Item 1. Business
Introduction
The Company was incorporated in the state of Nevada on June 2, 2010. In December 2012, we entered into a share exchange agreement with Touch Medical Solutions, Inc. (TMSI), whereby we assumed TMSI’s business operations (The Acquisition). We are currently in the business of developing and bringing to market a suite of medical software products. Our principal executive offices are located at 12502 West Atlantic Blvd., Coral Springs, Florida.
We have never been the subject of a bankruptcy, receivership or similar proceeding. Additionally, apart from the merger discussed herein, we have never been the subject of a material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.
Operations
The operations refer principally to our subsidiary Touch Medical Solutions, Inc. which we acquired by a share exchange in December 2012.
In 2009, we began prototyping a picture archiving and communication system (“PACS”) solution for market exploration. In July 2010, we were accepted as a Wake Forest University Demon Incubator startup company.
Operating Strategy
Management is of the opinion that the leaders of the technology market as a whole are beating their competitors by presenting a more effective end user experience and fulfillment of base requirements. We believe that products were judged by the number of features they offer; however, there has been an increasing trend towards not providing the greatest number of features, but rather to provide a simpler user interface than its competitors combined with a solid product workflow. We will attempt, as a medical device provider, to offer products that are user friendly and which have a core workflow that clients can easily implement and use. We believe that a goal of applying our product ideas efficiently will allow our customers to maintain high medical standards to help them to grow in their own individual markets.
With a growing PACS market and an emergent electronic medical record (“EMR”) market, we plan to provide a technically advanced but cost effective combined solution to medical practices that have been largely ignored by existing vendors. We will offer as a primary foundation technology, a digital imaging and communications in medicine (“DICOM”) viewer on innovative hardware, a fully Certification Commission for Healthcare Information Technology (“CCHIT”) certified EMR solution, and safe and efficient storage of diagnostic images both as individual clinical assets and as parts of a larger enterprise.
Our goal is to bring a fully integrated PACS/RIS/EMR package to market within a realistic timeframe in order to meet FDA and the American Recovery and Reinvestment Act of 2009 (“ARRA”) standards, starting with an innovative EMR framework as a basis for future product expansions. The stated project goal is to begin marketing a combined PACS/RIS/EMR solution by June 2014 under our brand. With a CCHIT qualified EMR fully integrated with TouchPACS, we will be qualified for ARRA reimbursement.
The PACS will support the DICOM v3 standards for both communication and visualization as a solution, a scope of service contained within the boundaries of the total TouchEMR package. PACS is being modularized this way in order to allow for other such future standards/relational forks as laboratory control or inpatient expansion. PACS will be deemed as v1 complete upon clearance of Food and Drug Administration (“FDA”) Class2 certification with all parts intact, and EMR v1 will be considered v1 complete on receiving CCHIT certification. PACS/EMR will be implemented to include all necessary hardware and configuration for a customer, such that our expected target audience is considered “computer illiterate” and will not be expected to provide implementation equipment independently. To that end, simplification of very complex workflow and diagnostic processes is a central focus within our developed interfaces. We propose that smart implementation of clinical software as a workflow client/server process will allow us to market both products (PACS and EMR) as either standalone or paired.
Technology
Over the next 18 months Touch Medical Solutions plans:
To market both individually and combined as a full Practice Management suite the following products:
TouchERP
- Medical Enterprise Resource Planning (“Medical Enterprise RP”) – Will be (is) designed for a complete solution to various business sectors, including healthcare. A combination of products providing Clinical Management, Resource Management, Financial Management, and a Practice Information System, that are critical to the medical practices in today’s healthcare industry.
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TouchPMS – Practice Management Suite
– This is a category of software that deals with the day-to-day operations of a medical practice. Such software frequently allows users to capture patient demographics, schedule appointments, maintain lists of insurance payers, perform billing tasks, and generate reports.
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TouchEMR – Electronic Medical (Health) Record
– This is a locally kept copy of the patient health information located at each applicable healthcare provider, which can then be merged with the central EHR record as diagnostic information changes. This record can be kept in any applicable form, as long as it contains the basic pieces of information necessary to resynchronize with a central provider.
