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CGHC > SEC Filings for CGHC > Form 10-Q on 7-Dec-2012All Recent SEC Filings

Show all filings for CAPITAL GROUP HOLDINGS, INC.

Form 10-Q for CAPITAL GROUP HOLDINGS, INC.


7-Dec-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

This document contains "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not intend, and undertake no obligation, to update any forward-looking statement. You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

· our current lack of working capital;
· inability to raise additional financing;
· the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
· deterioration in general or regional economic conditions;
· adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
· inability to efficiently manage our operations;
· inability to achieve future sales levels or other operating results; and
· the unavailability of funds for capital expenditures.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see "Item 1A. Risk Factors" in our annual Form 10-K filed with the SEC on October 15, 2012.

Throughout this Report references to "we", "our", "us", "Capital Group Holdings", "Capital Group", "CGH",OneHealthPassTM, OHP, OneHealth, OneHealth Urgent Care, OHUC, "the Company", and similar terms refer to, Capital Group Holdings, Inc.

Company History

We were incorporated under the laws of the state of Minnesota in 1980 as Implant Technologies, Inc. On September 19, 2007, the Company filed a certificate of amendment to the Company's Articles of Incorporation changing its name to Oasis Online Technologies, Corp. On October 29, 2010, we changed our name to Capital Group Holdings, Inc.

On September 3, 2012 The Company and its wholly owned subsidiary OneHealth Urgent Care, Inc., an Arizona corporation, ("OneHealth UC") completed the acquisition of Alliance Urgent Care by acquiring all of the assets, liabilities, and operations of combined entities owning Alliance Urgent Care MCS Ventures I through VII ("Sellers). (See Note 2 to the financial statements) OneHealth Urgent Care now operates 7 urgent care clinics through its wholly owned subsidiary Alliance Urgent Care. One Health UC has plans for expansion into additional states.

Capital Group Holdings, Inc.

Capital Group Holdings, Inc. (OTCQB: CGHC, "Capital Group") is an acquirer and operator of innovative health and wellness organizations that have strong market presence, brand awareness, and talented management teams working towards achieving exceptional performance over time. The Company, through its subsidiaries, currently operates 7 urgent care clinics ("OneHealth Urgent Care," "OneHealth UC") in metropolitan Phoenix, Arizona and will soon launch its telemedicine services through its subsidiary One Health Pass Inc. One Health Pass Inc. ("OHP"). OneHealthPass™ is a direct-to-consumer medical membership program (provided by One Health Pass Inc.) that provides members with 24/7/365 access to board-certified physicians via telephone or internet. Capital Group is positioning these companies to provide immediate access to medical services to the public in an effort to avoid any delay in access to physicians and to provide a significantly lower cost for high quality, patient-centric healthcare.

Our customers can reach a physician any time, day or night, can access basic medical services, and have the ability to receive sound medical advice and treatment for the most common minor medical issues. Our network of independent board-certified doctors may, at their discretion, provide prescriptions for treatment that can be retrieved immediately at the member's local pharmacy. Should a member need to be examined in person, they can be examined at one of our local urgent care clinics, or be referred elsewhere such as the ER, a primary care doctor, or even a specialist. Capital Group's strategy of partnering OHP with OneHealth Urgent Care is unique. The linkage will allow us to direct our new OHP members to our urgent care clinics instead of competitor clinics when they get sick, thus significantly extending our membership services, promoting customer loyalty, and significantly reducing the inherent medical liability associated with traditional telemedicine services.

OneHealthPass™

OneHealthPass™ ("OHP") is a membership program that provides access to board-certified physicians via the telephone and internet. Membership is billed monthly and members may utilize the service at any time. Should our members require additional consultations, there is a small surcharge that is added to their billing to accommodate additional consultations. OneHealthPassTM offers the following features:

· Immediate access to consultations 24/7/365
· Treatment for non-emergency ailments (cold & flu, allergies, sinus problems, bronchitis, etc.)
· Telephonic or live video consultations over a broadband connection
· Highly secure HIPAA compliant electronic health record (EHR) storage and retrieval
· 24-hour customer service agents

Capital Group plans to aggressively market OneHealthPass™ direct to consumers via local television and internet marketing campaigns. The Company plans to leverage the exposure of television advertising with a complex, information-driven Search Engine Optimization ("SEO") campaign to educate prospective members on the benefits of OneHealthPass™. Our Direct Response Television ("DRTV") program is anticipated to create millions of impressions and a significant number of new OneHealthPassTM memberships. We believe that having access to physicians via the telephone and web, as well as access to nearby urgent care centers can provide them with most of their basic healthcare needs. OneHealthPassTM was created to lead Capital Group's growth by providing broad access to telehealth services in conjunction with new urgent care clinics in each new state.

