UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2017

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File No. 000-55715

 

EMR TECHNOLOGY SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

 

Nevada		47-5482792
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

 

90 Washington Valley Road 

Bedminster, NJ 07921 

(Address of principal executive offices)

 

(908) 997-0617 

(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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 (Sec.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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 13, 2017, there were 9,974,754 shares outstanding of the registrant’s common stock.

 

 

 

TABLE OF CONTENTS

 

		Page
PART I – FINANCIAL INFORMATION		1
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	12
Item 4.	Controls and Procedures.	12
PART II – OTHER INFORMATION		13
Item 1.	Legal Proceedings.	13
Item 1A.	Risk Factors.	13
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	13
Item 3.	Defaults Upon Senior Securities.	13
Item 4.	Mine Safety Disclosures.	13
Item 5.	Other Information.	13
Item 6.	Exhibits.	13
Signatures		14

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

EMR TECHNOLOGY SOLUTIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

 

		September 30, 2017				December 31, 2016
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents		$	4,940			$	42,186
Accounts receivable, net			61,486				16,579
Total Current Assets			66,426				58,765
Property and equipment, net			0				818
Other Assets:
Security Deposit			1,450				0
Software, net			1,120,280				1,025,169
Customer lists, net			930,142				327,596
Covenant not to compete, net			29,819				3,767
Total other assets			2,081,691				1,356,532
TOTAL ASSETS		$	2,148,117			$	1,416,115
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	55,395			$	48,214
Accrued expenses			176,281				34,687
Deferred revenue			58,957				0
Promissory notes – current portion			225,000				0
Total Current Liabilities			515,633				82,901
Promissory note – related party			500,000				500,000
Promissory notes – non-current			375,000				200,000
TOTAL LIABILITIES			1,390,633				782,901
Commitments and Contingencies (See Note 5)
Stockholders’ Equity:
Common Stock, 70,000,000 shares authorized, $.001 par value, 9,911,754 and 7,974,252 shares issued and outstanding in 2017 and 2016, respectively			9,912				7,974
Additional paid in capital			3,867,388				2,819,326
Accumulated deficit			(3,119,816	)			(2,194,086	)
Total stockholders’ equity			757,484				633,214
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,148,117			$	1,416,115

 

The Notes to the Condensed Consolidated Unaudited Financial Statements are an integral part of these statements.

 

 

EMR TECHNOLOGY SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016
(Unaudited)

 

		Three Months Ending September 30,								Nine Months Ending September 30,
		2017				2016				2017				2016
Revenues:
Service revenues		$	43,967			$	0			$	161,557			$	0
Contract revenues			104,477				2,960				273,643				2,960
Total revenues			148,444				2,960				435,200				2,960
Costs and expenses:
Cost of revenues			27,453				427				82,280				427
Selling, general, and administrative expense			206,739				1,897,362				605,085				1,898,612
Amortization expense			221,163				8,749				608,925				8,749
Total operating expenses			455,355				1,906,538				1,296,290				1,907,788
Loss from operations			(306,911	)			(1,903,578	)			(861,090	)			(1,904,828	)
Other Income (Expense)
Interest expense (net)			(21,500	)			(56	)			(64,640	)			(56	)
Total other income (expense)			(21,500	)			(56	)			(64,640	)			(56	)
Loss before income taxes			(328,411	)			(1,903,634	)			(925,730	)			(1,904,884	)
Provision for income taxes			0				0				0				0
Net Loss		$	(328,411	)		$	(1,903,634	)		$	(925,730	)		$	(1,904,884	)
Basic and diluted net loss per common share		$	(0.03	)		$	(0.53	)		$	(0.10	)		$	(0.59	)
Weighted Average Number of Common Shares			9,911,754				3,624,256				9,484,052				3,230,772

 

The Notes to the Condensed Consolidated Unaudited Financial Statements are an integral part of these statements.