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TouchRIS–Radiology Information System
– This is a computerized database used by radiology departments to store, manipulate and distribute patient radiological data and imagery. The system generally consists of patient tracking and scheduling, result reporting and image tracking capabilities. RIS complements HIS (Hospital Information Systems) and is critical to efficient workflow to radiology practices.
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TouchPACS – Picture Archiving and Communications Systems -
In medical imaging, PACS have been developed to provide economical storage, rapid retrieval of images, access to images acquired with multiple modalities, and simultaneous access at multiple sites.
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TouchPHR – Personal Health Record
– This is an abstract definition of copies of patient electronic health record information, such as radiology studies or lab results, which are provided to a clinic by a patient in electronic form. This is relative to any type of portable copy device, such a CDR or USB, and defines import and export guidance for merging copies into a local (practice level) EMR.
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TouchTranscription –
Integrates voice recording and digital scripting into the patient record.
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TouchPaperlessOffice
– Through the use of a Paperless Office Solution, medical providers can store, index, search, retrieve, and modify all aspects of a patient’s medical records to provide a paperless office that can eliminate bottlenecks in a patient work flow.
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Our potential for success will depend upon our ability to:
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(i) develop project synergy where our products are designed for projects to work both independently as well as in a multiple product suite;
(ii) develop enhanced workflow and customization by creating a system workflow that will adopt an existing practices workflow as opposed to the practice needing to change their process and ideology based on the systems constraints. While the main portions of the software suite must be standardized, customization will be allowed to accomplish individual practice goals; and
(iii) Training – All our customers will receive training before, during, and after implementation to fully understand how the systems are designed to be used.
Project Development Timeline - Complete
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June 2010 - EHR research and early prototyping
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Oct 2010 - Final draft SDLC design submission, final relational and logic models achieved
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Dec 2010 Beta Status - Database relational logic
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Dec 2010 Alpha Status - Implementation 1 components, servers
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Jan 2011 Beta Status - Implementation 1 components, servers
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July 2011 Final to QA - Implementation 1 components, servers
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December 2011 – FDA Class 2 Submission for TouchPACS
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January 2012 – FDA Class 2 Approved
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Creating a Comprehensive Healthcare Technology Solution.
Currently, one of the key barriers to EMR use is the lack of synergy between the EMR and other clinical data systems (such as lab, radiology, and referral systems).
All practices that have installed EMR system recently or are planning to implement an EMR system must recognize that EMR is the Enterprise Resource Planning (“ERP”) system for every practice. ERP is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete the processes of your practice. This requires subject matter expertise to properly align a practice with its EMR needs.
Similarly, when a patient walks into a clinic, everyone in the clinic from the front desk, through the middle office and back office to partners such as pharmacies, labs, referring physicians, and hospitals will all be affected. Seeing an EMR from this perspective is critical for EMR's successful and efficient implementation.
The provider's usage of EMR is only twenty percent (20%) of the use of the entire system. For an EMR to be efficient and successful, all those involved -- patients, employees, and partners -- must be on one single unified platform.
While PACS has enjoyed a growing market, EMR has traditionally been implemented via non-standard, “one-off”, task dedicated solutions. This has led to care facilities, which are attempting to mix and match a plethora of system types to form a complete software solution, and without standards, prior to the HHS final Ruling, July 2010, these amalgam solutions have led to very complex and expensive problems of interaction and intercommunication.
We believe that an enterprise software solution for a typical small clinic or hospital should function as glue to model the business processes with, holding together their varying laboratory, diagnostic imaging, medical record, and workflow needs. Most practices have engaged in a best of breed philosophy selecting PACS, EMR, HIS, based predominately on its own qualifications and not focusing on how these systems might interact and need to co-exist in the same infrastructure.
Cross implementation of different software models has led to chaos in many historical clinical implementations by other companies due to lack of enforceable standards. With DICOM solidifying, and now with the impending new EMR enforcement of selective standards in the near future, we believe it is important to model software around the entire idea of the clinical software workflow from a single design with an enforceable foundation to ensure that each of the parts are held to be clinically valid.
