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ITEM 2
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MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
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Overview
Our major
focus remains the diversification and expansion of the application of our
technology into new areas of the healthcare industry. Target markets remain
independent clinics, including specialized corporate healthcare providers, and
oncology specialty facilities such as the Segal Cancer Center. These system
deployments are rapid, cost-effective and have a much shorter sales cycle than
when dealing with hospitals regarding the fully integrated VisualMED Clinical
Information System.
Due to our
efforts to adapt the existing technology and the opening of these new markets,
we have begun to reduce our operating expenses.
At March 31,
2008, the Company had a working capital deficiency of $2,635,306 and had
incurred losses of $32,195,847 since inception. These factors raise substantial
doubt about our ability to continue as a going concern without raising
significant additional capital or generating significant revenue in the upcoming
fiscal year.
We incurred
losses of $474,481 for the three months ending March 31 2008. This compares to
$10,630,206 in the comparable prior year period. The components of these losses
were costs associated with sales and marketing, research and development,
customer service and general administration. We also incurred professional
expenses, depreciation and filing fees.
Operating
expenses for the three months ending March 31, 2008 were $630,761.
Marketing Strategy and Recent Developments
We continue to
work closely with Plexo group and Medical.MD on the first subscriber-based
internet health record for private healthcare clinics. VisualONCOLOGY, our
stand alone oncology module, is successfully operating at the Segal Cancer
Center in Montreal. It remains the only fully integrated clinical cancer module
on the market.
Our current
association with the Segal Cancer Center and the McGill University Department
of Oncology has started to result in further contracts of our VisualONCOLOGY
module. These contracts include St. Marys Hospital and the Ville Marie Breast
Clinic, both of Montreal.
As of the date
of filing, we expect our installed base to have reached 7 sites by the end of
calendar 2008, with oncology leading the way. We continue to move away from
concentrating on full-hospital deployments, with the inherent delays and long
sales cycles associated with large healthcare bureaucracies, and focus on
smaller, faster implementations in the private sector. We continue to pursue
the opportunities that our growing client base provides, and management is
confident our client base will continue to grow at an accelerated pace, with a
fully diversified revenue stream fuelled by the activities of Medical.MDs
subscriber-based internet health record, VisualONCOLOGY, and our installed
sites in Texas, Michigan and Kansas. We now expect our developing oncology
activities to help create a coordinated market for VisualANESTHESIOLOGY, as
these two modules are complimentary.
A further
revenue branch is being explored, as we have begun to market parts of the
VisualMEDs diverse abilities to help large pharmaceutical companies better
control data and results from the clinical trial process used in developing and
monitoring new drugs.
2
In the
interim, our new stand alone modules are more easily affordable to prospective
clients, including small practices, clinics and private specialty facilities
whose decision making timeframe is much shorter than regular hospitals:
typically months instead of years.
Management
remains confident that the VisualMED brand, with its highly rated clinical
functionality and rich content, is by now well known within the medical
community. When healthcare institutions are prepared to fully comply with
recent and active legislation, and adhere to federally mandated operational
reform programs, VisualMEDs traditional software solutions will find no
shortage of customers.
Negotiations
with several hospital management groups in Europe continue to make progress.
Our brand and market presence with some decision-making bodies are now well
established in France and Italy. We have rekindled some of our key
relationships with major French teaching hospitals, and are preparing for
another major marketing effort in France. Another Italian change of government
will now delay once again our ongoing efforts to obtain a national contract,
however our key relationships with Italian medical leaders remains intact and
we remain hopeful for a multi-hospital implementation to conclude our 2-year
sales drive.
VisualMED has
been selected as a participant in the upcoming Oncology EHR Workshop being
presented as part of the 2008 meeting of the American Society of Clinical
Oncology (ASCO) in Chicago, May 30 June 3. Twenty-five vendors were invited
to the pre-selection evaluation, of whom ten were selected to present. Vendors
were required to meet a number of rigorous criteria appropriate to oncology
electronic patient records and prescriptions. Such records are used by health
care providers to manage cancer patient care over timeframes ranging from
months to years. Of note, VisualMED is the only new vendor added to the list
of last years participants. It is anticipated that each vendor will do between
50 and 100 presentations over the course of the 3-day event, making this event
an extremely time- and cost-efficient marketing and sales opportunity.
