Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File Number: 000-52712
PEER REVIEW MEDIATION AND ARBITRATION, INC.
-------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 65-1126951
------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1450 S. Dixie Highway, Ste. 201
Boca Raton, Florida 33432
-------------------------------
(Address of principal executive offices)
(561) 347-1178
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant 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 (section 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 [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in Rule 12b-2 of
the Exchange Act.
2
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of August 23, 2011, there were 9,162,071 shares of Peer Review
Mediation and Arbitration, Inc. Common Stock, $0.001 par value per
share, issued and outstanding.
3
PART I
FINANCIAL INFORMATION
Page
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Item 1. Financial Statements 4
Consolidated Balance Sheets as of
March 31, 2011 (Unaudited) and December 31, 2010 6
Consolidated Statements of Operations for the
Three Months Ended March 31, 2011
and 2010 (unaudited) 8
Consolidated Statements of Cash Flows for the
Three Month Periods Ended March 31,
2011 and 2010 (unaudited) 10
Notes to Consolidated Financial Statements (unaudited) 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 17
Item 4. Controls and Procedures 17
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. (Removed and Reserved) 19
Item 5. Other Information 19
Item 6. Exhibits 19
Signatures 20
4
PART I - FINANCIAL INFORMATION
PEER REVIEW MEDIATION AND ARBITRATION, INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Quarter Ended March 31, 2011
5
PEER REVIEW MEDIATION AND ARBITRATION, INC.
Consolidated Financial Statements
(Unaudited)
TABLE OF CONTENTS
Page
----
FINANCIAL STATEMENTS 4
Consolidated balance sheet 6
Consolidated statements of operation 8
Consolidated statements of cash flows 10
Notes to consolidated financial statements 12
6
PEER REVIEW MEDIATION AND ARBITRATION, INC.
CONSOLIDATED BALANCE SHEETS
March 31,
December 31, 2011
2010 (Unaudited)
---------- ----------
ASSETS
Current assets:
Cash $ 155,655 $ 218,849
Accounts receivable 30,663 127,133
Inventory 22,294 22,294
Marketable securities 79 79
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Total current assets 208,691 368,355
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Fixed assets 328,522 1,279,451
Less accumulated depreciation (99,663) (872,298)
Other assets 13,584 13,940
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242,443 421,093
---------- ----------
Total Assets $ 451,134 $ 789,448
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued payables $ 633,379 $ 746,131
Related party payables 2,797,987 2,875,437
Notes payable - current portion - 74,656
Notes payable - related party -
current portion 189,391 182,815
Capital lease obligation - 95,749
Other liabilities 3,894 -
----------- -----------
Total current liabilities 3,624,651 3,974,788
Capital lease obligation - 2,553
Notes payable - 198,987
Notes payable - related party 15,000 15,000
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Total liabilities 3,639,651 4,191,328
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7
Stockholders' Equity
Preferred stock, Series II, $.001 par value;
1,000,000 shares authorized; convertible;
1,000,000 issued and outstanding 1,000 1,000
Common stock, $.001 par value; 45,000,000
shares authorized; 9,140,683 (2010)
and 9,154,458 (2011) 9,140 9,154
Additional paid in capital 22,409,747 22,960,450
Stock subscription receivable (7,968,750) (7,203,750)
Accumulated deficit (17,625,384) (19,155,324)
Accumulated other comprehensive
income (loss) (13,673) (13,673)
----------- -----------
Total PRMA stockholders' equity (3,187,920) (3,401,880)
Noncontrolling Interest (597) 263
----------- -----------
Total Stockholders' Equity (3,188,517) (3,401,880)
----------- -----------
Total Liabilities and Stockholders' Equity $ 451,134 $ 789,448
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
8
PEER REVIEW MEDIATION AND ARBITRATION, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2010 2011
---------- -----------
Revenue $ 12,906 $ 1,931,923
Cost of sales 5,102 1,667,525
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Gross Profit 7,804 264,398
Expenses:
Depreciation 4,277 60,533
Selling general and administrative 373,131 576,935
Write offs - 1,051,900
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377,408 1,689,388
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Loss from operations (369,604) (1,424,990)
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Other income (expense)
Interest income - 7
Interest (expense) (58,855) (70,443)
Beneficial conversion feature - (34,813)
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(58,855) (105,249)