To build a uniform idea of medical interoperability, we believe that the larger, more expensive corporate design of software is too monolithic to allow architects to model enforcement of multiple standards simultaneously, and that by using a smaller development team with a broader understanding of how clinical technology standards evolve and interconnect, we can possibly evolve a software product line which can deliver a quality product to fit those needs at a much lower price point than our competitors.
By incorporating the PACS into the design of the TouchEMR products, we strive for tight integration, while allowing for services including online prescriptions, valid integrated medical coding (CPT), and insurance validation and billing integration among others. To these ends, the development target for the first release of TouchEMR is to certify the product for reimbursement qualification under the ARRA (Recovery Act) plan. This will allow us to market either as a PACS standalone product or as an evolved EMR product that can be installed as a software suite.
Establishing qualification as a product goal, our products are standards-based designs, allowing for their use among existing platforms and will incorporate large portions of the HL7, IHE, and DICOM standards. Our current product goal for the EMR suite of software is to complete CCHIT certification, and by default ARRA certification, by the end of 2014.
PACS
In the 2nd quarter of 2014, we plan bring to market our Enterprise PACS system (TouchPACS) at a competitive price point. The focus of TouchPACS is to keep hardware and subscription costs affordable, making it an option for any size or type of clinical practice. In addition to a traditional PACS system on-site, TouchPACS will also offer offsite content storage, automated backup solutions, and remote software access via a web based portal product. These traditionally have been separate offerings and have represented a significant integration challenge for the small to mid-sized medical practice. We plan that TouchPACS will also provide the ability to link multiple offices, providing practices the ability to have a single system supporting all sites in which they practice.
Clinical Trial Management
In the 3
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quarter of 2014, we plan to launch a Clinical Trial Management Solution or Laboratory Information System (TouchCT). Both the Clinical Trial Management Solutions and the TouchEMR product share many core requirements offering an opportunity to expand functionality of the TouchEMR product to satisfy trial management needs. An electronic Clinical Trial Management system can provide service to drug development and medical research companies who are in the process of bringing clinical products to market in a newly regulated (by government mandate, required by 2014) drug certification process.
Form Factor
Our products will offer multiple suite configurations to fit customer needs. We will offer both traditional wall- mounted displays as well as portable laptops and tablet computers.
Management is of the opinion that having a portable solution will be most useful for physicians who treat patients in multiple locations as well as for other situations where the flexibility of being mobile is required.
We will also provide a web based DICOM viewer that will allow image presentation on smartphones including:
(i) iPhones
(ii) BlackBerry
(iii) Android, and
(iv) other Operating Systems
but these will be used for preliminary diagnostics only (wet read), as such devices must be FDA Class-3 approved by equipment manufacturers in order to be used for final reads in a clinical setting.
Our systems will offer a touch screen display allowing easy manipulation of images without the need to sit at a workstation with a mouse and keyboard except where this is clinically required. Utilizing modern touch screen interface technology will be attractive to physicians who want to be ahead of the technology curve, or where a physician or physician assistant will be more effective without being tied to a keyboarded workspace.
For fully integrated PACS consumers, a multi-monitor diagnostic station solution will be used to assure full conformance with DICOM and diagnostic imaging standards.
Project Overview and Highlights
● Product Design
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Standards-Based Design
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Uses HL7 for Document Formatting, Government Reporting, and Procedure Interaction within the Logic Model.
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PACS is based on DICOM v3
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EMR is based on HL7 v2.51
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Documents use the HL7-CDA model (v3), and storage is Adobe PDF, making exports and translation uniform
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Product uses the National Library of Medicine (NLM) Meta-thesaurus vocabularies, allowing precise coding of Rx (RxNorm, UNII, National Drug File), Insurance (CPT-4, CPT-2010), and Diseases and Problems (ICD-9, ICD-10, SNOMED, LOINC), and Drug allergies (UNII, NDF). TouchPACS is a registered Vendor with the NLM, and is licensed to resell all included vocabularies.
