Notes to Consolidated Financial Statements
NOTE A - ORGANIZATION AND OPERATIONS
Description of Business:
The parent company, Net Medical Xpress Solutions, Inc., derives revenues from the development and marketing of proprietary internet technology-based software. This division encompasses all revenues and costs from the software aspect of the business, including software usage, software hosting and maintenance, custom programming (customization or modification to the Company’s core software products). The Company also occasionally derives revenue from scanning services and other services such as consulting, training and installation, which would be included in this division.
The Company’s wholly-owned subsidiary, Telerad Service, Inc., operates under the trade names Net Medical Xpress Services, Net Medical Xpress Specialists, and Net Medical Xpress Staffing. Net Medical Xpress Services provides medical diagnostic reading services. All revenues and costs from radiological and cardiological services are included in this division.
Net Medical Xpress Specialists is the clinical division that provides telemedicine services to hospitals and other medical services providers. The Company currently employs credentialed specialists in the field of neurology, cardiology and critical care in this division. The Company facilitates real-time assessment of patients through a virtual examination via video conferencing combined with its medical software. Currently, all revenues and costs for neurology/stroke assessment and behavioral medicine assessments are included in this division, as well as revenues and costs for equipment necessary for the customer to initiate the specialist program.
Net Medical Xpress Staffing is the division that locates and recruits physicians to provide telemedicine services. Revenues and costs for the recruitment of telemedicine physicians are included in this division.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts Net Medical Xpress Solutions, Inc. and its wholly-owned subsidiary, Telerad Service, Inc. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. At December 31, 2015, the Company did not have cash and equivalents that exceeded federally insured limits.
Trade Accounts Receivable:
The Company extends unsecured credit to customers under normal trade agreements which generally require payment within 30 - 45 days. Accounts not paid within 15 days after their original due date are considered delinquent. Unless specified by the customer, payments are applied to the oldest unpaid invoice. Accounts receivable are presented at the amount billed.
F-6
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trade Accounts Receivable, continued:
The Company also estimates an allowance for doubtful accounts, which amounted to $28,000 and $29,000 at December 31, 2015 and 2014, respectively. The estimate is based upon management’s review of all accounts and an assessment of the Company’s historical evidence of collections. Specific accounts are charged directly to the reserve when management obtains evidence of a customer’s insolvency. Charge-offs, net of recoveries, for the years ended December 31, 2015 and 2014 totaled $8,000 and $80,000, respectively.
Property and Equipment:
Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
Depreciation is computed on the straight-line and accelerated methods for financial reporting and income tax reporting purposes based upon the following estimated useful lives:
|
| |
|
Software development
|
3 years
|
|
Equipment
|
5 years
|
|
Computer hardware
|
5 years
|
|
Office furniture
|
7 years
|
Long-Lived Assets:
The Company accounts for its long-lived assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value or disposable value. The Company determined that none of its long-term assets at December 31, 2015 or 2014 were impaired.
Stock-Based Compensation:
The Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date.
F-7
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation, continued:
The Company calculates the fair value of option grants and warrant issuances utilizing the Binomial pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.
During the years ended December 31, 2015 and 2014, the Company recognized stock-based compensation expense totaling $128,000 and $178,000, from the issuance of a total of 0 and 9,800,000 shares of its common stock to officers, directors, and consultants (See Note G).
Income Taxes:
The Company accounts for its income taxes under the provisions of ASC Topic 740, “Income Taxes
.”
The method of accounting for income taxes under ASC 740 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.
Gain (Loss) per Share:
The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
Revenue Recognition:
The Company recognizes revenue in accordance with Statement of Position ASC Topic 985
Software Revenue Recognition
as amended.
Revenue from proprietary software sales that does not require further commitment from the Company is recognized upon persuasive evidence of an arrangement as provided by agreements executed by both parties, delivery of the software, and determination that collection of a fixed or determinable fee is probable. These sales are generally direct purchases of a software product and there is no other involvement by the Company.
The Company offers with certain sales of its software products, software maintenance, upgrade and support arrangements. These contracts may be elements in a multiple-element arrangement or may be sold on a stand-alone basis. Revenues from maintenance and support services are recognized ratably on a straight-line basis over the term that the maintenance service is provided.
