☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2018
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period From ________ to _________
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PACIFIC HEALTH CARE ORGANIZATION, INC.
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(Exact name of registrant as specified in its charter)
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Utah
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87-0285238
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer I.D. No.)
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1201 Dove Street, Suite 300
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Newport Beach, California
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92660
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer (Do not check if a smaller reporting company) ☐
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Smaller reporting company ☒
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Emerging growth company ☐
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Page
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PART I — FINANCIAL INFORMATION
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3
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4
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5
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6
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9
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15
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15
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PART II — OTHER INFORMATION
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16
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16 | ||
17
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18
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ASSETS
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||||||||
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March 31,
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December 31,
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||||||
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2018
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2017
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||||||
Current Assets
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||||||||
Cash
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$
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6,705,681
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$
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5,815,071
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||||
Accounts receivable, net of allowance of $60,150 and $60,150
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663,323
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1,041,242
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||||||
Deferred tax assets
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43,670
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43,670
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||||||
Prepaid expenses
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170,657
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166,782
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Total current assets
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7,583,331
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7,066,765
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Property and Equipment, net
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Computer equipment
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366,616
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363,627
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Furniture and fixtures
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209,778
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209,779
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Office equipment
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15,595
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15,595
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||||||
Total property and equipment
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591,989
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589,001
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Less: accumulated depreciation and amortization
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(438,368
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)
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(422,024
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)
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Net property and equipment
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153,621
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166,977
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Other assets
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26,788
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26,788
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Total assets
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$
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7,763,740
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$
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7,260,530
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||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
Current Liabilities
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||||||||
Accounts payable
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$
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23,913
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$
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71,138
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||||
Accrued expenses
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250,793
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255,205
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Income tax payable
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237,691
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81,715
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Dividends payable
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56,923
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56,923
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Unearned revenue
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38,689
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38,357
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Deferred rent expense
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34,072
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35,214
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Total current liabilities
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642,081
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538,552
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||||||||
Total Liabilities
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642,081
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538,552
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||||||
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Commitments and Contingencies
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-
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-
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||||||
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Shareholder’s Equity
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Preferred stock; 5,000,000 shares authorized at $0.001 par value of which 10,000 shares
designated as Series A preferred and 4,000 shares issued and outstanding at March 31, 2018
and December 31, 2017.
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4
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4
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Common stock, $0.001 par value, 200,000,000 shares authorized,
3,200,000 shares issued and outstanding
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3,200
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3,200
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Additional paid-in capital
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1,237,348
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1,237,348
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Deferred stock compensation
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(811,679
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)
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(811,679
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)
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Retained earnings
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6,692,786
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6,293,105
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Total stockholders’ equity
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7,121,659
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6,721,978
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Total liabilities and stockholders’ equity
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$
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7,763,740
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$
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7,260,530
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For three months ended
March 31,
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2018
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2017
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Revenues:
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||||||||
HCO fees
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$
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399,442
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$
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302,569
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MPN fees
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134,644
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138,281
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NCM fees
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582,569
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587,236
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UR fees
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287,021
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237,045
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MBR fees
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114,039
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156,778
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Other
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65,594
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119,347
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Total revenues
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1,583,309
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1,541,256
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Expenses:
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Depreciation
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16,344
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19,827
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Bad debt provision
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-
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(3,250