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Using Microsoft Products
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All products programmed in MS Visual Studio
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All products Version Controlled and managed via MS Team Server
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Centrally deployed on MS SQL Server 2008
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Royalty Free
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All components (excepting MS Database and Server Licensing) are royalty free, and under no distribution restrictions
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Service-Based Returns
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Systems are typically sold turn-keyed with all equipment, and should provide company service revenue going forward from a customer purchase (maintenance costs, recurring).
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● Product Testing and Documentation
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PACS required Product Class-2 Certification with FDA following product development cycle. Completed in 1Q 2012..
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Documentation Foundation and methods using Microsoft implementation of Agile Software Development, a proven methodology for managing software development products
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Integrated build and test environment using Microsoft Team Foundation Server
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● Pilot Launch
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The PACS product is expected to market to beta both EMR and PACS system designs in 2Q, 2014.
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● Staffing and Budget
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Development Staff
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Software Architect/Team Lead
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DICOM and PACS developer
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HL7 and EMR developer
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Web Developer
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Internal Documentation and QA management
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Equipment Expenses
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Installation Costs
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Backup Solution Purchasing
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Tapes and Media
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Workstation Purchases
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Suite Component Purchases
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Recurring Software Licensure
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Development Component Upgrades
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Continuing Toolkit Agreements
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Marketing Costs
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Delivery Costs
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Role of pre-sales technician.
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Hardware and Equipment Costs
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● Servers
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● Workstations
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● Scanners, Fax, Microphones, Pedals, etc.
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Office Expenses
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Rental and Insurance
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Day to Day costs
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Standards
DICOM Standard
Our imaging solutions are based on the DICOM medical imaging standard, as the service is compatible with virtually every digital imaging modality and PACS in use today. This makes it a solution for orthopedists, obstetricians, family practice physicians, dentists, and chiropractors, in addition to the traditional radiology market. Increasingly, small non-radiological clinics make limited use of imaging as part of their everyday practice; we will provide a simplified, but industrial quality, answer to their software needs.
Platform
We will rely on Microsoft technologies as the backbone of our systems. By utilizing the Microsoft Visual C# development tools, and the Microsoft Visual Studio .NET 2008/2010 development environments, management is of the opinion that TouchPACS will be able to leverage Microsoft’s extensive coding library and features, and to provide an assured vendor as a foundation technology partner for our customers. We will use Microsoft Team Foundation Server to enforce an Agile software development and design philosophy. This philosophy emphasizes close collaboration between the programmer team and business experts, face-to-face communication, frequent delivery of new deployable business value and tight, self-organizing teams.
DICOM Viewer
We will provide a DICOM viewer offering advanced layering, image manipulation and other features that are typically used in large-scale implementations. By utilizing touch screen technology, we will provide a feature to a physician looking to demonstrate technology advancement to its patients. We will seeking FDA Class-2 certification for diagnostic imaging modality classifications, and will publish a formal DICOM conformance statement as a function of the development process. We are not seeking certification for use with Digital Mammography (“MG”) during stage one development, but will seek to display high resolution MG in a non-diagnostic format. The viewer product typically will deploy as a multi-monitor diagnostic station, and a touch-based tablet application, and will include a module for internet-based reading as part of the EMR portal project that we are attempting to develop.
Workflow Clients
We will provide support to our clients; in addition to DICOM PACS stations, for supporting medical records as a foundation of our product suite, including but not limited to:
(i) transcription,
(ii) management,
(iii) paperless workstation, and
(iv) export and reporting clients.
The clients’ products will be designed to work within the touch-based format or touch-assisted in cases like transcription, and are intended to be deployed on our branded encapsulated workstations and tablets.
Servers
TouchPACS has products to serve both Health Level 7 (“HL7”), a standard for exchanging information between medical applications and DICOM formatted messages natively, and allows for implementations to be unified to a central server or split into multiple servers, based on the scale needs of each customer. TouchPACS is also developing web based portal system to allow for patient scheduling, non-diagnostic review, referring physician review, and remote diagnostic reading capabilities. The web portal system will be implemented in a compatible way with both DICOM and HL7 needs in mind, allowing for a PACS web product to be developed concurrently with the EMR web product.
