ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended September 30, 2015 and presumes that readers have access to, and will have read, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.
The following discussion contains certain statements that may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, "Management's Discussion and Analysis of Financial Condition and Results of Operations." These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Annual Report on Form 10-K for the year ended September 30, 2015 in the section entitled "Risk Factors" for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.
Overview
We are an emerging growth company as defined in Section 2(a)(19) of the Securities Act. We will continue to be an emerging growth company until: (i) the last day of our fiscal year during which we had total annual gross revenues of $1,000,000,000 or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act; (iii) the date on which we have, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (iv) the date on which we are deemed to be a large accelerated filer, as defined in Section 12b-2 of the Exchange Act.
As an emerging growth company, we are exempt from:
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Sections 14A(a) and (b) of the Exchange Act, which require companies to hold stockholder advisory votes on executive compensation and golden parachute compensation;
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The requirement to provide, in any registration statement, periodic report or other report to be filed with the Securities and Exchange Commission (the "Commission" or "SEC"), certain modified executive compensation disclosure under Item 402 of Regulation S-K or selected financial data under Item 301 of Regulation S-K for any period before the earliest audited period presented in our initial registration statement;
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Compliance with new or revised accounting standards until those standards are applicable to private companies;
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The requirement under Section 404(b) of the Sarbanes-Oxley Act of 2002 to provide auditor attestation of our internal controls and procedures; and
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Any Public Company Accounting Oversight Board ("PCAOB") rules regarding mandatory audit firm rotation or an expanded auditor report, and any other PCAOB rules subsequently adopted unless the Commission determines the new rules are necessary for protecting the public.
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We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Startups Act.
We are also a smaller reporting company as defined in Rule 12b-2 of the Exchange Act. As a smaller reporting company, we are not required to provide selected financial data pursuant to Item 301 of Regulation S-K, nor are we required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We are also permitted to provide certain modified executive compensation disclosure under Item 402 of Regulation S-K.
TeleHealthCare, Inc., a Wyoming corporation, ("TeleHealthCare" "Company" "we," "us," or "our") was incorporated on December 10, 2012. Most of the activity through September 30, 2015 involved incorporation efforts, development of our internet portal, mobile applications and preparation for this Offering.
We are a development stage company and have limited financial resources. We have not established a source of equity or debt financing. Our financial statements include a note emphasizing the uncertainty of our ability to remain as a going concern.
Company Overview
We have spent the last nine months customizing our CarePanda mobile app for Apple and Android platforms. CarePanda system will launch in April of 2016 and will include secure text and chat communication between medical professionals, nurses, staff, vendors, pharmacists, lab contacts and many others.
Based on initial pilot programs with CarePanda and customer feedback, we are evolving our business model based. Telehealth will be launching a new telehealth service, branded On.CareTM to target emerging opportunities in the telehealth market for specialty and private label telehealth services. While CarePanda connects medical clinics and specialists together, On.CareTM connects physicians, patients and insurers (billing) together. By launching both systems, TeleHealthCare will have a full service solution that customers have been asking for.
We see five key areas driving demand for telehealth services:
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Escalating Healthcare Costs
– Healthcare represents $3 trillion USD in costs per year (CMS.gov) in the U.S. There is an urgent and growing need to control and lower the cost of providing healthcare.
(https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nation
alhealthexpenddata/downloads/highlights.pdf)
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Expanded Insured Patient Base –
There has been a rapid rise in patient volumes as more people are insured with passage and implementation of the Affordable Care Act.
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Aging Population –
As we age we have a higher incidence of chronic diseases. The average age of the population in the U.S. is growing resulting in an increase demand for services. It's estimated that 65 million baby boomers will become Medicare enrollees over the next decade (http://www.handsontelehealth.com/past-issues/74-why-is-telehealth-a-driving-force-in-healthcare)
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Shortage of Medical Professionals
– In many cities and towns throughout the U.S. there is a shortage of medical professionals, especially medical specialists. This is especially true for rural populations. This has created an imbalance of the available supply of practitioners to many areas' demand.
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Regulations –
Although only a few regulations have passed that allow billing and adoption of telehealth services in Medicare, Medicaid or Commercial health insurance services, new regulations look to greatly expand telehealth adoption. S. 2484 called the CONNECT for Health Act, would move to waive restrictions on Medicare telehealth coverage that many consider antiquated or arbitrary. In addition to a coalition of six senators and three representatives, the bill has the support of the American Medical Association, the American Telemedicine Association, and a number of other industry groups, health systems, and tech vendors.http://mobihealthnews.com/content/latest-telemedicine-bill-could-save-18b-waiving-medicare-restrictions.