 

 

EMR TECHNOLOGY SOLUTIONS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

(UNAUDITED)

 

		For the Nine Months ended September 30, 2017				For the Nine Months ended September 30, 2016
Cash Flows From Operating Activities:
Net Loss		$	(925,730	)		$	(1,904,884	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for services			0				1,620,550
Amortization			608,925				8,749
Depreciation			818				0
Changes in operating assets and liabilities:
Accounts receivable			213,157				(2,959	)
Prepaid Expenses			0				(7,500	)
Accounts payable and accrued expenses			60,538				29,879
Deferred revenue			(8,728	)			330
Other assets			(1,450	)			0
Net Cash Used in Operating Activities			(52,480	)			(255,835	)
Cash Flows From Investing Activities:
Cash acquired in acquisition			10,586				1,907
Payments for acquisitions			(1,045,352	)			(550,000	)
Net Cash Used in Investing Activities			(1,034,766	)			(548,093	)
Cash Flows From Financing Activities:
Repayment due to shareholder			0				(1,659	)
Proceeds from issuance stock			1,050,000				855,000
Net Cash Provided by Financing Activities			1,050,000				853,341
Net Change in Cash and cash equivalents			(37,246	)			49,413
Cash and cash equivalents at Beginning of the Period			42,186				0
Cash and cash equivalents at End of the Period		$	4,940			$	49,413
Cash paid for interest		$	43,141			$	0
Cash paid for taxes		$	0			$	0
Non-Cash Investing & Financing Activities:
Promissory note obligation incurred upon acquisition		$	400,000			$	900,000

 

The Notes to the Condensed Consolidated Unaudited Financial Statements are an integral part of these statements.

 

 

EMR TECHNOLOGY SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

(UNAUDITED)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

 

(A)

Basis of Presentation

 

The accompanying condensed consolidated unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.

 

It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year. 

 

The Company is a Nevada corporation formed on November 3, 2015. It was formed as a holding company whose principal activities consists of acquiring healthcare technology companies. Its fiscal year end is December 31. To date, the Company has financed and acquired four electronic medical records companies.

 

(B)

Use of Estimates

 

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the allocation of purchase price to fair value of assets acquired, valuation of deferred taxes, allowance for bad debt, useful lives of intangible assets, and stock-based compensation.

 

(C)

Cash and Cash Equivalents

 

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At September 30, 2017 and December 31, 2016, the Company had no cash equivalents.

 

(D)

Accounts Receivable

 

Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. Specific reserves are estimated by management based on certain assumptions and variables, including the customer’s financial condition, age of the customer’s receivables, and changes in payment histories. Accounts receivable are written off when management determines the likelihood of collection is remote. Interest is not charged on accounts receivable that are past due. The Company recorded an allowance for doubtful accounts of $82,617 and $0 as of September 30, 2017 and December 31, 2016, respectively.

 

(E)

Principles of Consolidation

 

The 2017 and 2016 consolidated financial statements include the operations of EMR Technology Solutions, Inc. (“EMR”), its wholly owned subsidiaries First Medical Solutions Corporation (from September 23, 2016) (“FMS”), EMRgence, LLC (from September 26, 2016) (“EMRG”), Empower Technologies, Inc. (from January 16, 2017) (“ETI”), and Digital Medical Solutions, Inc. (from March 15, 2017) (“DMSI”). All significant intercompany accounts and transactions have been eliminated in consolidation.

 

(F)

Income Taxes

 

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The tax return for the years ended December 31, 2016 and 2015 are subject to examination by the Internal Revenue Service. 

 

 

(G)

Furniture and Computer Equipment

 

Office Furniture and Computer Equipment are capitalized at cost, net of accumulated depreciation. Depreciation is calculated by using the straight-line method over the estimated useful lives of the assets, which is five to seven years for all categories. Repairs and maintenance are charged to expense as incurred. Expenditures for betterments and renewals are capitalized. The cost of computer equipment and the related accumulated depreciation are removed from the accounts upon retirement or disposal with any resulting gain or loss being recorded in operations. 

 

	Asset Category		Period
	Furniture and fixtures		7 Years
	Computer equipment		3 Years

 

(H)

Amortization and Impairment of Long-Lived Assets

 

Amortization and Impairment of long-lived assets are non-cash expenses relating primarily to intangible assets. The Company accounts for long-lived assets in accordance with the provisions of FASB ASC 360-10, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Software costs are amortized over three (3) years. Non-compete costs are amortized over three (3) years and Customer Lists are amortized over three (3) years. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of September 30, 2017, we have not recorded any impairments. Amortization expense was $221,163 and $608,925 for the three and six months ended September 30, 2017.

