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EX-31 - CAREADVANTAGE INC | v178874_ex31.htm |
EX-21 - CAREADVANTAGE INC | v178874_ex21.htm |
EX-32 - CAREADVANTAGE INC | v178874_ex32.htm |
EX-23.1 - CAREADVANTAGE INC | v178874_ex23-1.htm |
EX-10.37 - CAREADVANTAGE INC | v178874_ex10-37.htm |
EX-10.36 - CAREADVANTAGE INC | v178874_ex10-36.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended
December 31,
2009
Commission
file number 0-26168
CAREADVANTAGE,
INC.
(Exact
name of registrant as specified in its charter)
Delaware
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52-1849794
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(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification Number)
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485-C Route 1 South, Iselin, New
Jersey
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08830
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|
(Address
of principal executive offices)
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(Zip
Code)
|
Registrant’s
telephone number, including area code: (732) 362-5000
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per
share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes £ No þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes £ No þ
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 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 þ No £
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes £
No £ (Not
Applicable)
Indicate
by check mark if disclosures of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. þ
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
definition of “accelerated filer”, “large 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 þ
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).Yes £ No þ
The
aggregate market value of the registrant’s outstanding voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter: $140,263.03
The
number of shares of the registrant’s common stock outstanding as of February 22,
2010: 143,200,442
Documents
Incorporated by Reference
None
This
Annual Report of CareAdvantage, Inc. (“CareAdvantage” or the “Company”) on Form
10-K contains forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995. Readers of this report
should be aware of the speculative nature of “forward-looking
statements”. Statements that are not historical in nature, including
the words “anticipate”, “estimate”, “should”, “expect”, “believe”, “intend”, and
similar expressions, are based on current expectations, estimates and
projections about (among other things) the industry and the markets in which the
Company and its subsidiaries operate; they are not guarantees of future
performance. Whether actual results will conform to expectations and
predictions is subject to known and unknown risks and uncertainties, including
risks and uncertainties discussed in this Form 10-K, particularly relating to
revenues from performance-based services and re-negotiations of existing and new
contracts with customers, general economic, market or business conditions;
changes in our competitive position or competitive actions by other companies;
changes in laws or regulations or policies of federal and state regulators and
agencies; and other circumstances beyond the Company’s
control. Consequently, all of the forward-looking statements made in
this document are qualified by these cautionary statements, and there can be no
assurance that the actual results anticipated will be realized, or if
substantially realized, will have the expected consequences on the Company’s
business or operations. For a more complete discussion of these and
other risk factors, see Item 1A of Part I of this report. Except as
required by applicable laws, we do not intend to publish updates or revisions of
forward-looking statements it makes to reflect new information, future events or
otherwise.
Except as
expressly provided otherwise, the terms “CareAdvantage” and Company” as used in
this report refers to CareAdvantage, Inc. and the terms “we”, “us” and “our”
refer collectively to CareAdvantage, Inc. and its consolidated
subsidiaries.
PART
I
ITEM
1. BUSINESS
Introduction
and Background
CareAdvantage, Inc. (“CareAdvantage” or
the “Company”) and its direct and indirect subsidiaries, CareAdvantage Health
Systems, Inc. (“CAHS”) and Contemporary HealthCare Management, Inc. (“CHCM”),
are in the business of providing healthcare consulting services, data
warehousing and analytic services designed to enable integrated health care
delivery systems, healthcare plans, employee benefit consultants, other care
management organizations, self-insured employers and unions to reduce the costs,
while improving the quality of medical services provided to the healthcare
participants. The services include care management program enhancement services,
executive and clinical management services, training programs, risk
stratification and predictive modeling. The Company operates in one business
segment.
As part of offering its healthcare
consulting services, the Company has developed RightPath®
Navigator (“RPNavigator”), a proprietary tool to help its customers better
understand and forecast resource consumption, risk, and costs associated with
their respective populations. In providing its services, the Company licenses
RPNavigator to its customers and provides consulting services in connection with
that licensing. The tool uses 3M Company’ (“3M”) Clinical Risk Groups (CRGs), a
classification methodology that groups members according to risk related to the
individual’s clinical history and demographic information. RPNavigator, offers
customers:
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•
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actionable
financial and utilization data analytics;
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•
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clinical
analyses of health status and medical cost trends;
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•
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identification
of key management and quality opportunities;
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•
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enhanced
group-/segment-specific reporting;
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•
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transparent
methodology;
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•
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measurement
of internal and external vendors; and
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•
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reduced
dependence on internal resources to develop and produce required reports
to accomplish these tasks.
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2
With
respect to RPNavigator license fees, most of the Company’s customers that
license RPNavigator are required, as part of their agreements with the Company,
to receive consulting services from the Company. All contracts provide for
licensing of RPNavigator and consulting services at a fixed monthly fee, a per
member per month fee, or a combination of both. The Company earns the revenue
from licensing and consulting services on a monthly basis and recognizes revenue
from both services on a monthly basis at either a fixed monthly fee, a per
member per month fee or a combination of both. Additionally, the Company
provides separate consulting services on a fee for service basis. Revenue for
these consulting services is recognized as the services are provided.
Prior to
January 1, 2003, the Company provided certain health care cost containment
services, including utilization review, case management and disease management
and independent reviews. The Company provided these services
principally to Horizon Blue Cross and Blue Shield of New Jersey, formerly known
as Blue Cross Blue Shield of New Jersey, Inc. (“Horizon BCBSNJ”), which at the
time was a major stockholder of the Company, and another Blue Cross Blue Shield
organization. During 2002, the Company ceased providing these
services to the other Blue Cross Blue Shield organization, and as of December
31, 2002, to Horizon BCBSNJ on account of Horizon BCBSNJ’s termination of the
Services Agreement as of that date. As a result, beginning January 1,
2003, the Company ceased offering these services to new customers, since it no
longer maintained the employees and infrastructure necessary to support their
delivery.
Management
believes that the Company must continue the refinement of its current service
lines in order to continue adding value to existing and potential customers.
Management intends to continue its evaluation of each service in light of
anticipated changes in the health care industry, the cost to enter each such
service line as well as the availability and timeliness of competent resources.
To further expand its line of services, the Company contemplates pursuing
alternatives to its internal product and service development efforts by entering
into strategic alliances and joint ventures.
The
Company’s executive offices are located at 485-C Route 1 South, Metropolitan
Corporate Plaza, Iselin, New Jersey 08830 and its telephone number is (732)
362-5000.
Industry
Overview: Consumerism, Health Care Expenditures and Managed Care
The
American health care market continues to evolve within the environmental
emphases on consumer choice, coverage and confidentiality protections, and is
still battling the double challenge of accelerating costs and an aging
population. Employer groups are
still trying to find a balance, providing health insurance to employees in order
to attract the highest quality human capital, while developing strategies to
control escalating costs. In addition to the previous considerations,
the latest emphasis is shifting towards the principle of data transparency and
exchange of electronic health care information.
Data
transparency and exchange have several key characteristics, which include easy
accessibility, standardized performance metrics, nationally
recognized/MD-approved set of rules governing claim coding/grouping procedures,
automated data sharing/integration availability via the Internet, an underlying
reward system using chronic disease in lieu of episodic management/efficiency
and demonstration of intervention benefits in a credible way. The
Health Information Technology for Economic and Clinical Health Act (“HITECH
Act”) and economic stimulus package go a long way toward providing protection
for health information while creating standards for transfer/sharing of
electronic health information. In addition is the creation of grants
for the adoption of electronic health records (EHR) and health information
exchanges.
The above
focus of the marketplace points to an increased emphasis on health care quality
and cost-benefit. Tools that provide clear and defensible information
that is based on best practice and express results based on the relative
severity of disease of the underlying population provide full and accurate
disclosure. The Gartner Group has stated, “Without severity adjusted
data, no comparison can be made between entities within any stakeholder category
(e.g. hospital vs. hospital or MCO vs. MCO) because all differences may be
completely attributable to variations among the types and intensities of
diseases underlying the data.” 1 Increasingly
consumers, purchasers, insurers and providers will need tools that provide
severity-adjusted data in order to provide a clear and accurate picture of
health care quality attributable to different health plans and
groups. These same tools are critical to identify best practices and
test disease management activities and new treatment options.
Services
and Products
The
Company is a management consulting firm specializing in the improvement of
health care delivery and quality while reducing unnecessary cost. The
Company has a proven track record for detecting and reducing unnecessary
utilization while optimizing program performance and quality of
care. Program performance and quality of care are measured not only
on the basis of reduced costs but also using the context of a population’s
relative disease burden/severity, the rate at which it has progressed and the
degree to which the interventions of particular providers and programs have had
an impact on that progression rate.
1 The
Gartner Report - The Gartner Group - 1999
3
CareAdvantage
clients include health plans, employers, hospital systems, providers, state
governments and other purchaser groups. For the past 15 years, the
Company has worked with many leading health plans to develop effective,
affordable and timely data-driven strategies that improve case, disease and
utilization, as well as operations and network management. These
strategies have helped CareAdvantage clients to more effectively:
·
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Identify
and quantify disease burden and associated risk with their entire
population and sub-populations;
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Improve
member care quality through the defensible evaluation of health care
providers and facilities;
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Facilitate
provider cooperation and collaboration based on case mix and
severity-adjusted data;
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Forecast
resource consumption based on disease burden;
and
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Optimize
allocation of resources.
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Recently,
the Company has also assisted health plan clients with respect to further
validating the value that they bring to purchasers and have had a demonstrable
impact on sales retention and attraction of new sales. The
RPNavigator suite of services that the Company offers our state government
customers provides opportunities in transparency, improving quality, controlling
costs and providing information to consumers and healthcare policymakers to make
informed decisions.
In
addition, this expertise has been applied to help employers assess the
efficiency and effectiveness of their present health care insurers, carriers and
supporting vendors. CareAdvantage achieves this by empowering
employers with the information, skills and guidance necessary to facilitate
future purchasing decisions and optimize managerial and administrative
practices.
In order
to deliver these solutions, CareAdvantage utilizes experienced health plan
executives and medical directors as well as a wide range of care management
operations, clinical data analysis and information technology (IT)
subject-matter experts. It is this vast array of experience that
enables CareAdvantage to benefit clients with objective and quantifiable insight
to develop the strategies and tactical initiatives that combine care management
processes with a deep understanding of medical and health care insurance-related
best practices.
Operations
The
Company utilizes a multi-disciplinary team approach in providing its management,
data analysis and consulting services. The Company, through its
employees and independent contractors, assesses care management operations,
systems resources, integration and outcomes. Typically, assessment
occurs on the client’s site, through interviews and data analysis. At
the center of CareAdvantage’s data-driven analyses is RPNavigator, the next
generation software solution. RPNavigator categorizes and quantifies
a population’s disease burden and provides a clear picture of the health status
and severity associated with its clients’ member
populations. RPNavigator’s underlying infrastructure incorporates
classification methodologies from 3M Health Information Systems along with
various analytical techniques to stratify the population and describe the
individual member’s associated risks in intuitive ways. It also
enables the valid assessment of existing health care quality and cost as well as
projection of future risk from a resource consumption, disease progression and
mortality perspective. RPNavigator includes a data mining tool (RPN3) that employs
multi-dimensional “cubes” (data structures) for online analytic processing
(OLAP). RPN3
references the same data set within RPNavigator and allows power users
additional flexibility in querying that data.
RPNavigator
utilizes this information to stratify its clients’ members, groups and providers
through the use of a wide range of clinical and demographic descriptors to
quantify their risk as well as evaluate the impact of key interventions and
programs. These descriptors and the underlying logic increase the
associated transparency of the resulting analyses and support the new direction
of the industry. Among the benefits of this solution is the
ability of CareAdvantage clients to:
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Access
meaningful information via an Internet-based
portal;
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Track
population and member-related changes in disease status and severity over
time;
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Compare
client sub-populations;
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Profile
provider using case mix and severity-adjusted
techniques;
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Select
and prioritize members who would best benefit from care management
interventions;
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4
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Understand
adverse selection associated with existing and/or newly-obtained business
as well as understand the impact of a plan’s overall turnover in terms of
stayers and leavers; and
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Reduce
the dependence on internal resources to develop and produce required
reports to accomplish these tasks.
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There are
several related efforts that result in additional sources of income for
CareAdvantage, including:
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Developing
new standardized analyses on a client-specific basis to meet a particular
need for that client;
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Undertaking
broader analytic consulting projects, using the methodology and logic
within RPNavigator, on behalf of clients that need CareAdvantage’s
expertise in analyzing and interpreting the
data;
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·
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Offering
experienced health care executives for care management program leadership,
internal physician review services, and mentoring of less experienced
health plan staff (“Executive and Clinical Management
Services”).
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CareAdvantage
also supports its clients through the provision of a wide range of consulting
services to develop and implement the right solutions. These
solutions provide the health care industry with strategies and tactical
initiatives for effectively managing health care consumption, reducing costs and
improving the quality and cost benefit of care.
For its
services, the Company seeks to be compensated either (i) on a fee-for-service
basis; (ii) per member per month (PMPM); or (iii) on the basis of a combination
of both fee-for-service and PMPM.
Customers
and Marketing
The
Company currently provides its services to Blue Cross Blue Shield (“BCBS”)
organizations and other health plans, employers, organized labor, other health
care purchasers and the State of Utah Department of Health pursuant to one or a
combination of the compensation arrangements described above.
The
Company markets its services to the health insurance industry, health service
organizations, hospitals, insurance carriers, state governments, employers and
unions.
Two
customers, BCBS organizations, accounted for approximately 49% and 24% of
license fees and services revenue for the year ended December 31,
2009.
Competition
The
Company faces intense competition in a highly fragmented market of managed care
services firms. Several managed care service firms currently provide
and aggressively market services, which are in some respects similar to the
Company’s services. There are also a number of organizations developing a
variety of approaches that are in competition with the Company’s products and
services. Some of the Company’s competitors have substantially
greater financial resources and employ substantially greater numbers of
personnel.
The
Company intends to compete by offering what it believes to be the most
comprehensive approach in the marketplace to address the medical cost and
quality of care issues. Further, it believes that its competitive
position is enhanced by its ability to develop tailored programs for large
clients.
Government
Regulation
Health
Care Regulation
Government
regulation of health care cost containment services, such as those provided by
the Company, is a changing area of law that varies from jurisdiction to
jurisdiction and
generally gives responsible administrative agencies broad
discretion. The Company is subject to extensive and frequently
changing federal, state and local laws and regulations concerning company
licensure, conduct of
operations, acquisitions of businesses operating within its industry, the
employment of physicians and other licensed professionals by business
corporations and the reimbursement for services. Regulatory
compliance could have an adverse effect on the Company’s present business and
future growth by restricting or limiting the manner in which it can acquire
businesses, market its services, and contract for services with other health
care providers by limiting or denying licensure or by limiting its reimbursement
for services provided.
It should
be noted that in providing utilization review and case management services, the
Company made recommendations regarding what is considered appropriate medical
care based upon professional judgments and established
protocols. However, the ultimate responsibility for all health care
decisions is with the health care provider. Furthermore, the Company
is not an insurer, and the ultimate responsibility for the payment of medical
claims is with the insurer.
5
Although
the Company is not a health care provider, it could have potential liability for
adverse medical consequences. The Company could also become subject
to claims based upon the denial of health care services and claims such as
malpractice arising from the acts or omissions of health care
professionals. Its exposure in this regard is substantially reduced
since it ceased providing utilization review and case management services as of
December 31, 2002. Nonetheless, until the applicable statutes of
limitations have run, the Company retains exposure for past activities as well
as on account of its continued internal physician review services offered as
part of its Executive and Clinical Management Services.
The
Company’s operations in a particular state are typically subject to
certification by the appropriate state agency. The Company has
received or has filed the necessary application for such certification where
required. In addition, various state and federal laws regulate the
relationships between providers of health care services and physicians and other
clinicians, including employment or service contracts, investment relationships
and referrals for certain designated health services. These laws
include the fraud and abuse provisions of the Medicare or Medicaid statutes,
which prohibit the solicitation, payment, receipt or offering of any direct or
indirect remuneration for the referral of Medicare or Medicaid patients or for
the ordering or providing of Medicare or Medicaid covered services, items or
equipment. Violations of these provisions may result in civil or
criminal penalties for individuals or entities including exclusion from
participation in the Medicare and Medicaid programs. Several states
have adopted similar laws that cover patients in private programs as well as
government programs. Because the anti-fraud and abuse laws have been
broadly interpreted, they may limit the manner in which the Company can acquire
businesses and market its services to, and contract for services with, other
health care providers.
The
Company’s management believes that its present operations are in compliance with
all applicable laws and regulations and that it maintains sufficient
comprehensive general liability and professional liability insurance coverage to
mitigate claims to which the Company may be subject in the future. The Company
is unable to predict what, if any, government regulations affecting its business
may be enacted in the future or how existing or future regulations may be
interpreted. To maintain future compliance, it may be necessary for
the Company to modify its services, products, structure or marketing
methods. This could increase the cost of compliance or otherwise
adversely affect the Company’s operations, products, profitability or business
prospects.
Health
Information Security and Privacy Practices
The
Health Insurance Portability and Accountability Act of 1996, as amended,
(“HIPAA”) is a federal law that affects the use, disclosure, transmission and
storage of individually identifiable health information, referred to as
“protected health information.” HIPAA was enacted for the purpose of, among
other things, protecting the privacy and security of protected health
information. As directed by HIPAA, the Department of Health and Human Services
(“DHHS”) must promulgate standards or rules for certain electronic health
transactions, code sets, data security, unique identification numbers and
privacy of protected health information. DHHS has issued some of these rules in
final form, while others remain in development. HIPAA and the standards
promulgated by DHHS apply to certain health plans, healthcare clearinghouses and
healthcare providers (referred to as “covered entities”), which includes some of
our customers. The HITECH Act, which was enacted as part of the
American Recovery and Reinvestment Act of 2009, requires hospitals and health
care systems to make investments in their clinical information
systems. Additionally, the HITECH Act significantly expanded HIPAA by
extending the security standards of HIPAA to “business associates” of covered
entities. Under the HITECH Act, business associates are required to
establish administrative, physical and technical safeguards and are subject to
direct penalties for violations. Our activities frequently entail us
acting in the capacity of a business associate to the customers that we serve,
and therefore we are covered by the patient privacy and security standards of
HIPAA and subject to oversight by DHHS. We believe that we have
taken all necessary steps to comply with HIPAA, as it applies to us as a
business associate, but it is important to note that DHHS could, at any time in
the future, adopt new rules or modify existing rules in a manner that could
require us to change our systems or operations.
See the
“Risk Factors” section in Item 1A herein for more information regarding the
impact of privacy and security regulation on our Company.
Proposed
Health Care Reform
If
proposed federal and state health care reform initiatives are enacted, the
payments for and the availability of health care services may be
affected. Aspects of certain proposals, such as reductions in
Medicare and Medicaid payments, could adversely affect the
Company. The Company is unable to predict what impact, if any, future
enacted health care reform legislation may have on its current and future
business, and no assurance can be given that any such reforms will not have an
adverse impact on its business operations or potential
profitability.
6
On March
21, 2010, the U.S. House of Representatives passed the Patient Protection and
Affordable Care Act of 2010 (the Affordable Care Act”), which was signed into
law by President Obama on March 23, 2010. Also, on March 25, 2010,
both houses of the U.S. Congress passed the Health Care and Education
Reconciliation Act of 2010 (the “Reconciliation Act”), which strike's out and
modifies a number of tax and revenue provisions in the Affordable Care
Act. These pieces of legislation are the most sweeping health system
changes since the passage of Medicare in 1965. Prior to becoming law,
the Reconciliation Act must be signed by the President. Just after
President Obama signed the Affordable Care Act into law, Senator Jim DeMint
introduced Senate Bill 3152, which, if adopted, would repeal the health care
reform law. Additionally, on the same day, 14 states filed lawsuits
challenging the constitutionality of the health care reform law. The
status of the health care reform law is at present very uncertain and the
Company cannot predict if or how Senate Bill 3152 (or any other legislation that
may subsequently be introduced) or any of these lawsuits will impact the new
legislation.
See the
“Risk Factors” section in Item 1A herein for more information regarding the
impact of the recently enacted health care law.
Employees
At
December 31, 2009, we employed a total of 14 employees, of which 13 were
employed on a full-time basis. Of the full-time employees, ten
employees are engaged in servicing its clients and three are administrative
support, finance and human resources personnel. None of the Company’s
employees are party to any collective bargaining agreements.
ITEM
1A. RISK FACTORS
Company
Risk
The Company has a
history of losses. At December 31, 2009, the Company had
working capital of approximately $417,000, stockholders’ equity of approximately
$164,000 and an accumulated deficit of approximately $24,399,000. At
December 31, 2008, the Company had negative working capital of approximately
$240,000, stockholders’ deficit of approximately $379,000 and an accumulated
deficit of approximately $24,370,000. The losses in recent years were
attributable in large part to legal fees incurred in protecting the Company’s
intellectual property, rent for space in excess of the Company’s needs and the
difficulty in obtaining revenue from a new product. Although we had
net income of $180,000 for the 12 months ended December 31, 2009, we may not be
able to increase profitability on a quarterly or an annual basis in the
future. If we experience net losses in future periods, we may not be
able to timely satisfy our obligations.
We face
aggressive competition because new competitors can enter our field
easily. The Company faces intense competition in a highly
fragmented market of managed care services and new competitors can enter our
field easily. We believe our ability to compete will depend in part
upon our ability to:
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·
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continue
upgrading technology to leading
edge;
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·
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respond
effectively to technological
changes;
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·
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focus
development efforts on data available in electronic health record
environment; and
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·
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meet
the increasingly sophisticated needs of our
customers.
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Increased
competition may result in price reductions, reduced gross margins, and loss of
market share, any of which could have a material adverse effect on our results
of operations. In addition, pricing, gross margin, and market share could be
negatively impacted further as a greater number of available products in the
marketplace increases the likelihood that product and service offerings in our
markets become more fungible and price sensitive.
Due to increased
merger and acquisition activity, we may face stronger competition in the
future. Our industry, as well as many of our customers’
industries (i.e.,
health insurers and HMOs), have experienced significant merger and acquisition
activity. Merger and acquisition activity may result in decreased
opportunities to provide our services. The acquisition of a customer
could reduce our revenue and have a negative impact on our results of operation
and financial condition. A smaller overall market for our products and services
could also result in lower revenue and margins.
7
Revenue from a
limited number of customers comprises a significant portion of our total
revenue. Two customers, BCBS organizations, accounted for
approximately 49% and 24% of license fees and service revenue for the year ended
December 31, 2009. If the BCBS customers terminate or modify existing
contracts or experience business difficulties, it could adversely affect our
operations.
We depend on
effective information systems to deliver products and services to
customers. We depend on effective information systems and have
linked our computer systems with our customers’ computer systems in order to
conduct and deliver our products and services. Our information
systems require an ongoing commitment of resources to maintain and enhance
existing systems and develop new systems in order to keep pace with continuing
changes in information processing technology, evolving industry standards, and
changing customer preferences. Our failure to maintain effective and
efficient information systems could cause loss of existing customers, difficulty
in attracting new customers, customer disputes, regulatory problems and
increases in administrative expenses.
Our RPNavigator
tool is dependent upon third-party risk stratification
software. The Company currently has a license from 3M to use
its Clinical Risk Grouping Software™, which license expires on April 1, 2013,
and renews automatically thereafter for successive one-year terms unless
terminated by either party by written notice at least one year in
advance. In the event that 3M terminates its license at the end of
the term, the Company would be required to license other third-party risk
stratification software and would be required to reconfigure RPNavigator to
accommodate such other software. Moreover, although risk stratification software
is available from other third parties, including Johns Hopkins University and/or
its affiliates, the Company believes that the 3M software is more robust than
its competitors because it considers the severity of illnesses and
diseases. Because our RPNavigator tool depends on the integrity of
third-party-risk stratification software, if the information contained in that
software was found or perceived to be inaccurate, or if the information is
generally perceived to be unreliable, we may not be able to maintain commercial
acceptance.
The introduction
of software products incorporating new technologies and the emergence of new
industry standards could render the Company’s existing software products less
competitive, obsolete or unmarketable. There can be no
assurance that the Company will be successful in developing and marketing new
software products that respond to technological changes or evolving industry
standards. If the Company is unable, for technological or other reasons, to
develop and introduce new software products cost-effectively in a timely manner
in response to changing market conditions or customer requirements, the
Company’s business, results of operations and financial condition may be
adversely affected.
Developing
or implementing new or updated software products and services may take longer
and cost more than expected. The Company relies on a combination of internal
development, strategic relationships, and licensing to develop its software
products and services. The cost of developing new healthcare information
services and technology solutions is inherently difficult to
estimate. If the Company is unable to develop new or updated software
products and services cost-effectively on a timely basis and implement them
without significant disruptions to the existing systems and processes of the
Company’s customers, the Company may lose potential sales and harm its
relationships with current or potential customers.
To succeed, we
must maintain the confidential nature of criteria that we have acquired or
developed for the delivery of health care services in medical specialty
areas. The success of our knowledge and information-related
business depends on our ability to maintain the ownership rights to our
products. We rely on agreements with customers, confidentiality
agreements with employees, trade secrets, trademarks and patents to protect our
ownership rights. These legal protections and precautions may not
prevent misappropriation of our intellectual property. In addition,
substantial litigation regarding intellectual property rights exists in the
software industry, and we expect software products to be increasingly subject to
third-party infringement claims as the number of products and competitors in our
industry segment grows.
Recently enacted
health care reform legislation could adversely impact us. On
March 21, 2010, the U.S. House of Representatives passed the Affordable Care
Act, which was signed into law by President Obama on March 23,
2010. Also, on March 25, 2010, both houses of the U.S. Congress
passed the Reconciliation Act, which strikes out and modifies a number of tax
and revenue provisions in the Affordable Care Act. As stated
previously in this report, these pieces of legislation are the most sweeping
health system changes since the passage of Medicare in 1965. The
Reconciliation Act must be signed by the President prior to its becoming
effective. Just after President Obama signed the Affordable Care Act
into law, Senator Jim DeMint introduced Senate Bill 3152, which, if adopted,
would repeal the health care reform law. Additionally, on the same
day, 14 states filed lawsuits challenging the constitutionality of the health
care reform law. The status of the health care reform law is at
present very uncertain and the Company cannot predict if or how Senate Bill 3152
(or any other legislation that may subsequently be introduced) or any of these
lawsuits will impact the new legislation.
As they
stand now, the Affordable Care Act and the Reconciliation Act completely reform
the U.S. health care system. Among other things, the legislation
significantly increases governmental involvement in healthcare, requires most
Americans to carry health insurance coverage, with federal subsidies to help
many afford the premiums (insurance companies would be barred from denying
coverage to people with medical problems or charging them more); and completely
overhauls the environment in which healthcare industry constituents
operate. This legislation impacts most employers, virtually all tax
payers and all segments of the health care industry. It is impossible
to predict the ultimate impact that this new legislation will have on the health
care industry. Possible outcomes may be that healthcare industry
constituents may reduce their expenditures or postpone expenditure decisions,
including expenditures for our product and service offerings. Such a
response, and others that we cannot predict or foresee at this time, could have
a significant and material adverse impact on our current and future business
operations and, thus, our financial condition and results of
operations.
8
Federal and state
laws that protect patient health information may increase our costs and limit
our ability to collect and use that information. There
is substantial state and federal regulation of the confidentiality of patient
health information and the circumstances under which such information may be
used by, disclosed to, or processed by us as a consequence of our contacts with
various health plans and healthcare providers. Although compliance with these
laws and regulations is presently the principal responsibility of the health
plan, hospital, physician or other healthcare provider, regulations governing
patient confidentiality rights are dynamic and rapidly evolving. As
such, laws and regulations could be modified so that they could directly apply
to us. Also, changes to the laws and regulations that would require
us to change our systems and our methods may be made in the future, which could
require significant expenditure of capital and decrease future business
prospects. Furthermore, additional federal and state legislation
governing the dissemination of patient health information may be proposed and
adopted, which may also significantly affect our business. Finally,
certain existing laws and regulations require healthcare entities to
contractually pass on their obligations to other entities with which they do
business; as such, we are indirectly impacted by various additional laws and
regulations.
The
Company and the healthcare industry generally are impacted by HIPAA, which
mandates, among other things, the adoption of standards to enhance the
efficiency and simplify the administration of the healthcare
system. HIPAA is a federal law that affects the use, disclosure,
transmission and storage of individually identifiable health information
referred to as “protected health information.” These restrictions and
requirements are set forth in the Privacy Rule and Security Rule portions of
HIPAA. DHHS must promulgate standards or rules for certain electronic
health transactions, code sets, data security, unique identification numbers,
and privacy of protected health information. DHHS has issued some of
these rules in final form, while others remain in development. In general, under
these rules, we function as a “business associate” to some of our customers (who
are considered to be “covered entities” under HIPAA). The two rules relevant to
us and our customers—the Privacy Rule, and the Security Rule—are discussed
below. It is important to note that DHHS could, at any time in the
future, modify any existing final rule in a manner that could require us to
change our systems or operations.
The
Privacy Rule prohibits a covered entity from using or disclosing an individual’s
protected health information unless the use or disclosure is authorized by the
individual or is specifically required or permitted under the Privacy
Rule. The Privacy Rule imposes a complex system of requirements on
covered entities for complying with the basic standard. The Privacy
Rule directly applies to covered entities which, in most instances, are required
to execute a contract with any business associate that performs certain services
on the covered entity’s behalf involving the exchange or creation of protected
health information. Our health plan customers are covered entities, and to the
extent that we are required by our customer contracts to ensure that we comply
with various aspects of the Privacy Rule, we believe that we meet the
requirements of the Privacy Rule. The Privacy Rule and other similar
state healthcare privacy regulations could materially restrict the ability of
healthcare providers and health plans to disclose protected health information
from patient records using our products and services, or it could require us to
make additional capital expenditures to be in
compliance. Accordingly, the Privacy Rule and state privacy laws may
significantly impact our products’ use in the healthcare delivery system and,
therefore, decrease our revenue, increase working capital requirements and
decrease future business prospects.
The
Security Rule applies to the use, disclosure, transmission, storage and
destruction of electronic protected health information by covered entities. The
Security Rule requires that covered entities must implement administrative,
technical and physical security measures to safeguard electronic protected
health information. Also, as with the Privacy Rule, under the
Security Rule, covered entities are required to contractually bind their
business associates to certain aspects of the Security Rule. As such,
where we function as a business associate to a customer that is a covered
entity, we are required to enter into a business associate contract with that
customer. Such agreements must, among other things, provide adequate
written assurances:
•
|
as to how we will use and disclose the protected
health information;
|
•
|
that we will implement reasonable administrative,
physical and technical safeguards to
protect such information from
misuse;
|
•
|
that we will enter into similar agreements with
our agents and subcontractors that have access to the
information;
|
•
|
that we will report security incidents and other
inappropriate uses or disclosures of
the information; and
|
•
|
that we will assist the covered entity with
certain of its duties under the Privacy
Rule.
|
9
With the
enactment of the HITECH Act, the Privacy Rule and Security Rule of HIPAA have
been modified and expanded. The HITECH Act applies certain of the
HIPAA privacy and security requirements directly to business associates of
covered entities. In other words, we must now directly comply with
certain aspects of the Privacy and Security Rules, and are also subject to
enforcement for a violation of HIPAA standards. Significantly, DHHS,
as required by the HITECH Act, has issued a regulation setting forth new
mandatory federal requirements for both covered entities and business associates
regarding notification of breaches of security involving protected health
information.
Any
failure or perception of failure of our products or services to meet applicable
HIPAA standards and related regulatory requirements could expose us to certain
notification, penalty and/or enforcement risks and could adversely affect demand
for our products and services, and force us to expend significant capital,
research and development and other resources to modify our products or services
to address the privacy and security requirements of our customers and
HIPAA. The costs of complying with these contractual
obligations, new legal and regulatory requirements, and the potential liability
associated with the failure to do so could have a material adverse effect of on
our business, financial condition and results of operations.
We
believe our business practices and software offerings are consistent with the
Privacy Rule and Security Rule, as modified by the HITECH Act. However, DHHS
continues to publish change notices to the existing rules and propose new rules.
There is no certainty that we will be able to respond to all such rules in a
timely manner and our inability to do so could adversely affect our
business.
A breach of
security may cause the Company’s customers to curtail or stop using the
Company’s services. Accidental or
willful security breaches or other unauthorized access by third parties to the
Company’s information systems, the existence of computer viruses in the
Company’s data or software and misappropriation of the Company’s proprietary
information could expose the Company to a risk of information loss, litigation
and other possible liabilities which may have a material adverse effect on the
Company’s business, financial condition and results of operations. If security
measures are breached because of third-party action, employee error, malfeasance
or otherwise, or if design flaws in the Company’s software are exposed and
exploited, and, as a result, a third party obtains unauthorized access to any
customer data, the Company’s relationships with its customers and its reputation
will be damaged, the Company’s business may suffer and the Company could incur
significant liability. Because techniques used to obtain unauthorized
access or to sabotage systems change frequently and generally are not recognized
until launched against a target, the Company may be unable to anticipate these
techniques or to implement adequate preventative measures.
Investment
Risks
The market price
of the Company’s Common Stock has been extremely volatile. The
market price of the Company’s Common Stock has shown volatility and sensitivity
in response to many factors, including general market trends, public
communications regarding managed care, legislative or regulatory actions, health
care cost trends, pricing trends, competition, earnings or membership reports of
particular industry participants, and acquisition activity.
Because the
Common Stock is traded in the over-the-counter market in the OTC Bulletin Board,
our stock is illiquid. The Company’s Common Stock is not
listed on any exchange. Rather, shares of Common Stock are traded
through The NASDAQ Stock Market’s Over-the-Counter Bulletin Board, or “OTC
Bulletin Board,” in the over-the-counter market. The OTC Bulletin
Board is a regulated quotation service that displays real-time quotes, last-sale
prices and volume information in over-the-counter equity
securities. It is a quotation medium for subscribing members, not an
issuer listing service, and should not be confused with national stock exchanges
such as The NASDAQ Stock Market. As a result, an investor may find it
more difficult to dispose, or to obtain accurate quotations as to the value, of
our Common Stock. Because our Common Stock is subject to federal
securities rules affecting “penny stock,” the market liquidity for our Common
Stock is adversely affected.
The Common Stock
is subject to additional sales practice requirements for low priced
securities. The Company’s Common Stock is currently subject to
Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional
sales practice requirements on broker-dealers that sell shares of the Common
Stock to persons other than established customers and “accredited investors” or
individuals with net worth in excess of $1,000,000 or annual incomes exceeding
$200,000 or $300,000 together with their spouses.
The
rule:
|
·
|
requires
a broker-dealer to make a special suitability determination for the
purchaser and have received the purchaser’s written consent to the
transaction prior to sale. Consequently, the rule may affect
the ability of broker-dealers to sell the Company’s Common Stock and may
affect the ability of the Company’s shareholders to sell any of their
shares of Common Stock in the secondary
market;
|
10
|
·
|
generally
defines a “penny stock” to be any non-NASDAQ equity security that has a
market price less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain
exceptions;
|
|
·
|
requires
broker-dealers to deliver, prior to a transaction in a “penny stock”, a
risk disclosure document relating to the “penny stock”
market.
|
Disclosure
is also required to be made about compensation payable to both the broker-dealer
and the registered representative and current quotations for the
securities. In addition, the rule requires that broker-dealers
deliver to customers monthly statements that disclose recent price information
for the “penny stock” held in the account and information on the limited market
in penny stocks. Because of these regulations, broker-dealers may
encounter difficulties in their attempt to sell shares of the Company’s Common
Stock, which may affect the ability of selling shareholders or other holders to
sell their shares in the secondary market and have the effect of reducing the
level of trading activity in the secondary market. These additional
sales practice and disclosure requirements could impede the sale of the Common
Stock. In addition, this rule may decrease the liquidity of the
Company’s Common Stock, with a corresponding decrease in the price of our
securities.
ITEM
1B. UNRESOLVED STAFF
COMMENTS
None.
ITEM
2. PROPERTIES
The
Company’s executive offices and operations, comprising approximately 28,000
square feet of office space, are located in Metropolitan Corporate Plaza in
Iselin, New Jersey. The Company, through its subsidiary, CAHS,
had executed a six-year lease for this facility commencing June 15, 1995, which
was extended during 2000 for 10 additional years. The Company
guaranteed CAHS’ obligations under the lease. The extended lease
provides for an annual base rent of approximately $668,000 with annual
escalations based on increases in real estate taxes and operating
expenses.
On
January 10, 2005, the Company, through CAHS, entered into a Second Amendment to
Lease Agreement commencing January 1, 2005 to provide for the reduction in base
rent and the waiver of escalations based on increases in real estate taxes and
operating expenses, and to provide the landlord with the option to recapture up
to 50% of the leased premises at any time. (The landlord was granted
the recapture option because when the Company ceased providing services to
Horizon BCBSNJ, the Company no longer needed this space.) The
expiration date of the lease, March 31, 2011, remained unchanged by this Second
Amendment.
Under the
Second Amendment to Lease Agreement, the Company is required to meet the
following conditions: (1) the Company cannot assign the lease except for an
assignment of the lease or a sublet provided under the original lease; (2) the
Company cannot be in default under any terms and conditions of the original
lease. In the event the Company fails to meet these conditions, the
reduction in base rent, real estate taxes and operating expenses will be
nullified and entirely forfeited, and the Company will be immediately required
to pay the landlord additional rent for the difference in the base rent, and
additional rent for all escalations provided in the Second Amendment to Lease
Agreement and the original lease as extended. As of January 1, 2005,
the additional rent attributable to the difference in base rent is
$1,257,000.
Effective April 19, 2007 (the
“Recapture Date”), the landlord “recaptured” certain portions of the leased
premises pursuant to the provisions of the Second Amendment to Lease
Agreement. This recapture does not reduce or modify, in any respect,
the Company’s obligations to pay to the landlord monthly rent or, in the event
the Company fails to meet above conditions, additional
rent. Effective as of the Recapture Date, the premises leased by the
Company under the lease is deemed to be, and refers only to, 15,629 rentable
square feet.
As of March 26, 2008, the Company and
landlord entered into a Third Amendment of Lease which provided that the
reduction in base rent and the waiver of escalations based on increases in real
estate taxes and operating expenses shall be deemed to be amortized on a
straight line basis over the period commencing January 1, 2005 and ending March
31, 2011.
Effective
May 1, 2009, the Company signed a sublease agreement for approximately 3,700
square feet of its office space which calls for monthly rental payments of
approximately $7,000 to the Company from the sublessee. The term of
the sublease runs 23 months through March 31, 2011. The sublease
income does not cover the costs of the primary lease for the related
space. Consequently, in accordance with ASC Topic 840, formerly FASB
Technical Bulletin 79-15, Accounting for Loss on a Sublease
Not Involving the Disposal of a Segment, the Company recognized a loss of
approximately $79,000, which is included in selling, general and administrative
expense in the Company’s consolidated statement of operations.
11
Effective
September 1, 2009, the Company signed a sublease agreement for approximately 600
square feet of its office space which calls for monthly rental payments of
approximately $1,200 to the Company from the sublessee. The term of
the sublease runs 19 months through March 31, 2011. The sublease
income does not cover the costs of the primary lease for the related
space. Consequently, in accordance with ASC Topic 840, the Company
recognized a loss of approximately $11,000, which is included in selling,
general and administrative expense in the Company’s consolidated statement of
operations.
At
December 31, 2009, the additional rent that would be due if the Company failed
to meet the conditions of the Second Amendment to Lease Agreement would be
$251,000. As a result of the execution of a new Office Lease (as
described below) on January 18, 2010, there is no additional base rent that
would be due at December 31 of the following year.
On
January 18, 2010, the Company received delivery of an executed new Office Lease
with its current landlord for 6,189 square feet of space in Building A at
Woodbridge Corporate Plaza, 485 Route One South, Iselin, New Jersey, the same
office park in which the Company presently maintains its offices in Building
C. The new lease (“New Lease”) is made as of December 28, 2009, and
its term commences on April 1, 2010. The New Lease has a term of
seventy-six months and a monthly base rent for lease months 1 to 12 of
$22,512.49, and for lease months 13 to 76 of $14,441.00. In addition
to the base rent, the Company is obligated to pay separately metered electric
charges, and commencing January 1, 2011, a ratable portion of increases from
2010 in real estate taxes, operating expenses and certain utility
charges. The New Lease provides the Company a credit of $10,057.13
against the monthly base rent for lease months 1, 2, 7 and 14. In
addition, the New Lease provides the Company an additional credit of $8,379.67
per month during the twelve-month period commencing April 1,
2010. The New Lease does not initially provide for a security
deposit; however, the Company is required to deliver to the landlord no later
than January 15, 2011, the sum of $10,000 to be held as a security
deposit. Finally, the landlord will perform, at its expense, certain
work in readying the leased premises for the Company’s occupancy.
In
connection with entering into the New Lease, the landlord and CAHS entered into
a Surrender Agreement, delivered on January 18, 2010, and made as of December
28, 2009 (the “Surrender Agreement”), pursuant to which the landlord has agreed
to terminate the existing lease as of March 31, 2010 (or the day before the
commencement date of the New Lease, if later) (the “Surrender Date”), which
existing lease would have otherwise expired on March 31, 2011. As of
the date the New Lease commences, the security deposit of $167,027.67 under the
existing lease will be forfeited to the landlord. The Company and
CAHS will continue to remain liable for all of their obligations under the
existing lease through the Surrender Date and will continue to be responsible
for the payment of all base rent and other amounts due under the existing lease
through the Surrender Date.
Pursuant
to the Surrender Agreement, (i) CAHS releases the landlord from all claims
arising out of the existing lease, and (ii) upon CAHS’s delivery of the premises
to the landlord in accordance with the Surrender Agreement, and CAHS’s timely
payment of rent and other expenses owed to the Landlord under the existing lease
through the Surrender Date, the landlord releases CAHS of all claims arising out
of the existing lease.
Until
January 31, 2010, the Company maintained rent-free operation offices in Vermont
pursuant to an informal arrangement with its customer there, Blue Cross Blue
Shield of Vermont.
ITEM
3. LEGAL
PROCEEDINGS
Alan Fontes v. CareAdvantage,
Inc., pending in Superior Court of New Jersey, Chancery Division,
Monmouth County, was commenced in June 2004 by a former employee of the Company
seeking compensation under various legal theories. In October 2005,
the court dismissed the claim under all theories except express
contract. The Company believes that Mr. Fontes’s claim is without
merit and is contesting the matter vigorously. Moreover, the Company
filed a counterclaim for damages against Mr. Fontes claiming Mr. Fontes induced
another employee to quit his employment with the Company and in October 2005,
pursuant to court order, amended its counterclaim to seek equitable relief and
damages against Mr. Fontes and Integrated eCare Solutions, LLC, claiming Mr.
Fontes misappropriated and used certain Company property. This matter
is presently being tried before a chancery judge; it is anticipated that the
trial will conclude during 2010.
ITEM
4. [RESERVED]
12
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Market
Information
The
Company’s Common Stock has traded in the over-the-counter market since June 12,
1995 and is currently quoted on the OTC Bulletin Board under the symbol
“CADV”. The following table shows the range of the high and low bid
prices for each quarter of the Company’s two most recent calendar years. The
prices reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not represent actual transactions.
2009
|
2008
|
|||||||||||||||
Quarter Ended
|
High
|
Low
|
High
|
Low
|
||||||||||||
March
31,
|
$ | .004 | $ | .001 | $ | .014 | $ | .011 | ||||||||
June
30,
|
$ | .004 | $ | .001 | $ | .013 | $ | .003 | ||||||||
September
30,
|
$ | .014 | $ | .003 | $ | .010 | $ | .003 | ||||||||
December
31,
|
$ | .022 | $ | .008 | $ | .009 | $ | .001 |
Holders
As of
February 23, 2010, there were approximately 2,485 holders of record of the
Company’s Common Stock. No shares of the Company’s preferred stock
have been issued.
Dividends
During
the two most recent fiscal years, the Company paid no cash dividends on its
Common Stock. The payment of future dividends on its Common Stock is
subject to the discretion of the Board of Directors, out of funds legally
available for dividends, and is dependent on several factors, including the
Company’s earnings and capital needs.
Securities
Authorized for Issuance Under Equity Compensation Plans
Information
about the Company’s equity compensation plans is contained in the table
captioned “Equity Compensation Plans” in Item 12 of Part III of this Form 10-K,
which table is incorporated herein by reference.
Issuer
Purchases of Equity Securities
No shares
of the Common Stock were purchased by or on behalf of the Company and its
affiliates (as defined by Exchange Act Rule 10b-18) during the fourth quarter of
2009.
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
The
Company is a smaller reporting company and is not required to provide the
information contemplated by this item.
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Executive
Overview
The
Company and its direct and indirect subsidiaries, CAHS and CHCM, are in the
business of providing healthcare consulting services designed to enable
integrated health care delivery systems and other care management organizations
to reduce the costs, while improving the quality, of medical services provided
to their subscribers. The healthcare consulting services include care management
program enhancement services, executive and clinical management services, and
training programs. The Company’s healthcare consulting services have been and
continue to be provided to integrated health care delivery systems and other
care management organizations. The Company operates in one business
segment.
As part of the Company’s offering of its
healthcare consulting services, the Company has developed RPNavigator, a
proprietary tool to help managed care plans and employers better understand and
forecast resource consumption, risk, and costs associated with their respective
populations. In providing its consulting services, the Company licenses
RPNavigator to its customers. The Company recognizes revenue as services are
performed or ratably under contract terms. For a further discussion of
considerations relating to this business, see “Liquidity, Financial Condition
and Capital Resources – General Overview”.
13
Management
believes it must continue to refine its current service lines in order to
continue to add value to existing and potential customers. In
addition, the Company intends to broaden the services offered with unique and
complementary cost-containment strategies. Management intends to
evaluate each service in light of anticipated changes in the health care
industry, the cost to enter each such service line as well as the availability
and timeliness of competent resources. To further expand its line of
services, the Company contemplates pursuing alternatives to its internal product
and service development efforts by entering into strategic alliances and joint
ventures as well as through acquisitions.
Critical
Accounting Policies
The Company’s financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. Management bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Estimates and assumptions about future
events and their effects cannot be determined with certainty. These estimates
may change as new events occur, as additional information is obtained and as the
Company’s operating environment changes. These changes have historically been
minor and have been included in the consolidated financial statements as soon as
they became known. In addition, management is periodically faced with
uncertainties, the outcomes of which are not within the Company’s control and
will not be known for prolonged periods of time. Actual results may differ from
these estimates under different assumptions or conditions.
Certain
accounting policies have a significant impact on amounts reported in financial
statements. A summary of those significant accounting policies can be
found in Note B to the Company’s financial statements
A
critical accounting policy is one that is both important to the portrayal of the
Company’s financial condition or results of operations and requires significant
judgment or a complex estimation process. The Company believes the following fit
that definition:
Revenue
recognition
With
respect to RPNavigator license fees, most of the Company’s customers licensing
RPNavigator are required, as part of their agreements with the Company, to
receive consulting services from the Company. All contracts provide for
licensing of RPNavigator and consulting services at a fixed monthly fee, a per
member per month fee, or a combination of both. The Company earns the revenue
from licensing and consulting services on a monthly basis and recognizes revenue
from both services on a monthly basis at either a fixed monthly fee, a per
member per month fee or a combination of both. Additionally, the Company
provides separate consulting services on a fee for service basis. Revenue for
these consulting services is recognized as the services are
provided.
Accounting
for stock-based compensation
The
Company accounts for stock-based compensation in accordance with ASC Topic 718,
(Statement of Financial Accounting Standard No. 123R), “Share Based Payment”,
which requires that all equity-based payments, including grants of stock
options, be recognized in the statement of operations as compensation expense,
based on their fair values at the date of grant. Under the provisions of ASC
Topic 718, the estimated fair value of options granted under the Company’s
Employee Stock Option Plan and Director Stock Option Plan are recognized as
compensation expense over the service period which is generally the same as the
option-vesting period.
For the purposes of determining
estimated fair value under ASC Topic 718, the Company has computed the fair
values of all equity-based compensation using the Black-Scholes option pricing
model. This model requires the Company to make certain estimates and
assumptions. The Company calculated expected volatility based on the Company’s
historical stock volatility. The computation of expected life is determined
based on historical experience of similar awards, giving consideration to the
contractual terms of the stock-based awards, vesting schedules and expectations
of future employee behavior. The risk-free interest rate is based on the U.S.
Treasury yield curve in effect at the time of grant. Under ASC Topic 718,
forfeitures are estimated at the time of valuation and reduce expense ratably
over the vesting period. This estimate is adjusted periodically based on the
extent to which the actual forfeitures differ, or are expected to differ, from
the previous estimate.
14
Recent
Accounting Pronouncements
In April
2009, the Financial Accounting Standards Board (“FASB”) issued ASC 825-10,
(Staff Position No. 107-1), “Interim Disclosures about Fair Value of Financial
Instruments” (“FSP No. 107-1 and APB No. 28-1”). ASC 825-10 requires
disclosing qualitative and quantitative information about the fair value of all
financial instruments on a quarterly basis, including methods and significant
assumptions used to estimate fair value during the period. These
disclosures were previously required annually. The Company has been
disclosing this information on a quarterly basis and the adoption did not have a
material impact on the Company’s financial position and results of
operations.
In May
2009, the FASB issued ASC 855-10, FASB No. 165, “Subsequent Events” (“SFAS
165”). ASC 855-10 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before the
financial statements are issued or available to be issued. In
February 2010, the FASB issued Accounting Standards Update (ASU) 2010-09,
Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure
Requirements, to remove the requirement for Securities and Exchange Commission
(SEC) filers to disclose the date through which an entity has evaluated
subsequent events. This change removes potential conflicts with current
SEC guidance. ASU 2010-09 also clarifies the intended scope of the
reissuance disclosure provisions. ASU 2010-09 is effective upon issuance
and its adoption had no impact on the Company’s financial condition, results of
operations or cash flows.
In June
2009, the FASB issued ASC 105-10, FASB No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles”. This standard replaces SFAS No. 162, “The Hierarchy of
Generally Accepted Accounting Principles”, and establishes only two levels of
U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. The FASB Codification has become the sole source of
authoritative, nongovernmental GAAP, except for the rules and interpretive
releases of the SEC, which are sources of authoritative GAAP for SEC
registrants. Effective September 30, 2009, all references made to
GAAP in our consolidated financial statements will include the new Codification
numbering system. The adoption of this pronouncement did not have any
impact on the Company’s financial position and results of operations, as the
Codification was not intended to change or alter existing GAAP.
