought to reduce the Secured Note due to undisclosed material changes in the business.

In January 2019, Melamed requested mediation, seeking settlement of the pending litigation with the Company, including that which was initiated against the Company by her son, Hootan Melamed (Shahla and Hootan, collectively, the “Melameds”). Through mediation, the Company and the Melameds reached agreeable settlement terms, and on February 19, 2020, the Company received a counter-signed Settlement and Release Agreement (the “Settlement”).  Effective February 12, 2020 (the “Effective Date”), the Settlement is by and between Parallax Health Sciences, Inc., RoxSan Pharmacy, Inc., Michael Redmond, Edward Withrow III, Huntington Chase Financial Group, LLC, Calli Bucci and Dave Engert (collectively, “Parallax”), and Shahla Melamed and Hootan Melamed (collectively, the “Melameds”), and resolves all pending lawsuits between the parties in connection with the acquisition of RoxSan Pharmacy.

In consideration of the resolution of all existing and potential claims, including the cancellation of the Company’s contingent liability in the principal sum of $20,500,000, and accrued interest of approximately $4,500,000, and without further action or litigation and without admission of liability by either party, the Settlement terms include the following:

●A payment of $4,000,000 (the “Settlement Sum”) to the Melameds, to be paid as follows: 

$1,250,000 within 90 days of the Effective Date; 

$1,250,000 within one (1) year of the Effective Date; 

$1,500,000 within two (2) years of the Effective Date. 

●The issuance of ten (10) million shares of the Company’s Common Stock to an entity owned by Shahla Melamed. 

In addition, in the event forty percent (40%) or more of the Company and/or its subsidiaries (including by way of merger) is sold within two (2) years of the Effective Date, the Company shall pay the Melameds, within two (2) weeks of receipt of the proceeds from such sale (the “Sale Proceeds”), any outstanding unpaid Settlement Sum plus an additional 10% of the Sale Proceeds received, up to a total of an additional $3,000,000 over and above the Settlement Sum.

In the event the Company fails to cure a breach of timely payment of any portion of the Settlement Sum within thirty (30) days of a notice of default, a Stipulated Judgement may be filed by Melamed in the sum of $20,000,000, less any Settlement Sum amounts previously paid by the Company.

RoxSan Dissolution

On May 14, 2018, pursuant to unanimous resolutions of the boards of directors of RoxSan Pharmacy, Inc. and Parallax Health Sciences, Inc., RoxSan filed a Chapter 7 petition in the United States Bankruptcy Court for the Central District of California (the “Court”).  Mr. Timothy Yoo was appointed trustee (“Trustee”) on May 15, 2018.  In connection with this filing, RoxSan seeks to discharge approximately $5 million of liabilities owed to various parties, and intercompany loans in excess of $1 million owed to Parallax.  The Chapter 7 bankruptcy proceeding by RoxSan Pharmacy, Inc. was fully discharged and the case was closed on March 13, 2019, in U.S. Bankruptcy Court, Central District of California.

Disputes with Former Executives

●Action No. CV2017-052804 

On March 9, 2017, Mr. Dave Engert filed a lawsuit in Arizona and then later changed the venue to Federal Court in Southern California claiming, among other issues, that monies are owed to him under his Consulting Agreement and that his termination was without cause.  On October 23, 2017, the Company filed a response 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 “Engert Settlement”). The Engert 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 Engert 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.

●Action No. BC700070 

On March 28, 2018, Mr. J. Michael Redmond filed a lawsuit against the Company and RoxSan Pharmacy, Inc. in the United States District Court, Central District of California for an amount exceeding $75,000.  The Company intends to vigorously defend against this action. There are counterclaims that include possible fraud and negligence committed by Mr. Redmond, former President, Chief Executive Officer, Chairman and director of the Company and of RoxSan Pharmacy, Inc. An Arbitration is still pending.

Disputes with Lenders

●On March 18, 2020, the Company initiated legal action and filed a complaint against EMA Financial, LLC (“EMA”) a third-party lender, in the US District Court, Southern District of New York, case index number 20-cv-02375, citing fraud, unjust enrichment, and securities law violations, among other things. On April 27, 2020, EMA filed an answer substantially denying the Company’s claims, and filed counterclaims against the Company, including damages in excess of $2 million.  The matter is currently pending.  

There are two (2) legal matters currently pending.

Not applicable.

The Company’s Common Stock is quoted on the OTC Markets under the trading symbol PRLX.QB. The following table sets forth the high and low bid prices for the Company’s Common Stock per quarter as reported by the OTCQB for the last two years. These prices represent quotations between dealers without adjustment for retail mark-up, markdown or commission and may not represent actual transactions.

The Company’s Common Stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the Securities and Exchange Commission. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

Record Holders

As of December 31, 2019, an aggregate of 250,124,755 shares of the Company’s Common Stock were issued and outstanding.  Pursuant to Action Stock Transfer Corp., the Company’s shareholders' list at December 31, 2019, showed 153 registered shareholders and 220,849,503 shares of Common Stock issued and outstanding. This total does not include 29,275,252 issued shares pending stock certificates, of which 2,605,252 are in Common Stock awards and purchases, 21,620,000 are debt conversions, 300,000 are in connection with debt settlements, and 4,750,000 which were unvested at December 31, 2019.

As of December 31, 2019, an aggregate of 977,352 shares of the Company’s Preferred Stock were issued and outstanding and are held by 9 shareholders. The 823,691 shares of Series A Preferred Stock and 40,000 shares of Series B Preferred Stock are convertible into the Company’s Common Stock at a conversion rate of 20 shares of Common Stock for each share of Preferred Stock held. The 150,000 shares of Series C Preferred Stock are convertible into the Company’s Common Stock at a conversion rate of 41.67 shares of Common Stock for each share of Preferred Stock held.  Shares of Series B and Series C Preferred Stock include 50% warrant coverage (see Warrants).

Trading Suspension

On April 13, 2020, the Company received an Order of Suspension of Trading dated April 10, 2020 (the “Order”) from the United States Securities and Exchange Commission (“SEC”). The temporary suspension period is from 9:30 a.m. EDT on April 13, 2020, through 11:59 p.m. EDT on April 24, 2020.  The Order refers to questions raised regarding the accuracy of the Company’s recent press releases in relation to the Company’s development of a rapid screening test for COVID-19, and the Company’s access to “large quantities of COVID-19 diagnostics testing kits and personal protective equipment.”  

In an effort to protect the interests of shareholders, the SEC has issued similar orders and suspensions recently to several registrants, with concerns over the validity of claims made in connection with the availability of COVID-19 tests and supplies.  

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Pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until the Company has strictly complied with all provisions of the rule, including the filing of a new Form 15c2-11 with FINRA.  

The Company is required to file its Annual Report with the SEC for the purposes of satisfying its financial reporting requirements. However, in addition to the Company's reporting obligations, the Company must have a FINRA Member Market Maker file a 15c2-11 with FINRA in order for the Company’s shares to resume trading on the OTCQB market. These actions do not impact or otherwise affect the Company's results of operations or disclosures as set out in this Annual Report. The Company believes that this Annual Report fully complies with the requirements of the Securities Exchange Act of 1934, as amended and, in accordance with generally accepted accounting principles, that it fairly presents, in all material respects, the financial condition and results of operations of the Company as at the relevant dates.

