Capital Group Holdings, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Nature of Business
The Company was incorporated as Implant Technologies, Inc. in 1980 under the laws of the State of Minnesota. On April 26, 2006 the Company entered the development stage when it revived its corporate charter. On September 17, 2007, the Company changed its name to Oasis Online Technologies, Corp. and began development of technology for secure storage of online data. In November 2010, the Company changed its name to Capital Group Holdings, Inc. and has focused on developing a Telemedicine platform under the Company’s wholly-owned subsidiary OneHealthPass, Inc.
For the period from April 26, 2006 (date of commencement of the Development Stage) to March 31, 2012, the Company has not generated revenues from operations. The Company’s primary activities during this period have been developing its products, developing markets, securing strategic alliances and securing funding. Therefore, the Company is considered to be in the development stage, in accordance with the provisions of ASC 915-10-05, Accounting and Reporting by Development Stage Enterprises.
2. Summary of Significant Accounting Policies
The accompanying condensed consolidated financial statements have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto (the “Audited Financial Statements”) contained in the Company’s Annual Report for the fiscal year ended June 30, 2011 on Form 10-K filed with the Securities and Exchange Commission on July 26, 2012. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These interim financial statements include all adjustments consisting of normal recurring entries, which in the opinion of management are necessary to present a fair statement of the results for the period. The results of operations for the nine month period ended March 31, 2012 are not necessarily indicative of the operating results for the full year.
Use of Accounting Estimates
The preparation of the 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 as of the date of the financial statements and the reported amounts of expenses during the reporting period. The Company has identified matters subject to significant estimation and judgment to include amounts related to asset impairments, recoverability of deferred tax balances, useful lives of fixed assets, payroll tax liabilities, and stock based compensation. Actual results may differ from the estimates provided.
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Taxes
At March 31, 2012, management had recorded a full valuation allowance against the net deferred tax assets related to temporary differences and operating losses in the current period because there is significant uncertainty as to the realization of the deferred tax assets. Based on a number of factors, the currently available, objective evidence indicates that it is more-likely-than-not that the net deferred tax assets will not be realized.
The Company has accrued for unremitted payroll taxes, and employee withholdings due to various state and federal agencies along with accrued interest and penalties on the amounts outstanding as of March 31, 2012 as part of accrued payroll liabilities.
Earnings per Share
Net Loss Per Share – Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period. The Company has other potentially dilutive securities outstanding that are not shown in a diluted net loss per share calculation because their effect in both fiscal years would be anti-dilutive. The following chart lists the securities as of March 31, 2012, that were not included in the computation of diluted net loss per share because their effect would have been antidilutive:
| | | | |
| | Common Shares | |
Common stock subscribed | | | 571,182 | |
Warrants to purchase common stock | | | 2,562,214 | |
Convertible promissory notes | | | 20,000 | |
| | | | |
| | | 3,153,396 | |
Fair Value of Financial Instruments
ASC 820, Fair Value Measurement, requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s cash, stock subscription receivable, accrued liabilities, accounts payable approximate their estimated fair values due to their short-term maturities.
For assets and liabilities measured at fair value, the Company uses the following hierarchy of inputs:
Level one - quoted market prices in active markets for identical assets or liabilities;
Level two - inputs other than level one inputs that are either directly or indirectly observable; and
Level three - unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
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Notes receivable, convertible notes payable and payroll tax liabilities approximate their estimated fair value based on the borrowing rates available to the Company for loans of similar terms and maturities. Convertible notes payable are carried at an amount that approximates fair value based on their carrying amounts less a note discount for the relative fair value of the attached warrants issued with the notes. Warrants issued were valued using the Black-Scholes option pricing model, which uses level three inputs (see note 7). The notes have a maturity of less than one year and are classified as short-term liabilities.
Advertising
The Company expenses advertising costs as incurred.
Recently Issued Accounting Pronouncements
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its consolidated results of operation, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.
3. Going Concern and Liquidity
The Company has total accumulated losses as of March 31, 2012 of ($11,237,388), and has had negative cash flows from operating activities during the period from inception through March 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As such, the Company’s Independent Registered Public Accounting Firm has expressed a going concern opinion in their most recent audit report, dated July 25, 2012, for the year ended June 30, 2011.
If new sources of financing are insufficient or unavailable, we will modify our growth and operating plans to the extent of available funding, if any. Any decision to modify our business plans would harm our ability to pursue our growth plans. If we cease or stop operations, our shares could become valueless. Historically, we have funded operating, administrative and development costs through the sale of equity capital. If our plans and/or assumptions change or prove inaccurate, and we are unable to obtain further financing, or such financing and other capital resources, in addition to projected cash flow, if any, prove to be insufficient to fund operations, our continued viability could be at risk. To the extent that any such financing involves the sale of our equity, our current stockholders could be substantially diluted. There is no assurance that we will be successful in achieving any or all of these objectives in the future.
These condensed consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. If we are unable to obtain additional financing we may cease operations and not be able to execute on our operating plans. Accordingly, these condensed consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
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The Company had not been compliant with SEC reporting deadlines, but management has opted to make the necessary filings to be become compliant with the Securities and Exchange Commission (SEC) reporting guidelines to assist the Company’s effort to raise capital in order to execute on the Company’s business strategy. Management is attempting to raise capital, secure strategic alliances, and to operate our business strategy, however there is no assurance that these will be attained.
4. Note Receivable
During the period ending March 31, 2012 the Company issued a note receivable to a non-related party in the amount of $10,000. The note bears interest at 7% per annum and is due August 1, 2013.
5. Common Stock
Pursuant to the Articles of Incorporation as amended on September 19, 2007, the Company is authorized to issue 100,000,000 common shares, with a par value of $0.01 per share.
During the nine months ended March 31, 2012 and 2011, the Company issued 385,000 and 35,443,458 shares, respectively. The Company issued nil and 10,505,958 shares on the conversion of convertible notes payable during the nine months ended March 31, 2012 and 2011, respectively. The Company issued nil and 24,650,000 for compensation during the nine months ended March 31, 2012 and 2011, respectively. The Company issued 100,000 and 50,000 for cash and 285,000 and 237,500 for a subscription receivable during the nine months ended March 31, 2012 and 2011, respectively.
The company received $207,700 in cash for common stock subscribed during the nine months ended March 31, 2012. A total of $85,700 was received from a related party at $1.00 per share in accordance with a Capital Base Funding Agreement. The remaining stock was subscribed at the posted market rate on the funding date.
6. Common Stock Subscribed
As of March 31, 2012 and June 30, 2011 the Company had common stock subscribedin the amounts of $185,700 and $125,000, respectively. These represented subscriptions for 317,367 and 250,000 shares, respectively.
7. Convertible Notes Payable and Warrants
During the nine months ended March 31, 2012 and 2011, the Company issued nil and $1,627,964 convertible notes payable and nil and 1,627,964 attached warrants to third party investors in exchange for nil and $1,624,942 in cash and nil and $2,534 in stock subscriptions receivable, respectively. The notes have a one year maturity and bear interest at a rate of 12% per annum. The notes are convertible into common shares at a conversion price of $0.25 per share. As at March 31, 2012 all but $5,000 of the notes were converted to common stock.
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Convertible notes payable consisted of the following:
The Company issued attached warrants to purchase its common stock with the issuance of the convertible notes payable. The warrants have an exercise price of $0.25 with a three year expiration and immediate vesting. The fair value of each issuance is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates assumptions for each input. Expected volatilities are based on the historical volatility of the Company’s common equity traded on the OTC market. The Company estimates expected life of each warrant based on the midpoint between the date the warrant vests and the contractual term of the warrant. The risk-free interest rate represents the U.S. Treasury bill rate for the expected life of the related warrant.
The Black-Scholes option pricing model inputs used on the date of issuance have the following assumptions: stock price on the measurement date was between $0.05 and $0.60; expected term of three years; average expected volatility was 257%; and discount rate of 1.26%.
The following table summarizes information about the warrants as of March 31, 2012 and June 30, 2011:
| | | | | | | |
| Shares Under Warrants | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value |
Outstanding as of June 30, 2011 | 2,562,214 | | $ 0.25 | | 2.25 Years | | $ - |
Granted | - | | $ - | | | | |
Expired | - | | $ - | | | | |
Exercised | - | | $ - | | | | |
Outstanding as of March 31, 2011 | 2,562,214 | | $ 0.25 | | 1.50 Years | | $ 358,710 |
Exercisable as of March 31, 2011 | 2,562,214 | | $ 0.25 | | 1.50 Years | | $ 358,710 |
The year-end intrinsic values are based on a March 31, 2012 closing price of $0.39 per share.
