SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2007
000-49707 |
Commission file number |
|
(Exact name of small business issuer as specified in its charter) |
Nevada | 58-2412118 | |
(State of incorporation) | (IRS Employer Identification Number) |
2000 RiverEdge Pkwy |
(Address of principal executive office) |
770-919-7220 |
(Issuer's telephone number) |
Check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No _X_
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: September 30, 2007, we had 25,018,767 shares of our Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes ___ No _X_
INDEX PART I. CONSOLIDATED CONDENSED FINANCIAL INFORMATION Item 1. Consolidated Condensed Financial Statements Item 1. Legal Proceedings Signatures |
WiFiMed Holdings Company, Inc. | |||||||||
Consolidated Balance Sheet | |||||||||
(Unaudited) | |||||||||
September 30, | |||||||||
2007 | |||||||||
ASSETS | |||||||||
Cash | $ | 0 | |||||||
Accounts receivable, net | 360,237 | ||||||||
Notes receivable | 105,359 | ||||||||
Deferred cost of revenue | 85,365 | ||||||||
Prepaid expenses | 21,531 | ||||||||
Total current assets | 572,492 | ||||||||
Fixed assets | 98,611 | ||||||||
Accumulated depreciation | (51,776 | ) | |||||||
Fixed assets, net | 46,835 | ||||||||
| $ | 619,327 | ||||||||
LIABILITIES | |||||||||
Accounts payable | $ | 704,835 | |||||||
Credit cards payable | 22,317 | ||||||||
Accrued expenses | 166,162 | ||||||||
Deferred revenue | 444,635 | ||||||||
Bank line of credit | 120,300 | ||||||||
Loans and notes payable | 225,000 | ||||||||
Loans and notes payable to officer | 38,000 | ||||||||
Loans and notes payable to shareholder | 67,252 | ||||||||
Payroll payable | 224,542 | ||||||||
Payroll payable to officer | 63,865 | ||||||||
Capital lease - current portion | 7,204 | ||||||||
Total current liabilities | 2,084,112 | ||||||||
Capital lease - noncurrent portion | 12,175 | ||||||||
STOCKHOLDERS' DEFICIENCY | |||||||||
Common stock, par value $0.0001 | 2,502 | ||||||||
75,000,000 shares authorized | |||||||||
25,018,767 shares issued and outstanding | |||||||||
Additional paid in capital | 4,686,205 | ||||||||
Retained deficit | (6,165,667 | ) | |||||||
Total stockholders' deficiency | (1,476,960 | ) | |||||||
| $ | 619,327 | ||||||||
F-1
WiFiMed Holdings Company, Inc. | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenue | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Cost of revenue | 3,850 | (49 | ) | 6,766 | 36 | |||||||||||
Gross margin | (3,850 | ) | 49 | (6,766 | ) | (36 | ) | |||||||||
General & administrative expenses | 559,230 | 384,494 | 1,785,897 | 845,588 | ||||||||||||
Depreciation | 4,582 | 4,868 | 14,955 | 10,968 | ||||||||||||
Research & development expenses | 38,850 | 72,000 | 179,559 | 153,550 | ||||||||||||
Rent expense | 875 | 5,845 | 1,838 | 17,586 | ||||||||||||
Total operating expenses | 603,537 | 467,207 | 1,982,249 | 1,027,692 | ||||||||||||
Loss from operations | (607,387 | ) | (467,158 | ) | (1,989,015 | ) | (1,027,728 | ) | ||||||||
Interest income | 2,568 | 0 | 4,858 | 0 | ||||||||||||
Other expense | 0 | 0 | 0 | (9,024 | ) | |||||||||||
Interest expense | (7,283 | ) | (9,523 | ) | (26,194 | ) | (21,206 | ) | ||||||||
Net loss | $ | (612,102 | ) | $ | (476,681 | ) | $ | (2,010,351 | ) | $ | (1,057,958 | ) | ||||
Basic net loss per common share | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.14 | ) | ||||
Basic weighted average number of common shares | 24,941,383 | 8,396,203 | 22,836,886 | 7,476,999 | ||||||||||||
Diluted net loss per common share | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.09 | ) | $ | (0.14 | ) | ||||
Diluted weighted average number of | 24,941,383 | 8,396,203 | 22,836,886 | 7,476,999 | ||||||||||||
F-2
WiFiMed Holdings Company, Inc. | |||||||||