As of the date of filing of this Annual Report, the trading suspension period expired, and the Company is in the process compiling the information required for its 15c2-11 submission by a FINRA Member Market Maker. The Company anticipates the filing of a new Form 15c2-11 within the next 30 days.  If any party has any questions as to whether the Company has complied with the rule, they should contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for its common stock. Many brokers may be unwilling to engage in transactions in its common stock because of the added disclosure requirements, thereby making it more difficult for stockholders to dispose of their shares.

Dividends

The Company has never declared or paid dividends on its Common Stock, nor does the Company anticipate paying dividends on its Common Stock in the foreseeable future.  Instead, the Company anticipates that all of its earnings, if any, will be used or the operation and growth of its business.  Further, any credit agreement the Company may expect to enter into may restrict its ability to pay dividends or make distributions to its stockholders.  Any future determination to pay dividends will be at the discretion of the Board and will depend on the financial position, results of operations, cash flows, capital requirements, debt covenants, applicable law and other factors as the Board deems relevant.  

Dividends are payable semi-annually on the Company’s Series A Preferred Stock at a rate of 7% per annum, 10% per annum on Series B Preferred Stock, and 8% per annum on Series C Preferred Stock.  Dividends may be paid in kind, at the option of Parallax, to the extent that if the Company is not legally permitted to distribute cash dividends, the Company shall pay dividends in the form of shares of Preferred Stock equal to the amount of the dividend. No dividends have been declared on the Company’s Preferred Stock. Dividends in the amount of $422,761, representing cumulative dividends on Parallax’s Preferred Stock, were earned as of December 31, 2019, and are issuable in kind into 13,418,550 shares of Common Stock.

Equity Compensation Plan Information

In June 2019, pursuant to a resolution of the board of directors, the Company adopted the 2019 Stock Incentive Plan (the “2019 Plan”), wherein forty million (40,000,000) shares of the Company’s restricted Common Stock were reserved for issuance. The 2019 Plan was intended to assist the Company in securing and retaining key employees, directors and consultants by allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options. The 2019 Plan is currently administered by the Company's Board. Subject to the provisions of the plan, the board will determine who shall receive options, the number of shares of Common Stock that may be purchased under the options.  On June 17, 2019, the Company filed a Registration Statement on form S-8 for the registration of shares reserved under the 2019 Plan.

As of December 31, 2019, the Company has granted options to purchase an aggregate of 26,685,000 shares of its Common Stock, net of options exercised, expired and forfeited. In connection with the options granted, a total of $3,927,006 has been recorded as deferred stock option compensation, of which $1,655,840 was expensed in prior years, and $718,392 was expensed in 2019.  There remains $1,552,774 in deferred stock option compensation to be expensed over the next twenty-one (18) months.

Warrants

In connection with 150,000 shares of Series C Preferred Stock issued in 2018, the Company issued warrants to purchase 3,125,000 shares of Common Stock at an exercise price of $0.25 per share for a period of three (3) years.

In connection with certain convertible promissory notes issued in 2018, the Company issued warrants to purchase 25,000 shares of Common Stock at an exercise price of $0.25 per share for a period of three (3) years.

In connection with certain consulting agreements entered into in 2018, the Company issued warrants to purchase 450,000 shares of Common Stock at an exercise price of $0.25 per share for a period of three (3) years.

In connection with a certain consulting agreement entered into in 2018, the Company issued warrants to purchase 300,000 shares of Common Stock at an exercise price of $0.001 for a period of five (5) years.

In connection with a certain consulting agreement entered into in 2018, the Company issued warrants to purchase 125,000 shares of Common Stock at an exercise price of $0.25 for a period of three (3) years.

In connection with certain convertible debentures issued in 2018, the Company issued warrants to purchase 600,000 shares of Common Stock at an exercise price of $0.15 per share for a period of five (5) years.  The warrants were subsequently cancelled in 2019 in connection with a debt settlement.

In connection with a certain consulting agreement entered into in 2018, the Company issued warrants to purchase 75,000 shares of Common Stock at an exercise price of $0.01 for a period of two (2) years.

In connection with 40,000 shares of Series B Preferred Stock, the 400,000 underlying warrants have expired.

In connection with certain convertible promissory notes issued in 2019, the Company issued warrants to purchase 3,200,000 shares of Common Stock at an exercise price of $0.15-$0.20 for a period of five (5) years.

In connection with a certain 2019 Securities Purchase Agreement, the Company issued warrants to purchase up to 13,500,000 shares of Common Stock at an exercise price of $0.25 per share for a period of two (2) years.

In connection with a certain Simple Agreement Future Equity (“SAFE”) offering, the Company issued warrants to purchase 18,000,000 shares of Common Stock at an exercise price of $0.25 for a period of three (3) years.

In connection with a certain consulting agreement entered into in 2019, the Company issued warrants to purchase 250,000 shares of Common Stock at an exercise price of $0.25 for a period of three (3) years.

In connection with a certain promissory note issued in 2019, the Company issued warrants to purchase 2,528,413 shares of Common Stock at an exercise price of $0.1046 for a period of five (5) years.

In connection with certain consulting agreements entered into in 2019, the Company issued warrants to purchase 500,000 shares of Common Stock at an exercise price of $0.01 for a period of three (3) years.

In connection with a certain promissory note issued in 2019, the Company issued warrants to purchase 2,500,000 shares of Common Stock at an exercise price of $0.10 for a period of five (5) years.

In connection with a certain promissory note issued in 2019, the Company issued warrants to purchase 100,000 shares of Common Stock at an exercise price of $0.12 for a period of three (3) years.

In connection with a certain 2019 Securities Purchase Agreement, the Company issued warrants to purchase 125,000 shares of Common Stock at an exercise price of $0.12 for a period of two (2) years.

As of December 31, 2019, the Company had 56,785,913 warrants issued and outstanding.  The number of shares of Common Stock underlying the warrants and the exercise price are subject to adjustment upon certain events.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

The Company did not purchase any shares of its Common Stock or other securities registered by the Company during the year ended December 31, 2019.

Recent Sales of Unregistered Securities

The following represents all unregistered securities issued by the registrant during the current period, including sales of reacquired securities, as well as new issues, securities issued in exchange for property, services, or other securities, and new securities resulting from the modification of outstanding securities:

On January 24, 2019, in connection with a certain senior secured promissory note, the Company issued 150,000 shares of its restricted Common Stock to the note holders as a form of interest.  The shares were valued at $15,000.

On January 30, 2019, in connection with a certain convertible debenture, the holder elected to convert $175,000 into 1,750,000 shares of its restricted Common Stock at a conversion rate of $0.10 per share.

On January 31, 2019, in connection with a certain consulting agreement, the Company issued 1,666,667 shares of its restricted Common Stock to the consultant for services valued at $200,000.

