UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|X|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the
quarterly period ended March 31, 2010
or
|_|TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period
from to
Commission
File Number: 333-107824
PATIENT PORTAL TECHNOLOGIES, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
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02-0656132
|
|
(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
|
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8276
Willett Parkway
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|
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Baldwinsville, NY
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13027
|
|
(Address
of principal executive offices)
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(Zip
Code)
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(315) 638-6708
(Registrant's
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year,if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer |_|
|
Accelerated
filer |_|
|
|
|
|
|
Non-accelerated
filer |_|
|
Smaller
reporting company |X|
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(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined inRule 12b-2
of the Exchange Act). Yes |_| No |X|
Indicate
the number of shares outstanding of each of the issuer's classes ofcommon stock,
as of the latest practicable date.
As of
December 31, 2009, there were 45,979,553 shares of common stock, $.001par value
per share, outstanding.
TABLE OF
CONTENTS
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Page No.
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PART
I - Financial Information
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Item
1.
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Condensed
Consolidated Financial Statements
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1
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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10
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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19
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Item
4.
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Controls
and Procedures
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19
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PART
II - Other Information
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Item
1.
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Legal
Proceedings
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20
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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20
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Item
6
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Exhibits
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20
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Signatures
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21
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Part I.
Financial Information
Item
1. Condensed Consolidated Financial Statements
PATIENT
PORTAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEET
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(Unaudited)
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March
31,
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December
31,
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ASSETS
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2010
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2009
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Cash
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$
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115,577
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$
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34,781
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Accounts
Receivable, Net
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1,081,177
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1,692,924
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Prepaids
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236,952
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290,999
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Other
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224,770
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63,192
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TOTAL
CURRENT ASSETS
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$
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1,658,476
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$
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2,081,896
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Property,
Plant & Equipment, Net
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4,244,391
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4,167,115
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Investments
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1,475,000
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1,475,000
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Hospital
Contracts, Net
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6,571,153
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6,784,619
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Debt
Issuance Costs
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259,854
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283,477
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Note
Receviable
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-
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-
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TOTAL
ASSETS
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$
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14,208,874
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$
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14,792,106
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LIABILITIES AND CAPITAL
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Accounts
Payable
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624,884
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$
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2,049,316
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Current
Portion - LTD / Leases
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536,445
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530,852
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Accrued
Expenses
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408,498
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555,774
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Notes
Payable - Current
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100,000
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-
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Other
Current Liabilities
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679,384
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-
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TOTAL
CURRENT LIABILITIES
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$
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2,349,211
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$
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3,135,942
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Long
Term Debt, net of discount
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3,357,543
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3,205,492
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Long
Term Leases
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133,008
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168,460
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TOTAL
LIABILITIES
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$
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5,839,762
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$
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6,509,894
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STOCKHOLDER'S
EQUITY
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Series
C Convertible Preferred Stock , $.01 par value
authorized
1,000,000: 8,037 issued
and
outstanding March 31, 2010; 7,937 issued
and
outstanding Dec 31, 2009
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80
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79
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Common
Stock, $.001 par value, authorized
100,000,000: 45,979,553 (Mar 31,
2010 and Dec 31, 2009) issued and
outstanding
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45,980
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45,980
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Additional
Paid in Capital
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17,512,715
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17,241,308
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Retained
Deficit
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(9,189,663
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)
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(9,005,155
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)
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TOTAL
STOCKHOLDER'S EQUITY
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$
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8,369,112
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$
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8,282,212
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TOTAL
LIABILITIES AND
STOCKHOLDER'S EQUITY
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$
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14,208,874
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$
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14,792,106
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See notes
to the condensed consolidated financial statements
PATIENT
PORTAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE
MONTHS ENDED
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March
31,
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March
31,
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2010
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2009
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Total
Revenue
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$
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2,571,705
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$
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3,882,760
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Cost
of Revenue
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1,038,888
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2,257,256
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Gross
Profit
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$
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1,532,817
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$
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1,625,504
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Operating
Expenses
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Selling,