Consolidated Statements of Cash Flows | |||||||||
(Unaudited) | |||||||||
Nine months ended | |||||||||
2007 | 2006 | ||||||||
Operations: | |||||||||
Net loss | $ | (2,010,351 | ) | $ | (1,057,958 | ) | |||
Adjustments to net income: | |||||||||
Depreciation | 14,955 | 10,968 | |||||||
Deferred compensation - stock options and warrants | 211,530 | 26,010 | |||||||
Changes in assets & liabilities | |||||||||
Deferred cost of revenue | (47,635 | ) | 0 | ||||||
Prepaid expenses | 3,307 | (9,418 | ) | ||||||
Accounts payable | 304,746 | 87,400 | |||||||
Credit cards payable | (318 | ) | 4,221 | ||||||
Accrued expenses | (19,757 | ) | (20,242 | ) | |||||
Payroll payable | 204,542 | 44,058 | |||||||
Payroll payable to officer | 32,615 | 0 | |||||||
Net cash used in operating activities | (1,306,366 | ) | (914,961 | ) | |||||
Investing: | |||||||||
Advance on note receivable | (100,500 | ) | 0 | ||||||
Purchase of fixed assets | (23,174 | ) | (11,170 | ) | |||||
Net cash used in investing activities | (123,674 | ) | (11,170 | ) | |||||
Financing: | |||||||||
Net proceeds from issuance of loans | 511,800 | 40,000 | |||||||
Net proceeds from issuance of loans to officer | 0 | 208,807 | |||||||
Net proceeds from issuance of bank loans | 19 | 3,329 | |||||||
Net proceeds from capital lease | 16,222 | 0 | |||||||
Net proceeds from issuance of common stock | 902,000 | 275,000 | |||||||
Net proceeds from issuance of Series B preferred stock | 0 | 385,177 | |||||||
Net cash provided by financing activities | 1,430,041 | 912,313 | |||||||
Change in cash | 0 | (13,818 | ) | ||||||
Cash at beginning of period | 0 | 13,818 | |||||||
Cash at end of period | $ | 0 | $ | 0 | |||||
Supplemental disclosures: | |||||||||
Interest paid | 0 | 1,553 | |||||||
Taxes paid | 0 | 0 | |||||||
Non-cash investing and financing activities: | |||||||||
Conversion of loans and notes to stock | 313,800 | 95,000 | |||||||
Conversion of loans and notes from officer to stock | 0 | 89,080 | |||||||
Issuance of Series B stock for services | 0 | 11,799 | |||||||
Forgiveness of compensation to officer | 0 | 315,000 | |||||||
The accompanying notes are an integral part of these financial statements.
F-3
WiFiMed Holdings Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2007
1. Description of Business and Summary of Significant Accounting Policies
Business
We provide applications and solutions to manage the Patient Workflow Process (PWP). Our proprietary solution is the first physician-centric application that meets physician demands for usability, mobility, and affordability. It is a fully featured, intuitive, tablet-based system that enables physicians to document the entire physician-patient encounter while reducing practice overhead and improving care. Our solution meets HIPAA requirements and easily and securely integrates with existing Practice Management (PM), lab and other office systems.
The Company was previously in the development stage. Development activities have ceased and planned principal operations have commenced. The Company generates revenues in the form of software license fees, hosting subscription fees, implementation fees from customization and integration services related to its software licensing and hosting arrangements, as well as fees from the sale of equipment. The Company has experienced operating losses since its inception. Additional operating losses are anticipated for the foreseeable future as the Company builds its revenue base while expanding its operations, sales and marketing activities, and product technology development.
The Company was formed as a limited liability corporation in Georgia during November 2002. During December 2004 WiFiMed, Inc. was formed as a Delaware C-Corporation. The companies were not formally merged until May 2006.