F-8
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition, continued:
The Company typically charges 17% to 21% of the software purchase price for a 12-month maintenance contract with discounts available for longer-term agreements. The complexity of the software determines the percentage that is charged to any individual customer, and that percentage remains consistent upon renewal unless there is a change in the software or the terms of the agreement.
Charges for hosting are likewise spread ratably over the term of the hosting agreement, with the typical hosting agreement having a term of 12 months, with renewal on an annual basis. The Company sells some hosting contracts in conjunction with the sale of software, and some hosting contracts without an associated software sale. When the hosting arrangement is sold in conjunction with a software sale, the Company allocates a portion of the fee to the software license. Hosting
services do not require the customer to purchase the software license, and for those hosting contracts that are sold without an associated software sale, the customer has neither the right nor the ability to operate the software on its own.
Should the sale of software involve an arrangement with multiple elements (for example, the sale of a software license along with the sale of maintenance and support to be delivered over the contract period), the Company allocates revenue to each component of the arrangement using the residual value method based on the fair value of the undelivered elements. The Company defers revenue from the arrangement equivalent to the fair value of the undelivered elements and recognizes the remaining amount at the time of the delivery of the product or when all other revenue recognition criteria have been met. Fair values for the ongoing maintenance and support obligations are based upon separate sales of renewals of maintenance contracts. Fair value of services, such as training or consulting, is based upon separate sales of these services to other customers.
The Company follows the guidance in FASB ASC Topic 605,
Accounting for Performance of Construction-Type and Certain Production-Type Contracts
for custom software development arrangements that require significant production, customization or modification to its core software. Revenue is generally recognized for such arrangements under the percentage-of-completion method. Under percentage-of-completion accounting, both the product license and custom software development revenue are recognized as work progresses based on specific milestones in accordance with FASB ASC Topic 450. The Company believes that project milestones based on completion of specific tasks provide the best approximation of progress toward the completion of the contract. At December 31, 2015 and December 31, 2014, there were no custom software development arrangements in progress.
The Company also occasionally derives revenue from the sale of third party hardware, which is billed as a separate deliverable under consulting or custom development contracts.
Revenue from diagnostic services, clinical consulting services, telemedicine recruiting services, software installation, and any training or miscellaneous consulting services is recognized when the services are rendered. These revenues include services that are separate from the functionality of the software. If these services are included in a software agreement with multiple elements, amounts are allocated to these categories based on the estimated number of hours required to complete the work, which is the same criteria used to bill for the services separately. License revenue is recognized ratably over the term of the license.
F-9
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition, continued:
Amounts collected prior to satisfying the above revenue recognition criteria are included in deferred revenue.
The application of ASC 605, as amended, requires judgment, including a determination that collectability is probable and the fee is fixed and determinable.
The Company follows the guidance provided by SEC Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition in Financial Statements
and SAB No. 104,
Revenue Recognition
, which provide guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC.
Due to uncertainties inherent in the estimation process it is at least reasonably possible that completion costs for contracts in progress will be further revised in the near-term.
The cost of services, consisting of staff payroll, outside services, equipment rental, communication costs and supplies, is expensed as incurred.
Research and Development Expenses:
Costs of research and development activities are expensed as incurred.
Advertising Expenses:
The Company expenses advertising costs which consist primarily of direct mailings, promotional items and print media, as incurred. Advertising expenses amounted to $0 and $0 for the years ended December 31, 2015 and 2014, respectively.
Fair Value of Financial Instruments:
The Company adopted the Financial Accounting Standards Board (“FASB”) standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
·
Level 1: Observable inputs such as quoted prices in active markets;
·
Level 2: Inputs other than quoted prices in active markets that are observable either directly or indirectly; and
·
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
F-10
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments, continued:
The Company’s financial instruments consist of cash, accounts receivable, inventory, prepaid expenses, leasehold improvements, property and equipment, deposits, other assets, accounts payable, accrued expenses, deferred revenue, capital leases and notes payable. The recorded values of cash, accounts receivable, inventory, prepaid expenses, and accounts payable approximate fair values due to the short maturities of such instruments. Recorded values for notes payable and related liabilities approximate fair values, since their stated or imputed interest rates are commensurate with prevailing market rates for similar obligations.
Recent Pronouncements:
The Company’s management has reviewed recent accounting pronouncements issued through the date of the issuance of these financial statements. In management’s opinion, no pronouncements apply or will have a material effect on the Company’s financial statements.