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On February 6, 2019, in connection with certain convertible debt in the amount of $20,000 and accrued interest in the amount of $2,000, the Company issued 220,000 shares of its restricted Common Stock at a conversion rate of $0.10 per share.  

In 2019, in connection with a certain senior secured promissory note, the Company issued 180.000 shares of its restricted Common Stock to the note holders as a form of interest.  The shares were valued at $18,000.

On February 25, 2019, in connection with a SAFE offering, the Company issued 6,000,000 shares of its restricted Common Stock at $0.0625 per share for $375,000 cash.  

In 2019, in connection with a certain consulting agreement, the Company issued 172,656 shares of its restricted Common Stock to the consultant for services valued at $18,750.

On February 27, 2019, in connection with a certain consulting agreement, the Company issued 1,000,000 shares of its restricted Common Stock to the consultant for services valued at $120,000.

In March 2019, in connection with a certain convertible debenture, the holder elected to convert $95,000 into 1,719,328 shares of the Company’s restricted Common Stock.  

On March 25, 2019, in connection with a SAFE offering, the Company issued 1,200,000 shares of its restricted Common Stock at $0.0625 per share for $75,000 cash.  

In April 2019, in connection with a certain convertible debenture, the holder elected to convert $105,000 into 2,340,410 shares of the Company’s restricted Common Stock.  

On April 5, 2019, in connection with a certain services agreement, the Company issued 600,000 shares of its restricted Common Stock for services valued at $44,160.

On April 15, 2019, the Company issued 400,000 shares of its restricted Common Stock for services valued at $50,000.

On April 25, 2019, in connection with a SAFE offering, the Company issued 3,200,000 shares of its restricted Common Stock at $0.625 per share for $200,000 cash.  

On April 26, 2019, in connection with a certain stock purchase agreement, the Company issued 400,000 shares of its restricted Common Stock, valued at $28,000, for cash in the amount of $400.  

On April 29, 2019, in connection with a certain private placement agent agreement, the Company issued 1,000,000 shares of its restricted Common Stock to the consultant for services valued at $71,000.

On May 2, 2019, in connection with a SAFE offering, the Company issued 800,000 shares of its restricted Common Stock at $0.0625 per share for $50,000 cash and $15,000 in services.  

On May 6, 2019, in connection with an equity funding, the Company issued 12,000,000 shares of its restricted Common Stock for cash in the amount of $1,000,000.  The shares were included in the Company’s recent Registration Statement filed on Form S-1, with an effective date of December 20, 2019.

On May 8, 2019, in connection with a certain convertible promissory note in the principal sum of $20,000, the Company issued 289,017 shares of its restricted Common Stock.

On May 15 2019, in connection with the conversion of 57,500 Series A Preferred Stock valued at $69,000, the Company issued 1,150,000 shares of its restricted Common Stock at a conversion ratio of 20 shares of Common Stock for each share of Series A Preferred Stock held.

On May 15, 2019, in connection with an employment agreement, the Company issued 125,000 shares of the Company’s restricted Common Stock, valued at $8,388, for cash in the amount of $125.

On May 15, 2019, in connection with the executive employment agreement, the Company issued David Appell, the Chief Operating Officer, 3,000,000 shares of the Company’s restricted Common Stock for cash in the amount of $3,000.  The shares were valued at $201,300, of which 25% vest immediately, and the remaining vest when the Company achieves certain earnings goals.

In 2019, in connection with a certain convertible debenture, the holder elected to convert $95,142 into 2,983,970 shares of the Company’s restricted Common Stock.  

On June 11, 2019, in connection with a settlement for the retirement of 3,666,670 warrants (4,401,760 warrants, as adjusted under anti-dilution provisions), the Company issued 1,000,000 shares of the Company’s restricted Common Stock, valued at $71,000.

On June 20, 2019, in connection with a certain consulting agreement, the Company issued 2,000,000 shares of its restricted Common Stock to the consultant for services valued at $212,000.

In July 2019, in connection with certain promissory notes in the amount of $220,000, the Company issued 1,200,000 shares of its restricted Common Stock, valued at $190,200.

In July 2019, in connection with the settlement of certain related party convertible debentures, the Company issued 1,380,811 shares of its restricted Common Stock, valued at $131,315.

In August 2019, in connection with an investment in Global Career Network, Inc., the Company issued 6,666,667 shares of its restricted Common Stock for $0.15 per share, valued at $1,000,000.

In September 2019, in connection with the conversion of certain convertible debt in the amount of $437,000, the Company issued 4,370,000 shares of its restricted Common Stock to Huntington Chase, LLC, a beneficial owner.

In 2019, in connection with certain consulting agreements, the Company issued 1,392,596 shares of its restricted Common Stock for services valued at $122,250.

In 2019, in connection with certain stock subscriptions, the Company issued 500,000 shares of its restricted Common Stock for cash in the amount of $27,500.

In 2019, in connection with the conversion of certain convertible debt in the amount of $722,583, the Company issued 11,654,492 shares of its restricted Common Stock.

In December 2019, the Company issued 100,000 shares of its restricted Common Stock for services valued at $5,000.

In December 2019, in connection with the conversion of certain accrued compensation, the Company issued 12,000,000 shares of its restricted Common Stock in exchange for the reduction of accrued compensation in the amount of $600,000, including 8,000,000 shares issued to related parties for accrued compensation in the amount of $400,000.

As of December 31, 2019, a total of $3,469,313 in deferred stock compensation was recorded, of which $2,123,691 was expensed in prior years, and $685,553 was expensed in 2019.  There remains $660,069 in deferred stock compensation as of December 31, 2019, to be expensed over the next eighteen (18) months.

Exemption From Registration. None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D or Regulation S promulgated thereunder) as transactions by an issuer not involving any public offering. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof, and appropriate legends were placed on the share certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

Forward-Looking Statements

This Annual Report contains forward-looking statements. These statements relate to future events or the future financial performance of Parallax Health Sciences, Inc. (“Parallax” or the “Company”), and include statements made by the Company regarding pharmaceutical insurance reimbursements, state licenses, product development and obtaining FDA clearances. 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 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 its industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 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.

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Unless otherwise specified, all dollar amounts are expressed in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. All references to “Common Stock” refer to the common shares; and “Preferred Stock” refer to the preferred shares; of the Company’s capital stock.

You should read the following discussion of the Company’s results of operations and financial condition with the consolidated financial statements and related notes included elsewhere in this Annual Report. The Company intends for this discussion to provide you with information that will assist you in understanding the Company’s financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes.

Corporate History

The Company was incorporated in the State of Nevada on July 6, 2005.  On November 1, 2012, we, formerly Endeavor Power Corporation, and its wholly-owned subsidiary Endeavor Holdings, Inc., a Nevada corporation, entered into an Agreement and Plan of Merger with Parallax Diagnostics, Inc., a Nevada corporation (“Parallax Diagnostics”), whereby Parallax Diagnostics became a wholly-owned subsidiary.  On January 9, 2014, the Company changed its name to Parallax Health Sciences, Inc. (“Parallax”).  (OTCQB.PRLX)

The Parallax business was founded on the Company’s point of care diagnostic business, Parallax Diagnostics, Inc., in 2010, when the Company acquired the right, title, and interest, through an exclusive license with Montecito BioSciences, Ltd. (“MBS”), to develop, manufacture and commercialize the Target System, an immunoassay point-of-care diagnostic testing system. Concurrently, through an Assignment Agreement with MBS, the Company acquired the right, title, and interest to twenty-five (25) FDA-cleared tests in the area of infectious disease, medical conditions, drugs of abuse, cardiac and pregnancy, that are designed to be utilized with the Target System.