WiFiMed, Inc. merged with Bellacasa Productions, Inc. in March 2007. The merger transaction was accounted for as a reverse merger with WiFiMed being deemed the acquiring entity for financial accounting purposes. The combined company was subsequently renamed WiFiMed Holdings Company, Inc. Thus, the historical financial statements of the Company prior to the effective date of the Bellacasa merger have been restated to be those of WiFiMed.
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and the general instructions to Form 10-QSB. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. These interim financial statements should be read in conjunction with our audited financial statements and notes thereto included in our annual report for the fiscal year ended December 31, 2006. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates.
Operating results for the nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007 or any future period.
The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of WiFiMed Holdings Company, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Management makes estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Actual results could differ from those estimates.
2. Stock-based employee compensation
WiFiMed has a stock option plan under which employees, consultants, and other advisors may be issued options to purchase the common stock of the Company. The plan is administered by the Board of Directors or a committee thereof.
The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for options granted during the nine months ended September 30, 2007: dividend yield of 0%; expected volatility of 12%; risk-free interest rate of between 4.59% and 5.14%; and an expected life of 3 years.
The following table summarizes stock option activity for the nine months ended September 30, 2007:
Weighted | Weighted | ||||||||
Average | Average | ||||||||
Exercise | Fair | ||||||||
Shares | Price | Value | |||||||
Outstanding at December 31, 2006 | 4,678,498 | $ | 0.35 | 0.05 | |||||
Granted | 54,402 | 1.35 | |||||||
Exercised | 0 | ||||||||
Canceled or expired | (1,468,831 | ) | 0.46 | ||||||
Outstanding at September 30, 2007 | 3,264,069 | $ | 0.31 | 0.06 | |||||
Exercisable | 1,441,630 | ||||||||
As of September 30, 2007 there was $205,577 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to stock options granted.
The following table summarizes warrant activity for the nine months ended September 30, 2007:
Weighted | Weighted | |||||||
Average | Average | |||||||
Exercise | Fair | |||||||
Shares | Price | Value | ||||||
Outstanding at December 31, 2006 | 271,921 | $ | 0.46 | 0.07 | ||||
Granted | 2,410,572 | 1.01 | 0.52 | |||||
Exercised | 0 | |||||||
Canceled or expired | 0 | |||||||
Outstanding at September 30, 2007 | 2,682,493 | $ | 0.95 | 0.48 | ||||
Exercisable | 2,682,493 | |||||||
3. Net loss per common share
Net loss per share is computed in accordance with SFAS No. 128, "Earnings Per Share." We compute basic net loss per share by dividing net income or loss by the weighted average number of common shares outstanding for each period. Diluted net loss per share is based upon the addition of the effect of common stock equivalents (stock options and warrants) to the denominator of the basic net loss per share calculation using the treasury stock method, if their effect is dilutive. Diluted earnings per share is the same as basic earnings per share for all of the periods presented since the effect of the conversion of preferred stock, stock options and warrants would have an anti-dilutive effect on earnings per share. The computation of net loss per share for the nine months ended September 30, 2007 is as follows:
Nine Months | |||||||
Net loss | $ | 2,010,351 | |||||
Weighted average common shares outstanding – basic | 22,836,886 | ||||||
Weighted average common share equivalents | 0 | ||||||
Weighted average common shares outstanding – diluted | 22,836,886 | ||||||
Net loss per share: | |||||||
Basic | $ | (0.09) | |||||
Diluted | $ | (0.09) | |||||
4. Mergers and Acquisitions
Effective March 6, 2007, we completed merger with Bellacasa Productions whereby we merged with a subsidiary of Bellacasa with WiFiMed remaining as the surviving corporation and a wholly owned subsidiary of the Bellacasa. Bellacasa subsequently changed its name to WiFiMed Holdings Company, Inc. In exchange for all of the outstanding shares of WiFiMed, Inc. common stock, holders of WiFiMed, Inc. common stock received approximately 17,944,680 shares, options and warrants of the Company representing approximately 86% of the outstanding shares of the Company on a fully diluted basis after giving effect to the merger and the reverse stock split discussed herein.