NOTE C - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of approximately $15,642,000 since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through the future issuances of the common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE D - FURNITURE, EQUIPMENT, AND IMPROVEMENTS
Furniture, equipment, and improvements as of December 31, 2015 and 2014 consisted of the following:
|
|
|
|
|
|
| |
|
|
|
2015
|
|
2014
|
|
Computers
|
|
$
|
499,000
|
|
$
|
499,000
|
|
Furniture, fixtures and equipment
|
|
|
150,000
|
|
|
150,000
|
|
Automobiles
|
|
|
41,000
|
|
|
41,000
|
|
Leasehold improvements
|
|
|
20,000
|
|
|
20,000
|
|
|
|
|
710,000
|
|
|
710,000
|
|
Accumulated depreciation
|
|
|
(694,000)
|
|
|
(670,000)
|
|
|
|
$
|
16,000
|
|
$
|
40,000
|
Depreciation expense for the years ended December 31, 2015 and 2014 was $12,000 and $15,000, respectively.
F-11
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE E - NOTES PAYABLE
Notes Payable - Related Party:
On March 1, 2011, the Company received a $2,000 loan from a director of the Company. This loan is non-interest bearing and is due on demand. On May 1, 2012, the Company received a $25,000 loan from a director of the Company. The loan bears interest at 7% per annum with principal and interest payable on or before April 30, 2015. On September 1, 2012, the Company received an $18,000 loan from a director of the Company. The loan bears interest at 7% per annum with principal and interest payable on or before August 31, 2015. During 2015, all loans were extended for one year. At December 31, 2015 and December 31, 2014, there is approximately $10,000 and $8,000, respectively, in accrued interest included in notes payable - related party related to these notes.
Notes Payable:
During the year ended December 31, 2015, the Company financed various insurance premiums in the amount of $167,000. The notes bear interest rates ranging from 0% to 10.25%, are payable in monthly principal and interest payments ranging from $900 to $12,000 with maturity dates beginning in February 2016 through December 2016. As of December 31, 2015, these notes totaled $39,000. Total interest expense for the year ended December 31, 2015 related to notes payable for insurance premiums was approximately $5,000.
NOTE F - GOODWILL
On July 1, 2013, the Company completed its merger with MedTel Solutions, LLC (“MedTel”), an Alabama limited liability company, in accordance with its Merger Agreement dated June 28, 2013. MedTel was organized on June 13, 2012 for the purpose of engaging in and is now engaged in the business of providing licensed medical practitioners to perform services via telemedicine. Pursuant to the agreement, the Company authorized the issuance of 3,000,000 shares of its common stock in exchange for 100% of the outstanding membership interests of MedTel. The fair value of the consideration given up totaled $275,000 of which $36,000 has been allocated to the fair value of net identifiable assets and the remaining $239,000 to goodwill.
In accordance with FASB ASC 350, “Intangibles - Goodwill and Other,” the Company performs goodwill impairment testing at least annually, unless indicators of impairment exist in interim periods. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess. As of December 31, 2015 and December 31, 2014, there is no impairment of goodwill.
In connection with the merger, the Company also entered into two employment agreements with the former holders of MedTel membership interests. Each agreement provides for bonus compensation of 2,000,000 shares of common stock to be earned equally upon attainment of quarterly sales and profitability goals. At December 31, 2015, no additional compensation has been earned.
F-12
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE G - STOCKHOLDERS’ EQUITY
Common Stock:
The holders of our common stock are entitled to equal dividends and distributions when, as, and if declared by the Board of Directors from available funds. No holder of any shares of common stock has a preemptive right to subscribe for any of our securities, nor are any common shares subject to redemption or convertible into other of our securities, except for outstanding options described below. Upon liquidation, dissolution or winding up, and after payment of creditors and preferred stockholders, if any, the assets will be divided pro-rata on a share-for-share basis among the holders of the shares of common stock. All shares of common stock now outstanding are fully paid, validly issued and non-assessable. Each share of common stock is entitled to one vote with respect to the election of any director or any other matter upon which shareholders are required or permitted to vote. Holders of our common stock do not have cumulative voting rights, so the holders of more than 50% of the combined shares voting for the election of directors may elect all of the directors if they choose to do so, and, in that event, the holders of the remaining shares will not be able to elect any members to the Board of Directors.
During the year ended December 31, 2015, the Company effected the following common stock transactions:
Earned compensation for two doctors from shares issued during 2013 of $20,000 is included in expense for the year ended December 31, 2015.