Effective December 24, 2018, 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. On January 28, 2019, the amended articles of incorporation were filed with the state of Nevada.

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 commenced 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, valued at $201,300, for cash in the amount of $3,000, 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, valued at $195,600 using the Black-Scholes method, are for a period of five (5) years, and vest annually over the term of the agreement, with an initial vesting of 25%. The assumptions used in valuing the options were: expected term 4.75 years, expected volatility 2.21, risk free interest rate 2.15%, and dividend yield 0%.  On February 2, 2020, Mr. Appell resigned as the Company’s Chief Operating Officer. His resignation was not the result of a disagreement with the Company on any matters relating to the Company's operations, policies, or practices.  Concurrent with his resignation as COO, Mr. Appell will serve as Managing Director of the Company’s wholly-owned subsidiary, Parallax Communications, Inc. (“PCOM”). As Managing Director, Mr. Appell will provide business advisory and strategic planning advice to the Company with PCOM. In exchange for these services, Mr. Appell will be paid $2,000 per month plus medical benefits.

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

In June 2019, the Company filed a Registration Statement on form S-1 for the registration, as amended, of 32,583,436 shares of Common Stock, and, after resolving the comments and questions from the SEC in relation to the filing, the Company received an effective date from the SEC of December 20, 2019.

In June 2019, pursuant to a resolution of the board of directors, the Company adopted the 2019 Stock Incentive Plan (the “2019 Plan”), wherein forty million (40,000,000) shares of the Company’s restricted Common Stock were reserved for issuance. The 2019 Plan was intended to assist the Company in securing and retaining key employees, directors and consultants by allowing them to participate in the Company's ownership and growth through the grant of incentive and non-qualified options. The 2019 Plan is currently administered by the Company's Board. Subject to the provisions of the plan, the board will determine who shall receive options, the number of shares of Common Stock that may be purchased under the options.  On June 17, 2019, the Company filed a Registration Statement on form S-8 for the registration of shares reserved under the 2019 Plan.

Effective February 12, 2020 (the “Effective Date”), the Company and Shahla Melamed and Hootan Melamed (collectively the “Melameds”) reached agreeable settlement terms in connection with the pending legal actions between the parties.  The Settlement is by and between Parallax Health Sciences, Inc., RoxSan Pharmacy, Inc., Michael Redmond, Edward Withrow III, Huntington Chase Financial Group, LLC, Calli Bucci and Dave Engert (collectively, “Parallax”), and the “Melameds, and resolves all pending lawsuits between the parties in connection with the acquisition of RoxSan Pharmacy.  In consideration of the resolution of all existing and potential claims, including the cancellation of the Note in the principal sum of $20,500,000, and accrued interest of approximately $4,500,000, and without further action or litigation and without admission of liability by either party, the Settlement terms include the following:

●A payment of $4,000,000 (the “Settlement Sum”) to the Melameds, to be paid as follows: 

$1,250,000 within 90 days of the Effective Date; 

$1,250,000 within one (1) year of the Effective Date; 

$1,500,000 within two (2) years of the Effective Date. 

●The issuance of ten (10) million shares of the Company’s Common Stock to an entity owned by Shahla Melamed. 

In addition, in the event forty percent (40%) or more of the Company and/or its subsidiaries (including by way of merger) is sold within two (2) years of the Effective Date, the Company shall pay the Melameds, within two (2) weeks of receipt of the proceeds from such sale (the “Sale Proceeds”), any outstanding unpaid Settlement Sum plus an additional 10% of the Sale Proceeds received, up to a total of an additional $3,000,000 over and above the Settlement Sum.

On April 7, 2020, the Company executed an Executive Agreement (the “Executive Agreement”) for the appointment of Dr. David L. Stark as the Company’s President, with an effective date of March 1, 2020.  The Executive Agreement replaces any other agreement between Dr. Stark and the Company or any of its subsidiaries, and provides a base compensation of $225,000 in year one, $250,000 in year two and $275,000 in year three, commencing after the initial term estimated at approximately six (6) months, during which time Dr. Stark will devote fifty percent (50%) of his time at a compensation proportionate to the year one base compensation. The Executive Agreement also provides for various performance bonuses, and customary employee benefits, as well as (i) a grant to purchase 2,000,000 restricted common shares at $0.001 per share, of which 25% vest immediately, and the remainder vest upon the Company’s achievement of certain earnings goals; and (ii) stock options to purchase 3,000,000 shares of the Company's Common Stock at an exercise price of $0.25 per share for a period of five (5) years, of which 25% vest immediately, and the remainder vest quarterly in equal amounts over the term of the Agreement.  

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In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 virus a global pandemic, and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States.  As of the date of the filing of this Annual Report, the WHO reports over 4 million confirmed COVID-19 cases and over 275,000 deaths worldwide, including over 75,000 in the U.S. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

The COVID-19 pandemic may adversely affect the Company’s customers’ operations, its employees and its employee productivity. It may also impact the ability of the Company’s subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. These effects, and the direct effect of the virus and the disruption on the Company’s employees and operations, may negatively impact both the Company’s ability to meet customer demand and its revenue and profit margins. The Company’s employees, in many cases, are working remotely and using various technologies to perform their functions. The Company might experience delays or changes in customer demand, particularly if customer funding priorities change. Further, in reaction to the spread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit the Company’s ability to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, the Company may experience a material adverse effect on its business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

In response to the global need for diagnostics and personal protective gear and equipment, the Company, through its wholly-owned subsidiary, Parallax Diagnostics, Inc., has registered with the Food and Drug Administration (FDA), and has established strategic relationships with wholesale suppliers of various FDA-approved diagnostic tests and Personal Protective Equipment (“PPE”) for distribution to US medical practices, hospitals, nursing operations, emergency centers, and nursing homes.  Included in the products available are COVID-19 diagnostic test kits, PPE such as protective masks, sterile gowns, and eye goggles, as well as ventilators and other medical grade equipment,  The Company also intends on adapting its own proprietary diagnostics test and SPARKS Mobile™ testing device to be able to identify markers to the coronavirus.  Parallax is profoundly gratified by its ability to help those in need during this crisis.

Trading Suspension

On April 13, 2020, the Company received an Order of Suspension of Trading dated April 10, 2020 (the “Order”) from the United States Securities and Exchange Commission (“SEC”). The temporary suspension period is from 9:30 a.m. EDT on April 13, 2020, through 11:59 p.m. EDT on April 24, 2020.  The Order refers to questions raised regarding the accuracy of the Company’s recent press releases in relation to the Company’s development of a rapid screening test for COVID-19, and the Company’s access to “large quantities of COVID-19 diagnostics testing kits and personal protective equipment.”  