8. Leases
At December 21, 2007, the Company signed a new operating lease for its headquarters facility that expired March 31, 2011. Under the terms of the lease agreement, the Company was responsible for its share of normal operating costs. Rent for the first 12 months was $817 per month which included city tax and a parking fee. The rent for the remaining 24 months was $881 per month including tax and parking. The lease agreement included a $775 security deposit. A new lease for the facility was executed on March 5, 2010 for a period of two years with the lease
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ending March 5, 2012. Rent was increased to $2,500 per month with a security deposit of $7,500. Under the terms of the lease agreement, the Company is responsible for its share of normal operating costs, including maintenance expenses, property taxes and insurance.
The lease for the headquarters facility is continuing on a month to month basis.
The Company incurred rent expense on the headquarters facility of $7,500 and $22,500 for the three and nine months ended March 31, 2012 and 2011, respectively.
9. Related Party Transactions
On August 9, 2007, the Company entered into a Capital Base Funding Agreement with its largest single shareholder, Big Eye Capital, Inc. (“Big Eye”) whereby Big Eye would make available to the Company up to one hundred thousand dollars ($100,000) in working capital in exchange for newly issued common stock of the Company. The amount of common stock of the Company to be issued to Big Eye would be based on the greater of the previous day’s closing market prices or $1.00 per share. The agreement has been extended by Big Eye indefinitely and the total available capital was increased to $150,000.
In connection with the Capital Base Funding Agreement, Big Eye Capital, Inc. provided a total of $51,046 of funding to the Company in 2007 resulting in Big Eye Capital, Inc. being issued 51,046 shares of the Company’s common stock. During the nine months ended March 31, 2012, Big Eye Capital provided an additional $85,700 of funding in exchange for stock subscribed at $1.00 per share. As at March 31, 2012 there remains $13,254 of capital available under this agreement.
10. Subsequent Events
Subsequent to March 31, 2012, the Company has accepted subscriptions for 133,333 shares of common stock at $0.15 per share.
On April 12, 2012, the Company entered into a joint marketing agreement with a health care provider to acquire customers. The health care provider will provide a total of $190,000 to fund the advertising program that the Company will initiate in Arizona. Net revenues collected from customers the Company signs up for services under the marketing agreement, shall be split with 51% paid to the Company and 49% paid to the health care provider. Unless terminated in writing 30 days prior to the end of the 36 month term, the Agreement will automatically renew for additional one (1) year terms. The full amount of funds was received subsequent to March 31, 2012 in accordance with the payment terms specified in the agreement.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking Statements
Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Throughout this report references to “we”, “our”, “us”, “Capital Group Holdings”, “Capital Group”, “CGHC”, “the Company”, and similar terms refer to, Capital Group Holdings, Inc. and our wholly owned subsidiary, One Health Pass, Inc.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: general economic or industry conditions, both nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, international gold prices, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Overview
We intend to offer a suite of secure, online products that provide consumers with the tools to more effectively manage their health and wellness as well as the ability to manage their personal health records, from all of their healthcare providers whether paper-based or digital. We are part of a trend where people are increasingly trusting on-line services as a way for them to store and manage critical, sensitive information such as medical records, financial records and vital documents.
Our suite of secure, web-based products all are built on an open source technology that allows users, including consumers, affinity groups, membership organizations, small businesses, physicians and health care professionals to easily store and organize information. Our consumer products are built around our trademarked “OneHealthPass” brand. Our planned site will consist of www.OneHealthPass.com.
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OneHealthPass is an easy-to-use, secure web-based Personal Health Record system, or “PHR”, which allows documents, images and voice mail messages to be transmitted in and out of our system using a variety of methods, including fax, voice and file upload. OneHealthPass converts documents it receives by fax into Adobe's Portable Digital Format, or PDF, file. These files, as well as voice files and any other uploaded files are stored in the consumer's personal account, which is secured by a unique user ID and password combination. A notification is sent to up to three user e-mail addresses (including to e-mail enabled cell and smart phones) whenever a new record is received.