 

(I)

Fair Value Measurements and Fair Value of Financial Instruments

 

The Company adopted FASB ASC Topic 820, Fair Value Measurements. ASC Topic 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The Company did not identify any assets or liabilities that are required to be presented on the balance sheets at fair value in accordance with ASC Topic 820 (F).

 

(J)

Advertising

 

Advertising costs are expensed as incurred. The Company did not incur any advertising expenses for the three months and nine months ended September 30, 2017 or for the three and nine months ended September 30, 2016.

 

(K)

Business Segments

 

The Company operates in one segment and therefore segment information is not presented.

 

 

(L)

Revenue Recognition

 

The Company recognizes revenue on arrangements in accordance with FASB ASC Topic. 605 “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company derives revenue from the sale of hardware and software licenses when the products are installed and all required post implementation services are completed. The Company recognizes revenue from consulting services as the services are performed. The income statements break out revenue by contract and services revenues. Contract revenues are recurring revenues for the software license, support and maintenance. Service revenues are one-time revenues generated from customer requests for non-contract services.

 

(M)

Stock-Based Compensation

 

The Company accounts for stock-based instruments issued to employees for services in accordance with ASC Topic 718. ASC Topic 718 requires the Company to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued to employees. The value of the portion of an employee award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASC Topic 505-50, “Equity-Based Payments to Non-Employees”.

 

(N)

Cost of Revenue

 

Cost of revenue consists primarily of sub-contractor costs related to personnel who provide services to our customers, co-location costs, and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred.

 

(O)

Basic and Diluted Net Loss Per Common Share

 

In accordance with ASC 260-10, “Earnings Per Share”, basic net loss per common share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. As of September 30, 2017 and September 30, 2016, the Company has 366,667 and -0- shares of common stock issuable upon the conversion of notes payable that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive.

 

(P)

Recent Accounting Pronouncements

 

In February 2016, the FASB issued accounting standard update (“ASU”) No. 2016-02, “Leases (Topic 842)”, (“ASU 2016-02”). This ASU requires that an entity should recognize assets and liabilities for leases with a maximum possible term of more than 12 months. A lessee would recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the leased asset (the underlying asset) for the lease term. This guidance also provides accounting updates with respect to lessor accounting under a lease arrangement. This new lease guidance is effective for fiscal years beginning after December 15, 2019. Entities have the option of using either a full retrospective or a modified approach (cumulative effect adjustment in period of adoption) to adopt the new guidance. Early adoption is permitted for all entities. We are currently evaluating the impact of the adoption of this guidance in our consolidated financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”, (“ASU 2016-09”). This guidance which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the full impact of the new standard.

 

 

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” The update gives entities a single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide goods or services, would supersede the revenue recognition requirements in Topic 605 “Revenue Recognition,” and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included in Subtopic 605-35 “Revenue Recognition – Construction-Type and Production-Type Contracts.” The update removes inconsistencies and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 

Accounting standards-setting organizations frequently issue new or revised accounting rules. We regularly review all new pronouncements to determine their impact, if any, on our financial statements.

 

NOTE 2 – GOING CONCERN

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained a net loss for the nine months ended September 30, 2017. The Company also has a working capital deficit and an accumulated deficit at September 30, 2017. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital to sustain its current level of operations.

 

Management plans to continue raising additional capital through private placements and is exploring additional avenues for future fund-raising through both public and private sources.