General & Administrative
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1,057,539
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1,408,601
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Depreciation
and Amortization
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414,097
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370,895
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Income
from Operations
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$
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61,181
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$
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(153,992
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)
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Interest
Expense
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81,805
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499,436
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Income
(Loss) Before Taxes
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(20,624
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)
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(653,428
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)
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Income
Tax Expense
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4,475
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-
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Net
(Loss) before Preferred Stock Dividend
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$
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(25,099
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)
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$
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(653,428
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)
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Preferred
Stock Dividend
|
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159,409
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$
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-
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Net
Loss
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$
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(184,508
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)
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$
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(653,428
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)
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Net
(Loss) Per Common Share
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$
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(0.00
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)
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$
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(0.02
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)
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Weighted
Average Shares Outstanding
|
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45,979,553
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41,516,757
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See notes
to the condensed consolidated financial statements
PATIENT
PORTAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), THREE MONTHS
ENDED
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March
31,
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March
31,
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2010
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2009
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
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Net
Income (Loss)
|
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$
|
(184,508
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)
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$
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(653,428
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)
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Adjustments
to reconcile net (loss) to net cash used in operations:
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Depreciation
and amortization
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414,097
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370,895
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Debt
Discount and Loan Costs Amortization
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23,623
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224,680
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(Increase)
decrease in assets:
|
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Accounts
receivable
|
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611,747
|
|
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355,346
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Other
current assets
|
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(107,531
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)
|
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97,583
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Increase
(decrease) in liabilities:
|
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Accounts
payable
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(1,219,432
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)
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(511,254
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)
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Other
current liabilities
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517,611
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(267,356
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)
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Short
Term Notes payable
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100,000
|
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205,000
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Total
adjustments
|
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340,115
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474,894
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Net
cash flows used in operating activities
|
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155,607
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(178,534
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)
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CASH
FLOWS INVESTING ACTIVITIES:
|
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|
|
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Purchase
of property, plant and equipment
|
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(257,817
|
)
|
|
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(111,929
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)
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|
|
|
|
|
|
|
|
|
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Net
cash used in investing activities
|
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(257,817
|
)
|
|
|
(111,929
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)
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|
|
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CASH
FLOWS FINANCING ACTIVITIES:
|
|
|
|
|
|
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Proceeds
from equity investors
|
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|
172,000
|
|
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|
15,000
|
|
|
Preferred
stock dividend payment in kind
|
|
|
99,408
|
|
|
|
-
|
|
|
Payments
on long-term debt and leases
|
|
|
(88,402
|
)
|
|
|
(37,142
|
)
|
|
Net
cash flows provided by financing activities
|
|
|
183,006
|
|
|
|
(22,142
|
)
|
|
|
|
|
|
|
|
|
|
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NET (DECREASE)
INCREASE IN CASH
|
|
|
80,796
|
|
|
|
(312,604
|
)
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
34,781
|
|
|
|
411,229
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
115,577
|
|
|
$
|
98,625
|
|
|
|
|
|
|
|
|
|
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|
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Supplemental
disclosure of cash flow information:
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Cash
paid during the period for:
|
|
|
|
|
|
|
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Interest,
net
|
|
$
|
71,636
|
|
|
$
|
74,010
|
|
See notes
to the condensed consolidated financial statements
PATIENT
PORTAL TECHNOLOGIES, INC.,
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations and Basis of Presentation -
Patient Portal Technologies, Inc. and its wholly owned subsidiaries (The
"Company") are in two primary businesses. First, the sale of televisions and
associated equipment to hospital facilities and second, providing non-medical
management and patient support services assisting hospitals to improve patient
satisfaction and outcomes. In the fourth quarter of 2009, the Company decided to
exit the ownership of the television equipment sales business and instead work
with third party distributors to provide equipment to customers as needed. This
allows the company to focus its resources exclusively on its service business
where it has a strong competitive advantage. The accompanying consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America.
Consolidation- The accompanying
consolidated financial statements include the accounts of Patient Portal
Technologies, Inc. and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Financial Statement Preparation- The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts and related disclosures. Actual results may differ from those
estimates.
Revenue Recognition- The Company
recognizes revenue from the sales of
Television
equipment when the product is delivered to the customer. Revenue for its other
management and patient center services is recognized when the service is
rendered.
Income Taxes - Income taxes are not
provided for in these financial statements since the Company has a significant
net operating loss carry-forward from previous years and incurred a loss for the
period.
Cash Equivalents- The Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Cash Receivable - The Company performs
ongoing credit evaluations of its customers and adjusts credit limits based upon
payment history and the customer's current creditworthiness, as determined by
review of their credit information. The Company continuously monitors
collections and payments from its customers and maintains a provision for
estimated credit losses based upon historical experience and any specific
customer collection issues that have been identified. Credit losses have
historically been within management's expectations and the provisions
established. The allowance for bad debts was approximately $336,000 as of March
31, 2010.
Debt Issuance Costs - Cost incurred to
issue debt are deferred and amortized over the term of the related
debt.
Recent Accounting Pronouncements - In
September 2006, the FASB issued SFAS NO 157 "Fair Value Measurements" (SFAS 157)
which provides guidance for measuring assets and liabilities at fair value. SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. The adoption of SFAS 157 is not expected to have a
material impact on the Company's consolidated financial statements.
