United Health Products, Inc.

During the three months ended March 31, 2021, a total of 31,930,000 shares of common stock were issued to officers, directors and various consultants related to vesting of RSU’s with a total stock-based compensation cost of $23,990,421, 2,000,000 shares of common stock were issued to Mr. Beplate as a stock bonus with a stock-based compensation cost of $2,180,000, 125,000 shares of common stock were sold to an affiliated investor in a private placement for total cash proceeds of $100,000, 100,000 shares of common stock were issued for settlement of a business consulting agreement with a fair value of $111,000, 25,000 shares of commons stock were issued to settle $20,000 of related party advances (see Note 3), 152,835 shares of common stock were issued to settle $133,523 of accrued liabilities – related party (see Note 3), 1,047,139 shares of common stock were issued due to the conversion of convertible notes payable and accrued interest (see Note 5), 1,353,111 shares of common stock were issued due to the conversion of convertible notes payable and accrued interest – related party (see Note 3) and 117,647 shares of common stock were cancelled.

^{On May 4, 2021 the Company received notification from the Food & Drug Administration (FDA) that, following the resubmission of its application for Pre-market Approval for HemoStyp gauze on April 6th}, the FDA has now accepted for review and commenced its Substantive Review of the application. The commencement of Substantive Review serves as a confirmation that the FDA deems the contents of a PMA application to be adequate and in acceptable form to review and thoroughly evaluate the merits of the product and its proposed applications. The FDA has not yet offered any assessment of the Company’s PMA application beyond taking this step, and there can be no assurance that a PMA will be granted.

Our NORC technology is protected through patents issued by by the U.S. Patent and Trademark Office (“USPTO”) in 2013 and which protection currently runs through 2029. In 2020 we filed an additional U.S. patent that would protect the use of our NORC technology in a gel or hydrocolloid formulation. On January 21, 2021, the U.S. Patent Office provided notification of publication of the Company’s patent application for the method of forming and using a hemostatic hydrocolloid. This publication does not imply any assurance of the receipt of the patent but establishes an obligation of any party that seeks to use the applicable method to pay royalties for the right to do so. The patent application for this process remains pending as of the date of this filing. 

On February 11, 2021, the Company was notified that its application to establish global patent protection for the process of creating and deploying a hydrocolloid (or gel) format of its previously patented HemoStyp hemostatic gauze was accepted for publication under the procedures of the Patent Cooperation Treaty (“PCT”), which is an international patent law treaty which provides a unified procedure for filing a patent application in most foreign countries. The Company previously filed provisional patent applications for its HemoStyp gauze and the hydrocolloid process in July 2019 and 2020, respectively. The Company now has up to one year to register specific patents in those countries where it wishes to commercialize any future HemoStyp gel formats and will do so as its gel-related R&D activity progresses through 2021.

The increase in operating expenses is due primarily to an increase in stock-based compensation expense of $26,233,921. The Company recorded a total $26,281,421 of stock-based compensation during the three months ended March 31, 2021 compared to $47,500 during the three months ended March 31, 2020.

The increase in stock-based compensation is primarily related to vesting and amortization of RSUs. During the three months ended March 31, 2021, the Company amended the RSU agreement with its former Chief Executive Officer and current Chairman. The amendment resulted in the vesting of 21,970,000 RSUs along with the issuance of an additional 2,000,000 shares of restricted stock as a bonus. The change in vesting and issuance of the bonus shares of common stock resulted in the immediate recognition of $26,127,300 in stock-based compensation expense. The Company also recognized $43,121 of stock-based compensation due to the amortization of the RSUs that vested on January 1, 2021 and issued 100,000 shares of common stock for settlement of a consulting agreement valued at $111,000. The Company issued 50,000 shares of common stock for services valued at $47,500 and did not record any stock-based compensation related to RSU’s during the first quarter of 2020.

As of March 31, 2021, the Company had a negative working capital of $60,077. The Company has not yet attained a level of operations, and for the foreseeable future will not be pursuing commercial operations, which will allow us to meet our current overhead while we seek FDA Class III approval. Our primary strategy calls for one or more  commercial collaborations to market and distribute current and future HemoStyp products to the Class III marketplace, or to pursue a strategic transaction including a potential sale of the Company. If we are not successful in our strategy, we cannot assure that we will be able to fund a marketing and sale strategy, and if we do, we are unable to assure we will attain profitable operations within the next year or at all. The report of our independent registered public accounting firm on our 2020 financial statements includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. While the Company has funded its initial operations with private placements, and secured loans from related parties, there can be no assurance that adequate financing will continue to be available to the Company and, if available, on terms that are favorable to the Company. Our ability to continue as a going concern is also dependent on many events outside of our direct control, including, among other things, our ability to achieve our business goals and objectives, as well as improvement operating conditions in the healthcare industry.