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)
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Consulting fees
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78,814
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77,260
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Salaries and wages
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491,478
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588,657
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Professional fees
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77,470
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82,084
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Insurance
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67,029
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87,275
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Outsource service fees
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95,881
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112,748
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Data maintenance
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32,431
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34,619
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General and administrative
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168,205
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161,388
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Total expenses
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1,027,652
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1,160,608
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Income from operations
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555,657
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380,648
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||||||
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Other expense
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-
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-
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Total other expense
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-
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-
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||||||
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Income before taxes
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555,657
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380,648
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Income tax provision
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(155,976
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)
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(158,391
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)
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Net income
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$
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399,681
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$
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222,257
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Basic earnings per share:
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Earnings per share amount
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$
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0.12
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$
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0.07
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Basic common shares outstanding
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3,200,000
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3,200,000
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Fully diluted earnings per share:
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Earnings per share amount
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$
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0.11
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$
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0.07
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Fully diluted common shares outstanding
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3,544,000
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3,204,000
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Three Months Ended
March 31,
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2018
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2017
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Cash flows from operating activities:
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Net income
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$
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399,681
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$
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222,257
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Adjustments to reconcile net income to net cash:
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Increase in depreciation and amortization
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16,344
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19,827
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Changes in operating assets and liabilities
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(Decrease) in bad debt provision
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-
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(3,250
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)
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Decrease (increase) in accounts receivable
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377,919
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(286,412
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)
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(Increase) in prepaid expenses
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(3,875
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)
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(5,692
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)
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(Decrease) in accounts payable
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(47,225
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)
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(53,418
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)
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(Decrease) increase in deferred rent expense
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(1,142
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)
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469
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(Decrease) increase in accrued expenses
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(4,412
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)
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35,854
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Increase in income tax payable
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155,976
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158,391
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Increase (decrease) in unearned revenue
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332
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(932
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Net cash provided in operating activities
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893,598
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87,094
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Cash flows from investing activities:
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||||||||
Purchase of furniture and office equipment
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(2,988
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)
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(5,754
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)
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Net cash used in investing activities
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(2,988
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)
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(5,754
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)
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Cash flows from financing activities:
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||||||||
Net cash used in financing activities
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-
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-
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||||||
Increase in cash
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890,610
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81,340
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Cash at beginning of period
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5,815,071
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5,005,617
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||||||
Cash at end of period
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$
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6,705,681
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$
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5,086,957
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Supplemental cash flow information
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Cash paid for:
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||||||||
Interest
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$
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-
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$
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-
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Income taxes paid
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$
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-
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$
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-
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3/31/2018
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12/31/2017
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||||||
Customer A
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27
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%
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35
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%
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Customer B
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0
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%
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13
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%
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Customer C
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11
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%
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5
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%
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3/31/2018
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3/31/2017
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Customer A
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32
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%
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18
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%