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A bipartisan group of US Senators led by Brian Schatz (D-HI) has introduced new telemedicine legislation that would move to waive restrictions on Medicare telehealth coverage that many consider antiquated or arbitrary. In addition to a coalition of six senators and three representatives, the bill has the support of the American Medical Association, the American Telemedicine Association, and a number of other industry groups, health systems, and tech vendors. http://mobihealthnews.com/content/latest-telemedicine-bill-could-save-18b-waiving-
medicare-restrictions
"Telehealth is the future of health care," Schatz said in a statement. "It saves money and improves health outcomes. Our bipartisan bill puts us on a path to transform health care delivery, making it less costly and more convenient for patients and providers."
http://www.schatz.senate.gov/imo/media/doc/CONNECT%20for%20Health%20Act.pdf
The bill would improve access to telehealth in three major ways. It would establish a "bridge program" that allows doctors participating in the Merit-based Incentive Payment System (MIPS) to apply for demonstration waivers that would exempt them from restrictions Medicare imposes on the coverage of telehealth. It would automatically exempt participants in alternative payment models (such as ACOs) from those restrictions. Finally, it would expand the coverage of remote patient monitoring technologies for patients with chronic conditions.
Additionally, telemedicine reimbursement options would be expanded for non-hospital sites including telestroke evaluation and management sites, Native American health service facilities, dialysis facilities, community health centers, and rural health clinics.
Third Way, a centrist Washington think tank, crunched the numbers on the first three provisions and predicts that they would save the government $1.8 billion. Although the waiver program would increase federal spending by $1.1 billion, the other two would offset those costs.
http://go.avalere.com/acton/attachment/12909/f-0292/1/-/-/-/-/20160129_Telehealth%20 and
%20RPM%20Scoring%20Memo.pdf
PRODUCTS & SERVICES:
Based on the growing market for telehealth services, TeleHealthCare will focus its energies on building an "end to end" telehealth solution company that incorporates the following services, software and devices. Many companies, including medical groups, disease management firms, mental health providers, and others find it difficult to get all these services within one solution.
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Information Technology (IT) Services
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Platform for Electronic Medical Records (EMR), Scheduling and Billing
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IT Services
These services offered on a 'menu' basis would include everything from setting up and managing a customer's IT network for telehealthcare; to providing training, support, setup and configuration of the telehealth services, monitoring devices, mobile apps, an EMR platform and a billing system.
Secure Video and Chat
TeleHealthCare will be offering secure, HIPAA compliant video and chat capabilities. Some customers may only want chat, others video and some both services. TeleHealthCare can integrate video and chat into a customer's existing systems.
Platform for EMR, Scheduling and Billing
While the majority of hospitals have adopted EMR systems, most disease management firms, specialty medical clinics, long term care centers, skilled nursing facilities, rehab centers and others have not yet adopted these systems. An EMR is necessary to document patient visits, manage online scheduling of telehealth services and track billing of telehealth services.
http://dashboard.healthit.gov/index.php
Monitoring Devices
To effectively monitor and manage patients in telehealth programs, especially patients with chronic care conditions, medical providers will need access to patient information gathered from remote monitoring devices that can track vital signs such as ECG, heart rate, pulse oximetry, blood pressure, temperature, weight, glucose levels, activity levels, etc. TeleHealthCare, Inc. will incorporate monitoring device management directly into their platform to provide vital sign history and alerts on the patient's condition. The Company will also sell certain devices to its customers.
Telehealth Programs
TeleHealthCare will develop "packaged" telehealth programs that include turn-key business plans for customers to launch a telehealth program. This includes all the organization, billing and marketing of their telehealth solution.
Telehealth Platform
Our telehealth platform will be branded as On.Care
TM
. The certified platform is built upon Microsoft .NET technology and is 100% SaaS based product and hosted with a secure HIPAA compliant hosting company. On.Care
TM
will be a web-based platform that provides very low initial investment from customers and no major upgrade charges or expensive licensing fees. On.Care
TM
provides flexibility to access telehealth information from anywhere and on most devices – desktops, tablets and mobile devices.
On.Care
TM
is designed and developed from physician input and is developed to reduce data entry and maximize physician time.
Features:
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Electronic Health Record
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Scheduling for in-office and online visits
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Billing for in-office and online visits
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Secure video and chat for online visits
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Secure text and chat for in office communication and vendor communication
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Patient device integration (vital sign measurements, activity monitors, etc.)