Financial Condition, Liquidity and Capital
Resources
During the
three months ending March 31 2008, we recognized revenue of $186,873 from
licensing of our product.
At March 31,
2008, we had a working capital deficiency of $2,635,306, compared to a working
capital deficiency of $1,511,763 at June 30, 2007.
We had a net
loss of $474,481 and $10,630,206 for the three month periods ending March 31,
2008 and 2007 respectively.
At March 31,
2008 our total assets were $200,984, as compared to total assets of $467,873 at
June 30, 2007.
At March 31,
2008 we had pre-paid expenses of $26,189. This amount consists of Rent and
Property Taxes of $14,805, a Trade Show for $7,000 and security deposit on an
automobile lease of $4,384.
At March 31
2008, our total liabilities were $2,806,995, as compared to total liabilities
of $1,928,446 at June 30, 2007.
We will need
to raise additional equity/debt financing to sustain operations over the next
12 months. Our auditors have expressed substantial doubt about our ability to
continue as a going concern in their audit report that was included in Form
10-KSB for the fiscal year ended June 30, 2007.
3
Critical Accounting Policies
Our discussion
and analysis of financial condition and results of operations are based upon
the Consolidated Financial Statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of Consolidated Financial Statements require management to make
estimates and judgments that affect the reported amounts of assets and
liabilities, revenues and expenses and disclosures on the date of the
Consolidated Financial Statements. On an on-going basis, we evaluate our
estimates, including, but not limited to, those related to revenue recognition.
We use
authoritative pronouncements, historical experience and other assumptions as
the basis for making judgments. Actual results could differ from those
estimates. Critical accounting policies identified are as follows:
Long-Lived Assets
In accordance
with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, we test long-lived assets or asset groups for recoverability when events
or changes in circumstances indicate that their carrying amount may not be
recoverable. Circumstances which could trigger a review include, but are not
limited to: significant decreases in the market price of the asset; significant
adverse changes in the business climate or legal factors; accumulation of costs
significantly
Recoverability
is assessed based on the carrying amount of the asset and its fair value which
is generally determined based on the sum of the undiscounted cash flows
expected to result from the use and the eventual disposal of the asset, as well
as specific appraisal in certain instances. An impairment loss is recognized
when the carrying amount is not recoverable and exceeds fair value.
Foreign Currency Transactions/Balances
Our functional
and reporting currency is the United States dollar. The functional currency of
the Companys subsidiary is the Canadian dollar. The financial statements of
this subsidiary are translated to United States dollars in accordance with SFAS
No. 52,
Foreign Currency Translation
,
using period-end rates of exchange for assets and liabilities, and average
rates of exchange for the period for revenues and expenses. Translation gains
(losses) are recorded in accumulated other comprehensive income (loss) as a
component of stockholders equity. Foreign currency transaction gains and
losses are included in current operations.
Revenue Recognition
The Company
recognizes revenue related to sales and licensing of medical software in
accordance with Statement of Position No. 97-2, Software Revenue Recognition
(SOP 97-2), as amended by Statement of Position No. 98-9, Software Revenue
Recognition with Respect to Certain Arrangements. Pursuant to SOP 97-2 and
Staff Accounting Bulletin No. 104 Revenue Recognition, revenue will only be
recognized when the price is fixed or determinable, persuasive evidence of an
arrangement exists, the service is performed, and collectability is reasonably
assured. The Companys revenue contracts are accounted for in conformity with
Accounting Research Bulletin No. 45 Long-Term Construction-Type Contracts
(ARB 45), using the relevant guidance in SOP 81-1 Accounting for Performance
of Construction-Type and Certain Production-Type Contracts, unless specified
criteria for separate accounting for any service element are met. The Company
uses the completed contract method to recognize revenue from long term service
contracts. Licensing revenue is recognized if all revenue
4
recognition
criteria pursuant to SAB 104 are met. The Company also follows the guidance in
Emerging Issues Task Force (EITF) Issue No. 00-21 Revenue Arrangements with
Multiple Deliverables relating to the separability of deliverables included in
an arrangement into different units of accounting and the allocation of an
arrangements consideration to those units of accounting. It does not address
when revenue should be recognized for the units of accounting.