In August
2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring
Liabilities at Fair Value” (ASU 2009-05). ASU 2009-05 is an update to
Accounting Standards Codification Topic 820, “Fair Value
Measurements”. This update provides amendments to reduce potential
ambiguity in financial reporting when measuring the fair value of liabilities
and provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the valuation techniques
described in ASU 2009-05. The adoption of this pronouncement did not
have any impact on the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update No. 2009-13, “Multiple
Deliverable Revenue Arrangements” (ASU 2009-13). ASU 2009-13 replaces
EITF 00-21, and clarifies the criteria for separating revenue between multiple
deliverables. This statement is effective for new revenue
arrangements or materially modified arrangements in periods subsequent to
adoption. Adoption is required for fiscal years beginning on or after
June 15, 2010, but early adoption is allowed. We anticipate the
adoption of this pronouncement will not have any impact on the Company’s
financial position and results of operations.
Results
of Operations—12 Months Ended December 31, 2009, Compared to 12 Months Ended
December 31, 2008
The
following discussion compares the Company’s results of operations for the 12
months ended December 31, 2009, with those for the 12 months ended December 31,
2008. The Company’s consolidated financial statements and notes
thereto included elsewhere in this report contain detailed information that
should be reviewed in conjunction with the following discussion.
Total revenues for the years ended
December 31, 2009 and 2008 were approximately $4,069,000 and $3,824,000,
respectively. The increase in revenues of approximately $245,000 was
primarily attributable to increased revenue of approximately $229,000 from new
business and approximately $123,000 from increased services primarily with an
existing customer, offset by decreased revenue of approximately $107,000 in
one-time engagements and consulting services that did not reoccur in
2009.
Cost of
services:
Cost of
services for the years ended December 31, 2009 and 2008 were approximately
$1,361,000 and $1,546,000, respectively. The decrease in the cost of
services of approximately $185,000 was primarily due to decreases in personnel
costs of approximately $185,000 relating to terminated employees, decreases in
travel costs of approximately $8,000, offset by increases in professional costs
of approximately $8,000. The Company’s direct costs are mostly fixed
with the exception of its costs associated with licensing fees. Any
variation in direct costs is largely due to a change in licensing fees related
to a change in license fee revenue. Other direct costs, such as
personnel costs, may increase only if a large volume of increased business
occurs where additional staffing would be required.
15
Operating
Cost and Expenses
Selling,
general and administrative:
Selling, general and administrative
costs for the years ended December 31, 2009 and 2008 were $2,440,000 and
$3,014,000, respectively. The decrease in selling, general and
administrative costs of approximately $574,000 is largely due to decreases in
professional costs of approximately $418,000, largely due to legal and
consulting fees relating to Alan Fontes vs. CareAdvantage, Inc. litigation
discussed in Item 3 of this report (including a settlement of legal fees of
approximately $120,000), facility costs of approximately $91,000 due to
subleasing space to a third party and amortization of loss on sublease,
personnel costs of approximately $65,000, travel costs of
approximately $10,000, and other general and administrative costs of
approximately $80,000 largely due to decreased insurance premiums and stock
compensation charges, offset by an increase in costs due to a loss on sublease
of approximately $90,000.
.
Depreciation
and amortization:
Depreciation
and amortization for the year ended December 31, 2009 aggregated $65,000
compared to $70,000 for the year ended December 31, 2008. The
decrease in depreciation and amortization costs of approximately $5,000 is
largely due to fully depreciated assets.
Interest
expense:
Interest
expense for the years ended December 31, 2009 and 2008 was $21,000 and $23,000,
respectively. The decrease in interest expense of approximately
$2,000 is largely attributable to decreased interest on equipment capital
leases.
Net
income/( loss):
The
Company had net income of $180,000 for the year ended December 31, 2009,
compared to a net loss of ($832,000) for the year ended December 31,
2008. This increase in net income reflects new business of
approximately $240,000 and a decrease in professional costs of approximately
$418,000 largely related to Alan Fontes vs. CareAdvantage, Inc. litigation and
decreased personnel costs due to employee terminations in 2008 of approximately
$250,000 offset by salary increases relating to market
adjustments. The Company’s net income for the twelve month period
ended December 31, 2009 includes a loss on sublease of approximately
$90,000.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future material effect on the company’s
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital resources or capital
reserves.
Liquidity,
Financial Condition and Capital Resources
General
Overview:
At December 31, 2009, the Company had
cash of approximately $510,000 and working capital of approximately
$417,000. At December 31, 2008, the Company’s cash balance was
$88,000 and negative working capital was approximately $240,000.
Financial
Condition:
Net cash provided by/(used in) by
operating activities amounted to approximately $129,000 and ($354,000) for the
years ended December 31, 2009 and 2008, respectively. This increase in cash
provided by operating activities is largely due to changes in operating assets
and liabilities relating primarily to net proceeds from the sale of unregistered
common stock to the Company’s three directors and its general counsel of
approximately $352,000, deferred revenue of approximately $200,000, non-cash
charges of approximately $74,000 and the Company’s profit of $180,000, offset by
accounts payable decrease of approximately $372,000 and approximately a $154,000
decrease in deferred rent, offset with a loss on sublease of
$90,000.
16
Net cash used in investing activities
amounted to approximately $1,000 and $4,000 for the years ended December 31,
2009 and 2008, respectively. This decrease in cash used is largely
attributable to a decrease in capital purchases.
Net cash provided by/(used in)
financing activities amounted to approximately $294,000 and ($62,000) for the
years ended December 31, 2009 and 2008, respectively. This increase
in cash provided is largely due to net proceeds of approximately $352,000 from
the sale of unregistered common stock to the Company’s three directors and its
general counsel, offset by repayment on capital leases.
The
Company generates most of its revenue from the licensing of RPNavigator and
providing consulting services in connection with that licensing. Based on cash
on hand at December 31, 2009 and cash flow from operations based on a forecast
prepared by management, which took into account executed contracts, and cost
reductions planned and effectuated as of December 31, 2009, management expects
the Company to be able to meet its obligations as they become due during the
next 12 months. Such forecast includes contracts with new customers as well as
expanding business with current customers that are expected to start in the next
three to six months. However, there can be no assurances that management’s
plans, including projected revenue, will be attained. Although the
Company has had a history of losses, for the 12 months ended December 31, 2009,
it had net income of $180,000.
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
The Company is a smaller reporting
company and is not required to provide the information contemplated by this
item.
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The Financial Statements and
supplementary data required by this item can be found beginning on page F-1
immediately following the signatures to this annual report and are incorporated
herein by reference.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
None.
ITEM
9A(T).
|
CONTROLS
AND PROCEDURES
|
Evaluation of Disclosure Controls and
Procedures
Senior management maintains disclosure
controls and procedures that are designed to ensure that information required to
be disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods provided in the SEC’s rules and forms, and that
such information is accumulated and communicated to our management, including
the Chief Executive Officer, who is also currently the acting Principal
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and
procedures, senior management has recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and therefore has been required to
apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
In accordance with Rule 13a-15(b) of
the Exchange Act, as of the end of the fiscal year ended December 31, 2009, we
carried out an evaluation under the supervision and with the participation of
our management, including our Chief Executive Officer, who is also the acting
Principal Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures as defined in Rule 13a-15(e) and
15d-15(e) under the Exchange Act. Based on that evaluation, our Chief
Executive Officer has concluded that our disclosure controls and procedures are,
in fact, effective at the reasonable assurance level.
Internal
Control Over Financial Reporting
There
were no changes in our internal controls over financial reporting during the
quarter ended December 31, 2009 that have materially affected, or are reasonably
likely to materially affect the Company’s internal controls over financial
reporting.
As required by Section 404 of the
Sarbanes-Oxley Act of 2002, management has performed an evaluation and testing
of the Company’s internal control over financial reporting as of December 31,
2009. Management’s report on the Company’s internal control over
financial reporting is included on the page that follows.
17
Management’s
Annual Report on Internal Control Over Financial Reporting
Pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002, management is responsible for establishing and
maintaining adequate internal control over financial reporting and for assessing
the effectiveness of our internal control over financial reporting, as defined
in Exchange Act Rule 13a-15(f) and 15d-15(f). Internal control
over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer, who is also the acting Principal
Financial Officer, to provide reasonable assurance to our management and Board
of Directors and Audit Committee regarding the reliability of financial
reporting and the fair presentation of published financial statements in
accordance with U.S. generally accepted accounting principles, and includes
those policies and procedures that:
·
|
pertain
to maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and disposition of our
assets;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that our financial decisions are being made only
in accordance with authorizations of our management and our Board of
Directors; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized transactions relating to our assets that could have a
material impact on our financial
statements.
|
This annual report on Form 10-K does
not include an attestation report of the Company’s registered public accounting
firm regarding internal control over financial reporting because management’s
report was not subject to attestation pursuant to temporary rules of the SEC
that permit the Company to provide only this management’s report.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. A control system, no matter how well
designed and operated can provide only reasonable, but not absolute, assurance
that the control system’s objectives will be met. The design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their cost.
Management assessed the effectiveness
of the Company’s internal control over financial reporting as of December 31,
2009. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework (the “COSO Framework”).
Based on this assessment and on the
foregoing criteria, management has concluded that, as of December 31, 2009, the
Company’s internal control over financial reporting is effective.
Respectfully,
|
/s/ Dennis J. Mouras
|
Dennis
J. Mouras,
|
Chief
Executive Officer and
|
Acting
Principal Financial
Officer
|
18
ITEM
9B.
|
OTHER
INFORMATION
|
On January 4, 2010, the Company
received delivery of an Amended and Restated Services and License Agreement
between the Company and Blue Cross Blue Shield of Vermont (“BCBSVT”)
made as of January 1, 2010 (the “2010 Services and License
Agreement”). The 2010 Services and License Agreement amends and
restates (i) the Third Amended and Restated Service Agreement dated as of April
1, 2001, as amended, between the Company and BCBSVT (the “Service Agreement”),
and (ii) the Services and License Agreement dated as of September 1, 2004, as
amended, between the Company and BCBSVT (the “Service and License
Agreement”). Pursuant to the 2010 Services and License Agreement,
BCBSVT directly assumed the performance of certain consulting functions that had
previously been performed by the Company pursuant to the Service Agreement,
including BCBSVT’s assuming the responsibility for providing itself with a
corporate medical director and other support functions. BCBSVT has
agreed to pay a recruitment fee to the Company in the event BCBSVT directly
hires certain of the Company’s staff that had been performing such
services. The 2010 Services and License Agreement
also reflects the reduced responsibilities of the Company to BCBSVT,
provides specifically the services the Company will provide to BCBSVT, and
memorializes certain informal agreements between the parties, including certain
billing and payment practices. Additionally, the 2010 Services and
License Agreement amends the Service and License Agreement to provide for
RPNavigator updates six times per year rather than four times per
year. Finally, the 2010 Services and License Agreement modifies the
indemnification obligations of the parties to also provide that BCBSVT will
indemnify the Company and its officers, directors, employees, ex-employees or
agents from and against any and all claims resulting from any act or omissions
of certain of the Company’s employees in connection with the Company’s services
for BCBSVT.
In
connection with the 2010 Services and License Agreement, the Company and BCBSVT
entered into a letter agreement (the “Letter Agreement”) dated December 30,
2009, pursuant to which the Company agreed to provide the services of one of its
employees from the period of January 1, 2010 to January 31, 2010.
A copy of
the 2010 Services and License Agreement is filed as Exhibit 10.36 to this Annual
Report on Form 10-K and a copy of the Letter Agreement is filed as Exhibit 10.37
to this Annual Report of Form 10-K.
PART
III
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
The
Company’s directors, executive officers and control persons as of December 31,
2009 are as follows:
Name
|
Age
|
Positions with the
Company
|
||
David
G. Noone (1,
2)
|
56
|
Chairman
of the Board of Directors
|
||
Dennis
J. Mouras
|
53
|
Chief
Executive Officer, President, acting Principal Financial Officer, and
Director
|
||
David
J. McDonnell (1,2)
|
67
|
Director
|
(1)
|
Member
of Compensation Committee.
|
(2)
|
Member
of Audit Committee.
|
There are
no family relationships between any directors or executive officers of the
Company.
All
directors of the Company are elected by the stockholders of the Company or, in
the case of a vacancy, are elected by the directors then in office to hold
office until the next annual meeting of stockholders of the Company and until
their successors are elected and qualify or until their earlier resignation or
removal.
The
following sets forth certain information with respect to each director and
executive officer of the Company as of December 31, 2009:
19
David G. Noone has been a director of
the Company since January 1999 and Chairman of the Board since July 30,
2002. He served as CEO of the Company from January 1999 until
February 15, 2001, and was an employee of the Company engaged
in identifying and pursuing strategic business combinations from February 15,
2001 to September 2001. Most recently, Mr. Noone is serving as the
Local Census Office Manager, United States Bureau of the Census, Middlebury,
Connecticut, where he has been employed since October 2009; previously he had
been employed as Executive Director of Village at East Farms, Waterbury,
Connecticut, from May 2007 through December 31, 2008. Prior to his
service with the Company, Mr. Noone served from September 1995 to February 1997
as the President and Chief Executive Officer of Value Health International, a
subsidiary of Value Health, Inc., where he was responsible for the migration of
Managed Health Care strategies to emerging opportunity markets in Europe, Latin
America and Asia. Mr. Noone’s specific qualifications to serve
as a director of the Company include his history with the Company as an
executive and a director, his leadership experience and his background with
Managed Health Care strategies.
Dennis J.
Mouras has served as the Chief Executive Officer and a director of the Company
since February 15, 2001. He has served as President and Chief
Operating Officer of the Company since October 30, 2000, and as the Executive
Vice President of Marketing and Sales of the Company from April 1999 to October
30, 2000. He has also served as Acting Principal Financial Officer since January
2003. Prior to that, Mr. Mouras served as President of Intracorp,
Inc. from January 1997 to January 1999, and as President and General Manager of
CIGNA Healthcare of Colorado from October 1994 to January
1997. Currently, Mr. Mouras is also the Vice President and 40%
owner of Best View Farm Breeders LLC, Glenmoore, Pennsylvania, which conducts a
horse breeding business. Mr. Mouras’ role as the Chief Executive
Officer and acting principal financial officer of the Company, as well as
serving in various other capacities as an employee of the Company for the past
11 years, qualifies him to serve as a director of the Company.
David J.
McDonnell, currently retired, has been a director of the Company since January
1997. He served from December 1993 to February 1997 as a director of Value
Health, Inc., a company engaged in the health care service business. Prior to
that, he was employed by Preferred Health Care Ltd., a behavioral managed care
company, where he served as that company’s Chief Executive Officer from 1988 to
1993, and its President from 1988 to 1992. Mr. McDonnell also served as Chairman
of Preferred Health Care Ltd.’s Board of Directors from 1991 to
1993. Mr. McDonnell’s specific qualifications to serve as a director
of the Company include his extensive board experience and employment history in
the health care services industry.
Audit
Committee Financial Expert
The Board
of Directors has determined that the Company does not have an “audit committee
financial expert” as defined by Item 407 of the SEC’s Regulation
S-K. The Board of Directors believes that the Company’s extremely
small size, limited financial resources and limited activity make such a
position unnecessary.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934:
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
executive officers and directors, and persons who own more than 10% of a
registered class of the Company’s equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and NASDAQ, copies of which are required by regulation to be furnished to the
Company. Based solely on review of the copies of such reports
furnished to the Company, the Company believes that during fiscal year ended
December 31, 2009, its executive officers, directors and ten percent (10%)
beneficial owners complied with all the Section 16(a) filing
requirements.
Code
of Ethics
During
the past several years, the Company’s resources and operations were
substantially curtailed. The Company currently has approximately 13 full-time
employees, of which only one is a principal executive and financial officer, and
has reduced its overhead expenses in order to operate within the constraints of
its limited revenues. Because of the small staff, the involvement of
management and the Board of Directors in the business and operations of the
Company, and the internal policies of the Company, the Company has not adopted a
separate code of ethics for principal executive and financial officers. We
experience a limited number of financial transactions in our present operations,
all of which are approved and executed by our chief executive officer, who is
also currently acting as our principal financial officer. The Board
of Directors and management have unequivocally set the tone for integrity and
credibility in all aspects of the Company’s operations. In view of
the Company’s very small size and the limited number of personnel who are
responsible for its operations, a formal code of ethics is not
necessary. Our Board of Directors periodically revisits this issue to
determine if adoption of a code of ethics is appropriate. In the
meantime, our management intends to promote honest and ethical conduct, full and
fair disclosure in our reports to the SEC, and compliance with applicable
governmental laws and regulations.
20
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
Executive
Compensation
The
following table sets forth the total remuneration for services in all capacities
awarded to, earned by, or paid to our Chief Executive Officer and President (the
“named executive officer”) for each of the last two completed fiscal
years. No other person who served as an executive officer during 2009
earned total compensation in excess of $100,000 for 2009 (or would have earned
in excess of such amount had they been an executive officer as of December 31,
2009). The Company does not maintain any nonequity incentive
compensation plans or nonqualified deferred compensation plans.
Summary
Compensation Table
Name and principal
position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)(2)
|
Option
awards ($)(2)
|
All other
Compensation
($)(3)
|
Total
($)
|
|||||||||||||||||||
Dennis
J. Mouras
|
2009
|
400,000 | - | - | - | 68,779 | 468,779 | |||||||||||||||||||
Chief
Executive Officer
|
2008
|
415,385 | - | - | - | 68,029 | 483,414 | |||||||||||||||||||
&
President (1)
|
(1)
|
Mr.