 

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – ACQUISITIONS

 

Effective September 23, 2016, EMR entered into a Stock Purchase Agreement (“SPA”) in which EMR purchased all the shares of First Medical Solutions, Inc., a Florida corporation (“FMS”) from Denis Salins, the sole shareholder of FMS. Pursuant to the SPA, EMR acquired FMS whereby FMS became a wholly owned subsidiary of EMR. FMS has developed a proprietary and fully integrated software program for the healthcare industry, targeting the ambulatory care market for electronic medical records. The purchase price was nine hundred seventy-seven thousand two hundred and fifty dollars ($977,250) of which two hundred fifty thousand dollars ($250,000) was paid in cash at close, twenty-seven thousand two hundred and fifty dollars ($27,250) was paid in the form of fifty thousand (50,000) shares of EMR’s common stock, and EMR issued a three (3) year convertible promissory note (“FMS Note”) for seven hundred thousand dollars ($700,000).

 

Effective September 26, 2016, EMR entered into a Purchase Agreement (“PA”) in which EMR purchased all the membership interests of EMRgence, LLC. (“EMRG”), a Florida limited liability corporation, from Susan Turcotte, the sole member of EMRG. Pursuant to the PA, EMR acquired EMRG whereby EMRG became a wholly owned subsidiary of EMR. EMRG has developed a proprietary software program for the healthcare industry, targeting the vascular care market for electronic medical records. The purchase price was five hundred thousand dollars ($500,000) of which three hundred thousand dollars ($300,000) was paid in cash at close and EMR issued a three (3) year convertible promissory note (“EMRG Note”) for two hundred thousand dollars ($200,000). On November 7, 2016, an additional purchase price payment of $11,907 was paid to Susan Turcotte for net revenues earned for the period from September 1, 2016 through September 25, 2016.

 

 

Effective January 1, 2017 (the “Effective Date”), EMR entered into a Purchase Agreement (“Agreement”) by and among Empower Technologies, Inc., a Nevada corporation (“ETI”), and its sole shareholder Dr. John F. Stagl (the “Seller” and together with ETI and the Company, the “Parties”).  Pursuant to the Agreement, the Company purchased all of the Capital Stock (as defined in the Agreement) of ETI from the Seller (the “ETI Shares”) in exchange for (i) $500,000, subject to certain post-closing adjustments for working capital and deferred revenue, consisting of (a) $300,000 in cash, and (b) a Convertible Promissory Note (the “Note”) issued in favor of the Seller in the principal amount of $150,000 payable over a 36 month period, with 6% annual interest, convertible into common stock of the Company at a price of $3.00 per share (the “Purchase Price”). On January 16, 2017, in accordance with the terms and conditions of the Agreement, ETI became a wholly owned subsidiary of the Company (the “Closing Date”). The post-closing adjustments referenced above consisted of $4,648 reduction in cash at closing for working capital and a reduction of the convertible promissory note of $50,000 for deferred revenue.

 

The acquisition date estimated fair value of the consideration transferred consisted of the following:

 

	Liabilities assumed		$	(72,917	)
	Net tangible assets			(72,917	)
	Non-compete agreements			36,109
	Customer list			482,160
	Total purchase price		$	445,352

 

Effective January 1, 2017 (the “Effective Date”), EMR Technologies, Inc., a Nevada corporation (the “Company”) entered into a Purchase Agreement (“Agreement”) by and among Digital Medical Solutions, Inc., a Florida corporation (“DMSI”), and its sole shareholder Dr. Joseph J. Memminger III (the “Seller” and together with DMSI and the Company, the “Parties”).  Pursuant to the Agreement, the Company purchased all of the Capital Stock (as defined in the Agreement) of DMSI from the Seller (the “DMSI Shares”) in exchange for (i) $1,000,000, subject to certain post-closing adjustments for working capital and earnings before interest, taxes, depreciation, and amortization, consisting of (a) $750,000 in cash, and (b) a Convertible Promissory Note (the “Note”) issued in favor of the Seller in the principal amount of $250,000 payable over a 36 month period, with 6% annual interest, convertible into common stock of the Company at a price of $3.00 per share (the “Purchase Price”). On March 15, 2017, in accordance with the terms and conditions of the Agreement, DMSI became a wholly owned subsidiary of the Company (the “Closing Date”).

 

The acquisition date estimated fair value of the consideration transferred consisted of the following:

 

	Tangible assets acquired		$	269,067
	Liabilities assumed			(83,428	)
	Net tangible assets			185,639
	Customer list			364,361
	Software			450,000
	Total purchase price		$	1,000,000

 

The agreements resulted in the purchase of 100% of the outstanding shares of FMS, EMRG, ETI, and DMSI.