In an effort to protect the interests of shareholders, the SEC has issued similar orders and suspensions recently to several registrants, with concerns over the validity of claims made in connection with the availability of COVID-19 tests and supplies.  

The Company, along with its counsel, is cooperating fully with the SEC to substantiate the Company’s recent public announcements and business endeavors, and is addressing any questions and/or concerns raised regarding the accuracy of the assertions made in the Company’s press releases.  

Pursuant to Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, no quotation may be entered unless and until the Company has strictly complied with all provisions of the rule, including the filing of a new Form 15c2-11 with FINRA.  

The Company is required to file its Annual Report with the SEC for the purposes of satisfying its financial reporting requirements. However, in addition to the Company's reporting obligations, the Company must have a FINRA Member Market Maker file a 15c2-11 with FINRA in order for the Company’s shares to resume trading on the OTCQB market. These actions do not impact or otherwise affect the Company's results of operations or disclosures as set out in this Annual Report. The Company believes that this Annual Report fully complies with the requirements of the Securities Exchange Act of 1934, as amended and, in accordance with generally accepted accounting principles, that it fairly presents, in all material respects, the financial condition and results of operations of the Company as at the relevant dates.

As of the date of filing of this Annual Report, the trading suspension period expired, and the Company is in the process compiling the information required for its 15c2-11 submission by a FINRA Member Market Maker. The Company anticipates the filing of a new Form 15c2-11 within the next 30 days.  If any party has any questions as to whether the Company has complied with the rule, they should contact the staff in the Division of Trading and Markets, Office of Interpretation and Guidance, at (202) 551-5777.

Changes in Management

On April 6, 2017, the Company’s board of directors (the “Board”) elected Mr. J. Michael Redmond as Chairman, to serve until the next annual meeting of the shareholders, in accordance with the Company’s bylaws, and/or until his successor is duly appointed, or a resignation is duly tendered.

Effective July 6, 2017, the Board caused the departure of Mr. Redmond from his position as President and Chief Executive Officer of Parallax and RoxSan Pharmacy, Inc., and concurrently Mr. Redmond was removed from all board member seats.

Effective July 7, 2017, pursuant to a unanimous Board resolution, Mr. Paul R. Arena was appointed as the Company’s President and Chief Executive Officer, and the Board caused Mr. Arena's election to the Board and the board of directors of the Company’s wholly-owned subsidiaries, Parallax Health Management, Inc. and Parallax Behavioral Health, Inc.

On July 26, 2017, Dr. Jorn Gorlach resigned as a member of the Board.  This resignation did not involve any disagreement with the Company.

On June 4, 2018, Mr. Anand Kumar resigned as a member of the Board.  This resignation did not involve any disagreement with the Company.  Mr. Nathaniel T. Bradley, currently serving as Chief Technology Officer, succeeded him; and agreed to serve as a member of the Board until the next annual meeting of the shareholders and/or until his successor is duly appointed.

On May 15, 2019, Mr. David Appell joined the Company as its Chief Operating Officer.  On February 2, 2020, Mr. Appell resigned his position.  His resignation was not the result of a disagreement with the Company on any matters relating to the Company's operations, policies or practices.  Concurrent with his resignation as COO, Mr. Appell will serve as Managing Director of the Company’s wholly-owned subsidiary, Parallax Communications, Inc. (“PCOM”). As Managing Director, Mr. Appell will provide business advisory and strategic planning advice to the Company with PCOM.  In exchange for these services, Mr. Appell will be paid $2,000 per month plus medical benefits.   

On March 1, 2020, Dr. David L. Stark was appointed as the Company’s President.  In connection with the appointment, Mr. Paul R. Arena, who has held the position of President since July 2017, remains the Company’s Chief Executive Officer and Chairman of the Board of Directors, but resigned the position of President to afford Dr. Stark’s appointment.

Dispute with Former Owner of RoxSan

On August 13, 2015, the Company completed the acquisition of RoxSan Pharmacy, Inc. (“RoxSan” or the “Pharmacy”).  Shortly thereafter, the Company's management and the former owner (“Former Owner” or “Melamed”) clashed over control of the RoxSan Pharmacy business operations and bank accounts.

In October 2015, shortly following the Company’s acquisition of RoxSan, Melamed initiated two (2) legal actions against the Company in the Superior Court of the State of California, County of Los Angeles, West District, Shahla Melamed v. Parallax Health Sciences, Inc., action numbers SC 124873 and SC 125702.  In the matter, action No. SC 124873, Melamed sought rescission of the August 13, 2015, Purchase Agreement. In the Matter, action No. SC125702, 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 also initiated legal action against Melamed and filed a complaint in October 2015, action number SC 124898, in the Superior Court of the State of California, County of Los Angeles, West District, Parallax Health Sciences, Inc., et al. v. Shahla Melamed, et al.  The complaint in that action alleges that Melamed breached several obligations under the Purchase Agreement, and the Company sought to reduce the Secured Note due to undisclosed material changes in the business.

Settlement Reached:

In January 2019, Melamed requested mediation, seeking settlement of the pending litigation with the Company, including that which was initiated against the Company by her son, Hootan Melamed (Shahla and Hootan, collectively, the “Melameds”). Through mediation, the Company and the Melameds reached agreeable settlement terms, and on February 19, 2020, the Company received a counter-signed Settlement and Release Agreement (the “Settlement”).  Effective February 12, 2020 (the “Effective Date”), the Settlement is by and between Parallax Health Sciences, Inc., RoxSan Pharmacy, Inc., Michael Redmond, Edward Withrow III, Huntington Chase Financial Group, LLC, Calli Bucci and Dave Engert (collectively, “Parallax”), and the Melameds, and resolves all pending lawsuits between the parties in connection with the acquisition of RoxSan Pharmacy.

In consideration of the resolution of all existing and potential claims, including the cancellation of the Note in the principal sum of $20,500,000, and accrued interest of approximately $4,500,000, and without further action or litigation and without admission of liability by either party, the Settlement terms include the following:

●A payment of $4,000,000 (the “Settlement Sum”) to the Melameds, to be paid as follows: 

$1,250,000 within 90 days of the Effective Date; 

$1,250,000 within one (1) year of the Effective Date; 

●The issuance of ten (10) million shares of the Company’s Common Stock to an entity owned by Shahla Melamed. 

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In the event the Company fails to cure a breach of timely payment of any portion of the Settlement Sum within thirty (30) days of a notice of default, a Stipulated Judgement may be filed by Melamed in the sum of $20,000,000, less any Settlement Sum amounts previously paid by the Company.

On May 14, 2018, pursuant to unanimous resolutions of the boards of directors of RoxSan Pharmacy, Inc. and Parallax Health Sciences, Inc., RoxSan filed a Chapter 7 petition in the United States Bankruptcy Court for the Central District of California (the “Court”).  Mr. Timothy Yoo was appointed trustee (“Trustee”) on May 15, 2018.  In connection with this filing, RoxSan seeks to discharge approximately $5 million of liabilities owed to various parties, and intercompany loans in excess of $1 million owed to Parallax.  The Chapter 7 bankruptcy proceeding by RoxSan Pharmacy, Inc. was fully discharged and the case was closed on March 13, 2019, in U.S. Bankruptcy Court, Central District of California.