Mouras also serves on the Board of Directors but receives no separate
remuneration for such service.
|
(2)
|
The
Company calculates the value of equity awards using the provisions of ASC
Topic 718, “Share Based Payment’. See Note B to the audited
consolidated financial statements presented elsewhere in this annual
report regarding assumptions underlying valuation of equity
awards.
|
(3)
|
Includes
Company matching contributions to a 401(k) profit sharing/savings plan in
the amount of $7,350 for 2009 and $6,600 for 2008, $ 649 for both 2009 and
2008 related to imputed income for premiums paid for group term life
insurance coverage and $60,780 for both 2009 and 2008 for commuting
allowances plus federal and state tax gross-ups
therefor.
|
Mouras
Employment Agreement
On October 25, 2000, the Company
entered into an Employment Agreement with Dennis Mouras (the “Mouras Employment
Agreement”), the current Chief Executive Officer and President and acting
Principal Financial Officer. The Mouras Employment Agreement replaced
an earlier agreement between Mr. Mouras and the Company during the time that Mr.
Mouras served as the Company’s Executive Vice President of Marketing and
Sales. The Mouras
Employment Agreement had an initial one-year term, after which it renews
automatically for successive one-year terms unless terminated by either party on
at least 60 days notice prior to an anniversary date. The Mouras
Employment Agreement initially provided for (a) an annual salary of $285,000,
(b) a grant of incentive stock options on October 26, 2000 pursuant to the
Company’s Stock Option Plan for 2,500,000 shares, (c) six months of severance
benefits if employment is terminated without cause, and (d) other benefits,
including participation in the Company’s 401(k) plan, life insurance coverage,
and medical insurance coverage available to all eligible
employees. Under the Mouras Employment Agreement, Mr. Mouras waived
unpaid sales commissions to which he was otherwise entitled under his prior
agreement. The Mouras Employment Agreement also contains a
non-solicitation restriction for one year after the termination of Mr. Mouras’
employment. On October 30, 2002, the Company amended the Mouras
Employment Agreement by agreeing to increase to one year the severance that Mr.
Mouras would be entitled to receive if his employment is terminated without
cause. On November 11, 2005, the Company further amended the Mouras
Employment Agreement by agreeing to increase the allowance for commuting paid
Mr. Mouras to $3,000 per month from $1,500 per month, grossed-up in each case
for federal and state income tax liability. On November 20, 2007, the
Company further amended the Mouras Employment Agreement to increase the annual
salary payable to Mr. Mouras to $400,000 per year, effective as of the date of
the amendment.
Stock
Option Plan
The
Company’s Restated and Amended Stock Option Plan for key employees was adopted
on June 6, 1996 and was approved by the Company’s stockholders. This
plan terminated pursuant to its terms on June 6, 2006. At December
31, 2009, the named executive officer did not hold any outstanding stock options
or other equity award.
Benefits
Upon Termination of Employment
Mr.
Mouras’ amended Employment Agreement provides for a severance payment by the
Company of 12-months salary in the event his employment is terminated by the
Company without cause. This severance benefit would be paid out over
12 months. As of December 31, 2009, the total amount of severance
benefits that could be paid to Mr. Mouras upon a termination of employment is
$400,000.
21
401(k)
Plan
The Company maintains a 401(k) plan
for employees who meet the eligibility requirements set forth in the
plan. Pursuant to the plan, the Company provides a 50% matching
contribution of the first 6% of each participant’s contribution. All
contributions by the Company must comply with the federal pension laws’
non-discrimination requirements and the terms of the plan.
COMPENSATION OF
DIRECTORS
The following table provides
information about compensation paid to or earned by the Company’s Directors
during 2009 who were not named executive officers. Mr. Mouras does
not receive director compensation.
Name
|
Fees earned
or paid in cash ($)
|
Option
awards ($)(1) |
All other
compensation ($)(2) |
Total
($)
|
||||||||||||
David
J. McDonnell
|
$ | 4,800 | - | $ | 874 | $ | 5,674 | |||||||||
David G. Noone
|
$ | 4,800 | - | $ | 767 | $ | 5,567 |
(1)
|
The
Company calculates the value of equity awards using the provisions of
ASC
Topic 718, “Share Based Payment”. See Note B to the
audited consolidated financial statements presented elsewhere in this
annual report regarding assumptions underlying valuation of equity
awards. At December 31, 2009, each of Messrs. McDonnell and
Noone held options outstanding to purchase 1,250,000 shares of Common
Stock.
|
(2)
|
Amount
reflects reimbursement for out-of-pocket expenses associated with
attending meetings of the Board of
Directors.
|
Directors’
Fees
Directors
who are not officers of the Company are paid $1,200 for each meeting of the
Board of Directors that they attend. Directors are also reimbursed
for their reasonable out-of-pocket expenses for each attended meeting of the
Board or any committee thereof. The Board held six meetings during
2009.
Directors
Stock Option Plan
Until its
termination on June 6, 2006, non-employee directors of the Company were eligible
to receive stock options under the Company’s Restated and Amended Directors’
Stock Option Plan (the “Director Plan”). The Company adopted the
Director Plan on June 6, 1996, which was amended on July 24, 1996 and the
Director Plan, as amended, was approved by the stockholders on August 23,
1996. Thereafter, the Director Plan was further amended on January
26, 1999 with the stockholders approving that amendment on July 7,
1999.
The Director Plan contemplated the
grant of non-qualified stock options and was administered by the Board of
Directors, who had authority to determine: (i) the number of shares of the
Company’s Common Stock that could be purchased upon the exercise of options;
(ii) the time or times when options became exercisable; (iii) the exercise
price; and (iv) the duration of options, which could not exceed 10
years. The Director Plan reserved an aggregate of 2% of the Company’s
authorized number of shares of Common Stock for issuance. On January 19, 2001,
the Company increased its authorized shares of Common Stock to 200,000,000
shares, so the number of shares reserved for issuance under the Director Plan
was 4,000,000 shares.
All options granted under the Director
Plan are exercisable during the option grantee’s lifetime only by the option
grantee (or his or her legal representative). In the event of
termination of an option grantee’s directorship, such person shall have three
months from such date to exercise such option to the extent the option was
exercisable as at the date of termination, but in no event subsequent to the
option’s expiration date. In the event of termination of an option
grantee’s directorship due to death, such person’s legal representative shall
have 12 months from such date to exercise such option to the extent the option
was exercisable at the date of death, but in no event subsequent to the option’s
expiration date.
The Directors Plan contains
anti-dilution provisions which provide that in the event of any change in the
Company’s outstanding capital stock by reason of stock dividend,
recapitalization, stock split, combination, exchange of shares or merger or
consolidation, the Board shall equitably adjust the aggregate number and kind of
shares reserved for issuance, and for outstanding options, the number of shares
covered by each option and the exercise prices per share.
22
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
The following table sets forth as of
February 23, 2010 certain information regarding the beneficial ownership of the
Company’s Common Stock by (i) all persons known to the Company who own more than
5% of the outstanding Common Stock, (ii) each director, (iii) the named
executive officer, and (iv) all executive officers and directors as a group.
Unless otherwise indicated, the persons named in the table below have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
Beneficial
Ownership of Common Stock by
Certain
Stockholders and Management
Number
of Shares
|
||||||||
Name of Beneficial Owner
|
Beneficially Owned (1)
|
Percent of Ownership (2)
|
||||||
Principal
Holders:
|
||||||||
Credit
Suisse Asset Management, LLC (3) (5)
|
7,536,204 | 5.26 | % | |||||
George
Neidich (4) (9)
|
21,777,777 | 15.21 | % | |||||
Directors
and Executive Officers
|
||||||||
David
J. McDonnell (6) (9)
|
22,150,000 | 15.33 | % | |||||
David
G. Noone (7) (9)
|
24,150,000 | 16.72 | % | |||||
Dennis
J. Mouras (8) (9)
|
29,500,100 | 20.60 | % | |||||
All
directors and executive officers as
|
||||||||
a
group (3 persons) (9)
|
75,800,100 | 52.02 | % |
* Less
than 1%
(1) Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission, which generally attribute beneficial ownership of
securities to persons who possess sole or shared voting or investment power with
respect to those securities. Beneficial ownership includes the
right to acquire shares within 60 days (such as through the exercise of stock
options).
(2)
The percent beneficially owned by any person or group who held options
exercisable within 60 days has been calculated assuming all such options have
been exercised in full and adding the number of shares subject to such options
to the total number of shares issued and outstanding.
(3)
The principal business address of Credit Suisse Asset Management, LLC, is 466
Lexington Avenue, New York, New York 10017.
(4)
The principal business address of George Neidich, is 9301 Morison Lane, Great
Falls, Virginia 22066.
(5)
Information based on Schedule 13G filed by Credit Suisse Asset Management, LLC
on December 22, 2004, with the Securities and Exchange Commission
(“SEC”).
(6)
The business address of Mr. McDonnell, a director of the Company, is 301 Aqua
Court, Naples, Florida 34102.
(7)
The business address of Mr. Noone, a director of the Company, is 34 Sunset Hill
Road, Redding, Connecticut, 06896.
(8)
The business address of Mr. Mouras, Chief Executive Officer and director, is
485-C Route 1 South, Iselin, New Jersey 08830.
(9)
41,667 shares of Mr. Neidich’s Common Stock, 1,250,000 shares of Mr. McDonnell’s
Common Stock, 1,250,000 shares of Mr. Noone’s of Common Stock, and 2,500,000
shares of the Common Stock owned by all directors and executive officers as a
group are issuable upon the exercise of stock options to purchase shares of
Common Stock that were exercisable on February 23, 2010 or that will become
exercisable within 60 days of such date.
23
Equity
Compensation Plans
The following table sets forth the
securities authorized for issuance under the Company’s equity compensation plans
as of December 31, 2009:
(A)
|
(B)
|
(C)
|
||||||||||
Plan category
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
Weighted-average
exercise price of,
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected in column (A) |
|||||||||
Equity
compensation plans approved by security holders
|
12,186,667 | $ | 0.012 | - | ||||||||
Equity
compensation plans not approved by security holders
|
- | $ | - | - | ||||||||
Total
|
12,186,667 | $ | 0.012 | - |
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Related
Transactions since January 1, 2009
On
September 9, 2009, the Company raised $400,000 in capital in a private placement
to fund certain expenses that became due and payable, and to help fund working
capital. The private placement consisted of the sale of 80,000,000
shares of Common Stock of the Company to its three directors, Dennis J. Mouras
(also the Company’s Chief Executive Officer), David G. Noone, and David J.
McDonnell, and its general counsel, George Neidich (the “Investors”) at a
purchase price of $0.005 per share, the current market price per share of Common
Stock, for an aggregate purchase price of $400,000. Each Investor
purchased 20,000,000 shares of Common Stock for
$100,000.
Additionally,
during the year ended December 31, 2009, the Company paid legal fees in the
amount of $138,000 to George Neidich, the Company’s general counsel and the
beneficial owner of 15.21% of the Company’s issued and outstanding shares of
Common Stock.
Director
Independence
The
Company’s Board of Directors has determined that David G. Noone and David J.
McDonnell are “independent directors” as defined in NASDAQ Marketplace Rule
5605(2) (formerly Rule 4200(a)(15)).
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Audit
and Non-Audit Fees
The following table shows the fees
billed to the Company for the audit and other services provided by the Company’s
principal accountant, Eisner LLP, in 2009 and 2008:
Services Performed
|
2009
|
2008
|
||||||
Audit
Fees (1)
|
$ | 97,600 | $ | 97,600 | ||||
Audit-Related
Fees
|
- | - | ||||||
Tax
Fees (2)
|
15,200 | 15,200 | ||||||
All
Other Fees
|
- | - | ||||||
Total
Fees
|
$ | 112,800 | $ | 112,800 |
(1) Audit
fees represent fees for professional services provided in connection with the
audit of the Company’s financial statements and review of the financial
statements included in the Company’s 10-K and 10-Q filings, and services that
are normally provided in connections with statutory and regulatory filings or
engagements.
24
(2) Tax
fees are fees for professional services performed by Eisner LLP with respect to
tax compliance, tax preparation, tax advice and tax planning in 2008 and
2009.
Pre-Approval of Audit and
Non-Audit Services
The Audit
Committee currently pre-approves all services provided by our independent
registered public accounting firm. All of the above fees for 2009 and 2008 were
pre-approved by the audit committee. No fees in 2009 or 2008 were
paid to the independent registered public account firm pursuant to the “de
minimis” exception to the foregoing pre-approval policy.
The Audit
Committee has considered the nature and amount of fees billed by Eisner LLP and
believes that the provision of services for activities unrelated to the audit is
compatible with maintaining Eisner LLP’s independence.
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES
(a)(1),
(2) and (c) Financial statements and schedules:
Report of
Independent Registered Public Accounting Firm
Consolidated
Balance Sheets at December 31, 2009 and 2008
Consolidated
Statements of Operation — Years Ended December 31, 2009 and 2008
Consolidated
Statements of Changes in Stockholders’ Equity — Years Ended December 31, 2009
and 2008
Consolidated
Statements of Cash Flows — Years Ended December 31, 2009 and 2008
Notes to
Consolidated Financial Statements for the years ended December 31, 2009 and
2008
(a)(3)
and (b) Exhibits required to be filed by Item 601 of Regulation
S-K:
The
exhibits filed or furnished with this annual report are shown on the Exhibit
Index that follows the signatures to this annual report, which index is
incorporated herein by reference.
25
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.
CareAdvantage, Inc.
|
||
(Registrant)
|
||
Date: March
31, 2010
|
By:
|
/s/ Dennis J. Mouras
|
Dennis
J. Mouras, 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:
Date:
March 31, 2010
|
By:
|
/s/ Dennis J. Mouras
|
Dennis
J. Mouras, Chief Executive Officer, Director
and acting Principal Financial Officer and Accounting Officer |
||
Date:
March 31, 2010
|
By:
|
/s/ David J. McDonnell
|
David
J. McDonnell, Director
|
||
Date:
March 31, 2010
|
By:
|
/s/ David G. Noone
|
David
G. Noone, Director
|
26
CAREADVANTAGE,
INC.
AND
SUBSIDIARIES
CONSOLIDATED
FINANCIAL
STATEMENTS
DECEMBER
31, 2009 AND 2008
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets at December 31, 2009 and 2008
|
F-3
|
Consolidated
Statements of Operations for the years ended December 31, 2009 and
2008
|
F-4
|
Consolidated
Statements of Changes in Stockholders’ Equity/(Deficit) for the years
ended December 31, 2009 and 2008
|
F-5
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2009 and
2008
|
F-6
|
Notes
to consolidated financial statements
|
F-7
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Stockholders
CareAdvantage,
Inc.
