Forward-Looking Information
The Company may from time to time make written or oral "forward-looking statements" including statements contained in this report and in other communications by the Company, which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our beliefs as well as assumptions made by and information currently available to us. When used in this document, words like "may," "might," "will," "except," "anticipate," "believe," "potential," and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from our current expectations.
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Forward-looking statements in this report, including without limitation,
statements related to the Company's plans, strategies, objectives, expectations,
intentions and adequacy of resources, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that such forward-looking statements involve risks and
uncertainties including, without limitation, the following: (i) changes in the
Company's plans, strategies, objectives, expectations and intentions, which may
be made at any time at the discretion of the Company; (ii) the impact of
uncertainties in global economic conditions, including the impact on the
Company's suppliers and customers; (iii) changes in client needs and consumer
spending habits; (iv) the impact of competition and technological changes on the
Company; (v) the Company's ability to manage its growth effectively, including
its ability to successfully integrate any business it might acquire; (vi)
currency fluctuations; (vii) increases in the cost of borrowings resulting from
rising interest rates; (viii) international trade policies and their impact on
demand for our products and our competitive position, including the imposition
of new tariffs or changes in existing tariff rates; and (ix) other risks and
uncertainties indicated from time to time in the Company's filings with the
OVERVIEW
Throughout the year ended
The Company's revenue, however, in 2019, decreased from its revenue in 2018.
This decrease occurred primarily as a result of the acquisition of the Company's
largest account by another account with whom the Company also had a contract,
but had not yet had time to implement. In 2018, the Company had existing
contracts with two of the nation's largest clinic chains servicing the
interstate commercial trucking industry -- Concentra and
During 2019, and into 2020, the Company successfully materially expanded its
customer base. In
In
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In the first part of 2020, we entered into a three-year, exclusive, worldwide
cooperation agreement with
We have also now established relations with the
Additionally, the Company believes that the integration of USHW into Concentra
is essentially complete, and the Company's revenue from this account has shown a
material increase. In the first quarter of 2020, we had an overall increase in
sales in
SOURCES OF REVENUE
A quantitative summary of our revenues by source category for 2019 and 2018 as follows: 2019 2018 Change OSA-related$ 300,098 $ 524,172 $ (224,074 ) Results of Operations 2019 vs. 2018
Revenues and Costs of Goods sold
Revenues For the year ended
OSA-related
OSA services decreased to
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Cost of revenues decreased to
Selling, general and administrative expense
Selling, general and administrative expense in total was as follows:
2019$ 2,092,806 2018 1,745,094 Change$ 347,712 Percentage Change 19.93 %
We evaluate selling, general and administrative expenses at the Parent company level as well as at our PVMS subsidiary. Selling, general, and administrative expenses at the Parent company level include overhead and the cost of being a public entity. Selling, general, and administrative expenses at PVMS are solely related to the OSA services segment. A breakdown of these expenses is as follows:
2019 2018 Change Parent 870,305 533,933$ 336,372 PVMS 1,222,501 1,211,161 11,340
Total selling, general and administrative
Parent Company level 2019 2018 Change Travel expense$ 3,993 $ (413 ) $ 4,406 Professional fees 566,206 223,314 342,892 Board of Directors fees 150,000 150,000 - Rent expense 97,860 99,485 (1,625 ) Other 52,246 61,547 (9,301 )
Total selling, general and administrative
Explanations of variations by line item follow:
Travel expense increased by
Professional Fees increased by
Board of Directors Fees accrue at the rate of
37 PVMS Subsidiary 2019 2018 Change Executive compensation and payroll related$ 512,844 $ 542,578 $ (29,734 ) Travel expense 254,289 258,469 (4,180 ) Professional fees 177,449 123,606 53,843 Advertising 50,562 50,811 (249 ) Other 227,357 235,697 (8,340 )
Total selling, general and administrative
Payroll related expenses decreased by
Travel expense was
Professional Fees increased
Advertising decreased
Other Expense decreased by
Interest Expense
Interest expense between 2019 and 2018 was as follows
2019$ 1,428,671 2018 1,436,974 Change$ (8,303 ) Percentage change (0.58 )% A breakdown of the interest expense for the years endedDecember 31, 2019 and 2018 is as follows: 2019 2018 Change Parent$ 648,879 $ 935,849 $ (286,970 ) PVMS 779,792 501,125 278,667 Total$ 1,428,671 $ 1,436,974 $ (8,303 ) 38
Interest expense stayed consistent with the interest expense in 2018.
Liquidity and Capital Resources
During the year ended
Short Term: We funded our operations with revenues from sales and private borrowings.
Subsequent to 2019, we issued
ACCOUNTING POLICIES AND ESTIMATES
Preparation of our consolidated financial statements requires us to make significant estimates and judgments to develop the amounts reflected and disclosed in the consolidated financial statements. On an on-going basis, we evaluate the appropriateness of our estimates and we maintain a thorough process to review the application of our accounting policies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Revenue recognition. The Company is on an accrual basis and revenue is recognized when billed, which is approximately when the testing service is performed or CPAP machine is shipped.
Income taxes. Computing our provision for income taxes involves significant judgment and estimates particularly in relation to the determination of a valuation allowance for deferred tax assets (primarily from net operating loss carryforwards). See Note 16 to the consolidated financial statements.
Stock-based compensation. We issue various stock-based compensation awards to our employees and members of our Board of Directors. We account for the awards in accordance with ASC 718 "Compensation - Stock Compensation" and measure compensation cost for stock options at fair value on the grant date and recognize compensation cost on a straight-line basis over the service period for those options expected to vest. We use the Black-Scholes option pricing model, which requires us to use certain variable assumptions for input, to calculate the fair value of a stock award on the grant date. These assumptions, which are set forth in Note 2 to our consolidated financial statements variables include the expected volatility of our stock price, award exercise behaviors, the risk-free interest rate, and expected dividends. We use significant judgment in estimating expected volatility of the stock, exercise behavior and forfeiture rates developing our assumptions as follows:
Expected Volatility
We estimate the volatility of the share price by using historical data of our traded stock in combination with our expectation of the extent of fluctuation in future stock prices. We believe our historical volatility is more representative of future stock price volatility and as such it has been given greater weight in estimating future volatility.
39 Expected Term
A variety of factors are considered in determining the expected term of options granted. Options granted are grouped by their homogeneity based on the optionees' position, whether managerial or clerical, and length of service and turnover rate. Where possible, we analyze exercise and post-vesting termination behavior. For any group without sufficient information, we estimate the expected term of the options granted by averaging the vesting term and the contractual term of the options.
Expected Forfeiture Rate
We generally separate our option awards into two groups: employee and non-employee awards. The historical data of each group are analyzed independently to estimate the forfeiture rate of options at the time of grant. These estimates are revised in subsequent periods if actual forfeitures differ from estimated forfeitures.
Risk-free Interest Rate
We estimate the risk-free interest rate by reference to the interest rate for a
Expected Dividends
No dividends are expected to be paid for the expected life of the instruments; therefore, we assume a dividend rate of zero.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent Accounting Standards Update - Recently various new ASUs were issued by
the
In
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