In December 2007, the FASB issued
Statements of Financial Accounting Standards NO. 141 (revised 2007), "Business
Combinations" (FAS 141(R)) and No. 160, "Non-controlling Interests in
Consolidated Financial Statements, an amendment for ARB No. 41 (FAS 160)". FAS
141(R) will change how business acquisitions are accounted for and FAS 160 will
change the accounting and reporting for minority interests, which will be
characterized as non-controlling interests and classified as a component of
equity. FAS 141(R) and FAS 160 are effective for fiscal years beginning on or
after December 15, 2008 (January 1, 2009 for the Company). The adoption of FAS
141(R) and FAS 160 will not have a material impact on the Company's consolidated
financial statements.
Effective January 1, 2008, the Company
adopted Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" (SFAS 157). SFAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with generally accepted accounting
principles and expands disclosures about the fair value measurements. The
adoption of SFAS 157 did not have a material impact on the Company's financial
condition and results of operations. For additional information on the fair
value of certain financial assets and liabilities, see Note 8, "Fair Value
Measurements".
Fair Value Option: In February 2007,
the FASB issues SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities - including an amendment of FASB Statement No. 115," which
permits an entity to measure certain financial assets and financial liabilities
at fair value, with unrealized gains and losses reported in earnings at each
subsequent measurement date. The fair value option may be elected on an
instrument-by-instrument basis, as long as it is applied to the instrument in
its entirety. The fair value option election is irrevocable, unless an event
specifies in SFAS No. 159 occurs that results in a new election date. This
statement is effective for fiscal years beginning after November 15, 2007. The
Company adopted SFAS No. 159 as of January 1, 2008 and has elected not to
measure any additional financial instruments and other items at fair
value.
Note 2 -
BUSINESS DISCONTINUATIONS AND ACQUISITIONS
In December 2009 the Company decided to
exit the ownership of the television equipment sales business and instead work
with third party distributors to provide equipment to customers as needed. This
decision allows the company to focus its resources exclusively on it service
business where it has a strong competitive advantage.
Note 3 -
PROPERTY, PLANT & EQUIPMENT
Property and equipment are stated at
cost and depreciated and amortized generally on the straight-line method over
their estimated useful lives of three to fifteen years. Property and equipment
consist of the following at March 31, 2010 and December 31, 2009.
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Television
sets/system installations, equipment
|
|
$
|
4,006,752
|
|
|
$
|
3,757,328
|
|
|
Computer
equipment and Software
|
|
|
1,411,186
|
|
|
|
1,405,372
|
|
|
Office
equipment
|
|
|
339,492
|
|
|
|
339,492
|
|
|
|
|
|
5,757,430
|
|
|
|
5,502,192
|
|
|
Accumulated
depreciation
|
|
|
1,513,039
|
|
|
|
1,335,077
|
|
|
Total
|
|
$
|
4,244,391
|
|
|
$
|
4,167,115
|
|
Note 4 -
INTANGIBLE ASSETS
In accordance with SFAS No. 142 the
Company's intangible assets are being amortized over the anticipated useful life
of the assets. At the end of March 31, 2010 there was a balance of $
6,571,153 in intangible assets which reflected the unamortized
portion of multiyear hospital contracts purchased during 2007 and 2008. The
contracts are being amortized over a 120 month period using the straight line
method. A summary of the balances follows:
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Hospital
Contracts
|
|
$
|
8,795,156
|
|
|
$
|
8,795,156
|
|
|
Accumulated
Amortization
|
|
|
2,224,003
|
|
|
|
2,010,537
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,571,153
|
|
|
$
|
6,784,619
|
|
The amortization expense for the three
month period ended March 31, 2010 was approximately $ 213,500 and for fiscal
2009 was approximately $908,000. The estimated annual amortization for the next
five years will be $850,000.
Note 5 -
LONG TERM DEBT
Long-term debt consists of the
following:
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Bank
Term Loan
|
|
$
|
2,939,484
|
|
|
$
|
2,979,122
|
|
|
Other
Long-term Debt
|
|
|
828,772
|
|
|
|
632,215
|
|
|
|
|
|
3,768,256
|
|
|
|
3,611,337
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Current portion of long-term debt
|
|
|
410,714
|
|
|
|
405,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,357,542
|
|
|
$
|
3,205,492
|
|
On June 19, 2009 the Company closed on
a new credit facility with a commercial bank. The facility included a $2.5
million term loan and a $500,000 equipment facility. The term loan is repayable
over 42 months with interest only payments for the first twelve months. Interest
is payable at prime plus 2% with a floor of 5.25%.