We have
audited the accompanying consolidated balance sheets of CareAdvantage, Inc. and
subsidiary (the "Company") as of December 31, 2009 and 2008 and the related
consolidated statements of operations, changes in stockholders' equity/(deficit)
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were
not engaged to perform an audit of the Company’s internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CareAdvantage, Inc.
and subsidiary as of December 31, 2009 and 2008 and the consolidated results of
their operations and their consolidated cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Eisner
LLP
New York,
New York
March 31,
2010
F-2
CareAdvantage,
Inc. and Subsidiaries
Consolidated
Balance Sheets
December
31,
|
||||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 510,000 | $ | 88,000 | ||||
Accounts
receivable
|
143,000 | 239,000 | ||||||
Prepaid
expenses and other current assets
|
108,000 | 102,000 | ||||||
Security
deposits
|
167,000 | - | ||||||
Total
current assets
|
928,000 | 429,000 | ||||||
Property
and equipment, at cost, net of accumulated depreciation
|
108,000 | 170,000 | ||||||
Intangible
assets, net of accumulated amortization
|
2,000 | 4,000 | ||||||
Security
deposits
|
- | 167,000 | ||||||
Total
Assets
|
$ | 1,038,000 | $ | 770,000 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY/(DEFICIT)
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 82,000 | $ | 454,000 | ||||
Accrued
compensation and related benefits
|
81,000 | 73,000 | ||||||
Accrued
professional fees
|
65,000 | 50,000 | ||||||
Other
current liabilities
|
1,000 | 1,000 | ||||||
Deferred
revenue
|
231,000 | 33,000 | ||||||
Capital
lease obligation – current
|
51,000 | 58,000 | ||||||
Total
current liabilities
|
511,000 | 669,000 | ||||||
Long
Term Liabilities:
|
||||||||
Capital
Lease Obligation - Long Term
|
23,000 | 76,000 | ||||||
Deferred
rent
|
340,000 | 404,000 | ||||||
Total
long term liabilities
|
363,000 | 480,000 | ||||||
Total
Liabilities
|
874,000 | 1,149,000 | ||||||
Commitments
and contingencies (Note H)
|
||||||||
Stockholders’
equity/(deficit):
|
||||||||
Preferred
stock - par value $.10 per share; authorized 10,000,000 shares; none
issued
|
||||||||
Common
stock - par value $.001 per share, authorized 200,000,000 shares; issued
142,554,442 issued and outstanding at December 31, 2009 and 115,534,262
shares issued and 62,139,442 shares outstanding at December 31,
2008
|
143,000 | 115,000 | ||||||
Additional
paid in capital
|
24, 420,000 | 24, 138,000 | ||||||
Accumulated
deficit
|
(24, 399,000 | ) | (24, 370,000 | ) | ||||
Treasury
Stock at cost, 53,394,820 shares
|
- | (262,000 | ) | |||||
Total
stockholders’ equity/(deficit)
|
164,000 | (379,000 | ) | |||||
Total
Liabilities and Stockholders’ Equity/(Deficit)
|
$ | 1,038,000 | $ | 770,000 |
See
notes to consolidated financial statements
F-3
CareAdvantage,
Inc. and Subsidiaries
Consolidated
Statements of Operations
Year
Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
License
fees and service revenue
|
$ | 4,069,000 | $ | 3,824,000 | ||||
Cost
of services
|
1,361,000 | 1,546,000 | ||||||
Gross
profit
|
2,708,000 | 2,278,000 | ||||||
Operating
expenses:
|
||||||||
Selling,
general and administrative
|
2,440,000 | 3,014,000 | ||||||
Depreciation
and amortization
|
65,000 | 70,000 | ||||||
Total
operating expenses
|
2,505,000 | 3,084,000 | ||||||
Operating
income/(loss)
|
203,000 | (806,000 | ) | |||||
Interest
expense
|
(21,000 | ) | (23,000 | ) | ||||
Income/(loss)
before provision for income taxes
|
182,000 | (829,000 | ) | |||||
Provision
for income taxes
|
2,000 | 3,000 | ||||||
Net
income/(loss)
|
$ | 180,000 | $ | (832,000 | ) | |||
Net
income/(loss) per share of common stock -
|
||||||||
Basic
and diluted
|
$ | .00 | $ | ( .01 | ) | |||
Weighted
average number of common shares outstanding -
|
||||||||
Basic
and diluted
|
87,431,000 | 60,951,000 |
See
notes to consolidated financial statements
F-4
CareAdvantage,
Inc. and Subsidiaries
Consolidated
Statements of Changes in Stockholders’ Equity/(Deficit)
Common
Stock
|
Treasury
Stock
|
|||||||||||||||||||||||||||
Number
of
Shares
|
Par
Value
Amount
|
Additional
Paid
In
Capital
|
Accumulated
Deficit
|
Number
of
Shares
|
Par
Value
Amount
|
Total
Stockholder’s
(Deficit)/Equity
|
||||||||||||||||||||||
Balance
as of January 1, 2008
|
113,256,485 | $ | 113,000 | $ | 24,086,000 | $ | (23,538,000 | ) | $ | (53,394,820 | ) | $ | (262,000 | ) | $ | 399,000 | ||||||||||||
Grant
of stock-based compensation
|
1,000,000 | 1,000 | 19,000 | 20,000 | ||||||||||||||||||||||||
Issuance
of stock for services
|
1,277,777 | 1,000 | 1,000 | 2,000 | ||||||||||||||||||||||||
Stock-based
compensation
|
32,000 | 32,000 | ||||||||||||||||||||||||||
Net
loss for the year ended December 31, 2008
|
(832,000 | ) | (832,000 | ) | ||||||||||||||||||||||||
Balance
as of January 1, 2009
|
115,534,262 | $ | 115,000 | $ | 24,138,000 | $ | (24,370,000 | ) | $ | (53,394,820 | ) | $ | (262,000 | ) | $ | (379,000 | ) | |||||||||||
Stock
grants
|
200,000 | 1,000 | 1,000 | |||||||||||||||||||||||||
Stock
purchase
|
80,000,000 | 80,000 | 320,000 | 400,000 | ||||||||||||||||||||||||
Direct
costs related to stock purchase
|
(48,000 | ) | (48,000 | ) | ||||||||||||||||||||||||
Retirement
of treasury stock
|
(53,394,820 | ) | (53,000 | ) | (209,000 | ) | 53,394,820 | 262,00 | - | |||||||||||||||||||
Exercise
of stock options
|
215,000 | 2,000 | 2,000 | |||||||||||||||||||||||||
Stock-based
compensation
|
8,000 | 8,000 | ||||||||||||||||||||||||||
Net
income for the year ended December 31, 2009
|
180,000 | 180,000 | ||||||||||||||||||||||||||
Balance
as of December 31, 2009
|
142,554,442 | $ | 143,000 | $ | 24,420,000 | $ | (24,399,000 | ) | $ | 0 | $ | 0 | $ | 164,000 |
See
notes to consolidated financial statements
F-5
CareAdvantage,
Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
Year
Ended
|
||||||||
December 31
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income/(loss)
|
$ | 180,000 | $ | (832,000 | ) | |||
Adjustments
to reconcile net loss to net cash (used in)/provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
65,000 | 70,000 | ||||||
Stock
based compensation
|
9,000 | 54,000 | ||||||
Deferred
revenue
|
198,000 | 12,000 | ||||||
Deferred
rent and other liabilities
|
(154,000 | ) | (24,000 | ) | ||||
Loss
on sublease
|
90,000 | - | ||||||
Gain
on settlement of accounts payable
|
(120,000 | ) | - | |||||
Changes
in:
|
||||||||
Accounts
receivable
|
96,000 | 148,000 | ||||||
Prepaid
expenses and other assets
|
(6,000 | ) | 46,000 | |||||
Accounts
payable
|
(252,000 | ) | 392,000 | |||||
Accrued
expenses and other liabilities
|
23,000 | (220,000 | ) | |||||
Net
cash provided by/(used in) operating activities
|
129,000 | (354,000 | ) | |||||
Cash
flows from investing activity:
|
||||||||
Capital
expenditures
|
(1,000 | ) | (4,000 | ) | ||||
Net
cash used in investing activities
|
(1,000 | ) | (4,000 | ) | ||||
Cash
flows from financing activity:
|
||||||||
Net
proceeds from sale of common stock
|
352,000 | - | ||||||
Proceeds
from exercise of stock options, net of costs
|
2,000 | - | ||||||
Repayment
of capital leases
|
(60,000 | ) | (62,000 | ) | ||||
Net
cash provided by/(used) in financing activities
|
294,000 | (62,000 | ) | |||||
Net
increase/(decrease) in cash and cash equivalents
|
422,000 | (420,000 | ) | |||||
Cash
and cash equivalents - beginning of year
|
88,000 | 508,000 | ||||||
Cash
and cash equivalents - end of year
|
$ | 510,000 | $ | 88,000 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Income
taxes paid
|
$ | 2,000 | $ | 3,000 | ||||
Interest
paid
|
$ | 21,000 | $ | 23,000 |
See
notes to consolidated financial statements
F-6
CareAdvantage,
Inc. and Subsidiaries
NOTE
A - BUSINESS AND BASIS OF PRESENTATION
[1]
|
Business:
|
CareAdvantage,
Inc. (the “Company”) and its direct and indirect subsidiaries, CareAdvantage
Health Systems, Inc. (“CAHS”) and Contemporary HealthCare Management, Inc.
(“CHCM”), are in the business of providing healthcare consulting services, data
warehousing and analytic services designed to enable integrated health care
delivery systems, healthcare plans, employee benefit consultants, other care
management organizations, self insured employers and unions to reduce the costs,
while improving the quality, of medical services provided to the healthcare
participants. The services include care management program enhancement services,
executive and clinical management services, training programs, risk
stratification and predictive modeling. The Company operates in one business
segment.
As part
of offering its healthcare consulting services, the Company has developed
RightPath® Navigator (RPNavigator), a proprietary tool to help its customers
better understand and forecast resource consumption, risk, and costs associated
with their respective populations. In providing its services, the Company
licenses RPNavigator to its customers and provides consulting services in
connection with that licensing.
[2]
|
Basis
of Presentation:
|
The
financial statements have been prepared and presented assuming the Company will
continue as a going concern. For the years ended December 31, 2009
and 2008, the Company incurred net income/(loss) of $180,000 and ($832,000),
respectively, and it has an accumulated deficit as of December 31, 2009 of
$24,399,000. Additionally, the Company had $510,000 of cash and cash equivalents
at December 31, 2009, compared to $88,000 at December 31, 2008, and working
capital of approximately $417,000 and stockholders equity of $164,000 at
December 31, 2009, compared to a negative working capital of approximately
$240,000 and a capital deficit of $379,000 at December 31, 2008. The Company
generates most of its revenue from the licensing of RPNavigator and providing
consulting services in connection with that licensing. Based on cash and cash
equivalents at hand at December 31, 2009 and a forecast prepared by management,
management expects the Company to be able to meet its obligations as they become
due during the next twelve months. Such forecast includes contracts with new
customers as well as expanding business with current customers that are expected
to start in the next three to six months. However, there can be no
assurances that management’s plans, including projected revenue, will be
attained.
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1]
|
Principles
of consolidation:
|
The
consolidated financial statements include the accounts of the Company, and its
wholly owned subsidiary, CAHS and CAHS’s wholly owned subsidiary, CHCM.
Intercompany accounts and transactions have been eliminated in
consolidation.
[2]
|
Revenue
recognition:
|
With
respect to RPNavigator license fees, all of the Company’s customers licensing
RPNavigator are required, as part of their agreements with the Company, to
receive consulting services from the Company. All contracts provide for
licensing of RPNavigator and consulting services at a fixed monthly fee, a per
member per month fee, or a combination of both. The Company earns the revenue
from licensing and consulting services on a monthly basis and recognizes revenue
from both services on a monthly basis at either a fixed monthly fee, a per
member per month fee or a combination of both. Additionally, the Company
provides separate consulting services on a fee for service basis. Revenue for
these consulting services is recognized as the services are
provided.
[3]
|
Depreciation
and amortization:
|
Depreciation
is computed by the straight-line method, over the estimated useful lives of the
assets, which range from three to seven years. Leasehold improvements are
amortized using the straight-line method over the remaining term of the related
lease or the estimated useful life, whichever is shorter. Amortization of assets
recorded under a capital lease is computed using the straight-line method and is
included in depreciation expense. (See Note D)
Intangible
assets, principally software development costs, are amortized over the expected
useful lives of five to seven years on the straight-line method (see Note C).
Amortization expense was $2,000 for both years ended December 31, 2009 and
2008.
F-7
CareAdvantage,
Inc. and Subsidiaries
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[4]
|
Per
share data:
|
Basic and
diluted net loss per share has been computed based on the weighted average
number of outstanding shares of common stock. Potentially dilutive securities
where the exercise prices were greater than the average market price of the
common stock during the period were excluded from the computation of basic loss
per share because they had an anti-dilutive impact are as follows:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Total
Potential Dilutive shares
|
12,187,000 | 12,766,000 |
[5]
|
Concentration
of credit risk/Fair value of financial
instruments:
|
Financial
instruments that potentially subject the Company to credit risk consist of cash
and cash equivalents and accounts receivable. The Company maintains its cash and
cash equivalents balances in financial institutions. At times, the amount of
cash maintained in a given financial institution may exceed the federally
insured limits.
The fair
value of the following instruments approximates their carrying values due to the
short-term nature of such instruments: cash and cash equivalents;
accounts receivable; accounts payable; and accrued liabilities.
[6]
|
Estimates:
|
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions, such as those estimates pertaining to stock based
compensation, that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[7]
|
Cash
and cash equivalents:
|
The
Company considers all highly liquid investments which have maturities of three
months or less when acquired, to be cash equivalents.
[8]
|
Accounts
Receivable and Allowance for Doubtful
Accounts:
|
The
Company shows accounts receivable amounts at their net realizable value, which
reflects the invoiced amounts. The Company does not currently maintain an
allowance for doubtful accounts based on management’s consideration of
historical collection experience and the characteristics of existing accounts.
The Company has not had any accounts receivable allowances or write-offs for the
accounting periods presented.
[9]
|
Major
customers:
|
Two
customers, BCBS organizations, accounted for approximately 49% and 24%,
respectively, of license fees and service revenue for the year ended December
31, 2009 and approximately 86% and 3% of accounts receivable, respectively. The
same two customers, BCBS organizations, accounted for approximately 53% and 25%,
respectively, of license fees and service revenue for the year ended December
31, 2008. If the BCBS customers terminate or modify existing contracts or
experience business difficulties, it would adversely affect our results of
operations.
[10]
|
Stock-based
compensation:
|
The
Company recognizes stock-based compensation in accordance with FASB ASC Topic
718, “Share Based Payment”, which requires that all equity-based payments,
including grants of stock options, be recognized in the statement of
operations as a compensation expense, based on their fair values at the date of
grant. Under the provisions of FASB ASC Topic 718, the estimated fair value of
options granted under the Company's Employee Stock Option Plan and Director
Stock Option Plan are recognized as compensation expense over the option-vesting
period; all outstanding stock options are fully exercisable.
F-8
CareAdvantage,
Inc. and Subsidiaries
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[11]
|
Recent
Accounting Pronouncements
|
In April
2009, the Financial Accounting Standards Board (“FASB”) issued ASC 825-10,
(Staff Position No. 107-1), “Interim Disclosures about Fair Value of Financial
Instruments” (“FSP No. 107-1 and APB No. 28-1”). ASC 825-10 requires
disclosing qualitative and quantitative information about the fair value of all
financial instruments on a quarterly basis, including methods and significant
assumptions used to estimate fair value during the period. These
disclosures were previously required annually. The Company has been
disclosing this information on a quarterly basis and the adoption did not have a
material impact on the Company’s financial position and results of
operations.
In May
2009, the FASB issued ASC 855-10, FASB No. 165, “Subsequent Events” (“SFAS
165”). ASC 855-10 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before the
financial statements are issued or available to be issued. In
February 2010, the FASB issued Accounting Standards Update (ASU) 2010-09,
Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure
Requirements, to remove the requirement for Securities and Exchange Commission
(SEC) filers to disclose the date through which an entity has evaluated
subsequent events. This change removes potential conflicts with current
SEC guidance. ASU 2010-09 also clarifies the intended scope of the
reissuance disclosure provisions. ASU 2010-09 is effective upon issuance
and its adoption had no impact on the Company’s financial condition, results of
operations or cash flows.
In June
2009, the FASB issued ASC 105-10, FASB No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles”. This standard replaces SFAS No. 162, “The Hierarchy of
Generally Accepted Accounting Principles”, and establishes only two levels of
U.S. generally accepted accounting principles (“GAAP”), authoritative and
nonauthoritative. The FASB Codification has become the sole source of
authoritative, nongovernmental GAAP, except for the rules and interpretive
releases of the SEC, which are sources of authoritative GAAP for SEC
registrants. Effective September 30, 2009, all references made to
GAAP in our consolidated financial statements will include the new Codification
numbering system. The adoption of this pronouncement did not have any
impact on the Company’s financial position and results of operations, as the
Codification was not intended to change or alter existing GAAP.
In August
2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring
Liabilities at Fair Value” (ASU 2009-05). ASU 2009-05 is an update to
Accounting Standards Codification Topic 820, “Fair Value
Measurements”. This update provides amendments to reduce potential
ambiguity in financial reporting when measuring the fair value of liabilities
and provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more of the valuation techniques
described in ASU 2009-05. The adoption of this pronouncement did not
have any impact on the Company’s financial position and results of
operations.
In
October 2009, the FASB issued Accounting Standards Update No. 2009-13, “Multiple
Deliverable Revenue Arrangements” (ASU 2009-13). ASU 2009-13 replaces
EITF 00-21, and clarifies the criteria for separating revenue between multiple
deliverables. This statement is effective for new revenue
arrangements or materially modified arrangements in periods subsequent to
adoption. Adoption is required for fiscal years beginning on or after
June 15, 2010, but early adoption is allowed. We anticipate the
adoption of this pronouncement will not have any impact on the Company’s
financial position and results of operations.
F-9
CareAdvantage,
Inc. and Subsidiaries
NOTE
C - INTANGIBLE ASSETS
Intangible
assets, net of accumulated amortization consist of the following at December 31,
2009 and 2008:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Trademark
|
$ | 3,000 | $ | 3,000 | ||||
Software
development cost
|
304,000 | 304,000 | ||||||
307,000 | 307,000 | |||||||
Less
accumulated amortization
|
(305,000 | ) | (303,000 | ) | ||||
$ | 2,000 | $ | 4,000 |
Amortization
expense for intangible assets for future years ending December 31 is as
follows:
Year ending
|
Amortization
Expense |
|||
2010
|
2,000
|
|||
$
|
2,000
|
[1]
|
Trademark:
|
The
trademark fees of $3,000 are associated with RPNavigator.
[2]
|
Software
development costs:
|
Software
development costs are capitalized beginning when project technological
feasibility is established and concluding when the product is ready for
release.
NOTE
D - PROPERTY AND EQUIPMENT
Property
and equipment consist of the following at December 31, 2009 and
2008:
December
31,
|
||||||||
2009
|
2008
|
|||||||
Computer
equipment
|
$ | 717,000 | $ | 716,000 | ||||
Furniture
and fixtures
|
1,000 | 1,000 | ||||||
Office
machines and telephone equipment
|
64,000 | 64,000 | ||||||
Leasehold
improvements
|
2,000 | 2,000 | ||||||
784,000 | 783,000 | |||||||
Less
accumulated depreciation and amortization
|
(676,000 | ) | (613,000 | ) | ||||
$ | 108,000 | $ | 170,000 |
Property
and equipment, principally computer equipment costs, are depreciated over the
expected useful lives of three to five years on the straight-line method.