On March 26, 2007 we entered into a letter of intent to acquire 100% of the stock of JMJ Technologies, Inc. in exchange for stock of WiFiMed plus the assumption of certain liabilities of JMJ. The acquisition is subject to due diligence and other conditions. As part of the letter of intent we agreed to provide bridge financing to JMJ until closing of the transaction in the form of a secured promissory note. The balance outstanding on the note at September 30, 2007 was $105,359.
5. Income Taxes
At September 30, 2007 the entire deferred tax asset balance was reserved and no provision for income taxes had been reflected for the year then ended.
In periodically assessing our ability to realize our deferred tax assets, management considers whether it is more likely than not that some portion or all of our deferred tax assets will be realized. Management analyzes several factors including the amount and timing of the scheduled expiration and reversals of our net operating loss carry forwards (NOLs) and deferred tax items, respectively, as well as potential generation of future taxable income over the periods for which the NOLs are applicable. Certain estimates used in this analysis are based on the current beliefs and expectations of management, as well as assumptions made by, and information currently available to, management. Although we believe the expectations reflected in these estimates are based upon reasonable assumptions, we can give no assurance that actual results will not differ materially from these expectations.
6. Litigation
The Company currently is involved in litigation with a former employee who claims to be owed unpaid compensation, benefits and separation payments. The Company is also involved in litigation with the holders of the Company's promissory notes who have demanded repayment thereon.
The Company is subject to a variety of other claims and suits that arise from time to time in the ordinary course of our business. Although management currently believes that resolving claims, individually or in aggregate, will not have a material adverse impact on the Company's financial position, its results of operations, or its cash flows, these matters are subject to inherent uncertainties and management's view of these matters may change in the future.
7. Going Concern
The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported a net loss of approximately $2.0 million for the nine months ending September 30, 2007. As a result, there is an accumulated deficit of approximately $6.2 million at September 30, 2007.
The Company's continued existence is dependent upon its ability to raise capital and/or to successfully market and sell its products. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
8. Subsequent Events
Acquisition of Assets of JMJ Technologies
Effective October 2007, EncounterPRO Healthcare Resources, Inc. ("EncounterPro"), a newly formed wholly owned subsidiary of the Company, completed the acquisition of substantially all of the assets of JMJ Technologies, Inc. ("JMJ"). The Asset Purchase Agreement replaces a previous agreement that provided for the purchase of the outstanding stock of JMJ rather than its assets.
Change in Directors and Officers
Effective October 2007 Jeffrey Simon, the Company's President, Chief Executive Officer, Acting Chief Financial Officer and member of the Board of Directors, resigned. Gregory Vacca, former President and Chief Executive Officer of JMJ, was appointed the Company's President, Chief Executive Officer, Acting Chief Financial Officer and member of the Board of Directors.
Letter of Intent to Acquire CyberMedx
During November 2007 the Company signed a letter of intent to acquire CyberMedx Medical Systems, Inc. ("CyberMedx"). CyberMedx has developed the InteleNettTM family of wireless patient data management products for the hospital industry and the STATusTM Electronic Medical Data Exchange family of Internet-based telemonitoring device data management products for the home care and nursing home industries. These systems increase productivity, reduce cost, improve efficiency, and extend the operational life expectancy of existing patient monitoring and therapy delivery devices. The transaction is expected to close in late 2007.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of WiFiMed Holdings Company, Inc. ("WiFiMed")
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto presented elsewhere in this report on Form 10-QSB.
The following discussion and analysis provides information, which WiFiMed management believes is relevant to an assessment and understanding of WiFiMed's results of operations and financial condition. The discussion should be read in conjunction with the financial statements and related notes that appear elsewhere in this report.
Overview
WiFiMed is a provider of wireless patient information through its proprietary product Tablet MD which WiFiMed developed to assist physicians and health care providers manage patient workflow. At September 30, 2007, WiFiMed has an accumulated deficit of approximately $6.2 million.