Other Long term Debt - Debt is payable in monthly installments of $833 to
$4804 including interest at 12 % expiring at various dates
through January 2012. These notes are either unsecured or secured by
television equipment.
Note 6 -
COMMITMENTS AND CONTINGENCIES
Lease Commitments - The Company
finances its use of certain facilities and equipment under committed lease
arrangements provided by various institutions. At March 31, 2010, future lease
payments under the long-term real estate leases totaled approximately $1.5
million.
Employment Agreements - As of March 31,
2010, the Company has three employment agreements in effect for key
executives.
Litigation - The Company is presently involved in two lawsuits which management,
as well as outside counsel, believes are without merit and will not have a
material effect upon the financial condition of the Company. There are no other
lawsuits pending nor are any such material legal proceedings
anticipated.
Warrants and Options - As of March 31,
2010, in addition to the Company's aforesaid outstanding Common Stock, there are
issued and outstanding Common Stock Purchase Warrants which are exercisable at
the price-per-share indicated, and which expire on the date indicated, as
follows:
|
|
|
|
|
|
Exercise
|
|
|
|
Description
|
|
Number
|
|
|
Price
|
|
Expiration
|
|
Class
"A" Warrants
|
|
|
365,000
|
|
|
$
|
2.00
|
|
12/31/11
|
|
Class
"B" Warrants
|
|
|
365,000
|
|
|
$
|
3.00
|
|
12/31/11
|
|
Class
"C" Warrants
|
|
|
365,000
|
|
|
$
|
4.00
|
|
12/31/11
|
|
Class
"D" Warrants
|
|
|
9,480,050
|
|
|
$
|
.50
|
|
12/31/11
|
On
September 30, 2009 the Shareholders of the Company ratified the
Company's "2009 Incentive Stock Option Plan" and reserved 10,000,000 shares for
issuance pursuant to said Plan. As of September 30, 2009, 8,000,000 shares under
this plan have been issued to officers of the company under this Plan and in
accordance to their employment agreements.
Note
8 FAIR VALUE MEASUREMENTS
As described in Note 2, "New Accounting
Standards", the Company adopted SFAS 157 effective January 1, 2008. SFAS 157
defines fair value as the price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. SFAS 157 also describes three levels of
inputs that may be used to measure fair value:
Level 1 - quoted prices in active
markets for identical assets and
liabilities.
Level 2 - observable inputs other than
quoted prices in active markets
for
identical assets and liabilities.
Level 3 - unobserved inputs in which
there is little or no market data
available,
which require the reporting entity to develop its own
assumptions.
Item
2. Management's Discussion and Analysis of Financial
Condition and
Results
of Operations
Forward-Looking
Statements
In addition to historical information,
this Report contains forward-looking statements. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in these
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, management of growth, competition, pricing pressures on
the Company's products, industry growth and general economic conditions. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's opinions only as of the date hereof. The Company
undertakes no obligation to revise or publicly release the results of any
revision to these forward-looking statements.
General
This discussion and analysis should be
read in conjunction with our financial statements and accompanying notes, which
are included elsewhere in this prospectus. This discussion includes
forward-looking statements that involve risks and uncertainties. Operating
results are not necessarily indicative of results that may occur in future
periods. When used in this discussion, the words "believes", "anticipates",
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
projected.
Our business and results of operations
are affected by a wide variety of factors, as we discuss under the caption "Risk
Factors" and elsewhere in this prospectus, which could materially and adversely
affect us and our actual results. As a result of these factors, we may
experience material fluctuations in future operating results on a quarterly or
annual basis, which could materially and adversely affect our business,
financial condition, operating results and stock price.
Any forward-looking statements herein
speak only as of the date hereof. Except as required by applicable law, we
undertake no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Income
Taxes
We make estimates to determine our
current provision for income taxes, as well as our income taxes payable. Our
estimates with respect to the current provision for income taxes take into
account current tax laws and our interpretation of current tax laws,
as well as possible outcomes of any future tax audits. Changes in tax laws or
our interpretation of tax laws and the resolution of any future tax audits could
significantly impact the amounts provided for income taxes in our financial
statements.
Legal
Contingencies
The Company is presently involved in two lawsuits which management believes does
not have any merit and will not have a material effect upon the financial
condition of the Company. There are no other lawsuits pending nor are any such
material legal proceedings anticipated.
In the
opinion of management, the ultimate resolution of such matters will not have a
material adverse effect on our financial position, results of operations or
liquidity.