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Customer B
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11
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%
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7
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%
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Customer C
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6
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%
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13
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%
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For three months ended March 31,
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|||||||||||||||
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2018
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2017
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Amount Change
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% Change
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||||||||||||
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||||||||||||||||
Revenues:
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||||||||||||||||
HCO fees
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$
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399,442
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$
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302,569
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$
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96,873
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32
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%
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||||||||
MPN fees
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134,644
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138,281
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(3,637
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)
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(3
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%)
|
||||||||||
NCM fees
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582,569
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587,236
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(4,667
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)
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(1
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%)
|
||||||||||
UR fees
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287,021
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237,045
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49,976
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21
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%
|
|||||||||||
MBR fees
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114,039
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156,778
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(42,739
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)
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(27
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%)
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||||||||||
Other
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65,594
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119,347
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(53,753
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)
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(45
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%)
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||||||||||
Total revenues
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1,583,309
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1,541,256
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42,053
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3
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%
|
|||||||||||
|
||||||||||||||||
Expense:
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||||||||||||||||
Depreciation
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16,344
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19,827
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(3,483
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)
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(18
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%)
|
||||||||||
Bad debt provision
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-
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(3,250
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)
|
3,250
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100
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%
|
||||||||||
Consulting fees
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78,814
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77,260
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1,554
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2
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%
|
|||||||||||
Salaries and wages
|
491,478
|
588,657
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(97,179
|
)
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(17
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%)
|
||||||||||
Professional fees
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77,470
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82,084
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(4,614
|
)
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(6
|
%)
|
||||||||||
Insurance
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67,029
|
87,275
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(20,246
|
)
|
(23
|
%)
|
||||||||||
Outsource service fees
|
95,881
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112,748
|
(16,867
|
)
|
(15
|
%)
|
||||||||||
Data maintenance
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32,431
|
34,619
|
(21,188
|
)
|
(6
|
%)
|
||||||||||
General and administrative
|
168,205
|
161,388
|
6,817
|
4
|
%
|
|||||||||||
Total expenses
|
1,027,652
|
1,160,608
|
(132,956
|
)
|
(11
|
%)
|
||||||||||
|
||||||||||||||||
Income from operations
|
555,657
|
380,648
|
175,009
|
46
|
%
|
|||||||||||
|
||||||||||||||||
Income before taxes
|
555,657
|
380,648
|
175,009
|
46
|
%
|
|||||||||||
Income tax provision
|
155,976
|
158,391
|
(2,415
|
)
|
(2
|
%)
|
||||||||||
|
||||||||||||||||
Net income
|
$
|
399,681
|
$
|
222,257
|
$
|
177,424
|
80
|
%
|
|
For the three months ended March 31,
|
|||||||
|
2018
(unaudited)
|
2017
(unaudited)
|
||||||
|
||||||||
Net cash provided by operating activities
|
$
|
893,598
|
$
|
87,094
|
||||
Net cash used in investing activities
|
(2,988
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)
|
(5,754
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)
|
||||
Net cash used in financing activities
|
-
|
-
|
||||||
|
||||||||
Net increase in cash
|
$
|
890,610
|
$
|
81,340
|
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Payments Due By Period
|
|||||||||||||||||||
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Total
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Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
|||||||||||||||
Operating Leases:
|
||||||||||||||||||||
Operating Leases – Equipment(1)
|
$
|
46,519
|
$
|
20,675
|
$
|
25,844
|
$
|
-
|
$
|
-
|
||||||||||
Office Leases(2)
|
$
|
1,031,400
|
255,608
|
775,792
|
-
|
-
|
||||||||||||||
Total Operating Leases
|
$
|
1,077,919
|
$
|
276,283
|
$
|
801,636
|
$
|
-
|
$
|
-
|
(1) |
In March 2017, we entered a 39-month operating lease for an office copy machine with scanner with monthly payment at $1,723, commencing in April 2017.
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(2) |
In July 2015, we entered a 79-month lease to lease approximately 9,439 square feet of office space that commenced in September 2015. This office space serves as our principal executive offices, as well as, the principal offices of our operating subsidiaries.
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Cancelled Option Amount
|
||||||||
Name of Optionholder
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Pre-Forward Split
|
Post-Forward Split
|
||||||
Tom Kubota
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50,000
|
200,000
|
||||||
Fred Odaka
|
11,000
|
44,000
|
||||||
Kristina Kubota
|
1,000
|
4,000
|
||||||
Lauren Kubota
|
1,000
|
4,000
|
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Exhibit Number
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Title of Document
|
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Exhibit 4.1
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|||
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Exhibit 31.1
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Exhibit 31.2
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Exhibit 32.1
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Exhibit 99.1
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|||
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Exhibit 101
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The following materials from Pacific Health Care Organization, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of Cash Flows, and (iv) Notes to the Unaudited Condensed Consolidated Financial Statements.
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PACIFIC HEALTH CARE ORGANIZATION, INC.
|
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Date:
|
May 15, 2018
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/s/ Tom Kubota
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Tom Kubota
Chief Executive Officer
|
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Date:
|
May 15, 2018
|
/s/ Fred Odaka
|
|
|
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Fred Odaka
Chief Financial Officer
|
|
With respect to any Participant, unless the applicable Award Agreement states otherwise:
(a) If the Participant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or
(b) If no such agreement exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.
|
|
(a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company;
(b) The date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company;
(c) The acquisition, after the Effective Date of this Plan, by any Person of Beneficial Ownership of 50% or more (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (d) of this definition or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or (d) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “Surviving Company”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.
|
|
(a) If an Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Good Reason, the definition contained therein; or
(b) If no such agreement exists or if such agreement does not define Good Reason, the occurrence of one or more of the following without the Participant’s express written consent, which circumstances are not remedied by the Company within thirty (30) days of its receipt of a written notice from the Participant describing the applicable circumstances (which notice must be provided by the Participant within ninety (90) days of the Participant’s knowledge of the applicable circumstances): (i) any material, adverse change in the Participant’s duties, responsibilities, authority, title, status or reporting structure; (ii) a material reduction in the Participant’s base salary or bonus opportunity; or (iii) a geographical relocation of the Participant’s principal office location by more than fifty (50) miles.