WiFiMed began operations as WiFiMed, LLC, a Georgia limited liability company, in November 2002. In September 2004, WiFiMed, LLC entered into an Agreement and Plan of Merger with WiFiMed, Inc., a corporation formed in Delaware on December 17, 2004. Due to an administrative oversight, articles of merger were not filed in Delaware or Georgia until on or about March 21, 2006, at which time the merger became effective. Then in March 2007, WiFiMed merged with and into Bellacasa Productions, Inc., which was subsequently renamed WiFiMed Holdings Company, Inc.
WiFiMed's offices are located at 2000 RiverEdge Parkway, Suite GL 100A, Atlanta, GA 30328, phone number is (770) 919-7220 and its website is www.wifi-med.com.
Tablet MD
Tablet MD manages patient medical information, consultation notes, prescriptions, and other components of the medical chart through five proprietary technologies. Deployed on tablet PCs with wireless connectivity, Tablet MD is designed to reduce medical errors, documentation time, overhead, and time spent filing insurance claims. With data collection screens that are configured to mimic each physician's preferred forms and documentation processes, Tablet MD personalizes (and thereby hastens) medical charting. The easy addition of drawings, dictation and handwriting make Tablet MD an excellent tool for digitizing data, making the transition from paper to a fully paperless office easier and cheaper. Because Tablet MD employs "thick client" technology, each tablet PC holds a copy of the chart data on the practice's server, and each care provider can take the entire practice's data with him or her untethered, without the need to connect wirelessly (or otherwise) to the server at th e practice to add data. This transportability makes it easy for care providers to access patient data from office, hospital or home.
Critical Accounting Policies
Revenue recognition
The Company's revenue consists of revenues from the licensing of software to end user customers; fees for services rendered to include installation, training, implementation, and customer maintenance contracts; fees for the resale of certain computer equipment; and the outsourcing or hosting of services.
The Company recognizes software license revenue under Statement of Position No 97-2 "Software Revenue Recognition" as amended by Statement of Position No. 98-9, "Software Revenue Recognition With Respect to Certain Transactions", Emerging Issues Task Force 00-21, "Revenue Arrangements with Multiple Deliverables", and related interpretations.
Sales of licensed software are recognized as revenue upon delivery and installation of the software at the customer site. Sometimes our agreements with customers include acceptance provisions, in which case revenue is not recognized prior to customer acceptance. Regardless of the form of sale, no revenue is recognized without persuasive evidence of an arrangement existing. Persuasive evidence is determined to be a signed purchase order received from the customer or an equivalent form for those customers lacking a formalized purchase order system. In the case where customer acceptance is required, persuasive evidence includes this customer acceptance documentation. In the case of software license sales, a software license agreement signed by both parties is often required in addition to a purchase order or equivalent. Additionally, revenue is only recognized when a selling price is fixed or determinable and collectibility of the receivable is deemed to be probable.
Service revenues such as training, installation and implementation are recognized when the service is complete and acknowledged by the customer. Fees charged to customers for post-contract Customer Support are recognized ratably over the term of the contract. Costs related to maintenance obligations are expensed as incurred.
Sales which constitute a multiple-element arrangement are accounted for by determining if the elements can be accounted for as separate accounting units, and if so, by applying values to those units for which there is vendor specific objective evidence of their fair value. We use the residual method to apply any remaining balance to the remaining elements of the arrangement. More specifically, this methodology applies when there is embedded maintenance (post-contract customer support) involved in the sale of a software license, or when the sale of a software license is made in conjunction with required installation services. In the latter case, the recognition of the software license is deferred until installation is completed. Fees relating to the delivery of equipment are also incurred and deferred until recognition of the software license is appropriate, and shown on the balance sheet as deferred cost of goods sold.
The Company's revenues generated through hosting solutions are recognized using the proportional performance method. Revenues are recognized in the month services are rendered and earned under service agreements with clients where service fees are fixed or determinable. Accounts receivable are recorded when the Company invoices its customer for goods and/or services rendered, pursuant to contractual terms. Purchased inventory is reduced at the time that goods are shipped to the customer.