CORPORATE
INFORMATION
The Company is a Delaware corporation
which was originally organized on November 22, 2002 as Suncoast Naturals, Inc.
and commenced business operations in January, 2003. Pursuant to a Registration
Statement filed in accordance with the Securities Act of 1933, as amended, and
declared effective by the Securities and Exchange Commission on July 3, 2004,
the Company in October, 2004 distributed 499,282 Shares of its Common Stock to
shareholders of record of The Quigley Corporation.
On December 8, 2006, Patient Portal
Connect, Inc. of Palm Beach Gardens, Florida, a Delaware corporation organized
in May 2006, acquired approximately 80% of the capital stock of Patient Portal
Technologies, Inc. (formerly known as Gambino Apparel Group, Inc., hereafter
referred to as "PPRG")in a tax free exchange that resulted in the shareholders
of Patient Portal Connect, Inc. owning 17,500,000 shares of Common Stock of
Patient Portal Technologies, Inc., as part of a "reverse" transaction. As a
result of this transaction, Patient Portal Connect, Inc. (hereinafter referred
to as "PPC") became a wholly-owned operating subsidiary of the
Company.
Through this acquisition of PPRG, we
became a leading provider of innovative non-medical service solutions for
hospitals. The Company's services are delivered over the Company's
state-of-the-art proprietary technology platform. The Company uses the
technology to create a communication portal between patients, hospitals and
third parties, allowing the delivery of many useful services focused on
impacting satisfaction and improving financial outcomes for
hospitals.
On November 1, 2007 the Company raised
$7,000,000 through the issuance of a convertible debenture agreements with
Dutchess Private Equities Fund, Ltd. These funds were primarily utilized for
acquisition purposes.
In June, 2009 the Company closed on a
transaction with Dutchess Private Equities Fund, Ltd. to restructure
the convertible debenture.
On November 2, 2007, the Company
acquired 100% of the capital stock of
TB&A
Hospital Television, Inc. (hereinafter "TB&A").
The Company's offices are located at
8276 Willett Parkway, Suite 200, Baldwinsville, New York 13027. The telephone
number is (888) 774-3579. The Company's website is
www.patientportal.com.
CURRENT PLAN OF
OPERATIONS
The healthcare industry is in the midst
of dramatic change which is redefining the way hospitals provide services to
patients. Education, safety, entertainment, comfort and enhanced communication
all contribute greatly to a quality experience for patients and their families.
Not surprisingly, these non- edical services rank higher on importance and lower
on satisfaction than most care delivery needs.
Patient Portal is positioned in the
marketplace as the nation's first Total Satisfaction Company. We are focused on
developing and delivering a broad array of patient-centric, non-medical
services. Our leading edge technologies and 24/7 personal call communication
center leverage a hospital's existing infrastructure to connect patients and
their families to a whole suite of customizable services designed to enhance the
patient experience, reduce costs, increase efficiency, and generate
revenue.
Patient Portal works with healthcare
facilities to address patient needs in three simple stages - before, during, and
after a hospital stay. At each stage, we have the opportunity to add value to
the patient experience, which in turn, adds value to the hospital. We work with
hospitals to achieve Total Satisfaction - for patients and their families, the
hospital, and other third parties.
The advantages of our solution is that
it requires minimal capital, can integrate with legacy systems, has a low per
patient cost and can be installed with minimal physical modification. All of
which will make perfect sense to healthcare facilities challenged with making
the best use of every dollar for maximum impact in a competitive market.
Additionally we support our service platform with a 24/7 employee staffed
communication center, which provides a market distinction and results in a very
personable and customer centric outcome.
Our business objective is to support
hospitals as they work to improve patient outcomes and enhance satisfaction
throughout the continuum of care cycle. The benefit of our proprietary
technology platform supported by our communication center is that it allows us
to be in a unique position to deliver a variety of services aimed at impacting
these areas of hospital performance. From a financial perspective our services
are high impact, high margin, low cost and are scalable with the addition of new
hospital accounts, with low fixed costs.
The Company has adopted a recurring
subscription based revenue model that utilizes patient interactions. We have
approximately 60 long term contracts with hospitals, serving over 1 million
patients annually.
Our sophisticated technology platform
can be expanded to support additional revenue streams, with minimal cost, as
market demand changes. This scalable architecture creates even greater
profitability by enabling multiple services to be delivered over the Company's
service delivery platform.
Our growth strategy involves gaining
market share through competitive advantage as well as utilizing acquisitions
where appropriate.
PATIENT
PORTAL TECHNOLOGY SERVICES
The Company offers a menu of services
under its Total Satisfaction program. All of these services are aimed at
impacting the non-medical patient experience before, during, and after the
hospital stay.