Users can then access their files via the Internet and take advantage of an intuitive, customized filing system that allows them to categorize, annotate and file their records for easy access, organization and retrieval. Users can then print, download, e-mail or fax their records from their account, giving our customers greater control over their own personal health records and other information, which they can share with health care providers and others as they move through the continuum of care.
We plan to initially sell our OneHealthPass Telemedicine product primarily direct to consumers through a direct response advertising campaign.
We recognize the critical nature of managing an individuals' health information requires that our products and advances be implemented with the utmost care to protect the privacy and confidentiality of our customers' data. The Health Insurance Portability and Accountability Act of 1996, commonly referred to as HIPAA, requires covered entities to protect the privacy and confidentiality of protected health information, or PHI, of their patients and customers. Although we are not a covered entity (as that term is defined in HIPAA), we consider it important to take into account the Privacy and Security Standards and other requirements of HIPAA when implementing our products and services and believe that we meet and/or exceed current HIPAA standards.
The Health Information Technology for Economic and Clinical Health Act, commonly referred to as HITECH, enacted on February 17, 2009 as part of the American Recovery and Reinvestment Act, expanded HIPAA's reach beyond that of just covered entities. Now, business associates, defined as an entity that performs a function, activity, or service on behalf of a covered entity and that requires use or access to the information of the covered entities, and vendors of Personal Health Records that use or access information, must also comply with the Privacy and Security Standards of HIPAA. One of the key obligations under HITECH is the requirement to notify individuals when there has been (or there is a strong possibility of) a breach of the individual's information.
While we only rarely function as a business associate to a covered entity, we continue to meet and/or exceed the current HIPAA standards. Further, as a vendor of PHRs, we are implementing policies and procedures and reviewing our relationships with all necessary parties to ensure our compliance with HITECH and its associated regulations.
We plan to continue to take advantage of the burgeoning consumer health information market and leverage recent federal legislation, including the HITECH Act. We believe that the health
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care reform legislation recently passed by Congress and signed by the President into law represents a significant behavioral shift in how consumers manage their health care because of the requirement that everyone have insurance. We also believe that as medical costs and insurance costs increase, and benefits decrease, healthcare consumers will require greater control over their personal (and their family's) health information.
OneHealthPass with its dynamic PHR enable consumers to store their important medical records and data in one central and secure place where they can manage those records and control how they are accessed and shared. While every healthcare consumer in the U.S., as well as other countries that are focused on health information technology, are potential users of our OneHealthPass Platform, we believe that the product has most appeal to these particular market niches:
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The chronically ill and their families who share information among many doctors; this "co-morbid population" represents a disproportionate share of U.S. health care costs;
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Individuals with Health Savings Accounts who need to carefully manage their eligible expenses over the course of a year;
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Consumers with "senior" parents who, in their role as caregivers, want to be sure they have current medical information readily available to react quickly in case of parental illness;
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Consumers with newborns who will be able to build a complete medical file for the newborn, which can last the newborn's entire life;
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Employees who are forced to change doctors and other providers when their employer changes health insurance and who therefore need to manage the transfer of medical information to their new providers;
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Travelers and businesspeople working overseas who want to ensure that they always have access to their medical records in the event of an emergency.
Our Products
Telemedicine Services The Company intends to contract with strategic alliance partners throughout the country to provide access to our members and customers with the best and broadest market coverage for telemedicine services.
Specialist referral services typically involves a specialist assisting a general practitioner in rendering a diagnosis. This may involve a patient "seeing" a specialist over a live, remote consult or the transmission of diagnostic images and/or video along with patient data to a specialist for viewing later. Recent surveys have shown a rapid increase in the number of specialty and subspecialty areas that have successfully used telemedicine. Radiology continues to make the greatest use of telemedicine with thousands of images "read" by remote providers each year. Other major specialty areas include:
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dermatology, ophthalmology, mental health, cardiology and pathology. According to reports and studies, almost 50 different medical subspecialties have successfully used telemedicine.
The patient consultations use telecommunications to provide medical data, which may include audio, still or live images, between a patient and a health professional for use in rendering a diagnosis and treatment plan. This might originate from a remote clinic to a physician's office using a direct transmission link or may include communicating over the Web.
Remote patient monitoring uses devices to remotely collect and send data to a monitoring station for interpretation. Such "home telehealth" applications might include a specific vital sign, such as blood glucose or heart ECG or a variety of indicators for homebound patients. Such services can be used to supplement the use of visiting nurses.
Medical education provides continuing medical education credits for health professionals and special medical education seminars for targeted groups in remote locations.
Consumer medical and health information includes the use of the Internet for consumers to obtain specialized health information and on-line discussion groups to provide peer-to-peer support.
Benefits of Telemedicine
Telemedicine has been growing rapidly because it offers three fundamental benefits:
Improved Access For over 40 years, telemedicine has been used to bring healthcare services to patients in distant locations. Not only does telemedicine improve access to patients but it also allows physicians and health facilities to expand their reach, beyond their own offices.
Cost Efficiencies Reducing or containing the cost of healthcare is one of the most important reasons for funding and adopting telehealth technologies. Telemedicine has been shown to reduce the cost of healthcare and increase efficiency through better management of chronic diseases, shared health professional staffing, reduced travel times, and fewer or shorter hospital stays.
Patient Demand Consumers want telemedicine. The greatest impact of telemedicine is on the patient, their family and their community. Using telemedicine technologies reduces travel time and related stresses to the patient. Over the past 15 years study after study has documented patient satisfaction and support for telemedical services. Such services offer patients the access to providers that might not be available otherwise as well as medical services without the need to travel long distances.
OneHealthPass Additional Features
OneHealthPass will offer users multiple ways to enter their personal medical information, including by voice or digital file upload. We believe this capability makes OneHealthPass easier to use than other products in the marketplace and makes our product's information storage
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features more accessible to potential customers. In addition to the core document conversion, storage and retrieval capabilities, OneHealthPass provides a layer of useful, value-added interactive tools to help users better manage their personal and/or their families' medical records.
These tools include:
Ability to Attach Received Faxes to e-mail Notifications Users can elect to have records attached to the notification e-mail they receive when a new medical record is received into their account. This capability is intended to save users the extra step of logging into their account to view new records, which we believe creates a higher level of convenience and usability.
Health History Users can enter their personal health history, including information about doctors (such as a doctor's name, address and specialty), vaccinations and immunizations, hospitalizations/surgeries, allergies and medical conditions that may affect ongoing healthcare.
Appointment Calendar Feature Users are able to take advantage of a calendar feature to schedule and generate reminders about upcoming doctor and other health-related appointments. These reminders appear when a user logs into his or her OneHealthPass PHR account and also can be sent to the user's e-mail address (or e-mail enabled cell phone) and imported into Microsoft Outlook.
Prescription History and Refill Reminder Feature Users are able to enter their prescriptions, pharmacies and refill dates into their OneHealthPass accounts. The system generates reminders about refills, which are visible to users when they log into their accounts and are sent to their e-mail addresses (or e-mail enabled cell phone).
Drug Information and Interaction Database Users can check for potential interactions across multiple prescriptions and over the counter drugs with this comprehensive database, licensed from Multum. When each user adds a new drug to their MMR PHR prescription history, they can quickly determine if that medication has any kind of negative interaction with other prescriptions they take. This tool is especially vital because drug interactions kill as many as 100,000 Americans each year and consumers who see multiple providers are especially at risk.
Voice Reminders and Messaging We believe our OneHealthPass Records PHR product may create more efficient communication between doctors and patients. In addition to using a patient's personal OneHealthPass Records PHR telephone number to fax health information to a patient's secure on-line account, people can use the telephone number to leave a voice message, such as an appointment reminder, in a secure voice mailbox that is only accessible by the OneHealthPass PHR user. Users can also take advantage of this feature to leave themselves a reminder message such as for a doctor appointment or prescription refill reminder. Our OneHealthPass PHR product is designed to send a user a notification via e-mail when he or she receives a voice message. This gives users a helpful tool that they can access remotely.
Secondary Passwords on Selected File Folders Users can assign a second password to four of the file folders in their OneHealthPass PHR account. This feature creates an additional layer of security for personal vital or medical documents that a OneHealthPass PHR user does not want a
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doctor to have access to in the event that the user has given the doctor access to the account, or if the user does not want other family members to be able to see selected information.
Emergency Log-In For Physicians and Other Emergency Response Personnel Users can create a special password, discretely associated with each family member, which doctors and other emergency response personnel can use to gain access to the particular family member's medical records in the event of a medical emergency. This password grants access to an account but does not allow any additions, changes or deletions to be made to the account. In addition, users can decide which records a doctor will be able to see in an emergency situation. Users can write this password on an emergency sticker they receive when they enroll in our OneHealthPass PHR service, which can be affixed to a driver's license or personal ID. Users can even include a photograph in their emergency profile.
Health Information Library Users have access to an interactive audio and visual encyclopedia, licensed from a third-party, of over 2,000 health information topics presented in both English and Spanish.
U.S. Healthcare Market
On March 23, 2010, President Obama signed into law a major overhaul of the United States health care and health insurance industries. As part of this overhaul, we anticipate that there will be an increased demand for the cost savings inherent in the use of electronic medical records, particularly the benefits to patients by having a personal health record. Also on February 17, 2009, President Obama signed into law the American Reinvestment and Recovery Act of 2009, or the ARRA, representing the largest government-driven investment in electronic healthcare technologies. Within ARRA, the Health Information Technology for Economic and Clinical Health Act, or HITECH, provided more than $19 billion in incentives to healthcare organizations that modernize their medical records systems through the widespread use of health information technology, or HIT. Throughout the process of healthcare reform, the challenge to rein in healthcare expenses will continue to be one of the nation's biggest long-term fiscal challenge and this creates opportunities for HIT solutions that are shown to create greater efficiencies in care, safety and costs.
Our marketing strategy for our OneHealthPass calls for focus on four sales channels:
Direct to Consumer Marketing We intend to continue to focus on marketing our OneHealthPass directly to consumers via both on-line and off-line advertising vehicles. OneHealthPass is currently available to individuals on a monthly or annual subscription basis.
Corporate Sales and Employee Benefit Offering We are pursuing the human resources and benefits market to secure agreements or strategic arrangements providing for companies to offer our product to their employees and members. We believe the user-friendly nature of OneHealthPass makes it readily acceptable to employees and gives companies a low cost way to demonstrate their employee-friendliness.
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Affinity Groups and Membership Organizations OneHealthPass can be bundled with other health or travel-related services. For example, a travel accident insurance company can include our OneHealthPass in its suite of emergency medical and repatriation services for travelers going abroad. We believe giving users the ability to access their medical records in an emergency situation overseas may add considerable value to an insurance company's travel insurance policies. Additionally, an affinity group, such as an alumni association, may offer OneHealthPass as a recruitment or renewal tool.
Private Label Branding OneHealthPass is designed to allow site pages to be customized with a corporate, affinity group or membership organization logo and content that is specific to that entity. The technology built into OneHealthPass also is designed to allow companies, groups or organization to instantly communicate with hundreds or even thousands of employees in the event of an announcement or emergency situation.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. We use assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. We believe there have been no significant changes in accounting policies during the period ended March 31, 2012.
Recently Issued Accounting Standards
The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its condensed consolidated results of operation, financial position and/or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its consolidated financial statements.
Results of Operations
During the three and nine months ended March 31, 2012, we incurred a net loss of $149,192 and $465,011, respectively, compared to net loss of $904,806 and $4,388,479 for the three and nine months ended March 31, 2011, respectively. The decrease in our net loss for the three and nine months ended March 31, 2012 over the comparable period of the prior year is primarily due to the decrease in operations as a result of a lack of funding and cash resources.
Liquidity and Capital Resources
Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through the issuance of stock, convertible notes payable and by borrowings.
Operating expenses for the Company have been paid from the issuance of stock and convertible notes payable of the Company. At March 31, 2012 we had a deficit in working capital (current
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liabilities in excess of current assets) of $1,126,215. The working capital deficit at June 30, 2011 was $888,651. The increase in working capital deficit when compared to June 30, 2011 was principally due to the current period net loss which was partially offset by stock subscribed.
Since inception, we have financed our cash flow requirements through issuance of common stock and notes payable. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending generation of revenues. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings to the extent available or to obtain additional financing to the extent necessary to augment our working capital. In the future we need to generate sufficient revenues from sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.
As of March 31, 2012, the current assets decreased by $20,122 when compared to June 30, 2011 due to the collection of a stock subscription receivable and the proceeds were used to pay for services rendered.
As of March 31, 2012, the current liabilities increased by $217,442 when compared to June 30, 2011 current liabilities. The primary reason for the increase is our accrued payroll liabilities.
We anticipate that we will likely incur operating losses during the next twelve months. The Company’s lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks include, but are not limited to, an evolving and unpredictable business model, the management of growth and the establishment of revenue generating activities. These factors raise substantial doubt about our ability to continue as a going concern. To address these risks, we must, among other things, develop a customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Going Concern
The Company has total accumulated losses as of March 31, 2012 of ($11,237,388), and has had negative cash flows from operating activities during the period from inception through March 31, 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As such, the Company’s Independent Registered Public Accounting Firm has expressed a going concern opinion in their most recent audit report, dated July 25, 2012, for the year ended June 30, 2011.
The accompanying condensed consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. If we are unable to obtain additional financing we may cease operations and not be able to execute our
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operating plans. Accordingly, the condensed consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
We are currently delinquent in filing our SEC quarterly reports. However, management has opted to make the necessary filings to be become compliant with the Securities and Exchange Commission (SEC) reporting guidelines to assist us in our efforts to raise capital in order to execute on the Company’s business strategy. Management is attempting to raise capital, secure strategic alliances, and to execute our business strategy, however there is no assurance that these will be attained.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our management, with the participation of our chief accounting and executive officers evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on that evaluation, our chief accounting and chief executive officers concluded that, as of March 31, 2012, our disclosure controls and procedures were, subject to the limitations noted above, not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief accounting officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
There have been no changes in internal control over financial reporting during the three months ended March 31, 2012.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is presently not party to any legal proceedings.
Item 1A. Risk Factors.
For a discussion of the Company’s risk factors, please refer to Part 1, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, filed on July 27, 2012. There has been no material changes in the Company’s assessment of its risk factors during the quarter ended March 31, 2012.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During January 2012, the Company received $31,500 in cash for stock subscriptions representing 31,500 shares of common stock.
On January 17, 2012, the Company issued 100,000 shares of common stock to satisfy obligations under share subscription agreements for $25,000 in cash included in shares subscribed.
On February 29, 2012, the Company issued 266,667 shares of common stock to satisfy obligations under share subscription agreements for $40,000 in cash included in shares subscribed.
The issuance of securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act of 1933 and Regulation D as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. The sales of these securities were made without general solicitation or advertising.
The Company intends to use the proceeds from sale of the securities for the purchase of equipment for supplies and payroll for operations, professional fees, and working capital.
There were no underwritten offerings employed in connection with any of the transactions set forth above.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Mine Safety Disclosures
None; not applicable.
Item 5. Other Information.
None
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Item 6. Exhibits.
Index to Exhibits:
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Exhibit Number | Description of Exhibit |
| |
3.1 | Articles of Incorporation (incorporated by reference to the exhibits to Registrant's Form 8-K filed on October 3, 2007). |
| |
3.2 | By-Laws (incorporated by reference to the exhibits to Registrant's Form 10-SB filed on December 14, 2006). |
| |
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended |
| |
31.2 | Certification of Principal Accounting Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended |
| |
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) |
| |
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Accounting Officer) |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CAPITAL GROUP HOLDINGS. INC. FKA OASIS ONLINE TECHNOLOGIES CORP
| |
August 15, 2012 | /s/ Erik J. Cooper |
By: | Erik J. Cooper |
Its: | Chairman President Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
CAPITAL GROUP HOLDINGS. INC. FKA OASIS ONLINE TECHNOLOGIES CORP
| |
August 15, 2012 | /s/ Erik J. Cooper |
By: | Erik J. Cooper |
Its: | Chairman President Chief Executive Officer |
| |
| /s/ Eric Click |
By: | Eric Click |
Its: | Director Secretary Treasurer Chief Operating Officer Principal Accounting Officer |
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