OneHealth Urgent Care

OneHealth Urgent Care ("OneHealth UC" or "OHUC") provides walk-in, extended hour access for acute illness and injury care that is either beyond the scope or availability of the typical primary care practice or retail clinic, or a referral service from a OneHealthPassTM member. OHUC centers are full-service board certified-staffed urgent care clinics that provide convenient access to affordable, high-quality care for episodic acute events requiring immediate attention, initially serving the greater metro Phoenix community.

OneHealth Urgent Care customers experience an average service time (check-in to check-out) of under 40 minutes (better than industry average), versus more than four hours, on average, for ER wait times. The cost of an urgent care visit is one-sixth the cost of an ER visit. OHUC provides care on a walk-in basis between 8 am and 8 pm, the hours which account for 80% of ER visits. OneHealth Urgent Care's performance has exceeded expectations. OHUC revenues exceeded $5.4 million in 2011, growing at least 30% since 2010.

Additional OneHealth Urgent Care facts include:

· Opened 7th clinic in October 2012
· Emphasis on providing a patient-centric experience
· 99% customer satisfaction

· Always staffed with a licensed, board certified providers, most of whom are physicians
· Ability to deal with high acuity medical conditions
· 40 min door-to-door time or less for 90% of patients
· Equipped with digital x-ray, lab, Electrocardiogram (EKG)
· Branded, with passive and active marketing and advertising campaigns

OneHealth Urgent Care clinics are located in cities with high ER volume, strong demographics and busy primary care physicians. OneHealth Urgent Care is actively seeking prospective site locations for de novo clinics in Arizona and Nevada and has generated potential leads for acquisitions in Arizona, California and Nevada. OneHealth Urgent Care operates billing and collection process that have overseen significant improvement in Days Sales Outstanding ("DSO") over time. Using Electronic Medical Records ("EMR"), electronic submissions whenever possible, and sending out claims within 24 hours helps expedite insurance payments. There are numerous processes in place to ensure accuracy of bills going out, tracking of all incoming payments, resulting in rapid posting, supported by vigorous, detailed policies for following up on denied claims. All billing and collections are processed in-house.

OneHealth Urgent Care will deliver a far-reaching direct-to-consumer television campaign designed to create approximately three million impressions per month. This campaign will be managed separate from the DRTV for OneHealthPassTM, with both designed to complement each other.

Competitive Landscape

Telehealth

As the demand for telehealth grows, companies such as Teladoc, ConsultADoctor, WhiteGlove Health, and MD247.com may gain market share. Like OneHealthPassTM, these companies generally offer 24/7 access to a doctor via phone, email, and video, as well as online lab testing and results, prescriptions via phone, and a professional online personal health manager.

OneHealthPassTM is starting with a small-scale retail entry into the telehealth market; it is focused on the individual managing his or her own personal health. By managing individual customer access, as opposed to large groups, we maintain relationships with our customers, and can offer a myriad of telehealth services without the significant cost of enterprise-level development costs and integration that larger companies must incur.

The Company's sales and marketing plan is targeted towards acquiring individual memberships for OHP as opposed to targeting large employer and/or association groups (payors). We are looking to acquire individual membership accounts for 2 main reasons: 1. Avoid any issues that could arise with insurance regulators who may construe OHP as exhibiting features of an insurance product and 2. The Company should realize significantly higher margins because of retail pricing for individuals as opposed to the current wholesale pricing models employed by our competition that primarily sell plans based upon large groups. The OHP pricing model has a base membership fee and an adjusting "utilization" fee month by month based upon the number of actual consultations that are performed. Our competition typically charges a very nominal fee (or none at all) to the payor and then charges consultation fees to the individual group member obtaining the consultation. We feel this model requires an extraordinary amount of operating capital to become profitable because revenue is based upon actual consultations performed at very slim margins whereas OHP customers are billed a recurring monthly fee and accrue consultations over time as they pay their monthly membership fees.