The services are paid for by hospitals,
patients, and third parties based upon the type and benefit of the service. Most
of the services are fully supported and delivered over the Company's proprietary
technology platform supported by an employee staffed communication center that
is available to patients 24/7.
The Company is focused on delivering
patient services at three points in time; prior to entry and admission into the
hospital; during the hospital stay, and post-discharge. The pre-admission
services include a reminder call to patients at their home, information package
that can be emailed or direct mailed and condition specific 30 second med clip
videos. Services during the hospital stay include installation, support and
management of the bedside entertainment system (TV and phone) inside a patient's
room (including the remote activation, billing / collecting and deactivation of
the service), patient education through the monitor, concierge response line,
and in room patient surveys. Post-discharge services include medication
management service including coordination of hand off of prescriptions between
doctor / hospital / third party and home delivery of medication, post discharge
follow up call and survey, and after care med clips.
The following is a brief description of
some of the principal products and services that we deliver to our
customers:
HealthCast(TM) Patient Network System:
In March 2007, we acquired a nine percent interest in Omnicast, Inc. in exchange
for 2,950,000 shares of the Company's common stock. Omnicast, Inc. is a
leading-edge technology and media provider that offers a variety of customized
education and entertainment solutions for the healthcare industry.
As a part of this agreement, the
Company received an exclusive technology license for the education and
communication portal, HealthCast(TM) Patient Network System. We believe that
HealthCast(TM) will fundamentally change the way patient communications are
delivered at the bedside, leading to significant revenue
opportunities.
HealthCast(TM) is the first suite of
customized hospital television channels that invites viewers to interact with
channel programming and delivers condition-specific content directly to a
patient's TV. HealthCast(TM) features an exclusive digital-signage platform that
promotes an unparalleled level of communication by simultaneously showing video,
an information scroll, and additional customized messaging to a single patient,
certain patient groups, or to specific areas of the hospital. HealthCast(TM) is
the only patient network that puts the hospital in control of multiple
information streams for an unprecedented level of communication and education
for patients and families. In addition, HealthCast(TM)'s proprietary platform
captures viewing metrics so hospitals can document content delivery for
pay-for-performance reimbursement, and commercial sponsors can respond to
patient viewing habits. In response to demand from healthcare facilities, we
have developed channels for Patient Education, Hospital Foundation, Maternity
and New Born Care, Patient Safety, General Information, and Nutrition, in
addition to customized, condition-specific content that can be delivered
on-demand to patients.
MedEx(SM)Home Delivery: MedEx(SM) Home
Delivery coordinates the information flow between the doctor/ hospital /
fulfillment company for the patients medication upon discharge from the
hospital. The patient also receives home delivery of their prescription with a
short time after discharge. The fulfillment and delivery service is provide
through third party partners. With MedEx(SM), we offer a turnkey
solution for healthcare facilities that improves the hand-off of prescriptions
when patients are discharged and returns all real-time data to the facility and
physician for improved medication reconciliation and medication therapy
management. The Company controls the private-branded process by deploying its
technology to manage the information flow between all stakeholders, in addition
to being the primary interface between the healthcare provider, patient,
drivers, and pharmacy. MedEx(SM) presents a unique vehicle to extend the patient
relationship to the home and opens an array of revenue streams through patient
education, aftercare, advertising, and product offerings.
Instant Response Line: The Instant
Response Line is an interactive, live-response solution that enables patients to
log a non-medical need that is electronically transferred to an appropriate
facility department for resolution in a timely fashion. Multiple staff can be
notified using various media, and all communications are time stamped and
escalated as needed for immediate service recovery. A key element to the success
of this system is access to real-time data, which enables administrators to see
how quickly and efficiently staff respond and allows for improved strategic
planning over time. Instant Response Line provides a single point of contact for
all patient problems and leads to greater patient satisfaction. Putting the
facility in proactive mode improves interdepartmental communication and adds an
unparalleled level of customer service for the patient.
Quick Pulse Surveys: Quick inpatient
surveys allow administrators to keep their "finger on the pulse" of what
patients are thinking while in house or shortly after returning home. By
conducting live surveys with patients while they are still involved in the
experience leads to a higher response rate and gives the facility opportunity to
proactively respond in real time. This presents a vastly different concept from
the standard post-discharge written surveys healthcare facilities typically
employ that include a six to eight week delay in data return. Our customized
surveys focus on finite issues, allowing the facility to direct specific, timely
solutions. These short, flexible surveys are cost effective enough to be
repeated frequently, which enables the facility to benchmark data and measure
improvements in operational efficiencies over time. Giving administrators
real-time access to patient response data is a key differentiator between our
service and competing survey services.
