You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited condensed consolidated financial
statements and the related notes included in Item 1, “Financial Statements” of
this Form 10-Q. In addition to our historical unaudited condensed consolidated
financial information, the following discussion contains forward-looking
statements that reflect our plans, estimates, and beliefs which involves risk,
uncertainty and assumptions. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or
contribute to these differences include those discussed below and elsewhere in
this Form 10-Q.
Corporate Information
liability company which was organized in
focused on developing functionality for the software now used and sold by
Corp.
were interest holders of
5G, the technology acquired has been accounted for at predecessor cost of
facilitate the planned acquisition by
(“Alliance”), on
entity,
with SCW Acquisition being the surviving entity. Subsequently, on
2018
company and certain of our stockholders agreed to cancel 6,510 shares of common
stock. In
June to
shares of common stock to new third-party investors. In addition, on
2019
FL Corp.
Alliance acquired
exchange transaction and changed Alliance’s name to
company’s current name, with
2020
subsidiary,
Our principal executive offices are located at
also had a lease in
now month-to-month.
In this Quarterly Report, the terms “
“our” refer to
otherwise. Unless specified otherwise, the historical financial results in this
Annual Report are those of our company and our subsidiaries on a consolidated
basis.
Our Business
normalization and interoperability of information for healthcare providers and
big data analytics for the healthcare industry.
associated services that improve healthcare processes and information flow
within hospitals.
simplify, repair, and organize its data (“data normalization”), allows the data
to be utilized across multiple internal software applications
(“interoperability”) and provides the basis for sophisticated data analytics
(“big data”).
quickly and accurately between the existing supply chain, electronic medical
records, clinical systems, and patient billing functions. The software is
designed to achieve multiple operational benefits such as supply chain cost
reductions, decreased accounts receivables aging, accelerated and more accurate
billing, contract optimization, increased supply chain management and cost
visibility, synchronous Charge Description Master (“CDM”) and control of vendor
rebates and contract administration fees.
21
visibility to an advanced business intelligence that enables better
decision-making and reductions in product costs and utilization, ultimately
leading to accelerated and accurate patient billing.
perform separate functions as follows:
? virtualized ItemMaster File repair, expansion and automation; ? CDM management; ? contract management; ? request for proposal automation; ? rebate management; ? big data analytics modeling; and ? data integration and warehousing.
the finest, most well-respected healthcare providers in
Clients are geographically dispersed throughout the country. Our focus is to
assist healthcare providers with issues they have pertaining to data
interoperability.
direct sales and relationships with strategic partners.
typically a three-to-five-year contracted term, where such software is hosted in
the client through a secure connection in a software as a service (“SaaS”)
delivery method.
hospitals and health systems through its direct sales force and its distribution
and reseller partnerships.
ticketing platform focused on serving regional MMA (“mixed martial arts”)
promotions.
We currently hosts our solutions, serve our customers, and support our
operations in
and infrastructure provider, Rackspace. We incorporate standard IT security
measures, including but not limited to; firewalls, disaster recovery, backup,
etc. Our operations are dependent upon the integrity, security and consistent
operation of various information technology systems and data centers that
process transactions, communication systems and various other software
applications used throughout our operations. Disruptions in these systems could
have an adverse impact on our operations. We could encounter difficulties in
developing new systems or maintaining and upgrading existing systems. Such
difficulties could lead to significant expenses or to losses due to disruption
in our business operations.
In addition, our information technology systems are subject to the risk of
infiltration or data theft. The techniques used to obtain unauthorized access,
disable or degrade service, or sabotage information technology systems change
frequently and may be difficult to detect or prevent over long periods of time.
Moreover, the hardware, software or applications we develop or procure from
third parties may contain defects in design or manufacture or other problems
that could unexpectedly compromise the security of our information systems.