Urgent Care

As one of the fastest-growing segments of the American healthcare system, urgent care services have grown in size and market acceptance. Urgent care companies including NextCare Urgent Care, Fast-Med Urgent Care, and other locally-owned urgent care clinics may provide significant competition. The following macroeconomic trends support continued urgent care sector growth:

· Increasing ER volume and declining number of ERs
· Growing costs and lesser access
· Health reform adding millions of newly insured Americans to the system
· Aging population requiring more healthcare

Industry conditions are favorable:

· Clear value to both patients and payors - better quality of care, lower costs, greater access
· Industry is fragmented
· Lack of customer focus in the industry
· Large and relatively untapped parts of Southwest

Management Team

Erik J. Cooper
Capital Group Holdings, Inc. - Chairman, CEO

Mr. Cooper has served on the Company's Board of Directors and held various officer positions with the Company since July of 2007. He was elevated most recently to Chairman of the Board and CEO on June 28 2011. Mr. Cooper whose broad expertise as an entrepreneur is centered around mass marketing was also elected to serve as the President of One Health Pass, Inc. the Company's tele-medicine subsidiary to oversee the development and launch of OHP services. Mr. Cooper previously served as President and COO of the Company from Feb. 2010 to July 2011 and prior to that served as Chairman and CEO from July 2007 to Feb. 2010. Mr. Cooper also founded and serves as President of Big Eye Capital, a private Arizona corporation which advises small to medium-sized businesses in product development, sales and marketing, financing and real estate management. Prior to joining the Company Mr. Cooper was a leading mortgage banker for Centex, a fortune 500 company and in his 8 year tenure secured over $80 million in retail residential financing for over 500 families. He was responsible for the mass marketing of mortgage products though television and print advertising. Mr. Cooper was also co-founder of Solarcomm Wireless, a nationwide wholesale and retail distributor of wireless products and services.

Eric Click
Capital Group Holdings, Inc. - Director, COO, CFO

Prior to his appointment on July 21, 2011 as Director, COO and CFO Mr. Click has spent over 20 plus years working in finance, operations, and sales; providing strategic, thought leadership while driving results. He has been essential in establishing goals, implementing objectives, and financial controls over operating groups; thereby driving a culture of responsibility coupled with accountability. Mr. Click has worked in many facets of operations and sales:
including expense management, budgeting, restructuring, contract negotiations and project management, compliance, brand development, training, and new business development.

Mr. Click earned is finance degree from the prestigious W.P. Carey School of Business at Arizona State University. Prior to his current role with Capital Group Holdings, Inc., Mr. Click worked as a Certified Mortgage Planner with Prime Lending Inc. / CTX Mortgage Company from February 2004 to May 2010. Mr. Click also held the position of Manager of Finance at American Express Company Inc. from June 1996 to January 2004.

Michael J. Epps
Capital Group Holdings, Inc. - IT Manager

Mr. Epps joined the Company full-time November 5, 2012 bringing his 15 years of experience in information technology and project management specializing in electronic billing, call center software development and management, medical billing applications and software. Throughout his career Mr. Epps has provided conceptual leadership, application architecture development, project management and development for technology solutions and management for a variety of industries including telecommunications, defense, marketing and government. Prior to joining the Company Mr. Epps was Director of Technology for Advanced Focus LLC, an internet service provider.