Due to, among other things, the reduction in RoxSan’s cash flows during 2016 and 2017, RoxSan became delinquent in its payroll tax depository obligations, resulting in a liability owed to federal and state taxing agencies in the aggregate of $1,148,811, which includes $601,148 in taxes withheld from employees (“Trust Fund Taxes”), employer taxes of $183,172, and penalties and interest of $364,491 through December 31, 2018. The liability was included as part of the Chapter 7 bankruptcy petition, and certain portions of the liability may be discharged.  However, in accordance with California bankruptcy laws, federal and state Trust Fund Taxes are not dischargeable.  The Company has retained a tax resolution specialist and is in communications with the taxing agencies in order to resolve RoxSan’s liability.

As a result of the loss of financial control of RoxSan, the Company derecognized the subsidiary as of September 30, 2018. The derecognition resulted in a gain of $4,478,268. The Company also extinguished $22,778,281 in debt and accrued interest related to the acquisition of RoxSan.

Disputes with Former Executives

On March 9, 2017, Mr. Dave Engert 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.  The Company filed an answer and counterclaims against Mr. Engert for an amount exceeding $100,000.  The counterclaims included 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 “Engert Settlement”). The Engert 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 Engert 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.

On March 28, 2018, Mr. J. Michael Redmond filed a lawsuit against the Company and RoxSan Pharmacy, Inc. in the United States District Court, Central District of California for an amount exceeding $75,000.  The Company intends to vigorously defend against this action. There are counterclaims that include possible fraud and negligence committed by Mr. Redmond, former President, Chief Executive Officer, Chairman and director of the Company and of RoxSan Pharmacy, Inc. An Arbitration is still pending.

Disputes with Lenders

On March 18, 2020, the Company initiated legal action and filed a complaint against EMA Financial, LLC (“EMA”) a third-party lender, in the US District Court, Southern District of New York, case index number 20-cv-2375, citing fraud, unjust enrichment, and securities law violations, among other things. On April 27, 2020, EMA filed an answer substantially denying the Company’s claims, and filed counterclaims against the Company, including damages in excess of $2 million.  The matter is currently pending.

The total gain (loss) on extinguishment of debt for the years ended December 31, 2019 and 2018, respectively was ($927,399) and $22,858,009.

The Company has developed, acquired and licensed multiple platforms, proprietary and exclusive, that provide services and products across the healthcare continuum.  These platforms are designed to allow for multiple points of reciprocal consideration through innovative business models that provide patients with increased quality of services and products at reduced cost of time and money.  They also provide healthcare providers with increased access to their patients, the ability to deliver better and more efficient service and increase their income from the services they supply.

The Company believes that its products and services can provide solutions that mitigate rising costs, reduce waste in spending and the amount of unnecessary services, and increase the health and wellness of patients.  The Company’s endeavors to change the healthcare industry are strengthened by providing solutions to real problems facing healthcare stakeholders today.  The Company’s products and services have been developed, and are continuing to be developed, to address these issues now.

The Good Health Outcomes™ 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’s value proposition as a whole.

●Optimized Outcomes 

The Company’s REBOOT™ technology, an acronym for “Reliable Evidence-Based Outcome Optimization Technology,” is at the heart of the Company’s behavioral technology provides reliable evidence-based outcome optimization through a patented machine learning platform.  REBOOT™ has been specifically designed to improve health treatment outcomes through internet-based and mobile behavioral technology systems that enable its users and user groups to more effectively achieve goals within a prescribed timeline, with the potential to transform the cost of treating and managing chronic illnesses such as pulmonary-COPD-asthma, diabetes, and cardiovascular disease by effecting the modification of behavior in patients being treated for these chronic diseases.  The REBOOT™ technology, developed and commercially tested for over 5 years at a cost exceeding $4,000,000, provides reliable evidence-based outcome optimization through a patented machine learning platform delivered through:

●A cloud-based software system, scalable for use from one patient to over 100 million; 

●A mobile application, COMPASS™, that is interchangeable from one disease to another, and one patient to another; and 

●A stratification tool, WIZARD™, which was developed specifically to support scalability of the REBOOT™/ COMPASS™ platform.   

REBOOT™ can be sold as a product line into certain defined verticals, independent of, or in combination with, the Company’s connected healthcare and data platforms, products and services.  The REBOOT™ technology is currently protected by patents issued in U.S., China, India, and Hong Kong and Macao.

●Connected Health 

Fotodigm®

Fotodigm® is the Company’s patent-pending, integrated, interoperable, cloud-based platform, that allows for ease of use of the Company’s proprietary products and services and third-party Plug-n-Play interfaces. Designed with increased accessibility and accelerated adoption in mind, Fotodigm® enables patients and doctors to use a singular, integrated, interoperable platform for:

●Telehealth;  

●Remote Patient Monitoring (“RPM”); 

●Point-of-Care (“POC”) testing; 

●Personal Protective Equipment (“PPE”) 

●Healthcare education services.  

Fotodigm® provides simple, cost-effective, accessible and affordable products and services that deliver industry breakthrough advantages.  The Fotodigm® construct was developed to provide payers, patients and providers with the ability to choose and interchange their services, and be able to interchange where the healthcare practitioner deems it the best course of action. The Fotodigm® system is being developed to utilize a proprietary Machine Face Recognition engine along with proven and existing Optical Character Recognition (“OCR”) technology through third-party license.  The technology has been beta tested and utilized in the field by patients within remote patient monitoring systems for the reduction of hospital readmissions.

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The Target System is the Company’s proprietary diagnostic immunoassay testing platform and test cartridges designed for twenty-five specific FDA-cleared tests in areas of infectious diseases, cardiac markers, drugs of abuse and various other medical conditions. The Target System is comprised of:

●the VT-1000, an FDA-cleared, clinically and commercially proven bench-top quantitative and qualitative immunoassay testing system specifically designed to reside in the primary care physician office; 

●the SPARKS Mobile™, a patented (US, China, India, Hong Kong, Macao, and India) mobile testing system, currently in development, that incorporates the VT-1000 feature set with smartphone capabilities (to be completed before commercialization, includes design and build, then certification); 

●25 FDA-cleared rapid tests in the areas of: 

Cardiac;  

Infectious diseases;  

Medical conditions;  

Drugs of abuse;  

Pregnancy. 

●the Target Antigen Detection System (“TADS”),  a unique, patented single-use device cartridge that allows for positive, controlled sample processing, a system of specific immune reactions to detect individual disease conditions, and a quick response diagnostic system that provides answers to specific screening problems under ten minutes. 

The Target System has the capacity to test hundreds of conditions, and is to be offered to doctors for use at the doctors’ offices and at patients’ homes, or in triage and ambulatory environments.

The Target System is not commercially available at this time, as the product is currently in redesign and development, with a primary focus on developing the SPARKS Mobile™, the patented handheld mobile version of the VT-1000 desktop analyzer.