Unauthorized parties may also attempt to gain access to our systems or
facilities through fraud or deception aimed at our employees, contractors or
temporary staff. In the event that the security of our information systems is
compromised, confidential information could be misappropriated, and system
disruptions could occur. Any such misappropriation or disruption could cause
significant harm to our reputation, lead to a loss of sales or profits or cause
us to incur significant costs to reimburse third parties for damages.
Impact of the COVID-19 Pandemic
Our operations and business have experienced disruption due to the unprecedented
conditions surrounding the COVID-19 pandemic spreading throughout
States
headquartered, was at one of the early epicenters of the coronavirus outbreak in
is impacting new customer acquisition. We have been following the
recommendations of local health authorities to minimize exposure risk for our
team members since the outbreak.
22
In addition, our customers (hospitals) have also experienced extraordinary
disruptions to their businesses and supply chains, while experiencing
unprecedented demand for health care services related to COVID-19. As a result
of these extraordinary disruptions to our customers’ business, our customers are
currently focused on meeting the nation’s health care needs in response to the
COVID-19 pandemic. As a result, there is a significant risk that our customers
will not be able to focus any resources on expanding the utilization of our
services, which could adversely impact our future growth prospects, at least
until the adverse effects of the pandemic subside. In addition, the financial
impact of COVID-19 on our hospital customers could cause the hospital to delay
payments due to us for services, which could negatively impact our cash flows.
We are endeavoring to mitigate these risks through the sale of personal
protective equipment (“PPE”) and COVID-19 rapid test kits to the health care
industry, including many of our hospital customers.
On
wholly-owned subsidiary,
database to identify trends within the purchasing supply chain and use this
information to source and provide critical, difficult-to-find items for the
healthcare industry. Items may become difficult to source due to unexpected
disruptions within the supply chain, such as the COVID-19 pandemic. These
products currently include:
? Test Kits - the Company has identified multiple potential sources for Rapid
Test Kits for COVID-19.
? PPE - Personal Protective Equipment (PPE) includes items such as masks,
gloves, gowns, shields, etc. The Company's Chief Executive Officer and
employees have extensive experience in the healthcare industry and industry
contacts, and a database of items specifically designated to assist the
healthcare industry in fulfilling its inventory demands.
The sale of PPE and rapid test kits for COVID-19 represent a new business for
our company and is subject to the myriad risks associated with any new venture.
We have for example encountered great difficulty in attempting to secure
reliable sources of supply for both COVID-19 Rapid Test Kits and PPE including,
3M N95 masks, which are the preferred medical grade mask of US healthcare
companies. Further, we have encountered shipping delays with regard to masks and
other PPE, and significant quality related issues regarding N95 masks. In
addition, regarding our sourcing of COVID-19 Rapid Test Kits, we have
encountered significant shipping delays, as well as reduced quantities.
Consequently, there is no assurance as to the timing or quantities of any future
deliveries of COVID-19 Test Kits. We have yet to complete the sale of any
COVID-19 rapid test kits and had no test kits or PPE in inventory as of
31, 2020
addition, changes in FDA processes governing the sale of COVID-19 serology tests
could have the effect of rendering the COVID-19 serology tests to be sold by our
company not saleable in
effect on our company. There can be no assurance that we will be able to
generate any significant revenue from the sale of PPE products or rapid test
kits.
We have yet to complete the sale of any COVID-19 rapid test kits. Through the
date of filing we have not generated any material revenue from the sale of PPE.
Results of Operations –
Our operating results for the three month periods endedMarch 31, 2020 and 2019 are summarized as follows: Three Months Ended March 31, March 31, 2020 2019 Difference Revenue$ 1,123,827 $ 1,248,104 $ (124,277 ) Cost of revenues 833,200 971,209 (138,009 ) General and administrative 1,440,278 6,627,939 (5,187,661 ) Other income - 441,335 (441,335 ) Benefit from income taxes - (195,000 ) 195,000 Net loss (1,149,651 ) (5,714,709 ) 4,565,058 Revenues
Revenue for the three months ended
revenue for the three months ended
revenue is primarily related to revenue from data consulting projects completed
during the first quarter of 2019 that was not present in the first quarter of
2020. The decrease was partially offset by the addition of new multi-year
customer contracts and monthly revenue from customers which were brought on in
2019 subsequent to the end of the first quarter. Given the disruption caused to
our hospital customers by the COVID-19 pandemic, our second quarter has been
adversely impacted, and we expect the impact to continue into at least the third
quarter of this year, if not longer. Customer retention includes monthly and
annual recurring revenue that should not be significantly impacted by the
pandemic.