Mike Blumhoff, MD
OneHealth Urgent Care - Medical Director, CEO Capital Group Holdings, Inc. - Director

Dr. Blumhoff has served as the Chief Executive officer and Medical Director of Alliance Urgent Care since its inception in March of 2006. When the Company acquired Alliance Urgent Care, on September 3rd, 2012 Dr. Blumhoff became the Chief Executive Officer and Medical Director of OneHealth Urgent Care, Inc as well. On November 14, 2012 Dr. Blumhoff accepted a position on the Board of Capital Group Holdings, Inc. Dr. Blumhoff has a long and successful career as a Medical Director and entrepreneur in the urgent care field. Prior to starting Alliance urgent care in 2006 and building it from one clinic to the 7 clinics it now operates from 2002 to 2006 Dr. Blumhoff successfully grew NextCare from 5 to 26 clinics. Dr. Blumhoff completed his residency in Family medicine at St Joseph's Hospital and Medical Center in Phoenix Arizona.

Rose Hanne
OneHealth Urgent Care - COO, Clinical Manager

Rose Hanne has served as Chief Operating Officer for Alliance Urgent Care ("Aliance") since December 2006. She has been a key member of the team which developed Alliance's unique people-focused, efficient care delivery model. Prior to joining Alliance, Mrs. Hanne spent 9 years at Banner Health. Initially as part of the physician practice management consulting team where she specialized in analyzing operations and implementing efficiency improvement measures before moving on to Occupational Health Services where she reorganized the billing, information system, and care delivery model. Under her direction, the Business Health Services division grew from 4 to over 30 Occupational Health and School Based clinics in multiple states. Mrs. Hanne was also tasked with restructuring Banner's Emergency Management Services which was responsible for disaster recovery and emergency response planning. During her time at Banner She was recognized on multiple occasions for achieving "World Class" employee engagement ranking as part of the Gallup organization measure of employee engagement. She also received the highest physician client satisfaction scores among her peer group.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this quarterly report to "we", "our", "us", "Capital Group Holdings", "Capital Group", "CGHC", "the Company", "Alliance Urgent Care", "AUC", "One Health Urgent Care", "OHUC", and similar terms refer to, Capital Group Holdings, Inc. and subsidiaries unless otherwise expressly stated or the context otherwise requires. This discussion contains forward-looking statements that involve risks and uncertainties. Capital Group Holdings Inc's actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included elsewhere in this filing.

Management of the Company continues to pursue avenues of generating cash or revenues during the next twelve months from the date of issuance of this Form 10-Q. The Company is pursuing financing to market and build the infrastructure for One Health Pass Inc. Management believes that with the current market demand and growth in Telemedicine services, along with our planned marketing and infrastructure development, the Company will generate positive cash flow from operations from when our telehealth services are brought to market in the next twelve months from the date of issuance of this Form 10-Q.

On September 3, 2012 The Company and its wholly owned subsidiary OneHealth Urgent Care, Inc., an Arizona corporation, ("OneHealth UC") completed the acquisition of Alliance Urgent Care by acquiring all of the assets, liabilities, and operations of combined entities owning Alliance Urgent Care MCS Ventures I through VII ("Sellers). (See Note 2 to the financial statements) OneHealth Urgent Care now operates 7 urgent care clinics through its wholly owned subsidiary Alliance Urgent Care. One Health UC has plans for expansion into additional states.

The purchase of the Alliance Urgent Care operations and locations is key in that it changes some of the Company's dynamics when it comes to seeking funding. Through this acquisition, the Company has moved from a development stage business to a fully functioning operating unit. To date AUC has produced positive cash flows from operations sufficient to retire almost all of the debt the newly acquired unit has produced during its creation and expansion. It immediately gives the Company access to a working line of credit for $1,250,000 that expires in May 2013. As of this filing the amount available under the line of credit was approximately $800,000.

In addition, the purchase, which was completed on September 3, 2012, occurred just prior to the beginning of AUC's most productive time period. Historically, most of AUC's revenues and positive cash flow has been produced during the winter months. While there is no assurance that this will continue to be the case, management believes that the Phoenix, Arizona metropolitan area, wherein the subsidiary operates, is undergoing an economic recovery. Further, OneHealth UC (and its subsidiary Alliance Urgent Care) has recently opened a new facility (where a majority of the start-up costs had been incurred prior to acquisition) and this will only lead to more favorable operating results. The acquisition overall of AUC will help the Company tremendously in rolling out its Telemedicine concept, as it will have already established itself to have a genuine, fully functional platform from which to expand, or, to rely upon for cash flow if expansion plans should get delayed.

While there is no assurance that the Company will be able to obtain cash flow from operations or to obtain additional financing management believes that it will be successful. To date the Company has already utilized some of the subsidiary's capital resources to continue its expansion projects, and management thinks that based upon the size of current operations OneHealth UC should continue to generate positive cash flow. Management feels confident that this will continue. In addition, the company has identified two service providers to provide long-term marketing, strategic planning and investor relations assistance (see Note 7. Prepaid Expenses) through the issuance of Company stock. The Company is currently in negotiations with several potential investment sources for equity investment and/or debt financing for the Company. If successful, these will satisfy our long-term operations and capital expenditure plans. There are no guarantees that such negotiations will be successful to obtain additional funding for our long term goals. While management remains hopeful that one or more transactions will proceed, no assurances can be expressed that the Company will be successful in these negotiations. It is expected though that current levels of funding will continue from our newly acquired business.

Results of Operations

QUARTER ENDED SEPTEMBER 30, 2012 COMPARED TO THE SEPTEMBER 30, 2011 PERIOD

Since April 26, 2006, the Company had been a development stage company with no revenues reported. We ceased being a development stage company on September 3, 2012, when the Company acquired the operations of Alliance Urgent Care. The revenues reported for the quarter ended September 30, 2012 represent the revenues of the urgent care centers from the date of acquisition through the end of the quarter.

On a reporting basis the Company reflected an increase in losses of approximately $425,000, from $171,000 in 2011 to $596,000 in 2012. Approximately $130,000 of this loss is attributable to the increase in cost for Company compliance related to professional fees needed for its public filings, while $282,000 of the increased costs are associated with its operating expenses associated with the roll out of its strategic plans. The loss related to the newly acquired subsidiary was marginal and for the month that the subsidiary's operations were included its loss for this period was approximately $13,000.

Although the Company did not own AUC for the full quarter, pro-forma financials were prepared for the three month periods ending September 30, 2012 and 2011, respectively based upon AUC's historical operations. This was done in order to evaluate the Urgent care operations on a like period basis.

On a pro-forma basis revenues from OHUC/AUC for the quarters ending September 30, 2012 and 2011 would have been approximately $1,389,000 and $1,108,000 respectively. Gross profits for the quarter would have been approximately $149,000, and $87,000, respectively. Correspondingly, the net loss for the quarter ending September 30, 2012 and 2011 would have been approximately ($271,000) and ($205,000), respectively. The reduction in gross profit and the increase in losses are directly related to two key events that happened later in the calendar year 2011 and the recent opening of a new facility in 2012. Both of these events, the opening of the Phoenix facility in November 2011 and the opening of the Queen Creek location on October 8, 2012, caused operating expenses such as payroll, rent, utilities, insurance, and EMR expenses to be higher without any noticeable increase in revenue. For the Phoenix location the market has not yet matured as quickly as other similar OHUC locations. For the Queen Creek location significant operating expenses have been recorded without any corresponding revenue as the location did not open until after September 30, 2012.

Liquidity and Capital Resources

Liquidity is a measure of a company's ability to meet potential cash requirements. Prior to the acquisition of the urgent care business the Company met its capital requirements through the issuance of stock and by borrowings short term financing.

However, with the advent of the acquisition of the urgent care business, the addition of its two new service providers and its negotiations with various lenders management of the Company believes they are in a stronger position to meet the Company's current and future cash flow needs.

The current balance sheet (after the acquisition) reflects a negative working capital of approximately $700,000. This is in large part due to the accrual of prior payroll and payroll related obligations that will be eliminated once the new funding is secured. Without this obligation the Company's working capital would have been improved by approximately $970,000. If the Company is unsuccessful in securing this additional funding it will rely on the newly acquired subsidiary to continue to provide positive cash flow and the remaining existing line of credit to meet its short term needs.

Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. We ceased being a development stage company on September 3, 2012, when the Company acquired the operations of Alliance Urgent Care. The revenues reported for the quarter ended September 30, 2012 represent the revenues of the urgent care centers from the date of acquisition. Since we do not have a long history in generating revenue, we have negative cash flows from operations, and negative working capital, the Company's independent registered public accounting . . .

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