●Smart Data 

Parallax’s Intrinsic Code™ is the Company’s unique Smart Data patient data collection and repository system.  Intrinsic Code™ not only identifies the traditional data from patients, but is also designed to provide actionable insights into the behavioral changes in patients, which has resulted in increased adherence to their medical regimens and pharmacologic therapies.  These insights are extremely valuable to pharmaceutical companies, as medication nonadherence creates false efficacy results of therapies in the manner in which they were designed, tested and provided regulatory approval upon. Payers are deeply concerned with the data on adherence to medical and medication therapy regimens, as it directly affects their financial performance.

Management

Parallax is led by experienced veterans from the healthcare, technology, finance and management fields.  The Company's disciplined and organized approach is balanced by its optimism for the future, and the opportunities present in the current healthcare market. The Parallax team is grounded in a belief that success in business is built on a combination of research, planning and execution.

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  

Parallax has developed a distinctive technology platform that provides for the complete remote patient care delivery system: the patent-pending Fotodigm® platform, which utilizes proprietary software and technology to bridge clinical behavioral science with technology and logistics for payers, providers and clinical professionals across a variety of wellness and clinical devices, including both fitness and clinical applications. Fotodigm® is a secure and scalable platform for collecting, transmitting and analyzing biometric, pharmaceutical, and health data to healthcare providers, primarily hospitals, accredited nursing operations, and physicians using optical character recognition, otherwise known as “Machine Face Recognition” technology that is licensed from others.

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.

In April 2017, the Behavioral Health Services 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 December 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.  

Balance Sheet  

As of December 31, 2019, the Company had total assets of $1,359,896 compared with total assets of $1,364,357 at December 31, 2018. The decrease in total assets of $4,461 is attributable to an increase in cash of $6,183, an increase in operating lease asset of $52,176, an increase in investments, net of impairment, of $50,000, $120,620 of amortization related to intangible assets, and an increase in deposits of $7,800.

As of December 31, 2019, the Company had total liabilities of $11,614,479 compared with total liabilities of $7,314,811 at December 31, 2018. The increase in total liabilities of $4,299,668 is attributable to a decrease in accounts payable and accrued expenses of $572,160, an increase in operating lease liability of $52,176, an increase in short-term settlements payable of $2,824,200, an increase in short-term derivative liability of $38,875, a decrease in short-term convertible debentures of $724,903, a decrease in short-term related party convertible debentures of $411,006, an increase in short-term notes payable of $345,000, an increase in short-term note payable, bank of $18,616, an increase in short-term related party notes payable of $126,152, an increase in short-term convertible notes payable of $806,364, an increase in related party payables of $103,760, an increase in long-term settlements payable of $1,240,000, an increase in license fees payable of $12,000, an increase in royalties payable of $15,165, a decrease in long-term derivative liability of $34,000, a decrease in long-term debentures of $184,870, a decrease in long-term notes payable, bank of $28,995, an increase in related party note payable of $633,294, and an increase in convertible notes payable of $40,000.

Results of Operations

The year ended December 31, 2019, compared to the year ended December 31, 2018

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Revenue in the amount of $128,600 for the year ended December 31, 2019, consists of license fees in the amount of $125,000 in connection with the Company’s intellectual property, contract fees and equipment sales related to the Company’s remote health care systems in the amount of $1,800, and subscription fees related to the Company’s behavioral health services in the amount of $1,800.

Revenue in the amount of $11,739 for the year ended December 31, 2018, consists contract fees and equipment sales related to the Company’s remote health care systems in the amount of $9,939, and subscription fees related to the Company’s behavioral health services in the amount of $1,800.

The Company’s behavioral health services segment had not yet begun full operations, generating limited test market sales.  The Company has not yet fully launched the medical diagnostics and testing activities of the Company’s Connected Health division.

Cost of sales

Costs of sales in the amount of $16,827 for the year ended December 31, 2019, consists of equipment and other costs related to the Company’s remote health care systems.

Costs of sales in the amount of $20,339 for the year ended December 31, 2018, consists of equipment and other costs related to the Company’s remote health care systems.

The Company’s behavioral health services segment had not yet begun full operations, generating limited test market sales.  The Company has not yet fully launched the medical diagnostics and testing activities of the Company’s Connected Health division.

General and Administrative Expenses

General and administrative expenses in the amount of $6,626,063 for the year ended December 31, 2018, were comprised of $2,166,590 in legal, accounting and management fees, $3,513,710 in stock compensation/stock option amortization, $210,191 in professional fees and outside services, $181,656 in salaries and related taxes, $126,070 in benefits and allowances, $8,455 in marketing, $73,896 in product development, $120,620 in depreciation and amortization, $73,351 in rent expense, $50,767 in travel, meals and entertainment, and $100,757 in office overhead and other general and administrative expenses.

●a decrease in legal, accounting and management services of $146,102, primarily due to a decrease in legal costs of $372,253 resulting from the settlement of pending litigation; a decrease in the $250,000 reserve established in prior year for anticipated future legal costs related to pending litigation; an increase in accounting and audit fees of $128,016 due to additional services required as a result of a financial statement restatement and the Company’s S-1 filing; an increase management consulting fees of $203,218 resulting from changes in management; an increase of $106,000, resulting from the establishment of director compensation plan;  and an increase in miscellaneous management fees of $38,917; and 

●an increase in professional fees and outside services of $376,231, primarily due to an increase in investing and financing advisory services and due diligence costs; and  

●a decrease in salaries and related taxes of $14,417, primarily due to a decrease in compensation of $55,779 resulting from a decrease in staff; and an increase in payroll tax expense of $41,362 resulting from a reduction in accrued compensation and related payroll taxes in the prior year; and 

●an increase in benefits and allowances of $54,143, primarily due to an increase in insurance benefits of $2,943; and an increase in contractual expense allowances of $51,200 resulting from a full year of expense in the current year compared to a partial year of expense for the prior year; and 

●an increase in marketing of $247,052, primarily due to the engagement of marketing firms, resulting in an increase of $198,000; and an increase in other marketing fees of $49,052; and 

●an increase in product development of $2,721, primarily due to a decrease in development costs of $5,219; and an increase in patent costs of $7,940; and 

●an increase in depreciation and amortization of $352, primarily due to office equipment acquired in the current year, resulting in additional depreciation of $352; and 

●an increase in rent expense for office space of $66,169, primarily due to additional office space leased in the current year; and 

●a decrease in travel, meals and entertainment of $874, primarily due to a decrease in travel costs of $5,065; and an increase in meals and entertainment of $4,191; and  

●an increase in office supplies and miscellaneous expenses of $25,407, due to increases in automobile expense of $17,142, computer and internet costs of $5,557, repairs and maintenance of $7,419, royalties of $7,165; taxes, licenses and permits of $4,644, telephone expense of $5,747, transfer agent fees of $4,787, and other general office and administrative expenses of $3,781; and decreases in insurance expense of $6,654 and storage and moving of $24,181. 

General and administrative expenses for both 2019 and 2018 were incurred for the purpose of advancing the Company closer to its financing and operating goals in the bio-medical and digital healthcare sectors.

