|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Overview
Health Advance Inc. (the “Company”) was incorporated on April 14, 2010 in Wyoming. The Company is an on-line retailer of home medical products with operations in Canada and the United States, and with administration and infrastructure supported globally. Our strategy is to attract opportunities in the health care industry through the development and growth of our existing web site www.healthadvancemd.com. We believe we can operate more cost efficiently and compete as a discounter that delivers value and low cost branded lines of home medical care products together with valuable customer care that is currently missing in the marketplace. Our goal is to become our customers’ single source for low cost health care supplies, by meeting all of our customer’s needs.
From inception to April 30, 2014 we have incurred a net loss of $316,395. The ability of the Company to continue as a going concern depends upon its ability to raise adequate financing and develop profitable operations. If we cannot generate sufficient revenues from our services, we may have to delay the implementation of our business plan. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
The Company is actively seeking financing for its current business operation. The Company is optimistic that the financing will be secured and the going concern risk will be removed. We are in discussions with various parties and believe a successful financing is likely. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of shares of common stock from the Company’s authorized capital.
On February 14, 2013, the Company affected a 10-for-1 forward split of the Company’s issued and outstanding common shares. The Company’s issued and outstanding common shares were therefore increased from 2,452,000 to 24,520,000. All per share amounts have been restated to reflect this stock split.
Plan of Operation
We were incorporated on April 14, 2010 in Wyoming. Our business office is located at 3651 Lindell Road, Suite D#155, Las Vegas, NV, 89103. Our telephone number is 702-943-0309. We were founded by Jordan Starkman, who serves as our President and Director. In addition, Domenico Pascazi was appointed as a director in March 2011. On February 12, 2013, Mr. Pascazi resigned from his position as a member of the board of directors. Mr. Pascazi’s resignation was not a result of any disagreement with the Company or its executive officers, or any matter relating to the Company’s operations, policies or practices.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
|
We are an on-line retailer of home medical products with operations in Canada and the United States, and with administration and infrastructure supported globally. Our strategy is to attract opportunities in the health care industry through the development and growth of our existing web site www.healthadvancemd.com. We believe we can operate more cost efficiently and compete as a discounter that delivers value and low cost branded lines of home medical care products together with valuable customer care that is currently missing in the marketplace. Our goal is to become our customers’ single source for low cost health care supplies, by meeting all of our customers’ needs.
We strive to offer health care professionals, medical distributors and consumers the highest quality brands and products at the most affordable prices. We expect to achieve this by forming relationships with suppliers that will be able to provide us with preferred prices once we are able to make bulk purchases.
In the fiscal year 2014, we plan to build our business across four key product categories including: (1) respiratory, (2) diabetes, (3) ostomy, and (4) mastectomy supplies. Our growth plan is to generate operating revenues during fiscal years 2014-2015. We plan to complete a financing in the fiscal year 2014. We have not yet entered into any agreements with any parties with respect to obtaining financing for the Company.
If we are unable to obtain financing on reasonable terms, we could be forced to delay or scale back our plans for expansion. In addition, such inability to obtain financing on reasonable terms could have a material adverse effect on our business, operating results, or financial condition.
If we are able to obtain financing, we plan to implement both online and offline marketing and customer engagement campaigns for both our traditional durable medical products and our four key product areas mentioned above. We intend to target consumers with on-line marketing, and businesses, including various senior care facilities, with direct mail, telemarketing and flyer campaigns. Initially, we will target small to medium size facilities. We also intend to launch our direct mail onsite flyer campaigns and outbound calling campaigns in unison to increase the frequency and awareness of HealthAdvanceMD. We expect to replace and expand any existing major wholesaler relationships we currently work with by fiscal years 2014-2015. Further, during this expected time frame, we plan to establish direct-from-manufacturer programs for our four key growth markets. We intend to continue to run our durable medical products business through the existing wholesaler relationships given the large range of product SKUs in the durable medical product category where we carry no less than a selection of nearly 2,000 products. No steps have been taken thus far to secure customers for our products.
The Company has started the process of preparing for an online marketing campaign. The Company has a relationship with AGS Cybertech located in India who will manage and coordinate all of our online marketing efforts. The campaign will include internet banner ads, search engine optimization, and social media optimization. All banner advertising will be strategically placed with various click per view programs as part of our overall sales and marketing plan.