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Income (loss) before provision
for income taxes (428,459) (1,530,239)
Provision for income tax - -
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Net income (loss) $ (428,459) $(1,530,239)
Other comprehensive income (loss) net of tax
Unrealized gain (loss) on securities (6) -
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Comprehensive income (loss) $ (428,465) $ (428,465)
Comprehensive (income) loss attributable
to non-controlling interest - 299
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Comprehensive income (loss)
attributable to PRMA (428,465) (1,529,940)
9
Net income (loss) per share
(basic and fully diluted) $ (0.05) $ (0.17)
========== ===========
Weighted average number of common
shares outstanding 8,394,802 9,150,071
========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
10
PEER REVIEW MEDIATION AND ARBITRATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2010 2011
--------- -----------
Cash Flows From Operating Activities:
Net income (loss) $(428,459) $(1,530,239)
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation 4,277 60,553
Accounts receivable (1,300) (47,352)
Accrued payables 76,611 108,858
Related party payable 122,074 122,074
Compensatory equity issuances - -
Other assets - (356)
Bad debt expense - -
Beneficial conversion feature - expense - 34,813
Writeoffs - 1,051,900
--------- -----------
Net cash provided by (used for)
operating activities (226,797) (244,373)
--------- -----------
Cash Flows From Investing Activities:
Fixed Assets (1,212) (10,071)
Business Acquisition - net - 11,706
--------- -----------
Net cash provided by (used for)
investing activities (1,212) (1,635)
--------- -----------
11
Cash Flows From Financing Activities:
Notes payable - borrowings - -
Related party loans - payments (28,836) (104,392)
Capital lease obligation - payments - (21,739)
Related party loans - payments - -
Equity sales - subsidiary - 278,500
Option exercises 296,988 153,563
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Net cash provided by (used for)
financing activities 268,152 305,932
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Net Increase (Decrease) in Cash 40,143 63,194
Cash at the Beginning of the Period 27,392 155,655
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Cash at the End of the Period $ 67,535 $ 218,849
========= ===========
Schedule of Non-Cash Investing and
Financing Activities
None
Supplemental Disclosure
Cash paid for interest $ 1,001 $ 9,323
Cash paid for income taxes $ - $ -
The accompanying notes are an integral part of the
consolidated financial statements.
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PEER REVIEW MEDIATION AND ARBITRATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Peer Review Mediation And Arbitration, Inc. ("PRMA", the "Company"),
was incorporated in the State of Florida on April 16, 2001. The Company
provides peer review services and expertise to law firms, medical
practitioners, insurance companies, hospitals and other organizations
in regard to personal injury, professional liability and quality
review.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of
the information and disclosures required by generally accepted
accounting principles for complete financial statements. All
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the interim periods
have been made and are of a recurring nature unless otherwise disclosed
herein. The results of operations for such interim periods are not
necessarily indicative of operations for a full year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Peer Review Mediation and Arbitration, Inc. and its wholly owned
subsidiary. All intercompany accounts and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect 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.
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PEER REVIEW MEDIATION AND ARBITRATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (continued)
Income tax
The Company accounts for income taxes pursuant to ASC 740. Under ASC
740 deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income
(loss) by the weighted average number of shares of common outstanding.
Warrants, stock options, and common stock issuable upon the conversion
of the Company's preferred stock (if any), are not included in the
computation if the effect would be anti-dilutive and would increase the
earnings or decrease loss per share.
Revenue recognition
Revenue is recognized on an accrual basis after services have been
performed under contract terms, the service price to the client is
fixed or determinable, and collectability is reasonably assured.
Property and equipment
Property and equipment are recorded at cost and depreciated under the
straight line method over each item's estimated useful life.