Incremental
direct costs related to contract acquisition and origination, which result in
deferred revenue, are expensed as incurred. Any significant customer accounts
that are not reasonably assured to be collected are excluded from revenues.
During the year ended June 30, 2007, the Company licensed technology to a
customer for $1,410,600 ($1,500,000 CAD). At March 31, 2008, $986,865
($1,013,000 CAD) has been excluded from revenues as collectability was
considered by management to not be reasonably assured. During the nine month
period ended March 31, 2008, the Company recognized revenue of $441,541 related
to a $2,200,000 contract with a customer. Revenue was recognized since customer
acceptance or the work completed was obtained and the Company has no further
obligations related to this portion of the contract.
Disclosure Regarding Forward-Looking Statements
Certain
statements contained in this quarterly report on Form 10QSB/A constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause deviations in actual results, performance or
achievements to be materially different from any future results, performance or
achievement expressed or implied. Such factors include but are not limited to:
market and customer acceptance of and satisfaction with our products, market
demand for our products; fluctuations in foreign currency markets; the use of
estimates in the preparation of our financial statements; the impact of
competitive products and pricing in our field; the ability to develop and
launch new products in a timely fashion; government and industry regulatory
environment; fluctuations in operating results, including, but not limited to,
spending on research and development, spending on sales and marketing
activities, spending on technical and product support; and other risks outlined
in previous filings with the Securities and Exchange Commission, and in this
quarterly report on Form 10-QSB/A. The words believe, expect, may,
anticipate, intend and plan and similar expressions identify
forward-looking statements. Such statements are subject to risks and
uncertainties that cannot be quantified and, consequently, actual results may
differ materially from those expressed or implied by such forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements. The terms Company, we, us, our, VisualMED
and the Registrant refer to VisualMED Clinical Solutions Corp., a Nevada
corporation, and its subsidiaries.
Factors that
could cause actual results to differ from those expressed in forward-looking
statements include, but are not limited to:
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Our limited
operating history;
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Our auditors
have issued a going concern opinion. Therefore we may not be able to achieve
our objectives and may have to suspend or cease operations;
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Because we
have historically incurred losses and these losses may increase in the
future, we must begin generating a profit from our operations. If we do not
begin generating a profit we may have to suspend or cease operations;
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We have
experienced a history of losses and expect to incur future losses. Therefore,
we must continue to raise money from investors to fund our operations. If we
are unable to fund our operations, we will cease doing business;
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5
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Because we
depend on a limited number of third parties to manufacture and supply
critical components for our products and services, if a third party
manufacturer should cease operations or refuse to sell components to us, we
may have to suspend or cease operations;
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If we cannot
deliver the VisualMED systems our customers demand, we will be unable to
attract customers, which would likely result in a loss of income and
eventually a termination of our operations;
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Competition
from companies with already established marketing links to our potential
customers may adversely affect our ability to market our products;
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Our parent
company has significant influence over our corporate decisions;
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Because we
do not have any patents, we rely on trade secrets, confidentiality agreements
and contractual agreements, which may not be adequate to protect our proprietary
interests. If our proprietary interests are divulged to the public, our
operations may be adversely impacted and we may have to cease operations;
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Third
parties may claim that our current or future products or services infringe
their proprietary rights or assert other claims against us;
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Fluctuations
in the value of foreign currencies could result in increased product costs
and operating expenses;
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We must be
able to respond to rapidly changing technology, services and standards in
order to remain competitive;
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Because the
market for our common stock is limited, our investors may not be able to
resell their shares of common stock;
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Because our
common stock is subject to penny stock rules, the liquidity of investments
may be restricted.