|
(a) |
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 15, 2018
|
By:
|
/s/ Tom Kubota | |
Tom Kubota | |||
Chief Executive Officer | |||
(a) |
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting; and
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 15, 2018
|
By:
|
/s/ Fred Odaka | |
Fred Odaka | |||
Chief Financial Officer | |||
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: May 15, 2018
|
|
/s/ Tom Kubota | |
Tom Kubota | |||
Chief Executive Officer | |||
/s/ Fred Odaka | |||
Fred Odaka | |||
Chief Financial Officer |
Date of Grant
|
Date of Vesting
|
Number of Shares*
|
Exercise Price*
|
PACIFIC HEALTH CARE ORGANIZATION, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
OPTIONHOLDER
|
||
[NAME]
|
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 14, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | PACIFIC HEALTH CARE ORGANIZATION INC | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 3,200,000 | |
Amendment Flag | false | |
Entity Central Index Key | 0001138476 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Well-known Seasoned Issuer | No | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 |
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounts receivable, allowance (in Dollars) | $ 60,150 | $ 60,150 |
Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
5,000,000 | 5,000,000 | |
Preferred stock, shares issued | 4,000 | 4,000 |
Preferred stock, shares outstanding | 4,000 | 4,000 |
Common stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 3,200,000 | 3,200,000 |
Common stock, outstanding | 3,200,000 | 3,200,000 |
Series A Preferred Stock [Member] | ||
10,000 | 10,000 |
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”) and in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain information and footnote disclosures normally included in consolidated financial statements have been condensed or omitted in accordance with GAAP rules and regulations. The information furnished in these interim condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect both the recorded values of assets and liabilities at the date of the condensed consolidated financial statements and the revenues recognized and expenses incurred during the reporting period. These estimates and assumptions affect the Company’s recognition of deferred expenses, bad debts, income taxes, the carrying value of its long-lived assets and its provision for certain contingencies. The reasonableness of these estimates and assumptions is evaluated continually based on a combination of historical information and other information that comes to the Company’s attention that may vary its outlook for the future. While management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with the Company’s audited financial statements and notes thereto included in its annual report on Form 10-K for the year ended December 31, 2017. Operating results for the three months ended March 31, 2018, are not necessarily indicative of the results to be expected for the year ending December 31, 2018. Principles of Consolidation — The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Basis of Accounting — The Company uses the accrual method of accounting. Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Either a retrospective or cumulative effect transition method, referred to as the modified retrospective method, is permitted. The Company adopted Topic 606 on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 had no material impact on the Company’s interim financial statements. The core principle underlying Topic 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Revenues are generated as services are provided to the customer based on the sales price agreed and collected. The Company recognizes revenue as the time is worked or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. The Company derives its revenue from the sale of managed care, bill review and nurse case management services. These services are billed individually as separate components to our customers. These fees include monthly administration fees, claim network fees, legal support fees, Medicare-set-aside fees, lien service fees, workers’ compensation carve-outs, flat rate fees or hourly fees depending on the agreement with the client. The Company enters into arrangements for bundled managed care which includes various units of accounting such as network solutions and patient management, including managed care. Such elements are considered separate units of accounting due to each element having value to the customer on a stand-alone basis and are billed separately. The selling price for each unit of accounting is determined using the contract price. When the Company’s customers purchase several products the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with the Company’s customer contracts. Based upon the nature of the Company’s products, bundled managed care elements are generally delivered in the same accounting period. The Company recognizes revenue for patient management services ratably over the life of the customer contract. Based upon prior experience in managed care, the Company estimates the deferral amount from when the customer’s claim is received to when the customer contract expires. Advance payments from subscribers and billings made in advance are recorded on the balance sheet as deferred revenue. Accounts Receivables and Bad Debt Allowance – In the normal course of business the Company extends credit to its customers on a short-term basis. Although the credit risk associated with these customers is minimal, the Company routinely reviews its accounts receivable balances and makes provisions for doubtful accounts. The Company ages its receivables by date of invoice. Management reviews bad debt reserves quarterly and reserves specific accounts as warranted or sets up a general reserve based on amounts over 90 days past due. When an account is deemed uncollectible, the Company charges off the receivable against the bad debt reserve. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, the Company performs ongoing credit evaluations of its customers’ financial condition. Through these evaluations, the Company may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit rating or bankruptcy. The allowance for doubtful accounts is based on the best information available to the Company and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy. At March 31, 2018 and December 31, 2017, our bad debt reserves were $60,150 as a general reserve for certain balances over 90 days past due and for accounts that are potentially uncollectible. The percentages of the amounts due from major customers to total accounts receivable as of March 31, 2018 and December 31, 2017 are as follows:
Significant Customers - We provide services to insurers, third party administrators, self-administered employers, municipalities and other industries. We are able to provide our full range of services to virtually any size employer in the state of California. We are also able to provide UR, MBR and NCM services outside the state of California. During the period ended March 31, 2018 and 2017, we had two customers that accounted for more than 10% of our total sales. The following table sets forth details regarding the percentage of total sales attributable to our significant customers in the past two years:
|
NOTE 2 - SUBSEQUENT EVENTS |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | NOTE 2 - SUBSEQUENT EVENTS In accordance with ASC 855-10 Company management reviewed all material events through the date of issuance and other than disclosed in this Note 2 there are no material subsequent events to report. As disclosed in the Definitive Information Statement the Company filed with the Commission on March 6, 2018, and mailed to its shareholders by March 14, 2018, during the first quarter of 2018 the Company’s board of directors and majority shareholder approved a four-shares-for-one-share forward split of our outstanding common stock (the “Forward Split”). The number of authorized shares of the Company’s common stock also increased at the same ratio, from 50,000,000 shares to 200,000,000 shares. The number of authorized shares of Company preferred stock did not increase. The Forward Split took effect on April 5, 2018. As a result of the Forward Split, the number of outstanding shares of Company common stock increased from 800,000 shares to 3,200,000 shares and, consistent with the Articles of Incorporation of the Company, the number of outstanding shares of Series A Preferred Stock increased from 1,000 to 4,000. As a result of the Forward Split, the number of shares available for issuance under the Company’s 2002 Stock Option Plan (the “2002 Plan”) and the Company’s 2005 Stock Option Plan (the “2005 Plan”), as well as all awards outstanding under those plans also increased at the same four-shares-for-one-share ratio, and the exercise prices of stock options outstanding at the time of the Forward Split were adjusted to reflect the Forward Split. On April 6, 2018, the day immediately following the effective date of the Forward Split, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) became effective. On May 14, 2018, the Company entered into Stock Option Cancellation Agreements (the “Cancellation Agreements”) with certain executive officers, directors and other senior level employees/consultants of the Company, pursuant to which such individuals (the “Optionholder”) agreed to the surrender and cancellation of certain previously granted stock options (the “Cancelled Options”) under the 2002 Plan and the 2005 Plan to purchase 85,000 pre-Forward Split shares (340,000 post-Forward Split shares) of the Company’s common stock. Under the terms of the Cancellation Agreements, each Optionholder and the Company acknowledged and agreed that the surrender and cancellation of the Cancelled Options was without any expectation on the part of the Optionholder to receive, and without any obligation on the Company to pay or grant, any cash, equity awards or other consideration presently or in the future with respect to the Cancelled Options. Following the surrender and cancellation of the Cancelled Options there were no awards outstanding under the 2002 Plan or the 2005 Plan and pursuant to the provisions of the 2002 Plan and the 2005 Plan, the Company’s board of directors terminated the 2002 Plan and the 2005 Plan. |
Accounting Policies, by Policy (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Consolidation, Policy [Policy Text Block] | Principles of Consolidation — The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. |
||||||||||||||||||||||||||||||||||||
Basis of Accounting, Policy [Policy Text Block] | Basis of Accounting — The Company uses the accrual method of accounting. |
||||||||||||||||||||||||||||||||||||
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition — In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” Either a retrospective or cumulative effect transition method, referred to as the modified retrospective method, is permitted. The Company adopted Topic 606 on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 had no material impact on the Company’s interim financial statements. The core principle underlying Topic 606 is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Revenues are generated as services are provided to the customer based on the sales price agreed and collected. The Company recognizes revenue as the time is worked or as units of production are completed, which is when the revenue is earned and realized. Labor costs are recognized as the costs are incurred. The Company derives its revenue from the sale of managed care, bill review and nurse case management services. These services are billed individually as separate components to our customers. These fees include monthly administration