Earned compensation for two officers from shares issued during 2014 of $54,000 is included in expense for the year ended December 31, 2015.
Earned compensation for two outside directors from shares issued during 2014 of $54,000 is included in expense for the year ended December 31, 2015.
Preferred Stock:
Under the Company’s Certificate of Incorporation, the Board of Directors has the power, without further action by the holders of the common stock, to designate the relative rights and preferences of the preferred stock, and to issue the preferred stock in one or more series as designated by the Board of Directors. The designation of rights and preferences could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of the common stock or the preferred stock of any other series. The issuance of preferred stock may have the effect of delaying or preventing a change in control of the Company without further shareholder action and may adversely affect the rights and powers, including voting rights, of the holders of common stock. In certain circumstances, the issuance of preferred stock could depress the market price of the common stock.
During the year ended December 31, 2015, the Company effected no preferred stock transactions.
F-13
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE G - STOCKHOLDERS’ EQUITY (CONTINUED)
Stock Options:
Exercise prices and weighted-average contractual lives of stock options outstanding as of December 31, 2015 and 2014 are as follows:
|
|
|
|
|
|
|
|
| |
|
Options Outstanding
|
|
Options Exercisable
|
|
Exercise
Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
Weighted
Average
Exercise
Prices
|
|
Number
Exercisable
|
|
$0.03-$0.044
|
|
6,500,000
|
|
1.38
|
|
$0.03
|
|
6,500,000
|
Summary of Options Granted and Outstanding:
|
|
|
|
|
|
|
|
| |
|
|
|
For the Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Options:
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year
|
|
6,500,000
|
|
$0.03
|
|
8,000,000
|
|
$0.03
|
|
Granted
|
|
0
|
|
$0.00
|
|
0
|
|
$0.00
|
|
Cancelled
|
|
0
|
|
$0.00
|
|
0
|
|
$0.06
|
|
Exercised
|
|
0
|
|
$0.03
|
|
(1,500,000)
|
|
$0.03
|
|
Outstanding at end of year
|
|
6,500,000
|
|
$0.03
|
|
6,500,000
|
|
$0.03
|
During the years ended December 31, 2015 and December 31, 2014, no options were granted.
NOTE H - INCOME TAXES
The Company accounts for income taxes using the liability method, under which deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
As of December 31, 2015, the Company had net operating loss carry forwards of approximately $15,642,000, which expire in varying amounts between 2020 and 2031. Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carry forward.
At December 31, 2015 and 2014, the Company had a federal operating loss carry forward of $15,642,000 and $15,793,000, respectively.
F-14
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE H - INCOME TAXES (CONTINUED)
Components of net deferred tax assets, including a valuation allowance, are as follows at December 31:
|
|
|
|
|
|
| |
|
|
|
2015
|
|
2014
|
|
Deferred tax assets:
|
|
|
|
|
|
Net operating loss carry forward
|
|
$
|
4,768,000
|
|
$
|
4,805,000
|
|
Stock based compensation
|
|
|
128,000
|
|
|
178,000
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
4,896,000
|
|
|
4,983,000
|
|
Less: Valuation Allowance
|
|
|
(4,896,000)
|
|
|
(4,983,000)
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Assets
|
|
$
|
--
|
|
$
|
--
|
The valuation allowance for deferred tax assets as of December 31, 2015 and 2014 was $4,768,000 and $4,983,000, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would be realized as of December 31, 2015 and 2014.
Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:
|
|
|
|
| |
|
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
Federal statutory tax rate
|
|
(35.0)%
|
|
(35.0)%
|
|
State taxes, net of federal tax benefit
|
|
(5.0)%
|
|
(5.0)%
|
|
Permanent difference and other
|
|
40.0%
|
|
40.0%
|
|
|
|
|
|
|
|
Effective tax rate
|
|
0%
|
|
0%
|
NOTE I - MAJOR CUSTOMERS
During the year ended December 31, 2015, two customers accounted for 30% of the Company’s total revenue. During the year ended December 31, 2014, one customer accounted for 25% of the Company's total revenue.
As of December 31, 2015, balances due from one customer comprised 14% or $62,000 of total accounts receivable.