 

As of September 30, 2017, the Company has recorded an estimated fair value of the intangible assets of FMS, EMRG, ETI, and DMSI based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. After the preliminary purchase price allocation period, we record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

 

Pro-forma Financial Information

 

The following unaudited pro-forma information presents the combined results of operations for the periods as if the acquisition of FMS, EMRG, ETI, and DMSI had been completed on January 1, 2017 and 2016.

 

			For the Nine Months Ended September 30, 2017				For the Nine Months Ended September 30, 2016
	Revenue		$	607,998			$	614,365
	Total expenses			(1,301,932	)			(2,282,888	)
	Net income (loss)		$	(693,934	)		$	(1,668,523	)
	Net income (loss) per common share, basic and diluted		$	(0.07	)		$	(0.51	)

 

 

NOTE 4 – PROMISSORY NOTES

 

The $700,000 FMS Unsecured Note has an interest rate of ten percent (10%) per annum for a period of two (2) years and fully amortizes during the third (3rd) year. The note is secured by an escrowed copy of the software source code. The note can be converted at any time, at the option of the holder, into shares of the Company’s stock at a conversion price of $3 per share. On October 31, 2016, the holder of the FMS Note converted $200,000 of the note for 200,000 shares of common stock. The Company has recorded a loss on conversion of debt of $72,000.

 

The Company issued a three (3) year unsecured convertible promissory note (the “EMRG Note”) for two hundred thousand dollars ($200,000). The EMRG Note has an interest rate of six percent (6%) per annum for a period of one (1) year and fully amortizes during the next two (2) years. The note is secured with a pledge of forty percent (40%) of the membership interests acquired. The note can be converted at any time, at the option of the holder, into shares of the Company’s stock at a conversion price of $3 per share.

 

The Company issued a three (3) year unsecured convertible promissory note (the “ETI Note”) for one hundred fifty thousand dollars ($150,000). The ETI Note has an interest rate of six percent (6%) per annum for a period of two (2) years and fully amortizes during the third (3rd) year. The note can be converted at any time, at the option of the holder, into shares of the Company’s stock at a conversion price of $3 per share.

 

The Company issued a three (3) year unsecured convertible promissory note (the “DMSI Note”) for two hundred fifty thousand dollars ($250,000). The DMSI Note has an interest rate of six percent (6%) per annum for a period of one (1) year and fully amortizes during the next two (2) years. The note can be converted at any time, at the option of the holder, into shares of the Company’s stock at a conversion price of $3 per share.

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

The Company leases office space on a month to month basis. Rent expense for the nine months ended September 30, 2017 and the nine months ended September 30, 2016 was $9,305 and $621 respectively.

 

NOTE 6 – STOCKHOLDERS’ EQUITY

 

(A) - Stock issued for cash

 

Effective August 23, 2016, the Company entered into an Investor Stock Subscription Agreement (“Agreement”) with an entity controlled by our Chief Financial Officer (the “Investor”) to purchase three million seven hundred thousand (3,700,000) shares of the Company’s common stock for two million dollars ($2,000,000) in tranches based on certain milestone events. On August 23, 2016, the investor purchased 656,751 shares of common stock for $355,000. On September 22, 2016, the Investor purchased 925,001 shares of common stock for $500,000 that was used to close two acquisitions. On December 29, 2016, the Investor purchased 92,500 shares of common stock for $50,000 that was used for working capital. On January 13, 2017, the Investor purchased 550,001 shares of common stock for $300,000 that was used to close an acquisition. On March 17, 2017, the Investor purchased 1,387,501 shares of common stock for $750,000 that was used to close an acquisition. The remaining investments are subject to the company reaching certain milestones under the agreement.

 

(B) - Stock issued for Services

 

On January 6, 2016, the Company issued 550,000 shares of stock to eight individuals for services with a fair value of $550.

 

 

On August 22, 2016, the Company issued 3,000,000 shares of Common Stock for services with a fair value of $1,620,000 based on recent cash sales.