Depreciation expense was $63,000 and $68,000 for years ended December 31, 2009
and 2008, respectively. The above includes capital lease equipment
with a net book value of approximately $104,000 and $161,000 at December 31,
2009 and 2008, respectively.
F-10
CareAdvantage,
Inc. and Subsidiaries
NOTE
E - CAPITAL LEASES
Future
payments as of December 31, 2009 on the capital lease equipment are as
follows:
Year
|
Lease
|
|||
Ending
December 31,
|
Obligation
|
|||
2010
|
70,000
|
|||
2011
|
38,000
|
|||
108,000
|
||||
Less:
amounts representing interest
|
34,000
|
|||
Present
value of minimum lease payments
|
74,000
|
|||
Less:
current portion of capital lease obligation
|
51,000
|
|||
Long
term portion of capital lease obligation
|
$
|
23,000
|
NOTE
F - STOCKHOLDERS’ EQUITY
[1]
|
Preferred
stock:
|
The
preferred stock is issuable in such series and with such designations,
preferences, conversion rights, cumulative, participating, optional or other
rights, including voting rights, qualifications, limitations or restrictions
thereof as determined by the Board of Directors of the Company. As such, the
Board of Directors of the Company is entitled to authorize the creation and
issuance of 10,000,000 shares of preferred stock in one or more series with such
limitations and restrictions as may be determined in the Board’s sole
discretion, with no further authorization by stockholders required for the
creation and issuance thereof.
[2]
|
Stock
option plans:
|
The Stock
Option Plan (the “Plan”) was administered by a Committee of the Board of
Directors consisting of at least two members who are “outside directors” as
defined in Section 162(m) of the Internal Revenue Code who are also
“disinterested persons” as defined in regulations under the Securities and
Exchange Act of 1934. Employees, officers, and other persons selected by the
Committee were eligible to receive options under the Plan. On June 6, 2006,
pursuant to its terms, the Plan terminated.
All
options granted under the Plan are exercisable during the option grantee’s
lifetime only by the option holder (or his or her legal representative) and
generally only while such option grantee is in the Company’s employ. Unless the
Committee otherwise provided, in the event an option grantee’s employment is
terminated other than by death or disability, such person would have three
months from the date of termination to exercise such option to the extent the
option was exercisable at such date, but in no event subsequent to the option’s
expiration date. Unless the Committee otherwise provided, in the event of
termination of employment due to death or disability of the option grantee, such
person (or such person’s legal representative) would have 12 months from such
date to exercise such option to the extent the option was exercisable at the
date of termination, but in no event subsequent to the option’s expiration date.
A grantee may exercise an option by payment of the exercise price via any lawful
method authorized by the Committee.
Pursuant
to the terms of the Director Stock Option Plan (the “Director Plan”), the Board
of Directors could grant non-qualified stock options to non-employee directors
and determine: (i) the number of shares of the Company’s common stock that may
be purchased upon the exercise of such option; (ii) the time or times when the
option becomes exercisable; (iii) the exercise price; and (iv) the duration of
the option, which cannot exceed ten (10) years. Under the Director Plan, an
aggregate of 2% of the Company’s authorized number of shares of common stock
were reserved for issuance. The Director Plan terminated on June 6, 2006 in
accordance with its terms.
All
options granted under the Director Plan are exercisable during the option
grantee’s lifetime only by the option grantee (or his or her legal
representative). In the event of termination of an option grantee’s
directorship, such person shall have three months from such date to exercise
such option to the extent the option was exercisable as at the date of
termination, but in no event subsequent to the option’s expiration date. In the
event of termination of an option grantee’s directorship due to death, such
person’s legal representative shall have 12 months from such date to exercise
such option to the extent the option was exercisable at the date of death, but
in no event subsequent to the option’s expiration date.
F-11
CareAdvantage,
Inc. and Subsidiaries
NOTE
F - STOCKHOLDERS’ EQUITY (CONTINUED)
The Plan
and Director Plan provides that if at any time after the date of grant of an
option, the Company shall, by stock dividend, split up, combination,
reclassification or exchange, or through merger or consolidation or otherwise,
change its shares of Common Stock into a different number or kind or class of
shares or other securities or property, then the number of shares covered by
such option and the price per share thereof shall be proportionately adjusted
for any such change by the Committee or the Board whose determination thereon
shall be conclusive.
The number
of shares available for issuance upon exercise of outstanding options as of
December 31, 2009 is 9,787,000 shares of Common Stock under the Plan and
2,400,000 shares of Common Stock under the Director Plan.
The
following table summarizes information about stock options at December 31,
2009:
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||
Exercise Price
|
Number
Outstanding |
Weighted
Average Remaining Contractual Life In Years |
Weighted
Average Exercise Price |
Number
Exercisable |
Weighted
Average Exercise Price |
||||||||||||||||
$ |
.008
|
2,083,000 | 4.63 | 2,083,000 | |||||||||||||||||
$ |
.010
|
3,664,000 | 5.07 | 3,664,000 | |||||||||||||||||
$ |
.015
|
6,440,000 | 6.38 | 6,440,000 | |||||||||||||||||
12,187,000 | $ | 0.012 | 12,187,000 | $ | 0.012 |
For the
year ended December 31, 2009, the Company included approximately $9,000 of
equity-based compensation in its operating expenses (Selling, general and
administrative) in the Company’s statement of operations. For the year ended
December 31, 2008, the Company included approximately $54,000 of equity-based
compensation in the statement of operations, of which approximately $20,000 was
related to a stock bonus grant of one million shares of common stock to an
employee.
FASB ASC
Topic 718 requires cash flows resulting from the tax benefits of tax deductions
in excess of the compensation cost recognized for those options (excess tax
benefits) to be classified as financing cash flows. The Company did not realize
any tax benefits from stock options during the twelve months ended December 31,
2009 and 2008.
As of
December 31, 2009, there was no unrecognized compensation cost related to
non-vested share-based compensation arrangements granted under existing stock
option plans.
The
following table summarizes the activity of the Company’s stock options for the
years ended December 31, 2009 and December 31, 2008:
Weighted
|
Weighted
Average
|
|||||||||||||||
Average
|
Remaining
|
Aggregate
|
||||||||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||||||||
Shares
|
Price
|
Term
|
Value
|
|||||||||||||
Number
of shares under option:
|
||||||||||||||||
Outstanding
at December 31, 2007
|
16,266,000 | $ | 0.013 | |||||||||||||
Granted
|
- | $ | ||||||||||||||
Exercised
|
- | $ | ||||||||||||||
Canceled
or expired
|
(3,500,000 | ) | $ | 0.012 | ||||||||||||
Outstanding
as of December 31, 2008
|
12,766,000 | $ | 0.013 | |||||||||||||
Granted
|
- | $ | - | |||||||||||||
Exercised
|
(215,000 | ) | $ | 0.010 | ||||||||||||
Canceled
or expired
|
(364,000 | ) | $ | 0.031 | ||||||||||||
Outstanding
as of December 31, 2009
|
12,187,000 | $ | 0.012 | 5.68 | $ | 9,983 | ||||||||||
Exercisable
at December 31, 2009
|
12,187,000 | $ | 0.012 | 5.68 | $ | 9,983 | ||||||||||
Expected
to vest after December 31, 2009
|
- | $ | $ |
F-12
During
the year ended December 31, 2009, the exercise of certain stock options resulted
in the issuance of 215,000 shares of common stock for proceeds of
$2,000.
For the
purposes of determining estimated fair value under ASC Topic 718, the Company
has computed the fair values of all share-based compensation using the
Black-Scholes option pricing mode. The Company calculated expected volatility
based on the Company’s historical stock volatility. There were no options
granted during the years ended December 31, 2009 and 2008.
Under ASC
Topic 718, forfeitures are estimated at the time of valuation and reduce expense
ratably over the vesting period. This estimate is adjusted periodically based on
the extent to which the actual forfeitures differ, or are expected to differ,
from the previous estimate.
NOTE
G - INCOME TAX
On
January 1, 2007, the Company adopted ASC Topic 740, “Accounting for Uncertainty
in Income Taxes - An interpretation of FASB Statement No. 109”. ASC Topic 740
clarifies the accounting for uncertainties in income taxes recognized in a
company’s financial statements in accordance with ASC Topic 740 and prescribes a
recognition threshold and measurement attributes for financial disclosure of tax
positions taken or expected to be taken on a tax return. Additionally, ASC Topic
740 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The adoption of ASC
Topic 740 did not impact our financial position, results of operations or cash
flows for the twelve months ended December 31, 2009 and 2008. We file income tax
returns in the U.S. Federal jurisdiction and various state and local
jurisdictions. Generally, our federal, state and local jurisdiction income tax
returns for 2005 through 2008 remain subject to examination by various tax
authorities.
Under the
asset and liability method used by the Company as outlined in ASC Topic 740,
“Accounting for Income Taxes”, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences
between the consolidated financial statements’ carrying amounts of existing
assets and liabilities and their respective tax bases.
The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets at December 31, 2009 are as follows:
December
31,
|
||||||||
Noncurrent portion of deferred tax
assets/(liabilities):
|
2009
|
2008
|
||||||
Net
operating loss carryforwards
|
$ | 5,865,000 | $ | 8,117,000 | ||||
Deferred
rent
|
133,000 | 158,000 | ||||||
Tax/
book basis of fixed assets
|
316,000 | 325,000 | ||||||
Intangibles
|
11,000 | 35,000 | ||||||
Stock
based compensation
|
94,000 | 91,000 | ||||||
Alternative
minimum tax credit
|
55,000 | 55,000 | ||||||
Deferred
tax assets
|
6,474,000 | 8,781,000 | ||||||
Valuation
allowance
|
(6,474,000 | ) | (8,781,000 | ) | ||||
$ | 0 | $ | 0 |
The
Company’s deferred tax asset has been fully reserved, as its future realization
cannot be determined. The Company has net federal operating loss carryforwards
of approximately $15,889,000 at December 31, 2009, expiring through 2028.
Pursuant to Section 382 of the Internal Revenue Code, the carryforwards are
subject to limitations on annual utilization based upon an ownership change that
took place during 1996 and 2004. It is possible that the amount of the
carryforward and its annual utilization may be reduced upon examination by the
Internal Revenue Service. The valuation allowance on the Company’s deferred tax
asset decreased approximately $2,307,000 for the year ended December 31, 2009
and increased approximately $317,000 for the year ended December 31, 2008,
respectively. The Company’s deferred tax asset was reduced due to the expiration
of its net federal operating loss carryforward applicable to
1994. The Company has provided 100% valuation allowance since it is
more likely than not that the Company will utilize its NOL’s prior to their
expiration. The Company incurred state income tax of approximately
$2,000 and $3,000 for the years ended December 31, 2009 and 2008,
respectively.
F-13
CareAdvantage,
Inc. and Subsidiaries
NOTE G - INCOME TAX
(CONTINUED)
The
difference between the federal statutory rate and the Company’s effective tax
rate is as follows:
Year
Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Income
tax benefit at federal statutory rate
|
$ | 62,000 | $ | (282,000 | ) | |||
Permanent
differences
|
1,000 | 2,000 | ||||||
Change
in valuation allowance
|
(2,307,000 | ) | 317,000 | |||||
Tax
effect of expired net operating loss carryforwards
|
2,243,000 | - | ||||||
State
taxes, net of federal benefit
|
9,000 | (41,000 | ) | |||||
Other
|
(6,000 | ) | 7,000 | |||||
$ | 2,000 | $ | 3,000 |
NOTE
H - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
[1]
|
Contingencies:
|
A legal
action pending in Superior Court of New Jersey was commenced in June 2004 by a
former employee of the Company seeking compensation under various legal
theories. In October 2005, the court dismissed the claim under all theories
except express contract. The Company believes that the plaintiff’s claim is
without merit and is contesting the matter vigorously. Moreover, the Company
filed a counterclaim for damages against the plaintiff claiming the former
employee induced another employee to quit employment with the Company and in
October 2005, pursuant to court order, amended its counterclaim to seek
equitable relief and damages against the plaintiff and a limited liability
company of which the plaintiff is a member, claiming the plaintiff
misappropriated and used certain Company property. This matter is presently
being tried before a chancery judge; it is anticipated that the trial will
conclude during 2010.
[2]
|
Operating
leases:
|
The
Company’s lease for both the current location and the office space that will be
effective April 1, 2010 expires in March 2010 and July 31, 2016, respectively.
Minimum annual lease payments for office space for future years ending December
31 are as follows:
Year
|
Lease
|
|||
Ending
|
Obligation
|
|||
2010
|
285,000 | |||
2011
|
162,000 | |||
2012
|
173,000 | |||
2013
|
173,000 | |||
2014
|
173,000 | |||
2015
|
173,000 | |||
2016
|
101,000 | |||
$ | 1,240,000 |
Rent
expense was $426,000 and $526,000 for each of the years ended December 31,
2009 and 2008, respectively.
F-14
CareAdvantage,
Inc. and Subsidiaries
NOTE
H - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
On
January 10, 2005, the Company, through CAHS, entered into a Second Amendment to
Lease Agreement commencing January 1, 2005 to provide for the reduction in base
rent and the waiver of escalations based on increases in real estate taxes and
operating expenses, and to provide the landlord with the option to recapture up
to 50% of the leased premises at any time. (The landlord was granted
the recapture option because when the Company ceased providing services to
Horizon BCBSNJ, the Company no longer needed this space.) The
expiration date of the lease, March 31, 2011, remained unchanged by this Second
Amendment.
Under the
Second Amendment to Lease Agreement, the Company is required to meet the
following conditions: (1) the Company cannot assign the lease except for an
assignment of the lease or a sublet provided under the original lease; (2) the
Company cannot be in default under any terms and conditions of the original
lease. In the event the Company fails to meet these conditions, the
reduction in base rent, real estate taxes and operating expenses will be
nullified and entirely forfeited, and the Company will be immediately required
to pay the landlord additional rent for the difference in the base rent, and
additional rent for all escalations provided in the Second Amendment to Lease
Agreement and the original lease as extended. As of January 1, 2005,
the additional rent attributable to the difference in base rent is
$1,257,000.
Effective
April 19, 2007 (the “Recapture Date”), the landlord “recaptured” certain
portions of the leased premises pursuant to the provisions of the Second
Amendment to Lease Agreement. This recapture does not reduce or
modify, in any respect, the Company’s obligations to pay to the landlord monthly
rent or, in the event the Company fails to meet above conditions, additional
rent. Effective as of the Recapture Date, the premises leased by the
Company under the lease is deemed to be, and refers only to, 15,629 rentable
square feet.
As of
March 26, 2008, the Company and landlord entered into a Third Amendment of Lease
which provided that the reduction in base rent and the waiver of escalations
based on increases in real estate taxes and operating expenses shall be deemed
to be amortized on a straight line basis over the period commencing January 1,
2005 and ending March 31, 2011.
Effective
May 1, 2009, the Company signed a sublease agreement for approximately 3,700
square feet of its office space which calls for monthly rental payments of
approximately $7,000 to the Company from the sublessee. The term of
the sublease runs 23 months through March 31, 2011. The sublease
income does not cover the costs of the primary lease for the related
space. Consequently, in accordance with ASC Topic 840, formerly FASB
Technical Bulletin 79-15, Accounting for Loss on a Sublease
Not Involving the Disposal of a Segment, during the year ended December
31, 2009, the Company recognized a loss of approximately $79,000, which is
included in selling, general and administrative expense.
Effective
September 1, 2009, the Company signed a sublease agreement for approximately 600
square feet of its office space which calls for monthly rental payments of
approximately $1,200 to the Company from the sublessee. The term of
the sublease runs 19 months through March 31, 2011. The sublease
income does not cover the costs of the primary lease for the related
space. Consequently, in accordance with ASC Topic 840, during the
year ended December 31, 2009, the Company recognized a loss of approximately
$11,000, which is included in selling, general and administrative
expense.
At
December 31, 2009, the additional rent that would be due if the Company failed
to meet the conditions of the Second Amendment to Lease Agreement would be
$251,000. As a result of the execution of a new Office Lease on
January 18, 2010 (as described below), there is no additional base rent that
would be due at December 31 of the following year.
On
January 18, 2010, the Company received delivery of an executed new Office Lease
with its current landlord for 6,189 square feet of space in Building A at
Woodbridge Corporate Plaza, 485 Route One South, Iselin, New Jersey, the same
office park in which the Company presently maintains its offices in Building
C. The new lease (“New Lease”) is made as of December 28, 2009, and
its term commences on April 1, 2010. The New Lease has a term of
seventy-six months and a monthly base rent for lease months 1 to 12 of
$22,512.49, and for lease months 13 to 76 of $14,441.00. In addition
to the base rent, the Company is obligated to pay separately metered electric
charges, and commencing January 1, 2011, a ratable portion of increases from
2010 in real estate taxes, operating expenses and certain utility
charges. The New Lease provides the Company a credit of $10,057.13
against the monthly base rent for lease months 1, 2, 7 and 14. In
addition, the New Lease provides the Company an additional credit of $8,379.67
per month during the twelve-month period commencing April 1,
2010. The New Lease does not initially provide for a security
deposit; however, the Company is required to deliver to the landlord no later
than January 15, 2011, the sum of $10,000 to be held as a security
deposit. Finally, the landlord will perform, at its expense, certain
work in readying the leased premises for the Company’s occupancy.