Software development expenditures
The Company accounts for its software development costs that will be sold, leased, or otherwise marketed in accordance with Statement of Financial Accounting Standards Board ("FASB") 86 "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." Accordingly, software development costs are capitalized once technological feasibility has been established and continues until the product is available for general market release. These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and changes in hardware and software technologies. During the three month periods ended September 30, 2007 and September 30, 2006, the Company expensed software development costs as incurred because the net realizable value was not assured. These costs totaled $38,850 and $72,000 for the three month periods ended September 30, 2007 and September 30, 2006, respectively.
Recent Accounting Policies
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), "Share-Based Payment," which is a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation." Statement 123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and amends FASB Statement No. 95, "Statement of Cash Flows." The approach to accounting for share-based payments in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values and no longer allows pro forma disclosure as an alternative to financial statement recognition.
Summary Financial Information
The following tables set forth summary financial information for the nine months ended September 30, 2007 and September 30, 2006:
Nine Months Ended | ||||||||||||
2007 | 2006 | |||||||||||
STATEMENT OF OPERATIONS DATA: | ||||||||||||
Revenue | $ | 0 | $ | 0 | ||||||||
Operating expenses: | 1,982,249 | 1,025,385 | ||||||||||
Loss from operations | (1,989,015 | ) | (1,027,728 | ) | ||||||||
Basic & diluted net loss per share | $ | (0.09 | ) | $ | (0.14 | ) | ||||||
Weighted average number of common | 22,836,886 | 7,476,999 | ||||||||||
September 30, | ||||||||||||
BALANCE SHEET DATA: | 2007 | 2006 | ||||||||||
Cash, cash equivalents and short-term investments | $ | 0 | $ | 0 | ||||||||
Total current assets | 572,492 | 166,397 | ||||||||||
Total assets | 619,327 | 215,436 | ||||||||||
Deferred revenue | 444,635 | 127,035 | ||||||||||
Total current liabilities | 2,084,112 | 869,134 | ||||||||||
Total shareholders' deficit | (6,165,667 | ) | (3,574,101 | ) | ||||||||
Quarterly Financial Information
Results of Operations
Comparison of the three months ended September 30, 2007 with the three months ended September 30, 2006.
Sales – Total revenue for the three months ended September 30, 2007 and for the three months ended September 30, 2006 was $0.
Costs and Expenses - Total operating expenses for the three months ended September 30, 2007 were $603,537, compared to $467,207 in the three months ended September 30, 2006.
General and administrative expenses in the three months ending September 30, 2007 were $559,230, which consisted primarily of payroll and related employee expenses of $258,742; professional fees of $98,595 for legal and accounting services; $24,050 for commissions; and $11,026 for travel, meals and entertainment. Much of the cost for legal and accounting expenditures was related to SEC, federal, and state filings and the expenditures involved in due diligence for the JMJ acquisition. Other expenses for the period were research and development, $38,850; non-cash compensation charges, $106,529; rent, $875; and depreciation, $4,582. Interest expense for the period was $7,283.
General and administrative expenses in the three months ending September 30, 2006 were $384,494 which consisted primarily of payroll and related employee expenses of $218,790; professional fees of $90,584 for legal and accounting services; $44,559 for commissions; and $7,642 for travel, meals and entertainment. Other expenses for the period were research and development, $72,000; and depreciation, $4,868. Interest expense for the period was $9,524.
Net Loss - Net loss, before taxes, for the three months ended September 30, 2007 was $612,102. Net loss, before taxes, for the three months ended September 30, 2006 was $476,681. The net change of approximately $140,000 resulted from lower payroll and related employee expenses; lower research and development fees; offset by higher non-cash compensation charges and higher professional fees.
WiFiMed has not reduced its net loss, for the three months ended September 30, 2007 or for the three months ended September 30, 2006, by any tax benefit, and consequently, for both periods, its net loss was the same before and after taxes.