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Patient portal for patients to view physician notes, connect to online visits, manage devices and health information
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Organizing patient information
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Monitoring medical billing & reduce billing errors
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Improved claim accuracy
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Customizable Online Forms for any medical specialty
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Transcription interface to easily capture notes and update charts
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Meaningful use dashboard
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HI Exchange for patient data interopability
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On.Care
TM
also supports the latest billing codes for ICD-10.
On.Care
TM
Product Advantages:
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Accessible anytime, anywhere
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Easy to navigate user interface
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Multi-platform compatible on desktop, tablet or mobile
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Template driven chart notes to support any medical specialty
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Fully integrated patient reminders
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Automatic transfer of Lab results
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Dictation and transcription interface
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Built-in Patient Portal
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Patient Education Materials on Patient Portal
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Phone and Email Customer Support
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Other
As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in "Liquidity" below and/or elsewhere in this prospectus. We believe that the perception that many people have of a public company make it more likely that they will accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. However, there can be no assurances that we will be successful in any of those efforts even if we become a public entity. Additionally, the issuance of restricted shares will dilute the percentage of ownership interest of our stockholders.
Results of Operations
Comparison of the three months ended June 30, 2016 and 2015
Revenues
Revenues were $0 and $0 for three months ending June 30, 2016 and 2015, respectively.
Cost of Sales
Cost of sales were $0 and $0 for three months ending June 30, 2016 and 2015, respectively.
General and Administrative Expenses
General and administrative expenses were $64,394 and $22,003 for three months ending June 30, 2016 and 2015, respectively. For 2016, the expenses consisted primarily of $24,509 for payroll expense, $5,000 for consulting expenses, $16,000 software licensing fee, and $14,010 for other professional fees. For 2015, the expenses consisted primarily of $11,325 for professional fees, $6,000 for compliance expenses and $4,375 for stock compensation.
Interest Expense
Interest expense was $350 and $673 for three months ending June 30, 2016 and 2015, respectively.
Comparison of the nine months ended June 30, 2016 and 2015
Revenues
Revenues were $0 and $25,000 for nine months ending June 30, 2016 and 2015, respectively. The 2015 revenue was earned for developing a private label portal with the same functionalities as CarePanda.
Cost of Sales
Cost of sales were $0 and $7,500 for nine months ending June 30, 2016 and 2015, respectively.
General and Administrative Expenses
General and administrative expenses were $328,467 and $84,820 for nine months ending June 30, 2016 and 2015, respectively. For 2016, the expenses consisted primarily of $24,509 payroll expense, $44,750 for consulting expenses, $16,000 software licensing fee, $18,265 for other professional fees and $220,000 for stock compensation. For 2015, the expenses consisted primarily of $65,301 for professional fees, $6,000 for compliance expenses and $13,125 for stock compensation.
Interest Expense
Interest expense was $695 and $2,026 for nine months ending June 30, 2016 and 2015, respectively.
Liquidity and Capital Resources
The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the nine months ended June 30, 2016 and 2015:
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Nine months ended
June 30,
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2016
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2015
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Operating Activities
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$
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(44,209
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$
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(8,194
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Investing Activities
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—
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—
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Financing Activities
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89,000
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Net Effect on Cash
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$
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44,791
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$
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(8,194
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In the nine months ending June 30, 2016, the Company incurred a net loss of $329,162. This was offset by stock compensation of $220,000 and an increase in accounts payable and accrued expenses of $56,758 and accrued interest of $695. For the nine months ended June 30, 2015, the Company incurred a net loss of $69,346 and a decrease in accounts receivable of $12,000 which was offset by an increase in accounts payable of $57,550 and accrued interest of $2,027.
In the nine months ending June 30, 2016, the Company received $14,000 from the issuance of a note payable and $75,000 from the issuance of 750,000 of the Company's common stock.
Going Concern Uncertainties
We have sufficient working capital for the next 6 months and may secure additional working capital through loans or sales of common stock. Nevertheless our auditor has issued a "going concern" qualification as part of his opinion in the Audit Report for the year ended September 30, 2015, and our unaudited financial statements for the quarter ended June 30, 2016 include a "going concern" footnote contingent on us to be able to raise working capital to grow our operations.
Commitments and Contractual Obligations
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Recently Issued Accounting Pronouncements
Refer to the notes to the financial statements for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.
Critical Accounting Policies
Our financial statements were prepared in conformity with U.S. generally accepted accounting principles. As such, management is required to make certain estimates, judgments and assumptions that they believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the periods presented. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following: