Wednesday March 18, 2009
Patient Access Solutions, Inc.. Files SEC form 10-K, Annual Report
Annual Report
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
Management's Discussion and Analysis contains various "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks and uncertainties. Certain statements included in this Form 10-K, including, without limitation, statements related to anticipated cash flow sources and uses, and words including but not limited to "anticipates", "believes", "plans", "expects", "future" and similar statements or expressions, identify forward looking statements. Any forward looking statements herein are subject to
certain risks and uncertainties in the Company's business, including but not limited to, reliance on key customers and competition in its markets, market demand, product performance, technological developments, maintenance of relationships with key suppliers and difficulties of hiring or retaining key personnel, all of which may be beyond the control of the Company. The Company's actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors, including those set forth therein.
Management's Discussion and Analysis of Consolidated Results of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the consolidated financial statements included herein. In addition, you are urged to read this report in conjunction with the risk factors described herein.
This discussion and analysis of financial position and results of operation is prepared as at October 31, 2008. The consolidated financial statements have been prepared using generally accepted accounting principles in the United States of America and, in the opinion of management, include all adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows of the Company.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the Company's consolidated financial statements.
Stock Based Compensation
In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements.
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition.
Accounting Policies and Estimates
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management's initial estimates as reported. A summary of significant accounting policies are detailed in notes to the financial statements which are an integral component of this filing.
Revenues
The Company has adopted the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.
Our plan of operations relies heavily on the sale of the PAS suite of products. We have 5 main strategies to accomplish this:
Revenue Strategy -
The focus of the Revenue Strategy is as follows:
1. Identify the most receptive healthcare target prospects and those communities of influence and geographies that offer the greatest concentration of healthcare target prospects. Identify the ideal customer and channel or partnering profiles. Select the best targets and determine the entry point strategy for each product offering.
2. Develop and enhance the way Patient Access Solutions positions itself in the market. We will work with our existing marketing team, and develop and refine the optimal positioning statements, value propositions and other messaging that responds to the most important priorities of the target markets and that aligns best with Patient Access Solution's product offerings and capabilities.
3. Determine the most efficient and potent use of available resources for capturing the greatest possible revenue stream in the shortest period of time. Determine which of the organization's messages will have the greatest impact when delivered into these markets. i.e.-Physician Market, Hospital Market, Pharmaceutical market.
4. Decide on the market mechanism or that combination of Lead Generation, Sales, Business Development, Marketing, and PR that will deliver the most potent impact on revenue capture in the shortest period of time.
5. Validate and test the pricing model to ensure that it optimizes margins and accelerates revenue capture.
P.A.S. believes in a great Revenue Strategy that will maximize revenue and share growth possibilities. Getting this part right from the start will pay enormous dividends to Patient Access Solutions over the long term. P.A.S. will review prior efforts in this area, develop positioning and value premise statements as well as review the current sales strategy. We will validate and refine these strategies and endeavor to discover new strategies, markets, methods and approaches to these markets. Finally, we will develop tactical plans to execute the strategy quickly and efficiently.
Revenue Acceleration Process -
Concurrently, P.A.S. will develop an end-to-end Revenue Acceleration Process for executing the Strategy. The central focus of this effort is as follows:
1. Develop a repeatable Revenue Process (i.e.: residual income) that ensures a high win rate and is built around the healthcare practice culture, positioning and the competitive landscape.
2. Custom craft a complete set of execution tools that will be used in client-facing encounters and in planning and managing pursuits.
3. Develop a measurement and rewards system to manage, and motivate the sales team members to exhibit those behaviors that are most predictive of sales success.
4. Deploy AccessAccelerationTM active performance management practices and metrics to a) jump start revenue, b) create strategic wins, and c) mobilize the P.A.S. organization around growth.