Net Income (Loss)

Liquidity and Capital Resources

As of December 31, 2019, the Company had cash in the amount of $6,445 compared to $262 as of December 31, 2018.

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Cash Flows from Operating Activities

During the year ended December 31, 2019, the Company used $2,945,573 of cash flow for operating activities of continuing operations, compared with $1,291,984 for the year ended December 31, 2018. The increase in cash used by operating activities of $1,653,589 is primarily attributable to a decrease in net income from continuing operations of $28,474,541; increases in depreciation and amortization of $66,761, securities issued in exchange for licenses sold of $50,000, losses on settlements of $4,134,972, and impairment losses of $1,002,276; decreases in stock compensation/stock option amortization of $731,284, discount amortization of $2,780,209, and allowance for bad debt of $236; decreases in gains from disposal of subsidiary of $4,478,268, and extinguishment of debt of $23,785,408; decreases in losses from fair value adjustments of $318,386, and debt accretion of $924,153; increases in deposits of $7,800, royalties payable of $7,165, and related party payables of $96,398; and decreases in accounts receivable of $3,039, and accounts payable and accrued expenses of $1,935,189.

Cash Flows from Investing Activities

During the year ended December 31, 2019, the Company used $2,628 of cash flow for investing activities, compared with none for the year ended December 31, 2018.  The increase in cash used by investing activities is attributable to the purchase of professional equipment in the amount of $2,628.

Cash Flows from Financing Activities

As of December 31, 2019, related parties are due a total of $2,359,026, consisting of $796,175 in accrued compensation owed to related parties; $312,305 in accrued benefits owed to related parties, and cash advances from related parties for operating expenses; $759,446 in promissory notes, and $491,100 in convertible promissory notes.

As of December 31, 2019, a convertible promissory note is payable to a related party in the aggregate sum of $491,100, representing cash loans and unpaid compensation.  The note bears interest at a rate of 7% per annum, matures December 31, 2023, and contains a repayment provision to convert the debt into restricted shares of the Company’s Common Stock.  On December 31, 2019, the note was modified to change the conversion rate from $0.10 to $0.08 per share.  During the year ended December 31, 2019, interest in the amount of $33,663 was expensed, and $98,642 was converted to Common Stock.  As of December 31, 2019, a total of $9,795 in interest remains accrued.

During the year ended December 31, 2019, the Company exchanged related party convertible debentures in the principal sum of $411,006, plus accrued interest of $42,778, to non-convertible Senior Secured Promissory Notes (the “Senior Notes”) in the aggregate principal of $759,446.  The Senior Notes bear interest at a rate of 8% per annum, with payments of $126,152 plus interest accrued thereon due December 31, 2019; $300,000 due December 31, 2020; and the remaining principal and accrued interest due December 31, 2021.  In connection with the exchange, the Company issued the following in favor of the lender: 1,380,811 shares of the Company’s restricted Common Stock, valued at $131,315; and warrants, valued at $92,150, to purchase 2,528,413 shares of the Company’s Common Stock for a period of five (5) years at an exercise price of $0.10461.  As a result, the Company recognized a net loss on the exchange in the amount of $434,837, net of $2,140 in derivative liability remaining from the warrants issued with the debentures.  As of December 31, 2019, no accrued interest remains.

The Company’s principal sources of funds have been from the Company’s sales of its Preferred and Common Stock, and loans from related parties and third-party lenders.

The following represents the obligations previously in default as a result of cash flow constraints, which have been cured to the satisfaction of the noteholder:

[1]Consists of $125,000 in new non-convertible promissory note, $30,000 in cash and 2,400,000 shares of Common Stock, valued at $280,000. 

A convertible promissory note in the principal sum of $100,000 matured in May 2018.  Due to cash flow constraints, the note went into default.  In August 2019, a settlement was reached with the noteholder, the terms of which include the issuance of a new non-convertible promissory note in the amount of $125,000, a cash payment in the amount of $30,000, and 2,400,000 shares of the Company’s Common Stock, valued at $280,000, at which time the default was cured. The new promissory note bears interest at a rate of 8% and matures August 2020.

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As of December 31, 2019, the Company had 9 employees, inclusive of 4 executive officers. All 9 employees were full-time employees.

Currently, the Company has 9 employees, inclusive of 4 executive officers. All 9 employees are full-time employees.

Contractual Obligations

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

Going Concern

The Company has incurred losses since inception resulting in an accumulated deficit of $32,057,254, and further losses are anticipated in the development of its business. 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 generate profitable operations and/or 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 audited consolidated financial statements included with this Annual Report have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that the Company’s assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the audited consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s audited consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. The Company believes that understanding the basis and nature of the estimates and assumptions involved with the following aspects of the Company’s financial statements is critical to an understanding of its consolidated financial statements.  The following should be read in conjunction with Note 3 to the Company’s consolidated financial statements, “Summary of Significant Accounting Policies”:

Impairment reviews

Management is required to perform tests annually, or more often if necessary, for impairment of its finite lived and indefinite lived assets, to determine if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections, when available, which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters, including management’s expectations of:

●growth in EBITDA, calculated as adjusted operating profit before depreciation and amortization; 

●long term growth rates; and 

●the selection of discount rates to reflect the risks involved. 

For the purpose of determining goodwill impairment, if any, the Company prepares five year projections and uses these as the basis for its impairment reviews. Changing the assumptions selected by management, in particular the discount rate and growth rate assumptions used in the projections, could significantly affect the Company’s impairment evaluation and, hence, results.

The Company’s review for impairment also includes the evaluation of key assumptions related to sensitivity in the projections. Included are estimates for varying levels of growth, including aggressive, median, and conservative.  In the Company’s evaluation, the conservative level of growth is utilized. For additional information, see Impairment of Long-Lived Assets under Note 3, Summary of Significant Accounting Policies, in the Notes to the Financial Statements.

Contingent liabilities

The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and is not required to provide the information under this item.

The Company’s audited consolidated financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

The following audited consolidated financial statements are filed as part of this Annual Report:

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CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL CORPORATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders of Parallax Health Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Parallax Health Sciences, Inc., and subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 8 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficiency and has significant contingencies that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Valuation of Convertible Debt and Warrant Liabilities

The Company issued convertible debt with attached warrants and evaluated the accounting treatment for convertible debt and warrants to determine the impact (if any) of 1) embedded conversion option; 2) beneficial conversion feature; 3) bifurcation; 4) derivative liability; and 5) fair value adjustments and other expenses thereto.

We identified the evaluation of the accounting treatment for convertible debt and warrants as a critical audit matter. Complex auditor judgment was involved in evaluating the Company’s interpretation of applicable accounting rules and the valuation of convertible debt and warrant liabilities.

/s/ Freedman & Goldberg CPAs

We have served as the Company’s auditor since 2016.

Farmington Hills, Michigan

May 15, 2020

2444 East Hill Road, Grand Blanc, Michigan 48439  (810) 694-0336  Fax (810) 694-9789

Website: freedmangoldberg.com

CONSOLIDATED BALANCE SHEETS

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

CONSOLIDATED STATEMENTS OF OPERATIONS