23
Operating Expenses
Cost of revenues
Cost of revenues were
compared to
decreased usage of third party contractors as there was less work needed to
support new customers in the first three months of 2020 compared to the same
period in 2019.
General and administrative
General and administrative expenses decreased
three months ended
of 2019. Stock-based compensation expense decreased
quarter of 2019. The 2019 period included costs related to equity awards to
employees, directors, and consultants and the transfer of common shares by our
CEO and a former significant shareholder to non-employee consultants. We expect
stock-based compensation to be significant in 2020 due to equity awards made to
officers, directors, employees and consultants in
increased by approximately
compared to the same period of 2019, as a result of our use of third party
salespeople. Salary and wages increased approximately
quarter of 2020 as a result of higher headcount. Insurance increased by
approximately
other insurance coverages. Accounting expenses decreased approximately
due to the expenses incurred in 2019 related to the acquisition of AMMA
completed on
We also expect legal fees to increase in 2020 based on the legal and regulatory
actions which we are currently experiencing.
approximately
Other income (expense)
We had other income of
compared to
on the fair value of convertible note receivable of
interest expense was
conversion of the debt to equity in 2019. We had a gain on the fair value of
asset (warrant) in the three months ended
Net Loss
For the three months ended
compared to a net loss of
Liquidity and Capital Resources
Going Concern
As of
accumulated deficit of
2020
We have historically incurred operating losses and may continue to incur
operating losses for the foreseeable future. We believe that these conditions
raise substantial doubt about our ability to continue as a going concern. This
may hinder our future ability to obtain financing or may force us to obtain
financing on less favorable terms than would otherwise be available. If we are
unable to develop sufficient revenues and additional customers for our products
and services, we may not generate enough revenue to sustain our business, and we
may fail, in which case our stockholders would suffer a total loss of their
investment. There can be no assurance that we will be able to continue as a
going concern.
As of the date of this report, we have only limited cash on hand, and we are
experiencing negative cash flows from operations. Consequently, we need to raise
additional capital in the near term to fund our operations and the
implementation of our business plan.
On
initiated a “T12 trading halt,” which means the halt will remain in place until
the Company has fully satisfied Nasdaq’s request for additional information.
This trading halt could impact the Company’s ability to raise additional
capital.
On
Paycheck Protection Program (“PPP”), which was enacted as part of the
Coronavirus Aid, Relief and Economic Security Act (the “CARES ACT”). The funds
were received from
CARES Act. The CARES Act was established in order to enable small businesses to
pay employees during the economic slowdown caused by COVID-19 by providing
forgivable loans to qualifying businesses for up to 2.5 times their average
monthly payroll costs. The amount borrowed under the CARES Act and used for
payroll costs, rent, mortgage interest, and utility costs during the 24 week
period after the date of loan disbursement is eligible to be forgiven provided
that (a) we use the PPP Funds during the eight week period after receipt
thereof, and (b) the PPP Funds are only used to cover payroll costs (including
benefits), rent, mortgage interest, and utility costs. While the full loan
amount may be forgiven, the amount of loan forgiveness will be reduced if, among
other reasons, we do not maintain staffing or payroll levels or less than 60% of
the loan proceeds are used for payroll costs. Principal and interest payments on
any unforgiven portion of the PPP Funds (the “PPP Loan”) will be deferred to the
date the SBA remits the borrower’s loan forgiveness amount to the lender or, if
the borrower does not apply for loan forgiveness, 10 months after the end of the
borrower’s loan forgiveness period for six months and will accrue interest at a
fixed annual rate of 1.0% and carry a two year maturity date. There is no
prepayment penalty on the CARES Act Loan.