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6
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ITEM 3
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CONTROLS AND PROCEDURES
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As of the end
of the period covered by this report, under the supervision and with the
participation of our management, including Gerard Dab, our Chief Executive
Officer, and Larry Kurlender, our Chief Financial Officer, we have evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities and Exchange Act of 1934 (Exchange Act)). Based on
that evaluation, our Chief Executive Officer and our Chief Financial Officer
have concluded that these disclosure controls and procedures are effective to
ensure that information required to be disclosed in our annual reports filed
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities Exchange Commission rules and forms.
There were no changes in our internal control over financial reporting during
the fiscal quarter ended March 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
Our officers
believe that our disclosure controls and procedures are effective to ensure
that information required to be disclosed in the reports that VisualMED files
or submits under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and our Chief Financial
Officer in order to allow timely decisions regarding required disclosure. There
are frequent daily communications among all of our executives, including Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer, President
and our Vice President for Finance. All of our budgetary decisions and all of
our billing and other expenditures require the written, signed approval of at
least three of our executives. All issues regarding disclosures and procedures
are discussed in a timely fashion, including all financial and other key
operational information. Current disclosure controls and procedures are
governed by the Board of Directors, and any changes to such controls and
procedures must be made with the Boards approval.
7
PART II
On March 20,
2008, a legal action was commenced in Quebec, Canada against the Company
seeking payment in the amount of $150,000 and 140,941 common shares of the
Company pursuant to a finder fees agreement. The Company has accrued $150,000
and believes the claim to the 140,941 shares are without merit and will defend
its position.
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ITEM 2
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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None
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ITEM 3
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DEFAULTS UPON SENIOR SECURITIES
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None
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ITEM 4
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None
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ITEM 6
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EXHIBITS AND REPORTS ON FORM 8-K
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(a)
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Exhibits
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Description
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3.1
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Articles of
Incorporation (incorporated by reference to Exhibit 3.1 to the Companys
Registration Statement on Form SB2 (Registration No. 33394835) filed with
the SEC on January 18, 2001).
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3.2
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Amendment to
the Articles of Incorporation (incorporated by reference to Exhibit 3.2 to
the Companys Quarterly Report on Form 10QSB filed with the SEC on February
22, 2005).
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3.3
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By-Laws
(incorporated by reference to Exhibit 3.2 to the Companys Registration
Statement on Form SB-2 (Registration No. 333-94835) filed with the SEC on
January 18, 2001
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3.4
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VisualMED
Clinical Solutions Corp. November 2007 Nonqualified Stock Option Plan
(incorporated by reference to the Companys Registration Statement on Form
S-8 filed with the SEC on November 20, 2007).
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3.5
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VisualMED
Clinical Solutions Corp. July 2007 Nonqualified Stock Option Plan
(incorporated by reference to the Companys Registration Statement on Form
S-8 filed with
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8
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the SEC on
July 24, 2007).
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3.6
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Regulation
FD Disclosure (incorporated by reference to Form 8-K filed with the SEC on
November 8, 2007)
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3.7
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VisualMED
Clinical Solutions Corp. February 2008 Nonqualified Stock Option Plan (incorporated
by reference to the Companys Registration Statement on Form S-8 filed with
the SEC on March 6, 2008).
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31.1
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Certification
of Principal Executive Officer pursuant to Rule 13a-15(e) and Rule 15d-15(e),
promulgated under the Securities and Exchange Act of 1934, as amended.
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31.2
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Certification
of Principal Financial Officer pursuant to Rule 13a-15(e) and Rule 15d-15(e),
promulgated under the Securities and Exchange Act of 1934, as amended.
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32.1
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Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Principal Executive Officer).
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32.2
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Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Principal Financial Officer).
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9
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on this 13
th
day of May,
2008.
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VISUALMED CLINICAL SOLUTIONS CORP.
(Registrant)
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By:
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/s/ Gerard Dab
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Gerard Dab
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Principal Executive Officer, Secretary and
a
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member of the Board of Directors
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