Net Loss per Share - For the three months ended September 30, 2007 and September 30, 2006, net loss was $0.02 and $0.06 per share, respectively. Per share losses for the three months ended September 30, 2007 and September 30, 2006 period were based on 24,941,383 and 8,396,203 weighted average shares, respectively.
Comparison of the nine months ended September 30, 2007 with the nine months ended September 30, 2006.
Sales – Total revenue for the nine months ended September 30, 2007 and for the nine months ended September 30, 2006 was $0.
Costs and Expenses - Total operating expenses for the nine months ended September 30, 2007 were $1,982,249, compared to $1,027,692 in the nine months ended September 30, 2006.
General and administrative expenses in the nine months ending September 30, 2007 were $1,785,897, which consisted primarily of payroll and related employee expenses of $927,460 professional fees of $268,662 for legal and accounting services; $159,340 for commissions; and $52,264 for travel, meals and entertainment. Much of the cost for legal and accounting expenditures was related to SEC, federal, and state filings and the expenditures involved in due diligence for the JMJ acquisition. Other expenses for the period were research and development, $179,559; non-cash compensation charges, $11,530; rent, $1,838; and depreciation, $14,955. Interest expense for the period was $26,194.
General and administrative expenses in the nine months ending September 30, 2006 were $845,588 which consisted primarily of payroll and related employee expenses of $360,500 professional fees of $155,449 for legal and accounting services; $111,951 for commissions; and $27,906 for travel, meals and entertainment. Other expenses for the period were research and development, $153,550; and depreciation, $10,968. Interest expense for the period was $21,206.
Net Loss - Net loss, before taxes, for the nine months ended September 30, 2007 was $2,010,351. Net loss, before taxes, for the nine months ended September 30, 2006 was $1,057,958. The net change of approximately $1 million resulted from higher payroll and related employee expenses, higher professional fees; higher commission expenses; higher travel expenses and higher non-cash compensation charges.
WiFiMed has not reduced its net loss, for the nine months ended September 30, 2007 or for the nine months ended September 30, 2006, by any tax benefit, and consequently, for both periods, its net loss was the same before and after taxes.
Net Loss per Share - For the nine months ended September 30, 2007 and September 30, 2006, net loss was $0.09 and $0.14 per share, respectively. Per share losses for the nine months ended September 30, 2007 and September 30, 2006 period were based on 22,836,886 and 7,476,999 weighted average shares, respectively.
Liquidity and Capital Resources
As of September 30, 2007, WiFiMed's cash balance was $0, as compared to $0 on September 30, 2006. At September 30, 2007 WiFiMed had an accumulated deficit of approximately $6.2 million and working capital deficit of approximately $1,500,000. As disclosed below, WiFiMed requires additional working capital in order to develop its business operations.
As of September 30, 2007, WiFiMed liabilities totaled approximately $2.1 million, which consisted of accrued but unpaid compensation to officers of $63,865; accrued but unpaid compensation to employees of $224,542; accounts payable of $704,835; accrued expenses of $166,162; loans and notes payable of $225,000 deferred and unearned revenue of $444,635; loans and notes payable to an officer of $38,000; loans and notes payable to a shareholder of $67,252; bank lines of credit of $120,300; credit cards payable of $22,317; and capital lease obligations of $19,379.
As of September 30, 2006, total liabilities were approximately $869,134, which consisted of accounts payable of $279,905; deferred and unearned revenue of $127,035; loans and notes payable of $257,500; accrued expenses of $123,165; loans and notes payable to officer of $38,000; and bank line of credit of $23,529.
WiFiMed intends to meet its cash needs for the next 12 months by the sale of securities or borrowings. WiFiMed needs to raise approximately $5 million to $10 million in capital in order to pursue its business plan over the next 12 months, and the required additional financing may not be available on acceptable terms, or at all. No binding commitment for an investment in WiFiMed has been made, and a number of factors beyond its control may make any future financings uncertain. There is no assurance WiFiMed will be able to sell its securities or borrow funds to pursue its business objectives. WiFiMed will require the infusion of capital to sustain planned growth and failure to raise enough capital to continue operations may hold a significant risk to its shareholders.