24
During
135,527 shares of common stock (at a price of
purchase 169,409 shares of common stock, at an exercise price of
share. This transaction is subject to execution of definitive documents.
In connection with the Class Action and derivative claims and investigations
described in Item 1. Legal Proceedings of this Quarterly Report on 10-Q, we are
obligated to indemnify our officers and directors for costs incurred in
defending against these claims and investigations. Because we currently do not
have the resources to pay for these costs, our directors and officers liability
insurance carrier has agreed to indemnify these persons even though the
retention under such policy has not yet been met. Ultimately, we will be
obligated to pay the amount of the retention to the extent of actual settlement
and defense costs, which payments could have a material adverse effect on the
Company.
We are currently experiencing an increasing working capital deficiency. As of
compared to a deficit of approximately
approximate
to an approximate
increase in contract liabilities (due primarily to a
for personal protective equipment, which was offset by an increase in prepaid
expenses for a deposit we placed for personal protective equipment of
approximately
receivable, due to less project revenue, and an approximate
cash.
Based on our current business plan, we anticipate that our operating activities
will use approximately
or approximately
consequently, we are unable to fully implement our current business plan.
Accordingly, we have an immediate need for additional capital to fund our
operating activities.
In order to remedy this liquidity deficiency, we are actively seeking to raise
additional funds through the sale of equity and debt securities, and ultimately,
we will need to generate substantial positive operating cash flows. Our internal
sources of funds will consist of cash flows from operations, but not until we
begin to realize additional revenues from the sale of our products and services.
As previously stated, our operations are generating negative cash flows, and
thus adversely affecting our liquidity. If we are able to secure sufficient
funding in the near term to fully implement our business plan, we expect that
our operations could begin to generate significant cash flows during early 2021,
which should ameliorate our liquidity deficiency. If we are unable to raise
additional funds in the near term, we will not be able to fully implement our
business plan, in which case there could be a material adverse effect on our
results of operations and financial condition.
In the event we do not generate sufficient funds from revenues or financing
through the issuance of common stock or from debt financing, we may be unable to
fully implement our business plan and pay our obligations as they become due,
any of which circumstances would have a material adverse effect on our business
prospects, financial condition, and results of operations. The accompanying
financial statements do not include any adjustments that might be required
should we be unable to recover the value of our assets or satisfy our
liabilities.
Based on our limited availability of funds we expect to spend minimal amounts on
software development and capital expenditures. We expect to fund any future
software development expenditures through a combination of cash flows from
operations and proceeds from equity and/or debt financing. If we are unable to
generate positive cash flows from operations, and/or raise additional funds
(either through debt or equity), we will be unable to fund our software
development expenditures, in which case, there could be an adverse effect on our
business and results of operations.
Cash Flows
Three months ended
March 31,
2020 2019
Net cash used in operating activities
Net cash provided by investing activities
- 4,998,505 Net cash provided by financing activities - 256,023 Change in cash$ (286,861 ) $ 2,688,831 Operating Activities
Cash used in operating activities was approximately
months ended
The net loss was partially offset by stock-based compensation of
net changes in operating assets and liabilities consisting primarily of an
approximate
increase in accounts payable and an approximate
liabilities.
Cash used in operating activities was
customers, an increase in prepaid assets of
payable and accrued liabilities of
payable balances mainly from the acquisition of
stock based compensation of
shares from our founders and CEO and President to non-employee contractors, and
equity awards to our management team and board of directors, and fair value
gains on warrants and convertible note assets.
25
Investing Activities
We had no investing activities for the three months ended
Cash provided by investing activities was
ended
purchase of Alliance, offset by funding of advances due to foundershareholder
of
AMMA of
Financing Activities
We had no financing activities for the three months ended
Cash provided by financing activities was
related party of
from common stock warrants exercises of
Off-Balance Sheet Arrangements
As of
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
© Edgar Online, source
