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HEALTH ADVANCE, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations
(Edgar Glimpses Via Acquire Media NewsEdge) The following plan of operation provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our predictions.
Overview
The Company has incurred losses since inception and the ability of the Company
to continue as a going-concern depends upon its ability to raise adequate
financing and develop profitable operations. Management is actively targeting
sources of additional financing to provide continuation of the Company's
operations. In order for the Company to meet its liabilities as they come due
and to continue its operations, the Company is solely dependent upon its ability
to generate such financing.
The Company is actively seeking financing for its current business
operation. The Company is optimistic that the financing will be secured and the
going concern risk will be removed. We are in discussions with various parties
and believe a successful financing is likely. We will likely to raise funds
through either debt or issuing shares of our common stock in order to achieve
our business goals. The issuance of additional shares or securities convertible
into any such shares by us, any shares issued would dilute the percentage
ownership of our current stockholders. There are no agreements with any parties
at this point in time for additional funding.
Plan of Operation
We were incorporated on April 14, 2010 in Wyoming. Our business office is
located at 3651 Lindell Road, Suite D#155, Las Vegas, NV, 89103. Our telephone
number is 702-943-0309. We were founded by Jordan Starkman, who serves as
President and Director. In addition, Domenico Pascazi was appointed as a
director in March 2011.
We are an on-line retailer of home medical products with operations in Canada
and the US, and with administration and infrastructure supported globally. Our
strategy is to attract opportunities in the health care industry through the
development and growth of our existing web site www.healthadvancemd.com. We
believe we can operate more cost efficiently and compete as a discounter that
delivers value and low cost branded lines of home medical care products together
with valuable customer care that is currently missing in the marketplace. Our
goal is to become our customers' single source for low cost health care
supplies, by meeting all of our customer's needs.
We strive to offer health care professionals, medical distributors and consumers
the highest quality brands and products at the most affordable prices. We expect
to achieve this by forming relationships with suppliers that will be able to
provide us with preferred prices once we are able to make bulk purchases.
In the fiscal year of 2013, we plan to build our business across four key
product categories including: (1) respiratory, (2) diabetes, (3) ostomy, and (4)
mastectomy supplies. Our growth plan is to achieve $250,000 in net revenues
within the first 12 months following our July 31, 2012 year-end, with $120,000
derived from these four growth product lines at an average of $30,000 from each
new growth category business unit.
We plan to complete a financing through a private offering for a minimum of
$200,000 in the fiscal year of 2013. We have not yet entered into any agreements
with any parties with respect to obtaining financing for the Company.
If we are unable to obtain financing on reasonable terms, we could be forced to
delay or scale back our plans for expansion. In addition, such inability to
obtain financing on reasonable terms could have a material adverse effect on our
business, operating results, or financial condition.
If we are able to obtain financing, we plan to implement both online and offline
marketing and customer engagement campaigns for both our traditional durable
medical products and our four key product areas mentioned above. We intend to
target consumers with on-line marketing, and businesses, including various
senior care facilities, with direct mail, telemarketing and flyer campaigns.
Initially, we will target small to medium size facilities. We also intend to
launch our direct mail onsite flyer campaigns and outbound calling campaigns in
unison to increase the frequency and awareness of HealthAdvanceMD. We expect to
replace and expand any existing major wholesaler relationships we currently work
with by the beginning of year two following our July 31, 2012 year-end. Further,
during this expected time frame, we plan to establish direct-from-manufacturer
programs for our four key growth markets in order to achieve improved margin of
between 25-35%. We intend to continue to run our durable medical products
business through the existing wholesaler relationships given the large range of
product SKUs in the durable medical product category where we carry no less than
a selection of nearly 2,000 products. No steps have been taken thus far to
secure customers for our products.
The Company has recently started the process of preparing for an online
marketing campaign. The Company has a relationship with AGS Cybertech located in
India who will manage and coordinate all of our online marketing efforts. The
campaign will include internet banner ads, search engine optimization, and
social media optimization. All banner advertising will be strategically placed
with various click per view programs as part of our overall sales and marketing
plan.
In the fiscal year of 2013 and 2014, we intend to achieve total sales of
$500,000. We expect to achieve this by generating revenue of $300,000 from our
core four growth markets at a sales growth rate of approximately 50% per year;
along with an additional $200,000 from our durable medical products business and
over $50,000 derived from margin improvements on existing product lines within
our four core growth categories.