Financial Instruments
The carrying value of the Company's financial instruments, as reported
in the accompanying balance sheet, approximates fair value.
Marketable Securities
The Company's marketable securities are classified as available-for-
sale, are presented in the balance sheets at fair market value, and
consist entirely of equity securities. Gains and losses are determined
using the specific identification method.
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PEER REVIEW MEDIATION AND ARBITRATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (continued)
The Company accounts for comprehensive income (loss) under ASC 220,
which establishes standards for reporting and display of comprehensive
income and its components. Unrealized gains (losses) from marketable
securities are reported as other comprehensive income (loss) in the
consolidated statements of income and comprehensive income and as
accumulated other comprehensive income (loss) in stockholders' equity.
Stock based compensation
The Company accounts for employee and non-employee stock awards under
ASC 718, whereby equity instruments issued to employees for services
are recorded based on the fair value of the instrument issued and those
issued to non-employees are recorded based on the fair value of the
consideration received or the fair value of the equity instrument,
whichever is more reliably measurable.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Act of 1934. The statements regarding Peer Review Mediation
and Arbitration, Inc. and its subsidiaries contained in this Report
that are not historical in nature, particularly those that utilize
terminology such as "may," "will," "should," "likely," "expects,"
"anticipates," "estimates," "believes" or "plans," or comparable
terminology, are forward-looking statements based on current
expectations and assumptions, and entail various risks and
uncertainties that could cause actual results to differ materially from
those expressed in such forward-looking statements.
OVERVIEW
We were incorporated under the laws of the State of Florida on April
16, 2001. We have been conducting business operations ever since,
primarily focused on the creation and continual development of our
proprietary Private Network Application which allows direct access to
our Peer Review Data Archival resource via our PeerReviewboard.com
Internet web site. Our wholly owned subsidiary, Independent Review,
Inc., is engaged in providing medical case reviews to the Texas
Insurance Commission pursuant to a license from the state of Texas.
Our service enables subscribers, attorneys, insurance claims agents,
healthcare providers and consumers the ability to efficiently search
and engage medical experts for a variety of medical consulting
projects. PRMA maintains a network of independent physicians as members
of its Peer Review Board, available to assist in areas such as: expert
medical opinions and testimony, legal case evaluation and strategy,
assessment of damages, case valuation, medical peer review and chart
review, independent medical review, quality and utilization review,
medical case management, and medical second opinion. In addition, we
offer a diverse program of technology and innovation services as member
benefits to our member physicians through Pro-Med Alliance, our wholly-
owned subsidiary.
RESULTS OF OPERATIONS
Comparison of Results of Operations for the Three Months Ended March
31, 2011 and 2010
Sales were $1,931,293 for the quarter ended March 31, 2011, as compared
to sales of $12,906 for the quarter ended March 31, 2010, an increase
of $1,918,387, or 14,684%. These revenues were generated by our
operating subsidiary mediation, staffing, environmental and
transcription divisions. The significant increase is due to the fact
that the operations of the staffing, environmental, and transcription
divisions all came online after March 31, 2010, and therefore are not
reflected in the comparable numbers for 2010.
16
Cost of sales was $1,667,525 for the quarter ended March 31, 2011, as
compared to cost of sales of $5,102 for the comparable period in 2010,
an increase of $1,662,423 or 32,584%. Cost of sales increased
significantly due to the corresponding increase in revenues noted in
the previous paragraph.
For the quarter ended March 31, 2011, we incurred operating expenses of
$1,689,388, which included a goodwill writeoff of $1,051,900 associated
with acquisitions, and selling, general and administrative expenses of
$576,935, compared to operating expense of $377,408 during the quarter
ended March 31, 2010, which included selling, general and
administrative expenses of $373,131, or a 35.3% increase in selling,
general and administrative expense, principally because of increased
business activity. Selling, general and administrative expenses during
the quarter ended March 31, 2011, consisted of $81,887 in physician
recruitment, $54,591 in administrative expense, $45,493 in operational
expense, $70,245 in IT maintenance and hosting, $25,505 in rent,
$90,823 in officers and directors compensation, $38,748 in consulting
fees, $70,443 in interest expense, $9,399 in telephone expense, $13,250
in legal and & professional fees, $1,988 in utilities and maintenance,
$7,750 in office supplies, $300 in promotion and advertising, and
$2,202 in miscellaneous fees. Depreciation and amortization expense
increased to $60,553 during the quarter ended March 31, 2011, compared
with that of $4,277 for the same period in 2010, due to the significant
increase in depreciable assets obtained as part of acquisition
activity.