In our key growth areas we plan to focus on reducing and concentrating the number of product SKUs in each growth category in order to create leverage with our supply chain across selected relationships with respiratory, diabetes, ostomy and mastectomy suppliers. These new direct-from-manufacturer programs will primarily be drop ship programs and will essentially result in no new product inventory risks. They will be predominantly product substitution strategies where direct manufacturers carry the inventory risk in order to get shelf space within our business to consumer e-commerce property
www.healthadvancemd.com
and other sales channels. These programs will be based on committed but non-binding contracted volume from us with each manufacturer, but where the manufacturer still carries the inventory, marketing investment, and the majority of the time continues to handle drop shipments direct to our customers and sales channels.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
|
The first tranche of these direct-from-manufacturer programs is expected to be with North America based manufacturers given a tendency for higher quality product, margins and their ability to handle inventory and direct shipments to our customers. We also plan to evaluate a select number of overseas supplier relationships if we identify that a select overseas direct supplier can and will meet our delivery, financing and quality and return warranty terms. As a result of these supply chain improvements we expect to increase our net revenues based on margin improvements of an average of 20-25% and this does not include factoring in even higher margins if we choose to source from overseas markets.
We expect that these new product launches will be outlined and planned within the 2014-2015 fiscal years and the beginning of fiscal year 2014, once our financing is completed. During the next 24 months, we plan to work with our manufacturing partners to develop and finalize no less than two new product lines within each core product group for respiratory, diabetes, ostomy and mastectomy supplies and launch them by the second half of year 2. Together with our manufacturer partners we intend to develop and test market and then finalize our packaging and product features and licensing requirements by the end of July 2015.
In addition to attempting to achieve supply chain optimization by the first quarter of 2015, which we intend to result in reduced overall cost of goods, we also plan to drive top line growth with a major marketing initiative for new products. No formal products have been discussed as of yet. By the end of the second quarter 2015, we intend to achieve the 3 key milestones outlined above including: (1) entering into new growth markets, (2) optimizing our supply chain, and (3) launching new product lines in our new growth from existing product line sales in growth markets for respiratory, diabetes, ostomy and mastectomy supplies through a margin optimized supply chain; a contribution from our traditional durable medical products businesses through existing wholesaler channels and from new products launched.
We have estimated that we will incur minimum expenses equal to $15,000 in the year following our July 31, 2013 year-end in order to maintain our business operations. However, if we conduct a financing, we will devote the capital raised to operational expenses as indicated below. The Company will attempt to complete a financing for a minimum of $200,000 within the 12-month period following the Company’s 2014 year-end. Any capital raised will be through either a private placement or a convertible debenture and will result in the issuance of common shares from the Company’s authorized capital.
Web Development and Maintenance
|
|
$
|
5,000
|
|
Legal/Accounting
|
|
$
|
15,000
|
|
Computer hardware and software systems
|
|
$
|
10,000
|
|
Advertising and Marketing
|
|
$
|
130,000
|
|
General and administrative
|
|
$
|
10,000
|
|
Salaries and Customer Service
|
|
$
|
25,000
|
|
Telephone
|
|
$
|
1,000
|
|
Travel
|
|
$
|
4,000
|
|
Total Expenses
|
|
$
|
200,000
|
|
The above represents managements’ best estimate of our cash requirements based on our business plans and current market conditions. The above is based on our ability to raise sufficient financing and generate adequate revenues to meet our cash flow requirements. The actual allocation between expenses may vary depending on the actual funds raised and the industry and market conditions over the next 12 months following our July 31, 2013 year-end.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
|
The Company is currently negotiating financing in the amount of $200,000 to further the Company’s business operations. Any capital raised will likely be through either a private placement or a convertible debenture and will likely result in the issuance of common shares from the Company’s authorized capital.
If we are able to complete a financing through a private offering for a minimum of $200,000 within the 12 month period following our July 31, 2013 year-end, we expect to replace and expand any existing major wholesaler relationships we currently work with by the beginning of year two following our July 31, 2013 year-end. Further, during this expected time frame, we plan to establish direct-from-manufacturer programs for our four key growth markets in order to achieve improved margin of between 25-35%. We will continue, however, to run our durable medical products business through the existing wholesaler relationships given the large range of product SKUs in the durable medical product category where we carry no less than a selection of nearly 2,000 products.
Results of Operations
For the three and nine months ended April, 30 2014 and 2013
For the three and nine months ended April 30, 2014 and 2013 we did not have any sales and have generated no revenues. The Company’s on-line web site www.healthadvancemd.com encountered a virus/worm and subsequently underwent extensive repairs that accounted for the Company’s lack of sales. We expect to generate increased sales once our advertising campaign begins.
Operating expenses for the three and nine months ended April 30, 2014 were $17,072 and $52,825, respectively as compared to operating expenses of $35,473 and $62,213 for the three and nine months ended April 30, 2013, respectively. The operating expenses were primarily attributed to professional fees, consulting fees, web design fees, rent and other general overhead. The decrease in overall expenses of $18,401 and $9,388 for the three and nine months ended April 30, 2014 as compared to 2013 is mainly attributed to a consulting charge of $5,000 and web design and services repair of $10,000 during the nine months ended April 30, 2013, which was not there during the nine months ended April 30, 2014. Further, the increase in professional fees from $6,599 for the nine months ended April 30, 2013 to $17,176 for the nine months ended April 30, 2014 mainly attributable to engaging an external accountant.