 

(C) - Stock issued for Acquisitions

 

On September 23, 2016, the Company issued 50,000 shares of common stock as partial consideration of the acquisition of FMS with a fair value of $27,250 based on recent cash sales prices. 

 

(D) - Equity Incentive Plan

 

On January 30, 2016, the Board of Directors, with the approval of a majority of the shareholders of the Company, adopted the 2016 Equity Incentive Plan (the “Plan”) which will be administered by a committee appointed by the Board.

 

The Company, under its 2016 Plan, issues options to various officers, directors and consultants. The options vest in equal annual installments over a five-year period. All of the options are exercisable at a purchase price based on the last price of the Company’s common stock on the date of grant and have a term of 10 years.

 

As of September 30, 2017, no options had been granted or were outstanding.

 

(E) – Stock Issued for Conversion of Convertible Promissory Note

 

On October 31, 2016, the holder of the FMS Note converted $200,000 of the note for 200,000 shares of common stock. The Company has recorded a loss on conversion of debt of $72,000.

 

NOTE 7 - RELATED PARTY TRANSACTIONS

 

Effective August 23, 2016, the Company entered into an Investor Stock Subscription Agreement (“Agreement”) with an entity controlled by our Chief Financial Officer (the “Investor”) to purchase three million seven hundred thousand (3,700,000) shares of the Company’s common stock for two million dollars ($2,000,000) in tranches based on certain milestone events. On August 23, 2016, the investor purchased 656,751 shares of common stock for $355,000. On September 22, 2016, the Investor purchased 925,001 shares of common stock for $500,000 that was used to close two acquisitions. On December 29, 2016, the Investor purchased 92,500 shares of common stock for $50,000 that was used for working capital. On January 13, 2017, the Investor purchased 550,001 shares of common stock for $300,000 that was used to close an acquisition. On March 17, 2017, the Investor purchased 1,387,501 shares of common stock for $750,000 that was used to close an acquisition. The remaining investments are subject to the company reaching certain milestones under the agreement.

 

On September 23, 2016, the Company issued a $700,000 Convertible Promissory Note to the Chief Technology Officer in conjunction with the acquisition of FMS. On October 31, 2016, $200,000 of the note was converted to 200,000 shares of the Company’s common stock.

 

NOTE 8 – SUBSEQUENT EVENTS

 

On October 5, 2017, two (2) members of the Board of Directors of the Company were each issued twenty-five thousand shares (25,000) of the Company’s common stock as compensation for services in such capacity.

 

On October 17, 2017, ten thousand (10,000) shares of the Company’s common stock were issued to a non-executive employee of the Company as a bonus for performance.

 

On October 23, 2017, the Company issued 3,000 shares of common stock to 15 individual investors at $1.00 per share.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This quarterly report on Form 10-Q and other reports filed by EMR Technology Solutions Inc. (the “Company”) from time to time with the SEC (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

 

Plan of Operation

 

Our plan of operation over the next twelve months is to continue our three primary approaches: (i) acquiring electronic medical record companies and then migrating the customers of those companies to our solutions, (ii) selling our solutions directly to healthcare providers practicing in ambulatory settings, and (iii) acquiring providers of other healthcare technology services such as third party insurance administrators and revenue cycle management companies. We intend to distribute our solutions through our websites, endorsements from medical groups and associations, and referrals from existing clients.

 

Revenues

 

For the three and nine month periods ending September 30, 2017, revenues were $148,444 and $435,200 compared to $2,960 and $2,960 for the same periods in 2016. The increase in revenue for the three and nine month periods ended September 30, 2017 is attributable to the acquisitions of EMRG in September 2016, ETI in January 2017, and DMSI in March 2017.

