(This should be known by most, it breaks down their business model a little more. For those long term investors holding on by a hope and a pray, I wish you the very best in 2015)
August 15, 2013
iMedicor Inc., a Nevada Corporation, (the “Company” or “iMedicor”), builds cloud based software and healthcare records capture, storage, retrieval, transport and security related products. The Company’s focus presently is on four distinct revenue streams: (1) iMedicor’s cloud-based exchange, the iCoreExchange, which allows physicians, patients and other members of the healthcare community to exchange patient-specific healthcare information securely via the internet, while maintaining compliance with all current Health Insurance Portability and Accountability Act (“HIPAA”) regulations. (2) A customized EHR platform technology, iCoreMD, that is specifically tailored to provide specialized medical practices with a technology that conforms to workflows of that particular medical discipline such as ophthalmology, orthopedics and other specialty practices. (3) A customized EHR platform technology, iCoreDental the is specifically tailored to provide dental practices with a technology that conforms to dental imaging dental workflows and other aspects of dental care. This technology is the first specialty medical discipline that represents a customized platform base on the iCoreMD platform technology (4) iMedicor has developed a Meaningful Use Consulting Practice targeting both medical and dental healthcare providers to assist becoming “Meaningful Use” compliant and ultimately qualify for federal incentive funds under the Federal Meaningful Use Incentive Funds Program.
iMedicor’s integrated software and service offering is unique in the healthcare space as it enables doctors to meet the increasing regulatory burden associated with secure HIPAA-compliant medical records capture, retrieval and transport. The challenge to a software and service provider is to provide products and services that allow healthcare providers to maintain HIPAA compliance with no change in healthcare delivery workflows at a very reasonable cost. The iCoreExchange provides security to records transport while the Company’s custom EHR software solutions allow healthcare providers to migrate to digital records capture, storage and retrieval at an extremely affordable price relative to the Company’s competition. iMedicor’s software solutions are:
The Company has also not created an allowance for doubtful accounts for the Meaningful Use Consulting business. The funding source behind this business is the federal government and payments are made by states that administer the Meaningful Use Incentive Funds Program. iMedicor secures funds through this program for doctors who have had difficulty understanding the program or who were unaware of the program’s existence. When a state is prepared to issue a check to a doctor or dentist that has been approved for funding, iMedicor is notified in advance by the state. iMedicor then notifies the doctor or dentist that a check will be forthcoming and that an invoice will arrive at approximately the same time as the check. When the doctor or dentist receives a check they have already been invoiced for iMedicor’s portion of the MU dollars and generally pay iMedicor within 30 days of receiving their check. The Company has not experienced a circumstance under which a client has refused or substantially delayed payment. The Company has experienced circumstances under which delays have occurred due to delays at the state level, processing a specific attestation application. While such delays may increase the time it takes to collect our consulting fees, the Company has not experienced any non-payment by physicians after a state has dispersed a check.
The Company believes two reasons exist for the high compliance rate. The first reason is simply because iMedicor is highly successful securing funds on behalf of our clients who would otherwise not have known about or been able to obtain the funds. The second reason is that a provision of the MU program regulations provides a strong incentive for physicians to make payment to iMedicor after they have received funding. iMedicor reports payments by physicians to iMedicor to the state that made payment to the physician. In the event a state is notified that a physician has not remitted payment to iMedicor, the physician will no longer be eligible for the remaining 67% of MU incentive funds available over the remaining life of the program. In addition, a physician that does not remit payment will not become MU compliant and will, therefore, be subject to Medicare rate reductions of 1% or more as determined by the federal government. While this rate reduction does not yet apply to Medicaid-eligible physicians, the Company believes that such an incentive will be initiated in the coming months.
On October 29, 2013 the Company engaged Western State Bank as its primary commercial lender. The Company’s initial line of credit was in the amount of $250,000 and is backed by the Company’s accounts receivable balance. The Company is able to borrow against the line up to 80% of qualified receivables. The rate at which the Company borrows is the greater of either 6.5% or the Wall Street Journal Prime Interst Rate plus 1.000%. Interest is accrued and paid monthly with principle balance due on January 30, 2015.
Subsequent to the close of the December 31, 2013 quarter, on February 22, 2014, the Board of Directors of the Company notified the former Chief Executive Officer, Fred Zolla, that he was in violation of various provisions of his Separation Agreement and that the Company would no longer make payments under the terms of the Settlement Agreement. The former Chief Executive Officer disputes this claim and has filed an arbitration action with the American Arbitration Association (AAA), as required by the Separation Agreement that was in place at the time of Mr. Zolla’s separation from the company. The Company believes that it has acted in a manner in accordance with the terms of the Agreement and will rigorously make assertions to that effect during the AAA process. We do not believe that any costs or losses associated with this action will be material to the company. A hearing is expected to proceed in December 2014.
Loss from operations for the six months ended December 31 2013 totaled $1,324,923 as compared to a loss from operations of $887,343 for the six months ended December 31, 2013. The increase in operating losses was attributable to increased general and administrative expenses including increased stock based compensation in the period as well as measured investments in new product development, sales and marketing. Other income includes a $2,966,493 gain on change in derivative liability value which was the result of a reclassification of that instrument from a liability to additional paid in capital. (See Note 3. Accounting for Derivative Instruments).