1
--------------------------------------------------------------------------------In our key growth areas we plan to focus on reducing and concentrating the
number of product SKUs in each growth category in order to create leverage with
our supply chain across selected relationships with respiratory, diabetes,
ostomy and mastectomy suppliers. These new direct-from-manufacturer programs
will primarily be drop ship programs and will essentially result in no new
product inventory risks. They will be predominantly product substitution
strategies where direct manufacturers carry the inventory risk in order to get
shelf space within our business to consumer ecommerce property
www.healthadvancemd.com and other sales channels. These programs will be based
on committed but non-binding contracted volume from us with each manufacturer,
but where the manufacturer still carries the inventory, marketing investment,
and the majority of the time continues to handle drop shipments direct to our
customers and sales channels.
The first tranche of these direct from manufacturer programs is expected to be
with North America based manufacturers given a tendency for higher quality
product, margins and their ability to handle inventory and direct shipments to
our customers. We also plan to evaluate a select number of overseas supplier
relationships if we identify that a select overseas direct supplier can and will
meet our delivery, financing and quality and return warranty terms. As a result
of these supply chain improvements we expect to increase our net revenues by
over an additional $50,000 based on margin improvements of an average of 20-25%
and this does not include factoring in even higher margins if we choose to
source from overseas markets.
These new product launches will be outlined and planned within the 2013 fiscal
year, once our financing is completed. During the next 24 months following our
2012 year-end, we plan to work with our manufacturing partners to develop and
finalize no less than 2 new product lines within each core product group for
respiratory, diabetes, ostomy and mastectomy supplies and launch them by the
second half of year 2 based on an estimate of an average of $50,000 net revenue
per new product line per year. Together with our manufacturer partners we intend
to develop and test market and then finalize our packaging and product features
and licensing requirements by the end of July 2014.
In addition to supply chain optimization coming into full effect by the
beginning of January 2014 which should result in reduced overall cost of goods,
we also plan to drive top line growth with a major marketing initiative for new
products. No formal products have been discussed as of yet. As a result by the
end of July 2014, based on achieving the 3 key milestones outlines above
including: (1) entering into new growth markets, (2) optimizing our supply chain
and (3) launching new product lines in our new growth markets - we intend as
part of a 36 month plan from July 31, 2012, to achieve a top line net revenue
from our operations of $2,000,000.
This $2,000,000 will be comprised of $1,200,000 from existing product line sales
in growth markets for respiratory, diabetes, ostomy and mastectomy supplies
through a margin optimized supply chain; a contribution of over $400,000 from
our traditional durable medical products businesses through existing wholesaler
channels and $400,000 in net revenue from new products launched.
We have estimated that we will incur minimum expenses equal to $15,000 in the
year following our July 31, 2012 year-end in order to maintain our business
operations. However, if we conduct a financing, we will devote the capital
raised to operational expenses as indicated below. The Company will attempt to
complete a financing for a minimum of $200,000 within the 12-month period
following the Company's 2012 year-end. Any capital raised will be through either
a private placement or a convertible debenture and will result in the issuance
of common shares from the Company's authorized capital.
Web Development and Maintenance $ 5,000.00
Legal/Accounting
$ 15,000.00
Computer hardware and software systems $ 10,000.00
Advertising and Marketing
$ 130,000.00
General and administrative $ 10,000.00
Salaries and Customer Service $ 25,000.00
Telephone $ 1,000.00
Travel $ 4,000.00
Total Expenses $ 200,000.00
2--------------------------------------------------------------------------------The above represents our Managements best estimate of our cash requirements
based on our business plans and current market conditions. The above is based on
our ability to raise sufficient financing and generate adequate revenues to meet
our cash flow requirements. The actual allocation between expenses may vary
depending on the actual funds raised and the industry and market conditions over
the next 12 months following our July 31, 2012 year-end.
The Company is currently negotiating financing in the amount of $200,000 to
further the Company's business operations. Any capital raised will be through
either a private placement or a convertible debenture and will result in the
issuance of common shares from the Company's authorized capital.
Results of Operations for the three months ended October 31, 2012
For the three months ended October 31, 2012 and October 31, 2011, we had no
sales. Cost of goods sold for the three-month period ended October 31, 2012 and
October 31, 2011 were $0 and $0, respectively. Operating expenses for the three
months ended October 31, 2012 and October 31, 2011 were $10,606 and $26,473
respectively.