F-15
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE J - REPORTABLE SEGMENTS
Management has identified the Company's reportable segments based on separate lines of business. The parent company, Net Medical Xpress Solutions, derives revenues from the development and marketing of proprietary internet technology-based software. The Company’s wholly-owned subsidiary, Telerad Service, Inc., operates under the trade names Net Medical Xpress Services, Net Medical Xpress Specialists and Net Medical Xpress Staffing. Net Medical Xpress Services provides medical diagnostic reading services. Net Medical Xpress Specialists provides virtual telemedicine services to hospitals and other medical entities. Net Medical Xpress Staffing locates and recruits physicians to provide telemedicine services.
Information related to the Company's reportable segments for the year ended December 31, 2015 is as follows:
|
|
|
|
|
| |
|
|
Services
|
Specialists
|
Solutions
|
Staffing
|
TOTAL
|
|
Revenue
|
$2,427,000
|
$1,387,000
|
$301,000
|
$107,000
|
$4,222,000
|
|
|
|
|
|
|
|
|
Cost of Service
|
2,010,000
|
881,000
|
151,000
|
13,000
|
3,055,000
|
|
General & administrative
|
367,000
|
203,000
|
212,000
|
105,000
|
887,000
|
|
Depreciation
|
2,000
|
0
|
10,000
|
0
|
12,000
|
|
Research & development
|
1,000
|
49,000
|
50,000
|
0
|
100,000
|
|
Bad debt
|
7,000
|
0
|
1,000
|
0
|
8,000
|
|
|
|
|
|
|
|
|
Operating Income (loss)
|
$40,000
|
$254,000
|
$(123,000)
|
$(11,000)
|
$160,000
|
|
|
|
|
|
|
|
|
Total assets
|
$429,000
|
$202,000
|
$305,000
|
$265,000
|
$1,201,000
|
Operating information related to our reportable segments for the year ended December 31, 2014 is as follows:
|
|
|
|
|
| |
|
|
Services
|
Specialists
|
Solutions
|
Staffing
|
TOTAL
|
|
Revenue
|
$3,478,000
|
$624,000
|
$397,000
|
$84,000
|
$4,583,000
|
|
|
|
|
|
|
|
|
Cost of Service
|
2,736,000
|
565,000
|
307,000
|
157,000
|
3,765,000
|
|
General & administrative
|
367,000
|
312,000
|
208,000
|
181,000
|
1,068,000
|
|
Depreciation
|
4,000
|
0
|
10,000
|
1,000
|
15,000
|
|
Research & development
|
0
|
118,000
|
3,000
|
0
|
121,000
|
|
Bad debt
|
80,000
|
0
|
0
|
0
|
80,000
|
|
|
|
|
|
|
|
|
Operating Income (loss)
|
$291,000
|
$(371,000)
|
$(131,000)
|
$(255,000)
|
$(466,000)
|
|
|
|
|
|
|
|
|
Total assets
|
$732,000
|
$114,000
|
$141,000
|
$252,000
|
$1,239,000
|
A reconciliation of the segments' operating income to the consolidated net income is as follows:
|
|
|
| |
|
Segment’s operating income
|
|
$
|
160,000
|
|
Other income (expense)
|
|
|
(9,000)
|
|
Consolidated net income
|
|
$
|
151,000
|
F-16
Net Medical Xpress Solutions, Inc.
Notes to Consolidated Financial Statements
NOTE K - COMMITMENTS AND CONTINGENCIES
Leases:
The Company leases office space in New Mexico expiring on January 31, 2017. The Company also leases office equipment valued at $7,000 expiring in May 2017, and computer equipment valued at $17,000 expiring in November 2016. Future minimum lease payments as of December 31, 2015 are as follows:
|
|
| |
|
Year
|
|
Amount
|
|
2016
|
|
94,000
|
|
2017
|
|
9,000
|
Rent expense for the years ended December 31, 2015 and 2014 amounted to $86,000 and $83,000, respectively.
Employment Agreement (Related Party):
During the first quarter of 2013, the Company entered into a new employment agreement with Mr. Govatski whereby agreeing to annual compensation of $30,000 for a term of one year commencing on January 1, 2013. The agreement will automatically renew annually unless terminated by either party. The non-compete agreement has remained intact and becomes effective only in the event of termination by either party. It will remain in effect for duration of the contract.
NOTE L - SUBSEQUENT EVENTS
Management has evaluated all subsequent events through the date of filing. No significant events have occurred during the period from December 31, 2015 through the date of filing.
F-17