COMPETITION
Our Company's markets are extremely
competitive and are subject to rapid technological change. We believe that our
Company is unique in the healthcare industry because we are positioned to
provide services and products across the entire patient-service spectrum. Our
competitors typically focus products on specific market niches that address a
finite need within the industry. We approach the market with more innovation and
versatility. Our services coordinate multiple processes toward improved
productivity and communication between various stakeholders.
The competition that we face in this
healthcare services marketplace can be broken down into two different company
types:
Small
Niche Competitors: The competition in this category is comprised of smaller
companies offering few very specific products. They focus on one or two areas,
such as providing patient education information or administrative services. Some
of the competitors in this area include Get Well Network, Allen Technologies,
Skylight Systems, Beryl, and TeleTracking. Most companies in this category have
a very small hospital base (ten or fewer). Patient Portal Connect has a unique
advantage vis-a-vis the small-niche competitors because we offer
revenue-generating opportunities across a full continuum of care instead of a
stand-alone application, 24/7 integration with our Patient Contact Center,
access to an extensive customer base, and a long history serving hospitals and
patients.
Large Technology-based Providers: The
large technology-based providers typically offer very expensive and complex
systems that deliver a variety of administrative services at high cost.
Companies such as Siemens and Hill-Rom are in this category. Although the
product set is enticing, to date they have sold few services due to the cost,
complexity of integration, and the amount of system wide change required to
sustain the services. Our technology allows us to integrate new products easily
without requiring a cultural shift or debt load. Patient Portal Connect focuses
on rapidly deploying less expensive, user-friendly services compared to the
competition.
RESEARCH
AND DEVELOPMENT
The Company employs a multiple product
and services sourcing strategy that includes internal software and hardware
development and licensing from third parties. In the future, Company strategy
may also include acquisitions of technologies, product lines or
companies.
As part of our business strategy to
reduce direct costs and improve margins, elements of some of the Company's
products and services are licensed from third parties. Our main outsourcing
activities are related to both developing new modules for our software, and
marketing and supporting our product. While our business depends somewhat on our
ability to outsource, we are not dependent on any one contractor or
vendor.
In the future, the Company may make
select strategic acquisitions to secure certain technology, people and products
which complement or augment overall product and services strategy. Both
time-to-market and potential market share growth, among other factors, are
considered when evaluating acquisitions of technologies, product lines or
companies. Management may acquire and/or dispose of other technologies and
products in the future.
As a technology and services Company,
we realize that we must maintain our investment in research and development to
design both new, experimental products and marketing campaigns. Management
anticipates incurring additional research and development expenditures as its
business grows and adequate cash flow becomes available to fund such
costs.
EMPLOYEES
As of March 31, 2010 the Company and
its affiliates had approximately 40 full time equivalent employees.
REGULATORY
ISSUES
We are not subject to any special
governmental regulation concerning our supplying of products and services to the
market place and we believe we are in compliance in all material respects with
all existing regulations governing other aspects of our
businesses.
RESULTS
OF OPERATIONS
Critical
Accounting Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
Management believes there are no
material charges to net income in the current period related to sales from a
prior period.
Three
months ended March 31, 2010 compared with three months ended March 31,
2009.
Net sales for the three month period
ended March 31, 2010 were $2,571,705, reflecting a decrease of
approximately $1.3 million over the net sales of $ 3,882,760 for the comparable
three month period ended March 31, 2009. The decrease was largely attributable
to a reduction in equipment sales revenue of approximately
$1,250,000. In December 2009 the Company decided to exit the
ownership of the television equipment sales business and instead work with third
party distributors to provide equipment to customers as needed. This decision
allows the company to focus its resources exclusively on it service business
where it has a strong competitive advantage.
Cost of sales as a percentage of net
sales for the three months ended March 31, 2010 was 40%, compared to 58% for the
comparable 2009 period. The cost of sales percentage reduction was due to the
company exiting the equipment sales business segment at the end of 2009 and
focusing on its service business, which carries a higher gross margin than the
equipment sales segment.
Selling and administrative expenses for
the three month period ended March 31, 2010 was $1,057,539, a reduction of
nearly 25%, or $350,000, from the 2009 level of $1,408,601. This reduction was
caused by the elimination of the equipment business unit as well as additional
efficiencies gained from operational improvements. Interest expense for the
three month period ending March 31, 2010 was about $82,000 compared to nearly
$500,000 for the first quarter of 2009. The reduction in interest
expense is due largely to the restructuring of Dutchess Capital debt that
occurred in the second quarter of 2009 as well as repayment of higher interest
debt.