Net loss for the three months ended October 31, 2012 and October 31, 2011 were
$11,103 and $26,302 respectively. The operating expenses were primarily
attributed to professional fees, consulting fees, web design fees, rent and
other general overhead. The decreased loss from October 31, 2012 compared to
October 31, 2011 is attributed to the decrease in professional fees and
management fees. Professional fees for the three months ended October 31, 2012
was $362 compared to $8,000 for the three months ended October 31, 2011.
During the period from inception (April 14, 2010) to October 31, 2012 the total
operating expenses were $188,251 and the net loss was $188,436.
During the three months ended October 31, 2012 the director's contributed
services totaled $6,000. These services were included in the calculation of
additional paid in capital.
During the three months ended October 31, 2012 we operated from a premises
leased by a director. The costs of this premises and other general and
administrative expenses paid on our behalf during the three months ended October
31, 2012 totaled $4,200. These expenses are payable to the shareholder and
included in current liabilities.
During the period from inception (April 14, 2010) to October 31, 2012, we had no
provision for income taxes due to the net operating losses incurred.
Any sales generated consist of the sale of medical supplies from our wholesalers
and any profit generated is derived from the margins on the products sold. We
expect to generate increased sales once our advertising campaign begins.
Liquidity and Capital Resources
As of October 31, 2012 we had a cash balance of $159, prepaid expenses of $665,
and a working capital deficit of $37,836.
The initial use of the consideration received from the Company's unregistered
common share sales that occurred in the amount of $89,200 was allocated to
offering expenses, professional fees, advertising/marketing, website and
ecommerce platform development and working capital. The breakdown of the $89,200
received by the Company consists of $9,200 in cash received from sales of
unregistered common stock and $80,000 of unregistered common stock issued in
exchange for services. In July 2012, the Company raised an additional $16,000
for professional and consulting fees.
3
--------------------------------------------------------------------------------The Company is currently seeking funding for our continued operations. The
Company intends to raise a minimum of $200,000 and a maximum of $500,000 in
order to continue the introduction of the www.healthadvancemd.com e-commerce
site to the retail community and health care community. To achieve our goals
the Company expects to commit the majority of its funding to the advertising of
the Company's web site. There is no assurance that the company will be able to
raise the capital required to complete its goal and objectives and the Company
is currently seeking capital to further its business plan. We will likely to
raise funds through either debt or issuing shares of our common stock in order
to achieve our business goals. The issuance of additional shares or securities
convertible into any such shares by us, any shares issued would dilute the
percentage ownership of our current stockholders. There are no agreements with
any parties at this point in time for additional funding; however, we are in
discussions with various funders in the US.
We believe we can satisfy our cash requirements for the next twelve months with
our expected revenues and if needed an additional loan from our director, Jordan
Starkman. We cannot assure investors that adequate revenues will be generated
and there is no current loan commitment in place between the Company and Jordan
Starkman. However, the success of our operations is dependent on attaining
adequate revenue. In the absence of our projected revenues, we may be unable to
proceed with our plan of operations or we may require financing to achieve our
profit, revenue, and growth goals.
We anticipate that our fixed costs made up of legal & accounting and general &
administrative expenses for the next 12 months will total approximately
$25,000. Legal and accounting expenses of $15,000 represents the minimum funds
needed to sustain operations. The $25,000 will be financed through the Company's
cash on hand, additional financing, net sales and if needed, an advance from our
officer and director, Jordan Starkman. We do not anticipate the purchase or
sale of any significant equipment. We also do not expect any significant
additions to the number of employees, until financing is raised. The foregoing
represents our best estimate of our cash needs based on our current business
condition. The exact allocation, purposes and timing of any monies raised in
subsequent private financings may vary significantly depending upon the exact
amount of funds raised and our progress with the execution of our business
plan. It is currently expected that the Company will spend an additional
$175,000 in variable costs relating to marketing and business development that
will be funded from future financings.
In the event we are not successful in reaching our initial revenue targets, we
need additional funds to proceed with our business plan for the development and
marketing of our core services. Should this occur, we would likely seek
additional financing to support the continued operation of our business. We
anticipate that depending on market conditions and our plan of operations, we
may incur operating losses in the foreseeable future. Therefore, our auditors
have raised substantial doubt about our ability to continue as a going concern.
Recent Accounting Pronouncements
The management did not believe that recent accounting pronouncements issued by
the FASB have a material impact on the Company's present or future consolidated
financial statements.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance
sheet guarantees, interest rate swap transactions or foreign currency contracts.
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