Results of Operations-For the Ten months Ended October 31, 2008 as Compared to Ten months Ended October 31, 2007
Revenue
Our service revenues for ten months ended October 31, 2008 and 2007 were $239,209 and $242,602 respectively a decrease of $3,393. Credit card processing fees for ten months ended October 31, 2008 and 2007 were $52,772 and $25,191, respectively an increase of $27,581. During the Ten months ended October 31, 2008 the We shifted our sales and marketing efforts towards from credit card terminals toward and credit card processing towards sales in the Electric Medical records and documentation management industry using digital pen and paperwork.
GROSS PROFIT
Our gross Profit margin for ten months ended October 31, 2008 and 2007 were 23% and 33% respectively a decrease of 10%. The decrease was primarily attributable to additional customer support personnel.
Operating Expenses
Our general and administrative expenses for ten months ended October 31, 2008 and 2007 were $1,845,818 and $668,592 respectively an increase of $1,177,226. During the ten months ended October 31, 2008 the We incurred significant costs do to our expansion of the sales department, hiring industry consultants and the development and marketing and our documentation management technology using digital pen and paperwork.
Our consulting expenses for ten months ended October 31, 2008 and 2007 were $4,765,434 and $0 respectively. During the ten months ended October 31, 2008 we issued common stock valued at $3,950,260 to several consultants. We also paid several other consultants during the ten months ended October 31, 2008.
Results of Operations-For the Year Ended December 31, 2007 as Compared to the period April 3, 2006 (Inception) to December 31, 2006
Revenue
Our service revenues for year ended December 31, 2007 and the period April 3, 2006 (Inception) to December 31, 2006 were $292,292 and $219,991 respectively a increase of $72,301. Credit card processing fees for the year ended December 31, 2007 and the period April 3, 2006 (Inception) to December 31, 2006 were $30,351 and $0. The increase in our service revenue and credit processing revenue was directly attributable to the Company's increase sales and marketing efforts.
GROSS PROFIT
Our gross profit margin for the year ended December 31, 2007 and the period April 3, 2006 (Inception) to December 31, 2006 were 66% and 59% respectively an increase of 6% The increase was attributable to the generating additional revenue from card processing.
Operating Expenses
Our general and administrative expenses for year ended December 31, 2007 and the period April 3, 2006 (Inception) to December 31, 2006 were $805,533 and $184,204 respectively an increase of $621,329. During the year ended December 31, 2007 the We incurred significantly costs do to the expansion of our sales department, and a hiring industry consultants and additional support and administrative personnel.
LIQUIDITY AND CAPITAL RESOURCES
During the ten months October 31, 2008 the We were funded by proceeds of notes payable of $446,298, proceeds of convertible notes payable of $395,000 and the sale of common stock of $1,687,645. Subsequent to October 31, 2008 the We entered into a recourse factoring agreement with a third party. In addition the We received $104,100 in the form of a note payable bearing interest at a rate of 18% per annum and is payable in full on March 31, 2009.
As reflected in the accompanying financial statements, the We have a net loss of $7,575,124 for the ten months ended October 31, 2008, a working capital, deficiency of $1,230,762, and a stockholders' deficiency of $908,379.
To date, we have financed our operations through the combination of our operating revenues, equity and debt financing (in connection with which we have at times incurred significant costs), short-term bank loans, and the use of shares of our common stock issued as payment for services rendered to us by third parties. In the past, we issued shares of our common stock in private placement transactions to help finance our operations, and to pay for professional services (such as financial consulting, market development, legal services and public relations services). We recognized these services on our books as operating or deferred expenses and amortized over their estimated useful life.
In order to ensure sufficient funds to meet our future needs for capital, management believes that, from time to time, we will continue to evaluate opportunities to raise financing through some combination of commercial bank borrowings, the private or public sale of equity, or issuance of debt securities. However, future equity or debt financing may not be available to us at all, or if available, may not be on terms acceptable to us. If we are unable to obtain financing in the future, we will continue to develop our business on a reduced scale based on our existing capital resources.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
We do not expect to incur any significant research and development costs.
We currently do not own any significant plant or equipment that we would seek to sell in the near future.
We have not paid for expenses on behalf of our director. Additionally, we believe that this fact shall not materially change.
We do not intend to engage in a merger with, or effect an acquisition of, another company in the foreseeable future.