fees, claim network fees, legal support fees, Medicare-set-aside fees, lien service fees, workers’ compensation carve-outs, flat rate fees or hourly fees depending on the agreement with the client. The Company enters into arrangements for bundled managed care which includes various units of accounting such as network solutions and patient management, including managed care. Such elements are considered separate units of accounting due to each element having value to the customer on a stand-alone basis and are billed separately. The selling price for each unit of accounting is determined using the contract price. When the Company’s customers purchase several products the pricing of the products sold is generally the same as if the products were sold on an individual basis. Revenue is recognized as the work is performed in accordance with the Company’s customer contracts. Based upon the nature of the Company’s products, bundled managed care elements are generally delivered in the same accounting period. The Company recognizes revenue for patient management services ratably over the life of the customer contract. Based upon prior experience in managed care, the Company estimates the deferral amount from when the customer’s claim is received to when the customer contract expires. Advance payments from subscribers and billings made in advance are recorded on the balance sheet as deferred revenue. |
||||||||||||||||||||||||||||||||||||
Receivables, Policy [Policy Text Block] | Accounts Receivables and Bad Debt Allowance – In the normal course of business the Company extends credit to its customers on a short-term basis. Although the credit risk associated with these customers is minimal, the Company routinely reviews its accounts receivable balances and makes provisions for doubtful accounts. The Company ages its receivables by date of invoice. Management reviews bad debt reserves quarterly and reserves specific accounts as warranted or sets up a general reserve based on amounts over 90 days past due. When an account is deemed uncollectible, the Company charges off the receivable against the bad debt reserve. A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes. In order to assess the collectability of these receivables, the Company performs ongoing credit evaluations of its customers’ financial condition. Through these evaluations, the Company may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit rating or bankruptcy. The allowance for doubtful accounts is based on the best information available to the Company and is reevaluated and adjusted as additional information is received. We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy. At March 31, 2018 and December 31, 2017, our bad debt reserves were $60,150 as a general reserve for certain balances over 90 days past due and for accounts that are potentially uncollectible. The percentages of the amounts due from major customers to total accounts receivable as of March 31, 2018 and December 31, 2017 are as follows:
|
||||||||||||||||||||||||||||||||||||
Concentration Risk, Customer Risk, Policy [Policy Text Block] | Significant Customers - We provide services to insurers, third party administrators, self-administered employers, municipalities and other industries. We are able to provide our full range of services to virtually any size employer in the state of California. We are also able to provide UR, MBR and NCM services outside the state of California. During the period ended March 31, 2018 and 2017, we had two customers that accounted for more than 10% of our total sales. The following table sets forth details regarding the percentage of total sales attributable to our significant customers in the past two years:
|
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Credit Concentration Risk [Member] | |||||||||||||||||||||||||||||||||||||
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] |
The percentages of the amounts due from major customers to total accounts receivable as of March 31, 2018 and December 31, 2017 are as follows:
|
||||||||||||||||||||||||||||||||||||
Customer Concentration Risk [Member] | |||||||||||||||||||||||||||||||||||||
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] |
During the period ended March 31, 2018 and 2017, we had two customers that accounted for more than 10% of our total sales. The following table sets forth details regarding the percentage of total sales attributable to our significant customers in the past two years:
|
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Details) [Line Items] | ||
Allowance for Doubtful Accounts Receivable | $ 60,150 | $ 60,150 |
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | ||
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Details) [Line Items] | ||
Number of Customers | 2 |
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Details) - Schedules of Credit Concentration Risk - Credit Concentration Risk [Member] - Accounts Receivable [Member] |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Credit Concentration Risk, Percentage | 27.00% | 35.00% |
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Credit Concentration Risk, Percentage | 0.00% | 13.00% |
Customer C [Member] | ||
Concentration Risk [Line Items] | ||
Credit Concentration Risk, Percentage | 11.00% | 5.00% |
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION (Details) - Schedules of Customer Concentration Risk - Customer Concentration Risk [Member] - Sales Revenue, Net [Member] |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Customer A [Member] | ||
Concentration Risk [Line Items] | ||
Customer Concentration Risk | 32.00% | 18.00% |
Customer B [Member] | ||
Concentration Risk [Line Items] | ||
Customer Concentration Risk | 11.00% | 7.00% |
Customer C [Member] | ||
Concentration Risk [Line Items] | ||
Customer Concentration Risk | 6.00% | 13.00% |
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