As a result, we incurred a loss of $1,530,239 during quarter ended
March 31, 2011, or ($0.17) per share, compared with a loss of $428,465
during the quarter ended March 31, 2010, or ($0.05) per share.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2011, we had $218,928 in cash and marketable securities.
During the quarter ending March 31, 2011, operations were funded
through the exercise of our outstanding Common Stock Purchase Options.
On April 2, 2009 our registration statement was deemed effective by the
SEC wherein we registered 323,940 shares of our Common Stock that
underlie previously issued purchase options. As of the date of this
report we have received an aggregate of $3,262,708 from the exercise of
these Purchase Option and issued 186,440 shares of our Common Stock as
a result. It is management's intent to use the funds generated by the
exercising of these options to execute the business plan.
The net cash used in operating activities for the quarter ended March
31, 2011 was $244,373. The net cash provided from financing activities
for the quarter ended March 31, 2011 was $305,932. We had $218,928 in
cash and cash equivalents as of March 31, 2011, compared to $67,691 in
cash and cash equivalents as of March 31, 2010. We had $127,133 in
account receivables as of March 31, 2011, as compared to $8,260 at
March 31, 2010.
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OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources and would be considered material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures. Our management, with the
participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended as of the end of
the period covered by this report.
These controls are designed to ensure that information required to be
disclosed in the reports we file or submit pursuant to the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the
Securities and Exchange Commission, and that such information is
accumulated and communicated to our management, including our CEO and
CFO, as appropriate, to allow timely decisions regarding required
disclosure.
Based on their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and
procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and
reported within the time periods specified in the applicable Securities
and Exchange Commission rules and forms, and (ii) accumulated and
communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
We believe that our consolidated financial statements presented in this
Quarterly Report on Form 10-Q fairly present, in all material respects,
our financial position, results of operations, and cash flows for all
periods presented herein.
18
Inherent Limitations - Our management, including our Chief Executive
Officer and Chief Financial Officer, do not expect that our disclosure
controls and procedures will prevent all error and all fraud. A control
system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control
system are met. The design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Further, 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 costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our company
have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdown can
occur because of simple error or mistake. In particular, many of our
current processes rely upon manual reviews and processes to ensure that
neither human error nor system weakness has resulted in erroneous
reporting of financial data.
Changes in Internal Control over Financial Reporting - There were no
changes in the Company's internal control over financial reporting
during the first quarter of 2010, which were identified in conjunction
with management's evaluation required by paragraph (d) of Rules 13a-15
and 15d-15 under the Exchange Act, that have materially affected, or
are reasonably likely to materially affect, the Company's internal
control over financial reporting.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. (REMOVED AND RESERVED)
None
ITEM 5. OTHER INFORMATION
On January 3, 2011, the Company acquired the assets of A-1 Pipe
Cleaning Services, Inc., a Florida based company, through an asset
purchase agreement. Under the terms of the agreement, the Company
agreed to receive all assets, all liabilities associated with the
operating of A-1, including operating leases for equipment and
liabilities associated with the principal owners' funding of the
company, in exchange for 50,000 shares of PRMA restricted common stock.
ITEM 6. EXHIBITS
Exhibit 31* - Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32* - Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
* Filed herewith
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PEER REVIEW MEDIATION AND ARBITRATION, INC.
Dated: August 23, 2011
By: /s/ Willis Hale
----------------
Willis Hale
Chief Executive Officer
By: /s/ Marc E. Combs
-----------------
Marc E. Combs
Chief Financial Officer