 

Cost of Revenues

 

Cost of revenues was $27,453 and $82,280 for the three and nine month periods ended September 30, 2017 compared to $427 and $427 for the same periods in 2016. The increase in cost of revenues for the three and nine month periods ended September 30, 2017, was a result of the acquisitions of EMRG in September 2016, ETI in January 2017, and DMSI in March 2017.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses was $206,739 and $605,085 for the three and nine month periods ended September 30, 2017 compared to $1,897,362 and $1,898,612 for the same periods in 2016. The increase in selling, general and administrative expenses for the three and nine month periods ended September 30, 2017, was a result of the acquisitions of EMRG in September 2016, ETI in January 2017, and DMSI in March 2017 and offset by a decrease in Professional Fees of approximately $1,622,000 in 2016.

 

Amortization Expense

 

Amortization expense was $221,163 and $608,925 for the three and nine month periods ended September 30, 2017 compared to $8,749 and $8,749 for the same periods in 2016. The increase in amortization expense for the three and nine month periods ended September 30, 2017, was a result of the acquisitions of FMS in September 2016, EMRG in September 2016, ETI in January 2017, and DMSI in March 2017.

 

Other Income (Expense)

 

Other Expense was $21,500 and $64,640 for the three and nine month periods ended September 30, 2017 compared to Other Expense of $56 and $56 for the same periods in 2016. The increase in Other Expense for the three and nine month periods ended September 30, 2017, was a result of the acquisitions of FMS in September 2016, EMRG in September 2016, ETI in January 2017, and DMSI in March 2017.

 

 

Net Loss

 

Net Loss was $328,411 and $925,730 for the three and nine month periods ended September 30, 2017 compared to $1,903,634 and $1,904,884 for the same periods in 2016. This decrease was primarily due to the increase in Revenues and offset by the increases in, Cost of Goods Sold, SG&A Expenses, Amortization, and Other Expense described above.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at September 30, 2017 compared to December 31, 2016. 

 

		September 30, 2017				December 31, 2016
Current Assets		$	66,426			$	58,765
Current Liabilities		$	515,633			$	82,901
Working Capital (Deficit)		$	(449,207	)		$	(24,136	)

 

At September 30, 2017, we had a working capital deficit of ($449,207) as compared to working capital deficit of ($24,136) at December 31, 2016, an increase in working capital deficit of $425,071.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our PEO and PFO concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

(b) Changes in Internal Control over Financial Reporting.

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 23, 2017.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Except as set forth below, during the quarter ended September 30, 2017, the Company has not issued any securities which were not registered under the Securities Act and not previously disclosed in the Company’s Annual Report on Form 10-K or Current Reports on Form 8-K.

 

On October 5, 2017, two members of the Board of Directors of the Company were each issued 25,000 of the Company’s common stock as compensation for services in such capacity.

 

On October 17, 2017, 10,000 shares of the Company’s common stock were issued to a non-executive employee of the Company as a bonus for performance.

 

On October 23, 2017, the Company entered into Investor Stock Subscription Agreements with 15 individual investors to purchase up to 3,000 shares of the Company’s common stock at a price per share equal to $1.00.

 

The above issuances of securities qualified for exemption under Section 4(a)(2) of the Securities Act. The securities were exempt from registration under Section 4(a)(2) of the Securities Act because the issuance of such securities by the Company did not involve a “public offering,” as defined in Section 4(a)(2) of the Securities Act, due to the insubstantial number of persons involved in the transaction, size of the offering, and manner of the offering and number of securities offered. The Company did not undertake an offering in which it sold a high number of securities to a high number of investors. In addition, the investor had the necessary investment intent as required by Section 4(a)(2) of the Securities Act since they agreed to, and received, the securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2) of the Securities Act.

 

Item 3. Defaults Upon Senior Securities.

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
31.2		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)). *
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document *
101.SCH		XBRL Taxonomy Extension Schema *
101.CAL		XBRL Taxonomy Extension Calculation Linkbase *
101.DEF		XBRL Taxonomy Extension Definition Linkbase *
101.LAB		XBRL Taxonomy Extension Label Linkbase *
101.PRE		XBRL Taxonomy Extension Presentation Linkbase *

 

* Filed herewith

 

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.

 

	EMR TECHNOLOGY SOLUTIONS, INC.
Date: November 13, 2017	By:	/s/ John X. Adiletta
	Name:	John X. Adiletta
	Title:	Chief Executive Officer
		(Principal Executive Officer)

 

 

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