F-15
CareAdvantage,
Inc. and Subsidiaries
NOTE
H - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)
In
connection with entering into the New Lease, the landlord and CAHS, entered into
a Surrender Agreement, delivered on January 18, 2010, and made as of December
28, 2009 (the “Surrender Agreement”), pursuant to which the landlord has agreed
to terminate the existing lease as of March 31, 2010 (or the day before the
commencement date of the New Lease, if later) (the “Surrender Date”), which
existing lease would have otherwise expired on March 31, 2011. As of
the date the New Lease commences, the security deposit of $167,027.67 under the
existing lease will be forfeited to the landlord. The Company and
CAHS will continue to remain liable for all of their obligations under the
existing lease through the Surrender Date and will continue to be responsible
for the payment of all base rent and other amounts due under the existing lease
through the Surrender Date.
Pursuant
to the Surrender Agreement, (i) CAHS releases the landlord from all claims
arising out of the existing lease, and (ii) upon CAHS’s delivery of the premises
to the landlord in accordance with the Surrender Agreement, and CAHS’s timely
payment of rent and other expenses owed to the Landlord under the existing lease
through the Surrender Date, the landlord releases CAHS of all claims arising out
of the existing lease.
As a
result of the New Lease, in 2010 the Company will record a loss of approximately
$224,000, which includes the forfeiture of the security deposit of under the
existing lease as described above.
[4]
|
Employee
benefit plans:
|
The
Company administers a profit-sharing/savings plan pursuant to
Section 401(k) of the Internal Revenue Code. The plan provides for a
matching contribution by the Company up to a maximum level, which in no case
exceeds 3% of the employees’ compensation. Company contributions are fully
vested immediately.
The
Company’s matching contribution was $47,000 and $54,000 for the years ended
December 31, 2009 and 2008, respectively.
[5]
|
Employee
commitment:
|
As of
October 25, 2000, the Company entered into an Employment Agreement with Dennis
Mouras (the “Mouras Employment Agreement”), the current Chief Executive Officer
and President. The Mouras Employment Agreement replaces an earlier agreement
between Mr. Mouras and the Company during the time that Mr. Mouras served as the
Company’s Executive Vice President of Marketing and Sales. The Mouras Employment
Agreement continues for a one-year term, after which it renews automatically for
successive one-year terms unless terminated by either party on at least sixty
days notice prior to an anniversary date. Under the Mouras Employment Agreement,
Mr. Mouras is entitled to (a) an annual salary of $285,000, (b) a grant of
incentive stock options on October 26, 2000 pursuant to the Company’s Stock
Option Plan for 2,500,000 shares, and (c) other benefits, including
participating in the Company’s 401(k) plan, life insurance coverage, and medical
insurance coverage available to all eligible employees. Under the Mouras
Employment Agreement, Mr. Mouras waived unpaid sales commissions to which he was
otherwise entitled under his prior agreement. The Mouras Employment Agreement
also contains a non-solicitation restriction for one year after Mr. Mouras’
employment. On October 30, 2002, the Company amended the Mouras Employment
Agreement by agreeing to increase to one year (from six months) the severance
that Mr. Mouras would be entitled to receive upon his termination from the
Company without cause, and on November 11, 2005, the Company further amended the
Mouras Employment Agreement by agreeing to increase the allowance for commuting
paid Mr. Mouras to $3,000 per month from $1,500 per month grossed-up in each
case for federal and state income tax liability. On November
20, 2007, the Company further amended the Mouras Employment Agreement to
increase the annual salary payable to Mr. Mouras to $400,000 per year, effective
as of the date of the amendment.
Note
I—Subscription of Common Stock:
On
September 9, 2009, the Company raised $352,000 (net of approximately $48,000 in
professional and consulting fees) in capital in a private placement of common
stock to fund certain expenses that became due and payable, and to help fund
working capital. The private placement to the Company’s
three directors, one of whom is also the Company’s Chief Executive Officer, and
general counsel consisted of the sale of 80,000,000 shares of common stock at a
purchase price of $0.005 per share, the market price per share, for an aggregate
purchase price of $400,000.
Note
J – Settlement of Accounts Payable:
During
the year ended December 31, 2009, the Company settled a claim for approximately
$305,000 in legal fees, including fees for legal services provided prior to the
period, with a payment of $185,000. This resulted in a $120,000
reduction in legal expenses during the year ended December 31,
2009.
F-16
2.1
|
Deposit
Agreement dated October 31, 1994 among Midlantic Bank, N.A., PMDX and the
Registrant (incorporated by reference to Exhibit 2.1 filed with the
Company's Registration Statement on Form S-1, File No.
33-89176).
|
|
2.2
|
Certificate
of Merger of Care Advantage Health Systems (f/k/a Advantage Health
Systems, Inc.), a Georgia corporation into CareAdvantage Health Systems,
Inc., a Delaware corporation (incorporated by reference to Exhibit 2.2
filed with the Company's Registration Statement on Form S-1, File No.
33-89176).
|
|
3.1
|
Registrant's
Certificate of Incorporation (incorporated by reference to Exhibit 3.1
filed with the Company's Registration Statement on Form S-1, File No.
33-89176).
|
|
3.1(a)
|
Amended
and Restated Certificate of Incorporation (incorporated by reference to
the Company's Information Statement dated September
1996).
|
|
3.2
|
Registrant's
By-Laws (incorporated by reference to Exhibit 3.2 filed with the Company's
Registration Statement on Form S-1, File No. 33-89176).
|
|
3.2(a)
|
Amendment
to the Registrant’s Bylaws (incorporated by reference to Exhibit 3.2(a)
filed with the Company’s Form 10-KSB for the year ended December 31,
2006).
|
|
10.1
|
Letter
of intent dated September 30, 1994 between the Registrant and New Jersey
BCBS, amendments thereto of December 29, 1994, February 27, 1995 and April
4, 1995 and Interim Services Agreement as of April 1, 1995 between the
Registrant and New Jersey BCBS (incorporated by reference to Exhibit 10.12
filed with the Company's Registration Statement on Form S-1, File No.
33-89176).
|
|
10.1
|
Lease
Agreement dated April 14, 1995 between the Registrant and Metropolitan
Life Insurance Company (incorporated by reference to Exhibit 10.13 filed
with the Company's Registration Statement on Form S-1, File No.
33-89176).
|
|
10.2
|
Letter
of Intent dated January 2, 1996 between CW Ventures II, L.P., the
Registrant and its CareAdvantage Health Systems, Inc. subsidiary
(incorporated by reference to Exhibit 10.14 filed with the Company's
Annual Report on Form 10-KSB for the year ended October 31,
1996).
|
|
10.3
|
CW
Exchangeable Note (incorporated by reference to Exhibit 10.16 filed with
the Company's Annual Report on Form 10-KSB for the year ended October 31,
1996).
|
|
10.4
|
Stock
Acquisition Agreement dated February 22, 1996 among EHC, CHCM, CAHS and
the Registrant (incorporated by reference to Exhibit 10.17 filed with the
Company's Annual Report on Form 10-KSB for the year ended October 31,
1996).
|
|
10.5
|
EHC
Exchangeable Note (incorporated by reference to Exhibit 10.18 filed with
the Company's Annual Report on Form 10-KSB for the year ended October 31,
1996).
|
10.6
|
Stockholders’
Agreement dated February 22, 1996 among EHC, CW Ventures and the
Registrant (incorporated by reference to Exhibit 10.20 filed with the
Company's Annual Report on Form 10-KSB for the year ended October 31,
1996).
|
|
10.7
|
Promissory
Note and Security Agreement, dated April 1, 1997, by CHCM in favor of
Horizon BCBSNJ, in the original principal amount of $1,862,823
(incorporated by reference to Exhibit 10(f)(3) filed with the Company's
Form 10-QSB for the quarter ended April 30, 1997).
|
|
10.8
|
Separation
Agreement dated April 20, 1995 between PMDX and the Registrant
(incorporated by reference to Exhibit 10.1 filed with the Company's
Registration Statement on Form S-1, File No. 33-89176).
|
|
10.9
|
Registrant’s
1996 Stock Option Plan (incorporated by reference to the Company's
Information Statement dated September 1996).
|
|
10.10
|
Registrant’s
1996 Director Stock Option Plan (incorporated by reference to the
Company's Information Statement dated September 1996).
|
|
10.11
|
Option
Agreement between CW Ventures and Horizon BCBSNJ (incorporated by
reference to Exhibit 5 of Schedule 13(d) of Horizon BCBSNJ respecting
beneficial ownership of Common Stock of the Company dated June
1997).
|
|
10.12
|
Settlement
and Release Agreement entered into among Horizon BCBSNJ, the Company,
CAHS, and CHCM, Enterprise Holding Company, Inc. ("EHC") and CW Ventures
(incorporated by reference to Exhibit 10(a) filed with the Company’s Form
10-QSB for the quarter ended July 31, 1998).
|
|
10.13
|
Employment
Agreement, effective as of April 19, 1999, between Dennis M. Mouras, and
the Company, (incorporated by reference to Exhibit 10.40 filed with the
Company’s Form 10KSB for the year ended December 31,
1999).
|
|
10.14
|
Settlement
Agreement dated August 9, 2000 among the Company, Horizon Healthcare of
New Jersey, Inc. and Allied Specialty Care Services, Inc. (incorporated by
reference to Exhibit 10.1 filed with the Company’s Form 10QSB for the
quarter ended September 30, 2000).
|
|
10.15
|
Satisfaction
of Debt Agreement among Horizon Blue Cross Blue Shield of New Jersey,
Horizon Healthcare of New Jersey, Inc., CareAdvantage Inc., CareAdvantage
Health Systems, Inc. and Contemporary Healthcare Management, Inc.
(incorporated by reference to Exhibit 10.1 filed on the Company’s Form 8-K
dated December 5, 2000 and filed on December 13, 2000).
|
|
10.16
|
Amendment
dated March 26, 2001 to Satisfaction of Debt Agreement dated as of
November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New Jersey,
Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
Contemporary HealthCare Management, Inc (incorporated by reference to
Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
March 31, 2001).
|
10.17
|
Service
Agreement dated as of January 1, 2000 between Blue Cross Blue Shield of
Rhode Island, Coordinated Health Partners, Inc. and CareAdvantage Health
Systems, Inc. (incorporated by reference to Exhibit 10.2 filed with the
Company’s Form 10-QSB for the quarter ended March 31,
2001).
|
|
10.18
|
Amendment
dated as of August 9, 2001 to Satisfaction of Debt Agreement dated as of
November 1, 2000 among Horizon BCBSNJ, Horizon Healthcare of New Jersey,
Inc., CareAdvantage, Inc., CareAdvantage Health Systems, Inc. and
Contemporary Healthcare Management, Inc. (incorporated by reference to
Exhibit 10.1 filed with the Company’s Form 10-QSB for the quarter ended
June 30, 2001).
|
|
10.19
|
Settlement
Agreement between CareAdvantage, Inc. and Horizon Blue Cross Blue Shield
of New Jersey, effective as of October 1, 2004 (incorporated by reference
to Exhibit 10.1 filed on the Company’s Form 8-K filed on October 1,
2004).
|
|
10.20
|
Second
Amendment to Lease Agreement between CareAdvantage Health Systems, Inc.
and Corporate Plaza Associates, L.L.C. (incorporated by reference to
Exhibit 10.1 filed on the Company’s Form 8-K filed on January 11,
2005).
|
|
10.21
|
Services
and License Agreement between the Company and Kaiser Foundation Health
Plan of the Northwest ("Kaiser"), effective as of January 1, 2005
(incorporated by reference to Exhibit 10.49 filed with the Company’s Form
10KSB for the year ended December 31, 2005. Portions of this exhibit
(indicated by asterisks) have been omitted pursuant to a request for
confidential treatment pursuant to Rule 24b-2 of the Securities Exchange
Act of 1934).
|
|
10.22
|
Amendment
to Employment Agreement between the Company and Dennis J. Mouras, dated as
of November 11, 2005, and Employment Agreement between the Company and
Dennis J. Mouras, dated as of October 25, 2000 (incorporated by reference
to Exhibit 10.50 filed with the Company’s Form 10-QSB for the quarter
ended September 30, 2005).
|
|
10.23
|
First
Amendment to Services and License Agreement between the Company and Kaiser
Foundation Health Plan of the Northwest (“Kaiser”), effective as of
January 1, 2006 (incorporated by reference to Exhibit 10.51 filed with the
Company’s Form 10KSB for the year ended December 31, 2005. Portions of
this exhibit (indicated by asterisks) have been omitted pursuant to a
request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934).
|
|
10.24
|
Second
Amendment to Services and License Agreement between the Company and
Kaiser, effective as of April 1, 2006 (incorporated by reference to
Exhibit 10.52 filed with the Company’s Form 10KSB for the year ended
December 31, 2005. Portions of this exhibit (indicated by asterisks) have
been omitted pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934).
|
|
10.25
|
Services
and License Agreement between the Company and Blue Cross Blue Shield of
Texas (“BCBSTX”), effective as of August 18, 2003 (incorporated by
reference to Exhibit 10.53 filed with the Company’s Form 10-QSB for the
quarter ended June 30, 2006. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934).
|
|
10.26
|
Amendment
to Services and License Agreement between the Company and BCBSTX,
effective as of June 1, 2006 (incorporated by reference to Exhibit 10.54
filed with the Company’s Form 10-QSB for the quarter ended June 30, 2006.
Portions of this exhibit (indicated by asterisks) have been omitted
pursuant to a request for confidential treatment pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934).
|
|
10.27
|
Letter
from Kaiser Foundation Health Plan of the Northwest terminating Services
and License Agreement (incorporated by reference to Exhibit 10.1 filed on
the Company’s Form 8-K filed on October 3, 2006).
|
|
10.28
|
Amendment
to Employment Agreement between the Company and Dennis J. Mouras, dated as
of November 20, 2007 (incorporated by reference to Exhibit 10.1 filed on
the Company’s Form 8-K filed on November 26,
2007).
|
10.29
|
Data
Services License Agreement between the Registrant and 3M Company dated
April 8, 2003, as amended (incorporated by reference to Exhibit 10.57
filed with the Company’s Form 10KSB for the year ended December 31, 2007.
Portions of this exhibit (indicated by asterisks) have been omitted
pursuant to a request for confidential treatment pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934).
|
|
10.30
|
Services
and License Agreement between the Company and Blue Cross Blue Shield of
Vermont made as of September 1, 2004, as amended (incorporated by
reference to Exhibit 10.58 filed with the Company’s Form 10KSB for the
year ended December 31, 2007. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934).
|
|
10.31
|
Third
Amended and Restated Service Agreement between the Company and Blue Cross
Blue Shield of Vermont made as of April 1, 2001, as amended (incorporated
by reference to Exhibit 10.59 filed with the Company’s Form 10KSB for the
year ended December 31, 2007. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934).
|
|
10.32
|
Third
Amendment of Lease Agreement between CareAdvantage Health Systems, Inc.
and SMIII Woodbridge Plaza, LLC dated March 26, 2008 (incorporated by
reference to Exhibit 10.60 filed with the Company’s Form 10KSB for the
year ended December 31, 2007).
|
|
10.33
|
Form of Subscription Agreement for Common Stock of
the Company (incorporated by reference to Exhibit 10.1 to the
Company’s Form 8-K filed on September 10,
2009).
|
|
10.34
|
Office Lease between SMIII Woodbridge Plaza, LLC
and the Company, delivered on January 18, 2010 and made as of December 28,
2009 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K
filed on January 20,
2010).
|
|
10.35
|
Surrender Agreement between SMIII Woodbridge
Plaza, LLC and CareAdvantage Health Systems, Inc., delivered on January
18, 2010 and made as of December 28, 2009 (incorporated by reference to
Exhibit 10.2 to the Company’s Form 8-K
filed on January 20,
2010).
|
|
10.36
|
Amended and Restated Services and License
Agreement between the Company and Blue Cross Blue Shield of Vermont made
as of January 1, 2010. Portions of this exhibit (indicated by
asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 of the Securities Exchange Act of
1934).*
|
|
10.37
|
Letter Agreement between the Company and Blue
Cross Blue Shield of Vermont made as of December 31,
2009. Portions of this exhibit (indicated by asterisks) have
been omitted pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of
1934).*
|
|
21
|
Subsidiaries
of the Registrant*
|
|
23.1
|
Consent
of Independent Auditors*
|
|
31
|
Certifications
pursuant to Rule 13a-14(a), promulgated under the Securities Exchange Act
of 1934, as amended, and Section 302 of the Sarbanes-Oxley Act of
2002*
|
|
32
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
**
|
**
furnished herewith