Net Loss for the three month period
ended March 31, 2010 was ($184,508) compared to a net loss of ($653,428) for the
quarter ended March 31, 2009. Subtracting interest, taxes, depreciation and
amortization from the Company’s net loss results in an EBITDA measurement.
Management utilizes the EBITDA measurement as it reflects the Company’s
operating performance before these deductions which can mask true operating
performance due to the nature of previous hospital contract acquisitions which
tend to inflate amortization and depreciation expenses. We believe that this
information is useful for investors to fully understand the operating
performance of the business. The Company’s EBITDA improved 119% over the same
period of 2009, from $217,000 to $475,000 for the three months ended March 31,
2010.
Liquidity
and Capital Resources
As shown in the above financial
statements, the Company incurred a net loss of ($184,508) during the three month
period ended March 31, 2010 and ($653,428) during the quarter ended March 31,
2009. On a cash basis (Net Loss less depreciation, amortization and preferred
stock dividends), the Company had income of approximately $389,000 for the first
quarter of 2010 compared to a loss of $283,000 for the same period of 2009, an
improvement of approximately $672,000 for the quarter.
The
Company has been successful in raising capital through private placements of its
equity. It has plans to raise more capital through public or private financing,
through the issuance of its common stock and the issuance of debt instruments,
including debt convertible to equity. When attaining financing if available, it
cannot be certain such financing will be on attractive terms. Should the Company
obtain more capital, in turn, it may cause dilution to its existing stockholders
and providing the Company can obtain more capital, it cannot be assured to
ultimately attain profitability. However, management expects that its core
business will continue to experience positive growth and the restructuring
transaction with Dutchess Capital will have a significant positive impact on the
company’s liquidity and overall operations.
As part
of the debt restructuring transaction the Company closed on a $3.0 million
credit facility to be used to fund working capital. The new debt was obtained at
competitive commercial bank rates.
The Company intends to continue its efforts to complete the necessary steps in
order to meet its cash flow requirements throughout fiscal 2010 and to continue
its product development efforts and adjust its operating structure to reduce
losses and ultimately attain profitability. Management's plans in this regard
include, but are not limited to, the increase in business operations which it
expects from the acquisition of additional retail hospital contracts by our
Patient Portal Connect subsidiary and the continuing roll-out of its product
line to its existing and future customer base.
Management believes that actions presently being taken will generate sufficient
revenues to provide cash flows from operations and that sufficient capital will
be available, when required, to permit the Company to realize its plans.
However, there can be no assurance that this will occur. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Because our business is evolving and changing,
particularly regarding our recent acquisitions and the Dutchess restructuring
transaction, our future operating cash flows will be significantly increased
from past results, and past operations are not a good gauge for anticipating
future
operations.
Inflation
The rate of inflation has had little
impact on the Company's results of operations and is not expected to have a
significant impact on continuing operations.
Capital
Expenditures
Capital expenditures during the
remainder of 2010 are not expected to be material.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
The Company's operations are not
subject to risks of material foreign currency fluctuations, nor does it use
derivative financial instruments in its investment practices. The Company places
its marketable investments in instruments that meet high credit quality
standards. The Company does not expect material losses with respect to its
investment portfolio or exposure to market risks associated with interest rates.
The impact on the Company's results of one percentage point change in short-term
interest rates would not have a material impact on the Company's future
earnings, fair value, or cash flows related to investments in cash equivalents
or interest-earning marketable securities..
Item
4. Controls and Procedures
Evaluation of disclosure
controls and procedures
. Under the supervision and with the participation
of our management, including the Chief Executive Officer and Chief Financial
Officer, we have evaluated the effectiveness of our disclosure controls and
procedures as required by Exchange Act Rule 13a-15(b) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that these disclosure
controls and procedures are effective.
Changes in internal control
over financial reporting
. There was no change in our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during our first quarter of fiscal 2010 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Part II.
Other Information
Item
1. Legal Proceedings
The Company is presently involved in two lawsuits, which management believes do
not have any merit and will not have a material effect upon the financial
condition of the Company. There are no other lawsuits pending nor are any such
material legal proceedings anticipated.
Item
4. Submission of Matters to a Vote of Security
Holders
None.
Item
6. Exhibits
|
(1)
Exhibit 31.1
|
Certification
by the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
(2)
Exhibit 31.2
|
Certification
by the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
(3)
Exhibit 32.1
|
Certification
by the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
(4)
Exhibit 32.2
|
Certification
by the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PATIENT
PORTAL TECHNOLOGIES, INC.
|
By:
|
/s/ Kevin J. Kelly
|
|
|
KEVIN
J. KELLY
|
|
|
Chief
Exec. Officer
|
Date: May
13, 2010
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