Ability to Continue as a Going Concern and Plan of Operation
WiFiMed's consolidated financial statements, which are included in this report, have been presented on a going concern basis, which contemplates the realization and the satisfaction of liabilities in the normal course of business. WiFiMed liquidity has been adversely affected by losses of more than $6 million since its incorporation date, December 2004, which raises substantial doubt about WiFiMed's ability to continue as a going concern without additional capital contributions and/or achieving profitable operations. WiFiMed's management's plan includes raising additional capital either in the form of common stock or convertible securities and continuing its research and development efforts. There can be no assurance, however, that WiFiMed will be successful in accomplishing its objectives.
As disclosed above, WiFiMed requires at least $5 million of working capital in order to pursue its business plan over the next twelve months. Such funds shall be used for continued research and development; sales and marketing; and general working capital purposes.
Capital Expenditures
During the nine months ended September 30, 2007 and September 30, 2006 WiFiMed purchased $23,174 and $11,170, respectively, of capital equipment, largely computer equipment, software and demonstration units.
Research and Development
WiFiMed spent $38,850 on research and development activities for the three months ended September 30, 2007. These activities were focused on developing and refining our proprietary technology.
Item 3 - Controls and Procedures
Evaluation of disclosure controls and procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2007. This evaluation was accomplished by our Chief Executive Officer and Acting Chief Financial Officer, Gregory D. Vacca, who joined the company on October 15, 2007. We concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the quarterly report on Form 10-QSB has been made known to him.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon an evaluation conducted for the period ended September 30, 2007, we have identified the following material weakness of our internal controls:
· Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.
· Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.
· Insufficient documentation and approval policies with regard to expenses claimed by employees
In order to remedy our existing internal control deficiencies, as soon as our finances allow, we will hire a full-time Chief Financial Officer who will be sufficiently versed in public company accounting to implement appropriate procedures for timely and accurate disclosures.
Changes in internal control over financial reporting
We have implemented the following changes in our internal control over financial reporting subsequent to the end of the period covered by this report on Form 10-QSB:
· Segregation of accounting duties to ensure that the keeping of the books within the company 1) is not controlled by a single person and 2) is not controlled by an officer of the company.
· Granting privileges to review company books and company checking accounts to multiple persons within the company.
· Appointment of a Secretary (who is not also the CEO and the CFO) who has been granted full privileges to review all company records.
· Implementation of new policies regarding approval of expenses.
· Hiring of in-house counsel to review internal controls and implementation of internal control.
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings
On July 3, 2007, we were sued in an action entitled Kevin M. Charest v. WiFiMed, Inc. (Superior Court Cobb County, Georgia- Case Number 07105534-48), for breach of contract and misrepresentation of employment status. The plaintiff, a former employee is seeking severance pay and expenses totaling approximately $100,000. We have filed an answer claiming various defenses and have asserted a counterclaim. The case is in the early stages of discovery. We plan to vigorously defend the suit and pursue our counterclaims.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2007, pursuant to a private placement memorandum, we issued 167,000 shares of our common stock together with three-year warrants to purchase 334,000 additional shares. The proceeds of the sales were used for working capital. The securities, which were issued pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended, are restricted as to transferability. The purchasers were deemed accredited investors and had access to current information regarding the Company at the time of purchase.
Item 6. Exhibits
(a) Exhibits required by Item 601 of Regulation S-B
31.1 Form 302 Certification of Chief Executive Officer and Principal Financial Officer
32.1 Form 906 Certification of Chief Executive Officer and Principal Financial Officer
(b) Reports on Form 8-K
On August 13, 2007, we reported on Form 8-K, under Item 1.01 that we entered into a merger agreement with JMJ Technologies, Inc.
SIGNATURE
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 as a duly authorized officer of the Registrant.
WiFiMed Holdings Company, Inc.
| By: | /s/ Gregory Vacca |
| Gregory Vacca Chief Executive Officer and Principal Financial Officer |
DATED: November 19, 2007