Net losses for the three and nine months ended April 30, 2014 were $17,072 and $53,034, respectively as compared to net losses of $35,602 and $62,342 for the three and nine months ended April 30, 2013, respectively. The decrease in net losses is attributable to the decrease in consulting charges offset by the increase in professional fees as explained above.
During the period from inception (April 14, 2010) to April 30, 2014 the total operating expenses were $315,635 and the net loss was $316,395.
During the three and nine months ended April 30, 2014 the director’s contributed services totaled $6,000 and $18,000, respectively. These services were included in the additional paid-in capital.
During the three and nine months ended April 30, 2014 we operated from a premises leased by a shareholder. The costs of this premises and other general and administrative expenses paid on our behalf during the three and nine months ended April 30, 2014 totaled $4,200 and $12,600, respectively. These expenses are payable to the shareholder and included in current liabilities.
During the period from inception (April 14, 2010) to April 30, 2014, we had no provision for income taxes due to the net operating losses incurred.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
|
Liquidity and Capital Resources
As of April 30, 2014, we had a cash balance of $Nil and a working capital deficit of $87,295.
In October 2013, the Company received $4,000 in exchange of 1,600,000 shares to be issued at a price of $0.0025 per share.
In April 2014, the Company received $2,000 in exchange of 40,000 shares to be issued at a price of $0.05 per share.
The Company is currently seeking funding for our continued operations. The Company intends to raise a minimum of $200,000 and a maximum of $500,000 in order to continue the introduction of the
www.healthadvancemd.com
e-commerce site to the retail community and health care community. To achieve our goals the Company expects to commit the majority of its funding to the advertising of the Company’s web site. There is no assurance that the Company will be able to raise the capital required to complete its goal and objectives and the Company is currently seeking capital to further its business plan. We are planning to raise funds through either debt or issuing shares of our common stock in order to achieve our business goals. The issuance of additional shares or securities convertible into any such shares may dilute the percentage ownership of our current stockholders. There are no agreements with any parties at this point in time for additional funding; however, we are in discussions with various funders in the United States.
We believe we can satisfy our cash requirements for the next twelve months with our expected revenues and if needed an additional loan from our director, Jordan Starkman. We cannot assure investors that adequate revenues will be generated and there is no current loan commitment in place between the Company and Jordan Starkman. However, the success of our operations is dependent on attaining adequate revenue. In the absence of our projected revenues, we may be unable to proceed with our plan of operations or we may require financing to achieve our profit, revenue, and growth goals.
We anticipate that our fixed costs made up of legal and accounting and general and administrative expenses for the next 12 months will total approximately $25,000. Legal and accounting expenses of $15,000 represents the minimum funds needed to sustain operations. The $25,000 will be financed through the Company’s cash on hand, additional financing, net sales and if needed, an advance from our officer and director, Jordan Starkman. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees, until financing is raised. The foregoing represents our best estimate of our cash needs based on our current business condition. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and our progress with the execution of our business plan. It is currently expected that the Company will spend an additional $175,000 in variable costs relating to marketing and business development that will be funded from future financings.
In the event we are not successful in reaching our initial revenue targets, we will need additional funds to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.
Recent Accounting Pronouncements
The management did not believe that recent accounting pronouncements issued by the FASB have a material impact on the Company’s present or future financial statements.
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
|
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Not required for Smaller Reporting Companies.
Disclosure of Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure, due to the material weaknesses identified below.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Report of Management on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to the Company's annual or interim financial statements will not be prevented or detected.
Item 4.
|
Controls and Procedures (continued)
|
Report of Management on Internal Control over Financial Reporting (continued)
In the course of management's assessment, we have identified the following material weaknesses in internal control over financial reporting:
●
|
Segregation of Duties
– As a result of limited resources, we did not maintain proper segregation of incompatible duties, namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.
|
|
|
●
|
Maintenance of Current Accounting Records
– We may from time to time fail to maintain our records that in reasonable detail accurately and fairly reflect the transactions of the Company. This weakness specifically affects the payments and purchase cycle and therefore we failed to maintain effective internal controls over the completeness and cut off of accounts payable, expenses and other capital transactions.
|
|
|
●
|
Application of GAAP
– We did not maintain effective internal controls relating to the application of generally accepted accounting principles in accounting for transactions in a foreign currency.
|
We are in the continuous process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff, but additional effort is needed to fully remedy these deficiencies. Management has engaged a Certified Public Accountant as a consultant to assist with the financial reporting process in an effort to mitigate some of the identified weaknesses. The Company is still in its development stage and intends on hiring the necessary staff to address the weaknesses once revenue has been realized.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.