Government Regulation
According to the FDA, a "device" is: "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or intended to affect the structure or any function of the body of man or other animals, and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes."
The FDA classifies devices as either Class I/II-exempt, Class II, or Class III.
Class III: Pre-Marketing Approval, or PMA: A Pre-Marketing Approval or PMA is the most stringent type of device marketing application required by FDA. A PMA is an application submitted to FDA to request clearance to market, or to continue marketing of a Class III medical device. A PMA is usually required for products with which FDA has little previous experience and in such cases where the safety and efficacy must be fully demonstrated on the product. The level of documentation is more extensive than for a 510(k) application and the review timeline is usually longer. Under this level of FDA approval, the manufacturing facility will be inspected as well as the clinical sites where the clinical trials are being or have been conducted. All the appropriate documents have to be compiled and available on demand by the FDA. The manufacturing facility is registered with the FDA and the product or device is registered with the FDA.
Class II: 510(k). This is one level down from the PMA and it is applied to devices with which the FDA has had previous experience. A 510(k) is a pre-marketing submission made to FDA to demonstrate that the device to be marketed is as safe and effective, that is, substantially equivalent, to a legally marketed device that is not subject to pre-market approval. Applicants must compare their 510(k) device to one or more similar devices currently on the U.S. market and make and support their substantial equivalency claims. The legally marketed device to which equivalence is drawn is known as the "predicate" device. Applicants must submit descriptive data and, when necessary, performance data to establish that their device is SE to a predicate device. Again, the data in a 510(k) is to show comparability, that is, substantial equivalency (SE) of a new device to a predicate device. Under this level of approval, the manufacturing facility is registered with the FDA and the product or device is registered with the FDA. Inspections under this classification are possible. All the appropriate cGMP and clinical data backing the claims made must be on file and available on demand by the FDA.
Class I/II Exemption: This is the lowest level of scrutiny. Most Class I devices and a few Class II devices are exempt from the pre-marketing notification requirements subject to the limitations on exemptions. However, these devices are not exempt from other general controls. All medical devices must be manufactured under a quality assurance program, be suitable for the intended use, be adequately packaged and properly labeled, and have establishment registration and device listing forms on file with the FDA.
In January 2012, the TouchPACS software suite received a Class II 510(k) clearance from the FDA.
Effect of Compliance with Federal, State, and Local Provisions for the Protection of the Environment
We have not incurred and do not anticipate incurring any expenses associated with environmental laws.
Main Competitors
The following are comparable PACS solutions to a TouchPACS system.
Emed Fusion/Merge Systems
http://www.merge.com
Intelerad
http://www.intelerad.com/en/index.php
Fuji Synapse
http://www.fujimed.com/
GE Centricity
http://www.gehealthcare.com/centricityenterprise/
Agfa Impax
http://www.agfa.com/en/he/products_services/all_products/impax_enterprise.jsp
Patents, Trademarks, Licenses and Intellectual Property
In May 2011, we applied for trademark protection with the United States Trademark and Patent Office for the following trademarks:
a) Touch Medical Solutions Touch PACS
b) Touch Medical Solutions TouchEMR
c) Touch Medical Solutions TouchPMS
d) Touch Medical Solutions TouchRIS
The trademarks have not been approved to this date.
Employees
We currently have 2 employees: Rik J. Deitsch is the Company’s
President and Chief Executive Officer. Jason Barry is the Company’s
Chief Financial Officer, Secretary, and Treasurer.
Report to Security Holders
We are subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly, we file annual, quarterly and other reports and information with the Securities and Exchange Commission. You may read and copy these reports in Washington, D.C. Our filings are also available to the public from commercial document retrieval services and the Internet world wide website maintained by the Securities and Exchange Commission at
www.sec.gov
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Item 1A. Risk Factors
You should carefully consider the risks described below regarding our operations, financial condition, financing, our common stock and other matters. If any of the following or other material risks actually occur, our business, financial condition, or results or operations could be materially adversely affected.
Our ability to continue as a going concern is in doubt absent obtaining adequate new debt or equity financing and achieving sufficient sales levels.
We incurred net losses of $1,101,578 for the 12 months ended December 31, 2013 and $228,800 in fiscal 2012. We anticipate that these losses will continue for the foreseeable future. Our continued existence is dependent upon our achieving sufficient sales levels of our products and obtaining adequate financing. Unless we can begin to generate material revenue, we may not be able to remain in business. We cannot assure you that we will raise enough money or generate sufficient sales to meet our future working capital needs.
We have no revenue producing history and expect losses to continue for the foreseeable future.
We have yet to establish any history of profitable operations. We have incurred annual losses of $1,101,578 and $228,800 during the fiscal years of operations ending December 31, 2013 and 2012 respectively. Our potential profitability will require the successful commercialization of our medical software products.
We will require additional financing to sustain our operations and without it will be unable to continue operations.
At December 31, 2013 we had a working capital deficit of $978,279. We have a negative cash flow from operations of $270,560 and $105,221 for the years ended December 31, 2013 and 2012, respectively. We have insufficient financial resources to fund our operations.
If we cannot sell a sufficient volume of our products, we will be unable to continue in business.
To date, we have no sales of our medical software products. If we cannot achieve sufficient sales or we are unable to secure financing our operations will be negatively affected.
We have no history of generating revenues on which to evaluate our potential for future success and to determine if we will be able to execute our business plan; accordingly, it is difficult to evaluate our future prospects and the risk of success or failure of our business.
You must consider our business and prospects in light of the risks and difficulties we will encounter as an early-stage revenue producing company. These risks include:
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our ability to effectively and efficiently market and distribute our products;
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our ability to obtain market acceptance of our current products and future products that may be developed by us; and
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our ability to sell our products at competitive prices which exceed our per unit costs.
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We may be unable to address these risks and difficulties, which could materially and adversely affect our revenue, operating results and our ability to continue to operate our business.
Our growth strategy reflected in our business plan may be unachievable or may not result in profitability.
We may be unable to implement our growth strategy reflected in our business plan rapidly enough for us to achieve profitability. Our growth strategy is dependent on a number of factors, including market acceptance of our products and the acceptance by the medical community of using these products in practice. We cannot assure you that our products will be purchased in amounts sufficient to attain profitability.
Among other things, our efforts to expand our sales will be adversely affected if:
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we are unable to attract sufficient customers to the products we offer in light of the price and other terms required in order for us to attain the level of profitability that will enable us to continue to pursue our growth strategy;
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adequate penetration of new markets at reasonable cost becomes impossible limiting the future demand for our products below the level assumed by our business plan;
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we are unable to meet regulatory requirements in the intellectual marketplace that would otherwise allow us for wider distribution; and
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we are unable to meet FDA regulatory requirements that would potentially expand our product base and potential revenues.
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If we cannot manage our growth effectively, we may not become profitable.
Businesses, which grow rapidly often, have difficulty managing their growth. If we grow rapidly, we will need to expand our management by recruiting and employing experienced executives and key employees capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully.
Among other things, implementation of our growth strategy would be adversely affected if we were not able to attract sufficient customers to the products and services we offer or plan to offer in light of the price and other terms required in order for us to attain the necessary profitability.
If we are unable to protect our proprietary technology, our business could be harmed.
Our intellectual property, including our proprietary software, is our key asset. Competitors may be able to back-engineer our products and compete effectively with us. The cost to prosecute infringements of our intellectual property or the cost to defend our products against patent infringement or other intellectual property litigation by others could be substantial. We cannot assure you that:
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patents licensed by us will not be challenged by competitors,
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our patents, licensed and other proprietary rights from third parties will not result in costly litigation;
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pending and future patent applications will result in issued patents,
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the patents or our other intellectual property will be found to be valid or sufficiently broad to protect these technologies or provide us with a competitive advantage,
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if we are sued for patent infringement, whether we will have sufficient funds to defend our patents, and
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we will be successful in defending against future patent infringement claims asserted against our products.
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Should any risks pertaining to the foregoing occur, our brand name reputation, results of operation and revenues will be negatively affected.
We are subject to substantial FDA regulations which may increase our costs or otherwise adversely affect our operations.
Our software products are subject to FDA regulations. If we fail to comply with current or future regulations, the FDA could force us to stop selling our products or require us to incur substantial costs from adopting measures to maintain FDA compliance.
Loss of any of our key personnel could have a material adverse effect on our operations and financial results.
We are dependent upon a limited number of our employees: (a) our Chief Executive Officer who directs our operations; and (b) our Chief Operating Officer who oversees product development and marketing activities. Our success depends on the continued services of our senior management as well as our ability to attract additional members to our management and research and development teams. The unexpected loss of the services of any of our management or other key personnel could have a material adverse effect upon our operations and financial results.
We may be unable to maintain and expand our business if we are not able to retain, hire and integrate key management and operating personnel.
Our success depends in large part on the continued services and efforts of key management personnel. Competition for such employees is intense and the process of locating key personnel with the combination of skills and attributes required to execute our business strategies may be lengthy. The loss of key personnel could have a material adverse impact on our ability to execute our business objectives. We do not have any key man life insurance on the lives of any of our executive officers
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Risks Related to Our Common Stock
Because the market for our common stock is limited, persons who purchase our common stock may not be able to resell their shares at or above the purchase price paid by them.
Our common stock trades on the OTCBB, which is not a liquid market. There is currently only a limited public market for our common stock. We cannot assure you that an active public market for our common stock will develop or be sustained in the future. If an active market for our common stock does not develop or is not sustained, the price may decline.
Because we are subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our common stock, which adversely affects its liquidity and market price.
The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the OTCBB has been substantially less than $5.00 per share and therefore we are currently considered a “penny stock” according to SEC rules. This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.
Because much of our outstanding shares are freely tradable, sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.
As of December 31, 2013, we had 271,500,000 outstanding shares that were subject to the limitations of Rule 144 under the Securities Act of 1933. In general, Rule 144 provides that any our non-affiliates, who have held restricted common stock for at least six-months, are entitled to sell their restricted stock freely, provided that we stay current in our SEC filings. After one year, a non-affiliate may sell without any restrictions.
An affiliate may sell after one year with the following restrictions: (i) we are current in ours filings, (ii) certain manner of sale provisions, (iii) filing of Form 144, and (iv) volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed 1% of the total number of outstanding shares. A person who has ceased to be an affiliate at least three months immediately preceding the sale and who has owned such shares of common stock for at least one year is entitled to sell the shares under Rule 144 without regard to any of the limitations described above.
An investment in our common stock may be diluted in the future as a result of the issuance of additional securities or the exercise of options or warrants.
In order to raise additional capital to fund our strategic plan, we may issue additional shares of common stock or securities convertible, exchangeable or exercisable into common stock from time to time, which could result in substantial dilution to any person who purchases our common stock. Because we have a negative net tangible book value, purchasers will suffer substantial dilution. We cannot assure you that we will be successful in raising funds from the sale of common stock or other equity securities.
Since we intend to retain any earnings for development of our business for the foreseeable future, you will likely not receive any dividends for the foreseeable future.
We have not and do not intend to pay any dividends in the foreseeable future, as we intend to retain any earnings for development and expansion of our business operations. As a result, you will not receive any dividends on your investment for an indefinite period of time.
Due to factors beyond our control, our stock price may continue to be volatile.
The market price of our common stock has been and is expected to be highly volatile. Any of the following factors could affect the market price of our common stock:
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our failure to generate revenue,
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our failure to achieve and maintain profitability,
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short selling activities,
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the sale of a large amount of common stock by our shareholders including those who invested prior to commencement of trading,
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actual or anticipated variations in our quarterly results of operations,
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announcements by us or our competitors of significant contracts, new products, acquisitions, commercial relationships, joint ventures or capital commitments,
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the loss of major customers or product or component suppliers,
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the loss of significant business relationships,
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our failure to meet financial analysts’ performance expectations,
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changes in earnings estimates and recommendations by financial analysts, or
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changes in market valuations of similar companies.
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In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.